DCIT,Central-1, Bhopal, Bhopal V. M/s Regent Beers And Wines Ltd. , Indore

ITSSA 19/Ind/2020

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 4754 (ITAT-INDORE)
• Duration Of Justice: 2 year(s) 2 month(s) 11 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 17-04-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 05-02-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained investment; Unexplained expenditure; Business income; Depreciation; Search and seizure; Loose papers; Document seized; Opportunity of being heard; Additional evidence; Corroborative evidences; Notional interest; Commercial expediency; Documents seized; Capital expenditure
• Section: 68; 69; 145; 37; 132; 69C; 40A(3); 139; 143(3); 153A; 69B; 143(2); 69A; 192; 142(2A); 113; 73; 13; 153; 22; 153C

Judgement Text

आयकरअपील यअ धकरण,इंदौर यायपीठ,इंदौर IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI MAHAVIR PRASAD, JUDICIALMEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER VIRTUAL HEARING IT(SS)A No.19 to 21/Ind/2020 Assessment Years:2011-12, 2012-13 & 2014-15 DCIT Central-1 Bhopal बनाम/ Vs. M/s. Regent Beers & Wines Ltd. Indore (Appellant) (Respondent ) P.A. No.AAACR7950D Appellant by S/Shri Anil Kamal Garg & Arpit Gaur, CAs Respondent by Shri P.K. Mitra, CIT-DR Date of Hearing: 18.01.2022 Date of Pronouncement: 18.04.2022 आदेश / O R D E R PER BENCH: The above captioned appeals filed at the instance of the Revenue are directed against the Common Order of the Ld. Commissioner of Income Tax (Appeals)-3, Bhopal (in short ‘CIT(A)’), dated 01.11.2019, which is arising out of the Common Assessment Order u/s. 153A r.w.s. 143(3) of the Income-Tax Act, 1961 (in short, ‘the Act’) dated 13.08.2018 passed by the ACIT (Central) -I, Bhopal. IT(SS)A No.19 to21/Ind/2020 Assessment Years: 2011-12 to 2014-15 Regent Beers & Wine Ltd. 2 As submitted by the Ld. Counsel for the assessee and also duly accepted by the Ld. Departmental Representative that the issues raised in these appeals are common and inter-linked and as also, are arising out of the similar facts, for the sake of convenience and brevity, all these appeals were heard together on the request of both the parties and are being disposed off by this common order. 2.1 Grounds of appeal raised by the Revenue for AY 2011-12 in IT(SS)A No.19/Ind/2020: “1. On the fact and in the Circumstances of the case the Ld. CIT (A) has erred in not appreciating the facts mentioned in the remand report and in accepting the additional evidence submitted by the assessee during the appeal proceedings, without furnishing any proper justification or identifying the circumstances which have hindered the assessee to comply during assessment proceedings, as laid down in rule 46A of the Income Tax Rules, 1962. 2. On the fact and in the Circumstances of the case the Ld. CIT (A) erred in deleting the addition of Rs. 6,25,000/- made by the Assessing Officer on account of disallowance of expenses u/s. 40A(3) of the Income-Tax Act, 1961. 3. On the fact and in the Circumstances of the case the Ld. CIT (A) erred in deleting the addition of Rs. 4,17,36,813/- made by the Assessing Officer on account of unexplained expenditure” 2.2 Grounds of appeal raised by the Revenue for AY 2012-13 in IT(SS)A No.20/Ind/2020: “1. On the fact and in the Circumstances of the case the Ld. CIT (A) has erred in not appreciating the facts mentioned in the remand report and in accepting the additional evidence submitted by the assessee during the appeal proceedings, without furnishing any proper justification or identifying the circumstances which have hindered the assessee to comply during assessment proceedings, as laid down in rule 46A of the Income Tax Rules, 1962. 2. On the fact and in the Circumstances of the case the Ld. CIT (A) erred in deleting the addition of Rs. 43,807/- made by the Assessing Officer on account of disallowance of expenses u/s. 40A(3) of the Income-Tax Act, 1961. 3. On the fact and in the Circumstances of the case the Ld. CIT (A) erred in deleting the addition of Rs. 6,83,760/- made by the Assessing Officer on account of disallowance of expenses u/s. 40A(3A) of the Income-Tax Act, 1961. IT(SS)A No.19 to21/Ind/2020 Assessment Years: 2011-12 to 2014-15 Regent Beers & Wine Ltd. 3 4. On the fact and in the Circumstances of the case, the Ld. CIT (A) erred in deleting the addition of Rs. 6,77,31,617/- made by the Assessing Officer on account of undisclosed income” 2.3 Grounds of appeal raised by the Revenue for AY 2014-15 in IT(SS)A No. 21/Ind/2020: “1. On the fact and in the Circumstances of the case the Ld. CIT (A) has erred in not appreciating the facts mentioned in the remand report and in accepting the additional evidence submitted by the assessee during the appeal proceedings, without furnishing any proper justification or identifying the circumstances which have hindered the assessee to comply during assessment proceedings, as laid down in rule 46A of the Income Tax Rules, 1962. 2. On the fact and in the Circumstances of the case the Ld. CIT (A) erred in deleting the addition of Rs. 8,98,830/- made by the Assessing Officer on account of disallowance of expenses u/s. 40A(3) of the Income-Tax Act, 1961. 3. On the fact and in the Circumstances of the case the Ld. CIT (A) erred in deleting the addition of Rs. 10,60,043/- made by the Assessing Officer on account of disallowance of expenses u/s. 40A(3A) of the Income-Tax Act, 1961. 4. On the fact and in the Circumstances of the case, the Ld. CIT (A) erred in deleting the addition of Rs. 8,44,86,020/- made by the Assessing Officer on account of undisclosed income” 5. On the fact and in the Circumstances of the case, the Ld. CIT (A) erred in deleting the addition of Rs. 38,63,950/- made by the Assessing Officer on account of undisclosed income” 3.1 The brief facts of the case as culled out from the records are that the assessee is company carrying out the business of manufacturing of liquor. The assessee furnished its original returns of income for the various years u/s. 139 of the I.T. Act, 1961. Search and seizure operations u/s. 132 were carried out at various premises of Shivhare group and the assessee on 07/01/2016. Consequently, notices u/s. 153A were issued to the assessee for A.Y. 2010-11 to A.Y. 2015-16 on 13.02.2017. In response to the above notices, the assessee filed returns of income for A.Ys. 2010-11 to 2015-16 on 07/07/2017. The details of returns of income for A.Y. 2011-12, A.Y. 2012-13 and A.Y. 2014-15, the assessment years under appeal, are as under: A.Y. Date of filing of Return u/s. 139 Returned income (in Rs.) Date of filing of Return in response to the notice Income declared in Return u/s. 153A Additional Income offered, if any IT(SS)A No.19 to21/Ind/2020 Assessment Years: 2011-12 to 2014-15 Regent Beers & Wine Ltd. 4 u/s. 153A (in Rs.) (in Rs.) 2011-12 06.12.2011 (-)86,97,541 07.07.2017 (-)86,97,541 Nil 2012-13 30.09.2012 (-)2,53,19,737 04.04.2018 (-)2,53,19,737 Nil 2014-15 29.11.2014 (-)68,21,711 04.04.2018 (-)68,21,711 Nil 3.2 In case of the assessee, during the course of the assessment proceedings, a reference was made for special audit u/s. 142(2A) of the Act and accordingly, the special auditors submitted their report on 18.06.2018. The report of the special auditors, as produced by the assessee, was duly perused and considered by the AO and as also, by the CIT(A). A copy of the Special Auditors Report was also filed by the assessee before this Bench on 18/01/2022 which has been placed on record. 3.3 Finally, the AO made additions of Rs.6,77,31,617/- in A.Y. 2012-13 and Rs.8,44,86,020/- in A.Y. 2014-15 on account of undisclosed income being the difference in figures of capital as per Tally data of some ABC Ltd. and audited accounts (para 13), Rs.6,60,640/- in A.Y. 2014-15 on account of undisclosed income for carrying out Hawala Transactions (para 14), Rs.1,17,94,925/- in A.Y. 2014-15 on account of illegal expenditure recorded in the books of ABC Ltd. (para 15), Rs.6,25,000/- in A.Y. 2011-12, Rs.43,807/- in A.Y. 2012-13 and Rs.8,98,830/- in A.Y. 2014-15 on account of disallowance u/s. 40A(3) of the Act (Para 16), Rs.51,57,732/- in A.Y. 2014-15 on account of undisclosed transactions found recorded in the books of ABC Ltd. (Para 19), Rs.4,17,36,813/- in A.Y. 2011-12 on account of undisclosed expenditure in the form of Interest on capital (Para 20) and Rs.6,83,760/- in A.Y. 2012-13, Rs.6,95,276/- in A.Y. 2013-14 and Rs.10,60,043/- in A.Y. 2014-15 on account of disallowance u/s. 40A(3) of the Act (Para 22). 4. Aggrieved assessee preferred separate appeals for the subject assessment years under consideration before Ld. CIT(A). The ld. CIT(A), vide his common Order dated 01.11.2019 adjudicated the appeals of the assessee thereby giving substantial relief and also confirming certain additions for the assessment years under consideration. 5. We have been given to understand by both the parties that the appeals filed by the assessee against the Order of the ld. CIT(A) have got dismissed being withdrawn as the assessee had opted for Direct Tax Vivad se Vishwas Scheme in respect of its appeals. IT(SS)A No.19 to21/Ind/2020 Assessment Years: 2011-12 to 2014-15 Regent Beers & Wine Ltd. 5 6. However, aggrieved by the relief granted by the ld. CIT(A) to the assessee, the revenue is pursuing the appeals before this Tribunal for the assessment years under consideration. 7. As all the appeals of the Revenue relate to the same assessee and the issues raised are common, they were heard together and are being disposed off by this common order for sake of convenience and brevity. 8. Ground No. 1 of the Revenue for A.Ys. 2011-12, 2012-13 & 2014-15 8.1 Through the Ground No. 1, common for all the assessment years under consideration, the revenue has challenged the action of the ld. CIT(A) in not appreciating the facts mentioned in the remand report and in accepting the additional evidences submitted by the assessee during the appeal proceedings, without furnishing any proper justification or identifying the circumstances which have hindered the assessee to comply during the assessment proceedings, as laid down in Rule 46A of the Income-Tax Rules, 1962. 8.2 Before us, learned CIT(DR) vehemently argued that the ld. CIT(A), while passing the subject Order, has not appreciated the facts mentioned in the Remand Report by the AO. The ld. CIT(DR) further contended that during the course of the appeal proceedings, the assessee could not justify the circumstances which prevented it to make compliance before the AO as contemplated under Rule 46A of the Income-Tax Rules, 1962. 8.3 Per Contra, Learned Counsel for the assessee has filed written synopsis. The relevant portion of such synopsis is being reproduced as under: “D. Key Points of Assessee’s Submission and Relevant Pages of the Paper Book: In this context it is submitted as under: 1.01 During the course of the assessment proceedings, the AO did not afford reasonable opportunity of being heard to the assessee company. 1.02 Your Honours, the ld. CIT(A) vide Para (3) on page no. 21 of his Order has given categorical findings for acceptance of additional evidences furnished by the assessee. 1.03 Your Honours, the additional evidences so furnished by the assessee company during the course of the appellate proceedings were duly forwarded by the ld. CIT(A) to the AO for his comments. The AO has also furnished his remand reports before the ld. CIT(A) which are placed at IT(SS)A No.19 to21/Ind/2020 Assessment Years: 2011-12 to 2014-15 Regent Beers & Wine Ltd. 6 page no. 73 to 78 of our Paper Book for A.Y. 2012-13 and page no. 115 to 120 of Paper Book for A.Y. 2014-15. 1.04 Your Honours, the AO has been given the due opportunity by the ld. CIT(A) and the AO had duly verified the additional evidences so furnished by the assessee company and only thereafter, the remand report has been submitted by him before the ld. CIT(A). It is submitted that by furnishing the additional evidences by the assessee, no loss has caused to the revenue. Thus, the ground so raised by the revenue for acceptance of additional evidences for all the assessment years under consideration may kindly be dismissed.” E. Key Papers filed in the Paper Book (A.Y. 2012-13) on which the assessee wish to place reliance: S. No. Description of the document Page No. Remarks 1 Copy of Remand Report dated 25-06-2019 submitted by the AO for A.Y. 2010-11 to A.Y. 2012-13 73-78 (AY 2012-13) - 2 Copy of Remand Report dated 27-06-2019 submitted by the AO for A.Y. 2014-15 115-120 (AY 2014-15) - 8.4 Before us, the counsel of the assessee contended that in its case, during the course of the assessment proceedings, reasonable opportunity of being heard was not afforded to it and therefore, before the AO, many of the vital evidences having bearing on the issues in hand could not be furnished. It was contended that in its case, search u/s. 132 was carried out on 07/01/2016 and its case was centralized u/s. 127 with the AO on 25/11/2016. The first notices u/s. 153A were issued on 13/02/2017 and after receiving the notices, the assessee made request for providing copies of the documents seized during the course of the search which had taken quite a long time. Eventually, the assessee had furnished its returns u/s. 153A on 07/01/2017 and thereafter, in its case, a reference was made for the special audit u/s. 142(2A) on 22/12/2017 and Special Auditors had submitted their Report on 18/06/2018. After receiving the Report from the Special Auditors, the AO issued notice to the assessee on 23/07/2018 and finally, within 20 days, he framed the assessment orders on 13/08/2018 and due to paucity of the time, the assessee was prevented from furnishing the various evidences before the AO and therefore, the same were furnished before the ld. CIT(A) with a prayer for admission of such evidences under Rule 46A of the Income-Tax Rules, 1962. It was further contended that a copy of the additional evidences furnished by the assessee were duly provided by the ld. CIT(A) to the assessing officer and in IT(SS)A No.19 to21/Ind/2020 Assessment Years: 2011-12 to 2014-15 Regent Beers & Wine Ltd. 7 response, the assessing officer had duly submitted his remand report on 26/06/2019. Such fact is evident from the para (3) of the ld. CIT(A)’s Order at page no. 21. A copy of the Remand Report dated 25/06/2019 as submitted by the AO to the Office of the ld. CIT(A) is placed at page no. 73 to 78 of the Paper Book for A.Y. 2012-13. According to the assessee, in response to such Remand Report, the assessee had made its Counter Comments vide its letter dated 16/07/2019 which is placed at page no. 79 to 84 of the Paper Book for A.Y. 2012-13. It was further contended that the Remand Report and the Counter Comments were duly considered by the ld. CIT(A) before passing the impugned Order and therefore, there being no substance in the ground taken by the Revenue, the same deserves to be dismissed in limine. 9.1 We have heard rival contentions, perused the records placed before us, duly considered the facts and circumstances, carefully gone through the orders of lower authorities and written and oral submissions made from both the sides. We find merit that during the course of the assessment proceedings, the assessee could not get sufficient opportunity to furnish various documentary evidences in defense of its case. We find that the documents were duly furnished by the assessee before the ld. CIT(A) in accordance with the rule 46A of the Income Tax Rules, 1962. In our considered view, the CIT(A) has co- terminious power with that of an AO and if considering the genuine hardship of the assessee in furnishing the documentary evidences before the AO, for meeting the ends of the justice, CIT(A) would be well within his power to admit the evidences as additional evidences in accordance with the provisions of Rule 46A of the Income Tax Rules, 1962. However, whenever any additional evidences are admitted, the CIT(A) is duty bound to provide a copy of such additional evidences to the AO so that the AO after making further inquiry can make his comments on such evidences by way of a Remand Report. We find that in the instant case, the ld. CIT(A) has not only forwarded the additional evidences to the AO, but, on such additional evidences, the AO has also furnished his Remand report and we further find that in the impugned Order, the ld. CIT(A) has mentioned at many places that such Remand Report was duly taken into consideration while passing the impugned Order. We also find that before us, the ld. CIT(DR) could not point out any specific instance where the ld. CIT(A) had not taken the comments of the AO into his consideration. Thus, in our view, there was absolutely no violation of the provisions of Rule 46A of the Income Tax Rules, 1962 in the present case and therefore, the Ground No.1 of the Revenue for A.Y. 2011-12, A.Y. 2012-13 and A.Y. 2014-15, being devoid of any merit, is Dismissed. IT(SS)A No.19 to21/Ind/2020 Assessment Years: 2011-12 to 2014-15 Regent Beers & Wine Ltd. 8 10. Ground No. 2 of the Revenue for A.Ys. 2011-12, 2012-13 & 2014-15 and Ground No. 3 for A.Ys. 2012-13 & 2014-15 10.1 Through the Ground No. 2, common for all the assessment years under consideration, the revenue has challenged the action of the ld. CIT(A) in deleting the additions made by the AO on account of disallowance of expenses u/s. 40A(3) of the Act. Further, through the Ground No. 3 for A.Y. 2012-13 & A.Y. 2014-15, the revenue has challenged the action of the ld. CIT(A) in deleting the additions made by the AO on account of disallowance of expenses u/s. 40A(3A) of the Act. 10.2 Briefly stated facts of the issue, as culled out from the records, are that during the course of the assessment proceedings, the books of account of the assessee were audited by the Special Auditors and from such books of accounts, it was ascertained by the Special Auditors that the assessee during the A.Y. 2010-11 to A.Y. 2014-15, made cash expenditure in violation to the provisions of sections 40A(3)/40A(3A) of the Act. The AO vide para (16.7) at page no. 100 of her Order, has given a finding that the assessee could only provide the details of the botteling fees and Government Fees through challans but for remaining cash expenses, the assessee could not provide the necessary evidences. Further, as noted by the AO, various payments were also made by the assessee to sundry creditors in cash on regular basis. Accordingly, the AO made the additions of Rs.6,25,000/- in A.Y. 2011-12, Rs.43,807/- in A.Y. 2012-13 and Rs.8,98,830/- in A.Y. 2014-15 on account of disallowance u/s. 40A(3) of the Act (Para 16) and additions of Rs.6,83,760/- in A.Y. 2012-13, Rs.6,95,276/- in A.Y. 2013-14 and Rs.10,60,043/- in A.Y. 2014-15 on account of disallowance u/s. 40A(3) of the Act (Para 22). 