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TMI Blog2022 (8) TMI 1245X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee under the garb of consultancy income, and this entire transaction of consultancy income was coloring device adopted by assessee to give legitimacy to its unaccounted and undisclosed cash/money/income by depositing cash in bank during demonetization period, to avoid bank notes held by it from becoming valueless as legal character of old bank notes of denomination of Rs. 500 and Rs. 1000 were withdrawn, owing to demonetization announced on 08th November, 2016. We have observed that both the authorities have passed well reasoned ,detailed and speaking order, and we are not inclined to interfere with the orders passed by authorities below, and we confirm the appellate order passed by ld. CIT(A). We also hold that learned CIT(A) rightly relied upon decision of Hon ble Supreme Court in the case of Sumati Dyal [ 1995 (3) TMI 3 - SUPREME COURT] and Durga Prasad More [ 1971 (8) TMI 17 - SUPREME COURT] as the claim of consultancy income set up by the assessee is a coloring device adopted by the assessee to convert its unaccounted and undisclosed money which was going to become valueless due to bank notes of Rs. 1000 and Rs. 500 ceased to be legal tender , due to demonetization an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 18 Appeal No.13/DCIT/CC/Vns./CIT(A) -III/Lko/18-19 02.12.2019 34/Vns/2020 M/s Admire Infra Projects Private Ltd. 2017- 18 Appeal No.08/DCIT/CC/Vns./CIT(A) -III/Lko/18-19 03.12.2019 35/Vns/2020 M/s Admire Infraheights Private Ltd. 2017- 18 Appeal No.15/DCIT/CC/Vns./CIT(A) -III/Lko/18-19 03.12.2019 36/Vns/20 20 M/s Tulsiani Fitness and Healthcare Pvt. Ltd., 2017- 18 Appeal No.12/DCIT/CC/Vns./CIT(A) -III/Lko/18-19 02.12.2019 37/Vns/20 20 M/s Sunshine Infrazone (P) Ltd., 2017- 18 Appeal No.07/DCIT/CC/Vns./CIT(A) -III/Lko/18-19 02.12.2019 24/Vns/2020 M/s Avantika Infra Venture (P) Ltd., 2017- 18 Appeal No.09/DCIT/CC/Vns./CIT(A) -III/Lko/18-19 03.12.2019 The aforesaid appellate proceedings had arisen before ld. CIT(A) , from diffe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .12.2018 2. Since all these nine appeals involved common issues, they were heard together and are being disposed of by this common order. All these nine appeals were filed by different assessee s , and these assessee s had not entered appearance before the Division Bench, despite notices being sent by Registry by speed post as well by e-mail. It is in-fact, the assessee who filed an application for early hearing on 23.02.2021 , but since then the assessee is not appearing before the Division Bench. When this appeal came up for hearing before DB on 23rd August, 2022, none appeared on behalf of the assessee nor any adjournment applications were filed on behalf of the respective assessee s. The DB decided to proceed to adjudicate these nine appeals on merits in accordance with law, after hearing ld. CIT-DR and after perusing the material on record. We will first take up assessee s appeal in ITA No. 30/Vns/2020, for ay: 2017-18, filed by the assessee namely Pawini Infraventures Private Limited. ITA No.30/Vns/2020, AY 2017-18 3. The grounds of appeal raised by assessee in memo of appeal filed with Income Tax Appellate Tribunal, Varanasi Circuit Bench, Varanasi, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... veral documents, cash, jewellery etc. as per Annexures to the Panchnama s drawn, were claimed by Revenue to have been found/seized by the search party. A search was conducted in the business premises of the assessee namely M/s. Pawini Infraventures Pvt. Ltd., on 16.11.2016. Thereafter the cases was centralized with ld. DCIT , Central Circle, Varanasi, vide order dated 26.09.2017 passed by ld. PCIT, Allahabad , for completion of assessment proceedings u/s. 153A/143(3) of the 1961 Act. The assessee filed return of income u/s. 139 , on 27.03.2018 for impugned assessment year 2017-18, showing total income of Rs.7,75,350/-. The AO issued notice s u/s. 143(2) and 142(1) of the 1961 Act, on 14.09.2018 , which were claimed by Revenue to have been duly served on the assessee. The assessee is a Private Limited Company and has claimed to be engaged in construction and other ancillary and related activities and it claimed to have derived income under the head business and profession. The Assessing Officer observed during course of assessment proceedings that for all the assessment years from 2011-12 to 2016-17, the assessee had not offered income to the scale offered in ay: 2017-18. Since t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s been received against sales/service. Registration under service tax law is not