The Dy.CIT., Central Circle-1(1), Ahmedabad V. Priya Blue Industries Private Limited, Bhavnagar

ITSSA 29/AHD/2023

• Counselvise Citation: [2024] 100 COUNSELVISE.COM (IT) 1365 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 3 month(s) 27 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 27-06-2024
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 02-04-2024
• Assessment Year: 2019-2020
• Appeal Filed On: 02-03-2023
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHRIKAMLESHMAKWANA; FORTHEASSESSEESUBMITTEDTHATTHE; FORTHEREVENUESUPPORTED; FORTHEREVENUEVEHEMENTLYCONTENDEDTHATTHETRIBUNAL; FORTHEASSESSEESUBMITTEDTHATTHEASSESSEEISNOTPRESSING
• Assessee Lawyers: REFERRINGTHEDECISIONSRENDEREDBYTHECOORDINATE
• Keywords: Search and seizure; Retraction

Judgement Text

INTHEINCOMETAXAPPELLATETRIBUNAL “C”BENCH,AHMEDABAD BEFORESHRIWASEEMAHMED,ACCOUNTANTMEMBER AND SHRIT.R.SENTHILKUMAR,JUDICIALMEMBER Sl. No.IT(SS)ANos. Asst Years Appeal(s)filedby: Appellant-Vs-Respondent 1. 2. 04/Ahd/2023 & 33/Ahd/2022 2019-20 & 2020-21 PriyaBlueIndustries Pvt.Ltd. 504SwaraParklane, Opp.JoggersPark AtabhaiRoad, Bhavnagar-364001 PAN:AABCP2808B DCIT CentralCircle-1(1), Ahmedabad. 3. 4. 29/Ahd/2023 & 39/Ahd/2022 2019-20 & 2020-21 DCIT CentralCircle-1(1) Ahmedabad PriyaBlueIndustries Pvt.Ltd. 504SwaraParklane, Opp.JoggersPark AtabhaiRoad, Bhavnagar-364001 PAN:AABCP2808B 5. 18/Ahd/20232019-20HooglyShip BreakersLtd., 323Giriraj,Iron MarketSantTukaram Road,Mumbai400009 Maharashtra,India PAN:AAACH6191C DCIT CentralCircle-1(1), Ahmedabad 6. 27/Ahd/2023 2019-20 DCIT CentralCircle-1(1), Ahmedabad HooglyShip BreakersLtd., 323Giriraj,Iron MarketSantTukaram Road,Mumbai400009 Maharashtra,India PAN:AAACH6191C Assessee(s)by:ShriTusharHemani,Sr.-Advocate withShriParimalsinhBParmar,AR Revenueby:ShriKamleshMakwana,CIT-DR DateofHearing:03/04/2024 DateofPronouncement:28/06/2024 IT[SS]A4,29/Ahd/2023& 4orsPriyaBlueIndPLtd& HooglyShipBreakersLtd.Page 2 COMMONORDER PERT.RSENTHILKUMAR,JUDICIALMEMBER: ITANos.04&29/Ahd/2023and33&39/Ahd/20022:These CrossAppealsarefiledbytheAssesseeandtheRevenueasagainst separateappellateordersdated27.12.2022and27.09.2022passed bytheCommissionerofIncomeTax(Appeals)-11,Ahmedabadarising outoftheassessmentorderspassedundersection153Ar.w.s. 144C(3)oftheIncomeTaxAct,1961(hereinafterreferredtoas‘the Act’)relatingtotheAssessmentYears2019-20to2020-21.Since theissueinvolvedintheseappealsareidentical,forthesakeof convenience,thesamearedisposedofbythiscommonorder. 2.WetakeIT(SS)ANo.04/Ahd/2023relatingtoAsst.Year2019-20 astheleadcase.Thebrieffactsofthecasearethattheassesseeisa PrivateLimitedCompanyengagedinthebusinessofShipBreaking, RecyclingandSaleofScrapes.FortheAsst.Year2019-20,the assesseefileditsoriginalReturnofIncomeon25.12.2020declaring totalincomeofRs.4,99,08,500/-.Thesamewasprocessedu/s. 143[1]oftheActacceptingthereturnedincome. 3.Itisthereafterasearchactionu/s.132oftheActwasconducted inPriyaBlueGroupofCompanieson19.11.2019,inwhichthe businesspremisesoftheassesseewasalsocovered.Consequentlyin responseto153Anotice,theassesseefiledtheReturnofIncomeas admittedintheoriginalReturnofRs.4,99,08,500/-.Sincethere wereTransferPricingissuesinrespectofInternationalTransactions orSpecifiedDomesticTransactionorboth,thecasewasreferredto TransferPricingOfficeru/s.92CA(1)oftheAct.TheTPOafter makingdetailedenquiryu/s.92CA(2)oftheAct,passedtheTransfer IT[SS]A4,29/Ahd/2023& 4orsPriyaBlueIndPLtd& HooglyShipBreakersLtd.Page 3 PricingOrderu/s.92CA(3)oftheActmakinganupwardadjustment ofRs.1,54,77,374/-namely [a]onbenchmarkingofprovisionofservicesrenderedto AssociateEnterpriseofRs.67,96,987/-and [b]CorporateGuaranteegiventoAEofRs.86,80,387/-. AstheassesseehasnotchosentochallengetheTPO’sorderbefore DisputeResolutionPanel,thereforetheAssessingOfficerpassedthe finalassessmentorderu/s.143(3)r.w.s.92CA(3)r.w.s.153Aofthe ActdeterminingtheincomeasRs.22,06,39,716/-bydisallowing [c]UnexplainedrentalexpensesofRs.5,00,000/= [d]Unaccountedprofitof.Rs.11,29,61,022/= [e]Suppressionofsale-GasturbineRs.3,41,34,100/=. 4.ThustherearefiveissuestobeadjudicatedbythisTribunal, eachissueofdisallowancemadebytheLdAOandthefindingsgiven byLdCIT[A]areasfollows: 5.BenchmarkingofprovisionofservicesrenderedtoAEof Rs.67,96,987:DuringthecourseofTransferPricingProceedings, Assesseevidesubmissiondated17-01-2022statedthatMr. RavindraJagadeandMr.SanchitManglickemployeesofthe assesseecompanyareexecutingbackofficeworkofM/s.BestOasis Limited[hereinafterreferredasBOL].TheAOfurtherfoundthatMr. SanjayMehtaandMr.TriptiMehta,DirectorsofAssesseecompany aredrawingremunerationarealsodirectorsofBOL.Basedupon suchfact,theTPOhasaskedtheassesseetoprovideitsexplanation regardingnonchargingoffees,forrenderingservicesbyassesseeto BOL.Theexplanationprovidedbytheassesseeisreproducedin TPO'sorder.However,thecontentionoftheassesseewasnotfound tobecorrectbytheTPOonthegroundthatemployeesanddirectors oftheassesseecompanyareworkingforBOL,butNofeesare recoveredfromBOL.TheTPOhasreferredtostatementsofRavindra IT[SS]A4,29/Ahd/2023& 4orsPriyaBlueIndPLtd& HooglyShipBreakersLtd.Page 4 Jagade,BhavikHarikrishnanMody,SanjayMehta,Sanchit Manglick,ViralShah,GauravMehta,EmployeesandDirectorsof assesseecompanyhaveadmittedthatvariousworksofBOLare executedbythem. 5.1.TheTPOfurtherobservedthatsalariespertainingtovarious employeesarepaidbytheassessee,buttheirtimeandeffortsare alsoutilizedforBOLwork,whichisanopportunitycostofthe assesseecompany.Eachcompanyworksforprofitandnotfor charity.TheAOhasreferredtorelevantextractofstatementofMr. RavindraJagade,ChiefAccountantofBOL,whereinhehasstated thatthereisnotaxabilityofoffshorecompanyinHongKongandto taketheadvantageofthisfact,BOLwasregistereditsoffshore companyinHongKong.Consideringthenon-taxabilityofBOL, variouscostsassociatedwithBOLwerenotchargedbyassessee companyandbasedonFARanalysisgiveninTransferPricingstudy report,theTPOhadbifurcatedfunctionsofemployeesasrelatableto appellantcompany.TheTPOhasgivenweightagefortheupperend andBOLat58:42.Thereafter,heobservedthatforservicesprovided toanythirdpartywouldnotonlyreclaimtheexpenses,butwould chargemarkupontheseexpenses.TheTPOhascomparedmarkup of17companiesandArms-lengthmark-upwasarrivedat5.58%. Baseduponthisfact,theTPOhascomputedupwardadjustmentof Rs.67,96,987/=. 5.2.TheLdCIT[A]confirmedtheadditionmadebytheAOby observingasfollows: “....TheabovereferredstatementsarealreadyreproducedinTPO’s orderwhichconclusivelyproofthatcertainemployeesofAppellant companyareworkingforBOLaswellastheappellant.However, certainexpenditurepertainingtotherewereclaimedbytheappellant company.Once,theassociatedcompanyoftheappellantisutilising theservicesofEmployees/DirectorsoftheAppellantCompany, IT[SS]A4,29/Ahd/2023& 4orsPriyaBlueIndPLtd& HooglyShipBreakersLtd.Page 5 expenditureneedtobechargedfromsuchAE.Iftheseemployees werehiredbyBOLorandtheirpaymentsaremadebythem, accordingtotimeandeffortsofsuchemployees,expendituretothat extentinthehandsofappellantwouldhavebeenatloweramount andprofittothatextentwouldhavebeenhigherinthereturnof income.ItistheSettledlegallawthatwhenAEisutilizingservicesof it'sIndiancompany,suchservicesneedtobebenchmarked consideringittobeinternationaltransaction.Thecontentionofthe appellantthatnochargesarerequiredtoberecoveredfromAEwas withoutanybasisordocumentaryevidences.Theemployees/ directorsofAppellantcompanyhavecategoricallyadmittedtheirrole inBOLinstatementsrecordedduringthecourseofsearch.The appellantinitswrittensubmissionhasstatedthatsomeofthe employeeshaveclarifiedandretractedtheirstatementstakenduring thecourseofsearch,astheywereunderduressandunder mechanicalmanner.However,appellanthasnotprovidedanyother evidencesinsupportofsuchretraction.Mereretractionofemployees doesnotsupportthecontentionoftheappellantasithadnotproved thatBOLhadsufficientemployeestolookafteritsentirework.The contentionofappellantthatemployeesareonlydoingmeagreback- officework,hencenoallocationofexpenditureisrequiredtobemade cannotbeacceptedasroleofeachemployeeorpredeterminedand BOLhasutilisedtheirservices.Consideringthesefacts,theTPOwas correctinmakingupwardadjustmentrelatingtoprovisionsof servicesgiventoAE. 6.3.Sofar,thequantumofbenchmarkingofsuchservicecharges fromAEisconcerned,itisobservedthatduringcourseoftransfer pricingproceedings,AOhascorrectlyworkedoutweightageof expendituretobebifurcatedbetweenappellantcompanyandBOL andsuchbifurcationwasbaseduponfunctionscarriedoutbyeach companyandbaseduponFARanalysis.TheTPOhasgiventhe weightageforfunctionsofvariouspersonsforexecutingthework, riskinvolvedandinvolvementofemployeesforacquiringassets/ machinery.ItisalsoobservedthatduringthecourseofTP proceedings,Appellantcompanyhasprovidedworkingofweightage basedupontheFARanalysis,whichispartofitssubmissionsbefore TPO.AsperAppellant,weightageshouldbegiven75:25asagainst TPO’sweightageof58:42.However,thisworkingoftheappellant companyiswithoutanybasisandonpresumptionthatcertain technicalfunctionswereperformedinBOLonlybyGerdLeopoldand hisconsiderationispaidfromBOL.However,itisamatteroffactthat theTPOhasassignedtheweightageofworkrequiredandnottriedto dividesalariesbetweentheappellantandBOL.Theappellanthasnot foundanydefectinsuchworking.Consideringthesefacts,the workingprovidedbyappellantbeforeTPOcannotbeaccepted.The appellanthasnotdisputedArmslengthmark-upof5.58%.Itis pertinenttonotethatidenticaladjustmentweremadebyTPOfrom IT[SS]A4,29/Ahd/2023& 4orsPriyaBlueIndPLtd& HooglyShipBreakersLtd.Page 6 AY2014-15to2018-19whereinUndersignedvideorderdated17-08- 2022hasconfirmedsuchadjustment.Asfactsoftheyearunder considerationaresimilartofactsofearlieryears,theupward adjustmentsmadebyTPOforRs.67,96,987/=isupheld. 6.CorporateGuaranteegiventoAEofRs.86,80,387/-:The AssesseehasprovidedCorporateGuaranteetoitsforeignAE,but notchargedguaranteefeesonit.TheAOhasrelieduponprovisions ofSection92BoftheActalongwithdecisionofHon’bleMadrasHigh CourtinthecaseofCIT–Vs-RedingtonIndia[430ITR298]and observedthatcorporateguaranteeisaninternationaltransaction. TheAOhasalsorejectedthecontentionoftheassesseethat guaranteeisnotashareholderactivityandreferredOECD Guidelines2010.TheTPOhasalsoobservedthatguarantee providedbyAssesseeisexplicitguarantee,asassesseehasexplicitly enteredintoagreementwithrespectivebankstoprovideguarantees. TheAOhasreferredtothedecisionofBombayHighCourtinthe caseofCIT–Vs-EverestKentoCylindersLimitedandconsideredthe rateof0.5%asarm-lengthforchargingcorporateguaranteesand consequentlyhemadeUpwardadjustmentofRs.86,80,387/=. 6.1.TheLdCIT[A]confirmedtheadditionmadebytheAOby observingasfollows: “...7.3Oncarefulconsiderationofrelevantfactsonrecord,itis observedthatappellanthasgivenguaranteetoBankofIndiaand IndianOverseasBankforBOLandforprovidingsuchservice, Appellanthasnotchargedanycorporateguaranteefees.Hon’ble MadrasHighCourtinthecaseofRedingtonIndiaLimited.[supra]has clearlystatedthatGuaranteeisaninternationaltransactionand guaranteefeeswastobechargedforthesame.Theprovisionsof section92BoftheActarealsoamendedbyFinanceAct2012.Which alsoprovidesthatguaranteefeesisaninternationaltransaction. Clause[c]ofexplanation[i]tosection92BoftheActclearlystatesthat theexpressioninternationaltransactionshallinclude.Capital financing,includinganytypeoflongtermorshorttermborrowings, lendingorguarantee,purchaseorsaleofmarketablesecuritiesor IT[SS]A4,29/Ahd/2023& 4orsPriyaBlueIndPLtd& HooglyShipBreakersLtd.Page 7 anytypeofadvance,paymentsorDeferredpaymentsorreceivableor anyotherdebtarisingduringthecourseofbusiness.Considering suchamendment,broughttothestatue,contentionofappellantthat noadjustmentisrequiredforbankguaranteeprovidedbyappellant companyforitsassociatedenterpriseisfactuallyincorrect.The decisionofHon’bleAhmedabadITATinthecaseofMicroInklimited versusACITrelieduponbyappellantisfortheperiodpriorto amendmentandhenceitcannotbemadeapplicable. 7.4.SofarascontentionofappellantthatBOLhasdirectlypaidall thelegalchargestoBankofIndiaandIndianOverseasBankand appellanthasneverincurredanycostforprovidingguaranteesis concerned,itisobservedthatAppellanthasexplicitlyenteredinto agreementwithrespectivebankstoprovideguarantee.Oncethe appellanthasprovidedservicestoitsAE,itshouldreasonably chargesfeesforsuchservices.TheloansgiventoBOLwerebased uponguaranteesprovidedbyappellantcompany.Thedecisionsrelied uponbyApparentatpara4.4ofitswrittensubmissionarepriorto amendmentbroughttoSection92BoftheAct,hencecannotbemade applicable. 