9911796707
TMI Blog2021 (2) TMI 361X X X X Extracts X X X X X X X X Extracts X X X X ..... pany. Mr. Dinesh R Mehta also maintained separate ledger for unaccounted transactions. The entries found in M/s. A N Engineering Bearing ledger account maintained by Mr. Dinesh R Mehta were tallied - unaccounted transactions maintained in the computer system under the name of M/s. A N Engineering Company is not at all belonged to the assessee. Further, data found in computer was kept in the premises of Mr. Dinesh R Mehta and was seized during course of search from his premises. In this case, documents found during the course of search from the premises of Mr. Dinesh R Mehta clearly indicate that unaccounted transactions recorded in the name of M/s. Vikas Bearing and Wires was carried out by Mr. Dinesh R Mehta and assessee has no role on it. This fact is further strengthened by bank account opened by Mr. Dinesh R Mehta at City Union Bank, Coimbatore with account no.3067 which coincides with registration of M/s. Vikas Bearing and Wires, Coimbatore. The said bank account has deposits by way of clearing and withdrawal by cash. The transactions recorded in HDFC bank account are part of regular returns filed by assessee. Further, during the course of search, it was found that tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 377;20,06,686/- under the account titled RPM in the books of M/s. A N Engineering Company. Therefore, we are of the considered view that additions made by Assessing Officer towards balance with M/s. A N Engineering Company on the basis of incriminating materials found during the course of search in the hands of assessee on protective basis is incorrect. Hence, we direct the Assessing Officer to delete addition made. Addition made towards cash credit in bank account - HELD THAT:- We find that assessee has failed to explain source of income for remaining cash deposit although assessee claims that source of cash deposits is out of liquidation of debtors, but failed to file any evidence to prove that cash deposit is out of realization of debtors. Hence, we are of the considered view that there is no error in the findings recorded by learned CIT(A) to sustain additions made by Assessing Officer towards cash deposit. We reject grounds taken by assessee. Addition of cash credit in bank account - HELD THAT:- At the time of hearing, learned AR for assessee except making argument that additions made by Assessing Officer towards credit found in capital account is not made out of sei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A) was right in confirming additions made by Assessing Officer towards cash credit in bank account, credit in personal book and difference in remuneration. Cash found during the course of search, profit from M/s.Vikas Bearing and Wires, new sundry creditors and sundry creditors with transactions - HELD THAT:- Once protective addition made towards stock in trade receivables is held to be not taxable in the hands of assessee , the other protective additions made towards cash found during the course of search, profit from M/s.Vikas Bearing and Wires and new sundry creditors and sundry creditors with transactions cannot be sustained in the hands of assessee. Therefore, we are of the considered view that learned CIT(A) has erred in confirming additions made by Assessing Officer on protective basis towards cash found and other additions. We reverse findings of learned CIT(A) and direct Assessing Officer to delete protective addition made towards cash found during the course of search, profit from VBW and new sundry creditors and sundry creditors with transactions. However, in respect of additions made towards cash credit in bank account of Union Bank of India, assessee has failed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sible owned by Shri Dinesh R,Mehta, in the hands of the appellant by drawing adverse inference from the orders passed by the assessing officer in the case of Dinesh R,Mehta, 5. The learned CIT(A)-19 ought to have seen that although the Hon ble ITAT vide its order dated 30.06.2017 had set aside the appeal in the case of Dinesh R Mehta, the issue of ownership of Vikas Bearing and Wires which stands determined in the hands of Dinesh R.Mehta by the first appellate authorities was not the subject matter of appeal before the Hon ble ITAT, 6. The learned CIT(A)-9 ought to have seen that the orders passed by the first appellate authorities in the case of Dinesh R Mehta dated 20,05,2010 and 24,06.2014 point out to the fact that the ostensible ownership of M/s. Vikas Bearings and Wires is with Dinesh R Mehta which fact remains undisturbed by the orders of the liAr despite the assessment orders being set aside. 