9911796707
TMI Blog2023 (6) TMI 432X X X X Extracts X X X X X X X X Extracts X X X X ..... of appeal, therefore, with the consent of parties, all these appeals were clubbed, heard together and are being decided by this consolidated order to avoid the conflicting decision. For appreciation of and reference of facts, the appeal for the A.Y. 2018-19 is treated as a "lead case". In this appeal, the revenue has raised following grounds of appeal: "1. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in deleting the addition made by the Assessing Officer of Rs. 89,83,700/- on account of unexplained cash credit under Section 68 of the Act. 2. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in deleting the addition made by the Assessing Officer of Rs. 89,83,700/- on account of unexplained cash credit under Section 68 of the Act, ignoring the fact that despite providing sufficient opportunities, the assessee has failed to furnish necessary supporting evidences to substantiate the source of cash found from the possession and also details of the property transactions for which it was claimed to have been transported to Mumbai. 3. It is, therefore, prayed that the order of ld. CIT(A)-4 Surat may be set ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... zed in Mumbai. In response to said summon, partner of assessee Shri Kishore Kumar Manilal Patel appeared/attended the hearing and stated that cash of Rs. 89,83,700/- belongs to firm was transported to Mumbai from Rajkot, Bhavnagar and Ahmedabad branches of the firm. He also made statement that cash was being transported for making payment with regard to purchase of property in Mumbai by the assessee firm. Later on the Assessing Officer recorded the statement of Shri Babubhai N. Patel, partner of the assessee on 03/07/2019. The Assessing Officer recorded that the assessee was asked to produce documentary evidence related to purchase of property for which a cash of Rs. 89,83,700/- was transferred to Mumbai. The Assessing officer recorded that the assessee failed to give any satisfactory explanation. In absence of satisfactory explanation, the Assessing Officer issued show cause notice as to why the entire cash amount of Rs. 89,83,700/- should not be treated as unaccounted/unexplained cash for A.Y. 2018-19. The assessee filed its reply as recorded in para 6.1 of the assessment order. The Assessing Officer recorded that reply of assessee was not accepted. The Assessing Officer was of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee firm maintained cash book at their branches which are subject to audit, day to day cash balance is maintained as per cash book. The cash is generated mainly from the business income on account of Angadias charges, courier charges/commission received during ordinary course of business. All income is supported by Bharatias, receipt books maintained during ordinary course of business. The income credited in the books of assessee are reflected in the return filed under respective Act i.e. Service Tax and GST. The assessee further explained that the cash of Rs. 6,83,700/- from Bhavnagar, Rs. 43.00 lacs from Ahmedabad and Rs. 40.00 lacs from Rajkot was transferred to Mumbai branch. The C.A. certificate was filed before the DDIT (Inv.), Mumbai alongwith all supporting evidences and during assessment, the assessee fully explained and proved beyond doubt that source of said cash with supporting evidences was as per day to day cash book. Assessee further submitted that as per provisions of Section 68, the addition can only be made in case if any summon is found credited in the books of account and the assessee failed to explain the source of said credit then only Section 68 is applica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,907/- was opening balance at Bhavnagar out of which Rs. 6,83,700/- was sent to Mumbai and Rs. 44,56,273/- has opening cash balance at Ahmedabad out of which Rs. 43.00 lacs was transferred to Mumbai. On the basis of his cross verification of opening cash balance and cash transferred, the ld. CIT(A) was of the view that the assessee was having sufficient cash balance in three respective branches from where the cash was transported to Mumbai. The ld. CIT(A) held that the assessee has proved that they maintained substantial cash balance in its head office and branches which is evident from the cash balance shown for three preceeding financial years and the availability of cash on the date of transfer in three branches proved the source of cash found at Mumbai Central Railway station. On the basis of such observation, the ld. CIT(A) held that the addition of cash found and seized was not warranted and directed to delete the entire addition. Aggrieved by the order of ld. CIT(A), the revenue has filed present appeal before this Tribunal. 7. We have heard the submissions of the learned Commissioner of Income tax- departmental representative (CIT-DR) for the revenue and the learned author ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . CIT(A) during the appellate stage, also cross verified the details of cash in hand of assessee in last three assessment years as well as availability of cash at specific branch from where cash was transported to Mumbai. The only objection of Assessing Officer was that the assessee has not given documentary evidence about intending purchase of property. The ld. AR of the assessee submits that such deal was not materialized so the details of property was not made available particularly when the assessee has proved the source of cash beyond reasonable doubt. The ld. AR of the assessee invited the attention of Bench that the assessee has offered taxable income of Rs. 2.30 crores for A.Y. 2018-19. The availability of cash at different branches cannot be doubted vis a vis nature of business activities of assessee. The Assessing Officer has not given any finding on various documentary evidences. 