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TMI Blog2013 (10) TMI 750X X X X Extracts X X X X X X X X Extracts X X X X ..... time of search – Held that:- For Jewellery: On the date of search, assessee was still a bachelor and the only lady in the house was his mother and since the entire jewellery found and seized were ladies, it actually belonged to his mother. Even in the remand report, the AO could not controvert this fact – Cash: Cash was duly reflected in the books of the firm and the books are with the department, therefore no addition can be made as the cash is not unexplained – Investment in furniture and fixtures: Submission by Assessee that flat belonged to the parents of the assessee, which was purchased in 1986 and the furniture & fixtures was also purchased around the same time or immediately thereafter. No separate evidence, indicating that the furniture & fixtures belonged to the assessee or the assessee spent his undisclosed money to acquire the same – Decided against the Revenue. Addition on account of salary and commission - Assessee was a partner in M/s Aggarwal Trading Company and as per the Deed of Partnership, the assessee would receive Rs.48,000/- as salary and commission @ 2% of turnover (Rs.4,00,000/-, being 2% of Rs.2,00,00,000/- turnover) – Held that:- As per the arguments a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the deposition made u/s 131 dated 17.01.1994, the assessee explained the modus operandi for such fraudulent refunds and as consequence of the modus operandi, as explained, it was presumed that the assessee was the man behind the entire fraud exercise. It was thus presumed that the assessee would retain substantial portion and pass on the remaining 25-30% to such fraudulent assessees and earned between 20 to 25 lacs in assessment year 1994-95. The AO, therefore, on the basis of these presumptions, estimated assessee s income from this fraudulent exercise at Rs.3,00,000 and added it to the income of the assessee. 5. Before the CIT(A), the assessee explained that he was an ITP and was only assisting its clients. The assessee submitted that the fact that private sector employees filed fraudulent returns was between those persons and the revenue department. The assessee also submitted that neither it was the case of the department that the refunds were issued to the assessee nor was the case of the department that the assessee had solicited any refunds. On the contrary, after the fraud was blown up, the department issued notices u/s 148 on all such assesses who had claimed false re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d M/s Goyal Textiles to the tune of Rs.1,10,000/- and Rs.3,06,000/- respectively, which cannot be termed as genuine. The AO, on the basis of statement recorded estimated a sum of Rs.45,000/- as income from such hawala transactions. 16. Before the CIT(A), the assessee produced his books and pointed out that he had actually earned Rs.1,650/- on Rs.1,10,000/- given to Goyal Textiles for five months and Rs.8,262/- on Rs.3,06,000/- given to Sanjeev Fabrics for 9 months. On the basis of these facts, the CIT(A), reduced the amount added as commission on hawala transaction to Rs.9,912/- against Rs.45,000/-, estimated by the AO. 17. The department is in appeal before us and the DR strongly supported the decision of the AO, in adding Rs.45,000/-. The AR on the other hand supported the observations of the CIT(A). 18. We have heard the arguments from either side and we find that except for the admission of the assessee in his statement u/s 131 that he was giving hawala loans, nothing else has been found in the search nor any evidence indicated anything beyond, what the assessee had himself admitted before the CIT(A). 19. Even before us, the DR has not been able to bring about anything ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut of such persons, there is any genuine person/assessee, then the assessee should not be burdened by that persons liability. If in circumstance, the assessee(s) is non existent as in the case is quite apparent, then the liability has been cast upon the instant assessee, by the CIT(A), to meet the tax demands and make the tax payments accordingly. 29. We, endorse this finding of the CIT(A) and endorse the decision of the CIT(A). 30. In the result, the appeal filed by the department is dismissed. ITA no. 3015/Mum/2003 for Assessment year 1994-95: 31. The appeal filed by the department is directed against the order of CIT(A) XIV, Mumbai, dated 02.01.2003, wherein, the department has raised the following grounds: 1. On the facts and in the circumstances of the case the Ld. CIT(A) erred in law in deleting the addition of Rs.5,55,036/- u/s 69A being investment made in acquisition of jewellery, out of undisclosed income. 