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TMI Blog2016 (4) TMI 1230X X X X Extracts X X X X X X X X Extracts X X X X ..... No such default occurred in the present case - the provisions of section 40(a)(ia) are not invokable - Decided in favour of assessee. Addition u/s 68 - Held that:- The authorities below were fully justified in holding that the peak for the assessment year under consideration is required to be considered separately, independent to other documents. There is no dispute that the seized document i.e. Annexure A-3 pertains for a short period of seven day i.e. from 12.2.2006 to 19.2.2006. It is also an admitted fact that the other seized documents relate to the next financial year onwards. We find no material on record to controvert the findings of the lower authorities. Accordingly, we uphold the order of CIT(A) and reject ground No.4 of the appeal. Addition u/s 69C on account of unexplained expenditure - Held that:- The document in question does not contain the specific date particularly the year. There is no evidence on record to prove that the document in question pertains to assessment year 2008-09 or the search period. It is also relevant to point out here that Assessing officer has not examined any authorized person of Sakshi Jewellers in order to bring the truth. In our opin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, we are of the view that CIT(A) was fully justified in deleting the addition. - ITA No. 41/Chd/2013, ITA No. 42/Chd/2013, ITA No. 43/Chd/2013, ITA No. 44/Chd/2013, ITA No. 45/Chd/2013, ITA No. 222/Chd/2013, ITA No. 223/Chd/2013 - - - Dated:- 29-4-2016 - H. L. Karwa (Vice President) And Rano Jain (Accountant Member) For the Appellant : Neeraj Jain For the Respondent : Manoj Mishra ORDER H. L. Karwa (Vice President) These seven appeals (05 preferred by the assessee and 02 by the Revenue) involving certain common issues were heard together and are being disposed off by this common order for the sake of convenience. 2. Firstly, we will take up appeal of the assessee in ITA No. 41/Chd/2013 relating to assessment year 2005-06. In this appeal, the assessee has raised the following grounds:- 1. That the Ld. CIT(A) is not justified in not giving the proper opportunity of hearing which is against the natural justice. 2. That the Ld. CIT(A) is not justified in confirming the addition made u/s 153A(1)(b) r.w.s. 143(3) of I.T. Act, 1961 which is not as per the provisions of the assessment in search cases. 3. That the Ld. CIT(A) is not justified in c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ove said persons to whom the interest has been paid furnished form No. 15H/15G to the assessee as per the provisions of section 197A (1), (1A) and (IC) of the Act. Shri Neeraj Jain Ld. Counsel for the assessee vehemently argued that keeping in view the provisions of Act/Rules, it is clear that where form No. 15G/H has been furnished by the payees, no tax is required to be deducted at source on the same. Shri Neeraj Jain Ld. Counsel for the assessee further pointed out the fact of receiving form No. 15G/H by the assessee has also been admitted by the Assessing officer in the assessment order. Shri Neeraj Jain, Ld. Counsel for the assessee further stated that disallowance has been made on the basis that no information was filed whether Form No.15G/H has been filed in CIT(A) s office within time limit or not. It was stated by the Ld. Counsel for the assessee that copy of form No. 15G/H was submitted in the CIT(A) s office on 7.4.2005, which is within time prescribed u/s 197 of the Act. Shri Neeraj Jain, Ld. Counsel for the assessee submitted that on the facts of the present case, there was no need to deduct tax at source on the interest payments and thus, there was no default committe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deduction has not been paid. In this case, the assessee was to deduct tax under provisions of section 194A. Section 194A is further qualified by the provisions of section 197A(1A) wherein if a person furnishes a declaration in writing in prescribed Form and verified in the prescribed manner to the effect that tax on his estimated total income is to be included in computing his total income will be nil, there is no need to deduct tax The assessee has received such Forms as prescribed from those persons to whom interest was paid/being paid and accordingly no deduction of tax was to be made in such cases. The default for non-furnishing of the declarations to the CIT as prescribed may result in invoking penalty provisions u/s. 272A(2)(f), for which separate provision/procedure was prescribed under the Act. However, once Form 15G/Form 15H was received by the person responsible for deducting tax, there is no liability to deduct tax. Once there is no liability to deduct tax, it can not be considered that tax is deductible at source under Chapter XVII-B as prescribed u/s. 40(a)(ia). The provisions of section 40(a)(ia) can only be invoked in a case where tax is deductible at source and such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le to