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TMI Blog2022 (5) TMI 885X X X X Extracts X X X X X X X X Extracts X X X X ..... . The Ld. CIT(A) has erred in law and on facts in dismissing the grounds raised by the Respondent in respect Lack of Jurisdiction and proceedings initiated under section 147 of the Act. The Respondent respectfully submits that entire reason to belief is not sustainable in the eyes of law in its entirety since consolidated reasons are recorded for different assessment years corelatable to impugned notice issued under section 148 for the concerned assessment year 2010-11 so as to say that the case of the Respondent cannot be reopened on the strength of subject matter of reasons recorded by the Ld. AO as the reasons are based out of seized material so impounded from the premises of Barter Group relevant to A.Y. 2011-12 and thus the reason recorded for reopening by the clearly lack of jurisdiction u/s. 147/148 of the Act. 2. The Ld. CIT(A) after considering the facts of the case, submission of the Respondent as well as the various judicial pronouncements relied upon by the Respondent held that the appellant firm has discharged its onus by submitting cash book which clearly reflects all the cash deposits and withdrawals as all entries of withdrawals and deposits in the bank both stan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o interest has been paid by the Respondent. In nutshell, The Ld. CIT(A) has rightly deleted the entire addition of Rs. 3,81,00,0007- made by the AO u/s. 68 of the Act while holding that " on careful consideration of the above material, the identity of the depositors Saral Management and Kalpesh Patel and creditworthiness is duly established. Therefore, the addition made by the AO on account of unsecured loan of Rs. 3,81,00,000/- received from Saral Management and Consultancy and Kalpesh Patel is not justified and the same is hereby deleted". 3. Your Respondent craves right to add, amend, alter, modify, substitute, delete or modify all or any of the above grounds of cross objection. 3. The assessee in the CO has challenged the virus of the notice issued under section 148 of the Act on the reasoning that there was no tangible material available with the AO for forming the belief that income of the assessee has escaped assessment for the year under consideration. 4. The necessary facts to be stated in brief for the purpose of the adjudication of the impugned CO are that the assessee in the present case is a partnership firm and engaged in the business of trading and commissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deration which was immediately transferred to various firms and companies controlled and managed by 'Sutaria Family/Group' and Barter Group. Such cash deposit was not reflected in the return of income filed by the assessee. As such the assessee has filed the return of income declaring an income of Rs. 2,21,601/- only under the head business and profession. Accordingly, the AO formed the reasons to believe that the income of the assessee to the extent of cash deposit of Rs. 95,58,227/- has escaped assessment in respect of which the assessee failed to disclose fully and truly all material facts necessary for the assessment. Likewise assessee has not claimed the TDS of Rs. 16,897/- credited from city union bank and Prism Cement, thus the corresponding income of Rs. 1,68,970 also remain unexplained and escaped assessment. Therefore, the AO initiated the proceedings under section 147 of the Act by issuing a notice under section 148 of the Act. 4.3 However, the assessee before the AO has challenged the initiation of the proceedings under section 147 of the Act by contending that notice under section 148 of the Act has issued on basis of some MS excel sheet found from the premises of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ia group) and details of the activity carried out by Sarthav group and Barter group and their correlation are already discussed in the reasons recorded. Therefore the contention of the assessee that Anil Shah and Sanket Shah are not related to assessee in any manner is not acceptable at all and the material seized from their premises have due relevance in case of assessee. Further, Assessing officer has also correlated the data in the seized sheet with the bank account of the assessee and only after such detailed correlation, AO has made belief that the income has escaped assessment. Therefore, there was new tangible material on record being seized sheet and finding in the assessment proceeding u/s 153C for AY 2011-12 In case of assesses and based on the new tangible material, information and analysis & correlation of the bank account with seized material and genuineness of the transactions, the AO made reason to believe that the income has escaped assessment. Further, onus is on assessee to bring some contradictory fact from the seized material and then only ask for any statement or cross examination. Therefore, the objection of the assessee is general and not tenable. Hence, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... found and seized during the search proceedings. However, under the provision of the Act, in case of search and seizure operation only recourse available with the AO to initiate proceeding under section 153A in case of searched person or under section 153C in case document found and seized belong to other than search person. Both these section have overriding effect over the provisions of section 147 and 148 of the Act. Therefore, the AO exceeded his jurisdiction in issuing notice under section 148 of the Act on basis of search materials. The assessee in support of its contention relied upon the various case laws which are incorporated in the assessee's submission, reproduced in the order of the learned CIT(A). 