10.3 Aggrieved with the Order of Assessment, the assessee preferred separate appeals for the subject assessment years before the ld. CIT(A). During the course of the first appellate proceedings, the assessee made detailed written submissions along with the documentary evidences. During the course of the appellate proceedings, Before the ld. CIT(A), the assessee also furnished certain documents, as additional evidences under Rule 46A which were forwarded to the Assessing Officer for comments. The copy of the Remand Report of the AO was provided by the ld. CIT(A) to the assessee and in response, the assessee filed its rejoinder. The Ld. CIT(A), after considering the remand report of the AO as well as the rejoinder of the assessee, deleted the entire additions made by the AO on this count. While deleting the additions for various assessment years, the ld. CIT(A) held that some of the cash payments were made by the IT(SS)A No.19 to21/Ind/2020 Assessment Years: 2011-12 to 2014-15 Regent Beers & Wine Ltd. 9 assessee to the labours and the contractors under compulsion as they had went on strike asking for immediate payments. The ld. CIT(A) also found that some of the payments were in the nature of capital expenditure and therefore, the same could not be subject matter of disallowance u/s. 40A(3). The ld. CIT(A) also found that although in respect of some expenditure, a consolidate entry have been made in the books of account comprising of various expenditure, but, as evident from the invoices furnished by the assessee, all these expenses were below the prescribed limit of Rs. 20,000/-. In respect of the freight expenses, the ld. CIT(A) observed that the assessee company had reimbursed a consolidated payment to its transport manager and transport manager had incurred the expenditure on various occasions below the limit prescribed u/s. 40A(3) of the Act. For the sake of ready reference, the relevant findings given by the ld. CIT(A) at paras (4.3.2)(b), (4.3.2)(c) and (4.3.2)(e) of his order are reproduced as under: “(b) Assessment Year 2011-12:- On perusal of written submissions filed by the appellant, it has been observed that the appellant has made cash payment of (i) Rs. 2,50,000/- on 17.01.2011 to M/s Baba Shree Bottling Co. and (ii) Rs. 3,75,000/- on 05.01.2011 to Mr Anilesh Tomar. (i) Payments made to M/s Baba Shree Botteling Co. The appellant during the course of appellate proceedings submitted that appellant was in contract with M/s Baba Shree Bottling Co for proving labour for cleaning, filling and packaging of beer bottles and the payments were made after completion of the month to contractor and the contractor shall pay the same to the workers. However, due to liquidity crunch the payments to contractor got delayed and the payments to worker subsequently got delayed. Therefore, all the workers on 17.01.2011 went on a strike demanding their pending dues. Due to strike by all the workers the production work came to halt and appellant in order to maintain smooth production of goods made partial payment to contractor in cash and the same was distributed among the workers. The appellant has taken plea that due to business exigencies the payment of Rs. 2,50,000/- was made in cash. After considering the facts of the case, it is clear that the payments were made in order to call off the strike by workers. Strike by the workers/workforce is not a routine work and is only done once for a while in order to fulfill their demand. In the instant case their dues have not been cleared by the appellant due to financial crunch faced by the appellant. Therefore, the appellant in these exceptional circumstances or say due to these circumstances the appellant was forced to make payment in cash over and above Rs. 20,000/- as per section 40A(3) and has violated the provisons of the said section. Thus the identity of the contractor, the genuineness of the transaction and the exceptional circumstances IT(SS)A No.19 to21/Ind/2020 Assessment Years: 2011-12 to 2014-15 Regent Beers & Wine Ltd. 10 warranting cash payment in the interest of business are duly established. Now the only issue which remains for adjudication is whether a genuine recorded transaction undertaken in cash in the best interest of the business and otherwise allowable can be disallowed only on a mere technical default. Reference in this regards is made to the decision of the Hon’ble Supreme Court in the case of Attar Singh Gurmukh Singh v. ITO 59 taxmann.com 11 wherein the object of insertion of section 40A(3) and rule 6DD was explained by the Hon’ble Court as under: “The terms of section 40A (3) are not absolute. Consideration of business expediency and other relevant factors are not excluded. The genuine and bona fide transactions are not taken out of the sweep of the section. It is open to the assessee to furnish to the satisfaction of the Assessing Officer the circumstances under which the payment in the manner prescribed in section 40A (3) was not practicable or would have caused genuine difficulty to the payee. It is also open to the assessee to identify the person who has received the cash payment..” Relying on these observation of the Hon’ble Rajasthan High Court in the case of Harshila Chordia vs. ITO 298 ITR 349 has held that list of exceptions provided under rule 6DD is not exhaustive. Meaning thereby that more could be read into it, if the same does not violate the reason for which section 40A (3) was introduced. The court held that:- “......Apparently, this provision was directly related to curb the evasion of tax and inculcating the banking habits. Therefore, the consequences, which were to befall on account of non-observation of sub-section (3) of section 40A must have nexus to the failure of such object. Therefore the genuineness of the transactions and it being free from vice of any device of evasion of tax is relevant consideration which has been overlooked by the Tribunal” The Jaipur Bench of the ITAT in its recent judgment in the case of M/s A Daga Royal arts v ITO (ITA 1065/JP/2016) delivered on 15.05.2018 have considered various decisions of various courts and tribunals and concluded that “In the entirety of facts and circumstances of the case and respectfully following the legal proposition laid down by the various Courts and Coordinate Benches referred supra, we are of the view that the identity of the persons from whom the various plots of land have been purchased and source of cash payments as withdrawals from the assessee’s bank IT(SS)A No.19 to21/Ind/2020 Assessment Years: 2011-12 to 2014-15 Regent Beers & Wine Ltd. 11 account has been established. The genuineness of the transaction has been established as evidenced by the registered sale deeds and lastly, the test of business expediency has been met in the instant case. Further, as held by the Hon’ble Rajasthan High Court in case of Harshila Chordia (supra), the consequences, which were to befall on account of non- observation of sub-section (3) of section 40A must have nexus to the failure of such object. Therefore the genuineness of the transactions and it being free from vice of any device of evasion of tax is relevant consideration. The intent and the purpose for which section 40A (3) has been brought on the statute books has been clearly satisfied in the instant case. Therefore, being a case of genuine business transaction, no disallowance is called for by invoking the provisions of section 40A (3) of the Act. In the case of the assessee the genuineness of the payments are free from doubt and there is no attempt made by the assessee for evasion of any of its tax liability by making payment in cash and accordingly respecting the judgments of the various courts mentioned above the addition made of Rs. 2,50,000/- is directed to be deleted. (ii) Payments made to Shri Anilesh Tomar:- The appellant has strongly contended that a sum of Rs. 3,75,000/- has been received from Shri Anilesh Tomar against sale of car by the appellant company. However, the said car was not sold to Shri Anilesh Tomar, therefore, amount received from Shri Anilesh Tomar was returned back on 05.01.2011. In support appellant has also filed copy of ledger account of Shri Anilesh Tomar. Appellant by taking alternative plea stated that no claim has been made u/s 67 or under any other provision of law. On perusal of copy of ledger account of Shri Anilesh Tomar it is evident that sum of Rs. 3,75,000/- has been receive by appellant on 30.11.2010 and sum of Rs. 3,75,000/- was paid on 05.01.2011. The aforesaid sum has been received against sale of car and lateron the same was returned back. The provisions of sections are only applicable in the case of payment or expenditure made or incurred towards business or profession. In the instant case the beneficial owner does not comes under the preview of clause (b) of sub section (1) of section 40A of the Act. Thus, provisions of section 40A(3) have not been violated by the appellant. Therefore, addition made by the AO amounting to Rs. 3,75,000/- is deleted. (c) Assessment Year 2012-13:- On perusal of written submissions filed by the appellant, it has been observed that the appellant has made cash payment of (i) Rs.43,807/- towards vehicle running and maintenance expenses and (ii) Rs. 6,83,760/- on 05.01.2011 to Mr Yogesh Bottlewala. IT(SS)A No.19 to21/Ind/2020 Assessment Years: 2011-12 to 2014-15 Regent Beers & Wine Ltd. 12 (i) Payments made towards Vehicle running and maintenance:-The appellant during the course of appellate proceedings has taken a plea that a sum of Rs. 43,807/- has been spent on running and maintenance of vehicle which include following payments:- Payment made to Rajpal car Décor for Vehicle repairing Rs. 23,164/- Payment made to Bharmal Glass House for Glass purchase Rs. 5,250/- Payment made to tyre Tune UP for Vehicle repairing (labour) Rs. 250/- Payment made to RR Tyrage Pvt Ltd for purchase of tyre 14,800/- Payment made towards toll charges Rs. 84/- Payment made to Virendra Tyre Service Rs. 80 Misc vehicle and running maintenance expenses R. 179/- Appellant has also filed copy of invoice of payment made to Rajpal Car Décor. On perusal of copy of the said invoice it was observed that no payment is made towards expenses not relating to the vehicle repair and maintenance also none of the expense is excessive. The payment made by the appellant under consideration except one i.e. payment made to M/s Rajpal Car Decor is over threshold limit of Rs. 20,000/-. Also, the payment was made toward a genuine transaction. Now it is for the AO to examine the expenditure and create a nexus that the expenditure claimed is excessive and not relating to business which is clearly missing in the instant case. Therefore, addition made by the AO amounting to Rs. 43,807/- is deleted. (ii) Payment made to Shri Yogesh Bottlewala:- The appellant during the course of appellate proceedings submitted that none of the payment was made over Rs. 20,000/-. On perusal of copy of ledger account scanned by AO on page no 134 in the body of assessment order it is abundantly clear that none of the payment was made in violation to provisions of section 40A(3) of the Act. Hon’ble ITAT Delhi Bench in the case of S R C Aviation P Ltd vs DCIT (2012) 13 ITR 600 (Del Trib) has held that where in any case the payments made in cash were less than the limit prescribed u/40A(3) and the same facts has been accepted/confirmed by the other party accepting such payment, then no disallowance can be made under the provision of section 40A(3) of the Act. Therefore, addition made by the AO amounting to Rs. 6,83,760/- is deleted. IT(SS)A No.19 to21/Ind/2020 Assessment Years: 2011-12 to 2014-15 Regent Beers & Wine Ltd. 13 (e) Assessment Year 2014-15:- On perusal of written submissions filed by the appellant, it has been observed that the appellant has made cash payment of (i) Rs.6,07,460/- to Shri R S Bhadoriya, (ii) Rs. 55,000/- to Shri Ritesh Raghuvanshi on 25.10.2013, (iii) Rs. 55000/- to Shri Rakesh Goswami on 25.10.2013, (iv) Rs. 1,00,800/- towards freight expenses on 04.01.2014, (v) Rs. 50,370/- towards purchase of civil item on 12.07.2013 and (vi) Rs. 10,60,043/- to M/s yash Enterprises. (i) Payment made to Shri R S Bhadoriya:- On perusal of written submissions filed by the appellant it is observed that sum of Rs. 6,07,460/- has been paid to Shri R S Bhadoriya who manages routine operations of logistic services of finished goods from factory to various state Excise Depots. The imprest money is used to make payments for daily routine expenses and are fully recorded under head ‘Freight Outward’ and ‘Loading & Hammali’ expenses. On perusal of copy of statement showing details of expenses incurred against imprest payment to Shri R S Bhaduria the payments have been made toward freight charges in multiple of Rs. 7,500/- and that to on different dates and to different vehicle driver/owner. Thus, from above it is very clear that payment have been made towards freight charges and are also under threshold limit of Rs. 35,000/-. Therefore, addition made by the AO amounting to Rs. 6,07,460/- is deleted. (ii) Payment made to Shri Ritesh Raghuvanshi:- Appellant through its written submissions has stated that Shri Ritesh Raghuvanshi is a marketing manager and sum of Rs. 55,000/- was given as an imprest money. The imprest money is given to meet travelling, lodging, boarding and other expenses of marketing team. The actual expenditure made by Shri Ritesh Raghuvanshi was Rs. 45,634/- and residual imprest money has been adjusted with their salary. In support appellant has also filed copies of tour bills of Shri Ritesh Raghuvanshi. On perusal of the copies of tour bills it is observed that the bills include expenses of stay, food, transportation and mobile bills and are below the threshold limit of Rs. 20,000/-. Thus, addition made by the AO amounting to Rs. 55,000/- is deleted. (iii) Payment made to Shri Rakesh Goswami:- Appellant through its written submissions has stated that Shri Rakesh Goswami is a marketing manager and sum of Rs. 55,000/- was given as an imprest money. The imprest money is given to meet travelling, lodging, boarding and other expenses of marketing team. The actual expenditure made by Shri Rakesh Goswami was Rs. 43,474/- and residual imprest money has been adjusted with their salary. In support appellant has also filed copies of tour bills of Shri Rakesh Goswami. On perusal of the copies of tour bills it is observed that the bills include expenses of stay, food, transportation and mobile bills and are below the threshold limit of Rs. 20,000/-. Thus, addition made by the AO amounting to Rs. 55,000/- is deleted IT(SS)A No.19 to21/Ind/2020 Assessment Years: 2011-12 to 2014-15 Regent Beers & Wine Ltd. 14 (iv) Payment towards freight expenses:-The appellant during the course of appellate proceedings has submitted that payment of Rs. 1,00,800/- has been made to M/s Iarl Logistcs against three different freight invoices for transport of its goods from the factory premises at Maksi to Deharadun Excise Depot. The payments were made on three different dates, however, the invoices were submitted on a later date. In support appellant has filed copies of invoices dated 06.01.2014, 07.01.2014 & 08.01.2014 amounting to Rs. 33,600/- each. On perusal of copy of these invoices it is clear that the provisions of section 40A(3A) are not attracted and therefore, addition made by the AO amounting to Rs. 1,00,800/- is deleted. (v) Payments made towards purchase of civil item:- The appellant before me has taken a plea that sum of Rs. 50,370/- has been spent on civil construction which has been duly capitalized in audited books of company and no claim of deduction of payment has been made by the appellant company. Clearly, the provisions of section 40A(3)/40A(3A) comes into action when there is claim of any expenditure or payment relating to business. In the instant case the expenditure is towards civil construction is duly recorded in books of accounts of the appellant. Further, appellant did not claim any deduction w.r.t the said expenditure, therefore, provisions of section are not attracted. Thus, addition made by the AO amounting to Rs. 50,370/- is deleted. (vi) Payments made to M/s Yash Enterprises:- The appellant during the course of appellate proceedings submitted that none of the payment was made over Rs. 20,000/-. On perusal of copy of ledger account scanned by AO on page nos 130 & 131 in the body of assessment order it is abundantly clear that none of the payment was made in violation to provisions of section 40A(3) of the Act. Hon’ble ITAT Delhi Bench in the case of S R C Aviation P Ltd vs DCIT (2012) 13 ITR 600 (Del Trib) has held that where in any case the payments made in cash were less than the limit prescribed u/40A(3) and the same facts has been accepted/confirmed by the other party accepting such payment, then no disallowance can be made under the provision of section 40A(3) of the Act. Therefore, addition made by the AO amounting o Rs. 10,60,043/- is deleted. In view of the above discussion, the addition made by the AO amounting to Rs. 14,45,478/- & 3,96,635/- in AY 2010-11, Rs. 6,25,000/- in AY 2011-12, Rs. 43,807/- & 6,83,760/- in AY 2012-13, Rs. 3,41,086/- & 6,95,276/- in AY 2013- 14 and Rs. 8,98,830/- & Rs. 10,60,043/- in AY 2014-15 are Deleted. Therefore, appeal on this ground is Allowed. 10.4 Aggrieved with the additions deleted by the ld. CIT(A), the revenue is in appeal before us. IT(SS)A No.19 to21/Ind/2020 Assessment Years: 2011-12 to 2014-15 Regent Beers & Wine Ltd. 15 10.5 Before us, learned CIT(DR) vehemently argued supporting the observations of the AO on this issue. 10.6 Per Contra, Learned Counsel for the assessee has filed written synopsis. The relevant part of the assessee's submission is being reproduced as under: “D. Key Points of Assessee’s Submission and Relevant Pages of the Paper Book: In this context it is submitted as under: FOR A.Y. 2011-12: 1.00 At the outset, it is submitted that impugned addition of Rs.6,25,000/- made by the learned AO on account of disallowance of expenses paid in cash in excess of Rs.20,000/- by invoking the provisions of s.40A(3) of the Act, suffers from the legal deficiency inasmuch such addition has been made by the learned AO merely on the basis of entries found recorded in the regular books of account by the Special Auditors. It is submitted that on the date of initiation of the search under s. 132, no assessment proceeding was pending in respect of the assessment year under consideration and therefore, without having recourse to any seized incriminating document or material, no addition can be made in respect of the discrepancies found in the books of account of the assessee. 2.00 Your Honours, it is submitted that subject addition of Rs.6,25,000/- for A.Y. 2011-12, appears to have been made by the ld. AO on the basis of findings given by the special auditors in his report submitted under s. 142(2A) of the Act. During the course of the special audit, the special auditor went through the tally ledger account of the assessee company and from such tally ledger account only, the special auditors noticed that the assessee had made cash payments exceeding a sum of Rs.20,000/- which were liable for disallowance under s. 40A(3). 2.01 Your Honours, during the course of assessment proceedings, the learned AO had required the assessee to show-cause as to why the proposed addition in respect of cash payments exceeding a sum of Rs.20,000/- be not disallowed under the provisions of s.40A(3). In response to the aforesaid query, the assessee made its necessary detailed explanation with relevant documentary evidences. Accordingly, the ld. AO, partially, accepted the explanation of the assessee company, thereby rejecting the explanation of the assessee company in respect of the payments of Rs.6,25,000/- made by the assessee to two parties, as per the details given below : (Amount in Rs.) S. No. Particulars Date of Payment Amount (i) Payment made to Baba Shree Bottling Co. 17-01-2011 2,50,000 (ii) Payment made to Shri Anilesh Tomar 05-01-2011 3,75,000 IT(SS)A No.19 to21/Ind/2020 Assessment Years: 2011-12 to 2014-15 Regent Beers & Wine Ltd. 16 TOTAL 6,25,000 3.00 Your Honours, now as regard the addition of Rs. 2,50,000/- made in respect of alleged payments made to M/s. Baba Shree Bottling Co., it is submitted that the special auditors, have extracted the details from the ledger accounts maintained by the assessee in its tally system. A copy of the relevant ledger account, in the books of account of the assessee for the relevant previous year, is placed at PB Page No. 220. 