applicable on your assessee as the receipt of commission is less than Rs. 9,00,000/-. The AO issued show cause notice u/s. 142(1) dated 11.12.2018to the assessee, whereby the assessee was asked to submit PAN, name and address of persons from whom cash was received allegedly against sales/service, which as per the Assessing Officer , the assessee had failed to adduce evidence to proveidentity, creditworthiness and genuineness of the parties whose name appears in those receipts. Further , the Assessing Officer asked the assessee to justify the claim for expenses and to produce bills for expenses. The AO also asked assessee to justify the nature and scope for consultancy services allegedly provided by the assessee. As per the Assessing Officer vide aforesaid show cause notice , claim of the assessee for consultancy income was not genuine , and the cash deposited and credited in the books of accounts was generated out of unexplained and unaccounted sources and the same was brought in the books of accounts by the assessee under the garb of consultancy income. Thus, the Assessing Officer asked assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not provide the details of employees or key persons of the company who have been providing consultancy on behalf of the company.The AO observed that the receipt voucher is after thought and was prepared post search merely to justify the claims of assessee s receipt. The AO observed that the genuineness of transaction and the identity and creditworthiness of persons from whom money is claimed to have been received , have not been justified. The Assessing Officer also observed that the assessee has not produced books of account during assessment proceedings, despite being given several opportunities. The Assessing Officer also doubted genuineness of the expense incurred by the assessee, and the AO observed that the expenses such as audit fee, ROC fee, Bank charges and professional charges have not increased in proportion to increase in income , while so far as staff salary expenses of Rs. 90,000/- claimed by the assessee, the AO observed that apart from this year under consideration , the assesse has not claimed salary expenses in any of the earlier years. The AO concluded that the expenditure was claimed by the assessee merely to disguise the receipt of credit of money in the bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... first eight months of the year against consultancy services, but did not receive anything in the remaining four months of the financial year. This as per AO is clear evidence of windows dressing of accounts and the assessee has tried to fabricate its account post demonetization and search operation. The AO observed that the expenditure claimed and income shown is used as coloring device merely to establish the genuineness of sources of income, while as per AO the fact is that the assessee deposited cash in bank account out of unaccounted and undisclosed sources of income , under the garb of consultancy income. The Assessing Officer also observed that no documents relating to consultancy services for the financial year 2016-17 pertaining to relevant ay: 2017-18 was found ,impounded or seized during the course of search, seizure and survey operations conducted by Revenue. It was also observed by the Assessing Officer that survey u/s. 133A of the Act was conducted by Revenue in the premises of Shri Uday Kushwaha, CA of the assessee, but no document supporting the claim of the consultancy services were found . Thus, the AO concluded that the vouchers are all made up post search and/or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 891300 25200 800000 13.11.2016 3 Grace Infrazone Pvt. Ltd. 0 0 24500 35400 25000 26600 859700 26550 800000 13.11. 2016 4 Admire Infraprojects Pvt. Ltd. 0 32000 40500 30500 33400 33800 882000 35500 800000 16.11.2016 5 Admire Infraheights Pvt. Ltd. 0 30000 92000 34500 36900 32600 890700 34500 800000 16.11.2016 6 Tulsiani Fitness and Healthcare P. Ltd. 0 33000 42000 40500 36500 34650 932400 34100 80000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5. Admire Infraheights Pvt. Ltd. 890700 852200 38500 6. Tulsiani Fitness and Healthcare Pvt. Ltd. 932400 892400 40000 7. Admire Realtors Pvt. Ltd. 829500 829500 0 8. Pawini Infrazone Pvt. Ltd. 978600 857700 120900 9. Avantika Infraventure Pvt. Ltd. (sale of soil) 807100 794600 12500 10. Pawini Buildzone Pvt. Ltd. 879800 859500 20300 11. Sunshine Infrazone Pvt. Ltd. 895300 895300 0 The Assessing Officer observed that evidently turnovers of all the companies are having similar pattern. None of the companies have reported turnover in any other assessment year to the extent shown in the demonetizatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case of CIT v. P. Mohankala Thus, the AO held that the consultancy receipt of Rs. 8,93,100/- shown by assessee is unexplained cash credit u/s. 68 of the 1961 Act , and is to be taxed @60% by invoking provisions of Section 115BBE of the 1961 Act, vide assessment order dated 27th December, 2018 passed by AO u/s 143(3) read with Section 153B of the 1961 Act. 5. Aggrieved by assessment order dated 27th December, 2018 passed by the AO u/s 143(3) read with Section 153B of the 1961 Act, the assessee filed first appeal before ld. CIT(A) , which stood dismissed by ld. CIT(A) vide appellate order dated 03rd December, 2019, by holding as under: Ground No. 1 to 6 are relates to addition of Rs. 8,93,100/-, made by the AO. 7. In this case return of income was filed at total income of Rs. 7,75,350/- on receipts of 8,93,100/-. During the course of assessment proceedings the AO noted that the appellant had disclosed abnormal jump in income for the year under consideration. The appellant had deposited 8,00,000/- on 13/11/2016 in the bank account, during demonetization period. On being confronted to substantiate source of deposit and receipts, it was submitted that the total receipts w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt has disclosed receipts in the range of Rs. 31,160/- to 58,000/-. The receipt of the appellant has again dipped to Rs. 31400/- in the next year, for the A.Y. 2018-19. 12. Thus it is clear that their is no rising trend in the trajectory of receipts of the appellant. The receipts disclosed by the appellant in the year under consideration are abnormally high in comparison to the overall trend of amount of receipts disclosed by the appellant. It is a fact that no document was found during the search and seizure operation conducted at the premises of the appellant with regard to the professional receipts and the appellant has submitted the copies of the bills during the assessment proceedings only 13. The receipts issued by the appellant are all issued prior to the date of deposit of cash i.e. 13/11/2016 . It is practically improbable that a company having a robust business up to a certain date ceases to have any business after that particular date. The bills issued by the appellant does not provide any information with regards to identity of the person to whom the same is being issued except for the name of the person. Thus the genuineness of the receipt issued by the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Name of the Company Amount of turnover 1 Pawini Infraventure Pvt. Ltd. 813900 2 Pawini Homes Pvt. Ltd. 851200 3. Grace Infrazone Pvt. Ltd. 859700 4. Admire Infraprojects Pvt. Ltd 882000 5 Admire Infraheights Pvt. Ltd 852200 6 Tulsiani Fitness and healthcare Pvt. Ltd 892400 7. Admire Realtors Pvt. Ltd. 829500 8 Pawini Infrazone Pvt. Ltd. 857700 9 Avantika Infraventures Pvt Ltd. (Sale of soil) 794600 10 Pawini Buildzone Pvt Ltd, 859500 11 Sunshine Infrazone Pvt. Ltd. 895300 A peculiar fact that emerges from the perusal of the above reveals that all these companie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has to establish the truth of those recitals otherwise it will be very easy to make selfserving statements in documents either executed or taken by a party and rely on those recitals. If all that an assessee who wants to evade tax is to have some recitals made in a document either executed by him or executed in his favour then the door will be left wide open to evade tax. A little probing was sufficient in the present case to show that the apparent was not the real. The taxing authorities were not required to put on blinkers while looking at the documents produced before them. They were entitled to look into the surrounding circumstances to find out the reality of the recitals made in those documents. It is well settled principle of law as declared by the Hon'ble Supreme Court in the case of Sumati Dayal Vs. CIT (214 ITR 801) (SC) that the true nature of transaction have to be ascertained in the light of surrounding circumstances. It needs to be emphasized that standard of proof beyond reasonable doubt has no applicability in determination of matters under taxing statutes, in the present case, it is clear that apparent is not the real as evidence from the investigation repor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de Finance Act 2016w.e.f. 01.04.2017 to the effect that no setting off of any loss shall be allowed against Income of the nature referred to in the specified sections. This section was further amended vide Taxation Laws (Second Amendment) Act 2016 w.e.f. 01.04.2017 (A.Y 2017- 18). The section as amended as on today reads as under: (1) Where the