AI Insights
The case involves Shivali Fashion Pvt. Ltd., which faced search and seizure operations under section 132 of the Income-tax Act, 1961, leading to substantial additions in their income assessments for A.Y. 2019-20 and 2020-21. The additions were primarily based on alleged under-invoicing and unaccounted cash sales and receipts. The CIT(A) partially upheld these additions but restricted them significantly after finding that the Assessing Officer had extrapolated findings from a limited set of data to the entire turnover. The Tribunal's decision focused on the legality of these extrapolations and the proper estimation of profits from unaccounted sales, ultimately reducing the additions made by the CIT(A).
Appeal Details
Counselvise Citation
[2025] 140 COUNSELVISE.COM (IT) 711580 (ITAT-AHMEDABAD)
Assessee PAN
Bench
Appeal Number
CRN Number
Appellant
Respondent
Appeal Type
Income Tax (Search & Seizure) Appeal
Pronouncement Date
24-07-2025
Appeal Filed By
Assessee
Order Result
Partly Allowed
Assessment Year
2020-2021
Judgement Text
"आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण,अहमदाबाद \bयायपीठ अहमदाबाद \bयायपीठ अहमदाबाद \bयायपीठ अहमदाबाद \bयायपीठ ‘C’ अहमदाबाद। अहमदाबाद। अहमदाबाद। अहमदाबाद। IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, AHMEDABAD ]BEFORE S/SHRI T.R. SENTHIL KUMAR, JUDICIAL MEMBER AND MAKARAND V.MAHADEOKAR, ACCOUNTANT MEMBER IT(SS)A No.55/Ahd/2025 Asstt.Year : 2020-21 Shivali Fashion Pvt. Ltd E-240, Sumel Business Park – III Opp: New Cloth Market Ahmedabad. PAN : ABACS 2336 P Vs. The ACIT, Cent.Cir.2(3) Aaykar Bhavan Ahmedabad. IT(SS)A No.69 and 70/Ahd/2025 Asstt.Year : 2019-20 & 2020-21 WITH Cross Objection No.54/Ahd/2025 IN IT(SS)A. No.69/Ahd/2025 The ACIT, Cent.Cir.2(3) Aaykar Bhavan Ahmedabad. Vs. Shivali Fashion Pvt. Ltd E-240, Sumel Business Park – III Opp: New Cloth Market Ahmedabad. PAN : ABACS 2336 P (Applicant) (Responent) Assessee by : Shri Dinal Shah, AR Revenue by : Shri Rignesh Das, CIT-DR सुनवाई क तारीख/Date of Hearing : 03/07/2025 घोषणा क तारीख /Date of Pronouncement: 24/07/2025 आदेश आदेश आदेश आदेश/O R D E R PER MAKARAND V.MAHADEOKAR, AM: These cross appeals filed by the assessee as well as the Revenue are directed against the respective appellate orders passed by the learned Printed from counselvise.com IT(SS)A.No.55/Ahd/2025 and 3 Others Shivali Fashion P. Ltd. Vs. ACIT 2 Commissioner of Income-tax (Appeals)-12, Ahmedabad [hereinafter referred to as “the CIT(A)”] for the Assessment Years 2019–20 and 2020–21. The relevant assessment orders were framed by the Assistant Commissioner of Income Tax, Central Circle-2(3), Ahmedabad [hereinafter referred to as “the Assessing Officer” or “AO”] under section 153A of the Income-tax Act, 1961 [hereinafter referred to as \"the Act\"]. Facts of the Case 2. The assessee is a private limited company engaged in the business of trading in readymade garments. For A.Y. 2019–20, the assessee initially filed its return of income under section 139(1) of the Income-tax Act, 1961 (“the Act”) on 30.10.2019 declaring total income of RS. 3,37,53,410/-, which was subsequently revised under section 139(5) on 30.09.2020 declaring income of RS. 3,38,09,940/-. For A.Y. 2020–21, the return under section 139(1) was filed on 31.10.2021 declaring income of Rs.4,03,69,430/-. 2.1 A search and seizure operation under section 132 of the Act was conducted on 15.10.2019 in the case of Shri Shivkumar Lachmandas Gogia and associated business concerns forming part of the “Land Broker and Financer” group. The search action was carried out at the residential premises located at Bungalow No. 2, Krish/Shiv Villa, Opp. Aarmaan Bungalows, Sindhu Bhavan Road, Thaltej, Ahmedabad, and at business premises operated under the names of M/s. Shivali Fashion Pvt. Ltd., M/s. Shivali Creations, M/s. Shivali Fashion, M/s. Sagar Fashion, M/s. Shivam Associates, and M/s. Shiv Sagar Enterprise, situated at Shop Nos. 239–246 and 339–348 on the 2nd and 3rd Floors respectively, 'E' Block, Sumel Business Park-3, Opp. Raipur Gate, Raipur, Ahmedabad. During the course of the search, various incriminating materials and loose papers were found and seized. Details are tabulated below: Printed from counselvise.com IT(SS)A.No.55/Ahd/2025 and 3 Others Shivali Fashion P. Ltd. Vs. ACIT 3 Sr. No. Annexure No. Page Nos. Description 1 A/1 1 to 69 \"Goal College Notebook\" recording alleged cash sales of readymade garments to various parties 2 A/2 1 to 161 Sale of ready-made dresses to J.M. Jain, Angel Garments, Siddhi Creation, etc.; copy of tax invoices, order estimation forms, e- way bills, and cheques. 3 A/3 1 to 153 Sale of ready-made dresses to various parties; copies of tax invoices, e-way bills, and cheques. 4 A/4 1 to 141 5 A/5 1 to 129 6 A/6 1 to 174 Order estimation forms. 2.3 The seized documents comprised invoices issued to various parties, order estimation forms, e-way bills, cheque copies, WhatsApp communications retrieved from the Director’s mobile phone, and outstanding ledger and billing reports relating to parties. 2.4 In the post-search proceedings, the assessee was specifically required to furnish page-wise comments on the contents of these documents. Further, a statement of Shri Shivkumar Lachmandas Gogia was recorded under section 131 of the Act on 27.01.2020. In response to Question No. 5, he admitted that the entries recorded in Pages 1 to 69 of Annexure A/1 represented sales of readymade garments in cash to various customers, not recorded in the books of account. In response to Question 6, he admitted that pages 5, 6, and 9 of Annexure A/12 seized from the office premises of the assessee related to sales made to various parties, including Angel Garments, Madhya Pradesh. He explained that manual order bookings reflected a total sale of Rs. 1,05,345/-, against which a final bill of only Rs.43,325/- was issued, and the difference of Rs.62,020/- was received in cash but not recorded in the books of account. A similar instance was noted in respect of Siddhi Creation, Bairagarh, Madhya Pradesh, where the order estimate recorded a total sale of Rs.1,25,835/-, but the final bill was only for Rs.23,355/-, and the balance of Rs.1,02,480/- was again received in Printed from counselvise.com IT(SS)A.No.55/Ahd/2025 and 3 Others Shivali Fashion P. Ltd. Vs. ACIT 4 cash and remained unrecorded. Pages 10 to 16 of the same annexure contained additional manual order entries of a similar nature. Further Shri Gogia confirmed that page 17 reflected a ledger titled “SK-Account from 24th October 2018,” showing purchases of ready-made garments amounting to Rs.37,31,188/-, of which Rs.30,00,000/- was paid in cash and Rs.7,31,188/- by cheque. He admitted that these purchases were made from Devratna Enterprise and Sai Trading, Rajkot, and the cash component was not recorded in the books. Supporting documents relating to this SK Account were found in pages 29 to 34, which detailed the corresponding purchase bills linked to the payments noted on page 17. In addition to documents, cash amounting to Rs. 15,30,650/- was also seized during the course of the search from the premises of the assessee group. During the course of the search action, Shri Mayur R. Ramchandvani, Sales and Billing Clerk, was confronted with the seized loose papers. In response to Questions 7 and 8 of his statement recorded under section 131 of the Act on 15–16/10/2019, he confirmed that the transactions noted in the said documents pertain to sales made to various parties and included copies of tax invoices, manual order forms, e-way bills, and cheques. 2.5 In addition, WhatsApp messages retrieved from the mobile phones of company personnel revealed internal discussions regarding the product mix and billing practices. Notably, message entries reflected a billing pattern in a 60:40 ratio, indicating a potential structure where 60% of consideration was recorded in books and the remaining 40% was received in cash. Though the assessee claimed that this represented a product mix ratio and not under-invoicing, the AO treated this as corroborative digital evidence supporting cash dealings outside the books. Digital photo images retrieved from mobile devices also contained handwritten notes and transactional details indicating part-payment in cash. One such example involved a customer transaction of Rs.7,23,270/-, where only Rs.2,58,800/- was invoiced and the balance of Rs.4,50,000/- was allegedly received in cash. Similar data relating to other customers like Jyotiben Soni and Printed from counselvise.com IT(SS)A.No.55/Ahd/2025 and 3 Others Shivali Fashion P. Ltd. Vs. ACIT 5 Smt.Sonalben Soni were also found. These statements and seized materials formed the primary basis for the Assessing Officer to invoke proceedings under Chapter XIV, leading to issue of notice under section 153A of the Act. In response, the assessee filed return under section 153A on 17.11.2020 declaring the same income. 2.6 Assessments for both years were completed by separate orders dated 28.09.2021 under sections 153A r.w.s. 143(3) (for A.Y. 2019–20) and under section 143(3) r.w.s 153B(1)(b) r.w.s l53A of the (for A.Y. 2020–21). The Assessing Officer made substantial additions on account of alleged under- invoicing, unaccounted cash sales and receipts, and unexplained cash, primarily relying upon the seized Annexure A/1 and the sworn statement of Shri Gogia recorded during post-search proceedings. Following is the tabulated summary of both the years – Particulars A.Y. 2019–20 A.Y. 2020–21 Date of original return under section 139(1) 30.10.2019 31.10.2021 Income declared u/s 139(1) Rs. 3,37,53,410/- Rs.4,03,69,430/- Revised return u/s 139(5) 30.09.2020 — Revised income declared Rs. 3,38,09,940/- — Notice under section 153A 19.10.2020 Not applicable Return filed u/s 153A 17.11.2020 Not applicable Income declared in 153A return Rs. 3,38,09,940/- — Assessment order date 28.09.2021 28.09.2021 Additions: Under-invoicing of sales Rs.1,25,78,89,010/- Rs.8,62,66,857/- Additions: Unaccounted sale of garments Rs. 7,97,268/- Rs. 4,46,533/- Additions: Unaccounted cash collections — Rs.1,17,34,170/- Additions: Unexplained cash (u/s 69A) — Rs.15,30,650/- Assessed income Rs.1,29,24,06,220/- Rs.94,03,47,640/- Printed from counselvise.com IT(SS)A.No.55/Ahd/2025 and 3 Others Shivali Fashion P. Ltd. Vs. ACIT 6 2.7 The assessee challenged the assessment orders before CIT(A), who allowed the assessee's appeal in part. The learned CIT(A), after analysing the factual matrix, noted that the addition was made without any incriminating document or seized material specifically relatable to A.Y. 2019–20. The CIT(A) also noted that the documents found during search (01.10.2019 to 14.10.2019) pertained only to F.Y. 2019–20 (relevant to A.Y. 2020–21) and not to A.Y. 2019–20, the year under appeal. He observed that the basis of the addition was primarily drawn from the seized material and statements pertaining to subsequent assessment years, without any direct nexus to the year under consideration. Following binding judicial precedents including those of the Hon’ble Gujarat High Court and coordinate benches of the Tribunal, the CIT(A) held that in the absence of incriminating material for the concluded assessment year, no addition could be sustained under section 153A. Consequently, the entire addition of Rs.1,25,78,89,010/- on account of alleged under-invoicing was deleted. Similarly, out of the addition of Rs. 7,97,268/- made towards alleged cash sales of samples, the CIT(A) accepted the assessee’s explanation that such samples were sold at negligible or throwaway value and accordingly sustained only the profit element of Rs.79,727/- and deleted the balance amount of Rs.7,17,541/-. 