3.01 Your Honours, it submitted that the assessee company had entered into a contract outsourcing of labour with the aforesaid concern i.e. Baba Shree Bottling Co. and under such contract, Baba Shree Bottling Co. supplied labourer to the assessee company for washing, filling and packing of Beer bottles. On a perusal of the ledger account submitted above it shall be observed by Your Honour that the assessee company first used to avail services from Baba Shree Bottling Co. and then at the month end makes payment through account payee cheques or online banking services. However, during the year there was only instance where the assessee company was required to make payment exceeding Rs.20,000/- in cash. 3.02 Your Honours, during the relevant previous year only once i.e. on 17-01- 2011, the assessee company made payment to the aforesaid contractor through cash and such payment too was made under the compelling circumstances. It is submitted that due to liquidity crunch, the assessee company was not keeping itself regular in making payment of dues to the contractor and in turn, the contractor was also not keeping regular in making payment to the workers. In such circumstances, all of a sudden, on 17-01-2011, the workers of the factory went on a strike demanding their dues from the contractor. In turn, the contractor demanded its money from the assessee company. As due to strike by the workers, the entire production had got at a halt, the assessee company, as a prudent businessman, opted to make partial payment to workers by way of making cash payment to the contractor. It shall thus be appreciated by Your Honours that the payment of Rs.2,50,000/- was made by the assessee company under a business compulsion and therefore, the same was allowable under s. 40A(3) of the Act read with rule 6DD of the Income-Tax Rules, 1962. 3.03 Your Honours, in order to substantiate the aforesaid claim of the assessee, we have furnished a copy of labour payment statement showing details of payment to the various workers along with their acknowledgment of receipt of such money, which is placed at PB Page No. 221 to 223. On a perusal of such statement, it shall be appreciated that all such cash payments were made by the assessee company to different persons on a single day and that too below the limit of Rs.20,000/- prescribed under s.40A(3). 4.01 Your Honours, as regard the remaining addition of Rs.3,75,000/- made by the learned AO in respect of cash payment to Shri Anilesh Tomar, on 05-01-2011, it is submitted that the aforesaid addition has been made by the learned AO IT(SS)A No.19 to21/Ind/2020 Assessment Years: 2011-12 to 2014-15 Regent Beers & Wine Ltd. 17 merely on the basis of some findings given by the special auditor’s in their audit report, which is factually incorrect. 4.02 Your Honours, the Special Auditors as well as the learned AO, both failed to appreciate that in respect of the aforesaid payment of Rs.3,75,000/-, the assessee company has not made any claim for expenditure either for the assessment year under consideration or any other assessment year. It is submitted that the aforesaid payment of Rs.3,75,000/- has been made by the assessee company against an equivalent sum of Rs.3,75,000/- received against the sale of car by the assessee company on 30-11-2010. Such fact is evident from the copy of the ledger account of Shri Anilesh Tomar in the books of account of the assessee for the relevant previous year which is placed at PB Page no. 224. 4.03 Your Honours, since in respect of the subject payment of Rs.3,75,000/- the assessee company has not made any claim either under section 37 or under any other provision of the law. The question of any disallowance under s. 40A(3) does not arise. 5.00 Your Honours, it is further submitted that the assessee had maintained regular books of account in its ordinary course of business and such books of account were subject to audit under the provisions of s.44AB of the Income Tax Act, 1961, by a firm of qualified chartered accountants, who after scrutinizing such books comprising of bills, vouchers and ledgers, in depth, as per the requirements of Income Tax Law has duly issued an unqualified Tax-Audit report to the assessee company. A copy of such Tax Audit Report is placed at page no. 99 to 113 of our paper book. Your Honour, the Tax-auditor’s at clause no. 17(h) of the tax audit report has issued a clean report for compliance of the provisions of s.40A(3) by the assessee company [Refer PB Page No. 102]. Such fact speaks in volume to the effect that there was no violation on the part of the assessee company in complying with the provisions of s.40A(3). 6.00 Your Honours, the ld. CIT(A) after considering the facts and circumstances of the case as well as written and oral submissions made by the assessee on the subject issue, Remand Report of the AO and Rejoinder of the assessee, has deleted the entire addition made by the AO on the subject issue. As against the relief so granted by the ld. CIT(A), the Revenue is in appeal before this Hon’ble Bench. In view of the facts and circumstances of the case, it is submitted that the addition of Rs.6,25,000/- so made by the learned AO by invoking the provisions of s.40A(3) of the Act was rightly deleted by the ld. CIT(A) and therefore, the action of the ld. CIT(A) deserves to be upheld by this Hon’ble Bench. FOR A.Y. 2012-13: 1.00 Your Honours, at the outset, it is submitted that impugned additions of Rs.43,807/- and Rs.6,83,760/- made by the learned AO on account of disallowance of expenses paid in cash in excess of Rs.20,000/- by invoking the IT(SS)A No.19 to21/Ind/2020 Assessment Years: 2011-12 to 2014-15 Regent Beers & Wine Ltd. 18 provisions of s.40A(3) of the Act, suffers from the legal deficiency inasmuch such addition has been made by the learned AO merely on the basis of entries found recorded in the regular books of account by the Special Auditors. It is submitted that on the date of initiation of the search under s. 132, no assessment proceeding was pending in respect of the assessment year under consideration and therefore, without having recourse to any seized incriminating document or material, no addition could have been made on the allegation of some discrepancies found in the books of account of the assessee. 2.00 Your Honours, without prejudice to the above, it is submitted that impugned additions of Rs.43,807/- and Rs.6,83,760/- were not called in view of the facts and circumstances of the case as discussed in the ensuing paras. 3.00 Your Honours, it is submitted that subject additions of Rs.43,807/- and Rs.6,83,760/-, appears to have been made by the ld. AO on the basis of findings given by the special auditors in his report submitted under s. 142(2A) of the Act. During the course of the special audit, the special auditor went through the tally ledger account of the assessee company and from such tally ledger account only, the special auditors noticed that the assessee had made cash payments exceeding a sum of Rs.20,000/- which were liable for disallowance under s. 40A(3). 3.01 Your Honours, during the course of assessment proceedings, the learned AO had required the assessee to show-cause as to why the proposed addition in respect of cash payments exceeding a sum of Rs.20,000/- be not disallowed under the provisions of s.40A(3). In response to the aforesaid query, the assessee made its necessary detailed explanation with relevant documentary evidences. Accordingly, the ld. AO, partially, accepted the explanation of the assessee company, thereby rejecting the explanation of the assessee company in respect of the payments of Rs.43,807/- and Rs.6,83,760/-. 4.01 Your Honours, as regard the addition of Rs.43,807/- on the allegation cash payment in excess of Rs.20,000/-, it is submitted that the aforesaid expenses pertains to payment made towards Vehicle Running & Maintenance expenses incurred by the assessee company. 4.01.1 Your Honours, it is submitted that the assessee company on 21-12-2011 had payment of Rs.43,807/- towards various vehicle running & maintenance expenses and the same had been recorded in the books of account by passing only one consolidated single entry by the accountant. However, the subject cash payment of Rs.43,807/- was actually paid by the assessee company in respect of various expenses to different persons on the same day and thus, the provisions of section 40A(3) does not attract. A summary of such expenses along with the details of relevant documentary evidence is being given in a tabular form as under: S. No. Particulars Amount Documentary Evidence (Invoice) 1. Payment made to Rajpal Car Decor for Vehicle Repairing 23,164 A-5.01 [PB Page no. 59 & IT(SS)A No.19 to21/Ind/2020 Assessment Years: 2011-12 to 2014-15 Regent Beers & Wine Ltd. 19 60] 2. Payment made to Bharmal Glass House for Glass purchase 5,250 A-5.02 [PB Page no.61] 3. Payment made to Tyre Tune UP for Vehicle Repairing (Labour) 250 A-5.03 [PB Page no.62] 4. Payment made to R.R. Tyreage Pvt. Ltd. for purchase of tyre 14,800 A-5.04 [PB Page no.63] 5. Payment made towards Toll Charges 84 A-5.05 [PB Page no.64] 6. Payment made to Virendra Tyre Services for 80 A-5.06 [PB Page no.65] 7. Misc. vehicle & running maintenance expenses 179 - TOTAL 43,807 4.01.2 Your Honours, on a perusal of the table above and the documents submitted hereinabove it shall be observed that except making one payment of Rs.23,164/- all other payments were below the prescribed limit of Rs.20,000/- and therefore, at the worst, the addition under s. 40A(3) could have been made to the extent of Rs.23,164/- only. 5.00 Your Honours, as regard the remaining addition of Rs.6,83,760/-, made by the learned AO under s. 40A(3) in the assessee’s income, in respect of payment made to one Mr. Yogesh Bottlewala, it is submitted that as per the copy of the ledger account of Shri Yogesh Bottlewala, scanned by the learned AO herself at page no. 134 of the impugned assessment order, the entire payment has been made in the small trenches of Rs.20,000/- only. It is submitted that the learned AO, merely on guess work, surmises and conjectures, leveled the actual tally account found during the course of search as a manipulated account of the assessee. It is submitted that the learned AO could not assign any single basis for her such assumption or allegation. She could not bring on record, either by way of conducting necessary enquiry from the payee or by any other means, any material to disprove the claim of the assessee that it had made payment to the extent of a sum of Rs.20,000/- only to the payee on different dates. It is submitted that since the payee was not inclined to accept the payment through banking channel, the assessee, instead of making the lump-sum payment, made the payment to the extent of the sum permissible as per law, in accordance with the provisions of section 40A(3) of the Act. It is submitted that the law does not prohibit any person to make payment of any sum to the extent of Rs.20,000/- in cash to a person on different dates instead of making a lump-sum payment. 6.00 Your Honours, it is further submitted that the assessee had maintained regular books of account in its ordinary course of business and such books of account were subject to audit under the provisions of s.44AB of the Income Tax Act, 1961, by a firm of qualified chartered accountants, who after scrutinizing such books comprising of bills, vouchers and ledgers, in depth, as per the requirements of Income Tax Law has duly issued an unqualified Tax-Audit report to the assessee company. A copy of such Tax Audit Report is placed at page no. IT(SS)A No.19 to21/Ind/2020 Assessment Years: 2011-12 to 2014-15 Regent Beers & Wine Ltd. 20 25 to 38 of our paper book. Your Honour, the Tax-auditor’s at clause no. 17(h) of the tax audit report has issued a clean report for compliance of the provisions of s.40A(3) by the assessee company [Refer PB Page No. 28]. Such fact speaks in volume to the effect that there was no violation on the part of the assessee company in complying with the provisions of s.40A(3). 7.00 Your Honours, the ld. CIT(A) after considering the facts and circumstances of the case as well as written and oral submissions made by the assessee on the subject issue, Remand Report of the AO and Rejoinder of the assessee, has deleted the entire addition made by the AO on the subject issue. As against the relief so granted by the ld. CIT(A), the Revenue is in appeal before this Hon’ble Bench. In view of the facts and circumstances of the case, it is submitted that the additions of Rs.43,807/- and Rs.6,83,760/- so made by the learned AO by invoking the provisions of s.40A(3) of the Act were rightly deleted by the ld. CIT(A) and therefore, the action of the ld. CIT(A) deserves to be upheld by this Hon’ble Bench. FOR A.Y. 2014-15: 1.00 Your Honours, at the outset, it is submitted that impugned additions of Rs.8,98,830/- (sic.Rs.8,68,830/-) and Rs.10,60,043/-, as made by the learned AO on account of disallowance of expenses paid in cash in excess of Rs.20,000/- by invoking the provisions of s.40A(3) of the Act, suffers from the legal deficiency inasmuch such addition has been made by the learned AO merely on the basis of entries found recorded in the regular books of account by the Special Auditors. It is submitted that on the date of initiation of the search under s. 132, no assessment proceeding was pending in respect of the assessment year under consideration and therefore, without having recourse to any seized incriminating document or material, no addition could have been made on the allegation of some discrepancies found in the books of account of the assessee. 2.00 Your Honours, without prejudice to the above, it is submitted that impugned additions of Rs.8,98,830/- (sic.Rs.8,68,830/-) and Rs.10,60,043/- were not called in view of the facts and circumstances of the case as discussed in the ensuing paras. 3.00 Your Honours, it is submitted that subject additions of Rs.8,98,830/- and Rs.10,60,043/-, appears to have been made by the ld. AO on the basis of findings given by the special auditors in their report submitted under s. 142(2A) of the Act. During the course of the special audit, the special auditor went through the tally ledger account of the assessee company and from such tally ledger account only, the special auditors noticed that the assessee had made cash payments exceeding a sum of Rs.20,000/- which were liable for disallowance under s. 40A(3). IT(SS)A No.19 to21/Ind/2020 Assessment Years: 2011-12 to 2014-15 Regent Beers & Wine Ltd. 21 3.01 Your Honours, during the course of assessment proceedings, the learned AO had required the assessee to show-cause as to why the proposed addition in respect of cash payments exceeding a sum of Rs.20,000/- be not disallowed under the provisions of s.40A(3). In response to the aforesaid query, the assessee made its necessary detailed explanation with relevant documentary evidences. However, the ld. AO, only partially accepted the explanation of the assessee company, thereby rejecting the explanation of the assessee company in respect of the payments of Rs.8,98,830/- and Rs.10,60,043/- made by the assessee to different persons, as per the details given below : (Amount in Rs.) S. No. Particulars Date of Payment Amount I. Payment made for expenses 1. Payment made to Shri R.S. Bhadoriya 01-04-2013 1,30,660 31-05-2013 3,55,000 01-06-2013 1,21,800 Sub-Total (1) 6,07,460 2. Payment made to Shri Ritesh Raghuvanshi for salary 25-10-2013 55,000 3. Payment made to Shri Rakesh Goswami for salary 25-10-2013 55,000 4. Payment made for freight expenses 04-01-2014 1,00,800 5. Payment made to purchase of civil item 12-07-2013 50,370 TOTAL (I) 8,68,630 II. Payment made to various persons 6. Payment made to M/s. Yash Enterprises - 10,60,043 TOTAL (II) 10,60,043 GRAND TOTAL [ (I) + (II) ] 19,28,673 3.01 Your Honours, as regard the cash payment of Rs.6,07,460/- serialized at S. no. 1 of the table above, it is submitted that the Shri R.S. Bhadoriya is an employee of the assessee company, managing the routine operations of the assessee company in respect of logistic services of finished products from the factory premises to the various State Excise Depots. For the same, the assessee company used to make a lump-sum payment to the Shri R.S. Bhadoriya as an Imprest and in turn the employee Shri R.S. Bhadoriya from the imprest money, used to make payments in respect of the logistics arrangements and labour services, to different persons on the basis of services availed for the assessee company. The expenses so incurred by the employee are recorded in the books of account of the assessee company under the head of ‘Freight Outward’ and ‘Loading & Hammali’ expenses, on the basis of the actual invoices/receipts/voucher provided by Shri R.S. Bhadoriya to the assessee company. 3.01.1 Your Honours, it is submitted that none of the payments made by Shri R.S. Bhadoriya, at any instance, during the relevant previous year was not above the threshold limit of Rs.35,000/-, as prescribed under s. 40A(3) for goods plying services. In evidence of our aforesaid assertion, we have furnished copies of IT(SS)A No.19 to21/Ind/2020 Assessment Years: 2011-12 to 2014-15 Regent Beers & Wine Ltd. 22 statements showing details of expenses incurred against the Imprest payment of Rs.6,07,460/- as submitted by Shri R.S. Bhadoriya, which are placed at PB Page No. 82 to 85. 3.02 Your Honours, as regard the two cash payments of Rs.55,000/- made to Shri Ritesh Raghuvanshi and Shri Rakesh Goswami, each, serialized at S. No. 2 & 3 of the table, it is submitted that aforesaid persons are marketing managers of the assessee company and the subject payments of Rs.55,000/- are in nature of imprest money payment to such marketing employees to bear their tour travelling expenses in respect of lodging, boarding and stay. 3.02.1 Your Honours, as against the imprest payments, as aforesaid, the employees Shri Ritesh Raghuvanshi and Shri Rakesh Goswami had actually incurred expenses amounting to Rs.45,634/- and Rs.43,474/- respectively. Further, the residual imprest money of Rs.9,366/- and Rs.11,526/- respectively had been adjusted towards their salary for the respective period. It is submitted that the actual expenses as incurred by them on tour were below the threshold limit of Rs.20,000/-. In evidence of the same we have furnished a statement as prepared by the aforesaid employees mentioning the details of the expenses, which is placed at PB Page no. 86 to 91. 3.03 Your Honours, as regard the cash payment of Rs.1,00,800/- serialized at S. No.4 of the table above, it is submitted that the aforesaid payment was made to M/s. Iarl Logistics by the assessee against three different freight invoices for transport of its goods from the factory premises situated at Maksi to Deharadun Excise Depot. It is submitted that the aforesaid payments were actually made on three different dates by the assessee company to the aforesaid entity and that too below the threshold limit of Rs.35,000/- as applicable in the instant case, but only one consolidated entry against the same was recorded in the books on a single date solely for the reason that the freight invoices were provided by the aforesaid entity on a later date to the assessee. In support of the same we have furnished the copies of the relevant freight invoices for kind perusal and record of Your Honour, which are placed at PB Page no. 92 to 94. 