AWEJ MOHMED YUSUF KOKANI,NASHIK vs. ACIT, CENTAL-2, NASHIK, NASHIK

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH “B”, PUNE BEFORE SHRI R. K. PANDA, VICE PRESIDENT AND SHRI VINAY BHAMORE, JUDICIAL MEMBER आयकर अपील सं. / IT(SS)A Nos.22 to 24/PUN/2022 िनधा�रण वष� / Assessment Years: 2010-11, 2013-14 & 2015-16 Awej Mohmed Yusuf Kokani, Vs. ACIT, Central Circle-2, 500, Indira Gandhi Path, Nashik. Trimbakeshwar, Nashik- 422212. PAN : ALVPK4444J Appellant Respondent Assessee by : Shri Pramod S. Shingte Revenue by : Shri Sourabh Nayak Date of hearing : 10.06.2024 Date of pronouncement : 21.08.2024 आदेश / ORDER PER VINAY BHAMORE, JM: The above captioned three appeals filed by the assessee are directed against the combined order of ld. Commissioner of Income Tax (Appeals)-12, Pune [‘the ld. CIT(A)’] dated 30.09.2021 for the assessment years 2010-11, 2013-14 and 2015-16 respectively. 2. Since the above captioned three appeals of the assessee were heard together, therefore, we proceed to dispose of the same by this common order.

2 IT(SS)A Nos.22 to 24/PUN/2022 3. First, we shall take up the appeal of the assessee in IT(SS)A No.22/PUN/2022 for the assessment year 2010-11 for adjudication. IT(SS)A No.22/PUN/2022, A.Y. 2010-11 : 4. The appellant has raised the following grounds of appeal :- “1. On the facts and in law the CIT(A) is not justified in upholding the addition on account of disallowance of part of the agricultural income and added u/s 68 to the extent of Rs.67,088/-. 2. On the facts and in law the CIT(A) is not justified in upholding the addition on account of unexplained cash in hand to the extent of Rs.6,81,115/- by treating the same as cash in hand out of unexplained source. 3. The appellant craves, leave to add, alter amend and delete any of the above grounds of appeal.” 5. The facts of the case, in brief, are that the assessee is an individual engaged in the business of running a Hotel at Trimbakeshwar and also engaged in agricultural activities. A search & seizure operation u/s 132 of the IT Act was conducted in the business as well as residential premises in the case of Kokani Group including the assessee. The Assessing Officer issued notice u/s 153A on 07.06.2016. In response to the said notice, the appellant filed return of income declaring total income of Rs.1,58,900/- and agricultural income of Rs.4,99,600/-. Subsequently, the assessment was completed by the Assessing

3 IT(SS)A Nos.22 to 24/PUN/2022 Officer vide order dated 29.12.2017 passed u/s 144 r.w.s. 153A of the IT Act at total income of Rs.1,00,76,010/-. While doing so, the Assessing Officer made various additions on account of following heads :- (i) Unexplained business expenditure : Rs.9,69,761/- (ii) Unexplained agricultural income : Rs.4,99,600/- (iii) Unexplained cash in hand : Rs.7,32,100/- (iv) Unexplained investment : Rs.8,00,000/- (v) Unexplained investment : Rs.22,00,000/- (vi) Unexplained cash in hand : Rs.13,90,600/- (vii) Unexplained investments in assets : Rs.33,25,049/- Total : Rs.1,00,76,010/- 6. Being aggrieved by the above additions, an appeal was filed before the ld. CIT(A), who vide impugned order confirmed the addition on account of unexplained agricultural income of Rs.67,088/- and addition on account of unexplained cash in hand to the extent of Rs.6,81,115/-. However, the ld. CIT(A) deleted all other additions as made by the Assessing Officer for the assessment year under consideration. 7. Being aggrieved with the decision of the ld. CIT(A), the assessee is in appeal before us. 8. Ld AR submitted before us that the ground no.1 is not pressed by him, therefore the ground no.1 is dismissed as such.

4 IT(SS)A Nos.22 to 24/PUN/2022 9. Regarding ground no.2 it is submitted that LD CIT(A) is not correct in disallowing the ground regarding determination of unexplained cash / income u/s 68 of the IT Act of Rs.6,81,115/-. In this regard it was submitted that the assessee does not maintain books of accounts & therefore it is not possible for him to produce any documentary evidence regarding opening cash balance of Rs.12,64,039/- as on 01-04-2009, but it is the regular practice of the assessee to maintain such cash balance in hands. It was also submitted that the assessee was earning agricultural income since long & therefore opening cash balance of Rs.12,64,039/- was available with him, & current years available income Rs.7,09,485/- justifies the closing cash balance of Rs.13,90,600/- as on 31-03-2010. On the basis of above, LD AR requested to delete the addition of Rs.6,81,115/- ( closing cash balance Rs.13,90,600 – Rs.7,09,485 current years available income) as unexplained cash in hand. 10. LD DR relied on the order passed by LD CIT(A) & requested to confirm the same. 11. We have heard LD counsels from both the sides & perused the material available on record. The only ground left in this appeal is regarding the addition on account of unexplained cash in