2.8 For A.Y. 2020–21, the assessee submitted before CIT(A) that the Assessing Officer had grossly erred in extrapolating the under-invoicing ratio to the entire turnover solely based on a limited set of 176 instances out of 1127 total tax invoices. It was contended that most of the tax invoices did not suffer from any discrepancy and the actual amount of cash component established from the seized material for the period 01.10.2019 to 14.10.2019 was only Rs.38,53,500/-, against the recorded sales of Rs.11,32,74,455/-, yielding a ratio of just 3.40%. 2.9 The CIT(A), after considering the chronology and contents of the statements recorded and the retraction, noted that the retraction came after Printed from counselvise.com IT(SS)A.No.55/Ahd/2025 and 3 Others Shivali Fashion P. Ltd. Vs. ACIT 7 a delay of 646 days and was not accompanied by any contemporaneous material to support the revised version. The CIT(A) further observed that the original statement was corroborated by the seized documents contained in Annexures A/2 to A/6, which showed significant mismatches between the order estimates and the invoices issued. In addition, the CIT(A) referred to the statement of Shri Shivkumar L. Gogia, Managing Director of the assessee company, recorded on 27.01.2020 under section 131 of the Act, wherein he also accepted that, in certain instances, cash was received from customers for the differential amount between the order estimate and the invoice. These facts formed the basis for the Assessing Officer’s addition and were considered in detail by the CIT(A) while adjudicating the issue of under-invoicing of sales. 2.10 The learned CIT(A) found that while there was some seized material and statements available for the year under appeal, the methodology of extrapolation adopted by the Assessing Officer was arbitrary and excessive. The CIT(A) held that the approach of the Assessing Officer in cherry-picking only incriminating entries and ignoring neutral or exculpatory ones violated the settled judicial principle that seized documents are required to be read as a whole and not in parts. The Ld. CIT(A) undertook a detailed and exhaustive analysis of the seized materials. It was noted that Annexure A/2 (41 entries) revealed average under-invoicing of 40.64%, Annexure A/3 (1 entry) reflected a ratio of 13.01%, Annexure A/5 (8 entries) yielded a cash portion ranging from 16.99% to 40.11% with an average of 25.15%, and Annexure A/6 (1 entry) showed under-invoicing of only 3.65%. The total cash received in unaccounted form during the said period, as per seized material, aggregated to Rs.38,53,500/-. On this basis, the Ld. CIT(A) concluded that the ratio of unaccounted to accounted sales, considering the total recorded sales of Rs.11,32,74,455/-, worked out to 3.40% (Rs.38,53,500 ÷ Rs.11,32,74,455). To plug possible revenue leakage, the Ld. CIT(A) conservatively estimated the under-invoicing ratio at 4% instead of 3.40% and accordingly reworked the undisclosed income at Printed from counselvise.com IT(SS)A.No.55/Ahd/2025 and 3 Others Shivali Fashion P. Ltd. Vs. ACIT 8 Rs.5,53,91,678/- (i.e., Rs. 132,94,00,286 × 4%) as against Rs. 88.62 crore adopted by the Assessing Officer. The balance addition of Rs.83,08,75,179/- was directed to be deleted. 2.11 Regarding the cash sales of samples, for A.Y. 2020-21, the CIT(A) held that the entire amount could not be taxed as income and, following the same reasoning as for the earlier year, sustained a profit (10%) addition of Rs.44,653/- out of Rs. 4,46,533/-. Likewise, in respect of the addition of Rs.1,17,34,170/- on alleged unaccounted cash collections, the CIT(A) estimated and retained Rs.11,73,417/- being 10% profit embedded therein. As regards the addition of Rs.15,30,650/- made under section 69A, the CIT(A) accepted the assessee’s explanation that the cash found was relatable to already considered business receipts, and hence, no separate addition was warranted. Accordingly, the said addition was deleted in full. 3. Aggrieved by the orders of the CIT(A), both, the revenue and assessee are in appeal before us raising following grounds of appeal: Following are the grounds of appeal raised by both parties: In Revenue’s appeal - IT(SS)A No. 69/Ahd/2025 for A.Y. 2019-20 1. On facts and in law, the Learned CIT(A) has erred in deleting the addition of Rs.1,25,78,89,010/- made by the Assessing Officer on account of under-invoicing of sales, despite the presence of seized documents, corroborating digital evidence, and statements recorded under oath indicating systematic under-reporting of sales. 2. The Ld. CIT(A), while appreciating the legal position on extrapolation, may have inadvertently overlooked the factual matrix wherein specific seized documents and digital evidence pertaining to the year under consideration were available and relied upon by the Assessing Officer in good faith and after due inquiry. 3. The Ld. CIT(A) erred in holding that the addition was made solely on extrapolation without incriminating material for AY 2019-20, whereas the assessment order drew on tangible evidence directly related to the year under appeal, including statements of key personnel admitting to the practice of recording part of the sales outside the books. Printed from counselvise.com IT(SS)A.No.55/Ahd/2025 and 3 Others Shivali Fashion P. Ltd. Vs. ACIT 9 4. The Ld. CIT(A) has also erred, in deleting the addition of Rs.7,17,541/- out of Rs.7,97,268/- made on account of unaccounted sales of readymade garments, despite clear documentary evidence and statements recorded under section 131 of the Act, affirming the authenticity of such unaccounted sales. 5. The deletion of the above additions by the Ld. CITA) may not be fully consistent with the facts on record, particularly in light of the voluntary and consistent statements of the assessee's own employees and promoters during the search and post-search proceedings. 6. Without prejudice to the above, the Hon'ble Tribunal may kindly consider the matter in light of the overall pattern of conduct and the principle that unaccounted sales, as confirmed by seized materials and sworn statements, warrant reasonable and proportionate tax addition, even d the exact quantification is subject to best judgment assessment. 7. The appellant craves leave to add, amend, or modify any of the above grounds of appeal at the time of hearing in the interest of justice. In Revenue’s appeal - IT(SS)A No. 70/Ahd/2025 for A.Y. 2020-21 1. On the facts and in the circumstances of the case and in law, the Learned Commissioner of Income-tax (Appeals) [Ld. CIT(A)))] has erred in restricting the addition on account of unaccounted turnover from Rs.88,62,66,857/- to Rs.5,53,91,678/- by arbitrarily estimating the under-invoicing at 40% instead of 40% as determined by the Assessing Officer (AO), without properly appreciating the incriminating documents seized under section 132 of the Income-tax Act, 196l (\"the Act\") and the corroborative statements recorded under sections 132(4) and l3l from key personnel, including the Director and Billing Clerk. 2. The Ld. CIT(A)) has failed to consider the consistent, systemic, and large- scale pattern of under-invoicing and cash transactions revealed from seized documents, digital evidence, parallel books of account, and uncontroverted statements of responsible persons, which collectively demonstrated deliberate suppression of turnover, justifying the addition made by the Assessing Officer in full. 3. The Ld. CIT(A) has erred in restricting the addition of Rs.4,46,533/- on account of cash sales of readymade samples to Rs.44,653/- by applying a notional profit margin, disregarding the fact that such sales were directly supported by documentary evidence found during the search and were duly admitted by the assessee's employees in statements recorded under section 131 and application of profit margin to such unaccounted sales is inappropriate where the full receipts were unrecorded and undisclosed. 4. The Ld. CIT(A) has erred in law and on facts in reducing the addition of Rs.1,17,34,170/- on account of unaccounted cash sales and cash collections to Rs.11,73,417/- by applying estimated margins, without Printed from counselvise.com IT(SS)A.No.55/Ahd/2025 and 3 Others Shivali Fashion P. Ltd. Vs. ACIT 10 appreciating that the seized material represents gross business receipts which were never recorded in the regular books of account and in the absence of any evidence of expenses being incurred against such receipts, the entire amount is liable to be assessed as income, particularly in light of the provisions of section 69C read with section 115BBE of the Act. 5. The Ld. CIT(A) has erred in deleting the addition of Rs.15,30,650/- made under section 69A read with section 115BBE of the Act, on account of unexplained cash found during the course of search, by erroneously accepting the assessee's explanation that the cash formed part of already taxed or estimated income and explanation lacks support from contemporaneous books of account, confirmations, or any third-party evidence, and hence does not discharge the burden cast on the assessee under the Act. 6. The Ld. CIT(A) has erred in accepting the assessee's explanation regarding the source of unexplained cash found during the search proceedings, despite the absence of corroborative evidence and in the face of direct, credible material in the form of seized assets and sworn statements of key persons, which have not been retracted or invalidated. 7. The Ld. CIT(A) has failed to appreciate that the assessment made under section l53A of the Act was based on seized material which clearly disclosed undisclosed income, and the additions made by the Assessing Officer were fully supported by tangible, credible, and contemporaneous evidence collected during search proceedings. 8. The Ld. CIT(A) has not given due regard to the statutory presumption under section 292C of the Act, which provides that documents, books of account, or other assets found in possession of a person during a search are presumed to belong to such person and the contents thereof to be true and further, the statements recorded under section 132(4) of the Act, having evidentiary value under the law, were not retracted or shown to be recorded under coercion, and hence, ought to have been relied upon in full. 9. The appellant craves leave to add, alter, amend, or withdraw any of the above grounds of appeal at the time of hearing. In Assessee’s Cross Objection No. 54/Ahd/2025 in IT(SS)A No. 69/Ahd/2025 – A.Y. 2019-20 1. On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in confirming the action of the AO despite the fact that the reassessment order passed under section 153A by the AO is illegal, invalid and without jurisdiction. 