Appeal details
Counselvise Citation
[2024] 130 COUNSELVISE.COM (IT) 5573 (ITAT-RAJKOT)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 1 month(s) 12 day(s)
Appellant
Respondent
Appeal Type
Income Tax (Search & Seizure) Appeal
Pronouncement Date
18-08-2024
Appeal Filed By
Assessee
Order Result
PartlyAllowed
Bench Allotted
DB
Next Hearing Date
17-07-2024
Assessment Year
misc
Appeal Filed On
06-07-2023
Judgement Text
ITA No. 66/Rjt/2023& others Range Ceramic Pvt. Ltd. &Ors 1 IN THE INCOME TAX APPELLATE TRIBUNAL, RAJKOT BENCH, RAJKOT BEFORE DR. ARJUN LAL SAINI, ACCOUNTANT MEMBER SHRI DINESH MOHAN SINHA, JUDICIAL MEMBER (Physical Hearing) Sr. No. IT(SS)A No. A.Y. APPELLANT RESPONDENT 1. 66/Rjt/2023 2017-18 M/s. Range Ceramic Pvt. Ltd., Survey No. 211P1 & 211P2, At: Bela-Rangpar, Jetpar Road, Morbi-363642 PAN: AAGCR6625M The DCIT, Central Circle-2, Rajkot 2. 41/Rjt2023 2017-18 Ador Ceramic Pvt. Ltd. Survey No. 115/P, 8A, National Highway, B/h, Pengvin Ceramics, Sartanpur, Wankaner-363621 PAN: AAGCA8971R The ACIT/DCIT, Circle-2, Rajkot 3. 42/Rjt/2023 2018-19 Ador Ceramic Pvt. Ltd. Survey No. 115/P, 8A, National Highway, B/h, Pengvin Ceramics, Sartanpur, Wankaner-363621 PAN: AAGCA8971R The ACIT/DCIT, Circle-2, Rajkot 4. 43/Rjt/2023 2018-19 Lasa Cera Pvt. Ltd. Survey No. 258, Jetpar Road, At: Bela, Rajkot-363642 PAN: AACCL6726H The ACIT/DCIT, Circle-2, Rajkot 5. 67/Rjt/2023 2018-19 M/s. Range Ceramic Pvt. Ltd., Survey No. 211P1 & 211P2, At: Bela-Rangpar, Jetpar Road, Morbi-363642 PAN: AAGCR6625M The DCIT, Central Circle-2, Rajkot 6. 94/Rjt/2023 2018-19 M/s. Laxmi Plastic, 4/5 Lati Plot, Near Santosh Time, Thorala, Thorala, B.O. Rajkot PAN: AADFL4004C The DCIT, Central Circle-2, Rajkot 7. 95/Rjt/2023 2018-19 Shri VijaybhaiBhudarbhaiFefar, A6, Kudrat Anjani, Park, Ravapar Canal Road, Morbi, Rajkot-363641 PAN: AAVPF2925J The DCIT, Central Circle-2, Rajkot 8.. 211/Rjt/2023 2019-20 Ador Ceramic Pvt. Ltd. Survey No. 115/P, 8A, National Highway, B/h, Pengvin Ceramics, Sartanpur, Wankaner-363621 PAN: AAGCA8971R The ACIT/DCIT, Circle-2, Rajkot 9. 212/Rjt/2023 2019-20 Lasa Cera Pvt. Ltd. Survey No. 258, Jetpar Road, At: Bela, The ACIT/DCIT, Circle-2, Rajkot ITA No. 66/Rjt/2023& others Range Ceramic Pvt. Ltd. &Ors 2 Rajkot-363642 PAN: AACCL6726H 10 214/Rjt/2023 2019-20 Dovel Ceramic, Matel Road, 8/A National Highway, At. Matel, Wakaner-363621 PAN: AALFD9717G The ACIT/DCIT, Circle-2, Rajkot 11 216/Rjt/2023 2019-20 Admin Vitrified Pvt. Ltd. Survey No. 506, Opp. FlavourGranito, Khokhara Road, At: Bela, Morbi-363642 PAN: AAPCA4252N The ACIT/DCIT, Circle-2, Rajkot 12 217/Rjt/2023 2019-20 Success Ceramic Pvt. Ltd. Survey No. 163/P, Opp. Ganga Ceramic, 8-A, National Highway, Wankaner-363622 PAN: AAPCS9226E The ACIT/DCIT, Circle-2, Rajkot 13 231/Rjt/2023 2019-20 M/s. Range Ceramic Pvt. Ltd., Survey No. 211P1 & 211P2, At: Bela-Rangpar, Jetpar Road, Morbi-363642 PAN: AAGCR6625M The DCIT, Central Circle-2, Rajkot 14 232/Rjt/2023 2019-20 Ronald Ceramic, Survey No. 264, At-Rangpar, Jetpar Road Morbi-363642 PAN: AAPFR4777A The DCIT, Central Circle-2, Rajkot 15 233/Rjt/2023 2019-20 Winsun Ceramic Pvt. Ltd., Survey No. 661P3, At: Rangpar, Jetpar Road, Morbi-363642 PAN: AABCW5044N The DCIT, Central Circle-2, Rajkot 16 234/Rjt/2023 2019-20 Legend Ceramic Pvt. Ltd. Survey No. 250/P/3, B/h, Topland Ceramic, Jetpar Road, Bela-Rangpar, Morbi-363642 PAN: AACCL0599E The DCIT, Central Circle-2, Rajkot 17 235/Rjt/2023 2019-20 Lorians Ceramics LLP, Shop No. 12 & 13, Second Floor, Laxmi Plaza, Sanala Road, Morbi, Gujarat-363641 PAN: AAHFL1151A The DCIT, Central Circle-2, Rajkot 18 236/Rjt/2023 2019-20 Livanto Ceramic Pvt. Ltd., Survey N. 940, B/H. Lexus Vitrified, Lakhdhirpur Road, Ghuntu, Morbi, Gujarat-363642 PAN: AABCL9543K The DCIT, Central Circle-2, Rajkot ITA No. 66/Rjt/2023& others Range Ceramic Pvt. Ltd. &Ors 3 19 313/Rjt/2023 2019-20 Shailesh Kanjibhai Mendpara, At- Pithad,Ta-Jodhiya, Dist-Jamnagar, Jamnagar PAN: APOPM5059E The DCIT, Central Circle-2, Rajkot 20 315/Rjt/2023 2019-20 Flecto Ceramic Pvt. Ltd. Survey No. 291/P1, 2, Opp. Benten Ceramic, At-Rangpar, Morbi-363642 PAN: AABCF7714L The DCIT, Central Circle-2, Rajkot 21 352/Rjt/2023 2019-20 Lucaso Ceramic Pvt. Ltd., Survey No. 323, P1 & P2, At- Rangpur, Taluka-Morbi, Rangpur, Gujarat-363642 PAN: AACCL6627R The DCIT, Central Circle-2, Rajkot 22 448/Rjt/2023 2019-20 Laxmi Plastic, 4/5, Lati Plot Near Santosh Time, Morbi, Gujarat-363641 PAN: AADFL4004C The DCIT, Central Circle-2, Rajkot 23 449/Rjt/2023 2019-20 VijaybhaiBhudarbhaiFefar, A-6, Kudrat Anjani Park, Ravapar, Canal Road, Morbi-363641 PAN: AAVPF2925J The DCIT, Central Circle-2, Rajkot 24 452/Rjt/2023 2019-20 SanketVaghjibhaiBhalodiya, Chitrakut Society, Sanala Road, Morbi, Gujarat-363641 PAN: AXWPB6790M The DCIT, Central Circle-2, Rajkot 25 455/Rjt/2023 2019-20 Admark Ceramic Industries, Survey No. 330/P and 331 Jetpar Road, Nr. Bela Village, Morbi-363642 PAN: AAXFA6653N The DCIT, Central Circle-2, Rajkot Sr. No. ITA No. A.Y. APPELLANT RESPONDENT 26 49/Rjt/2023 2018-19 The DCIT, Central Circle-2, Rajkot Hiren Khimjibhai Kalariya,102, Jadabapa, Vari Sheri, Chamapar, Morbi, Gujarat-363642 PAN: CVFPK2608L 27 50/Rjt/2023 2019-20 The DCIT, Central Circle-2, Rajkot Hiren Khimjibhai Kalariya,102, Jadabapa, Vari Sheri, Chamapar, Morbi, Gujarat-363642 PAN: CVFPK2608L Assessee by: Shri Mehul Ranpura,& Shri Vimal Dasai, AR Revenue by: Shri Shramdeep Sinha, CIT-DR Date of hearing: 18.07.2024 Date of pronouncement: 19.08.2024 ITA No. 66/Rjt/2023& others Range Ceramic Pvt. Ltd. &Ors 4 आदेश/ORDER PER BENCH: This is the bunch of twenty-seven appeals, filed by the different assessees, pertaining to different assessment years (AYs), are directed against separate orders passed by the Commissioner of Income Tax (Appeals), [in short ‘the Ld. CIT(A)], which in turn arise out of separate assessment orders passed by the Assessing Officer under section 153C/143(3) and 153A of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’). 2. Since, the issue involved in all these appeals, are common and identical, therefore all these appeals have been clubbed and heard together and a consolidated order is being passed for the sake of convenience and brevity. Out of these 27 appeals, 25 appeals pertain to assessment framed by the assessing officer under section 153C/ 143(3) of the Act, however, 2 appeals at serial Nos. 26 and 27 of above title pertain to assessment framed by the assessing officer, under section 153A read with section 143(3) of the Act. 3. First, we shall adjudicate appeals at serial Nos.1 to 25 of above title, which pertain to assessment framed by the assessing officer, under section 153C/ 143(3) of the Act. The facts, as well as grounds narrated in IT(SS)A No.66/Rjt/2023 for Assessment Year (AY).2017-18, in the case of M/s.Range Ceramics Private Limited, have been taken into consideration for deciding above these 25 appeals en masse. 4. The grounds of appeal raised by the assessee, as per ‘lead case’ in IT(SS)A No.66/Rjt/2023, for assessment year (AY) 2017-18, are as follows: “1. The grounds of appeal mentioned hereunder are without prejudice to one another. ITA No. 66/Rjt/2023& others Range Ceramic Pvt. Ltd. &Ors 5 2. The learned Commissioner of Income-tax (Appeals)-11, Ahmedabad [CIT(A)] erred on facts as also in law in confirming initiation of action u/s 153C of the Act. That on fact as also in law, the proceedings initiated u/s 153C of the Act is invalid and without jurisdiction and assessment finalized on such invalid notice deserves to be quashed and may kindly be quashed. 3. The Ld. CIT(A) erred on facts as also in law in confirming the addition to the extent of Rs.36,080/- out of the addition made by assessing officer of Rs.41,000/-. The addition has been made on the alleged ground of unaccounted profit estimated on the alleged unaccounted sales of Rs.1,64,000/-. The addition confirmed by CIT(A) is bad in law as also on facts and therefore the same may kindly be deleted. 4. The ld. CIT(A) erred on facts as also in law in partly confirming the addition made by assessing officer without allowing the assessee an opportunity of cross- examination to third party. 5. The ld. CIT(A) erred on facts as also in law in disallowing the carry forward loss of Rs.2,31,64,078/- on the alleged ground of excess loss availed by the assessee. The disallowance of loss is bad in law as also on facts therefore the disallowance may kindly be deleted. 6. Your Honour’s, assessee craves leave to add, to amend, alter, or withdraw any or more grounds of appeal on or before the hearing of appeal.” Facts of the assessee`s case 5.The relevant material facts, as culled out from the material on record, are as follows.The assessee, before us is a Private Limited Company and had filed his return of income for the year under consideration on 22.09.2017, declaring total income at Rs.0/-. The assessee is engaged in the business of manufacturing and supply of tiles. A search action u/s 132 was carried out and warrant u/s 132(1) of the Act, was executed in the case of Hiren Khimjibhai Kalariya. This search was conducted, along with the group cases of “Coral Group of Morbi” which was commenced on 03.01.2019 and was finally concluded on 02.03.2019 in all the group cases. From the premises of Shri Hiren Khimjibhai Kalariya, certain incriminating documents/assets were found and seized and statement on oath was also recorded during the search and post search enquiries. During the course of search proceedings certain incriminating documents were found and seized. On analysis of these documents it has been established by the assessing ITA No. 66/Rjt/2023& others Range Ceramic Pvt. Ltd. &Ors 6 officer that the assessee has executed certain transaction with Hiren Khimjibhai Kalariya. During the course of search at the residential premises of Shri Hiren Kalariya, various diaries and loose paper sheets containing details of various cash transactions, pertaining to group companies and with other entities were found and seized. Further, in his statement recorded u/s 132(4) of the Income- tax Act, he has explained detailed modus operandi adopted by him to assist the group companies and other persons in collection of proceeds of unaccounted sales. He stated that initially the money is deposited by the customers of group companies and other persons in various designated bank accounts at multiple locations as per the business practice adopted by the group companies, these accounts are being maintained by him or his accomplice and later on, the money so deposited by customers of group companies are withdrawn and handed over to the concerned persons of the group companies and other persons. He also stated that if the cash received is of any other company / concern, he calls the concerned person of the company and hands over the cash to him. He also keeps day to day record of such transactions in manual form (dairies and loose paper file) at his business/ residential premise which were found and seized as annexure A-1 to A-7. 6. The assessing officer observed that Shri Hiren Khimjibhai Kalariya, has categorically stated in his statement that he has made dealings of cash with different ceramic persons/entities of Morbi and also stated the manner in which he recorded these transactions in the diaries/loose papers maintained by him which has been seized by the department. The details/data mentioned in these seized materials (Annexure A-1 to A-7) were decoded. On analysis of the seized data it was found by the assessing officer, that assessee is also one of the beneficiaries of such transaction adopting such modus operandi. ITA No. 66/Rjt/2023& others Range Ceramic Pvt. Ltd. &Ors 7 7. The assessing officer noted that as per the amended section 153C(1)(b) of the Act, where the Assessing Officer is satisfied that any books of account or documents, seized or requisitioned, pertains or pertain to, or any information contained therein, relates to a person other than the person referred to in section 153A, then the proceedings u/s 153C shall be initiated. In the present case, it can be said that the incriminating digital data / documents / books of accounts found & seized from the residential premise of Shri Hiren Khimjibhai Kalariya (covered u/s. 153A of the I. T. Act) contained information pertaining / relating to assessee and the same is having bearing on determination of total income relevant to the period AY. 2013-14 to A.Y. 2018-19 and 2019-20. Therefore, the assessing officer noted that provisions of section 153C of the Act, are clearly applicable in the case of assessee. During the course of assessment proceeding u/s 153A in the case of Hiren Khimjibhai Kalriya, satisfaction note of the assessee was recorded considering all the facts of the case. Again a satisfaction also recorded in accordance with the provision of the Income Tax Act, 1961 and notice u/s 153C of the Act was issued to the assessee on 24.03.2021. In response, the assessee has filed his return of income at Rs.0/-, on 05.04.2021 and assessee was requested to collect copy of the satisfaction note and Seized documents through ITBA. On receipt of notice u/s 153C of the Act, the Assessee has filed objection against initiation of proceeding u/s 153C of the I.T. Act in his case. The assessing officer had disposed of the objection raised by the assessee by passing speaking order. The operating part of said speaking order is as under: “2. Vide afore-said letter, you have objected to issue of notice u/s.153C of the Act, which is disused as under: In this regard it is to inform you that- In your objection, you have asked for the seized material and the statement of Hiren Kalariya (Shroff).In this regard, it is submitted that a letter already issued to you on 05/01/2022 to collect incriminating documents/ other relevant documents, same. Therefore, you are once again requested to collect copy of satisfaction note, copy of ITA No. 66/Rjt/2023& others Range Ceramic Pvt. Ltd. &Ors 8 relevant incriminating documents and copy of statement of the person from the data has been seized. The satisfaction note was recorded considering all the facts of the case which is discussed in detail in the satisfaction note and after satisfying themselves by the informing officer and the jurisdiction officer notice u/s 153C has been issued to initiate the proceedings for completion of the assessment. Fact of the case is that Search action named "Operation White Flower" u/s. 132 was conducted on 03.01.2019 on the 'Coral Group of Companies' and its various associated concerns and persons along with at the premises of Shri Hiren Khimjibhai Kalariya. During the course of search at the residential premises of Shri Hiren Khimjibhai Kalariya (Shroff), his statement was recorded u/s 132(4) of the Income-tax Act. In his statement, he has explained the detailed modus operand/ adopted by him to assist the various companies in collection of proceeds of unaccounted sales. He has stated that initially the money is deposited by the customers of concerned companies in various designated bank accounts, at multiple locations as per the business practice adopted by the group companies, these accounts are being maintained by him or his accomplice and later on, the money so deposited by customers of various companies are withdrawn and handed over to the key person of the concerned companies. During the course of search action at his residential premises, various incriminating documents are found and seized which was inventoried as per Annexure A/I to A/7. Further, on perusing of the seized material and statement given by Hiren K Kalariya, it is revealed that Shri Hiren K Kalahya assist to you in collection of proceedings of unaccounted sales and the cash deposited by the customer are withdrawn and handed over to you and it is also worthwhile mentioned during the course of search assessment u/s. 153A of the Act, Shri Hiren Kalariya has also offered commission income on such amount, therefore, it is Cleary established that you have been received unaccounted cash which is discussed in details in satisfaction note. As per amended section 153C(1)(b), where the Assessing Officer is satisfied that any books of account or documents, seized or requisitioned, pertains or pertain to, or any information contained therein, relates to a person other than the person referred to in section 153A, then the proceedings u/s 153C shall be initiated. In the present case, it can be said that the incriminating digital data / documents / books of accounts found & seized from the residential premise of Shri Hiren Kalariya. (covered u/s 153A of the I. T. Act) contained information pertaining / relating to you). On the basis of the findings of the seized and statement recorded conclusion drawn is elaborately discussed in the satisfaction note. Therefore there was sufficient information /basis to issue notice and the assessment u/s 153C in the case of assessee.” 