9. We have considered the rival submissions of both the parties and have perused the orders of lower authorities carefully. We find that the Assessing officer made addition of cash seized by CGST, Mumbai at Mumbai Central Railway station only on the ground that the partner of assessee took stan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raised by the revenue are dismissed. 11. In the result, this appeal of revenue is dismissed. 12. Now we take assessees appeal for A.Y. 2019-20 being IT(SS)A No. 45/Srt/2022 wherein the assessee has raised following grounds of appeal: "1. In the facts and circumstances of the case, the learned Commissioner of Income Tax (Appeals) should have held the assessment as time barred and assessment order should have been held as illegal, void and nonest. The Ld. Commissioner of Income tax should have annulled, quashed the assessment. 2. In the facts and circumstances of the case, the learned Commissioner of Income Tax (Appeals) erred in confirming addition for alleged suppression of commission of Rs. 21,55,608/- on estimated basis. 3. In the facts and circumstances of the case, the learned Commissioner of Income Tax (Appeals) erred in confirming addition for alleged suppression of commission of Rs. 46,436/- on estimated basis. 4. In the facts & circumstances of the case, the addition of Rs. 21,55,608/- & Rs. 46,463/- may be deleted. 5. The appellant craves leave to add to, alter, amend and/or withdraw any ground or grounds of appeal either before or during the course of hearing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the appellate order (Para 7.4) that details of transactions as per Page 3 and 4 of Annexure A-l pertain to March 2019, placing reliance on the generic statement of Shri Ashok Patel that details pertained to 15-20 days prior to date of survey/search and thereby misleading himself to erroneous finding, ignoring the vital evidence in the form of loose paper (Page 2 of Annexure A-l ) found and seized during the course of search proceedings wherein the date i.e. 02.09.2018 has been clearly mentioned. 5. In addition and in alternate to Ground No.(2), (3) & (4), on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in interpreting the transactions appearing on page 1 and 2 of Annexure Al seized from the premises 3/145, Parsi Sheri, Navapura, Surat and considering the total amount of commission earned only on delivery of parcel of Jewellery and Diamonds amounting to Rs. 96,41,640/- to be as the total amount of cash transferred by the firm and accordingly reaching to erroneous conclusion in regard to the commission earned by the assessee. 6. In addition and in alternate to Ground No.(2), (3), (4) & (5), on the facts and in the circumstances of the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of search proceedings. 10. It is, therefore, prayed that the order the Ld. CIT(A)-4, Surat may be set aside and that of the AO may be restored to the above extent. 11. The appellant craves leave to add, alter, amend and/or withdraw any ground(s) of appeal either before or during the course of hearing of the appeal. 13. As recorded in the facts for A.Y. 2018-19, a search was conducted on 12/04/2019 at the office premises and branch offices. Notice under Section 153A of the Act was served upon the assessee. In response to notice under Section 153A of the Act, the assessee filed return of income on 23/02/2021 declaring income of Rs. 16,58,880/- . The assessment was completed under Section 153A r.w.s. 153(3) of the Act on 30/09/2021. The Assessing Officer made ad hoc addition on account of salary expenses of Rs. 1,72,25,981/-, unexplained expenditure of rent expenses of Rs. 8,43,788/-, both the additions under Section 69C, addition on account of suppression of commission income of Rs. 29,73,77,660/- and addition on account of images found in the mobile phone of employee of Rs. 2,32,18,000/-. On appeal before the ld. CIT(A), the additions on account of commission income was restri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ua the persons employed. The Assessing Officer after issuing show cause notice, and receiving reply thereof, not found satisfactory explanation, worked out the salary expenses of Rs. 1,72,25,981/- (Rs. 2,07,36,000 - 35,10,019/-). The ld. CIT(A) deleted the salary expenses by taking a view that the Assessing Officer made addition on the basis of approximate figure of employees. It was held that during the course of statement of partner, no question was asked about the expenses debited in the P&L account on account of salary expenses only a general question was asked. No addition in other assessment year was made purely on presumption basis. The ld. CITDR for the revenue submits that the additions were made on the basis of admission of partner of assessee who himself given idea of number of employees and addition was made on logical and prudent basis while inferring the number of employees at 134 in all branches of the assessee. 