3.04 Your Honours, as regard the cash payment of Rs.50,370/- serialized at S. No.5 of the table above, it is submitted that the aforesaid payment has been made by the assessee company in respect of its civil construction which has duly been capitalized in its audited books of account. It is submitted that since the assessee has not made any claim in respect of the aforesaid payment, the question of disallowance thereof under s. 40A(3) does not arise. 4.01 Your Honours, as regard the remaining addition of Rs.10,60,043/-, made by the learned AO under s. 40A(3) in the assessee’s income, in respect of payment made to M/s. Yash Enterprises, it is submitted that as per the copy of the ledger account of the M/s. Yash Enterprises, scanned by the learned AO herself at page no. 130 & 131 of the impugned assessment order, the entire payment has been made in the small trenches below Rs.20,000/- only. It is submitted that for the relevant previous year the assessee had not made any IT(SS)A No.19 to21/Ind/2020 Assessment Years: 2011-12 to 2014-15 Regent Beers & Wine Ltd. 23 payments to the aforesaid concern in respect of any expenditure which is incurred by it during the relevant previous year, whereas, such payment is in respect of discharge of its opening liability standing towards expenditure incurred by the assessee company in earlier years. Thus, the learned AO was not justified in making the subject addition under the provisions of s.40A(3) of the Act and thus the addition so made is illegal and bad-in-law and deserves to deleted on this count only. 4.02 Your Honours, without prejudice to the above, it is submitted that the learned AO, merely on guess work, surmises and conjectures, leveled the actual tally account found during the course of search as a manipulated account of the assessee. It is submitted that the learned AO could not assign any single basis for her such assumption or allegation. She could not bring on record, either by way of conducting necessary enquiry from the payees or by any other means, any material to disprove the claim of the assessee that it had made payment to the extent of a sum of Rs.20,000/- only to the payee on different dates. It is submitted that since the payee was not inclined to accept the payment through banking channel, the assessee, instead of making the lump-sum payment, made the payment to the extent of the sum permissible as per law, in accordance with the provisions of section 40A(3) of the Act. It is submitted that the law does not prohibit any person to make payment of any sum to the extent of Rs.20,000/- in cash to a person on different dates instead of making a lump-sum payment. 5.00 Your Honours, it is further submitted that the assessee had maintained regular books of account in its ordinary course of business and such books of account were subject to audit under the provisions of s.44AB of the Income Tax Act, 1961, by a firm of qualified chartered accountants, who after scrutinizing such books comprising of bills, vouchers and ledgers, in depth, as per the requirements of Income Tax Law has duly issued an unqualified Tax-Audit report to the assessee company. A copy of such Tax Audit Report is placed at page no.35 to 61 of our paper book. Your Honour, the Tax-auditor’s at clause no. 21(d) of the tax audit report has issued a clean report for compliance of the provisions of s.40A(3) by the assessee company [Refer PB Page No. 43]. Such fact speaks in volume to the effect that there was no violation on the part of the assessee company in complying with the provisions of s.40A(3). 6.00 Your Honours, without prejudice to the above, although, in the instant case, imprest payments were made in cash by the assessee company in excess of the limits of s.40A(3), which in turn, were actually expended in trenches below the limit as prescribed under s.40A(3), it is submitted that such payments were only made by the assessee company in order to meet its commercial expediency and not with an intention to evade tax. Further, the genuineness of the aforesaid transactions as entered into by the assessee are established beyond all doubts in view of the ample of documentary evidences as furnished hereinabove. Therefore, no disallowance is called for in view of the following judicial pronouncements: i) Jitendra Kumar Mandleena Vs. ITO (2014) 23 ITJ 644 (Indore Trib.) IT(SS)A No.19 to21/Ind/2020 Assessment Years: 2011-12 to 2014-15 Regent Beers & Wine Ltd. 24 ii) Santosh Traders vs. ITO (2004) 23 CCH 0024 (Cauttack Trib.) 7.00 Your Honours, the ld. CIT(A) after considering the facts and circumstances of the case as well as written and oral submissions made by the assessee on the subject issue, Remand Report of the AO and Rejoinder of the assessee, has deleted the entire addition made by the AO on the subject issue. As against the relief so granted by the ld. CIT(A), the Revenue is in appeal before this Hon’ble Bench. In view of the facts and circumstances of the case, it is submitted that the additions of Rs.8,98,830/- and Rs.10,60,043/- made by the AO by invoking the provisions of s.40A(3) of the Act were rightly deleted by the ld. CIT(A) and therefore, the action of the ld. CIT(A) deserves to be upheld by this Hon’ble Bench. E. Key Papers filed in the Paper Book on which the assessee wish to place reliance: S. No. Description of the document Paper Book Page Reference Page No. A.Y. 1 Copy of Abstract of Special Auditor’s report giving the details of alleged cash payments exceeding a sum of Rs.20,000/- 219 A.Y. 2011-12 2 Copy of ledger account of Shree Balaji Bottling Co. in the books of account of the assessee company for the F.Y. 2010-11 220 A.Y. 2011-12 3 Copy of labour payment statement evidencing payment of wages to various workers 221-223 A.Y. 2011-12 4 Copy of ledger account of Anilesh Tomar in the books of account of the assessee company for the F.Y. 2010- 11 224 A.Y. 2011-12 5 Xerox copies of invoices aggregating to a sum of Rs.43,807/- in respect of payments made against vehicle running & maintenance expenses 59-65 A.Y. 2012-13 6 Copies of statements showing details of expenses incurred against the Imprest payment of Rs.6,07,460/- as submitted by Shri R.S. Bhadoriya 82-85 A.Y. 2014-15 7 Copies of statements showing details of expenses incurred against the Imprest payments of Rs.55,000/-, as submitted by the marketing personnels 86-91 A.Y. 2014-15 8 Xerox copies of freight invoices raised by M/s. Iarl Logistics 92-94 A.Y. 2014-15 9 Remand Report of the AO dated 25-06-2019 for the A.Y. 2011-12 & A.Y. 2012-13 73-78 A.Y. 2012-13 10 Rejoinder of the assessee dated 16-07-2019 for the A.Y. 2011-12 & A.Y. 2012-13 79-84 A.Y. 2012-13 11 Remand Report of the AO dated 27-06-2019 for the A.Y. 2014-15 115-120 A.Y. 2014-15 12 Rejoinder of the assessee dated 16-07-2019 for the A.Y. 2014-15 121-127 A.Y. 2014-15 IT(SS)A No.19 to21/Ind/2020 Assessment Years: 2011-12 to 2014-15 Regent Beers & Wine Ltd. 25 10.7 Besides filing the written submission, as extracted hereinabove, before us, the counsel of the assessee also argued the making of the additions by the AO on legal ground. It was contended by the counsel that in the case of the assessee, search and seizure operations u/s. 132 were carried out on 07/01/2016 whereas, much before the date of the search the assessee had furnished its return of income u/s. 139 of the Act i.e. on 06/12/2011 for A.Y. 2011-12, on 30/09/2012 for A.Y. 2012-13 and on 29/11/2014 for A.Y. 2014- 15, as noted by the AO herself at para (5.0) of the Assessment Order. It was further contended that on the date of the search, assessment proceedings in respect of such assessment years were not pending and further, the time limit for issuance of notice u/s. 143(2) in respect of such assessment years had got expired much prior to the date of the search. Accordingly, the assessment years under consideration were completed assessment years and therefore, in view of the settled position of law, in respect of such completed assessment years, no addition in an assessment made u/s. 153A could have been made without having recourse to any incriminating material. It was further contended that from the assessment order, it is evident that the subject additions u/s. 40A(3)/40A(3A) were made by the AO only on the basis of the report submitted by the Special Auditors u/s. 142(2A) of the Act from the examination of the regular audited books of account. Thus, according to the counsel of the assessee, such additions being not based upon any incriminating material or evidence found during the course of the search, the same were liable to be deleted in view of the decisions of the various Courts, especially the cases of CIT vs Kabul Chawla 380 ITR 573 (Del.), Jai Steel (India) vs. CIT (2013) 259 CTR 281 (Raj.), Income Tax v. Continental Warehousing Corporation (Nhava Sheva) Ltd. [2015] 58 Taxmann.Com 78 (Bom), Pr. CIT vs. Saumya Construction Pvt. Ltd. (2016) 387 ITR 529 (Guj.) and Kalani Brothers in IT(SS)A No. 71/Ind/2014 (ITAT Indore). 11.1 We have heard rival contentions, perused the records placed before us, duly considered the facts and circumstances, carefully gone through the orders of the authorities below, Special Auditors Report, written and oral submissions made from both the sides and also gone through the judgments and decisions referred to and relied upon by both the sides. 11.2 We find that the AO, while making the impugned additions on account of disallowance u/s. 40A(3)/ 40A(3A) of the Act in the assessment years under consideration, has not made any single reference to any incriminating material found during the course of the search. Before us, the ld. CIT (DR) has also not brought on record any single incriminating material on the basis whereof the additions have been made by the AO in the assessment order for the years under consideration. We find that the years under appeals are non-abated IT(SS)A No.19 to21/Ind/2020 Assessment Years: 2011-12 to 2014-15 Regent Beers & Wine Ltd. 26 assessment years. It is a settled proposition of law that addition in non-abated assessment years can be made only on the basis of incriminating material found during the course of search. 11.3 We find support from the decision of the Hon’ble Delhi High Court in the case of CIT vs. Kabul Chawla (2016) 380 ITR 53 (Del HC) wherein the Hon’ble Court after considering various judgments had dealt with this issue as under: “37. On a conspectus of Section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under: i. Once a search takes place under Section 132 of the Act, notice under Section 153 A (1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place. ii. Assessments and reassessments pending on the date of the search shall abate. The total income for such AYs will have to be computed by the AOs as a fresh exercise. iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO has the power to assess and reassess the 'total income' of the aforementioned six years in separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of the six AYs "in which both the disclosed and the undisclosed income would be brought to tax". iv. Although Section 153 A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment "can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material." v. In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153 A is relatable to abated proceedings (i.e. those pending on the date of search) and the word 'reassess' to completed assessment proceedings. vi. Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the AO. vii. Completed assessments can be interfered with by the AO while making the assessment under Section 153 A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment.” IT(SS)A No.19 to21/Ind/2020 Assessment Years: 2011-12 to 2014-15 Regent Beers & Wine Ltd. 27 11.4 The above stated ratio laid down by the Hon’ble Delhi High Court has been applied by this Tribunal in the case of Kalani Bros. [IT(SS) No.71/Ind/2015 dated 6.11.15] observing as follows:- "We have heard both the sides. We have also gone through the case laws relied upon by both the sides. We have also considered various relevant facts of the case. It is a settled legal position that once a search and seizure action has taken place u/ s 132 of the Act or a requisition has been made u/ s 132A, the provisions of section 153A trigged and Assessing Officer is bound to issue notice u/ s 153A of the Act. Once notices are issued u/ s 153A of, the Act then assessee is legally obliged to file return of income for six years. The assessment and reassessment for six years shall be finalised by the Assessing Officer. It is also held by various Courts that once notice u/ s 153A of the Act issued, then assessment for six years shall be at large both for Assessing Officer and assessee have no warrant of law. It has been also held that in the assessment years where assessments have been abated in terms of second proviso to section 153A then Assessing Officer acts under original jurisdiction and one assessment is made for total income including the addition made on the basis of seized material. But where there is no abatement of assessments and assessments were completed on the date of search then addition can be made only on the basis of incriminating documents or undisclosed assets, etc. In these cases there was no incriminating document found and seized. No assessment proceedings were abated in these assessees. Thus assessments for these assessment years were completed on the date of search. The assessments were completed u/ s 143(3} of the Act read with section 153A/ 153C of the Act after the search. There was no abatement of any proceedings in these cases for these assessment years in terms of second proviso to section 153A of the Act. There is no seized material belonging to the assessee which was found and seized in relation to additions made. In. a recent decision, Hon'ble Delhi High Court in the case of CIT vs. Kabul Chawla (supra) has held that completed assessments can be interfered with by the Assessing Officer while making assessment u/ s 153A of the Act, only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which was not produced or not already disclosed or made known in the course of original assessment. In. all these cases no assessments were pending on the date of search for these assessment years. No assessments were abated in terms of second proviso to section 153A of the Act. Hon'ble Delhi High / Court in the case of CIT vs. Kabul Chawla (supra) has considered various High Court decisions relied upon by the learned DR. The Hon'ble Delhi High Court has considered the cases of Canara Housing Development Co. vs. DCfT; Madugula vs. DCIT; CIT vs. Chetandas Laxmandas and CIT vs. Anil Kumar Bhatia (supra). The only decision of the Hon'ble Allahabad High Court in the case of CIT vs. Raj Kumar Arora; 367 ITR 517 relied on by the learned DR was not considered by Hon'ble Delhi High Court while deciding the issue in the case of Kabul Chawla. The Hon'ble Allahabad High Court has reversed the order of the Tribunal and remanded the issue to the Tribunal to consider the appeal of the department on merits. It is a settled legal position that when two views are possible on a particulars issue then the view favourable to the assessee should be followed as held by the Hon'ble Apex Court in the case of CIT vs. Vegetable Products; 88 ITR IT(SS)A No.19 to21/Ind/2020 Assessment Years: 2011-12 to 2014-15 Regent Beers & Wine Ltd. 28 192. Respectively following the decision of the Hon'ble Apex Court, we dismiss the ground of appeals of the Revenue. Departmental appeals are disposed accordingly." 11.5 Similar view also taken in the case of DCIT, Indore vs. Shri Satish Neema (2020) 37 ITJ 308 (Trib. Indore). Relevant extract of the decision is reproduced below: “19. We therefore respectfully following the decision referred above and also considering the latest judgement of Hon'ble High court of Delhi in the case of Pr. CIT & Ors. Vs. Meeta Gutgutia (supra) come to the conclusion that since the assessment orders in question were concluded and non-abated assessments no addition can be made in the assessment proceedings u/s 153A of the act unless there is any incriminating material found during the course of search. We find no inconsistency in the finding of Ld. CIT(A) quashing the assessment proceedings u/s 153A of the Act since the additions were not made on the basis of any incriminating material found during the course of search. Thus revenue's appeal for Assessment Years 2005-06, 2006- 07 and 2009-10 stands dismissed.” 11.6 This Tribunal in the case of Rajmohan Agrawal (Ind), Bhopal vs. ACIT- 2(1), Bhopal [IT(SS)A No.04/Ind/2019 Order dated 07-09-2021] has held as under: “9. We find that the year under appeal is A.Y. 2006-07. Time limit of issuance of notice u/s 143(2) of the Act for selecting assessee’s case for scrutiny expires on 30th September 2007. Search was conducted on 13.11.2007. Except registered sale deed no other incriminating material was found. Consideration mentioned in the registered sale deed is duly accounted for. Other evidences are gathered by the Ld. AO by issuing notice u/s 131 of the Act and statement of the sellers were recorded during the course of assessment proceedings. The year under appeal is a non-abated assessment year. Addition in such non-abated assessment years can be made only on the basis of incriminating material found during the course of search. 10. Our this proposition is supported by the judgment of Hon'ble Delhi High Court in the case of CIT vs. Kabul Chawla 280 ITR 570 and in the case of Pr. CIT vs. Meeta Gutgutia 395 ITR 526. We have also followed this ratio in the case of Satish Neema –IT(SS)A No.149/Ind/2016 dated 07.02.2020. Ld. DR failed to bring any other binding precedence in its favour. We, therefore, respectfully following the above referred decisions allow the legal ground raised by the assessee and delete the impugned addition.” IT(SS)A No.19 to21/Ind/2020 Assessment Years: 2011-12 to 2014-15 Regent Beers & Wine Ltd. 29 11.7 Thus, respectfully following the settled judicial precedence which are squarely applicable on the instant issue, we are of the view that no addition could have been made by the AO in the assessee’s income in a completed year of assessment without having recourse to any incriminating material. We find full substance in the legal plea taken by the assessee that all the assessment years under appeal are those in respect of which no assessment proceedings could be said to be pending on the date of initiation of the search in the case of the assessee on 07/01/2016 and therefore, merely on the basis of entries found recorded in the regular audited books of account of the assessee, no addition could have been made for making disallowance u/s. 40A(3)/40A(3A) of the Act. We are also of the view that in respect of unaccounted transactions, since the assessee itself is not claiming any deduction or allowance, the provisions of ss. 40A(3) & 40A(3A) cannot be invoked. Even on the merits of disallowances, we find that the ld. CIT(A) has given separate specific findings in respect of each and every item of the disallowances made by the AO and we find that the ld. CIT(A) has rightly analyzed the fact & circumstances prevailing at the time of making each of the payments. Thus, in our considered view, there is absolutely no infirmity in the findings given by the CIT(A) and accordingly, the Ground No. 2 for A.Ys. 2011-12, 2012-13 & 2014-15 and Ground No. 3 for A.Ys. 2012-13 & 2014-15 of the Revenue are hereby Dismissed. 12. Ground No. 3 of the Revenue for A.Y. 2011-12 12.1 Through this ground of appeal, the revenue has challenged the action of the ld. CIT(A) in deleting the addition of Rs.4,17,36,813/- in A.Y. 2011-12 on account of unexplained expenditure. 