M/S. COASTAL ENERGY PRIVATE LIMITED REPRESENTED BY OFFICAL LIQUIDATOR,CHENNAI V. ACIT CENTRAL CIRCLE -1(1), CHENNAI

ITTPA 53/CHNY/2023

AI Insights

The case involves Coastal Energy Pvt. Ltd., which faced multiple assessments for the assessment years 2010-11 to 2017-18 under the Income Tax Act, 1961. The assessments included additions for undisclosed income and downward adjustments in transfer pricing, based on the company's transactions with its associated enterprises. The company contested these assessments, arguing that they were made during a moratorium period under the Insolvency and Bankruptcy Code, 2016, and that the additions were based on incomplete considerations of the seized materials and the income offered before the Settlement Commission. The Tribunal's decision highlighted the need for a comprehensive re-evaluation of the assessments, considering all relevant materials and legal provisions.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 107997 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 5 month(s) 23 day(s)
• Appeal Type: Income Tax (Transfer Pricing) Appeal
• Pronouncement Date: 11-11-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 11-09-2024
• Assessment Year: 2011-2012
• Appeal Filed On: 19-05-2023
• Other Referred Cases: Sundaresh Bhatt, Liquidator of ABG Shipyard vs. Central Board of Indirect Taxes and Customs, S.V. Kondaskar v. V.M. Deshpande, ACIT vs. RP of Diamond Power Infrastructure Ltd., Tilda Riceland Pvt. Ltd. v ACIT, Panna Corporation vs. Dy. CIT, President Industries vs. CIT, Balchand Ajit Kumar vs. CIT, Nawal Kishore Soni vs. ACIT, Diamond Power Infrastructure Ltd. vs. ACIT, Godhra Electricity Co. Ltd. vs. CIT, Poona Electricity Supply Company Limited vs. CIT, Equipment Finance Limited vs. CIT, S.V. Kondaskar vs. V.M. Deshpande
• Laws Referred To: Income Tax Act, 1961, Insolvency & Bankruptcy Code, 2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A. SASIKUMAR
• Assessee Lawyers: RAMAKRISHNAN
• Keywords: Set aside; Business income; Difference of opinion; Change of opinion; Additional evidence; Transfer pricing; International transaction; Document seized; Documents seized; Tax effect; Retraction; Search and seizure; Liquidation
• Section: 148; 143(3); 142(1); 143(2); 271(1)(c); 153A; 43; 22; 13; 92CA; 40A(3); 20

Judgement Text

"आयकरअपीलीयअिधकरण,‘ डी’ ᭠यायपीठ,चे᳖ई IN THE INCOME TAX APPELLATE TRIBUNAL ‘D’ BENCH, CHENNAI ᮰ीमहावीरᳲसह, उपा᭟यᭃएवं᮰ीएस.आर.रघुनाथा, लेखासद᭭यके समᭃ BEFORE SHRI MAHAVIR SINGH, VICE PRESIDENTAND SHRI S.R.RAGHUNATHA, ACCOUNTANT MEMBER आयकर अपील सं./IT(TP)A Nos.:52, 53, 54, 55, 56, 57, 58 & 59/CHNY/2023 िनधाᭅरण वषᭅ/Assessment Years:2010-11, 2011-12, 2012-13, 2013-14, 2014-15, 2015-16, 2016-17 & 2017-18 Coastal Energy Pvt. Ltd., Rep. by Official Liquidator, Chennai Old No.22, New No.28, Menod Street, Purasawakkam, Chennai – 600 007. PAN: AAACC 4160A Vs. The Assistant Commissioner of Income Tax, Central Circle -1(1), Chennai. (अपीलाथᱮ/Appellant) (ᮧ᭜यथᱮ/Respondent) अपीलाथᱮकᳱओरसे/Appellant by : Shri Ramakrishnan, FCA ᮧ᭜यथᱮकᳱओरसे/Respondent by : Shri A.Sasikumar, CIT सुनवाई कᳱ तारीख/Date of Hearing : 11.09.2024 घोषणा कᳱ तारीख/Date of Pronouncement : 11.11.2024 आदेश /O R D E R PER S.R. RAGHUNATHTA, ACCOUNTANT MEMBER: These appeals by the assessee are arising out of the common order of the Commissioner of Income Tax (Appeals)-18, Chennai in Appeal Reference Nos. CIT(A),Chennai-18/10218/2009-10, 10146/2010-11, 10117/2011-12, 10137/2012-13, 10409/2013-14, - 2 - ITA Nos.52 to 59/CHNY/2023 11107/2014-15, 11256/2015-16 & 10876/2016-17 dated 31.03.2023. The assessment were framed by the ACIT, Central Circle 1(1), Chennai for the assessment year 2010-11 u/s.143(3) r.w.s. 92CA r.w.s. 144C(3) r.w.s. 147 of the Income Tax Act, 1961 (hereinafter the ‘Act’) vide order dated 17.04.2021 and for the assessment years 2011-12 to 2017-18 u/s.143(3) r.w.s.92CA r.w.s.144(C) r.w.s. 153B r.w.s. 153A of the Act vide orders dated 16.04.2021 / 17.04.2021. 2. The first common issue, raised by ld.AR for the assessee during the course of hearing, in these eight appeals of assessee is as regards to the order of CIT(A) upholding the assessments framed in these assessment years i.e., 2010-11 to 2017-18 during moratorium period u/s.14 of the Insolvency & Bankruptcy Code (IBC), 2016, for which insolvency application pertaining to the assessee have been admitted by the National Company Law Tribunal (NCLT), Chennai vide letter dated 06.01.2020. For this, assessee raised common ground No.2 in all these eight appeals. Hence, we will take the ground and facts from assessment year 2010-11 i.e., the lead year raised in ITA No.52/CHNY/2023. The relevant ground reads as under:- “2. For that the Learned Commissioner of Income Tax (Appeals) erred in upholding the Assessment Order dated 17.04.2021 passed during the - 3 - ITA Nos.52 to 59/CHNY/2023 moratorium period u/s 14 of the Insolvency and Bankruptcy Code, 2016 for the insolvency application pertaining to the appellant had been admitted by National Company Law Tribunal vide order dated 06.01.2020.” 3. Brief facts are that the assessee M/s.Coastal Energy Private Limited (\"the Appellant\") is a Private Limited Company engaged in the business of the fuel supply chain, logistics, container services and trading coal, which issourced by way of imports from Indonesia, South Africa and Australia. The Appellant is assessed to tax by Assistant Commissioner of Income Tax, CentralCircle-1(1), Chennai ('the Assessing Officer' or 'AO) under the PAN: AAACC4160A. For the subject Assessment Year (\"AY\") the appellant company had filed its return of income u/s.139(1) on 22-09-2010 admitting a total income of Rs. 8,03,60,975/-. The case was selected for the scrutiny under CASS during the course of which reference was made to the Transfer Pricing Officer ('the TPO) u/s 92CA. The TPO found the international transactions with AE to be at Arm's Length and therefore, determined the Transfer Pricing adjustment at 'NIL'. The Assessing Officer in pursuance thereof passed an order u/s 143(3) r.w.s 92CA(3) of the Income-tax Act, 1961 ('the Act') dt. 18.03.2014 by restricting disallowances only to other corporate additions totalling to Rs.13,28,177/- and thus determined the total income atRs.8,16,89,152/-. The Search u/s.132 of the Act was carried out at the premises of the appellant and its group companies on - 4 - ITA Nos.52 to 59/CHNY/2023 04.01.2017. Consequently, a notice u/s 148 of the Act for the subject assessment year dated 28.03.2017 was issued and in response, the appellant filed its return of income on 07.04.2017 declaring the same total income of Rs.8,03,60,975/- as had been disclosed in the return filed under section 139(1). Notice u/s 143(2) dated 21.11.2017 was issued and duly served to the appellant. A letter dated 21.11.2017 was also issued to the assessee communicating the reasons for reopening the case u/s.147 of the Act. Meanwhile, a reference was made for \"Exchange of Information\" on 28.12.2017. Further, a notice u/s.142(1) dated 27.11.2018 and a show cause notice dated 28.11.2018 were issued asking the appellant to show-cause as to why an amount of Rs.23,71,96,630/- should not be treated as an additional income towards over-invoicing of coal purchase made from M/s. Coal and Oil LLC, Dubai, over-invoicing of stevedoring, transporting charges and unrecorded cash sales as the same was shown in the letter dated 03.03.2017 filed by Mr.Ahmed Buhari, Director of M/s.Coastal Energy Private Limited and also as admitted in the sworn statements recorded from him on 02.03.2017. 3.1 Subsequently, based on the findings during the course of search proceedings pertaining to transfer pricing issues, the learned - 5 - ITA Nos.52 to 59/CHNY/2023 AO referred the case to the TPO. In this regard, the appellant company had filed settlement application inS.A.No.TN/CN51/2018- 19/62/1T before the Hon'ble Income Tax Settlement Commission, Additional Bench, Chennai on 12.12.2018. The said application was rejected by the Hon'ble Settlement Commission vide order u/s 245D(1) dated 19.12.2018. The appellant thereafter filed another settlement application in S.A.No.TN/CN51/2018-19/120/1T on 14.02.2019, which was also rejected vide order u/s 245D(1) dated 21.02.2019. Further, the appellant filed another settlement application in SA No.TN/CN51/2019-20/10/1T on 16.04.2019, which was treated as defective by the Hon'ble Income Tax Settlement Commission vide letter in F.No.TN/CN52/2019-20/10-12/IT dated 25.04.2019. Meanwhile, the TPO proposed downward adjustments of Rs.132,11,71,500/- to the value of purchase of the coal and accordingly the show cause notice dated 26.08.2019 was issued to which the Appellant had objected to. However, the learned TPO rejected the submissions of the appellant and made the said downward adjustment vide order No. ITBA/TPO/F/92CA3/2019- 20/1019690595(1) dated 01.11.2019. Further, Show cause notice dated 20.11.2019 was issued by the Assessing Officer to the appellant intimating the status of the assessment proceeding and its revival in term of Section 245HA of the Act and posting the case for - 6 - ITA Nos.52 to 59/CHNY/2023 hearing on 29.11.2019. In response to the mentioned notice, the appellant vide a letter dated 02.12.2019 stated that it is in process of preparing and filing another settlement application u/s.245C of the Act on or before 06.12.2019. 