2. On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in rejecting the contention of the assessee that the learned AO has erred in making the addition in order passed u/s 153A Printed from counselvise.com IT(SS)A.No.55/Ahd/2025 and 3 Others Shivali Fashion P. Ltd. Vs. ACIT 11 r.w.s 143(3) of the Act, without any incriminating material having been found during the course of search. 3. (i) On the facts and circumstances of the case, the learned CIT(A) has erred in rejecting the contention of the assessee that the assessment order passed by the AO is illegal and liable to be quashed as the same has been passed violating the mandatory provisions of section 153D of the Act. (ii) That the purported approval u/s 153D of the Act is illegal, bad in law and also without application of mind. 4. (i) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the addition of Rs.79,727/- made by the AO alleging that assessee has made unrecorded cash sales of samples to various parties and adding the same as business income. (ii) That the abovesaid addition has been confirmed by the CIT(A) estimating the adhoc profit margin of 10% without there being any basis of the same. 5. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in rejecting the contention of the assessee that AO has erred in drawing adverse inference against the assessee by misinterpreting the statement recorded during the course of search. 6. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the abovesaid addition despite the same has been made by indulging in surmises and conjectures without bringing on record any direct evidence against the assessee, only on the basis of presumption and assumption. 7. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the abovesaid addition made by the AO using the data extracted from the digital devices without following the procedure prescribed under section 65B of the Indian Evidence Act. 8. The respondent craves leave to add, amend or alter any of the grounds of appeal. In Assessee’s Appeal IT(SS)A No. 55/Ahd/2025 – A.Y. 2020-21 1. On the facts and circumstances of the case, the order passed by the learned Commissioner of Income Tax (Appeals) [\"CIT(A)\"] is bad both in the eye of law and on facts. 2. (i) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in rejecting the contention of the assessee that the assessment order passed by the AO is illegal and liable to be quashed as the same has been passed violating the mandatory provisions of section 153D of the Act. Printed from counselvise.com IT(SS)A.No.55/Ahd/2025 and 3 Others Shivali Fashion P. Ltd. Vs. ACIT 12 ii) That the purported approval under section 153D of the Act is illegal, bad in law and also without application of mind. 3. (i) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the addition of Rs. 5,53,91,678/- on account of under-invoicing of sales made by the AO. (ii) That the abovesaid addition has been confirmed rejecting the detailed submissions and explanations along with the evidences brought on record by the assessee to justify that no such under-invoicing has been done by the assessee. (iii) That the abovesaid addition has been confirmed arbitrarily on estimation basis without there being any justification for the same. (iv) That the abovesaid addition has been confirmed rejecting the contention of the assessee that the extrapolation of seized documents to the total sales is unjustified, illegal and unsustainable. (v) Without prejudice to the above, the learned CIT(A) has erred in rejecting the contention that only the profit embedded in these transactions can be taxed and not the entire amount of alleged sales. 4. (i) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the addition of Rs. 44,653/- on account of alleged unaccounted cash sales, estimating profit margin on those sales @10%. (ii) That the abovesaid addition has been confirmed rejecting the submissions and explanations submitted by the assessee in this regard. (iii) That the abovesaid estimation made by the AO is arbitrary, too high and unsustainable. 5. (i) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the addition of Rs. 11,73,417/- made by the AO on account of alleged unaccounted cash sales, estimating profit margin on those sales @10%. (ii) That the abovesaid addition has been confirmed rejecting the detailed submissions and explanations submitted by the assessee in this regard. (iii) That the abovesaid estimation made by the AO is arbitrary, too high and unsustainable. 6. (i) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the action of the AO in making the addition of Rs.15,30,650 on account of cash found during the course of search. Printed from counselvise.com IT(SS)A.No.55/Ahd/2025 and 3 Others Shivali Fashion P. Ltd. Vs. ACIT 13 (ii) That the CIT(A) has erred in ignoring the submissions and explanations given by the assessee explaining the source of cash found during the search. 7. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in rejecting the contention of the assessee that the addition has been made without conducting any independent enquiry under section 133(6)/ 131 of the Act. 8. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in rejecting the contention of the assessee that the additions has been made relying upon the material collected at the back of the assessee without confronting the same to the assessee and without providing proper and adequate opportunity to the assessee to rebut the same. 9. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in rejecting the contention of the assessee that the additions has been made relying upon the statement recorded at the back of the assessee without providing the opportunity to cross examine the same. 10. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the abovesaid additions despite the same has been made by indulging in surmises and conjectures without bringing on record any direct evidence against the assessee, only on the basis of presumption, suspicion and assumption. 11. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the abovesaid additions made by the AO using the data extracted from the digital devices without following the procedure prescribed under section 65B of the Indian Evidence Act. 12. The appellant craves leave to add, amend or alter any of the grounds of appeal. 4. During the course of hearing, the learned Departmental Representative (DR) relied on the orders of the Assessing Officer. and submitted that the addition of Rs.7,97,268/- for A.Y. 2019-20 and Rs.4,46,533/- for A.Y. 2020-21 was made on the basis of clear and direct incriminating evidence found during the course of search at the residential and business premises of Shri Shivkumar Lachmandas Gogia and his group concerns, including the assessee, M/s. Shivali Fashion Pvt. Ltd. The DR submitted that Annexure-A/1, comprising 69 pages from a seized notebook titled \"Goal College Book,\" contained detailed entries relating to cash sales Printed from counselvise.com IT(SS)A.No.55/Ahd/2025 and 3 Others Shivali Fashion P. Ltd. Vs. ACIT 14 of ready-made garments to various parties such as Rich Girl, Himmat (KB Creation), Irfan Karigar, and Ayush Textile, which were not recorded in the regular books of account. The authenticity of these entries was corroborated by the statement recorded under section 131 of Shri Shivkumar Gogia on 27.01.2020, wherein he admitted that the entries pertained to unrecorded cash sales effected by the assessee. 4.1 The DR further submitted that the assessee’s claim regarding subsequent destruction or negligible realisable value of samples was self- serving and unsubstantiated by any contemporaneous evidence. It was pointed out by the DR that the Assessing Officer had issued a specific show cause notice calling upon the assessee to explain the notings in Annexure- A/1. In response, the assessee offered a detailed explanation and quantified the aggregate of such entries at Rs.12,43,801/-, apportioned between two financial years. After analysing the seized material and the explanations offered, the Assessing Officer treated the amounts of Rs.7,97,268/- relating to A.Y. 2019–20 and Rs. 4,46,533/- for A.Y. 2020-21 as unaccounted cash sales and added the same to the business income of the assessee. The DR thus contended that the seized material constituted incriminating evidence directly relatable to the year under consideration. 4.2 The DR submitted that the addition on account of under-invoicing of sales was based on the statement of Shri Mayur R. Ramchanwani Salesa and Billing Clerk, a long-serving employee of the assessee group, who had been associated with the business for nearly eighteen years, and whose statement was recorded under section 131 during the post-search investigation. The DR emphasized that Shri Mayur, in his deposition as recorded at page 30 of the assessment order, categorically admitted that the assessee was habitually preparing two parallel estimates for orders—one for internal records reflecting actual sale value and another suppressed version for the customer, which was subsequently used for billing purposes. The DR pointed out that the said employee further revealed that after settlement Printed from counselvise.com IT(SS)A.No.55/Ahd/2025 and 3 Others Shivali Fashion P. Ltd. Vs. ACIT 15 of payments, the original estimates showing the actual sales values were systematically destroyed by the accounts department as a matter of regular business practice. The DR contended that the very destruction of these documents prevented their seizure during the search and that this practice itself demonstrated the deliberate nature of concealment. The DR submitted that in such a scenario, the absence of physical seized documents for each transaction cannot be held against the Department, particularly when cogent oral evidence supported by digital records and partial documentary trail is available. It was argued that the Assessing Officer made reasonable estimation of suppressed turnover based on seized records of the subsequent year and extrapolated the same ratio backwards, especially since the modus operandi of under-invoicing was uniform and systematic across years. The DR submitted that the statement of the key persons, having remained un-retracted and corroborated by parallel entries and digital backups, provided sufficient basis for invoking best judgment and making addition under section 153A. The DR also contended that the learned CIT(A) had misdirected himself in treating the issue as one of pure extrapolation without contemporaneous material, ignoring the statement of this long-standing employee which formed the substratum of the AO’s findings. 