2019 (10) TMI 1369 - AT - Income Tax

Addition u/s 69A - Computing peak balance for current account transactions - search action u/s. 132 - HELD THAT - Since the assessee had received cash to the amount of ₹ 45 lacs and ₹ 55 lacs from R jesh Jhaveri on 18-03-2010 and 19-03-2010 pertaining to the assessment year 2010-11, therefore, we do not find any infirmity in the action of the ld. CIT(A) in shifting the peak balance from assessment year 2011-12 to assessment year 20-10-2011. No merit in the cross objection filed by the assessee, therefore, the same is dismissed. No error in the finding of the ld. CIT(A) in deleting the separate addition which was already covered by the peak balance. As source of such payment was out of sale of Mumbai flat which was already included in the fund flow statement. After considering the above facts, we do not find any substance in the appeal of the revenue as the assessing officer has considered the payment side of transactions and without any relevant reasons ignored the receipt transactions. It is clear from the finding of ld. CIT(A) that the aforesaid amount was already considered and covered by the peak balance therefore, we do not find any infirmity in the decision of ld. CIT(A) in deleting the aforesaid addition which was already covered in the peak balance. Addition on account of unexplained jewellery - During the course of search total jewellery weighing 7876.92 grams, 106.73 diamonds and 33650 grams of silver worth ₹ 2,15,25730/- was found belonging to the Sanghvi Group - disclosure made under the VDIS scheme - HELD THAT - Assessee furnished the certificate issued u/s. 68(2) of the VDIS, 1997 along with challan of payment of taxes filed by the assessee. These facts were also reported by the assessee in his statement recorded u/s. 132(4) of the act at the time of search action. During the course of assessment, the assessee has also furnished remaking bill of jewellery to substantiate his claim that jewellery was remade out of the jewellery declared under VDIS. The assessee has also furnished the confirmation of the jeweller confirming the remaking of the jewellery. CIT(A) has rightly allowed the telescoping of the income against separate addition, therefore, we do not find any substance in this ground of appeal of the Revenue and the same is dismissed. Addition on account of advance made in cash - HELD THAT - On the basis of material on record, we consider that the assessing officer has made the aforesaid addition on self analysis and assumption without contradicting the claim of the assessee of the corresponding receipt amount shown in the cash flow statement. The assessee in his statement recorded u/s. 131 of the act on 26-05-2011 has stated that this diary contains noting of current account transactions and the source of noting recorded are largely either out of his income or income of the group, sale of capital assets and from the funds advanced earlier out of the income. In the cash flow statement, the assessee has computed peak of such transactions and offered the same as income. However, it is observed that the assessing officer has not brought any material on record to contradict the claim of the assessee and only payment made has been taken into account while computing unaccounted income - Decided against revenue. Addition as unaccounted cash and cash advances - addition on the basis of diary as per annexure A-3 seized during the course of survey at the office premises of Fincap Pvt. Ltd. which contained various entries regarding cash payment - HELD THAT - Assessee has already considered the amount of ₹ 2.74 crore in the found flow statement, however, the assessing officer had again added the same amount in the total income of the assessee without contradicting these facts with any relevant supporting material, therefore, we do not find any infirmity in the decision of ld. CIT(A) in deleting the addition of ₹ 2.74 crore. CIT(A) has proved in his findings that the transaction of ₹ 45 lacs was different and distinct from the transaction of Babulal Vora over the transaction of ₹ 2.74 lac. The assessee has failed to disprove these material facts with relevant supporting evidences, therefore, we justify the decision of ld. CIT(A) in sustaining the addition to the extent of ₹ 45 lacs. Further, we do not find any infirmity in the decision of ld. CIT(A) for giving telescoping of addition of ₹ 45 lacs against the addition of ₹ 40,66,860/- sustained by the ld. CIT(A) as per para 15.3 of his order as the Revenue has failed to contradict that why the additional income of ₹ 40,66,860/- be not considered for telescoping against the payment/outflow. Therefore, this ground of appeal of the Revenue is dismissed. Assessee could not substantiate with relevant evidences that cash loan given to the Babulal Vora was separate transaction. However, the ld. CIT(A) has already provided telescoping effect to the cash loan of ₹ 45 lacs against the income of ₹ 40,66,860/- and ultimately the ld. CIT(A) has confirmed the balance amount to the extent of ₹ 4,33,140/-. The assessee failed to controvert the finding of the ld. CIT(A) with any relevant supporting material therefore the cross objection filed by the