Income Tax Appellate Tribunal - Raipur
R.K. Associates & Hotliers Pvt. Ltd., ... vs Deputy Commissioner Of Income Tax ... on 4 July, 2024
आयकर अपीलीय अिधकरण, रायपु र ायपीठ, रायपुर
IN THE INCOME TAX APPELLATE TRIBUNAL RAIPUR BENCH, RAIPUR
ी रिवश सूद, ाियक सद एवं ी अ ण खोड़िपया, लेखा सद के सम ।
BEFORE SHRI RAVISH SOOD, JM & SHRI ARUN KHODPIA, AM
(ITA No's: 82,83 & 84/RPR/2023)
(Assessment Year: 2020-21)
Sr. ITA No's Appellant Respondent
no
01 82/RPR/2023 DCIT (Central-1), M/s Brandavan Food Products,
Raipur Opposite Railway Station,
Deepak Nagar, Durg
PAN: AAGFB5137P
02 83/RPR/2023 DCIT (Central-1), Rahul Agrawal,
Raipur House No. 53, Friends Colony East,
Sri Puri Tehkhand, Okhla Industrial
Estate, S.O., South East Delhi-110020
PAN: ACJPA4135D
03 84/RPR/2023 DCIT (Central-1), R.K. Associates & Hotliers Pvt. Ltd.,
Raipur C/o Hotel Sagar International,
Opposite Railway Station, Durg
C.G. -491001
PAN: AAECR2971C
Cross Objection Nos. 5,6 & 7/RPR/2023
(Assessment Year: 2020-21)
Arising out of ITA Nos. 82-84/RPR/2023
Sr. CO No's Respondent Appellant
no (Arising Out of
ITA)
01 05/RPR/2023 M/s Brandavan Food Products, DCIT (Central-1),
(82/RPR/2023) Opposite Railway Station, Raipur
Deepak Nagar, Durg
PAN: AAGFB5137P
02 06/RPR/2023 Rahul Agrawal, DCIT (Central-1),
(83/RPR/2023) House No. 53, Friends Colony East, Raipur
Sri Puri Tehkhand, Okhla Industrial
Estate, S.O., South East Delhi-
110020
PAN: ACJPA4135D
03 07/RPR/2023 R.K. Associates & Hotliers Pvt. Ltd., DCIT (Central-1),
(84/RPR/2023) C/o Hotel Sagar International, Raipur
Opposite Railway Station, Durg
C.G. -491001
PAN: AAECR2971C
2 ITA No. 82, 83 & 84/RPR/2023
M/s Brandavan Food Products,
Rahul Agrawal,
R.K. Associates & Hotliers Pvt. Ltd.
िनधा रती की ओर से /Assessee by : Shri Mayank Patawari, CA
राज की ओर से / Revenue by : Shri S. L. Anuragi, CIT-DR
सु नवाई की तारीख / Date of Hearing : 16.05.2 024
घोषणा की तारीख / Date of : 04.07.2 024
Pronouncement
आदे श / O R D E R
Per Arun Khodpia, AM:
The captioned appeals are filed by the revenue and the cross objections by the assessees against the separate orders of Commissioner of Income Tax (Appeals)-3, Bhopal, (in short "Ld. CIT(A)"), for the Assessment Year 2020-21, all dated 22.12.2022, which in turn arises from the orders u/s 143(3) r.w.s. 153A of the Income Tax Act (in short "The Act"), passed separately for aforesaid assessees, all dated 28.09.2021, by Assistant Commissioner of Income Tax, Circle-1, Raipur (in short "Ld. AO").
2. Since, all the aforesaid matters pertains to a group of entities known as R. K. Associates Group. Having common, interconnected and inextricably interwoven issues involved therein, therefore, for the sake of convenience and brevity, all the aforesaid matter are taken up for adjudication under this common order.
3 ITA No. 82, 83 & 84/RPR/2023M/s Brandavan Food Products, Rahul Agrawal, R.K. Associates & Hotliers Pvt. Ltd.
3. At the outset, Ld. Authorized Representative, Shri Mayank Patawari of the assessee (in short "Ld. AR"), has made a request seeking permission for not pressing the grounds of cross objection and additional grounds raised therein. To this effect, written applications have been submitted by the Ld. AR for our consideration, which are extracted as under:
4 ITA No. 82, 83 & 84/RPR/2023M/s Brandavan Food Products, Rahul Agrawal, R.K. Associates & Hotliers Pvt. Ltd.5 ITA No. 82, 83 & 84/RPR/2023
M/s Brandavan Food Products, Rahul Agrawal, R.K. Associates & Hotliers Pvt. Ltd.6 ITA No. 82, 83 & 84/RPR/2023
M/s Brandavan Food Products, Rahul Agrawal, R.K. Associates & Hotliers Pvt. Ltd.
4. Apropos, aforesaid requests of the assessee refraining themselves from pressing of grounds of cross objection and additional ground thereto, when confronted to Ld. CIT DR, he did not raise any objection. Considering the request of the assessee and no resistance by the department, the permission was granted as requested. Accordingly, the grounds of cross objection and additional ground thereto are dismissed as not pressed.
Resultantly, CO Nos. 5, 6 & 7/RPR/2023 filed by the aforesaid assessee's, are dismissed as not pressed.
5. Adverting to the adjudication of appeals of the revenue, which are observed to be assailed for common, identical and interconnected controversies involved, therefore, to deliberate upon such analogous issues, we are taking the case of M/s Brandavan Food Products in ITA No. 82/RPR/2023, as the lead case and our decision in the said case shall apply, mutatis mutandis in the remaining two matters.
6. The facts of the case, which are elaborately explained by the Ld. CIT(A) in his order and again reiterated before us by the appellant, thus, for the sake of completeness and clarity, the same are culled out from the order of Ld. CIT(A), as under:
2.1 During the course of search action u/s 132 of the Act on 10.10.2019, various incriminating evidences in the form of data and excel sheet recorded in laptop showing huge cash payment to the tune of Rs. 60 crores for purchase of the hotel property, were found and seized. Both, Shri Jai Prakash Agrawal, key 7 ITA No. 82, 83 & 84/RPR/2023 M/s Brandavan Food Products, Rahul Agrawal, R.K. Associates & Hotliers Pvt. Ltd.
person of SBIL group and Shri Rahul Agrawal, key person of RKA group were confronted with all the incriminating documents seized during the course of search and their statements were recorded on oath u/s 132(4) of the Act. Both the key person in their statements confirmed that a sum of Rs. 60 crores have been paid by RKA group and received by SBIL group also. This fact has also been confirmed by Shri Saurabh Gupta (person deployed by the broker company M/s Hotelivate Pvt Ltd) and Shri Vishal Saxena (Director of SBIL) who facilitated the cash transaction. Further, the payments in cash were also not found recorded in seized books of account of any of the group concern.
2.2 Shri Rahul Agrawal, key person of AKA group in his statement recorded on oath u/s 132(4) on 10.10.2019 at Hotel Fortune Miramar, Goa accepted that sum of Rs. 60 crores in cash had been paid by him to Shri Vishal Saxena in installments on various occasions during the month of August and September, 2019 in Delhi. Shri Rahul Agrawal, in reply to Q.No 26, while admitting suppression of sales has explained entire modus operandi adopted for suppression of sales for generating cash and arranging entire transaction by stating that "each day the total cash collected at our office is entered in the books. It is at this point I had instructed to suppress these cash receipts such that the property transaction takes place."
2.3 However, Shri Rahul Agrawal during post search investigation, before the ADIT(Inv)-2, Goa vide letter dated 20.02.2020 changed his stand and submitted that the cash payment of Rs. 60 crore actually was made out of sales recorded in books of accounts. He further stated that out of total amount of Rs. 60 crores, sum of Rs. 33 crores had been paid by M/s RK Associates & Hoteliers Pvt Ltd (In short M/S RKAAHPL), Rs. 7 crores had been paid by the appellant (M/s BFP) and Rs. 20 crores by himself. He further explained that the appellant was having cash in hand balance of Rs.8.72 crores as on date of search 10.10.2019 without deducting payments of Rs. 7 crores made to SBIL during the month of August and September, 2019. Likewise, M/s RKAAHPL have cash in hand balance of Rs. 35.01 as on 10.10.2019 without deducting payments of Rs. 33 crores made to SBIL during the month of August and September, 2019. Further, he claimed that he is managing partner in the appellant firm and the remaining amount of Rs. 20 crores paid to SBIL by him as he is a person of high networth 8 ITA No. 82, 83 & 84/RPR/2023 M/s Brandavan Food Products, Rahul Agrawal, R.K. Associates & Hotliers Pvt. Ltd.
and regular filer of return of income. Total income of Rs. 12 crores has been shown in the return of income filed for A.Y. and as a person of resources and in order to meet the obligation, he made cash payment of Rs.20 crore to M/s .SBIL. He further submitted that after reconciliation of records, he would be able to tell about the exact nature and source of the cash investment of Rs.20 crore and however, the above amount would be offered for taxation either in his or firm's hand. He, in addition to earlier submission dated 20.02.2020, further submitted before the ADIT(Inv)-2, Goa vide letter dated 20.03.2020 that since he is an individual person and is not maintaining any books of account for transactions executed in personal capacity, the details of nature and source of investment in cash could only be submitted after due perusal of records/details etc for which sufficient time would be required. He also assured that such information would be duly submitted to the department during filing of return of income and before finalization of assessment proceedings. Subsequent to this, he submitted the details during assessment proceedings only.
2.4 Consequent to search, notice u/s 153A of the Act was issued on 03.02.2021 for AYs 2014-15 to 2019-20. Since, the assessment u/s 153A r.w.s 143(3) of the Act were already completed for AYs 2014-15 to 2017-18, therefore, in response to above notice, the appellant filed returns of income for AYs 2018-19 & 2019-20 on 05.08.2021. Regular return of income for year under consideration was filed on 30.11.2020 declaring total income of Rs. 19,09,25,700/- for which the appellant furnished revised computation by reducing income at Rs. 18,83,93,689/- and the same has been accepted by the AO. The AO during the course of assessment proceedings required the appellant to furnish details of payments towards on-money to SBIL. The appellant, in reply, relied upon the contents of letter dated 20.02.2020 filed by Shri Rahul Agrawal before ADIT(Inv)-2, Goa. The appellant also stated that the appellant and M/s RKAAHPL generate revenue approximately 50-55% in cash. Here, vide the impugned reply the appellant claimed that M/s Satyam Caterers Pvt Ltd (In short SCPL) has made investment of Rs. 20 crores instead of Shri Rahul Agrawal as claimed vide letter 20.02.2020 and 20.03.2020. It was explained that SCPL during FY 201920 has revenue from operations at Rs. 75,68,78,799/- which includes cash receipts of Rs. 55,42,92,976/-. Out of these cash receipts 9 ITA No. 82, 83 & 84/RPR/2023 M/s Brandavan Food Products, Rahul Agrawal, R.K. Associates & Hotliers Pvt. Ltd.
sum of Rs. 20 crores have been invested towards purchase of property. The appellant has also placed reliance on the decision of Hon'ble Delhi High Court in the case of CIT vs Kabul Chawala, [2016/ 380 ITR 573 (Delhi) and PCIT vs Meeta Gutgutia, [2017/ 395 ITR 526 (Delhi) claiming that no incriminating material was found during the course of search suggesting suppression of sales and in absence of incriminating material, addition cannot be made.
2.5 The AO after considering entire facts and submission of the appellant, did not find the same acceptable for the following reasons (para 10 of the assessment order):-
"10. Conclusion The submission made by the assessee cannot be accepted on the following grounds: -
(1) As per tally data of the group companies which was seized during the course of search proceedings at the office premises of RK Associates Group shows that the cash balance as on 10.10.2019 in the two group entities as under:
Brandavan Food Products Rs. 7,79,31,476/-
RK Associates and Hoteliers Pvt Ltd Rs. 30,88,71,831/-
In the tally data the amount of cash balance is shown as above. In the tally data or in the books of accounts the payments of Rs.60 crore has not been entered.
That the payment of Rs.60 crore was not entered in the books of accounts and also the availability of the cash balance of Rs.30.88 crore signifies that there was no payment made from the regular books of accounts and the amount paid was unaccounted.
(2) The total agreed price of the resort, as stated by Shri Saurabh Gupta was Rs. 140 Crores for the incomplete hotel project, out of which Rs.60 Crores was paid in cash in September 2019 whereas an amount of Rs.50 Crores was paid through banking channels. The relevant portion of the statement is reproduced below:
10 ITA No. 82, 83 & 84/RPR/2023M/s Brandavan Food Products, Rahul Agrawal, R.K. Associates & Hotliers Pvt. Ltd.
Q. No 10 Please explain the timeline of the transaction Ans. Sir, I was trying to find prospective buyers on behalf of STIL since last two years. But I was able to approach Shri Rahul Agrawal in May. Then they were able to meet the seller. Negotiations were going as for the basis of valuation of property. There were deliberation between the two parties. The buyer i.e. SR TIL was expecting price of 198 crores. The total expectation was on the premise that on payment of 198 crores to the seller, the seller would complete the hotel with all approvals and hand over the property on completion in a ready operate condition. But buyer could not trust that even on complete payments the project would be completed. Therefore, the final price was fixed at a 140 crores. And the sale deed would be made of the property as it is without completion. The breakup of the consideration was Rs. 3 crores was paid through demand draft in favour of SDITL an 06/07/2019, And Rs. 47 Crores was transferred by Pacifica Hotels Pvt. Ltd. in the first week of October. And the buyer had agreed to pay Rs 60,00, 00, 000/- in cash.