5 IT(SS)A Nos.22 to 24/PUN/2022 hand to the extent of Rs.6,81,115/- by treating the same as cash in hand out of unexplained source. In this regard we find that LD CIT(A) has decided this issue in last para of page no 22 of his order. The same is reproduced as under :- “As discussed above, the appellant failed to submit any evidence in support of the opening cash balance. The arguments given by the appellant are mere statements, which are self serving in nature to justify the cash balance and therefore, not acceptable. Though the closing cash balance could not be explained by the appellant, the same was used by the appellant to explain the investments in subsequent years. Therefore, if the closing cash balance is taken at Rs. 13,90,600/-, it would result into unexplained income in the hands of the appellant during the year as the sources shown by the appellant are not sufficient to explain such cash balance. During the year, the appellant had explained closing cash balance from opening cash balance as well as from business income and agricultural income and after considering the drawings as well as the investments during the year, the closing balance was determined. However, as discussed above, the appellant could not substantiate cash balance as on 1.4,2009 of Rs. 12,64,039/-. During the year, the appellant had income from business of Rs. 349885, as determined in ground No. 1 above and agricultural income (including unexplained receipts as determined in Ground No. 2 above) of Rs. 499600/-, totalling Rs. 849485/-. Further, the appellant had shown drawings for the year of Rs. 120000/- and Postal RD of Rs. 20000/- and considering the same, the appellant had explanation for availability of cash of Rs. 709485/- only. Therefore, if the closing cash balance as on 31.3.2010 is taken at Rs. 13,90,600/-, as claimed by the appellant, there would be shortfall to the extent of Rs. 6,81,115/-, source for which remain unexplained. Hence, addition to the extent of Rs.6,81,115/- is upheld and the appellant gets relief to the extent of Rs.50,985/- (7,32,100 – 6,81,115). The ground no.3 raised by the appellant is partly allowed.” 12. From the above we find that the assessee has claimed closing cash balance of Rs.13,90,600/- as on 31-03-2010 & opening cash balance of Rs.12,64,039/- as on 01-04-2009. But in support of this

6 IT(SS)A Nos.22 to 24/PUN/2022 opening cash balance neither documentary evidence nor any other relevant evidence was furnished. Even return of income was also not filed by the assessee for asstt year 2009-2010, which could support the contention of opening cash balance of Rs.12,64,039/-. As the assessment order was passed ex-parte, LD CIT(A) called for the remand report from the AO on this ground & in the remand report the AO submitted that there is no evidence in respect of opening cash balance. Even before LD CIT(A) no concrete evidence was furnished by the assessee & therefore in the absence of any supporting material, LD CIT(A) denied the availability of any opening cash balance as claimed by the assessee but restricted the addition to Rs.6,81,115/- by allowing the benefit of current year’s available income of Rs.7,09,485/-, against closing cash balance of Rs.13,90,600/-. In the above circumstances we do not find any infirmity in the order passed by LD CIT(A) & therefore we do not hesitate to confirm the same, consequently the ground of appeal raised by the assessee is dismissed. 13. In the result, the appeal filed by the assessee in IT(SS)A No.22/PUN/2022 for A.Y. 2010-11 stands dismissed

7 IT(SS)A Nos.22 to 24/PUN/2022 IT(SS)A No.23/PUN2022, A.Y. 2013-14 : 14. The appellant has raised the following grounds of appeal :- “1. On the facts and in law the CIT(A) is not justified in upholding the addition on account of disallowance of part of the agricultural income and added u/s 68 to the extent of Rs.3,56,885/-. 2. On the facts and in law the CIT(A) is not justified in upholding the addition on account of alleged unexplained investment in land at Gat no.341 to the extent of Rs.8,30,695/-. 3. On the facts and in law the CIT(A) is not justified in upholding the addition on account of alleged unexplained loans to the extent of Rs.6,00,000/-. 4. On the facts and in law the CIT(A) is not justified in upholding the addition on account of increase in fixed assets out of alleged unexplained sources to the extent of Rs.9,33,400/-. 5. The appellant craves, leave to add, alter amend and delete any of the above grounds of appeal.” 15. Ld AR submitted before us that the ground no.1 is not pressed by him, therefore the ground no.1 is dismissed as such. 16. Regarding ground no.2 it is submitted that LD CIT(A) is not justified in sustaining the addition of Rs.8,30,695/- regarding purchase of property at Gat No.341. It was submitted that out of total payment of Rs.12,31,650/-, an amount of Rs.1,00,000/- was paid in Asstt Yr 2012-13 & amount in all to Rs.10,53,000/- in 4 instalment by cheque was paid during Asstt Year 2013-14. But the AO wrongly treated this payment as made in CASH during the period under consideration & sustained the addition of Rs.8,30,695/- for unavailability of cash balance.

