9911796707
TMI Blog2018 (8) TMI 60X X X X Extracts X X X X X X X X Extracts X X X X ..... search and seizure action as well as recorded in the books of account of the assessee. When the Assessing Officer has not found any significant discrepancy in the income offered by the assessee and corresponding application of income then there is no reason for not accepting the income offered by the assessee. Accordingly, in facts and circumstances of the case when the addition was made by the AO purely on ad hoc estimation and without any tangible material, the same is not sustainable and consequently is liable to be deleted. Hence we delete the addition made by the Assessing Officer and sustained by the ld. CIT(A) on this account. Accordingly, ground No. 1 of the assessee’s appeal is allowed and ground No. 1 of the revenue’s appeal is dismissed. Interest chargeable U/s 234B after giving the credit of the amount in the PD account - cash seized during the search and seizure action is available for adjustment against the advance tax liability and consequently chargeability of interest U/s 234B - Held that:- Accordingly in view of the binding precedents as well as the CBDT circular, we do not find any error or illegality in the impugned order qua this issue. Hence, this ground of r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as undisclosed income of the assessee. Accordingly, we delete the addition made by the Assessing Officer on this account. Disallowance on account of short fall of fund and making excess investment - Held that:- CIT(A) has recasted cash flow statement and found that there is no short fall of fund as per the revised fund flow statement. Moreover when we have already decided the issue of jewellery in favour of the assessee, then the question of disallowance on account of short fall of fund and making excess investment does not arise. Accordingly, in view of the facts and circumstances of the case, we do not find any error or illegality in the impugned order of the CIT(A). Hence, the grounds No. 1 and 2 raised in the revenue’s appeal is dismissed. X X X X Extracts X X X X X X X X Extracts X X X X ..... 2013-14 14,87,160 2,16,92,730 Nil Since the ld. CIT(A) has allowed part relief to the assessee, therefore, both the assessee as well as the revenue are aggrieved by the impugned orders of the ld. CIT(A) and filed cross appeals for the A.Ys. 2007-08 to 2012-13. For the A.Y. 2013-14, the ld. CIT(A) has deleted the addition made by the Assessing Officer, therefore, the revenue has filed the appeal against the impugned order of the ld. CIT(A). 4. In the appeals for A.Y. 2007-08, the assessee as well as the revenue have raised following grounds in the cross appeals: Grounds of assessee's appeal: "1. The ld. CIT(A) has erred on facts and in law in estimating the undisclosed interest income at ₹ 40,00,000/- as against ₹ 13,24,230/- declared by the assessee thereby confirming an addition of ₹ 26,63,770/-. 2. The assessee craves to amend, alter and modify any of the grounds of appeal. 3. The appropriate cost be awarded to the assessee." Grounds of revenue's appeal: "1. Whether on the facts and the circumstances of the case Id CIT(A), was right in restricting the addition from ₹ 46,63,770/- to ₹ 26,63,770/- made on account of undisclosed in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... activity. The Assessing Officer took the balance sheet as on 30/09/2009 showing capital of ₹ 8,72,54,810/- and estimated the undisclosed income for the period 01/4/2006 to 17/06/2009. The assessee in the return of income, declared the income from the finance scheme on estimated basis which was not accepted by the Assessing Officer and found to be on lower side considering the fund involved in the financing business prior to 01/4/2006. The Assessing Officer accordingly took opening balance of ₹ 8.00 crores as on 01/4/2006 and on said capital, the Assessing Officer estimated interest income for the A.Y. 2007-08 at ₹ 60.00 lacs. Since the assessee declared the interest income of ₹ 13,26,230/-, accordingly, the addition of ₹ 46,63,770/- was made by the Assessing Officer on account of undisclosed interest income. 