Facts of the Case

A search operation under Section 132 of the Income-tax Act, 1961 was conducted on 21.08.2017 in the case of Laxmi Remote Group, including the assessee Shri Vijay Kumar Sachdeva, who was a director in M/s Laxmi Remote (India) Pvt. Ltd., a company engaged in manufacturing remote controls and set-top boxes.

During the search proceedings, the department found:

  • Cash: ₹61,56,000
  • Jewellery: ₹53,15,286

The Assessing Officer treated these amounts as unexplained income under Section 69A due to lack of satisfactory explanation regarding the source.

Subsequently:

  • The CIT(A) restricted the jewellery addition from ₹53,15,286 to ₹1,80,820.
  • The addition of ₹61,56,000 cash was deleted.

Both the assessee and the Revenue filed appeals before the ITAT.

Further, the Laxmi Remote Group had filed a settlement petition before the Interim Board for Settlement, declaring undisclosed income covering accommodation entries and related transactions.

Issues Involved


  1. Whether the addition of ₹61,56,000 as unexplained cash under Section 69A was justified when the amount was already covered in the settlement proceedings before the Interim Board for Settlement.
  2. Whether the addition of ₹53,15,286 on account of jewellery as unexplained investment under Section 69A was justified.
  3. Whether bogus unsecured loans of ₹3,45,00,000 and commission of ₹10,35,000 relating to accommodation entries could be added despite the settlement proceedings.

 Petitioner’s Arguments (Assessee)


  • The search primarily related to accommodation entries taken by the company through entry operators.
  • The company filed a settlement petition before the Settlement Commission on 26.12.2019.
  • It was established during search and assessment proceedings that the directors and the company had only one source of income, i.e., business income of the company.
  • The accommodation entries, jewellery seized, and related transactions were already disclosed in the settlement petition.
  • The Interim Board for Settlement accepted the income declared by the group, which included amounts related to directors and the company.
  • Since the income had already been offered for taxation and taxes were paid, further addition under Section 69A would lead to double taxation.

 Respondent’s Arguments (Revenue)


  • The CIT(A) wrongly deleted the addition of ₹61,56,000 cash found during search.
  • The addition of jewellery should not have been restricted, as the assessee failed to reconcile the amounts offered before the Settlement Commission.
  • There was no specific reference in the settlement order linking the surrendered income with the jewellery and cash seized.
  • In AY 2014-15, the assessee had taken bogus unsecured loans of ₹3,45,00,000 through accommodation entries, and commission expenses of ₹10,35,000 were incurred for obtaining such entries.
  • These amounts should therefore be treated as unexplained income under Sections 68/69A.

 

Court Findings

  • The Interim Board for Settlement had already examined the issues arising out of the search.
  • The assessee group had declared:
    • ₹39.29 crore in returns filed under Section 153A
    • ₹34.07 crore offered during settlement proceedings
    • ₹6.25 crore further assessed by the Settlement Board
  • Thus, the total income determined by the Interim Board was ₹79.61 crore, which covered the entire amount related to accommodation entries and their utilization.
  • The Settlement Board had already accepted the surrender relating to jewellery and unexplained cash.
  • The CIT(A) correctly observed that the jewellery surrendered was slightly less than the unexplained jewellery detected during search, resulting in a difference of ₹7,23,279, which was distributed among four family members.
  • Accordingly, only ₹1,80,820 was sustained in the hands of the assessee.

For cash:

  • The cash addition of ₹61,56,000 was already covered within the surrendered amount of ₹67,00,000 accepted by the Settlement Board, hence the protective addition was rightly deleted.

Regarding bogus loans and commission:

  • The Interim Board for Settlement had accepted the disclosure relating to accommodation entries, and the Revenue had not challenged that order.

Court Order


  • There was no reason to interfere with the findings of the CIT(A).
  • The cash addition of ₹61,56,000 was rightly deleted.
  • The addition for jewellery was correctly restricted to ₹1,80,820.
  • The additions relating to bogus unsecured loans and commission were rightly deleted as they were covered by the settlement order.
  • Revenue appeals were dismissed.
  • Assessee’s appeal was also dismissed.

 Important Clarification

The Tribunal clarified that when income related to search findings, accommodation entries, jewellery, and cash is already offered and accepted in settlement proceedings, separate additions in individual assessments may not be justified, especially when the Revenue has not challenged the settlement order.

Link to download the order -  https://itat.gov.in/public/files/upload/1735715726-JNrzDp-1-TO.pdf

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