SHRI HARESHBHAI M. SHAH,,VADODARA vs. THE ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE-1(2),, VADODARA

PER WASEEM AHMED, ACCOUNTANT MEMBER:

The assessee has raised the following grounds of appeal;

1. On the facts and circumstances of the case as well as law on the subject, the learned Commissioner of Income Tax(Appeals) has erred in partly confirming the action of the Assessing Officer in making the addition of Rs.4,32,13,153/- out of total addition of Rs.4,75,71,951/- made by the assessin officr for the alleged unexplained investment on account of variouos items.

2. It is therefore prayed that the above addition made by assessing Officer and confirmed by learned Commissioner of Income tax (Appeals) may be deleted.

3. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of hearing of the appeal.

The issue raised by the assessee is that the Ld. CIT (A) erred in restricting the addition made by the AO for Rs. 4,32,13,153/- out of the total addition of Rs. 4,75,71,951/- on account of unexplained investment.

2.1 The AO on the basis of AIR information found that the assesse has deposited cash amounting to Rs. 32,35,000/- in his Central Bank of India bank account and similarly Rs. 19,00,000/- in his HDFC bank account. Moreover it was also reported that the assessee has purchased an immovable property on 18-02-2010 for Rs. 2,25,08,550/- only.

Regarding the cash deposit of Rs. 19,00,000/- in HDFC Bank A/c 2.3 The assessee during the assessment proceedings regarding the cash deposited in the above said bank account explained that such cash was a part of agricultural income earned by him. The assessee buttressed his contention by explaining that he owned an ancestral land at Village Jabugam, Tal Pavi Jetpur, Dist-Baroda. Besides the land purchased during the year was also for agriculture purpose to earn agriculture income.

2.4 However, the AO after examining the ITR submitted by the assessee observed that he did not disclose in his ITR any agricultural income earned during the year as claimed by him.

2.5 Moreover, the AO observed that the cash credits made in his bank accounts appeared in round figures as Rs. 3,00,000/- in 25-06-2009, Rs. 8,00,000/- each on 29-01-2010 and 05-03-2010. As such, the assesse was unable to substantiate the source of such cash deposits. Accordingly, the AO made an addition of such cash deposit amounting to Rs. 19,00,000/- to the total income of the assessee as unexplained cash credits.

Regarding the cash deposit of Rs. 32,35,000/- in Central Bank of India 2.6 The assessee during the assessment proceedings propositioned that cash credits amounting to Rs. 32.35 lacs is on account of withdrawal from his company Krish Immigration & Tours Pvt Ltd (in short KIT) and major entries are nothing but interbank transactions. He further submitted that some of the credit entries appearing in his bank account were fees deposited by students. Page 3 of 14 The accounts of the said company are in HDFC and Kotak Mahindra Bank. The bank’s branches are rarely available in the villages. Therefore the students for convenience deposited the fees in his account being director of the company and later the fees was transferred to the company’s account on regular basis.

2.7 However the AO further observed that apart from the above cash deposit various other deposits through cheque were appearing in the account. Nonetheless, these deposits were unverifiable but since such transactions were channeled through the banks hence the AO treated the same as student fees. Consequently the AO added cash credit entries amounting to Rs. 32,35,000/- to the total income of the assessee as unexplained cash credits.

Regarding the deposit of cash in SBI Rs. 55,99,400/- 2.8 The AO during the assessment proceedings observed that the assessee hold another account in State Bank of India, Ajwa Road, Baroda where he had deposited Rs. 55,99,400/- during the previous year 2009-10 relevant to the assessment year 2010-11.

2.9 However the assessee in respect of the source of credit entries appearing in the above said account submitted that the amount was deposited from his agricultural income whereas he did not submit any documentary evidence during the assessment proceedings.

Thus the AO made an addition of Rs. 55,99,400/- towards total income of the assesse as unexplained cash credits within the meaning of section 68 of the Act. Page 4 of 14 Regarding the unsecured loan of Rs. 132.26 lacs 2.10 The AO in the scrutiny proceedings of KIT Pvt Ltd noted that the assessee, in the capacity of director, provided unsecured loans to the company amounting to Rs. 75.26 Lakhs during the year. Similarly another director Smt. Margi Darpan Shah daughter-in-law of assessee has also deposited Rs. 57.00 Lakhs in the company through the bank account of the assessee. He further admitted vide a letter dated 24-12-2012 that he provided loans of Rs. 22 Lakhs and Rs. 35 Lakhs on the dates 24-11-2009 & 26-11-2009 respectively to his daughter-in-law which was further deposited in the company KIT Pvt Ltd. However the assessee did not substantiate the source of these unsecured loans provided to the company KIT Pvt Ltd. Purchase of land of Rs. 2,36,11,550.00 2.11 Apart from these loans he also did not submit any sufficient evidence in respect of purchase of land of Rs. 2,36,11,550/- during the previous year 2009-10.