Of the remaining Rs, 30 crores, negotiations were going on the Agreement to sell (ATSO which would be decided by both the parties and signed at the time of execution of sale deed. This part of the consideration was final many Installations and work fixtures (already done by the sellers) had to be accounted for in the sale deed.
Q. No 11 Today, during the search proceedings at this Hotel In Goa, room no .412 was also searched which was occupied by you. During the search of this room, laptop, which is used and maintained by you was found and presented by you for Inspection. In the laptop there is a folder in ich documents pertaining to the transaction at Wyndhum Goa project are saved. Perusal of the document in the said folder revealed a document which was printed and is being seized as page no I of Annexure-A/RK/O1. I am showing you page no 17 of a file containing loose papers of your term sheet in which 11 ITA No. 82, 83 & 84/RPR/2023 M/s Brandavan Food Products, Rahul Agrawal, R.K. Associates & Hotliers Pvt. Ltd.
proposed transaction and sale consideration for the proposed transaction has been shown at Rs. 198.25 crores (exclusive of taxes). Please explain?
Ans. Sir, Rs. 198.25 crores was the consideration quoted by SBTIL for a fully completed hotel project, however, since the buyer RK Associates group had doubts about the capability of SBTIL for a complete hotel project and RK Associates group agreed to SBTIL construction the project for Rs. 140 crores and the agreed deal was thus for Rs. 140 crores. It was decided the entire interiors will be done by RK Associates group after bringing in a suitable brand. Because of this only the sale deed was forecasted to be registered today and cash amount of Rs. 60 crores was paid upfront by RK Associates group. These transactions have been recorded by me in the page no 17 shown by you. I have been made aware of entire negotiation and the transaction and I am also aware of the amount and mode of payment of the agreed consideration, an amount of Rs. 60 crores was agreed to be paid in cash and has been paid by RK Associates group in cash. I came to know about the cash transaction telephonically by both parties. However I am not aware as to how the payment was actually made. However, I can confirm that this amount has been paid based on the information received by me and it is after all the payments having been made that the sale deed was supposed to be signed today, for which I had travelled to Goa along with Mr. Rahul Agrawal and Mr. Sharan Bihari Agrawal The statement of Saurabh Gupta is reinforced by the incriminating documents reproduced below where it is clearly mentioned that an amount of Rs. 60 crore was paid in cash in Delhi on 20 September.
Shri Saurabh Gupta had recorded the details of the transaction in an excel sheet titled "Payment" in the folder "Wyndham Goa. A printout of the same is annexed to this report as Annexure-- Exhibit No. l. The extract ofdetails noted in the said excel sheet is reproduced as under:12 ITA No. 82, 83 & 84/RPR/2023
M/s Brandavan Food Products, Rahul Agrawal, R.K. Associates & Hotliers Pvt. Ltd.
Date Occasion Towards Value Instrument
18- July TS signing Part payment of sale 3 DD
deed value
27-Aug Advance 1
20-Sep In Delhi 60
07-Oct Interbank transfer 43
10-Oct Sale deed Sale of land + building
10-Oct ATS for movable assets 0.11
107.11
The above extract shows the details of payments made by RK Associates group to SBTIL Group from the time of signing of Term Sheet on 18.07.2019 to 10.10.2019 i.e upto the date of planned execution of sale deed (date of search). Shri Saurabh Gupta confirmed that he had maintained this record as per the information gathered from the two parties to the transaction.
It was therefore apparent that admitted on-money of Rs. 60 Crores was paid, in cash, by the R K Associates Group represented by Shri Rahul Agrawal to SBTIL towards the purchase of the under-construction resort. The total agreed price of the resort, as stated by Shri Saurabh Gupta was Rs. 140 Crores out of which Rs.60 Crores was paid in cash in September 2019 where as an amount of Rs.50 Crores was paid through banking channels When the payment was made in the month of September, the same should have been entered in the books of accounts on the date of payment itself However, the payment was not entered in the books of accounts till the date of search i.e. 10.10.2019 which clearly shows that the amount of Rs. 60 crore was paid out of undisclosed sources.
(3) It is also clear from the sale deed of the property that the total sale consideration of the property was registered for an amount of Rs. 50 crore. If the 13 ITA No. 82, 83 & 84/RPR/2023 M/s Brandavan Food Products, Rahul Agrawal, R.K. Associates & Hotliers Pvt. Ltd.
amount of Rs. 60 crore was paid out of regular books of accounts the same would have been included in the sale consideration. The fact that the sale consideration was Kept at Rs. 50 crore in the sale deed clearly shows the intention of both the buyer and seller to keep the amount of on money of Rs. 60 crores out of the books.
(4) Shri Rahul Agrawal stated during statement that he directed to suppress the sales & the cash so generated has to be kept aside, later he retracted from statement with the explanation that he misunderstood the meaning of these terms. In fact, he stated that it was surplus cash and not the suppressed sales.
Ans: Sir, I have approximately 400 Crores turnover combined in bath M/s Brandavan Food Products and RK Associates and Hoteliers Pvt Ltd. Out of the total turnover approximately 50 to 55% of my receipts are in cash and the remaining is through banking channels. I operate restaurants of approximately 20 units in the name of Comesum in main stations like Nizamuddin, Agra, Mathurs Gwalior Jhansi etc. The receipts from these restaurants and through catering in super-fast trains are mainly in cash. The cash generated in these places are made into cash packets and given at panty as the train when we operate. For ex Samta Express runs though Nizamuddin to Vizag. The restaurants operated by us in this route give thin cash packet to the pantry manager in the train who is our employee. Such manager delivers the packet to our office at 17, Okhla Phase l, new Delhi. Each day the total cash collected at our office is entered in books. It is at this point I had instructed to suppress these cash receipts such that the property transaction takes place. Apart from this we have cash management services of IndusInd Bank at various locations where the cash generated in these centres is directly credited to our respective bank account of M/s Brandavan Food Product and RK Associates and Hoteliers Pvt Ltd However the receipts which are through cheque are mainly from the bills cleared by IRCTC for trains like Shatabdi or Rajdhani where the meals are inclusive of the tickets. As these bank credits cannot be suppressed these receipts are offered to tax.
Q. No. 27 Please state how much cash is generated in both the firm and company M/S. Brandavan Food Products and RK Associates and Hotiliers Pvt. Ltd.
14 ITA No. 82, 83 & 84/RPR/2023M/s Brandavan Food Products, Rahul Agrawal, R.K. Associates & Hotliers Pvt. Ltd.
Ans: Sir, at that point of time I am not able to tell that what exact cash sales is generated in both the firm and company M/s. Brandavan Food Products and RK Ltd. The same will be furnished by me in next 7 days.
Q.NO 28 Please explain in detail the regular sale suppression that was being carried out at your instructions to your accounts department.
Ans: Sir, there was no suppression till 31 March 2019. I intended to buy this property which came to my knowledge in April 2019. Hence, I instructed my accounts department person Mr SK Roonga to suppress the cash sales for accumulating the cast for the said deal.
Q.NO 29 Please explain where you had kept the unaccounted cash in Delhi?
Ans Sir whole cash was kept at my office at D-187, Okhla Phase l, New Delhi. Some of the cash was also kept at my residence.
The explanation extended by the assessee is nothing, but an afterthought developed over the post search period. The alibi, resorted to by the purchaser group the RK Associates Group that their group entities had cash balances in their books of accounts which was utilized to pay off the cash consideration for the resort project cannot be accepted since had it been the actual case the cash consideration would have been included in the sale dead because that would have also increased the book value of the resort project which hitherto remains at Rs.50 Crores only.
(5) The assessee relied upon the judicial pronouncement of Delhi High Court in the case of CIT vs. Kabul Chawla ITA No. 707, 709 & 713 of 2014. The decisions of honorable court as mentioned in the submission of the assessee are distinguishable as the facts in those cases. are completely different from the case of the assessee. In the case of the assessee there are incriminating documents seized during the course of search which shows that the amount of Rs .60 crore was paid in cash out of unaccounted business income. That the amount of Rs. 60 crore was paid in cash was also confirm by the statement of Shri Saurabh Gupta.
15 ITA No. 82, 83 & 84/RPR/2023M/s Brandavan Food Products, Rahul Agrawal, R.K. Associates & Hotliers Pvt. Ltd.
Further the tally data seized during the course of search shows that the payment made in cash has not been entered in the books of accounts till the date of search, although the payment of Rs .60 crore was made in cash in the month of September itself.
(6) The tally data of the group companies was seized during the course of search proceedings at the office premises of R K Associates Group which shows that the cash balance as on 10.10.2019 in the two group entities as under:
Brandavan Food Products Rs. 7,79,31,476/-
RK Associates and Hoteliers Pvt Ltd Rs. 30,88,71,831/-
Contrary to the above balances as appearing in the tally data as on 10.10.2019 it is an admitted fact admitted by Rahul Agrawal as well as Vishal Saxena and Sameer Biyani that the cash had exchanged hands in the month of September 2019. Therefore, stating that the cash paid to SBTIL was out of the cash balance held in the books of the above two entities is just an afterthought.
(7) As per submission of the assessee, M/s Pacifica Hotels (Ahmedabad Projects) Private Limited and other entities / persons who have provided unaccounted cash in the Hotel Project deal, have entered in Memorandum of Understanding (MOU) to invest in acquiring the Hotel project on the terms of sharing of revenues after it becomes operational. This MOU was not revealed at the time of search, although it was stated during the post search proceedings that such MOU existed. It is not a registered document. The explanation given by the assessee is not acceptable. It is a mutually agreed document and all the parties concerned have signed it. As per the terms of the said MOU, the investment made by each entity/company/person has been recorded as business asset/investment in the books of the respective entity/person which has made the requisite investment. Since the cash has been paid by M/s RK Associates & Hoteliers Pvt. Ltd., M/s Brandavan Food Products and Shri Rahul Agarwal, it has been recorded as business asset/ investment in the respective books/records of these entities/person only. Since, this setup or understanding was not disclosed during search or post search proceedings, there is no difficulty in believing that it is an afterthought arrangement to avoid the tax.
16 ITA No. 82, 83 & 84/RPR/2023M/s Brandavan Food Products, Rahul Agrawal, R.K. Associates & Hotliers Pvt. Ltd.
As discussed earlier, such transactions have been recorded in the books of accounts, this is unaccounted business income.
In the course of assessment proceedings, the assessee furnished the bifurcation of source of cash payments to M/S Sir Bio Tech Limited totalling to Rs. 60 crore as under:-
(a) M/s RK Associate & Hotliers Private Limited-Rs.33 Crore
(b) M/s Brandavan Food Products - Rs. 7 Crore
(c) M/s Rahul Agrawal - Rs.20 Crore From all the facts as narrated above, it is crystal clear that it is an afterthought arrangement to avoid the tax.
Considering all the facts, the amount of Rs. 60 crore shall be treated as unaccounted business income in the hands of M/s R K Associate & Hotliers Private Limited, M/s Brandavan Food Products and Shri Rahul Agrawal in the same ratio as submitted by the assessee.
Accordingly, an amount of Rs. 7,00,00,000/- shall be treated as unaccounted business income of the assessee for A. Y. 2020-21 and charged to tax accordingly.
7. Aggrieved by aforesaid order of Ld. AO making addition on account of unaccounted business income, the assessee preferred an appeal before the Ld. CIT(A), wherein various issues raised were discussed at length. The legal contentions raised by the assessee before the first appellate authority, objecting to the validity of assessment order passed u/s 143(3) has been deliberated upon by the Ld CIT(A), while deciding on the following grounds of appeal:
17 ITA No. 82, 83 & 84/RPR/2023M/s Brandavan Food Products, Rahul Agrawal, R.K. Associates & Hotliers Pvt. Ltd.
3.1 Ground No. 1, 3, 3.1 to 3.2: - Through these grounds of appeal, the appellant has challenged validity of assessment order passed u/s 143(3) on the following grounds: -
(i) The order passed u/s 143(3) being bad in law and as well as on the facts, deserves to be quashed.
(ii) Assessment order u/s 143(3) has been passed without affording opportunity of being heard and without issuing show cause notice.
(iii) The conclusion arrived at by the AO was only on the basis of whims and fancies. The addition has been made in absence of any incriminating material supporting the conclusion of the AO and sole basis of the addition was statement recorded u/s 132(4).
(iv) No specific deficiency in the audited books of account has been pointed out and addition has been made without rejecting books of account u/s 145(3).
