AHIR SLAT AND ALLIED PRODUCTS PVT LTD, GANDHIDHAM V. ACIT, CENTRAL CIRCLE-1, RAJKOT, RAJKOT

ITSSA 6/RJT/2022

• Counselvise Citation: [2024] 101 COUNSELVISE.COM (IT) 6530 (ITAT-RAJKOT)
• Duration Of Justice: 1 year(s) 6 month(s) 15 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 11-06-2024
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 13-03-2024
• Assessment Year: 2016-2017
• Appeal Filed On: 27-11-2022
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Business income; Income from undisclosed sources; Loose papers; Application of stay; Question of law; Documents seized
• Section: 68; 69; 132; 139; 153A; 260A; 139(1); 158B(b)

Judgement Text

आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरणआयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण, राजकोट राजकोटराजकोट राजकोट यायपीठ, यायपीठ, यायपीठ, यायपीठ, राजकोट राजकोटराजकोट राजकोट IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT (Conducted Through Virtual Court) BEFORE SMT.ANNAPURNA GUPTA, ACCOUNTANT MEMBER AND SHRI T.R. SENTHIL KUMAR, JUDICIAL MEMBER Stay Petition No.01 and 02/RJT/2023 WITH IT(SS)A No.6 and 7/RJT/2022 Assessment Year :2016-17 and 2017-18 M/s.Ahir Salt and Allied Products, Gandhidham BBZ-S-60, Zanda Chowk Gandhidham. PAN : AABCA 8202 E Vs. The DCIT, Cent.Cir.1 Rajkot. अपीलाथ अपीलाथ अपीलाथ अपीलाथ / (Appellant) य य य यथ थ थ थ /(Respondent) Assessee by : Shri S.N. Soparkar, ld.Sr.Advocate Revenue by : Shri Shramdeep Sinha, ld.CIT-DR सुनवाई क तारीख/Date of Hearing : 14/03/2024 घोषणा क तारीख /Date of Pronouncement: 12/06/2024 आदेश आदेशआदेश आदेश/O R D E R PER ANNAPURNA GUPTA, ACCOUNTANT MEMBER The present two appeals filed by the assessee are against a consolidated order passed by the ld.Commissioner of Income Tax(A)- 11, Ahmedabad [hereinafter referred to as “Ld.CIT(A)] , under section 250(6) of the Income Tax Act, 1961 ("the Act" for short) dated 30.9.2022, pertaining to Asst.Year 2016-17 and 2017-18.The assessee has also filed two stay petitions mentioned in the cause-title against the order seeking stay of tax demand qua the Asst.Year 2016- 17 and 2017-18. IT(SS)A No.6 & 7/RJT/2022 2 2. The stay petitions of the assessee were heard on 30.5.2023 and since both the parties were agreeable to getting the appeals heard at the earliest, the appeals to which the stay applications pertained, in IT(SS)A.Nos.6 & 7/RJT/2022 , were directed to be fixed for hearing on 21-06-23 alongwith the stay applications. The appeals were finally heard on 23-06-23. Thereafter on 19.9.2023, the matter was fixed for seeking clarifications on the digital materials seized during search on the assessee and its evidentiary value in terms of the provisions of section 65B of the Indian Evidence Act. Subsequently the assessee changed its counsel and engaged Shri S.N. Soparkar, Sr. Advocate, who orally sought consolidation of appeals for various years of the assessee by pleading that all the years involved in the case of the assessee involved issue of identical additions made in assessments framed under section 153A of the Act, in consequence to search action undertaken on the assessee, and therefore needed to be heard together. An application in this regard was directed to be filed, which was duly filed before the Bench, but was rejected noting reasons in order-sheet entry dated 8.3.2024. Thereafter, the present appeals along with Stay Petitions were posted for hearing on 13.3.2024 and the hearing was finally concluded on 14.3.2024. The appeals accordingly are being adjudicated upon by us and the stay applications stand disposed of as a consequence. 3. Brief facts relating to the case are that the assessee is a private limited company engaged in the business of manufacturing and trading of salt, Logistics and Transportation and Liquid Cargo Storage terminal. A search and seizure operation was conducted under section 132(1) of the Act on 10.11.2020 at; • the various business premises of the assessee, IT(SS)A No.6 & 7/RJT/2022 3 • premises of major stakeholders of the assessee, which included Kangad family (Neelkanth group) and Ahir family, and • the premises of cashier (Sh. Vijay Nagda) and Accountant (Sh. Naran Maheshwari) of the promoter family. 4. During the course of search, a pen drive was recovered from the premises of Sh Naran Maheshwari, accountant, which was noted to contain digital data allegedly in the form of parallel books of accounts of various group concerns of the Neelkanth group, which was a stakeholder in the assessee company. This pen-drive contained tally data file titled as “FOR CA STUDENT FROM 1-4-2010 – 31-3-2017” which was noted by the AO to contain accounts reflecting share of profits of the Neelkanth group earned through the assessee company, all unaccounted, upto 31-03-2017. Another folder in the pendrive was found to contain signed vouchers and bills in.pdf files which were found recorded in tally file and even physical copies of the bills and vouchers were found duly signed by group promoters and key persons at the premises of Sh. Vijay Nagda ,cashier of the group. The AO noted that the persons, companies, firms and parties noted in the tally file did exist and had business relations with the Neelkanth group and further the transactions recorded in the tally file were independently verifiable with third party evidences. Even the key person of the group, Sh Mihir Kangad, had in his statement recorded during search u/s. 132(4) of the Act admitted Sh Narain Maheshwari to be accountant of the group, names in the tally folder to be that of group concerns and persons and transactions to relate to the group. He therefore held the transactions recorded in the pendrive to be genuine. From these digital records he found the assessees name appearing in various ledgers, which ledgers he found reflected share of unaccounted profit /loss of the Neelkanth group from the assessee company. IT(SS)A No.6 & 7/RJT/2022 4 5. Another location in the same pendrive was found to contain a tally file named “ASM” recording yearwise journal entries of Profits earned and its allocation in a definite proportion/ percentage to different groups, i.e Neelkanth group, Ahir Salt group, Hiralal, Parekh group and Dhirubhai Shah group, covering transactions from 31-03- 2007 to 11-07 -2015.The entries in this file pertaining to share of profit allocated to Neelkanth group was noted to correspond with the profits recorded as received allegedly from the assessee by the group in tally file FOR CA STUDENT FROM 1-4-2010 – 31-3-2017. The AO accordingly interpreted the data in tally file ASM to reflect unaccounted profits earned by the assessee in various years, i.e Financial Year 2010-11, pertaining to assessment year 2011-12 to F.Y. 2016-17 pertaining to A.Y.2017-18. Further, for the remaining period i.e. from F.Y. 2017-18 pertaining to A.Y.2018-19 to F.Y.2020- 21 pertaining to A.Y.2021-22, the loose papers recovered from the premises searched, was used to ascertain unaccounted income for these years. Accordingly, total amount of undisclosed profits / income of the assessee for F.Y 2010-11 to F.Y 2020-21, including the effect of losses, was arrived at Rs.64,56,44,844/-. The same was confronted to the assessee who denied having anything to do with the entries in the pendrive. The AO however rejected the contentions of the assessee and went on to divide the total unaccounted profits so revealed from the digital and other data found during search, in the proportion of turnover reported in the books of the assesse for each year resulting in addition for the impugned years before us, i.e. Asst.Year 2016-17 and 2017-18 being Rs.4,87,17,205/- and Rs.7,00,80,179/- respectively in assessment framed u/s 153A of the Act. IT(SS)A No.6 & 7/RJT/2022 5 6. The matter was carried in appeal before the ld.CIT(A) who confirmed the findings of the AO of the data revealing undisclosed profits of the assessee but directed the AO to make addition on account of the same as per data revealed in documents found during search. He rejected AO’s method of distributing profits in the ratio of turnover of the assessee. Accordingly the undisclosed profits attributable to the impugned years, A.Y 2016-17 & A.Y 2017-18 came to Rs.12,69,69,992/- and Rs.12,50,99,546/- respectively, thus in turn enhancing the addition made to the income of the assessee for these years. Aggrieved by the same, the assessee has come up in appeal before us, raising various grounds. Since admittedly the additions made in both the years before us are based on identical facts, both the appeals were taken up for hearing together and are being adjudicated vide this common consolidated order. 7. We shall be dealing with the assessees appeal for A.Y 2016-17 in IT(SS)A.No.6/RJT/2022 and our decision rendered therein will apply mutatis mutandis to the other appeal also. IT(SS)A.No.6/RJT/2022 - A.Y 2016-17 Assesses Appeal: 8. The grounds raised are as under: 1. The grounds of appeal mentioned hereunder are without prejudice to one another. 2. The learned Commissioner of Income-tax (Appeals)-11, Ahmedabad [CIT(A)] erred on facts as also in law in rejecting appellants plea that no addition could ^have been made in the order passed u/s 153A of the Act, in absence of there being incriminating material found from the appellant. The order passed making addition without there being any incriminating materials may kindly be deleted. 3. The learned CIT(A) erred on facts as also "In law in not appreciating the fact that the seized data / documents were found from the premises of third party, therefore addition on the basis of the said document cannot IT(SS)A No.6 & 7/RJT/2022 6 be made in the hands of the appellant u/s 153A of the Act. The AO may kindly be directed to delete the addition on this ground. 