Thus the AO in view of the above made additions amounting to Rs. 4,75,71,950/- (Rs. 32,35,000/- + Rs. 19,00,000/- + Rs. 55,99,400/- + Rs. 75,26,000 + Rs. 57,00,000 + Rs. 2,36,11,550/-) to the total income of the assessee as unexplained investment under section 69 of the Act.

3.1 On the one hand all the cash deposits are added as unexplained cash credits while on other hand payment made towards land and loans to the company KIT Pvt Ltd has also been added to the total income. Thus the same amount has been added to the total income twice.

3.2 The assessee further in support of the agriculture income filed the copies of 7/12 to prove that he held the land as well as crops grown therein. He also submitted the details of receipts against the agricultural produce sold for the AY 2010-11.

3.3 The assessee also filed the details of withdrawal and deposits of the entire three bank accounts to justify that the cash withdrawn was deposited in his bank account. The details stand as under: Sl.No. Name of the Account No. Cash Cash deposit Bank Withdrawal 1. Central Bank 3054663362 58,00,000 32,35,001 of India 2. State Bank of 00000010395217577 0 5,20,000 India 3. HDFC Bank 00331510000217 0 19,00,000 Total 58,00,000 56,55,001 From the above it can be observed that the total cash withdrawal is Rs. 58 Lakhs whereas cash deposit is Rs. 56.55 Lakhs. The assessee further pointed out that total cash deposit in SBI was Rs. 5.20 Lakhs whereas the AO while framing the order made addition of Rs. 55,94,400/-.

3.4 The assessee further in his last submission regarding the investment in land of Rs. 2.36 crores and investment in KIT Pvt Ltd submitted that he made investment in land from the bank accounts belonging to him and Vandana H Shah (wife of the assessee). The investment was made out of the premature encashment of FD of Rs. 64,51,331/-. The funds available in the account of Vandana M shah was transferred from the company KIT Pvt Ltd or from his bank accounts. The details stand as under:

Date Bank Name Cheque No. Amount (Rs.) Particulars 18.02.2010 Central Bank Of 607110 15,00,000 Transferred from India Krish Immigration pvt. Ltd. 01.12.2009 Central Bank of 166802 17,00,000 Transferred from India CBI Bank of Haresh Shah 22.02.2010 Central Bank of 169983 53,00,000 Transferred from India CBI Bank of Haresh Shah TOTAL 85,00,000 3.5 However the AO in his remand report submitted that the source of investment towards purchase of land out of the loans received was not provided by him. In order to verify the statement of the assesse, that he made part payment for purchase of property out of the FD, the AO called upon the details of FD which is available on page no 12-13 of Ld. CIT order.

3.6 The AO further issued notice u/s 133(6) of the Act dated 26-05-2015 to Mahesh Kumar Chotalal Thakkar where in his reply, he admitted that the bills were issued by him against payment in cash for purchase of crops sold by the assessee.

3.7 However the Ld. CIT (A) after considering the submissions of the assessee along with remand reports submitted by the AO observed that the AO has wrongly made the addition of Rs. 55,99,400/- instead of Rs. 5.2 Lakh deposited in cash in SBI bank account 3.8 The assessee is entitled for the benefit of agriculture income of Rs. 20,00,000/- for the A.Y. 2010-11 being received by him in cash. As such the evidence proves that he had grown the crop on the land held in the name of the HUF as well as the land taken on lease by him. Thus the Ld. CIT (A) directed to the AO to consider only 50% of such agriculture income for computing the rate of tax to calculate the tax of the year.

3.9 The assessee deposited total cash till 31-10-2009 amounting to Rs. 18,50,798/- received against his agriculture income. Cash deposited in CBI amounting to Rs. 9.35 lakhs before 26-11-2009 also included therein.

3.10 After that the assesse made cash deposits amounting to Rs. 39 Lakhs out of the withdrawal of Rs. 40 Lakhs from the account maintained at the CBI bank. It also includes the cash deposit of Rs. 5.2 Lakhs as Rs. 55,99,400/- mentioned in the assessment order. Owing to the fact that the assesse had explained all the cash deposit in the bank account therefore addition made by the AO on account of cash deposit made in the account was accordingly deleted.

4.3 The Ld. CIT (A) further observed that out of the above unexplained deposits, investment in purchase of land was made for Rs. 1,12,54,275/- on dated 20-02-2010 and similarly an identical amounts was invested from the bank account of Vandana Shah, wife of the assessee. The amount invested by Vandana Shah of Rs. 17,00,000/- and Rs. 53,00,000/- on dated 01-12-2009 and 22-02-2010 respectively was transferred from the account of the assessee. Thus the total investment made in the purchase of land directly and indirectly Page 9 of 14 aggregated to Rs. 1,82,54,275/-. As such the same was added by the AO as unexplained investment therefore no separate addition was required.