7. The learned CIT(A)-19 ought to have seen that the said assessing officer of Dinesh R Mehta ought not to have entertained the issue of ownership of MIs. Vikas Bearings and Wires when the Hon ble ITAT has given an opportunity to the said appellant only for the purpose o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt Commission, Chennai and such application was rejected due to non-payment of taxes. During the course of search a statement u/s. 132(4) was recorded from Mr. Dinesh R Mehta on 23.02.2005, where he has stated that his employees are persons who actually received goods and sell them and value given by them represent correct amount of transactions carried out in the name of various concerns managed by him. Accordingly, value of stock of three entities namely M/s. Vikas Bearing Corporation, Chennai, M/s. Vikas Submersible Pumps and Spares, Chennai and M/s. Vikas Bearing and Wires, Coimbatore, was taken on the date of survey. Further Mr. Dinesh R Mehta while giving his own statement during the course of search has accepted closing stock found in the premises of M/s. Vikas Bearing and Wires belongs to him and not to Mr.Raju P Mehta, proprietor of M/s.Vikas Bearing and Wires. 4. Consequent to search, case of the assessee was taken up for assessment and accordingly notices u/s.153C dated 06.10.2006 was issued . The assessee has challenged notice issued u/s. 153C by filing Writ Petition before Hon ble High Court of Madras and Hon ble High Court vide order dated 11.12.2006 had directed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ables has been added in the hands of assessee on protective basis. The relevant findings of Assessing Officer are as under:- 3. Unaccounted closing Stock: As per sales tax registration the assessee had business activities at the following premises in addition to Shop No- 2-, 814 Bharathiar Road, PN Palayam Coimbatore-3?. Shop No 1,814 Bharathiar Road PN Palayam, Coimbatore-37 No 705 ldayar Street, Coimbatore.-l However it is noticed that he assessee was having operations at the following addresses also First Floor, No 24 Dhandapani Street PN Palayam Coimbatore-37 811 Saravana Complex. Rharathiar Road! Coimbatore- 37 In course of search inventory of stock was taken and the stock was also valued- Sri ORM was asked to provide the value of stock to derive value of closing stock. As there was a discrepancy in the value provided by Shri DRM for the purpose of valuation, the stock was valued based on price quoted in the sales quotation. The quotations are nothing but sale bill as admitted by Shri DRM and his employees. Therefore, rejecting the price adopted by Shri DRM the value derived from quotations is adopted to determine the stock value. Shri B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 464,856,168 Unaccounted dosing stock 2,46,89,177 Unaccounted closing stock is apportioned to various financial years: Source of datea Unaccounted purchase Unaccounted closing F.Y.2000-01 9,1 08,672 464.602 F.Y.2001-02 81.353.875 4149541 F.Y.2002-03 108 637 501 5541172 F.Y.2003-04 113,451,851 5,786733 F.Y.2004-05 87,551,711 4,465,669 Bearings 2004-05 accts Sales GP @ 5% 83,940,204 4281460 484,043,904 24,689,177 Shri RPM on the issue of closing stock at VSW, coimbatore stated vide letter dated 27.03.2007 as under: Closing Stock found at Coimbatore : In response to you query regarding the closing stock found at the offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vables among the F.Ys 2000-01 to 2004-05, the purchase data gathered from ledger account of MIs Vikas Bearing 8 Wires found in the books of MIS A NEO. and purctiase in proportion to the sale ,on a estimated basis, found in the account of Blearing 2004-05 are considered to apportion the receivable among various FYs. The working of receivables are as under: Un accounted receivable as per Bearing 2004-05 as on 16.2.2005 (includes Vikas Chennai of ₹ 13,87,23,904/-) ₹ 15,39,29,167 F.Y Source of purchase Unaccounted Purchase Unaccounted receivables 2000-01 VBW in A N Eng accts 9,108,762 2,896,647 2001-02 do- 81353,875 25.871,070 2002-03 -do I08.637501 34.547445 2003-04 -do 113.451.851 36.078440 2004-05 -do 87,551.711 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evidences filed by assessee and also reiterated his observations made during the course of assessment proceedings on the basis of various incriminating materials found during the course of search coupled with statements recorded from Mr. Dinesh R Mehta regarding ownership of M/s.Vikas Bearing and Wires. The learned CIT(A) after considering relevant submissions of the assessee and has also taken note of various evidences collected during the course of search coupled with statement recorded from Mr. Dinesh R Mehta and his employees and also by taking note of statement of assessee made during the course of