SHRI JAWAHAR RAMJIBHAI MORI,,RAJKOT vs. THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-1,, RAJKOT

आयकर अपीलीय अिधकरण, अहमदाबाद �यायपीठ IN THE INCOME TAX APPELLATE TRIBUNAL, RAJKOT BENCH, RAJKOT (CONDUCTED THROUGH E-COURT AT AHMEDABAD) BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND Ms. MADHUMITA ROY, JUDICIAL MEMBER अपील सं./ITA No.23/Rjt/2019 िनधा�रण वष�/Asstt. Year: 2013-2014 Shri Jawaharbhai Ramjibhai Mori, D.C.I.T., Design Workshop Architects Vs. Central Circle-1, Consultants, Rajkot. Trisha Complex, 1, 2nd Floor, Above Chandan Super Market, Amin Marg. Rajkot.

PAN: AELPM3631C

(Applicant) (Respondent) Assessee by : Shri Nitin Kamdar, A.R Revenue by : Shri S.S. Rathi, Sr. D.R सुनवाई क� तारीख/Date of Hearing : 29/09/2021 घोषणा क� तारीख /Date of Pronouncement: 25/10/2021 आदेश/O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:

The captioned appeal has been filed at the instance of the Assessee against the order of the Learned Commissioner of Income Tax (Appeals)-11, Ahmedabad, dated 15/10/2018 arising in the matter of assessment order passed under s. 143(3) r.w.s. 147 of the Income Tax Act, 1961 (here-in-after referred to as "the Act") relevant to the Assessment Year 2013-2014.

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3.1 Accordingly, the above income of ₹ 27 Lacs was treated as unaccounted income and added to the total income of the assessee.

3.2 The assessee carried the matter before the learned CIT (A) and submitted that the amount of cash was received from the different parties for various expenses to be incurred on their behalf. These expenses were in the nature of fees to be paid

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to Municipal Corporation such as scrutiny fees, CD, AOP, Treeguard, development charges, Jagah Rokan, open plot charges, drainage charges etc. The cash was received from the parties for the reason that the municipal corporation does not receive the payment in cheque. Therefore such amount of cash was not recorded in the books of accounts as it was not the income of the assessee. The assessee in support of his contention filed the confirmation of all the parties to the AO during the assessment proceedings. But there was no enquiry conducted by the AO to disprove the contention of the assessee.

3.3 The assessee also submitted that seized document was neither written in his handwriting or on his letterhead nor signed by him. As such seized paper was written by the staff of the assessee for making various calculations depicting the fee to be received and the expenses to be incurred on behalf of the parties. Accordingly, the receipt of ₹27 Lacs does not represent the income of the assessee.

3.4 At the time of survey, there was not found any cash more than the cash recorded in the regular books of accounts which evidences that the cash received from the parties for incurring the expenses on their behalf does not belong to him. The assessee alternatively contended that the entire amount cannot be treated as income as the impugned amount of cash receipt represents the business receipts. As such the element of profit embedded in such cash receipt can be brought to tax. However, the learned CIT (A) confirmed the order of the AO by observing that the entries reflected in the seized documents were in cash as well as in cheque. Part of the bank entries were matching with the regular books of accounts of the assessee. Accordingly, it is evident that the cash entries shown in the seized documents are correct.

3.5 Nevertheless, the learned CIT (A) was convinced with the alternate contention of the assessee that entire amount of cash receipt cannot be treated as income of the assessee as held by various judicial pronouncements. Accordingly he has applied 50% of the cash receipt as income after making a reference to the Page 3 of 8

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provisions of section 44 AD of the Act as the assessee was engaged in the profession of architect. Hence, the learned CIT (A) confirmed the addition of ₹13.50 Lacs to the total income of the assessee.

7.1 It was contended by the learned AR that once an addition of ₹5 lakhs has been made in the hands of Now Iron Triangle Ltd., therefore the same cannot be added to the total income of the assessee. However, we disagree with the contention of the learned AR for the assessee for the following reasons. i. Generally, every expenditure represents the income in the hands of the recipient. But the allowability of expenditure as deduction does not depend on the fact that the recipient has included such receipt in his Page 4 of 8

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income. The criteria for the expenditure from the allowability point of view has been provided under chapter IV-D of Income Tax Act being Profits and Gains of business and profession. Thus, we have to see whether the expenditure claimed by the assessee as deduction meets the conditions/provisions of the Act. Thus, the fact that the other party has included such amount of receipt in the taxable income cannot be a criteria for allowing the expenses. If this practice is adopted then it will be difficult to disallow the expenses which do not meet the criteria laid down under the provisions of law on the reasoning that the other party i.e. recipient has included such income in his return of income. ii. We have to allow the expenses from the point of view of the assessee and not from the point of the income in the hands of the recipient. These are 2 different things and therefore there cannot be established any nexus for allowing or disallowing the expenses. 7.2 In view of the above, we are of the view that prayer made by the learned AR for the assessee at the time of hearing is not acceptable. Therefore, we reject the same.