5. The Id. CIT(A) erred on facts as also in law in not deleting the addition made on the basis of dumb data / documents stated to have been recovered from the premises of third party. The Action of Id. CIT(A) in not deciding the around of appeal on merit is unjustified. The AO may kindly be directed to delete the addition. The Id. CIT(A) erred on facts as also in law in enhancing addition from 4,87,17,205/- to Rs.12,69,69,992/- being alleged unaccounted income as per loose paper / data recovered from the premise of third party. The entire addition is totally unwarranted and unjustified therefore deserves to be deleted and may kindly be deleted. 6. Your Honour’s appellant craves leave to add, to amend, alter, or withdraw any or more grounds of appeal on or before the hearing of the appeal.: 9. Additional grounds on merits were also raised before us vide application dated 10-02-24 on the ground that it remained to be taken earlier. The said grounds read as under: "1. Alternatively and without prejudice to grounds Form 36, Ld. CIT(A) erred in law and on facts in not allowing carry forward of business loss as per seized data and further in not allowing set off the same in subsequent years against the addition confirmed and enhanced by him the same in subsequent years against the addition him. The AO may kindly be directed to allow carry the same in subsequent years. 2. Alternatively and without prejudice to grounds Form 36, Ld. CIT(A) erred in law and on facts of profit in treating the business profit as per seized data as unaccounted income and not giving credit of book profit declared in audited financial statements. The AO may kindly be directed to allow credit of book profit against the business profit as determined by the ld.CIT(A).” 10. Ground No.1 and 6 are general in nature and do not require adjudication. 11. With respect to the grievance raised in ground no.2 and 3, the pleadings of the Ld.Counsel for the assessee was that no incriminating material was found from the premises of the assessee during search, and therefore, the addition of undisclosed profits, could not have been made under section 153A of the Act. The contention of the Ld.Counsel for the assessee was to the effect that, incriminating material whatever found was from the premises of the third-party, i.e the cashier and accountant of the group, and not having been found IT(SS)A No.6 & 7/RJT/2022 7 from the assessee’s premises, it could not have been considered for making addition in the hands of the assessee in the assessment framed under section 153A of the Act. 12. The ld.CIT(A) in his common order for A.Y 2011-12 to A.Y 2021- 22, dealt with this issue raised before him at para 6.3 to 6.3.1 of his order as under: “6.3 The third plea of the appellant is that the materials were found from the possession of third parties and hence, proceedings u/s.153C is the right recourse and not proceedings u/s.153A, 6.3.1 This argument has been carefully perused. On perusal of the records, it is seen that this argument was raised by the appellant before the AO and the AO has dealt on this issue in the assessment order. The plea of the appellant is that since nothing incriminating was found from the possession of the appellant during search carried out at its premises, therefore the completed assessment cannot be disturbed. The appellant has also stated, since the so- called material was found from the possession of third party, therefore proceedings were supposed to be initiated u/s.153C. However, the statement of Mihir Kangad reproduced in the assessment order is of utmost importance, in the statement he has categorically admitted that, the entries were made at the direction of the family members of the Neelkanth Group. This implies that Shri Naran B Maheshwariand Shri Vijay Nagda are connected with the appellant. The AO has given the clear finding in the assessment order that Shri Mihir T. Kangad (kev person of the group) had admitted in his statement recorded u/s. 132(4) of the Act dated 23.12.2020 that Shri Naran B. Maheshwan & Shri Viiav Nagda was the accountant & cashier of the group respectively and were looking after the financial affairs of the appellant also. Secondly, since search has been carried out at the premises of the appellant and its employees or connected persons, group concerns at the same time, then the AO is right in law in treating this as part of the material of the appellant and thus finalizing the assessment u/s. 153A of the I.T. Act. It is observed that search was carried out at various premises simultaneously and based upon evidences found from parties connected with appellant, addition was made. Thus, AO was justified in making addition while passing the assessment order u/s 153A of the Act. Hence, the plea of the appellant is rejected.” The same has also been dealt at para 39.1 & 39.2 of his order as under: 39.1 The Appellant has contended that the materials do not belong to the appellant, as the same has been recovered from unconnected persons namely Shri Naran B. Maheshwari and Shri Vijay Nagda. The appellant stressed that during the search carried out at its business premises, no such incriminating documents or any other incriminating data has been recovered supporting the disputed digital data recovered IT(SS)A No.6 & 7/RJT/2022 8 from the above-named persons. The appellant further contended that name as per disputed digital data seized is "ASM", which cannot be correlated with the appellant company. The appellant also submitted the duly sworn affidavit of Shri Naran Maheshwari stating that he himself is not aware of such digital data and as such author or origin of such disputed data remained unidentified. In nutshell, the appellant contended that in absence of any corroborative evidence or any nexus or live link in support of the digital data seized from the possession of Shri Naran Maheshwari, no addition could have been made in its case. The appellant relied upon various judicial pronouncements on applicability of section 292C of the Act in support of its contention that addition in the hands of appellant could not be sustained on the basis of data or documents found from third party and in absence of any other corroborative materials. 39.2 The above stated submission of the appellant is not convincing in view of the fact that though Shri Naran Maheshwari and Shri Vijay Nagda may not be employees of the appellant but both of them are working under other business concerns of Neelkanth Group and the appellant company is part of the Neelkanth Group. It is important to mention here that the AO has given the clear finding in the assessment order that Shri Mihir T. Kangad (key person of the group) had admitted in his statement recorded u/s. 132(4) of the Act dated 23.12.2020 that Shri Naran B. Maheshwari & Shri Vijay Nagda was the accountant & cashier of the group respectively and were looking after the financial affairs of the appellant also. Therefore, it cannot be said that the impugned data has been seized from third party and there is no linkage of the appellant company with such data. Further, appellant's plea that originator or author of data is not known has no relevance as the key personnel of the Neelkanth Group Shri Mihir Kangad in his statement recorded on 24/12/2020 admitted that entries in the digital data is made by group accountant and cashier on the basis of directions issued by various family members and management persons. In this regard, it is important to refer the observation of the AO made in the para 11 of the assessment order (reproduced above in para 6.2.3 of this order).So far as title of the digital data "ASM" is concerned, it appears that the same is abbreviation of "Ahir Salt Mix" and they are matching with accounting entry in tally file "For CA Student" in the account named as "ASA Mix". It is also seen that year-end journal entries of profit have been passed in tally file "A S M" with profit. Therefore, there is purpose behind maintaining such tally files and thus, appellant's plea that the data is not related to them is rejected.” Ld.DR has relied on the order of the Ld.CIT(A). 13. Having heard both the parties, we now proceed to adjudicate the two grounds raised by the assessee. IT(SS)A No.6 & 7/RJT/2022 9 14. The assessee’s argument before us is that, the assessment framed in the present case under section 153A of the Act was invalid, since no incriminating material was found from the assessee’s premises during search conducted; that whatever incriminating material was found, it was found from a third-party. The plea was to the effect that in assessment framed under section 153A of the Act, consequent to search undertaken on the assessee, only incriminating material found from the assessee’s premises can be considered while framing assessment under section 153A of the Act. 15. We are not in agreement with the contention of the Ld.Counsel for the assessee that the incriminating material found in the present case was from a third party and not from the assessee. 