Heaven Asociates, Baroda V. DCIT, Central Circle-1, Baroda

ITA 647/AHD/2018

AI Insights

The case involves multiple appeals and cross-objections related to the assessments of Heaven Associates for the years 2012-13, 2013-14, and 2014-15, following a search operation under section 132 of the Income Tax Act. The primary issues revolved around the additions made by the Assessing Officer (AO) under sections 68 and 69 of the Act, concerning unexplained cash credits and unaccounted sales receipts. The CIT(A) had deleted these additions, leading to the Revenue's appeals. The Tribunal examined the legal and factual basis of the CIT(A)'s decisions, including the application of a higher net profit rate based on the settlements of other group entities with the Settlement Commission.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 133502 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-03-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 28-12-2022
• Assessment Year: 2014-2015
• Appeal Filed On: 13-03-2018
• Other Referred Cases: Pr.CIT Vs. Saumya Construction P.Ltd., CIT Vs Jayaben Ratilal Sorathia, PCIT Vs. D&H Enterprises, Principal Commissioner of Income Tax Vs. RSA DIGI Prints
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Loose papers; Document seized; Question of law; Validity of assessment; Accommodation entries; Documents seized; TDS; Set aside
• Section: 68; 132; 143(3); 153A; 133(6); 143(2); 64; 48; 72; 13

Judgement Text

आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरणआयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण, अहमदाबाद 瀈यायपीठ अहमदाबाद 瀈यायपीठअहमदाबाद 瀈यायपीठ अहमदाबाद 瀈यायपीठ ‘B’ अहमदाबाद। अहमदाबाद।अहमदाबाद। अहमदाबाद। IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, AHMEDABAD BEFORE MRS.ANNAPURNA GUPTA, ACCOUNTANT MEMBER AND MR. T.R. SENTHIL KUMAR, JUDICIAL MEMBER IT(SS)A.No.245/Ahd/2017, 86/Ahd/2018 & ITA No.716/Ahd/2018 Asst.Year : 2012-13, 2013-14 & 2014-15 WITH Cross Objection No.24/Ahd/2018 IN IT(SS)A.No.245/Ahd/2017 DCIT, Cent.Cir.1 Baroda. Vs. Heaven Associates A-23, Mit Bungalows Nr.Amin Party Plot Subhanpura, Baroda PAN : AAGFH 1011 C IT(SS)A No.71/Ahd/2018 & ITA No.647/Ahd/2018 Assessment Year : 2013-14 & 2014-15 Heaven Associates A-23, Mit Bungalows Nr.Amin Party Plot Subhanpura, Baroda PAN : AAGFH 1011 C Vs. DCIT, Cent.Cir.1 Baroda. अपीलाथ / (Appellant) यथ /(Respondent) Assessee by : Shri S.N. Soparkar, Sr.Advocate and Shri Dhrunal Bhatt, AR Revenue by : Shri Jamesh Kurian, CIT-DR स ु नवाई क तार ख/Date of Hearing : 29/12/2022 घोषणा क तार ख /Date of Pronouncement: 24/03/2023 आदेश/O R D E R PER ANNAPURNA GUPTA, ACCOUNTANT MEMBER The impugned appeals relate to the same assessee and are against order of the ld.CIT(A)-12, Ahmedabad (hereinafter referred to as the “ld.CIT(A)” passed under section 250(6) of the Income Tax DCIT Vs. Heaven Associates & (6 appeals) DCIT Vs. Heaven Associates 2 Act, 1961 ("the Act" for short) pertaining to Assessment years 2012- 13, 2013-14 and 2014-15.For A.Y 2012-13 the Revenue has filed appeal while the assessee has filed cross objection, for A.Y 2013-14 and 2014-15 there are cross-appeals filed by the Revenue and the assessee 2. Present appeals arise on account of assessment framed pursuant to search action conducted on the assessee u/s 132 of the Act on 07.01.2014. The issues involved, it was common ground, were similar arising in the background of identical facts. Therefore, all the appeals were taken up together for hearing and are being disposed of by way of this consolidated order. 3. We shall first take up the appeal of the Department and the CO of the assessee pertaining to the Asst.Year 2012-13. IT(SS) 245/Ahd/ 2017 Revenues appeal CO 24/Ahd/2018 of the assessee for A.Y 2012-13 4. At the outset, the ld.DR contended that the Revenue is aggrieved by order of the ld.CIT(A) passed in the present case, for having deleted all the additions made on the sole legal ground and proposition, that in the absence of any incriminating material found during the search,no addition couldhave been made in the impugned case as the assessment pertaining to the impugned year was unabated. The ld.DR pointed out that the ld.CIT(A) had held so following the proposition of law laid down by the Hon’ble jurisdictional High Court in the case of Pr.CIT Vs. Saumya Construction P.Ltd. (2016) 387 ITR 0529 (Guj). The ld.DR contended that this proposition laid down by the Hon’ble Gujarat DCIT Vs. Heaven Associates & (6 appeals) DCIT Vs. Heaven Associates 3 High Court had not been accepted by the Department and has challenged before the Hon’ble Supreme Court, and therefore, the present appeal filed before us. He further contended that the Revenue was also aggrieved by the ld.CIT(A) having not decided the appeal on merits, holding it to be a mere academic exercise, after having held that the assessment was invalidly framed accepting the legal ground raised by the assessee. He drew our attention to the grounds raised by the Revenue in its appeal in IT(SS) No.245/Ahd/2017 raising the aforementioned pleas as under: “[1] On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in law and/or on facts in not appreciating the provisions of section 153A of the I.T. Act which requires the total income to be brought under tax without any restrictions. [2] On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in law and/or on facts in holding that such assessment or re-assessment u/s 153A is to be restricted only to the incriminating materials found during the search. [3] On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in holding that as the ground on legality of additions is allowed, the other grounds on merits are considered not necessary to be adjudicated as the same are purely academic. . [4] On the facts and in the circumstances of the case and in law, the Ld.CIT(A) has erred in law and/or on facts in deleting the addition made on account of unexplained cash credit u/s 68 of the Act of Rs.50,00,000/-. [5] On the facts and in the circumstances of the case and in law, the Ld.CIT(A) has erred in law and/or on facts in deleting the addition made on account of disallowance of interest of Rs.l,46,427/-on unexplained cash credit. [6] On the facts and in the circumstances of the case and in law, the Ld.CIT(A) has erred in law and/or on facts in deleting the addition made on account of unrecorded sales receipts of Rs.2,13,14,769/-.” 5. The ld.counsel for the assessee on the other hand stated that order of the ld.CIT(A) did not call for any interference since it had been rendered following the proposition laid down by the jurisdictional High Court which to date has remained undisturbed. He further stated that since the assessment order has been set aside on the legal ground raised by the assessee, the ld.CIT(A) had DCIT Vs. Heaven Associates & (6 appeals) DCIT Vs. Heaven Associates 4 rightfully found no need to decide the appeal on merits as it was a mere academic exercise. 6. We have heard both the parties. The facts relating to the case, as arise from the orders of the authorities below, are that there was search action under section 132 of the Act in the Bafna Panchal group of cases including the assessee, on 7.1.2014. Thereafter notice under section 153A was issued on 3.7.2014 and the assessee filed return of income on 27.11.2014 declaring income of Rs.4,47,520/- for the impugned Asst.Year 2012-13, which was the income as shown in the original return of income. In the assessment framed under section 153A of the Act, the AO made addition on account of unexplained deposits/unsecured loans from M/s.Zeelan Infrastructure P.Ltd. amounting to Rs.50.00 lakhs, disallowed interest paid on the unexplained deposits amounting to Rs.1,46,427/- and made addition on account of unrecorded sales receipt (on-money) of Rs.2,13,14,769/-. 