9911796707
TMI Blog2015 (1) TMI 465X X X X Extracts X X X X X X X X Extracts X X X X ..... tion note, could not controvert the plea taken by the Revenue in this respect - - Decided against the assessee. Assessment made u/s 153A - Whether no incriminating material was found during the search against the assessee? - Held that:- The assessee firm had never raised any objection that no incriminating material was found against it, rather has returned the additional income in pursuance to the notice issued to it. Under such circumstances, the assessee had no case that any incriminating material was not found against it or that the satisfaction recorded by the concerned AO was wrong or vitiated. In the absence of such a case, how can it be said that any right of the assessee has been infringed or affected by mere not mentioning the ‘section 153C’ in the body of the notice which has been duly issued as per the provisions of section 153A as prescribed therein under the provision of section 153C itself. - Decided against the assessee. Unaccounted income from money lending - Held that:- The interest of justice will be best served if the additions are reduced considering the submission of the assessee that it is not possible that the assessee had been charging same rate of i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to different assessment years have been directed against the orders of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] dated 30.10.09 in ITA Nos.1759, 1757, 1758 1760/M/2010 (Revenue s appeals) and dated 30.10.09 in ITA Nos.1495 1496/M/2010 (assessee s appeals) and dated 29.01.10 in ITA Nos.4564 4565/M/2010 (assessee s appeals). All, the above titled appeals are in relation to additions made on identical issues on the basis of seized material for the corresponding/relevant Assessment Years falling in the block period. Since the facts and issues involved therein are identical in nature, hence the same are taken together for disposal by this common order. For the sake convenience, facts have been taken from ITA 1495/M/2010 for A.Y. 2004-05. ITA 1495/M/2010 for A.Y. 2004-05 (appeal of the assessee firm) 2. The assessee, a partnership firm is into the business of trading in gold jewellery. A search action u/s 132 of the I.T. Act was carried out on 07.12.2006 by the Income tax authorities in premises of the partners of the firm namely Shri Amritlal Hirachand Sanklesha (Mutha) and Shri Ramesh Hirachand Sanklesha (Mutha). The business premises ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... part ies, without appreciating the facts that they were duly recorded in audited books of accounts and also confirmed by third parties in writ ing and also during the statement recorded in course of assessment proceedings. 5. On the facts and in the circumstances of the case, the learned Commissioner of Income-tax erred in enhancing the income by ₹ 10,05,568/- on account of torn papers, purported to be found from one of the partners residence, without appreciating the fact that the said torn papers were not even part of the seizedpapers and was not recorded in the Panchanama made on the date of search even in case of partner Shri Ramesh Sanklecha. 6. On the facts and in the circumstances of the case, the learned Commissioner of Income-tax (Appeals) erred in enhancing the addition of ₹ 10,05,568/- in hands of firm on account of certain torn papers found from the dustbin of one of the partner's residence, without appreciating the fact that the said document was a non-speaking and dumb document. 7. The appellant craves the leave to add, amend, alter and/or delete any of the above grounds of appeal at or before the time of hearing. 5. Our findings in respe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecord produced by the Revenue regarding the typographical error occurred as to the date mentioned on the satisfaction note, could not controvert the plea taken by the Revenue in this respect, hence this issue is accordingly decided against the assessee. Ground No.2 Additional Legal Ground taken during the arguments: 7. Vide Ground No. 2, the assessee has agitated that no incriminating material was found during the search against the assessee hence assessment made u/s 153A was bad in law. During the course of arguments, the Ld. A.R. for the assessee has raised another legal ground though, not taken specifically in the grounds of appeal. His contention has been that the assessment under section 153C in the case of the assessee was bad in law as no notice as per the provisions of section 153C was issued to the assessee. In fact, the alleged notice was issued under section 153A of the Act. He has contended that in fact the search action was conducted in the case of partners of the firm namely Shri Amritlal Hirachand Sanklesha (Mutha) and Shri Ramesh Hirachand Sanklesha (Mutha) and the firm being distinct entity from its partners under the Income Tax Act, is a third party, hence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsideration of the matter, we deem it proper to reproduce the relevant provisions of the section 153A and 153C herein below: Assessment in case of search or requisition. 153A. Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, in the case of a person where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after the 31st day of May, 2003, the Assessing Officer shall (a) issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years referred to in clause (b), in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139; (b) assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ous year in which search is conducted under section 132 or requisition is made under section 132A and in respect of such assessment year (a) no return of income has been furnished by such other person and no notice under sub-section (1) of section 142 has been issued to him, or (b) a return of income has been furnished by such other person but no notice under sub-section (2) of section 143 has been served and limitation of serving the notice under sub-section (2) of section 143 has expired, or (c) assessment or reassessment, if any, has been made, before the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person, such Assessing Officer shall issue the notice and assess or reassess total income of such other person of such assessment year in the manner provided in section 153A. 10. A perusal of the above sections reveals that in case of search action initiated under section 132 of the Act, the AO has to issue notice under section 153A requiring the searched person to furnish the returns of income in respect of six assessment years preceding the year in which the search ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ust be recorded by the Assessing Officer that any undisclosed income belongs to any person, other than the person with respect to whom search was made under section 132 of the Act; (ii) the books of account or other documents or assets seized or requisitioned had been handed over to the Assessing Officer having jurisdiction over such other person; and (iii) the Assessing Officer has proceeded under section 158BC against such other person. (Emphasis supplied by us) 12. We may mention here that the provisions of section 153A are analogous to section 158BC prescribing procedure to be followed in the case of searched person. In the light of above stated legal position, we have to now look into from the facts of the case that whether the AO had followed the prescribed procedure and further that whether such an omission or mistake in service of notice, as has been alleged by the assessee, has resulted into any infringement, curtailment or extinguishment of any right of the assessee which was available to it under the provisions of the law and thereby has in any manner caused prejudice to the interests of the assessee. 13. We find that in the case in hand, the search was cond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... over the person about whom the satisfaction has been recorded has to issue notice and assess the income of that other person in accordance with the provisions of section 153A. 16. There is no denial to the fact that a notice had been issued to the assessee firm in this case as per the provisions of section 153A. Now the contention of the Ld. AR has been that the relevant section mentioned in the notice issued to the assessee was section 153A and not section 153C. We have to see at this stage, as observed above, that whether any prejudice has been caused to the assessee by the omission of the AO in not mentioning section 153C in the notice which was issued not only as per but also under the provisions of section 153A. The purpose of issuance of notice u/s 153A, in our view, is to call upon and requiring the assessee to furnish the returns of immediately preceding six years and thereafter the AO has to assess or reassess the income for the said six years as per the provisions of the Act. Law has been almost settled on the point that assessment/reassessment cannot be made of the already concluded assessments, if no incriminating material is found against the searched person ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emuneration to the partners on such additional income. The original return, in this case had been filed u/s 139(1) on 22/10/02, admitting a total income of ₹ 38,030/-. Hence it is not the case of the assessee that no incriminating material was found against the assessee during the search action against its partners. The assessee firm had never raised any objection that no incriminating material was found against it, rather has returned the additional income in pursuance to the notice issued to it. Under such circumstances, the assessee had no case that any incriminating material was not found against it or that the satisfaction recorded by the concerned AO was wrong or vitiated. In the absence of such a case, how can it be said that any right of the assessee has been infringed or affected by mere not mentioning the section 153C in the body of the notice which has been duly issued as per the provisions of section 153A as prescribed therein under the provision of section 153C itself. So in view of the peculiar facts and circumstances of this case, in our view, no prejudice has been caused to the assessee, so far so, the non mentioning of section 153C in the body of the notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee has reiterated his submissions made before the Ld. CIT (A) whereas the Ld. DR has relied upon the findings of the lower authorities on this issue. We have considered the rival contentions. The AO has made the additions on the basis of the incriminating material found relating to F.Y. 2006-07. The additions for the year under consideration i.e. A.Y. 2004-05 have been made assuming that similar modus operandi might have been adopted by the assessee during this year. 20. We find force in the contention of the Ld. DR that when some incriminating material is found against the assessee showing some method or modus operandi adopted by the assessee leading to concealment or underassessment of income, then in such a case, the burden is on the assessee to prove that similar modus operandi was not adopted in the past. However the fact which cannot be ignored in this case is that the AO had correlated the entries relating