8. The aforesaid contentions of the assessee / appellant, before the Ld. CIT(A) were discussed at length, and after deliberations the same are partly allowed, under following categorical observations:
3.1.2. The above contentions of the appellant are being dealt with in the following manner:-
a. Regarding the contention that the order passed u/s 143(3) is bad in law, the appellant has not made any specific submission. Further, I have found that search and seizure operations were carried out at the business as well as residential premises of the appellant group on 10.10.2019. Accordingly, notices u/s 153A of the Act dated 03.02.2021 were issued to file return of income for the AYs 201415 to 2019-20. The year under consideration being the year in which search, and seizure operation was conducted, as per the guideline in this regard, was selected under compulsory scrutiny as the appellant had filed its return of income u/s 139(1) on 30.11.2020. In the 18 ITA No. 82, 83 & 84/RPR/2023 M/s Brandavan Food Products, Rahul Agrawal, R.K. Associates & Hotliers Pvt. Ltd.
assessment order it has been specifically mentioned that the statutory notices were issued and served in the manner and procedures provided in the Act. The AO has also mentioned that the appellant or its counsel never objected the centralization of the cases as well as validity of notices issued and served. I find that the assessment order for the year under consideration has been passed u/s 143(3) of the Act after following due procedure and law as per the Act. The appellant never objected the validity of the notice u/s 143(2) of the Act and also complied with the various notices issued u/s 142(1) of the Act on 06.02.2021, 08.02.2021, 08.07.2021 etc. Therefore, the order passed u/s 143(3) cannot be said to be bad in law. The appellant had made compliances. Proper opportunity of being heard was made available to the appellant. Accordingly, principles of natural justice have also been followed by the AO. There is no dispute that the notice u/s. 143(2) of the Act was issued beyond time limit prescribed in the Act and order u/s.143(3) was barred by limitation. In such circumstances, the order u/s 143(3) of the Act cannot be held as bad in law. Accordingly, the contentions of the appellant are rejected.
b. Regarding contention that no reasonable opportunity of being heard was provided and order was passed without issuing show cause notice, the appellant has submitted that the AO had sought explanation regarding source of payment of Rs. 7 crores which was duly explained with the support of documentary evidences submitted vide submission dated 26.08.2021. However, the AO did not ask for further explanation rejecting the contents of the submission and passed order on 29.09.2021, after the lapse of more than one month from the date of last submission without issuing a show cause notice for not accepting the submission of the appellant. The action of the AO was against the instruction of CBDT and various judicial pronouncements. The appellant has placed reliance upon CBDT's instruction no 20/2015 dated 29.12.2015 and on several judicial pronouncements like SAS Fininvest LLP, WP(c) No 5087/2021 (Delhi HO, Modi care Foundation WP(c) No 5535/2021 (Delhi HC), Saawariya Impex Pvt Ltd WP(c) 5196/2021 (Delhi HC) and submitted that there was requirement to issue show cause notice duly indicating the 19 ITA No. 82, 83 & 84/RPR/2023 M/s Brandavan Food Products, Rahul Agrawal, R.K. Associates & Hotliers Pvt. Ltd.
reasons for proposed additions so as not to violate the principles of natural justice.
I have found from the appellants reply dated 26.08.2021 that the appellant has clarifiedbefore the AO that there was no suppression of sales and the sales of the appellant was in accordance with the GST returns. The AO has made addition on account of suppressed business income. Thus, it is clear that the appellant submitted all the details and evidences .before the AO to substantiate its sales Accordingly, it cannot be said that the appellant was not provided opportunity of being heard and file proper reply on the issue of suppression of sales. Non acceptance of explanation by the AO is altogether a different issue and it depends upon the interpretation and appreciation of facts on various aspects and .angles The AO was not satisfied with explanation offered by ,the appellant and hence treated the cash payment of Rs.7 crore as unaccounted business income. On this issue, I find that sufficient opportunity of being heard was provided to the appellant. If the show cause notice was issued, then the appellant would have reiterated the same reply as submitted in past before the AO. Ialso find this presumption correct as during the appellate proceedings, the submissions of the appellant are in the same line which were already presented before the AO. No new aspect to support its contentions hasbeen brought in by the appellant during appellate .proceedingsConsidering the above discussion, principles of natural .justice have been duly followed in this case Therefore, above decisions cannot be applied here. In view of the above discussion, the contentions of the appellant are not found acceptable.
C. Regarding the addition made without any incriminating material and only on the basis of statement recorded u/s 132(4), the appellant has submitted that the AO has made addition on the basis of statement of Shri Rahul Agrawal taken u/s 132(4) on 10.10.2019, wherein, he had stated that the investment in Goa Hotel Project was made out of suppressed sales. This statement has been made the basis of addition of Rs. 7 crores in the hands of appellant. The appellant has further submitted that statement wasrecorded under the strenuous conditions wherein Shri Rahul Agrawal stated 'suppression of sales' instead of 'surplus of sales'. Further, no evidence during search and seizure proceedings was found which could support the suppression of sales by the 20 ITA No. 82, 83 & 84/RPR/2023 M/s Brandavan Food Products, Rahul Agrawal, R.K. Associates & Hotliers Pvt. Ltd.
appellant. Accordingly, the appellant submitted that statement recorded without any supporting concrete evidence cannot termed to be incriminating material in view of various judicial pronouncements. The appellant has placed reliance upon various judgments such as Anand Kumar Jain (2021) SCC Online (Del) 3174, Harjeev Aggarwal ITA No 8/2004 (Del HC), Best Infrastructure Pvt Ltd 397 ITR 182 (Del HC) and Mantri Share Brokers ITA No 502/2011 (Raj HC). The appellant has further submitted that statementrecorded u/s 132(4) cannot be the sole basis for making addition to the total income. For this, the appellant has placed reliance upon various decisions such as Kailashben Manharlal Choksi (2010) 328 ITR 411 (Guj), Anand Kumar Jain (2021) SCC Online (Del) 3174, Narendra Garg and ,Ashok Garg ITA No 1531 to 1532/2007 (Guj), Dilbag Rai Arora ITA No. 304/2009 (All), Smt Jaya Laxmi Ammal (2017) 390 ITR 189 (Mad), S. Kadar Khan Sons (2008) 300 ITR 15 (Mad). The appellant has also placed reliance upon CBDT Circular F. No 286/2003 dated wherein, it 10.03.2003 has been emphasized that focus ,should be on collecting credible evidences not on the confession of undisclosed income. In view of the above, the appellant submitted that his statement is not based upon any evidence found during the course of search and seizure proceedings and therefore, the statement cannot be categorized as incriminating material. Accordingly, this cannot be sole basis for the purpose of making addition. The appellant has further submitted that he was facing a long, strenuous and forceful proceeding of search and seizure while he had gone for registry of hotel property in Goa. As he was not in his office at the time of recording his statementand therefore, was not able to reconcile the status of cash collected for payments to SBIL group. There was no support of any account or finance person of his business group. Therefore, he could not understand that cash generated on sales in the books of account was available as 'surplus of sale', not 'suppression of sales'. In absence of copy of statement given on 10.10.2019, he could not review his version with the help of account staff ,members. It was only on 05.02.2020, when he was shown the above statement, it became known to him that he had used the word 'suppression of sales' and thereafter, he confirmed cash payments of Rs. 60 crore to SBIL and regarding source of the same, he stated that the cash payments were made 21 ITA No. 82, 83 & 84/RPR/2023 M/s Brandavan Food Products, Rahul Agrawal, R.K. Associates & Hotliers Pvt. Ltd.
out of surplus generated through regular sales. Under these circumstances, the documentary evidences presented before the AO should have been considered and reviewed before making the assessment. The appellant submitted that above contentions are also supported by the judgement of Hon'ble Bombay HighCourt in the case of Rakesh Ramani, (2018) 168 DTR 356, wherein, it has been held that voluminous evidences filed by the assessee during the course of assessment proceedings has been completely ignored on the ground that the same were not produced when the seizure was made, no requirement in law that evidence in support must be produced only at the time when, the seizure has been made and not .during the assessment proceedings In view of the above, the appellant submittedthat statement of Shri Rahu Agrawal is not based upon any evidence found during the course of search and seizure proceedings and therefore, the statement cannot be categorized as incriminating material. Accordingly, this cannot be sole basis for the purpose of making addition.
I have found that search and seizure operation was conducted in the cases of two business groups viz. M/s Sir Biotech India Ltd (SBIL) represented by Shri Jai Prakash Agrawal and RKA Group represented by Shri Rahul Agrawal on 10.10.2019. During the course of search and seizure proceedings, at room no of Hotel Fortune Miramar, Goa, occupied by Shri Sourabh Gupta, certain 412 'records were found maintained in laptop in form of excel sheet titled 'payment in the folder 'Wydham, Goa' wherein, following details relating to purchase of under construction hotel by group from SBIL group were found:-
Date Occasion Towards Value Instrument
18- July TS signing Part payment of sale 3 DD
deed value
27-Aug Advance 1
20-Sep In Delhi 60
07-Oct Interbank transfer 43
10-Oct Sale deed Sale of land + building
22 ITA No. 82, 83 & 84/RPR/2023
M/s Brandavan Food Products,
Rahul Agrawal,
R.K. Associates & Hotliers Pvt. Ltd.
10-Oct ATS for movable assets 0.11
107.11
In his statement Shri Saurabh Gupta explained the above payment made by RKA group persons to SBIL group persons. He stated that this record had been maintained as per information gathered from the two parties i.e. seller andpurchaser. He also confirmed that the total deal was finalized at Rs.140 crores between RKA group and SBILgroup for the purchase of under construction hotel. On the basis of this incriminating material, statement of Shri Rahul Agrawal, the key person of RKA group, was also recorded u/s132(4), wherein, he admitted that amount of Rs. 60 crores was paid in cash to SBIL group and same was paid out of suppressed sale of the /appellant and Ms .RKAAHPL. Shri Rahul Agrawal in the statement also admitted and confirmed that the cash of Rs. 60 crores was assessable as unaccounted income in the hands of above two concerns though the resort project was purchased in the name ofM/s Pacifica. Thus, it is evident that the statement of Shri Rahul Agrawal and Shri Saurabh Gupta were recorded on the basis of entries found and maintained in a file in the laptop of Shri Saurabh Gupta. The entries appearing in laptop and objective of the entries have never been denied by the above both persons. The statements are backed by seized material as narrated above. The amount of Rs. 60 crores .was paid in cash which has also been confirmed by above both persons Further, as per books of account of the RKA group concerns as available in tally data seized during the course of search and seizure proceedings, did not contain the entries in respect of cash payment of Rs. 60 crores. In the circumstances, the file recovered from the laptop of Shri Saurbah Gupta was certainly incriminating materials, the contentsparticularly payment of .cash of Rs 60 crore of which never denied by Shri Rahul Agrawal. The year under consideration in which the search was conducted had been selected for scrutiny u/s 143(3). This year does not fall under the category of abated or non-abated year, therefore, it will not be correct to say that in the year under consideration, addition was to be made on the basis of incriminating 23 ITA No. 82, 83 & 84/RPR/2023 M/s Brandavan Food Products, Rahul Agrawal, R.K. Associates & Hotliers Pvt. Ltd.
material only. However, the AO has made the statement of Shri Rahul Agarwal recorded u/s 132(4) basis for making the addition which may not be correct without disproving subsequent correction made in the said statement. However, Shri Rahul Agrawal has subsequently explained the source of cash payment of Rs. 60 crores, which includes the amount of cash payment of Rs. 7 crores made by the appellant, by placing cogent evidences with support of books of account completed after the search on the basis of valid piece of evidences, giving valid reasons for incompleteness of books of account. But the AO has not found same convincing for which no cogent reason has been given. On other hand the appellant by placing various evidences successfully proved that the cash payments were made out of surplus cash generated from sales and not from suppression of sales as stated by Shri Rahul Agrawal during statement proceedings u/s 132(4). It has been held by Hon'ble Supreme Court and other courts that it is open to the assessee so that the admission made in the statement was not correct. The decision of Hon'ble Supreme Court in the case of Pullangode Rubber Produce Company Limited 91 ITR 18 (SC), Nagubai Amal vs B Sharma Rat) AIR 1956 (SC) 593 and Awad Kishore Dass AIR 1979 (SC) 861 are squarely applicable to the case of the appellant. Therefore, making addition ignoring the retracted statement of Shri Rahul Agrawal and without considering material brought on record during assessment proceedings, the action of the AO cannot be held justifiable. Considering the above discussion, the contentions of the appellant are found partly acceptable.
d. Regarding the contention of the appellant that no specific defect has been pointed out by the AO and books of account have not been rejected u/s 145(3) of the Act while making addition on account of suppression of sales/business income, the appellant has submitted that the AO has not countered the evidences/explanation furnished by the appellant before treating the recorded amount of payments to SBIL, out of cash generated through regular sales, as unaccounted business income. The books of accountof the appellant have regularly been audited on which no negative inference has been drawn by the AO. The AO has neither pointed out any deficiency in the audited books of 24 ITA No. 82, 83 & 84/RPR/2023 M/s Brandavan Food Products, Rahul Agrawal, R.K. Associates & Hotliers Pvt. Ltd.
account nor has rejected them u/s 145(3). Therefore, he was not justified in making the impugned addition. The appellant has placed reliance upon various judicial pronouncements in this regard such as Ompakash Overseas (2008) 173 taxman 185 (P&H), Anil & Kumar C o (2016) 386 ITR 702 (Kar) and Talbros Engineering Ltd (2016) 386 1TR 154 (P&H) wherein, it has been held that the addition to the total income is not sustainable if the books of account of an assessee have not been rejected u/s 145(3). The appellant has further submitted that the same income cannot be taxed twice inthe hands of an assessee. Since, the amount of Rs. 7 crore is part of sale proceeds and due tax has already been paid and the use of such amount for making payment/investment to/with SBIL group as per MOU, taxing the impugned amount again as unaccounted income would lead to double taxation which is against the various judicial pronouncements. The appellant has the decisions in the cases of Laxmipat Singhania (1969) 72 ITR 291 (SC), Jain Brothers and Others (1970) 77 ITR 107 (SC), Nagarjuna Fertilizers and Chemicals Limited ITTA No 100/2003 (AP) and Mahaveer Kumar Jain CA No (SC). 4166/2006 I find that the AO has mentioned in the assessment order that there was cash balance ofRs. 7,79,31,476/- as on 10.10.2019 i.e. date of search and no cash payments were found entered in the books of accounts. On this basis, AO concluded that the payment of Rs. 7 crores was made out of unaccounted business income of the appellant. Though the AO has not rejected the books of account of the appellant u/s 145(3) but the above defect has been pointed out which caused the addition to the total income. While pointing out above ,defect the AO has placed reliance upon the statement of Shri Rahul Agrawal taken u/s 132(4) wherein, he had explained the modus operandi of suppression of sales of the appellant and explained the source of cash payment of Rs. 60 crores to SBIL out of suppressed sales. Since, no entry was passed in respect of cash payment to SBIL, the AO did not accept the contentions of the appellant that the cash payment was made out of cash balance in the books of account of the appellant While rejecting the explanation offered by the appellant for the reasons mentioned in the assessment order, the AO has not accepted the retraction from the statement by Shri Rahul Agrawal, MOU 25 ITA No. 82, 83 & 84/RPR/2023 M/s Brandavan Food Products, Rahul Agrawal, R.K. Associates & Hotliers Pvt. Ltd.