7. Before the ld.CIT(A), the assessee contended that the AO had not referred to any incriminating material found from the assessee or from any other group persons or premises categorically evidencing or supporting the additions made by him. He stated that with regard to the unsecured loans, there was no document or evidence seized from the assessee or anywhere else during the course of search suggesting that the loan was out of undisclosed income earned by the assessee. With regard to the additions made on account of unaccounted sale consideration, similarly, the assessee contended that during the course of search, no incriminating material or evidence was found which could prove that the assessee DCIT Vs. Heaven Associates & (6 appeals) DCIT Vs. Heaven Associates 5 had received sale consideration over and above the amount recorded in the sale deed and in the books of accounts. He further pointed out to the ld.CIT(A) that the solitary seized document relied upon by the AO was document BS/1 Page 50-51 which had been interpreted incorrectly by the AO as relating to the undisclosed sale consideration received by the assessee, when in fact it was a quotation for 16 lifts required by the assessee. The assessee further pointed out that even the statements of various persons recorded during search and relied upon by the AO for making addition of “on- money”, was of no consequence, since the statements contained nothing adverse relating to the assessee for the impugned year. The assessee summarized his specific contentions with regard to the statements recorded containing nothing adverse against the assessee in tabular form reproduced at page no.5 of the Ld.CIT(A)’s order as under: DCIT Vs. Heaven Associates & (6 appeals) DCIT Vs. Heaven Associates 6 8. Assessee further contended that as on the date of search, the assessment for the impugned year stood completed, as the time limit for issuance of notice under section 143(2) had already expired on 30.9.2013 while the search conducted on 7.1.2014. He therefore stated that in such a case of unabated assessment, additions could have been made only on the basis of incriminating material and in the absence of the same additions made in the present case needed to be deleted. He relied on the decision of Hon’ble jurisdictional High Court in the case of Pr.CIT Vs. Saumya Construction P.Ltd. (supra) for this proposition and further referred to several other decisions of other High Courts and Co-ordinate Bench of the ITAT also which had followed such decisions. 9. The ld.CIT(A) considered the basis of the AO for making additions in the present case and noted that during the course of search at the residential premises of Shri Sanjay Doshi ,who was partner in M/s.Shalibhadra Developers, Dharnidhar Reality and M/s.Sumangal Enterprise, a diary containing details of “on-money” (A/1) was seized which also contained details of accommodation entries in lieu of cash received as on-money for sale of units and introduced in the books. He noted that Shri Sanjay Doshi also admitted under section 132(4) of the Act, how on-money was received and how accommodation entries in the form of unsecured loans were arranged from three companies viz. Highland Industries, Snazzy Export Ltd., and Sampda Chemical Ltd. He further noted that after finding this diary and admission of Shri Sanjay Doshi, the AO verified books of accounts of all firms/companies of the group during the course of search proceedings, and noticed that all the firms/companies of the group had taken similar type of loans from DCIT Vs. Heaven Associates & (6 appeals) DCIT Vs. Heaven Associates 7 companies having address of Kolkatta/Mumbai. He noted that the AO further verified these companies from ITD system and under section 133(6) of the Act and found that these companies were sham companies with negligible income and most of the notices issued to them had remained unserved. He thereafter tabulated the result of inquiry with regards to the depositors of the assessee company. He further noted that while the assessee filed forms, copies of ITR and annual accounts of these depositors, along with bank statements, evidencing the genuineness of the deposits accepted from these parties during the impugnedyear,the AO, after discussing the evidences, held that the amount of deposits received was unexplained, relying upon inquiries conducted by the Investigation wing, Ahmedabad and inquiry conducted in the assessment proceedings. The AO also made disallowance of interest expenditure made on the said loan. As regards addition of unrecorded sales receipts, he noted that the AO had estimated the sale consideration at Rs.2000/- per sq.feet of properties sold for making this addition. Apart from relying on the evidences of on- money relating to and/or seized from other group concerns, he referred to documents being Annexure BS/1, Page no.50-51 of the seized documents and construed the same to be evidencing 25% cash receipts for units of purchase, rejecting the assessee’s explanation that it related to quotation for lifts to be installed in the project. The AO, he noted, also referred to various statements recorded during the course of search to substantiate his arguments that the assessee and other group charged on-money on various schemes and applied this on-money in obtaining deposits by way of accommodation entries. After so noting the basis of the AO for making the additions, and after considering the contentions of the DCIT Vs. Heaven Associates & (6 appeals) DCIT Vs. Heaven Associates 8 assessee as above, that the additions were not based on any incriminating material found during the course of search, the ld.CIT(A) found merit in the contentions of the assessee and deleted the additions made relying on the proposition laid down by the Hon’ble jurisdictional High Court in the case of Pr.CIT Vs. Saumya Construction P.Ltd. (supra). The finding of the ld.CIT(A) on facts that addition was not based on any incriminating material are at para-5 of the order as under: “5. I have perused the assessment orders and the written submissions filed by the appellant. I have patiently heard the ARs at length. I have also noticed that these two assessments had indeed remained "unabated" as on the date of the search as they had attained finality. I find that while the AO has referred to indeed no adverse and incriminating evidence seized from the appellant or seized from any other premises also, for getting "triggered for" or for supporting the additions u/s 68, he does refer to a document seized from Chetan Jogi (which invariably pertains to the appellant) for making addition of "on-money" receipts. Having perused this document, however, I fully agree with the AR that this document is not the quotation for "bulk deal for flats", and has indeed nothing to do also with the price of the flats. As such, when the document itself quotes different "offer prices" for "units" giving speeds of 0.7 m/s and ] m/s, and when the seized paper is explained by the holder of the paper to be "quotation for lifts", the AO has no authority to disbelieve such plausible explanation simply on conjectures and without bringing any positive material to establish that "these are the rates of sale of Units in the projects of the appellant". The AR is also right in his submission that even if this document is considered to be "for bulk deal of flats", there is no incriminality in this document so as to confer valid jurisdiction on AO in revisiting the issue of "on-money receipt" in a concluded unabated assessment because there is no "transaction" of receipt or payment of "on-money" recorded on this paper which is evidently and merely an "offer letter". Moreover, evidently, there is nothing on the document which indicates that even if the document is considered to be "the evidence of the rate at which flats are sold", such rates were also charged for sales during the relevant previous year. Thus, I categorically hold that the document BS-1 page 50-51 is a "dumb" document and thus not "incriminating" so as to confer jurisdiction on AO to "interfere" with concluded issue (of sale-proceeds) in unabated assessment for A.Y. 2012- 13. I have perused the statements u/s 132(4) as referred to by AO and as tabulated above, and while I agree with the ARs that statements in themselves cannot be construed to be "incriminating evidences seized", I also find as a matter of fact that the statements have no categorical reference, admission or incriminality vis-a-vis appellant for the years under reference with regard to any addition made by him. I have also perused the Authorities relied upon by the appellant. Having done so, I am also in DCIT Vs. Heaven Associates & (6 appeals) DCIT Vs. Heaven Associates 9 complete agreement with the submissions of the Ld. AR that in unabated assessments to be re-framed u/s 153A, the AO has no authority to "interfere with" the concluded assessments de hors incriminating seized documents/assets as has been ruled by Jurisdiction Tribunal and Jurisdiction HC and other Authorities as under: *** *** *** *****” And his order deleting the addition on the legal proposition that in the absence of any incriminating material, no addition could be made in the impugned year where the assessment was unabated, is at para-6 of the order as under: “6. In view of the above, and in view of by now settled legal position as enunciated by Jurisdictional 11C, the AO, in re assessments of any of unabated and finally concluded assessments framed u/s 153A/1.53C, is not authorized to "interfere" except on the basis of and except having been prompted by incriminating seized dornrnfini-.fi relatable to that assessment year. In view of my finding that the documents relied upon by the AO are neither seized from the appellant, nor pertaining to the appellant (except BS.1/50-51, which in any case, are held to be