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Income Tax Appellate Tribunal, ‘A’ BENCH, CHENNAI
Before: SHRI MANJUNATHA. G, HON’BLE & SHRI MANOMOHAN DAS, HON’BLE
आदेश /O R D E R
PER MANJUNATHA. G, ACCOUNTANT MEMBER:
This appeal filed by the assessee is directed against the order passed by the Commissioner of Income Tax (Appeals)- 18, Chennai, dated 29.05.2019 and pertains to assessment year 2016-17.
The assessee has raised the following grounds of appeal: “1. The order of the Learned Commissioner of Income Tax (Appeals) is contrary to the law, facts and circumstances of the case.
:-2-: ITA. No: 2304/Chny/2019 2. For that the Learned Commissioner of Income Tax (Appeals) erred in confirming the addition of Rs.6,64,481/-as unexplained cash deposits in the bank account (Tax Effect Rs. 2,05,325/-). 3. The Learned Assessing Officer erred in not mentioning the section under which the unexplained cash deposits are brought to tax under the Income Tax Act, 1961 (the Act.). 4. Without prejudice to ground no 3, the Learned Assessing Officer has used the words "unexplained cash deposits", in the assessment order and hence the same is taxable u/s 68 of the Act. In this regard, it is pertinent to note that for the purpose, bank statements cannot be construed to be books of account of the appellant and, therefore, any sum found credited in the bank account cannot be treated as an unexplained cash deposit and hence the addition is bad in law. 5. Without prejudice to ground no. 3 to 4, the Learned Commissioner of Income Tax (Appeals) ought to have appreciated the fact that the appellant is a senior citizen and the managing partner of the firm Mis. Al Aziz Broilers had deposited in his personal bank a/c the cash sales from the firm's business as the branch in which the firm maintains the account is in Shenoy Nagar which is far from his business premises, for the sake of convenience, considering his age. 6. Without prejudice to ground no. 3 to 4, the Learned Commissioner of Income Tax (Appeals) ought to have appreciated the fact that the cheques were issued to suppliers of Chicken and also EMI to the finance companies for vehicles for use of firm from the appellant's personal bank a/c. 7. Without prejudice to ground no. 3 to 4, the Learned Commissioner of Income Tax (Appeals) ought to have considered the cash flow statement submitted by the appellant during the appellate proceedings. 8. For that the Learned Commissioner of Income Tax (Appeals) erred in confirming 1480 grams of Jewellery as unaccounted income of the appellant amounting to Rs.38,81,632/-(Tax Effect Rs.11,99,424/-). 9. For that the Learned Commissioner of Income Tax (Appeals) ought to have appreciated the fact that it is customary and ubiquitous that parents proffer jewellery at the time of marriage. 10. For that the Learned Commissioner of Income Tax (Appeals) ought to have appreciated the fact that the jewellery belonged to the appellant's wife, married daughter living with the appellant and his grandchildren through gifts received on
:-3-: ITA. No: 2304/Chny/2019 various occasions and a part of it was inherited from their parents 11.For that the Learned Commissioner of Income Tax (Appeals) erred in confirming the addition of Rs.15,70,650/- as unaccounted cash, without considering the explanations submit e y the appellant (Tax Effect Rs. 4,85,330/-). For these grounds and such other grounds that may be adduced before or during the hearing of the appeal, it is prayed that the Hon'ble Tribunal may be pleased to delete the above additions, confirmed by the Commissioner of Income Tax(Appeals) and / or pass such other orders as this Hon'ble Tribunal may deem fit.”
The brief facts of the case are that, the assessee is a partner of the firm M/s. Al Aziz Broilers, which deals in poultry products. The assessee has an equal share in the firm along with Shri. Khaleel Basha, his relative. The assessee did not file any return of income on his own till Search and Seizure operation was conducted in his residence, as a part of the search operation in the case of SS Hyderabad Biryani Private Limited group on 24.08.2015. Consequent to search, notice u/s. 153A of the Income-tax Act, 1961 (hereinafter referred to as “the Act”) was issued, requiring the assessee to file the return. In response to the notice, the assessee filed return of income on 19.12.2017, declaring total income of Rs. 1,38,600/-. The assessment has been completed u/s. 143(3) r.w.s. 153B(1)(b) of the Act, on 29.12.2017 and determined total income of Rs. 75,85,625/-, by making additions towards
:-4-: ITA. No: 2304/Chny/2019 unexplained cash deposits and capital introduction for Rs. 6,64,481/-, unaccounted cash found during search for Rs. 15,70,650/- and unaccounted gold jewellery for Rs. 51,92,994/-. The assessee carried the matter in appeal before the first appellate authority, but could not succeed. The ld. CIT(A), for the reasons stated in their appellate order, dated 29.05.2019, rejected arguments of the assessee and sustained additions made towards unexplained cash deposits, cash found during the course of search and unexplained gold jewellery. Aggrieved by the CIT(A) order, the assessee is in appeal before us.