16. That the incriminating material is a pen drive containing some accounting information/data allegedly of the Neelkanth group and the assessee and certain vouchers of income and expenses, is a fact which is not in dispute. That they were found from the premises of Shri Naran B. Maheshwari and Sh. Vijay Nagda during search conducted on them as part of the search action taken on the group to which the assessee belonged, is also a fact which is not disputed. That these persons are the accountant and cashier of the group, looking after its financial affairs, is also an admitted fact. 17. In the light of the above facts, the persons from whose possession the incriminating material was found, i.e the pendrive, are admittedly closely linked with the assessee, in relation especially to maintenance of accounts. They are surely not alien to the transactions. And cannot be said to be outsiders / third parties. In fact considering the fact that they were admittedly maintaining data of the group, the possession of pendrive, also containing data of the IT(SS)A No.6 & 7/RJT/2022 10 group, with them in fact is to be attributed to the group, of which the assessee is a part. The possession of the pendrive, though physically found from other persons, the constructive possession is to be treated as that of the assessee. The Hon’ble Madras High Court in the case of S.R. Trust Vs. ACIT, in its order in Writ Petition No.22213 of 2018, dated 12.3.2021, dealt with an identical plea of the assessee, and rejected the same applying the principle of constructive possession. The Hon’ble High court made a very pertinent observation in this respect stating that if such an approach, as canvassed by the assessee is adopted, then it would be very easy for any assessee to evade the provisions of the Act by utilizing services of the third-party. Relevant finding of the Hon’ble High Court in this regard is at para 16 of the order as under: “16. Once I come to the conclusion that the materials seized by the department incriminate the petitioners herein, notices issued to Dr.S.Gurushankar for six assessment years have to necessarily be sustained. Of course, one other contention of the petitioners' counsel deserves to be considered. The petitioners' claim that nothing was seized from the residence of Dr.S.Gurushankar. The material was seized only from the residence of Sachithananth. Sachithananth was not an assessee. But this argument has to be stated only to be rejected. Sachithananth is not someone who is alien to the transaction. He is the Personal Assistant to Dr.S.Gurushankar. Dr.S.Gurushankar is none other than the Managing Trustee of M/s.S.R.Trust which runs MMHRC. Therefore, the possession of incriminating material by Sachithananth can certainly be attributed to both the petitioners herein. The principle of constructive possession can very well be applied to the case on hand. If such an approach is not adopted, then it will be very easy for an assessee to evade the provisions of the Act by utilizing the services of third parties. In a case arising under the http://www.judis.nic.in Prevention of Corruption Act, the Hon'ble Supreme Court applied the principle of constructive receipt. The Hon'ble Supreme Court in the decision reported in (2015) 12 SCC 348 (D.Velayutham vs. State), held as follows:-“ “15.Though this Court has stressed the need and significance of phenolphthalein as a trap device in corruption cases, so as to allay doubts about the actual receiving of bribes by accused persons, there may be cases where there are multiple demanders in a common or conjoint bribe demand, and for whatsoever reason, only one receives the sum on their behalf, and is entrapped in consequence. Depending on strength of the remainder of evidence, in these cases, constructive receipt by co-accused persons is open to establishment by the prosecution, in order that those who intermediately obtain bribes be latched with equal culpability as their co- accused and entrapped receivers. ... If the receipt and handling of bribe money by Accused IT(SS)A No.6 & 7/RJT/2022 11 2 so convincingly and inexorably points towards his http://www.judis.nic.in custodianship of part of the same bribe amount on behalf of his superior officer, namely Accused 1, then Accused 1 cannot rely on mere non- handling/ non-receipt of the bribe money, as his path to exculpation. This Court's construal of anti- corruption cases is sensitive even to these byzantine methods of bribetaking, and where an evader escapes a trap, constructive receipt has to be an alternate means of fastening criminal culpability.” The case on hand warrants a similar approach. If incriminating material was seized from the personal assistant of the assessee, then constructive possession must be attributed to the assessee.” 18. Moreover, we completely agree with the Ld.CIT(A)( para 6.3.1) that the incriminating material found during search on the group and its employees, anywhere , can be used for framing assessment u/s 153A of the Act. As long as the incriminating material is found during a common search action, it can be used for framing assessment. There cannot be and there is no requirement in law for the incriminating material to be found only with the assessee for use against him. This proposition militates against the basic purpose of conducting search on various entities and persons related to a group simultaneously, which is unearthing all incriminating material relating to the group wherever kept. Since all entities and persons are related, incriminating material can be found any where in the group. The underlying principle is discovery of incriminating material during search. This can be used against any entity searched to which it relates. 19. In view of the above, plea raised by the assessee in Ground nos.2 and 3 that the incriminating material was not found at the premises of the assessee, and therefore, no addition could have been made in the hands of the assessee in the assessment framed under section 153A of the Act, deserves to be rejected. Ground Nos.2 and 3 of the assessee are accordingly dismissed. 20. Ground No.4 and 5 and the additional grounds raised, it was stated by the ld.counsel for the assessee, are with respect to the merits IT(SS)A No.6 & 7/RJT/2022 12 of the addition made in the hands of the assessee by the AO, which was further enhanced by the ld.CIT(A). 21. Arguments at length were made on the above grounds raised, which can be summarized as under: i) Addition has been made on the basis of information contained in a pen-drive seized from the accountant of the assessee-group; that this electronic evidence has no evidentiary value in view of section 65B of the Indian Evidence Act (“Evidence Act” for short), which lists the conditions, subject to fulfilment of which ,electronic data can be admitted as evidence. Reliance was placed on the decision of the Hon’ble Madras High Court in the case of Vetrivel Minerals Vs. ACIT, (2021) 437 ITR 178 (Mad). Copy of the same was placed before us. ii) The addition made in the impugned year was by way of extrapolation of the data found in the pen-drive which is not permissible; that the addition was made solely on the basis of some ledger entries, and there were no connection established by the department of these ledger entries with the 18,427 vouchers also found; that the addition made was based solely on certain ledger entries without any backing, either by way of vouchers or by way of any undisclosed assets or investments found to have been made by the assessee . iii) Without prejudice to the above, the amount of profits already disclosed by the assessee needed to be set off against the addition made of undisclosed profits since there is nothing with the Department to hold that entire IT(SS)A No.6 & 7/RJT/2022 13 undisclosed profits shown in the ledger accounts, were in relation to the profits not disclosed by the assessee; iv) The assessee be allowed set off of loss assessed in earlier years; 22. We shall first be dealing with the contention of the ld.counsel of the assessee that incriminating material found, being electronic record in a pendrive, did not qualify as evidence admissible in terms of section 65B of the Evidence Act, which deals with admissibility of electronic record as evidence, and therefore, could not be taken cognizance of. The reason being that if merit is found in this argument entire addition made in the hands of the assessee, based on information contained in the incriminating material/ pen-drive, would be nullified and no addition would survive; that there would be no need therefore to deal with other arguments raised by the assessee on merit. 23. As stated above, the addition in the hands of the assessee was made based on data contained in the digital device i.e. pen-drive, which was seized from the premises of the accountant of the assessee, Shri Naran B. Maheshwari during the search action. There is no dispute with respect to the above fact. The contention of the ld.counsel for the assessee is that, since the conditions specified u/s 65B of the evidence Act have not been complied with the same has no evidentiary value and no addition therefore can be made on the basis of data/ information contained in the pendrive. Reliance was placed on the decision of the Hon’ble Madras High Court in the case of Vetrivel Minerals Vs. ACIT (supra) in this regard. 24. During the course of hearing it was put to the notice of the ld.counsel for the assessee at Bar that the Hon’ble Apex Court in the IT(SS)A No.6 & 7/RJT/2022 14 case of Anvar P.V. Vs. PK Basheer in appeal No 4228 of 2012, order dated 18.9.2014 had exhaustively interpreted the provision of section 65B of the Evidence Act. His comments were sought on the same, to which he stated that the decision of the Hon’ble Madras High Court was direct on the issue and would apply squarely to the facts of the present case. 25. We have carefully considered the contention of the Ld.Counsel for the assessee and have also gone through both the case laws referred to before us. 26. The contention of the Ld.Counsel for the assessee, we hold fails for several reasons. 