non-incriminating by me) nor incriminating vis-a-vis the appellant, it is clear that any of the additions made by the AO is not based on any incriminating documents recovered or seized from the appellant. As such, as per even the AO in the assessment order, the additions u/s 68 for both the assessment years are based on verification of information which was already available in the pre-search return of income filed by the appellant which had attained finality as on the date of search. Similarly, addition of "on-money" for A.Y.2012-13by adopting an arbitrary liverage rate of sale of Rs.2000 per sq. ft. is by merely comparing the appellant's own sales of different units and is founded on non-incriminating, irrelevant and dumb document seized from third party premises which has been read in a twisted and convenient way by the AO and is thus a pure guess-work of the AO without any meaningful foundation in any material, leave aside seized material. I strongly believe that while AO could possibly rely exclusively on circumstantial and collateral evidences for making addition in regular assessments or "abated assessments", he has no such authority de hors seized incriminating evidences in revisiting issue and making addition on the foundation of such circumstantial evidences in "unabated" assessments like the present ones. Thus and therefore, the Ld. AR is absolutely right in contending that the additions made by the Ld. AO, de hors any incriminating documents seized from the appellant, in these unabated assessments refrained by him u/s 1 53A, are without requisite authority in law and are therefore not sustainable in law. The Delhi HC decision in Anil Bhatia (supra) relied upon by the AO has been considered in later decisions by Delhi HC in Kabul Chawla and by Jurisdictional HC in Saumya Construction (supra) respectively, relied upon by the appellant, and DCIT Vs. Heaven Associates & (6 appeals) DCIT Vs. Heaven Associates 10 therefore, can no longer be considered relevant or decisive on the issue. Similarly and needless also to mention that despite being aware of a contrary decision of Kerala HC -in favour of revenue in E. N. Gopak.um.ar (2016) 75 taxmann.com 215 (Ker.) wherein the view has been taken that there are no restraints on powers of the AO in making addition in assessment framed u/s 1 53A, / would need to respectfully follow the Jurisdictional HC in Saumya Construction (supra). As such, and therefore, when AO's examination of documents/assets seized from the appellant could not lead him to any specific and categorical incriminating evidence for each addition for each year under reference justifying any enquiry or addition for any of the relevant year under reference, he was duty bound merely to "reiterate" the total income which had attained finality before search and he indeed erred, and clearly exceeded his authority, in making the additions de hors such incriminating seized material. In view of this, and respectfully following the Jurisdictional High Court mandate, I have no hesitation in deleting the additions as under: A.Y. Additions deleted 2011-12 Rs.10,00,000 2012-13 Rs.2,64,61,196....” 10. Before us, we find that the Revenue has neither challenged the factual finding of the ld.CIT(A) that the additions made on account of unexplained deposits, interest on unexplained deposits and on account of unaccounted sale consideration was not based on any incriminating material found during the course of search; nor, we find, that the Revenue has contested the legal proposition of law applied by the ld.CIT(A) following the decision of the Hon’ble jurisdictional High Court in the case of Pr.CIT Vs. Saumya Construction P.Ltd. (supra). The only grievance of the Revenue is that it has not accepted this legal proposition of the Hon’ble jurisdictional High Court, having challenged it before the Hon’ble Supreme Court and therefore, the order of the ld.CIT(A), it has been pleaded, be reversed. 11. We do not find any merit in this contention of the Revenue. Undisputedly, the order of the ld.CIT(A) is in conformity with the proposition laid down by the jurisdictional High Court in the case of DCIT Vs. Heaven Associates & (6 appeals) DCIT Vs. Heaven Associates 11 Pr.CIT Vs. Saumya Construction P.Ltd. (supra). The factual findings of the Ld.CIT(A) regarding absence of any incriminating material found has remained unchallenged before us. There is no reason therefore for us to reverse the order of the ld.CIT(A) which has admittedly been passed in accordance with law. Therefore, the contention of the Revenue that the ld.CIT(A) had applied incorrect proposition of law while deciding the present appeal is dismissed. Ground No. 1 & 2 are dismissed. 12. As for the ground raised by the Revenue that the ld.CIT(A) ought to have decided the case on merits also, we hold that the ld.CIT(A) has rightly treated the same as a mere academic exercise, since the assessment order has been held to be invalidly passed. Ground of appeal No.3 is dismissed. And as a consequence grounds raised on merits of the additions deleted also stand dismissed. 13. In effect appeal of the Revenue is dismissed. Cross Objection No.24/Ahd/2018 (By assessee) – Asst.Year 2012-13 14. The grounds raised by the assessee are on the merits of the case. Plea being that the ld.CIT(A) ought to have deleted the additions on merit also. Since the assessment order has been held to be invalid, above, we fully agree with the ld.CIT(A) that there is no reason to go into the merits to the case, being a mere academic exercise. The CO of the assessee is thus dismissed. DCIT Vs. Heaven Associates & (6 appeals) DCIT Vs. Heaven Associates 12 15. In effect both the appeal of the Revenue and CO of the assessee are dismissed. 16. The ld.counsel for the assessee, thereafter pointed out that the issue involved in the remaining appeals, pertaining to the Asst.Year 2013-14 and 2014-15, were identical and had been dealt by the ld.CIT(A) in common consolidated order passed. He pointed out that in these two assessment years also, the additions were identical as that in Asst.Year 2012-13,dealt with by us as above,relating to unexplained deposits/unsecured loans, disallowance of interest claimed by the assessee to have been paid thereon and on account of unaccounted sales consideration/on-money received by the assessee. Both the parties agreed therefore that the grounds of appeal pertaining to both the years be dealt together. IT(SS)A.No.86/Ahd/2018 Asst.Year 2013-14 & ITA No.716/Ahd/2018 for Asst.Year 2014-15 (Revenue’s appeals): IT(SS)A.No.71/Ahd/2018 Asst.Year 2013-14 and ITA No.647/Ahd/2018 Asst.Year 2014-15 (Assessee’s appeals): 17. Briefly stated the AO, in the impugned years, made addition under section68 of the Act on account of unexplained loans in relation to the following parties as tabulated at page no.3 of the CIT(A)’s order as under: Name of Party Assessment Year Amount of addition IchrajVinimay Pvt Ltd 2014-15 70 00 000 2013-14 30 00 000 Softlink Securities Pvt Ltd 2013-14 95 00 000 Bothra Auto Finance 2014-15 20 00 000 DCIT Vs. Heaven Associates & (6 appeals) DCIT Vs. Heaven Associates 13 BothraFinlease Corporation 2013-14 20 00 000 Vansh Glass Pvt Ltd 2014-15 53,00,000 Total : 2,88,00,000 18. The said addition for Asst.Year 2013-14 amounted to Rs.1,45,00,000/- while that for Asst.Year 2014-15 amounted to Rs.1,43,00,000/-. The interest disallowed thereon by the AO amounted to Rs.14,64,691/- and Rs.3,62,025/- respectively, and addition on account of undisclosed sale/ on money received for the two years amounted to Rs.2,12,85,806/- and Rs.1,10,06,379/-. 19. The AO made addition of unsecured loans under section 68 of the Act for both the years on protective basis subject to finalization of the addition on account of unrecorded sales receipts to the extent of unsecured loans. The Ld.CIT(A) deleted the addition made of unsecured loan pertaining to that received from M/s Vansh Glass P.Ltd of Rs.53 lacs noting that the said amount stood disclosed to and accepted by the Settlement commission by Param Enterprises. The remaining addition pertaining to unsecured loans was also deleted by the Ld.CIT(A) noting that nothing adverse against the assessee was found during search on the assessee or its group entities, while the assessee had discharged its onus of proving the genuineness of the loans. The addition made of unaccounted sales receipts was also deleted noting that the adverse material relied upon by the AO for making the addition pertained to some other transaction of the assessee. However the Ld.CIT(A) applied net profit rate of 17.5% to DCIT Vs. Heaven Associates & (6 appeals) DCIT Vs. Heaven Associates 14 the turnover of the assessee for estimating its profits based on the disclosure made by other group entities to the Settlement Commission. In nutshell the entire addition made by the AO by estimating undisclosed sales, u/s 68 of the Act on protective basis and interest paid on unsecured loans in both the years was deleted and the AO was directed to make addition on account of low gross profit for Rs.27,75,740/- in A.Y 2013-14 and Rs.23,73,113/- in A.Y 2014-15. 