presented subsequent to search and completed books of account. On consideration of submission made before me as well as before the AO, it has been found that during search and seizure proceedings, Shri Rahul Agrawal stated that cash payment to SBIL was out of suppressed sales of the appellant and M/s RKAAHPL, but at the same time no material evidencing suppression of sales by any of the group concern including the appellant has been found during the search and seizureproceedings. Subsequently, Shri Rahul Agrawal also retracted from his statement stating that the cash payments were made out of surplus sales. The retraction made by Shri Rahul Agrawal is found to be backed by completed books of account, wherein, sufficient cash balances in form of opening cash balance of Rs. 63.94 lakhs and cash sales on various dates were available on the dates of payments. The opening balance and sales recorded .in the books of account have not been disputed by the AO ,Further the appellant has completed its books of account on the basis of valid ,documents like bills/vouchers statements received from various branches situated at many locations within the country etc. even entries relating to bank transactions were also pending on the date of search. Sales upto the month of August 2019 are also supported by the GST returns filed much before the search. Therefore, the appellant was justified in completing its books of accountsincorporating the cash payments to SBIL. MOU, ccontents of which have not been countered by the AO by brining any contrary material on record, produced after the search also supports the contentions of the appellant that the payments were to be made to SBIL in cash and according to MOU the appellant paid cash to SBIL. For not accepting all these material the AO has not given any justifiable reason/s. The above material should have been considered and after pointing out defects in the books of account or other material the conclusion of unaccounted business income should have been drawn. I find that the AO was not correct in his approach in not considering the material placed before him by the appellant. Hence, the contentionsof the appellant that the additions without rejection of books of account u/s 145(3) is not justified, are found acceptable. The decision relied upon by the appellant are also squarely applicable to it. In view of the above discussion the AO was not justified in making addition without pointing out any defect/rejecting books of account of the appellant.
26 ITA No. 82, 83 & 84/RPR/2023M/s Brandavan Food Products, Rahul Agrawal, R.K. Associates & Hotliers Pvt. Ltd.
3.1.3 In view of the discussion made herein above, the appeal on these grounds is partly allowed.
9. Further, before the Ld. CIT(A), the assessee has raised certain grounds, seeking adjudication of the same on merits, which are culled out as under:
2. That on the facts and the circumstances of the case and in law, the learned Assessing Officer (hereinafter referred to as 'the ld. AO") has erred in making an addition of Rs.7,00,00,000/- (Rupees Seven Crores) to the income of the appellant by alleging the same as unaccounted business income for AY 2020-21.
2.1 That the ld. AO has grossly erred in making the addition of Rs.7,00,00,000/- by alleging it as unaccounted business income by ignoring the fact that the same was already forming part of the sale proceeds as per regular books of accounts, GST returns and the audited financial statements of the appellant.
3.3. That the Ld. AO has erred in objectively rejecting the submissions of the appellant without going into the merits of the detailed explanations, evidences and judicial pronouncements placed on record by the appellant.
10. While deliberating upon the aforesaid grounds on merit, considering the submissions of the assessee a/w the material available, Ld. CIT(A) had observed that the contentions raised by the assessee are worth accepting, and deserves to be concurred with, accordingly, he decided to delete the addition of Rs. 7.00 crores imposed by the Ld. AO. The contentions of the assessee are exhaustively dealt with by the Ld. CIT(A), the relevant observations being of vital importance for interpreting the issues in the present case, are extracted as under:
27 ITA No. 82, 83 & 84/RPR/2023M/s Brandavan Food Products, Rahul Agrawal, R.K. Associates & Hotliers Pvt. Ltd.
3.2.2 I have considered the facts of the case, material evidences on record, written submission filed by appellant and to the facts and findings of the AO inter alia material brought on record. After considering the facts of the case and submission of the appellant, the AO made addition of unaccounted business income of Rs.7 crores on the following grounds:-
(i) During the course of search and seizure proceedings, Shri Jai Prakash Agrawal, key person of SBIL group and Shri Rahul Agrawal , key person of RKA group were confronted with the evidences for cash payments and in their respective statements recorded u/s 132(4), both of them confirmed the cash payment of Rs.60 crores by RKA group to SBIL group which was not recorded in the books of account of the group concerns of the appellant. The facts regarding cash payments was also confirmed in their statements by Shri Saurabh Gupta, person deployed by the broker company Hotelivate Pvt Ltd for the deal being entered into by the above two groups, Shri Vishal Saxena, director in SBIL and Shri Sameer Biyani.
Shri Saurabh Gupta and Shri Vishal Saxena had facilitated the cash transactions held between RKA group and SBIL group.
(ii) Shri Rahul Agrawal in his statement u/s 132(4) dated 10.10.2019 recorded at Hotel Fortune Miramar, Goa confirmed that the cash of Rs. 60 crores had been paid by him to Shri Vishal Saxena in the installments at various occasions during the month of August and September 2019.
(iii) Shri Rahul Agrawal in his statement u/s. 132(4) dated 10.10.2019, stated that the amount of cash of Rs.60 crores was generated by suppression of sales of the appellant and M/s RKAAHPL and also stated that the above amount was assessable in the hands of the appellant and RKAAHPL, though the hotel project was purchased in the name of M/s Pacifica.
28 ITA No. 82, 83 & 84/RPR/2023M/s Brandavan Food Products, Rahul Agrawal, R.K. Associates & Hotliers Pvt. Ltd.
(iv) As per seized books of account following cash balances as on 10.10.2019 was found:
BFP - Rs. 7,79,31,476/- RKAAHPL (appellant) - Rs. 30,88,71,831/-
However, entries regarding cash payments were not available in the books of account of both the concerns. Thus, it has been concluded by the AO that no payment was made from the regular books of account. Subsequently, the appellant stated that the cash paid to SBIL was out of cash balance reflected in the books of account which was treated as an afterthought by the AO.
(v)After perusal of transaction recorded in the laptop, Shri Saurabh Gupta also confirmed the payment of Rs. 60 crores in cash.
(vi) The resort property was purchased for Rs. 50 crores which is evident from the sale deed executed after the search. Therefore, there was no intention to record the cash payment in the books of account by both the parties i.e. seller and purchaser.
(vii) Shri Rahul Agrawal retracted from his statement given on the date of search stating that he mis-understood the meaning of suppressed sales and the cash paid was actually made out of surplus cash. The AO treated this retraction as an afterthought.
(viii) MOU entered into between M/s Pacifica and the appellant, BFP and SCPL was not disclosed during search or post search proceedings. Therefore, this MOU was an afterthought arrangement to avoid the tax liability.
29 ITA No. 82, 83 & 84/RPR/2023M/s Brandavan Food Products, Rahul Agrawal, R.K. Associates & Hotliers Pvt. Ltd.
In view of the above findings, the AO treated entire cash payment of Rs. 60 crores as unaccounted business income in the hands of following entities/persons in following manner
(a) RKAAHPL - Rs. 33,00,00,000/-
(b)M/s BFP (appellant) - Rs. 7,00,00,000/- (c) M/S Rahul Agrawal - Rs. 20,00,00,000/-
Accordingly, amount of Rs. 7,00,00,000/- has been added to the total income of the appellant.
3.2.3 The appellant has submitted that it is engaged in the business of catering and operating COMESUM restaurant across various railway stations in India. The sale proceeds includes the collection in cash from various trains and restaurant and amount received from IRCTC in the bank account directly. The sales are entered in the regular books of account and being vouched and verified at various levels including IRCTC. The appellant have been regularly filing GST returns on monthly basis. All the sales are verified and accounted for. There exists a possibility of time lag between the cash received and actual reporting and making entries into the tally system. Therefore, various sales, expenses, banking transactions could not be entered in the books of account upto 10.10.2019. The AO has made addition on the basis that the cash payment made to SBIL were not found entered in the books of account and not considered the completed books of account presented during the assessment proceedings. The AO has not pointed out any inconsistency in the completed books of account. Therefore, addition made on the basis of incomplete books of account and without considering various facts is not justified. The appellant has placed reliance upon the judgment of Hon'ble ITAT Jaipur bench in the case of M/s Jewels Emporium, ITA No 303/JP/2019 wherein, it has been held that when the books of account 30 ITA No. 82, 83 & 84/RPR/2023 M/s Brandavan Food Products, Rahul Agrawal, R.K. Associates & Hotliers Pvt. Ltd.
were incomplete during the course of search and completed later on, the same cannot be the basis of addition of undisclosed income, if no inconsistency in the completed books of account was found.
The appellant further submitted that the server of the group concerns was under recovery and up gradation process for 2-3 times during July 2019 onwards due to virus and updating requirements which led to delay in making some entries in the tally data and even led to not being recovered or completely reflected. On this account also, the completed books of account should have been considered by the AO.
It has been submitted that the major movement of cash balance is reported by the top management to the account department and thereafter entries are being made in tally data. Since, this was a high value transaction, the top management, for maintaining secrecy, may not have wanted to disclose the nature of payment and other details to the staff of account department. Since, registry of property was pending as on the date of search, the cash available in the books was utilized for making payment which may not have been sent to account department. In these circumstances, payments made in cash as investment in the Goa resort project, as per MOU could not be entered in the books of account.
Further, cash balance as per the seized books of account was not found during the course of search and seizure proceedings which also establishes that the cash as per the incomplete books had already been utilized for making payments to SBIL. In support of this contention the appellant has also submitted copy of cash inventory prepared at the time of search and seizure proceedings as per which cash of Rs. 20,55,220/- was found from the office premises and Rs. 79,45,600/- was found at the residence. The cash found has been duly reconciled with the completed books of account which were also submitted before the AO. The said 31 ITA No. 82, 83 & 84/RPR/2023 M/s Brandavan Food Products, Rahul Agrawal, R.K. Associates & Hotliers Pvt. Ltd.
position of cash balance has been accepted by the AO as no negative inference has been drawn in the assessment order. Therefore, in view of facts and evidences, it may be accepted that cash balance in the books of account was utilized for making payment to SBIL but the necessary entries in the books of account were remained to be made upto the date of search and seizure proceedings.
The sales of the appellant are also supported by the GST returns which had been submitted during the course of assessment proceedings. The GST returns also support the regular generation of cash which cannot be termed as afterthought.
The statement of Shri Rahul Agrawal recorded on the date of search has been duly retracted by clarifying that the source of cash was from 'surplus from sales', not out of 'suppressed sales'. The other contents of the statement have not been retracted by Shri Rahul Agrawal. Regarding retraction from statement dated 10.10.2019, the appellant submitted that Shri Rahul Agrawal was facing a long strenuous and forceful proceeding of search and seizure while he had gone for registry of the resort in Goa. He was not in his office and not provided with any support of account department, therefore, he erroneously stated the cash payment was made out of suppression of sales. Shri Rahul Agrawal was not provided with the copy of statement so that he could discuss the same with account staff. It could be discussed after 05.02.2020 when the statement was made available to him. Thereafter, vide letter dated 20.02.2020 and 20.03.2020 submitted to DDIT(Inv)-2, Goa clarified the source of payment of cash of Rs. 60 crores, therefore, there was no occasion to review the statement given by Shri Rahul Agrawal before the 05.02.2020. The appellant has submitted that it is a fundamental right of an assessee to correct any mistake in his statement subsequently. In support the appellant has placed reliance upon the decision of Hon'ble ITAT Pune bench in the case of 32 ITA No. 82, 83 & 84/RPR/2023 M/s Brandavan Food Products, Rahul Agrawal, R.K. Associates & Hotliers Pvt. Ltd.
Jyotichand Bhaichand Saraf & Sons Pvt Ltd (2012) 139 ITD 10 (Pune) and submitted that factual retraction should not be brushed aside without verifying facts and circumstances.