6. The assessee challenged the action of the Assessing Officer before the ld. CIT(A) and submitted that the assessee was suffering from Tuberculosis (TB) during these years and therefore,, the assessee could not do any business of financing due to ill health. This fact was not disputed by the Assessing Officer. Considering these facts, the ld. CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Officer has estimated the interest income by considering the said amount by taking a backward calculation of fund available with the assessee deployed under 100 days scheme. The Assessing Officer has duly given rebated on account of ill health of assessee during the period and therefore, estimation made by the Assessing Officer is not without any basis but it is very well passed on the scientific method of computing the income by taking the opening balance of ₹ 8.00 crores as on 01/4/2006 and then computing the backward estimation of income from that date downwards, therefore, the Assessing Officer has estimated only ₹ 60.00 lacs for the A.Y. 2007-08, which was enhanced to ₹ 1.20 crores in the next subsequent years. The margin on the scheme is so high that the amount estimated by the Assessing Officer on the capital of ₹ 8.00 crores as very reasonable and rather conservative. The ld CIT DR has further contended that as per the seized material outstanding balances were found which shows that an outstanding advance up to 31/3/2016 was ₹ 23.00 lacs comparing the said amount of outstanding advance with the data available in the seized material the esti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r consideration, no addition can be made on estimated basis. It is an undisputed fact that the material found during the search and seizure action contains the entries w.e.f. 19/6/2009 and therefore, prior to the said period, no record or material was found to disclose or indicate any income on account of interest on the scheme. Only fact which can be ascertained from the documents is that the assessee was engaged in the business activity of finance under the scheme known as 100 days scheme. However, in absence of any seized material, the Assessing Officer cannot make an addition on estimate basis. The assessee already declared and surrendered an amount of ₹ 10 crores on account of cash, investment and interest income. Hence, having regard to the facts and circumstances of the case when the Assessing Officer as well as the ld. CIT(A) has accepted the fact that the assessee was suffering from the ailment and was undergoing the treatment of Tuberculosis during the period under consideration then the estimation made by the Assessing Officer as well as the confirmed by the ld. CIT(A) without any proper and reasonable basis and particularly in the reassessment proceedings U/s 153A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... int. The explanation-2 to Section 132B of the Act has been introduced in the statute by the Finance Act, 2013 w.e.f. 01/6/2013, therefore, the said explanation is applicable prospectively and is not application for the assessment year under consideration. The ld AR has also referred to the CBDT Circular No. 20/2017 dated 12/06/2017 and submitted that the CBDT has clarified that prior to 01/6/2013, the seized/requisitioned cash can be adjusted against the advance tax liability as held by the various courts and the department has accepted the judgments including the judgment of Hon'ble Punjab & Haryana High Court in the case of Spaze Towers Pvt. Ltd. dated 17/11/2016. Hence, the ld AR has submitted that when the explanation is applicable only prospectively and not applicable in the case prior to 01/6/2013 then the ld. CIT(A) is justified in allowing the adjustment of the seized cash against the advance tax liability. 14. We have heard the rival submissions as well as relevant material on record. The only dispute is regarding cash seized during the search and seizure action is available for adjustment against the advance tax liability and consequently chargeability of interest U/s 23 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Expenditure tax Act, 1987, the GT Act, 1958, and the Interest-tax Act, 1974, and since in the other statutes, there is no concept of advance tax, therefore the expression 'existing liability' used in s. 132B(1)(i) cannot be understood to mean advance tax liability under the IT Act, 1961. In our considered opinion, interpretation placed by the Revenue is misplaced and would lead to absurd results. 