4.3 The learned DR further submitted that the Assessing Officer has categorically brought on record material evidencing a systematic practice of under-invoicing adopted by the assessee group, whereby only 60% of the actual sale value was recorded in the books and the balance 40% was received in unaccounted cash. It was submitted that during the course of search proceedings, several incriminating documents were seized from the business premises of the assessee, including order estimate forms and tax invoices, found in Annexures A-2 to A-6, which revealed discrepancies between the actual value of goods sold and the invoices raised. Printed from counselvise.com IT(SS)A.No.55/Ahd/2025 and 3 Others Shivali Fashion P. Ltd. Vs. ACIT 16 4.4 The DR particularly invited attention to the pages from these annexures which demonstrated consistent instances of cash components in sale transactions, which were not reflected in the books of account. The DR contended that digital evidence in the form of WhatsApp messages seized during the search corroborated this practice. Specifically, WhatsApp messages retrieved from the mobile device of the assessee’s director, Shri Amit Gogia, revealed internal communication with the company’s accountant, Shri Nikhil Agrawal, wherein it was clearly stated that billing was being done in the ratio of 60:40. The DR pointed out that the messages dated 31.05.2019 make reference to the cost of dresses, sale price, and the instruction to maintain a 60:40 ratio, a clear indicator that the assessee was issuing invoices for only 60% of the transaction value and receiving the remaining 40% in cash. 4.5 The DR submitted that this was not a matter of product mix or commercial negotiation, as sought to be explained by the assessee, but an intentional and systematic arrangement to suppress actual turnover and evade taxes. It was further highlighted by the DR that Shri Amit Gogia, Director of the assessee company, in his statement recorded during the search, did not dispute the contents of these WhatsApp messages and accepted that such communications were genuine. The DR emphasised that such admission by a key managerial person corroborated the seized documentary and digital evidence, which collectively pointed to a conscious and deliberate practice of under-invoicing by the assessee. The DR submitted that the AO had tabulated turnover disclosed by different group concerns for multiple years and applied a uniform estimation approach (40% of turnover) to compute the unaccounted cash component, which the AO rightly treated as undisclosed income under section 69A. The same pattern was discernible across all group entities run by family members, which clearly establishes the consistency of this malfeasance. The DR pointed out that despite the evidence of suppression ranging from 45% to 60%, the AO has conservatively adopted 40% of turnover as the quantum Printed from counselvise.com IT(SS)A.No.55/Ahd/2025 and 3 Others Shivali Fashion P. Ltd. Vs. ACIT 17 of cash sales to avoid excessive estimation. This further strengthens the fairness and reasonableness of the estimation method adopted. 5. The learned Authorised Representative (AR) appeared on behalf of the assessee and advanced submissions contesting the additions made by the Assessing Officer and partly confirmed by the learned CIT(A). At the outset, the AR clarified that he did not press the legal and jurisdictional grounds taken in the appeal and cross-objection relating to the validity of assessment proceedings under section 153A of the Act in the absence of incriminating material for the relevant years; and the alleged mechanical and non-application of mind in the approval granted under section 153D of the Act. Accordingly, no arguments were advanced on these issues, and these grounds were treated as not pressed. Thereafter, on the merits of the additions, A.Y. 2020-21 was taken up as a lead year and the AR submitted that the alleged under-invoicing is based on extrapolation of certain notings. The AR vehemently objected to the extrapolation adopted by the AO, stating that the addition of under-invoicing for the entire year is based solely on the statement of an employee, Shri Mayur Ramchandwani, and not on any credible, year-specific incriminating material found during search. It was emphasised that extrapolation of a limited data set found for a short period (01.10.2019 to 14.10.2019) to the entire year is impermissible in law, particularly in absence of corroborative seized evidence. Refuting the claim of the DR that Shri Mayur Ramchandwani was a long-serving employee working for 18 years, the AR pointed out that the said individual had been employed only since 2018. Thus, the reliance placed by the AO on his statement to justify widespread under-invoicing across multiple financial years lacks factual foundation. The AR drew attention to the retraction affidavit filed by Shri Mayur Ramchandwani on 24.07.2021, wherein he clarified that cash billing was only occasional and limited to the Diwali season, and not a regular or systematic practice. Though this retraction came after a delay, the AR contended that such delay does not per se invalidate the retraction, particularly when supported by a sworn affidavit. Printed from counselvise.com IT(SS)A.No.55/Ahd/2025 and 3 Others Shivali Fashion P. Ltd. Vs. ACIT 18 The AR further submitted that the CIT(A) had dealt with this issue in detail and rightly found the extrapolated addition unsustainable. It was forcefully argued that the AO failed to carry out any independent verification or inquiry under section 133(6) or 131 to substantiate the alleged under- invoicing. No attempts were made to verify the seized order estimates or to confront any customers. The entire addition has been made on assumptions and unverified third-party statements, which were neither subjected to cross-examination nor independently corroborated. The AR relied on the detailed findings of the CIT(A), particularly paras 6.6 to 6.9 of the appellate order, which show that the seized Annexures A/2 to A/6 relate to a limited period and not the entire financial year. The AR referred to the observation that during the relevant period, out of sales of Rs. 11.32 crores, cash component amounted only to Rs. 38.53 lakhs (approx. 3.4%), thereby negating the presumption of a 60%-40% split applied by the AO. The AR placed reliance on the following judicial precedents to argue that the addition on the basis of extrapolation is not permissible and hence unsustainable: i. CIT Vs. Amar Corporation – 2012(7) TMI 983 (Gujarat High Court) ii. CIT – II Vs. Standard Tea Processing Co. Ltd. 2013(7) TMI 539 (Gujarat High Court) 5.1 The AR submitted that the entries in the seized notebook (Annexure A-1) pertain only to sample garments given to suppliers and job workers, which are generally returned in deteriorated condition and are sold, if at all, at negligible value to vendors in the local market. The cost noted therein represents only indicative costs furnished by suppliers. It was submitted that the seized pages do not reflect actual sales transactions, and in any event, the goods noted therein were not part of regular stock. Without prejudice, it was argued that even if such entries are to be construed as sales, only the profit element, if any, can be taxed and not the entire transaction value. The CIT(A)’s adoption of 10% profit margin was also contested as being ad hoc and without any basis. The AR further argued that the actual gross profit margin of the assessee is only 5%. Printed from counselvise.com IT(SS)A.No.55/Ahd/2025 and 3 Others Shivali Fashion P. Ltd. Vs. ACIT 19 5.2 The AR contended that the so-called collections noted in digital messages or statements pertain to general business correspondence and no evidence has been brought on record to show that these were unaccounted receipts. The amounts, if any, are already reflected in the books or are hypothetical entries with no corroborative evidence of receipt. The application of a 10% profit rate on these amounts is wholly unjustified. It was argued that without identification of actual sales or corresponding purchase and expense, the notings in WhatsApp messages or statements cannot be converted into taxable income. 5.3 The AR submitted that the entries recorded on the seized loose sheets (Annexure A/1 – pages 1 to 4), which were the basis of the addition, pertain exclusively to the Deepawali festival season and are not reflective of the assessee's regular business operations. It was contended that such notings do not represent a year-round practice but are confined to a brief and specific festive period during which certain customers prefer cash transactions, especially for bulk orders or incentive-linked purchases. The AR explained that the seized notings record cash collections received in lieu of sales incentives or bonuses extended to staff and do not represent formal or structured sales made outside the books. It was emphasized that the cash noted therein was neither part of regular trading stock nor reflective of unaccounted business profits but merely incidental incentive-based receipts. While admitting that such cash collections were not recorded in the books of accounts, the AR argued that the profit margin on such incidental transactions was minimal or even nil, and hence, estimation of entire turnover as unaccounted sales was highly excessive and unjustified. The AR submitted that the quantum of entries in Annexure A/1 is extremely limited (only 4 pages) and does not establish any systematic modus operandi of unrecorded sales. The AO failed to bring any corroborative evidence of continuation of such cash dealings beyond this brief festive window. The AR strongly objected to the extrapolation made by the AO and CIT(A), treating Printed from counselvise.com IT(SS)A.No.55/Ahd/2025 and 3 Others Shivali Fashion P. Ltd. Vs. ACIT 20 the entire amount of Rs.1,17,34,170/- as unaccounted turnover and further estimating 10% thereof as unaccounted profit. It was submitted that such estimation is based purely on conjecture and presumption without any objective foundation or direct link to the assessee’s regular business conduct. The AR also pointed out that the entries relied upon by the AO are coded entries, and though one such entry was decoded as Rs.4,00,000/-, the entire coding method is unclear and unverified. No third-party verification or cross-examination was undertaken by the AO to establish the actual transaction behind the entries. Although Shri Shivkumar L. Gogia, director of the assessee, admitted in his statement that the entries represent cash not recorded in books, the AR argued that this solitary statement cannot form the sole basis for addition without supporting material or inquiry. It was further submitted that the CIT(A) has erred in treating the entire Rs.1.17 crore as unaccounted turnover merely based on this statement, and even the 10% profit estimation is unfounded when the actual gross profit margin as explained is about 5%. 