deduct tax at source under section 194A, was to be accepted Held, yes- Whether, consequently, impugned disallowance made by authorities below was to be deleted Held, yes In the instant case, the claim of the assessee was that at the time of paying the interest to the 34 persons mentioned in the assessment order, he had before him the appropriate declarations in the prescribed form from the payees stating that no tax was payable by them in respect of their total income and therefore, tax need not be deducted from interest under section 194A, and in the light of these declarations he had no option but to make the payment of interest without any fax deduction. If the claim was true then the contention must be accepted because under sub-section (IA) of section 197A, if such a declaration is filed by the payee of interest, no deduction of tax be made by the assessee. The revenue authorities had doubted the assessee's version because according to them it was only when the Assessing Officer proposed the disallowance of the interest by invoking the section 40(a )(ia) in the course of the assessment proceedings that the assessee filed the declarations claimed to have been sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay, if the assessee proves that there was reasonable cause for the same. Further, under sub-section (4) of section 272A, no penalty can be imposed unless the assessee is given an opportunity of being heard. All these provisions indicate that the failure on the part of the assessee, who was the payer of the interest, to file the declarations given to him by the payees of the interest, within the time-limit specified in sub-section (2) to section 197A was distinct and separate and merely because there was a failure on the part of the assessee to submit the declarations to the income-tax department within the time-limit, it could not be said that the assessee did not have declarations with him at the time when he paid the interest to the payees. That would be a separate matter and separate proof and evidence was required to show that even when the assessee paid the interest, he did not have the declarations from the payees with him and therefore he ought to have deducted the tax from the payment. No such evidence or proof had been brought on record by the department. [Para 7] For the aforesaid reasons, the assessee's claim was to be accepted that since he had the declarations ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .Act 1961, 4. That the Ld. CIT(A) is not justified in confirming the addition of ₹ 5,37,900/- u/s. 68 on account of peak credit of Annexure: A:3. 5. That the Ld. CIT(A) is not justified in confirming the addition of ₹ 65,094/- u/s. 40 (a) (ia) on account of non-deduction of tax at source on interest payments to different persons. 6. That without prejudice to the above Grounds of Appeals:- a) The appellant disputes the quantum of additions. b) That the Ld. A.O. is not justified in not giving the telescoping/set off of addition against the surrender made in the A.Y. 2009-10. 12. At the time of hearing of appeal, Shri Neeraj Jain, Ld. Counsel for the assessee did not press for ground Nos. 1 to 3 of the appeal and, hence, we dismiss the same as not pressed. 13. Ground No.4 relates to addition of ₹ 5,37,900/- made u/s 68 of the Act. The Assessing officer noted that during the course of search operation at the residence of the assessee, a document (Annexure A-3) was seized. Page Nos. 80 to 86 of the said document contained details of purchases, sales and other expenses/receipts of the assessee relating to jewellery business. These transac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee as unexplained cash credit u/s 68 of the Income-tax Act, 1961 (in short 'the Act'). 14. On appeal, the CIT(A) confirmed the addition stating that Annexure A-3 pertained for a short period of 7 days from 12.2.2006 to 19.2.2006. Thereafter, the other seized document and the entries therein relate to the next financial year. According to CIT(A), there was a gap of more than four months in the subsequent seized document. He, therefore, held that the peak for the assessment year under consideration should be considered separately, independent of other documents. He Accordingly, confirmed the addition of ₹ 5,37,900/-. 15. After considering the rival submissions, we hold that the authorities below were fully justified in holding that the peak for the assessment year under consideration is required to be considered separately, independent to other documents. There is no dispute that the seized document i.e. Annexure A-3 pertains for a short period of seven day i.e. from 12.2.2006 to 19.2.2006. It is also an admitted fact that the other seized documents relate to the next financial year onwards. We find no material on record to controvert the findings of the lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the order of CIT(A), (Gurgaon) dated 12.12.2012 relating to assessment year 2007-08. The assessee in ITA No. 43/Chd/2013 has raised the following grounds:- 1. That the Ld. CIT (A) is not justified in not giving the proper opportunity of hearing which is against the natural justice. 