to six persons only. Whereas as per the assessee, there were about 500 to 600 persons to whom the advances were made. In our view, it will not be justified to assume that advances were made at the double rate of interest than shown in the books of accounts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls like proof for purchase by them from various parties, but the assessee failed to provide. The AO further found that, though the assessee claimed to have been giving interest @ 6 % to gold loan parties, the same was not found debited to the books nor was the loan reflected in the balance sheet. These circumstances led the AO to arrive at a conclusion that 1400 gms of gold jewellery said to have been received as gold loan and 2300 gms said to have been received as security deposits from karigars was an afterthought and accordingly the AO treated it as unexplained investment in stock and taxed it. 24. In appeal before the Ld. CIT(A), the assessee filed detailed submissions in this respect. The relevant portion of which is reproduced hereunder for reference: The learned Assessing Officer erred in making the addition of ₹ 16,96,044/- on account of difference in stock. As stated by the assesseefirm to the assessing officer vide their letter dated 3rd December' 2008 26th December 2008 we reproduce the explanation submitted by the assessee as under: 'The quantity as per GS 12 register for the F. Y. 2003-04 shows 16852.33 gms. of gold, whereas as per Annexure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts accepted by the firm is genuine the persons from whom the same were accepted have been crossed verified by the department in the second week of december'08. The appellant firm produced thekarigar and the gold loan creditors, thereby proving their identity and they have admitted the loan transactions/deposits to the assessee firm. There are enough judgments to the effects that this is sufficient discharge of onus by the appellant. The capacity of the creditors is not to be proved by the appellant. Reliance is placed on the decision of NemichandKothari V/S CIT 264 ITR 254(Gau) and CIT V/s NevendraAhuja 290 ITR 453 (MP) (copies enclosed). Hence the proposed addition of ₹ 16,96,044/- needs to be deleted. 25. The Ld. CIT(A) after considering the submissions of the assessee confirmed the additions made by the AO on this issue observing as under: 10.6. In the case of Nemichand Kothari, the Hon High Court Guwahati has taken a view that section 68 of the IT Act does not alloy revenue to inquire into the sources of creditors or sub creditors and once the assessee has disclosed the sources from which he has received the loan, his burden stands discharged. The Hon High ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee had claimed to have been giving interest at the rate of 6% to the parties to the gold loan agreement, however, the same was not found debited in the books of account. Even the gold loan was also not reflected in the balance sheet. He therefore held that it was an afterthought of the assessee. We have perused the copies of the gold loan agreement placed on paper book at page No.2 to 29. A perusal of the above stated copies of the gold loan agreement reveals that all the gold loan agreements have been written on stamp paper of the value of ₹ 50/-. The assessee has placed 8 copies of the said gold loan agreement entered into with different persons. Surprisingly, every stamp paper for ₹ 50/- for each of the gold loan agreement, bears the same serial number i.e. 7545. That means all the 8 stamp papers have been shown to be purchased by the assessee against the one and the same entry in the register of the stamp vendor. Though the agreements have been shown to have been entered on different dates of the month of October and November 2003 but the stamp papers for all the agreements have been purchased in the name of the partner of the assessee firm namely Shri Ramesh H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee to substantiate that these Karigars were working with the assessee since April, 2003. As per the letter, the gold was to remain with the assessee till he works with him and was returnable thereafter. However, nothing was brought on record by assessee to the effect that these Karigars continued to work with assessee firm since 2003 till 2014, insofar as no gold was returned by assessee firm to these Karigars. All the gold alleged to be given by these Karigars were used by assessee firm for making jewellery which was also found during physical taking of inventory at the time of search/survey. It is also not the case of the assessee that the alleged gold was returned to the karigars even after more than 10 years. Since April, 2003, more than 11 years had expired, but nothing was shown either before the lower authorities or before us to contend that gold was again returned to the karigars or continued to be used by assessee firm on the plea of same Karigar continued to work with the assessee firm. In a jewellery business, the jeweler gives gold to the karigar for making jewellery, in the contrast, the assessee has claimed that karigars had given gold to the assessee which was us ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee with regard to the addition sustained by CIT(A) on account of unaccounted stock is hereby dismissed in all the years under consideration. Grounds No. 5 6 30. These grounds of appeal relate to enhancement of income on the basis of torn papers, purported to be found from one of the partners residence. During the search in the premises of one of the partners, Shri Ramesh H. Shanklesha, a loose sheet in torn condition with incriminating entries