2022 (5) TMI 1098 - AT - Income Tax

Assumption of jurisdiction u/s.153A / 153C - Whether no search material was found or seized during the course of search? - Addition u/s 68 - HELD THAT - We noted that the assessee before AO as well as before CIT(A) could not explain how the transactions recorded in the hard disk which was seized vide Annexure ANN/SR/RJ/Hard Disc/S representing inconsistency in the pattern of expenditure, additions of cash credit, sundry loan creditors u/s.68 of the Act and bogus purchases. The hard disk containing incomplete tally package and recording of the above mentioned entries was recovered during the course of search throws light on the above additions and these are not rebutted by the assessee before either of the authorities and even now before us. AO has brought on record adequate material that the assessee has not maintained books of account in term of section 44AA of the Act and has not got them audited u/s.44AB of the Act and filed with the AO - this is uncontroverted claim that the hard disk contains incriminating material having bearing on the determination of income on account of unaccounted indirect expenditure, peak cash credits, sundry loan creditors added u/s.68 of the Act, bogus purchases and unexplained investment in property. We find that this is a common feature in all the assessees cases and once this is the fact, we noted that the AO has rightly assumed jurisdiction u/s.153A or 153C - Decided against assessee. Addition of indirect expenditure - AO estimated the expenditure and disallowed 25% of the expenditure - CIT(A) restricted the disallowance at 10% - HELD THAT - As assessee has made a claim before the AO and before CIT(A) that the accounts of the group concern is statutorily audited and the respective business owners i.e., the assessee, his wife and his mother have duly filed Form No.3CB 3CD, as audited by the auditor. It was claimed that the books of account of the assessee is statutorily audited and duly filed by the assessee. The assessee before CIT(A) claimed that the AO never questioned the statutory audit and disallowance made in regard to indirect expenditure on estimate basis. We noted that the CIT(A) simply estimated the disallowance at 10% as against estimated by AO at 25%. But, now the question arises that the assessee is unable to produce the books of account and even now before us, despite specific opportunities given, no books of account or audited accounts were produced. Even, the assessee on merits has not made any argument or has not made any claim. In such circumstances, we have no hesitation in confirming the action of the AO and that of the CIT(A). Hence, the order of CIT(A) is confirmed and this issue of assessee s appeals is dismissed. Addition of incentives received by assessee in assessment years - HELD THAT - As noted that the assessee is not maintaining any books of account and the information received is from seized hard disk containing tally details of purchases and sales seized from the business premises of the assessee pursuant to the search u/s.132 of the Act on 22.05.2012. Now, before us assessee has not made any argument in regard to the merits of the case, whereas the ld.CIT-DR relied on the order of CIT(A). Once the assessee has not maintained any books of account nor any bills and vouchers and despite number of opportunities given to him to produce the accounts, he could not do so and hence, we have no alternative except to confirm the findings of the CIT(A). The issue in this appeal of assessee in regard to addition of incentive is confirmed. Addition of peak cash credit of bank statement as unexplained cash credits - HELD THAT - Before us, assessee has not made any argument except that the cash deposit in South Indian Bank is on account of sale proceeds. But on query from the Bench, could not produce any books of account or evidences or source of cash deposit in the bank. Once there is no books of account, how the assessee can make a claim that the cash deposits are arising out of sale proceeds or he could not link the same with the sales made by producing any evidence. In such circumstances, we have no alternative except to confirm the addition. This issue of assessee s appeal is dismissed. Addition on account of transfer from personal books and loan - HELD THAT - We noted that the CIT(A) has already deleted the addition made on account of loan from Shri Dharmichand Jain to the extent of Rs.6 lakhs while dealing with the issue of sundry creditors as unexplained cash credit u/s.68 of