Regarding MOU executed between M/S. SCPL, M/S. BFP, M/S. RKAAHPL and M/S. Pacifica, the appellant has submitted that the entities who had paid cash to SBIL entered into a MOU to invest their money on revenue sharing basis. The MOU is a written document and it contains all the elements of a valid contract. This MOU has been signed by the competent persons and has also been notarized. There are no explicit or implied provisions under the Act either in Indian Contract Act or Income Tax Act which state that only registered agreement / contract are inforceable or valid. The authenticity of the MOU cannot be suspected on the basis of non-registration. Further, on the basis of this MOU necessary entries in the books of account have also been made by the three parties who made the cash payment in the business interest. The appellant submitted that numerous courts have pronounced that business decisions may not be questioned by the AO on the basis of prudence or otherwise. The appellant has placed reliance upon decision of Hon'ble ITAT in the case of DCIT vs Deloite Haskns and Sales in ITA No 2970/Asd/2017, Hon'ble Delhi ITAT in the case of Neho Construction Ltd ITA No 3063/Del/2011. The decisions in the business interest have been taken by the appellant and MOU in this regard has been executed and terms and conditions of the same are being followed in letter and spirit. Therefore, the conclusion drawn on the issue of MOU by the AO is merely on surmise. The AO accepted the bifurcation of amount as per MOU but failed to appreciate the cash balances as have been recorded in the books of account of the appellant. During the period of search and seizure proceedings the priority was to register the property being purchased by M/S. Pacifica as the complete payment was already made, therefore, under the strenuous pressure situation Shri Rahul Agrawal could not 33 ITA No. 82, 83 & 84/RPR/2023 M/s Brandavan Food Products, Rahul Agrawal, R.K. Associates & Hotliers Pvt. Ltd.
inform the search party in respect of the MOU. The MOU was not available with Shri Rahul Agrawal or Shri Sharan Bihari Agarwal who were searched in Hotel Fortune Miramar, Goa. Therefore, MOU was presented after the search. The AO has made additions on the basis that the said MOU was not made available at the time of search and seizure proceedings which is not justifiable. The appellant has placed reliance upon decision of Hon'ble Bombay High Court in the case of Rakesh Ramani (2018) 168 DTR 356 (Bom) wherein, Hon'ble court has held that there is no requirement in law that evidence in support must be produced only at the time when the seizure has been made and not during the assessment proceedings.
On the basis of these submissions, the appellant has submitted that the amount of Rs. 7 crores paid in cash is out of regular sales proceeds and duly accounted for in the books of account and therefore, it is not unaccounted business income.
3.2.4 I have duly considered the submission made by the appellant and facts mentioned in the assessment order. Considering all the aspects of the case, the issues involved in the above grounds of appeal are being adjudicated as under:-
(i) During the course of search and seizure proceedings on the appellant group, the books of account maintained in tally software were seized. In the case of appellant there was cash balance of Rs.
7,79,31,476/- as on 10.10.2019. The appellant has made claim that cash of Rs. 7,00,00,000/was paid to SBIL on various dates out of regular sales proceeds of the business. But the AO has not accepted this claim as no entry in this regard was made in the books of account till the date of search. However, the appellant has submitted that the books of account were incomplete on the date of search for various 34 ITA No. 82, 83 & 84/RPR/2023 M/s Brandavan Food Products, Rahul Agrawal, R.K. Associates & Hotliers Pvt. Ltd.
reasons such as time lag between cash received and actual reporting and making entries into tally software, the software was under up- gradation and various data was under recovery, for the sake of secrecy top management had not intimated the high value of cash investment with SBIL to the account staff etc. I find that the various entries including sales/deposits in the bank account/cash investment with SBIL were not made in the books of account till the date of search and seizure proceedings. After search and seizure proceedings the appellant completed entries and presented before the AO for examination. The appellant has made entries in the books of account on the basis of bills/vouchers/statements of branches the appellant lawfully completed the books of account wherein, total cash payment of Rs.
7,00,00,000/- to SBIL has also been recorded on the following dates:-
S.No. Date Amount
1 12.08.2019 10000000
2 31.08.2019 10000000
3 16.09.2019 10000000
4 21.09.2019 4000000
5 30.09.2019 36000000
Total 70000000
During the appellate proceedings, I have analysed the pending entries in the books of account and found that sales receipts including cash and IRCTC (through banking channels) for various dates had not been entered in the books of account. Few instances are being presented below:-
Particulars Date of last Sales as Date of last Sales as per Balance entry as per per seized entry as per completed amount seized books books of completed books of pending of account account account for entry 35 ITA No. 82, 83 & 84/RPR/2023 M/s Brandavan Food Products, Rahul Agrawal, R.K. Associates & Hotliers Pvt. Ltd.
books of account Catering services (NZM- 30.06.2019 5504660 05.10.2019 8181284 2676624 ERS) Catering services 31.08.2019 6790874 09.10.2019 9422213 2631339 (Mahabodhi Express Down) Catering services 31.08.2019 6950035 09.10.2019 8580625 1630590 (Mahabodhi Express UP) Cater services 31.08.2019 7482413 09.10.2019 9770612 2288199 (Samparkrati express down) Catering services 31.08.2019 7777819 09.10.2019 10244664 2466845 (Samparkranti Express UP) Catering services 25.07.2019 60395377 05.10.2019 93048544 32653167 (NDLS-Dibrugarh 12424) Catering services 25.07.2019 10123900 05.10.2019 14263685 4139785 (NDLS-Dibrugarh 20504) Catering services 25.07.2019 19001789 05.10.2019 28715836 9714047 (NDLS-Dibrugarh 20506) Catering services 25.07.2019 13078931 05.10.2019 18373883 5294952 (NDLS-Chennai 12434) Catering services 25.07.2019 23845365 05.10.2019 33215289 9369924 (NDLS-Trivendrum 12432) Catering services 25.07.2019 20672535 05.10.2019 30192830 9520295 (NDLS-Bhopal 12002) Catering services 25.07.2019 4192232 05.10.2019 6063866 1871634 (NDLS-Kanpur 12034) Catering services 25.07.2019 7488205 05.10.2019 12210233 4722028 (NDLS-Kathgodam 12040) Catering services 25.07.2019 12016410 05.10.2019 18722417 6706007 (NDLS-Lucknow 12004) Catering services (NDLS- 25.07.2019 2335010 05.10.2019 3441617 1106607 Ludhiyana 12037) It is important to mention that the appellant receives the sales proceeds of Rajdhani Express from IRCTC through banking channel which was remained to be entered in the books of account. This error of the appellant cannot be treated as malafide or intentional. The above sales have also been included in GST returns, but many other 36 ITA No. 82, 83 & 84/RPR/2023 M/s Brandavan Food Products, Rahul Agrawal, R.K. Associates & Hotliers Pvt. Ltd.
sales instances were also not recorded in the books of account and subsequently, the entries have been made to complete the books of account. I further find that various transactions like sales to IRCTC, sales in ordinary/express trains, bank deposits, bank and cash collection and various expenses etc were executed before the date of search but entries in the books of account could not be made due to various reasons as narrated earlier. The sales of the appellant are also matching with the GST returns which were filed prior to search and seizure proceedings. The appellant has also submitted evidences regarding pending entries like bank statements evidencing bank deposits and payment made, GST returns evidencing sales made to IRCTC and retail customers in trains/restaurants. Therefore, the appellant has validly updated its books of accounts which should have been taken into consideration by the AO. I find substance in the submission of the appellant that cash payments made to SBIL were not recorded in the books of account and these books of account at the time of search were incomplete for the genuine and practical reasons. Following data reveals that sales shown in GST returns and sales recorded in completed books of accounts are matching with insignificant variation in the month of August and September,2019:-
Month Sales as per Sales as Difference (2- Sales as per Difference seized books per audited 3) GST in audited of books of books of account account account and GST return 3-5 1 2 3 4 5 6 April 104297107 105165454 (868347) 105165454 -
May 148673257 149428650 (75539 ) 149428650 -
June 193972844 194824990 (852146) 194824990 -
Jul 100259044 101067524 808480) 101067524 -
August 42856097 12656311 1 (83707014) 126563115 (4)
September 3596434 117019384 (1 13422950) 1 17019385 (1)
October 1 st to - 41138704 (41138704)
9th Oct
Total 593654782 835207816 (241553034) 794069117 (5)
37 ITA No. 82, 83 & 84/RPR/2023
M/s Brandavan Food Products,
Rahul Agrawal,
R.K. Associates & Hotliers Pvt. Ltd.
It has been explained that difference of appearing in the month of April to July 2019 is related to sales of Bhilai Restaurant whose books were not available in seized data. However, GST returns were filed much before the search and seizure proceedings and sales figures shown in the GST return are matching with the completed books of account. Regarding sales difference for the month of August 2019, it has been explained that train sales amounting to Rs. 8,19,64,163/-, sales amounting to Rs. 8,30,370/- of Bhilai Restaurant not available in seized data and train sales of Rs. 9, 12,481/- were short booked. However, the total sales in GST return has been shown which again matches with the completed books of account. It is pertinent to mention that GST Returns for the above months had already been filed much before the date of Search.
Regarding sales difference for the month of September 2019, it has been explained that train sales amounting to Rs. 10,29,13,720/-, sales amounting to Rs. 7,71,560/- of Bhilai Restaurant not available in seized data and train sales of Rs. 20,29,201/- were short booked and food plaza sales amounting to Rs. 77,08,469/- were not booked. Sales as per GST return and as per books is matching.
On being asked the appellant also furnished month wise chart of sales during FY 2018-19 and FY 2019-20 which is being presented below:-38 ITA No. 82, 83 & 84/RPR/2023
M/s Brandavan Food Products, Rahul Agrawal, R.K. Associates & Hotliers Pvt. Ltd.
Month Sales FY 2019-20 Sales FY 2018-19 April 105165454 73696837 May 149428650 138620294 June 194824990 141772349 July 101067524 140768092 August 1265631 1 125309982 September 1 17019384 126202681 October 139885044 119846742 November 155902476 135663940 December 171263880 132816485 January 157803170 140925487 February 141513979 134503823 March 132066854 177996142 Total 1692504516 1588122854
On perusal of above month wise sales data, it has been found that there is no abnormal increase/decrease in total sales and therefore, sales shown in the books of account for the year under consideration cannot be doubted.
In view of the above factual finding, the appellant had every right to update its books of account by making pending entries including payments to SBIL and therefore, the completed and audited books of account should have been considered by the AO during the assessment proceedings.
(ii) During the course of statement proceedings u/s 132(4) Shri Rahul Agrawal had admitted that payment of Rs. 60 crores was made in cash and it was out of the suppressed sale of the appellant and M/S. RKAAHPL. However, lateron he 39 ITA No. 82, 83 & 84/RPR/2023 M/s Brandavan Food Products, Rahul Agrawal, R.K. Associates & Hotliers Pvt. Ltd.
retracted partly from his initial statement and submitted before the investigation wing as well as the AO that the said cash payment as made out of surplus cash available in the books of accounts of the group concerns namely M/s. BFP, M/s. RKAAHPL and M/s SCPL and not out of suppressed sales. As discussed in earlier part of the order that no material evidencing suppression of sales has been found in the case of appellant or any other group concern which supports the contentions of the appellant that the payments were made out of surplus sales, not from suppression of sales. subsequent statement of Shri Rahul Agrawal has also been found to be supported by completed books of account of the above concerns and MOU dated 12.07.2019. The books of account of the appellant were incomplete on the date of search. Lateron same have been completed and pending entries have been incorporated in the books of account which is also evident from discussion made in point (i) above. I find that the retraction from the statement is backed by valid reasons and evidences. Various Hon'ble Courts have held that an assessee can correct his/her statement recorded u/s 132(4) the basis of valid reasons. The reliance is placed on following judgments:-
(i) Pullangode Rubber Produce Co Ltd Vs. State of Kerala 91 ITR 18 (SC): It has been held that "an admission is an extremely important piece evidence but it cannot be said that it is conclusive. It is open to the assessee who made the admission to show that it is incorrect.
(ii) Nagubai Ammal Vs. B. Sharma Rao AIR 1956 SC 593: It has been held " an admission is not conclusive as to the truth of the matters stated therein . It is only a piece of evidence, the weight to be attached to which must depend on the circumstances under which it is made. It can be shown to be erroneous or untrue".
(iii) Awad Kishore Dass AIR 1979 SC 861: It has been held that "it is true that the evidentiary admissions are not conclusive proof of the facts admitted and may be explained or shown to be wrong.40 ITA No. 82, 83 & 84/RPR/2023
M/s Brandavan Food Products, Rahul Agrawal, R.K. Associates & Hotliers Pvt. Ltd.
Similar view has been expressed by Hon'ble Madras High Court in the case of CIT vs S Kader Khan Sons (2008) 300 ITR 157 (Mad).
It is important to mention that Shri Rahul Agrawal never denied cash payment of Rs. 60 crores but he lateron stated that the said payment was made by the three group concerns including appellant in compliance to MOU dated 12.07.2019 and out of cash available in their books of account. On verification, all cash payments are found to be made out of cash balances in the books of account. As narrated above, I have found that the appellant has paid Rs. 7 crores in cash out of opening cash balance of Rs. 63.94 Lakhs and cash generated through regular business sales. Therefore, the retraction from the statement by Shri Rahul Agrawal is found justifiable and acceptable as backed by audited books of account and genuine reasons.