16. On the addition of rent expenses, the ld. CIT-DR for the revenue submits that during the assessment, the Assessing Officer noted that the assessee has debited Rs. 20,36,212/- as rent expenses for F.Y. 2018-19. On the basis of such figure, the monthly ren ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s purely on estimation basis on a general statement of Babubhai N Patel, partner of the firm without bringing on record any incriminating material to show that the assessee made any expenses on the addition to the expenses debited in the P&L account. Search was conducted on 12/04/2019, the statement recorded on that date will apply for the employee working on that day and not for the earlier years. The ld. AR submits that the Assessing officer made presumption merely on the basis of statement which was made on estimation basis, no exact number of employees was disclosed by the partner, no addition merely on the basis of statement unless any corroborative evidence found during the search can be made. 19. On the addition of rent and stationary expenses, the ld. AR of the assessee submits that the Assessing Officer made addition purely on assumption and presumption basis without any evidence. The assessee debited actual expenses in P&L account. The Assessing Officer made ad hoc addition, the ld. CIT(A) appreciated the facts and deleted the addition. To support such submission, the ld. AR of the assessee relied upon the following decisions; * Delhi High Court in the case of Pr.CIT V ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the basis of such observation, the ld. CIT(A) deleted the entire additions. Before us, no contrary fact or evidence or any law is brought to our notice by the ld. CIT-DR except relying on the order of Assessing Officer. Thus, we do not find any infirmity in the order of ld. CIT(A). The addition is made on mere assumption and presumption without any evidence on record. Thus, this part of ground of appeal is dismissed. 21. So far as addition of rent expenses of Rs. 8,43,788/- and Rs. 4,03,710/- stationary and vehicle expenses is concerned, we find that the Assessing Officer made these two additions on the basis of fact that main branches of the assessee are in metro cities like, Delhi, Mumbai, Surat, Baroda, Ahmedabad, Rajkot and Bhavnagar. The assessee has 20 other placed in various districts of Gujarat. The Assessing Officer on the basis of rent expenses debited by assessee worked out the monthly rent expenses. The Assessing Officer was of the view that the fair estimate of rent expenses would be Rs. 12,000/- per month for 20 offices thereby worked out the monthly rent of Rs. 2.40 lacs and multiplied by 20 thereby worked out the total estimation of rent expenses of Rs. 28,80,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Based on entries writings on page No. 3 and 4 of Annexure A-1, the commission income comes to Rs. 1,41,070/- and the cash transfer is Rs. 7.69 crores. The said commission income is of Surat office for half day only. The Assessing Officer during the assessment, noted that the assessee has offered commission income in the return of income of Rs. 2.485 crores. The Assessing Officer on the basis of statement of employee worked out the commission for whole of the year by excluding Sundays. The Assessing Officer estimated the commission income of all the branches and the assessee at Rs. 10,29,488/- per day and by excluding 52 Sundays, the Assessing Officer multiplied the income of 313 days and worked out the total commission income at Rs. 32,22,29,841/- and after granting set off commission income declared at Rs. 2,48,52,181/- worked out the difference of Rs. 29,73,77,600/-. The ld. CIT(A) restricted the addition to the extent of Rs. 21,55,608/- by taking a view that the details found during the search was for the month of March 2019 i.e. a month prior to date of search. Once it is accepted that transactions are for the month of March, 2019, efforts were made to find out whether these t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the period of 15 days and therefore, extrapolated commission for whole of the year. Similarly, on page No. 3 and 4 of Annexure-A-1, the ld. CIT(A) worked out the commission of Rs. 1,41,070/- for 15 days and extrapolated the commission for whole of the year and confirmed the addition of Rs. 16,92,820/-. Thus, the total addition confirmed by the ld. CIT(A) is Rs. 21,55,608/-. The ld. AR of the assessee submits that as per the trade practice, the commission earned by assessee is at Rs. 100/- per lacs which has been offered in the return of income. The ld. AR of the assessee submits that the addition confirmed/sustained by the ld. CIT(A) is also liable to be deleted. 24. We have considered the submissions of both the parties and have gone through the orders of lower authorities carefully. The Assessing Officer made addition of Rs. 29,73,77,640/- by taking a view that during the statement of Ashok Bhai Pate, recorded under section 131 on 13.04.2019, he stated that page No. 3 and 4 of Annexure-A-1 contains certain details of commission expenses earned, the amount transferred and pertains to Surat office of their firm for March, 2019. No date is mentioned on the pages, thus, the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 840/- (1,41,070 x 12). Such details were also made a part of order by the ld. CIT(A) as Exhibit-II. Thus, on the basis of his working, the ld. CIT(A) upheld the addition to the extent of Rs. 21,55,608/- (4,62,768 +16,92,840) thereby granted relief to the assessee. Before us, the ld. AR of the assessee vehemently argued that as per the trade practice, the commission earned by assessee is at Rs. 100/- per lac which has been offered in the return of income. We find that addition made by Assessing Officer is not based on incriminating material. The addition was made on hypothetical and presumption basis. The ld. CIT(A) is also on the basis of details mentioned in Exhibit-II presumed that the assessee earned commission @ Rs. 200/- per one lacs, without bringing any adverse material on record. No specific question is raised by the ld. CIT(A) while considering the commission income @ Rs. 200/- as a transfer charges for per lacs amount. 