The first issue that came up for our consideration from ground no. 2 to 7 of assessee’s appeal is addition towards unexplained cash deposits and capital introduction. During the course of assessment proceedings, the Assessing Officer noticed that the assessee has made cash deposits to his savings bank account maintained with HDFC Bank, Sowcarpet Branch, amounting to Rs. 9,43,253/-. The Assessing Officer called upon the assessee to explain source for cash deposits, for which the assessee stated that cash deposits to bank account is out of his current year income, income from
:-5-: ITA. No: 2304/Chny/2019 business and house property and also from savings. The Assessing Officer did not satisfy with the explanation furnished by the assessee and according to the Assessing Officer, the assessee is not having sufficient source of income to explain cash deposits and capital introduction in partnership firm. Therefore, rejected explanation of the assessee and made addition of Rs. 6,64,481/- towards unexplained cash deposits.
The Ld. Counsel for the assessee, submits that the ld. CIT(A) erred in sustaining addition made towards unexplained cash deposits and capital introduction without appreciating fact that the assessee is having regular income from business, being share of profit from partnership firm and rental income which is the source for cash deposits and capital introduction into the partnership firm.
The ld. DR, on the other hand supporting the order of the CIT(A) submits that, the assessee could not explain source for cash deposits. Therefore, the Assessing Officer has rightly made addition and their order should be upheld.
We have heard both the parties and considered relevant arguments of the Ld. Counsel for the assessee, in light of facts
:-6-: ITA. No: 2304/Chny/2019 brought on record by the Assessing Officer and we find that the Assessing Officer has made addition towards unexplained cash deposits by ignoring explanation furnished by the assessee with regard to the source for cash deposits and capital introduction. We further noted that, the assessee is a partner in a partnership firm having 50% share of profit. The partnership firm was subjected to Search and Seizure by the Department. On appeal before the tribunal, the ITAT in ITA No. 68 & 69/Chny/2022, directed the Assessing Officer to estimate 8% profit on total turnover and allow 90% of total expenditure claimed in the profit and loss account which results in net profit for assessment years 2015-16 and 2016- 17 to Rs. 1.20 crores, and assessee’s share of profit works out to Rs. 59.95 lakhs. If you consider the assessee’s share of profit out of income assessed in the hands of the partnership firm, then obviously the assessee can explain source for cash deposits, out of income from partnership firm and rental income. Therefore, considering the fact that the assessee is having source of income to explain unexplained cash deposits and capital introduction, we direct the Assessing Officer to delete addition of Rs. 6,64,481/- towards unexplained cash deposit and capital introduction.
:-7-: ITA. No: 2304/Chny/2019
The next issue that came up for our consideration from ground no. 8 to 10 of assessee’s appeal is addition towards unexplained gold jewellery of 1480 gms found during the course of search. During the course of search, 1980 gms of gold jewellery was found in the premises of the assessee. A statement was recorded from the appellant, wherein he has stated that gold jewellery belongs to his wife, mother and daughter. The Assessing Officer, rejected explanation of the assessee and made addition towards unexplained jewellery for Rs. 51,92,944/-. It was the explanation of the assessee before the Assessing Officer and CIT(A) that entire gold jewellery found during the course of search cannot be assessed in his hands, because gold jewellery is belongs to his entire family and was acquired over a period of time from its savings and income of family members.
We have heard both the parties and considered relevant facts brought on record by the Assessing Officer, in light of arguments of the Ld. Counsel for the assessee. The Assessing Officer made addition towards gold jewellery of 1980 gms found during the course of search as unexplained, for the reason that the assessee could not explain the source. The
:-8-: ITA. No: 2304/Chny/2019 CIT(A) sustained addition to the extent of 1480 gms by allowing relief to the extent of 500 gms jewellery belonging to other family members. It was the explanation of the assessee that entire gold jewellery cannot be assessed in his hand because said jewellery belongs to his wife, mother and daughter and the same has been acquired by family members over the period of time. We find force in the arguments of the Ld. Counsel for the assessee, for the simple reason when family members are residing in a common house, obviously the jewellery belongs to various family members cannot be assessed in the hands of one person, more particularly when family members includes ladies. It is also an admitted fact that it is customary in India that ladies acquire gold jewellery out of their savings over a period of time. It is also admitted fact that the CBDT itself has directed the Department not to seize jewellery to the extent of 500 gms for married women and 200 gms for unmarried women. If you go by the same, the assessee deserves relief towards jewellery belonging to his family members. Therefore, considering the fact that the jewellery found during the course of search does not belongs to assessee himself and also fact that the assessee is having sufficient source of income to explain source for jewellery
:-9-: ITA. No: 2304/Chny/2019 found during the course of search, out of income assessed in the hands of his partnership firm, we deem it appropriate to allow relief to the extent of 1000 gms out of total jewellery of 1980 gms found during the course of search. Therefore, we direct the Assessing Officer to sustain addition of 980 gms in the hands of the assessee and delete remaining 1000 gms of jewellery, which assessee claims to have been belongings of his family members.