3.2 In the meantime, the appellant filed Writ Petitions in W.P.Nos. 34618, 34626, 34630, 34644,34656, 34660, 34665 and 34668 of 2019 before the Hon'ble Madras High Court, challenging the consolidated order of the Transfer Pricing Officer u/s.92CA(3) of the Act dated01.11.2019 for the A.Ys. 2010-11 to 2017-18.The Hon'ble High Court directed the assessing officer, pending disposal of the said writ petitions, to proceed with the process of completing the assessments in accordance with the law and pass the orders of assessment, but shall not give effect to the same until further orders from this Court. Accordingly, a Draft Assessment Order u/s 143(3) r.w.s. 92CA r.w.s 144C(1) r.w.s 153B r.w.s147 of the Act, was forwarded on 29.12.2019, making the following additions: 1. Alleged undisclosed income in the hands of the appellant - Rs.23,71,96,630/- 2. Upward Transfer Pricing adjustment as proposed by the TPO amounting to Rs.1,32,11,71,500/- Thus, the Total assessed income was arrived at Rs 1,64,00,57,282/-. - 7 - ITA Nos.52 to 59/CHNY/2023 3.3 Finally, the Learned AO completed the assessment and passed the final Order u/s 143(3) r.w.s 144C(3) r.w.s 92CA r.w.s 153B r.w.s 147 of the Act on 26.02.2020, confirming the above additions/disallowances arriving at the assessed income of Rs.1,64,00,57,282/-. 3.4 In the meanwhile, the Hon'ble High Court, vide order dated 27.08.2020 in W.P.Nos.34618,34626, 34630, 34644, 34656, 34660, 34665 and 34668 of 2019, set aside the orders of the TPO and directed the TPO to initiate the proceedings de novo and to complete the same as directed therein. Further, the Hon'ble High Court directed the assessing officer to pass a consolidated order of assessments, incorporating the transfer pricing component of the assessment, consequent to the fresh order of the TPO. 3.5 Consequently, the TPO (DCIT, TPO Circle 1(1), Chennai) passed a fresh order under section92CA(3) of the Act on 09.12.2020 proposing a downward adjustment of Rs.78,48,23,876/-with respect to the transaction of purchase of coal from AEs. Accordingly, the Learned Assessing Officer, as directed by the Hon'ble High Court, passed the final Assessment Order u/s.143(3) r.w.s. 92CA r.w.s. 144C(3) r.w.s. 147 of the Act, 1961on 17.04.2021 making the following additions: - 8 - ITA Nos.52 to 59/CHNY/2023 Sl.No. Nature of Adjustment Reason for additional disallowance Total Addition (Rs.) 1. Income stated in the sworn stated as undisclosed income Income admitted as undisclosed income in the sworn statements recorded from Mr.AhmedBuhari on account of over-invoicing and cash sales 23,71,96,630/- 2. Downward adjustment in the purchases made from its AE based on ALP re computed by the TPO The ALP for the purchases of coal was re-computed by the TPO and AO had accordingly adopted the adjustments 78,48,23,876/- Total 1,02,20,20,506/- Thereby, the AO determined the assessed income at Rs.1,10,37,09,658/- and raised a demand of Rs.75,72,46,232/-. Aggrieved, assessee preferred appeal before CIT(A). 4. The CIT(A) confirmed the additions / disallowances and also enhanced the income. The enhancement by CIT(A) was carried out in assessment year 2013-14 on account of shortfall / difference between the amount offered during the course of search and in the application filed before the Settlement Commission for the assessment years 2013-14, 2015-16, 2016-17 & 2017-18. Before CIT(A), the assessee pleaded the ground regarding the process of insolvency and stated that the assessee company is undergoing corporate resolution process under IBC by filing an insolvency application, which was admitted by NCLT vide order dated - 9 - ITA Nos.52 to 59/CHNY/2023 06.01.2020 and moratorium was ordered u/s.14 of the IBC by the NCLT. It was contended before CIT(A) by the assessee that the AO/TPO should not have carried out on the process of estimation in the case of the assessee, when the assessee was undergoing corporate insolvency resolution process. But the CIT(A) after considering the submissions of the assessee and the provisions of IBC as well as the decision of Hon’ble Supreme Court in the case of Sundaresh Bhatt, Liquidator of ABG Shipyard vs. Central Board of Indirect Taxes and Customs reported in [2022] 141 taxmann.com 471 (SC) rejected the assessee’s ground by observing that the assessment in assessee’s case of undisclosed income is not in the nature of legal proceedings, thus section 14 of the IBC does not bar the Revenue from continuing its assessment and further held that admission of application pertaining to assessee into corporate insolvency resolution plan does not have a bearing on the present assessment proceedings by discussing the entire provisions of IBC. The CIT(A) finally rejected the assessee’s ground and upheld the action of AO by observing in para 9.1.9.2 to 9.1.10 as under”- 9.1.9.2 Thus, the Hon'ble Apex Court has held that during the moratorium period, the assessing authority has powers to assess/ determine the quantum of levy. The Hon'ble Court in its analysis at paragraph 45 of the order has referred to its own decision in the case of S.V. Kondaskar v. V.M. Deshpande, AIR 1972 SC 878 wherein the Court has expounded the interplay of Section446 of the Companies Act 1956 (bankruptcy provision) with the Income Tax Act, 1961 and observed that the argument that the - 10 - ITA Nos.52 to 59/CHNY/2023 proceedings for assessment or re-assessment of a company which is being wound up can only be started or continued with the leave of the liquidation court is also, on the scheme both of the Act and of the Income Tax Act, unacceptable. We have not been shown any principle on which the liquidation court should be vested with the power to stop assessment proceedings for determining the amount of tax payable by the company which is being wound up\". 9.1.9.3 Further, in paragraph 46 of the order in Sundaresh Bhat, RP of ABG Shipyard, the Hon'ble Supreme Court has held as under: “46. Therefore, this Court held that the authorities can only take steps to determine the tax, interest, fines or any penalty which is due. However, the authority cannot enforce a claim for recovery or levy of interest on the tax due during the period of moratorium. We are of the opinion that the above ratio squarely applies to the interplay between the IBC and the Customs Act in this context.\" 9.1.9.4 The above observation of the Hon'ble Supreme Court makes it clear that the Assessing authority under the Income-tax Act,1961 can also determine the tax, interest, fines or any penalty which is due. 9.1.9.5 This decision of the Hon'ble Supreme Court was not available to the Hon'ble Calcutta High Court when the Hon'ble Court had decided the issue in Equipment Finance Limited (supra). 9.1.9.6 Therefore, duly following the decision of the Hon’ble Supreme Court in the case Sundaresh Bhatt, Liquidator of ABG Shipyard, I hold that the assessments made by the TPO/ AO during the moratorium period are valid under law. 9.1.9.7 Further, it is appropriate to bring to notice the observation of the Hon'ble Court in paragraph 47 of the aforesaid order wherein it said: \"47. ... The interim resolution professional, resolution professional or the liquidator, as the case may be, has an obligation to ensure that assessment is legal and he has been provided with sufficient power to question any assessment, if he finds the same to be excessive.\" - 11 - ITA Nos.52 to 59/CHNY/2023 Thus, by filing the appeals before the undersigned against the assessments order, the Resolution Professional has himself followed the aforesaid decision of the Hon'ble Supreme Court as contained in paragraph 47 of the order. Therefore, while following one part of the order and at the same time, he cannot agitate an issue by questioning the powers of the assessing authority in determining the tax, interest, etc which is also upheld by the same order of the Hon’ble Supreme Court. 9.1.10 Therefore, there is no merit in the claim of the assessee on this issue and accordingly, the grounds 2 and 3 of the assessee and the submission on this issue are dismissed in all these appeals.” Aggrieved, now assessee is in appeal before the Tribunal. 5. We have heard rival contentions and gone through facts and circumstances of the case. Before us, the ld.counsel for the assessee first of all drew our attention to the order passed by NCLT on 06.01.2020 and took us through the relevant paras of the order i.e., para 31 & 32 which reads as under:- 31. The duration of period of moratorium shall be as provided in Section14(4) of the Code which is reproduced below for ready reference; (4) The order of moratorium shall have effect from the date of such order till the completion of the Corporate Insolvency Resolution Process Provided that where at any time during the Corporate Insolvency Resolution Process period, if the Adjudicating Authority approves the Resolution Plan under sub - section (1) of Section 31 or passes an order for liquidation of Corporate Debtor under Section 33, the moratorium shall cease to have effect from the date of such approval or liquidation order, as the case may be.