12.2 Briefly stated facts of the issue, as culled out from the records, are that during the course of the search and seizure action u/s. 132 of the Act carried out in the premises of Shri Ramesh Chandra Rai, at Q-8, Ras Bahar, Jhansi (U.P.), one loose paper inventorized at page no. 23 of UPS-1 A-4 was found and seized. The AO, from the subject loose papers, noted that the seized document contains details of summary of capital and interest working as on 31.03.2011 in M/s. Regent Beers and Wines Ltd. by three groups namely some Gautam Group (37.5%), Rai Group (31.25%) and Kedia Group (31.25%). The AO further noted that the following companies have paid amounts towards share capital of the assessee company (1) Premier Forest India Ltd. (Rs.1,28,35,000/-); (2) Calcutta Developers Pvt. Ltd. (Rs.55,00,000/-); (3) Royal Highland Distilleries Ltd. (Rs.5,12,54,974/-); and (4) Lord Krishna (Rs.1,63,92,726/-). It was also IT(SS)A No.19 to21/Ind/2020 Assessment Years: 2011-12 to 2014-15 Regent Beers & Wine Ltd. 30 observed by the AO that interest has been paid on share capital which is not an admissible expense. Further, as per the AO, these investing companies were having no revenue from business activity and were also not having any fixed assets in their audited financial statements which could have justified the huge capital provided by them to the assessee. Therefore, the assessee was required by the AO to show cause as to why no addition should be made on this count. The assessee furnished its reply before the AO, which has also been reproduced by the AO at para (20.4) of the Assessment Order, contending that during the relevant previous year, the assessee had not accepted any fresh share capital and the entire funds were obtained prior to 31/03/2009 as is evident from the seized document itself. The AO made inquiry in respect of the investing companies and found that these companies were only operating for name sake without any fixed asset and business premises. Finally, vide para (20.4) of the Order, the AO made an addition of Rs. 4,17,36,813/- in the assessee’s income on account of unexplained expenditure of the assessee in capital. 12.3 Aggrieved with the Order of Assessment, the assessee preferred an appeal for the subject assessment year before the ld. CIT(A). During the course of the first appellate proceedings, the assessee made detailed written submissions along with the documentary evidences which were also furnished by it before the AO. The ld. CIT(A), while giving his findings at para (4.5.2) of his Order, noted that the subject seized loose paper pertains to period from 01.04.2006 to 31.03.2009 and are carried forward till 31.03.2011. The ld. CIT(A) further observed that the share capital was introduced between F.Y. 2006-07 (A.Y. 2007-08) to F.Y. 2008-09 (A.Y. 2009-10) which is also verifiable from the audited balance sheet of the assessee company on record. Thus, the ld. CIT(A) observed that since no fresh share capital was introduced during the relevant previous year, no addition u/s. 68 could have been made on this count. Accordingly, the ld. CIT(A) deleted the entire addition of Rs.4,17,36,813/- thereby giving full relief to the assessee. 12.4 Aggrieved with the relief granted by the ld. CIT(A), the revenue is in appeal before us. 12.5 Before us, learned CIT(DR) vehemently argued supporting the observations of the AO on this issue. 12.6 Per Contra, Learned Counsel for the assessee has filed written synopsis. The relevant portion of such synopsis is being reproduced as under: IT(SS)A No.19 to21/Ind/2020 Assessment Years: 2011-12 to 2014-15 Regent Beers & Wine Ltd. 31 “D. Key Points of Assessee’s Submission and Relevant Pages of the Paper Book: In this context it is submitted as under : 1.00 Your Honours, the impugned addition of Rs.4,17,36,813/- has been made by the learned AO on the basis of a loose paper seized from the premises of Shri Ramesh Chand Rai, one of the directors of the assessee company, inventorized as UPS-1, A-4, Page 23. Such loose paper appears to be in the form of a computerized excel sheet, containing summary of some rough working of capital & interest on capital as on 31-03-2011. A copy of the said loose paper is placed at PB Page no. 225. 2.01 Your Honours, based upon the aforesaid loose paper, during the course of the assessment proceeding, the learned AO vide her show-cause notice dated 23- 07-2018, required the assessee to furnish its explanation on the said loose paper. 2.02 Your Honours, in response to the aforesaid query, the assessee vide its letter dated 04-08-2018, furnished its detailed explanation on the subject loose paper. The entire explanation of the assessee has duly been reproduced by the learned AO at para (20.4) on page no. 118 of the impugned Order. However, for a ready reference of Your Honour, the relevant abstract of the assessee reply is being reproduced as under: “13. EXPLANATION ON ALLEGED UNEXPLAINED INCOME IN THE FORM OF SHARE CAPITAL INTRODUCED THROUGH SHELL COMPANY OF Rs.8,59,82,700/- AND ALLEGED UNDISCLOSED EXPENDITURE THROUGH INTEREST ON CAPITAL OF Rs.4,17,36,813/- In this context, it is submitted that the loose papers as referred by your good self in the captioned query are in the form of computerized excel sheets prepared in respect of our company. It is submitted that in the subject loose paper, some details regarding capital employed and interest have been given. Madam, on a careful examination of such excel sheet, we have noted that the excel sheet was prepared to have an analysis of the estimated return on proposed investment in the company. As regard, allegation made by your good self regarding undisclosed income in the form share capital introduced through shell company of Rs.8,59,82,700/-, it is submitted that the entire share capital from four companies namely, Premier Forests India Pvt. Ltd. [1,28,35,000], Calcutta Developers Pvt. Ltd. [55,00,000], Royal Highland Distilleries Ltd. [5,12,54,974] and Lord Krishna [1,63,92,726] were genuinely taken by our company before 31-03-2009. In other words, these share capital were not taken during the periods under assessment viz. A.Y. 2010- 11 to A.Y. 2016-17. Our such assertion is evident from the copy of your Annexure G-1 itself in which there is mention of two periods i.e. one from 01-04-2006 to 31- 03-2009 and another from 01-04-2009 to 31-03-2011. Further, against the name IT(SS)A No.19 to21/Ind/2020 Assessment Years: 2011-12 to 2014-15 Regent Beers & Wine Ltd. 32 of every shareholder/share applicant, the position of his share capital/share application as of 31-03-2009 and 31-03-2011 has been stated. It shall be observed that against the names of all the above said four companies, the amount of share capital/share application, under the period of 01-04-2006 to 31- 03-2009, has duly been stated which clearly proves that such amount was taken by our company prior to 31-03-2009. Madam, as regard alleged payment of interest, it is submitted that first of all under the provisions of Companies Act, 1956, no interest on any equity share capital can be paid by any company to any shareholder and we were not an exception to it. Even otherwise it is submitted that the said excel sheet appears to be in the nature of some analysis for the purpose of computing return on investment made in the company. In view of the above facts and circumstances, it is submitted that no additions, as proposed at Rs.8,59,82,700/- and 4,17,36,813/- deserves to be made on these counts.” 3.00 Your Honours, despite making the explanation as mentioned above, the ld. AO made the addition of Rs.4,17,36,813/- in the assessee’s income on the allegation of unexplained interest expenditure incurred by the assessee company. According to the learned AO, the assessee could not produce its books of account and further, could not demonstrate, by evidence, that the interest expenses were not actually incurred by the assessee. 4.00 Your Honours, as regard the first basis taken by the learned AO that no books of account were produced, it is submitted that such a finding is factually incorrect. The fact remained that first of all such books of account were seized in the soft copies from the premises of the assessee during the course of the search proceedings. Secondly, such books of account were duly produced by the assessee before the Special Auditors. It shall be appreciated that had the assessee not produced the books of account before the Special Auditors, the instances of cash payments exceeding Rs.20,000/- could not have been noticed by the Special Auditors. The production of books of account by the assessee before the Special Auditors has been admitted by the learned AO herself at para (22) of the impugned assessment order. It is submitted that in the instant case, the learned AO too has made the separate addition, on the allegation of cash payment, by invoking the provisions of section 40A(3) of the Act and such a finding could have not been given by the learned AO without first going through the books of account of the assessee. Even otherwise, it is submitted that a negative aspect i.e. non-incurrence of certain expenditure could not have been established by the assessee from its books of account. It is submitted that only if the assessee would have actually incurred such expenditure and claimed the same then only, he could have prove such claim with the assistance of books of account, which is not a case here. 4.01 Your Honours, as regard the second basis taken by the learned AO for making the impugned addition i.e. the assessee could not produce any positive IT(SS)A No.19 to21/Ind/2020 Assessment Years: 2011-12 to 2014-15 Regent Beers & Wine Ltd. 33 evidence to establish that interest expenses were not actually incurred, again, it is submitted that the law does not pre-suppose an assessee to establish a non- existing or a negative fact. The assessee by making its written explanation as aforesaid had denied to have made any payment of interest expenditure as alleged and by its denial it had discharged its initial onus. Thereafter, the onus had got shifted to the learned AO and it was the learned AO who was required to establish with any positive evidence that the assessee, in fact had incurred any interest expenditure. However, in the instant case, the learned AO miserably failed to discharge his onus. 4.02 Your Honours, in the instant case, except relying upon the subject excel sheet, the learned AO did not conduct any independent enquiry from the companies/ persons whose names were found mentioned on the subject excel sheet. The learned AO grossly erred in not accepting and considering the explanation of the assessee that under the Companies Act, 1956, then prevailing, it was prevented from making payment of interest on its share capital. The learned AO, without assigning any reason, did not consider the explanation of the assessee that the calculation of the interest might have been merely a computation of notional interest on the funds introduced by various entities, in the assessee company by way of share capital. It is submitted that many a times merely for working out the opportunity cost, such notional interest is computed without there being any actual payment of interest. It is submitted that from the excel sheet no way it appears that the interest payment, as computed in the said sheet, was actually made by the assessee company. 5.00 Your Honours, without prejudice to the above, it is submitted that the learned AO made the impugned addition without proper application of her mind inasmuch, on the one hand she alleged that the companies/ persons whose names were found mentioned in the excel sheet were not genuine and existing company and on the other hand, the learned AO alleged that the assessee made payment of interest to such companies. It is submitted that if according to the learned AO herself the entities whose names were written on the subject excel sheet were not in existence then the question of payment of any interest to such entities would not have arisen. 6.00 Your Honours, it is a settled law that merely on the basis of some excel sheet, no addition can be made without there being any corroborative evidence. It is submitted that from the subject excel sheet, which was not found from the business premises of the assessee but only from one of the directors of the assessee company, at the worst, the amount of notional interest on the share capital invested by various entities can be inferred but it cannot be said that the notional interest so computed was actually paid by the assessee company during the relevant previous year so as to attract the provisions of section 69C or any other deeming provisions of the Act. It is submitted that by any stretch of imagination, the actual payment of interest computed up till 31-03-2011 could not have been supposed to be made during the financial year 2010-11 itself. So, even on this count, no addition on the allegation of unexplained expenditure could have been made for the assessment year under consideration i.e. A.Y. 2011-12. IT(SS)A No.19 to21/Ind/2020 Assessment Years: 2011-12 to 2014-15 Regent Beers & Wine Ltd. 34 7.00 Your Honours, the ld. CIT(A) after considering the facts and circumstances of the case as well as written and oral submissions made by the assessee on the subject issue, Remand Report of the AO and Rejoinder of the assessee, has deleted the entire addition made by the AO on the subject issue. As against the relief so granted by the ld. CIT(A), the Revenue is in appeal before this Hon’ble Bench. In view of the facts and circumstances of the case, the impugned addition of Rs.4,17,36,813/- on the allegation of unexplained interest expenditure, was rightly deleted by the ld. CIT(A) and therefore, the action of the ld. CIT(A) deserves to be upheld by this Hon’ble Bench. E. Key Papers filed in the Paper Book (A.Y. 2011-12) on which the assessee wish to place reliance: S. No. Description of the document Page No. Remarks 1 Copy of the loose paper seized and inventoried as UPS-1, A-4, Page No.23, provided to the assessee in form of ‘Annexure G-1’ to the show cause notice dated 23-07-2018. 225 - 13.1 We have heard rival contentions, perused the records placed before us, duly considered the facts and circumstances, carefully gone through the orders of lower authorities and written and oral submissions made from both the sides and also gone through the judgments and decisions referred to and relied upon by both the sides. We have carefully gone through the seized document inventorised as as UPS-1, A-4, Page No.23, a copy whereof has been filed by the asessee in his Paper Book for A.Y. 2011- 12 at page no. 225. The same has also been scanned by the AO at page no. 116 of her Assessment Order. On a perusal of such seized document, we find that it is in the form of some computerized excel sheet with the heading ‘Summary of Capital and Interest Workings as on 31.03.2011’. We find that in such excel sheet, in the first column, name of various persons/entities have been mentioned whereas, at column no. 2 & 3, details of capital and interest against such persons for the period from 01.04.2006 to 31.03.2009 have been mentioned and likewise, under column no. 4 & 5, the similar details of capital and interest workings for the period 01.04.2009 to 31.03.2011 have been mentioned. We find that the entire capital balance which is appearing under the column of capital as on 31.03.2011 was also appearing, and in some case even with a higher amount, IT(SS)A No.19 to21/Ind/2020 Assessment Years: 2011-12 to 2014-15 Regent Beers & Wine Ltd. 35 under the column of capital as on 31.03.2009. Thus, in our considered view, both the AO and ld. CIT(A) has taken a correct view that during the year under consideration, the assessee company had not accepted any fresh capital from any of the shareholders. 13.2 We find that in the instant case, the AO has made the addition of Rs. 4,17,38,813/- in the assessee’s income on the basis of the amount written under the head interest in the seized document. We find that on the basis of such seized document, the AO reached to the conclusion that the assessee had actually incurred such expenses and such expenses were also claimed by it in its books of account. For reaching such conclusion, the AO took a stand that no books of accounts were produced and therefore, whether or not such expenses have been claimed by the assessee in its books of accounts could not be verified at her end. According to the AO, the assessee has claimed such interest expenditure which are not allowable in the nature. However, we find merit in the contention of the assessee that first of all, the entire books of account in the soft copy were seized by the search party. Secondly, such books of account were duly produced before the Special Auditors and such production of books of account before the Special Auditors is evident from the various findings as regard to the cash payments etc. given by the Special Auditors which have been referred to by the AO in the body of the assessment order itself. Further, we find that without making a reference to the regular books of account, the same could not have been referred to the Special Auditors u/s. 142(2A) of the Act. Thus, the findings given by the AO that the assessee had not produced books of account, in our view, are not factually correct. We also find that during the course of the assessment proceedings, the assessee vide its submission letter dated 15/11/2017, as placed at page no. 95 to 98 of the Paper Book for A.Y. 2011-12 had also furnished the details of all the large expenses. We also find from the copy of the audited financial statements of the assessee company for A.Y. 2011-12 as placed at page no. 99 to 130 of the Paper Book for A.Y. 2011-12, that in such audited financial statements, the assessee as per Schedule 15 has claimed Interest to Bank to the extent of Rs. 1,43,66,439/- and interest to others with a meager sum of Rs. 1,63,923/-. Thus, from such financial statements, we did not find claiming of any expenditure by way of interest on share capital as presumed by the AO on the basis of the seized document. We find merit in the contention of the assessee that merely for the purpose of computing the opportunity cost of investment in the assessee company, computation of interest was made on notional basis and from such computation itself, it cannot be conclusively held IT(SS)A No.19 to21/Ind/2020 Assessment Years: 2011-12 to 2014-15 Regent Beers & Wine Ltd. 36 that such interest expenditure were actually incurred or paid by the assessee company to various shareholders. In view of such finding, we find absolutely no justification in the action of the ld. AO in making the addition of Rs. 4,17,36,813/- in the assessee’s income on account of interest on capital and accordingly no interference is called for in the finding of Ld.CIT(A) and therefore Ground No. 3 of the Revenue for A.Y. 2011-12 is Dismissed. 14. Ground No. 4 of the Revenue for A.Y. 2012-13 14.1 Through this ground of appeal, the revenue has challenged the action of the ld. CIT(A) in deleting the addition of Rs.6,77,31,617/- made by the AO on account of suppression of profit for A.Y. 2012-13. 