20. Aggrieved by the same both the Revenue and the assessee have come up in appeal before us for both the years raising identical grounds. 21. Since there are primarily three issues involved in both the appeals we shall be adjudicating the appeals issue wise dealing with the appeals of the Revenue and the assessee together. 22. We shall first be taking up the issue relating to addition made on account of undisclosed sale receipts/ on money, by the AO amounting to Rs.2,12,85,006/- in Asst.Year 2013-14 and Rs.1,10,06,379/- in Asst.Year 2014-15 both of which were deleted by the ld.CIT(A) in entirety. It is the Revenue which has come up in appeal before us against this issue. 23. The reason for taking up this issue first, as opposed to the issue of unsecured loan, is that we have noted from the assessment order that while dealing with the issue of unsecured loans, which was found to be accommodation entries, the AO had begun by referring to the documents seized during the search which contained noting of on-money received by the group companies on their sale of DCIT Vs. Heaven Associates & (6 appeals) DCIT Vs. Heaven Associates 15 flats/shops, and one of the key-persons of the group companies, Shri Sanjay Joshi, in his statement recorded under section 132(4) of the Act, had explained that this unexplained on-money was routed back into the companies in the form of unsecured loans. The AO thereafter went on to mention that similar unsecured loans from dubious companies in Kolkata/Mumbai were found to be taken in the case of other group companies also. Therefore, the basis with the AO for conducting inquiry and investigation with respect to the unsecured loans found in the assessee-company was the documents found during search and the admission of one of the key-persons, that undisclosed receipts of the group-companies in the form of on- money had been routed back into the companies in the form of unsecured loans taken from the dummy-companies based in Kolkata/Mumbai. Therefore, it is pertinent to first adjudicate the issue, whether the assessee had undisclosed income by way of on- money receipts during the year, since it formed one of the crucial basis for the AO for finding unsecured loans to be accommodation entries. Accordingly we take up first the issue of undisclosed income/ on-money receipts, added to the income of the assessee by the AO in two years, and deleted by the ld.CIT(A). Issue No.1 – undisclosed Sales/ On money receipt 24. A perusal of the assessment order reveals that the AO arrived at his finding of unrecorded sale receipts by the assessee on the following basis: i) He noted that the assessee had undertaken one residential projects viz. “Green Heaven” at Atladra-Padra Main Road, Nr.Bhayali Station, Samiyala, Baroda. He noted that M/s.Lupin Enterprise, another group concern also had similar project in the same area and key person DCIT Vs. Heaven Associates & (6 appeals) DCIT Vs. Heaven Associates 16 of the said enterprise, Shri Sanjay Jogi, had in a statement recorded under section 132(4) of the Act admitted to the rate of booking of the project to be Rs.2,000/- per square feet; ii) Documents seized from the residence of Shri Chetan Jogi, key-person of the assessee,being Annexure-BS/1 Page No.50 & 51, as per the AO revealed that cheques and cash components of the receipts was in the ratio of 75:25; iii) From the details submitted by the assessee of the year- wise receipt of sales from different flats/offices, the AO noted that the assessee had shown booking at the rate of Rs.2000/- per sq.feet, but the average sale rate was shown at Rs.760/- to Rs.1200/- per square feet. In the absence of any justification given by the assessee for the huge difference in the average rate of sales, though bookings were made in the same period, the AO held that the assessee had not disclosed true rate of sales of all the properties; iv) He had noted, the same modus operandi in the case of other entities of the group i.e. M/s.Dharnidhar Reality, M/s.Shalibhadra Developers, M/s. Sumangal Enterprise, M/s.Autocare Services etc. The AO on the above basis took the sale consideration for all properties sold at the rate of Rs.2000/- per sq.feet and taking overall ratio of cheque to cash at 75:25, he worked out the suppressed sale for two years at Rs.2,12,85,006/- in Asst.Year 2013-14 and Rs.1,10,06,379/- in Asst.Year 2014-15 respectively. 25. Before us, the ld.DR relied on the order of the AO. He pointed out that the statement of Shri Sanjay Jogi was relevant, as he was key-person in the group being a partner in M/s.Lupin Enterprise, which had undertaken an identical project and was brother of Chetan Jogi who also partner in the firm. Further, on the piece of DCIT Vs. Heaven Associates & (6 appeals) DCIT Vs. Heaven Associates 17 evidence, Annexure-BS/1 (page no.50 &51), he stated that the findings of the ld.CIT(A) that they did not relate to the receipts from the sale of flats of the assessee but pertained to some quotation of lifts stated to be purchased by the assessee as explained by the assessee, was not correct. He drew our attention to para-6.5 and 6.6 of the assessment order wherein the AO had analysed the said documents while rejecting identical explanation of the assessee before him also; that the documents pertained to quotation for purchase of lifts. He pointed out therefrom that the AO had noted the said documents mentioned 16-units, but the assessee having five towers in the scheme ,considering two lifts for each tower, at the most ten lifts needed to be installed, and therefore there was no question of considering 16 lifts, and seeking quotation for the same by the assessee. He further pointed out that the AO had also noted that the assessee having purchased one lift for Rs.12 lakhs, at this rate, the price for all 16 lifts would amount to Rs.1.92 crores while the documents mentioned final offer at Rs.2.5 crores, which was not commensurate at all with the price at which lifts were ultimately purchased by the assessee. He further pointed out that while documents mentioned cheque and cash ratio of 75:25% , the account of the lift purchased showed that the assessee had made almost 50% upfront payment for the purchase of lifts. Para 6.4 to 6.6 is reproduced hereunder: “6.4 The assessee's submission is duly considered. It is found that during the course of search proceedings, Shri Sanjay Jogi, the key person of the group, in his statement u/s 132(4) of the I T Act has admitted that the rate of booking the Green heaven project is Rs.2000 per sq. ft. Sh. Sanjay Jogi is a partner of M/s Lupin Enterprise & his brother Sh. Chetan Jogi is a partner of the assessee firm. 6.5 Another piece of evidence (Annx. BS/1 page no. 50 & 51) was found and seized from the residence of Shri Cheatn Jogi, partner of Heaven DCIT Vs. Heaven Associates & (6 appeals) DCIT Vs. Heaven Associates 18 Associates, where in a working in respect of sale of 16 flats have been worked out at a price of Rs.2,37,27,845 and below this amount it was written that w above calculation is based on c/i@ 75% and ca @ 25% cash". Therefore, the each flat cost Rs 14,82,990/- in this bulk deal and the cash component comes to Rs. 370747/- (@25%). This paper clearly implies that assessee is collecting "On money" from buyers. Scan copy of the above page is as under : 6.5 In the above reference, the assessee has stated that the above rates are not for the sales of the construction units. The above is the quotations & negotiation figures of lift to be installed in the towers built up by the assessee firm. The assessee has also furnished copies of invoices of some of the lifts stating that the working on the page is for 16 lifts however the assessee has purchased only 5 lifts till date. The assessee's submission is not acceptable. There are five towers in the scheme. Therefore, there must be 10 lifts to be installed considering 2 lift for each tower. In view of the above factual position, there is no question of considering 16 units in the seized papers as 16 lifts. Further, the assessee has purchased one lift @ Rs. 12 lacs. If the average rate of Rs. 12 lacs per lift is considered, then there would be value of Rs. 1,92,00,000/-. This is not commensurate with the rates quoted in the seized papers as the final offer is mentioned at Rs.2,05,00,000/-. 