\" 32. Based on the above terms, the Application stands admitted in terms of Section 7 of the I & B Code, 2016and the Moratorium shall come into effect as of this date. - 12 - ITA Nos.52 to 59/CHNY/2023 5.1 In term of the above order, the ld.counsel for the assessee stated that NCLT has passed order and admitted application of the creditors i.e., Indian Overseas Bank allowing period of moratorium as provided in section 14(4) of the IBC. Thereafter, ld.counsel for the assessee took us through the section 14 of the IBC and read out the relevant provisions of section 14(1)(a) reads as under:- “14. Moratorium – (1) Subject to provisions of sub-sections (2) and (3), on the insolvency commencement date, the Adjudicating Authority shall by order declare moratorium for prohibiting all of the following namely- (a) the institution of suits or continuation of pending suits or proceedings against the corporate debtor including execution of any judgment, decree or order in any court of law, tribunal, arbitration panel or other authority;” 5.2 In term of the above, the ld.counsel for the assessee made submission that once moratorium period starts it prohibits all the Authorities, Tribunals, Courts or Institutions from proceeding to institute suits or continue with pending suits or proceedings against the corporate debtor including exclusion of any judgment, decree or order in any court of law, tribunal, arbitration before or any other authority. The ld.counsel for the assessee stated that the provisions of section 14 of IBC is very clear that in the present case, the AO could not have proceeded with framing of assessment order, which - 13 - ITA Nos.52 to 59/CHNY/2023 was framed in all these assessment years on 17.04.2021 during the pendency of moratorium period which is from 06.01.2020. To support this, the ld.counsel for the assessee made submissions that in case, the AO want to proceed with the assessment he has to seek permission from the NCLT to proceed with the assessment proceedings. The ld.counsel for the assessee for this proposition relied on the decision of NCLAT in the case of ACIT vs. RP of Diamond Power Infrastructure Ltd., reported in [2024] 166 taxmann.com 74 has considered the chronology of that case and considered the AO’s submission and allowed proceeding with the assessment even during the course of moratorium period. The ld.counsel drew our attention to para 2 of the NCLAT order, which reads as under:- “2. The chronological sequence of events of the present case which are necessary to be noticed for consideration of the matter by us is as hereunder:  On 24.08.2018, the Corporate Debtor - M/s Diamond Power Infrastructure Ltd - Respondent No.3 was admitted into Corporate Insolvency Resolution Process (‘CIRP’ in short) vide order dated 24.08.2018.  Subsequently, the Respondent No. 1 was appointed as the Resolution Professional (‘RP’ in short). The RP constituted the Committee of Creditor (‘CoC’ in short).  On 25.10.2018, Notices under relevant provisions of the Income Tax Act for A.Y. 2013-14 to A.Y. 2018-19 was issued by the Appellant to the Respondent No. 3 Company to furnish their Income Tax returns.  On 08.11.2019, Form B was submitted by the Appellant to the RP/Respondent No. 1 in respect of proof of claim. - 14 - ITA Nos.52 to 59/CHNY/2023  On 27.05.2020, the Appellant approached the Adjudicating Authority seeking permission to carry out the assessment proceedings of Respondent No. 3 Company for the A.Y. 2013-14 to 2019-20. The said application was allowed by the Adjudicating Authority vide its order in IA No. 672 of 2019 dated 27.05.2020 wherein the RP was directed to extend cooperation to the Appellant.  On 06.06.2020, the Appellant informed the RP that though the tax demand of Respondent No. 3 Company could not be crystallized, however, there was a likelihood of a heavy demand.  On 20.01.2021, 22.01.02021, 25.01.2021, 09.02.2021, 15.02.2021 and 26.02.2021, the Respondent No. 3 Company was served with Notices by the Appellant under the Income Tax Act. This was followed up with a special audit which report was received on 02.12.2021.  The resolution plan submitted by SRA/Respondent No. 2 was approved by CoC and subsequent thereto, the RP filed an application for approval of the resolution plan which was allowed by the Adjudicating Authority on 20.06.2022.  The assessment proceedings were completed for A.Y. 2013-14 to 2019-20 and a Show Cause Notice issued to the Corporate Debtor Company on 15.06.2022. Thereafter, the Appellant served Demand notices under the Income Tax Act upon Respondent No. 3 Company for A.Y. 2013-14 to 2019-20 on 29.06.2022, 30.06.2022 and 01.07.2022 by which time resolution plan was approved by Adjudicating Authority.” 6. Per contra, the Ld.DR asserted the action of the CIT(A) and stated the order has been passed by Ld.CIT(A) after considering the submissions of the assessee and the provisions of IBC as well as the decision of Hon’ble Supreme Court in the case of Sundaresh Bhatt, Liquidator of ABG Shipyard vs. Central Board of Indirect Taxes and Customs reported in [2022] 141 taxmann.com 471 (SC) rejected the assessee’s ground by observing that the assessment in assessee’s - 15 - ITA Nos.52 to 59/CHNY/2023 case of undisclosed income is not in the nature of legal proceedings, thus section 14 of the IBC does not bar the Revenue from continuing its assessment and further held that admission of application pertaining to assessee into corporate insolvency resolution plan does not have a bearing on the present assessment proceedings by discussing the entire provisions of IBC. The Ld.DR stated that the CIT(A) has rightly rejected the assessee’s ground and upheld the action of AO by relying on the decision of the Hon'ble Apex Court’s decision in the case of S.V. Kondaskar v. V.M. Deshpande, AIR 1972 SC 878, Sundaresh Bhat, RP of ABG Shipyard and therefore, there is no merit in the claim of the assessee on this issue and prayed for dismissing the grounds raised by the assessee on this issue. 7. We have heard the rival submissions and gone through the materials available on record and orders of the authorities below. We note that the Search operations u/s.132 of the Act was carried out at the premises of the assessee and its group companies on 04.01.2017.Consequently, a notice u/s 148 of the Act for the subject assessment year dated 28.03.2017was issued and in response, the appellant filed its return of income on 07.04.2017 declaring the same total income of Rs.8,03,60,975/- as had been disclosed in the return filed under section 139(1). Later on assessment was framed - 16 - ITA Nos.52 to 59/CHNY/2023 by making an addition of Rs.23,71,96,630/- as an additional income towards over-invoicing of coal purchase made from M/s. Coal and Oil LLC, Dubai, over-invoicing of stevedoring, transporting charges and unrecorded cash sales as the same was shown in the letter dated 03.03.2017 filed by Mr. Ahmed Buhari, Director of M/s.Coastal Energy Private Limited and also as admitted in the sworn statements recorded from him on 02.03.2017. Apart from the above addition, based on the order of the TPO, Downward adjustment in the purchases made from its AE for the reason that the ALP for the purchases of coal was re-computed and AO had accordingly adopted the adjustments of an amount of Rs.78,48,23,876/- passed an order dated 17.04.2021. The AO had passed an order during the moratorium period as per Section 14 of the Insolvency & Bankruptcy Code (IBC), 2016, for which insolvency application pertaining to the assessee have been admitted by the National Company Law Tribunal (NCLT), Chennai vide letter dated 06.01.2020. 7.1 We have gone through the provisions of IBC and also the reliance of decision of the Hon’ble Apex court in the case of Sundaresh Bhatt, Liquidator of ABG Shipyard vs. Central Board of Indirect Taxes and Customs reported in [2022] 141 taxmann.com 471 (SC), by the Ld.DR, wherein their lordship held as under: - 17 - ITA Nos.52 to 59/CHNY/2023 “46. Therefore, this Court held that the authorities can only take steps to determine the tax, interest, fines or any penalty which is due. However, the authority cannot enforce a claim for recovery or levy of interest on the tax due during the period of moratorium. We are of the opinion that the above ratio squarely applies to the interplay between the IBC and the Customs Act in this context.\" And also observed as under: \"47. ... The interim resolution professional, resolution professional or the liquidator, as the case may be, has an obligation to ensure that assessment is legal and he has been provided with sufficient power to question any assessment, if he finds the same to be excessive.\" 7.2 In the facts and circumstances of the case and respectfully following the decision of the Hon’ble Supreme Court (supra), we are of the considered opinion that the order passed by the AO during the moratorium period is in accordance with law and therefore, we uphold the order of AO and that of the Ld.CIT(A) in this issue and hence this ground of the assessee is dismissed. 8. Coming back to the issue of other additions to the tune of Rs.23,71,96,630/- made by the AO towards over-invoicing of coal purchase made from M/s. Coal and Oil LLC, Dubai, over-invoicing of stevedoring, transporting charges and unrecorded cash sales as the same was shown in the letter dated 03.03.2017 filed by Mr. Ahmed Buhari, Director of M/s.Coastal Energy Private Limited, and also the - 18 - ITA Nos.52 to 59/CHNY/2023 downward TP adjustment to ALP of Rs.78,48,23,876/-. The assessee raised the following grounds of appeal: “Transfer Pricing Adjustment 4. For that the Learned Commissioner of Income Tax (Appeals) erred in confirming the Order of the Assessing Officer pertaining to the downward Transfer Pricing adjustment of Rs. 78,48,23,876/- by holding that additional evidences were available to the Transfer Pricing Officer (\"TPO\") in this regard. .(Tax effect- Rs. 26,67,61,635/-) 5. For that the Learned Commissioner of Income Tax (Appeals) erred in confirming the downward Transfer Pricing adjustment of Rs.78,48,23,876/- without appreciating that the case being subjected to scrutiny assessment earlier u/s 143(3) of the Income Tax Act (\"the Act\") wherein it was concluded that no adjustment was necessary on account of International Transactions with Associated Enterprises, the Transfer Pricing adjustments in the subject re-assessment proceedings u/s 147 amounts only to a mere change of opinion that is unsustainable in law . 6. For that the Learned Commissioner of Income Tax (Appeals) erred in confirming the downward Transfer Pricing adjustment of Rs. 78,48,23,876/- by upholding the TIPS database used by the TPO for benchmarking the international transactions under the CUP Method and by rejecting that adopted by the appellant based on the relevant Market Price index. 