8 IT(SS)A Nos.22 to 24/PUN/2022 17. With regard to above we find that the assessee has produced copy of sale deed wherein it has been clearly mentioned that the payment of Rs.10,53,000/- was made through cheque during the period under consideration & Rs.1,00,000/- was paid during Asstt Year 2012-13. Therefore it is apparent that payment of Rs.10,53,000/- was made through banking channel & not through cash, secondly payment of Rs.1,00,000/- was not related to the period under consideration. The balance amount Rs.78,650/- only for registration etc was paid in cash during the period under consideration. Therefore considering all these facts we delete the addition of Rs.8,30,695/-. The ground of appeal raised in this regard is allowed. 18. Regarding ground no.3 it is submitted that the amounts were received from 2 persons namely Sadruddin Kokani Rs.5,00,000/- & Rs.100,000/- from Nilesh Bhalerao. It is submitted that both the persons have paid the amount through bank cheques only & the ledger accounts as well as confirmation of Sadruddin Kokani of Rs.5,00,000/- have also been filed in the paperbook, but LD CIT(A) has not appreciated those documents produced before him. 19. With respect to above ground, we find that the payments were received through cheques but due to ex-parte assessment, the

9 IT(SS)A Nos.22 to 24/PUN/2022 relevant documents in support of genuineness, creditworthiness & identity of the creditors could not be proved before the AO. Now, we also find that the ledger account and confirmation was produced before ld. CIT(A). Considering the totality of the facts, we find force in the argument of the assessee and allow the claim of the assessee regarding receipt of loan from above two persons and, therefore, delete the addition made by the AO and sustained by the ld. CIT(A) in this regard. 20. The next ground no.4 is with regard to addition of Rs.9,33,400/- on the basis of increase in fixed asset. LD AR in this regard submitted before us that it is not proper on the part of the AO to make addition on the basis of unavailability of cash fund & at the same time making addition on the basis of increase in the value of fixed assets. Even LD CIT(A) has allowed relief in this regard to the extent of cash available as per cash flow chart. It is therefore submitted before us that if other grounds are allowed in favour of the assessee then there will be no shortage of cash fund & hence prayed to delete the addition of Rs.9,33,400/-. 21. With regard to above we find that the AO made addition of Rs.26,48,354/- being difference in the opening & closing balance value of fixed assets & LD CIT(A) has allowed the relief of

10 IT(SS)A Nos.22 to 24/PUN/2022 Rs.17,14,954/- on the basis of relief granted in his order & sustained the balance addition of Rs.9,33,400/- on the basis of shortage in cash flow statement. Now in our order we have also allowed relief of Rs.8,30,695/- with respect to ground no.2 in previous paragraph of this appeal. Consequentially by allowing the ground no.2 & 3 of this appeal the availability of cash of Rs.9,33,400 will be there, which will increase cash flow & resultantly there will be no shortage of cash as alleged by the AO & sustained by LD CIT(A). Considering the totality of the facts we are of the opinion that cash of Rs.9,33,400/- is available with the assessee to justify the increase in value of fixed assets & therefore the addition of Rs.9,33,400/- is not justified. Accordingly, the same is directed to be deleted. Thus, this ground is allowed in favour of the assessee. 22. In the result, the appeal filed by the assessee in IT(SS)A No.23/PUN/2022 for A.Y. 2013-14 stands partly allowed. IT(SS)A No.24/PUN2022, A.Y. 2015-16 : 23. The appellant has raised the following grounds of appeal :- “1. On the facts and in law the CIT(A) is not justified in upholding the addition on account of disallowance of part of the agricultural income and added u/s 68 to the extent of Rs.1,88,740/-.