8.In this regard, the assessing officer, relied on the following decisions/ observations made by the different courts, as discussed below: ITA No. 66/Rjt/2023& others Range Ceramic Pvt. Ltd. &Ors 9 1. Section 153C of the Income-tax Act, 1961 - Search and seizure -Assessment of any other person (Conditions precedent) - A search operation was conducted at premises of 'K' wherein documents and incriminating materials belonging to assessee surfaced - Assessing Officer of searched person recorded his satisfaction that such documents belonged to assessee - Accordingly, Assessing Officer of assessee issued notice calling upon assessee to furnish return of income for assessment year 2003-04 - Assessee challenged said notice alleging that satisfaction as per section 153C was not recorded by Assessing Officer of searched person - It was found that Assessing Officer of searched person recorded that seized document was a copy of ledger of books of account of assessee-company evidencing certain cheque payments as well as cash payments by assessee to a company - Whether, on facts, there was prima facie material to suggest that satisfaction under section 153C was recorded and, thus, notice issued to assessee was justified - Held, yes [Paras 7 and 8] [In favour of revenue] [2016] 76 taxmann.com 311(Gujarat) HIGH COURT OF GUJARAT Rajesh Sunderdas Vaswani vs. Assistant Commissioner of Income-tax SPECIAL CIVIL APPLICATION NOS. 15980 & 15985 OF 2010 OCTOBER 10, 2016 2. Section 153A, read with section 153C, of the Income-tax Act, 1961 - Search and seizure - Assessment in case of Petitioner challenged constitutional validity of sections 153A and 153C on ground that distinguishable categories of persons mentioned in these two provisions are treated on same basis for purposes of assessing or reassessing their income - Whether fact that procedure followed in respect of two categories of persons mentioned in sections 153A and 153C overlaps or is similar is hardly of any consequence, as both have to be treated in accordance with principles of natural justice - Held, yes - Whether further, essentially both categories of persons mentioned in sections 153A and 153C are same inasmuch as their books of account, assets, documents, etc., are seized or requisitioned, though from different locations and, therefore, there is no hostile discrimination between two categories of persons - Held, yes - Whether therefore, writ petition was liable to be dismissed - Held, yes [2008] 171 Taxman 194 (Delhi) HIGH COURT OF DELHI Saraya Industries Ltd. vs. Union of India WP (C) NO. 1604 OF 2008 FEBRUARY 27, 2008 9. The assessee submitted, before the assessing officer that where in respect of any assessment year, no incriminating documents were found, the initiation of proceedings u/s 153C of the Act, for that year will be invalid. In respect of the same, assessee has submitted many case laws, before the assessing officer. However, the assessing officer has rejected the contention of the assessee and noted that in section 153C of the Income Tax Act, which says that if Assessing Officer is satisfied that the books of account or documents or assets seized or requisitioned have a bearing on the determination of the total income, of such other person for six assessment years immediately preceding the assessment ITA No. 66/Rjt/2023& others Range Ceramic Pvt. Ltd. &Ors 10 year relevant to the previous year in which search is conducted or requisition is made and for the relevant assessment year or years referred to in sub-section (1) of section 153A of the Act. Hence, in assessee`s case the notice u/s. 153C for the assessment years (A. Y.) 2013-14 to A. Y. 2019-20 is rightly issued. Further, the assessing officer has also referred, the provisions of section 153C of the IT Act, which are reproduced below: “(1) Notwithstanding anything contained in section 139, section 147, section 148 , section 149, section 151 and section 153, where the Assessing Officer is satisfied that,— (a) any money, bullion, jewellery or other valuable article or thing, seized or requisitioned, belongs to; or (b) any books of account or documents, seized or requisitioned, pertains or pertain to, or any information contained therein, relates to, a person other than the person referred to in section 153A, then, the books of account or documents or assets, seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against each such other person and issue notice and assess or reassess the income of the other person in accordance with the provisions of section 153A, if, that Assessing Officer is satisfied that the books of account or documents or assets seized or requisitioned have a bearing on the determination of the total income of such other person for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made and for the relevant assessment year or years referred to in sub-section (1) of section 153A: Provided that in case of such other person, the reference to the date of initiation of the search under section 132 or making of requisition under section 132A in the second proviso to sub- section (1) of section 153A shall be construed as reference to the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person” 10. The assessing officer observed that with regard to the facts and merits of the case on which notice issued for assessment proceedings u/s 153C, in the case of assessee, the same has been examined by the assessing officer, during the course of assessment proceeding. Therefore, the assessing officer did not find any merits in the contentions raised by the assessee. Subsequently, notice u/s 142(1), dated 20.12.2021of the Act along with a questionnaire requesting to furnish the compliances in the matter, as required, was issued electronically, through e- proceeding facility of ITBA. The Assessee has complied with the notices/questionnaire. The submission made by the assessee has been duly examined, by the assessing officer. From the data collected during search proceedings, and on analysis of the searched data it was noticed by the assessing ITA No. 66/Rjt/2023& others Range Ceramic Pvt. Ltd. &Ors 11 officer that assessee has executed transaction worth of Rs. 1,64,000/- in cash by adopting the modus operandi as discussed above with Shri Hiren Kalariya. In this regard the assessee vide notices/questionnaire, of the assessing officer, was specially asked to furnish his comments/explanation on details along with supporting evidence and was also asked to state whether the said receipts have been offered for taxation or not? In this regard, the assessee has simply denied the above facts and stated that he had never made any transaction with Hiren Khimjibhai Kalariya. Further, a show cause notice was also issued to the assessee informing the above facts and seeking explain as to why the amount of unaccounted sales of Rs. 1,64,000/- on account of unexplained money u/s 69A of the Act, should not be added to his total income for the year under consideration. 11.In response to the notice of the assessing officer, the assessee submitted its reply before the assessing officer, which is reproduced below: “1. At the outset, it is submitted that the assessment proceedings initiated u/s 153Cof the Act is totally invalid as there is no-valid satisfaction has been recorded by the assessing officer of "searched person" as well as assessing officer of "other person". In this context, we have raised detailed objections vide letter dated 06.12.2021, but the same was summarily rejected. Therefore, we reiterate the objections against validity of the assessment proceedings initiated u/s 153C of the Act and consequently, object the show cause notice issued in such invalid initiation of the assessment proceedings. 2. Furthermore, in continuation of objections raised earlier, it is also submitted alleged document stated to have been seized during the course of search in the case of Shri Hiren Khimjibhai Kalariya is neither belonging to or pertaining to us and as such, information contained therein is not relates to us. Therefore, primary conditions for triggering the provision of Section 153C of the Act are not fulfilled and hence, assessment proceeding initiated is completely misplaced. 3. On verification of alleged seized documents provided to us, it is seen that nowhere any name of our company is mentioned in such document. It is also seen that alleged unaccounted cash receipts quantified by your good self is on the basis of name "Harshad" mentioned against certain entries in seized documents. In this connection, it is submitted that company's name is not "Harshad". Therefore, it is not understood on what basis the assessment proceeding u/s 153C of the Act has been initiated in our case. ITA No. 66/Rjt/2023& others Range Ceramic Pvt. Ltd. &Ors 12 Reliance placed on the decision of Hon'ble ITAT, Rajkot Bench, Rajkot in IT(SS)A No. 15/Rjt/2018 & Others in the case of DCIT, Central Circle-1, Rajkot vs. Late Pravinsinh N. Zala, wherein, it is observed as under: “6. At the outset the learned AR before us objected on the initiation of the proceedings under section 153C of the Act, by contending that there is no name, address, phone numbers PAN, banking details or any other specific detail related to assessee was found from the seized documents. The learned AR in support of his contention drew our attention on page 21 of the paper book where the seized material was placed. The learned AR further submitted that there may be some reference in the seized documents about the assessee but that is not sufficient to initiate the proceedings under section 153C of the Act, until and unless there is some nexuses with the assessee based on cogent materials. As such the assessee had no connection of whatsoever with the company namely M/s. Amidhara Developers Pvt. Ltd. (in short ADPL) where the search was conducted. Neither the assessee nor persons closely connected with him were having any dealing of whatsoever with such company. Accordingly, the documents seized from the premises of the search party do not belong to the assessee. The learned AR also contended that the impugned seized document was made on 14- 4-2014 whereas the assessee has purchased the impugned survey numbers on 18-12- 2013 and 3-2-2014. Therefore, there cannot be any reference on such seized documents for the year under consideration. 8. ........From the above it is transpired that the document found during the search at the place of searched party must belong to the assessee for initiating the proceedings under section 153C of the Act. The word belong used in section 153C requires that there has to be control and possession of the assessee (person other than searched person) on such document even though the assessee is not legal owner. As such the document found in the case on hand from the premises of the 3rd party, the assessee had no control of whatsoever on such document. Therefore, in our considered view such document cannot be termed as belonging to the assessee. Once a document does not belong to the assessee as mandated under the provisions of section 153C of the Act, prior to the amendment, does not authorize the assessing officer to initiate the proceedings against the assessee. In this connection we draw support and guidance from the judgment of Hon'ble Delhi High Court in the case of Pepsico India Holding (P.) Ltd. v. ACIT (2014) 370ITR 295 (Del) wherein it was observed that: ‘The assessing officers should not confuse the expression 'belongs to' with the expressions 'relates to' or 'refers to'. A registered sale deed, for example, 'belongs to' the purchaser of the property although it obviously 'relates to' or 'refers to' the vendor. In this example if the purchaser's, premises are searched and the registered sale deed is seized, it cannot be said that it 'belongs to' the vendor just because his name is mentioned in the document. In the converse case if the vendor's premises are searched and a copy of the sale deed is seized, it cannot be said that the said copy ‘belongs to’ the purchaser just because it refers to him and he (the purchaser) holds the original sale deed. In this light, it is obvious that none of the three sets of documents - copies of preference shares, unsigned leaves of cheque books and the copy of the supply and loan agreement -can be said to 'belong to' the petitioner.' ITA No. 66/Rjt/2023& others Range Ceramic Pvt. Ltd. &Ors 13 We also find that the Hon'ble Gujarat High Court in the case of PCIT v. Himanshu Chandulal Patel (2019) 109 taxmann.com 202 (Guj) after making a reference to the judgment of Hon'ble Delhi High Court in case of Pepsico India Holding (P.) Ltd. (supra) as discussed above has held as under: 'In the instant case, the documents, which were seized during the course of search, there may be some reference of the assessee, but that it-self would not be sufficient. It is necessary to show some nexus on the basis of some cogent materials between the documents seized and the assessee.' From the above, it can be concluded that there cannot be any question of initiating the proceedings under section 153C of the Act, until and unless the documents found during the course of search from the premises of the 3rd party belongs to the assessee." 4. Though, the above-cited judgment of Hon'ble ITAT and relied upon decisions of Hon'ble High Courts pertains to pre-amended provision of Section 153C of the Act, the mute question is that whether the entries in the documents seized from third party, i.e., Shri Hiren Kalariya containing name "Harshad" can be considered as "belongs to" or "pertains to" the assessee? The obvious answer to the question is "NO" in as much as that the name in the seized documents is not anyway or evenly remotely related or connected to the assessee. 5. Without prejudice to the above, on verification of 'the satisfaction note as well as show cause notice issued, it is seen that assessment proceeding was initiated and the addition proposed on the basis of certain material stated to have been seized and the alleged statement in this regard recorded from Shri Hirenbhai Khimjibhai Kalariya (Shroff). Itis alleged that such seized data as well as statement alleged that we have received unaccounted cash of Rs.1,64,000/- during the year under consideration. 6. In connection with the above, it is submitted that the aforesaid observation / allegation in the satisfaction notes as well as in show cause notice is totally incorrect and devoid of facts. In fact, on verification of the materials stated to be seized from Shri Hirenbhai Khimjibhai Kalariya, it is seen that there no reference of name of company anywhere and specifically against the transaction alleged as pertaining to us for initiating assessment proceedings in our case. Therefore, it is not understood as to how the department has derived its finding that we have received unaccounted cash. 7. From the satisfaction note and the statements recorded in the case of Hirenbhai Khimjibhai Kalariya u/s 132(4) as also that recorded in post search proceedings and provided to us, it is seen that the satisfaction has been recorded on the basis of the statements only, which can by no stretch of imagination can be said to be incriminating materials as held by Hon'ble Supreme Court of India in the case of PCIT Vs. Anand Kumar Jain [2021] 133 taxmann.com 289 (SC) wherein it has been held that "Notice issued in SLP against order of High Court that in absence of incriminating material found during search, assessment made under section 153A on basis of statement recorded under section 132(4) of a third person, without providing an opportunity to cross-examine witness and without following mandatory procedure under section 153C, was not justified". ITA No. 66/Rjt/2023& others Range Ceramic Pvt. Ltd. &Ors 14 8. Further, on verification of the alleged seized data provided to us, it is seen that such data has not been signed or in any way authenticated by us or other relevant persons. Additionally, the name written into the seized data is "Harshad", which is not at all resemble with name of our company. Even otherwise, if there is any name which resembles with the name of director or key person written in seized data then also in the absence of any corroborative evidence and without establishing, any live link, no adverse inference should be drawn in our case because there are so many people is residing in Morbi suburbs having the similar name. Therefore, jurisdiction u/s 153C of the Act assumed in our case is totally misplaced and proceeding initiated is vehemently objected. 9. Furthermore, it is submitted that allegation has been made in our case and adverse inference has been drawn based on the impugned statement made by Shri Hirenbhai Khimjibhai Kalariya without providing cross-examination and cross confrontation is gross violation of principle of natural justice and proceeding is bad in law. In this connection, we have repetitive requested to provide cross-examination based on which adverse inference has been drawn in our case. However, nothing has been heard in this regard till date. Even otherwise, statement recorded from the searched person may bind on him, but such statement cannot be binding on us. Therefore, entire assessment proceeding initiated and addition proposed without allowing opportunity to cross-examine the parties from whose-possession alleged documents / data were seized is violative of principle of natural justice. As held by Hon'ble Supreme Court in the case of Andaman Timber Industries vs. CIT in Civil Appeal No. 4228 of 2006 Statements recorded from third party behind the back and without providing an opportunity of cross-examination is having no evidentiary value. 10. It needs to mention that the provision of Section 132(4A) and Section 292C of the Act creates deeming fiction on the assessee subjected to search, wherein it may be presumed that any such document found during the course of search from the possession or control of person searched belongs to such person. However, in the case under consideration, it is an undisputed fact that the so-called documents / data has not been found from the possession of assessee, but the same were found from the possession of third party. Therefore, noting made in such document / data do not present a preponderance of probabilities so as to support the allegation of receipt of unexplained cash in the case of the assessee. 