search upheld the additions made by Assessing Officer on protective basis towards unaccounted stock in trade and receivables found during the course of search in the name of M/s.Vikas Bearing and Wires, Coimbatore, in the hands of assessee . The learned CIT(A) has also taken support from order of ITAT in the case of Mr. Dinesh R Mehta and consequent assessment order passed by Assessing Officer u/s.143(3) r.w.s. 254 dated 30.12.2011, where the Assessing Officer has excluded unaccounted stock and receivables in the name of M/s.Vikas Bearing and Wires, Coimbatore, while considering ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s connection with the concern VBW and stated that the same belonged to Mr. Dinesh Mehta. Again. in the letter dated 01-11-2006 addressed to the ACIT, Shri Dinesh Mehta (as quoted on page 4 5 of order dated 15.03.2018 of Shri Dinesh Mehta) had stated that VBW does not belong to him. 6.2 Meanwhile, the assessment framed in the case of Shri Dinesh Mehta went upto ITAT. Chennai and the Honble TAT Chennai set aside the matter to the Assessing Officer for readjudication as follows: (Quote] The Issues n this appeal are restored to the file of the A0 for readjudication after granting the assessee adequate opportunity to substantiate his case . The Assessing Officer subsequent to the above restoration of the case, passed an order u/s 254 dated 15.03.2018 stating as order passed to give effect to the order of the Honble TAT for the set aside assessment u/s 143(3) r.w.s 254 passed on 30.12.2011, A perusal of the above order shows that on the submissions made by Shri Dinesh Mehta, the Assessing Officer concluded as follows: (Quotel Thus as in the previous years, in respect of arriving unaccounted profit of the assessee. Only the sales of the assessee is con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Mehta is one of the partners. There is no rational basis on which the income of M/s Vikas Bearings and Wires and M s Vikas Submersible Pumps Spares can be attributed to the appellant. Further, the income of the business entity should not have been assessed in the hands of the appellant as It a separate entity. distinct from the appellant. The appellant contested against the clubbing of income in letter dated 25th September 2006 1st November 2006, 22nd December 2011, 28th December 2011, but the same was subsequently rejected by the ACIT citing the previous acceptance of the appellant. Both Vikas Bearing Wires and Vikas Submersible Pumps Spares am not concerns of the assossee as per the records submitted and information pursued. [unquote] 6.4 The above decision of the AO was made known to the authorized representative of the appellant at the time of hearing on 29.112019. These facts are not controverted by the appellant. Therefore, the protective additions made in the case of appellant is upheld. 6. The first issue that came up for our consideration from ground Nos.4 to 7 of assessee appeals for all assessment years is protective addition made by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inesh R Mehta. The AR further referring to order of learned CIT(A) for assessment years 2001-02 to 2005- 06 in the case of Mr. Dinesh R Mehta submitted that learned CIT(A) has affirmed findings recorded by the Assessing Officer in respect of ownership of business and unaccounted income found during the course of search in form of stock in trade and receivables and held that said business was in fact carried out by Mr. Dinesh R Mehta and assessee has only lent his name. In fact, the matter reached Tribunal and before Tribunal pleading of assessee was in respect of violation of principles of natural justice by Assessing Officer in not providing adequate opportunity of hearing to assessee , but there is no grounds of appeal or pleading challenging findings recorded by Assessing Officer as well as affirmed by learned CIT(A) in respect of ownership of business and unaccounted income found during the course of search in the name of M/s. Vikas Bearing and Wires. The Tribunal under those facts and after considering plea of assessee regarding inadequate opportunity of hearing has set aside appeals to the file of Assessing Officer. Although, Tribunal has set aside appeals, but there is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... batore and whatever closing stock and receivables found during the course of search should be assessed in the hands of assessee on substantive basis. 