14.2 Briefly stated facts of the issue, as emanated from the records, are that during the course of the search and seizure action u/s. 132 of the Act, two sets of books of account were found and seized. The AO on perusal of these books of account, observed that the assessee maintained day-to-day transaction in tally in the name of M/s. ABC Ltd. and after finalization for statutory purposes, the books are renamed as M/s. Regent Beers and Wines Ltd.. It was further observed that similar fact was also stated by Smt. Sunita Rathore, Accountant of the assessee. Further, the AO observed that sales & purchase are not fully disclosed in audited books of account i.e. of M/s. Regent Beers and Wines Ltd. when compared with M/s. ABC Ltd. The AO prepared a table showing the comparative picture of both books of account, which is as under: Particulars As per Audited Accounts As per Incriminating Seized Data of ABC Ltd. Difference (Undisclosed profit) Sales 33,33,91,023.90 46,26,08,901.00 12,92,17,877.07 Purchase 24,74,04,599.90 30,88,90,859.60 6,14,86,259.64 Net Figure 6,77,31,617.43 During the course of the assessment proceedings, the AO required the assessee to explain the transactions and reconcile the same with audited books of account. The assessee, in response, furnished its explanation, which has been reproduced by the ld. CIT(A) at page no. 86 of his Order. The assessee’s explanation was not found acceptable to the AO and the AO made an addition of Rs.6,77,31,617/- in the assessee’s income on account of suppression of profit. IT(SS)A No.19 to21/Ind/2020 Assessment Years: 2011-12 to 2014-15 Regent Beers & Wine Ltd. 37 14.3 Aggrieved with the Order of Assessment, the assessee preferred an appeal for the subject assessment year before the ld. CIT(A). During the course of the first appellate proceedings, the assessee made detailed written submissions along with the documentary evidences. The ld. CIT(A) while upholding that the assessee used to maintain two sets of books of account, held that the entire difference of sales and purchases could not have been added by the AO but, only the net profit embedded in such unrecorded sales could have been subjected to tax. For such a finding, the ld. CIT(A) relied upon the decision of the Hon’ble High Court of Madhya Pradesh in the case of CIT vs. Balchand Ajit Kumar (2003) 263 ITR 610 (MP). Further, the ld. CIT(A) also took a note of various other judicial authorities, where the net profit for the business of liquor was estimated at 1.5%. Accordingly, the ld. CIT(A) estimated the net profit of the assessee @1.5% of total unrecorded sales turnover of Rs.12,92,17,877/- thereby deleting the addition to the extent of Rs.6,57,93,349/- on this count. 14.4 Aggrieved with the Order of the ld. CIT(A), the revenue is in appeal before us. 14.5 Before us, learned CIT(DR) vehemently argued supporting the observations of the AO on this issue. 14.6 Per Contra, Learned Counsel for the assessee has filed written synopsis. The relevant portion of such synopsis is being reproduced as under: “D. Key Points of Assessee’s Submission and Relevant Pages of the Paper Book: In this context it is submitted as under : 1.00 In the instant case, the impugned addition has been made by the learned AO on the allegation of undisclosed profit earned by the assessee, being the difference in figures of purchases and sales as per tally data of ABC Ltd. and the audited accounts of the assessee. In this regard, it is submitted that the assessee was maintaining regular books of account in ordinary course of its business. The books of accounts, so maintained, were subjected to audit by a firm of qualified chartered accountants. It is submitted that the assessee had obtained an Audit Report, in the prescribed form, from the Auditors in accordance with the provisions of s.44AB of the Act and also in accordance with the provisions of the Companies Act, 1956. The auditors conducting the audit had not found any defect or discrepancy in the maintenance of books of account of the assessee company. It shall be worthwhile to note that during the course of the assessment proceedings, the assessee company had furnished a copy of the aforesaid Audit Reports before the learned AO and had also produced all its books of account, IT(SS)A No.19 to21/Ind/2020 Assessment Years: 2011-12 to 2014-15 Regent Beers & Wine Ltd. 38 receipt books, bills, etc. before the learned AO for his verification. It is submitted that the learned AO has not found any defect or discrepancy in the books of account so maintained by the assessee company. Since no defect or discrepancy was found, the learned AO has not rejected the books of account of the assessee by invoking the provisions of s.145(3) of the Act. Now, it is submitted that once the books of account of the assessee were accepted, the learned AO was duty bound to determine the business income of the assessee only as per the transactions shown in its regular books of account, in accordance with the provisions of sub-section (1) to section 145 of the Act. Consequently, without rejecting the books of account, the learned AO could not have made any addition in the assessee’s income on this count. 2.00 For the aforesaid proposition, reliance is placed on the following judicial pronouncements: i) Pyarelal Mittal vs. ACIT (2007) 291 ITR 214 (Gau) ii) The ACIT vs. M/s. Narendra Industries (2008) 10 ITJ 88 (Ind) (Trib) iii) CIT vs. Maharaja Shree Umed Mills Ltd. (1991) 192 ITR 565(Raj) iv) ITO vs. Skyjet Aviation (P) Ltd. (2006) 66 TTJ (Ahd) (TM) 21. 3.01 Without prejudice to the above, it is submitted that the impugned addition of Rs.6,77,31,617/- has been made by the learned AO, on the basis of one trial balance, drawn as on 31-03-2012 in the name of ABC Ltd. which was found and seized from the residence of Shri Ramesh Chand Rai, one of the directors of the assessee company. The copy of the trial balance was so seized has been scanned by the learned AO herself at page no. 22 to 37 of the impugned assessment order. 3.02 Your Honours, during the course of the assessment proceedings, the learned AO reached to the conclusion that the trial balance so found actually pertains to the assessee company. After reaching to such conclusion, the learned AO at para (13.1.a) of the order, made a comparison between the sales and purchases that got shown in such trial balance and those shown by the assessee company in its audited books of account. By making a comparison, the learned AO finally reached to a conclusion that the assessee had suppressed profit to the extent of Rs.6,77,31,617/- in its audited books of account and accordingly made the addition. 4.01 Your Honours, on the subject issue, the learned AO, during the course of assessment proceedings, vide her show-cause notice dated 23-07-2018 had required the assessee to furnish its explanation. 4.02 Your Honours, in response to the aforesaid query, the assessee vide its letter dated 04-08-2018, furnished its explanation on the subject matter. For a ready reference, the relevant abstract of the assessee reply is being reproduced as under: IT(SS)A No.19 to21/Ind/2020 Assessment Years: 2011-12 to 2014-15 Regent Beers & Wine Ltd. 39 “4(a). EXPLANATION ON THE PROPOSED ADDITION AS UNDISCLOSED INCOME ON ACCOUNT OF DIFFERENCE IN SALES AND PURCHASE AS PER AUDITED FINANCIAL STATEMENTS AND AS PER INCRIMINATING LOOSE PAPER OF ABC LTD. – Rs. 6,77,31,617/- In this context, without admitting the authenticity of the trial balance of so-called ABC Ltd. as of 31-03-2012, it is submitted that based upon the copy of the trial balance of ABC Ltd., we have prepared a comparative statement showing variance between trial balance of ABC Ltd. vis-à-vis audited balance sheet of our company as of 31-03-2012. On a perusal of such statement, it shall be appreciated by your good self, that as per such statement, the net profit before tax of our company as per ABC Ltd. trial balance works out to be at Rs.5,07,76,896/- vis-à-vis the same shown in the audited Profit & Loss account at Rs.1,98,37,220/-. In other words, even if the authenticity of the trial balance of ABC Ltd. is taken to be true, there would result difference of Rs.3,09,39,676/- only and not that of Rs.6,77,31,617/- as proposed at your end. We are submitting herewith a comparative statement showing variance between trial balance of ABC Ltd. vis-à-vis audited balance sheet of our company as of 31-03- 2012, as Annexure D-3.00.” 5.00 Your Honours, at the outset, it is submitted that the subject trial balance on the basis of which the impugned addition has been made does not pertain to the assessee company. 6.00 That, without prejudice to the above, it is submitted that the assessee company is engaged in the business of manufacturing of beers, wines and other alcoholic products for human consumption. It is submitted that in any state, such business of the manufacturing in liquor can be carried out only in accordance with the relevant laws of Excise legislated by the concerning state and as also, in accordance with the rules, regulations and policies framed under such legislations from time to time. Accordingly, in the state of Madhya Pradesh, such business of manufacturing of liquor can be carried out only under the license granted by the State Excise Authority of Madhya Pradesh. Further, the liquor so manufactured by the liquor companies can be sold to the State Excise Authorities, who in turn store the same at their registered warehouses, and forward the respective sale proceeds to the liquor company after sales realization. 6.01 That, it shall thus be appreciated that in such a scenario where each and every transaction of sale is being directly made and controlled under the supervision of State Excise Authorities there cannot be any room for unauthorized receipt or removal of the goods from the factory premises without properly recording the same in the regular books of account. 7.00 Your Honours, without prejudice to the above and without admitting the authenticity of the trial balance of so-called ABC Ltd. as of 31-03-2012, it is submitted that the aforesaid addition so made by the learned AO is factually incorrect. It is submitted that it is a settled law that any document seized during the course of the search, if relied upon, has to be relied upon in its entirety and it IT(SS)A No.19 to21/Ind/2020 Assessment Years: 2011-12 to 2014-15 Regent Beers & Wine Ltd. 40 is not opened to the Income-Tax Authorities to rely upon only a part of the document by disregarding its remaining part. Thus, if the trial balance so seized was purported to be relied upon by the learned AO for the purpose of estimating undisclosed income then such trial balance was required to be relied upon completely. It is submitted that in such an eventuality the net profit of the assessee company was required to be determined on the basis of all the data mentioned in the said trial balance and it was not opened to the learned AO to act on pick and choose method and to determine the income merely on the basis of data of sales and purchases without taking into consideration other datas affecting the net profit of the entity to which such trial balance pertain. 7.01 Your Honours, during the course of the assessment proceedings, the assessee, without admitting the authenticity of the subject trial balance, had drawn and furnished a statement of reconciliation showing the comparison of datas shown in the trial balance of ABC Ltd. vis-à-vis audited financial statements of the assessee company. A copy of such statement is placed at PB Page no. 66 & 67. 7.02 Your Honours, on the basis of the above referred trial balance, it was demonstrated before the learned AO that there was not variance only between the figures of sales and purchases shown in such trial balance vis-à-vis audited financial statements but there was also variance in the datas relating to the other items of profit and loss account. It was demonstrated that if the figures of the trial balance are taken to be correct then the net profit before depreciation and tax of the ABC Ltd. (presumingly of the assessee company), would work out at Rs.5,07,76,896/- only as against the same shown in the audited financial statements at Rs.1,98,37,220/-. It was thus submitted before the learned AO that even if, the authenticity of the seized trial balance is taken to be fully correct, for the relevant previous year there could have been a case of suppression of profit to the extent of Rs.3,09,39,676/- only and not that of Rs.6,77,31,617/- as wrongly determined by the learned AO. 8.00 Your Honour, it is a settled law that for the undisclosed income of an assessee should be determined on the real income theory and for determining such income all the expenditure which have been found incurred by an assessee to earn such income should be allowed. In view of such principle, by granting deduction of all the direct and indirect expenditure, it was incumbent upon the learned AO to arrive at the net profit of the assessee before depreciation and tax only at Rs.5,07,76,896/- as shown in the statement of reconciliation [kindly refer PB page no. ...]. For the above proposition, reliance is placed on the following judicial pronouncements: i) Commissioner of Income Tax vs. D. D. Gears Ltd. (2012) 82 CCH 0093 DelHC ii) CIT (Central) Cochin vs. P.D. Abraham @ Appachan (2012) 252 CTR (Ker) 407 IT(SS)A No.19 to21/Ind/2020 Assessment Years: 2011-12 to 2014-15 Regent Beers & Wine Ltd. 41 9.00 Your Honours, the ld. CIT(A) after considering the facts and circumstances of the case as well as written and oral submissions made by the assessee on the subject issue, Remand Report of the AO and Rejoinder of the assessee, has deleted the entire addition made by the AO on the subject issue. As against the relief so granted by the ld. CIT(A), the Revenue is in appeal before this Hon’ble Bench. In view of the above facts and circumstances of the case, the addition made by the ld. AO on the ground of undisclosed business income has rightly been deleted by the ld. CIT(A) and therefore the action of the ld. CIT(A) deserves to be upheld by this Hon’ble Bench. E. Key Papers filed in the Paper Book (A.Y. 2012-13) on which the assessee wish to place reliance: S. No. Description of the document Page No. Remarks 1 Comparative statement of reconciliation showing the comparison of datas shown in the trial balance of ABC Ltd. vis-à-vis audited financial statements of the assessee company. 66-67 - 15.1 We have heard rival contentions, perused the records placed before us, duly considered the facts and circumstances, carefully gone through the orders of lower authorities and written and oral submissions made from both the sides and also gone through the judgments and decisions referred to and relied upon by both the sides. We find that undisputedly, the assessee had maintained two set of books of account as held by both the authorities below. But, we find that the major difference in both the set of books of account was qua the suppression of sales amounting to Rs. 12,92,17,877/- by the assessee in its regular books of account. We find that the ld. CIT(A) has applied net profit rate of 1.5% of suppressed sales and has confirmed the addition to the extent of Rs. 19,38,268/- out of the total additions of Rs. 6,77,31,670/- made by the AO. We find that while reaching to such finding, the ld. CIT(A) has followed the judgments of the jurisdictional High Court of Madhya Pradesh in the case of CIT vs. Balchand Ajit Kumar (2003) 263 ITR 0610 and again in the case of Manmohan Sadhani vs. CIT, (2008) 304 ITR 52. The ld. CIT(A) has also placed reliance on the decision of the Cordinate Bench of Jabalpur in the case of M/s. Ramesh Chandra Ravindra Kumar Rai vs. ITO (2010) 14 ITJ 34, Hon’ble ITAT Agra Bench in the case of ITO vs. Sh. Satyendra Singh Parmar (ITA No. 127/Agra/2017) and ITAT Jabalpur Bench in the case of Yadav Brothers IT(SS)A No.19 to21/Ind/2020 Assessment Years: 2011-12 to 2014-15 Regent Beers & Wine Ltd. 42 Construction Company (ITA No. 109 & 110/JAB/2012). We are in agreement with the contention of the assessee that the unaccounted set of books of account maintained by the assessee in the name of M/s. ABC Ltd. are not correct and complete and there were many expenditure which although, apparently incurred by the assessee were not found recorded. In such circumstances, respectfully following the decisions of the Hon’ble High Court of Madhya Pradesh, in the case of CIT vs. Balchand Ajit Kumar (2003) 263 ITR 0610 and again in the case of Manmohan Sadhani vs. CIT, (2008) 304 ITR 52, we uphold the findings of the ld. CIT(A) in applying the net profit rate of 1.5% on the amount of suppressed sales which has resulted into confirmation of addition to the extent of Rs. 19,38,268/- out of the total addition of Rs.6,77,31,617/- made by the AO. Accordingly, the Ground No. 4 of the Revenue for A.Y. 2012-13 is Dismissed. 16. Ground No. 4 of the Revenue for A.Y. 2014-15 16.1 Through this ground of appeal, the revenue has challenged the action of the ld. CIT(A) in deleting the addition of Rs.8,44,86,020/- made by the AO on account of undisclosed income being the difference in figures of capital and loans as per Tally data of ABC Ltd. and the audited accounts of the assessee. 16.2 Briefly stated facts of the issue, as emanated from the records, are that during the course of the search and seizure action u/s. 132 of the Act, two sets of books of account were found and seized. The AO on perusal of these books of account, observed that the assessee maintained day-to-day transaction in tally in the name of M/s. ABC Ltd. and after finalization for statutory purposes, the books are renamed as M/s. Regent Beers and Wines Ltd.. It was further observed that similar fact was also stated by Smt. Sunita Rathore, Accountant of the assessee. Further, the AO, on perusal of LPS-7 Page no. 262, observed that there is an unrecorded addition in capital of Rs.2,52,34,689/- and loan of Rs.5,92,51,331/- which have been invested in fixed assets and have also been utilized for incurring undisclosed expenditure. During the course of the assessment proceedings, the AO required the assessee to explain the transactions and reconcile the same with audited books of account. The assessee, in response, furnished its explanation, which has been reproduced at para (13.2) of her Order. However, the assessee’s explanation was not found tenable by the AO and the AO made an addition of Rs.8,44,86,020/- in the assessee’s income on account of undisclosed income being the difference in figures of capital and loans as per Tally data of ABC Ltd. and the audited accounts of the assessee. IT(SS)A No.19 to21/Ind/2020 Assessment Years: 2011-12 to 2014-15 Regent Beers & Wine Ltd. 43 16.3 Aggrieved with the Order of Assessment, the assessee preferred an appeal for the subject assessment year before the ld. CIT(A). During the course of the first appellate proceedings, the assessee made detailed written submissions along with the documentary evidences. The ld. CIT(A) while upholding that the assessee used to maintain two sets of books of account, observed that the differences in the figures of capital and loans were either due to the mis-recording/ mis-classification of transactions or non-recording thereof. The ld. CIT(A), after perusing the comparison furnished by the assessee in a tabular form, observed that the books of account of M/s. ABC Ltd. were not complete. The ld. CIT(A) also held that the AO has not made any independent enquiry to unearth the true facts. Accordingly, the ld. CIT(A) reached to a conclusion that the AO has made the addition merely on assumption, presumption and surmises. Finally, the ld. CIT(A) vide his findings given at para (4.11.3) to (4.11.5) of his Order, deleted the entire addition of Rs.8,44,86,020/- made by the AO on this count. 16.4 Aggrieved with the Order of the ld. CIT(A), the revenue is in appeal before us. 16.5 Before us, learned CIT(DR) vehemently argued supporting the observations of the AO on this issue. 