4.4 Regarding the loans provided to the company KIT Pvt Ltd the Ld. CIT (A) observed that the assessee himself and through his daughter-in-law provided Rs. 132.26 Lakhs as advance to the said company which was unexplained by him. Thus the total unexplained investment including above Rs. 2,88,84,153/- came to Rs. 4,21,10,153/-.

4.5 The Ld. CIT (A) further observed that the assesse besides having made the investment in land also invested Rs. 11,03,000/- out of the HDFC bank account. So far the source of such investment remained unexplained, therefore total unexplained investment including Rs. 11,03,000/- aggregating to Rs. 4,32,13,153/- was required to be added.

Being aggrieved by the order of the Ld. CIT (A) the assessee is in appeal before us.

5.1 The learned AR also claimed that there was surplus cash available with the assessee for ₹ 21,45,000.00 with should be adjusted against the deposit of cash in the impugned bank accounts.

5.2 The learned AR also submitted that the assessee should be given the benefit of the duplicate entries reflected in the bank statement. The relevant submission of the assessee stands as under:

Duplication of Addition:-1 – (33,50,000) Hon'ble CIT(A) has confirmed the addition, in respect of Investment made by Haresh Shah of Rs. 75,26,000/- into Krish Immigration & Tours Pvt. Ltd. (henceforth mentioned as KIT). However, the addition of Rs. 33,50,000/- have been made in duplicate, as the same amount have been transferred to KIT from the Central Bank of India - 3054663362 itself for which total credit entries have been added to the total income of the appellant. The details of rhe same are as under: Date Amount (Rs.) Chq No. 25.12.2009 17,00,000 166806 12.03.2010 16,50,000 169984

TOTAL 33,50,000

Both the above cheques aggregating to Rs. 33,50,000/- have been issued by the appellant to KIT for the purpose of making an investment from Central Bank of India - 3054663362 - f Haresh Shah himself. It is the same bank account for which all the credit entries have been added to the total income. Thus, it seems that there is duplication of addition of Rs. 33,50,000/-. Duplication of Addition: 2 (57,00,000) Hon’ble CIT(A) had confirmed the addition, in respect of investment made by Margi Darpan Shah of Rs.57,00,000/- into Krish Immigration & Tours Pvt. Ltd. However, it is pertinent to submit that Margi Darpan Shah is assessed to tax and the assessment of Margi Darpan Shah for A.Y. 2010-11 has already been completed on 03.01.2013 by making additions of Rs. 10,65,200/- for unexplained credit entries. It implies that the addition made by the AO is unwarranted and this Page 11 of 14 credit is already considered in the individual case of Margi Darpan Shah. Thus, in the instant case, addition of Rs.57,00,000/- by Margi shah for making an investment in KIT should be deleted. Duplication of Addition: 3 - (15,00,000) Hon'ble CIT(A) has considered Central Bank of India - 3054663362 credits only and restricted the additions to Rs. 4,32,13,153/- as against the addition of Rs. 4,75,71,951/-made by the AO. On 04.11.2009, a cheque of Rs. 15,00,000 was transferred from State Bank of India-10395217577 (Haresh Shah) to Central Bank of India - 3054663362, which was later on used for making an Investment in KIT. Therefore, it seems that there is duplication of the addition of Rs. 15,00,000/- which should be deleted.

7.1 Regarding the argument of the learned AR for the availability of cash in his hands out of the earlier years from the source of agricultural activity, we note that the assessee failed to file any documentary evidence suggesting that there was some cash available with him out of the agricultural operations carried on by him. Therefore, in the absence of such documentary evidence we reject the contention of the assessee.

7.2 Regarding the surplus cash of Rs. 21,45,000 as claimed by the ld. AR, available with the assessee, we note that the benefit for all the deposit of cash Page 12 of 14 has already been provided by the ld. CIT-A. Therefore, we are of the view that the same cannot be adjusted against the deposit of cheques in the central bank of India. Therefore, we reject the contention of the ld. AR for the assessee.

7.3 Regarding the addition of ₹33.50 lakhs, we note that these payments were made through the banking channel by the assessee. It is also not in dispute that the entire credit entries reflecting in the Central Bank of India has been added to the total income of the assessee, therefore we are of the view further addition of the impugned amount will result the double addition to the income of the assessee. Therefore we are inclined to delete the addition of ₹33.50 lakhs.

7.4 Regarding the investment made by the daughter in law namely Ms. Margi Darpan Shah of the 57 Lacs, we note that the assessee has vide letter dated 24-12-2012 has admitted that the impugned fund was provided by the assessee to his daughter in law. Moreover, the assessee has not explained the source of such investment before the authorities below. Even before us, the ld. AR could not controvert the finding of the ld. CIT-A. Accordingly, we reject the contention of the assessee.

7.5 Regarding the addition of ₹15 lakhs, we note that there was no addition made on account of the deposit of cheque of ₹15 lakhs in the State Bank of India. Therefore, we reject the contention of the assessee. Hence the ground of appeal of the assessee is partly allowed.

Order pronounced in the Court on 25/09/2019 at Ahmedabad.