THE DCIT, CENTRAL CIRCLE-1(3), AHMEDABAD vs. SHRI VIPUL H PATEL, AHMEDABAD

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ITSSA 176/AHD/2021Status: DisposedITAT Ahmedabad01 July 2024AY 2016-175 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the Ld. CIT(A) was justified in deleting the addition of Rs. 5,00,00,000/- made on a protective basis in the hands of the assessee. The Tribunal noted that the Ld. CIT(A) had found as a matter of fact that a substantive addition of Rs. 17 crores had already been made in the assessment of Sadbhav Engineering Ltd. for AY 2016-17, based on the same impounded material, including the diary in question. The Ld. CIT(A) had also observed that the diary entries pertained to M/s. Rohtak Panipat Tollway Private Limited, a step-down subsidiary of Sadbhav Engineering Ltd., and were not related to the assessee. The Tribunal agreed with the Ld. CIT(A) that confirming the addition in the assessee's hands would amount to double taxation of the same amount. The Tribunal found no reason to interfere with the order of the Ld. CIT(A) and dismissed the appeal of the Revenue. The issue of whether the entries were recorded in the assessee's books was rendered moot by the substantive addition in the company's case and the finding that the entries did not relate to the assessee.

What were the facts?

The Revenue has appealed the order of the CIT(A) for Assessment Year 2016-17. The Assessing Officer (AO) made an addition of Rs. 5,00,00,000/- on a protective basis to the income of Shri Vipul H. Patel. This addition was based on cash entries found in a diary impounded during search proceedings in the Sadbhav Group of cases. The assessee, a director in Sadbhav Engineering Ltd., contended that these entries related to transactions in Sadbhav group companies and that a separate show cause notice was issued to Sadbhav Engineering Ltd. The AO noted that the diary, which contained cash transactions of Rs. 2.00 crores and Rs. 3.00 crores on specific dates, prima facie related to Sadbhav Engineering Ltd. but made the addition as the assessee failed to prove the transactions were accounted for in his or the company's books.

What were the issues?

1. Whether, on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs. 5,00,00,000/- made under section 69A of the Income Tax Act, 1961, based on cash entries in impounded documents, despite the assessee failing to establish whether these entries were recorded in the assessee's or Sadbhav Engineering Ltd.'s books? Assessee's Contention: The assessee argued that the impounded diary pertained to transactions of Sadbhav group companies. A separate assessment order had already been passed for Sadbhav Engineering Ltd. for AY 2016-17, wherein a substantive addition of over Rs. 17 crores was made based on the same impounded material, including the diary. The diary entries themselves related to M/s. Rohtak Panipat Tollway Private Limited, a step-down subsidiary of Sadbhav Engineering Ltd., and thus did not relate to the assessee. Confirming the addition in the assessee's hands would amount to double taxation. Revenue's Contention: The Revenue contended that the Ld. CIT(A) erred in deleting the addition as the assessee failed to establish whether the cash entries were recorded in his books or the books of Sadbhav Engineering Ltd. The Revenue relied on the AO's finding that the impounded documents prima facie related to Sadbhav Engineering Ltd. and the assessee's failure to provide evidence.

Which sections of the Income-tax Act were involved?

Section 69A,Section 250,Section 132,Section 133A,Section 143(3),Section 153A(1)(b)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “B” BENCH, AHMEDABAD

Before: SMT.ANNAPURNA GUPTA & SHRI T.R. SENTHIL KUMAR

Hearing: 10/04/2024Pronounced: 01/07/2024

PER ANNAPURNA GUPTA, ACCOUNTANT MEMBER

This appeal has been filed by the Revenue against the order of the ld. Commissioner of Income-tax (Appeals)-11, Ahmedabad dated 04.8.2021 under section 250 of the Income Tax Act, 1961 (“the Act” for short) for the assessment year 2016-17.

2.

The grounds raised in the appeal are as under:

“On the facts and in the circumstances of the case and in law, Ld. CIT(A) erred in deleting the addition of Rs.5,00,00,000/- made u/s 69A of the IT. Act, 1961 made on the basis of cash entries appeared in the impounded documents found during the course of search proceedings in the Sadbhav Engineering Ltd, wherein the assessee is a Director, despite the assessee failed to establish whether the said cash entries were recorded either in the books of the assessee or in the books of the company Sadbhav Engineering Ltd.” 3. Solitary grievance of the Revenue is against the deletion of addition made by the AO to the income of the assessee amounting to

IT(SSA No.176 /Ahd/2021 2 Rs.5.00 crores allegedly made based on cash entries appearing in the impounded documents found during the search.

4.

A perusal of the assessment order reveals that the impugned addition was made in the hands of the assessee on protective basis. The fact of the case being that the search was conducted on 6.4.2017 in Sadbhav Group of cases, and the assessee was also covered under section 132 of the Act. During the survey proceedings at toll office of M/s.Rohtak Panipat Tollway Pvt.Ltd., Rohtak on 6.4.2019, a diary in which cash and other transactions recorded, were found and impounded. The diary contained 1-71 written pages and was in the name of “Shri Vipul Patel, Rohtak Hissar Project”. The Chief General Manager of the entity surveyed, in a statement recorded during the survey, stated that contents of the diary could be explained by the director of Sadbhav Engineering Ltd. The diary therefore was confronted to the assessee, Shri Vipul Patel, to offer his explanation to which he contended that they related to transactions undertaken in Sadbhav group companies. The assessee also stated that a separate show cause notice was issued in the name of company, Sadbhav Engineering Ltd., covering all the issues. The AO noted that page no.33 of the Annexure-A of the impounded material showed cash transaction of Rs.2.00 crores dated 15.10.2015 and Rs.3.00 crores dated 31.10.2015. He noted that the prima facie the paper seems to be related to Sadbhav Engineering Ltd. in which the assessee is the director. However, since the assessee had failed to prove with relevant evidence that the transactions were duly accounted for either in his books or in the books of Sadbhav Engineering Ltd., accordingly, he made addition of Rs.5.00 crores on protective basis under section 69A of the Act in the hands of the assessee.