9. It is well understood that as per s. 4 of the Act, an assessee is chargeable to income-tax in respect of his total income. Sub-s. (2) of s. 4 prescribes that the income-tax so chargeable shall be deducted at source or paid in advance, where it is so deductible or payable under any provision of the Act. We have observed earlier that advance tax liability is governed by ss. 208 to 210 of the Act. Similarly, s. 140A provides for payment of selfassessment tax on the basis of any return of income required to be filed by the assessee. The relevant provisions also prescribe the dates and the amount of tax required to be paid by an assessee. Therefore, the expression 'existing liability in s. 132B(1)(i) cannot be read to exclude a particular tax liability, if it can be shown t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty. The Hon'ble High Court specifically noted that it is only after an order under s. 132(5) is passed that the assessee can make a request that the seized amount which is sought to be released in his favour be adjusted or appropriated towards the liability to pay advance tax. Though, in the context of the present assessment year before us, the provisions of s. 132(5) are not applicable and therefore, strictly speaking, the ratio of the judgment of the Hon'ble Madhya Pradesh High Court does not apply, so however it is pertinent to observe that the Hon'ble High Court has not read any blanket prohibition in the Act against adjusting the seized assets against liability for payment of advance tax. Therefore, there is no justification for the CIT(A) to rely upon the order of the Madhya Pradesh High Court in the case of Ramjilal Jagannath (supra) and deny the claim of the assessee……….." In case of ACIT Central Circle-23 New Delhi Vs. Sh Arun Kumar Gupta, Hon'ble ITAT New Delhi in ITA No 4108/Del/2010 by respectfully following the decision of Nikka Mai Babu(supra) and K K Marketing( Delhi High Court 278 ITR 596) has upheld the decision of CIT(A) and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was written to the CiT-1 on 21.03.2010. Letter dated 05/07/2010 was also written to the DC IT Central Circle stating that return of income for A.Y. 2010-11 had been filed on 30/6/10 with tax payable of ₹ 2,92,25,240/- and therefore requesting the AO once again for adjustment of tax liability with the cash lying in the PD account, in the circumstances, the assessee had done all it could do so as to ensure that cash tying in the PD account would be adjusted towards the advance tax liability. However, it seen that no action was taken on the assessee's petition by any of the authorities before whom the assessee has filed the petition. To my mind, it is an apparent injustice to the appellant to hold on the cash belonging in the assessee in the Government Account and at the same time charge interest for non-payment of advance tax on the due dates, it is dear that the appellant's application for adjustment has been submitted before the various authorities, the seized cash should have been either been adjusted as requested by the assessee to meet the advance tax obligations or the Assessee should have been informed the reasons why the request made by the assessee cannot be acceded to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to whether the amendment was clarificatory in nature having retrospective applicability or it has only prospective applicability. 3. Several Courts have held that the insertion of Explanation 2 to section 1328 of the Act, is prospective in nature and not applicable to cases prior to 01.06.2013.The SLPs filed by the Department against the judgement of the Hon'ble Punjab and Haryana High Court in the case of Cosmos Builders and Promoters Ltd. 1 and the Hon'ble Allahabad High Court in the case of Sunil Chandra Gupta2 , have been dismissed. Subsequently, the CBDT has also accepted the judgment of the Hon'ble Punjab & Haryana High Court in the case of Spaze Towers Pvt. Ltd. 3 dated 17.11.2016, wherein it was held that the Explanation 2 to Section 132B of the Act is prospective in nature. 4. Accordingly, it has now been settled that insertion of Explanation 2 to Section 132B of the Act shall have a prospective application and so, appeals may not be filed by the Department on this issue for the cases prior to 01.06.2013 and those already filed may be withdrawn/ not pressed upon". Accordingly in view of the binding precedents as well as the CBDT circular, we do not fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A.Y. 2007-08, therefore, in view of our finding on this issue for the A.Y. 2007-08, ground No. 1 of the assessee's appeal stands allowed and ground No. 1 of the revenue's appeal stands dismissed. 18. The ground No. 2 of the revenue's appeal is also common to ground No. 2 of the revenue's appeal for the A.Y. 2007-08, therefore, in view of our finding on this issue for the A.Y. 2007-08, ground No. 2 of the revenue's appeal stands dismissed. 