(iii) The appellant, subsequent to search, submitted that M/S Pacifica and three group entities including appellant entered into MOU to invest in acquiring the Goa hotel project on the basis of sharing of revenue after it became operation. As per the MOU, the investment made by the appellant in cash has been recorded as business investment in its books of account. It was an arrangement between the group entities to share revenue so generated after the hotel project became operational. The MOU was entered into much before the search and seizure proceedings. The AO has rejected the MOU on the ground that it was not presented during the search and seizure proceedings and it is also not a registered document. I find that the AO has not brought any evidence on record to prove that the said MOU was not in existence at the time of search. Veracity of the MOU has not been examined by the AO. Without any concrete material, the contents of the MOU cannot be rejected. Further, Hon'ble Bombay High Court in the case of Rakesh Ramani (supra) has held that the evidences filed by the assessee cannot be ignored on the ground that supportive evidence must be produced only at the time of search and seizure proceedings and not 41 ITA No. 82, 83 & 84/RPR/2023 M/s Brandavan Food Products, Rahul Agrawal, R.K. Associates & Hotliers Pvt. Ltd.
during the assessment proceedings. The MOU produced subsequently should have been considered by the AO when genuineness of the MOU has not been disproved. In clause 5 of the MOU, it has been mentioned that M/S. SCPL, the appellant and M/S. RKAAHPL, in addition to the consideration to be recorded in the sale deed and to be paid by M/S Pacifica, shall also pay Rs. 20 crores, Rs. 7 crores, Rs. 33 crores aggregating to Rs. 60 crores in cash to the seller for acquiring certain business rights. The AO has taken figure of Rs. 7 crores from the MOU and submission of the appellant and treated this amount as unaccounted business income. The terms and conditions mentioned in MOU have been followed by the all three investors and they have recorded amount of cash paid as investment in Goa hotel property in the books of account. During appellate proceedings, I asked appellant to submit details regarding revenue sharing as per the MOU. The appellant submitted necessary details for the AY 2022-23. On perusal of the details, it has been found that M/S Pacifica has earned revenue from its operation which has been duly shared by the parties including appellant as per terms of MOU. The appellant has received Rs. 44.27 lakhs as its share of revenue which shows that the terms and conditions of the MOU have been followed. Therefore, the contents of the MOU cannot be doubted. It is a valid piece of evidence and admissible in the income tax proceedings. Therefore, it cannot be said that the MOU was an afterthought arrangement to avoid taxes.
(iv) During course of search and seizure proceedings, entries reflecting cash payment of Rs. 60 crores in the laptop of Shri Saurabh Gupta were recovered. Statement of Shri Rahul Agrawal, Shri Saurabh Gupta, Shri Vishal Saxena and Shri Sameer Biyani were recorded who confirmed the cash payment of Rs. 60 crores by the group concerns for acquiring hotel project in Goa. In the statement u/s 132(4) dated 10.10.2019, Shri Rahul Agrawal stated that amount of Rs. 60 crores in cash was generated by suppression of sales of appellant and Ws. RKAAHPL. However, lateron vide letter dated 20.02.2020 and 20.03.2020 filed before the DDIT(Inv)-2, Goa, Shri Rahul Agrawal stated that the said cash was 42 ITA No. 82, 83 & 84/RPR/2023 M/s Brandavan Food Products, Rahul Agrawal, R.K. Associates & Hotliers Pvt. Ltd.
not out of suppressed sales, but it was out of surplus cash generated through sales of the appellant. During assessment proceedings, the appellant reiterated the same and also submitted books of account and other evidences for examination. The AO mainly relying upon the statements of various persons as named above and incomplete books of account seized during search and seizure proceeding, wherein, payment entries relating to Rs 60 crores were not found, treated the amount of Rs. 7 crores as unaccounted business income of the appellant. As discussed in earlier paras retraction from the statement dated 10.10.2019 by Shri Rahul Agrawal is based upon supporting evidences, therefore, retraction is found admissible as held in various judicial pronouncements. Subsequent to search and seizure proceedings, the appellant established that the books of account of the appellant were not complete as on the date of search. Various entries in the books of account remained to be recorded for genuine reasons. The appellant during appellate proceedings as well as assessment proceedings submitted copy of cash book, wherein, cash payments to SBIL has been shown on various dates. The cash payments have been made out of available cash balance on the respective dates. Cash book of the appellant clearly shows that the cash had been generated to through their regular business activities of railway catering and restaurant. Cash has also been received from PAN India branches which has been incorporated in the cash book. In addition to availability of cash through cash sales the appellant had also opening cash balance of Rs. 63.94 lakhs as on 01.04.2019. The AO has not considered the completed cash book of the appellant and also not pointed out any discrepancy in the cash book. I find that the completed cash book, being supported by valid evidences is admissible for the purpose of making assessment of total income. The AO was not justified in not considering the completed cash book. I have further verified the cash book of the appellant and availability of cash on the date of cash payment to SBIL. The availability of cash and payment to SBIL on various dates is presented below:-
43 ITA No. 82, 83 & 84/RPR/2023M/s Brandavan Food Products, Rahul Agrawal, R.K. Associates & Hotliers Pvt. Ltd.
S.N0 Date Cash payment to Opening cash Remarks
SBIL (In IRS.) balance
1 12.08.2019 10000000 25286412
2 31.08.2019 10000000 13071571 In addition to opening balance,
the appellant also received cash
of 85,00,000/- on account of
branch transfer and small
amount of cash sales.
3 16.09.2019 10000000 21467512
4 21.09.2019 4000000 10334086
5 30.09.2019 36000000 10129703 In addition to opening balance,
the appellant also received cash
of 2,80,00,000/- account of
branch transfer and small
amount of cash sales.
Total 70000000
Conclusion on the basis of incomplete books of account may give wrong picture of affairs of any assessee which is apparent from the conclusion drawn by the AO in the instant case. Hon'ble ITAT Jaipur in the case of Jewel Emporium (supra) has held that when the books of account are incomplete during the search and seizure proceedings and lateron the same completed, the AO should have pointed out discrepancies in the completed books of account for making additions. Relevant para of the said decision is reproduced hereunder:-
11. We also found that both the AO as well as Id. to appreciate the fact that sales to the extent of Rs. 33,57,()()0/- was duly incorporated and recorded in the books of accounts while completing the same after search and thus there remained no difference in the cash physically found and as per books of accounts as on the date of search, therefore, no adverse inference could be drawn. It is settled proposition of law that assessee should be allowed to complete its books of accounts upto the date of search. In this regard reliance is placed on the decision of 44 ITA No. 82, 83 & 84/RPR/2023 M/s Brandavan Food Products, Rahul Agrawal, R.K. Associates & Hotliers Pvt. Ltd.
the ITAT Ahmedabad Bench reported in 107 Taxman 85 in the case of V.M Thakkar Vs. ACIT wherein it has been held that "It is incumbent upon Authorised officer during search or during assessment to allow the assessee to complete his books till date of search". .......
15. From the record, we also found that one major fact was ignored by the AO as well as by Id. CIT(A) that the sale of Rs. 33,57,039/- was duly recorded in the books of accounts and after inclusion of the same in total sales, cash balance, profits and stocks were derived which were accepted by both the authorities without any doubts. Thus, further addition by alleging the same as excess cash tantamount to taxation of an income twice. One in the shape of sales and profits embedded therein and again by making addition by alleging the same as unexplained excess cash. For this purpose, reliance may be placed on the following judicial pronouncements:
(i) CIT v. Kailash Jewellery House ITA No. 613/2010 (Delhi High court) dt.09.04.2010
(ii) CIT v. Jaora flour and Foods Pvt. Ltd. (MP) (2012) 344 ITR 294
(iii) CIT v. Vishal Exports Overseas Ltd., Tax Appeal No. 2471 of 2009 Gujarat High Court cit. 03.07.2012 (iv) Shri Vinod Bhandari vs Pr. CIT, ACIT-
2 (1), DCIT-2(1), [TAT, Indore Dt. 20/3/2020 in ITA Nos. 350/1nd/2017, 66/1nd/2017, 57/1nd/2019-
16. In view of the above discussion and considering the facts and circumstances of the case, we do not find any merit in the addition of Rs.
45 ITA No. 82, 83 & 84/RPR/2023M/s Brandavan Food Products, Rahul Agrawal, R.K. Associates & Hotliers Pvt. Ltd.
33,57, 039/- upheld by the Id. CIT(A) on account of excess cash. The A.O. is directed to delete the same. Above decision also supports the contentions of the appellant that addition of Rs. 7,00,00,000/- tantamount to taxation of income twice. The entire sales have been recorded in the books of account and corresponding profit thereon has been disclosed in the return of income by the appellant. Therefore, without pointing out any inconsistency or mistake in the books of account, the addition made by the AO is not justified.
Accordingly, It is concluded that the retraction from statement is acceptable. Contents of MOU cannot be doubted. The books of account of the appellant have not been rejected and no deficiency has also been pointed out by the AO. The results of audited books of account have been accepted by the AO. The amount of cash of Rs.7 crores invested with SBIL is found to be out of cash available in the books of the appellant. In lieu of such investment, the appellant has received share in revenue of M/S. Pacifica as per the terms and conditions of MOU. Therefore, addition of Rs. 7 crore on account of unaccounted business income in the hands of the appellant is not found sustainable.
In view of the above discussion, addition of Rs. 7,00,00,000/- is hereby deleted. Therefore, appeal on these grounds is allowed.
11. In terms of aforesaid observations of the Ld. CIT(A), the appeal of the assessee was partly allowed on legal grounds, whereas the contentions of the assessee on merits are allowed in sum and substance, consequently, the addition made by Ld. Assessing Officer was vacated in entirety.
46 ITA No. 82, 83 & 84/RPR/2023M/s Brandavan Food Products, Rahul Agrawal, R.K. Associates & Hotliers Pvt. Ltd.
12. Dissatisfied with the aforesaid decision of the Ld. CIT(A), aggrieved revenue has carried this matter before us, assailing the following grounds of appeals in ITA No. 82/RPR/2023:
(1) Whether on the facts and in the circumstances of the case, the Ld. CIT(A) was justified in deleting the addition of Rs. 7 crores made by the AO on account of unaccounted business income of the assessee as per the provisions of the IT Act, 1961?
(2) Whether the Ld. CIT(A) erred in accepting the assessee's version as well as part retraction of statement and thereby agreeing that the cash payment of the assessee, along with its group entities, of 60 crores (over and above Rs 50 crores paid through banking channels) was made not out of "suppressed"
cash sales but out of "surplus" cash available, ignoring that the sale consideration of the property was only Rs 50 crores in the registered sale deed?
(3A) Whether the Ld. CIT(A) erred in accepting the assessee's version as well as part retraction of statement and thereby agreeing that the cash payment was made not out of "suppressed" cash sales but out of "surplus" cash available, ignoring that the impugned cash payment of Rs. 7 crores had not been entered in the books of accounts even till date of search on 10.10.2019?
(3B) Whether the Ld. CIT(A) erred in accepting the assessee's explanation on delay in entering the impugned cash payment of Rs 7 crores in the books of accounts, ignoring:
a) the specific admission in the statement recorded u/s 132(4), quoted on page 5 of the assessment order of key person of the assessee Shri Rahul Agrawal that "Each day the total cash collected at our office is entered in the books"?
b) that assessee's explanation of huge delay is an afterthought and colourable device to evade payment of due taxes since the amount of Rs 7 crores paid in cash had not been entered in the books even till date 47 ITA No. 82, 83 & 84/RPR/2023 M/s Brandavan Food Products, Rahul Agrawal, R.K. Associates & Hotliers Pvt. Ltd.
of search on 10.10.2019 even when its first instalment (as submitted by assessee before Ld. CIT(A)) was paid as early as 12.08.2019?
(4A) Whether the Ld. CIT(A) erred in accepting the assessee's version as well as part retraction of statement and thereby agreeing that the cash payment was made not out of "Suppressed" cash sales but out of surplus" cash available, ignoring the significant specifics in the statement recorded u/s 132(4), quoted on page 5 of the assessment order of key person of the assessee Shri Rahul Agrawal which clearly show that the retraction and MOU were an afterthought to evade due taxes?
(4B) Whether the Ld. CIT(A) erred in accepting the assessee's version as well as part retraction of statement and thereby agreeing that the cash payment was made not out of "suppressed" sales but out of "surplus" cash available, ignoring the following significant specifics in the statement recorded u/s 132(4), as quoted on page 5 of the assessment order of Shri Rahul Agrawal:
(i) Admission of "suppression" of sales in the statement was not only categorical but was also made twice in the statement?
(ii) Admission of "suppression" in the statement was not a bland or bald one but it vividly distinguished between cash receipts as against bank receipts and even described how suppression of bank receipts is not possible?
(iii) Admission in the statement even specified who (Mr. S. K. Roongta) in accounts department was instructed to "suppress" the cash sales?
5. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) was justified in deleting the addition of Rs. 7 crores made by the AO on account of unaccounted business income by accepting the plea of the assessee ignoring the fact that incriminating materials available on record could not be proved by the assessee at the time of search and seizure proceedings?
48 ITA No. 82, 83 & 84/RPR/2023M/s Brandavan Food Products, Rahul Agrawal, R.K. Associates & Hotliers Pvt. Ltd.
6. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) was justified in accepting the retraction of the key person of the assessee (Sh. Rahul Agrawal) from the statement recorded u/s 132(4) which was retracted at later stage knowing the fact of evidentiary value of statement recorded u/s 132(4) of the IT Act and while retracting from the statement given earlier, the assessee could not produce substantive corroborative evidence in support of his retraction and Ld. CIT(A) further ignored the fact that in concluding part of the statement, the assessee agreed and gave his consent that the statement given by him is correct and accordingly put his signature?
7. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) was justified in ignoring that the SLP was dismissed in favour of revenue in the case of Kishore Kumar B. [2014] 52 taxmann.com 449 (Madras), wherein it has been held that "where assessee himself stated about his undisclosed income in sworn statement recorded during search, addition could be made on the basis of admission without scrutinizing documents?
13. We have given thoughtful consideration to the submissions, contentions, material evidence and relevant case laws in the present case and our ground wise deliberation and adjudication on the issues raised by the department, follows as under:
14. Ground No.1: Regarding challenging the justification of decision of Ld. CIT(A) in deleting the addition of Rs. 7.00 crores made by the Ld. AO on account of unaccounted business income of the assessee.