5.4 The AR contended that the addition of Rs.15,30,650/- on account of cash found during the course of search is unjustified, as the same can be duly explained with reference to the actual incriminating material seized during the search. It was submitted that the cash so found is not unexplained in isolation but is in fact reconcilable with the material seized from the assessee’s premises, particularly Annexures A/1 to A/6, which include tax invoices, order estimates, e-way bills, and loose papers detailing cash sales and collections. The AR pointed out that for A.Y. 2020–21, the cumulative value of incriminating material comes to Rs.1,60,33,703/-, comprising (i) difference in seized order estimates and tax invoice amounts of Rs.38,53,500/- as per Annexures A/2 to A/6, (ii) separately identified unaccounted cash sales of Rs.4,46,533/-, and (iii) unrecorded cash sales and cash collection amounting to Rs.1,17,34,170/- as per Annexure A/1. Applying the same estimation methodology as adopted by the CIT(A), i.e. 10% of the seized amounts, the unaccounted income works out to Printed from counselvise.com IT(SS)A.No.55/Ahd/2025 and 3 Others Shivali Fashion P. Ltd. Vs. ACIT 21 Rs.16,03,370/-, which sufficiently explains the availability of cash found during search. The AR further contended that the Revenue has not brought any material on record to demonstrate that the cash emanated from any source other than the above documented and quantifiable heads. It was submitted that the seized material has already been considered for addition under different heads and any separate addition of the cash found would amount to duplication of income. Therefore, the cash so found must be treated as emanating from the unaccounted business activity already considered in the seized documents, and hence the separate addition of Rs.15,30,650/- is unsustainable and liable to be deleted. 5.5 Based on the affidavits and documents provided, the AR contended that the retraction of the statements made during the search and post- search proceedings was duly made by both the employee and the director of the assessee-company. The AR submitted that Shri Mayur Raichandani, an employee of the assessee, who had initially admitted to preparing the “Order Estimate” and its connection with unaccounted sales during the search, subsequently filed a sworn affidavit dated 24.07.2021 (executed before a notary) wherein he categorically clarified that the “Order Estimates” were only indicative documents for estimation during the Diwali season and not indicative of actual unaccounted sales. He further affirmed that such estimates were neither shared with customers nor used for billing purposes. In parallel, Shri Shivkumar Lachmandas Gogia, Director of the assessee- company, also filed a detailed affidavit dated 02.11.2020 retracting the statements made during search proceedings. In his affidavit, he averred that the replies recorded in his statements were obtained under mental pressure, ill health, continuous questioning, and coercion, and that he was not given an opportunity to properly review or understand the contents. He explained that the answers recorded by the officers were not a true reflection of his actual replies and that many of them were twisted or altered, which came to his knowledge only when copies of the statements and seized documents were provided belatedly on 01.10.2020. Thus, the AR submitted Printed from counselvise.com IT(SS)A.No.55/Ahd/2025 and 3 Others Shivali Fashion P. Ltd. Vs. ACIT 22 that both retractions were duly made on oath and that the employee’s affidavit was sworn on 24.07.2021after studying the relevant seized documents forming the basis of assessment were provided to the assessee. Accordingly, the AR argued that the retraction should be treated as prompt and genuine, and that no adverse inference should be drawn solely on the basis of earlier statements obtained under duress. 5.6 At the threshold, the assessee placed reliance on certain well- established legal propositions to assail the validity and sustainability of the additions made. It was submitted that any addition made solely on the basis of extrapolation from isolated entries or events, without establishing a year- specific or transaction-specific nexus with the assessed income, is legally untenable. The assessee further contended that ad hoc additions made without reference to verifiable data or any empirical working violate the principles of reasonableness and fairness in assessment. It was emphasized that once the assessee has provided a prima facie plausible and supported explanation for a transaction—whether through books of account, vouchers, confirmations, or reconciliation—the burden squarely shifts to the Assessing Officer to disprove the same through independent enquiry or contrary evidence. It was urged that a mere suspicion, conjecture, or surmise—even if strong—cannot substitute the requirement of proof in the eyes of law, and the rejection of a bona fide explanation cannot be elevated to an inference of concealment without cogent rebuttal. 5.7 It was also contended that no addition is sustainable in the absence of clear identification of an undisclosed source of income or a discernible cash trail. The assessee argued that in the absence of any corroborative material, a statement recorded under section 132(4) or 131—especially if retracted or qualified—cannot constitute incriminating evidence by itself to justify an addition. The principle that a confessional statement, devoid of contemporaneous documentary backing, does not carry evidentiary sanctity unless tested through confrontation and cross-examination, was also Printed from counselvise.com IT(SS)A.No.55/Ahd/2025 and 3 Others Shivali Fashion P. Ltd. Vs. ACIT 23 reiterated. These submissions were sought to be fortified by reference to settled judicial pronouncements, including decisions of Hon’ble High Courts and coordinate benches of the Tribunal, forming part of the paper book and synopsis placed on record. 6. We have taken note of the above legal contentions and the supporting judicial principles and have applied them, wherever relevant, while adjudicating upon the respective grounds and issues arising in these appeals. 6.1 We have carefully considered the rival contentions advanced by the learned DR and the learned AR, perused the material available on record, and duly examined the assessment orders, the appellate orders passed by the learned CIT(A), and the seized documents and statements relied upon by both parties along with the judicial precedents relied on. Upon a comprehensive appraisal of the pleadings, grounds of appeal, and the respective contentions advanced by the parties, it emerges that the present set of appeals and cross-objection, though pertaining to two different assessment years, are factually and legally interconnected. The core issues revolve around the additions made by the Assessing Officer, pursuant to search proceedings conducted under section 132, and the corresponding partial relief granted by the learned CIT(A). The Revenue is in appeal against the relief granted, whereas the assessee has challenged the residual additions sustained. 6.2 At the outset, it is recorded that during the course of hearing, the learned Authorised Representative did not press the legal and jurisdictional grounds raised in the appeal and cross-objection concerning the validity of assessments under section 153A of the Act in the absence of incriminating material for A.Y. 2019–20 and the validity of approval granted under section 153D. As no arguments were advanced and the grounds were expressly stated to be not pressed, the same are treated as dismissed as not pressed. Printed from counselvise.com IT(SS)A.No.55/Ahd/2025 and 3 Others Shivali Fashion P. Ltd. Vs. ACIT 24 [Ground No. 1-3 of Assessee’s CO No.54/Ahd/2025 and Ground No. 1- 2 of the Assessee’s ITA No. 55/Ahd/2025] 6.3. From the record, the following substantive and interrelated issues arise for adjudication before us: i. Whether the evidentiary value of seized documents, digital records, and statements recorded during and after search proceedings has been appropriately appreciated by the CIT(A), including the validity of retractions made by key persons and the application of section 292C and the Indian Evidence Act, 1872. [Revenue’s Appeal ITA No. 69/Ahd/2025: Ground No.2,3,5 and 70/Ahd/2025: Ground Nos. 2,7,8] and [ Assessee’s ITA No. 55/Ahd/2025: Ground Nos. 10,11 and CO 54/Ahd/2025: Ground Nos. 5, 6, 7] ii. Whether the estimations made by the Assessing Officer based on extrapolation from limited seized data can be sustained, or whether the CIT(A)’s approach of restricting additions to only the demonstrable cash component and embedded profit is in accordance with law and judicial precedent. [Revenue’s Appeal ITA No. 69/Ahd/2025: Ground No.2,3,6 and 70/Ahd/2025: Ground Nos. 2,7,8] and [ Assessee’s CO 54/Ahd/2025: Ground Nos. 5, 6, 7] iii. Whether the learned CIT(A) was justified in deleting the addition of Rs. 1,25,78,89,010/- for A.Y. 2019–20 and restricting the addition of Rs. 88,62,66,857/- to Rs.5,53,91,678/- for A.Y. 2020–21, on account of under-invoicing of sales, particularly in light of the seized documents, statements recorded under section 131, digital evidence including WhatsApp messages, and other circumstantial indicia relied upon by the Assessing Officer. [Revenue’s Appeal in ITA No. 69/2025: Ground Nos. 1, 2, 3, 5, 6 and Revenue’s Appeal in ITA No. 70/Ahd/2025: Ground Nos. 1, 2, 7, 8] [Assessee’s Appeal in ITA No. 55/Ahd/2025: Ground Nos. 3(i) to 3(v), 10 and Assessee’s CO 54/Ahd/ 2025: Ground Nos. 2, 5, 6, 7] iv. Whether the CIT(A) was right in sustaining only the profit element embedded in alleged unaccounted cash sales of readymade garments/samples for both the years, instead of confirming the full addition made by the AO based on seized documents, including the \"Goal College Book\" (Annexure A/1). [Revenue’s 69/Ahd/2025: Ground No. 4 and 70/Ahd/2025: Ground No. 3] [Assessee’s Appeal in ITA No. 55/Ahd/2025: Ground Nos.4(i)to4(iii) and CO 54/Ahd/2025: Ground Nos. 4(i) & 4(ii)] v. Whether the CIT(A) was justified in restricting the addition of Rs.1,17,34,170/- made on account of alleged unaccounted cash collections to Rs.11,73,417/- by applying a profit estimation, and Printed from counselvise.com IT(SS)A.No.55/Ahd/2025 and 3 Others Shivali Fashion P. Ltd. Vs. ACIT 25 whether such estimation is consistent with settled principles of taxation in the absence of corresponding expenses. [Revenue’s Appeal ITA No. 70/Ahd/2025: Ground No. 4, Assessee’s ITA No. 55/Ahd/2025: Ground Nos. 5(i) to 5(iii)] vi. Whether the CIT(A) erred in deleting the addition of Rs.15,30,650/- made under section 69A in respect of cash found during the course of search, particularly when the assessee's explanation was not supported by contemporaneous books or third-party confirmations. [Revenue’s Appeal ITA No. 70/Ahd/2025: Ground No. 5,6 and Assessee’s ITA No. 55/Ahd/2025: Ground Nos. 6(i) to 6(ii)] 6.4 These consolidated issues being common across both assessment years and arising from materially identical facts, are taken up together for disposal in the ensuing paragraphs. 