8. We have heard both parties, perused material available on record and gone through the orders of authorities below. The facts borne out from records indicate that there was search in the case of Mr. Dinesh R Mehta on 23.02.2005. During the course of search and survey operations, various business premises including godowns owned in the name of M/s. Vikas Bearing Corporation, Chennai, M/s. Vikas Submersible Pumps and Spares, Chennai and M/s. Vikas Bearing and Wires, Coimbatore was covered. During the course of search various incriminating documents including a computer system was found, where unaccounted transactions of purchase and sales were recorded in the name of M/s. A N Engineering Company. The said computer system was found in the premises of Mr. Dinesh R Mehta and same has been marked as Annexure SKM/LS/S-1-20. Mr. Dinesh R Mehta in the statement recorded u/s.132(4) of the Act has admitted that transactions recorded in the name of M/s. A N Engineering Company belongs to him and also has owned up unaccounted stock found d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Engineering Company is fully controlled and operated by Mr. Dinesh R Mehta and assessee had no control on transactions which happened outside books of account, since as per seized documents and corroborative statements, transactions were not undertaken by assessee. Further, all documentary evidences show that transactions happened outside books are maintained separately by Mr. Dinesh R Mehta in the name of fictitious entity M/s. A N Engineering Company. Mr. Dinesh R Mehta also maintained separate ledger for unaccounted transactions. The entries found in M/s. A N Engineering Bearing ledger account maintained by Mr. Dinesh R Mehta were tallied. From the above, it is very clear that unaccounted transactions maintained in the computer system under the name of M/s. A N Engineering Company is not at all belonged to the assessee. Further, data found in computer was kept in the premises of Mr. Dinesh R Mehta and was seized during course of search from his premises. Once any document or evidence found in possession of a person, then presumption as per section 292C is on the person from whose possession said documents were found or seized unless the person in whose possession books of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h were suddenly changed, when he has framed assessment order in consequent to the directions of Tribunal. In fact, Tribunal has set aside appeals to the file of Assessing Officer without making any comments on merits of the additions made by Assessing Officer. The Tribunal has set aside appeal only on the ground of pleading of assessee that Assessing Officer has not given sufficient opportunity of hearing to explain its case . However, the Assessing Officer during third round of litigation without recording any change in facts and circumstances of the case and also bringing on record any new evidence suggests unaccounted stock in trade was originally added in the hands of Mr. Dinesh R Mehta would belong to the assessee and taxable in the hands of Mr.Raju P Mehta . In our considered view, the Assessing Officer has exceeded his power in going beyond the directions of Tribunal without any findings regarding issue of ownership of business and consequent unaccounted stock in trade and receivables, more particularly, when Mr. Dinesh R Mehta, himself has owned up and admitted business right from date of search while recording statement u/s. 132(4) and also subsequent confirmation by wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nlawfully obtained. Therefore, we are of the considered view that the Assessing Officer, while concluding assessment proceedings in the case of Mr. Dinesh R Mehta has excluded unaccounted transactions of stock in trade and receivables pertains to M/s. Vikas Bearing and Wires, Coimbatore without there being any change in facts and circumstances of case prevailing at the time of making substantive additions in the hands of Mr. Dinesh R Mehta and protective addition in the hands of assessee. This view is fortified by decisions of various High Courts, in particularly in the following case laws relied upon by the assessee:- 12. Retraction which is made by DRM is general in nature and there is no specific mention of a particular admission which was claimed to be retracted. The said retraction is unsubstantiated. There was no reference or mention of any evidence. There has been no pressure or torture, if there was such an allegation than DRM would have complained the same to the Commissioner or to any other Authority. Law in respect of admissibility of a retraction is very well settled. There must be some convincing and effective evidence in the hands DRM through which he could demons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered to reach the conclusion whether retraction was possible or not as there can be no universal rule. CIT Vs. Lekh Raj Dhunna: 344 ITR 352 (P H] In case the statement which was made by the assessee at the time of search and seizure was under pressure or due to coercion, the