14.1 At the outset, Ld. CIT DR vehemently supported the order of the Ld. AO.
he reiterated the facts of the issue from the order of Ld. AO and Ld. CIT(A), and submitted that Ld. AO has correctly interpreted the issue under a well-reasoned 49 ITA No. 82, 83 & 84/RPR/2023 M/s Brandavan Food Products, Rahul Agrawal, R.K. Associates & Hotliers Pvt. Ltd.
and speaking order, which was not appreciated in proper perspective by the first appellate authority. Accordingly, the order of Ld. CIT(A) on this issue is liable to be set aside and the addition made by the Ld. AO deserves to be sustained.
14.2 On the contrary, Ld. AR on behalf of the assessee have submitted that the books of accounts produced by the assessee are being regularly audited, no adverse inference or any deficiency regarding the books of accounts have been pointed out by the Ld. AO, much less the books of accounts of the assessee have not been rejected u/s 145(3) of the Act, Ld. AO accepted the book results of the assessee, the sales recorded in the books of assessee and proceeds from such sales were used for payment / investment by the assessee i.e., M/s Brandavan Food Products (in short "BFP") to M/s Pacifica Hotels (Ahmedabad) Project Pvt. Ltd. (in short "PHAPPL") as contribution of "BFP" in terms of Memorandum of Understanding (in short "MOU"), entered into for investment for acquiring of Hotel Project with the terms of sharing of revenue after it become operational. Ld. AR further submitted that though the Ld. AO had not believed the MOU, stating that it was not revealed at the time of search, which was brought on record during the post search proceedings and since it was not even registered, with such allegations, the MOU has been termed as afterthought arrangement to avoid tax and the addition of Rs.7.00 crores was made in the hands of the assessee M/s BFP, but simultaneously, Ld. AO, contradicting his own stand had relied on the MOU, while adopting the ratio and amount of investment, as specified therein for making the additions in the hands 50 ITA No. 82, 83 & 84/RPR/2023 M/s Brandavan Food Products, Rahul Agrawal, R.K. Associates & Hotliers Pvt. Ltd.
of entities specified in it, with a strong and undoubted conviction that the cash payment to the seller (SBIL) was made by them. Ld AO further, categorically mentioned in his closing remark that the amount of Rs.7.00 crores shall be treated as unaccounted business income of the assessee, without rejecting the books of accounts, thus the resultant income embedded in the sales recorded which was declared in the return of income by the assessee and already considered for computing the assessed income. Further, the observation and action itself impliedly shows that the Ld. AO was convinced that the amount invested has been generated from the business of the assessee and books of accounts of the assessee consisting of such sale receipts are accepted, thus, the addition of the income which is already recorded in the books of the assessee and the resulted profit have been offered for tax in the return of income filed by the assessee, cannot be taxed again by characterising the same as unaccounted income of the assessee. With such submissions, it was the prayer that the order of Ld. CIT(A) was under proper insight of the facts and in accordance with the prescribed provisions of law, wherein the unlawful addition by the Ld. AO was rightly deleted and, therefore, the same deserves to be uphold.
14.3 We have considered the rival submissions, perused the material available on record and case laws relied upon. On perusal of the available material before us, the admitted facts surfaced are that the addition of Rs.7.00 crores made by the Ld. AO was from alleged unaccounted business income of the assessee.
51 ITA No. 82, 83 & 84/RPR/2023M/s Brandavan Food Products, Rahul Agrawal, R.K. Associates & Hotliers Pvt. Ltd.
The returned income of the assessee have been taken into consideration while recomputing the assessed income in the conclusion part of the assessment order. The books of the account of the assessee are not rejected u/s 145(3), even no specific defects, infirmities or mistakes were pointed out in the books of accounts of the assessee. Ld. AO had only shown his suspicion, stating that the explanations extended by the assessee is nothing, but a concocted afterthought during the post search period. The fact that the assessee i.e., M/s 'BFP' has a cash balance of Rs.7,79,31,476/- in its books of accounts at the time of search action on 10.10.2019 was duly noted by the Ld. AO, but had disbelieved the same, stating that as the cash has exchanged hands in the month of September 2019 itself, then how the cash balance of such a huge amount shown in the books is justified, and why the entries regarding cash payment to M/s Sir Biotech India Ltd. (in short "SBIL") were not recorded in the impounded books. Ld. AO also had placed his objection against the MOU, stating that the said document was not registered, it was not revealed during the search, whereas it was emerged and brought on record by the assessee in the post search proceedings, therefore, it is just an afterthought arrangement to avoid the taxes. Ld. AO further observed that the transactions are recorded in the books of accounts, but the same are unaccounted business income of the assessee.
14.4 While deliberating on this issue Ld. CIT(A) has categorically and rightly observed, taking support from the order of Hon'ble Bombay High Court in the 52 ITA No. 82, 83 & 84/RPR/2023 M/s Brandavan Food Products, Rahul Agrawal, R.K. Associates & Hotliers Pvt. Ltd.
case of Rakesh Ramani (2018) 168 DTR 356 that there is no requirement in law that evidence in support must be produce only at the time when, the seizure has been made and not during the assessment proceedings. Further Ld. CIT(A) have elaborately made his observations qua the transactions under consideration in the present case, placing his reliance on Pullangode Rubber Produce Company Ltd. (supra) that addition by ignoring the retracted statement without considering material brought on record during assessment proceedings, the action of Ld. AO cannot be held justifiable. Ld. CIT(A) on the issue of unaccounted business receipts have taken a note that since the amount of Rs.7.00 Crores is part of sales proceeds of the assessee and due taxes have already been paid, thus, the utilization of such amount for making payment / investment with SBIL group as per MOU, taxing the impugned amount again as unaccounted income would lead to double taxation which is against the settled principle of law as laid down under various judicial pronouncements.
14.5 Ld. CIT(A) also deliberated on the issue of incomplete books of assessee.
It was the submission of assessee before Ld. CIT(A) that the books of accounts were incomplete on the date of search for various reason such as time lag between cash receipts and actual reporting and making entries into tally software, the software was under upgradation and various data was under
recovery, for the sake of secrecy top management had not intimated the high value of cash investment with SBIL to the accounts staff. To verify such contentions of the assessee, Ld. CIT(A) have examined and observed that the 53 ITA No. 82, 83 & 84/RPR/2023 M/s Brandavan Food Products, Rahul Agrawal, R.K. Associates & Hotliers Pvt. Ltd.
cash found from the office premises and residence of the assessee during the search was duly reconciled with the completed books of accounts, such facts were submitted before the Ld. AO also, who accepted the same and on such position of cash balance no negative inference was drawn. The cash sales of the assessee was also supported by the GST returns thus cannot be termed as an afterthought. Ld CIT(A) also observed that the assessee has made entries in the books of accounts on the basis of bills / vouchers / statements of branches, hence, the books completed are duly supported with lawful evidence. An important aspect regarding the sales of assessee that certain sale proceeds are received from IRCTC generated in Rajdhani Express through banking channel which had also remained to be entered in the books of accounts. Such error of the assessee cannot be treated as malafide or intentional as the same was duly included in the GST return of the assessee. With such observations, Ld. CIT(A) had concluded and rightly so that there is substance in the submission of the assessee that cash payment made to SBIL were not recorded in the books of accounts which are incomplete at the time of search for genuine and practical reasons. Ld. CIT(A) also analysed the comparative data of sales from GST returns and sales recorded in the completed / audited books and found that the same are matching with very paltry and insignificant variation. Ld. CIT(A) also after perusal of month wise sales figures of the assessee for the FY 2019-20 in comparison to previous FY 2018-19 have observed that there is no abnormal increase / decrease in total sales of the assessee, therefore, the sales figures shown for the year under consideration cannot be doubted. It is the observation 54 ITA No. 82, 83 & 84/RPR/2023 M/s Brandavan Food Products, Rahul Agrawal, R.K. Associates & Hotliers Pvt. Ltd.
of Ld. CIT(A) supported by the order of ITAT, Jaipur in the case of Jewel Emporium (supra) that conclusion on the basis of incomplete books of accounts may give wrong picture of affairs of any assessee, the completion of the books cannot be denied without pointing out discrepancies. It is the observation of Ld. CIT(A) that the retraction from the statement by Shri Rahul Agrawal is found justifiable and acceptable as the same was backed by audited books of accounts and genuine reasons.
14.6 In backdrop of aforesaid discussion, after giving a thoughtful consideration to the facts of present case, we are of the considered view that the Ld. CIT(A) had correctly and judiciously adjudicated the issue, deleting the addition made by Ld. AO on account of unaccounted business income of the assessee, which in absence of any contrary argument, material, decision or evidence brought on record by the revenue, deserves to be affirmed, thus, we uphold the same. Resultantly, ground no. 1 of the revenue stands rejected.
15. Ground No. 2 to 7: Regarding error on the part of Ld. CIT(A) in accepting the assessee's version as well as part retraction from the statement, ignorance of incriminating material, acceptance of retraction by the key person of the assessee.
15.1 On the aforesaid grounds, reiterating the same, it is the submission of Ld. CIT-DR that, the Ld. CIT(A) was in error while deciding the issue accepting the 55 ITA No. 82, 83 & 84/RPR/2023 M/s Brandavan Food Products, Rahul Agrawal, R.K. Associates & Hotliers Pvt. Ltd.
assessee's version as well as part retraction of statement that the assessee had agreed regarding cash payment of Rs.60 crores over and above Rs.50 crores paid through banking channels, that the same was not made out of 'suppressed' cash sale but out of 'surplus' cash available, ignoring the fact that sale consideration of the property was only Rs.50 crores in the registered sale deed.
It is further disagreed, that the impugned cash payment of Rs.7 crore had not been entered in the books of accounts even till the date of search i.e., 10.10.2019. Ld. CIT(A) had ignored the statement recorded u/s 132(4) wherein the key person of the assessee Shri Rahul Agrawal had admitted that "each day the total cash collected at our office is entered in books", the explanation of assessee that there was huge delay in completion of books was an afterthought and colourable device to evade legitimate taxes. That the retraction of Shri Rahul Agrawal and MOU brought in picture was an afterthought. That during the course of search the statement recorded u/s 132(4) of Shri Rahul Agrawal regarding suppression of sales was admitted twice, such statement was not a bland or bald one but it vividly distinguish between cash receipts and bank receipts, even it is described that how suppression of bank receipts is not possible. Ld. CIT(A) had also ignored the statement of Mr. R. K. Roongta, concerned person from accounts department, who was instructed to suppress the cash sales. It is the submission of Ld. CIT DR that all the aforesaid glaring facts were ignored by the Ld. CIT(A) and has decided the issues in favour of the assessee, which thus, are liable to be struck down and the addition made by Ld. AO merits to be restored in the interest of substantial justice.
56 ITA No. 82, 83 & 84/RPR/2023M/s Brandavan Food Products, Rahul Agrawal, R.K. Associates & Hotliers Pvt. Ltd.
15.2 Ld. AR on the other hand placed his reliance on the order of Ld. CIT(A) and have vehemently submitted that the cash paid by the assessee (BEF) to SBIL was out of surplus sales of the assessee, this fact was duly declared by Shri Rahul Agrawal in his statement during the search stating that such cash was out of sales, irrespective of the facts whether they were 'suppressed' or 'disclosed'. It is also submitted that the R.K. Group does not have any other source across all verticals to generate such huge cash apart from business operations. Ld. AR further explained that the cash sales of all the entities from R.K. Group are duly supported by GST returns and such returns were filed with the competent government authorities before the date of search (copies of such monthly GST returns for FY 2019-20 are enclosed in the assessee PB placed before us). Adverting further on the issue Ld. AR submitted that the availability of cash with the respective entities cannot be doubted as the seized books of accounts during the search proceedings have also showing the cash balance of Rs.7.79 crores in the case of M/s BFP (Rs.30.88 crores in the case of R. K. Associates and Hotels Pvt. Ltd.), such fact is duly appreciated and recorded by the Ld. AO in the assessment order. Before us, on this issue during the hearing also when the Ld. AR was confronted to place the details of turnover for the AY 2019-20 along with month wise details of GST returns incorporating the date of filing of such returns, such details were furnished and found to be in consonance with the observations and details reproduced by Ld. CIT(A) in his order. Ld. AR 57 ITA No. 82, 83 & 84/RPR/2023 M/s Brandavan Food Products, Rahul Agrawal, R.K. Associates & Hotliers Pvt. Ltd.
further placed before us a written submission on all the aforesaid issues raised by the department, the same is extracted as under:
58 ITA No. 82, 83 & 84/RPR/2023M/s Brandavan Food Products, Rahul Agrawal, R.K. Associates & Hotliers Pvt. Ltd.59 ITA No. 82, 83 & 84/RPR/2023
M/s Brandavan Food Products, Rahul Agrawal, R.K. Associates & Hotliers Pvt. Ltd.60 ITA No. 82, 83 & 84/RPR/2023
M/s Brandavan Food Products, Rahul Agrawal, R.K. Associates & Hotliers Pvt. Ltd.61 ITA No. 82, 83 & 84/RPR/2023
M/s Brandavan Food Products, Rahul Agrawal, R.K. Associates & Hotliers Pvt. Ltd.