6.6 Regarding cheque and cash ratio, the assessee has contended that the cash @ 25% is regarding upfront payment of lift for confirmation of the order and cheque @ 75% is regarding balance amount payable. The copy of account of lift purchase furnished alongwith the submission does not confirm the above ratio of the transaction. The assessee has purchased lift of Rs.12.05 lacs by making advance payment of Rs.5,70,000/-. The ratio of upfront payment is almost 50% of purchase value. The assessee's submission regarding cheque and cash ratio of 75 : 25 towards lift payment is also not acceptable. Further, it can be observed from the working in the Annexure A to this order that there is overall ratio of cheque and cash as 75: 25 as out of total receipts of Rs.20 crore, there is recorded receipts of Rs.14.65 crore whereas there is unrecorded receipts of Rs.5.36 crores. This further confirms that the assessee receives cheque and cash (recorded and unrecorded) receipts in the ration of 75:25. 26. The ld.counsel for the assessee relied on the orders of the ld.CIT(A) whose findings, deleting the addition made on account of unaccounted sale receipts ,at para 4.6 to 4.7 are as under: DCIT Vs. Heaven Associates & (6 appeals) DCIT Vs. Heaven Associates 19 “4.6 So far additions for undisclosed income being alleged on-moneyreceipts from customers are concerned, it is observed that while deciding the appeal for A.Y.2011- 12 & 12-13 my predecessor GJT(A) has categorically held that no documents relating to receipt of such income was found and the AO has made entire addition on assumption. The AO has estimated sale price @ Rs.2000/- per sq feet based upon statement of Shri Sanjay Jogi recorded u/s 132(4) dated 07/01/2014 but the statement is with reference to M/s Lupin Enterprise and not with reference to units constructed by appellant firm. Even Shri Sanjay Jogi in very same statement had clarified that he had no relation what so ever with M/s Heaven Associates and he was not the partner of Heaven Associates. When the appellant and M/s Lupin Enterprise both are separate entities, statement in case of one firm cannot be made applicable to the other case and even the AO himself has mentioned that size of flats are different. 4.7 It is also observed that while estimating on money receipt, the AO has referred to loose paper found during the course of search at Shri Chetan Jogi which my predecessor CIT(A) has already held as quotation of lift as same contains details like 0.7 m/s 1 m/s etc. As said loose papers have been considered by the AO in all assessment years, it is held that said loose paper is nothing but quotation of lift and does not pertain to price of 16 units (of lift). Thus, this loose paper has no bearing for estimating of on money receipt. Reliance is also placed on decision of Hon’ble Gujarat High court in the case of CIT Vs JayabenRatilalSorathia in Tax Appeal No 914 of 2012 dated 02/07/2013 has held as under: "4.00. At the outset, it is required to be noted that on the basis of search carried out in the premises of the son of the assessee and diary seized and on the basis of noting in the said diary, the assessee made disclosure of Rs.65 Lacs for the A.Y. 2006-07 with respect to the sale transactions which took place during the A.Y. 2006-07 and applying same ratio and ratio relating to A.Y. 2006-07 and A.Y. 2007-08, the Assessing Officer determined the income for the A. Y. 2005-06 and considering the fact that the regular assessment was framed under section 143(3) and there was no any seized material with respect to A.Y. 2005-06, considering the aforesaid fact and observing that no incriminating material was found with respect to A.Y. 2005-06 and during the assessment, the Assessing Officer did not find any defect in the books of accounts maintained by the assessee and considering the fact that even no any material was found during the search relating to assessment year in question, CTT(A) directed to delete addition of Rs.36,94,955/- by observing that the Assessing Officer was not justified in making addition of Rs.36,94,955/- solely on the basis of the disclosure of Rs.65 Lacs with respect to transactions which took place in the year 2006- 07 and the order passed by the CIT(A) is rightly confirmed by the Tribunal.” *** *** **** “ The ratio of said decision squarely applies to present facts as the AO has not brought any direct evidences which can prove that the appellant had collected average price of units at Rs.2000/- per sq.ft. hence entire addition made by AO based upon above calculation in both the assessment years are deleted.” 27. We have heard both the parties, and we do not find any merit in the contentions of the ld.DR that the addition made of DCIT Vs. Heaven Associates & (6 appeals) DCIT Vs. Heaven Associates 20 undisclosed sale receipts by the AO is justified. The ld.CIT(A) has deleted the addition noting that no incriminating relating to any on- money receipt by the assessee on sale of flats/office was relied upon by the AO while making the impugned addition and there was no direct evidence proving the case of the AO that the assessee had sold units/flats/ @ Rs. 2000/- per sq. ft. The Ld.CIT(A) has categorically mentioned that the statement of Sanjay Jogi relied upon by the AO was with respect to another enterprise viz. M/s.Lupin Enterprise, and had nothing to do with the assessee-firm. He has also noted that even Sanjay Jogi in his statement clarified that he had no relation whatsoever with the assessee-firm. As for the loose paper found during the search at Shri Chetan Jogi, the partner in the assessee-firm, the impugned document was not found to be incriminating by the ld.CIT(A) in his order passed for the immediately preceding assessment year i.e.Asst.Year 2012-13. The ld.CIT(A) also in the said order had noted that the assessee’s explanation of the loose paper as pertaining to the quotation of lift was plausible, pointing out that the paper mentioned “0.7m, 1 ms” which had no relation nor any connection was established by the AO to flats/office sold by the assessee. Moreover, he has mentioned that the said details mentioned original offer; 1 st , 2 nd and final revised order. Therefore, considering in totality, he found the assesses explanation of the same as pertaining to quotation for lifts, more plausible, as opposed to AO inferring the same as pertaining to sale price of units sold. 28. We find that in the preceding year also, i.e A.Y 2012-13, the basis for making addition of unaccounted sales/ on-money was the same, i.e statement of key person of another entity of the group and DCIT Vs. Heaven Associates & (6 appeals) DCIT Vs. Heaven Associates 21 document found during search on the assessee. All these were found to be not constituting incriminating material by the Ld.CIT(A) in the preceding year, which finding was not challenged by the Revenue before us in its appeal for the said year in IT(SS) No.245/Ahd/2017 as noted at para-10 & 11 of our order above.Therefore it follows that the same evidences are not incriminating material for the impugned years before us also. 29. Even otherwise, leave aside the document found during search on assessee, all other evidences are in relation to other group entities, be it the admission of Shri Sanjay Jogi who admitted to units being sold at the rate of Rs.2000/- per sq. feet in the entity in which he was key person, i.e Lupin Enterprise and categorically denied anything to do with the assessee. So also the information with the AO that other entities in the group were also following similar modus operandi of taking on money in cash on sale of flats which was unaccounted in their books of accounts.The AO has extended this modus operandi as being followed by the assessee also ,this despite the fact that search on the assessee revealed nothing to this effect. The department having taken the extreme action of invading the privacy of the assessee, searched its premises and found nothing, there remains no scope thereafter of presumption of any sort. 30. As for the document found during search, we find merit in the finding of the ld.CIT(A) that the assesses explanation that it related to quotation of lifts proposed to be purchased by it appears more plausible. As noted above by us, this finding of the Ld.CIT(A) in the preceding year was not challenged by the Revenue before us. Even otherwise, as rightly pointed out by the Ld.CIT(A), the documents DCIT Vs. Heaven Associates & (6 appeals) DCIT Vs. Heaven Associates 22 mentioned ‘0.7 m/’s, 1 m/s’ as also original offer, 1 st , 2 nd and final revised offers, which lend more credence to the assesses explanation that 0.7 m/s and 1m/s’ represented speed of lifts and different revised offers related to different quotations for the lifts, as opposed to the AO who ignored these details and read the document in part only and found it as relating to the sale price of the units sold by the assessee. The assessee’s explanation, we agree with the Ld.CIT(A), is more plausible than that the AO, and for the said reasons, we agree with the Ld.CIT(A) that the document had nothing to do with the units sold by the assessee. 