27. The Hon’ble Apex Court in the case of Anvar P.V (supra) exhaustively interpreted the provisions of the Evidence Act relating to admissibility of electronic evidences/ records contained in section 65B of the Indian Evidence Act, 1872. At para 24 of their order , the court held that if an electronic record as such is used as primary evidence u/s 62 of the Evidence Act, the same is admissible in evidence, without compliance of the conditions in section 65B of the Evidence Act. The relevant findings of the Hon’ble Apex court in this regard are as under: “24. The situation would have been different had the appellant adduced primary evidence, by making available in evidence, the CDs used for announcement and songs. Had those CDs used for objectionable songs or announcements been duly got seized through the police or Election Commission and had the same been used as primary evidence, the High Court could have played the same in court to see whether the allegations were true. That is not the situation in this case. The speeches, songs and announcements were recorded using other instruments and by feeding them into a computer, CDs were made therefrom which were produced in court, without due certification. Those CDs cannot be admitted in evidence since the mandatory requirements of Section 65B of the Evidence Act are not satisfied. It is clarified that notwithstanding what we have stated herein in the preceding paragraphs on the secondary evidence on electronic record with reference to Section 59, 65A and 65B of the Evidence Act, if an electronic record as such is used as primary evidence under Section 62 of the Evidence Act, the same is IT(SS)A No.6 & 7/RJT/2022 15 admissible in evidence, without compliance of the conditions in Section 65B of the Evidence Act.” 28. Section 62 of the Indian Evidence Act, 1872 defines primary evidence as under: Section 62 Primary Evidence : Primary evidence means the document itself produced for the inspection of the court. Any document therefore itself produced is primary evidence. 29. In the present case the pendrive has been found during search and data contained therein used as evidence. It is nothing but primary evidence. It is not that data was in a computer which was copied in the pendrive. In such circumstance the pendrive would constitute a secondary evidence. For that matter even the Ld.Counsel for the assessee did not rebut the fact when pointed out during the course of hearing. And going by the decision of the Hon’ble Apex Court in the case of Anvar P.V (supra), the said pendrive was admissible as evidence without compliance with the provisions of section 65B of the Indian Evidence Act. 30. Even otherwise the decision relied upon by the Ld.Counsel for the assessee in the case of Vetrivel (supra)has been stayed by a Division Bench of the Hon’ble Madras High Court in WA(MD)123/2022 dated 17/06/22. This fact was brought to the notice of the Ld.Counsel for the assessee during the course of hearing itself who fairly admitted to being unaware of the development. 31. For the above reasons, the contention of the Ld.Counsel for the assessee that the electronic record seized during search, i.e pendrive, was not admissible as evidence since the conditions specified u/s 65B of the evidence Act were not fulfilled, deserves to be dismissed. IT(SS)A No.6 & 7/RJT/2022 16 32. Taking up the next contention of the ld.counsel of the assessee which as stated above briefly is: • The addition made in the impugned year was by way of extrapolation of the data found in the pen-drive which is not permissible; • that the addition was made solely on the basis of some ledger entries, and there were no connection established by the department of these ledger entries with the 18,427 vouchers also found; • that the addition made was based solely on certain ledger entries without any backing, either by way of vouchers or by way of any undisclosed assets or investments found to have been made by the assessee . 33. To deal with the same it is pertinent first to bring out the facts leading to the addition made. The assessment order reveals that the pen-drive seized from the premises of the accountant of the group searched i.e. Shri Naran B. Maheshwari, contained digital data in tally files in the form of primary books of accounts of various group concerns of Neelkanth group. This data was contained in pen-drive in the following path: “Neelkanth Coal Mfg. Pvt Ltd\GSS-F.Y.2017-18 WIP\GSS- F.Y.2016-17 – Final\DATA\11617” 34. This was a Tally folder (“ Tally “ being an accounting software), which when accessed, it was found to contain the following files: • A folder named “Final – KPPL-SA-NP” which had files containing signed vouchers and bills in .pdf files. Transactions pertaining to these bills and vouchers were found recorded in the tally file with the date, amount, narration, party name etc. matching exactly. This fact is recorded at para 12 of the AO’s order wherein he has also reproduced sample cases to IT(SS)A No.6 & 7/RJT/2022 17 demonstrate the above facts. Further corresponding vouchers, signed by key group persons were also physically found at the premises of the cashier Sh. Vijay Nagda. • a file named “FOR CA STUDENT FROM 1.4.2010 TO 31.3.2017” was also found. This tally file contained a ledger named “PROFITS / LOSS FROM AHIR SALT UPTO MAR-16 the contents of which are as under: 35. Since this ledger was found from the path “Neelkanth Coal Mfg Pvt. Ltd” in the pen drive, it was interpreted by the AO to reveal the share of the Neelkanth group ,a stakeholder in the assessee-company, in the unaccounted profit of the assessee in various years. 36. Another location of the same pen-drive was also found with the path “KPPL_Data\Neelkanth Coal Mfg. Pvt Ltd.\GSS-F.Y.2017-18 WIP\30.06.2015\00001”. This ‘00001’ was found to be a tally file named “ASM” containing transaction from 31.3.2007 to 11.7.2015. Certain journal entries were noted to be passed in the day book IT(SS)A No.6 & 7/RJT/2022 18 contained in this file, for various years ending on 31.3.2011, 31.3.2012, 31.3.2013 and 31.3.2014, which are reproduced at para 7.1 of the order as under: IT(SS)A No.6 & 7/RJT/2022 19 37. The journal entry passed in the day-book as on 1.4.2014 and 31.3.2015 was also noted by the AO as under: 38. “ A S M “ file was interpreted by the AO as pertaining to the assessee, M/s Ahir Salt, and the profits shown in the journal entries passed in the day book contained in the said tally file as reproduced above, held to be unaccounted profits of the assessee for the different years. Thus the data in the A S M file was interpreted by the AO as revealing the profits earned by the assessee in the different years. 39. Further on comparative analysis of both the files i.e. “FOR CA STUDENTS FROM 1.4.2010 TO 31.3.2017” & “A S M”, the AO noted that the entries in both the files corresponded with each other. For example, he noted the A S M file to disclose unaccounted profits of Rs.15,76,52,644/- earned by the assessee-company in financial year 2012-13 out of which share of Neelkanth Group was 71% amounting to Rs.11,15,07,376/-.This same profit was noted to be reflected in the Profit and Loss account from Ahir Salt , contained in Tally file FOR CA STUDENTS FROM 1.4.2010 TO 31.3.2017” allegedly containing data of Neelkanth Group. 40. The AO inferred from the same that while file “ASM” contained complete data of unaccounted profits of the assessee from financial year 2007-08 to 2014-15, the file “for CA students” covered the IT(SS)A No.6 & 7/RJT/2022 20 relevant profit & loss entries from the assessee-company pertaining to the share of Neelkanth Group and containing data from financial year 2012-13 to 2016-17. Reading both the files together, the AO worked out unaccounted P&L account of the assessee company for FY.2010-11 to 2016-17, noted at para 9 of his order, as under: 41. Thus, he worked out unaccounted profits of the assessee- company from F.Y.2010-11 to 2016-17 to be Rs.63,42,04,277/-. For the remaining period, from financial year 2017-18 to 2020-21,no such data was recovered. However, the loose cash flow sheets recovered from the premises of one Shri Vijay Nagada, cashier of the group search, was utilized to ascertain unaccounted income of the Neelkanth Group by entering all the transactions seized in the loose sheets chronologically in the tally accounting software. From that data, the quantum of unaccounted transactions between Neelkanth group and the assessee-company was culled out year-wise and reproduced at para-10 of the order as under: IT(SS)A No.6 & 7/RJT/2022 21 42. Thus, the total quantum of unaccounted transaction of the assessee-company from FY 2010-11 to 2020-21 was worked out at Rs.66,56,44,8444/- (Rs.63,42,04,227/- plus Rs.1,14,40,670/-. 43. The AO divided this entire undisclosed income amongst all the financial years i.e. FY 2010-11 to 2017-18 in the proportion of turnover of each year reported by the assessee in its regular books of accounts, giving the results noted in the table given at para-15 of the order as under: 44. Picking up accordingly, the figures from the above table, the addition on account of unaccounted income amounting to Rs.4.87 crores in the Asst.Year 2015-16 and Rs.7 crores in Asst.Year 2016-17 was made to the income of the assessee. IT(SS)A No.6 & 7/RJT/2022 22 45. The ld.CIT(A), however rejected this basis adopted by the AO of distributing the total unaccounted income, revealed in the digital record/device ,on the basis of turnover of the assessee, and held that the data in the pen drive was revealing enough and was year-wise, and there was no need to disturb the said data. He, accordingly, held that the profits attributable to the respective years, as revealed from the digital data were to be considered as undisclosed income of these years, and accordingly referring to the data revealed from the digital device, tabulated at para-9 of the assessment order, and reproduced above by us, he held that the addition to be made in the impugned year on account of undisclosed income to be to the tune of Rs.12.69 crores and Rs.12.50 crores for Asst.Year 2015-16 and 2016-17 respectively as opposed to Rs. 4.87 crores in the Asst.Year 2015-16 and Rs.7 crores in Asst.Year 2016-17 added by the AO. 46. Having enumerated the facts as above, the contention of the ld.counsel for the assessee before us was that, with respect to the addition of undisclosed income made in the impugned year, i.e A.Y 2016-17,admittedly the file “ASM” which revealed as per the Revenue undisclosed income of the assessee, no data for the impugned years was disclosed. He drew our attention to para-9 of the assessment order, specifically stating the fact that the file “ASM” covers complete data for FY 2007-08 to 2014-15. He pointed out that figures of undisclosed income of Rs.12.69 crores and Rs.12.50 crores attributed to the impugned year was based on extrapolation of data pertaining to the profits attributed to Neelkanth revealed from the file “for CA Students”. He pointed out that as per the AO, file “for CA students” revealed share of the Neelkanth in the alleged undisclosed profits earned by the assessee company and the said file contained entries for the impugned year also, i.e it contained entries from FY 2012-13 to FY2016-17 as noted by the AO at para-9 of his order. Noting that IT(SS)A No.6 & 7/RJT/2022 23 the share of Neelkanth group was 71% as noted in the narration in the said ledger, the same was extrapolated and undisclosed income of the assessee worked out at Rs.12.69 crores and Rs.12.0 crores for the impugned year. The ld.counsel for the assessee contended that there was no dispute with respect to the above facts. His contention was that in the absence of any specific data pertaining to the alleged undisclosed income of the assessee for the impugned year, extrapolation could not have been done for determining the profits of the assessee-company. 