The next issue that came up for our consideration from ground no 10 & 11 of assessee’s appeal is addition towards unaccounted cash found during search at Rs. 15,70,650/-. During the course of search, physical cash of Rs. 15,70,650/- was found. It was the explanation of the assessee before the Assessing Officer that out of total cash of Rs. 15,70,650/-, a sum of Rs. 6,66,450/- found during the course of search pertains to partnership firm. It was further explained that remaining cash balance belongs to himself and his family members and source for said cash is out of his savings and business income. The Assessing Officer, was not convinced with the explanation furnished by the assessee and according to the Assessing Officer, the assessee could not explain source
:-10-: ITA. No: 2304/Chny/2019 for cash and thus, rejected arguments of the assessee and made addition of Rs. 15,70,650/- towards unaccounted cash found during the course of search.
The Ld. Counsel for the assessee, submits that cash belongs to partnership firm at Rs. 6,66,450/-, cannot be added in the hands of the assessee, because it is an admitted fact that the partnership firm deals with poultry products and the assessee mainly deals its business in cash and cash found during the course of search is out of sales of previous day. He further submits that the remaining cash is explained out of additions made in the hands of the partnership firm and if you consider source out of additions in the hands of the partnership firm, then there cannot be any addition towards cash found during the course of search.
The ld. DR, on the other hand supporting the order of the CIT(A) submits that, the assessee could not explain source for cash found during the course of search and thus, the Assessing Officer and CIT(A) has rightly sustained addition and their order should be upheld.
:-11-: ITA. No: 2304/Chny/2019 13. We have heard both the parties and considered relevant facts brought on record by the Assessing Officer, in light of arguments of the Ld. Counsel for the assessee. We find that during the course of search, a sum of Rs. 15,70,650/- was found and seized. It was the explanation of the assessee that out of cash found during the course of search a sum of Rs. 6,66,450/- pertains to partnership firm. We find force in the arguments of the assessee in so far as arguments with regard to cash pertains to partnership firm, because the partnership firm is having huge turnover and 90% of the total turnover comes from cash sales. Therefore, it is not surprise to find cash to the tune of Rs. 6,66,450/- when search was conducted. Therefore, we are of the considered view that the Assessing Officer is erred in making addition towards cash found during the course of search, to the tune of Rs. 6,66,450/- belonging to partnership firm and thus, we direct the Assessing Officer to delete addition made towards unaccounted cash found during the course of search for Rs. 6,66,450/-. In so far as remaining cash balance, the assessee could not explain source with known source of income. Although, the assessee seeks for telescopic benefit out of income assessed in the hands of the partnership firm, but the
:-12-: ITA. No: 2304/Chny/2019 benefit of telescopic cannot be given, because it was not the case of the assessee that cash found in the residential premises of the assessee is out of income of partnership firm. Therefore, we reject arguments of the assessee and sustain balance cash found during the course of search and added as unaccounted income of the assessee. To sum up, out of total addition of Rs. 15,70,650/-, the assessee gets relief to the extent of Rs. 6,66,450/- and balance amount of Rs. 9,04,200/- is sustained.
In the result, appeal filed by the assessee is partly allowed. Order pronounced in the court on 12th July, 2023 at Chennai. Sd/- Sd/- (मनोमोहन दास) (मंजुनाथ. जी) (MANJUNATHA. G) (MANOMOHAN DAS) लेखासद�य/Accountant Member �ाियक सद�/Judicial Member चे�ई/Chennai, �दनांक/Dated: 12th July, 2023 JPV आदेश क� �ितिलिप अ�ेिषत/Copy to: 1. अपीलाथ�/Appellant 2. ��यथ�/Respondent 3. आयकर आयु�/CIT 4. िवभागीय �ितिनिध/DR 5. गाड� फाईल/GF