11. Having regards to the fact that assessee has not received any unaccounted cash as alleged, any action on the basis of so-called data / document found from the third- party premises would be based on the assumption, surmises and conjectures. Reliance is placed on the following decisions: Hon'ble Supreme Court of India in the case of UOI vs. Playworld Electronics Pvt. Ltd. & Ors. 1990 AIR 202, wherein, it is observed "...Even a great deal of suspicion, not possible to hold otherwise without an evidence" Hon'ble Supreme Court of India in the case of Raj Kumar Singh vs. State of Rajasthan in the Criminal Appeal No. 931-932 of 2009 observed: "Suspicion, however grave it may be, cannot take the place of proof, and there is a large difference between something that 'may be' proved and 'will be- proved'. In a ITA No. 66/Rjt/2023& others Range Ceramic Pvt. Ltd. &Ors 15 criminal trial, suspicion no matter how strong, cannot and must not be permitted to take place of proof. This is for the reason that the mental distance between may be' and must be' is quite large and divides vague conjectures from sure conclusions The large distance between 'may be' true and 'must be' true, must be covered by way of clear, cogent and unimpeachable evidence produced by the prosecution, before an accused is condemned as a convict, and the basic and golden rule must be applied. In such cases, while keeping in mind the distance between 'may be' true and 'must be' true, the court must maintain the vital distance between conjectures and sure conclusions to be arrived at, on the touchstone of dispassionate judicial scrutiny based upon a complete and comprehensive appreciation of all features of the case, as well as the quality and credibility of the evidence brought on record. The court must ensure, that miscarriage of justice is avoided and if the facts and circumstances of a case so demand, then the benefit of doubt must be given to the accused, keeping in mind that a reasonable doubt is not an imaginary, trivial or a merely probable doubt, but a fair doubt that is based upon reason and common sense". Hon'ble High Court of Gujarat in the case of DCIT vs. Prarthana Construction Pvt. Ltd. in Tax Appeal No. 79 of 2000 wherein it has been held that the Revenue would not be justified in resting its case on the loose papers and documents found from the residence of third party even if such documents contain narration of transaction with the assessee. 12. Therefore, in absence of any corroborative evidences or any nexus or live link in support of the so-called documents seized from the possession of third party, no addition could have been made in the case of the assessee. Reliance is placed on the decision of Hon'ble Jurisdictional-High Court in the case of Pr. CIT vs. Himanshu Chandulal Patel in Tax Appeal No. 342/2019, wherein, the High Court has endorsed the view taken by ITAT as well as CIT(A) by relying on the decision of Delhi High Court in the case of Pepsi Foods Pvt. Ltd. (2015) 231 Taxman 58 (Delhi). In this case, Hon'ble Jurisdictional High Court opined that" It appears that the CIT, Ahmedabad by relying on the Delhi High Court decision in the case of Pepsi Foods Private Limited took the view that the satisfaction recorded by the Assessing Officer was not sufficient enough to proceed against the assessee by issuing notice under Section 153C of the Act. The CIT, Ahmedabad relied on the presumption under Section 292C(1)(i) of the Act, which provides that the document which is recovered from a person who was searched, would be belonging to that person. The CIT, Ahmedabad took the view there must be cogent and tangible material available with the Assessing Officer before he arrives at a satisfaction that the seized document did not belong to the searched person, but to someone else and such satisfaction cannot be on the basis of surmises and conjectures. Reliance is also placed on the decision of Hon'ble Apex Court of India in the case of CIT vs. Sunita Dhhadda (2018) 100 taxmann.com 526 (SC) dismissing the SLP filed by revenue against decision of Hon'ble High Court of Rajasthan holding that If assessing officer wants to reply upon documents found with third parties, the presumption u/s 292C against assessee is not available. As per the principles of natural justice, the assessing officer is bound to provide the evidence to the assessee& grant an opportunity to cross-examination. Secondary evidences cannot be relied on as if neither the person who prepared the documents nor the witnesses are produced. The violation of the natural justice renders the assessment null and void. The department cannot be given a second chance. ITA No. 66/Rjt/2023& others Range Ceramic Pvt. Ltd. &Ors 16 13. As regard the statement recorded from Shri Hiren Khimjibhai Kalariya (Shroff), it is submitted that statement recorded from third person is not binding on me and I vehemently object the allegations / averments put forth in the show-cause notice on the basis of such statements. It is also a well settled proposition of law that no addition could have been made on the basis of documents or data seized from the premises of third party or statements recorded from third party in absence of any other corroborative evidences or cross-examination of witness. Reliance is placed on some of the decisions as under: Hon'ble High Court of Gujarat in the case of ITO vs. Bharat A. Mehta (2015) 60 taxmann.com 31(Gujarat) had endorsed the view taken by Hon'ble ITAT, Ahmedabad Bench 'B' in (2001) 116 Taxman 301 (And) as under: The assessee's case that he paid only sale consideration of Rs.6,12,000/- was further corroborated by documentary evidence. The weighty evidence collected otherwise and not in presence of the assessee and which did not measure to the requirement of law was hardly of any avail to the revenue as it did not establish the case against the assessee. Having regard to all the circumstances mentioned above, it was to be held that addition of 'on-money' in the case of the assessee was unjustified. The addition of Rs.5,22,500 was, accordingly, directed to be deleted. Hon'ble ITAT, "G" Bench, 3534/Mum/2019.Mumbai in the case of JCIT (OSD) vs. Sanjay V. Parmar in ITA No.3534/Mum/2019. 13. .....When no material has been found that assessee has made any booking for the flat, a mere entry in a pen drive of a third party cannot ipso facto fasten the liability of on money transaction upon the assessee without further corroborative material brought on record. Hon’ble ITAT, “D" Bench, Mumbai in the case of DCIT vs. Shri Manoj M. Desai in ITA No.6301/Mum/2018 15. Hence in our considered opinion on the facts and circumstances of the case when the addition is solely based upon builder's employee statement, which has been retracted and without any corroborative material brought on record, the same is not sustainable. The case laws cited above duly support this proposition. As already noted above the assessing officer having not referred the matter to the DVO for valuation has committed a fatal error Hon'ble ITAT, "F" Bench, Mumbai in the case of ITO vs. Jayesh Kewalchand in ITA No. 5640/Mum/2017 8.......The assessing officer has made additions u/s 69A of the I.T. Act, 1961 towards purported cash payment of Rs. 1 crore to M/s Nish developers P. Ltd. for purchase of flats. The assessing officer has relied upon information received from DDIT (Inv.) as per which the CEO and trusted employee of M/s Nish Developers P. Ltd., in the statement recorded during search proceedings have admitted the fact of receiving cash for booking of flats. Except this, the assessing officer has not carried out any ITA No. 66/Rjt/2023& others Range Ceramic Pvt. Ltd. &Ors 17 independent enquiry to find out the truth in light of statement recorded from CEO of M/s. Nish Developers P. Ltd towards cash payment made for bookings flats. On the other hand, the assessee has filed an agreement between the parties as per which the agreed price for said flat was at Rs.2,75,00,000/-. The assessee has also filed copy of purchase deed which was executed on 24/12/2013 and market value of the said flat has been determined by the Registrar at Rs.2,72,20,000/- for the purpose of stamp duty. When the market value of the flat which was agreed to be purchased in 2010 for a purchase of price Rs.2,75,00,000/- is determined after more than three years by the Sub Registrar at Rs.2,72,20,000/-, there is no reason for the assessing officer to make additions towards alleged cash payment only on the basis statement of some persons, more particularly when the persons who gave such statements have been subsequently retracted statement by filing a sworn affidavit. The Ld. CIT(A) after considering relevant facts and also by following the decision of Hon'ble Supreme Court in the case of Shri Kishanchand Cheilaram Vs. CIT (1980) (125 ITR 730) held that the assessing officer has made additions without conducting any independent enquiry and solely on the basis of information received from DDIT (Inv.) without there being any further evidences to support his findings that a sum of Rs. 100 Lacs alleged to have been paid in cash by the assessee. We do not find any error in the findings of CIT(A). Hence, we are inclined to uphold findings of the CIT(A) and dismissed the appeal filed by the revenue. Hon'ble High Court of Gujarat' in the case of ACIT vs. Govindbhai N. Patel (2013) 215 Taxman 575 (Gujarat) Similar case has been decided by the Hon'ble ITAT, Ahmedabad 'C' Bench in the case of Jawaharbhai Atmaram Hathiwala vs. ITO In this case, search and seizure operation was carried out at the business premises of developers and during the course of search, the partner of the firm admitted that he had received Rs. 4,83,101 upto 31-3-1999 from the assessee for purchase of flat as recorded in the seized document and the assessing officer treated the said sum of Rs.4,83,101 as 'on-money' paid for purchase of flat and added the same to the income of the assessee as unexplained investment. In that case Hon'ble ITAT, Ahmedabad in [2010] 128 TTJ 36 (Ahmedabad) (UO) has held that "no evidence could be brought on record by the Revenue to show that in fact the assessee had paid 'on money' to the developers. No document containing signature of the assessee or handwriting of the assessee to corroborate the above making of payment by the assessee was found during the course of the search. Merely recording made by a third party or statement of a third party could not be treated as so sacrosanct so as to read as a positive material against the assessee. Therefore, addition in the hands of the assessee on account of 'on-money' was not justified." Hon'ble ITAT Chandigarh Bench in the case of Cosmos Infra Engineering (India) Ltd. vs. DCIT [2017] 88 taxmann.com 761 (Chandigarh - Trib.) has held that "when even the third party from whose premises the alleged documents were found, had not confirmed that the said entry belonged to the assessee, there was no question of any assumption or belief that the entry belonged to the assessee. Moreover, any entry found on loose papers in the premises of the third party without any corroborative evidence, cannot be made basis for addition in the case of the assessee. Thus, there was no justification to make addition in case of the assessee on the basis of an entry found in the 'bahi' of third party from which neither it could be definitely said that ITA No. 66/Rjt/2023& others Range Ceramic Pvt. Ltd. &Ors 18 the name written therein was that of the assessee nor any other evidence relating to the above transaction had been found. 14. Without prejudice to the above, kind attention is also invited to the fact that, on perusal of the satisfaction note it is seen that there is no bifurcation of year-wise alleged amount. Therefore, it is not clear for which year the amount pertained, who sent the same, why sent the same, what was the correct recipient hence based on such vague information not related us, assessment cannot be subjected to 153C. On this ground show cause notice issued and addition proposed is strongly objected. 15. Further, in show cause notice assessing officer has stated that reply to notice u/s 142(1) of the Act was considered but not found satisfactory. In this regard, it is submitted that assessing officer has, without raising the any specific query or notice and repetitively reproduced the content of the satisfaction, note, jumped to the conclusion without bringing any material fact on the table and disregarding the submissions made during the proceedings. 16. Without prejudice to the above and without admitting anything in any manner it is to submit that what is to be taxed is real income i.e. estimation of NP and not notional income i.e. entire sales consideration. In our case addition of Rs.1,64,000/- u/s 69A (entire sales consideration) proposed is not rational and legitimate way to tax the incomes. Therefore, on this ground show cause notice issued proposing the addition is strongly objected. 17. In view of the above, it appears that impugned show-cause notice has been issued without proper verification of basic fact's and thus, addition proposed in the show cause notice is vehemently objected as there is no element of the escapement of the income...." Findings of the assessing officer 12.However, the assessing officer rejected the above asseessee’s reply and observed that assessee`s case is not fit for cross examination, as the data clearly shows that assessee has made unaccounted transactions which was recorded by Hiren Khimjibhai Kalariya. The assessing officer noted that the statement recorded during the course of search is a strong piece of evidence. Courts have given great significance to the statements recorded observing that the disclosure / admission made in the course of search by way of statement has got evidentiary value and it cannot be used to side track the attention of the department from making deeper investigation in the matter. The assessing ITA No. 66/Rjt/2023& others Range Ceramic Pvt. Ltd. &Ors 19 officer also noted that the primary evidence on which the adverse inference is being contemplated is the seized document and not only the statement. 13.Hence, the claim of assessee was rejected by the assessing officer, in view of the facts that the assessee has been engaged in unaccounted sales and received payments through such shroffs. The assessing officer noted that assessee`s facts of the case are similar to case of CIT vs. President Industries (2002) 258 ITR 654 (Gujarat) wherein the Hon'ble Court has held that the profit element embedded in the sales ought to be taxed. In the assessee`s case, the assessee could not even reconcile the production, sales and the closing stock although the specific opportunity was provided by the undersigned. Accordingly, addition to the assessee's income ought to be made on account of suppression of profits earned out of unaccounted sales. It is also worthwhile to mention here that assessee has indulged in the business of unaccounted sale of tiles/ceramic material. The seized materials indicate about the prevalence of such unaccounted sales. The sum and substance of the above is that these transactions are not complete data of the assessee's business and cannot be considered to be a record of complete transactions of assessee's business for the given assessment year. The assessee might have incurred the expenses related to purchases and other expenses from the unaccounted sales and unaccounted cash receipts but in absence of complete data submitted by assessee in-spite of repeated opportunities, the assessing officer has no alternative but to estimate the unaccounted profits to best of his judgment. Considering the above facts and transaction with Sh. Hiren Kalaria on account of Sales receipts which is not recorded in assesses books of account, i.e. certain sales proceeds are altogether omitted from books of accounts, therefore, assessing officer was of the opinion that the assessee’s books of accounts are not showing correct statement of affairs or not showing true and fair view of the profit. Therefore, assessing officer was not satisfied about the correctness of the accounts. As per assessing ITA No. 66/Rjt/2023& others Range Ceramic Pvt. Ltd. &Ors 20 officer, the books of accounts of the assessee were not showing correct view, therefore, the assessing officer rejected the books of accounts of the assessee- company by way of invoking the provision of section 145(3) of the Act and made the assessment in the manner provided in section 144 of the Income Tax Act. From the perusal of past records of the assessee, it was noted by assessing officer, that the assessee has been showing a gross profit(GP) in range of 19.52% to 18.66% in case of accounted sales. It is highly probable that the assessee is resorting to unaccounted sales as the margin and profits of such unaccounted sales are usually higher. Moreover, there must be an element of unaccounted capital of the assessee being deployed in such unaccounted sale/purchase transactions. Hence, the profit element of such unaccounted sales is bound to be much higher and is definitely an incentive to the assessee to resort to such out-of-books transactions. In view of above facts, the book results of the assessee were rejected by the assessing officer and the profits of the stated unaccounted transactions are estimated @ 25% of the unaccounted sales. Thus, estimated profit element of Rs.41,000/- (1,64,000 * 25%) was treated as unaccounted income of the assessee and added to the total income of the assessee. 