2022 (9) TMI 1547 - AT - Income Tax

Unaccounted cash receipt found in books impounded during survey - CIT(A) deleted addition - HELD THAT - A sum Partly has been deleted for the reason that advances are received from the customer, is less than the total amount shown by the assessee as received advance in the books of accounts and therefore to that extent the addition also deserves to be deleted. Furthermore it is apparent that the impounded material did show the agreed value of the consideration as well as the amount received against that consideration. The balance of this sum is naturally not received by the assessee and therefore it could not have been considered as income of the assessee as the same has not been received at all. Such is the case with respect to the sum with respect to annexure A 8, pertaining to annexure A 9 and pertaining to annexure A 10 of Kandivali project. Further sum as mentioned in the second remand report clearly shows that this amount is not appearing in any of the impounded material, same has been included by the learned assessing officer on the basis of the balancing figure of the amount receivable, and amount received. Therefore if the amount is not received and is merely a balancing figure, the same could not have been taxed as income of the assessee as it is not at all received. Naturally, the sum pertains to assessment year 2007 08 and assessment year 2009 10 and therefore naturally they could not have been added in the hands of the assessee for assessment year 2008 09 and therefore same are deleted. Obviously, whether the same are taxable in the hands of the assessee or not in those years were required to be dealt with by deciding the appeal of the learned assessing officer for those respective years. Duplicate entries have been deleted by the learned CIT A . Therefore as the amount of addition sustained by the learned CIT A is higher than the amount of the balance addition after removing 1 amounts not received, 2 duplicate entries, 3 amounts not appearing in the impounded material and 4 amount received against the advance is less than the amount appearing in the books and a 5 amount pertaining to different years, the learned CIT A deleted those additions. There is no infirmity pointed out by the learned departmental representative in the order of the learned CIT A. No evidence is produced before us with respect to the fact that either any of the amount is received or the amount stated to be pertaining to the different years is pertaining to this year and duplicate entry stated by the learned assessing officer and confirmed by the learned assessing officer in remand report is incorrect. Nothing has been shown before us from the impounded material that the advances received by the assessee against the sale of the property are not accounted for in the books of account. In view of this, the learned CIT A has taken the correct view after considering the two different remand report obtained from the learned assessing officer and the rejoinder of the assessee. It is further to be considered that in the second remand report the learned CIT A has given a categorical direction to the learned assessing officer to examine particular aspect with respect to each of the items appearing in the impounded material. AO on examination of the impounded material came with the finding that the total addition should have been of ₹ 751,981,580 however out of which the sum of ₹ 748,451,911/ is required to be excluded for the respective reasons as stated above. Therefore, it is apparent from the order of the learned CIT A that he has not gone by the addition made in the assessment order of ₹ 619,105,369/ but he has considered the amount of addition required to be made as per the learned assessing officer as per the first remand report amounting to ₹ 751,981,580/ . Out of this, he has given a detailed explanation for deleting the addition of sum of ₹ 748,451,911/ and he sustained the addition of ₹ 9,136,813/- which is higher than the balance amount of ₹ 35,29,669/- (75,19,81,580 -74,84,51,911). Therefore, we confirm the order of the learned CIT A deleting the addition. Validity of reopening of assessment - jurisdiction of AO to make the assessment - HELD THAT - As the notice has been issued by the learned assessing officer who had no jurisdiction over the assessee, such notice has not been issued validly. If a valid notice is not issued u/s 143 (2) of the act for making an assessment, assessment order passed cannot be upheld. The honourable Supreme Court in case of Asst Commissioner of income tax versus Hotel Blue moon 2010 (2) TMI 1 - SUPREME COURT categorically held that notice u/s 143 (2) is mandatory for completing assessment. Therefore, as in the present case the assumption of jurisdiction for making an assessment has not been validly assumed by issuing the notice by the assessing officer who was authorised to issue such notice, the assessment cannot be upheld. Amount is received in cash by the assessee is only money which are not recorded in the books of account - Assessment year 2007 08 - CIT(A) deleted addition - HELD THAT - On careful consideration we find that the assessee has shown advances in its books of accounts Under the head advance received from customers. Therefore, it is apparent that the amount has already been recorded in the books of accounts the addition has been correctly deleted by the learned CIT A. The amount was found to be the bank balances and is cash on hand. Both the items are related to regular books of accounts and therefore there could not have been added as undisclosed income of the assessee which is rightly deleted by the learned CIT A. Secondly, a sum written in the seized material, have been extrapolated by the learned AO by adding 2 zeros in making at ₹ 11 lakhs. We find that such extrapolation is unwarranted unless it is mentioned in the impounded material. There is no mention of such extrapolation in the impounded material and therefore the addition to the extent of ₹ 11 lakhs could not have been made and therefore same is deleted by the learned CIT A the addition to the extent of ₹ 11,000/ is sustained. Further a sum of ₹ 1,751,440/ is not reflected in the impounded troopers and therefore correctly deleted. We further find that amount of ₹ 121,001/ has been considered twice, therefore same also correctly deleted by the learned CIT A. Now we find that the learned CIT A has deleted the addition holding that same is pertaining to assessment year 2008 09 and therefore same cannot be considered in assessment year 2007 08. This finding has been given by the learned CIT A without first ensuring that the same has been added in the assessment year 2008 09 or not. Therefore, we direct the learned assessing officer to examine that if the amount of ₹ 2,862,000 has been already added in assessment year 2008 09 then same may be deleted in this year is there cannot be any addition of the same amount in two different assessment years. Addition made by AO with respect to the own money is not in fact the receipt of the money but the payment for purchase of land and other brokerage expenses which are already accounted for in the books of accounts of the assessee and therefore they are not own money and cannot be added as income of the assessee. Those are correctly deleted by the learned CIT A. Coming to the addition wherein the learned CIT capital has deleted the addition stating that it is not related to the appellant as it was not reflected anywhere in the impounded material. If the same amount is deleted, for the reason that it did not belong to the assessee or not pertaining to the business of the assessee, the learned CIT A noted that to whom it belongs to. We found that at serial number 8 the transaction with respect to bhakti trading Co is mentioned on 5/9/2006 amount in ₹ 20 lakhs. The explanation of the assessee that these transaction is not in cash but through bank. Similarly at serial number nine there is a transaction in the name of VSK enterprise dated 4/10/2006, this also stated by the assessee to be transaction through cheque. However no details of recording of these entries in the books of the assessee is shown. Thus merely because the assessee has mentioned it to be a bank transaction, it cannot be deleted. Therefore the learned CIT A has deleted this addition only on the expression of the assessee. Accordingly, we direct the assessee to show before the learned assessing officer with respect to the above two entries whether they are recorded in the books of accounts through cheque in the books of the assessee on and if they are related to some other party, the assessee should give name and address of those parties to the learned assessing officer for examination determine that those are not unaccounted receipts of the assessee. The solitary ground raised by the learned assessing officer with respect to the addition is partly allowed. Undisclosed/unaccounted income during the survey conducted - Assessment year 2009 10 - CIT appeal held that the assessee has already included the above sum as an advance because the project is continuing an income would be offered on the basis of method of accounting, the relevant expenses are also shown, none of them are shown to be bogus or not genuine or unsupported by proper vouchers and bills. Therefore, the addition is not required to be made as assessee already accounted for the receipt. The findings of the learned CIT A are supported by verification of the accounts as well as the explanation of the assessee and remand report is of the learned assessing officer which were part of appellate proceedings for assessment year 2008 09. In the result the solitary ground of the appeal of the learned AO deserves to be dismissed. Audit u/s 44AB - As assessee does not have any turnover, there is no question of audit of accounts Under that Section. Therefore same is also deserves to be dismissed.