7.5.Sofarasalternatecontentionofappellantthatguaranteefees shouldbechargedconsideringactualusageofloanandsuchamount istobenettedoffagainfixeddepositisconcerned,itisobservedthat oncetheappellanthasprovidedcorporateguarantee,thetransfer pricingprovisionsrequireappellanttochargereasonableamountfrom AE.Consideringallthesefacts,hon’bleBombayHighCourtinthe caseofEverestKentoCylinders58TaxmanCom254hasconsidered 0.5%asreasonableguaranteefees.Hon’bleAhmedabadITATinthe caseofTorrentPharmaceuticalsLimitedinITAnumber.1285and 1286/Ahd/2017videitsorderdated22ndFebruary2022has uphold0.5%guaranteefeesasreasonablefeesforcorporate guaranteesgivenbyassesseetoitsAE.AsAOhasalreadycharged corporateguaranteefeesat0.5%.Nofurtheradjustmentisrequiredto bemade. 7.6.Inviewoftheabovefacts,upwardadjustmentmadebyTPOfor Rs.68,80,387isUpheld.” 7.UnaccountedprofitfromHSBLofRs.11,29,61,022:Duringthe courseofsearchconductedatBhavnagarofficepremisesofthe assesseecompany,seizedaJointVentureAgreementdated16-02- 2017betweenM/s.HooglyShipBreakersLtd[hereinafterreferred asHSBL]representedbyMr.RameshAgarwalandAssessee companyrepresentedbyMr.SanjayMehtaregardingbusinessof IT[SS]A4,29/Ahd/2023& 4orsPriyaBlueIndPLtd& HooglyShipBreakersLtd.Page 8 recyclingofvessels/shipsatplotno.V-2allottedtoHSBL.The relevantJointVentureAgreementisreproducedatpagenos.3to8of theassessmentorder.ThemainclauseoftheAgreementarethat assesseecompany/SanjayMethawillinvestfundsrequiredtocarry outbusinessatprevailingmarketrateofinterest,Profitandlossof JointVenturebusinessofshiprecyclingwouldbesharedintheratio of50:50.SuchJointVenturewillcontinuefor10yearsandallthe chequesshallbedrawnunderthejointsignaturesrepresentedby onepersonfromeachparty.Duringthecourseofsearch, SupplementaryAgreementdated18/12/2017wasalsofound,which isreproducedatpage#10oftheassessmentorder.Duringthe courseofsearch,MinutesofMeetingsofBoardofDirectorsofHSBL dated16-02-2016wasalsofound,whichisreproducedatpagenos. 13to16oftheassessmentorder,whereinAuthoritywasgrantedto Mr.SanjayMehtaandMr.RakeshGuptaforsigningofchequesfor andonbehalfofHSBL.TheAOhasreferredtothestatementofMr. DushyantPandyaofAssesseeCompanyrecordedon19-11-2019 whereinhehasstatedthatAssesseeCompanywasalsocarryingout shipbreakingactivityfromtheYardV-2ofHSBL.Therelevant statementofDushanPanyaisatpage#17oftheassessmentOrder. ThereaftertheAOhasreferredtodocumentsfoundfromthebackup ofthecomputerinstalledatMumbaiofficeoftheassesseecompany, whichcontainsbriefbackgroundofcompanyandpromoters.From whichitemergesthatAssesseewasindeedoperatingfrom shipbreakingyardV-2ofHSBL.Onthebasisofthesedigitaldata, theAOobservedthat50%RKbeingRs.11,29,61,022isunaccounted profitofHSBLand50%SPMpayablebyRKrepresentunaccounted profitofassesseecompanybasedonsuchobservation,thusAO madeadditionofRs.11,29,61,022/=inthehandsoftheassessee. IT[SS]A4,29/Ahd/2023& 4orsPriyaBlueIndPLtd& HooglyShipBreakersLtd.Page 9 7.1.TheLdCIT[A]modifiedtheadditionmadebytheAOby estimatingtheprofitat5%byobservingasfollows: “...DuringthecourseofAppellateproceedings,theassesseehas reiterateditscontentionaswasraisedbeforetheAOandstatedthat loosepaperismereprojectionasJointVenturehasneverhappened sinceGujaratMaritimeBoardRegulations,2015prohibitsanyJoint VenturesatAlangShipbreakingyard.Thereisnoreasontobelieve thatAssesseehasactuallyearnedanyprofit.Theappellanthasalso contendedthatloosepaperfoundduringthecourseofsearchdoes notcontainanysignatureofanyparty,there'snoadmissionof unaccountedincomebyeitherpartyinstatementrecordedduringthe courseofsearch,thereisnocashtrialofexchangeoffundsbetween boththeparties,henceadditioncannotbemadebaseduponrough nothingsfoundduringthecourseofsearch.Theappellanthasalso statedthatifsales,purchasesandotherexpensesasmentionedin loosepaperissummarized,thereisactuallossofRs.2,19,54,231/- asagainstallegedprofitofRs.23,38,26,274/=whichalsoprovesthat additionmadebyAObaseduponroughworkingisincorrect.The appellanthasalsosubmitteditsauditedannualaccountsaswellas accountsofHSBLinsupportofitscontentionthatnetprofitbeforetax shownonayeartoyearbasisisintherangeof1%ofturnoverand suchbookresultsareacceptedbytheAuthoritiesineachyear.Hence, thereisnoreasonforholdingthatappellanthashadhuge unaccountedprofitoperationsRs.11.3croresaspresumedbythe AO.” 7.2.TheLdCIT[A]afterverifyingthenetprofitdetailsofvarious previousyears,whereintheassesseehasshownthenetprofit between1.5to3.2%fromAY2015-16to2019-20.Similarly,HSBL hasshownprofitof0.56to0.84%inrelevantassessmentyears. Undisputedfactthatwhilepassingtheassessmentorderunder Section153AaswellasinHSBL,theAOhasnotdisputedthebook results.AsloosePaperfoundduringthecourseofsearchisnot reflectingthecorrectfigureofunaccountedincome,itisreasonable toestimatenetprofitat5%ontheturnoverandaboveprofitshown inregularbooksofaccounts.Baseduponsuchfacts,unaccounted netprofitearnedbyappellantandHSBLisapproximatelyworked IT[SS]A4,29/Ahd/2023& 4orsPriyaBlueIndPLtd& HooglyShipBreakersLtd.Page 10 outatRs.8,20,00,000onturnoverofRs.164.05crores.Asappellant washaving50%shareinsuchunaccountedprofit,additiontothe extentofRs.4,10,00,000/=isconfirmedinthehandsofthe Assessee.” 8.SuppressionofsaleofGasTurbineforRs.3,41,34,100:During thecourseofsearch,item-wisesalessummaryshownbeforeGST departmentwasfoundwhichreflectssalesofRs.182.16crores whereassalesasperSalesRegisterwasRs.178.75crores.Onthe basisofthediscrepancy,astatementofMr.SanjayMehta,Director ofthecompanywasrecorded,whereinheexplainedthatGas TurbinewassoldtoM/s.AIKayamMarineon23 rd March2019but suchpartyreturnedthegoodsasexportdidnotmaterialize.He furtherstatedthattheverysameGasTurbinewassoldtothesame partyon15 th June2019foragreedvalueofRs.1,55,00,000/which wasofferedtotax.Theassesseeexplainedthatthedifference betweenthesalesshowntoGSTandthesalesasperbooksof accountwasonaccountofreturnofgoods.Thecontentionofthe assesseewasnotacceptedbytheAOandobservedthedifference betweenthesalesshowntoGSTdepartmentandthesalesasper SalesregisterassuppressionofsaleofGasTurbrineandhemade anadditionofRs.3,41,34,100. 8.1.TheLdCIT[A]deletedtheadditionmadebytheAOsincethe samewastaxedinthesubsequentAY2020-21byobservingas follows: “...OnperusalofrelevantfactsonrecorditisobservedthatAppellant hasmadesalesofGasTurbineforRs.3,41,34,100/=intheyear underconsiderationbutsuchsaleswasnotmaterializedandgoods wasreturnedbysuchpartyinsamefinancialyear.Suchfactiseven admittedbyMr.SanjayMethainhisstatementrecordedduringthe IT[SS]A4,29/Ahd/2023& 4orsPriyaBlueIndPLtd& HooglyShipBreakersLtd.Page 11 postofsearch.Itisanundisputedfactthatthisgasturbinewassold tothesamepartyinAY2020-21forRs.1,55,00,000/andsuchsales wasofferedtotax.WhilepassingtheassessmentorderforAY2020- 21,AOhasmadeseparateadditionofRs.1,86,34,100/after consideringtherealvalueofthegasturbineatRs.3,41,34,100/and notRs.1,55,00,000/=.ThisadditionmadebytheAOhasalready beenupheldbytheundersignedinappellateorderdated27/9/2022 forAY2020-21.Itisobservedthatactualsaleofgasturbinewas madeinAY2020-21andtherealvalueofsuchgasturbinewas alreadytaxedinthatyear.Theexplanationprovidedbyappellant thatdifferenceofsalesasperdetailssubmittedtoGSTDepartment andthesalesshowninsalesregisterisonaccountofreturnofgoods iscorrect,asarealsalewasmadeinAY2020-21.Ifgoodswerenot returnedasexplainedbyappellant,therewasnoreasonformaking samesalestosamepartyinsubsequentyear.Theadditionmadeby AOinthisyearhasresultedindoubleadditioninthecaseof appellantaspartofthesalevaluewasalreadyofferedtotaxby upheldinAY2020-21andtheremainingunder-invoicingofsalevalue wasseparatelytaxedbyAOandconfirmedbyundersignedinAY 2020-21.OnthisgroundadditionmadebyaboveRs.3,41,34,100/is deleted.” 9.UnaccountedRentalincomeofRs.5,00,000/:Duringthe courseofsearchanotarizedcopyofRentalAgreementdated 29/12/2018wasseizedwhichwaspertainingtopropertytakenon rentfromM/s.SavinayDevelopers.Theagreementwasfortheperiod of11monthsandmonthlyrentalofRs.35,000permonthwasfixed. Alongwithsuchrentalagreement,ahandwrittennotewasalso foundandseizedwhichisreproducedatpage#4oftheassessment order,whichstatesthattherentofRs.1,35,000permonthwasfixed andoutofwhichRs.1,00,000isrequiredtobegiveninCASHand balanceamountisrequiredtobegiventhroughaccountpayee cheque.TheAOfoundthattheassesseehadpaidRs.35,000/- throughcheques,whichmeansthecashofRs.1lakhisnot accountedinthebooksofaccounts.Theassesseecontendedthat loosesheetfoundduringthecourseofsearchisadumpdocument asitdoesnotcontainanysignaturesneitheroftheassesseenorof theLandlord.Theassesseealsostatedthatnootherevidencewas IT[SS]A4,29/Ahd/2023& 4orsPriyaBlueIndPLtd& HooglyShipBreakersLtd.Page 12 foundwhichprovedthatassesseewasinfactmadepaymentincash, hencenoadditionbemadeonthisground.HowevertheAOhas referredtothestatementofMr.SanjayMehta,Directorofthe assesseecompanywhereinheadmittedthetransaction,basedon thesame,theAOmadeanadditionofunexplainedrentexpenseof Rs.5,00,000andassessedtaxtou/s.115BBEoftheAct. 9.1.LdCIT[A]confirmedtheadditionmadebytheAObyobserving thattheassesseehasnotretractedthestatementmadeu/s.132[4] oftheActandloosepaperseizedcannotbetreatedasdump documentandtherebyconfirmedtheaddition,sinceforthe subsequentasstyear2020-21similaradditionRs.12lakhsismade asunexplainedrentalexpensesinthehandsoftheassessee. 10.Aggrievedagainsttheappellateorders,boththeAssesseeand RevenueareinCrossappealbeforeus.Assessee’sGroundsof AppealinIT[SS]ANo.04/Ahd/2023relatingtotheA.Y.2019-20 areasfollows: 1.Inlawandinthefactsandcircumstancesofthecase,thelearned CIT(A)haserredinrejectingthecontentionoftheappellantthatthe appellantwasnotprovidedanyopportunityofbeingheardas requiredu/s.127(1)andu/s.127(2)beforetransferofappellant's casefromAssessingOfficer,BhavnagartoAssessingOfficerat CentralCircle,Ahmedabad.Further,anyorderu/s.127inthematter isnotreceived.Accordinglythetransferofcasewasnotvalid. Consequentassessmentorderwasalsonotvalid. 2.Inlawandinthefactsandcircumstancesofthecase,thelearned CIT(A)haserredinnotacceptingtheappellant'ssubmissionthatthe additionofRs.67,96,987madebytheAssessingOfficeronaccountof benchmarkingofservicestoAEwasnotbasedonanyincriminating materialandthusupholdingtheadditionsomade. 3.Inlawandinthefactsandcircumstancesofthecase,theLearned CIT(A)haserredinupholdingadjustmentmadebyTPOfor Rs.86,80,387whennosuchadjustmentiscalledfor.Theaddition maypleasebedeleted. IT[SS]A4,29/Ahd/2023& 4orsPriyaBlueIndPLtd& HooglyShipBreakersLtd.Page 13 4.Onthefactsandinthecircumstancesoftheappellant’scase,the LearnedCIT(A)haserredinholdingthatprofitofRs.4,10,00,000/- wastobeestimatedonaccountofrecyclingofshipsinrespectof JointVentureAgreementonthebasisofloosepaper.Without appreciatingthefactandexplanationgiventohim,theHon’bleITAT maypleaseordertodeletetheadditionmadebytheAssessing Officerentirely. 5.TheLearnedCIT(A)haserredinupholdingadditionofRs. 5,00,000/-madebyAssessingOfficerforunaccountedrental expenses. 6.Theappellantcravesleavetoadd,alter,amendand/orwithdraw anygroundorgroundsofappealeitherbeforeorduringthecourseof hearingoftheappeal. 11.Revenue’sGroundsofAppealinIT[SS]ANo.29/Ahd/2023 relatingtotheA.Y.2019-20areasfollows: 1.Inthefactsandonthecircumstancesofthecaseandinlaw,the Ld.CIT(A)erredindeletingtheadditionofRs.7,19,61,022/-outof totaladditionofRs.11,29,61,000/-madeonaccountofunaccounted incomeoutofshipbreakingactivityintheV2ShipbreakingYear despiteitwasspecificallyrecordedintheseizedmaterial(sheet namedACCOUNTSETTLEDASON12.07.2018UPTOOPPORTUNITY) astheprofitforAY2019-20,duetosuchshipbreakingactivityofRs. 11,29,61,022/-forboththeparties. 2.Inthefactsandonthecircumstancesofthecaseandinlaw,the Ld.CIT(A)erredindeletingtheadditionofRs.3,41,34,100/-madeon accountofsuppressionofsaleofGasTurbineconsideringthatthe saleswerecarriedoutinAY2020-21andnotforAY2019-20even thoughtheperiodoftransactionwasacceptedbySh.SanjayMehta, directorofPBIPLasAY2019-20,inhisstatementwhichwas recordedduringthesearchproceedingat504,SwaraParkLane,Opp. JoggersPark,Bhavnagar. 