assessee could have retracted from the same at the earliest, No plausible explanation has been furnished as to why the said statement could not be withdrawn earlier. In such a situation, the authenticity of the statement by Virtue of which surrender had been made at the time of search cannot be held to be bad. Assistant commissioner of Income tax vs. Hukum Chand Jam Ors. 337 ITR 0238-Chhattigarh Deputy Commissioner of Income Tax vs. Bhogilal Mulchand Kando-96 ltd 0344 13. Vikas bearings and wires is a proprietary concern registered in the name of the assessee Raju P Mehta engaged in the business of trading in bearings and wires. The assessee has been receiving monthly ienumeration for this and the same has been admitted by the appellant originally as drawings and in the revised return under the head salary. For all transaction undertaken by the appellant which happened through proper books, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nged to the assessee. Further, learned CIT(A) without application of mind has simply upheld protective addition only for the reason that Assessing Officer in his order dated 15.03.2018 in the case of Mr. Dinesh R Mehta has held that income of M/s. Vikas Bearing and Wires should not have been assessed in the hands of Mr. Dinesh R Mehta, as they are separate entities distinct from Mr. Dinesh R Mehta. Only on the basis of retraction filed by Mr. Dinesh R Mehta vide his letter dated 25.09.2006, although the said retraction was twice rejected by the Assessing Officer.. We further noted that all evidences gathered during course of search and post-search enquiries were clearly shown that unaccounted transactions of stock in trade and receivables recorded in computer system were carried out by Mr. Dinesh R Mehta, which was affirmed by his trusted employees. Mr. Dinesh R Mehta himself has admitted the fact that he had carried out said business in the name of Raju P Mehta. Therefore, we are of the considered view that learned CIT(A) has completely erred in confirming additions made by Assessing Officer on protective basis towards stock in trade and receivables in the hands of assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... form of computer hardware maintained in the name of M/s. A N Engineering Company indicates that a sum of ₹20,06,686/- was shown as debit balance in the name of RPM. The Assessing Officer has inferred that RPM refers to Raju P.Mehta and amount shown in the name of RPM is assessable in the hands of assessee as unaccounted income. We have gone through facts brought out by Assessing Officer along with arguments advanced by learned AR for the assessee. On verification of various details filed by assessee, we find M/s. A N Engineering Company is a fictitious entity existed in papers, but all transactions of purchase and sales recorded in the name of said entity was belonged to Mr. Dinesh R Mehta. Further, Mr. Dinesh R Mehta has owned up unaccounted business carried out in the name of M/s. Vikas Bearing and Wires and on that basis, substantive addition has been made in the name of Mr. Dinesh R Mehta and which was upheld by first appellate authority in second round of litigation . However, in third round of litigation, all of a sudden the Assessing Officer has suddenly changed his stand and excluded unaccounted transactions recorded in the name of M/s. A N Engineering Company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8377;1,60,600/-. 17. The learned AR for assessee submitted that learned CIT(A) has erred in confirming additions towards cash deposit of ₹1,54,400/- without bringing on record fact that assessee has satisfactorily explained source of cash deposits and such source of income is out of liquidation of outstanding debtors in respect of his business activity. The learned DR, on the other hand, strongly supported order of learned CIT(A). 18. Having heard both sides and considered material on record, we find that assessee has failed to explain source of income for remaining cash deposit of ₹1,54,400/- , although assessee claims that source of cash deposits is out of liquidation of debtors, but failed to file any evidence to prove that cash deposit is out of realization of debtors. Hence, we are of the considered view that there is no error in the findings recorded by learned CIT(A) to sustain additions made by Assessing Officer towards cash deposit of ₹1,54,400/-. Therefore, we are inclined to uphold findings of learned CIT(A) and reject grounds taken by assessee. 