11 IT(SS)A Nos.22 to 24/PUN/2022 2. On the facts and in law the CIT(A) is not justified in upholding the addition on account of income declared u/s 132(4) to the extent of Rs.3,69,300/- 3. The appellant craves, leave to add, alter amend and delete any of the above grounds of appeal.” 24. Ld AR submitted before us that the ground no.1 is not pressed by him, therefore the ground no.1 is dismissed as such. 25. Regarding ground no.2 it is submitted that LD CIT(A) is not correct in sustaining the addition of Rs.3,69,300/- on the basis of statement given during search u/s 132(4) of the IT Act, hence prayed to delete the same. 26. We have heard LD counsels from both the sides & perused the material available on record. The only ground left in this appeal is regarding, sustaining of addition of Rs.3,69,300/- on the basis of statement of assessee recorded u/s 132(4) of the IT Act. In this regard we find that during the search action at the premises of the assessee statement u/s 132(4) was recorded wherein it was admitted by the assessee that he will disclose income of Rs.10,00,000/- in his return of income for the period under consideration. But in the return in response to the notice u/s 153A an income of only Rs.6,30,700/- was disclosed. Therefore the AO made addition of Rs.10,00,000/- in the income of the assessee on the basis of his admission only. LD CIT(A) in first appeal has

12 IT(SS)A Nos.22 to 24/PUN/2022 restricted the addition to Rs.3,69,300/- being the difference of Rs.10,00,000/- and the income (Rs.6,30,700/-) returned by the assessee in response to notice u/s 153A of the IT Act. We further find that during the statement recorded u/s 132(4) of the IT Act the assessee never admitted to disclose additional income of Rs.10,00,000/- over & above the regular income. Therefore the AO is wrong in saying that the income offered in the statement was over & above the regular income of the assessee. It is also found that for making addition of Rs.10,00,000/- the AO has not brought on record any material other than the statement recorded u/s 132(4) on the basis of which it can be inferred that the income has been understated or concealed. The assessee further relied on the instruction dated 10-03-2003 issued by CBDT in this regard wherein it has been clearly mentioned/intended that in the absence of any credible evidence which leads to information that any income has not been disclosed, no addition should be made. For the sake of convenience, the instruction of the CBDT dated 10.03.2003 is reproduced herein below :- “F. No. 286/2/2003-IT (Inv) GOVERNMENT OF INDIA MINISTRY OF FINANCE & COMPANY AFFAIRS DEPARTMENT OF REVENUE CENTRAL BOARD OF DIRECT TAXES Room No. 254/North Block, New Delhi, the 10th March, 2003

13 IT(SS)A Nos.22 to 24/PUN/2022 To All Chief Commissioners of Income Tax, (Cadre Contra) & All Directors General of Income Tax Inv. Sir Subject : Confession of additional Income during the course of search & seizure and survey operation -regarding Instances have come to the notice of the Board where assessees have claimed that they have been forced to confess the undisclosed income during the course of the search & seizure and survey operations. Such confessions, if not based upon credible evidence, are later retracted by the concerned assessees while filing returns of income. In these circumstances, on confessions during the course of search & seizure and survey operations do not serve any useful purpose. It is, therefore, advised that there should be focus and concentration on collection of evidence of income which leads to information on what has not been disclosed or is not likely to be disclosed before the Income Tax Departments. Similarly, while recording statement during the course of search it seizures and survey operations no attempt should be made to obtain confession as to the undisclosed income. Any action on the contrary shall be viewed adversely. Further, in respect of pending assessment proceedings also, assessing officers should rely upon the evidences/materials gathered during the course of search/survey operations or thereafter while framing the relevant assessment orders Yours faithfully, Sd/- (S. R. Mahapatra) Under Secretary (Inv. II)” 27. We therefore in the light of above instruction of CBDT dated 10.03.2003 find force in the argument of the ld. Counsel for the assessee that the addition was made only on the basis of statement recorded at the time of search and no effort was made by the AO to collect any independent evidence in support of addition of Rs.10,00,000/- made by him. Therefore, the addition made solely

14 IT(SS)A Nos.22 to 24/PUN/2022 on the basis of statement recorded u/s 132(4) of the IT Act which has been partly sustained by the CIT(A) is hereby deleted. Thus, this ground is allowed in favour of the assessee. 28. In the result, the appeal of the assessee in IT(SS)A No.24/PUN/2022 for A.Y. 2015-16 stands partly allowed. 29. To sum up, the appeal in IT(SS)A No.22/PUN/2022 is dismissed and the appeals in IT(SS)A Nos.23 & 24/PUN/2022 are partly allowed, as stated above. Order pronounced in the open Court on 21st August, 2024. Sd/- Sd/- (R. K. PANDA) (VINAY BHAMORE) VICE PRESIDENT JUDICIAL MEMBER पुणे / Pune; �दनांक / Dated : 21st August, 2024. Sujeet आदेश क� �ितिलिप अ�ेिषत / Copy of the Order forwarded to : अपीलाथ� / The Appellant. 1. ��यथ� / The Respondent. 2. 3. The CIT(A)-12, Pune. 4. The Pr. CIT/CIT concerned. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, “B” ब�च, 5. पुणे / DR, ITAT, “B” Bench, Pune. गाड� फ़ाइल / Guard File. 6. आदेशानुसार / BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे / ITAT, Pune.