2. That the Ld. CIT (A) is not justified in confirming the assessment made u/s 153A (1) (b) r.w.s. 143(3) of I.T. Act 1961 which is not as per the provisions of the assessment in search cases. 3. That the Ld. CIT(A) is not justified in not deciding the issue that the Ld. AO has taken the income of ₹ 2,83,660/- as determined u/s. 143 (3) on 10.12.2009 instead of income of ₹ 93,810/- as declared by the assessee while making the assessment u/s 153 A(1) (b) r.w.s. 143(3) of I.T.Act 1961, 4. That the Ld. CIT(A) is not justified in confirming the addition of ₹ 25,29,110/- u/s. 68 on account of peak credit . 5. That the Ld. CIT(A) is not justified in confirming the addition of ₹ 76,448/- u/s. 40 (a) (ia) on account of non-deduction of tax at source on interest payments to different persons. 6. That without prejudice to the above Grounds of Appeals:- a) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5,26,000 A-3/P-III 6,22,000 A-3/P-IV 3,41,000 A-4 2,73,250 A-5 5,97,300 A-6 15,66,110 A-7 4,14,332 A-8 3,85,200 A-9 7,38,700 Total 54,63,982 According to Assessing officer, the assessee failed to reconcile the above entries with books of account after giving various opportunities. The Assessing officer, therefore, treated the peak credit of ₹ 54,63,982/- as unexplained cash credit u/s 68 of the Act and added back to the total income of the assessee. 25. On appeal, the CIT(A) reduced the addition to ₹ 25,29,110/- as against ₹ 54,63,982/- made by the Assessing officer. The CIT(A) allowed a relief of ₹ 29,34,872/-. Vide ground No.4 of the appeal the assessee has challenged the action of the CIT(A) in confirming the addition of ₹ 25,29,110/- u/s 68 of the Act on account of peak credit. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to 31.01.2007 3,41,000/- A;$ 01.02.2007 to 31.03.2007 2,73,250/- According to Ld. Counsel for the assessee, the above period may be taken as one period and should not be broken into months/quarters/years or any other period. According to him, the above period is in continuity and, therefore, period in the consideration should not be broken into months/quarters etc. Considering the entire facts and circumstances of the present case, we find considerable force in the above submissions of Shri Neeraj Jain, Ld. Counsel for the assessee. Accordingly, we set aside the findings of the CIT(A) on this issue and remand the issue to the file of the Assessing officer with a direction to decide the same afresh in accordance with law after affording due and reasonable opportunity of being heard to the assessee. Shri Neeraj Jain, Ld. Counsel for the assessee submitted that addition of ₹ 5,37,900/- has been made u/s 68 on account of peak credit of Annexure-3 for the assessment year 2006-07 and the benefit of the said addition may be given in this year. We remand this issue also to the file of the Assessing o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elescoping/set off additions made on account of peak credit in assessment year 2006-07, assessment year 2007-08 assessment year 2008-09 against the additions made for unexplained expenditure/unexplained investment. d) that the Ld. CIT(A) is not justified in not giving the telescoping/set off additions made on account of peak credit in assessment year 2006-07 and assessment year 2007-08 against the peak credit addition confirmed in assessment year 2008-09. 32. At the time of hearing of the appeal Shri Neeraj Jain, Ld. Counsel for the assessee did not press for ground Nos. 1, 2 and 6 of the appeal and, hence, we dismiss these grounds as not pressed. 33. Ground No.3 of the appeal relates to the addition of ₹ 7,38,700/- u/s 68 of the Act on account of peak of Annexure A-9. The Assessing officer noted that during the course of search operation at the residence of Shri Sandeep Bansal, partner of the assessee firm a document Annexure A-9 was seized. This is a note pad which contained details of purchases, sales and other expenses/receipts of the assessee relating to the jewellery w.e.f. 1.4.2007 to 14.7.2007. The Assessing officer reproduced the contents of these docum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shri Neaeraj Jain, Ld. Counsel for the assessee stated that the benefit of addition made on account of peak credit u/s 68 in the immediate preceding year may be given. We have restored a similar issue to the Assessing officer for a fresh consideration in accordance with law in assessment year 2007-08. We direct the Assessing officer to decide this issue in accordance with law after affording reasonable opportunity of being heard to the assessee. In the above terms, this ground of appeal is disposed of. 36. Ground No.4 of the appeal relates to addition of ₹ 1,20,000/- u/s 69C on account of unexplained expenditure. During the course of search operation at the business premises of Shri Sandeep Bansal, partner of the firm, a document Annexure A-2 was impounded. Page 33 of the Annexure A-2 contained the account of Sakshi Jewellers of dated 15/2. However, the year is not mentioned. 