14.The assessee- company has wrongly availed set off of carried forward of loss of Rs.2,31,64,078/-. During the year under assessment, in this regard the assessee company was asked as to why the excess loss availed should not be disallowed. However, the assessee company has not replied anything. Considering the facts of the case, the same was added back to the total income of the assessee- company. Findings of the Commissioner of Income Tax (Appeals) 15.Aggrieved by the order of the assessing officer (assessing officer), the assessee carried the matter in appeal before the Ld. CIT(A), who has partly ITA No. 66/Rjt/2023& others Range Ceramic Pvt. Ltd. &Ors 21 allowed the appeal of the assessee. During the appellate proceedings, the assessee argued before the ld CIT(A), that on perusal of the satisfaction notes recorded by the assessing officer of the ‘person searched’ and the ‘assessee’ that both the assessing officer did not carry out any independent verification or enquiry, but blindly relied upon the statement that has been recorded in the case of Hiren Kalariya in post-search investigation. In a way, the assessee emphasized that the proceedings were initiated on the basis of statements recorded only, which cannot be termed as incriminating materials. In this connection assessee relied upon various judicial pronouncements also. That is, the assessee contended before ld CIT(A) that the satisfaction note of both the assessing officers are same and verbatim and therefore, it clearly establishes that the satisfaction recorded is completely in mechanical manner and without carrying out independent verification. However, the ld CIT(A) noted that materials seized from Hiren Khimjibhai Kalariya, is undisputedly in respect of unaccounted sales and collection of cash of companies/persons. Further, the name "Harshad" in the seized documents represents the person of the assessee- company has been finalized on the basis of the post search enquiries and on the basis of the statement given by Shri Hiren Kalariya and supported by the seized documents and therefore it clearly establishes the link between the seized documents and the assessee. Therefore, initiation of proceedings u/s 153C of the Act is not on mere surmises or conjectures and on the basis of the incriminating materials seized during search in case of Hiren Khimjibhai Kalariya. Therefore, ld CIT(A) did not accept, the assessee`s plea and hence rejected the ground raised by the assessee. 16. On merit, the ld CIT(A) observed that assessee was one of the beneficiaries, who had received cash of unaccounted sales through Shri Hiren Kalariya. Before ld. CIT(A), the assessee argued that during the assessment proceeding, the assessing officer had not provided any specific document seized from the ITA No. 66/Rjt/2023& others Range Ceramic Pvt. Ltd. &Ors 22 premises of Shri Hiren Kalariya. The assessee stated that unaccounted transactions of Rs.1,64,000/- in the seized documents are in the name of "Harshad" and therefore, the assessing officer's action in considering the said transactions in its case is unjustified. It was contended that the assessing officer failed to bring any correlation or corroborative evidences that name "Harshad" in the seized documents of Shri Hiren Kalariya represents the assessee- company. The assessee, further contended before ld CIT(A) that merely because some entries or reference related to its name are found in the documents seized from third party, it is not sufficient to prove that the assessee has indulged in the unaccounted transactions. The assessee, relied on various case laws also. The assessee also argued that during the course of assessment proceeding, assessee has requested assessing officer to provide an opportunity of cross-examination of Shri Hiren Kalariya, however, the assessing officer did not provide the same. In this context, the assessee relied on various case laws and argued that principle of natural justice has not been followed. The assessee further contended that the presumption u/s 132(4A) and 292C applies only to a person from whose possession the material was seized and not to a third party. 17. However, ld. CIT( A) observed that entire addition has been made based upon investigation report/ search report in case of search carried out in the case of Shri Hiren Khimjibhai Kalariya and also with the group cases of "Coral Group of Morbi from which it is revealed that said person along with his entire group including the assessee were engaged in the unaccounted transactions, therefore, opportunity of cross examination is not necessary, in the assessee`s case under consideration. The ld CIT(A) rejected the contention of the assessee and upheld the action of the assessing officer of treating the assessee as one of the beneficiaries who had received cash of unaccounted sales through Shri Hiren Kalariya. During the appellate proceedings, the assessee has raised an alternative plea that the estimation of rate of profit at 25% on undisclosed sales ITA No. 66/Rjt/2023& others Range Ceramic Pvt. Ltd. &Ors 23 by the assessing officer is arbitrary and exaggerated. In support of this, the assessee furnished its audited financial statements and, on that basis, it was argued that rate of profit estimated by the assessing officer is on the higher side of declared gross profit, net profit (GP)/(NP). The Assessee mainly contended that if profit is estimated that should be net profit only as per the audited accounts or trend in the industry, whereas the assessing officer has estimated the profit @ 25% which is very high and impracticable. However, the Ld CIT(A) noted that it is an undisputed fact that transactions recorded in the documents seized from Shri Hiren Kalariya are related to unaccounted sales and therefore, the assessing officer has correctly applied the profit rate relying on the decision of territorial high court as well as well-accepted precedents. Here, the assessee's contention that rate of net profit as declared in the audited financial statements should be taxed is not acceptable in view of the fact that the profit in case of unaccounted sales is always higher than the accounted sales. This is so because fixed expenses are always borne and absorbed by the quantum of accounted sales. Therefore, the ld CIT(A) was of the view that the margin in the case of unaccounted sales remains high as compared to accounted sales and that commercial temptation prompts the assesses to indulge in unaccounted sales. Therefore, the contention of the assessee to estimate the profit on unaccounted sales as per books of accounts is not acceptable. On the other hand, though the assessing officer has been reasonable in his approach by estimating profit on the unaccounted sales, therefore, the ld CIT(A)was of the view that the rate of profit at 25% estimated by assessing officer is on a little higher side compared to the Gross Profit declared in the audited financial statement, looking to the profit margin shown by the assessee in the regular books of Account, therefore, the ld CIT(A) directed the assessing officer to take the unaccounted profit at the rate of 22% on the unaccounted cash receipts. In view of the above, the addition made by the assessing officer towards unaccounted business income to the extent of Rs.36,080/- (1,64,000 x 22%) was confirmed by ld CIT(A) and ITA No. 66/Rjt/2023& others Range Ceramic Pvt. Ltd. &Ors 24 balance addition of Rs.4,920/- was deleted. Thus, ld CIT(A) partly allowed the appeal of the assessee, on merit. 18.The assessing officer has disallowed the claim of set off of claim of carry forward loss of Rs 2,31,64,078/-, as no details were furnished before him. No details have been produced in support of the ground raised, even during the appellate proceedings. Therefore, the disallowance made by the assessing officer of Rs.2,31,64,078/- was held justified and was confirmed by ld CIT(A). 19. Aggrieved by the above findings of ld.CIT(A), the assessee is in further appeal before us. Arguments of Learned Counsel for the assessee. 20. Shri, Mehul Ranpura, and Shri Vimal Desai, Learned Counsel for the respective assessees, strongly argued, challenging the satisfaction note under section 153C of the Act, stating that satisfaction note was recorded, mechanically and without application of mind. Both the ld. Counsel argued that first of all, there is no incrementing material, the assessee has already explained and established that the so-called unrecorded sales, which is has never been occurred. Thus, the receipt of unaccounted sales assumed by the assessing officer on suspicion and mechanical and the belief as to incriminating material is based on improper verification of facts and based on suspicion. On verification of both the satisfaction notes, it can be seen that the observations made is one and the same being alleged receipt of unaccounted sales, through Shri Hiren Khimjibhai Kalariya. Both the assessing officers did not carry any independent verification or inquiry but relied on the statement recorded during the course of search. The assessee has never been inquired for the purpose of verification either by the assessing officer or by the investigation wing and thus, ITA No. 66/Rjt/2023& others Range Ceramic Pvt. Ltd. &Ors 25 satisfaction arrived by the assessing officer is only on the basis of assumptions. Thus, satisfaction note is defective, hence, proceedings initiated under section 153C of the Act, is bad in law and may be quashed. 21. On merit, both the ld Counsel pleaded that the assessee, under consideration, has never received the impugned amount from Shri Hiren Khimjibhai Kalariya. It has no business connection with Shri Hiren Khimjibhai Kalariya (Shroff). It has never undertaken any transaction with Shri Hiren Khimjibhai Kalariya. It is not known how the name of assessee has been identified. There is no tangible material as such, which proves that the assessees have received funds. Further, it is unknown for which year the allegation for unaccounted sale has been made and on what basis the figure of unaccounted sales has been worked out. Further, so-called receipt of sale proceeds or unrecorded sales has never been supported by any acknowledgement/paying slip or the name of depositor of such sales at various places, as alleged. The so-called cash book of the person, searched, shows the name of the place, amount and some initial against it. For example, from copy of page 51 and 64 of Annexure A-1 of such cash book, it is seen that as against the amount, the name of city and initial as "Harshad" is mentioned. It is not known who 'Harshad is? The basic details on which action u/s 153C initiated are also not ascertainable. Thus, the receipt of unrecorded sales assumed by the assessing officer of the person searched and the assessing officer of the assessee is merely on suspicion and mechanical and the belief as to incriminating nature is based on improper verification of facts and is based on suspicion only. Therefore, the basic facts leading to assumption of jurisdiction is on flawed premises. The ld Counsel for the assessee, relied on following decision: (i) CIT vs IBC Knowledge Park (P) Ltd 385 ITR 346 (ii) Hon'ble ITAT, Kolkata Bench 'C' in the case of I Q City Foundation v. ACIT, Central Circle-3(2), Kolkata [2021] 123 taxmann.com 134 (Kolkata - Trib.) ITA No. 66/Rjt/2023& others Range Ceramic Pvt. Ltd. &Ors 26 (iii) Hon'ble ITAT Delhi Bench 'C' in the case of Green Range Farms (P.) Ltd. [2018] 96 taxmann.com 249 (Delhi - Trib.) (iv) Hon'ble ITAT, Mumbai "H" Bench in the case of Beejay Security & Finance Ltd. vs. ACIT in ITA No. 4859 to 4865 / Mum / 2009. 22.The ld Counsel further, stated that nowhere in the seized material name of assessee or its director/partner or employees reflected. The assessing officer of search person blindly relied on the statement of Shri Hiren Kalariya recorded u/s. 132(4) of the Act, without bringing on record any incriminating material. In this connection, the assessee has relied on various judicial pronouncement, however the same is not rebutted by ld. CIT(A).The adverse inference has been drawn merely based on matching of name. The assessing officer has not brought any corroborative or even circumstantial evidence showing that the notings, are related to the assessee except name of person connected with it. The matching of name does not necessarily mean that there is only one person with the same name in this whole city/state/country. It is well settled law that merely because of some entries or references or even name of the assessee found in any documents / data seized from the possession of third party, the same are not sufficient to prove that the assessee indulged in the transactions mentioned in such documents / data. The ld Counsel relied on the following decisions: (i) Hon'ble Supreme Court in the case of CBI Vs. V.C. Shukla & Ors. (1998) 3 SCC 410 (ii) Hon'ble Supreme Court in the case of Vinod Solanki Vs. UoI&Anr (SC-Civil Appeal No.7407 of 2008) (iii) Hon'ble High Court of Bombay in the case of Addl. CIT vs. MissLata Mangeshkar (1974) 97 ITR 696 (Bombay) (iv) Hon'ble Supreme Court of India in the Writ Petition filed by Common Cause (A Registered Society) against Union of India. [(2017) 245 Taxman 214 (SC)]. 23.Thus, ld Counsel, contented that no addition can be made in case of assessee without establishing identity of the person mentioned in seized material. The ITA No. 66/Rjt/2023& others Range Ceramic Pvt. Ltd. &Ors 27 assessee has not undertaken any transaction with Hiren Kalariya. The assessing officer has not established identity and brought any corroborative evidence on record. As a matter of fact, during investigation / search report, no inquiry was done in case of assessee. Further, no information has been provided as to how the name of assessee was identified. However, it is an admitted fact that the searched party has not identified the noting made in seized material which can relate to assessee and the assessing officer has drawn adverse inference against assessee on its own, and that too without having any corroborative evidence on record. 24.The ld Counsel also argued that during the assessment proceedings, the assessing officer did not provide the opportunity of cross examination. The assessee demanded, by way of later that opportunity of cross examination should be provided to him, however, assessing officer has rejected the assessee`s prayer for cross examination. Therefore, denial of cross-examination is against principles of natural justice. 25.The ld Counsel also pleaded that Ld. CIT(A) erred in upholding action of assessing officer in rejecting book result of assessee, as the assessing officer without meeting with any requirement of provision of Act or pointing out any single defect or discrepancies in the books of accounts, any instance of suppression of sales, values or inflation of cost or expenditure, rejected the assessee's books. The books of accounts of the assessee were mainly rejected on the basis of statement of third party, which coupled with incorrect allegation of failing to reconcile the trading results, though specifically recorded in the audit report furnished to assessing officer. Further, estimation of gross profit by Id. CIT(A) on alleged unaccounted sales at arbitrary and imaginary rate of 22% without verification of Net profit as per audited financial statement is ITA No. 66/Rjt/2023& others Range Ceramic Pvt. Ltd. &Ors 28 unjustified. Therefore, ld Counsel, contended that estimated addition, if any, be made, should be based on the net profit ratio, as per audited financial statements of the assessee. The ld Counsel for the assessee, therefore, prayed the Bench that either the entire addition, made by the assessing officer, should be deleted, or the profit of the assessee, may be estimated by taking the net profit ratio, declared by the assessee, in the audited financial statements. Arguments of Learned DR for the Revenue 26.On the other hand, Learned DR for the Revenue, submitted that the ‘satisfaction note’ recorded by the assessing officer u/s 153C of the Act, is in accordance with law. While regarding the ‘satisfaction note’, the assessing officer has applied his mind and took into consideration the relevant facts of the case which are narrated in the ‘satisfaction note’ of the assessing officer u/s 153C of the Act. The ld DR further argued that assessing officer, during the assessment proceedings, had asked the assessee to avail copies of ‘satisfaction notes’ along with all the copies of seized incriminating materials. The proceedings were initiated on the basis of the incriminating materials seized during the course of search in the case of Hiren Kalariya. Since the subject matter is one and the same in both the satisfaction notes, there is no point in disputing proceedings on the ground of language/layout used by both the assessing officer. The moot point here is that the incriminating materials was there and unaccounted cash receipts are mentioned therein. During the course of search in the case of Hiren Khimjibhai Kalariya, clinching evidences in form of unaccounted cash collection/sales proceeds were found, which demonstrate cash disbursement to beneficiaries. The satisfaction note is based upon actual facts emanating from seized diaries / note book. The ld. DR also submitted that the ‘satisfaction note’ in some of the assessee`s cases were not challenged by the concerned assessees, before the lower authorities. Therefore, now, the plea of ITA No. 66/Rjt/2023& others Range Ceramic Pvt. Ltd. &Ors 29 the assessee should not be admitted, as the issue of ‘satisfaction note’ was not argued and pleaded before the authorities below. Therefore, ld DR argued that there is no defect in the satisfaction note. 27. On merit, the Learned DR for the revenue, argued that Shri Hiren Kalariya in his statement recorded on oath demonstrated the modus operandi of handling unaccounted cash transactions and identified the assessee- firm, as one of the beneficiaries of unaccounted transactions. Therefore, credibility of the seized documents and statement of Shri Hiren Kalariya cannot be ignored. Also, the assessing officer in the assessment order stated that the assessee, except denying his connection with said seized data did not submit any documentary evidence. The entire addition, was made by the assessing officer, based on the documents and evidences, seized in the search action, therefore, addition made by the assessing officer may be sustained. 