Facts of the Case

A search and seizure 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.

During the course of search proceedings, the department found:

  • Cash of Rs. 61,56,000
  • Jewellery valued at Rs. 53,15,286

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

Subsequently, the group filed a settlement petition before the Interim Board for Settlement (IBS), offering additional income arising from accommodation entries and related transactions.

The CIT(A) granted partial relief to the assessee by:

  • Restricting jewellery addition to Rs. 1,80,820
  • Deleting the addition of Rs. 61,56,000 cash

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

 

Issues Involved

  1. Whether addition of Rs. 61,56,000 as unexplained cash under Section 69A was justified when the amount had already been offered in settlement proceedings.
  2. Whether the addition for unexplained jewellery of Rs. 53,15,286 should be sustained.
  3. Whether bogus unsecured loans and commission on accommodation entries could be added when the same income had already been offered before the Interim Board for Settlement.

 

Petitioner’s Arguments (Assessee)

  • The search action primarily related to accommodation entries received by the Laxmi Remote Group.
  • The company and its directors had only one source of income – the business of the company.
  • The entire amount relating to accommodation entries, cash utilization, and jewellery found during search was disclosed before the Interim Board for Settlement.
  • The Interim Board accepted the total income of Rs. 79.61 crores covering all transactions of the group and its directors.
  • Since the disputed amounts were already included in the settlement proceedings and taxes were paid, separate addition in individual assessment would amount to double taxation.

 

Respondent’s Arguments (Revenue Department)

  • The CIT(A) erred in deleting the addition of Rs. 61,56,000 found during search.
  • The assessee failed to reconcile the income offered before the Settlement Commission with the cash and jewellery seized during search.
  • The addition for jewellery should not have been substantially reduced.
  • In AY 2014-15, the assessee received bogus unsecured loans of Rs. 3,45,00,000, which were rightly added by the Assessing Officer.

 

Court Findings / ITAT Order

1. Settlement Commission Covered Entire Income

The Tribunal noted that the Interim Board for Settlement had already examined the issues arising from the search and accepted the income offered by the assessee group.

The total income determined by the Settlement Board was:

  • Returned income u/s 153A – Rs. 39.29 crores
  • Additional income offered before Settlement Board – Rs. 34.07 crores
  • Further income assessed by Settlement Board – Rs. 6.25 crores

Total income determined: Rs. 79.61 crores

This amount covered all accommodation entries and their utilization for the company and the directors.

2. Cash Addition Not Sustainable

  • The cash of Rs. 61,56,000 found during search was already covered in the surrender of Rs. 67,00,000 accepted by the Settlement Board.
  • Therefore, the addition made by the Assessing Officer was rightly deleted by the CIT(A).

 

3. Jewellery Addition Partly Sustained

The CIT(A) found that:

  • Total jewellery found during search: 5624.06 grams
  • Jewellery explained: 1750 grams
  • Group offered Rs. 1,49,18,821 for jewellery before Settlement Board.

However, Rs. 7,23,279 remained unexplained, which was equally divided among four family members, resulting in an addition of Rs. 1,80,820 in the hands of each member.

The ITAT upheld this finding.

 

4. Bogus Loan Addition Also Covered by Settlement

The Tribunal also observed that:

  • The addition of Rs. 3,45,00,000 (bogus unsecured loans) and
  • Rs. 10,35,000 commission for accommodation entries

had already been considered and accepted in the order of the Interim Board for Settlement.

Since the Revenue had not challenged the Settlement Board’s order, the Tribunal refused to interfere with the decision of the CIT(A).

Important Clarification

Where income relating to accommodation entries, jewellery or cash found during search has already been disclosed and accepted in settlement proceedings, the same amount cannot be added again in individual assessments under Section 69A or Section 68 unless the Revenue establishes that such income was not covered by the settlement order.


Link to download the order -  https://itat.gov.in/public/files/upload/1735715849-nw6TXE-1-TO.pdf

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