26. We find that Delhi Tribunal in Pradeep Kumar Sharma Vs DCIT (supra) held that where assessing officer made addition to the income of the assessee on the basis of certain material found and seized during search conducted upon a colleague of assessee and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the extent of Rs. 46,436/-. We find that the assessee has also raised ground against restricting the commission income to the extent of Rs. 44,436/-. During the hearing, the ld. AR of the assessee submits that he is not pressing this ground of appeal. Considering the submission of ld. AR of the assessee, ground No. 3 of the assessees appeal is dismissed being not pressed. 31. So far as ground of appeal raised in revenue's appeal is concerned, the ld. CIT-DR for the revenue supported the order of Assessing Officer. The ld. CIT-DR for the revenue submits that during the search proceedings, various images were extracted from mobile phone of Ashokbhai V. Patel. Such images show certain transactions. In response to show cause notice, the assessee simply denied that such images do not pertain to assessee firm. These images pertain to cash transactions, however, the assessee failed to furnish complete details of these transactions. The total addition of the images of transactions were of Rs. 2,32,18,000/-. The Assessing Officer made addition in absence of proper explanation. The ld. CIT(A) restricted the addition to the extent of Rs. 46,436/-. The ld. CIT(A) held that the total transa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... find that the Assessing Officer has not brought any evidence on record to substantiate such addition. Once the Assessing Officer has accepted the business of assessee as of Angadias/courier services at the most only transaction charges/commission can be added and not the substantial or entire amount allegedly reflected in the images. We find that the ld. CIT(A) taxed the commission income @ Rs. 200 per lacs and sustained the addition to the extent of Rs. 46,436/-. In our view, the commission added by the ld. CIT(A) does not require any further interference, which is sufficient to avoid the possibility of revenue leakage. Thus, we affirm the order of ld. CIT(A). 34. In the result, the appeal of the revenue is dismissed and the cross appeal of the assessee is partly allowed. 35. Now we take revenue's appeal in ITA No. 202/Srt/2022 and cross appeal of assessee in ITA No. 184/Srt/2022 for the A.Y. 2020-21. In ITA No. 202/Srt/2022, the revenue has taken following grounds of appeal: "1. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) has erred in directing to verify the cash balance and grant consequent relief for the addition to the extent of Rs. 57,92,54 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment as time barred and assessment order should have been held as illegal, void and nonest. The Ld. Commissioner of Income tax should have annulled, quashed the assessment. 2. In facts and circumstances of the appellant's case, the Ld. Commissioner of Income Tax (Appeals) should have deleted the addition of cash found from the head office Surat amounting to Rs. 21,44,960/- as it is part of the cash balance as per the cash book of the appellant firm and all the evidences including cash book was submitted during the course of assessment proceedings and Ld. Commissioner of Income Tax (Appeals) should not have directed AO to examine the appellant's claim and if appellant had cash in hand of Rs 48,34,173/- as on the date of survey/search, no further addition is warranted in respect of cash found from the head office at Surat. 3. In facts and circumstances of the appellant's case, the Ld. Commissioner of Income Tax (Appeals)should have deleted the addition of cash found from the branch office at Lehripura Vadodra amounting to Rs 9,83,480/- as it is part of the cash balance as per the cash book of the branch office at Lehripura Vadodra of the appellant firm and all t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cted to Rs. 3,45,834/-. And revenue in its appeal has raised its plea in restricting the addition of commission income to the extent of Rs. 3,45,834/- 38. We have heard the submissions of both the parties and have gone through the orders of lower authorities carefully. Ground No1 is assessees appeal related to validity of assessment order passed beyond the time limit. No submissions were made by ld AR for the assessee, thus, this ground of appeal is treated as not pressed and dismissed as such. 39. Ground No. 1 revenue's appeal relates to restricting the addition of cash found to the extent of Rs. 19,14,740/-. The assessee has also raised cross grounds of appeal in ground No. 2, 3 and 4 in their appeal. The ld. CIT-DR for the revenue submits that during the course