19. The next issue that came up for our consideration for assessment year 2001-02 is additions ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing Officer noticed that assessee has an SB account with Union Bank of India, Sembudoss Street, Chennai . It was further noted that on various dates cash deposits amounting to ₹6,50,000/- were made, after immediately cheques were issued in favour of various parties. The assessee explained that an amount of ₹5,00,000/- brought by way of transfer has been returned. The Assessing Officer was not convinced with explanation furnished by assessee and according to him, source of income of cash deposits were unexplained, and accordingly made addition of ₹ 6,50,000/-. 22. The assessee preferred an appeal before learned CIT(A) and filed various additional evidences. During the course of appellate proceedings, learned CIT(A) has forwarded additional evidences filed by assessee to the Assessing Officer for his comments. During the remand proceedings, the Assessing Officer has accepted source of income for cash deposit of ₹1,50,000/- and in respect of remaining cash deposit of ₹5.00 lakhs, Assessing Officer has reiterated his observations made during the course of assessment proceedings. Therefore, learned CIT(A) has allowed relief to the extent of ₹1,50, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hrough the orders of authorities below. During the course of hearing, learned AR for the assessee except stating that Assessing Officer has made various additions without any incriminating materials found during the course of search has failed to file any evidences to prove source of income for cash credits found in SB account, and also failed to explain credit in personal trial balance, credit in capital account and difference in remuneration received from M/s. Vikas Bearing and Wires. The assessee has also failed to explain how deduction can be allowed towards compounding fee of ₹1,000/-. We are, therefore, of the considered view that there is no error in the findings recorded by learned CIT(A) to confirm additions on various accounts. We are inclined to uphold findings of learned CIT(A) and reject grounds taken by assessee. 26. The next common issue that came up for our consideration for assessment years 2003-04 2004-05 is protective additions made towards depreciation on car and finance charges on car loan. The Assessing Officer has disallowed expenses claimed under the head depreciation on car and interest paid on car loan on the ground that assessee is only a na ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ditions towards cash deposit of ₹ 2,10,000/- found in SB account maintained at Union Bank of India. The Assessing Officer has also made addition towards difference in remuneration received from M/s.Vikas Bearing and Wires. Likewise, Assessing Officer has made additions towards sundry creditors appearing in books of M/s.Vikas Bearing and Wires on the ground that assessee was only name lender and Mr.Dinesh R Mehta is real owner of proprietary business, therefore, he is not in a position to explain identity of sundry creditors. 30. The assessee has filed an appeal before learned CIT(A) and filed various additional evidences. During the course of appellate proceedings, the learned CIT(A) has forwarded additional evidences filed by assessee to the Assessing Officer for his comments. The Assessing Officer vide his remand report has accepted source of credits in personal book for ₹ 15,887/- on the ground that same represents interest paid on car loan. As regards credits in SB account, Assessing Officer has accepted source for income of ₹1,03,360/- because, the same is out of commission not offered to tax. Insofar as other additions, the Assessing Officer has rei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, where the Assessing Officer observed that assessee has failed to file source of income for cash deposits of ₹1,35,000/-. 34. We have heard both parties, perused materials available on record and gone through the orders of authorities below. We find that in preceding paragraph in respect of unaccounted receivables and stock in trade pertains to M/s.Vikas Bearing and Wires was held to be not taxable even on protective basis in the hands of assessee because substantive addition has been made in the hands of Mr.Dinesh R Mehta on the basis of various incriminating materials found during the course of search coupled with statements recorded from Mr.Dinesh R Mehta, the assessee and other employees of group , Once protective addition made towards stock in trade receivables is held to be not taxable in the hands of assessee , the other protective additions made towards cash found during the course of search, profit from M/s.Vikas Bearing and Wires and new sundry creditors and sundry creditors with transactions cannot be sustained in the hands of assessee. Therefore, we are of the considered view that learned CIT(A) has erred in confirming additions made by Assessing Officer on ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