28.On merit, the Learned DR for the revenue, pleaded that in some of the cases, protective additions were made by the assessing officer, to protect the interest of the Revenue, and since the substantive additions were made in the hands of the main person, who has gone to the Settlement Commission and settled the issue by paying 7% tax on the unaccounted income. No-doubt, the main person, on whom search was conducted, has gone to the scheme of settlement and paid the taxes @ 7% on unaccounted money, however, the associated persons who were engaged with the main person, were having the criminal mind, as these persons used to pay cash and receive cash, without paying tax to the government, through main person, Shri Hiren Kalaria. The commission was recorded in the diary of Shri Hiren Khimjibhai Kalaria. Since the additions were not sustained in the hands of the main person, M/s Coral Granito Pvt. Ltd, therefore, Shri Hiren Khimjibhai Kalaria is responsible to pay the tax on the entire amount, as he was owner of the transactions. The ld DR pointed out that at serial number ITA No. 66/Rjt/2023& others Range Ceramic Pvt. Ltd. &Ors 30 1 to 25 of the above appeals title, the assessees are the beneficiaries, therefore, these above 25 beneficiaries should pay the tax on unaccounted income. Therefore, ld. D.R. submitted that if the Tribunal wants to sustain an estimated addition, the estimated addition sustained by the ld. CIT would be suffice in case of above 25 beneficiaries (assessees), as the ld.CIT( A) has given sufficient relief to the above 25 assessees, therefore, addition sustained by Ld CIT(A), may be a upheld. 29.About opportunity of cross examination, the ld.DR for the revenue submitted that entire additions, were made by the assessing officer based on the seized document and evidences, therefore, opportunity of cross examination is not necessary, particularly, when the additions were made by the assessing officer based on documents and evidences. It is undisputed fact that Shri Hiren Kalariya was a commission agent and he was acting as a mediator for the collection of sale proceeds of unaccounted sales in lieu of commission. During the course of search and in post-search investigation, Shri Hiren Kalariya has admitted the modus operandi of his business activities, which also found recorded in various diaries and loose papers seized from his premises. The assessing officer has also noted in the assessment order that some of the beneficiaries whose names are mentioned in the seized diaries admitted that they had received cash from Shri Hiren Kalariya. Thus, the sanctity of the diaries seized from Shri Hiren Kalariya is established on records, and therefore, opportunity of cross examination should not be provided in these cases. The Ld.DR for the Revenue submitted before us written submissions on merit as well as on technical ground u/s.153C of the Act, about satisfaction note. We have gone through the written submissions of the Ld.DR and noted that, in sum and substance, whatever the Ld.DR stated in the written submissions have been considered by us, in brief, in the above paras. In the written submissions, the Ld.DR for the Revenue relied on many judgements of Hon’ble Supreme Court, ITA No. 66/Rjt/2023& others Range Ceramic Pvt. Ltd. &Ors 31 High Courts and Tribunals which we have considered and gone through the same carefully. Therefore, we cannot reproduce the entire written submissions of the Ld.DR for the sake of brevity. 30. In rejoinder, both Ld. Counsels submitted that in these group cases, there are three categories of assessees, viz: (i)In the first categories of assessees, say, ‘category A’, whose name is not there in the seized material, these were incorrectly identified, by the assessing officer, as the beneficiaries, these assessees do not deal in the business of tiles, as that of the other beneficiaries, (assessees), these assessees are in the business of small trade, for example LIC business, business of fruits, Kirana Store,Panwala, Puncturewala, etc., therefore, these assessees do not resemble with the business of other beneficiaries( assessees), Shri Hiren Kalaria, did not speak in his statement about these assessees, therefore, in their hands, additions should not be made. (ii) In the second categories of assessees, say category B, direct name of the assessee is not reflected in the documents seized, however, names of the other connected persons are reflected in the documents seized, and Shri Hiren Kalaria, in his statement stated that these other persons, are associated with ultimate beneficiaries, and these other connected persons are working for the ultimate beneficiaries. These other connected persons are working for the ultimate beneficiaries, whose assessment was framed by the assessing officer under sections 153C/143(3) of the Act. (iii) In the third category of assessees, say category C, the name of the assessees,( beneficiaries) himself have appeared, directly on the seized documents, and Shri Hiren Kalaria, in his statement stated that these are ultimate beneficiaries. ITA No. 66/Rjt/2023& others Range Ceramic Pvt. Ltd. &Ors 32 Both, the Ld.Counsel also submitted that in all the above category cases, the assessee had demanded the opportunity for cross examination. However, the assessing officer did not provide the opportunity for cross examination and hence the addition made by the assessing officer is in violation of the principle of natural justice. Analysis and conclusion 31. We have heard the rival parties and have gone through the material placed on record. First, we shall deal with “satisfaction note”, whether it is defective or not. For the sake of clarity and also being pertinent, we reproduce the provisions of section 153C of the Act, ( to the extent useful for our analysis), as follows: “153C Assessment of income of any other person. (1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, where the Assessing Officer is satisfied that— (a) any money, bullion, jewellery or other valuable article or thing, seized or requisitioned, belongs to; or (b) any books of account or documents, seized or requisitioned, pertains or pertain to, or any information contained therein, relates to, a person other than the person referred to in section 153A, then,the books of account or documents or assets, seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against each such other person and issue notice and assess or reassess the income of the other person in accordance with the provisions of section 153A, if, that Assessing Officer is satisfied that the books of account or documents or assets seized or requisitioned have a bearing on the determination of the total income of such other person for the relevant assessment year or years referred to in sub- section (1) of section 153A: Provided that in case of such other person, the reference to the date of initiation of the search under section 132 or making of requisition under section 132A in the second proviso to [sub-section (1) of section 153A] shall be construed as reference to the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person: Provided further that the Central Government may by rules made by it and published in the Official Gazette, specify the class or classes of cases in respect of such other person, in which the Assessing Officer shall not be required to issue notice for ITA No. 66/Rjt/2023& others Range Ceramic Pvt. Ltd. &Ors 33 assessing or reassessing the total income for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made except in cases where any assessment or reassessment has abated......” From the provisions of section 153C of the Act, as referred above, it is vivid that the primary condition for initiation of assessment proceeding u/s 153C of the Act, is that during the course of search in the case of any person, money, bullion, jewellery or other valuable article or thing is seized and the assessing officer of ‘searched persons’ satisfies, that such asset belongs to other person. Alternatively, during the course of search, any books of account or documents are seized or requisitioned, and the assessing officer of ‘searched person’ satisfies that such books or document pertains to or any information contained therein relates to other person. The mechanism provided in the Act is that in such manner that the assessing officer of ‘searched person’ after recording his satisfaction should handover the relevant seized assets or books of account or documents or information to the assessing officer of ‘other person’ and then,the assessing officer of ‘other person’ should record his satisfaction before initiating assessment proceeding in the case of ‘other person’ u/s 153C of the Act that the books of account / documents / assets seized from "searched person" is bearing on the determination of total income of "other person". 32. In the context of the above provisions of section 153C of the Act, we should examine the ‘satisfaction note’ recorded by the assessing officer, of the assessee under consideration. In the assessee`s case under consideration, the satisfaction note, recorded by the assessing officer, under section 153C of the Act, is reproduced below: “1. Search action named "Operation White Flower" U/S. 132 was conducted on 03-01-2019 on the 'Coral Group of Companies' and its various associated concerns and persons along with at the premises of Shri Hiren Khimjibhai Kalariya. 2. During the course of search at the residential premises of Shri Hiren Khimjibhai Kalariya (Shroff), his statement was recorded u/s. 132(4) of the Income-tax Act. In his statement, he has explained the detailed modus operandi adopted by him to assist the various companies in ITA No. 66/Rjt/2023& others Range Ceramic Pvt. Ltd. &Ors 34 collection of proceeds of unaccounted sales. He has stated that initially the money is deposited by the customers of concerned companies in various designated bank accounts, at multiple locations as per the business practice adopted by the group companies, these accounts are being maintained by him or his accomplice and later on, the money so deposited by customers of various companies are withdrawn and handed over to the key person of the concerned companies. 3. He has further stated that he regularly deals with Coral Group through Sh. Ketan Bhalodia and hands over the cash to the person as told by Ketan Bhalodia. He also stated that if the cash received is of any other company / concern, he calls the concerned person of the company / concern and hands over the cash to him. He also keeps record of such transactions in manual form at his business/ residential premise. 4. On being confronted with the statement of Shri Hiren Khimjibhai Kalariya, Shri Ketan Vaghji Bhalodiya agreed with the contents of his statement. Shri Hiren Khimjibhai Kalariya has also admitted in this statement (reply to Q. No. 8 & 9) that he does the same type of transactions/ business with other ceramic entities also and receives commission income on such transactions. 5. Further appraisal report and the details of investigation done in the matter and statement recorded by the Investigation wing is examined and it is found that RANGE CERAMIC PRIVATE LIMITED (AAGCR6625M) has also been received amount of Rs. 2,59,22,887/- in cash by adopting the modus operandi as discussed above. 6. In view of above, I am satisfied that the above discrepancy found from party named Shri Hiren Khimjibhai Kalariya covered u/s 153A of the I. T. Act belongs to and information in this regard and is relates RANGE CERAMIC PRIVATE LIMITED (AAGCR6625M) i.e. assessee being other than the person 153A of the Act, 7. As per amended section 153C(1)(b), where the Assessing Officer is satisfied that any books of account or documents, seized or requisitioned, pertains or pertain to, or any information contained therein, relates to a person other than the person referred to in section 153A, then the proceedings u/s 153C shall be initiated. 8. Therefore, I have satisfaction to proceed against the assessee RANGE CERAMIC PRIVATE LIMITE(AAGCR6625M) as per the provision of section 153C of the Income-tax Act, 1961. Hence, it is a fit case for initiation of proceedings u/s. 153C of the Act. The provisions of section 153C(1) has to be invoked for AY 2013-14 to AY 2018-19 and for u/s 143 (3) for AY 2019-20.” 33. We have gone through the above ‘satisfaction note’, recorded by the assessing officer, in the assessee`s case under consideration, and noted that there is no infirmity, in the ‘satisfaction note’ recorded under section 153C of the Act. As, we have already noted that a search and seizure action was carried out in the case of one Shri Hiren Khimjibhai Kalariya and during the course of search in his case, various incriminating documents were seized containing noting of fund ITA No. 66/Rjt/2023& others Range Ceramic Pvt. Ltd. &Ors 35 deposited in various bank accounts operated by him and withdrawal of such funds in cash for disbursing the same to the actual beneficiaries. Shri Hiren Khimjibhai Kalariya in his statement recorded u/s 132(4) and 131 of the Act, has described the modus operandi of his Angadiya/Shroff business activities and also given name of the beneficiaries of unaccounted cash transactions. The assessing officer of searched person in his satisfaction recorded has identified the assessee, being one of the beneficiaries, of unaccounted cash transactions and accordingly, the assessing officer of the assessee recorded his satisfaction for initiating assessment proceeding and notice issued to the assessee u/s 153C of the Act. The materials seized from Hiren Khimjibhai Kalariya is undisputedly in respect of unaccounted sales and collection of cash of companies/persons. The satisfaction note has been recorded, by the assessing officer, on the basis of the statement given by Shri Hiren Kalariya and supported by the seized documents and therefore it clearly establishes the link between the seized documents and the assessee. Therefore, initiation of proceedings u/s 153C of the Act is not on mere surmises or conjectures and on the basis of the incriminating materials seized during search in case of Hiren Khimjibhai Kalariya. Therefore, this argument of ld.Counsel for the assessee, is not acceptable and therefore, rejected. Thus, the ground of appeal No. 2 is dismissed. 34. Since we have adjudicated the issue pertaining to ‘satisfaction note’, under section 153C of the Act, by taking the lead case in IT (SS)A No.66/RJT/2023, for assessment year 2017–18, in the case of Range Ceramic Private Limited. In other assessees` case, the satisfaction note, are recorded by the assessing officer, in the same manner, as that of the assessee under consideration. Therefore, our instant adjudication shall applymutatis mutandis to the aforesaid other appeals of various assessees. Hence, we dismiss the ground raised by all other assessees, pertaining to ‘satisfaction note’, under section 153C of the Act. ITA No. 66/Rjt/2023& others Range Ceramic Pvt. Ltd. &Ors 36 35. In the result, grounds relating to ‘satisfaction note’, mentioned in IT(ss) Nos. 94/Rjt/2023, 95/Rjt/2023, 66/Rjt/2023,67/Rjt/2023, 41/Rjt/2023, 42/Rjt/2023, and 43/Rjt/2023, are dismissed. 