IT(SSA No.176 /Ahd/2021 3

5.

The matter was carried in appeal before the ld.CIT(A) who deleted the addition, noting that, in case of Sadbhav Engineering Ltd. the assessment order has been passed, wherein addition on substantive basis has been made amounting to Rs.17 crores based on the material found and impounded during the course of search under section 132 and survey under section 133A of the Act, including the diary and loose papers in question. He, accordingly held that the AO was not justified in making impugned addition again in the hands of the assessee, when the same has already been considered in the case of Sadbhav Engineering Ltd. for Asst.Year 2016-17. He noted the fact that the addition on account of these entries was made in the hands of the Sadbhav Engineering Ltd. was unverifiable from Sr.No.146 & 147 of the Annexure-1 to the assessment order. Therefore, finding as a matter of fact, that the addition on account of loose papers was made on substantive basis in the hands of the Sadbhav Engineering Ltd., the ld.CIT(A) held that there was no case for confirming the addition made in the hands of the assessee. He also noted that the diary in which these entries were found pertained to Rohtak Panipat Tollway Pvt.Ltd. which was a step-down subsidiary of Sadbhav Engineering Ltd., and therefore, the said entries did not in any way relate to the assessee. His finding in this regard are at para 6.3 to 6.6 of his order as under:

“6.3 1 have given careful consideration to the facts and written submission filed by the appellant in the course of proceedings. In this case, the addition of Rs.5,00,00,000/- was made on the basis of some unaccounted cash as entries found noted in the diary during the course of survey proceedings earned but in the ease of M/s. Rohtak Panipat Tollway Private Limited, Rohtak on 6.4 2019. 6.4 It is seen from the assessment order under appeal that the AO had recorded a clear finding in the assessment order itself to the effect that the impounded diary/loose paper -prima facie relates to Sadbhav Engineering Limited. The appellant who is a director of Sadbhav Engineering Limited had in the written submission reproduced hereinabove clearly stated that assessment order u/s 143(3) r.w.s. 153A(1)(b) had already been passed in the case of Sadbhav Engineering Limited for AY 2016-17, wherein huge

IT(SSA No.176 /Ahd/2021 4

addition on substantive basis amounting to more than Rs.17 crores had been made on the basis of the material found and impounded during the course of search u/s 132 and survey u/s 133A including the diary / loose paper in question.

6.5 Having regard to the totality of the facts and circumstances of the case and the ratio of the judgments in the eases of

ACIT Vs Siyaram Gupta (HUF) (ITAT Allahabad) in Miscellaneous Application (M.A.) No. 09 & 10/Alld./2012, Kapil Dev Vs. JCIT Spl. Range in ITA No. 2259/Del/2002, Dilip V. Dherai, Mumbai vs Department Of Income Tax in ITA Nos.1459 to 1461/Mum/2012 Smt. Hemlata Agarwal v. CIT UP. (64ITR 428) ClT v. Smt.Durgawati (234 ITR 249), I hold that the AO is not justified in making the impugned additions when the same had already been considered and disallowance/ addition of the same amount has already been made in the assessment completed in the case of Sadbhav Engineering Ltd for AY 2016-17 which is verifiable from Serial No. 146 & 147 of the Annexure - 1 to the assessment order of the company. Even otherwise also, the entries found noted in the said diary is pertaining to M/s. Rohtak Panipat Tollway Private Limited which is step down subsidiary of Sadbhav Engineering Ltd and the said entries are not related in any way to the appellant. Since in the case of Sadbhav Engineering Ltd., the disallowance/ addition towards the bogus claim of sub contract expenses and diesel expenses and corresponding cash receipts have already been considered and taxed therein, therefore, once again the same cannot be considered in the hands of the appellant otherwise it would tantamount to double taxable of the same amount.

6.6 Moreover, the AO has himself held that prima facie the loose paper / diary in question relates to Sadbhav Engineering Ltd. and assessment on substantive basis in the case of the said company for AY 2016-17 has already been completed u/s 143(3) r.w.s. 153A(1)(b), wherein addition of Rs.1§,26,94,746/- in respect of such bogus claim had been made. Under these circumstances and having regard to the ratio of the judgments cited supra, the addition made by the AO on protective basis in the case of the appellant assesses is not sustainable in the eyes of law.

Therefore, the same is hereby directed to be deleted. The above grounds of appeal are allowed.” 6. The ld.DR was unable to controvert the factual finding of the impugned protective addition of Rs.5 crs was made in the hands of the assessee did not relate to the assessee and also the fact that the said document had been considered while making addition in the hands of Sadbhav Engineering Ltd. for Asst.Year 2016-17.

IT(SSA No.176 /Ahd/2021 5

7.

In view of the above, we see no reason to interfere in the order of the ld.CIT(A) deleting the addition made on protective basis in the hands of assessee of Rs.5.00 crores based on the same documents.

8.

In the result, the appeal of the Revenue is dismissed.

Order pronounced in the Court on 1st July, 2024 at Ahmedabad.

Sd/- Sd/- (T.R. SENTHIL KUMAR) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad, dated 01/07/2024

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