of search and seizure action, total unaccounted cash of Rs. 77,02,280/- was seized out of which Rs. 15,67,170/- from Varachha branch, Rs. 21,44,960/- from Navpura Branch, Rs. 36,47,580/- from M.G. Road Branch, Vadodara and Rs. 3,47,570/- from Alkapuri Branch, Vadodara. The Assessing Officer asked the assessee to explain the cash seized during the search proceedings. The assessee simply stated that this cash is already a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e ld. CIT(A) directed to verify the claim of cash of Rs. 26,64,100/-, found and seized and the addition of amount has been made in the assessment order. The assessee made effort to explain the source of Rs. 9,83,480/- and Rs. 26,64,100/- (i.e. Rs. 36,47,580/-). If the explanation of cash of Rs. 26,64,100/- is perused, the assessee tried to explain it but there is contradiction in the factual submission and the total sum of Rs. 26,74,100/- and 9,83,480/- comes out to be Rs. 36,57,580/- and not Rs. 36,47,580/-. At the time of recording statement of Amitkumar M. Patel on 12/04/2019 that out of Rs. 36,47,580/-, the amount of Rs. 9,46,080/- belongs to assessee which is contrary to the contention of assessee made during the assessment proceedings. 40. On the addition of Rs. 17.29 crores added by Assessing Officer, the ld. CIT-DR submits that during the assessment, the partner of assessee was asked to give the complete details of the customers who have transferred their cash through assessee firm. However, the partner of assessee firm stated that he does not have details available with him. In reply to question No. 10, the partner of assessee stated that some of the amount involved from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and remaining Rs. 26,64,100/- belongs to various constituents, details of which were submitted as per page No. 233 to 235 of the paper book and separate paper book for copy of receipts issued to 87 different constituents and their ID proof etc. At Varachha, Surat branch, cash of Rs. 15,67,170 was found which was accepted by assessee and not disputed by Assessing Officer in their grounds of appeal before Tribunal. For cash of Rs. 3,47,570/- found at Alkapuri, Baroda branch was also accepted by assessee and not disputed by Assessing Officer in the grounds of appeal raised before the Tribunal. Thus, dispute is of only cash found at Surat and Lahripura, Baroda branch which is directed to be verified. The ld. AR of the assessee submits that a clear direction for verification of such cash book had been given to the Assessing Officer. 42. On the remaining ground which relates to ground No. 2 and 3 of revenue's appeal and ground No. 5 of assessees appeal which relates to addition of cash of Rs. 17.29 crores and restricted by the ld. CIT(A) to the extent of Rs. 3,45,835/- by making addition of commission income @ Rs. 200/- per one lac. The ld. AR of the assessee submits that the Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs. 15,67,170/- plus (+) Rs. 3,47,570/- in the income by crediting the said amount by P&L account and shown in the return of income. Thus, we affirm the order of ld CIT(A) to that extent. 44. The assessee offered explanation in the following manner: Point No. Cash Found & Seized at Amount (Rs) Explanation I Surat HO 21,44,960 Cash of Rs. 21,44,960 is part of the cash balance as per day to day cash book maintained by appellant firm II Lehripura (baroda) Branch 36,47,580 (a) Rs. 9,83,480/- was out of the cash balance as per cash book and (b) Rs. 26,64,100 belonging to various constituents received during ordinary course of business III Varachha branch Alkapuri Branch 15,67,170 Already offered amount of Rs. 19,14,740/- (Rs. 15,67,170 + Rs. 3,47,570/-) as income by crediting the said amount to profit and loss account and ultimately offered for taxation in ROI for AY 2020-21. Total 77,07,280 We find that the ld. CIT(A) after appreciating the contentions of assessee and perusal of cash book held that cash found from the Varachha Branch, Surat and Alkapuri Branch (Baroda) was offered to tax as undisclosed income, hence such addition was deleted. 45 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . During the course of their business at various branches, the assessee received cash from clients for transferring to another branch as per direction of their client. The evidence found during the course of search which is basis for making addition is also shown that the amounts are received from various parties for transferring them to other branches of the assessee. This fact is evident from the statement of Babubhai Patel. This cash was not found in the searched premises, such fact shows that cash in question is dealt by assessee by merely handling or transferring from one branch to another branch and does not belong to assessee. The cash is handled to their regular course of Angadiya business and cannot be taxed as income of assessee. The ld. CIT(A) held that at the most can be taxed is the commission earned by assessee on such transaction. The ld. CIT(A) estimated the commission of Rs. 200/- per lac and worked out the commission income of Rs. 3,45,834/- thereby granted substantial relief to the assessee. 47. Before us, the ld. AR of the assessee vehemently submitted that the commission estimated on handling of such cash is on the higher side, the assessee has already offered ..... X X X X Extracts X X X X X X X X Extracts X X X X
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