4.6 However the learned CIT (A) rejected the contention of the assessee by observing as under: The submission of the appellant, the facts mentioned in the assessment order! have been considered carefully and in totality. The First and Second grounds of appeal are against the proceedings initiated u/s. 147 of the Act. The AO in Para 4 of the assessment order has discussed that "during search at the residence of Anil Hiralal Shah at 36, Amrashirish Bunglow, Opp. Chimanbhai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the documents relied upon by the A.O for reopening the assessment u/s. 147 do not belong to the appellant but as per A.O they contain information relating to the unaccounted income of the appellant, the seized documents belong to Anil Hiralal Shah and Sanket Jitendra Shah (Vora) of Barter group and not to the appellant. Therefore the assertion made by the appellant on this account is without any merit. In view of the aforesaid facts and legal position the assessment has been found to be correctly reopened by the A.O as per the provisions of section 147 of the Act and hence, the First & Second grounds of appeal are dismissed. 5. Being aggrieved by the order of the learned CIT (A), the assessee is in appeal before us. 6. The learned AR before us filed a paper book running from pages 1 to 436 and contended that there was no tangible information available with the AO for the year under consideration suggesting that there was the escapement of income which has not been offered to tax. As per the learned AR, the entire thrust of the Revenue for initiating the proceedings under section 147 of the Act was based on the excel sheet recovered during the search from the premises of B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act can be initiated if the assessing officer has reasons to believe based on clinching tangible material that any income chargeable to tax has escaped assessment for any assessment year. The relevant extract of the provisions of section 147 of the Act reads as under: 147. If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year) : 7.2 From the above, it is transpired that it is necessary for the AO before initiating the proceedings under section 147 of the Act to form reasons to believe for the escapement of income. The words 'reasons to believe' contains 2 components. Firstly, the 'reasons' which refers to the cause or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10,24,100 have been made in the bank account of the assessee, but the mere fact that these deposits have been made in a bank account does not indicate that these deposits constitute an income which has escaped assessment. The reasons recorded for reopening the assessment donot make out a case that the assessee was engaged in some business and the income from such a business has not been returned by the assessee. As we donot have the liberty to examine these reasons on the basis of any other material or fact, other than the facts set out in the reasons so recorded, it is not open to us to deal with the question as to whether the assessee could be said to be engaged in any business; all that is to be examined is whether the fact of the deposits, per se, in the bank account of the assessee could be basis of holding the view that the income has escaped assessment. The answer, in our humble understanding, is in negative. The Assessing Officer has opined that an income of Rs 10,24,100 has escaped assessment of income because the assessee has Rs 10,24,100 in his bank account but then such an opinion proceeds on the fallacious assumption that the bank deposits constitute undisclosed incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or distant, remote and farfetched, which would warrant the formation of the belief relating to escapement of the income of the assessee from assessment." 7.6 In view of the above discussion, we are of the view that reason to believe formed by the AO for reopening the assessment is not valid as the same is not based on any tangible material which prima facie suggest income has escaped assessment rather the AO form believe merely based on suspicion, surmise and conjecture. 7.7 With respect to the contention of the learned AR that initiation of the proceedings under section 147 of the Act is invalid for the reason that the assessment should have been framed only under the provisions of section 153C of the Act as the year under consideration is 1 of the year out of 6 assessment years. This question has been answered by the jurisdictional ITAT in the case of Shaialesh S Patel vs. ITO reported in 97 taxmann.com 570 wherein it was held as under: The overriding provisions of section 153C merely enables the Assessing Officer to set aside the pending reassessment proceedings and grants primacy to section 153C. As noted earlier, exercise of power under section 153C is governed without ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt, whereas it had also cash deposit of Rs.1,63,87,939/- during F.Y.2009-10, the source of which was not explained by the assessee. 