36. So far merit, is concerned, we find that during the course of search action in the case of Shri Hiren Khimjibhai Kalariya, various diaries and loose papers sheets containing details of cash transactions were seized in Annexure No. A-1 to A-7. During the course of recording statement u/s 132(4), Shri Hiren Kalariya explained in detail, the modus operandi, adopted by him, to assist various beneficiaries for collection of sale proceeds of unaccounted sales. The assessing officer stated that on analysis of the data seized from Shri Hiren Kalariya, it is found that the assessee is one of the beneficiaries of unaccounted cash transactions (recipient) worth of Rs.1,64,000/-. The assessing officer rejected book results of the assessee by invoking provision of Section 145(3) of the Act, and by relying on the decision of Hon'ble High Court of Gujarat in the case of CIT vs. President Industries (2002) 258 ITR 654 (Gujarat), estimated unaccounted profit at the rate of 25% of the unaccounted gross receipts of Rs.1,64,000/-. The assessing officer stated that on perusal of past records of the assessee, it is noticed that the assessee has been showing gross profit (GP) in the range of 19.52% to 18.66% in accounted sales, but it is established fact that in unaccounted sales, such margin and profit would be higher. Thus, assessing officer, estimated profit element of Rs.41,000/- (1,64,000 * 25%), which was treated as unaccounted income of the assessee and added to the total income of the assessee. On appeal by the assessee, the learned CIT(A), restricted the estimated addition @ 22% on unaccounted gross receipts of Rs.1,64,000/-. Therefore, addition made by the assessing officer towards unaccounted business income to the extent of Rs.36,080/- (1,64,000 x 22%) was confirmed by ld CIT(A) and balance addition of Rs.4,920/- ( Rs.41,000- Rs.36,080) was ITA No. 66/Rjt/2023& others Range Ceramic Pvt. Ltd. &Ors 37 deletedby ld CIT(A). Now, the assessee is in appeal before us, and contended that balance addition of Rs.36,080/- may be entirely deleted or percentage of estimated addition @ 22% adopted by ld CIT(A) may be reduced at a reasonable rate. 37. We find that during the course of assessment proceeding, assessee has requested the assessing officer, to provide an opportunity of cross-examination of Shri Hiren Kalariya, however, the assessing officer did not provide the same. In this context, the ld Counsel relied on various case laws and argued that principle of natural justice has not been followed. The ld Counsel also contended that the presumption u/s 132(4A) and 292C of the Act, applies only to a person from whose possession the material was seized and not to a third party. We note that it is an undisputed that Shri Hiren Kalariya was a commission agent and he was acting as a mediator for the collection of sale proceeds of unaccounted sales in lieu of commission. During the course of search and in post-search investigation, Shri Hiren Kalariya has admitted the modus operandi of his business activities, which also found recorded in various diaries and loose papers seized from his premises. The assessing officer has also noted in the assessment order that some of the beneficiaries whose names are mentioned in the seized diaries admitted that they had received cash from Shri Hiren Kalariya. Thus, where the addition is made by the assessing officer, based on the documentary evidences, and these documentary evidences, speak clearly, then there is no need to provide opportunity for cross- examination. It is pertinent to note that Shri Hiren Kalariya recorded the names of the parties in his diaries as he knew the beneficiaries. Even in respect of representatives coming to collect cash on behalf of beneficiaries, Shri Hiren Kalariya clearly linked the names of such representatives with the respective beneficiaries in his statements recorded. Thus, Shri Hiren Kalariya had full knowledge of the persons with whom he was dealing as a commission agent and whose representatives' names are mentioned in the seized diaries. Further, in respect of ITA No. 66/Rjt/2023& others Range Ceramic Pvt. Ltd. &Ors 38 such transactions of undisclosed sales and receipts thereof, all the links in the chain remain well connected and therefore, the remittance of cash always reaches the intended recipients and not to anyone else. Therefore, mere denial on the part of the assessee stating that they have not carried out any transactions with Shri Hiren Kalariya is not sufficient in any manner. Since the seized material is clear in its contents and the assessee is not able to rebut such content by any contradicting evidence, the legal arguments of the assessee fail and they cannot be accepted de hors of the undeniable picture emerging from the seized material the sanctity of which is already established. Seized material (The diaries) was systematically maintained by Shri Hiren Kalariya and it is not just loose papers or dumb documents which is not capable of any meaning. Therefore, where the seized material contains the name of any beneficiary or the name of any representative of such beneficiary and such representative and the beneficiary are subsequently linked by Shri Hiren Kalariya, the beneficiary cannot escape consequential tax liability. The assessee has not produced any confirmation of Shri Hiren Khimjibhai Kalariya stating that notings in such seized material does not pertain to the assessee. 38. We find that about issue of cross examination, no natural justice requires that there should be a kind of a formal cross- examination. Formal cross- examination is procedural justice. It is governed by rules of evidence. It is the creation of Courts and not a part of natural justice but of legal and statutory justice. Natural justice certainly includes that any statement of a person, before it is accepted against somebody else, that somebody else should have an opportunity of meeting it whether it, by way of interrogation or by way of comment,does not matter, so long as, the party charged has a fair and reasonable opportunity to see, comment and criticise the evidences, statement or record on which the charge is being made against him the demands and therefore the test of natural justice are satisfied. The question whether denial of opportunity of cross-examination results in violation of natural justice depends upon facts of ITA No. 66/Rjt/2023& others Range Ceramic Pvt. Ltd. &Ors 39 each case. The object of cross-examination is to test the veracity of the version given in examination in chief. As, in the assassee`s case, under consideration, the assessee had proper opportunity to controvert the material gathered by the search team and assessing authority and used against it, then there had been compliance of the principle of natural justice. Having gone through the above findings of the ld. CIT(A), we observed that there was no need to provide opportunity of cross- examination, as the addition was made by the assessing officer, based on the documents and evidences seized during the search. Considering the above factual position, we reject the plea raised by the ld. Counsel for the assessee, in respect of cross examination. Hence, grounds raised by the assessees, relating to cross examination, are dismissed. 39. So far, merit of the case is concerned, we note that ld CIT(A) sustained the additions in the hands of various assessees at the rate of 20%, 22% and 25%. However, in most of the cases, the ld CIT(A) sustained the estimated addition at the rate of 20%, as against the addition made by the assessing officer at the rate of 25%. Both the ld Counsels, argued before us that documents and data were seized from the possession of third-party and these documents are dumb documents and moreover, these documents found in the search are not sufficient to prove that the various assessees are indulged in the transactions mentioned in the dump documents, therefore entire additions made in the hands of the respective assessees may be deleted. 40. We do not find merit in the above submissions of ld Counsels. We find that seized documents are incriminating documents, moreover, the statement of Shri Hiran Kalaria, is clearly corroborated with seized documents, therefore entire addition made by the assessing officer cannot be deleted, except in case of those assessees, whose name do not appear in seized documents, directly or indirectly. ITA No. 66/Rjt/2023& others Range Ceramic Pvt. Ltd. &Ors 40 41. However, we find that estimated additions, in the hands of various assessees, sustained by ld CIT(A), at the rate of 20%, 22% and 25% are at higher side. Both the ld Counsels for the assessees, have raised an alternative plea, before the Bench, that the estimation of rate of profit at 22% on undisclosed sales by the ld CIT(A), is arbitrary and exaggerated. In support of this, the ld Counsel furnished its audited financial statements of the assessees, before the Bench, (which were submitted by the assessees, before the lower authorities also), and, on that basis, it is argued that rate of profit estimated by the ld CIT(A), is on the higher side of declared gross profit and net profit(GP/NP). The ld Counsel, mainly contended that if profit is estimated then it should be net profit only as per the audited accounts or trend in the industry, whereas the ld CIT(A) sustained the estimated the profit @ 20%, in most of the cases, which is very high and impracticable. 42. We find merit in the submissions of ld. Counsel to the effect that profit rate sustained by the ld CIT(A), is at very higher side. Therefore, considering the nature of business, we proceed to work out the estimation of profit keeping in mind the following facts: (i)The estimate is not opened up to be framed in an arbitrary manner. (ii)The estimate by rule of thumb is absolutely infirm. (iii)The estimation of rate of profit return must necessarily vary with the nature of the business. (iv)There cannot be any uniform yardstick. (vi)An assessment to be best of judgement can only be based on the material available on record and past records and considering the totality of the facts. (v) Only real income and neither notional income nor astronomical income, can be taxed under the Income Tax Act, 1961. Accordingly, we hereby estimate the net profit (NP) at 13%, keeping in mind that the method to be adopted for estimation, must be, which is approximately nearer to the truth. In view of the above factual discussion, the addition made by ITA No. 66/Rjt/2023& others Range Ceramic Pvt. Ltd. &Ors 41 the assessing officer ( in the lead case) towards unaccounted business income to the extent of Rs.21,320/- (1,64,000 x 13%) should confirmed and balance addition should be deleted. Our above findings, are applicable to the following assessees: Sr. No. Name of Assessee AY Asst. Order Section IT(SS)A/ ITA No. Name in seized material Date of Hearing Category Seized material, facts and as per Hiren Kalaria’s statement 1 Roland Ceramic Pvt. Ltd. 2019-20 143(3) 232/Rjt/2023 Dipesh/ Lanbagh/ Rohan 18.07.2024 B Mr Hiren Kalaria stated in statement that Dipesh, Lanbagh and Rohan represents the company represents Roland Ceramic Pvt Ltd.. However, Lanbagh and Rohan are not directors. 2 Range Ceramic Pvt. Ltd. 2019-20 143(3) 231/Rjt/2023 Harshad 18.07.2024 B Mr Hiren Kalaria stated that the Harshad represent Range Ceramic Pvt. Ltd. 3 Winsun Ceramic Pvt. Ltd. 2019-20 143(3) 233/Rjt/2023 Nirav 18.07.2024 B Mr Hiren Kalaria stated that the Nirav represent Range Ceramic Pvt. Ltd. 4 Lorians Ceramic LLP 2019-20 143(3) 235/Rjt/2023 Hiren/ Hirmolo 18.07.2024 B Mr Hiren Kalaria stated Hiren and Hirmolo represents Lorians Ceramic LLP. 5 Livanto Ceramic Pvt. Ltd. 2019-20 143(3) 236/Rjt/2023 Jayesh 18.07.2024 B Mr Hiren Kalaria stated that the Jayesh represent Livanto Ceramic 6 Legend Ceramic Pvt. Ltd. 2019-20 143(3) 234/Rjt/2023 Legend / Lejend/ Lijend 18.07.2024 C Mr Hiren Kalaria stated that the Legend represents Legend Vitrified 7 Flecto Ceramic Pvt. Ltd. 2019-20 143(3) 315/Rjt/2023 Sunil 18.07.2024 C Mr Hiren Kalaria stated that the Sunil represents Flecto Ceramic Private Limited 8 9 Range Ceramic Pvt. Ltd. 2017-18 153C 66/Rjt/2023 Harshad 18.07.2024 B Mr Hiren Kalaria stated that the Harshad represent Range Ceramic Pvt. Ltd. 2018-19 153C 67/Rjt/2023 10 Admin Vitrified Pvt. Ltd. 2019-20 143(3) ITA 216/R/23 Chali, Charlie, Savan, Savant 18.07.2024 B No name of the appellant was in the seized material but Hiren Kalariya in his statement stated that the same belonged to the Appellant. 11 Adore Ceramic Pvt. Ltd. 2017-18 153C ITSS 41/R/23 H 18.07.2024 B 12 Adore Ceramic Pvt. Ltd. 2018-19 153C ITSS 42/R/23 H, M, Yogesh 18.07.2024 B 13 Adore Ceramic Pvt. Ltd. 2019-20 143(3) ITA 211/R/23 H, M, Yogesh 18.07.2024 B 14 Dovel Ceramics 2019-20 143(3) ITA 214/R/23 Deali 18.07.2024 B 15 Success Ceramic Pvt. Ltd. 2019-20 143(3) ITA 217/R/23 Sanjay 18.07.2024 B 16 Lasa Cera Pvt. Ltd. 2018-19 153C ITSS 43/R/23 Lasasera 18.07.2024 C Appellant’s name was in seized material 17 Lasa Cera Pvt. Ltd. 2019-20 143(3) ITA 212/R/23 Lasasera 18.07.2024 C ITA No. 66/Rjt/2023& others Range Ceramic Pvt. Ltd. &Ors 42 We note that above assessees, are ultimate beneficiaries. They worked through connected persons. For example, M/s Range Ceramic Pvt. Ltd, vide ITA No. 231/Rjt/2023, Mr. Hiren Kalaria stated that Shri Harshad represents, M/s Range Ceramic Pvt Ltd, therefore, M/s Range Ceramic Pvt. Ltd, is ultimate beneficiary and it falls in B category. For example, Lasa Cera Pvt. Ltd, vide ITA 212/Rjt/23, the assessee`s name is there in the seized material, that is, there is direct evidence available in this case, and this case falls in C category. We also find that in case of B category, the name mentioned in the seized material are resembling with the beneficiaries, identified by Shri Hiren Kalariya, therefore, in case of these assessees, it cannot be said that the seized materials are dumped documents, as we have noted that they are ultimate beneficiaries and in their hands the assessing officer has estimated the income @ 25%, however, on appeal, Ld. CIT(A) reduced the estimated profit from 25% to 20% and in some cases, from 25% to 22%. Therefore, these assessees are in appeal before us and praying the Bench that estimated addition is very higher side and it should be reduced, at a reasonable level. Considering the facts and circumstances, narrated above, we find that the estimation done by the assessing officer, and re-estimated addition, sustained by the Ld. CIT(A) @ 20% is very higher side. Therefore, we are of the view that the estimated addition on their unaccounted transaction should be @ 13%, which will take care of inconsistency in the undisclosed income. Therefore, the assessing officer, is directed to make the addition in the hands of all above assessees, at the rate of 13%, hence, appeals of those assessees, falling in category B and C, are partly allowed. 43. In the result, appeal filed by the assessees in ITA Nos. 232/Rjt/2023, 231/Rjt/2023, 233/Rjt/2023, 235/Rjt/2023, 236/Rjt/2023, 234/Rjt/2023, 315/Rjt/2023, 66/Rjt/2023, 76/Rjt/2023, 216/Rjt/2023, 211/Rjt/2023, ITA No. 66/Rjt/2023& others Range Ceramic Pvt. Ltd. &Ors 43 214/Rjt/2023, 217/Rjt/2023, 212/Rjt/23, IT(SS)A Nos. 41/Rjt/2023, 42/Rjt/2023 & 43/Rjt/2023, are partly allowed in above terms. 44. We note that in the following cases, wherein assessment order was framed by the assessing officer u/s 143(3)/153C of the Act, wherein we find that neither Shri Hiren Kalaria has given any statement or clarification about these assessees nor these assessees are linked with group cases. That is, Shri Hiren Kalaria, in his statement stated that he did not know the name of the ultimate beneficiaries, hence, these assessees relate to a different segment of trade and moreover, the trading activities of these assessees, noted below, are not similar to that of the other assessees in the group. Moreover, Shri Hiren Kalaria did not mention in his statement about these assessees that these assessees are related to the group business or they are connected with ultimate beneficiaries. Therefore, we note that the lists of assessees, given below, are not connected persons, and they are not ultimate beneficiaries. They are engaged in the different trade and business. The details of these assessees are mentioned below: Sr. No. Name of Assessee AY Asst. Order Section IT(SS)A/ ITA No. Name in seized material Date of Hearing Category Variation of facts and as per Hiren Kalaria’s statement 1 Laxmi Plastic 2019-20 143(3) 448/Rjt/2023 Jalpesh 18.07.24 A Mr Hiren Kalaria has not given mobile number of Jalpesh. In one of the statement there is other party named as Jalpesh Trading. Further, Jalpesh is not partner or employee of firm. 2 Vijay Fefar 2019-20 143(3) 449/Rjt/2023 Kishor 18.07.24 A Only Mobile No given. Mobile no. belongs to Kishor of Om Wire Products. Further, Vijay Fefar is deriving salary income from PGVCL and not engaged in any Ceramic Business. 3 Shailesh Kanji Mendpara 2019-20 143(3) 313/Rjt/2023 Shailesh 18.07.24 A Only Mobile number given by Mr Hiren Kalaria. The appellant is engaged in vehicle reparing garage business. Many person saves mobile no of appellant for repairing or servicing of their vehicles. 4 Lucaso Ceramic Pvt. Ltd. 2019-20 143(3) 352/Rjt/2023 Ramesh 18.07.24 A Name given by Mr Hiren Kalaria. However, Rameshbhai resigned from directorship of the Company from 13-06- 2016. 5 Admark 2019-20 143(3) 455/Rjt/2023 Vikas 18.07.24 A No name of the appellant ITA No. 66/Rjt/2023& others Range Ceramic Pvt. Ltd. &Ors 44 Ceramic Industries was in seized material and Hiren Kalariya in his statement also stated that he didn’t know the name of the ultimate beneficiary 6 Laxmi Plastic 2018-19 153C 94/Rjt/2023 Jalpesh 18.07.24 A Mr Hiren Kalaria has not given mobile number of Jalpesh. In one of the statement there is other party named as Jalpesh Trading. Further, Jalpesh is not partner or employee of firm. [Para (f) Page 18 of Paperbook]. 7 Vijay Fefar 2018-19 153C 95/Rjt/2023 Kishor 18.07.24 A Only Mobile No given. Mobile no belongs to Kishor of Om Wire Products. Further, Vijay Fefar is deriving salary income from PGVCL and not engaged in any Ceramic Business. 