2021 (11) TMI 762 - AT - Income Tax

Assessment u/s 153A - additions based on the seized documents apart from the addition made for surrendered made u/s 132(4) - HELD THAT - Addition deserves to be deleted, as it is based only on the statement recorded u/s 132(4) having no nexus whatsoever with any incriminating/seized material found during the course of search carried out u/s 132 of the Act at the premises of the assessee. Accordingly sole ground raised by the assessee is allowed. Addition u/s 69 - Addition for alleged pawning business and the addition for money-lending business calculated as per ceased diary BS-4 - HELD THAT - The alleged pawning business was not carried out by the assessee firm and it was carried out by the family members of the partners and the income from pawning business have been shown in the income tax return filed by them. This fact is supported by copy of income tax return computation of income and balance sheet placed in the paper book. Thus no addition was called for u/s 69 and has been rightly deleted by the Ld. CIT(A). Addition for money lending business - We find that this was also carried out by the partners of the firm and they have already surrendered income of ₹ 15,33,000/- for the alleged money lending business in their individual hands. Since the alleged seized documents referred for making alleged addition are not connected to the assessee firm, no addition was called for u/s 69 of the Act. We find no infirmity in the finding of Ld. CIT(A) and the same is confirmed. Accordingly ground no.1 2 of revenue s appeal for A.Y. 2016-17 stands dismissed. Unexplained cash found during the course of search - CIT-A deleted the addition - HELD THAT - Opening balance of cash in hands as on 01.04.2015 in the audited books of accounts was ₹ 76,16,708/- but in the manual cash book the balance as on 01.04.2015 was taken at ₹ 26,13,010/- which was marked in pencil. Since the audit for F.Y. 2014-15 was undergoing when the search took place on 21.08.2015, the assessee subsequently completed books of account, got them audited and produced such audited books before Ld. AO. During the course of assessment proceedings no additions have been made during A.Y. 2015-16 for the alleged cash in hands shown as on 31.03.2015. Thus Ld. AO has neither brought on record any deficiency in the books produced nor has rejected books of account. AO should have considered the opening balance of cash in hands as on 01.04.2015 of ₹ 76,16,708.71/-. On considering the opening balance as on 01.04.2015 at ₹ 76,16,708/- the alleged unexplained cash stands explained. Thus, no interference is called for in the finding of Ld. CIT(A) deleting the addition of ₹ 60,00,000/- ground no.3 raised by the revenue stands dismissed. Addition made u/s 69 based on the seized diary BS44 page 11 for the alleged money-lending business - HELD THAT - We observe that in seized diary BS-44 list of name amount and dates were appearing. Before Ld. AO it was submitted that the same is a list of debtors. Ld. AO refused to accept. The assessee filed audited balance sheet and the entries relating to debtors - the contentions made by the assessee before lower authorities and before us are duly supported by the audited balance sheet for preceding years and the alleged names appearing in the seized diary BS-44 are name of the outstanding debtors and have no relation with the alleged moneylending business. Ld. CIT(A) has rightly appreciated the facts and deleted the additions which thus no interference is called for. Ground No.4 of the revenue s appeal is stands dismissed. Addition u/s 69 on the basis of loose paper as per diary BS-43 - HELD THAT - Undisputed fact emerge that the alleged loose papers as per the diary BS43 which are the foundation for the addition of ₹ 5,00,000/- do not belongs to the assessee. It actually belongs to Jain trust namely Pandit Todarmal Smarak Trust. One of the partners of the firm namely Shikhar Chand Jain is known to be a preacher and a renowned speaker on Jain Dharma and also attached to the said Jain Trust. These loose papers refer to purchase of the idols of God worshiped by the Jain Community for being placed in a Jain Temple. Therefore, under the given facts and circumstances of the case since the alleged loose paper do not belong to the assessee firm, Ld CIT(A) has rightly deleted the addition. The finding of Ld CIT(A) needs no interference. Accordingly ground no.5 raised by the revenue stands dismissed. Unexplained jewellery - valuation of inventory of gold and silver ornaments and the diamonds - HELD THAT - As in view of the CBDT circular dated 11.05.1994, settled judicial precedents, will of late Chameli Devi, Wealth Tax returns for A.Y..2011-12 of the beneficiaries referred in the will, affidavit of Devendera Jain brother of late Chameli Devi substantiating the gift and the statement during the course of search are sufficient enough to explain the jewellery of 10987 grams which was included in the stock of inventory but not accounted in the books as they were personal assets of the partners and not of the assessee firm. Further in light of the evidence filed before us which were also placed before lower authorities which are of the dates preceding to the date of search it cannot be said to be an afterthought submission to explain the gold ornaments weighing 10987.35 grams. CIT(A) has rightly appreciated the facts and documentary evidences in accepting the contention of assessee that the alleged unexplained stock of gold ornament weighing 10987 gms is the personal jewellery of partners and is therefore duly explained. Addition for value of 5686 gms of gold jewellery claimed to be purchased prior to the date of search but bills accounted for after the date of search and addition being deleted by ld. CIT(A), we find that the assessee has provided the following details which commonly states that the payments were made prior to the date of search but the bills were received by the assessee subsequent to the date of search. All the above stated bills along with copy of invoices of the suppliers, details of payments made and confirmations received from suppliers were placed before the Ld. AO. who failed to find any discrepancy or inaccuracy in the above said documents produced before us. Under these given facts and circumstances of the case, we are of the considered view that the Ld. CIT(A) after appreciating the facts brought on record and in light of sufficient documentary evidences has rightly accepted the explanation of the jewellery weighing 5686 gms and thus rightly deleted the addition for alleged unexplained stock. Jewellery belonging to sister and brother in law weighing 779.64 gms we find merit in the submissions made by the assessee and finding of Ld. CIT(A) that this jewellery weighing 779.64 gms belong to Smt. Meena Jain and Ashok Jain who intended to go to Canada and the same is verifiable on the copy of Passport filed by the assessee. Thus, no addition was called for unexplained jewellery 779.64 gms. It is not in dispute that during the course of search valuation report of jewellery in the name of Ms. Meena Jain and Ashok Jain was found which clearly indicates that the jewellery of 779.64 gms belonged to them. Thus, we find no infirmity in the finding of Ld. CIT(A) deleting addition for unexplained gold ornaments weighing 779.64 gms. No reason to interfere in the finding of Ld. CIT(A) who had examined the facts of the case in detail and deleted the addition of unaccounted stock of ₹ 4,18,16,751/- which comprised of the alleged unaccounted stock of 10987 gms on account of jewellery of partners/family member, 5685.92 grms on account of purchase bills received after search and 779.64 gms belonging to Ms. Meena Jain and Ashok Jain. Thus, ground no.6 raised by the revenue stands dismissed.