47. His other contention was that even otherwise except for this ledger found pertaining to alleged share of Neelkanth Group and the alleged profit earned by the assessee during different years, the Department had made no efforts to unearth any other evidence to support its case that the profits reflected in this ledger were earned by the assessee. He contended that admittedly, there were 18,527 vouchers also found in a file in the pen-drive and the Department made no effort to collate entries in these vouchers and prove nexus between the information derived there from with results reflected in the above two ledgers. He also pointed out that other than the information as contained in the pen-drive, the department was unable to discover any asset, money, bullion, jewellery, investment and likewise, in which the huge profits alleged to be earned by the assessee-company were invested. He, therefore, contended that dehors any other evidence to back up the results reflected in the ledgers, the same could not have been relied upon by the Department to hold that the profits reflected therein were earned by the assessee. 48. In counter, the ld.DR submitted that the AO had made out a detailed case regarding the veracity of the data in the pen-drive, in the IT(SS)A No.6 & 7/RJT/2022 24 show cause notice issued to the assessee. He drew our attention to the same as reproduced in the assessment order at para-12 as under: The path is -Neelkanth Coal Mfg. Pvt Ltd\GSS - F.Y. 2017-18 WIP\GSS -F.Y. 2016-17 - Final \ DATA \ 11617 When this tally folder was accessed, it is found to contain a company named “FOR CA STUDENT FROM 1-4-2010 – 31-3-2017” In the same pen drive, folder named “Final – KPPL-SA-NP” with following files, which contains signed vouchers and bills in .pdf files: Perusal of these .pdf files reveals that these files contain scanned copies of vouchers and bills. When compared with the transactions in tally file IT(SS)A No.6 & 7/RJT/2022 25 discussed above, it is found that these bills and vouchers support the transactions recorded in the tally file. Comparison of contents of tally file with bills and vouchers reveals that date, amount, voucher no., narration, party names etc. match exactly. Compared evidences reinforce each other and therefore, corroborative & true. Such demonstrative comparative analysis is placed below in the form of pictorial illustrations IT(SS)A No.6 & 7/RJT/2022 26 The evidences discussed supra and the evidences found and seized during search proceedings at residential premises of Sh.Vijay Nagda, cashier of the group, situated at 76A, New Adinath Society, Ward-9B, Gandhidham contains vouchers signed by the group promoters and key group persons. It IT(SS)A No.6 & 7/RJT/2022 27 is seen from perusal of such evidences that corresponding to the transactions recorded in tally file, vouchers are maintained. These vouchers also contain approval of Neelkanth group promoters for performing such transactions. Therefore, the transactions recorded in tally file are actual transactions executed. The file contains records of 18427 transactions. The persons, companies, firms and parties recorded in this file do exist and have business or personal relations with Neel kanth group and therefore, live nexus with Neelkanth group, names of such persons exist in phonebooks of Neelkanth group persons, the mentioned vehicle numbers are owned by/related to assessee group, the events such as marriages and birthdays exist on recorded dates, the transactions are also identified to have actually taken place when compared with independently verifiable third-party evidences such as Revenue Records, RTO Records, Bank Statements, Insurance Company Records, Counterparties’ Bills etc.The transactions are duly supported by corresponding vouchers. The contents of this tally file were duly confronted to key person of the group Sh.Mihir T Kangad during recording of statement u/s 132(4) of the IT Act on 23.12.2020, who admitted that Sh. Naran B Maheshwari is accountant of the group. He also admitted that names of various group concerns and group persons are written in this tally file. He also admitted that the transactions are related to various group persons and group concerns. Name of AHIR SALT AND ALLIED PRODUCTS P LTD i.e. the assessee and / or his business concern/s is also appearing in various ledgers of this tally file. Some of the ledgers where the name of the assessee and / or his business concern appears are as under – Name of the ledger INTEREST - AHIR SALT - UPTO MAR-16 & Interest From ASA-Mix F.Y. 2016-17 IT(SS)A No.6 & 7/RJT/2022 28 PROFIT/LOSS FROM AHIR SALT UPTO MAR-16 PROFIT/LOSS FROM ASA-MIX - F.Y. 2016-17 IT(SS)A No.6 & 7/RJT/2022 29 All the above ledgers highlight the share of unaccounted Profit / Loss recognised by the Neelkanth Group from the assessee-company. The ledgers also reveal the transactions related to interest on capital / investment for the part of Neelkanth Group. From the pen drive of Shri Naran Maheshwari a tally file named “A S M” is also recovered which contain the unaccounted transactions of the assessee company. A copy of this file has already been handed over to the Authorised Representative of the assessee company. Year wise unaccounted profit as per the transactions recorded in this tally file are as under – Profit entry/ies for FY 2010-11 Profit entry/ies for FY 2011-12 Profit entry/ies for FY 2012-13: IT(SS)A No.6 & 7/RJT/2022 30 Profit entry/ies for FY 2013-14 Profit entry/ies for FY 2014-15 Profit entry/ies for FY 2010-11 IT(SS)A No.6 & 7/RJT/2022 31 Interest entries for FY 2011-12 Interest entries for FY 2011-12 IT(SS)A No.6 & 7/RJT/2022 32 Interest entries for FY 2012-13 IT(SS)A No.6 & 7/RJT/2022 33 Interest entries for FY 2013-14 IT(SS)A No.6 & 7/RJT/2022 34 Interest entries for FY 2014-15 IT(SS)A No.6 & 7/RJT/2022 35 3. From the above, it can be seen that the transactions pertaining profit and interest entries in the tally file made for the Neelkanth Group i.e. “FOR CA STUDENT FROM 1-4-2010 – 31-3-2017” are matching with those found with another tally file “A S M”. Therefore, it is quite clear that the transactions recorded in the file “A S M” are the unaccounted transactions pertaining to the assessee company. Therefore, please show cause as to why the unaccounted incomes as appearing from the tally file “A S M” should not be added in the respective years as unaccounted business income. 4. Further, your kind attention is also drawn towards the loose sheets containing details of unaccounted transactions recovered from the premise of Shri Vijay Nagda during the course of search at his premise. All these sheets highlight unaccounted transactions of Neelkanth Group entities from FY 2017-18 onwards especially the period from Aug-20 to Nov-20. These loose papers seized from the premise of Shri Vijay Nagda have also been entered in a tally file in order to ascertain the unaccounted earnings emanating from all these loose sheets post FY 2017-18 and the same has also been handed over to your Authorised Representative. Some transactions pertaining to the assessee-company have also been found from these sheets and are entered in the tally file. It is requested to peruse all the transactions in these tally files and show cause as to why not the unaccounted incomes pertaining to the assessee company be taxed as per the relevant provisions of the Act for respective years.” 49. Referring to the same, he pointed out that the AO had established that the vouchers contained in the PDF file in the folder named “Final-KPPL-SA-NP” were all found recorded in the tally folder, matched exactly with the bills and vouchers with respect to the date, amount and even voucher numbers. Some demonstrative examples were also pointed out in the show cause notice. He further pointed out that corresponding vouchers noted to be duly signed by the group promoters and key group persons were also found physically during search at the cashier of the group. Noting the above facts that duly approved vouchers were recorded in the IT(SS)A No.6 & 7/RJT/2022 36 tally file, the AO held that the transaction in the tally file were actual transaction executed. He also found that persons, company, firms and parties recorded in the PDF file containing the voucher, did exist and had business or personal relation with Neelkanth group. He also noted, the transactions recorded in the tally file independently verified with third party evidences. On the basis of the above, he noted that the evidence seized by way of PDF contained true and correct information. The show cause notice, he pointed out also recorded the fact that the key person of the group, Shri Mihir T. Kangad had admitted that the transaction in the tally file related to various group concerns, and group persons. He further noted that the transaction pertaining to the profit and interest entries in the tally file made for Neelkanth group matched with those found in the tally file “ASM” containing entries of profits and interest earned by the assessee. The ld.DR contended that in view of the above since duly approved vouchers were found recorded in the tally file, which matched with third-party evidences also, the contents of the PDF could not be doubted, and to this extent, there is no question for treating the transactions contained in the ledger account pertaining to the assessee and Neelkanth group, as not sufficient for making addition in the hands of the assessee. 