assessee is dismissed. Addition on account of own money payment - CIT(A) has deleted the impugned addition after allowing telescoping of the income against the application and the same has been covered in the cash flow statement - HELD THAT - As demonstrated from the material on records i.e. statements of the assessee recorded during the course of search that assessee was the key person of the group who had undertaken all the transactions particularly the cash transactions for or on behalf of the group. No substance in the inference of the assessing officer that on money payment was made prior to the incorporation of the company. The assessing officer has made the addition on assumption basis without disproving the material undisputed fact that the assessee was the key person who had undertaken most of the cash transactions on or on behalf of the group. Therefore, we do not find any infirmity in the decision of the ld. CIT(A) and appeal of the revenue on this issue is dismissed. Addition on account of RTGS entries - notings pertaining to RTGS transaction that aforesaid amounts were not recorded in the books of the assessee, therefore, the same was added as unaccounted income of the assessee - HELD THAT - AO had not disproved the material/evidences that the assessee was neither remitter nor beneficiary in the said transitions. After considering the above facts and findings of ld. CIT(A), we do not find any merit in the appeal of the Revenue as assessing officer has failed to disprove the material furnished by the assessee that the impugned transactions were pertained to the third party not to the assessee or his group. Therefore, this ground of appeal of the Revenue is dismissed. Addition on account of RTGS cash receipt - HELD THAT - CIT(A) has restricted the said addition to the extent of ₹ 6,03,00,000/- on the ground that act out of ₹ 6.11 crore an amount of ₹ 8,10,000/- has been disclosed in the books of Ashok D. Sanghvi. In this connection, the assessee has submitted that out of ₹ 6.11 crore an amount of ₹ 8.10 lacs has been accounted in the books of account of Ashok D. Sanghvi which has been accepted by the assessing officer, therefore, in the light of the above facts, we consider that we do not find any infirmity in the decision of ld. CIT(A) in providing relief to the assessee to the extent of ₹ 8,10,000/-. Income from advices given to investors - HELD THAT - HUF of the assessee was engaged in the share market activity and the HUF had disclosed additional income of ₹ 1,02,33,850/- in the return of income. The assessing officer has considered the same as unaccented income of the assessee on the ground that no details have been furnished by the assessee. In this regard, it is noticed that assessing officer on page no. 3 of assessment order has given the bifurcation of the income disclosed by the assessse in various years and it is noticed that an amount of ₹ 1,02,33,850/- has clearly disclosed by Dhirajlal Sanghvi HUF in assessment year 2011-12. Therefore, we consider without contradicting these materiel facts, the assessing officer is not justified in adding the same as unaccounted income of the assessee therefore we do not find any error in the decision of ld. CIT(A) on this issue. Addition on account of other expenses - HELD THAT - As demonstrated from the loose paper assessee had specifically incurred such expenses on BMW car. The lower authority had also not verified that assessee was having any BMW car. The ld. CIT(A) has accepted that out of such expenses on amount for ₹ 1,81,000/- was pertained to renovation expenses therefore we observe that the lower authority had failed to disprove the contention of the assessee that not any expenses of ₹ 6,14,589/- was incurred on BMW car. Therefore, addition to the extent of ₹ 6,14,598/- is deleted. Considering the finding of ld. CIT(A) that out of the expenses of ₹ 98,72,060/- expenses to the tune of ₹ 70,49,962/- has been considered in the cash flow statement, we do not find any force in the appeal of the Revenue on this issue. Accordingly, the appeal of the Revenue is dismissed and cross objection no. 4 of the assessee is partly allowed. Unexplained cash found during search - HELD THAT - Assessee had failed to explain the difference in cash as per the details filed in the original return and in the return filed u/s. 153A in the case of Shri Sagar Sanghvi. Considering the above, we find that the assessee has failed to substantiate the source of cash we do not find any merit in the ground of appeal filed by the assessee and the same is dismissed. Transactions pertaining to shares and earning of profit - HELD THAT - As assessee has failed to provide name and address of other beneficiaries of the transactions, therefore, the assessing officer has treated the profit from the transaction to the amount as unclosed income of the assessee. In this regard, we consider that assessee has failed to substantiate with any material that the balance amount was pertained to any other person and even the assessee has failed to provide basic information i.e. name and addresses of the beneficiaries of the transactions, therefore, this ground of cross objection of the assessee stands dismissed.