3.Onthefactsandinthecircumstancesofthecaseandinlaw,the Ld.CIT(A)oughttohaveupheldtheorderoftheAO. 4.Itistherefore,prayedthattheorderofthelearnedCommissioner (Appeals)besetasideandthatoftheA.O.berestoredtotheabove extent. IT[SS]A4,29/Ahd/2023& 4orsPriyaBlueIndPLtd& HooglyShipBreakersLtd.Page 14 12.SincecommonissuesareinvolvedintheaboveCrossappeals, forthesakeofconveniencetheGroundsraisedbybothpartiesare dealtwitheachissue-wise.AttheoutsetLd.SeniorCounselShri TusharHemaniappearingfortheassesseesubmittedthatthe assesseeisNOTpressingGroundNo.1namelyassumptionof jurisdictionu/s.127[2]oftheAct.Recordingthesame,Ground No.1raisedbytheassesseeisherebydismissed. 13.RegardingGroundNo.2,theLd.SeniorCounselsubmittedthat thereisnoincriminatingmaterialfoundduringthecourseofsearch, basedonwhichitcanbestatedthatemployeesofPBILwere workingforBOL.FurtherPBIListheholdingcompanyandBOLis thewhollyownedsubsidiarycompany.Evenifadjustmentismade onaccountofallegedservices,itshouldbekeptinmindthatcertain technicalfunctionswereperformedonlybyMr.GerdLeopard,who isanon-residentandwhohasbeenpaidconsiderationfromthe booksofBOLonly.NoconsiderationhasbeenpaidtoMr.Gerd Leopardorhistechnicalteambytheassesseecompany.Accordingly, weightageforPBILandBOLcanonlybearrivedat 75:25andreferredtoFARanalysisreport. ParticularsPBIPLBOLPerformed by FUNCTIONS ReceivingOffersfrombrokersfor shippurchase 0GerdLeopld &histeam Evaluationoftheoffers0GerdLeopld &histeam Finalizingtheofferandpurchasingtheship0GerdLeopld &histeam Arrangingthedeliveryofvessel0GerdLeopld &histeam CustomClearanceofthevessel1 Managingemployeesforoperations1 IT[SS]A4,29/Ahd/2023& 4orsPriyaBlueIndPLtd& HooglyShipBreakersLtd.Page 15 Managingcertificationstandards1 Compliancewiththeauthorities1 Businessknowhowofcashbuyers segmentofshippingindustry 0GerdLeopld &histeam Experienceandpresenceincashbuying segmentofshippingindustry 0GerdLeopld &histeam Worldwideconnectstobrokernetwork0GerdLeopld &histeam Managingnetworkofcustomers1 ASSETS Arrangementofnecessaryfinance11 TechnicalKeymanagerialpersons/Directors11 Investmentinrecyclingequipment/machineries1 Investmentinland/yard1 Investmentinworkingcapital11 RISKS Commercialliabilityrisk11 Financialdefaultrisk11 Guaranteegiventobanks1 Regulatorycompliancerelatedrisks11 CustomersDefaultrisk1 Inventoryrisk1 PriceRisk1 Labour/Workmenrelatedrisk1 Total186 13.1.PercontratheLdCITDRappearingfortheRevenuesupported theorderspassedbythelowerauthoritiesandrequestedtouphold thesameandconfirmtheadditions. 14.Wehaveheardrivalsubmissionsandperusedthematerialson recordandadjudicatethepreliminaryissuethatthereisno incriminatingmaterialfoundduringthecourseofsearchand statementsrecordedfromvariousemployeesoftheassessee companycannotberelieduponforassessment,thisargumentdoes notholdgoodsincethisassessmentyear2019-20wasnotabated IT[SS]A4,29/Ahd/2023& 4orsPriyaBlueIndPLtd& HooglyShipBreakersLtd.Page 16 andassessmentproceedingswerependingduringthecourseof searchproceedings,thereforethereisnoquestionincriminating materialrequiredfortheassessment,hencethisargumentis rejected. 14.1.Itisseenfromtheordersofthelowerauthoritiesthatthe assesseecompanyisintheshipbreakingandtradingofitemsactivity. Thereareseveraloperationswhichneedstobehandledbytheassessee company[PBIL]staffandtheirdirectorssittingatMumbaioffice,viz. a)CustomClearancesofthevessels b)Managingemployeesandworkersfortheseveraloperations, c)ManagingCertificationstandards, d)Compliancewiththeseveralauthorities e)Projectionsandbudgetingforthenecessaryfinance f)Identifyinganddecidingontheinvestmentinrecycling equipment/machineries g)appraisingtheworkingcapitalneedandmanagingit h)Managingnetworkofcustomers i)evaluatingandmanagingcommercialliability, j)Managinginventory, k)handlingthesalesoperations 1)identifyingthecustomersandnegotiatingwiththem, m)InstructingandallocatingmanpowerteamforShip breakingactivities n)follow-upwithbankers o)PreparingMISreportingforthequickreviewofmanagement. 14.2.TheRevenuedidnotdisputethatBOL'scashbuyingsegment washandledandleadbyMr.GerdLeopoldonly,whowashaving vastexperienceinthatfield.TheoperationsofAssesseecompanyis totallydifferentthanthatofactivitiescarriedoutbytheBOL.All employeesincludingreferredemployeesanddirectorsweremainly workingforthePBILoperationsonlyandBOLwasledbyGerd LeopoldwithhisindependentTechnicalTeam.Directorsofthe assesseecompanywerealsonothavinganypastexperienceand backgroundinthecashbuyingsegmentactivitiesastheywere IT[SS]A4,29/Ahd/2023& 4orsPriyaBlueIndPLtd& HooglyShipBreakersLtd.Page 17 mainlyengagedandoperatinginthefieldofshipdismantling activitiesonly. 14.2.Furtheritisundisputedfactthattheallegedemployeeswho hasworkedforBOLhavejoinedthePBILsinceyear2014-15only andwhereas,BestOasisLtdhadbeenincorporatedwaybackin 2010-11andconductingitsbusinesssincethen,henceitcan'tbe assumedthatanyoftheemployeeswereworkingforBOL,itwas merelythatcertainbackofficeresidualworkwasgettingallottedto thePBILemployeesastheoperationsofthegroupstartedexpanding. Itwillbemanifesttostatethatincaseof'cashbuying'activityin shippingindustrythemajoroperationpertainstothebuying operations,whichweregettinghandledbyGerd.Gerdandhisteam paymentwasdulydonebyBOLonly.NoneofthePriyaBlue Industriesemployeesweretechnicallysoundtohandlethe complexandhighlytechnicaloperationsoftheBOL,majorityof themwerejustaBachelordegreeholderwithnoprior experienceof'Cashbuying'segmentexperienceever,hence assumingthattheywereworkingmainlyforBOLisfar stretchingexercise.BOLisengagedinthebusinessofcashbuying ofshipsandvesselswhichismainlycontrolledbytheperson outsideIndiaandthereferredemployeesofAppellantwereonly providingbackofficeserviceandhasnootherrelationwiththe businessofcashbuying.Therefore,thequestionofcommon employeesdoesnotariseinthecase.Also,onstatementsbeen sharedofemployees,someoftheemployeeshasalsospecifically clarifiedandretractedtheirstatementtakenduringthecourseof searchunderduressandinmechanicalmanner. IT[SS]A4,29/Ahd/2023& 4orsPriyaBlueIndPLtd& HooglyShipBreakersLtd.Page 18 14.3.Evenifadjustmentistobemadeonaccountofalleged provisionofservices,thenitshouldbeconsideredherethatas certaintechnicalfunctionswereonlyperformedbyGerdLeopold whowasnon-residentandwhoseconsiderationwaspaidfromthe booksofBOLonlyandthereisnoconsiderationpaidtohimorhis TechnicalTeamfromthebooksofassesseecompany.Considering thesame,weightedaverageworkedoutbyappellantbeforeTPO basedontheFARReporti.e.75:25[reproducedinpara13above] isfoundtobereasonableandappropriate.ThereforetheLdAOis directedreworkTPadjustmentaccordinglyandthustheGround No.2raisedbytheassesseeispartlyallowed. 15.RegardingGroundNo.3,theLd.SeniorCounselreiteratingthe submissionsmadebeforethelowerauthoritiesthatitiswellsettled thatissuanceof“CorporateGuarantee”bytheassesseeonbehalfof itssubsidiarycompanyisinthenatureofquasi-capitalorshare holderactivityandnotinthenatureof‘provisionofservice’and thereforethesaidtransactionistobeexcludedfromthescopeof “internationaltransaction”u/s.92BoftheAct.LdSeniorCounsel furthercontendedthattheissueissquarelycoveredinfavourofthe assesseebyreferringthedecisionsrenderedbytheCo-ordinate BenchesoftheTribunal,inthecaseofMicroInkLd.Vs.ACIT reportedin157ITD132;DCIT-Vs-SuzlonEnergyLtd.ITA2216/ AHD/2018andDCIT-Vs-SuzlonEnergyLtd.153Taxman.com582 [Ahd]. 15.1.Ontheotherhand,theldCITDRsubmittedthattheorderof thisTribunalinthecaseofMicroInkLd.Vs.ACIT,reportedin63 taxmann.com353hasbeenreversedbythejudgmentofHon’ble MadrasHighCourtinthecaseofPCITVs.Redington(India)Limited. IT[SS]A4,29/Ahd/2023& 4orsPriyaBlueIndPLtd& HooglyShipBreakersLtd.Page 19 Therefore,learnedDRvehementlysupportedtheorderofthe authoritiesbelow. 16.Wehaveheardtherivalcontentionsofboththepartiesand perusedthematerialsavailableonrecord.Attheoutsetwenotethat thefactoftheissueonhandhasbeenelaboratedinprevious paragraphs,therefore,weproceedtoadjudicatethesame accordingly.Theprovisionsofsection92BoftheActdefinesthe parametersofwhatconstitutesan‘internationaltransaction’. Althoughtheambitofinternationaltransactionwaswideenough, yetduetojudicialinterpretation,certainclassesoftransactions werebeingleftoutofthetransferpricingnet.Totacklethesame,by theFinanceActof2012anExplanationtoSection92B[2]oftheAct wasbroughtonthestatutewithretrospectiveeffectfrom1stApril 2002.Theexplanationisclarificatoryinnatureandaddedcertain categoriesoftransactions,interalia,thetransactionasspecified underclause(c)ofexplanation(i)tosection92BoftheActwithin theambitofinternationaltransactionswhichisreproducedas under: [Explanation.—Fortheremovalofdoubts,itisherebyclarifiedthat— (i)theexpression"internationaltransaction"shallinclude— (a)*********** (b)************* (c)capitalfinancing,includinganytypeoflong-termorshort-term borrowing,lendingorguarantee,purchaseorsaleofmarketable securitiesoranytypeofadvance,paymentsordeferredpaymentor receivableoranyotherdebtarisingduringthecourseofbusiness; 16.1.Thusitcanbeseenthattheguaranteewasincludedwithin theambitofinternationaltransactionvidetheFinanceAct2012 withretrospectiveeffect.Thereremainsnoambiguitytothefactthat IT[SS]A4,29/Ahd/2023& 4orsPriyaBlueIndPLtd& HooglyShipBreakersLtd.Page 20 corporateguaranteeextendedbytheassesseetoitsAEisan internationaltransactionandthereforethesamehastobe benchmarkedatthearmlengthprice.However,wenotethatthe differentbenchesoftheITAThavetakendifferentview.Someof themheldthatthetransactionofcorporateguaranteeisan internationaltransaction,whereassomeofthemheldthatthe transactionofcorporateguaranteeisoutsidethepurviewofthe internationaltransactionincludingtheAhmedabadtribunalinthe caseofMicroInkLtd.vs.Addl.CITreportedin[2015]taxmann.com 353,whereinitwasheldthatthecorporateguaranteeisnot internationaltransaction.Thisdecisionwasfollowedbyother BenchesinthecaseofSuzlonEnergyLtd. 16.2.However,inourconsideredviewtheabovedecisionshasnot consideredtheamendmentintheFinanceActof2012and ExplanationtoSection92B[2]oftheActwhichwasbroughtonthe statutewithretrospectiveeffectfrom1stApril2002.Furtherwefind thattheHon’bleMadrasHighCourtinthecaseofPCITvs. Redington(India)Ltd.reportedin122taxmann.com136hasheld thatcorporateguaranteeiscoveredunderthelimbofinternational andhavingbearingonprofitandlossaccount.Therelevantfinding oftheHon’blecourtreadsasunder: “...TheconceptofbankGuaranteesandCorporateGuaranteeswasexplained inthedecisionoftheHydrabadTribunalinthecaseofProlificsCorpn.Ltdv. Dy.CIT[2015]55taxmann.com226/68SOT104(URO).Inthesaidcase,the revenuecontendedthatthetransactionofprovidingCorporateGuaranteeis coveredbythedefinitionofinternationaltransactionafterretrospective amendmentmadebyFinanceAct,2012.Theassesseearguedthatthe CorporateGuaranteeisandadditionalguarantee,providedbytheParent company.Itdoesnotinvolveanycostofrisktotheshareholders.Further,the retrospectiveamendmentofsection92Bdoesnotenlargethescopeoftheterm 'internationaltransaction'toincludetheCorporateGuaranteeinthenature providedbytheassesseetherein.TheTribunalheldthatincaseofdefault, Guarantorhastofulfiltheliabilityandtherefore,thereisalwaysaninherentrisk IT[SS]A4,29/Ahd/2023& 4orsPriyaBlueIndPLtd& HooglyShipBreakersLtd.Page 21 inprovidingguaranteesandthatmaybeareasonthatFinanceproviderinsist onnon-charginganycommissionfromAssociatedEnterpriseasacommercial principle.Further,ithasbeenobservedthathispositionindicatesthatprovision ofguaranteealwaysinvolvesriskandthereisaserviceprovidedtothe Associateenterpriseinincreasingitscreditworthinessinobtainingloansinthe market,befromFinancialinstitutionsorfromothers.Theremaynotbe immediatechargeonprofit&lossaccount,butinherentriskcannotberuled outinprovidingguarantees.U1andadjustmentaretobemadeonguarantee commissionsonsuchguaranteesprovidedbytheBankdirectlyandalsoonthe guaranteeprovidedtotheerstwhileshareholdersforassuringthepaymentof AssociateEnterprise.Inthelightoftheabovedecisions,theTribunal committedanerrorindeletingtheadditionsmadeagainstCorporateandBank GuaranteeandtheorderpassedbytheDRPistoberestored.” 16.3.Thusinviewoftheabove,weholdthatthebankguaranteeis aninternationaltransaction.Therefore,thesamehastobebench markedfordeterminingtheALP.Nextquestionthatarisefor adjudicationiswhethersuchamendmentisapplicableretrospect tivelyi.e.1-4-2002thoughthesamewasbroughtthefinanceAct 2012.Inthisregard,wenotethattheHon’bleMadrasHighCourtin thecaseofPCITvs.Redington(India)Ltd.