total income of an assessee, (a) Includes any income referred to in section 68, section 69, section 69A, section 69B, section 69C or section 69D and reflected in the Return of Income furnished under section 139, or (b) determined by the Assessing Officer includes any income referred to in section 68, section 69, section 69A, section 69B, section 69C or section 69D, if such income is not covered under clause (a), the income-tax payable shall be the aggregate of (i) the amount of Income-tax calculated on the income referred to in clause (a) and clause (b), at the rate of sixty per cent; and (ii) the amount of income-tax with which the assessee would have been chargeable had his total Income been reduced by the amount of income referred to in clause (i) The purpose and object of the latest amendment was explained in the state ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as failed to correctly explain the source of receipts disclosed by it and in such cases the application of provisions of section 11588E are warranted. 6. Still aggrieved by appellate order dated 03rd December, 2019 passed by ld. CIT(A), the assessee filed second appeal with tribunal . None appeared when this appealwas called for hearing before the Division Bench, on 23rd August, 2022. The assessee filed appeal in the year 2020 and despite opportunities granted to the assessee , the assessee chose not to enter appearance before tribunal. Notices for hearing were sent by Registry by email as well as speed post , which remains un-complied with by the assessee. In-fact, it is the assessee who moved an application filed on 23.02.2021 with tribunal for early hearing of the appeal, but later on the assessee never appeared before the tribunal. Now, when this appeal came up for hearing before the Division Bench , dated 23.8.2022, the Bench decided not to grant any further adjournment and proceeded to adjudicate this appeal on merits in accordance with law, after hearing ld. CIT-DR. The ld. CIT-DR opened argument before the Division Bench and submitted that this appeal pertains to ay:201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f account . The ld. CIT-DR submitted that it is against all human probability that such small-small amount of consultancy averaging Rs. 14000/- each will be rendered by all these nine assessee s , which was done to cover up cash deposit of Rs. 8,00,000/- in their bank accounts by all these nine assessee s. It was submitted that in all eleven companies belonging to the same group exhibited similar pattern of deposit of cash in their bank account between 13.11.2016 to 16.11.2016 , during the period of demonetization which was camaflouged as consultancy income with an intent to evade taxes. It was submitted by ld. CIT-DR that similar explanation was given by all the assessee in all the eleven cases. It was also submitted that for earlier years, the consultancy income shown was negligible and also for subsequent period post deposit of cash in bank account between 13.11.2016 to 16.11.2016, the consultancy income was negligible for the year under consideration , and even for subsequent assessment year, the assessee has shown negligible consultancy income. It was submitted that the assessee was searched on 16.11.2016. The ld. CIT-DR submitted that only nine cases are fixed out of the afor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to 13.11.2016 till the end of financial year on 31.03.2017, again the income level fell sharply, so much so alleged consultancy income of Rs. 8,13,900/- was stated to be received from 01.04.2016 to 13.11.2016 , while only Rs. 79,200/- was claimed to received from 14.11.2016 to 31.03.2017, and all alleged consultancy income were stated to be received in cash. Thus, none of the allegedconsultancy income was received by cheque , and despite the assessee having bank account , these alleged consultancy income received in cash , were not deposited in bank account, until 13.11.2016, when in one tranche the assessee deposited Rs. 8,00,000/- in its bank account. For earlier years , the assessee declared meager income and subsequent to ay:2017-18, the assessee declared meager income of Rs. 31400/- for ay:2018-19, which is evident from chart reproduced below , in this order. The assessee allowed cash to built up until13.11.2016 through these small small denomination of alleged consultancy income aggregating to Rs. 8,13,900/- claimed to have been received by the assessee, and deposited cash of Rs. 8,00,000/- in one tranche its bank account on 13.11.2016. Incidentally, when this cash of Rs. 8,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k account with Federal Bank in one tranche, on 13.11.2016, which is just within five