45. Therefore, we note that above these seven assessees are not connected with tile business and these assessees’ names are not therein the seized material, therefore, these assessees have been incorrectly identified, as beneficiary, by the assessing officer. These assessees are in different line of business, such as, Kiran shop wala, Paanwala, Pancturewala, or salaried employees etc. These above persons are not connected with ceramic industry and their names do not reflect in the seized materials. Therefore, in the case of above assessees, no addition should be made in their hands and whatever documents are relied by the assessing officer, for the purpose of above assessees, are dumped documents and, therefore, we delete the complete addition in their hands. 46. In the result, appeals filed by the assessee in ITA Nos. 448/Rjt/2023, 449/Rjt/2023, 313/Rjt/2023, 352/Rjt/2023, 455/Rjt/2023, IT (SS) Nos. 94/Rjt/2023, & 95/Rjt/2023, are allowed. 47. We note that in case of one assessee, namely, Shri Sanket Bhalodia, in ITA No.452/Rjt/2023, pertaining to A.Y. 2019-20, wherein the assessing officer has framed the assessment under Section 143(3) of the Act. We find that Shri Sanket Bhalodia is the employee of Coral Granito Pvt Ltd, and brother of Directors of said company. M/s. Coral Granito Pvt Ltd, has filed application ITA No. 66/Rjt/2023& others Range Ceramic Pvt. Ltd. &Ors 45 with Hon’ble Settlement Commission. Therefore, the income declared by the Coral Granito Pvt Ltd, in Settlement Commission, would take care of the addition made by the assessing officer in the hands of Shri Sanket Bhalodia. An affidavit stating these facts, has also been filed before the assessing officer that whatever addition made in the hands of Shri Sanket Bhalodia, has been covered in the income offered by M/s Coral Granito Pvt Ltd, before the Settlement Commission. Therefore, to make further addition in the hands of Shri Sanket Bhalodia, would tantamount to double addition. Hence, the addition is directed to be deleted. 48. In the result, the appeal filed by the assessee, in ITA No. 452/ Rjt/ 2023, is allowed. 49. In IT(SS)A No.66/Rjt/2023, for assessment year (AY) 2017-18, we find that the assessing officer has disallowed the claim of set off of claim of carry forward loss of Rs 2,31,64,078/-, as no details were furnished before him. No details have been produced in support of the ground raised, even during the appellate proceedings. We direct the assessing officer, to examine the factual documents of the assessee, relating to claim of set- off, of carry forward losses of Rs 2,31,64,078/-, and if the assessing officer, finds it correct, may allow the claim of set- off, of carry forward loss of Rs 2,31,64,078/-, in accordance with law. Therefore, statistical purposes, the ground No.5 raised by the assessee is allowed. Revenue`s appeals in case of Hiran Kalariya. 50. Now, we shall take appeals of the Revenue in ITA No.49/Rjt/2023, for assessment year(AY) 2018-19, and appeal in ITA No.50/Rjt/2023 for assessment year (A.Y.) 2019-20. These two appeals of Revenue relate to Shri ITA No. 66/Rjt/2023& others Range Ceramic Pvt. Ltd. &Ors 46 Hiren Khimjibhai Kalariya, wherein the assessing officer framed the assessment under section 153A r.w.s. 143(3) of the Act. The grounds of appeal raised by the Revenue, in ITA No.49/Rjt/2023, for assessment year(AY) 2018-19 are as follows: 1. On the facts and in the circumstances of the case and in law, learned Commissioner (Appeals) erred in deleting the addition of Rs. 36,95,40,540/- made on account of undisclosed/unaccounted sources u/s 69A of the Act on protective basis particularly when the appeal is pending against addition made on substantive basis in the cases of real beneficiaries. 2. On the facts and in the circumstances of the case and in law, the Ld.CIT(A), fails to appreciate the facts of the case, that during the course of search at the residential premises of assessee, various dairies and loose paper sheets containing details of various cash transactions pertaining to group companies and with other entities were found and seized. Further, Ld. CIT(A) also failed to appreciate the facts that while recording statement u/s 132(4) of the I.T. Act, 1961, the assessee has explained in detail the modus operandi adopted by him to assist the group companies and other persons in collection of proceeds of unaccounted sales. 3. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) ought to have upheld the order of the assessing officer. 4. It is therefore, prayed that the order of the learned Commissioner (Appeals) be set aside and that of the A.O. be restored to the above extent. 51. The grounds of appeal raised by the Revenue in ITA No.50/Rjt/2023 for assessment year (A.Y.) 2019-20, are as follows: “1. On the facts and on the circumstances of the case and in law, learned Commissioner (Appeals) erred in deleting the addition of Rs. 111,06,62,692/- made on protective basis particularly when the appeal is pending against addition made on substantive basis in the cases of real beneficiaries. 2. On the facts and on the circumstances of the case and in law, the Ld. CIT(A), erred in deleting the addition of Rs. 9,06,99,482/- made on account of undisclosed/unaccounted sources u/s 69A of the Act, particularly when the assessee failed to explain the sources of funds utilized for making such investment. 3. On the facts and on the circumstances of the case and in law, the Ld.CIT(A), erred in deleting the addition of Rs. 7,49,694/- made on account of commission @ .02% on unaccounted transactions. ITA No. 66/Rjt/2023& others Range Ceramic Pvt. Ltd. &Ors 47 4. On the facts and on the circumstances of the case and in law, the Ld.CIT(A), erred in deleting the addition of Rs. 2,52,28,530/- made on account of undisclosed/unaccounted investment u/s 69 of the Act, particularly when the assessee failed to give satisfactory explanation of the sources of funds utilized for making such investment. 5. On the facts and in the circumstances of the case and in law, the Ld. CIT(A), fails to appreciate the facts of the case, that during the course of search at the residential premises of assessee, various dairies and loose paper sheets containing details of various cash transactions pertaining to group companies and with other entities were found and seized. Further, Ld. CIT(A) also failed to appreciate the facts that while recording statement u/s 132(4) of the I.T. Act, 1961, the assessee has explained in detail the modus operandi adopted by him to assist the group companies and other persons in collection of proceeds of unaccounted sales. 6. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) ought to have upheld the order of the assessing officer. 7. It is therefore, prayed that the order of the learned Commissioner (Appeals) be set aside and that of the A.O. be restored to the above extent.” 52. We note that main issue involved in both these appeals is the addition on account of undisclosed/unaccounted sources u/s 69A of the Act on protective basis particularly when the appeal is pending against addition made on substantive basis in the cases of real beneficiaries. Therefore, we take lead case of Revenue`s appeal in ITA No.50/Rjt/2023 for assessment year 2019-20. 53. Succinct facts qua the issue are that assessing officer had made addition of Rs. 111,06,62,692/- u/s 69A of the Act, on protective basis, as the assessee was admittedly a commission earner and the real beneficiaries were other persons/entities, and the names of which were mentioned in the seize material. The names of such real beneficiaries were mentioned by the A.O. on page no 3 to 9 of the assessment order. The assessing officer had made protective addition of Rs. 111,06,62,692/-, in the hands of the assessee to protect the interest of the revenue on the ground that the assessee was not able to bring confirmations ITA No. 66/Rjt/2023& others Range Ceramic Pvt. Ltd. &Ors 48 from such real beneficiaries and the department had not yet started proceedings against such real beneficiaries when the assessment order in case of the assessee was framed by the assessing officer ( A.O.). 54. We have heard both the parties. Aggrieved by the above findings of the assessing officer, the assessee carried the matter in appeal before the ld. CIT (A), who has deleted the addition made by the assessing officer. During the appellate proceedings, it was submitted by the assessee that the assessee is undisputedly a commission agent, even as per the stand of the assessing officer and the assessing officer subsequent to passing of the assessment order in case of the assessee, initiated proceedings under section 153C of the Act, against real beneficiaries and also framed the assessment in their cases in making suitable additions on the basis of seized material found from the assessee. The assessee also submitted copy of assessment orders in case of a few of such beneficiaries. On this basis, the assessee submitted that there remains no valid justification or necessity of the protective addition in the hands of the assessee. 55. During the appellate proceedings, the Ld. CIT(A) has remitted the matter back to the assessing officer to examine the issue and to call the remand report. To verify the contentions of the assessee, the ld CIT(A) had called for a factual remand report from the assessing officer, vide letter dated 19.09.2022. In response, the assessing officer, vide letter dated 08.11.2022, submitted his report wherein the actions taken in case of real beneficiaries and the amounts added in their cases on substantive basis on the basis of seized material of the assessee have been mentioned. Copy of the factual report of the assessing officer is reproduced below for ready reference: ITA No. 66/Rjt/2023& others Range Ceramic Pvt. Ltd. &Ors 49 ITA No. 66/Rjt/2023& others Range Ceramic Pvt. Ltd. &Ors 50 ITA No. 66/Rjt/2023& others Range Ceramic Pvt. Ltd. &Ors 51 ITA No. 66/Rjt/2023& others Range Ceramic Pvt. Ltd. &Ors 52 ITA No. 66/Rjt/2023& others Range Ceramic Pvt. Ltd. &Ors 53 56.During the course of assessment proceedings, in respect of following 11 beneficiaries (mentioned in table below), the assessee, Shri Hiren Kalariya, has submitted an affidavit wherein he has stated that he had never worked with such 11 parties. Further, he has provided the name of real/actual beneficiaries.Basis on the assessee's submission, additions in the above mentioned 11 cases (mentioned in column no.1 of below table) were made on protective basis. Out of eleven cases, in eight cases, satisfaction have been drawn and sent to the ITA No. 66/Rjt/2023& others Range Ceramic Pvt. Ltd. &Ors 54 concerned jurisdictional assessing officer and assessment proceedings are going on with concerned jurisdiction Assessing Officer. However, in remaining 3 cases (i.e. Hirenkumar Pravinchandra Adroja, Vinod Training & Parvinbhai, mentioned at sr.no.3,4&7 respectively in below table) satisfaction could not be drawn, as details provided in these case are incomplete. Despite asking repeatedly Shri Hiren K. Kalaria, has not provided correct and complete name, address & PAN of these 3 beneficiaries. Further, no such person/parties could be ascertain from the tool available with the department. Since, the assessee has not provided complete details of these 3 so-called actual beneficiaries, the addition to the extent of amount involved in case of these beneficiaries (mentioned at Sr. No. 3,4 & 7 of column 1) may kindly be treated as substantive basis in the hand of the assessee, Shri Hiren K Kalaria. 57.After receiving the remand report from the assessing officer, the ld CIT(A) had sent the same to the assessee, for filing the Rejoinder, if any. In response to ITA No. 66/Rjt/2023& others Range Ceramic Pvt. Ltd. &Ors 55 the remand report, the assessee has filed Rejoinder through ITBA system on 06.12.2022, which is reproduced as under: “1. In his report dated 08.11.2022, the A.O. has provided the details of substantive additions made by him in the hands of the beneficiaries. The report also mentions that some of the beneficiaries have admitted before the A.O. to have received cash from the assessee and reconciled the same with their cash sales. 2. The above report of the A.O. supports my submission that I am a commission agent and therefore, neither any protective addition nor any substantive addition in my case is warranted since I have already offered the commission income for tax. 3. Further, at the cost of repetition, it is submitted that the substantive additions have been made by the A.O. in disregard of the ostensible and obvious content of the seized material. The same is not permissible in law. In my paper-book, I have submitted on this aspect in a detailed manner. 4. In view of the above, it is prayed that both the protective and substantive additions in my case may please be deleted and oblige.” 58. The ld CIT(A) after going through the remand report of the assessing officer, and reply of the assessee, on the demand report, it is noted from assessing officer's factual report, that a few of the beneficiaries have also admitted before the assessing officer to have received cash from the assessee and reconciled the same with its cash sales. In view of this report of the assessing officer, it is crystal clear that the assessing officer has proceeded against the real beneficiaries and made necessary action against them. Further, in the hands of the assessee, the commission income offered by him has been accepted on substantive basis and the A.O. has nowhere denied the fact that the assessee was a commission agent. Therefore, in view of (i) substantive additions having been made in the hands of the real beneficiaries and (ii) the assessee undisputedly being a commission agent even as per the assessing officer, there remains no ground for protective addition in the hands of the assessee. Therefore, ld CIT( A) deleted the protective addition of Rs. 111,06,62,692/- made in the hands of the assessee. ITA No. 66/Rjt/2023& others Range Ceramic Pvt. Ltd. &Ors 56 59.About action of the assessing officer in making addition of Rs.9,06,99,482/- u/s.69A r.w.s. 115BBE of the Act, on account of alleged income from undisclosed sources of substantive basis, the ld CIT(A) noted that on perusal of assessing officer's factual report, the assessing officer has reported that out of the total beneficiaries, the assessee has not provided complete details of 3 beneficiaries, so that the assessing officer could not draw satisfaction. The assessing officer has also requested to treat the addition made in the 3 beneficiaries, namely Hirenkumar Pravinchandra Adroja, Vinod Industries & Jay Rameshbhai Aghera as substantive basis in the hands of assessee, Shri Hiren K Kalariya. 60.In this regard, it was observed from the records that the assessing officer had made protective addition to the extent the beneficiaries were identified and traced by him and in respect of the remaining beneficiaries who could not be properly identified and traced by the assessing officer, the addition of the entire amount was made by the assessing officer in the hands of the assessee, for the reason that the assessee could not furnish complete address and PAN of these beneficiaries. 