7. For that the Learned Commissioner of Income Tax (Appeals) erred in confirming the downward Transfer Pricing adjustment of Rs.78,48,23,876/- by upholding the method adopted by the TPO being adoption of comparable rate based on TIPS database when available on a transaction by- transaction basis and that of monthly average of TIPS data in other cases without appreciating the submissions made by the appellant in this regard. Other additions : 8. For that the Learned Commissioner of Income Tax (Appeals) erred in confirming the addition of Rs.23,71,96,630/- made towards alleged over invoicing of coal purchase, over-invoicing of stevedoring and transportation charges and unrecorded cash sales. (Tax effect – Rs.8,06,23,135/-) 9. For that the Learned Commissioner of Income Tax (Appeals) erred in holding that telescoping is not possible and rejecting the claim of the appellant with respect to elimination of the effect of double disallowance, if - 19 - ITA Nos.52 to 59/CHNY/2023 any included on account of Transfer Pricing adjustments as against that made on over-invoicing of coal. 10. For that the Learned Commissioner of Income Tax (Appeals) erred in rejecting the claim of the appellant that the addition made on account of search proceedings ought to have been restricted to the net profit offered as undisclosed income before the Hon'ble Income Tax Settlement Commission in its Settlement Application vide SA.No.TN/CN51/2018-19/120/IT (which was computed after considering the entire seized material) in compliance with section 245HA of the Act by holding that the claim was neither borne out of the provisions of the said section 245HA nor from verified facts from the proceedings of the Commission. 11. For that the Learned Commissioner of Income Tax (Appeals) erred in confirming the addition of Rs. 23,71,96,630/- made prima-facie based on the sworn statements of Shri Ahmed Buhari dated 02.03.2017 and his letter dated 03.03.2017 holding that these were not retracted at all, without appreciating that no corroborative evidence was brought on record to substantiate such claims and that mere non-retraction does not vouch for its genuineness.” 9. We note that the assessee had filed settlement application before the Income Tax Settlement commission, Addl. Bench, Chennai. The details of the settlement application filed for A.Y.2010- 11 to 2017-18 and the same were rejected. The AO revived the assessment proceedings u/s.148 of the Act in terms of Section 245HA of the Act. Meanwhile, the assessee filed writ petitions challenging the orders dated 01.11.2019 passed by the TPO u/s.92CA(3) of the Act for the A.Y. 2010-11 to 2017-18. The Hon’ble High court of Madras, directed the AO, pending disposal of the said writ petitions, to proceed with the process of completing the assessments in accordance with the law and pass orders of assessment. Accordingly, a draft assessment order u/s.143(3) - 20 - ITA Nos.52 to 59/CHNY/2023 r.w.s.92CA r.w.s 144C(1) r.w.s.153B r.w.s. 147 of the Act, was forwarded on 29.12.2019 making an addition of Rs.132,11,71,500/- towards adjustment of arm’s length price as proposed by the TPO and determined the assessed income at Rs.164,00,57,282/-. Subsequently, the assessment u/s.143(3) r.w.s.92CA r.w.s 144C(1) r.w.s.153B r.w.s. 147 of the Act, was passed on 26.02.2020 determined the assessed income at Rs.164,00,57,282/-. Later on, the Hon’ble High court of Madras, vide order dated 27.08.2020 in W.P. No.34618 of 2019 and batch, had set aside the orders of the TPO directed the TPO to initiate the proceedings de novo and to complete the proceedings as directed therein and to pass a consolidated order of assessment incorporating the TP component relating to the adjustment of ALP consequent to fresh order of the TPO. 9.1 Consequently, the TPO made fresh order u/s.92CA(3) of the Act on 09.12.2020 proposing downward adjustment of Rs.78,48,23,876/- and the AO passed an order incorporating the same along with the addition of undisclosed income of Rs.23,71,96,630/- based on the holding as under: 5.4 Consequently, the TPO (DCIT ,TPO Circle 1(1), Chennai) passed a fresh order under section 92CA(3) of the Act on 09.12.2020 proposing a downward adjustment of Rs.78,48,23,876- to the transaction of purchase of coal from AE during the F.Y. 2009-10. As such, a draft assessment - 21 - ITA Nos.52 to 59/CHNY/2023 order was issued on 05.02.2021 and the same was duly served on the assessee on 08.02.2021. But, there is no response from the assesse within the prescribed period of 30 days of receipt of the draft assessment order. 5.5 Accordingly, the assessment is finalized as under: 6. Undisclosed income:- 6.1. Shri. Ahmed Buhari is a promoter-director of M/s Coastal Energy Pvt. Ltd and M/s Coastal Energen Pvt. Ltd. A Search and seizure action u/s 132 of the Income Tax Act was conducted in the cases of the afore- mentioned two companies by the Investigation Wing of Chennai on 04/01/2017. 6.2. In the sworn statement recorded u/s 132(4) of the I.T. Act, 1961 from Shri.Ahmed Buhari on 02/03/2017, he was asked the following question vide Question No. 3 as under: \"Qn.3.l am showing you the Loose Sheets numbered from 32 to 38 seized vide Annexure ANN/SAAIKS//LSIS-1 on 04-01-2017 during the course of search in the residential premises of Shri. Syed Ameer Ali. Please go through the same and offer your comments\" 6.3. In response thereof, Shri. Ahmed Buhari had replied to the said Question No.3 as under: \"Ans: These loose sheets refer to cash transaction in the company Coastal Energen P Ltd. And Coastal Energy P Ltd. As per the loose sheet 32 to 35, the opening balance as on 01-03-2009 is Rs.32,91,833. Therefore, the total cash receipts during the period from 01-042009 to 21-10-2009 is Rs.12,18,08,020 and the total cash payments is Rs.12,03,47,062. All the entries in the loose sheets referred in the question are cash receipts and cash payments. As per the loose sheet 36 to 38 the opening balance as on 28-10-2009 is Rs.47,52,784/-. Therefore, the total cash receipts during the period from 28-10-2009 to 31-03-2010 is Rs.18,13,86,610 and the total cash payments is Rs.17, 89, 16,740. All the entries in the loose sheets referred in the question are cash receipts and cash payments. As per the loose sheets, there are several contra entries and hence after excluding the same, the total cash receipts for the period from 01-04- 2009 to 3103-2010 is Rs.29,51,96,630/-. Out of the total sum of Rs.29,51,96,630/-, a sum of Rs.5,80,00,000/- is received by me as commission in cash from \"Asset Vendors\" of Coastal Energen P Ltd after price discovery and finalization on lowest bidder basis.This cash has been utilized locally for various payments. Hence, I - 22 - ITA Nos.52 to 59/CHNY/2023 agree to admit the sum of Rs.5,80,00,000/- as undisclosed income in my individual hands for the FY 200910 over and above the income already returned. The balance sum of Rs. 23,71,96,630 is cash generated in the company Coastal Energy P Ltd. Out of Rs. 23,71,96,630, a sum of Rs.7,42,60,000 is included in the purchase invoice of Coastal Energy P Ltd., in purchase of coal from its parent company Coal and Oil LLC, Dubai and received back in India, a sum of Rs. 57,25,000 is by over-invoicing of stevedorers and Transporters, and a sum of Rs. 15,72,11,630 Is by \"Cash sales\" in the company Coastal energy P Ltd. This cash was utilised for various payments for coastal energy P Ltd. I agree to disallow the sum of Rs.23,71,96,630/- in the company Coastal Energy P Ltd and admit the same as undisclosed income in the hands of Coastal Energy P Ltd for FY 2009-10. I request you to provide immunity in the penal proceedings. In continuation of my earlier statement dated 07.01.2017, a total sum of Rs.386.06 crores has been received by me as commission from various asset vendors after finalisation of tenders on lowest bidder basis. I agree to offer this sum as undisclosed income in the respective financial years in my personal hands and pay the appropriate tax as applicable in the provisions of Income tax Act,1961. I also confirm that a sum of Rs.243.87 crores will be offered as undisclosed income in the hands of Coastal Energy P Ltd in the respective financial years and pay the appropriate tax as per the provisions of Income tax Act 1961.\" 6.4. In the return of income dated 07/04/2017 filed in response to notice u/s.148, the assessee declared its total income as Rs.8,03,60,975/-. Further, it is seen that the assessee had not admitted its undisclosed income of Rs.23,71,96,630/- in its return of income, though Shri. AhmedBuhari, Director of M/s.Coastal Energy Private Limited, in the sworn statement recorded u/s.132(4) of the Act on 02/03/2017 admitted the undisclosed income of Rs.23,71,96,630/- in the hands of M/s.Coastal Energy Private Limited for the A.Y.2010-11. In the circumstances, the assessee was requested vide letter dated 27/11/2018 to show cause as to why the said amount of Rs.23,71,96,630/- should not be treated as additional income in its hands towards over-invoicing of coal purchase of Rs.7,42,60,000/- made from M/s.Coal and Oil LLC, Dubai, over-invoicing of stevedoring and transporting charges of Rs.57,25,000/- and unrecorded cash sales of Rs.15,72,11,650/-. Meanwhile, the assessee company filed settlement application before the Hon'ble ITSC, Addl. Bench, Chennai. The details of the Settlement Applications filed by the above mentioned assessee for the A.Ys.2010-11 to 2017-18 are as under: Sl. Number of the Date of filing application Status of the Date of rejection order - 23 - ITA Nos.52 to 59/CHNY/2023 No application u/s. 254C applicatio n u/. 245D(1) of the ITSC 1. 