Summary

Issues Involved:
1. Telescoping of income benefit amounting to ?70,00,000/-
2. Addition of ?1,00,00,000/- after computing peak balance
3. Addition of ?1,65,23,380/- on account of unexplained jewelry
4. Addition of ?4,31,50,000/- on account of advances made in cash
5. Addition of ?3,19,00,000/- on account of unexplained cash credits and cash advances
6. Addition of ?5,84,71,400/- on account of on-money payment
7. Addition of ?5,29,43,000/- on account of RTGS receipts
8. Addition of ?6,03,00,000/- on account of RTGS cash receipts
9. Addition of ?1,02,33,850/- on account of income from advices given to investors
10. Addition of ?98,72,060/- on account of other expenses
11. Addition of ?4,89,863/- on account of unexplained cash found during the search
12. Addition of ?45,00,000/- pertaining to cash advances to Babulal Vora
13. Addition of ?40,66,860/- on account of profit shown in loose paper

Detailed Analysis:

Issue 1: Telescoping of Income Benefit Amounting to ?70,00,000/-
The CIT(A) allowed the telescoping of income against the payment, stating that the source of such payment was largely out of the sale of a Mumbai flat, and separate addition for such current account transactions was deleted. The Tribunal upheld this decision, noting that the amount was already covered by the peak balance of ?1,09,50,310.

Issue 2: Addition of ?1,00,00,000/- After Computing Peak Balance
The CIT(A) confirmed the addition of ?1,00,00,000 after computing the peak balance for current account transactions. The Tribunal found no merit in the cross objection filed by the assessee and upheld the CIT(A)’s decision.

Issue 3: Addition of ?1,65,23,380/- on Account of Unexplained Jewelry
The CIT(A) deleted the addition, noting that the jewelry was disclosed under the VDIS scheme and that bills for remaking the jewelry were provided. The Tribunal upheld this decision, agreeing with the CIT(A) that the source of the jewelry was adequately explained and covered by the peak balance.

Issue 4: Addition of ?4,31,50,000/- on Account of Advances Made in Cash
The CIT(A) deleted the addition, stating that the transactions were current account transactions with funds being recycled. The Tribunal upheld this decision, noting that the assessing officer did not bring any corroborative evidence to support the addition.

Issue 5: Addition of ?3,19,00,000/- on Account of Unexplained Cash Credits and Cash Advances
The CIT(A) restricted the addition to ?4,33,140, allowing telescoping of ?45,00,000 against the income from investors. The Tribunal upheld this decision, agreeing with the CIT(A) that the transactions were adequately explained in the cash flow statement.

Issue 6: Addition of ?5,84,71,400/- on Account of On-Money Payment
The CIT(A) deleted the addition, noting that the payment was covered in the cash flow statement and allowing telescoping of the income against the application. The Tribunal upheld this decision, finding no merit in the revenue’s appeal.

Issue 7: Addition of ?5,29,43,000/- on Account of RTGS Receipts
The CIT(A) deleted the addition, stating that the transactions belonged to third parties and the assessee provided adequate details to prove this. The Tribunal upheld this decision, noting that the assessing officer failed to disprove the material furnished by the assessee.

Issue 8: Addition of ?6,03,00,000/- on Account of RTGS Cash Receipts
The CIT(A) restricted the addition to ?6,03,00,000, noting that ?8,10,000 was disclosed in the books of Ashok D. Sanghvi. The Tribunal upheld this decision, agreeing with the CIT(A) that the amount was adequately accounted for.

Issue 9: Addition of ?1,02,33,850/- on Account of Income from Advices Given to Investors
The CIT(A) deleted the addition, noting that the income was disclosed in the return of income for Dhirajlal Sanghvi HUF. The Tribunal upheld this decision, finding no error in the CIT(A)’s conclusion.

Issue 10: Addition of ?98,72,060/- on Account of Other Expenses
The CIT(A) restricted the addition to ?19,64,598, noting that the remaining expenses were included in the cash flow statement. The Tribunal upheld this decision, agreeing with the CIT(A)’s findings.

Issue 11: Addition of ?4,89,863/- on Account of Unexplained Cash Found During the Search
The CIT(A) sustained the addition, noting that the assessee failed to explain the difference in cash. The Tribunal upheld this decision, finding no merit in the assessee’s cross objection.

Issue 12: Addition of ?45,00,000/- Pertaining to Cash Advances to Babulal Vora
The CIT(A) confirmed the addition but allowed telescoping of ?40,66,860 against the income from investors. The Tribunal upheld this decision, agreeing with the CIT(A)’s findings.

Issue 13: Addition of ?40,66,860/- on Account of Profit Shown in Loose Paper
The CIT(A) sustained the addition, noting that the assessee failed to provide details of the other beneficiaries. The Tribunal upheld this decision, finding no merit in the assessee’s cross objection.

Conclusion:
The Tribunal upheld the CIT(A)’s decisions on all issues, dismissing the revenue’s appeals and partly allowing the cross objections filed by the assessee. The Tribunal found that the CIT(A) had correctly analyzed the facts and evidence, and there was no merit in the revenue’s contentions.