Summary

Issues Involved:
1. Addition based on the statement recorded under section 132(4) of the Income Tax Act.
2. Addition on account of undisclosed investment in loans in pawning business.
3. Addition on account of undisclosed investment in loans in money lending business.
4. Addition on account of unexplained cash found during the course of search.
5. Addition on account of undisclosed investment in loans in money lending as per diary BS-44.
6. Addition on account of undisclosed expenditure on basis of LPS-1 seized from the residence cum showroom.
7. Addition on account of undisclosed stock of gold and silver.

Detailed Analysis:

1. Addition Based on the Statement Recorded Under Section 132(4):
The assessee contended that the addition of ?1,60,00,000/- was made solely on the basis of the statement recorded under section 132(4) without any corroborative evidence or incriminating material. The Tribunal found that the addition was purely based on the statement without reference to any incriminating material. The Tribunal referred to similar cases, including the decision in Signature Builders vs. ACIT, which held that additions cannot be sustained merely on the basis of statements without corroborating incriminating material. The Tribunal deleted the addition of ?1,60,00,000/-.

2. Addition on Account of Undisclosed Investment in Loans in Pawning Business:
The addition of ?18,84,500/- was made based on the entries in diary BS-4. The assessee argued that the pawning business was conducted by the partners and their family members, and the income was shown in their individual returns. The CIT(A) accepted the assessee's contention, noting that the pawning business was carried out by the partners and family members and the income was recorded in their books. The Tribunal upheld the CIT(A)'s decision to delete the addition.

3. Addition on Account of Undisclosed Investment in Loans in Money Lending Business:
The addition of ?3,07,500/- was made based on the entries in diary BS-4. The assessee argued that the money lending business was conducted by the partners and their family members, and the income was shown in their individual returns. The CIT(A) found that the money lending business was conducted by the partners, not the firm, and deleted the addition. The Tribunal upheld the CIT(A)'s decision.

4. Addition on Account of Unexplained Cash Found During the Course of Search:
The addition of ?60,00,000/- was made based on the difference between the cash found and the cash balance as per the manually maintained books. The assessee argued that the cash balance as per the audited books was ?73,31,037/-. The CIT(A) noted that the opening cash balance as per the audited books was ?76,16,708/-, and the AO had not rejected the books of accounts. The Tribunal agreed with the CIT(A) that the cash balance as per the audited books should be considered, and deleted the addition.

5. Addition on Account of Undisclosed Investment in Loans in Money Lending as per Diary BS-44:
The addition of ?2,25,544/- was made based on the entries in diary BS-44. The assessee argued that the entries represented outstanding debtors recorded in the regular books of accounts. The CIT(A) found that the entries were indeed related to outstanding debtors and deleted the addition. The Tribunal upheld the CIT(A)'s decision.

6. Addition on Account of Undisclosed Expenditure on Basis of LPS-1 Seized from the Residence Cum Showroom:
The addition of ?5,00,000/- was made based on loose papers found in LPS-1. The assessee argued that the papers belonged to a Jain Trust and not to the assessee. The CIT(A) found that the papers were related to donations collected by the trust and deleted the addition. The Tribunal upheld the CIT(A)'s decision.

7. Addition on Account of Undisclosed Stock of Gold and Silver:
The addition of ?4,18,16,751/- was made based on the difference between the stock found during the search and the stock recorded in the books. The assessee explained that part of the stock was personal jewelry of the partners, jewelry purchased before the search but accounted for after the search, and jewelry belonging to family members. The CIT(A) accepted the explanations and deleted the addition. The Tribunal upheld the CIT(A)'s decision.

Conclusion:
The Tribunal allowed the assessee's appeal and dismissed the revenue's appeal, confirming the deletion of various additions made by the AO. The Tribunal's decision was based on the lack of corroborative evidence and the explanations provided by the assessee, which were supported by documentary evidence.