1st application in S.A.No. TN/CN51/2018-19/62/IT 12.12.2018 Rejected 19.12.2018 2 2nd application in S.A.No. TN/CN51/2018-19/20/IT 14.02.2019 Rejected 21.02.2019 3 3rd application in S.A.No. TN/CN51/2019-20/10-IT 16.04.2018 Treated as invalid The application has been treated as defective vide letter in F.No. TN/CN52/2019- 20/10-12/IT dated 25/04/2019 by Hon’ ITSC 6.5. As such, a show cause notice dated 20/11/2019 was issued to the assessee posting the case for hearing on 29/11/2019 and was requested to submit the information as called for in the notice u/s 142(1) dated 27/11/2018 and to reply to the issues mentioned in the show-cause notice dated 28/11/2018. It was further informed that if the required information/explanation was not filed by the said date, it would be deemed that the assessee had no information/explanation to be furnished and the assessment will be completed basing on the material available on record and without further opportunity. In response thereof, the assessee had filed a letter dated 02/12/2019 stating that the assessee company is in the process of preparing and filing of settlement application u/s 245G of the Act on or before 06/12/2019. However, no communication regarding filing of the settlement application was received by this office till date. The assessee has neither filed any information as called for u/s 142(1) nor replied to the issues mentioned in the show cause notice dated 28/11/2018. But, the assessee filed another letter dated 26/12/2019 (filed on 27/12/2019 through e-proceedings) stating that the time limit for completion of the assessment proceedings would expire in February, 2020 and requested for giving additional time to furnish evidences in support of its contentions and to prepare an effective response. As seen from the below mentioned table, sufficient time was already given to the assessee: S.N o Nature of opportunity Date of notice Date of hearing Response from the assessee Remarks (i) (ii) (iii) (iv) (v) (vi) - 24 - ITA Nos.52 to 59/CHNY/2023 1. 142(1) 27/11/2018 04/12/2018 No response Relevant information called for is not filed till date 2. Show-cause notice 28/11/2018 04/12/2018 No response Reply to show-cause notice is not filed till date 3. Show-cause notice 20/11/2019 29/11/2019 No response A letter dated 02/12/2019 was filed on 3/12/2019 stating that the assessee company is in the process of preparing and filing of settlement application u/s 245C of the Act on or before 6/12/2019. Relevant information called for is not filed till date. Reply to show- cause notice is also not filed. 6.6. Further, the assessee vide his submission dated 26/12/2019 enclosed a letter from his Advocate, wherein, it was mentioned that as per the Insolvency and Bankruptcy Code, 2016, all the suits and proceedings including Income Tax proceedings against the company will be kept in abeyance in lieu of proceedings before the Hon' National Company Law Tribunal ('NCLT'). However, no order of the same was provided to this office in support of his claim. Even if the assessee's claim is assumed to be true, the order of the Hon' Delhi High Court in the case of Power Grid Corporation of India Limited vs. Jyoti Structures Limited [2018] 145 SCL 449 (Delhi) may be relied upon. In the said order, it was held that the moratorium provisions would apply to \"debt recovery actions\" against the corporate debtor. The assessment proceedings are only aimed at giving finality to the assessment which may or may not lead to recovery procedures. Further, the Supreme· Court also dealt with sec. 446 of the Companies Act, 1956 in S.V.Kondaskar Official Liquidator & Liquidator of the Colaba Land and Mills Co. Limited vs. V.M.Deshpande, ITO, Bombay and another AIR 1972 SC 878. In the said order,.it was held that the sec.446 of the Companies Act provides that when a winding up order of the official liquidator has been appointed, no suit or legal proceedings shall be commenced, or if pending at the date of the order, the same shall - 25 - ITA Nos.52 to 59/CHNY/2023 be proceeded with, except by leave of the court. The Court further held that assessment proceedings for computing the amount of tax cannot be held to be such other legal proceedings as can only be started or continued with the leave of the liquidation court u/s 446 of the Companies Act. In the case of Assistant Commissioner of Central Excise, Guntur vs. Ramdev Tobacco Company, the Supreme Court explained the meaning of \"other legal proceedings\" which was used after suit and prosecution as contained in sec 40 (2) of the Central Excises and Salt Act, 1944.The court held that the words \"other legal proceedings\" must be read along with the proceeding words suit and prosecution and the issuance of a show-cause notice would not fall within the expression \"other legal proceedings\". Therefore, the term \"proceedings\" as appearing in the sec.14 of the IBC, 2016 ought to be interpreted in the context of preceding term \"suit\" and therefore cannot be extended to assessments under Income Tax Act. Since, the assessment of assessee's undisclosed income does not fall in the nature of \"Legal Proceedings\", section 14 of IBC does not bar the Department from continuing with its assessment. Hence, the admission of the assessee into Corporate Insolvency Resolution Process (CIRP) does not have a bearing on the present proceedings. 6.7. As such, the amount of Rs.23,71,96,630/- as detailed in para 6.4 above, is treated as undisclosed income earned by the assessee and added to the total income of the assessee. Addition: Rs.23,71,96,630/- 6.8. Penalty proceedings u/s 271 (1)(c) of the Act are initiated separately for concealment of income. 7. Adjustment to Arm's Length Price: 7 .1 The TPO (DCIT, TPO Circle 1(1), Chennai), vide order No. ITBA/TPO/F/92CA3/2020-21/1028926983(1) dated 09/12/2020 has made a downward adjustment of Rs.78,48,23,876/- to the value of purchases of coal. Section 92CA(4) of the Act makes it mandatory for the Assessing Officer to adopt the adjustments proposed by the Transfer Pricing Officer. Accordingly, the amount of Rs.78,48,23,876/- is added to the total income of the assessee. Addition: Rs. 78,48,23,876/- 7.2. In this connection, Penalty proceedings u/s 271(1)(c) are being initiated for furnishing inaccurate particulars of income. 8. Therefore, the assessee’s total income is computed as under: Income assessed as per order u/s. 143(3) r.w.s. 92CA(3) dated 18/03/2014 8,16,89,152 - 26 - ITA Nos.52 to 59/CHNY/2023 Add: undisclosed income 23,71,96,630 Add: Adjustment to Arm’s Length Price 78,48,23,876 Total Assessed income 110,37,09,658 Aggrieved, the assessee preferred an appeal before the Ld.CIT(A) – 18, Chennai. 10. On perusal of the submissions and details furnished by the assessee, the ld.CIT(A) dismissed the ground of the assessee in respect of “TP Reference” by holding as under: “9.2.2. Every person who has entered into an international transaction or specified domestic transaction during a previous year shall obtain a report from an accountant and furnish such report on or before the specified date in Form 3CEB. Hence, Form No. 3CEB would generally include the international transactions / specified domestic transaction entered into by the Appellant during the subject assessment years and disclosed by it. The TPO would however, only be able to reconcile the same with the audited financials of the Appellant unless the TPO has information about the any undisclosed transactions which the Appellant had not disclosed in the Form No 3CEB / TP report. 9.2.3 During the original TP audit, the assessee has not disclosed all material facts. After the original TP proceedings in the AYs 2010-11 to 2013-14, Search u/s 132 has been conducted in the assessee's premises on 04.01.2017 which unearthed the incriminating materials relating to the over-invoicing of the coal purchase price from the AE, the fact the assessee had admitted in its Settlement Commission application also. Though these materials were at the possession of the assessee and though the assessee was aware of the entire modus operandi of the related affairs, it had not disclosed all these details to the TPO in the original TP audits for the AYs 2010-11 to 2013-14. After search, consequent to the issue of notice u/s 148/ 153A, the AO made fresh TP reference for the AYs 2010-11 to 2013-14 intimating all the search findings to the TPO in terms of - 27 - ITA Nos.52 to 59/CHNY/2023 Clause (c) of para 3.3 of the Board's Instruction No.3 of 2016. Since reference to TPO is based on the incriminating material found during search relating to the over-invoicing of coal import from the AE, the TP reference in the proceedings u/s 148/ 153A is perfectly valid in AYs 2010- 11 to 2013-14. Thus, the fresh TP reference in the proceedings u/s 148/ 153A is as per law and as per Board's Instruction. 9.2.4 Since new material has come on record for the AO and TPO following search, there is no case of arguing change of opinion for fresh reference and the fresh TP audit for the AYs 2010-11 to 2013-14. The averment that the TP audits were only based on Form 3CEB is totally baseless. 9.2.5 Further, the order dated 09-12-2020 passed by the TPO reducing the amount of TP adjustment in comparison to the order passed on 01.11.2019 for the AYs 2010-11 to 2013-14 were based on the directions of the High Court of Madras dated 27-08-2020 and not merely any change in the opinion of the TPO as claimed by the Appellant. 9.2.6 Though Form No.3CEB has remained the same, what is important to note is that while passing the final TP orders dated 09.12.2020 additional evidences were available to the TPO and that while passing the order dated 09-12-2020, the TPO had followed the directions of the High Court of Madras. 