16.6 Per Contra, Learned Counsel for the assessee has filed written synopsis. The relevant portion of such synopsis is being reproduced as under: “D. Key Points of Assessee’s Submission and Relevant Pages of the Paper Book: In this context it is submitted as under : 1.00 Your Honours, at the outset it is submitted that in the opening part of the para (13.1.b) on the issue, the ld. AO has averted that from a paper seized from GF-1,2, Shekhar Residency, Indore, inventorised as LPS-7 PG 262, she observed that there was an unrecorded addition in capital of Rs. 2,52,34,689/- and loan of Rs. 5,92,51,331/- which apparently, appears to have been invested by the assessee in Fixed Assets. She also averted that the assessee had also incurred unexplained expenditure which were not disclosed in the assessee’s audited books of account. While giving such findings, the copy of the seized paper, which is in the form of a Trial Balance of some ABC Limited for the period from 1-04- 2013 to 31-03-2014 have also been scanned and reproduced by the ld. AO at Page No. 39 to 41 of the impugned assessment order. Although, the ld. AO averted that there was a difference in the capital account, loan account and fixed assets as shown in such seized trial balance vis-à-vis the audited financial statements of the assessee for the relevant period but, the working of the alleged IT(SS)A No.19 to21/Ind/2020 Assessment Years: 2011-12 to 2014-15 Regent Beers & Wine Ltd. 44 differences has not been given by the ld. AO, anywhere, in the body of the assessment order. Even in the show cause notice dated 23-07-2018, the ld. AO, although made the similar allegation, did not furnish any basis for working out the aforesaid figures of difference. It shall be pertinent to note that the alleged difference was not commented or reported by the Special Auditors who carried out the special audit of the books of account and the seized documents of the assessee. Thus, in other words, the assumption of the learned AO as regard to the differences is her own assumption and is not based upon the findings of the Special Auditors. 1.01 Your Honours, at para (13) of the impugned order, the ld. AO has deliberated upon the difference between the figures shown in the trial balance of ABC Ltd. and that of the assessee company for two financial years relevant to A.Y. 2012-13 and A.Y. 2014-15. So far as the assessment year under consideration i.e. A.Y. 2014-15 is concerned, the ld. AO, at the bottom most part of the sub-para (13.3), by making a huge addition of Rs. 8,44,86,020/- in the assessee’s income, summarily rejected the explanation of the assessee on the sole basis that the assessee could not justify the existence of M/s. ABC Ltd. and also could not explain as to why the amount was not disclosed in its books of accounts. However, again, the ld. AO miserably failed to pin point any particular amount which was not so found recorded by her in the audited books of account of the assessee company. It shall thus be appreciated by Your Honour that such a huge addition has been made by the ld. AO without passing any speaking order and without giving any specific finding in this regard. 1.02 Your Honours, without commenting upon the working of the so called variation as alleged by the ld. AO and without commenting upon the merits of the addition, it is submitted that mere variation found on comparison of one unaudited trial balance of some ABC Ltd. with that of audited financial statements of the assessee could not have by itself given rise to any addition in the income of the assessee company. It is submitted that in such circumstances, it was incumbent upon the ld. AO to first compare each and every item of the unaudited trial balance with the audited financial statements of the assessee; then to seek the explanation of the assessee; and finally, after considering the explanation of the assessee, in a holistic manner and with open mindedness, ought to have found out the grounds, if any, giving rise to suppression of any income by the assessee. In the present case, the ld. AO, has merely reproduced the copy of the seized trial balance and as also, the reply of the assessee and after production of the both, in a very cryptic and summary manner, made the impugned addition. It is submitted that the ld. AO has not invoked any specific provision of the Act for making the subject addition. The ld. AO has not specified whether the subject addition is purported to be made under s. 68 or s. 69 or s. 69A or s. 69B or s. 69C or s. 69D or any other deeming provision of the Act. It is submitted that mere variation between a tentative unaudited trial balance, which is prepared by a semi-qualified accountant; and an audited financial statement, which is prepared with the assistance of a qualified chartered accountant, who in his turn, follows the various accounting standards and rectifies all principal errors of accounting; cannot be a reason for making any addition. IT(SS)A No.19 to21/Ind/2020 Assessment Years: 2011-12 to 2014-15 Regent Beers & Wine Ltd. 45 1.03 Your Honours, our assertion as regard to the claim that the trial balance of ABC Ltd. was merely a rough trial balance drawn by a semi-qualified clerical staff can be verified from the fact that in such trial balance, there are many items such as balance of the deferred tax liability, balance of the reserves and surplus etc. which were appearing as the closing balances in the audited financial statements of the immediately preceding previous year are not getting reflected. It does suggest that the trial balance has not been drawn properly by taking the correct opening balances. 2.00 Your Honours, even on merits, it is submitted that the findings given by the ld. AO in the first few lines of para (13.1.b) to the effect that there was difference amounting to Rs. 2,52,34,689/- and Rs. 5,92,51,331/- respectively, under the heads capital and loans between those shown in the seized trial balance and the audited financial statements of the assessee for the relevant year under consideration are not factually correct. For our such assertion, a combined reference may be made to the trial balance of the ABC Ltd. as reproduced by the ld. AO at page no. 39 to 41 of the impugned order and the audited financial statements of the assessee company for the relevant previous year, as placed at page no. 62 to 81 of our Paper Book. 2.01 On a perusal of the trial balance of ABC Ltd. it shall be observed that in such trial balance the balance of Equity Share Capital has been shown to be at Rs. 20,00,00,000/- which gets fully tallied with the same shown in the audited financial statements (refer PB Page No. 70). However, undisputedly, there is a difference in the figures of Net Share Application Money shown in the trial balance at Rs. 82,04,974/- and that shown in the audited financial statements at Rs.3,67,04,974/-, thereby resulting in a difference of Rs. 2,85,00,000/-. In respect of such variation, it is submitted that while drawing the trial balance of ABC Ltd., certain sum amounting to Rs. 3,65,00,000/-, which were received by the assessee company as share application money have wrongly been classified as unsecured loans. Further, in the books of ABC Ltd., share application money account has been credited with the sum aggregating to Rs. 80,00,000/-, which was received from two persons through post dated cheques. However, since eventually such post dated cheques got dishonored, in the books of the assessee company no such entry was made in respect of the share application money. It shall be appreciated that because of the wrong classification of share application money as unsecured loans, a higher balance of unsecured loans is getting appeared in the trial balance of ABC Ltd, as averted by the ld. AO herself in the body of the assessment order. 2.02 Your Honours, although, the ld. AO in the body of the assessment order, has not specifically mentioned, but, it appears that the alleged difference of Rs. 2,52,34,689/- has been worked out by the ld. AO not by way of comparison of the trial balance of ABC Ltd. with the audited financial statements of the assessee company but such comparison appears to have been made by the learned AO between the trial balance of ABC Ltd. with the trial balance extracted from the tally accounts of the assessee as on 31-03-2014. For a ready reference, IT(SS)A No.19 to21/Ind/2020 Assessment Years: 2011-12 to 2014-15 Regent Beers & Wine Ltd. 46 we have extracted a copy of the trial balance from the tally accounts of the assessee company for the relevant previous year and a copy of such trial balance is placed at PB Page No. 95 to 101. On a perusal of such trial balance, it shall be observed that the balance in the capital account is getting appeared at Rs.18,29,70,285/- only as against the same appearing to be at Rs. 20,82,04,974/- (Rs. 21,32,04, 974 (-) Rs.50,00,000) in the seized trial balance of ABC Ltd. thereby giving a difference of exactly the same amount of Rs. 2,52,34,689/- as averted by the ld. AO. 2.02.1 Now, in respect of the aforesaid difference of Rs. 2,52,34,689/-, it is submitted that even if for a moment, the figures shown in the seized trial balance are considered to be correct in preference to that shown in the trial balance as per the regular tally accounts of the assessee, then also, there cannot be any case for suppression of any income. It is submitted that the suppression of income could have been presumed when in the regular tally datas the assessee had shown more liability then that shown in the seized datas. In such eventuality, it could have been presumed that the assessee had overstated its liability in its books of accounts or in other words, had introduced bogus liability and thereby, such a difference on account of overstated liability could have been presumed to be the undisclosed income of the assessee. However, in the instant case, the position is just reverse inasmuch the assessee in its audited books of accounts is showing lesser amount of liability i.e. at Rs.18,29,70,285/- than that shown in the seized trial balance at Rs.20,82,04,974/-. It is submitted that, our above said argument is only aimed to demonstrate the impact of the variation in the income of the assessee, however, factually, there exists no actual difference. It is reiterated that in the books of ABC Ltd., certain sum factually received as share application money, appears to have got wrongly classified as unsecured loans and further, some money, which actually could not be realized have also been shown in the books of ABC Ltd., as mentioned in the preceeding paras. It is submitted that during the course of the assessment proceedings, the assessee vide its reply dated 04-08-2018, had duly explained the reason for such variation in the figures of two trial balances. The reply of the assessee has also been reproduced by the ld. AO in her body of assessment order at para (13.2) from page no. 42 to 44. 3.00 Your Honours, the ld. AO has given the finding that as per the seized trial balance of ABC Ltd. there was an addition of Rs. 5,92,51,331/- in the unsecured loan by the assessee company. In this regard, at the outset it is reiterated that the necessary working of such alleged addition has not been given by the ld. AO anywhere in the body of the assessment order. However, here again, it appears to us that the ld. AO has arrived at such figure on the basis of comparison of the trail balance of ABC Ltd. vis-à-vis trial balance extracted from financial data of assessee company, as aforesaid. A summary of such differences is being given as under: S. No. Particulars Amount [Credit] [in Rs.] As per seized trial balance of ABC Ltd. As per trial balance extracted Unrecorded [ A-B ] IT(SS)A No.19 to21/Ind/2020 Assessment Years: 2011-12 to 2014-15 Regent Beers & Wine Ltd. 47 [ A ] from financial data of the Assessee Company [ B ] - Bank OD (OBC Bank) - Secured Loans from Banks - Unsecured Loans - Deferred Tax Liablity 11,07,02,215 4,89,35,394 6,42,91,900 - 10,74,03,370 4,89,37,780 50,93,188 32,43,840 32,98,845 (2,386) 5,91,98,712 (32,43,840) TOTAL 22,39,29,509 16,46,78,178 5,92,51,331 3.01 Your Honours, the aforesaid difference of Rs.5,92,51,331/- has basically got crept in for the following counts: (i) non-recording of certain transactions in the financial data of ABC Ltd.; (ii) non-passing of journal entry as regard to bank charges in the books of ABC Ltd.; (iii) wrong classification of share application money as unsecured loans in the trial balance of ABC Ltd. and finally (iv) non- making of entries regarding deferred tax in the books of ABC Ltd.. In order to summarize and for the sake of a better understanding, the reasons of such differences along with our explanation is been given in tabular form as under: Sl. No. Particulars Trial Balance of ABC Ltd. data as on 31-03-2014 Trial Balance extracted from financial data of assessee company as on 31-03-2014 Amount of variation Reasons for variation (1) (2) (3) (4) (5)=(3)-(4) (6) A BANK OD (OBC BANK) 11,07,02,215 10,74,03,370 32,98,845 Entries regarding payment through cheque made to the bank on 31-03-2014 though recorded in the audited books of the assessee but not got recorded in the books of ABC Ltd. TOTAL (A) 11,07,02,215 10,74,03,370 32,98,845 B Secured Loans from Banks 1 ICICI Bank Ltd. (Eicher) 12,75,061 12,75,061 - IT(SS)A No.19 to21/Ind/2020 Assessment Years: 2011-12 to 2014-15 Regent Beers & Wine Ltd. 48 2 ICICI Bank Ltd. (Tata Truck) 50,98,457 51,00,843 (2,386) Bank Charges not debited in ABC Ltd. 3 OBC Bank Term Loan 3,94,32,349 3,94,32,349 - 4 Punjab National Bank 31,29,527 31,29,527 - TOTAL (B) 4,89,35,394 4,89,37,780 (2,386) C. Unsecured Loans 1 Shri Harmindar Singh Bhatia (PAN:ACFPB4293H) 1,11,50,106 20,00,000 91,50,106 Factually, only a sum of Rs.20,00,000/- was received by the assessee as shown in its regular books of account. 1 Goldstar Pet Pvt. Ltd. 80,00,000 30,93,188 49,06,812 Principal amount of loan was repaid in its entirety at Rs.80,00,000/- but not recorded in the books of ABC Ltd.. Further, the entry regarding interest payable on the loan at Rs.30,93,188/- although made in regular books not recorded in the ABC Ltd’s books 3 Shri Ramswaroop Shivhare (PAN: AGHPS8985R) 95,70,000 - 95,70,000 Factually, only a sum of Rs.70,00,000/- was received by the assessee on account of share application money but in the books of ABC Ltd., first of all, the amount of receipt got overstated and secondly, got wrongly classified instead of correct classification of share application money. 4 Shri Laxminarayan Shivhare (PAN:AHIPS2394E) 60,00,000 - 60,00,000 Factually, only a sum of Rs.55,00,000/- was received by the IT(SS)A No.19 to21/Ind/2020 Assessment Years: 2011-12 to 2014-15 Regent Beers & Wine Ltd. 49 assessee on account of share application money but in the books of ABC Ltd., first of all, the amount of receipt got overstated and secondly, got wrongly classified instead of correct classification of share application money. 5 Shri Akash Shivhare (PAN:BBZPS9891L) 71,794 - 71,794 No such amount was factually received by the assessee company 6 Malwa Institute of Technology [MIT] (PAN:AAAAI0965M) 1,00,00,000 - 1,00,00,000 Wrong postings appear to have been made in the books of ABC Ltd. in the account of MIT. First of all, only a sum of Rs.45,00,000/- has been received from the MIT, and that too was received on account of share application money. Secondly, the posting of Rs.55,00,000/- wrongly made in the account of MIT in the books of ABC Ltd. whereas such sum was received from one M/s. Encords Enterprises Ltd. from which the assessee was owing a sum of Rs.55,00,000/- since opening. 7 Encord Commosales P. Ltd. [Share Application Money Account] (PAN: AACCE1193M) 1,95,00,000 - 1,95,00,000 Wrong classification made in the books of ABC Ltd.. The entire amount of Rs.1,95,00,000/- was received IT(SS)A No.19 to21/Ind/2020 Assessment Years: 2011-12 to 2014-15 Regent Beers & Wine Ltd. 50 towards share application money only. TOTAL (C) 6,42,91,900 50,93,188 5,91,98,712 D Deferred Tax Liability - 32,43,840 (32,43,840) No effect of deferred tax liability, which is notional in the nature, has been given in the books of ABC Ltd. TOTAL (D) - 32,43,840 (32,43,840) E GRAND TOTAL (A+B+C+D) 22,39,29,509 16,46,78,178 5,92,51,331 4.00 Your Honours, in the light of the submission made in the preceding paras, it would be appreciated that the differences pointed out by the learned AO as regard the balance of capital account and loan accounts are fully explained and reconciled. In such circumstances, it would be appreciated that no addition in the income of the assessee was warranted. 5.00 Your Honours, as regard the allegation of the learned AO to the effect that the unrecorded addition in capital and loan had either got invested in undisclosed fixed assets or the assessee company had incurred undisclosed expenditure, is again factually not correct. First of all, it is submitted that from the differences, pointed out by the learned AO, actual inflow of any fund in the hands of the assessee is not at all discernible so as to make any undisclosed fund available in the hands of the assessee for making or incurring any undisclosed investment or expenditure. Secondly, the learned AO except leveling a barred allegation as regard to making of such undisclosed investment/ expenditure could not pin point any single asset or expenditure towards which such alleged inflow of fund got utilized. 5.01 Your Honours, it is submitted that the assessee company has duly recorded and disclosed all the fixed assets held by it in its audited financial statements drawn for the relevant previous year. Your Honour, it appears that such an allegation has been made by the learned AO on the basis of comparison of the balances of fixed assets as appearing in the two sets of trial balances i.e. the net balance of Rs.40,75,78,761/- as on 31-03-2014 shown in the trial balance of ABC Ltd. [refer page no.39 of the impugned assessment order], and that of Rs.34,66,97,723/- as appearing in the trial balance extracted from the tally data of the assessee company as on 31-03-2014 [refer PB Page no. 96]. 5.01.1 Your Honours, it is submitted that in the regular books of the assessee, necessary entries regarding depreciation on fixed assets, as per the relevant Companies Act have been made whereas in the books of ABC Ltd., the entries for IT(SS)A No.19 to21/Ind/2020 Assessment Years: 2011-12 to 2014-15 Regent Beers & Wine Ltd. 51 depreciation have never been made. In other words, in the books of ABC Ltd. the fixed assets have been recorded at the gross value whereas in the books of the assessee, the fixed assets are recorded net of depreciation. It is submitted that because of this unique feature only, even a difference is getting reflected in the opening balances of fixed assets in both the books. It is submitted that alike, the closing balance, due to non-charging of depreciation in the books, the opening balance is also getting at a very substantial higher amount in the books of ABC Ltd.. It would be appreciated that in the trial balance of ABC Ltd., the depreciation for the relevant previous year is not getting appeared whereas the same is getting clearly reflected at Rs.1,98,43,486/- in the trial balance extracted from the regular tally account. It clearly proves our assertion that the entire difference in the balance of fixed assets is attributable to the non-making of entries in the books of ABC Ltd. on account of depreciation. 