[citedsupra]hasheldthat suchamendmentwasapplicableretrospectively.Therelevant portionofthejudgmentreadsasunder: “72.AnewEnactmentoranAmendmentmeanttoexplaintheearlierActhas tobeconsideredretrospective.Theexplanationinsertedinsection92Bby FinanceAct2012withretrospectiveeffectfrom1-4-2002commenceswiththe sentence"Fortheremovalofdoubts,itisherebyclarifiedthat-" 73.AnAmendmentmadewiththeobjectofremovalofdoubtsandtoclarify, undoubtedlyhastobereadtoberetrospectiveandCourtsareboundtogive effecttosuchretrospectivelegislation. 16.4.Inviewoftheabove,weholdthattheamendmentasdiscussed abovewasbroughtbytheFinanceAct2012butthesameis applicableretrospectivelyi.e.1-4-2002.Thustheamendmentis applicabletotheasstyear2019-20underconsideration.Thecase lawsreliedbytheassesseecompanydidnotconsideredthe IT[SS]A4,29/Ahd/2023& 4orsPriyaBlueIndPLtd& HooglyShipBreakersLtd.Page 22 retrospectiveamendmentbroughtbytheFinanceAct,2012, thereforethesamearenotapplicableforthepresentcase. 16.5.NextquestionarosewhatshouldbetheALPrateofthe commissiononcorporateguarantee?InthisregardwefindthatThe Tribunalinseveralcaseshasconsidered0.50%(ofcorporate guaranteegiven)asALPrateofCorporateGuaranteecommission. Someofthesecasesareasunder: (i)VideoconIndustriesLtd.v.Dy.CIT[2017]79taxmann.com216 (Mumbai-Trib.),Parentcompanychargedcommissionat0.25%. TheALPwasdeterminedbytheTribunalat0.50%. (ii)HindalcoIndustriesLtd.v.Addl.CIT[2015]62taxmann.com181 (Mum.),Parentcompanychargedcommissionat0.50%whichwas consideredasatALP. (iii)ManugraphIndiaLtd.v.Dy.CIT[2015]62taxmann.com347(Mum. Trib.),thecorporateguaranteewasnottreatedasinternational transactionbytheparentcompanybuttheTribunaltreateditas internationaltransactionu/s92BandupheldtheALPof0.50%, followingtheorderinthecaseoftheassesseefortheearlieryear. TheTribunalfollowedEverestKentoCylinderLtd.v.ACIT[2015]56 taxmann.com361(Mum-Trib).ItseemsthatthedecisioninBharti AirtelLtd.(supra)wasnotreferredtointhiscase. (iv)AdityaBirlaMincasWorldwideLtd.v.Dy.CIT[2015]56taxmann. com317(Mum-ITAT).Theassesseehadnotclassifiedthis transactionasinternationaltransaction.However,guarantee commissionwasfixedat0.50%. (v)MylanLaboratoriesLtd.v.Asstt.CIT[2015]155ITD1123(Hyd.- Trib.)Theassesseeadmittedcorporateguaranteeasinternational transaction,thenasagainst2%fixedbyTPOtheTribunalupheld theclaimoftheassesseeat0.53%followingthedecisioninProlifics Corpn.Ltd.v.Dy.CIT[2015]68SOT104(URO)/55taxmann.com 226(HYD-Trib.). (vi)EverestKantoCylinderLtd.(supra)-Assesseepaidguarantee commissionatrateof0.5%forobtainingguarantee.Thiswas acceptedasALPforallcorporateguaranteesgivenbytheassessee. (vii)GodrejConsumerProductsLtd.v.ACIT[2016]69taxmann.com 436(Mumbai-Trib.)Theassesseesuomotubenchmarkedthe IT[SS]A4,29/Ahd/2023& 4orsPriyaBlueIndPLtd& HooglyShipBreakersLtd.Page 23 commissionchargeableonbankguarantee@0.25%.Itwas determinedat0.50%. (viii)DelhiTribunalinthecaseofHavellsIndiaLtd.Vs.ACIT(LTU)in ITANo.6509/Del/2018dt.09.05.2022hadalsoechoedtheabove saidviewandheldthattheadditionof0.5%ontheamount guaranteedwouldbetheappropriatebenchmarktodeterminethe ALP. (ix)SimilardecisionwasalsopassedbytheBangaloreandPune BenchesoftheTribunalsinthecaseofGMRInfrastructureLtdin ITANo.344/Pun/2022dt.25.05.2022andJainIrrigationSystems inITA822/Pun/2022dt.22.12.2022,respectively. 16.6.Thus,inviewoftheaboverulingsbyvariousBenchesofthe Tribunal,wedismissthegroundno.3raisedbytheassesseeand confirmtheadditiontothetuneof0.5%ontheamountguaranteed ascorporateguaranteecommission. 17.RegardingGroundNo.4bytheassesseeandGroundNo.1bythe Revenue,UnaccountedprofitfromHSBLasdeterminedbythe AOofRs.11,29,61,022/=andwasestimatedbyCIT[A]to Rs.4.10crores. 17.1.LdSeniorCounselMr.TusharHimanisubmittedthatduring thecourseofsearchu/s.132oftheActon19-11-2019few documentswerefoundandseizednamely[a]JointVenture Agreementdated16-02-2017;[b]SupplementaryAgreementdated 18-12-2017;[c]MinutesofMeetingofBoardofDirectorsofHSBL dated16-02-2016;[d]Digitaldataofshipbreakingactivitycarried outV2shipbreakingyard;[e]Excelsheetwithheading“ACCOUNT SETTLEDASON12-7-2018UPTOOPPORTUNITY”.Aspertheexcel sheet“50%shareofSPMpayablebyRK”wasRs.11,29,61,022/=. TheLdAOpresumedthatsuchamountrepresentedtheshareofthe assesseecompanyintheprofitgeneratedonaccountofship IT[SS]A4,29/Ahd/2023& 4orsPriyaBlueIndPLtd& HooglyShipBreakersLtd.Page 24 breakingactivitiescarriedoutfromplotV-2pursuanttotheJVA enteredbetweenPBILandHSBL.Accordinglyashowcausenotice dated22-02-2022wasissuedcallingupontheassesseetoshowcase aswhytheadditionofRs.11,29,61,022/=shouldnotbemadeby treatingitasunaccountedincomeoftheassesseecompany.The assesseefurnisheddetailedresponseexplainingthatnoJoint VenturewasallowedatAlangshipbreakingyardasperthe restrictionfromtheGujaratMaritimeBoardRegulations,2015, Chapter-2,para2.5whichreadasfollows: “NoLeasing/Sub-letting:Thepermissiongrantedisfor specificpurposeofshiprecyclingbythepermissionholder. Innocase,thepermissionholdershallsublet,lease,assign, sub-contractorselltheplotortransferanyrightintheplot includingthepermissiblerighttousethesaidplottoany otherperson[s],noralienateinanymannerforanypurpose Whatsoever." 17.2.Inviewoftheaboverestriction,NOJointVenturesareallowed atAlangShipBreakingyard.HencethesaidJVallegedbytheAO wasneveractedupon.ThereforetheallegationoftheAOwith respecttocarryingourship-breakingactivitiespursuanttoalleged JVAandearningprofitonaccountofthesameareabsolutely baselessandincorrect. 17.3.FurtherwithreferencetoSupplementAgreementdated18-12- 2017onthebasisofwhichtheAOallegedthatundertheJVAaship named“Ltd42,400MT”waspurchasedforrecycling.Forthis transactionMr.SanjayPMethaarrangedfundstothetuneofRs.35 croresfortheactivitiesofshiprecycling,againstwhichhewasto receivethe100%sharesofHSBLassecurity.InthisregardtheLd CounselsubmittedthatsincetheallegedJVAwasneverproceeded withandnofundswereprovidedtoHSBLbytheassessee.However thefundsreceivedbyHSBLfromthemarketasunsecuredloans IT[SS]A4,29/Ahd/2023& 4orsPriyaBlueIndPLtd& HooglyShipBreakersLtd.Page 25 undertheguaranteeprovidedbytheassesseecompanybyblocking ofitsLCinitsnameofHSBL.InlieuofwhichHSBLprovidedthe sharecertificatesassecurity.Thesamehavebeendonetosecure theinterestofSanjayPMehtaandtheassesseecompanyforthe abovefunds. 17.4.RegardingtheMinutesofBoardMeetingthatauthorizationas signingauthorityforchequesissuedonbehalfofHSBLwasmade underallegedJVAwhichwasneverexecutedtoitsobjective. However,asstatedabovethatHSBLreceivedfundsfrommarketas unsecuredloansundertheguaranteeprovidedbytheassessee companyandtheblockingoftheassesseecompanyLCinitsname forsecuringtheinterestofthecompany.Onmutualagreement SanjayPMethaandRakeshGuptawereauthorizedassigning authorityforthechequesissuedonbehalfofHSBLfortheabove referredbankaccounts.ThiswasclearlyexplainedbyMr.SanjayP Methainhisstatementrecordedon21-11-2019,eveninthat statementthereisnoaffirmationthatallegedJointVenturewasin operationbetweentheparties.HoweverignoringthesametheLdAO presumedthatshipbreakingactivitiescarriedoutasperJVA betweentheparties. 17.5.Nextoneisexcelsheetfoundfromthebackupofthecomputer namely“ACCOUNTSETTLEDASON12-7-2018UPTO OPPORTUNITY”.Thisexcelsheetrepresentsonlyaroughworking andthesheetwaspreparedforanestimatedbasisandnoneofthe partieshasexecutedanytransactions.Nosuchamounthasbeen receivedeitherbySanjayPMehtaortheassesseecompany,since thesheetrepresentsroughworkingofestimatedamountstobe receivedbySanjayPMethaortheassesseecompany,iftheJoint Venturewastobeexecuted,whichduetotheregulationsofGujarat IT[SS]A4,29/Ahd/2023& 4orsPriyaBlueIndPLtd& HooglyShipBreakersLtd.Page 26 MaritimeBoardwasnotpossible.Suchsheetrepresentsno connectionwithanyrealincomewhichweretobeearnedbythe assesseecompanyorSanjayPMetha.Thereforeadditiononsuch groundwouldonlybebasedonassumptionandpresumptions. Furthertheseizedexcelsheetnowherecontainseitherofthe followingdetails *whatactivitieshavebeencarriedout; *whohascarriedoutsuchactivities; *whatisthepreciseperiodofcarryingoutsuchactivities; *methodologyofderivingamountpayable; *fullformof‘RK’and‘SPM’ *Detailsofactualpayment(namelyrecipient,date,modeof paymentetc.) *thesheetdoesnotcontainsignatureofanyoftheparties. *thesheetnowherementionsthatsuchprofithasbeen earnedfromjointventure *noneofthepartieshasactuallyexecutedsuchtransactions asperjointventureagreement *noneofthepartieshasevenstatedtohaveexecutedsuch transactionsasperjointventureagreement *evenasperthesheetamountispayablenotactuallypaid *thereisnocorroborativeevidenceofactualdistributionof profitorreceipt *there'snoadmissionofunaccountedincomebyeitherof theparties *thesheethasnoconnectionwiththerealincomeearned byBPILorSanjayPMehtaandnosuchamounthasbeen receivedbyeitherparties *eventheamountofprofitappearstobeatheoretical numbersuchanumberdoesnotshowanyfinancial record. *ifprofitorlossistobeworkedoutstrictlyonthebasisof thesheetinquestionitresultinalossofRs.2,19,54,231/ 17.6.Inviewoftheabove,LdSeniorCounselsubmittedthatitis clearthattheexcelsheetinquestionappearstobeonlyarough working,merelyreflectssomeprojections,appearstohavebeen preparedonestimatebasis.Merelybecauseoftheword50%RKand 50%SPMasmentionedinthesheetcannotrepresentthatsuch IT[SS]A4,29/Ahd/2023& 4orsPriyaBlueIndPLtd& HooglyShipBreakersLtd.Page 27 sheetreflectsquantumofprofitactuallyearned.Thereforetheld SeniorCounselsubmittedit'sclearlyevidentthatthesheetismerely a‘dumbdocument’.Thesheetisdressedupwiththeoretical numbers,theamountso-calledprofitcannotbederivedfromthe sheetwithoutcorrespondingevidence.Thereforetheimpugned additionmadeon‘dumbdocument’andnotbackedwithany corroborativeevidenceisunstainablelawandreliedonthefollowing decisions: ACIT–Vs-DharmendrasinhWaghelaTaxAppeal1539of2011[Guj] ACIT–Vs-ManavInfrastructurePLtdIT[SS]A314/Ahd/2012and ACIT–Vs-BhagvanbhaiKAjaraIT[SS]A194/Ahd/2013 ItiswellsettledthatNOadditioncanbemademerelyonthebasisof contentsofseizedmaterials.Relianceisplacedonthefollowing decisions: CIT–Vs-MaulikKumarKShah-307ITR137[Guj] CommonCause–Vs-UoI-394ITR220[SC] ITO–Vs-BharatAMetha–60taxmann.com1[Guj] 17.7.ThusLdSeniorCounselpleadedthatneithertheadditionby theLdAOofRs.11,29,61,022/=northeestimationmadebytheLd CIT[A]ofRs.4.10croresarenotsustainableinlaw. 18.PercontratheLdCITDRappearingfortheRevenuesupported theorderpassedbytheAOandrequestedtoupholdthesameand theLdCIT[A]isnotcorrectinestimatingtheprofitat5%and thereforerequestedtoupholdtheadditionmadebytheLdAO. 19.Wehaveheardrivalsubmissionsindetailandperusedthe materialsonrecord.Toappreciatethecontroversyonhandin correctprospective,thefollowingvitalfactsinrelationtoHooghly ShipBreakingLtdaremorerelevant.ShipbreakingyardV-2was IT[SS]A4,29/Ahd/2023& 4orsPriyaBlueIndPLtd& HooglyShipBreakersLtd.Page 28 ownedonlybyHSBLandnotbytheassesseePBIL.Incomefrom shipbreakingactivitiesof‘ShipArina’and‘ShipOpportunity’were accountedforinthebooksofHSBL.Searchactionundersection 132wascarriedoutinthepremisesoftheassesseecompanyand HSBLon19-11-2019.Laternoticeu/s.153AwereissuedonHSBL on23-12-2020andsearchassessmentsu/s.153Awereframedin thecaseofHSBLon20-09-2021andinthecaseofAssessee companyon07-03-2022bytheverysameDeputyCommissionerof IncomeTax,CentralCircle1[1],Ahmedabad.Paragraph4to4.6of boththeassessmentordersdealingwith“Additionwithrespectto shipsrecycledunderthejointventureagreementwithHSBL” whichisrunningto17pages[withreproductionofJVA, SupplementaryAgreement,MinutesofBoardMeetingofHSBL,etc.] whicharewordbywordandparagraphbyparagraphareidentical forboththeassesseecompanyandHSBL.Thusitisacutandpaste ordermadebytheldAOandraisedadditionofRs.11,29,61,022/= being50%eachshareincomeoftheassesseecompanyandHSBL. 19.1.BydoingsotheldAOmiserablyfailedtoconsidertheReturn ofIncomefiledbytheHSBLdeclaringtheincomeonrecyclingof ship‘Arena’andship‘Opportunity’andpaymentofstatutorydues, taxestovariousauthoritiesbyHSBL.ButtheLdAOblindlyrelied ontheseizeddocumentsnamelyJVA,SupplementaryAgreement, Excelsheetwithoutcorroborativeevidences. 