37. We have heard the rival submissions. Shri Neeraj Jain Ld. Counsel for the assessee, pointed out that the CIT(A) was not justified in confirming the addition, particularly when year is not mentioned in the document marked Annexure A-2. He vehemently argued that this document does not pertain to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of document A:2 6.. That the Ld. CIT(A) is not justified in confirming the addition of ₹ 10,84,000/- which the assessee has itself surrendered and declared as its income. This amounts to double addition. 7. That without prejudice to the above Grounds of Appeals:- a) The appellant disputes the quantum of additions/disallowances. b) That the Ld. CIT(A) is not justified in not giving the telescoping/set off of addition against the surrender made. c) that the Ld. CIT(A) is not justified in not giving the telescoping/set off additions made on account of peak credit in assessment year 2006-07, assessment year 2007-08 assessment year 2008-09 Assessment year 2009-10 against the additions made for unexplained expenditure/unexplained investment. d) that the Ld. CIT(A) is not justified in not giving the telescoping/set off additions made on account of peak credit in assessment year 2006-07 and assessment year 2007-08 and assessment year 2008-09 against the peak credit addition confirmed in assessment year 2009-10.. 42. At the time of hearing of the appeal Shri Neeraj Jain, Ld. Counsel for the assessee did not press for ground Nos. 1, 2 7 of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed any evidence in support of his submission and therefore, the plea that there was no discrepancy in stock cannot be accepted. Hence, a sum of ₹ 37, 37,415/- is being added back to the total income of the assessee u/s 69B on account of discrepancy in stock. In view of the above, the Assessing officer made the addition of ₹ 37,37,415/- u/s 69B of the Act. 44. On appeal, the CIT(A) held that there was a counting mistake as the Assessing officer in assessment order has taken stock value at ₹ 1,63,44,870/- which should actually be 1,62,94,820/-. According to CIT(A), the copies of the two inventory of gold and diamond respectively taken at the time of survey (Rs. 41,66,820 + ₹ 1,21,28,000) i.e. ₹ 1,62,94,820/- has been shown. He therefore, held that the difference of stock to the extent of ₹ 50,050/- taken in excess by the Assessing officer should be deleted. The CIT(A) further held that the GP rate applied by the Assessing officer was correct and he, therefore, confirmed the order of the Assessing officer to this extent. As regards the valuation of the stock, the CIT(A) observed that at the time of survey, the stock had been valued a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we observe that the Ld. CIT(A) has correctly held that the Assessing officer has wrongly taken the difference of stock to the extent of ₹ 50,050/- while comparing the stock value made by the registered valuer with the estimated trading account. The Assessing officer has mentioned the closing stock at the time of survey at ₹ 1,63,44,870/- whereas as per valuation made by the registered valuer of the Department, the closing stock was valued at ₹ 1,62,94,820/-. In our opinion, the Ld. CIT(A) has correctly opined that the difference of stock to the extent of ₹ 50,050/- taken in excess by the Assessing officer deserves to be deleted. It is also observed that the Ld. CIT(A) has correctly held that the Assessing officer has wrongly taken the difference of stock to the extent of ₹ 11,83,820/- while comparing the stock valuation made by the registered valuer with the estimated trading account. The Assessing officer has taken the quantities on estimate basis for net weight and not the actual weights. We also find that the stock has been valued at ₹ 1310 per gms for 24 ct jewellery at the time of survey whereas the same should have been calculated at 22 ct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e failed to reconcile these entries with the regular books of account, therefore, total peak credit of ₹ 19,29,920/- was added back to the total income of the assessee u/s 68 of the Act. During the course of survey operation, yet another document i.e. Annexure A-2 was also impounded. The peak credit of the said document came to ₹ 32,500/-. The Assessing officer made the addition of ₹ 32,000/- u/s 68 of the Act. 49. On appeal, the CIT(A) confirmed the addition of ₹ 9,91,000/- and allowed a relief of ₹ 9,38,920/-, observing as under:- 6.1 I find that the content of the seized documents have been reproduced in the impugned order to work out the peak credit. It is the assessee s contention that the transaction dates are continuous from 12.0.2006 and that all the documents seized pertain to different assessment year should be considered for working out one single peak credit. This contention was found inaccurate and consequently wherever there was a break in the transaction dates and where the opening and closing balance of the annexures did not tally, peak credits have been worked out separately