Summary

Issues Involved:
1. Unaccounted cash receipts.
2. Liability for audit under Section 44AB.
3. Validity of notices issued under Section 143(2).
4. Rejection of books of accounts and related expenses.
5. Duplication of entries and assessment of income across different years.
6. Jurisdictional issues regarding the issuance of notices.

Issue-wise Detailed Analysis:

1. Unaccounted Cash Receipts:
- Assessment Year 2007-08: The AO made an addition of Rs. 48,867,846 based on unaccounted cash receipts found during a survey. The CIT (A) deleted the addition, concluding that the receipts were advances for projects that were scrapped and thus liabilities, not income. The ITAT upheld this decision, noting that the AO failed to substantiate the additions with concrete evidence.
- Assessment Year 2008-09: The AO added Rs. 619,105,369 based on cash receipts not accounted for in the books. The CIT (A) deleted Rs. 609,968,556 of this addition, finding that many entries were either duplicates, related to other years, or not substantiated by evidence. The ITAT confirmed this deletion, agreeing with the detailed examination and remand reports considered by the CIT (A).
- Assessment Year 2009-10: The AO added Rs. 32,478,230 based on a survey declaration. The CIT (A) deleted this addition, noting that the declared income was already included in the books as advances, and the expenses were properly documented. The ITAT upheld this deletion, finding no basis for the AO's rejection of the books.

2. Liability for Audit Under Section 44AB:
- Assessment Year 2007-08: The AO's claim that the assessee was liable for audit under Section 44AB was dismissed as academic since the turnover did not meet the threshold for mandatory audit.
- Assessment Year 2009-10: Similarly, the claim was dismissed as the assessee's turnover did not necessitate an audit under Section 44AB.

3. Validity of Notices Issued Under Section 143(2):
- Assessment Year 2008-09: The ITAT found that the notice under Section 143(2) was issued by an officer without jurisdiction, rendering the assessment invalid. This decision was based on the precedent set by the Bombay High Court in Ashok Devichand Jain, which held that jurisdictional notices must be issued by the appropriate authority.
- Assessment Year 2009-10: The ITAT also quashed the assessment for this year on similar jurisdictional grounds, as the notice was issued by an officer not authorized to do so.

4. Rejection of Books of Accounts and Related Expenses:
- Assessment Year 2009-10: The AO rejected the books of accounts and disallowed expenses based on the survey declaration. The CIT (A) found this rejection unjustified, as the books were audited, and expenses were documented. The ITAT upheld this, emphasizing the need for concrete evidence to reject documented expenses.

5. Duplication of Entries and Assessment of Income Across Different Years:
- Assessment Year 2008-09: The CIT (A) identified and deleted duplicate entries totaling Rs. 467,68,927 and amounts related to other years, ensuring no double taxation. The ITAT confirmed these deletions, finding the CIT (A)'s detailed examination and reliance on remand reports appropriate.

6. Jurisdictional Issues Regarding the Issuance of Notices:
- The ITAT emphasized that notices under Section 143(2) must be issued by the correct authority as per CBDT instructions. Any defect in this regard is not curable, leading to the quashing of the assessments for 2008-09 and 2009-10.

Conclusion:
The ITAT upheld the CIT (A)'s decisions to delete substantial additions made by the AO across multiple years due to unaccounted cash receipts, improper rejection of books, and jurisdictional errors in issuing notices. The appeals by the AO were largely dismissed, with the ITAT confirming the need for proper jurisdiction and substantiated evidence in tax assessments.