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Income Tax Appellate Tribunal, RAJKOT BENCH, RAJKOT
Before: SHRI WASEEM AHMED
�थायी लेखा सं./जीआइआर सं./PAN/GIR No. : AAHFA7712NI (अपीलाथ� /Appellant) (��यथ� / Respondent) अपीलाथ� ओर से / Appellant by : Shri Kalpesh Doshi, A.R ��यथ� क� ओर से/Respondent by : Ms Namita Khurana, Sr. D.R. सुनवाई क� तार�ख / Date of Hearing 26/02/2020 घोषणा क� तार�ख /Date of Pronouncement 28/02/2020 आदेश / O R D E R PER BENCH: 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 [Ld. CIT(A) in short] dated 30/08/2016 arising in the matter of assessment order passed under s. 143(3) r.w.s. 153A of the Income Tax Act, 1961 (hereinafter referred to as "the Act") dated 11/08/2015 relevant to the Assessment Year (A.Y.) 2014-15.
The assessee has raised the following grounds of appeal:
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1. 1. That the learned CIT(A) has wrongly confirmed addition of Rs.50,05,956/- on account of undisclosed income.
2. That, the learned CIT(A) has wrongly confirmed the initiation of penalty proceedings u/s.271AAB of the I.T Act.
3. That, the learned CIT(A) has wrongly confirmed the charging of interest u/s.234A, 234B, 234C and 234D of the I.T Act. The appellant craves to add, alter, amend or delete any of the above grounds of appeal.
2. The only issue raised by the assessee is that the learned CIT (A) erred in confirming the addition made by the AO for Rs. 50,05,956/- on account of undisclosed income.
The facts in brief are that the assessee in the present case is a partnership firm and engaged in the business of trading and silver and gold bullion. The assessee during the course of survey has made the disclosure of income as detailed under:
Sr.No. Particulars Amount Rs. I Cash found and seized at the premises of 70,00,000 M/s.Shivshakti Enterprise on 01/05/2013 Ii Amount received as receivable in the loose paper 10,00,000 Ii Amount noted as receivable as Advisory income in the 40,00,000 FY 2012-13 Iv Excess cash found from the business premises 4,86,000 01/05/2013 3.1 However the assessee has disclosed an income of Rs. 74,94,044/- in the income tax return against the income admitted during the course of survey. On question by the AO, the assessee claimed that the income can be determined either on the basis of income or the investments. As such in present case there is more investment than the income as discussed above. Accordingly the higher amount of investment was shown as income in the income tax return.
3.2 However, the AO disagreed with the contention of the assessee by observing that the assessee has agreed to make the offer of income for Rs. 1.25
3 - crores approximately in the statement furnished during the survey/search proceedings. Moreover, the aforesaid income was found based on incriminating documents during the survey/search operations. Accordingly the AO treated the balance amount of income for Rs. 50,05,596/- as undisclosed income of the assessee and added the same to the total income.
Aggrieved assessee preferred an appeal to the learned CIT (A).
The assessee before the learned CIT (A) besides reiterating the submissions as made before the AO also claimed that there cannot be any addition to the income merely on the basis of the statement obtained during the course of survey/such operation until and unless the same is based on corroborative evidences.
4.1 However the learned CIT (A) disregarded the contention of the assessee by observing that the undisclosed income was duly admitted by it during the survey/search proceedings. Accordingly the learned CIT (A) confirmed the order of the AO.
Being aggrieved by the order of the learned CIT (A), the assessee is in appeal before us. The learned AR before us submitted as under:
“The "A" has filed return of income on 30/11/2014 declaring total income of Rs.20,49,660/- A survey action uls 133A was carried out at the premises of the "A". During the course of survey cash was seized uls 132A. The "A" has made disclosure of Rs. 1,25,00,000/- during the course of survey, the breakup of disclosure is placed on page no. 2 para 4 of the assessment order. Disclosure shows that the serial no. 1 and 4 are the cash found, which are investments and serial no. 2 and 3 are undisclosed income. Income disclose during the course of survey is subject to verification, rectification on higher/lower side. The "A" has made disclosure of income as well as corresponding assets in the form of cash and therefore disclosure was for both income as well as assets.