5. On the facts and in the circumstances of the case and in law, the Ld. C!T(A) ought to have upheld the order of the A.O. 6. It is, therefore, prayed that the order of the Ld. CIT(A) be set aside and that of the A.O. be restored to the above extent. 10. The 1st issue raised by the Revenue is that the learned CIT (A) erred in deleting the addition made by the AO for Rs. 98,31,461/- by treating the cash deposit as unexplained cash credit under section 68 of the Act. 11. The assessee in the year under consideration has deposited cash of Rs. 98,31,461/- in its bank accounts. During the assessment proceedings, it was explained by the assessee that cash deposits of Rs. 93/- lacs was made out of the cash withdrawal from banks on earlier occasion and the remaining amount was deposited either out of amount received from the debtor or from employee to whom advances were given. As per the assessee it has withdrawn the cash during the year on regular interval which was utilized to redeposit in the bank account in the year under consideration. 11.1 Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeal to the learned CIT-A. 13. The assessee before the learned CIT(A) reiterated that cash was deposited out of opening balance and withdrawal made during the year and all the withdrawal and deposits are duly recorded in the books of accounts and explained during the assessment proceedings. The AO without doubting the cash book and bank book merely treated the deposits as unexplained cash credits on basis of surmises and conjecture. The assessee further submitted that there is no limitation under the Act with regard to cash withdrawal or deposits. There was also no evidence brought on record by the AO that cash withdrawal was invested somewhere else and cash deposited was sourced from any other sources. Therefore, the addition merely made on basis of surmise and conjecture cannot be sustained and to support the argument, the assessee relied on various case laws which are incorporated in the order of ld. learned CIT(A). 14. The learned CIT(A) after considering the submission of the assessee deleted the addition made by the AO by observing as under: Therefore, the facts that the source of cash deposit was out of cash withdrawal from the bank on recurring basis which is verifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lvs. ITO [2017] 83 taxmann.com 246 (Mumbai-Trrb] v) Mehul V. Vyasvs.lTO [2017] 80 taxmann.com 311 (Mumbai-Trib] vi) SudhirbhaiPravinkantThaker vs. ITO. (2017) 88 taxmann.com 382 (Ahmedabad-Trib] Considering the facts of the appellant firm's case and the judicial pronouncements relied upon by the appellant firm, I hold that the addition made by the AO for unexplained cash credit u/s. 68 for an amount of Rs.98,31,461/- is not justified and the same is hereby deleted. This ground of appeal is allowed. 15. Being aggrieved by the order of the learned CIT-A, the Revenue is in appeal before us. 16. The learned DR before us vehemently supported the stand of the AO by reiterating the findings contained in his order which we have already adverted to in the preceding paragraph. Therefore we are not repeating the same for the sake of brevity. 17. On the contrary the learned the AR before us submitted that cash deposits were made out of cash withdrawal which is duly verifiable from cash books. The explanation for all the credit entries in bank and in cash book was duly furnished before the AO during the assessment proceedings. The copy of the explanation of sources of cash de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bank account on regular basis, appears to be very unusual. It is for the reason that no prudent businessman will do so, particularly in a situation where there was already sufficient cash in hand available with the assessee all the time. Indeed, a suspicion arises in the mind for the genuineness of the transaction on hand as discussed above. 19.3 It is the settled law, a suspicion cannot take the place of the evidence as held by Hon'ble Supreme Court in the case of CIT vs. Daulat Ram Rawatmull reposted in 53 ITR 574, the relevant extract reads as under: "The circumstances relied upon by Mr. Sastri do raise suspicion, but suspicion cannot take the place of evidence." 19.4 In view of the above, there cannot be any addition made to the total income of the assessee based on suspicion. A suspicion/doubt requires to investigate the facts in more detailed in order to find out some evidence so as to unearth the income of the assessee. 19.5 For the sake of repetition, we also note that indeed, the activity of withdrawing the cash and redeposit in the same in the bank is very unusual practice but there is no prohibition under any of the law for the time being in force for doing such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar as the amount of Rs.83,000/- is concerned, i.e. matching from withdrawals and deposits and rest of the amount, there is a gap between withdrawals and deposits of the amount. In respect of deposit made on 13/02/2008 is also within one month from the withdrawal of amount on 07/01/2008. In respect of other entries, the cash withdrawal is even before one year of deposit of the amount. The contention of the assessee is that the amount was kept as cash in hand. The authorities have doubted about the explanation furnished by the assessee. The authorities below have doubted the source of the cash deposits, however, the contention of the ld. counsel for the assessee is that he had withdrawn the amount from his bank account and there is no finding by the authorities below that the