was found from the dustbin and the same was seized. Certain entries against the name of Shri Ramesh H. Shanklesha and Shri Amritlal H. Shanklesha were found mentioned in the said seized slip. The AO treated the entries on the right hand side as payments made to undisclosed sources and the entries on the left hand side as receipts from undisclosed sources. In the statement recorded of Shri Ramesh H. Shanklesha, he stated that he was unable to give any explanation for the entries in the slip. However, in a letter dated 08/12/08 addressed to the AO, the said Shri Ramesh H. Shanklesha agreed to be assessed @ 20 % on net sales after treating the entries in the slip as unrecorded sales in the hands of the partnership firm. However, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Hence, proposed addition based on the seized material was unjustified and against the principle of law. It has been further contended that Shri Ramesh H. Shanklesha was not interrogated on this document while detailed statement was recorded of him on other issues. The seized document was in torn condition and was found in dustbin. Without prejudice, the figures found recorded in documents were similar to the figures of sales recorded in the regular books of account and the figures on the document were likely to be revenue generated by sales for this period. The Ld. AR has further stated that the assessee to buy peace and settle the matter had agreed before the lower authorities to treat ₹ 13,37,007/- and ₹ 14,76,709/- as unrecorded sales for the year 2003 and 2005 respectively to be assessed at 20 % thereon in the hands of the firm. On the other hand, the Ld. D.R. has relied upon the findings of the Ld. CIT(A). 33. We find that in the case of the partners of Shri Ramesh H. Sanklesha and Shri Amritlal H. Sanklesha, the said partners have taken a plea before the AO that the undisclosed income on the basis of the said loose papers was liable to be assessed at the h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m. Nothing was brought on record by the ld. AR to substantiate its contention that entries found recorded in the loose paper was unaccounted sales of the firm. Once it is held that entries so recorded was actually income of the firm, we do not find any infirmity in the order of CIT(A) for enhancing the income of the assessee firm after giving benefit of telescoping in respect of similar income assessed in the assessment year 2003- 04 amounting to ₹ 7,46,544/-. The detailed finding recorded by the CIT(A) are as per material on record, therefore, do not require any interference on our part. Accordingly, we confirm the action of CIT(A) in enhancing the income of assessee firm by ₹ 10,05,568/- in the assessment year 2003-2004. ITA No.1760/M/2010 for A.Y. 2004-05 (Revenue s Appeal) 34. The Revenue in this appeal has agitated the telescopic benefit given by the Ld. CIT(A) for assessment year 2003-04 while making enhancement of the income of the assessee firm on the basis of loose torn slip. We have already discussed the issue relating to enhancement of income on the basis of said loose torn slip while adjudicating ground No.5 6 of the assessee s appeal as above. As di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... market rate while the assessee has valued at FIFO method. The plea relating to gold loan and the gold received as security from karigars has already been discussed and decided by us while adjudicating ground No.4 of the assessee s appeal for assessment year 2004-05. However, the new ground taken by the assessee before the Ld. CIT(A) regarding the method of accounting, in our view, is an afterthought and the same is hereby rejected. So in view of our findings given while adjudicating the identical issue for assessment year 2004-05, this ground is decided accordingly. In the result, appeal of assessee is allowed in part. ITA No.1759/M/2010 for assessment year 2007-08 (Revenue s Appeal) 39. The Revenue has taken the following grounds of appeal: 01. On the facts and in law, the Ld. CIT(A) though confirmed the addition of ₹ 23,70,079/- on account of unaccounted stock, however, erred in giving credit for the sum of ₹ 16,00,000/-. 02. On the facts and in law, the Ld. CIT(A) erred in allowing credit for the sum of ₹ 16,00,000/- as the same has already been considered in the A.Y. 2002-2003. However, neither such sum is considered in the assessment order for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in the hands of the partner Shri Ramesh H. Snaklesha, in view of our findings given above. This appeal of the Revenue is accordingly dismissed. ITA No.1757/M/2010 for assessment year 2007-08 (Revenue s Appeal in the case of Shri Amirtlal H. Snaklesha, Partner) 42. Grounds No.1 to 3: Vide ground No.1 to 3 of the appeal, the Revenue has agitated the action of the Ld. CIT(A) in deleting the additions made on account of unexplained advances of ₹ 81,17,017/- added on the basis of loose torn slip found from the premises of above named assessee Shri Ramesh H. Snaklesha. While adjudicating ground No.5 6 of the firm s appeal bearing for A.Y. 2004-05 bearing ITA No.1495/M/10, we have upheld the action of the Ld. CIT(A) in making the additions in the hands of the firm. Hence, no addition is warranted in the hands of the partner Shri Amritlal H. Snaklesha, in view of our findings given above. The grounds No.1 to 3 of the Revenue s appeal are accordingly dismissed. 43. Ground No.4 5 : Vide ground No.4 5 the Revenue has agitated the action of the Ld. CIT(A) in deleting the addition on account of unexplained expenditure of ₹ 4,18,084/-. During the assessment proceedi ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