4 - Merely making a disclosure during the survey action cannot be considered as final, if the appellant is able to demonstrate that the any amount disclose: does not form part of the unaccounted income. The CBDT vide circular no. F. No. 286/2/2003-IT(lnv) has given to avoid practice of taking undue advantage of the "A". The copy of circular is enclosed 01 Page No. 23 of the Paper Book 1. The board also come out with another instruction dated 18/12/2014. It has expressed difficulties faced by the "A" during search. The copy of same is enclosed on Page No. 24 of the Paper Book 1. There would be perception difference of intellectual compatibility between trained team of IRS Officer vis-a-vis a business-man might be semi-literal fellow. Hence, the "A" made disclosure of Rs. 1,25,00,000/- under coercion, confusion and tension. There are two different modes of computation of undisclosed income. One of the recognized modes is income theory and other is 'investment an expenditure theory'. The second mode of computing undisclosed income is only come into play when the first mode is not possible. However, both such modes cannot be pressed into service simultaneously to work out undisclosed income. The correct disclosure is also enclosed on Page No. 4 of the Paper Book 1. In this regard reliance is placed on following decisions: • CIT vs. Radha Kishan Goel 278 ITR 454(AII.) • Jayantilal Thakordas Jariwala vs. Assistant Commissioner of Income Tax (Ahmadabad ITAT)(44 CCH 054) • S.R. Koshti vs. CIT 193 CTR 518 (Guj.) • Jagmohan Singh Arora & Others 101 TTJ 682 (Mum.) • ACIT vs. Shri Badri Ram Choudhary (Co-ordinate Bench of Jodhpur) (118 TT J 0492) • ACIT vs. Shri Mahendra B. Kataria (ITAT Ahmedabad) (268/Ahd/2010) • CIT v. K. S. M. Guruswamy Nadar and Sons (1984) 149 ITR 127 (Mad.) • CIT V. Singhal Industrial Corporation 303 ITR 225(Allahbad) • Kantilal & Bras V. ACIT 52 ITO 412 (Pune IT AT) • Sanjay Kumar Jain V. CIT 254 ITR 38 (HC of Cal.)”
On the other hand the learned DR vehemently supported the order of the authorities below.
5 - 7. We have heard the rival contentions of both the parties and perused the materials available on record. Indeed the assessee has admitted the undisclosed income during the course of survey/search proceedings. The question arises if there is undisclosed income then there has to be something in tangible form justifying the undisclosed income. As such the undisclosed income cannot be determined merely on the basis of the papers. In the present case the assessee has explained the undisclosed income in the form of cash found during the course of search/survey. Thus it is transpired that both the additions i.e. the income viz a viz cash found during the proceedings cannot be added to the total income of the assessee simultaneously to determine the undisclosed income.
We also find that the ITAT in the case of ACIT versus Shri Badri Ram Choudhary reported in 118 TTJ 0492 has decided the similar issue in favour of the assessee. The relevant extract of the order is reproduced as under:
“The second alternative mode of computing the undisclosed income by 'investment and expenditure theory' comes into play when the undisclosed income cannot be computed by the 'income theory' due to lack of the availability of complete information in this regard. In such alternative mode the total investments made and expenditure' incurred by the assessee out of the books are clubbed and presumption is made that the assessee must have earned so much undisclosed income which is represented by the undisclosed investment/expenditure. The second mode is employed only when income cannot be computed as per first mode. However, both such modes cannot be pressed into service simultaneously to work out the undisclosed income. To put it simply, if the assessee had earned Rs. 100 out of undisclosed sales out of which Rs. 60 is invested and Rs. 40 is either available or spent somewhere, the AO cannot adopt income at Rs.
The income from sales at Rs. 100 would be telescoped into the investment made out of such undisclosed income. In such a situation, only a sum of Rs. 100 would be included in the undisclosed income of the assessee.”
7.1 In view of the above we hold that the assessee has already disclosed the income based on the investments i.e. cash found during the course of proceedings. Therefore there cannot be any separate addition of undisclosed business income as the same has already been represented in the form of cash as 6 - discussed above. Therefore, we are not impressed with the finding of the authorities below. Accordingly we set aside the finding 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.
In the result, the appeal of the assessee is allowed.