2. On the facts and in the circumstances of the case the Ld. CIT(A) erred in law in deleting the addition of Rs.90,000/- added u/s 69A being unexplained cash. 3. On the facts and in the circumstances of the case the Ld. CIT(A) erred in law in de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 04 Furniture fixtures (under deemed seizure) 5,00,000 5,00,000 34. As per the submissions made before the CIT(A), the assessee contended that he was not provided with the seized material and because of which, he was unable to assist the AO. The AO, on consequential non cooperation added the above items, except for shares, under section 69A and 69C. 35. Since, the assessee took the plea that he was not provided with the copies of seized papers, the CIT(A) directed the AO to provide the assessee with the necessary documents. The assessee, on receipt of the documents filed his reply, sent the same to the AO for his comments in the remand proceedings. On receipt of the remand proceedings, the CIT(A) came to the conclusion: a) Jewellery : Jewellery was found from the bed room of the assessee s parents and the entire jewellery was ladies jewellery. The assessee also submitted to the CIT(A) that on the date of search, he was still a bachelor and the only lady in the house was his mother and since the entire jewellery found and seized were ladies, it actually belonged to his mother. Even in the remand report, the AO could not controvert this fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7,500/-. However, despite the fact that according to the partnership deed, the assessee would have received commission on turnover, as provided for, no such commission income was received by the appellant. Therefore, the question of estimating the commission income did not arise at all. The AO did not accept the said explanation and stated that, these points were discussed at length in the assessment order for A.Y. 1993-94, where an amount of Rs.48,000/- was added in the hands of the appellant as salary received from M/s Agarwal Trading Co, and an amount of Rs.8,62,000/- was added being commission @ 2% of the business turnover of the said firm. Thus like the last year, an amount of Rs.48,000/- was added as salary from M/s Aggarwal Trading Co. and Rs.4 lacs being 2% of the estimated turnover of M/s Aggarwal Trading Co. as commission earned. He, therefore, added Rs.2,48,000/-, to the total income of the appellant assessee. 42. The assessee submitted that, the AO estimated the turnover of the said firm at Rs 2 crores, and thereby, estimated commission income at Rs. 4 lacs, which was added in the income of the appellant along with salary of Rs.48,000/- from the said firm. He further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion income was received by the appellant, or paid by the firm, no presumptive addition could be made of Rs.4 lacs and the same may be deleted. 43. After hearing the arguments of the appellant and after taking into consideration the observation made by the AO in the Remand Report(s), the CIT(A) observed that even in the letter dated 17/02/1997, the assessee offered Rs.37,500/-. The CIT(A), thus concluded that the appellant s salary income from M/s Aggarwal Trading Co., should be taken at Rs.37,500/- in place of the salary income taken by the A.O at Rs. 48,000/-. He, therefore, directed the AO to assess the salary income receivable from M/s Aggarwal Trading Co., at Rs.37,500/-. 44. Regarding the commission income of Rs.4 lacs, since the appellant had not received any commission income, which was confirmed by the AO in his Remand Report, the CIT(A), directed the AO that, no commission income of Rs.4 lacs could be assessed in the hands of the appellant, and he, deleted the addition of Rs.4 lacs made on account of commission income. 45. The department is in appeal. 46. Before us, the DR relied on the observations of the AO and the assessee relied on the decision of the CTI(A). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... total consultancy income at Rs.95,000/-. 54. The appellant in the submission before the CIT(A) contended that the AO did not make any factual observation, while making addition of Rs.95,000/- as consultancy income. To prove his arguments, the appellant filed the chart, which was prepared from the seized material, during the course of inspection granted and also at the time of remand proceedings. From the said chart, the assessee submitted that he had filed only 195 returns during the relevant previous year pertaining to A.Y. 1994-95. 55. The CIT(A), after taking into consideration all the relevant submissions on this issue concluded that in the current year, the assessee had actually filed only 194 returns and not 394, as per the basis of addition made in the assessment order. The CIT(A), accepted the average fee of Rs.271/- per return and computed average expenses at 36%, concluded that the assessee would have earned Rs.33,820/- as fee for filing the returns and held that Rs.35,000/- would be reasonable addition to be made. 56. The department is in appeal before the ITAT on this reduction made by the CIT(A). 