as evident from the appellate orders for assessment y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en to pertain to one transaction. The Assessing officer had taken over the two peak credits for A-16 A-17, therefore, Assessing officer was not correct while taking two peak credit of A16 A17. In our opinion, the Ld. CIT(A) has correctly taken the peak credit of ₹ 9,91,000/- which is reflected in Annexure A-17. As regards the addition of ₹ 32,500/- also, we do not see any infirmity in the order of the CIT(A). The assessee has failed to reconcile the entries with the books of account. Thus, considering the entire facts and circumstances of the present case, we reject ground Nos. 4 5 of the appeal. Before parting this, we may add that the alternative contention, Ld. counsel for the assessee submitted that benefit of addition made on account of peak credit in the immediate preceding assessment year may be given to the assessee. We direct the Assessing officer to consider and decide this aspect of the matter in accordance with law after affording due and reasonable opportunity of being heard to the assessee. 53. Ground No.6 of the assessee s appeal relating to addition of ₹ 10,84,000/-. We may observe here that the Assessing officer noted that at the time of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame in trading account by specifically mentioning as surrendered income and making the addition on the same while making the assessment, it will amount to double addition. Accordingly, we hold that there was no justification in making the addition of ₹ 10.84 lakhs and we delete the same. This ground of appeal is allowed. 56. Vide ground Nos. (iii) (iv) of the appeal, (ITA No. 223/Chd/2013), the Revenue has challenged the action of the CIT(A) in deleting the addition of ₹ 31,38,527/- made on account of unexplained expenditure u/s 69C of the Act. The Assessing officer discussed this issue in para 4.2 of the assessment order. The Assessing officer noted that during the course of survey cash of ₹ 1,01,045/- was found but as per balances prepared as on 16.1.2009, balance of ₹ 28,43,782/- was found. In this regard, Shri Sandeep Bansal, parnter of the firm stated that during the course of survey he had withdrawn a sum of ₹ 15 lakhs. However, he failed to explain the difference of ₹ 12,42,737/-. Accordingly, , Shri Sandeep Bansal surrendered an additional income of ₹ 12,42,737/- in the hands of the firm. The Assessing officer observed that dur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... offered for taxation. The case of the ld. counsel is that the assessee has been taking shifting stands on various points of time. The AO has made addition not merely on the basis of statement but also on account of cash discrepancy noted by the survey officer. The assessee has displayed dismal tax morality. There is nothing on record to show the application of force or coercion. Therefore, the addition made by the AO is required to be restored. On the other hand, the burden of the argument of the ld. counsel is that the addition has been made solely on the statement, which does not have evidentiary value. The excess stock which results in income has been offered for taxation notwithstanding the stand taken in the notes on accounts. However, shortage of cash does not lead to inference of income. The shortage was explained during the course of assessment as the cash was lying elsewhere. Therefore, the addition is made merely on the statement, which does not have any evidentiary value. 7.1 In the case of Pullangode Rubber Produce Co. Ltd. (supra), the distinguishing feature is that entries were made in the books of account maintained in the regular course of business. The Hon' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disclosed or what is not likely to be disclosed before the revenue. They have been further advised that no attempt should be made to obtain confession as to the undisclosed income. Having gone through the statement, we find that it was tendered voluntarily and there was no attempt to obtain the confession. However, the survey officers lost focus and concentration on collection of evidence of income which leads to information on what has been disclosed or what is not likely to be disclosed in the return. They were happy because the Director-cum- DGM (Finance) made a statement surrendering the cash for taxation and did not go further to gather facts as to what has happened to the missing cash. While we may agree with the ld. CIT, DR that the assessee has displayed low tax morality, that cannot be a ground for sustaining an addition, which inference is otherwise not deductible under the law. The Department has no evidence except shortage of cash, which does not lead to the inference of earning equivalent income. In these circumstances, the order of the ld. CIT (Appeals) cannot be said to be perverse or illegal. Accordingly, we are of the view that the ld. CIT (Appeals) was right in de ..... X X X X Extracts X X X X X X X X Extracts X X X X
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