the Act. The CIT(A) observed in para 16.3 that this Rs.6 lakhs loan has already been confirmed as addition as sundry loan creditor in assessment year 2007-08 and now this was deleted for giving credit to the extent of Rs.6 lakhs as impugned investment of Rs.7.5 lakhs in M/s. Shree Battery House, as there is source to that extent is available with the assessee. CIT(A) in the absence of same confirmed the balance Rs.1.5 lakhs as unexplained investment from unaccounted income. Hence, we find no infirmity in the order of CIT(A) and hence, this issue of assessee s appeal is dismissed. Addition of unexplained credit u/s.68 of the Act received from Shri Dharmichand Jain - HELD THAT - We noted that this amount of Rs.6 lakhs from Shri Dharmichand Jain claimed by assessee but no details were filed to prove the identity, creditworthiness and genuineness of transaction. Even now before us the assessee could not discharge his onus to prove the transaction and therefore, we uphold the order of CIT(A) confirming the addition of Rs.6 lakhs. It is to be noted that this Rs.6 lakhs is doubly added by AO and we have already considered this issue in para 8 where this addition was deleted by CIT(A) and this deletion was confirmed but we sustain this addition here only. Hence, this is a single addition and not double addition. Disallowance of claim of deduction on the claim of LIC premium paid - AO disallowed the claim of deduction u/s.80C on account of LIC premium paid in the absence of any evidence - HELD THAT - As assessee could not produce any evidence or no argument was made in this regard and hence, the same is dismissed. This issue of assessee s appeals is dismissed. Estimation of profit@ 10% on sale of old batteries i.e., trading in scrap - assessee before AO contended that the profit margin on sale of old batteries is in the range of 0.5% to 1% and accordingly the estimate should have been made. Apart from this, the assessee has not produced any evidence or has not contested the addition. The CIT(A) reduced the estimation of profit and estimated the profit rate for all the years at 10% - HELD THAT - Before us, the ld.counsel for the assessee has not argued on merits or plea was made as regards to reduction in profit rate, hence we find no infirmity in the order of CIT(A) and the same is confirmed. The order of CIT(A) is confirmed on this issue. Accordingly, this issue of assessee s appeals for assessment years 2008-09 to 2010-11 is dismissed. Unexplained investment in property - AO noted that the investment made in these properties is out of alleged gift receipt - assessee failed to explain the sources of persons who gifted the amount and also evidences to prove the creditworthiness of the donor, genuineness of transaction and the identity of the donors - HELD THAT - Now before us assessee has not made any argument on merits and has not tried to file any evidences to prove the genuineness of gift or cash credit. Hence, we find no infirmity in the order of CIT(A) and the same is confirmed. This issue of assessee s appeal is dismissed. Addition of incentives received by assessee - AO during scrutiny assessment called for ledger account of the assessee in the books of Exide Industries and noted that the assessee has received incentives apart from cash discounts while purchasing the batteries from M/s. Exide Industries. But these incentives were not accounted for in its books of account - HELD THAT - As now before us, the ld.counsel for the assessee has not made any argument or not produced any evidences for deletion of addition of incentives received by assessee.This issue of assessee s appeal is dismissed. Penalty u/s.271A for non-maintenance of books of account - AO levied penalty despite the fact that the assessee contended that the assessee have maintained books of accounts and got them audited u/s.44AB - HELD THAT - We noted that only seized material found during the course of search is a hard disk i.e., document in the form of incomplete tally package inventories as ANN/SR/RJ/hard disc/S dated 22.5.2012 having bearing on the determination of the total income were recovered. This is incomplete tally package of documents i.e., sales, purchase but no books of account are maintained. Even now before us, the ld.counsel admitted that there is no books of account and assessee could not produce any books of account before us despite specific opportunity given. Hence, we are of the view that the lower authorities have rightly levied penalty for non-maintenance of books of account u/s.271A .