50. He also referred to the findings of the Ld.CIT(A) in this regard at para 39.1- 39.5 of his order as under: 39.1 The Appellant has contended that the materials do not belong to the appellant, as the same has been recovered from unconnected persons namely Shri Naran B. Maheshwari and Shri Vijay Nagda. The appellant stressed that during the search carried out at its business premises, no such incriminating documents or any other incriminating data has been recovered supporting the disputed digital data recovered from the above-named persons. The appellant further contended that name as per disputed digital data seized is "ASM", which cannot be correlated with the appellant company. The appellant also submitted the duly sworn affidavit of Shri Naran Maheshwari stating that he IT(SS)A No.6 & 7/RJT/2022 37 himself is not aware of such digital data and as such author or origin of such disputed data remained unidentified. In nutshell, the appellant contended that in absence of any corroborative evidence or any nexus or live link in support of the digital data seized from the possession of Shri Naran Maheshwari, no addition could have been made in its case. The appellant relied upon various judicial pronouncements on applicability of section 292C of the Act in support of its contention that addition in the hands of appellant could not be sustained on the basis of data or documents found from third party and in absence of any other corroborative materials. 39.2 The above stated submission of the appellant is not convincing in view of the fact that though Shri Naran Maheshwari and Shri Vijay Nagda may not be employees of the appellant but both of them are working under other business concerns of Neelkanth Group and the appellant company is part of the Neelkanth Group. It is important to mention here that the AO has given the clear finding in the assessment order that Shri Mihir T. Kangad (key person of the group) had admitted in his statement recorded u/s. 132(4) of the Act dated 23.12.2020 that Shri Naran B. Maheshwari & Shri Vijay Nagda was the accountant & cashier of the group respectively and were looking after the financial affairs of the appellant also. Therefore, it cannot be said that the impugned data has been seized from third party and there is no linkage of the appellant company with such data. Further, appellant's plea that originator or author of data is not known has no relevance as the key personnel of the Neelkanth Group Shri Mihir Kangad in his statement recorded on 24/12/2020 admitted that entries in the digital data is made by group accountant and cashier on the basis of directions issued by various family members and management persons. In this regard, it is important to refer the observation of the AO made in the para 11 of the assessment order (reproduced above in para 6.2.3 of this order).So far as title of the digital data "ASM" is concerned, it appears that the same is abbreviation of "Ahir Salt Mix" and they are matching with accounting entry in tally file "For CA Student" in the account named as "ASA Mix". It is also seen that year-end journal entries of profit have been passed in tally file "A S M" with profit. Therefore, there is purpose behind maintaining such tally files and thus, appellant's plea that the data is not related to them is rejected.” 39.3 The appellant also objected the evidentiary value of the digital data seized by taking support of the provisions of Section 65B(4) of the Act. However, it seems that the key personnel of group Shri Mihir Tejabhai Kangad in his statement recorded on 24/12/2020 has admitted the content of digital data seized. Therefore, there is no dispute regarding the genuineness of data recovered from the pen drive of Shri Naran B Maheshwari. Therefore, this plea of the appellant cannot be accepted. IT(SS)A No.6 & 7/RJT/2022 38 39.4 The appellant also contended that profit entry and year-end entries of profit is by way of Journal and there is no evidence of actual earning of income. The appellant also stated that there is no backend working related to how such profit has been derived. The AO did not bring into any evidence as to what sales or purchase has been made, amount of such sales/purchase, quantity of sales / purchase, nature of activities and thus, in absence of such primary information, no credence should be given to the figure of profit represented by single journal entry. The appellant submitted that if the impugned figure of profit is treated as unaccounted profit over and above the profit declared in audited books of account, then alt the financial ratios i.e., GP, NP, Production / yield shall give absurd and impractical result. The appellant stated that there is no possibility of earning such huge profit in the existing investment in business and on this ground, the appellant stated that the digital data seized is not correct, complete and authentic. 39.5 It is observed that seized material found during the course of search which is clearly established to be pertaining to the appellant, entries therein cannot be ignored. When the seized material found during the course of search and referred in Assessment Order itself depicts the profit of the company on year-to-year basis, such profit is required to be taxed. Now what the AO has in his possession is the digital data where earning of Profit and its journal is unambiguously written and, therefore, AO has taxed the same as income. On perusal of the assessment order, it is seen that at the end of each year, amount of profit or loss has been transferred to different accounts. The statement of Mihir Kangad, key person of the group is also in tandem with the findings of the AO in the assessment order to the effect that, the entries made therein were at the direction of the members of the group. Hence, it cannot be said that entire data is vague or not related to the appellant company and thus, one should arrive at the logical conclusion on the basis of information / data as well as broken period documents seized as above.The Hon'ble Delhi High Court in the case of Mahavar Woolen Mills V/s CIT111 Taxman 568 has held as under. "Section 260A of the Income-tax Act, 1961 - Appeal to High Court -Assessment year 1996-97 - Tribunal had come to factual conclusion that documents seized during search contained certain materials which were sufficient to come to conclusion about cash payments having been made in addition to those made by cheques and drafts and held that said payments would be liable to be assessed under section 69 - On appeal under section 260A, according to assessee, question whether seized papers could be construed as 'books of account' or 'document* for purpose of section 158B(b) which defines 'undisclosed income', was required to be adjudicated - Whether issue raised by assessee in appeal could be said to involve any question of law, or a substantial question of law - Held, no - Whether it is IT(SS)A No.6 & 7/RJT/2022 39 possible to turn a mere question of fact into a question of law by seeking whether as a matter of law authority came to a correct conclusion upon a matter of fact - Held, no." Further, reliance is placed on ratio of decision of Hon'ble Ahmedabad ITAT in file case of Shailash S Patel 97 taxman.com 570 wherein it is held as under. "I. Section 68, read with section 148. of the Income-tax Act, 1961 - Cash credits (Immovable property) - Assessment year 2012-13 - In course of search conducted upon premises of one 'SBA’ group, a Banakhat (agreement to sale) was found and seized which revealed that assessee agreed to purchase a land and also paid consideration for same - But this transaction was not incorporated by assessee in its return of income -Further, assessee also failed to explain source of amount of consideration paid to purchase said land - Accordingly, Assessing Officer reopened assessment and further passed reassessment order making additions in respect of amount of sale consideration under section 68 - Assessee contended that he entered into a Banakhat as a middleman and land was first acquired for sale consideration and thereafter arranged to be sold directly from QW0er to actual buyer to gain differential proceeds/commission. It was noted that assessee was in audacious denial even on face of tangible documentary evidence towards 51. We have heard both the parties and carefully gone through the order of the AO and the Ld.CIT(A). We do not find any merit in the contention of the Ld.Counsel for the assessee that the addition made of unaccounted profits was not based on any concrete evidence but mere entries in digital form that too not supported with any material evidence found during search and that in the impugned years before us the addition was based on extrapolation of data. 52. We completely agree with the Ld.CIT(A) that the data was very revealing/speaking, apparently genuine and duly corroborated, and the addition in the impugned year was not based on any extrapolation of data. 53. Addressing first the contention of the Ld.Counsel with regard to the data being a mere entry uncorroborated with any other material IT(SS)A No.6 & 7/RJT/2022 40 evidence, it is pertinent to first take note of the fact which has not been disputed before us, that the data in the pendrive pertained to the assessee. The Ld.CIT(A) has rightly noted that the linkage of the pendrive and other material, found with the accountant and cashier of the group with the assessee, was established since the assessee was part/ connected to the group and these persons looked after financial affairs of the assessee. Also we have rejected assessees contention of having no connection with the adverse material since it was found at third party premises while dealing with ground no 2 & 3 of the assessee above at para-25 to 31 of our order. 