7. Issue (i) - Evidentiary Value of Seized Material, Statements, and Retractions Including Application of Section 292C of the Act and Section 65B of the Indian Evidence Act 7.1 The additions made by the Assessing Officer are principally based on documents and data seized during the course of search under section 132 of the Act. These include: (i) physical documents such as Annexures A/1 to A/6; (ii) WhatsApp messages extracted from mobile devices; (iii) photographic images of order estimate sheets; and (iv) statements of key personnel, including billing clerks and directors, recorded under sections 132(4) and 131. The AO concluded, on the strength of this material, that the assessee was engaged in a systematic practice of under-invoicing its sales and receiving the differential amount in unaccounted cash. 7.2. The assessee, however, has contested the evidentiary value of the material relied upon. It was contended that: i. the statements of employees, which form the foundation of the additions, were later retracted by way of sworn affidavits and hence lost their probative value unless corroborated by independent evidence. Printed from counselvise.com IT(SS)A.No.55/Ahd/2025 and 3 Others Shivali Fashion P. Ltd. Vs. ACIT 26 ii. the digital data (WhatsApp messages and image files), having been retrieved from personal electronic devices, were not authenticated by way of a certificate under section 65B(4) of the Indian Evidence Act, 1872, which is a condition precedent for admissibility of electronic records. iii. the seized documents comprised unsigned rough order estimates and internal noting, lacking corroboration from third-party confirmations or bank records. iv. the statutory presumption under section 292C of the Act is rebuttable and cannot be invoked in a mechanical manner in the absence of cogent supporting evidence. 7.3 We have considered the rival submissions as well as the findings of the learned CIT(A). It is noted that the CIT(A) accepted that the seized documents and digital data are relevant, but their evidentiary strength is not absolute and requires corroboration. The retractions by the concerned employee and director were made through affidavits dated 24.07.2021 and 25.06.2021 respectively, soon after receipt of the documents from the Department. The CIT(A) examined the legal position on evidentiary value of statements under sections 132(4)/131 and held, following some judicial precedents that a statement recorded under oath carries strong evidentiary value and can form the basis of assessment, unless the assessee discharges the burden of proving that such statement was incorrect or made under coercion or duress. It was further held that a retraction must be prompt and accompanied by convincing evidence such as complaints to superior authorities or corroborative documentation. In the present case, the retractions were held to be self-serving and lacking any contemporaneous support, and therefore not sufficient to negate the probative value of the earlier statements. 7.4 Further, the CIT(A) placed reliance on the sworn statement of Shri Shivkumar Gogia recorded on 27.01.2020 under section 131, wherein he provided detailed explanations of entries and discrepancies noted in the Printed from counselvise.com IT(SS)A.No.55/Ahd/2025 and 3 Others Shivali Fashion P. Ltd. Vs. ACIT 27 seized documents, specifically in Annexures A/2 to A/6. He candidly admitted that differences between the order estimate sheets and the invoices represented cash receipts not recorded in the books. This admission was independently corroborated by the AO’s examination of seized pages such as Page Nos. 122 and 153–154, where the unbilled portion of order value aligned with the cash differential stated in the statement. Thus, the CIT(A) concluded that the documentary evidence and oral statements, read together, formed a cogent and reliable evidentiary base substantiating the AO’s inference of suppression of sales and receipt of unaccounted cash. Thus, the CIT(A) concluded that the documentary evidence and oral statements, read together, formed a cogent and reliable evidentiary base substantiating the Revenue’s inference of suppression of sales and receipt of unaccounted cash. However, while upholding the evidentiary value of the seized material and the statements recorded under section 132(4)/131, the CIT(A) did not accept the Assessing Officer’s methodology of extrapolating the findings to the entire turnover. Instead, he confined the additions strictly to the quantifiable discrepancies arising from specific entries in the seized documents (Annexures A/2 to A/6), thereby applying the principle that only such incriminating material as found during the course of search can form the basis for additions under section 153A. 7.5 We find that the CIT(A) has correctly appreciated the evidentiary value of the seized documents, digital records, and statements recorded under sections 132(4) and 131 during and after the search. He has applied the legal principles governing the admissibility and weight of such evidence, including the presumption under section 292C of the Act. He has also correctly distinguished between generalised statements and those substantiated by seized documents, limiting additions only to entries supported by specific incriminating material. The CIT(A)’s approach strikes the appropriate balance between upholding the probative force of search- Printed from counselvise.com IT(SS)A.No.55/Ahd/2025 and 3 Others Shivali Fashion P. Ltd. Vs. ACIT 28 based evidence and excluding arbitrary extrapolation. We, therefore, uphold his findings on this issue. 8. Issue (ii) - Legality and Sustainability of Estimation Based on Extrapolation from Seized Material 8.1 The AO based his additions on extrapolation of the pattern of under- invoicing observed in a few instances of seized documents and digital records, extending the same to the entire turnover or across multiple years, without conducting any third-party verifications or establishing a consistent pattern of suppressed income across all transactions. 8.2 The CIT(A) restricted the additions to the specific instances where seized material clearly demonstrated unaccounted cash receipts—i.e., where the value in the manually prepared “order estimates” exceeded the formal tax invoices. Only such differences, along with a reasonable profit rate on unrecorded turnover, were treated as taxable. No extrapolation was applied to transactions not supported by seized or corroborative material. The CIT(A)’s approach aligns with judicial precedents which emphasise that additions must have proximate nexus with seized material, extrapolation is impermissible in the absence of corroboration and estimated additions should be reasonable and based on transaction-specific material rather than conjecture. 8.3 We concur with the CIT(A)’s rationale of restricting additions to demonstrable unrecorded turnover and embedded profit, and accordingly reject the AO’s extrapolation as arbitrary, excessive, and devoid of evidentiary backing. However, we do not agree with the method adopted by the CIT(A) for computing such profit, as it is also premised on a presumptive percentage of the total declared turnover, rather than being confined strictly to the quantum of unaccounted receipts emerging from seized material. This approach, though beneficial in quantum, still lacks precision and fails Printed from counselvise.com IT(SS)A.No.55/Ahd/2025 and 3 Others Shivali Fashion P. Ltd. Vs. ACIT 29 to align with the well-settled principle that additions must directly emanate from incriminating material and not from generalized estimations. 9. Issue (iii): Whether the CIT(A) was justified in deleting the addition of Rs.1,25,78,89,010/- for A.Y. 2019–20 and restricting the addition of Rs. 88,62,66,857/- to Rs.5,53,91,678/- for A.Y. 2020–21 on account of under-invoicing of sales 9.1. The issue before us is whether the learned CIT(A) erred in granting substantive relief to the assessee by deleting the entire addition of Rs.1,25,78,89,010/- for A.Y. 2019–20 and restricting the addition of Rs.88,62,66,857/- made by the AO to Rs.5,53,91,678/- for A.Y. 2020–21, despite the existence of seized material, statements recorded under sections 132(4) and 131, and digital evidence including WhatsApp messages. 9.2 Upon careful consideration of the rival submissions, documentary record, and the appellate findings, we observe that the Assessing Officer had adopted a broad-brush approach by extrapolating instances of under- invoicing found in a limited set of seized documents to the entire turnover, thereby estimating unaccounted income of Rs.88,62,66,857/- for A.Y. 2020–21 and Rs.1,25,78,89,010/- for A.Y. 2019–20. The CIT(A), while acknowledging that the methodology adopted by the Assessing Officer was not sustainable in law, proceeded to examine the seized documents and invoice-wise reconciliations submitted by the assessee. 9.3 Based on this reconciliation, the CIT(A) found that in A.Y. 2020–21, the total value of recorded sales for which comparative seized material was available came to Rs.11,32,74,455/-, whereas the differential value of order estimates vis-à-vis invoiced amounts (under-invoicing) was Rs.38,53,500/- . This yielded a ratio of under-invoicing at 3.40%. To safeguard the interest of the Revenue and allow for a margin of estimation, the CIT(A) conservatively rounded up the under-invoicing ratio to 4%. Applying this 4% under-invoicing ratio to the total recorded turnover of Rs.132,94,00,286/-, the CIT(A) worked out the undisclosed income at Printed from counselvise.com IT(SS)A.No.55/Ahd/2025 and 3 Others Shivali Fashion P. Ltd. Vs. ACIT 30 Rs.5,53,91,678/-. The balance addition of Rs.83,08,75,179/- was directed to be deleted, holding that there was no legal or factual basis to extend the seized sample findings to the entirety of turnover in absence of corroborative or pan-period incriminating material. We are of the considered view that the method adopted by the CIT(A) in estimating the embedded profit though better than the AO’s unbridled extrapolation, still suffers from arbitrariness and lacks evidentiary justification. Estimation used by CIT(A) is also premised on a presumptive percentage of the total declared turnover, rather than being confined strictly to the quantum of unaccounted receipts emerging from seized material. In principle, the power to make best judgment assessment does not absolve the authorities from grounding such estimation in objective and demonstrable evidence. We therefore do not endorse the CIT(A)’s approach of applying a flat 4% profit rate on selectively picked seized documents while ignoring the entirety of the quantifiable material presented by the assessee. 