19.2.Theassesseebroughtonrecordnamelythebasicpurchase valueofshipArenaisRs.31,10,26,020/=asperthepurchase registerofHSBL.Note23containsreferencetoCIFvalueof purchaseofshipArena.Note25containsreferencetopurchaseof shipArenabyHSBL[Whichareavailableatpagenumber47and48 IT[SS]A4,29/Ahd/2023& 4orsPriyaBlueIndPLtd& HooglyShipBreakersLtd.Page 29 ofthepaperbook].FurtherLedgeraccountofShipRecycling/Port chargesofHSBLclearlyshowsthatHSBLpaidRs.22,45,691/=on 28-3-2017toGujaratMaritimeBoard[GMB]forthebreakingup shipArena.SimilarlyLedgeraccountof‘GujaratMaritimeBoard- PLDaccount’showsthepaymentofRs.22,45,691/byHSBLfor recyclingcharges.Furtherledgeraccountof‘Customsduty-raw materials[ships]’,clearlyshowsthatHSBLpaidappropriate CustomsdutyofRs.89,13,642/forshipArena.[Whichareavailable atpagenumber49and53ofthepaperbook]. 19.3.Similarlypurchasevalueofship‘Opportunity’byHSBLwasfor Rs.97,39,21,419/=.Importpurchaseregister–IGST,customsduty ofRs.18,16,80,681/=paidbyHSBL.FurtherLedgeraccountofShip Recycling/PortchargesofHSBLclearlyshowsthatHSBLpaid Rs.67,54,639/=toGujaratMaritimeBoard[GMB]forthebreaking shipOpportunity.SimilarlyLedgeraccountof‘GujaratMaritime Board-PLDaccount’showsthepaymentofRs.5,80,560/byHSBL forrecyclingcharges[whichareavailableatpagenumber54and60 ofthepaperbook]. 19.4.TheLdAOfailedtoconsiderthereplytothestatementdated 21-11-2019ofSriSanjayPMetharecordedatBhavnagaroffice, whichreadsasfollows: “Q.15.Iamshowingyouthepages1to53foundandseizedas AnnexureA-3fromyouroffice504SwarnaParkLane,opposite JoggersPark,Bhavnagar.Thepagesarerelatedtoyour agreementwiththepromotersofm/s.HooglyShipbreakersLtd. Aspertheagreementtheywereforming50%-50%JVwith theminlieuoftheprofitsharingandinreturnthe IT[SS]A4,29/Ahd/2023& 4orsPriyaBlueIndPLtd& HooglyShipBreakersLtd.Page 30 promotersHooglyShipbreakersLtd.havehandedovertoyouthe 50%ofthesharestobekeptinyourcustodyaresecurity.Please statewhetheryouarereceivinganyprofitfromthemandifyes detailsofthesame? Ans.:SirwearehavingadjacentplotsatSosiya.Wearehaving plotnumberV-1andtheyhaveV-2.Thecompanyinquestionis inlossandseverefinancialcrunch.Ihavesteppedintohelphim andtoopenhisLC,blockedmyLCandletthemusemyLCfor business.InreturnofwhichIhavetakentheshareforsecurity. SirwehavenotreceivedanyprofitfromthisJVtilldateasthey aremakinglosssinceFeb2017aftersigning”. 19.5.Atthisjuncturewewouldfurtherliketorefertheprovisionsof Section132(4A)oftheActwhichreadsasfollows:- "132(4A)Whereanybooksofaccount,otherdocuments,money, bullion,jewelleryorothervaluablearticleorthingareorisfoundin thepossessionorcontrolofanypersoninthecourseofasearch,it maybepresumed- (i)thatsuchbooksofaccount,otherdocuments,money,bullion, jewelleryorothervaluablearticleorthingbelongorbelongsto suchperson; (ii)thatthecontentsofsuchbooksofaccountandother documentsaretrue;and (iii)thatthesignatureandeveryotherpartofsuchbooksof accountandotherdocumentswhichpurporttobeinthe handwritingofanyparticularpersonorwhichmayreasonably beassumedtohavebeensignedby,ortobeinthehandwriting of,anyparticularperson,areinthatperson'shandwriting,and inthecaseofadocumentstamped,executedorattested,thatit wasdulystampedandexecutedorattestedbythepersonby whomitpurportstohavebeensoexecutedorattested." 19.6.Fromgoingthroughtheaboveprovision,wefindthatituses theword"itmaybepresumed",whichasrightlyheldbythe IT[SS]A4,29/Ahd/2023& 4orsPriyaBlueIndPLtd& HooglyShipBreakersLtd.Page 31 Hon'blejurisdictionalHighCourtinthecaseofCITvs.Dharmendra SinhWaghelathattheword"maypresume"thatsuch presumptionisrebuttableinasituationifRevenuecouldnot bringonrecordanymaterialtoprovethattheseizedmaterialis corroborativefortheaddition.Inthepresentcasebeforeus,the LdAOcouldnotcorelatethesizedmaterialswithcorroborative evidenceandalsonotmadesufficientenquirysoastoestablishthat infactthesaiddocumentsunearthedareconcealedbusiness activityoftheassessee.Intheabsenceofanysuchevidence,the additionsomadebytheAOremainedun-corroboratedandliableto bedeleted.ThisviewofoursissupportedbyJurisdictionalHigh CourtinthecaseDharmendraSinhWaghelawhichwasfollowedby theCo-ordinateBenchesoftheTribunalinthecaseofManav InfrastructurePLtdandACIT–Vs-BhagvanbhaiKAjara[cited supra]inIT(SS)ANo.194/Ahd/2013asfollows: “...11. Wehaveheardtherivalcontentionsandperusedtherecord placedbeforeus.Theissueraisedbyboththepartiesrelatestoa MemorandumofUnderstanding(MoU)whichwaspertainingtoa purchaseoflandof15,500sq.yardsatKalol@Rs.4,500/-persq. yard.Thisallegeddocumentwasseizedinthecourseofsearch conductedinthecaseofUmiyaGroupon04.03.2010.Thisdocument, inwhichmatterwastypedintheformofMemorandumof Understanding(MoU)betweenassessee-firmthroughitspartner DipakPrajapatiandthelandownerforthepurchaseoflandbearing SurveyNo.1001/18and1000atKaloladmeasuring15,500sq. yardsagreeingtopurchaseatRs.4,500/-persq.yard.Ld.Assessing Officer,duringthecourseofassessmentproceedings,observedthat thereisapurchaseofallegedlandadmeasuring15,500sq.yardsat thecostofRs.1,70,00,000/-intheregularbooksofaccounts.Ld. AssessingOfficerwasconvincedthattheallegedpurchaseofland wasactuallypurchasedatRs.6,97,50,000/-whichhecalculatedby applyingtherateofRs.4,500/-persq.yardasappearinginthe seizedMOU.HeaccordinglymadeanadditionofRs.5,27,50,000/- andcompletedtheassessment. 12.WhentheissuecameupbeforetheId.CIT(A),hetookaviewthat, ingeneralparlance,inthebusinessofrealestate,thereisanelement IT[SS]A4,29/Ahd/2023& 4orsPriyaBlueIndPLtd& HooglyShipBreakersLtd.Page 32 ofon-moneywhichisnormallytobecarriedoutincash.Ld.CIT(A) adoptedaratioof40:60,wherein40%ofthedealamountisnormally paidbychequeandremaining60%beingtheon-moneyispaidby cash.Ld.CIT(A)accordinglytakingthebaseofcostpriceappearingin assessee'sbooksofaccountsatRs.1,70,00,000/-calculatedthetotal considerationvalueatRs.4,25,00,000/-andthereaftercalculatedthe 60%on-moneyvalueatRs.2,55,00,000/-andsustainedtheaddition tothisextent. 13.Duringthecourseofproceedingsbeforeus,Id.Counselhas mainlycontendedthattheallegeddocument,i.e.,MOUandkaccha chitthi,areunsigned,undatedandmeredraftandisadumb documentwhichId.AssessingAuthorityshouldnothavetaken.We noticethattheallegeddocumentMOUisfiledatpageNo.15-21ofthe paper-bookandkacchachitthiatPageNos.22-23andobservethat theMemorandumofUnderstandingispreparedonastamppaper dated31.10.2007betweenUmaShaktiCorporationKalolProject, beingthepurchaserandthesellingpartiesandthisMOUisundated andonlythestampisofNovember2007.Thereappearsnosignature ofeitherofthepartiesonanyofthepages.Evenkacchachitthiisalso unsignedwhichspeaksaboutaroughdraftshowingapartnership firmtobeincorporatedandthereareothernotingsaboutinstallments andanamountofRs.51,00,000/-iswrittenonthelastpageofthe kacchachitthi.Ld.AssessingOfficerhasmadetheimpugnedaddition onthebasisofthesedocuments.Now,thequestionarisesbeforeus iswhetherthisunsigned,undatedMOUandkachhachitthicanbe takenascorroborativeevidenceagainsttheassesseeinorderto makeanaddition. 14.Beforeanalyzingthefacts,wefinditnecessarytogothroughthe decisionoftheCo-ordinateBenchinthecaseof ACITvs.Manav InfrastructureP.Ltd.(supra),whereinCo-ordinateBenchhas dealtwithsimilarissuerelatingtoadditionmadebytheAssessing Officeronthebasisofseizeddocumentsandwhetheranadditioncan besustainediftheallegedseizedpapersareroughworkandthereis noclearindicationastohowtheywillleadasabasisforthealleged addition.TheCo-ordinateBenchinthecaseofManavInfrastructureP. Ltd(supra)hasobservedasfollows:- "7.Wehavedulyconsideredrivalcontentionsandgonethroughthe recordcarefully.Section132(4A)contemplatesthatwhereanybooks ofaccounts,otherdocuments,money,bullion,jewelleryorother valuablearticleorthingisfoundinthepossessionorcontrolofany personincourseofasearch,itcanbeassumedthatsuchbooksof accountsotherdocumentsetc.belongstosuchperson,contentsin thebooksofaccountsordocumentsaretrue.Nodoubtsuchan evidenceisanadmissibleevidence,butnotaconclusiveone. IT[SS]A4,29/Ahd/2023& 4orsPriyaBlueIndPLtd& HooglyShipBreakersLtd.Page 33 Presumptionofbelonginganditsgenuinenessarerebuttableone. Hon'bleHighCourtinthecaseofDharmendrasinghR.Waghela (supra)hasalsopropoundedthatthoughsection132(4A)oftheAct usesexpression"maypresume",meaningtherebythatsuch presumptionisrebuttableone.Inthepresentappeal,wehavebeen calledupontoconstrueandinterpretsthesepagesandarriveata conclusionwhetheranytransactionhavingnexuswiththebusiness transactionoftheassesseecanbeinferred.Theassesseehasplaced onrecorddetailsintabularformexhibitingtotalshopsavailablein BalajiMallandhowtheseshopshavebeensoldinF.Y.2007-08,2008- 09and2009-10.Theassesseehasalsocompiledthesedetailsfloor- wisei.e.availabilityofshopsongroundfloor,secondfloor,third floorandfourthfloor.Ithasplacedonrecorddateofsales,areaand theamountforwhichtheseshopshavebeensold.Thus,complete pictureoftheshops,theirarea,theirgeographicallocation,dateof saleandtheamountforwhichtheyhavebeensold,havebeen placedbytheassesseeonpageno.43to49ofthepaperbook.During thecourseofhearing,wehaveconfrontedtheId.CIT-DRto demonstratenexusbetweennarrationsavailableonpageno.7to10 ofthepaperbookie.seizedmaterialvis-à-visallegedbookresultsby theassessee.However,theId.CIT-DRcouldpointoutthatonpage no.7i.e.2ndpageoftheseizedpaper,nameofAshishJ.Shahwas mentioned.ItcontemplatesbusinessofBalajiMall.Onananalytical examinationofthesedetails,wefindthatsomenarrationshereand there,arehavingaslightconnectionwiththeshops,butitisdifficult toarriveatlogicalconclusion.Thestandoftheassesseebeforethe AOwasthatthesepaperscanbedividedinthreepartsviz.(a)typed documents,handwrittendocumentsinGujaratipertainingtoShree BalajiMallandotherhandwrittendocumentswritteninEnglish withcertainnumbersmentionedinit.Accordingtotheassessee thesehand-writtendocumentsinEnglishisneitherofBalajiMallnor ofthecompany.Thesepapershaveneitherbeendrawnbythe directorsortheirfamilymembers.Thisaspectwasnotonly explainedduringthecourseofassessmentproceedings,buteven duringthecourseofsearchitself.Againstthisstandoftheassessee, thedepartmentdidnottakeanysteptoinvestigatetheissuefurther. TheAOhasalsonottriedtosupplementhisreasoningbyinductive methodie.hehasnotmadereferencetoanyotherconnected materialexhibitingnexusbetweenthesepaperswiththatofthe assessee'stransaction.Hesimplyobservedthatexplanationofthe assesseeisnotacceptable.TheassesseehasmadeadisclosureofRs.3 croresinreplytoquestionno.10recordedundersection132(4)ofthe Act.OutofthisRs.3ncrores,Rs.2croreshasbeenofferedfortaxation inthisyear.WehavebeeninformedthatrestofRs.1crorewere offeredinindividualhands.Wehavetriedourbesttopersuadeboth IT[SS]A4,29/Ahd/2023& 4orsPriyaBlueIndPLtd& HooglyShipBreakersLtd.Page 34 theId.representativestoshowsomenexusorreasonableconclusion fromallthefiguresmentionedinthesepapers.Byanyscientific meanstheydidnotgoadadjudicatingauthoritytoarriveata conclusionthatunaccountedprofitshavenoticedinthesepapers. TheId.CIT(A)hasappreciatedthesepapersandarrivedata conclusionthattheseareroughworkwithoutanyclearindicationas towhatthesaidnumbersreallyleadtoorrelatesto.Onananalysis ofcompletematerialincludingstatementofdirectorrecordedunder section132(4)andtheexplanationoftheassesseeextracted(supra) duringthecourseofassessmentproceedings,weareoftheviewthat theId.CIT(A)hasappreciatedthefactsinrightperspectiveway,and departmentisunabletogoadustoarriveatanyotherlogical conclusion.Therefore,wedonotfindanymeritinthisappealofthe Revenue.Itisdismissed. 15.WefurtherobservethatHon'blejurisdictionalHighCourtinthe caseofDharmendrasinhRWaghelaPropM/S.NarendraRoadlines (supra)hasalsoobservedasunder.- "2.Theissuearisesinfollowingfactualbackground.Duringthe courseofsearchoperationscarriedoutattheresidentialand businesspremisesoftherespondent-assessee,certaindocuments wereseized.Onthebasisofsuchdocuments,theAssessingOfficer desiredtomakeaddition.Theassessee,however,duringthecourse oftheassessment,contendedthatsuchdocumentsdonotbelongto him.Theassessee'sbusinesswasoftransportation.Thedocuments containedentriesregardingtheoilbusiness.Inshort,theassessee totallydisownedsuchdocuments. 3.TheAssessingOfficer,principallyplacingrelianceuponsection 132(4A)oftheIncomeTaxAct,1961("theAct"forshort),however, discardedsuchobjectionsandruledthatthepresumptionagainstthe assesseewouldarise.Onsuchbasis,hemadeadditionof Rs.30,27,987/-. 