31. Moreover, the basis adopted by the AO for computing the undisclosed sale by taking Rs.2000/- per sq.meter as average sale price of the each unit is not correct, more particularly, in the absence of any incriminating material indicating this rate to be correct rate. The AO, we find, inferred from the details submitted by the assessee that the unit sold during the year, showed large variance in the rate of sale of different units during year, which variance was not justified by the assessee. According to the AO, there was no reason for such variation in the sale price of the units in the year itself, and therefore, he presumed that the all the units must have been sold at the same average rate of Rs.2000/- per sq.feet. 32. We do not find any justification in the same. The entire basis of the AO was based on the presumption and conjectures, and the addition therefore was not justified more particularly, when no incriminating material in relation to undisclosed sale was found during the search. DCIT Vs. Heaven Associates & (6 appeals) DCIT Vs. Heaven Associates 23 Therefore, we completely agree with the ld.CIT(A) that the addition made on account of undisclosed sale receipts was totally unjustified. The deletion of addition made by the ld.CIT(A) therefore on account of undisclosed sale receipts of Rs.2,12,85,006/- in Asst.Year 2013-14 and Rs.1,10,06,379/- in Asst.Year 2014-15 respectively is accordingly upheld, and this issue is therefore decided in favour of the assessee. This issue accordingly is decided in favour of the assessee. Issue No.2 :Unsecured Loans & Interest on Unsecured Loans 33. Taking up the next the issue of addition made on account of unsecured loans u/s.68 of the Act finding them to be mere accommodation entries, deleted by the Ld.CIT(A),the addition made in the impugned years related to the following parties; Name of Party Assessment Year Amount of addition IchrajVinimay Pvt Ltd 2014-15 70 00 000 2013-14 30 00 000 Softlink Securities Pvt Ltd 2013-14 95 00 000 Bothra Auto Finance 2014-15 20 00 000 BothraFinlease Corporation 2013-14 20 00 000 Vansh Glass Pvt Ltd 2014-15 53,00,000 Total : 2,88,00,000 34. We have gone through the order of the Ld.CIT(A).With respect to the unsecured loan of Rs.53.00 lakhs added to the income of the assessee in Asst.Year 2014-15 being allegedly received from Vansh DCIT Vs. Heaven Associates & (6 appeals) DCIT Vs. Heaven Associates 24 Glass P.Ltd., the ld.CIT(A) noted that this amount had been disclosed in the Settlement Petition of M/s.Param. Enterprises, which was accepted by the Settlement Commission in its order passed under section 245D(4) on 5.9.2017. The ld.CIT(A) noted that the Settlement Commission had discussed the entire facts regarding receipt of undisclosed income as well as application towards accommodation entries, and finally estimated net profit rate at 17.5% of the total estimated receipts of the project in the case of Param Enterprise, as against 16% offered in the Settlement Commission. The ld.CIT(A) noted that the above loan of Rs.53 lakhs was duly covered by the Settlement Commission for Param Enterprise and accordingly deleted the addition made to that extent in the case of the appellant for Asst.Year 2014-15. His finding at para 4.2 and 4.3 of the order are as under: 4.2 So far as addition u/s 68 of the Act and interest thereon, it is observed that appellant has taken loan of Rs.53,00,000/- from M/s Vansh Glass Ind. Pvt. Limited in A.Y. 2014-15 and same has been claimed to be considered in the Settlement Application filed in the case of Param Enterprise". The Ld ARs of the appellant has submitted copy of said settlement application wherein in STATEMENT OF FACTS, at para 13, it was stated that "applicant has utilised cash generations in obtaining accommodation entries of unsecured loan." Further in para 14.1, the said applicant has also stated as under: " Since the applicant had received cash and additional income, it was utilised to procure entries of unsecured loans by giving cash and obtaining cheques in lieu thereof. Against the interest paid on such unsecured loans, the applicant has received back cash after adjustment of tax payable by the entry provider and commission. It is submitted that year wise list of unsecured loans which are not genuine is enclosed in Exhibit-29...... The outflow of cash for providing unsecured loans and inflow of cash against interest payment and on repayment of loans are exhibited in the cash flow statement which is enclosed as Exhibit -30.." The said applicant at Exhibit 29 has given break up unsecured loan considered as accommodative loans from A.Y. 2012-13 to 2015-16 which includes above loan of Rs.53,00,000/- received by appellant. The cash flow statement along with annexure as submitted by said applicant in Exhibit 30 is as under: DCIT Vs. Heaven Associates & (6 appeals) DCIT Vs. Heaven Associates 25 DCIT Vs. Heaven Associates & (6 appeals) DCIT Vs. Heaven Associates 26 undisclosed income as well as application towards accommodative entries and at para 11 of their order, they have finally estimated Net Profit @ 17.5% on total estimated receipts of the projects in the case of Taram Enterprise" as against 16% offered in the settlement application. Further, the Hon’ble Settlement Commission at para 13 of its order has stated that "Prayer of the applicants for capitalization of additional income is allowed as per the cash flows annexed as Exhibits to the SOFs " and cash flow of M/s Param enterprise duly reflected application of cash amount given loan taken by the appellant. These facts clearly prove that above loan of Rs 53,00,000 is duly covered by Settlement petition of M/s Param Enterprise hence addition made to that extent in the appellant in A.Y. 2014-15 is deleted. It is DCIT Vs. Heaven Associates & (6 appeals) DCIT Vs. Heaven Associates 27 observed that the appellant has not proved that interest paid on loan to M/s Vansh Glass Ind Pvt Limited is also covered by the Settlement Petition of M/s Param Enterprise hence addition of interest made by the AO for Rs.1,54,948/- is confirmed hsubject to directions made in subsequent pars. 35. With regard to remaining unsecured loans, the ld.CIT(A) found that no incriminating material was found during the course of search either from the assessee or on any of the entities of the group concerns, relating to the impugned loans. He further noted, the assessee on the other hand, had filed the documents evidencing genuineness of these loans. The ld.CIT(A) further noted that while the AO had made addition on the basis of investigation carried out by the Kolkatta and Ahmedabad Investigation Wing, in the course of which it was noted that impugned parties who had given unsecured loans have not responded to the summons issued to them. The ld.CIT(A) found that as far as the loan taken from Bothra Auto Finance of Rs.20.00 lakhs in Asst.Year 2014-15 by the assessee, the said party had responded to the summons issued to it, and had confirmed having given loan to the assessee. For the remaining parties, he found that these parties had either not responded to the summons or were not found at their given address. The ld.CIT(A) noted that jurisdictional High Court in the case of PCIT Vs. D&H Enterprises, 72 taxmann.com 91 had held that merely because the parties had not responded to the summons transactions could not be held to be ingenuine, particularly when the assessee had filed all documents evidencing the transaction. He also referred to the decision of various other High Courts in this regard, and accordingly held that addition on account unsecured loans in the present case, in the absence of any incriminating documents found during the course of search relating to these parties. The assessee on the other hand having evidenced their genuineness, could not have been made DCIT Vs. Heaven Associates & (6 appeals) DCIT Vs. Heaven Associates 28 addition merely on the basis of investigation conducted by the department by reporting that parties had not responded to the summons issued to them. His finding at para 4.4 to 4.5 of the order as under: 4.4 So far as other unsecured loans and interest paid thereon, it is observed that during the course of exhaustive search carried out on appellant and other group members, no documents were found which could clearly prove that the appellant has obtained loan as accommodation entries. While making impugned additions, the AO has referred to various statement to other group members and loose papers found during the course of search but same are not pertaining to the appellant as tabulated in chart herein above. The AO at para 5.1 to 5.3 of A.Y. 2013-14 has discussed the documents found from the residence of Shri Sanjay Doshi who is not the partner of the appellant