61.During the appellate proceedings, the assessee explained that the complete details of these beneficiaries were not available due to the reasons that in some cases, the relevant entries were not fully legible from the seized Annexures while in some other cases, the party had done only one time or occasional transactions with the assessee and in remaining cases, the parties could not be traced by the assessing officer himself though the particulars were provided by the assessee. The assessee further submitted that all these transactions were identical to the other transactions in the same seized material and therefore, it ITA No. 66/Rjt/2023& others Range Ceramic Pvt. Ltd. &Ors 57 was not proper on the part of the assessing officer to take contradictory views in respect of identical transactions from the same seized material. It was also submitted that there was nothing in the seized material to indicate that the remaining transactions belonged to the assessee and therefore, the view taken by the assessing officer and the addition made on such view were in direct conflict with the undisputed content of the seized material. On careful consideration of the entire factual matrix and the contents of seized material in particular, the ld CIT(A) accepted the submission of the assessee for the reasons as set out hereunder: (i)There is no dispute to the fact that the assessee was acting as a commission earner. In fact, the search in case of the assessee was initiated along with search in case of 'Coral Group' of Morbi for which the assessee worked as a commission agent for handling the cash of unaccounted transactions. (ii) The seized material found from the assessee during the course of search also indicated that the assessee acted as a commission agent for handling the cash of various beneficiaries. The assessee also admitted the same in his statement recorded during the course of search. (iii) The A.O. has also not disputed the fact that the assessee was a commission agent. The A.O. himself has assessed the commission income of the assessee on substantive basis in the assessment proceedings. It is also observed from the report of the A.O. dated 08.11.2022 that a few of the beneficiaries have also admitted having received cash from the assessee in the course of assessment proceedings. (iv) In respect of those beneficiaries who could be traced by the A.O. on the basis of seized material, the A.O. initiated proceedings u/s 153C in their cases ITA No. 66/Rjt/2023& others Range Ceramic Pvt. Ltd. &Ors 58 and made due addition in their hands. Hence, in respect of these beneficiaries, the fact that the assessee was a commission agent stood accepted by the A.O. himself. (v)Out of total transactions of Rs.157.09 Crores, the beneficiaries of transactions to the tune of Rs.148.08 Crores were traced and the beneficiaries to the tune of Rs.9.07 crores could not be traced. The untraced portion is just 5.77% of total transactions. The assessee has also put forward plausible explanations as to why such small fraction of beneficiaries could not be traced The small fraction and plausible explanation indicates genuine stand of the assessee and not any willful attempt to hide the details of any beneficiaries. (vi) The assessing officer, himself has also assessed the commission income of the assessee on the amount of Rs.9.07 Crores. Thus, on one side, the assessing officer has taken the view that the assessee is a commission agent and on the other side, he has also added the entire amount of Its.9.07 Crores in the hands of the assessee as his own transactions. This stand of the A.O. is self-contradictory. (vii).There is no apparent difference in the seized material between the transactions of Rs. 148.08 crores (beneficiaries identified) and Rs.9.09 crores (untraced beneficiaries). They are identical. The assessing officer has also not been able to show any difference between these transactions so as to justify different treatment. (viii) Most importantly, neither there was anything found during the course of search nor is there anything in the seized material to indicate that the assessee was doing any transactions/business of his own besides his activity as a commission agent. On the contrary, the seized material clearly indicated that the ITA No. 66/Rjt/2023& others Range Ceramic Pvt. Ltd. &Ors 59 assessee was a commission agent for entire transactions of Rs.157.09 Crores. The mere absence of complete particulars of a few beneficiaries by itself does not change the apparent and obvious nature of transactions recorded in seized material. (ix) It is a trite law that the seized material should be relied upon in entirety and pick and choose method is not allowable to any of the parties. Thus, when the seized material showed that the assessee was a commission agent for all the transactions mentioned therein, the A.O. cannot accept that view for one set of transactions and adopt opposite view for other set of transactions in contradiction to the content of seized material. Law does not permit approbate and reprobate to anyone. (x) The Rajkot ITAT decision in case of Smt. Ruksana Samir Makahni (IT(SS)A No. 134/RJT/2017) relied upon also applies to the case of the assessee. In the said case, the A.O. added entire amounts of cash deposits to the income of the assessee though the assessee was a commission agent as per the finding of the search. The Rajkot ITAT disapproved this action of the A.O. and directed to assess the commission income. This was also a case of Commission agent (Shroff) like the assessee handling cash transactions on behalf of the beneficiaries. In view of the above, the ld CIT(A) deleted the addition of Rs.9,06,99,482/- made by the assessing officer. 62.About addition of Rs.7,49,694/- on account of alleged commission income @ 0.2% of transaction value, the ld CIT(A) noticed that the seized material found from the assessee is speaking in nature meaning thereby that such seized material clearly contain the particulars of funds received on behalf of beneficiaries, funds received by the assessee after deducting commission of main agent, funds distributed by the assessee to beneficiaries and commission ITA No. 66/Rjt/2023& others Range Ceramic Pvt. Ltd. &Ors 60 income earned by the assessee. On the basis of seized material, the assessee prepared a date-wise chart of commission earned by him aggregating to Rs. 16,53,030/- which was offered for tax. However, the assessing officer disbelieved this commission on the contention that the market rate of commission was around Rs.200 to 300 per lakh. On this ground, the assessing officer estimated the commission income of the assessee at Rs.0.2% and re- worked the commission income of the assessee at Rs.24,02,724/- and thereby made addition of Rs.7,49,694/-. 63.During the course of appellate proceedings, the assessee submitted that the assessing officer was not justified in estimating the commission income at higher rate when such commission actually earned was clearly quantifiable from the seized material itself. It was further submitted by the assessee that the rate of Rs.200 to Rs. 300 per lakh assumed by the assessing officer was true for main agent and the seized material clearly showed that the assessee was a sub-agent and therefore, higher estimation made by the assessing officer was improper and misconceived. The ld CIT(A) noticed that it is a trite law that the seized material should be relied upon in its entirety and no pick and choose is permissible to any party. Here in case of the assessee, the assessing officer has relied upon the seized material and the assessment orders in case of the assessee, as well as in case of beneficiaries have been framed on the basis of such seized material only. The commission income of the assessee is also mentioned in such seized material and it is not the case of the assessing officer that the commission income of the assessee is not ascertainable from such seized material. This being the position, the determination of the commission income should be based on such seized material and not otherwise. The assessing officer has made higher estimate of commission only on the basis of his perception about the market rate of such commission. However, such perception alone cannot outweigh the seized material which should be the basis ITA No. 66/Rjt/2023& others Range Ceramic Pvt. Ltd. &Ors 61 of framing search related assessments as per the settled position of law. Therefore, the AO cannot estimate the commission income of the assessee particularly when such commission income is clearly ascertainable and quantifiable from the seized material. Further to this, the assessee has convincingly explained about the assumption of the A.O that the rate of Rs.200- 300 per lakh is for main agent whereas the assessee was a sub-agent which was evident from the seized material and therefore, even on this score, the rate adopted by the assessing officer was not applicable to the assessee since the rate of sub-agent always remain lower than that of main agent. The assessee has determined the commission income of Rs. 16,53,030/- by preparing a date-wise chart from the seized material and the assessing officer has not disputed that working. Hence, the commission income of the assessee can be assessed only at Rs. 16,53,030/- on the basis of seized maternal and the higher estimation made by the assessing officer is unsustainable both on facts as well as in law. Therefore, the addition of Rs.7,49,694/- was deleted by ld CIT(A). 64.About the making of addition of Rs.2,52,28,530/- u/s.69A r.w.s. 115BBE of the Act, on account of alleged undisclosed/unaccounted investments on protective basis, the ld CIT(A) noticed that the assessing officer had made protective addition of Rs. 2,52,28,530/- on the same analogy on which he made the addition of Rs. 111,06,62,692/- dealt with while adjudicating this ground. The ld CIT(A) noted that assessing officer has accepted the interest income offered by the assessee in respect of temporary advances made from the funds received and belonging to real beneficiaries. The Protective addition has been made to protect the interest of the revenue and at the time when the consequential actions in case of real beneficiaries were not yet taken. It is now clear from the report of the assessing officer dated 08.11.2022 that post assessment order in case of the assessee, he initiated proceedings under section 153C of the Act, in case of beneficiaries and made appropriate substantive ITA No. 66/Rjt/2023& others Range Ceramic Pvt. Ltd. &Ors 62 additions in their hands based on seized material found from the assessee. The underlying funds undisputedly do not belong to the assessee but to such beneficiaries. The assessee has merely earned interest by using such funds for temporary advances which income is offered and separately taxed by the assessing officer on substantive basis. In view of this the protective addition in the hands of the assessee is unwarranted. Therefore, the protective addition made by the assessing officer was deleted by ld CIT(A). 65. Aggrieved, by the order of the ld CIT(A), against each above addition, deleted by the CIT(A), the revenue is in appeal before us. The Ld. DR for the Revenue, for each addition, deleted by ld. CIT (A), has primarily reiterated the stand taken by the Assessing Officer, which we have already noted in our earlier para and is not being repeated for the sake of brevity. Therefore, learned DR for the Revenue, contended that original addition made by the assessing officer, in respect of each ground, in the assessment order, should be sustained and order of ld. CIT( A) may be reversed. 66. On the other hand, ld. Counsel for the assessee submitted that the additions were made by the assessing officer u/s. 69A of the Act, and the meaning of section 69A of the Act, is that assessee should be owner of the money or the amount, however, the assessee under consideration is not the owner of the money or the amount, therefore, the assessing officer, ought not to have made addition under section 69A of the Act. The ld. Counsel also submitted that diary was found in search and seizure action, and in that diary, the name of the assessee and his business, has specially mentioned stating that the assessee was acting as a commission agent. Therefore, the commission amount, may be taxable in the hands of the assessee, which was already texed by the department. Thus, ld. Counsel further submitted that in the case of Shri Hiren KhimjibhaiKalariya, in whose possession the diary was seized by the searched ITA No. 66/Rjt/2023& others Range Ceramic Pvt. Ltd. &Ors 63 team, is doing business of commission and the Department did not find any money deposit in the personal account of Shri Hiren KhimjibhaiKalariya. Moreover, in the case of Shri Hiren KhimjibhaiKalariya, in subsequent year, the assessment was framed by the assessing officer u/s 143(3) of the Act, wherein the Department has accepted him as a commission agent only. This way, ld Counsel, defended, the order passed by the ld CIT( A), in respect of each addition and stated that ld. CIT(A) has passed a reasoned order, which should be upheld. 67. We have gone through the findings of the Ld.CIT(A), in respect of each ground and the each addition deleted by the learned CIT(A), and considered, the submissions made by the learned DR for the Revenue, for each ground and learned Counsel for the assessee for each ground and we find that assessing officer has proceeded against the real beneficiaries and made necessary action against them. In the hands of Hiran Kalariya, the commission income offered by him has been accepted on substantive basis and the A.O. has nowhere denied the fact that the assessee was a commission agent. Therefore, in view of (i) substantive additions having been made in the hands of the real beneficiaries and (ii) the assessee undisputedly being a commission agent even as per the assessing officer, the ld CIT( A) deleted the protective addition of Rs. 111,06,62,692/- made in the hands of the assessee. We do not find any infirmity in the order of Ld CIT( A), hence, ground No.1 raised by the revenue is dismissed. 68.In respect of ground No.2, which relates to addition of Rs.9,06,99,482/- u/s.69A r.w.s. 115BBE of the Act, we note that the seized material should be relied upon in entirety and pick and choose method is not allowable to any of the parties. Thus, when the seized material showed that the assessee was a commission agent for all the transactions mentioned therein, the A.O. cannot accept that view for one set of transactions and adopt opposite view for other set ITA No. 66/Rjt/2023& others Range Ceramic Pvt. Ltd. &Ors 64 of transactions in contradiction to the content of seized material. Therefore, ld CIT(A) rightly deleted the addition made by the assessing officer, hence we dismiss the ground No. 2 raised by the revenue. 69. About ground No.3, which relates to addition of Rs.7,49,694/- on account of alleged commission income @ 0.2% of transaction value. We find that assessee has determined the commission income of Rs. 16,53,030/- by preparing a date-wise chart from the seized material and the assessing officer has not disputed that working. Hence, the commission income of the assessee can be assessed only at Rs. 16,53,030/- on the basis of seized maternal and the higher estimation made by the assessing officer is unsustainable both on facts as well as in law, therefore, the addition of Rs.7,49,694/- was rightly deleted by ld CIT(A). 70. So far ground No.4 and 5, are concerned, we find that ground No. 5 is general in nature, and hence do not require specific adjudication, as we have adjudicated this ground at appropriate places, while adjudicating other grounds. In ground No.4, we find that addition of Rs.2,52,28,530/- u/s.69A r.w.s. 115BBE of the Act, was made by the assessing officer, on account of alleged undisclosed investments on protective basis. The ld CIT(A) noticed that the assessing officer had made protective addition of Rs. 2,52,28,530/- on the same analogy on which he made the addition of Rs. 111,06,62,692/- dealt with while adjudicating this ground, pertaining to Rs. 111,06,62,692/-. The ld CIT(A) noted that assessing officer has accepted the interest income offered by the assessee in respect of temporary advances made from the funds received and belonging to real beneficiaries. The Protective addition has been made to protect the interest of the revenue and at the time when the consequential actions in case of real beneficiaries were not yet taken. It is now clear from the remand report of the assessing officer dated 08.11.2022 that post assessment order in case of the ITA No. 66/Rjt/2023& others Range Ceramic Pvt. Ltd. &Ors 65 assessee, he initiated proceedings under section 153C of the Act, in case of beneficiaries and made appropriate substantive additions in their hands based on seized material found from the assessee. The underlying funds undisputedly do not belong to the assessee but to such beneficiaries. The assessee has merely earned interest by using such funds for temporary advances which income is offered and separately taxed by the assessing officer on substantive basis. In view of this the protective addition in the hands of the assessee is unwarranted. Therefore, the protective addition made by the assessing officer was deleted by ld CIT(A). We concur with the above findings of ld CIT( A), and dismiss ground No.4 and 5 raised by the Revenue. 71. In the result, Revenue`s appeal in ITA No.50/Rjt/2023, for assessment year 2019-20, is dismissed. 72. We have adjudicated Revenue`s appeal, by taking lead case, in ITA No.50/Rjt/2023, for assessment year 2019-20, the facts and grounds of appeal, narrated in Revenue`s appeal in ITA No.49/Rjt/2023 for assessment year, 2018- 19, are similar and identical, therefore, our instant adjudication in ITA No.50/Rjt/2023, shall apply mutatis mutandis in the case of ITA No.49/Rjt/2023 for assessment year, 2018-19 also. Accordingly, this appeal of Revenue ( ITA No.49/Rjt/2023) is also dismissed. 73. In the combined result: (i).Appeals filed by the assessees in ITA Nos. 232/Rjt/2023, 231/Rjt/2023, 233/Rjt/2023, 235/Rjt/2023, 236/Rjt/2023, 234/Rjt/2023, 315/Rjt/2023, 66/Rjt/2023, 76/Rjt/2023, 216/Rjt/2023, 211/Rjt/2023, 214/Rjt/2023, 217/Rjt/2023, 212/Rjt/23, IT(SS)A Nos. 41/Rjt/2023, 42/Rjt/2023 & 43/Rjt/2023, are partly allowed. ITA No. 66/Rjt/2023& others Range Ceramic Pvt. Ltd. &Ors 66 (ii). Appeals filed by the assessee in ITA Nos. 448/Rjt/2023, 449/Rjt/2023, 313/Rjt/2023, 352/Rjt/2023, 455/Rjt/2023, IT (SS) Nos. 94/Rjt/2023, & 95/Rjt/2023, are allowed. (iii). Appeal filed by the assessee, in ITA No. 452/ Rjt/ 2023, is allowed. (iv) Appeals filed by the Revenue in ITA No.50/Rjt/2023 and in ITA No.49/Rjt/2023, are dismissed. Order pronounced in the open court on 19/08/2024 Sd/- Sd/- (DINESH MOHAN SINHA) (Dr.A. L. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER Rajkot; Dated: 19/08/2024 आदेशकȧĤǓतͧलͪपअĒेͪषत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT(A)-concerned / (NFAC), Delhi 5. DR, ITAT, Rajkot. 6. Guard file. By order/आदेशसे, स×याͪपत ĤǓत //True Copy// Assistant Registrar/SR. P.S./P.S. ITAT, Rajkot ITA No. 66/Rjt/2023& others Range Ceramic Pvt. Ltd. &Ors 67 Strengthened preparation & delivery of orders in the ITAT 1) Date of dictation 19.07.2024 2) Date on which the typed draft is placed before the Dictating Member & Other Member 22.07.2024/19.8.2024 3) Date on which the approved draft comes to the Sr. P.S./P.S. 4) Date on which the fair order is placed before the Dictating Member for pronouncement 5) Date on which the fair order comes back to the Sr. P.S./P.S. 6) Date on which the file goes to the Bench Clerk 21.8.’24 7) Date on which the file goes the Head Clerk 21.8.’24 8) Date on which the file goes to the Assistant Registrar for signature on the order 9) Date of Dispatch of the order