19. Ground No. 2 of the assessee's appeal is regarding the addition made by the Assessing Officer on account of cash deposits in the bank account of employees of the assessee. During the course of assessment proceedings, the Assessing Officer noted that during the search and seizure action, signed cheque books of the various persons were found. The Assessing Officer noted that there is a deposit of ₹ 1.87 crores on different dates in their bank accounts. The assessee filed explanation in respect of deposits in the bank account of these persons. The Assessing Officer finally made the addition of ₹ 1.10 lacs on account of deposit in the bank account of Shri Rajendra Jain, ₹ 5,65,400/- on account of deposit in the bank account of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions as well as the relevant material on record. The Assessing Officer has made addition of ₹ 13,26,600/- on account of cash deposits in the bank account of three persons namely Shri Rajendra Jain, Shri Ashok Sharma and Shri Mahaveer Prasad Sharma. The Assessing Officer treated the deposits made in the bank accounts of these persons as undisclosed income of the assessee on the basis of signed cheques of these persons were found during the search and seizure action at the place of the assessee. Though, the signed cheque book found with the assessee can be a ground for further investigation and inquiry regarding any undisclosed income of the assessee by using the accounts of these persons, however, the cheque book itself cannot be considered as an evidence for undisclosed income. The Assessing Officer has picked up the entries in the bank accounts of these persons where the cash was deposited. All other entries in these bank accounts were accepted by the Assessing Officer as carried out by these persons and not by the assessee, therefore, it is not a case of the Assessing Officer that these accounts were fully operated by the assessee. The assessee has contended that the cheque ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ver the deposits made in the bank accounts, then in the absence of any direct evidence or tangible material to disclose the fact that the cash deposit in the bank accounts of these persons belongs to the assessee, the addition made by A.O. is not sustainable. The said deposit is subject matter of assessment in the hands of these persons, accordingly, in the facts and circumstances of the case, we delete the addition made by the Assessing Officer on this account. 23. Grounds No. 3 and 4 of the assessee's appeal and ground No. 3 of the revenue's appeal are general in nature and does not require any adjudication. 24. Now we take the cross appeals for the A.Y. 2009-10. In these appeals the assessee as well as the revenue have raised following grounds of appeal: Grounds of assessee's appeal: "1. The ld. CIT(A) has erred on facts and in law in estimating the undisclosed interest income at ₹ 60,00,000/- as against ₹ 37,24,940/- declared by the assessee thereby confirming an addition of ₹ 22,75,060/-. 2. The ld. CIT(A) has erred on facts and in law in confirming the findings of A.O. that cash deposit in the bank account of Sh. Rajendra Jain ₹ 13,200/-, Sh. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee has produced the evidence in support of the source of cash deposit in the bank being return of income of these persons, in whose bank accounts, cash was found deposited. Accordingly, in view of our finding on this issue for the A.Y. 2008-09, the addition made by the Assessing Officer is deleted. Hence ground No. 2 of the assessee's appeal stands allowed. 28. Grounds No. 3 and 4 of the assessee's appeal and ground No. 3 of the revenue's appeal are general in nature and does not require any adjudication. 29. Now we take the cross appeals for the A.Y. 2010-11. In these appeals the assessee as well as the revenue have raised following grounds of appeal: Grounds of assessee's appeal: "1. The ld. CIT(A) has erred on facts and in law in estimating the undisclosed interest income for the period 01/4/2009 to 19/06/2009 at ₹ 25,00,000/- as against ₹ 13,15,275/- declared by the assessee thereby confirming an addition of ₹ 11,84,725/-. 2. The ld. CIT(A) has erred on facts and in law in confirming the action of A.O. in not allowing the expenses of ₹ 29,75,859/- found recorded in search which is claimed by the assessee in earning the interest income by hold ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2012-13. During the course of search and seizure action, certain incriminating documents were found containing the entries of transaction of 100 days finance scheme. The seized material also contains the entries of expenditure pertaining to A.Y. 2010-11, 2011- 12 and 2012-13 of ₹ 29,75,859/-, ₹ 82,59,551/- and ₹ 69,54,914/- respectively. The assessee in the return of income has claimed these expenses against the undisclosed income offered to tax. The Assessing Officer disallowed claim of assessee on the ground that these expenses are already recorded in the regular books of account. The assessee challenged the action of the Assessing Officer before the ld. CIT(A), but could not succeed. 