9.2.7 On one hand the Appellant is only contending that the TPO has relied on the same Form No.3CEB to pass different orders while on the other hand, the Appellant had admitted in its submissions before the tax authorities (including before Settlement Commission) that there were undisclosed income to the Appellant and that same included undisclosed cash transactions and purchase of coal from its AEs whose information was available only at a later point in time to the TPO. 9.2.8 In view of the above clear distinguishing facts, the decisions cited by the ARs are not applicable in the present case. 9.2.9 In view of the above reasons, the above grounds taken by the asses see in this regard are dismissed with reference to AYs 2010-11 to 2013- 14. 9.2.10 The Additional Ground 16 for AYs 2010-11, 2011-12 and 2013-14 and the Additional Ground 17 for AY 2012-13 is as follows: - 28 - ITA Nos.52 to 59/CHNY/2023 The Learned AO erred in making reference to the Transfer Pricing Officer u/ s 92CA of the Act, as the Appellant had already undergone Transfer Pricing Proceedings. Consequently, the additional time limit is not available and hence the order passed by the Learned AO is barred by limitation and is void ab initio. This is dealt as under. 9.2.11 As stated already, the fresh proceedings u/s 148 for the AY 2010-11 and u/s 153A for the AYs 2011-12, 2012-13 and 2013-14 are based on the search findings. It has already been held that the TP reference made is valid in all these AYs. Therefore, the time limit based on the fresh TP reference is very much available to the TPO and AO for all these AYs. In view of the above, the additional ground taken for all these AYs is dismissed. 10.1 The ld.CIT(A) also dismissed the ground of the assessee on merit in respect of downward adjustment of TP to ALP holding as under: “9.3.2 Ground 6 for the AYs 2010-11 to 2013-14 and Ground 4 of AYs 2014-15 to 2017-18 are general in nature. Other grounds are dealt hereunder. 9.3.3 The contention of the Appellant that the TPO has passed his orders based on the very same Form 3CEB and without any change in the transactions is not acceptable especially given that additional evidences / materials have come to the notice of the AO/ TPO through search procedure which was not available during the time of initial assessment proceedings. As all the details of over invoicing and modus operandi of the transactions have not been disclosed by the assessee in its TPSR (Transfer Pricing Study Report) and also during the original TP proceedings, the first TP orders for the AYs 2010-11 to 2013-14 cannot be taken into cognizance at all. The second TP orders of these AYs 2010-11 to 2013-14 and the first TP orders for the AYs 2014-15 to 2017-18 (TP order for all these AYs 2010-11 to 2017-18 dated 01.11.2019) have been quashed by the Hon'ble High Court for want of opportunity given to the assessee, and hence they also cannot be taken into cognizance. Thus, the argument can be based on the final TP orders (dated 09.12.2020) passed only. - 29 - ITA Nos.52 to 59/CHNY/2023 9.3.4 The CUP data from TIPS database have been furnished to the assessee in the show cause notices issued by the TPO and thus, the allegation in the written submission that TIPS data was not furnished is patently wrong. 9.3.5 The averment that 'Appellant had rightly applied CUP method to arrive at the ALP and the same is in line with the method adopted on year- on-year basis' is also patently wrong: During the TP proceedings, the assessee had furnished certain documents only for the AY 2012-13 and thereto, the details of over-invoicing and the modus operandi followed have been suppressed. There was no explanation/ clarification with regard to benchmarking of the import transactions under CUP method with the market price bearing index claimed to have been taken by the assessee. The rationale of adopting market price index which does not describe the landed cost of coal in India has not been established with evidences. Market price index cannot serve the purpose of CUP method; what is to be adopted in CUP method is comparison with actual transaction and not some index. On the contrary, the TIPS database (used by the TPO for benchmarking the international transaction under CUP method) is based on the actual transaction inputs from information publicly available with the Customs Department at different ports in India; it's a source of strategic and reliable data, policy and guidelines on India's Foreign Trade. 9.3.6 In the final TP orders dated 09.12.2020, the materials available on record, the search findings, assessee's import data date-wise, and comparable data from TIPS database date-wise (wherever date-wise not available, monthly average) have been marshalled applying the law and case-laws correctly by the TPO and also affording opportunity of being heard as directed by the Hon'ble High Court. 9.3.7 In the assessee's own case for the AY 2006-07, the Hon'ble jurisdictional ITAT held that as it was apparent by applying CUP method that import of coal by assessee from its AE had been over-invoiced, and authorities below were justified in malting appropriate adjustment to transfer pricing (12 taxmann.com 355). 9.3.8 On aggregated approach adopted by the TPO in the comparative analysis (by adopting monthly average import of cost/MT vis-à-vis comparables) in the AY 2004-05 in the assessee's case, the Hon'ble Jurisdictional ITAT (64 taxmann.com 425) held that transaction by transaction approach (date-wise) should be adopted. That is, averaging assessee's transaction monthly and comparing that average with the average monthly TIPS data is not correct. Averaging assessee's monthly transaction is not possible; assessee's date-wise transaction is to be taken for comparison; whereas averaging of comparables data is possible under CUP method. - 30 - ITA Nos.52 to 59/CHNY/2023 9.3.9 In the case of Tilda Riceland Pvt. Ltd. v ACIT [TS-47-ITAT- 2014(Del)-TP], the ITAT observed that taxpayer had compared average export price to its AEs with the average uncontrolled export price. The [TAT held that under Rule 10B(1)(a)(iii), the expression 'the international transaction' was used in singular and dis not permit taking into account, unlike Rule 10B(l)(a)(i), 'a number of such transactions'.Thus, ITAT ruled that while averaging is permissible for the uncontrolled transactions, each day's international transaction is to be taken on stand-alone basis. The ITAT held that it is not open to the taxpayer to compare the average price in its transactions with AEs with average price in uncontrolled transactions. 9.3.10 In the final TP orders, wherever CUP is available transaction by transaction, the same have been rightly taken from the TIPS database by the TPO for comparison and adjustments have been made on transaction by transaction basis; wherever such transaction by transaction CUP is not available, the TPO has rightly gone by monthly average approach for comparison of assessee's transaction with the monthly average TIPS data. Thus, no fault can be attributed on the TPO on the approach adopted by him in the TP orders dated 09.12.2020. Thus, there is no inconsistency or trial and error or changing goalpost as claimed by the assessee. 9.3.11 The findings of the search process and the order of the High Court of Madras are clear writing on the wall. Hence, by no stretch of imagination, the contention of the Appellant that the said attempts of the TPO need to be characterised as trial and error attempts to suit the convenience of the Revenue to match the desired results, which in common parlance referred to as 'shifting the goal post approach' is maintainable. 9.3.12 In view of the above reasons, the grounds preferred by the assessee in this regard are dismissed for all the AYs 2010-11 to 2017-18.” 10.2 In respect of the unexplained income the assessee’s claim was that the AO should have been considered all the material and other information produced by the assessee before the Settlement Commission or the results of the enquiry held or evidence recorded by the settlement commission in the course of proceedings before it. Therefore, the assessee assailed that the AO has erred in - 31 - ITA Nos.52 to 59/CHNY/2023 considering the entire undisclosed receipts to the tune of Rs.220,08,34,578/- without considering “cash utilised for business expenses” of Rs.201,32,18,442/-. Accordingly, the AO should have added only Rs.18,76,16,136/- as undisclosed income of the assessee. 10.3 This ground of the assessee has been dismissed by the Ld.CIT(A) holding as under: “9.5.13 The parties as shown by the assessee are big corporates, Government PSU, etc and no reason has been advanced by the assessee for making such very huge transactions in cash. There is no justification on the part of the assessee to claim the above expenditure in cash. The assessee has failed to furnish any information in respect of these expenditures as to how they are incurred wholly and exclusively for the purpose of business. Hence, it is held the above expenditure is not expended wholly and exclusively for the purpose of business and hence, not allowable u/ s 37 of the Income-tax Act, 1961. On perusal of the nature of expenditure, it is seen that the most of the expenditure are prohibited under law as per Explanation u/ s 37 of the Act and even on this ground, the expenditure is not allowable u/s 37 of the Act. 9.5.14 The claim of the assessee is that this huge expenditure is incurred in cash. Provisions of Section 40A(3) r.w.s. 40A(1) is as under: Expenses or payments not deductible in certain circumstances. 40A.(1) The provisions of this section shall have effect notwithstanding anything to the contrary contained in any other provision of this Act relating to the computation of income under the head \"Profits and gains of business or profession\". (3) Where the assessee incurs any expenditure in respect of which a payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft, or use of electronic clearing system - 32 - ITA Nos.52 to 59/CHNY/2023 through a bank account or through such other electronic mode as may be prescribed, exceeds ten thousand rupees, no deduction shall be allowed in respect of such expenditure. 