9.4. In the backdrop of the quantifiable seized material, the alternate plea raised by the learned Authorised Representative (AR) deserves consideration. The AR demonstrated, based on seized Annexures A/1 to A/6, that for A.Y. 2020–21, the total value of actual incriminating entries aggregates to Rs.1,60,33,703/-, comprising: (i) Rs.38,53,500/- being differential between order estimate and invoice amounts, (ii) Rs. 4,46,533/- representing separately identified unaccounted cash sales, and (iii) Rs.1,17,34,170/- being unrecorded cash receipts from Annexure A/1. Applying the same estimation methodology of embedded profit as adopted by the CIT(A), i.e., 10%, the resultant undisclosed income comes to Rs.16,03,370/- 9.5 In our view, this is a more precise and legally sustainable estimation as it is entirely based on demonstrable entries in seized material. We further note that the Revenue has not rebutted the reconciliation filed by the Printed from counselvise.com IT(SS)A.No.55/Ahd/2025 and 3 Others Shivali Fashion P. Ltd. Vs. ACIT 31 assessee nor conducted any independent enquiry to prove that the impugned cash did not originate from these identified sources. 9.6 We find considerable force in the assessee’s contention that in the absence of any evidence to support continuity, pattern, or generalization, any extrapolation of undisclosed income based on assumed ratios is impermissible. It is trite law that additions cannot be made merely on assumptions or conjectures, and where the seized documents provide exact quantification, such document-linked estimation alone can be the legal basis for addition. The AR rightly contended that once the assessee has furnished an explanation with supporting seized material, the burden shifts to the AO to disprove the same by way of independent enquiry or contrary evidence. The AO or CIT(A) has made no attempt to discredit the seized documents or show that they were incomplete or partial in capturing the totality of unaccounted income. No specific instance beyond Rs.1.60 crore was pointed out. Hence, taxing anything over and above the said figure would amount to duplicative and unsubstantiated estimation, which is impermissible in law. 9.7 The Departmental Representative relied upon the statements of Shri Shivkumar Gogia, a director of the assessee, and an employee (Mayur Ramchandani), recorded under section 131 post search. However, we find no corroborative reference in the assessment order demonstrating that such statements were matched with any seized material beyond those already quantified. A statement without corroboration from seized material is not sufficient for sustaining addition, especially in the case of retracted statements or statements not subjected to cross-examination. In the present case, the seized documents speak for themselves, and once the entire income from the said documents has been taxed, mere reliance on generic statements cannot be a substitute for material evidence. Printed from counselvise.com IT(SS)A.No.55/Ahd/2025 and 3 Others Shivali Fashion P. Ltd. Vs. ACIT 32 9.8 At this juncture, we consider it appropriate to refer to the judgment of the Hon’ble Jurisdictional High Court in the case of CIT v. Amar Construction [2012 (7) TMI 983, Tax Appeal No. 26 of 2012], relied upon by the learned Authorised Representative. In that case, the Hon’ble Court upheld the view taken by the Co-ordinate Bench of the Tribunal in holding that additions made merely by way of extrapolation, without supporting evidence, are not legally sustainable. The Revenue’s appeal was dismissed on the ground that no addition can be made in the absence of direct material indicating undisclosed income beyond what is demonstrable from seized documents. We have also carefully considered the objection raised by the learned Departmental Representative, who sought to distinguish the said decision on the ground that it pertained to a civil construction business, whereas the present case involves trading activity, in which, according to the DR, estimation or extrapolation could be a more acceptable method of assessment. However, we are equally conscious of the reliance placed by the learned AR on another judgment of the Hon’ble Gujarat High Court in CIT-II v. Standard Tea Processing Co. Ltd. [2013 (7) TMI 539, Tax Appeal No. 966 of 2010], wherein the principle of law relating to extrapolation of figures found in seized documents was also examined. For ease of reference, the relevant extract from the said judgment is reproduced below: 6. We are broadly in agreement with the view of the Tribunal noted above. It may be that on the basis of the seized material for a certain period, during the part of the block period, certain additions were made by the Assessing Officer. In the present case, however, such materials admittedly related to a brief period between 1.4.98 till 29.7.98. Thereafter, for the entire block period to extrapolate the same basis of modus operandi, that too without any basis or material from the seized documents, in our opinion, was simply not permissible. The Assessing Officer, presumed several things such as, the continued purchase by the assessee through the same agency at artificially inflated price. He also projected the rate at which such higher purchases were made for the said period about four months in absence of any evidence that such activities continued for the entire block period. In other words, in absence of any documents found during search to even link the assessees activities for the entire period, to project by way of Printed from counselvise.com IT(SS)A.No.55/Ahd/2025 and 3 Others Shivali Fashion P. Ltd. Vs. ACIT 33 extrapolation the facts found during the brief period of about four months would not be permissible and rightly so held by the Tribunal. 9.9 This principle, in our considered view, applies with equal force to the facts of the present case, where additions have been attempted based on extrapolation of entries in seized documents, without bringing on record any independent corroborative material relating to the period or extent sought to be assessed. 9.10 We find merit in the assessee’s reconciliation, which identifies total unaccounted turnover of Rs.1,60,33,703/- based on seized Annexures A/1 to A/6. Applying the CIT(A)’s own 10% profit rate thereto yields an addition of Rs.16,03,370/-, which is fair, specific, and evidence-backed. While we agree with the CIT(A) in rejecting the AO’s extrapolation, we do not approve the CIT(A)’s method of applying a flat 4% under-invoicing ratio on the entire turnover, as it still relies on broad estimation rather than concrete entries. In absence of any rebuttal or independent inquiry by the Revenue, the addition is restricted to Rs.16,03,370/- and the balance stands deleted. 9.11 As regards A.Y. 2019–20, we note that the learned CIT(A) has categorically recorded a finding that no incriminating material was found during the course of search which could be specifically related to the assessment year in question. The Assessing Officer had proceeded to make an addition of Rs.1,25,78,89,010/- solely by extrapolating the under- invoicing patterns detected from seized materials relatable to subsequent assessment years, particularly A.Y. 2020–21. However, the CIT(A), after detailed examination, concluded that such extrapolation was not supported by any seized document, statement, or digital evidence directly correlating to transactions undertaken during A.Y. 2019–20. In this regard, it is now well-settled that in respect of completed assessments, no addition can be made under section 153A in the absence of incriminating material found during the course of search. The jurisdictional condition for invoking assessment or reassessment under section 153A in such cases is the Printed from counselvise.com IT(SS)A.No.55/Ahd/2025 and 3 Others Shivali Fashion P. Ltd. Vs. ACIT 34 existence of seized material that reveals undisclosed income or income that has escaped assessment. In the absence of such material, the completed assessment cannot be disturbed. This principle was reiterated and approved by the Hon’ble Supreme Court in PCIT v. Abhisar Buildwell Pvt. Ltd. [(2023) 452 ITR 97 (SC)]. 9.12 Accordingly, we hold that for A.Y. 2020–21, the addition be restricted to Rs.16,03,370/- (As detailed and calculated in earlier paras) in place of Rs.5,53,91,678/- sustained by the CIT(A), and for A.Y. 2019–20, the deletion of Rs.1,25,78,89,010/- does not call for any interference. The Revenue’s appeals are partly allowed, and the assessee’s cross-objection is partly allowed. 10. Issue iv – Taxability of Unaccounted Cash Sales: Whether Only Embedded Profit or Entire Turnover Is to Be Added Based on \"Goal College Book\" (Annexure A/1) 10.1 We note that during the course of search action under section 132 of the Act, certain loose papers were found and seized from the business premises of the assessee, which were collectively marked as Annexure A/1 comprising 69 pages. These documents were confronted to one Shri Shivkumar L. Gogia during post-search enquiries. In his statement recorded under section 131 on 27.01.2020, he admitted that the notings in these pages represented cash sales of readymade garments made to various parties, which were not recorded in the books of account. The total unaccounted cash sale value reflected in Annexure A/1 for the relevant year was Rs.7,97,268/-. 10.2 During the appellate proceedings, the assessee submitted that the seized note book was in fact related to samples of readymade garments sent to job-workers/suppliers for preparing trial garments, which were ultimately returned after 2–3 months and sold at throwaway prices, as the samples had lost their commercial shine. The assessee contended that the Printed from counselvise.com IT(SS)A.No.55/Ahd/2025 and 3 Others Shivali Fashion P. Ltd. Vs. ACIT 35 realisable value of these samples was hardly 5% to 10% of cost and, therefore, the actual cash received was negligible. 