4.TheassesseecarriedthematterinappealbeforetheCommissioner. TheCommissionerconfirmedtheviewoftheAssessingOfficer,once againplacingheavyrelianceuponsection132(4A)oftheAct.The assesseecarriedthematterinfurtherappeal.TheTribunalreversed theviewoftherevenueauthoritiesandallowedtheappealofthe assessee,makingfollowingobservations: "17.Wehaveheardboththesides.Wehaveperusedthe materialplacedbeforeus.Asperthedocumentplacedon pageNo.179ofthecompilation,ithadreflectedsome businesstransactioninrespectofoilandkeroseneoil.As IT[SS]A4,29/Ahd/2023& 4orsPriyaBlueIndPLtd& HooglyShipBreakersLtd.Page 35 perthistypeddocument,therewasamentionofparties fromwhomabusinessactivitywasperformed.Thefigures havementionedtheratesappliedforthesaidcommodity andthedetailsoftheamountreceived.Thisdocumentin factappearstobeinrespectofsome"oilbusiness"butthere isnodenialofthisadmittedfactthattheassesseeisinthe businessofTransport.Hence,avehementcontentionisthat bytheverynatureofdocument,itdidnotrelatetothe businessactivityoftheassessee.However,therewasno findingorevenanallegationoftheRevenuethattherewas suchtypeofbusinessatallrunbytheassessee.Itwasnot thecaseoftherevenuethatanundisclosedbusinesswas unearthedwhichwasnotfoundrecordedinthebooksof account.Barringthispaper,thereisnomaterialin possessionoftheRevenuetocorroboratethatthesaid paperhadanyconnectionwiththeaccountedor unaccountedbusinessactivityoftheassessee.Fromthe sideoftheRevenueevennоsuchattemptwasevermadeto makeanenquiryfromthosepartieswhosenameswere printedonthesaidpaper.Becauseofthesereasons,Id.AR Mr.MukundBakshihasemphasizedthatthesaid documentwasnothingbutabalddocument.Forthislegal proposition,caselawscitedare:- 1ACITvs.SatyapalVasan295ITR(AT)352 [ITAT-Jabalpur] 2CITvs.GirishChaudhary(2008)296ITR619(Mad.) 3CITus.S.M.Aggarwal(2007)293ITR43(Del.) 4JayaS.Shettyvs.ACIT(1999)69ITD336(Mum) 5BansalStripsP.Ltd.vs.ACIT(2006)99ITD177(Del.) 18.Fromthesedecisions,ittranspiresthatifanadditionis tobemadeonthebasisofaseizeddocument,thenitmust besupportedbysomeidentificationhavinganynexuswith theunaccountedbusinessactivityoftheassessee.The natureoftransactionshouldreflectsomedirectorindirect connectionwiththeaccountedorunaccountedactivityofthe assessee.Ifadocumentissilentortheingredientscouldnot belinked,thenthesaiddocumentwasconsideredas"a dumbdocument".Placingrelianceonthesedecisions,inter- aliaweareoftheviewthattheRevenueDepartmenthad notmadesufficientenquirysoastoestablishthatinfact thesaiddocumenthadunearthedaconcealedbusiness activityoftheassessee.Intheabsenceofanysuch evidence,theadditionsomadebytheAOremainedun- corroborated,hence,weherebyreversethefindingsand allowthisground." IT[SS]A4,29/Ahd/2023& 4orsPriyaBlueIndPLtd& HooglyShipBreakersLtd.Page 36 5.CounselfortherevenuevehementlycontendedthattheTribunal committedanerrorininterferingwiththeconcurrentfindingsofthe revenueauthorities.Hesubmittedthattheassessee'sexplanation thatthedocumentsseizedwerenotfoundsatisfactory.That presumptionundersection132(4A)oftheActwouldapply 6.Weareoftheopinionthattheentireissueisbasedonappreciation ofthematerialonrecord.Section132(4A)oftheActusesthewords "maypresume",meaningtherebythatsuchpresumptionis rebuttable.Inthepresentcase,documentsfoundpertaintoentries relatedtooilbusiness.Theassessee'sbusinessatleastaccountedwas oftransportation.Revenuecouldnotbringonrecordanymaterialto suggestthattheassesseewasalsoinvolvedinthebusinessofdealing inoil.Additionally,theTribunalhascorrectlyrecordedthatthe documentsweredumpdocuments.Revenuedidnotmakeany attempttoinquireintothematterfurtherfromthepersonswhose nameswerereflectedinsuchentries. 7.Inshort,itcannotbestatedthattheconclusionsarrivedatbythe Tribunalareperverse.NoerroriscommittedbytheTribunal.Tax Appealisdismissed." 16.GoingthroughtheviewsexpressedinthejudgmentofHon'ble jurisdictionalHighcourtanddecisionofCo-ordinateBenchwhich givesfairviewthatiffromtheseizedmaterialnonexusorreasonable conclusioncanbearrived,thenevenifthedocumentsareseized duringthecourseofsearch,theycannotbeusedagainstthe assessee.Examiningthefactsofthecasebeforeus,weobservethat assessee-companywasincorporatedon28.01.2008anditsfirstbank transactionwasenteredon19.02.2008.Assessee-firmishavingsix partnersnamelyS/ShriVikasR.Patel,BrijeshS.Patel,DipakG. Prajapati,KamalbhaiJ.Patel,BhagvanbhaiK.AajraandArvindbhai N.Prajapati;andthemajorcapitalhascomefromShriBhagvanbhai K.Aajra.Onviewingtheallegeddocument,wefindthattheunsigned MOUisdated31.10.2007whichisalmost4monthsbeforethe incorporationoftheassessee-firm.TheallegedMOUalsodonotfulfill thebasicrequirementofthevalidcontractwhichneedstoawrittenor expressedagreementbetweentwopartiestoprovideaproductor serviceandforavalidcontracttherehastobeanintentiontocreate legalrelation,offer,acceptance,considerationandcapacitytofulfill thecontract.However,theallegedMOU,whichisunsignedand undated,donotstandforasavalidcontractandthesameisnot enforceablebylaw. 17.ItseemsthatId.AssessingOfficerhasstretchedalinkemanating fromtheseizedmaterialandhasformedupacompletestoryalong IT[SS]A4,29/Ahd/2023& 4orsPriyaBlueIndPLtd& HooglyShipBreakersLtd.Page 37 withtakingabasisofimpugnedlandwhichwaspurchasedinthe laterpartoftheyearandapplyingtheconditionsembeddedinthe allegedMOUontotheimpugnedlandpurchasetransactionsthereby calculatingthepurchaseconsiderationofthelandinquestionat Rs.6,97,50,000/-asagainstRs.1,70,00,000/-showninthebooks. WenoticethatId.AssessingOfficerhascompletelydisregarded relevantfactswhichincludesthedateofincorporationofthe assessee-firm,actualdateofregistrationofthelandpurchase documentdated12.03.2008andthedateofconversionoflandin question,i.e.,01.02.2008;coupledwiththatId.AssessingOfficeralso hasnotenquiredfromtheallegedsellersaboutthevalueof transactionsenteredintoforthesaleofland.Moreso,ld.Assessing Officerhasalsoignoredtheglaringfactthatproposalforpurchasing theimpugnedlandwasbroughtbyShriBhagvanbhaiAajra,whois alsothepartneroftheassessee-firm. .... ..Weare,therefore,respectfullyfollowingthejudgementofthe Hon'blejurisdictionalHighCourtanddecisionofCo-ordinateBench discussedaboveinprecedingparagraph,areoftheconsideredview thatId.AssessingOfficererredinmakingtheadditionof Rs.5,27,50,000/-andId.CIT(A)inrestrictingtheadditionat Rs.2,55,00,000/-asitwasbasedonundated,unsigned MemorandumofUnderstandingwhich,inourview,cannotbe correlatedwiththeassessee-firmasitwasincorporatedinthelatter periodtothatofMoUstampdatenorcanitbetakenascorroborative evidencetomakeadditionandalsointhelightofthefactthat Revenuecouldnotpointoutanyerrorintheactualregistered documentdated12.03.2008enteredintobytheassessee-firmforthe impugnedlandatKalol. 19.Intheresult,appealoftheassesseeisallowedandthatofthe Revenueisdismissed.” 19.7.Hon’bleGujaratHighCourtinthecaseofCITVs. MaulikkumarK.Shah,reportedin(2008)307ITR137(Gujarat)has heldthatMereentriesintheseizedmaterialwerenotsufficientto provethattheassesseehadindulgedinsuchatransaction.The additionasmadebytheAObeingbasedonmerepresumptionsand assumptionsandwithoutanycorroborativeevidence,couldnotbe sustained”asfollows: IT[SS]A4,29/Ahd/2023& 4orsPriyaBlueIndPLtd& HooglyShipBreakersLtd.Page 38 “...Theassesseehadconstructedcertainshops.Therewasasearch attheassessee'spremisesandadiarywasseizedinwhichthe assesseehadestimatedratesoftheseshops.Theassesseehad booked/sold35shopsasondateofsearch.Becauseofthedifference inratesasmentionedintheseizedpaperandthebooksofaccount, theAssessingOfficercalculatedthe'on-money'andmadeaddition accordingly. Heldthatnotingsintheseizeddiaryfoundfromthepremiseswere theonlymaterialonthebasisofwhichtheAssessingOfficerhad madetheimpugnedadditions.TheAssessingOfficerhadnotbrought anycorroborativematerialonrecordtoprovethatsuchsaleswere madeand'on-moneywasreceivedbytheassesseeoutsidethebooks ofaccount.TheAssessingOfficerhadnotexaminedanypurchaserto whomthesalesofshopswereeffected.Onusheavilylayonthe revenuetoprovewithcorroborativeevidencethattheentriesinthe seizeddiaryactuallyrepresentedthesalesmadebytheassessee. Suchonushadnotbeendischargedbytherevenue.Mereentriesin theseizedmaterialwerenotsufficienttoprovethattheassesseehad indulgedinsuchatransactionTheinferenceoftheAssessingOfficer thattheassesseehasreceived'on-money,wasmerelybasedon suspicionandsurmisesandtherewasnomaterialwhatsoeverto supporttheconclusionoftheAssessingOfficerthattheassesseehad infactreceivedany'on-money.Theadditionasmadebythe AssessingOfficerbeingbasedonmerepresumptionsand assumptionsandwithoutanycorroborativeevidence,couldnotbe sustained...” 19.8.Hon’bleSupremeCourtinthecaseofCommonCause(A RegisteredSociety)Vs.UnionofIndia,reportedin(2017)77 taxmann.com245(SC)heldasfollows: “...Section69AoftheIncome-taxAct,1961,readwithsection34of theIndianEvidenceAct,1872Unexplainedmoney(Loosepapers) Raidswereconductedontwobusinessgroupsandincriminating materialsinformofrandomsheetsandloosepapers,computerprints, harddisk,pendrivesetc.werefoundEvidenceofcertainhighly incriminatingmoneytransactionswerealsofoundHowever, departmenthadnoevidencetoprovethatentriesintheseloose papersandelectronicdatawerekeptregularlyduringcourseof businessofconcernedbusinesshouseWhetherthus,thesedetailed documentsrecoveredbyauthoritieshadnoevidentiaryvaluesand theycouldnothavebeenreliedontodirectregistrationofFIRand investigationincaseofhighpublicfunctionariesoccupyingimportant offices-Held,yesWhetherfurther,materialsinquestionwerenot onlyirrelevantbutwerealsolegallyinadmissibleundersection34of IT[SS]A4,29/Ahd/2023& 4orsPriyaBlueIndPLtd& HooglyShipBreakersLtd.Page 39 EvidenceAct-Held,yes[Paras22,24&27][Infavourof assessee]...” 19.9.Hon’bleGujaratHighCourtinthecaseofCommissionerof Income-taxOfficerVs.BharatA.Mehta,reportedin(2015)60 taxmann.com31(Gujarat). “...Section69oftheIncome-taxAct,1961-Unexplainedinvestment (Investmentinproperty)Assessmentyear1992-93Assessee purchasedabunglowinahousingschemefromabuilderfirmduring search,partnersofsaidfirmadmittedhavingreceivedcertainamount as'onmoneyfrombuyersofbunglowsinsaidscheme.Onbasisof thatmaterialAssessingOfficermadecertainadditionundersection 69toincomeofassesseeonaccountofonmoneypaidtobuildersOn appeal,Tribunaldeletedadditionholdingthatrevenuefailedtoprove thatassesseehadmadeundisclosedinvestmentinaforesaid bunglowWhetherasfindingsrecordedbyTribunalwerebasedon appreciationoffacts,nointerferencewascalledfor-Held,yes[Paras 9and10][infavourofassessee]...” 19.10.Inviewoftheaboveaspectsinrelationoftheconcernedtwo shipsnamelyship‘Arena’andship‘Opportunity’becomecrystal clearthatshipbreakingactivitieswerecarriedoutinplotV-2by HSBLandnotpursuanttotheJointVentureAgreemententered withPBPL/theassesseecompany.Resultantincomefromsuchship breakingactivitiesweredeclaredbyHSBLandfileditsReturn ofIncome,undersuchcircumstancestheLdAOandtheLdCIT[A] werenotjustifiedinholdingthatshipbreakingactivitieswerecarried outinplotV-2pursuanttotheJointVentureAgreemententered betweentheassesseecompanyandHSBL.Accordingly,the authoritieswerealsonotjustifiedinmakingadditioninrespectof incomeearnedbyHSBL,thereforetheentireadditionof Rs.11,29,61,022/=isliabletobedeletedinthehandsofthe assesseecompany.IntheresulttheGroundNo.4raisedbythe assesseeisfullyallowedandGroundNo.1raisedbytheRevenue isfullydismissed. IT[SS]A4,29/Ahd/2023& 4orsPriyaBlueIndPLtd& HooglyShipBreakersLtd.Page 40 20.Nextissueissuppressionofsaleofgasturbine:TheLd.CIT(A), heldthatthesaleofgasturbineisnotmaterializedduringtheAsst. Year2019-20,whereasthesamewasmaterializedduringtheAsst. Year2020-21.Hence,theadditionmadeonthesaleofgasturbineof Rs.3,41,34,000/-fortheAsst.Year2019-20isherebydeletedand GroundNo.2raisedbytheRevenueisdismissed. 21.NextissueisunaccountedrentalincomeofRs.5,00,000/-. TheLdAOrelieduponaseizednotarizedrentalagreementdated 29.12.2018,pertainingtothepropertytakenbytheassessee- companyonmonthlyrentfromM/s.SavinayDevelopers.Though therentalagreementstatesmonthlyrentalofRs.35,000/-per monthfortheperiodof11months,butseizedhandwrittennote saysrentofRs.1,35,000/-outofwhichRs.1,00,000/-isrequiredto bepaidincash.TheAOhasnotmadeanyenquirywiththelandlord namelyM/s.SavinayDevelopers,toverifythecashamountof Rs.1,00,000/-asrent.HoweverShriSanjayPMethainhis statementrecordedu/s.132[4]oftheActandinreplytoQuestion No.12admittedasfollows: “Ans:Sir,itiscorrectslip.WearepayingRs.1.35lakhsasrentoutof whichRs.1lakhispaidincashandRs.35,000ascheque.” ThereforetheadditionmadebytheLdAObasedontheabove statementissustainableinlaw.Therefore,theadditionof Rs.5,00,000/-madebytheAssessingOfficerisherebyconfirmed andtheGroundNo.5raisedbytheassesseeisdismissed. IT[SS]A4,29/Ahd/2023& 4orsPriyaBlueIndPLtd& HooglyShipBreakersLtd.Page 41 22.IntheresulttheappealfiledbytheassesseeinITANo.04/ Ahd/2023ispartlyallowedandtheappealfiledbytheRevenue inITANo.29/Ahd/2023isdismissed. 