cash withdrawn by the assessee was utilized for any other purpose. In the absence of such finding, addition is not justified. We find merit into the contention of the ld. counsel for the assessee that there is no dispute that the amount which was withdrawn by the assessee on various dates during the year 2006 was available with him for making deposits. In the absence of finding that the amount which was previous ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s no detail, such as copy of the PAN, ledger, ITR, bank statement, furnished by the assessee with respect to one of the party namely Shri Kalpesh Patel. ii. With respect to Saral Management Consultancy only part of the documents, such as PAN, contra ledger copy was submitted. As such the copy of the ITR, bank statement were not furnished by the assessee in order to prove the creditworthiness of the parties and genuineness of the transaction. iii. On the independent enquiry conducted from ITD data base, it was found that there was not sufficient creditworthiness of the parties who could advance loan to the assessee. iv. Saral Management Consultancy is concern of Sutariya Family. The lender Saral Management Consultancy has received fund through cash deposit and concern of Barter group controlled by Atul Hirala Shah which were involved in providing accommodation entries. Thus, merely the transaction was carried out through the banking channel does not establish the genuineness of the transaction. 21.3 Based on the above, the AO concluded that the assessee failed to discharge the onus cast upon it under the provisions of section 68 of the Act with respect to the identity, cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tancy has stated that the PAN No. of Saral Management and Consultancy and income declared in the return of income by Saral Management and Consultancy for AY 2010-11 for a substantial amount of Rs.11654700/- and the said lender party has also shown substantial income through the period of seven years i.e. from A.Y.2009-10 to till A.Y.2015-16.Showcausing the fact that the AO had access to both the PAN and the return of income for all of the years of the creditor so as to say the identity and/or genuineness of the transactions was not at question since it was crossverifiable from the said page no.99 of the assessment order so passed by him in the case of Sarthav Infrastructure Pvt. Ltd. The appellant firm has placed before me the said relevant page no.99, which is compiled as per Exhibit-Ill of synopsis of arguments, in case of Sarai Management & Consultancy (Prop.MahendraSutaria-HUF}, there was debit balance of Rs.70,32,710/- as opening balance of the aforesaid mentioned party and further unsecured loan for an amount of Rs.3,05,71,290/- has been received during the year under consideration and Rs. 2,69,82,000/- was also repaid during the year under consideration, and hence an additio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re placed. Accordingly, the learned AR contended there cannot be made any addition on account of loan transaction under section 68 of the Act. 29. We have heard the rival contentions of both the parties and perused the materials available on record. The provision of section 68 of the Act fastens the liability on the assessee to provide the identity of the lenders, establish the genuineness of the transactions and creditworthiness of the parties. These liabilities on the assessee were imposed to justify the cash credit entries under section 68 of the Act by the Hon'ble Calcutta High Court in the case of CIT Vs. Precision finance (p) Ltd reported in 208 ITR 465 wherein it was held as under: "It was for the assessee to prove the identity of the creditors, their creditworthiness and the genuineness of the transactions. On the facts of this case, the Tribunal did not take into account all these ingredients which had to be satisfied by the assessee. Mere furnishing of the particulars was not enough. The enquiry of the ITO revealed that either the assessee was not traceable or there was no such file and, accordingly, the first ingredient as to the identity of the creditors had not be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The repayment of the loan amount by the assessee was duly accepted by the Revenue. In this regard, we find support and guidance from the judgment of Hon'ble Gujarat High Court in the case of the CIT Vs. Rohini builders reported in 256 ITR 360 wherein it was held as under: "The genuineness of the transaction is proved by the fact that the payment to the assessee as well as repayment of the loan by the assessee to the depositors is made by account payee cheques and the interest is also paid by the assessee to the creditors by account payee cheques." 29.4 Thus, there remains no doubt that the transaction of the advance received by the assessee from the parties was not genuine. In our considered view, once the assessee is able to prove that the money received by it was returned during the year in the account of the same parties, then there remains no doubt to draw an inference that the advances received by the assessee were unexplained cash credit. 29.5 Similarly, we also note that in respect of all the parties as discussed above the AO had sufficient documentary pieces of evidence including the details of the income of the loan parties namely Saral Management Consultancy who we ..... X X X X Extracts X X X X X X X X Extracts X X X X
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