54. Further the AO has recorded detailed and pertinent facts establishing the genuineness of the data at para 11 of his order, where he found the persons, companies, firms and parties recorded in the tally file contained in the pendrive to exist, have business and personal relations with the Neelkanth group and the transactions recorded being independently verifiable with third party evidence. It is pertinent to reproduce his findings, which importantly have remained uncontroverted. “11. As far as the genuineness of this tally data is concerned, it is seen that the persons, companies, firms and parties recorded in the tally file do exist and have business or personal relations with Neelkanth group and, therefore, has live nexus with Neelkanth group. Names of such persons exist in phone books of Neelkanth group persons. The vehicle numbers mentioned in the narrations are owned by / related to assessee group, the events such as marriages and birthdays exist on recorded dates, the transactions are also identified to have actually taken place when compared with independently verifiable third-party evidences such as Revenue Records, RTO Records, Bank Statements, Insurance Company Records, Counterparties' Bills etc. The transactions are duly supported by corresponding vouchers. Also, evidences of signed approval of such transactions by Neelkanth ,group persons are found. The correlation between the transactions recorded in tally file with independently verifiable third-party evidences proves that the entries recorded in the seized tally data are true, correct and independently verifiable. 11.1 Without prejudice to the above factual confirmations regarding the authenticity of the seized tally data, the statement of Shri Mihir Kangad is also relevant to understand the reliability of the data. The transactions in "for IT(SS)A No.6 & 7/RJT/2022 41 CA Students from 01.04.2010 - 31.03.2017" were confronted to Sh. Mihir Kangad (key person of the Neelkanth Group). Sh. Mihir Kangad admitted that the transactions in the tally files are genuine and have been made on instruction of members of the Neelkanth Group. The relevant excerpts from the statements of Shri Mihir Kangad are as under - IT(SS)A No.6 & 7/RJT/2022 42 55. The AO also found all data in the tally folder of the pendrive to be generated from vouchers and bills, scanned copies of which were found in a separate file in the pendrive and even physical copies were found at the premises of the cashier of the group when searched. In all 18,427 transactions were so found recorded. These facts have also remained uncontroverted. The inference therefore from the same derived by the Revenue authorities that the transactions recorded were genuine transactions is we hold correct. 56. It is this data, which is found to be genuine and relating to actual transactions, which reveals clearly share of undisclosed profits of the Neelkanth group from the assessee in the folder “FOR CA STUDENTS”. And this entry is corroborated with ledger account revealing profits earned by the assessee and their allocation to different stakeholders contained in a tally file ASM. This is further IT(SS)A No.6 & 7/RJT/2022 43 corroborated with balance sheets found of the assessee for different years disclosing the said profits clearly. 57. For clarity, reference is made to data relating to F.Y 2012-13 found in the pendrive. The tally file FOR CA STUDENTS reveals share of Neelkanth group in undisclosed profits earned by assessee disclosed in the ledger PROFIT/ LOSS FROM AHIR SALT FOR F.Y 2012-13 to be Rs.11,15,07,378/- (para 6.2 A O’s order). File “ASM” discloses the same amount of profit of Rs.11,15,07,378/- allocated to Neelkanth group for the year @ 71/% out of the total undisclosed profits of the assessee for the year of Rs.15,70,52,643/-(para 7.1 A O’s order). The balance sheet of the assessee named ASM found during search, disclosing unaccounted assets and liabilities for the year ending 31-03-2013 also reveals same profit of Rs.15,70,52,643/- distributed/transferred during the year by the assessee 58. Thus the digital record is not just a mere uncorroborated entry, as contended by the Ld.Counsel for the assessee, but a speaking data revealing clearly profits earned by the assessee, duly corroborated with corresponding entry in the books of a stakeholder and also in the balance sheet of the assessee relating to the undisclosed business all found during search. It is, we hold, not a case of one instance of entry found but an entire trail of recording of the same entry in other records also pertaining both to the assessee and other parties. 59. We are in complete agreement, therefore, with the Ld.CIT(A) that the data cannot be said to be vague, and dismissed as such as not sufficient for drawing any inference therefrom. On the contrary a logical conclusion has to be derived therefrom. IT(SS)A No.6 & 7/RJT/2022 44 60. As per section 292C of the Act, books of accounts, documents, assets etc. found during search u/s 132 of the Act, are presumed to belong to the assessee and their contents presumed to be true. Section 292C is reproduced hereunder: Presumption as to assets, books of account, etc. 292C. (1) Where any books of account, other documents, money, bullion, jewellery or other valuable article or thing are or is found in the possession or control of any person in the course of a search under section 132 or survey under section 133A, it may, in any proceeding under this Act, be presumed— (i) that such books of account, other documents, money, bullion, jewellery or other valuable article or thing belong or belongs to such person; (ii) that the contents of such books of account and other documents are true; and (iii) that the signature and every other part of such books of account and other documents which purport to be in the handwriting of any particular person or which may reasonably be assumed to have been signed by, or to be in the handwriting of, any particular person, are in that person's handwriting, and in the case of a document stamped, executed or attested, that it was duly stamped and executed or attested by the person by whom it purports to have been so executed or attested. (2) Where any books of account, other documents or assets have been delivered to the requisitioning officer in accordance with the provisions of section 132A, then, the provisions of sub-section (1) shall apply as if such books of account, other documents or assets which had been taken into custody from the person referred to in clause (a) or clause (b) or clause (c), as the case may be, of sub-section (1) of section 132A, had been found in the possession or control of that person in the course of a search under section 132. 61. It is for the assessee to rebut the presumption with cogent evidence. Meaning thereby that the onus is on the assessee to show that the books/documents do not belong to it nor are their contents true. In the present case the presumption is that the digital record found during search belongs to the assessee and its contents revealing undisclosed profits earned by the assessee are true. The Ld.Counsel for the assessee pleading that the speaking digital data found during search needed to be corroborated with material evidence for concluding that they revealed undisclosed income earned by the assessee, is clearly contrary to law. The onus is on the assessee to explain the contents of the data found in its possession. It cannot be and is also not the case of the assessee that the data is a dumb IT(SS)A No.6 & 7/RJT/2022 45 document. In the absence of any explanation given by the assessee regarding the nature of the contents of the data, there is no question of shifting the onus on the Revenue to unearth further material evidence by way of any undisclosed assets etc. in which the profits were allegedly invested, to substantiate its case. 62. The contention of the Ld.Counsel for the assessee therefore that data found was a mere entry that too uncorroborated, is found by us to be incorrect, and his contention therefore for deleting the addition made of undisclosed profits in the hands of the assessees basis this data, needs to be rejected. 63. The next contention of the Ld.Counsel for the assessee that since specific entry of profit relating to the impugned years was not found in the digital data, addition on the basis of extrapolation of data found of another related entity could not be done, also merits no consideration. 64. There is no doubt that the data reveals profits earned by the assessee for various years, though not the impugned year. The data also reveals its distribution between all stakeholders in a fixed ratio/percentage for all years including the impugned year. Therefore the data when read in entirety reveals profits earned by the assessee distributed to its various stakeholders in a fixed ratio. This is corroborated with corresponding entry of profit received by one of the stakeholders in its books maintained in the digital record. This record is found for several years. Therefore the fact of assessee earning profits year to year and distributing it to its stakeholders is clearly revealed from the records/ data found. For the impugned year therefore when the data revealed clearly the share of the stakeholder alone, accounted for in its alleged books, it leads to the logical IT(SS)A No.6 & 7/RJT/2022 46 conclusion, that the said profits have arisen from profits earned by the assessee. The record of the stakeholder, Neelkanth enterprises, clearly revealing recording of profits received from the assessee equivalent to its share of 71%, there was no anomaly in the Revenue authorities holding assessee to have made profits in the impugned year calculated on the basis of that apportioned /distributed to its stakeholder. It is not case of extrapolation of data of the stakeholder to arrive at the profits earned by the assessee , but on the contrary a case of deriving factum of profit earned by the assessee clearly revealed from the data of the stake holder. Therefore the contention of the Ld.Counsel for the assesse of the addition made of undisclosed profits being based on extrapolation of data is found to be incorrect and his plea for deleting the addition therefore rejected. 