15.3 With the aforesaid written submissions, it was the prayer of Ld. AR on behalf of the assessee that the order of Ld. CIT(A) was a reasoned, speaking and justified order on the facts of the present case and under the settled principle of law, wherein each and every aspect emerging from the order of Ld. AO are considered under proper appreciation of the facts and circumstances of the case on each possible aspect, in terms of the mandate of law and according to the available jurisprudence by the Hon'ble Courts, therefore, the same is worth considering and deserves to be upheld.
15.4 We have considered the rival submission, perused the material available on record and case laws relied upon. A search was conducted in the residential / business premises of the assessee on 10.10.2019. During the course of the search and seizure operations evidence for cash payment of unaccounted sale consideration to the tune of Rs. 60 Crore towards deal of a hotel project at GOA between SBIL and RK Associates Group was unearthed. Statement u/s 132(4) of the Key person of RK Group Shri Rahul Agarwal were recorded, wherein he admittedly confirmed the cash payment of Rs. 60.00 Crore, such transaction was further confirmed by Shri Saurabh Gupta (person deployed by broker company Hotelivate Private Limited) and Shri Vishal Saxena (Director of SBIL), who have facilitated the cash transaction. Shri Rahul Agarwal in statement u/s 132(4) had declared that the cash was generated from 'suppressed sale' of the group entities of R K Associates Group, which subsequently was retracted and explained that under misunderstanding he mentioned 'supressed sales' instead 62 ITA No. 82, 83 & 84/RPR/2023 M/s Brandavan Food Products, Rahul Agrawal, R.K. Associates & Hotliers Pvt. Ltd.
of 'surplus cash sales'. Ld AO was not convinced with the explanations of the assessee; thus, he concluded the assessment with addition of Rs. 7.00 crore in the AY 2020-21 with specific observations that the assessee was unable to explain about the cash payment of Rs. 60.00 Crore which was not entered in the books of respective entities, although the same was paid in the month of September 2019 i.e., prior to the date of search on 10.10.2019, this shows that the amount was paid from undisclosed sources. It was the belief of Ld. AO that, the intention of both the buyer and seller was to keep the cash payment transaction out of books. The explanation of the assessee was an afterthought.
The books of assessee are showing a cash balance of Rs. 7.79 Crores on 10.10.2019, whereas, cash payment to SBIL of Rs. 7.00 Crore in September 2019 was not recorded in the said books proves that it is just an afterthought justification. Ld AO further, discussed about the MOU between Pacifica Hotels (Ahmedabad Projects) Private Limited, R K Associates & Hoteliers Pvt. Ltd., Brandavan Food Products and Shri Rahul Agarwal to invest in acquiring the Hotel Project jointly on the terms of sharing revenue after it became operational.
He disbelieved the genuineness of the MOU for the reasons that the same was not revealed during the course of search and seizure proceedings, it was not even registered, it is a mutual document, it is just an afterthought arrangement to evade tax. Herein, we may observe that Ld. AO had not considered the explanations of the assessee, he brushed aside all the material and factual evidence also disbelieving the same treating them as afterthought, however, simultaneously, he observed that such transactions are recorded in books 63 ITA No. 82, 83 & 84/RPR/2023 M/s Brandavan Food Products, Rahul Agrawal, R.K. Associates & Hotliers Pvt. Ltd.
afterwards as an afterthought thus are unaccounted business income of the assessee. Surprisingly, Ld AO accepted the books of accounts, no defect have been pointed out in such books, more over the books are not rejected by invoking provisions of relevant Section 145(3) of the Act, he accepted the returned income resulted from such books of accounts. Ld. AO regarded the MOU as a bogus document but have believed the amounts paid in cash in accordance with terms of the said alleged counterfeit document. He imposed the additions in the hands of entities, which as explained by the assessee are investors in the hotels project as per MOU, though, they are not a party in the main sale deed which is the genesis of the payment of cash payment of Rs.
60.00 Crore for acquiring the subject hotel property / project. It is pertinent to mention that no action or proceedings were initiated by the revenue against the buyer of the property i.e. 'PHAPPL'. Such conclusions of the Ld AO are incomprehensible, wherein he is blowing hot and cold together as per convenience to enforce the additions, brushing aside all the substantial evidence (GST returns, sale bills, branch sale records, transactions in bank statements etc.) without depicting any cogent reason to suspect the same. Ld. AO kept himself confined up to the words stated in the statement u/s 132(4), without adverting to the retractions afterwards, whereas he was under abundant obligation to consider all the relevant facts, evidence / documents placed during the post search proceedings or during the assessment proceedings, so as to check the veracity of such statements before reaching at any logical conclusion.
It is the trite law that the statement alone cannot, on a standalone basis, 64 ITA No. 82, 83 & 84/RPR/2023 M/s Brandavan Food Products, Rahul Agrawal, R.K. Associates & Hotliers Pvt. Ltd.
constitute 'incriminating material' to empower the Assessing Officer (AO) to frame an assessment under Section 153A. Under such facts and circumstances, we are unable to persuade ourselves to subscribe to the findings of the Ld AO, wherein he attempted to contradict with the explanations and facts furnished by the assessee, but unable to dislodge the same with any reasonable and convincing observation, in absence of any valid or plausible interpretation, while making the addition on account of unaccounted business income.
15.6 Adverting to the contentions raised by the revenue under their grounds of appeal which are duly deliberated, dealt and discussed by the Ld. CIT(A) in his order. The relevant observations / conclusions from the detailed observations extracted (supra), are culled out as under:
(a) The statement cannot be categorized as incriminating material.
Accordingly, this cannot be the sole basis for the purpose of making addition reliance placed on judgment by Hon'ble Bombay High Court in the case of Rakesh Ramani, (2018) 168 DTR 356.
(b) Making addition ignoring the retracted statement of Shri Rahul Agrawal and without considering the material brought on record during assessment proceedings, the action of the AO cannot be held justifiable.
Considering the above discussion, the contentions of the appellant are 65 ITA No. 82, 83 & 84/RPR/2023 M/s Brandavan Food Products, Rahul Agrawal, R.K. Associates & Hotliers Pvt. Ltd.
found partly acceptable. Reliance placed on Pullangode Rubber Produce Company Limited 91 ITR 18 (SC), Nagubai Amal vs B Sharma Rat) AIR (SC) 593 and Awad Kishore Dass AIR 1979 1956 (SC) 861.
(c) No specific defects in the books of accounts are pointed out by the Ld. AO.
(d) Rejection of books of accounts u/s 145(3) while making the addition was not done by the Ld. AO, thus, addition to total income is not sustainable, if the books of accounts of the assessee have not been rejected u/s 145(3), reliance was placed on Ompakash Overseas (2008) 173 taxman 185 (P&l-I), Anil Kumar & co (2016) 386 ITR 702 (Kar) and Talbros Engineering Ltd (2016) 386 1TR 154 (P&H),
(e) Books of accounts of the assessee have regularly been audited on which no negative inference has been drawn by the Ld. AO.
(f) The sales which is recorded in the books of accounts and resultant profit was offered for tax in such a situation utilization of such sales proceeds in payment or investment cannot be taxed again treating the same as unaccounted income of the assessee. Reliance was placed on Laxmipat Singhania (1969) 72 ITR 291 (SC), Jain Brothers and Others (1970) 66 ITA No. 82, 83 & 84/RPR/2023 M/s Brandavan Food Products, Rahul Agrawal, R.K. Associates & Hotliers Pvt. Ltd.
77 ITR (SC), Nagarjuna Fertilizers and Chemicals Limited ITTA 107 No 100/2003 (AP) and Mahaveer Kumar Jain CA No 4166/2006 (SC).
(g) The opening balances and sales recorded in books of accounts have not been disputed by the Ld. AO. The books were completed on the basis of valid documents like bills / vouchers, statements receipts from various branches located at different places within the country. Certain entries are incomplete even the bank transactions were also pending, sales up to month of August, 2019 are duly supported with GST returns. The appellant was justified in completing its books of accounts incorporating the cash payment to SBIL.
(h) Contents of MOU are not countered by the Ld. AO by bringing on record any contrary material. Production of MOU after the search supports the contention of appellant that the payments were made to SBIL in accordance with the MOU. The Ld. AO was unable to place on record any material or justifiable reason while rejecting all the aforesaid material placed by assessee before the Ld. AO.
(i) Ld. CIT(A) observed that " I find that the AO was not correct in his approach in not considering the material placed before him by the appellant. Hence, the contentions of the appellant that the additions 67 ITA No. 82, 83 & 84/RPR/2023 M/s Brandavan Food Products, Rahul Agrawal, R.K. Associates & Hotliers Pvt. Ltd.
without rejection of books of account u/s 145(3) is not justified, are found acceptable. The decision relied upon by the appellant are also squarely applicable to it. In view of the above discussion the AO was not justified in making addition without pointing out any defect/rejecting books of account of the appellant. "
(j) Ld. CIT(A) had duly analysed the pending entries in the books of accounts and found that sales receipts including cash and through banking channels for various dates had not been entered in the books of accounts. Few instances are also reproduced in his order.
(k) The sales of appellant are matching with GST returns which are filed prior to search and seizure proceedings. Requisite evidence regarding pending entries like bank statement, GST returns etc. are produced before Ld. CIT(A), therefore, he find substance in the submission of the assessee that the cash payments made to SBIL were not recorded in the books of the accounts of the assessee and these books of accounts at the time of search were incomplete for the genuine and practical reasons.
(l) Ld. CIT(A) also had made an systematic review of the sales transactions in the audited books of accounts vis-à-vis GST returns of the assessee and has recorded his satisfaction that there is no abnormal increase and decrease in total sales, therefore, sales shown in books of accounts for the year under consideration cannot be doubted. It is observed that the 68 ITA No. 82, 83 & 84/RPR/2023 M/s Brandavan Food Products, Rahul Agrawal, R.K. Associates & Hotliers Pvt. Ltd.
appellant had every right to update its books of accounts by making pending entries including payments to SBIL and, therefore, the completed and audited books of accounts should have been considered by the Ld. AO during the assessment proceedings.
15.7 In backdrop of the aforesaid observations, the Ld. CIT(A) finally concluded as under:
"Accordingly, It is concluded that the retraction from statement is acceptable. Contents of MOU cannot be doubted. The books of account of the appellant have not been rejected and no deficiency has also been pointed out by the AO. The results of audited books of account have been accepted by the AO. The amount of cash of Rs.7 crores invested with SBIL is found to be out of cash available in the books of the appellant. In lieu of such investment, the appellant has received share in revenue of M/S. Pacifica as per the terms and conditions of MOU. Therefore, addition of Rs. 7 crore on account of unaccounted business income in the hands of the appellant is not found sustainable.
In view of the above discussion, addition of Rs. 7,00,00,000/- is hereby deleted. Therefore, appeal on these grounds is allowed.69 ITA No. 82, 83 & 84/RPR/2023
M/s Brandavan Food Products, Rahul Agrawal, R.K. Associates & Hotliers Pvt. Ltd.
15.8 On a comparative evaluation of the aforesaid observations and decision of the Ld. CIT(A) as well as that of the Ld. AO, we find force and justification in the decision of the first appellate authority, who had considerately deliberated upon the issues with appropriate appreciation of the facts of the case, following the prescribed provisions of the Act, guided by the settled principle of law laid down by Hon'ble Courts, referred to (supra). We, thus, in absence of any further plausible, cogent or convincing explanation or contrary decision brought on record by the revenue, dislodging the aforesaid observations of the Ld CIT(A), supporting the action of Ld AO, are of the considered view that there was no infirmity in the decision of Ld. CIT(A) in deleting the addition made by Ld. AO, on account of unaccounted business income, thus, we uphold the same.
Consequently, ground no. 2 to 7 of the department, dehors proving / establishing any error in the order of Ld CIT(A) are rejected in terms of our aforesaid observations.
15.9 In the result, appeal in ITA No. 82/RPR/2023 by the revenue, stands dismissed.
16. As, we have approved the decision of Ld CIT(A) in vacating the addition made by Ld. AO in the case of M/s Brandavan Food Products in ITA No. 82/RPR/2023 in terms of our aforesaid observations, by dismissing the appeal of the department, therefore, our aforesaid decision shall equally apply on the remaining two cases in ITA No. 83 & 84/RPR/2023, having similar facts, issues 70 ITA No. 82, 83 & 84/RPR/2023 M/s Brandavan Food Products, Rahul Agrawal, R.K. Associates & Hotliers Pvt. Ltd.
and circumstances except quantum of addition, accordingly, the same are also rendered as dismissed.
17. In combined result ITA Nos. 82, 83 & 84/RPR/2023 filed by the revenue are dismissed and CO Nos. 05, 06 & 07/RPR/2023 of the assessee are dismissed as withdrawn, in terms of our aforesaid observations.
Order pronounced in the open court on 04/07/2024.
Sd/- Sd/-
(RAVISH SOOD) (ARUN KHODPIA)
ाियक सद / JUDICIAL MEMBER लेखा सद / ACCOUNTANT MEMBER
रायपुर/Raipur; िदनां क Dated 04/07/2024
Vaibhav Shrivastav
आदे श की ितिलिप अ े िषत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant-
2. थ / The Respondent-
3. आयकर आयु (अपील) / The CIT(A),
4. The Pr. CIT -1, Raipur, (C.G.)
5. िवभागीय ितिनिध, आयकर अपीलीय अिधकरण, रायपुर/ DR, ITAT, Raipur
6. गाड फाईल / Guard file.
// स या पत त True copy // आदे शानुसार/ BY ORDER, (Assistant Registrar) आयकर अपीलीय अिधकरण, रायपुर/ITAT, Raipur