33. Before us, the ld AR of the assessee has submitted that there is no dispute as to the fact that these expenses are found recorded in the seized documents. The AO has simply mentioned that the same are recorded in the regular books but has not specified how these expenses are recorded in the regular books. In fact, these are the expenditure other than those recorded in the regular books. The Ld. CIT(A) has also incorrectly mentioned that assessee has not filed any correlation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... record. There is no dispute that the amount of expenditure as claimed by the assessee against the undisclosed income for these three assessment years i.e. 2010-11 to 2012-13 were found recorded in the seized material. The undisclosed income offered by the assessee is also based on the same seized material and therefore, once the income and expenditure both are recorded in the same material, which is found and seized during the course of search and seizure action then the entire record and entries found in the seized material has to be taken into consideration and not a part of the seized material is accepted and part can be rejected. Thus, the seized material cannot be considered or accepted in piecemeal but the evidence which is the basis of undisclosed income has to be considered as a whole. However, the question arises whether the expenses found recorded in the seized material is already taken into account as part of the expenses recorded in the books of account or not. Neither the Assessing Officer nor the ld. CIT(A) has examined the relevant record and details to find out this fact that the expenditure which is found recorded in the seized material is also part of the expendi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the course of search and seizure action, the bills relating to sale of jewellery was found and seized as annexure AS-39. In the statement U/s 132(4) of the Act, the assessee explained these bills pertains to sale of jewellery by Smt. Saraswati Devi Sharma, mother in law of the assessee. In the post search statement dated 19/10/2012, the assessee further explained that because of ill health, his mother in law Smt. Saraswati Devi Sharma was residing with him and she kept her valuables and papers at his residence. Thus, the assessee claimed that she had sold the jewellery from time to time and the sale proceeds were received by cheque and credited in her bank account. In the assessment proceedings, the Assessing Officer rejected the explanation of the assessee by holding that the assessee has routed his undisclosed income through sale of jewellery of his mother in law. The Assessing Officer has observed that Smt. Saraswati Devi Sharma never filed her return of income or net wealth. The assessee has not produced any evidence of her holdings of such huge quantity of jewellery. Further she had four daughter and one son and therefore, the Assessing Officer was of the view that it is bey ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee in the month of April and May 2009 and deposited the same in her bank account with Central Bank of India, Vaishali Nagar, Jaipur. The assessee's wife Smt. Kalawati Sharma was nominee in this bank account. In this bank account which was opened on 15.09.2008 she deposited her savings and also the sale proceeds of the jewellery. This amount remained in her bank account for four months. Thereafter, from this bank account she issued cheque of ₹ 1 crore in the name of her daughter Smt. Kalawati Sharma, ₹ 35 lakhs each in the name of Saurabh Sharma and Himanshu Sharma, two sons of Kalawati Sharma and ₹ 40 lakhs in the name of Shruti Sharma, daughter of Kalawati Sharma on 12.08.2009 as gift from her. In the meanwhile, her health deteriorated and she was hospitalised in Soni Hospital, Sikar Road, Jaipur and therefore neither the cheques could be deposited in the bank account of donee nor the gift deed could be prepared though the stamp paper for gift declaration was purchased in her name. She ultimately expired on 18.08.2009 and therefore, cheques were deposited by the donee in their bank account on 19.08.2009. These facts were also stated by the assessee in reply to qu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pted. She had four daughters and one son and therefore, it is beyond human probability that a mother would give entire belongings and wealth only to one daughter excluding other three daughters and one son. Signed cheque book found with the assessee clearly shows that the assessee has manipulated and has channelized his undisclosed income through sale of jewellery. 