65. The next contention of the ld.counsel for the assessee before us was that without prejudice to his arguments made on the merits of the addition made, the assessee be allowed set off of losses. He pointed out that that in the data extracted from the pen-drive the assessee was noted to have earned loss in Asst.Year 2015-16 of Rs.9,61,09,539/- which has been held by the Ld.CIT(A) to be the assessed income / loss of the assessee for the said year. 66. His contention was that the set off of these losses be allowed to the assessee in the impugned immediately successive years , A.Y 2016-17 and A.Y 2017-18. 67. He contended that the Ld.CIT(A) had denied the set off of loss of A.Y 2015-16 amounting to Rs. 9,61,09,539/- since they were not returned, against which the assessee was aggrieved. IT(SS)A No.6 & 7/RJT/2022 47 68. The ld.counsel for the assessee contended that it is settled law that the issue of claim of set off of brought forward loss is to be examined in the year in which the set off is so claimed. This regard, IT(SS)A No.6 & 7/RJT/2022 48 we refer to the decision of Hon’ble Apex Court in the case of CIT Vs. Manmohan Das (Deceased), (1966) 59 ITR 699(SC). He also referred to the decision of the ITAT, Mumbai Bench ‘G’ in the case of Gajendra Kumar T. Agarwal Vs. ITO, (2011) 11 taxmann.com 231 (Mum). Reliance was also made to the decision of the ITAT, Delhi Bench in the case of Anant Raj Ltd. Vs. ACIT, ITA No.5169/Del/2017 and others order dated 11.5.2020. The ld.counsel for the assessee further stated that the benefit of set off of losses had been denied by the ld.CIT(A) for the reason that the assessee had not disclosed such loss in the return of income. He contended that the Hon’ble Gujarat High Court in the case of Kirit Dahyabhai Patel Vs. ACIT, (2017) 80 taxmann.com 162 (Guj) has held that in view of the specific provision of section 153A of the Act return filed in response to the notice under section 153A of the Act, is to be considered as return of income filed under section 139 of the Act. The ld.counsel for the assessee has also relied on the decision of the ITAT, Delhi Bench in the case of HBN Dairies & Allied Ltd. Vs. ACIT, (2018) 96 taxmann.com 353 (Del- Trib)(TM) for the proposition that the assessee’s claim of brought forward losses in search assessment was to be allowed. Copies of all the orders were placed before us. 69. We have heard both the parties. The assessee’s contention is that the assessed loss of immediately preceding year i.e. Asst.Year 2015-16 amounting to Rs.9,61,09,539/- be set off against the profits assessed for the impugned year amounting to Rs.12,69,69,992/- for Asst.Year 20016-17 and Rs.12,50,99,546/- for Asst.Year 2017-18. We are not agreeable with the same. It is an undisputed fact that the loss of the immediately preceding assessment year and the profits of the impugned assessment year were not returned to tax in the returns filed in IT(SS)A No.6 & 7/RJT/2022 49 response to the notice under section 153A of the Act. These losses/profits are assessed income of the assessee on the basis of incriminating material found during the search. The provision of law with regard to carry forward and set off of loss as contained in section1 39(3) of the Act is that only loss which are returned within the time allowed as per section 139(1) of the Act are allowed to be carried forward and set off against the income of the succeeding years. There is no dispute with respect to the above provision of law. As far as reliance of the assessee to decisions laying down the proposition that the return filed in response to the notice under section 153A of the Act are to be treated as that filed under section 139(1) of the Act (Kirit Dahyabhai Patel(supra),there is no denial or dispute with regard to the same also. But the said decision is of no help to the assessee, because the assessee has not claimed the loss in the return filed in response to the notice under section 153A of the Act, as noted above before us. Thus since the loss of the preceding year has not been returned to tax in the return filed in response to notice u/s 153A of the Act, the law does not allow benefit of set off of such losses against incomes of succeeding years. Such a proposition as canvassed by the Ld.Counsel for the assessee would result in honest assessees being placed in a disadvantageous position as compared to those who otherwise do not disclose correct incomes but it is discovered during search proceedings. As per the provisions of law it is only losses disclosed in returns filed within prescribed time which are allowed the benefit of being carried forward and set off against incomes of succeeding years. An honest assessee who otherwise discloses losses but not within IT(SS)A No.6 & 7/RJT/2022 50 prescribed time is therefore denied the benefit of carry forward and set off of the losses. If the proposition canvassed by the Ld.Counsel for the assessee is accepted then losses discovered during search, not otherwise disclosed in returns filed are to be allowed benefit of carry forward and set off. In short an unscrupulous assesses whose undisclosed economic activities are discovered during search will be in a beneficial position with regards to set off and carry forward of losses as opposed to an honest assessee . This surely cannot be the intention of law. The decision of the ITAT Delhi Bench in the case of HBN Dairies (supra) does not help the case of the assessee since in the said case losses claimed to be set off against profits were disclosed in the return filed u/s 153A 0f the Act. As for the other decisions relied upon by the ld.counsel for the assessee, they only lay down the proposition that the claim of set off of losses is to be examined in the year in which the set off is claimed. How these decisions are of any assistance to the assessee’s claim in the impugned year, we fail to understand, considering the fact that even as per the provision of law, the assessee is not eligible to claim the set off of losses since the losses were not returned in the return of income filed in response to the notice under section 153A of the Act. We, therefore, are in complete agreement with the ld.CIT(A) that the assessee is not entitled to any set off of loss brought forward from the preceding years and these contentions of the ld.counsel for the assessee is accordingly dismissed. 70. The last contention of the ld.counsel for the assessee before us was that the profits disclosed by the assessee in its return should be reduced from the alleged profits disclosed in the ledger found in the IT(SS)A No.6 & 7/RJT/2022 51 PDF for determining the undisclosed profits of the assessee for the impugned years. His contention was that there is no basis with the department to hold that the entire profits, as disclosed in the ledger was undisclosed. Therefore, the benefit of profits already disclosed by the assessee should be given to it. 71. Ld.DR on the other hand relied on the findings of the Ld.CIT(A) rejecting this contention of the assessee at para 39.8 (ii) and (iii)and (iv) as under: IT(SS)A No.6 & 7/RJT/2022 52 72. We have considered the argument of the Ld.Counsel for the assessee that profits already disclosed by the assessee be reduced from the profits assessed on the basis of alleged incriminating material found during search, and noting the findings of the Ld.CIT(A) IT(SS)A No.6 & 7/RJT/2022 53 while rejecting this plea of the assessee, which findings have remained uncontroverted before us, we find no merit in the plea of the assessee. The Ld.CIT(A) has noted pertinent facts while rejecting this contention. He has noted that the assessee has not produced single evidence to show that the data found during search included transactions accounted for by the assessee in its Books of accounts. On the contrary the Ld.CIT(A) found that the data was found by the AO to be a recording of only unaccounted transactions of the assessee reflected in vouchers and other documents found both physically with the assessee and scanned copies found in the digital data. 73. The Ld.CIT(A) also found that seized data revealing assets of the assessee were also found in the form of Balance sheets of the assessee pertaining to different years which reflected clearly the unaccounted profits earned by the assessee. He noted that the assets reflected therein were far less than that as per Books of accounts of the assessee. The above facts have remained uncontroverted before us. 74. In view of the same, we completely agree with the Ld.CIT(A) that the incriminating material reflected only the unaccounted profits of the assessee. There is no question therefore of reducing the unaccounted profits added to the income of the assessee with the profits disclosed and returned to tax by the assessee. This contention/ground raised by the assessee is also dismissed. 75. Ground No.4 & 5 and the additional grounds raised by the assessee are dismissed. IT(SS)A No.6 & 7/RJT/2022 54 76. In effect, both the appeals are dismissed. As a consequence, the stay petitions filed by the assessee do not survive, and the same are also dismissed. Order pronounced in the Court on 12 th June, 2024 at Ahmedabad. Sd/- Sd/- (T.R. SENTHIL KUMAR) JUDICIAL MEMBER (ANNAPURNA GUPTA) ACCOUNTANT MEMBER Ahmedabad,dated 12/06/2024