23.Assessee’sGroundsofAppealinIT[SS]ANo.33/Ahd/2022 relatingtotheA.Y.2020-21areasfollows: 1.Inlawandinthefactsandcircumstancesofthecase,thelearned CIT(A)haserredinrejectingthecontentionoftheappellantthatthe appellantwasnotprovidedanyopportunityofbeingheardas requiredu/s.127(1)andu/s.127(2)beforetransferofappellant's casefromAssessingOfficer,BhavnagartoAssessingOfficerat CentralCircle,Ahmedabad.Further,anyorderu/s.127inthematter isnotreceived.Accordinglythetransferofcasewasnotvalid. Consequentassessmentorderwasalsonotvalid. 2.Inlawandinthefactsandcircumstancesofthecase,thelearned CIT(A)haserredinupholdingadditionofRs.1,86,34,100/-being allegedsuppressionofsaleofGasTurbine.Heoughttohavedeleted suchaddition. 3.Inlawandinthefactsandcircumstancesofthecase,theLearned CIT(A)haserredinupholdingadditionofunaccountedrental expensesofRs.12,00,000/-.Heoughttohavedeletedsuchaddition. 4.Inlawandinthefactsandcircumstancesofthecase,thelearned CIT(A)haserredinupholdingadditionofunaccountedsalary expensesforRs4,30,000/-.Heoughttohavedeletedsuchaddition. 4.1Inlawandinthefactsandcircumstancesofthecase,thelearned CIT(A)haserredinupholdingadditionofRs.4,30,000/-eventhough documentswerenotseizedduringthecourseofsearchatappellant’s premises. 5.Inlawandinthefactsandcircumstancesofthecase,thelearned CIT(A)haserredinupholdingadditiononunaccountedsaleof GeneratorofRs8,28,000.Heoughttohavedeletedsuchaddition. 6.Inlawandinthefactsandcircumstancesofthecase,thelearned CIT(A)haserredinupholdingadditionofRs.95,00,000/-beingcash loanonaccountoflandtransaction.Heoughttohavedeletedsuch addition. 7.Inlawandinthefactsandcircumstancesofthecase,the learnedCIT(A)oughttohaveallowedapplicationofalleged IT[SS]A4,29/Ahd/2023& 4orsPriyaBlueIndPLtd& HooglyShipBreakersLtd.Page 42 unaccountedincomeagainstadditionmadeforallegedunaccounted investment/expendituremadebyAO.Heoughttohavedeletedsuch addition. 8.Theappellantcravesleavetoadd,alter,amendand/orwithdraw anygroundorgroundsofappealeitherbeforeorduringthecourseof hearingoftheappeal. 24.AttheoutsetLd.SeniorCounselShriTusharHemaniappearing fortheassesseesubmittedthattheassesseeisNOTpressing GroundNo.1namelyassumptionofjurisdictionu/s.127[2]of theAct.Recordingthesame,GroundNo.1raisedbythe assesseeisherebydismissed. 25.RegardingGroundNo.2,theLd.SeniorCounselsubmittedthat ThatthestatementofSanjayPMehtarecordedu/s.132(4)oftheAct, whereinhehassatedthattheGasTurbinewasoriginallysoldtoAl KayamMarineon23.03.2019forRs.3,41,34,100/-.TheAssessing Officer(AO)discardedtheaforesaidstatementaswellassubmission furnishedbytheassessee,therebydifferentialsumof Rs.1,86,34,100/-istreatedasthesuppressedsalesofgasturbine. Thus,theAOhasnocorroborativeevidencebroughtonrecordto maketheadditionofRs.1.86crores.TheAOfurtherhasnotmade independentinquirythatAlKayamMarineontheabovesale transaction.TheAOconvenientlyoverlookedthestatementofSanjay PMehtarecordedu/s.132(4)oftheAct,andhasmadepickand chooseapproachwhichisnotpermissibleinlawandtheaddition madeisnotjustified. 26.Wehavegivenourthoughtfulconsiderationandperusedthe materialsavailableonrecord.ThestatementofSanjayPMehta IT[SS]A4,29/Ahd/2023& 4orsPriyaBlueIndPLtd& HooglyShipBreakersLtd.Page 43 recordedu/s.132(4)oftheAct,oftheActrelatingtothisissueread asfollows: Q.16.Duringthecourseofsearchproceedingsatfactorypremiseof thecompanyatAlang,anitem-wisesalessummarysheetisfound whereintotalsalesbeforeGSTduringFY2018-19comesto Rs.182.16crorewhereassalesbeforeGSTinthesalesregisteras extractedfromthebooksofaccountsmaintainedatofficeshows Rs.178.75crore.Thus,salesinthebooksofaccountsisshownless byRs.3.41crorei.e.Pleaseexplain.[attachedasAnnexureS5-page nos.1to8] Ans.Sir,thedifferenceofRs.3.41crorewasduetothefactthatGas TurbinewassoldtoM/s.AlKayamMarinevidebillNo.T1/3254 dated23.03.2019forexportpurpose.Thereafter,thesaidparty returnedthegoodsastheexportdidnotmaterialize.Duringtheyear, againthesamepartypurchasedthesaidgoodsvideInvoice No.T1/1030dated15.06.2019forRs.1,55,00,000/-.Wehavesold thesegoodsatRs.1,55,00,000/-asourcostingisonlyRs.25,000/- pertonne. 26.1FromtheabovestatementitisclearthatSajayPMehtahas confirmedtheoriginalsaleofGasTurbineinMarch2019.Since,the exportdidnotmaterialized,thesameGasTurbinewassoldtothe samepartyinJune2019forRs.1.5croresbytheassessee-company. Insupportofthesame,theassesseefiledtheoriginalinvoicebillof AlKayamMarineandE-wayBillfortheoriginalsaleandcanceledof E-waybill24.03.2019andtheinvoicecopiesofthesaleofgas turbineon15.06.2019whereintheappropriateCGSTandSGST amountswherebeingcollectedbytheassessee-companywhichare availableatpageno.18to26ofthepaperbook.TheAOhasnot madeanyenquirythatpurchaseroftheGasTurbinenamelyAl KayamMarineandsimplyaddedthedifferenceofRs.1,86,34,000/- asthesuppressedsale.Thus,theAOconvenientlyignoredthe statementmadeunderoathu/s.132(4)oftheAct.Inotherwordsthe Ld.AOhasadoptedtheapproachofchooseandpickintermsof relatingtoaforesaidstatement,whichisimpermissibleunderthe IT[SS]A4,29/Ahd/2023& 4orsPriyaBlueIndPLtd& HooglyShipBreakersLtd.Page 44 law.Therefore,theadditionmadebytheAOisun-sustainableunder lawandthesameisherebydeleted.Intheresult,thisgroundno.2 raisedbytheassesseeisherebyallowed. 27.Groundno.3istheadditionofRs.12,00,000/-inrespectof allegedunaccountedrentalexpenses.ShriSanjayPMehtainhis statementrecordedundersection132(4)oftheAct,inreply,to questionno.12admittedhavingpaid1,00,000/-permonthincash towardsrentalexpenses.However,theseizedrentalagreementisfor aperiodof11monthsandexpiredon31.10.2019andforthe presentAYtherewere7monthsonlyfrom01.04.2019to31.10.2019 asrentpaid.Thus,theadditionberestrictedonlyto7monthsand balance5monthsadditionisliabletobedeleted.Intheresult,this groundno.3raisedbytheasseseeispartlyallowed. 28.Groundno.4isthatheLd.CIT(A)havebeenconfirmedaddition ofRs.4,30,000/-inrespectofallegedunaccountedsalaryexpenses. DuringthecourseofsearchproceedingsinthecaseofHooglyShip BreakerLtd.,itwasfoundthattheassessee-companywascarrying outcuttingofitsship“MTBELL”fromtheyardbelongingtoHSBL. TheAOhasreliedonthestatementofSanjayPMehtaandRamesh AgrawalwhereinclaimedthattheshipMTBellwasoriginally beachedatyardV-1andthenwasdriftedtoyardV-2ofHSBL.It washeldtheworkersandthelabourerworkingtherebelongingto assesee-companyandcashpaymentweremadetothemtherebythe AOmadeadditionofRs,4,30,000asunaccountedsalaryexpenses. Itisseenfromtheassessmentorder,theAOhasreproducedthe statementrecordedbytheemployeesandhavingreceivedpart paymentincashandpartpaymentbycheque.Thesocalled Employeesarenotthirdpartiestotheassessee,sothequestionof IT[SS]A4,29/Ahd/2023& 4orsPriyaBlueIndPLtd& HooglyShipBreakersLtd.Page 45 givingcrossexaminationdoesnotariseinthiscase.Thus,the contentionoftheassesseenoindependentinquirymadebytheAO isnotcorrect.Therefore,theimpugnedadditionmadebytheAO doesnotrequireanyinterferenceandthegroundno.4raisedby theassesseeisherebydismissed. 29.Groundno.5additionofRs.8,28,000/-onallegedunaccounted salesofGenerator.Thebrieffactofthecaseisthattheassesee- companyhassoldDGsetgeneratorfromRameshNagpurforpower generationbecauseofpersonalrelationnoamountwaspaidto RameshNagpur.TheAOpresumedthattheassesseehasreceived anamountofRs.8,28,000/-incashforsaleofDGsetandaddedin thehandsoftheassesseeundersection69AoftheAct.Therelevant statementofSanjayPMehtaisreproducedasfollows: Q.54PleasecontinueexplainingthecontentsofPageno.6to8ofthe reddiary,inventorizedAR. Ans:Onpageno.6also,dateandexpensesmadeincashare recordedincontinuationofpageno.5.1cannotremembertheexact natureoftransactionsrecordedinpageno.7andpageno.8.Ishall explainthesetransactionsafterrecallinglater. Onpageno.8,thedetailsofaDGsetof400kVAareentered.We havetakenthisDGsetfromRamesh(Nagpur)on30.09.2019for powergenerationforoperatingcraneonthevessel,whichiscurrently beachedinoneofourAlangyards.Wehavenotpaidany considerationoranyrentforusingtheDGset,becauseofmy personalrelations. Icannotrememberthemeaningof"8.280".Thenumbers"1475" writteningreenmaymeantheamounttobepaidperkVA,ifweare notabletoreturntheDGsetingoodcondition." 29.1ItisseenfromtheassessmentrecordtheAOhasnotmade anyverificationwithsocalledRameshofNagpurbeforemaking additionofRs.8,28,000/-thus,theadditionmadebytheAOis IT[SS]A4,29/Ahd/2023& 4orsPriyaBlueIndPLtd& HooglyShipBreakersLtd.Page 46 basedonpresumptionwithoutcorroborativeevidencesand independentenquiry.Therefore,theadditionisnotjustifiedandwe herebydeletedthesame.Thus,groundno.5filedbytheassessee isallowed. 30.Groundnos.6&7raisedbytheassesseeisAdditionof Rs.95,00,000/-madeinrespectofallegedcashloanonland transactions.TheAOmadeimpugnedadditiononthebasisofun- datedchequesduringthecourseofsearchonthepresumptionthat theassesseewouldhavepaidcashofequalsumtoDineshBatua. TheLd.AOhasreferredtotheagreementofsale(banakath)dated 08.07.2014,betweentheassesseeandDineshBatuawithrespectto landtransaction,forwhichthesumofRs.5,00,000/-waspaidby theassesseetoDineshBatuathroughcheque.Duringthe assessmentstage,theassesseeplacedonrecordanaffidavitof DineshBatuatoclarifythatthetransactionmentionedinBanakhat dated08.07.2014,didnotmaterialized.However,theAOignoredthe affidavitfiledbytheDineshBatua,andmadeadditionsinthehands oftheassessee-company.TheLd.CounselsubmissionthattheAO oughttohaveappreciated. (i)AgreementtosalepertainstoFY2014,henceinanycaseit cannotbepresumedthatappellanthasreceivedcashduringthe yearunderconsideration. (ii)Thereisnoevidencetoprovethatmarketvalueoflandishigher thanthevaluementionedinthebanakhat. (iii)Nocashtrailisfoundduringthecourseofsearchwhich substantiatestheargumentofAssessingOfficer. (iv)Noloosepaperfoundduringthecourseofsearchwhichproves thatcashwastobegivenbythesellertothebuyer. IT[SS]A4,29/Ahd/2023& 4orsPriyaBlueIndPLtd& HooglyShipBreakersLtd.Page 47 (v)Proposedbuyerhasalreadyconfirmedthatnocashpaymentis made. 30.1ItisseenthattheLd.AOmadetheadditionbasedoncheque foundduringthecourseofsearch.TheLd.AOcannotassumethat theassesseehadreceivedorpaidinlieuofcheque.Moreover,when thereisnootherevidencetoprovethesame.Theassesseealso placedonrecordthenotarizedaffidavitofShriDineshBatua, however,withoutconsiderationthesamehasmadeadditionwhich isnotpermissibleinlaw.InsimilarsituationtheCo-ordinateBench oftheITATinthecaseofLaxmiNarayanAgarwalinITA No.1392/Ahd/2010dated17.06.2015heldasfollows: "Alltheabovepersonshaveconfirmedthatchequeshavebeen handedovertotheappellantonlyasameasureofsecurityforsupply ofscraporforthepurposeofobtainingtheloan,butallofthemhave deniedhavingobtainedanyloanfromtheappellant.Thestatements givenbythosepeopleremainsuncontroverted.ThoughtheAOis justifiedinentertainingdoubtthattheappellantisengagedinthe businessofmoneylendingandthechequeshavebeenobtained,only aftertheamountswereadvancedsinceintheabsenceofanypositive evidenceinsupportoftheappellanthavinglentmoneytotheabove persons,wearenotinapositiontoconfirmtheaddition.Accordingly, theadditionsaredeleted." 30.2Inviewoftheabove,whatisfoundduringthecourseofsearch isnotconclusivelyprovethattheassessee-companyhaspaidor receivedcash.Hence,theadditionisliabletobedeleted.Inthe result,thegroundno.6&7filedbytheassesseearepartly allowed. 31.Intheresult,theappealfiledbytheassesseeinITA No.33/Ahd/2022ispartlyallowed. IT[SS]A4,29/Ahd/2023& 4orsPriyaBlueIndPLtd& HooglyShipBreakersLtd.Page 48 32.Revenue’sGroundsofAppealin IT[SS]ANo.39/Ahd/2022forthe A.Y.2020-21areasfollows: 1.Onthefactsandinthecircumstancesofthecaseandinlaw, theLd.CIT(A)erredindeletingtheadditionofRs.11,05,94,000/- madeonaccountofunaccountedcashloanonthebasisofundated chequesseizedduringthecourseofsearch,despitetheassessee couldnotexplainthenatureandsourcethereof. 