9.5.15 Thus, the cash expenditure claimed for all the impugned AYs are not allowable u/s.40A(3) also. 9.5.16 In view of the above, the additions made by the AO for AY 2011-12 to AY 2017-18 are hereby confirmed.” 10.4 Further, the Ld.CIT(A) issued an enhancement notice and made further addition of undisclosed income by rejecting the reply filed by the assessee, as detailed below: III. Addition as per enhancement Notice: 9.5.17 Vide para 4 of the enhancement notice, the Assessee was show caused as under: \"4. The comparison between the amount offered during the course of search and in the application filed before the Settlement Commission (since abated) is as under: Asst year As per statement dated 03.03.2017 read with sworn statement u/s. 132(4) dated 02.02.2017 Undisclosed income as per the settlement application Short fall between the amount mentioned in the settlement application and in statement dated 03.03.2017 2010-11 23,71,96,630 - - 2011-12 15,32,00,000 12,22,41,477 - 2012-13 14,34,00,000 6,98,69,725 - 2013-14 77,74,00,000 78,85,41,091 1,11,41,091 2014-15 38,76,00,000 36,32,08,099 - 2015-16 23,96,00,000 27,51,34,424 3,55,34,424 2016-17 44,66,00,000 46,20,17,697 1,54,17,697 2017-18 5,38,00,000 11,98,22,065 6,60,22,065 Total 2,20,08,34,578 - 33 - ITA Nos.52 to 59/CHNY/2023 Thus, the shortfall as mentioned above, comes to Rs.1,11,41,091/-, Rs.3,55,34,424/-,Rs.1,54,17,697/- and Rs.6,60,22,065/- for the assessment years 2013-14, 2015-16, 2016-17, and 2017-18 respectively. You are requested to state as to why the unexplained income assessed in the respective assessment years should not be enhanced to the extent of the aforesaid amounts in the respective assessment years.\" 9.5.18 In reply to the notice, the assessee has only reiterated its claim that only the amounts in the settlement application be considered. This claim has already stand rejected in the sense it had been observed that the inputs from the settlement application can be taken for consideration. 9.5.19 It is seen that the additions were made by the AO on the basis of the seized documents read with the admissions made by Shri Ahmed Buhari vide his letter dated 03.03.2017 to the extent of Rs.220.16 crores for AY 2011-12 to AY 2017-18. Therefore, the same has been sustained already. The enhancement amount is based on the admission before the Hon'ble Settlement Commission and therefore, this information is admissible u/s 245HA of the Act. The assessee has not produced any reconciliation that this difference amount is considered in the other assessment years. In fact, the assessee in the submissions stated that the amounts shown in the settlement application for the AYs 2013-14, 2015-16, 2016-17, and 2017- 18 have been arrived at based on the careful calculation of amounts appearing for the respective AYs in the seized material. 9.5.20 In the circumstances, the shortfall as mentioned above, amounting to Rs.1,11,41,091, Rs.3,55,34,424, Rs.1,54,17,697 and Rs.6,60,22,065/- for the assessment years 2013-14, 2015-16, 2016-17, and 2017-18 respectively is hereby enhanced u/s 251(2) of the Act as undisclosed business income and assessed accordingly.” 11. The ld.counsel for the assessee also drew our attention to the provisions of section 245HA of the Act and the provision states about abatement of proceedings before Settlement Commission and he particularly drew our attention to section 245HA (2) & (3), which reads as under:- - 34 - ITA Nos.52 to 59/CHNY/2023 “245HA. Abatement of proceeding before Settlement Commission …………….. …………….. (2) Where a proceeding before the Settlement Commission abates, the Assessing Officer, or, as the case may be, any other income-tax authority before whom the proceeding at the time of making the application was pending, shall dispose of the case in accordance with the provisions of this Act as if no application under section 245C had been made. (3) For the purposes of sub-section (2), the Assessing Officer, or, as the case may be, other income-tax authority, shall be entitled to use all the material and other information produced by the assessee before the Settlement Commission or the results of the inquiry held or evidence recorded by the Settlement Commission in the course of the proceedings before it, as if such material, information, inquiry and evidence had been produced before the Assessing Officer or other income-tax authority or held or recorded by him in the course of the proceedings before him. 11.1 In term of the above, the ld.counsel for the assessee argued that where proceedings before Settlement Commission abates, the AO or as the case may be, other Income-tax Authority shall be entitled to use all the material and other information produced by the assessee before the Settlement Commission or the results of the inquiry held or evidence recorded by the Settlement commission in the course of proceedings before Settlement Commission as if such material, information, inquiry and evidence had been produced before the AO or other Income-tax authorities or held or recorded by him in the course of proceedings before him. The AO can use that information but that has to be considered in term of seized material or explanation to be submitted by the AO and not standalone basis - 35 - ITA Nos.52 to 59/CHNY/2023 as considered by AO and CIT(A). The ld.counsel for the assessee made his submission that neither the AO nor CIT(A) has considered the search material while framing assessment and hence, in case the continuation of proceedings is to be held as valid, the matter be restored back to the file of the AO for considering the entire seized material for reframing the assessment afresh. 11.2 Further, the Ld.AR stated that the AO has grossly erred in enhancing the assessment as per para No.9.5.20 of the CIT(A) order, for the A.Y. 2013-14 for Rs.1,11,41,091/-, A.Y. 2015-16 for Rs.3,55,34,424/-, A.Y.2016-17 for Rs.1,54,17,697/- and A.Y. 2017- 18 for Rs.6,60,22,065/- by considering only the short fall between the amount mentioned in the settlement application and in the statement dated 03.03.017 read with sworn statement u/s.132(4) dated 02.02.017, without considering the entire amount of Rs.220.08 crores which has been bifurcated year wise in the application filed before the settlement commission, thereby praying for setting aside the order and direct the AO to recompute the undisclosed income after considering the corresponding cash expenditure spent. Further, Ld.AR submitted that vide the sworn statement recorded by Shri Ahmed Buhari on 07.01.2017, in reply to Q.No.4, he had admitted a sum of Rs.220.15 crores as that - 36 - ITA Nos.52 to 59/CHNY/2023 undisclosed income pertaining to the appellant company. In line with the same, as stated above, on an analysis of the materials seized, Rs.220.08 crores was admitted as undisclosed income in the application made before the ITSC pertaining to AYs 2011-12 to 2017-18. While the sum in toto remained the same, the year-wise breakup as between that admitted in his letter dated 03.03.2017 and that before in the ITSC application differs – the reason behind being the latter is based on the analysis made subsequently while the former was based on Shri Ahmed Buhari’s understanding then, as stated in the preceding paras. It is reiterated that in such a scenario, in the absence of any other corroborative evidence, the true and full disclosure made by the assessee vide their application before ITSC ought to be upheld. 11.3 The Ld.AR drew our attention to the following chart, wherein the Ld.CIT(A) conveniently ignored the excess amounts offered for other years, which is equal to the amount enhanced. Assessment Year Undisclosed income as per settlement application As per statement dt 03.03.2017 r.w. sworn statement u/s 132(4) dt 02.02.2017 Excess amount between the amount mentioned in the settlement application and in statement dt 03.03.2017 Shortfall between the amount mentioned in the settlement application and in statement dt 03.03.2017 - - 37 - ITA Nos.52 to 59/CHNY/2023 enhanced by CIT(A) AY 2011-12 12,22,41,477 15,32,00,000 - 3,09,58,523 AY 2012-13 6,98,69,725 14,34,00,000 - 7,35,30,275 AY 2013-14 78,85,41,091 77,74,00,000 1,11,41,091 AY 2014-15 36,32,08,099 38,76,00,000 - 2,43,91,901 AY 2015-16 27,51,34,424 23,96,00,000 3,55,34,424 AY 2016-17 46,20,17,697 44,66,00,000 1,54,17,697 AY 2017-18 11,98,22,065 5,38,00,000 6,60,22,065 Total 2,20,08,34,578 2,20,16,00,000 12,81,15,277 - 12,88,80,699 11.4 In this connection, the ld.AR drew our attention to the popular ‘Real Income theory’ which provides that only actual profits and gains should be considered as income chargeable to tax. “Real income”, as held by the Supreme Court in Poona Electricity Supply Company Limited versus CIT [1965] 57 ITR 521 (SC) means profits arrived at on commercial principles, subject to the provisions of the Act. Profits and gains should be true and correct profits and gains, neither under nor over stated. In this context, the term ‘profits’ only indicate income net of expenditure that ought to be taxed as stated above. Reliance is placed on the following case-laws in this regard: “Supreme Court decision in the case of CIT vs. Shoorji Vallabhdas & Co. [1962] 46 ITR 144(SC) wherein it was held that “Income-tax is a levy on income. No doubt, the Income-tax Act takes into account two points of time at which the liability to tax is attracted, viz., the accrual of the income or its receipt; but the substance of the matter is the income. If income does not - 38 - ITA Nos.52 to 59/CHNY/2023 result at all, there cannot be a tax, even though in book-keeping, an entry is made about a \"hypothetical income\", which does not materialise. Where income has, in fact, been received and is subsequently given up in such circumstances that it remains the income of the recipient, even though given up, the tax may be payable. Where, however, the income can be said not to have resulted at all, there is obviously neither accrual nor receipt of income, even though an entry to that effect might, in certain circumstances, have been made in the books of account.”  