6.00 Your Honours, the ld. CIT(A) after considering the facts and circumstances of the case as well as written and oral submissions made by the assessee on the subject issue, Remand Report of the AO and Rejoinder of the assessee, has deleted the entire addition made by the AO on the subject issue. As against the relief so granted by the ld. CIT(A), the Revenue is in appeal before this Hon’ble Bench. In view of the above facts and circumstances of the case, it is submitted that the impugned addition of Rs.8,44,86,020/- so made by the learned AO has rightly been deleted by the ld. CIT(A) and therefore the action of the ld. CIT(A) deserves to be upheld by this Hon’ble Bench. E. Key Papers filed in the Paper Book (A.Y. 2014-15) on which the assessee wish to place reliance: S. No. Description of the document Page No. Remarks 1 Copy of trial balance of the assessee company for the relevant previous year 95-101 - 2 Audited financial statements of the assessee company for the relevant previous year 62-81 - 17.1 We have heard rival contentions, perused the records placed before us, duly considered the facts and circumstances, carefully gone through the orders of lower authorities and written and oral submissions made from both the sides and also gone through the judgments and decisions referred to and relied upon by both the sides. We find that although the AO has made a huge addition of Rs. 8,44,86,020/- in the assessment order on account of difference between two financial datas, but, nowhere in the Order, the AO has provided the basis or working for arriving at such a difference. We find that the AO has made a summary finding on the issue. However, we find that at para (13.2) at page no. 42 to 44 of the assessment order, the AO has reproduced the written IT(SS)A No.19 to21/Ind/2020 Assessment Years: 2011-12 to 2014-15 Regent Beers & Wine Ltd. 52 submission of the assessee before him, on the subject issue, during the course of the assessment proceedings. We find that in the written submission, the assessee has furnished the details of various financial datas as per its audited balance sheet as of 31/03/2014 and also, as per the data according to the parallel book maintained with the title ‘ABC Ltd.’ and the assessee himself has worked out the difference between two datas at Rs. 8,44,86,020/- which has been made subject matter of addition by the AO for A.Y. 2014-15. 17.2 We find that as per the comparative data, referred to hereinabove, datas have been given only in respect of liabilities and there is no data as regard to the assets or expenditure, for which the AO has given a finding at para (13.1.b) at page no. 38 that the difference was found to have been invested in Fixed Assets and undisclosed expenditure. Thus, in support of her finding that the assessee was found to have made any unaccounted investment in assets or had incurred any undisclosed expenditure, no material has been brought on record by the AO. From the comparative data, we find that total liabilities of the assessee as on 31/03/2014 as per its audited balance sheet and parallel books data were to the extent of Rs. 34,76,48,463/- and Rs. 43,21,34,483/-, thereby resulting into the subject difference of Rs. 8,44,86,020/-. From such comparative data, there can be drawn only one inference that the assessee had incurred certain liabilities up till 31/03/2014 which although recorded in the parallel books of account of the assessee were not so recorded in the regular audited books of account. Thus, in other words, the present case is a case of suppression of liabilities in audited books of account vis-à-vis the parallel set of books of account. In our considered view, under the scheme of the law, any undisclosed investment or undisclosed expenditure can be subject matter of addition either u/s. 69 or s. 69A or s. 69B or s. 69C of the Act but in the present case the issue is with regard to unexplained liability. We find that the addition of Rs. 8,44,86,020/- was made by the AO on the only basis of the difference in the audited financial statements and the parallel data. But since, the difference cannot lead to assumption of any income, whether real or deemed, in the hands of the assessee, in our considered view, there was absolutely no justification for the AO to make the impugned addition. Accordingly, we find no infirmity in the action of the ld. CIT(A) in deleting the entire addition of Rs. 8,44,86,020/-. Resultantly, Ground No. 4 of the Revenue for A.Y. 2014-15 is Dismissed. 18. Ground No. 5 of the Revenue for A.Y. 2014-15 IT(SS)A No.19 to21/Ind/2020 Assessment Years: 2011-12 to 2014-15 Regent Beers & Wine Ltd. 53 18.1 Through this ground of appeal, the revenue has challenged the action of the ld. CIT(A) in deleting the addition to the extent of Rs.38,63,950/- out of the total addition of Rs.51,57,732/- made by the AO on account of undisclosed transactions found recorded in the books of M/s. ABC Ltd.. 18.2 Briefly stated facts of the issue, as emanated from the records, are that during the course of the assessment proceedings, the AO on a perusal of the audited financial statements provided by Special Auditors, found that various cash transactions pertaining to F.Y. 2014-15 & F.Y. 2015-16 could not be verified from audited books of account of the assessee. The AO further noted that the assessee failed to collect TCS on sale of scrap. The brief details of these documents are scanned on page no. 109 to 111 of the assessment order. During the course of the assessment proceedings, the AO required the assessee to furnish its explanation. The assessee, in response, furnished its explanation, which has been reproduced by the ld. CIT(A) at page no. 106 to 108 of his Order. However, the assessee’s explanation was not found acceptable to the AO and the AO made an addition of Rs.51,57,732/- in the assessee’s income on account of undisclosed transactions found recorded in the books of M/s. ABC Ltd.. 18.3 Aggrieved with the Order of Assessment, the assessee preferred an appeal for the subject assessment year before the ld. CIT(A). During the course of the first appellate proceedings, the assessee made detailed written submissions along with the documentary evidences. The ld. CIT(A) noted that out of the total addition of Rs.51,57,732/-, an addition of Rs.38,63,950/- was made on the basis of one excel sheet found from PC of Shri Harminder Singh Bhatia. The ld. CIT(A) further noted that the AO made addition to the tune of Rs.9,38,990/- on account of sale of scrap which are not recorded in regular books of account and the assessee could not furnish the details of receipt from scrap sale, TCS deducted etc. but, it was found that the scrap sales were duly recorded in books of account of M/s. ABC Ltd. The ld. CIT(A) also noted that another addition of Rs.3,54,792/- was on account of legal & professional expenses but the assessee could not file any details with supporting evidence. Accordingly, the ld. CIT(A) confirmed an addition to the tune of Rs.12,93,782/- out of the total addition of Rs.51,57,732/- made by the AO on this count. However, as regard the addition of Rs.38,63,950/- made by the AO on account of an excel sheet found from the PC of Shri Harminder Singh Bhatia, the ld. CIT(A) noted that the AO could not bring any cogent material on record to substantiate that any investment was made by the assessee in the farm house. IT(SS)A No.19 to21/Ind/2020 Assessment Years: 2011-12 to 2014-15 Regent Beers & Wine Ltd. 54 Thus, the ld. CIT(A), by relying upon the decisions of Hon’ble Supreme Court in the cases of Dhakeshwari Cotton Mills Ltd. vs. CIT (1954) 26 ITR 775 (SC) and Umacharan Saha & Bros. vs. CIT 37 ITR 21 (SC), deleted the addition to the tune of Rs.38,63,950/- so made by the AO. 18.4 Aggrieved with the Order of the ld. CIT(A), the revenue is in appeal before us. 18.5 Before us, learned CIT(DR) vehemently argued supporting the observations of the AO on this issue. 18.6 Per Contra, Learned Counsel for the assessee has filed written synopsis. The relevant portion of such synopsis is being reproduced as under: “D. Key Points of Assessee’s Submission and Relevant Pages of the Paper Book: In this context it is submitted as under : 1.00 Your Honours, it is submitted that an addition of Rs.51,57,732/- was made by the learned AO merely on the basis of transactions found to have been recorded in the books of ABC Ltd.. 2.01 Your Honours, the learned AO during the course of assessment proceedings vide her show-cause notice dated 23-07-2018, required the assessee to furnish its explanation on the subject transactions by proposing an total addition of Rs.1,48,02,940/- for the year under consideration. 2.02 Your Honours, in response to the aforesaid query, the assessee vide its letter dated 04-08-2018, furnished its explanation on the subject matter. For a ready reference, the relevant abstract of the assessee reply is being reproduced as under: “12. EXPLANATION ON THE ISSUE OF PROPOSED ADDITIONS OF Rs.2,38,97,374/- IN RESPECT OF VARIOUS CASH TRANSACTIONS Madam, through the captioned Query, at the first instance, it has been alleged that our company has made various cash transactions aggregating to Rs.2,38,97,374/- which have been alleged to be undisclosed as per the annexure marked as Annexure F-7 which have been provided with the captioned notice by your good self. Madam, at the outset, it is reiterated that the incriminating seized tally data of ABC Ltd. has no credence, reliability and authenticity and, therefore, no adverse inference on the basis of such tally data deserves to be drawn against us. IT(SS)A No.19 to21/Ind/2020 Assessment Years: 2011-12 to 2014-15 Regent Beers & Wine Ltd. 55 Without prejudice to the above, we wish to submit our explanation in respect of each and every item, contained in your aforesaid Annexure F-7, in a tabular form as under : Date Amount Description of the document seized Our Explanation Remarks / Annexure Apr – 15 20,37,442/- Copy of ledger account of Scarp Glass sales in ABC Ltd. for the F.Y. 2015-16 The actual sales realization from scrap glass sales was to the extent of Rs.13,85,699/- only and not of Rs.20,37,442/- as alleged. A copy the ledger account of Scrap Glass sales in our regular books for the F.Y.2015-16, as Annexure D-8.01. Apr – 15 21,36,019/- Copy of ledger account of Scarp Glass sales in ABC Ltd. for the F.Y. 2014-15 The actual sales realization from scrap glass sales was of a higher sum i.e. of Rs.32,91,434/- and not of Rs.21,36,019/- as alleged. A copy the ledger account of Scrap Glass sales in our regular books for the F.Y.2014-15, as Annexure D-8.02. 11-04- 2014 10,00,000/- Copy of abstract of Cash book of ABC Ltd. reflecting amount received from Rishi, New Delhi It appears that our mischievous staff made unaccounted sales and embezzled the same as discussed in reply to query No.7 (supra) -- 02-01- 2014 7,56,248/- Copy of abstract of Expenses account of ABC Ltd. reflecting amount of Rs.7,56,248 on account of MPAKVN Lease rent for the year 2012-13 The expenditure relates to payment of lease rent to MPAKVN. The entire payment was made through demand draft. A higher sum of Rs.17,49,636/- was paid and recorded in our regular books. A copy of the ledger account of lease rent payable to MPAKVN in our books of account is enclosed, as Annexure D-8.03. 30-04- 2013 3,54,792/- Copy of abstract of Expenses account of ABC Ltd. under the head Legal and professional expenses for the year 2013-14 It is mere a Journal Entry in ABC Ltd, with no implication on actual payments. It also proves our assertion that the books of ABC Ltd. are not reliable. 25-02- 2015 44,000/- Copy of abstract of Cash book of ABC Ltd. reflecting amount received It appears that our mischievous staff made unaccounted sales and embezzled IT(SS)A No.19 to21/Ind/2020 Assessment Years: 2011-12 to 2014-15 Regent Beers & Wine Ltd. 56 from Piyush Vijayvargiya against Scrap Glass sales the same as discussed in reply to query No.7 (supra) 09-01- 2015 44,400/- --do-- --do-- --do-- 29-07- 2013 1,00,00,000/- Document in form of application form dated 29-07-2013 of PNB for RTGS made in favour of M/s. Pacific Alcobev Pvt. Ltd. (i) Factually, we have not received but made the payment to such M/s. Pacific Alcobev Pvt. Ltd. through RTGS (ii)Duly recorded in books of account of our company. Copy of account of Pacific Alcobev Pvt. Ltd. in our regular books of account as Annexure D-8.04 & Copy of relevant bank statement, as Annexure D-8.05 & D-8.06 Mar-14 9,38,990/- Copy of sale of Scarp Glass sales account in ABC Ltd. for the F.Y. 2015-16 It appears that our mischievous staff made unaccounted sales and embezzled the same as discussed in reply to query No.7 (supra) 01-04- 2013 to 07-11- 2013 38,63,950/- Excel Sheet abstracted from the PC of Shri Harminder Singh Bhatia containing details of some cash payment to Viaks Jaiswal regarding Gokul Krishi Farm House, Barwah Our company is not having any farm house anywhere and we are not required to incur any expenditure relating to such farm house. 27-07- 2009 2,10,864/- Copy of sale of Scarp Glass sales account in our company’s books during the F.Y. 2009-10 Transaction is duly recorded in our regular books Submitting, copy the ledger account of Scrap Glass sales in our books of account, as Annexure D-8.07 05-12- 2009 3,50,669/- Copy of sale of Scarp Glass sales account in our company’s books during the F.Y. 2009-10 -do- TOTAL 2,38,97,374 (sic.) 2,17,37,374 IT(SS)A No.19 to21/Ind/2020 Assessment Years: 2011-12 to 2014-15 Regent Beers & Wine Ltd. 57 2.03 That, after making the explanation as aforesaid, the ld. AO made an addition of Rs.51,57,732/- out of the total proposed addition of Rs.1,48,02,940/- in the assessee’s income on account of alleged undisclosed transactions found recorded in the books of M/s. ABC Ltd. 3.00 Your Honours, it is submitted that the impugned addition of Rs.51,57,732/- comprises of three transactions found in the books of account of ABC Ltd., the details of which are as under: Date Amount Nature of account Description of the document seized 30-04-2013 3,54,792 Expense [legal and professional charges] Copy of abstract of Expenses account of ABC Ltd. under the head Legal and professional expenses for the year 2013-14 April-13 to March 2014 9,38,990/- Sales [scrap material sales account] Copy of sale of Scarp Glass sales account in ABC Ltd. for the F.Y. 2013-14 01-04-2013 to 07-11- 2013 38,63,950 -- Excel Sheet abstracted from the PC of Shri Harminder Singh Bhatia containing details of some cash payment to Viaks Jaiswal regarding Gokul Krishi Farm House, Barwah TOTAL 51,57,732 3.01 Your Honours, as regard the transaction of Rs.3,54,792/-, it is submitted that it is in the nature of mere journal entry passed in the books of ABC Ltd. for transferring a portion of legal expenses incurred to the prior period expenses. It is submitted that in the books of the assessee, such entry was already passed in the relevant year. 3.02 Your Honours, as regard the transaction of Rs. 9,38,990/-, it is submitted that as against such jotting of sale of scrap material, the assessee company has recorded, receipts amounting to Rs.5,94,997/- in its books of accounts. In evidence of the same we have furnished a copy of the ledger account of Scrap sales for the relevant previous year, which is placed at PB Page no.105. It submitted that on sale of such scrap material the assessee company had duly collected tax at source in accordance with the provisions of s.206C of the Income Tax Act, 1961 at Rs.5,951/- and had duly deposited the same to the credit of Central Government. In evidence of the same, we had submitted the challans as paid by the assessee , which are placed at PB Page no. 105 to 109. 3.03 Your Honours, now as regard the transaction of Rs.38,63,950/-, it is submitted that such addition has been made by the ld. AO on the basis of one computerized excel sheet seized and inventorized as LPS 10 Page nos.3 & 4. A copy of such computerized excel sheet has been provided by the learned AO in form of Annexure F-7.33 & F-7.34 along with show cause notice dated 23-07- 2018. A copy of the same is placed at PB Page No. 110 & 111. IT(SS)A No.19 to21/Ind/2020 Assessment Years: 2011-12 to 2014-15 Regent Beers & Wine Ltd. 58 3.03.1 Your Honours, it is submitted that the aforesaid excel sheet is extracted from the laptop of Shri Harminder Singh Bhatia, neither belongs to the assessee company nor the name of the assessee company has been mentioned anywhere on the subject excel sheet. Thus, in such circumstances, the learned AO was not justified in making the addition of Rs.38,63,950/- in the assessee’s income on the allegation of undisclosed transaction merely on the basis of some computerized excel sheet found during the course of search which was not pertaining to the assessee company. 4.00 Your Honours, the ld. CIT(A) after considering the facts and circumstances of the case as well as written and oral submissions made by the assessee on the subject issue, has given partial relief to the assessee company to the extent of Rs.38,63,950/- and confirmed the remaining addition of Rs.12,93,782/-. As against the relief so granted by the ld. CIT(A), the Revenue is in appeal before this Hon’ble Bench on the subject issue. E. Key Papers filed in the Paper Book (A.Y. 2014-15) on which the assessee wish to place reliance: S. No. Description of the document Page No. Remarks 1 Xerox copy of the loose paper seized and inventoried as LPS-07 Pg. No. 225 & 229 102-103 - 2 Xerox copy of the loose paper seized and inventoried as LPS-07 Pg. No. 102 104 - 3 Copy of ledger account of scrap glass sales in the books of account of the assessee company for the previous year under consideration 105 - 4 Xerox copies of challans paid by the assessee for Tax Collected at Source 106-109 - 5 Xerox copy of the loose paper in form of computerized excel sheet seized and inventoried as LPS 10 Page nos.3 & 4 110-111 - 19.1 We have heard rival contentions, perused the records placed before us, duly considered the facts and circumstances, carefully gone through the orders of lower authorities and written and oral submissions made from both the sides and also gone through the judgments and decisions referred to and relied upon by both the sides. We find that the subject addition of Rs. 38,63,950/- was made by the AO on the basis of one computerized excel sheet seized and inventorized as LPS 10 Page nos.3 & 4. A copy of such computerized excel sheet has been filed by the assessee before us in his Paper Book for A.Y. 2014- 15 at Page No. 110 & 111. Before us, the assessee contended that such excel sheet was extracted from the laptop of Shri Harminder Singh Bhatia, one of the directors of the company, and not from the premises of the assessee company IT(SS)A No.19 to21/Ind/2020 Assessment Years: 2011-12 to 2014-15 Regent Beers & Wine Ltd. 59 and such contention was not rebutted by the CIT(DR). From a perusal of the excel sheet, we find that it contains the details of some agricultural expenses in respect of some land at Mortaka and the sheet contains the caption as ‘Gokul Krishi Farm House’. We find that it is not the case of the Revenue that the assessee company was holding any agriculture land at Mortaka and therefore, without having any other corroborative evidence, merely on the basis of such excel sheet, it could not have been conclusively held that such expenditure were incurred by the asseseee company itself. Accordingly, we find no infirmity in the action of the ld. CIT(A) in deleting the addition of Rs. 38,63,950/- in the income of the assessee on account of unaccounted cash payments. Resultantly, Ground No. 5 of the Revenue is Dismissed. 20. In the result, all the appeals of the Revenue are dismissed. The order pronounced as per Rule 34 of ITAT Rules, 1963 on 18.04.2022. Sd/- Sd/- (MAHAVIR PRASAD) (MANISH BORAD) JUDICIAL MEMBER ACCOUNTANT MEMBER दनांक /Dated : 18.04.2022 Patel/Sr. PS Copy to: The Appellant/Respondent/CIT concerned/CIT(A) concerned/ DR, ITAT, Indore/Guard file. By Order, Asstt.Registrar, I.T.A.T., Indore