and same are relatable to other group concerns being Shalibhadra Developers, Dharnindhar Reality, Sumangal Enterprise etc hence such loose papers and modus operendi cannot have any locus standi in present case. Similarly, while making addition u/s 68 of the Act, the AO has referred to loose papers pertaining to other concerns to prove that loan taken by the appellant is bogus but such loose papers no where prove that similar cash payments are made by the appellant against loan obtained by it. It is settled legal law that loose papers found during the course of search pertains to entities to whom it relates and anything emanating from such loose paper cannot have impact on other transactions carried out by other entities. The AO has referred to statement of Shri Sanjay Doshi and scanned loose papers at page 14 to order but said statement was with reference to loan taken from Limited and such statement has no reference with parties from whom the appellant has taken loan. The AO himself has stated that these entries are pertaining to "Shalibhadra Developers". Similarly statement of Shri MahendraKankaria is with reference to transactions carried out by M/s Shanti Buildcon, M/s SafalNirmal Pvt Limited etc. The statement of Shri Sandeep U shah was taken as director of M/s Sumangal Enterprise Pvt. Ltd. who has already filed separate settlement petition hence it has no direct relevance with issue involved in present appeal. 4.5 It is observed that during the course of assessment proceedings as well as in the appellate proceedings, the appellant has submitted the confirmation of the parties, address, PAN of them, copies of return of income , annual accounts, bank statements etc which clearly prove that loan have been taken through account payee cheques and the appellant has deducted TDS on interest payment made on such loan. It is observed that bank statement of depositors clearly prove that funds are given to appellant and the AO has not proved that sources of such funds are undisclosed income of appellant. The appellant has discharged its onus cast u/s 68 of the Act by proving identity, genuineness and creditworthiness of depositors but the AO has failed to bring any direct material on record to prove that parties are shell companies or they have given accommodative entries.HonTale Gujarat High Court in case of Principal Commissioner of Income Tax Vs. RSA DIGI Prints vide Tax Appeal No: 503 of 2017 dated 06/09/2017 "3. From the materials on record, Commissioner of Income Tax (Appeals) and Tribunal both had come to the conclusion that the assessee had produced the copy of PAN card, address confirmation, copy of the return and the bank statements of the payee for the present assessment year as well as in the earlier assessment year where such an issue had cropped up. Essentially, Commissioner of Income Tax (Appeals) as well as the Tribunal held that the DCIT Vs. Heaven Associates & (6 appeals) DCIT Vs. Heaven Associates 29 assessee established the genuineness of transaction, creditworthiness of payee and the source of the payment. The issue hinges on appreciation of material on record. No question of law arises. Tax Appeal is dismissed." 36. The Ld.DR’s argument before us was that the AO had given detailed findings while holding the impugned unsecured loans as accommodation entries. He pointed out that the search action conducted on the assessee group as well as post search inquiry and inquiry and investigation by the AO had unearthed documents. Admissions of interested persons in the group as well as information revealing that the unsecured loans were only accommodation entries. 37. The Ld.Counsel for the assessee relied on the order of the Ld.CIT(A). 38. We have heard both the parties. We have noted that the ld.CIT(A) while deleting the addition on account of unsecured loans, has recorded a finding of the fact that no incriminating material relating to the unsecured loans was found during the course of search. The entire addition was based on investigation made by the AO, in which the concerned parties had not responded or were not found to have existed. As noted above by us also, as per the Revenue’s inquiry and investigation, it was unaccounted sale receipts /on money on sale of flats which was routed back into the group-companies including the assessee by way of accommodation entries of unsecured loans from sham entities. The issue of unaccounted sales has been adjudicated first by us and we have held no merit in the addition made on this count in the hands of the assessee for both the years. Coupled with the same is the fact that the in relation to the impugned unsecured DCIT Vs. Heaven Associates & (6 appeals) DCIT Vs. Heaven Associates 30 loans no incriminating material was found during search at the assesses premises. Identical addition of alleged accommodation entries of unsecured loans in the preceding year, was deleted by the Ld.CIT(A) in the absence of any incriminating material justifying the validity of assessment made which finding of the Ld.CIT(A) has not been challenged by the Revenue before us in the preceding year as noted at para-22 & 23 of our order above. 39. Clearly the very basis with the Department of unsecured loans being bogus accommodation entry for unaccounted sales of the assessee no longer survives, on the addition made of unaccounted sales being deleted by us above. And added to it the fact that no material was found during search evidencing the Revenues stand. The finding of the AO that the unsecured loans were bogus accommodation entries is based merely on surmises and conjectures and is not sustainable more particularly when the assessee has been found by the Ld.CIT(A) to discharge its onus of proving the genuineness of the transactions. The ld.CIT(A), we find, noted that the assessee had filed all evidences to prove genuineness of the transaction. With regard to the unsecured loans taken by the assessee in Asst.Year 2014-15 from Vansh Glass P.Ltd. theld.CIT(A) has recorded a categorical finding of the fact that this amount was offered for settlement by Param Enterprise, an entity of the group searched. The above factual finding of the ld.CIT(A) have not been controverted by the ld.DR before us. Therefore we are in complete agreement with the Ld.CIT(A) that there was no basis or material with the AO for treating the unsecured loans of the assessee as being accommodation entries. DCIT Vs. Heaven Associates & (6 appeals) DCIT Vs. Heaven Associates 31 40. In view of the above, we do not find any infirmity in the order of the ld.CIT(A) deleting the additions on account of unsecured loans. As a consequence, the disallowance made of interest paid on unsecured loans by the AO, deleted by the ld.CIT(A), is also upheld. This issue also is decided in favour of the assessee. Issue No.3 – Net Profit estimation 41. The ld.CIT(A) further went on to make addition by estimating net profit earned by the assessee at the rate of 17.5% as against 16% declared by the assessee on the basis of disclosure made by other group concerns in their Settlement Application filed. The net profit rate was applied to the turnover reflected by the assessee in its books of accounts since the addition made on account of estimated turnover was deleted by the ld.CIT(A). His finding at para 4.8 of the order, making impugned addition is as under: “4.8 It is also observed that various group concers of the appellant have preferred a settlement application wherein they have made disclosure considering average Net Profit @ 16% for projects and while applying such net profit, it has considered both disclosed sales and undisclosed sale found during the course of search. It is observed that disclosure is arrived at after reducing net profit before interest 85 remuneration as shown in audited annual accounts. The above method is also accepted by the Hon'ble Settlement Commission in its order referred supra wherein in majority cases, it is held that average net profit is 17.5% as against 16% considered by the applicants. To maintain the consistency and to protect the interest of revenue, it is held that in the present case average net profit is required to be estimated @ 17.5% as against income shown in return of income. As I have already held that addition for undisclosed sale as estimated by the AO does not survive, net profit in present case for both the assessment years are estimated @ 17.5% on sales disclosed in return of income after rejecting books of account u/s 145(3) of the Act as under: A.Y Business Income before Interest and Remuneration (Rs.) Turnover as per books (Rs.) N.P at 17.5% (Rs.) Net Profit -Book Profit before Interest and Remuneration (Rs.) 2013-14 2014-15 37 06 468/- 27 76 035/- 37041 186/- 2 94 23 702/- 64 82 208/- 51 49 148/- 27 75 740/- 2373 113/- DCIT Vs. Heaven Associates & (6 appeals) DCIT Vs. Heaven Associates 32 Total 64 82 503/- 6 64 64 888/- 1 16 31 3557- 51 48 852/- It is also observed that as I have estimated net profit in both the assessment years, separate addition of interest expenditure as confirmed in A.Y. 2014-15 for unsecured loan taken from M/s Vansh Glass Pvt Limited cannot be made. In the nutshell, entire addition made by the AO for estimating undisclosed income, addition u/s 68 of the Act made on protective basis and interest paid on unsecured loans made in both the assessment years are deleted. The AO is directed to make addition on account of low gross profit for Rs.27,75,740/- in A.Y. 2013-14 and Rs.23,73,113/- in A.Y. 2014-15. Thus, related grounds of appeal are partly allowed.” 