Summary

Issues Involved:
1. Condonation of delay in filing appeals.
2. Jurisdictional issue regarding assessments under Section 153A/153C.
3. Addition of indirect expenditure.
4. Addition of incentives received.
5. Addition of peak cash credits.
6. Addition of unexplained investment.
7. Addition of sundry loan creditors.
8. Disallowance of LIC premium paid.
9. Estimation of profit on sale of old batteries (trading in scrap).
10. Penalty under Section 271A for non-maintenance of books of account.
11. Penalty under Section 271B for not filing audit reports under Section 44AB.

Detailed Analysis:

1. Condonation of Delay in Filing Appeals:
The appeals filed by the assessees were delayed by 7 to 138 days. The assessees filed condonation petitions supported by affidavits explaining the delays were due to frequent changes in authorized representatives and difficulties in gathering necessary documents. The Tribunal found the reasons sufficient and condoned the delay, admitting the appeals for adjudication.

2. Jurisdictional Issue Regarding Assessments Under Section 153A/153C:
The assessees argued that the assessments were unabated and no incriminating material was found during the search. The Tribunal noted that a hard disk containing Tally details of purchases and sales was seized, which was considered incriminating material. The Tribunal upheld the jurisdiction assumed by the AO under Section 153A/153C, dismissing the assessees' appeals on this issue.

3. Addition of Indirect Expenditure:
The AO disallowed 25% of the indirect expenditure due to inconsistencies and lack of supporting bills or vouchers. The CIT(A) restricted the disallowance to 10%. The Tribunal confirmed the CIT(A)'s decision, noting the assessees' failure to produce books of account or audited accounts.

4. Addition of Incentives Received:
The AO added incentives received from M/s. Exide Industries, which were not accounted for in the books of account. The CIT(A) confirmed the addition, and the Tribunal upheld this decision, noting the assessees' failure to produce any evidence to contradict the findings.

5. Addition of Peak Cash Credits:
The AO added peak cash credits as unexplained cash credits. The CIT(A) confirmed these additions, and the Tribunal upheld the decision, noting the assessees' failure to produce books of account or evidence to explain the cash deposits.

6. Addition of Unexplained Investment:
The AO added unexplained investments made in properties and firms. The CIT(A) confirmed the additions where the assessees failed to provide evidence of the sources. The Tribunal upheld the CIT(A)'s decision, noting the lack of evidence provided by the assessees.

7. Addition of Sundry Loan Creditors:
The AO added sundry loan creditors as unexplained cash credits. The CIT(A) confirmed the additions due to the assessees' failure to prove the identity, creditworthiness, and genuineness of the transactions. The Tribunal upheld these decisions.

8. Disallowance of LIC Premium Paid:
The AO disallowed the deduction claimed under Section 80C for LIC premium paid due to lack of evidence. The CIT(A) confirmed the disallowance, and the Tribunal upheld this decision, noting the assessees' failure to produce any evidence.

9. Estimation of Profit on Sale of Old Batteries (Trading in Scrap):
The AO estimated the profit margin on the sale of old batteries at various rates. The CIT(A) restricted the profit margin to 10%. The Tribunal confirmed the CIT(A)'s decision, noting the assessees' failure to produce evidence to support a lower profit margin.

10. Penalty Under Section 271A for Non-Maintenance of Books of Account:
The AO levied penalties under Section 271A for non-maintenance of books of account. The CIT(A) confirmed the penalties, and the Tribunal upheld these decisions, noting the assessees' admission of not maintaining books of account.

11. Penalty Under Section 271B for Not Filing Audit Reports Under Section 44AB:
The AO levied penalties under Section 271B for not filing audit reports. The CIT(A) confirmed the penalties. However, the Tribunal deleted these penalties, citing High Court decisions that penalty under Section 271B cannot be levied if penalty under Section 271A is already imposed for non-maintenance of books of account.

Summary of Results:
- Appeals regarding quantum additions and jurisdictional issues were largely dismissed.
- Appeals regarding penalties under Section 271A were dismissed.
- Appeals regarding penalties under Section 271B were allowed.