10.3 The CIT(A), after a careful evaluation of the assessee’s submissions and the seized documents, observed that the entries in Annexure A/1 indicated meticulous recording of garment descriptions, names of parties, and transaction dates, which collectively established that these were indeed sales transactions conducted outside the regular books of accounts. The assessee’s explanation that these were mere sample movements was found to be unsubstantiated by any supporting documentary evidence. However, instead of upholding the entire addition of Rs.7,97,268/-, the CIT(A) found that since no corresponding purchase costs were recorded for these alleged unaccounted sales, only the profit element embedded in such transactions could be considered as income. This finding was based on the settled judicial principle that in the absence of any finding regarding undisclosed investment in purchase of goods sold off the books, the entire gross receipts cannot be treated as income of the assessee. In support, the CIT(A) relied on the judgement of Hon’ble Jurisdiction High Court in case of CIT v. President Industries [(2002) 258 ITR 654 (Guj.)], where it was held that the realisation of excess over the cost incurred that only forms part of the profit included in the consideration of sales and unless there is a finding to the effect that investment by way of incurring the cost in acquiring the goods has not been disclosed, the entire sum of undisclosed sale proceeds cannot be treated as income of the relevant assessment year. 10.4 The CIT(A) further noted that the assessee had shown gross profit of 5% in its regular books. Since the nature of activity was retail trade in garments and the transactions were unaccounted, it was considered reasonable that profit retained in cash would be higher than the book margin. Accordingly, the CIT(A) estimated a profit margin of 10% on the unaccounted cash sales of Rs.7,97,268/- and confirmed addition to the extent of Rs.79,727/-,while deleting the balance addition of Rs.7,17,541/-. Printed from counselvise.com IT(SS)A.No.55/Ahd/2025 and 3 Others Shivali Fashion P. Ltd. Vs. ACIT 36 10.5 This conclusion, in our considered view, is in consonance with settled judicial principles laid down by the Hon’ble jurisdictional High Court as well as various coordinate benches. In the absence of any finding by the Assessing Officer that there was any undisclosed investment in acquiring the garments sold for Rs.7,97,268/-, and in light of the evidence that the sales were off-book, the addition to the extent of estimated profit is a fair and judicious conclusion. Accordingly, the Revenue’s grievance in Ground No. 4 of IT(SS)A No. 69/Ahd/2025 is devoid of merit, while the assessee’s corresponding grounds in ITA No. 55/Ahd/2025 and CO No. 54/Ahd/2025 seeking full deletion are also not acceptable in view of cogent evidence supporting suppressed sales. Hence, we uphold the CIT(A)'s action of estimating and sustaining the profit element at 10% of the unaccounted sales of Rs.7,97,268/-, which comes to Rs. 79,727/-. The balance addition stands rightly deleted. We affirm the order of the CIT(A) on this issue for A.Y. 2019–20. 10.6 In respect of A.Y. 2020–21, the Assessing Officer had made an addition of Rs.4,46,533/- towards alleged unaccounted cash sales of readymade garments, based on the entries recorded in seized Annexure A/1. The CIT(A), after examining the material on record, upheld the occurrence of cash sales but found merit in the assessee’s alternate plea that only the profit element embedded therein could be brought to tax. Applying an estimated profit rate of 10%—in contrast to the book GP rate of 5.14%—the CIT(A) restricted the addition to Rs.44,653/- and deleted the balance of Rs.4,01,880/-. This approach is in consonance with judicial precedents, including CIT v. President Industries [(2002) 258 ITR 654 (Guj.)], and ensures that only real income is brought to tax. We see no infirmity in the findings or estimation made by the CIT(A) and accordingly uphold the order sustaining the addition to the extent of Rs.44,653/- for A.Y. 2020–21 and deleting the balance. Printed from counselvise.com IT(SS)A.No.55/Ahd/2025 and 3 Others Shivali Fashion P. Ltd. Vs. ACIT 37 11. Issue v: Estimation of Profit on Alleged Unaccounted Cash Collections 11.1 The Assessing Officer, in the assessment order, made an addition of Rs.1,17,34,170/- on the basis of seized Annexure A/1 (pages 1 to 4), which recorded notings of cash sales and cash collections not reflected in the assessee’s books of account. The said entries were admitted to be genuine by Shri Shivkumar L. Gogia in his statement recorded under section 131 of the Act on 27.01.2020. He explained that the amounts were noted in coded figures by omitting two zeros, and such cash sales and receipts were not accounted for in the regular books. The AO, relying on this admission and perusal of seized documents, treated the entire cash component of Rs.1,17,34,170/- as unaccounted income. 11.2 During appellate proceedings, the assessee submitted that the transactions were specific to Deepawali season, and the seized papers reflected only cash sales and receipts, without recording corresponding expenditure. It was contended that these transactions were incentive-linked and the profits were meagre. The CIT(A) noted that both in the statement and in the written submissions, the assessee had admitted that the seized pages related to unrecorded cash sales and collections. Therefore, the CIT(A) upheld the finding that the said sum represented unaccounted turnover. However, as regards the quantum to be brought to tax, the CIT(A) referred to the consistent principle adopted in the case of unaccounted sales and held that only the embedded profit margin can be brought to tax. Referring to his earlier finding in para 8 (relating to another addition), the CIT(A) estimated a net profit margin of 10% on such unaccounted cash sales and collections and accordingly restricted the addition to Rs. 11,73,417/- (i.e. 10% of Rs. 1,17,34,170/-). The balance amount of Rs. 1,05,60,753/- was directed to be deleted. This approach is in consonance with settled judicial precedents where it was held that the entire sales could not be treated as undisclosed income of the assessee. Only the profit element embedded in the sales could be treated as income. Printed from counselvise.com IT(SS)A.No.55/Ahd/2025 and 3 Others Shivali Fashion P. Ltd. Vs. ACIT 38 11.3 We find no infirmity in the approach adopted by the CIT(A) in applying the principle of taxing only embedded profit in unaccounted sales. The AO failed to bring any material on record to demonstrate that the entire cash received constituted net income, without any associated expenditure. 11.4 Accordingly, we uphold the decision of the CIT(A) in restricting the addition to Rs.11,73,417/- and deleting the balance amount of Rs.1,05,60,753/-. The Revenue’s ground is dismissed, and the assessee’s ground seeking further reduction is also rejected, as the estimation of 10% is found to be reasonable and in line with judicial norms. 12. Issue (vi) – Deletion of the addition of Rs. 15,30,650/- made under section 69A in respect of cash found during the course of search 12.1 During the course of search under section 132 of the Act at the business premises of the assessee, cash of Rs.15,30,650/- was found and seized. The Assessing Officer treated the same as unexplained money under section 69A on the ground that the assessee failed to offer any satisfactory explanation backed by contemporaneous records or third-party confirmations. In the assessment order, the AO observed that the explanation offered by the assessee that the cash was generated from business activities and advance collections, was neither corroborated by books of account found during the search nor substantiated through confirmations from customers or records of receipt. The AO therefore concluded that the amount represented unexplained money within the meaning of section 69A and made an addition accordingly. 12.2. During the appellate proceedings, the assessee contended that the amount of Rs.10,50,763/- out of the total cash belonged to family members and was duly reflected in their books. The remaining cash balance of Rs.4,79,887/- was stated to be part of cash sales and cash collection already included in the total unaccounted turnover considered by the AO, and thus the addition of the same amount would result in double taxation. It was therefore submitted that the addition of Rs.15,30,650/- should be Printed from counselvise.com IT(SS)A.No.55/Ahd/2025 and 3 Others Shivali Fashion P. Ltd. Vs. ACIT 39 deleted. The CIT(A), after considering the rival contentions and referring to the facts recorded in para 9.1 to 9.7 of the impugned order, noted that the explanation of the assessee regarding cash of Rs. 10,50,763/- belonging to family members could not be accepted at face value, since no contemporaneous books or confirmations were submitted during the search, and the explanation was found to be an afterthought. However, with regard to the remaining cash balance of Rs. 4,79,887/-, the CIT(A) noted that the Assessing Officer had already made substantive additions on the basis of seized material under various heads and accepted the assessee's contention that the cumulative quantifiable amount of incriminating material determined on the basis of seized documents amounted to Rs.1,60,33,703/-, and out of the said unrecorded turnover, the Assessing Officer had already estimated embedded profits and made substantive additions, which were partly confirmed and partly modified in appellate proceedings. Having regard to the totality of facts and judicial principles laid down, the CIT(A) concluded that the addition of Rs. 15,30,650/- made under section 69A was unwarranted, since it merely represented the application of unaccounted income already subjected to tax on a substantive basis in the hands of the assessee. Accordingly, the said addition was deleted, subject to the observation that if the substantive additions made on account of suppressed turnover are deleted in future appellate stages, the protective addition under section 69A would revive. 12.3 Before us the AR reiterated before us that the entire cash of Rs.15,30,650/- was explainable from the regular books of account and the quantifiable turnover computed on the basis of seized documents. It was submitted that the cash belonged to the assessee and was part of the suppressed turnover already subjected to tax in the hands of the assessee. Hence, no further addition under section 69A was warranted. 12.4 We find no infirmity in the reasoning and conclusion of the CIT(A). The principle that when source of income has already been subjected to tax, its subsequent application cannot be taxed again, is well-established. The Printed from counselvise.com IT(SS)A.No.55/Ahd/2025 and 3 Others Shivali Fashion P. Ltd. Vs. ACIT 40 AR before us has quantified the turnover linked to the cash found and demonstrated that the impugned sum of Rs.15,30,650/- was well within the scope of suppressed sales and collections as identified from seized material. Since the profit element on the entire suppressed turnover has already been estimated and taxed, separate addition under section 69A is not tenable. 12.5 Accordingly, we uphold the deletion of the addition made under section 69A. The order of the CIT(A) deleting the addition of Rs.15,30,650/- under section 69A is affirmed. Grounds of appeal Nos. 5 and 6 of the Revenue are dismissed, and Grounds 6(i) and 6(ii) of the assessee are allowed. 13. In the combined result the Revenue’s appeals (IT(SS)A Nos. 69 & 70/Ahd/2025) are dismissed in full, Assessee’s appeal (ITA No. 55/Ahd/2025) is partly allowed, and Assessee’s cross-objection (CO No. 54/Ahd/2025) is allowed. Order pronounced in the Court on 24th July, 2025 at Ahmedabad. Sd/- Sd/- (T.R. SENTHIL KUMAR) JUDICIAL MEMBER (MAKARAND V. MAHADEOKAR) ACCOUNTANT MEMBER Ahmedabad, dated 24/07/2025 vk* Printed from counselvise.com "
Other Referred Cases
CIT Vs. Amar Corporation, CIT \/ II Vs. Standard Tea Processing Co. Ltd.
Laws Referred To
Income-tax Act, 1961
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