42. We have gone through the orders of the Ld.CIT(A) authorities. 43. We are not agreement with the ld.CIT(A)for estimating the net profit of the assessee by application of net profit rate of 17.5% to the turnover disclosed by the assessee in his books of accounts, based on net profit rate disclosed by other entities in the group to the Settlement Commission. An estimated net profit rate was applicable only in the circumstances where books of accounts of the assessee were found to be not reliable and rejected by the Department. In the present case, both the ld.CIT(A) and even ITAT have found no infirmity in the books of accounts of the assessee. All additions made by the AO on account of unsecured loans or unaccounted sale consideration have been deleted both by the CIT(A), and his order has been upheld by us above in the earlier part of this order. Therefore, no infirmity found in the books of accounts of the assessee. In the absence of any infirmity there is no reason to reject book results and estimate net profit rate. Accordingly, net profit applied at the rate of 17.5% of the turnover disclosed in the books of the assessee, is held to be untenable in law, and addition made on account of the same is directed to be deleted in both the years. The assessee’s appeal in both the years is accordingly allowed. 44. This issue also stands decided in favour of the assessee. DCIT Vs. Heaven Associates & (6 appeals) DCIT Vs. Heaven Associates 33 45. Having adjudicated the issues involved in the cross-appeals of the assessee and Revenue for A.Y 2013-14 and 2014-15,we shall now deal with the appeals ground wise for both the years. A.Y 2013-14 46. IT(SS)A No.86/Ahd/2018 (Revenues appeal): Grounds raised are as under: “(1) On the facts and circumstance Ld.CIT(A) has erred in law and on facts in deleting the protective addition of Rs.1,45,00,000/- made on account of unexplained cash credits. (2) On the facts and circumstance Ld.CIT(A) has erred in law and on facts Rs.14,64,691/- made on account of disallowance of interest on unexplained cash credits. (3) On the facts and circumstance of the case and in law, the Ld.CIT(A) has erred in deleting the addition of Rs.1,85,10,066/- made on account of unrecorded sales receipts.” 47. Ground No.1 and 2 of the appeal raised by the Revenue relates to the issue of addition under section 68 of the Act on account of unsecured loans taken by the assessee found to be bogus and disallowance of interest on unsecured loans. This issue has been dealt with by us in Issue No.(2) above against the Revenue’s appeal, and in favour of the assessee, and our findings are at paragraphs-38 to 40. Accordingly, ground no.1 and 2 of the Revenue are dismissed. 48. Ground No.3, relates to the issue of unaccounted sales/on- money receipt added to the income of the assessee, which has been dealt with by us at Issue No.1 (above) and adjudicating the issue in favour of the assessee, upholding the order of the ld.CIT(A) deleting DCIT Vs. Heaven Associates & (6 appeals) DCIT Vs. Heaven Associates 34 entire amount. Our finding are at paragraph-27 to 32 (above). Ground No.3 is therefore dismissed. In effect, the appeal of the Revenue is dismissed. 49. IT(SS)A.No.71/Ahd/2018 (Assessee’s appeal)Asst.Year 2013-14: Grounds raised are as under: 1. in taw and facts and circumstances of appellant's case, the Id, CIT (A) has directed A.O. to make addition on account of low gross profit for Rs.27,75,740/- on turnover shown in books of account without appreciating fact that both AC and CIT(A) has not found any discrepancies in books of account maintained by the appellant and same was not subject matter of addition made by A.O. 1.1 In law and Ld, CIT (A) has grossly erred in estimating-profit @ 17.5% in of appellant relying upon order of Settlement Commission passed in of group cases of appellant, without appreciating the fact that even as per his own stand, there is no on-money taken by the appellant in present project whereas in before Hon'ble Settlement Commission, during the course of search evidences were found that said concern have taken on-money on various projects executed by them, Addition made by the AO deserves to be deleted.” 50. Ground No.1 and 1.1 raised by the assessee are against addition made to the income of the assessee by estimating net profit earned by applying rate of 17.5% to its turnover, as disclosed by other entities of the assessee-group to the Settlement Commission. This issue has been dealt with by us at Issue No.3 (above) deleting the addition made. Accordingly, ground no.1 and 1.1 of the assessee’s both the appeals are allowed. 51. In effect, the appeal of the assessee is allowed. Asstt.Year 2014-15 52. ITA No.716/Ahd/2018 (Revenues appeal): DCIT Vs. Heaven Associates & (6 appeals) DCIT Vs. Heaven Associates 35 (1) On the facts and circumstances of the case and in law, the Ld.CIT(A) has erred in law and on facts in deleting the protective addition of Rs.1,43,00,000/- made on account of unexplained cash credits. (2) On the facts and circumstances of the case and in law, the Ld.CIT(A) has erred in law and on facts in deleting the addition of Rs.34,62,025/- made on account of disallowance of interest on unexplained cash credits. (3) On the facts and circumstances of the case and in law, the Ld.CIT(A) has erred in deleting the addition of Rs.86,33,266/- made on account of unrecorded sales receipts. 53. Ground No.1 and 2 of the appeal raised by the Revenue relates to the issue of addition under section 68 of the Act on account of unsecured loans taken by the assessee found to be bogus and disallowance of interest on unsecured loans. This issue has been dealt with by us in Issue No.(2) above against the Revenue’s appeal, and in favour of the assessee, and our findings are at paragraphs-38 to 40. Accordingly, ground no.1 and 2 of the Revenue are dismissed. 54. Ground No.3, relates to the issue of unaccounted sales/on- money receipt added to the income of the assessee, which has been dealt with by us at Issue No.1 (above) and adjudicating the issue in favour of the assessee, upholding the order of the ld.CIT(A) deleting entire amount. Our findings are at paragraph-27 to 32 (above). Ground No.3 is therefore dismissed. 55. In effect, the appeal of the Revenue is dismissed. 56. ITA.No.647/Ahd/2018 (Assessee’s appeal) Asst.Year 2014- 15: 1. In taw and facts and circumstances of appellant's case, the Id, CIT (A) has directed A.O. to make addition on account of low gross profit for Rs.23,73,113/- on turnover shown in books of account without appreciating fact that both AC and CIT(A) has not found any discrepancies in books of account maintained by the appellant and same was not subject matter of addition made by A.O. DCIT Vs. Heaven Associates & (6 appeals) DCIT Vs. Heaven Associates 36 1.1 In law and Ld, CIT (A) has grossly erred in estimating-profit @ 17.5% in of appellant relying upon order of Settlement Commission passed in of group cases of appellant, without appreciating the fact that even as per his own stand, there is no on-money taken by the appellant in present project whereas in before Hon'ble Settlement Commission, during the course of search evidences were found that said concern have taken on-money on various projects executed by them, Addition made by the AO deserves to be deleted.” 57. Ground No.1 and 1.1 raised by the assessee are against addition made to the income of the assessee by estimating net profit earned by applying rate of 17.5% to its turnover, as disclosed by other entities of the assessee-group to the Settlement Commission. This issue has been dealt with by us at Issue No.3 (above) deleting the addition made. Accordingly, ground no.1 and 1.1 of the assessee’s both the appeals are allowed. 58. In effect, the appeal of the assessee is allowed. 59. In the result, all the appeals of the Revenue are dismissed, appeals of the assessee are allowed. Cross objection of the assessee is dismissed. Order pronounced in the Court on 24 th March, 2023 at Ahmedabad. Sd/- Sd/- (T.R. SENTHIL KUMAR) JUDICIAL MEMBER (ANNAPURNA GUPTA) ACCOUNTANT MEMBER Ahmedabad, dated 24/03/2023 vk*