2.Onthefactsandinthecircumstancesofthecaseandinlaw, theLd.CIT(A)erredindeletingtheadditionofRs.18,05,94,000/- madeonaccountofunaccountedcashloanonthebasisofundated chequesseizedduringthecourseofsearch,despitetheassessee couldnotexplainthenatureandsourcethereof. 3.Onthefactsandinthecircumstancesofthecaseandinlaw, theLd.CIT(A)erredindeletingtheadditionofRs.4,00,00,000/- madeonaccountofunaccountedcashloanonthebasisofundated chequesseizedduringthecourseofsearch,despitetheassessee couldnotexplainthenatureandsourcethereof. 4.Onthefactsandinthecircumstancesofthecaseandinlaw, theLd.CIT(A)oughttohaveupheldtheorderoftheA.O. 5.Itis,therefore,prayedthattheorderoftheLd.CIT(A)beset asideandthatoftheA.O.berestoredtotheaboveextent. 32.1GroundNo.1isdeletionofadditionofRs.11.05croresmade onaccountofunaccountedcashloanonthebasisofun-dated chequesseizedduringthesearch. 32.2Brieffactsofthecasearethatduringthecourseofsearch7 undatedchequespertainingtoAxisBankamountingtoRs.7crores issuedbyVHCLIndustriesLimitedwerefound.Further,4more undatedchequespertainingtoAxisBankissuedfromVHCL IndustriesLimitedforRs.4,05,94,000/-werefound.Thus, aggregatingundatedchequesofRs.11,05,94,000/-wasfound pertainstoVHCLIndustriesLimited. IT[SS]A4,29/Ahd/2023& 4orsPriyaBlueIndPLtd& HooglyShipBreakersLtd.Page 49 TheAOheldthe11chequesdepositedbyULCCorporationthatthe assesseehasclearlyinferredsecuritydepositsinrespectofloanin cashavailedbythemfromtheassessee-company.Similarly,7 chequesissuedbyPMSExportPvt.Ltd.weredepositedforsecurity purpose.Thus,theAOconcludedthatthecashloanof Rs.18,05,94,000/-isadvancebyassessee-companyfromits undisclosedsourceofIncomeandassessedasincomeu/s.69r.w.s 115BBEoftheAct. 33.Onappeal,theLd.CIT(A),deletedtheadditionsbyobservingas follows: “...12.Toconcludefollowinguncontrovertedfactshavebeenobserved fromtherecordwithregardtoallegedadditiondiscussedinpara11 hereinabove. (i)Nocashtrailisfoundduringthecourseofsearch,which substantiatestheargumentsofAssessingOfficerthatcashhasbeen given. (ii)Noloosepaperfoundduringthecourseofsearchwhichproves thatcashwasreceived/paidinlieuofcheques. (iii)Eventheotherpartyhasnotbeenconfronted/confirmedof makingorreceivingcashfromtheAppellant. (iv)ReasonformakingallegedadditioninthecurrentFYonthebasis ofundatedchequeisnotexplainedbytheAO. (v)ItisapparentthatAOhasnotmadeanyenquirieswiththeparties referredsupraeitherbyissuingnoticeunderSection133(6)oftheAct or131oftheAct.TheAOhasnotrecordedanystatementof concernedpartiestosupporthiscontentionthatAppellanthasgiven cashloanortheotherparty(s)havetakencash. (vi)Noadditioncanbemadeforchequeswhichareissuedwithout nameofpayee.Inpresentcase,chequesofRs25crorearewithout anynameofpayee.Itisalsoobservedthatoneofthechequesfor whichAOhasmadeadditioninpresentcaseisalreadysubject matterofadditioninthecaseofanothercase. IT[SS]A4,29/Ahd/2023& 4orsPriyaBlueIndPLtd& HooglyShipBreakersLtd.Page 50 Theremainingchequesareinthenameofwrongpersonandnotin thenameoftheappellant. (vii)Asheldbyvariouscourtsasdiscussedhereinabove,Itissettled lawthatsuspicion,howeverstrongcannottaketheplaceoflegal proof.." 12.1Consideringfactsdiscussedhereinaboveandrelyingupon decisionsreferredsupra,allthethreeadditionsmadebyAOfor Rs.11,05,94,000/-(GroundNo.7),Rs.18,05,94,000/-(GroundNo.8) andRs.4,00,00,000/-(GroundNo.9)aredeleted.Thus,thegrounds ofappealno.7,8&9areallowed...” 34.Wehaveheardtherivalsubmissionandperusedthematerials availableonrecord.TheLd.AOhasmadeadditionsof Rs.11,05,94,000/-,Rs.18,05,94,000/-andRs.4,00,00,000/-based ontheundatedchequesfoundduringthecourseofsearch.TheAO madetheentireadditiononpresumption,astheAOhasnot establishanynexusbetweenhispresumptionofgivingcashloan withsuchcheques.Duringthecourseofsearch,noincriminating evidenceswerefoundwhichprovethattheassessee-companyhas givencashloanstotheabovereferredpartiesnamelyVHCL IndustriesLtd.,ULCCorporation&PMSExportLtd.Further,no cashtrialloosepaperwerefoundbytheRevenuewhichsupport contentionoftheAO.Further,thechequesfoundduringthecourse ofsearchareun-datedandcorroboratedbytheLd.AOthathis presumptionofgivingcashloanbytheassessee-company.Further, theAOhasnotmadeanyinquirieswiththeabovesaidpartiesnor hasrecordedanystatementofsuchpartiesbeforemakingsuch additions.TheLd.CIT(A),hasconsideredthesubmissionofthe assesseeandalsoreproducedtheblankchequeswithoutnameof theassessee-companyinhisordertherebydeletedtheaddition madebytheAOwhichisbasedonmerepresumption.Further,the Ld.DRcouldnotsiteanyinfirmityintheorderpassedbythe IT[SS]A4,29/Ahd/2023& 4orsPriyaBlueIndPLtd& HooglyShipBreakersLtd.Page 51 Ld.CIT(A).Thus,thegroundnos.1to3raisedbytheRevenueis devoidofanymeritandsameisliabletoberejected. 35.Intheresult,theappealfiledbytheRevenueinITA No.39/Ahd/2022isherebydismissed. 36.HooglyShipBreakersLtd.Assessee’sGroundsofAppealin IT[SS]ANo.18/Ahd/2023areasfollows: 1.ThelearnedCIT(A)haserredinlawandonfactsofthecasein upholdinginvocationofs.153AoftheActdespitethefactthatno incriminatingmaterialwasmadethegroundforissuanceofsuch noticeu/s153AoftheAct.Asaresultofwhichnoticeissuedu/s. 153AoftheActisillegal,withoutjurisdictionandbadinlaw. 2.ThelearnedCIT(A)haserredinlawandonfactsofthecasein upholdingassessmentorderframedu/s143(3)r.w.s.153A(1)(b)of theActdespitethefactthatnoincriminatingmaterialfoundand seizedduringthesearchattheappellant’spremiseswasmadethe groundforframingsuchassessment.Asaresultofwhich assessmentframedu/s.143(3)r.w.s.153A(1)(b)oftheActisillegal, withoutjurisdictionandbadinlaw. 3.ThelearnedCIT(A)haserredinlawandonfactsofthecaseinnot holdingthatassessmentwascompletedwithoutprovidingcopyof material,documents,statements,etc.relieduponbyhimformaking additions.Hence,itisinviolationofprinciplesofnaturaljusticeand law. 4.Noopportunityforcrossexaminationofpersonwhosestatements havebeenrelieduponformakingadditionshadbeenaffordedtothe appellantwhichisviolativeofprinciplesofnaturaljustice. 5.Evenotherwise,theassessmentorderisillegalandwithout jurisdiction. 6.ThelearnedCIT(A)haserredinlawandonthefactsofthecasein confirmingtheadditionofRs.4,10,00,000/-byapplyingtherateof netprofitattherateof5%ontheallegedunaccountedturnover.Inthe factsandcircumstancesofthecasenosuchunaccountedbusiness wascarriedoutbytheappellantandevenotherwise,rateofnetprofit adoptedbylearnedCIT(A)isunwarrantedandhighlyexcessive. IT[SS]A4,29/Ahd/2023& 4orsPriyaBlueIndPLtd& HooglyShipBreakersLtd.Page 52 7.ThelearnedCIT(A)hasalsoerredinlawandonthefactsofthe caseinpartlydisallowingtheadditionwithoutbringingany corroborativeandcogentevidence,material,etc.onrecordandmerely basedonassumption. 8.ThelearnedCIT(A)haserredinlawandonfactsofthecasein confirmingactionoftheld.AOincharginginterestu/s.234A/B/C/D oftheAct. 9.TheLd.CIT(A)haserredinlawandonthefactsinconfirmingthe actionofLd.AOininitiatingpenaltyu/s270AoftheAct. 10.Theappellantcravesleavetoadd,amend,alter,edit,delete, modifyorchangealloranyofthegroundsofappealatthetimeofor beforethehearingoftheappeal. 37.HooglyShipBreakersLtd.Revenue’sGroundsofAppealin IT[SS]ANo.27/Ahd/2023relatingtoA.Y.2019-20areasfollows: i.Inthefactsandonthecircumstancesofthecaseandinlaw, Ld.CIT(A)erredindeletingtheadditionofRs.7,19,61,022/-outof totaladditionofRs.11,29,61,000/-madeonaccountofunaccounted incomeoutofshipbreakingactivityintheV2ShipbreakingYard despiteitwasspecificallyrecordedintheseizedmaterial(sheet namedACCOUNTSETTLEDASON12.07.2018UPTOOPPORTUNITY) astheprofitforA.Y.2019-20,duetosuchshipbreakingactivityofRs. 11,29,61,022/-forboththeparties. ii.Onthefactsandinthecircumstancesofthecaseandinlaw, theLd.CIT(A)oughttohaveupheldtheorderoftheA.O. iii.Itis,therefore,prayedthattheorderoftheLd.CIT(A)besetaside andthatoftheA.O.berestoredtotheaboveextent. 38.SincecommonissuesareinvolvedintheaboveCrossappeals, forthesakeofconveniencetheGroundsraisedbybothpartiesare dealtwitheachissue-wise.AttheoutsetLd.SeniorCounselShri TusharHemaniappearingfortheassesseesubmittedthatthe assesseeisNOTpressingGroundNo.1namelyassumptionof jurisdictionu/s.127[2]oftheAct.Recordingthesame,Ground No.1raisedbytheassesseeisherebydismissed. IT[SS]A4,29/Ahd/2023& 4orsPriyaBlueIndPLtd& HooglyShipBreakersLtd.Page 53 39.RegardingGroundNo.2,theLd.SeniorCounselsubmittedthat thereisnoincriminatingmaterialfoundduringthecourseofsearch andstatementsrecordedfromvariousemployeesoftheassessee companycannotberelieduponforassessment,thisargumentdoes notholdgoodsincethisassessmentyear2019-20wasnotabated andassessmentproceedingswerependingduringthecourseof searchproceedings,thereforethereisnoquestionincriminating materialrequiredfortheassessment,hencethisGroundNo.2is devoidofmeritandliabletoberejected. 40.NexteffectivegroundbyrivalpartiesareUnaccountedprofit fromHSBLasdeterminedbytheAOofRs.11,29,61,022/=and wasestimatedbyCIT[A]toRs.4.10crores. 40.1ThisissuewasconsideredbyusinParagraph19to19.10of thiscommonorderinthecaseofPriyaBlueIndustriesPvtLtd, whereinweheldthatShipbreakingyardV-2wasownedonlyby HSBLandnotbytheassesseePBIL.Incomefromshipbreaking activitiesof‘ShipArina’and‘ShipOpportunity’wereaccountedfor inthebooksofHSBL.Searchactionundersection132wascarried outinthepremisesoftheassesseecompanyandHSBLon19-11- 2019.Laternoticeu/s.153AwereissuedonHSBLon23-12-2020 andsearchassessmentsu/s.153AwereframedinthecaseofHSBL on20-09-2021andinthecaseofPBILon07-03-2022bythevery sameDeputyCommissionerofIncomeTax,CentralCircle1[1], Ahmedabad.Paragraph4to4.6ofboththeassessmentorders dealingwith“Additionwithrespecttoshipsrecycledunderthe jointventureagreementwithHSBL”whichisrunningto17pages [withreproductionofJVA,SupplementaryAgreement,Minutesof BoardMeetingofHSBL,etc.]whicharewordbywordandparagraph IT[SS]A4,29/Ahd/2023& 4orsPriyaBlueIndPLtd& HooglyShipBreakersLtd.Page 54 byparagraphareidenticalforboththeHSBLandPBPL.Thusitisa cutandpasteordermadebytheldAOandraisedadditionof Rs.11,29,61,022/=being50%eachshareincomeofHSBLandPBPL. Theonlydifferenceistheassessee’sreplyisNOTreproducedinthe HSBLassessmentorder. 40.2.BydoingsotheldAOmiserablyfailedtoconsidertheReturn ofIncomefiledbytheHSBLdeclaringtheincomeonrecyclingof ship‘Arena’andship‘Opportunity’andpaymentofstatutorydues, taxestovariousauthoritiesbyHSBL.ButtheLdAOblindlyrelied ontheseizeddocumentsnamelyJVA,SupplementaryAgreement, Excelsheetwithoutcorroborativeevidences. 40.3.Theassesseebroughtonrecordthebasicpurchasevalueof shipArenaisRs.31,10,26,020/=asperthepurchaseregisterof HSBL,ShipRecycling/PortchargesofRs.22,45,691/=paidon28-3- 2017toGujaratMaritimeBoard[GMB]forthebreakingupship ArenaandCustomsdutyofRs.89,13,642/forshipArena.Similarly purchasevalueofship‘Opportunity’byHSBLwasfor Rs.97,39,21,419/=.Importpurchaseregister–IGST,customsduty ofRs.18,16,80,681/=paidbyHSBL.FurtherShipRecycling/Port chargesofRs.67,54,639/=paidtoGujaratMaritimeBoard[GMB] forthebreakingshipOpportunity. 40.4.Inviewoftheaboveaspectsinrelationoftheconcernedtwo shipsnamelyship‘Arena’andship‘Opportunity’becomecrystal clearthatshipbreakingactivitieswerecarriedoutinplotV-2by HSBLandnotpursuanttotheJointVentureAgreemententered withPBPL.ThereforetheentireadditionofRs.11,29,61,022/=is liabletobedeletedinthehandsoftheHSBLandassessment orderissetaside.Sinceresultantincomefromsuchshipbreaking IT[SS]A4,29/Ahd/2023& 4orsPriyaBlueIndPLtd& HooglyShipBreakersLtd.Page 55 activitiesweredeclaredbyHSBLandfileditsReturnofIncome,in theabovecircumstancestheLdAOdirectedtoverifytheReturnof Incomewithrelevantmaterialsonrecordandframefresh assessmentinaccordancewithlawbygivingopportunityofhearing totheassessee.IntheresulttheGroundNo.6raisedbythe assesseeispartlyallowedandGroundNo.1raisedbythe Revenueispartlyallowed. 41.SincetheassessmentissetasidetothefileofJurisdictional AssessingOfficerforpassingfreshorder,theotherGroundsraised bytheassesseedoesnotrequireseparateadjudication.Howeverthe JAOshouldprovideafairhearingtotheassesseeforframingfresh assessmentorder. 42.Inthecombinedresulttheappealfiledbytheassesseein IT[SS]ANo.18/Ahd/2023andappealfiledbytheRevenuein IT[SS]ANo.27/Ahd/2023arepartlyallowed. OrderpronouncedintheCourton28 th June,2024at Ahmedabad. Sd/-Sd/- (WASEEMAHMED) ACCOUNTANTMEMBER (T.R.SENTHILKUMAR) JUDICIALMEMBER (TrueCopy) Ahmedabad,Dated28/06/2024