7.3 Moving further, we note that the assessee is under the obligation to explain the entries found in the seized documents. It is for the reason that as per the provision of section 292C(1) of the Act it is presumed that the documents found during survey from the premises of the assessee belongs to the assessee and its contents are also correct. The relevant extract of the provisions of section reads as under: Presumption as to assets, books of account, etc. 292C. (1) Where any books of account, other documents, money, bullion, jewellery or other valuable article or thing are or is found in the possession or control of any person in the course of a search under section 132 or survey under section 133A, it may, in any proceeding under this Act, be presumed— (i) that such books of account, other documents, money, bullion, jewellery or other valuable article or thing belong or belongs to such person; (ii) that the contents of such books of account and other documents are true; and (iii) that the signature and every other part of such books of account and other documents which purport to be in the handwriting of any particular person or which may Page 5 of 8

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reasonably be assumed to have been signed by, or to be in the handwriting of, any particular person, are in that person's handwriting, and in the case of a document stamped, executed or attested, that it was duly stamped and executed or attested by the person by whom it purports to have been so executed or attested.

7.4 However, we find that several court has held that, the presumption as discussed above is rebuttable. In other words, the assessee by furnishing the documentary evidence can rebut the presumption specified under section 292C of the Act. In this regard we refer the judgment of Hon’ble Delhi High Court in case of Pr. CIT vs. Delco India (P) Ltd, reported in 67 taxmann.com 357, where it was held as under: Section292C, inter alia, provides that where any books of account or other documents are found in possession or control of any person in the course of search undersection 132 or survey undersection 133A, it may be presumed that such books or documents belong to such person. Undisputedly, such presumption is rebuttable.

7.5 In this regard we also find support and guidance from the judgment of Hon’ble Madras High Court in case of Lalitha Jewellery Mart (P) Ltd vs. DCIT, 115 taxmann.com 369, where it was held as under:

Further, both undersection 132(4A) and section292C(1), there is only a presumption. However, such presumptions are rebuttable if adequate explanations are given. Therefore, it was not proper on the part of the DIT Kolkata to exercise control over the seized gold articles to deny the rights of the petitioner jeweller under the 1st proviso to section 132. [Para 43]

7.6 Coming to the facts of the case, we find that the assessee has furnished the necessary details such as ledgers, confirmation from the clients stating that the cash received from these parties were for certain expenses to be incurred on behalf of the clients. Furthermore, the amount of fees received by the assessee in the form of cheque was only the income of the assessee. Now, the onus shifted upon the AO disprove the contention of the assessee. For this purpose, the AO has been given enough power under the provisions of law especially under section 133(6)/131(1) of the Act. But we find that no such power was exercised by the authorities below. We find that in the similar facts and circumstances the Hon’ble Delhi High Court in

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the case of CIT vs. Paeveen Juneja [IT Appeal No. 57 of 2017, dated 14-7-2017] held as under:

"3. A search took place in the premises of the Respondent/Assessee pursuant to which certain documents were seized. The document on the basis of which the above addition was made was a piece of paper (identified as Annexure-2. This was a hand written paper purportedly containing details of house construction expenses of Rs. 49 lakhs out of which Rs. 29. 70 lakhs has already been paid. 4. The explanation offered by the Assessee was that the said paper was not related to him the assessee.1 He was working as a professional director in Shamken Multifab Ltd. and used to handle various projects of the said company. The CIT (A) rejected the above explanation. Since the said document had been seized from the residence of Assessee, the CIT (A) drew a presumption under section 292C of the Act was that it belonged to him. Further, the CIT(A) proceeded to hold that Rs. 49 lakhs constituted the unexplained income of the Assessee since the Assessee had not submitted any evidence like a confirmation letter or any other document to show that expenditure related to any project of the aforementioned company. 5. The ITAT in the impugned order noted that the said document "does not indicate if it pertains to the assessee nor the address and location of the property is mentioned therein nor such property has been located by the AO during the assessment proceedings. The AO has also not brought on record any forensic evidence to prove the handwriting of the loose paper relied upon by him to make the addition, which is exclusively made on the basis of suspicion and guesswork. Even no corroborative material has brought on record by the AO to substantiate the addition nor the CIT(A) has called for any remand report seeking corroborative evidence, if any."

7.7 It is also pertinent to note that seized document is a piece of evidence which play a vital role to determine the income of the assessee. But such document cannot give absolute power to the authorities below to work out undisclosed income of the assessee without bringing corroborative evidences. The seized document give the information to the AO to dig out the facts in more detail that too in a particular direction. The seized documents must be supported based on other materials indicating that cash received by the assessee was either available or it was utilized in some other manner. Thus, based on piece of lose paper, nothing adverse can be drawn against the assessee without verifying or bringing other corroborative evidences to support the case of the revenue.

7.8 In view of the above and after considering the facts in totality we are not inclined to confirm the order of the authorities below. Hence, we set aside the order

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of the learned CIT (A) and direct the AO to delete the addition made by him. Hence, the ground of appeal of the assessee is allowed.

Order pronounced in the Court on 25/10/2021 at Ahmedabad.

Sd/- Sd/- (MADHUMITA ROY) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER (True Copy) Ahmedabad; Dated 25/10/2021 Manish

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