39. We have considered the rival submissions as well as relevant material on record. There is no dispute that the sale bills of jewellery was found during the course of search and seizure action and seized as Annexure-AS-39, therefore, it is a seized material and cannot be held as a bogus claim or document manipulated or manufactured by the assessee being afterthought cooked story. Therefore, when the sale of jewellery is found as per the bills seized during the search then the transaction of sale cannot be disputed by the department. The sale proceeds of the jewellery was also undisputedly received by cheque and credited in the bank account of mother in law of the assessee. The only doubt which is raised by the Assessing Officer is that it is beyond human probability that she would not give anything to other daughters ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f assessee's appeal: "1. The ld. CIT(A) has erred on facts and in law in confirming the action of A.O. is not allowing the expenses of ₹ 82,59,551/- claimed by the assessee in earning the interest income of ₹ 3,86,42,943/- by holding that the same is recorded in the regular books of account. 2. The assessee craves to amend, alter and modify any of the grounds of appeal. 3. The appropriate cost be awarded to the assessee." Grounds of revenue's appeal: "1. Whether on the facts and the circumstances of the case Id CIT(A) was right in allowing the appeal of the assessee without appreciating the facts that amount lying in the PD account has to be adjusted against the existing liability of the assessee but as per explanation-2 of the section 132B of the I.T. Act 1961, it has been clarified that the "existing liability" does not include advance tax payable in accordance with the provisions of part-C of chapter XVII. 2. The appellant craves the right to amend alter or add to any of the grounds of appeal given above." 42. Ground No. 1 of the assessee's appeal is common and identical to the issued raised in ground No. 2 in the appeal filed by the assessee for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e tax liability. This ground of revenue's appeal is also common to ground No. 2 of the revenue's appeal for the A.Y. 2007-08, therefore, in view of our finding on this issue for the A.Y. 2007-08, ground No. 1 of the revenue's appeal stands dismissed. 48. Grounds No. 2 and 3 of the assessee's appeal and ground No. 2 of the revenue's appeal are general in nature and does not require any adjudication. 49. Now we take the revenue's appeal for the A.Y. 2013-14, wherein the revenue has raised following grounds of appeal: "1. Whether on the facts and the circumstances of the case Id CIT(A) has erred in deleting the addition of ₹ 2,16,92,726/- made on account of undisclosed investment excess over the income without appreciating the facts and a detailed cash flow statement for the relevant period was prepared which clearly shows that there was undisclosed investment excess over the income. 2. Without appreciating the fact that while preparing the revised flow statement, ld CIT(A) has reduced the additions deleted by him in A.Y. 2007-07 to 2012-13, which has not been accepted by the department and challenged in further appeal. 3. The appellant craves the right to amend alter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as well as other items of addition made by the Assessing Officer. The ld. CIT(A) has considered this issue in para 3.1.2 as under: "3.1.2 I have duly considered assessee's submission and carefully gone through assessment order. I have also taken a note of factual matrix of the case as well as applicable case laws relied upon. The only issue in this ground is that if there is any shortfall after considering the outcome of appeals on various additions / application of income made in AY 2007-08 to 2012-13, then the same is to be added. In this case, I have decided appeals for AY 2007-08 to 2012-13 wherein certain additions have been deleted. After considering these, u a revised cash flow chart is prepared and annexed herewith as per Annexure-A. For the sake of clarity, relevant extracts of revised cash flow statement is reproduced here as under: Assessment Year 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 AO's Cash Flow Chart: Estimated op cash capital as on 01.04.06 8,00,00,000 8,58,50,000 9,35,83,400 8,16,68,227 4,22,08,139 7,37,62,067 15,53,049 add : income as above 60,00,000 1,20,00,000 1,70,00,000 1,72,99,094 3,86,42,943 3,54,04 ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