Supreme Court decision in the case of Godhra Electricity Co. Ltd. Vs CIT [1997] 91 Taxman 351 (SC) has also upheld that only real income can be taxed. 11.5 The contention that only the profit/income embedded in a transaction is liable to be taxed and not the entire receipts is upheld by various courts/ Tribunals in the following cases as under: a. Hon'ble Gujarat High Court in the case of Dy. CIT v. Panna Corporation (2012) 74 DTR (Guj) 89 observed that “It can thus, be seen that consistently, this Court and some other Courts have been following the principle that even upon detection of on-money receipts or unaccounted cash receipts, what can be brought to tax is the profit embedded in such receipts and not the entire receipts, themselves. If that be the legal position, what should be estimated as a reasonable profit out of such receipt must bear an element of estimation.” b. Hon'ble Gujarat High Court in the case of CIT V. President Industries 258 ITR 654 held that “It cannot be a matter of an argument that the amount of sales by itself cannot represent the income of the assessee who has not disclosed the sales. The sales only represent the price received by the seller of the goods - 39 - ITA Nos.52 to 59/CHNY/2023 for the acquisition of which it has already incurred the cost. It is the realisation of excess over the cost incurred that only forms part of the profit included in the consideration of sales. Therefore, unless there is a finding to the effect that investment by way of incurring cost in acquiring goods which have been sold has been made by the assessee and that has also not been disclosed, the question, whether entire sum of undisclosed sale proceeds can be treated as income of the relevant assessment year answers by itself in the negative.” c. Hon’ble High Court of Madhya Pradeshin the case of CIT v. Balchand Ajit Kumar[2004] 135 Taxman 180 (Madhya Pradesh) held that “The total sale cannot be regarded as the profit of the assessee. The net profit rate has to be adopted and once a net profit rate is adopted, it cannot be said that there is perversity of approach. Whether the rate is low or high, it would depend upon the facts of each case. In the instant case, net profit rate of 5 per cent applied by the Tribunal was not required to be enhanced. It was also not high. In any case, there was no perversity of approach.” d. Hon’ble ITAT, ‘A’ Bench, Jaipur in the case of Shri Nawal Kishore Soni vs. ACIT, Central Circle – 3, Jaipur in ITA Nos. 1307, 1308 & 1309/JP/2019 had held that “In respect to transaction of purchase and sales not recorded in regular books of accounts but found in ‘Hajir’ Software, we observe that the record found in Hajir software is correct and complete. The complete details of all transactions alongwith quantitative details are available in said record and trading A/c with the said record was prepared by assessee showing gross profit/gross loss resulted from those transaction not recorded in books of accounts. The A.O. found no mistake, defect or deficiency therein and accepted the purchase/sales as shown in said trading account but instead of accepting the declared profit arbitrarily putting stress that assessee accepted 1% G.P. rate which is wrong as explained above, otherwise also in accordance with section 292C of the Act the contents of documents found in course of survey are to be accepted as true and no subtraction/ addition/interpolation can be made in law - 40 - ITA Nos.52 to 59/CHNY/2023 without any corroborative and supportive material therefor and, therefore trading results i.e. gross profit arrived from the said documents found in course of survey which is correctly worked out deserves to be accepted.” e. Hon’ble ITAT, Surat in the case of Poonam Developers vs ACIT in ITA No. 15/SRT/2021 had observed that “Further it is the net profit and net income which has to be added and not the gross profit since indirect expenses are also incurred in the business. Lord Macnaghten, in the case of London County Council v Attorney-General 1901 AC 26, 35-6 (HL), 4 TC 265, 293, stated as follows: S “Income Tax, if I may be pardoned for saying so, is a tax on income. It is not meant to be a tax on anything else. It is one tax, not a collection of taxes essentially distinct.” Therefore, net profit is taxable income.” 12. When the same is confronted to the ld.DR, he stated that there is no fault in the action of the ld.CIT(A) in upholding the action of the AO in respect of addition made considering the seized materials instead of restricting the net profit offered before the settlement commission of income tax by the assessee u/s.245HA, which has been rejected. Further, ld.DR in supporting the TPO order, the order is framed based on the seized materials, which were not available during the original assessment of the transactions with AE. Hence, the ld.DR prayed for dismissing the appeal of the assessee by confirming the order of the Ld.CIT(A). 13. We have heard the rival contentions, perused the materials available on record and gone through the findings of the AO as well - 41 - ITA Nos.52 to 59/CHNY/2023 as the Ld.CIT(A). It is undisputed fact that the assessee was searched on 04.01.2017 and consequential assessment was framed by the Assessing officer after obtaining the order of the TPO. During the course of the assessment proceedings, the assessee filed a Writ petition before the Hon'ble Madras High Court, challenging the consolidated order of the Transfer Pricing Officer u/s.92CA(3) of the Act dated 01.11.2019 for the A.Ys. 2010-11 to 2017-18. Subsequently the direction was given by the hon’ble high Court of Madras to the TPO to carry out the assessment proceedings de novo. Accordingly, the TPO (DCIT, TPO Circle 1(1), Chennai) passed a fresh order under section 92CA(3) of the Act on 09.12.2020 proposing a downward adjustment of Rs.78,48,23,876/-with respect to the transaction of purchase of coal from AEs. Consequently, the AO passed the final Assessment Order u/s.143(3) r.w.s. 92CA r.w.s. 144C(3) r.w.s. 147 of the Act, 1961on 17.04.2021 making the addition on account of undisclosed income as shown in the sworn in statement of Rs.23,71,96,630/- along with Downward adjustment of Rs.78,48,23,876/- in the purchases made from its AE based on ALP re computed by the TPO. 13.1 We note that, the assessee had filed settlement application before the Income Tax settlement Commission for 3 times on 12.12.2018, - 42 - ITA Nos.52 to 59/CHNY/2023 14.02.2019 and 16.04.2019, which were rejected by the settlement commission u/s.245D(1) of the Act. The Assessee had reconciled the income offered in the sworn statement of Mr. Ahmed Buhari recorded with the seized materials and the same has been offered as income before the settlement commission in the application filed U/s.245D, after claiming the corresponding expenditure as detailed below: AY Undisclosed Gross Income as per seized documents offered before ITSC (A) Cash utilized for business expenses as per seized documents deducted from (A) (B) Income offered in the application (C=A-B) 2010-11 - - - 2011-12 12,22,41,477 11,07,93,400 1,14,48,077 2012-13 6,98,69,725 4,35,65,000 2,63,04,725 2013-14 78,85,41,091 76,76,58,500 2,08,82,591 2014-15 36,32,08,099 34,98,86,750 1,33,21,349 2015-16 27,51,34,424 24,66,19,467 2,85,14,957 2016-17 46,20,17,697 40,19,20,937 6,00,96,760 2017-18 11,98,22,065 9,27,74,388 2,70,47,677 Total 2,20,08,34,578 2,01,32,18,442 18,76,16,136 13.2 The AO and that of Ld.CIT(A) have rejected the claim of the expenditure, considering only the amount of income offered based on the statement recorded of Mr. Ahmed Buhari at the time of search to the tune of Rs.220.08 crores, apart from the enhancement in 4 Assessment years as discussed at para No.9.5.20 of the - 43 - ITA Nos.52 to 59/CHNY/2023 Ld.CIT(A) order, in our considered opinion, this action of the lower authorities cannot be countenanced. 13.3 Therefore, in the present facts and circumstances of the case, we are of the considered view that the AO and that of ld.CIT(A) have erred in making additions as unexplained money without considering entire materials and facts available on record filed with settlement commission as per section 245HA(3) and hence we set aside the order of the ld.CIT(A) and remit the issues back to the file of AO for framing de novo assessment. Needless to say, that the AO shall provide reasonable opportunity to the assessee and consider all the materials and facts available on record. 14. Since, the facts of A.Y. 2010-11 are identical in the appeal of the assessee filed for the A.Y.2011-12 to 2017-18 vide appeal No.ITA-1604/Chny/2024, the above findings and decision thereon applicable mutatis mutandis and hence orders of the Ld.CIT(A) for these 7 years i.e. A.Y.2011-12 to 2017-18 are also set aside and remit the issues back to the file of AO for framing de novo assessment. Thus, these appeals of the assessee are allowed for statistical purpose. - 44 - ITA Nos.52 to 59/CHNY/2023 15. In the result, all the appeals filed by the Assessee for the A.Y.s 2010-11 to 2017-18 are allowed for statistical purpose. Order pronounced in the open court on 11th November, 2024 at Chennai. Sd/- (महावीर िसंह ) (MAHAVIR SINGH) उपा᭟यᭃ /Vice President Sd/- (एस. आर. रघुनाथा) (S. R. RAGHUNATHA) लेखासद᭭य/Accountant Member चे᳖ई/Chennai, ᳰदनांक/Dated, the 11th November, 2024 JPV आदेशकᳱᮧितिलिपअᮕेिषत/Copy to: 1. अपीलाथᱮ/Appellant 2. ᮧ᭜यथᱮ/Respondent 3. आयकरआयुᲦ /CIT, Chennai 4. िवभागीयᮧितिनिध/DR 5. गाडᭅफाईल/GF. "