57. The DR, vehemently argued that the observations made by the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncluded, on the submissions of the assessee and the remand report that the AO had only estimated the interest and dividend income at Rs.35,000/-, whereas, the appellant had correctly declared Rs.10,269/- as income from interest and dividend in the return of income, on the basis of bank statement. The CIT(A) accordingly, directed the AO to take the interest and dividend income at Rs.10,269/- in place of the estimated income at Rs.35,000/-. 64. The department is in appeal before the ITAT on this issue. 65. Before us the DR relied on the observations made by the AO, whereas, the assessee, submitted that the view taken by the CIT(A) was correct. 66. We have heard the arguments of either side and have perused the orders of the revenue authorities and we find that the CIT(A) has taken the decision after the receipt of the remand report, wherein the AO had after going through the seized documents came to the conclusion and thereafter, accepted that in the impugned year, the assessee had not received any dividend or interest income. 67. In the light of these observations of the CIT(A), we are of the view that the decision taken by the CIT(A) was very reasonable. We, therefore, reje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the appellant. 72. The CIT(A), after considering the entire factual matrix, which included the order of the coordinate Bench of Mumbai ITAT in the case of Sanjay Enterprises, concluded to tax 10% of Rs.89,602/- being alleged commission, out of hawala loan transactions earned by the appellant. He, therefore, directed the AO to restrict the addition of Rs.89,602/-, to an addition of Rs.8,960/- on account of commission out of hawala loan transactions, on substantive basis in the hands of the appellant. 73. The department is in appeal before the ITAT. 74. Before us the DR submitted that the fact that the assessee was indulging in hawala business is not in dispute and in such circumstance, the AO was correct in estimating the income at Rs.89,602/-, even though a similar addition was made in Sanjay Enterprises on protective basis. 75. The assessee, on the other hand submitted that the view taken by the CIT(A) was to be relied upon. 76. After hearing the parties, we find that a definite view has been taken by the coordinate Bench in the case of Sanjay Enterprises. The addition has been based primarily on the statement recorded under section 132(4), wherein the assessee has ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee, such returns of income were reopened under section 148 of the Income Tax Act and were taken under scrutiny. The department, by assessing those persons, not only disallowed the refunds granted to them, also initiated penalty proceedings and raised demands on such assessees. If at all it was the assessee, who was the mastermind in the racket, then how the refunds were received by the clients of the assessee, then how could such demands would have been raised, in the cases of such employees (the copies of order in such few cases were enclosed in the paper book). The assessee further submitted that, he merely acted as an ITP in these cases and the refunds had neither accrued to him, nor received by him. Further it was natural for most of the assessees to keep there bank passbooks etc, with their Tax Practitioner, which fact would not lead to the conclusion that, such bank accounts belonged to the appellant. Even if, in some cases of the employees of private sector companies, the refund had been granted on the basis of the returns of income filed, in all such cases, the scrutiny assessments were made, and the Department had recovered such refunds granted wrongly, by raisin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the returns of income and claim the refunds, which were issued to them. No any evidence in the seized material pointed out towards the fact that, all these refunds claimed by the respective employees of private companies, ultimately accrued to the assessee. The CIT(A), accordingly, held that the income of Rs.30,00,000/- assessed in the hands of the appellant was unreasonable and without any evidence on record. He, therefore, directed the AO to delete the addition of Rs.30,00,000/- made by him, being income out of refund rackets. 84. The department is in appeal against this decision of the CIT(A). 85. Before us the DR and the AR relied their arguments as per the arguments in assessment year 1993-94. 86. We have discussed the issue on facts in assessment year 1993-94, wherein the addition is based on the same set of seized documents and we have taken the decision, wherein, we have deleted the addition. 87. Since the addition is based on same facts and on same seized documents, respectfully following our own order in the assessment year 1993-94, we delete the addition, in this year as well. 88. In the result, the ground of appeal is dismissed. 89. In the result, the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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