days of demonetization of bank notes of Rs. 500 and Rs. 1000 announced by GOI. However , to allow genuine and bonafide people not to suffer due to the sudden demonetization of these old bank notes of denomination of Rs. 500 and Rs. 1000wherein they ceased to be legal tender, government allowed a window to exchange for value such demonetized old bank notes notes of denomination of Rs. 500 and Rs. 1000 as well allowed deposit ofsuch demonetized bank notes in bank accounts, during specified period. In the case of this group as many as 11 companies deposited Rs. 8,00,000/- each in their respective bank accounts between 13.11.2016 to 16.11.2016, and in all these 11 entities belonging to Tulsiani Group , similar pattern of explanation is offered that consultancy income was earned by these companies which were all of small small denomination averaging Rs. 14000/-. Only name of person to whom alleged consultancy services were claimed to be rendered by these assessee s had been given, while no details of the address , PAN of these persons to whom consultancy was rendered were given . Even the scope of co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2018- 19 Cash deposit during demonetization Date of deposit 1 Pawini Infraventure Pvt. Ltd. 58000 46000 0 45000 33500 31160 893100 31400 800000 13.11.2016 2 Pawini Homes Pvt. Ltd. Nil Nil 25500 40800 27400 26560 891300 25200 800000 13.11. 2016 3 Grace Infrazone Pvt. Ltd. 0 0 24500 35400 25000 26600 859700 26550 800000 13.11.2016 4 Admire Infraprojects Pvt. Ltd. 0 32000 40500 30500 33400 33800 882000 35500 800000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts as per ledger 13.11.2016 to 31.3.2017 1. Pawini Infraventure Pvt. Ltd. 893100 813900 79200 2. Pawini Homes Pvt. Ltd. 891300 851200 40100 3. Grace Infrazone Pvt. Ltd. 859700 859700 0 4. Admire Infraprojects Pvt. Ltd. 882000 882000 0 5. Admire Infraheights Pvt. Ltd. 890700 852200 38500 6. Tulsiani Fitness and Healthcare Pvt. Ltd. 932400 892400 40000 7. Admire Realtors Pvt. Ltd. 829500 829500 0 8. Pawini Infrazone Pvt. Ltd. 978600 857700 120900 9. Avantika Infraventure Pvt. Ltd. (sale of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s rendered large number of consultancies of small small amounts.Even , the assessee did not provide details of employees or key persons of the company who have been providing consultancy on behalf of the company. Even during search and seizure conducted by Revenue u/s 132(1) , on 16.11.2016, there was no evidence /material found/seized which could suggest that the assessee was in-fact rendering consultancy services. Even survey u/s133A was conducted by Revenue on CA of the assessee, but no evidence /material as to rendering of such consultancy services was found/impounded during the course of survey. The assessee is obligated to maintain and keep proper books of accounts not only under the 1961 Act but also under the Companies Act, as the assessee is private limited company. The primary onus is on the assessee to prove that the transactions recorded in its books of accounts towards consultancy receipts are genuine and apparent is real and not a smoke screen to evade taxes, which inter-alia requires proving whether consultancy services were infact rendered and to whom the services were rendered, and thus these alleged consultancy services were genuinely rendered and not used as shie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncy income was coloring device adopted by assessee to give legitimacy to its unaccounted and undisclosed cash/money/income by depositing cash in bank during demonetization period, to avoid bank notes held by it from becoming valueless as legal character of old bank notes of denomination of Rs. 500 and Rs. 1000 were withdrawn, owing to demonetization announced on 08th November, 2016. We have observed that both the authorities have passed well reasoned ,detailed and speaking order, and we are not inclined to interfere with the orders passed by authorities below, and we confirm the appellate order passed by ld. CIT(A). We also hold that learned CIT(A) rightly relied upon decision of Hon ble Supreme Court in the case of Sumati Dyal(Supra) and Durga Prasad More(Supra) , as the claim of consultancy income set up by the assessee is a coloring device adopted by the assessee to convert its unaccounted and undisclosed money which was going to become valueless due to bank notes of Rs. 1000 and Rs. 500 ceased to be legal tender , due to demonetization announced on 08th November, 2016 . The authorities below have rightly invoked provisions of Section 68 and made additions to the income of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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