THE ACIT, CENTRAL CIRCLE-1(2),, AHMEDABAD vs. SHRI JIGNESH K.THAKKAR, AHMEDABAD
What did the Tribunal hold?
The Tribunal held that the assessee's grounds for AY 2008-09 and 2009-10 were identical to those for AY 2007-08. The Tribunal found no infirmity in the CIT(A)'s observations regarding the deletion of additions for unaccounted interest income. The CIT(A) had correctly noted that seized documents did not indicate interest income, and the assessee's AR admitted these notings pertained to undisclosed commission income. The Tribunal agreed that making separate additions for interest income when additions were already confirmed for commission income would amount to double addition. Consequently, the Tribunal dismissed the assessee's appeals for AY 2007-08, 2008-09, and 2009-10. The Department's appeal for AY 2009-10 was also dismissed. The issue of whether additions could be sustained without incriminating documents was implicitly addressed by upholding the CIT(A)'s order, which involved deletions based on the nature of evidence.
What were the facts?
The appeals concern assessment years (AY) 2007-08 to 2009-10, involving assessee Shri Jignesh K. Thakkar and the Revenue. The dispute arose from additions made by the Assessing Officer (AO) following a survey at Shri Jagadish Sheth's premises, who allegedly issued bogus bills. Investigations led to the bank accounts of M/s. Shittal Enterprises and M/s. Jain Enterprise. The assessee, proprietor of M/s. Anand Corporation, was found to have introduced the operator of M/s. Shittal Enterprises' account. A search at the assessee's residence on 05.02.2009 led to a statement under Section 132(4) where the assessee admitted to operating these accounts and Rs. 40,00,000/- as unaccounted commission income. This statement was later retracted. The AO made additions totaling Rs. 10,82,45,337/-. The CIT(A) granted partial relief, deleting additions related to interest income and reducing other additions.
What were the issues?
1. Whether additions made in a search assessment can be sustained when no incriminating documents were found during the search, as per Section 132(1) of the Income Tax Act, 1961? The assessee argued that additions were based solely on a retracted statement obtained under pressure during a health-compromised state, and no incriminating material was found. The Revenue contended that the additions were based on collated details, statements, and documents found. 2. Whether the CIT(A) erred in upholding the AO's rejection of the assessee's books of accounts for AY 2008-09 and 2009-10? The assessee argued that the CIT(A) ignored their submissions. The judgment does not record specific arguments from the Revenue on this point. 3. Whether the CIT(A) erred in upholding the AO's treatment of bank accounts of M/s. Jain Enterprises/Shittal Enterprise as benami accounts of the assessee, leading to additions as peak credit and commission income for AY 2008-09 and 2009-10? The assessee argued that the CIT(A) ignored their submissions. The judgment does not record specific arguments from the Revenue on this point.
Which sections of the Income-tax Act were involved?
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Income Tax Appellate Tribunal, “B” BENCH, AHMEDABAD
Before: SMT. ANNAPURNA GUPTA& SHRI SIDDHARTHA NAUTIYAL
PER SIDDHARTHA NAUTIYAL, JM:
These are appeals filed by the assessee for A.Ys. 2007-08, 2008-09 and 2009-10 and cross appeals filed by the Department for A.Y. 2009-10. Since common facts and issues for consideration are involved for all the years under consideration and all appeals are emanating out of common order passed by Ld. CIT(A)-I, Ahmedabad vide order dated 20.12.2011 for the various assessment years under consideration, all appeals for the impugned assessment years are being taken up together.
IT(SS)A Nos. 24 to 26/Ahd/2012 & IT(SS)A No. 129/Ahd/2012 Shri Jignesh K. Thakkar vs. ACIT and ACIT vs. Shri Jignesh K. Thakkar Asst. Years –2007-08 to 2009-10 - 2 -
We shall start with A.Y. 2007-08 and our observations for this year shall apply to other years as well, wherever applicable.
Assessment Year 2007-08:-
The assessee raised the following grounds of appeal:-
“1. That being aggrieved by the order of the learned CIT (Appeals) -1, Ahmedabad, the assessee has preferred appeal before this Hon'ble Tribunal. 2. In the said appeal, ground which is goes to the root of the validity of the proceedings remained to be raised. 3. The ground sought to be raised as per the attached sheet goes to the root of the proceedings and it being jurisdictional one, the assessee may kindly be allowed to raised the same and may be heard on merits. 4. Appellant craves liberty to furnish additional grounds of appeal. Grounds which appellant intends to raise being a crucial issue and root cause to determine validity of penalty order. 5. Hon'ble Gujarat High court in the case of CIT-4, Vs. Saumya Construction Private Limited held that when no incrementing documents found during search no addition to be made in assessment of search assessee when no incrementing material found during the search.”
We shall first discuss the additional ground of appeal raised by the assessee in which the assessee has contended that the additions in search assessment are not based on incriminating documents found during the course of search.
To understand this issue, it would be useful to first discuss the background of the case and the nature and basis for making additions by the Department, for the impugned year under consideration. A survey action under Section 133A of the Act was carried out in the case of Shri Jagadish Sheth, Ahmedabad on 01.11.2007. During the course of survey proceedings, it was found that Shri Jagadish Sheth was engaged in issuance of bogus (adjustments) bills, in the colour and chemicals trade. These bills were issued to various parties without any transfer of materials. During the
IT(SS)A Nos. 24 to 26/Ahd/2012 & IT(SS)A No. 129/Ahd/2012 Shri Jignesh K. Thakkar vs. ACIT and ACIT vs. Shri Jignesh K. Thakkar Asst. Years –2007-08 to 2009-10 - 3 - survey proceedings, it was observed that the modus operandi followed by Shri Jagadish Sheth was that the cheques were received from the beneficiaries and the same were deposited in the bank. After depositing the aforesaid amounts, either cash was withdrawn and given to the parties or cheques were issued to them as per their direction. Subsequently, statements of all bank accounts held and operated by Shri Jagadish Sheth in the name of M/s. Chandini Corporation were obtained by the Department. Further, post-survey enquiries established the modus operandi and the Department observed that from the bank statement it is seen that the money so credited was withdrawn from the concerned bank account, either in cash or by third party cheques. Based on the enquiries, the Department observed that the cheques so issued by Shri Jagadish Sheth were all issued to persons having no business activity relating to purchase and sale of goods in colour and chemical business. Based on the information available, the bank statement of one of the main persons involved M/s. Shittal Enterprises was called from Suvikas Peoples Co-operative Bank Ltd., Ahmedabad. It was observed that Shri Jagadish Sheth had issued cheques for very huge amounts to M/s. Shittal Enterprise, which was engaged by it. Along with the bank statement, various other documents obtained from the bank were also analysed to ascertain the identity of the person operating the bank account of M/s. Shittal Enterprises. On analysis of the account opening form of M/s. Shittal Enterprises, the Department observed that the said amount was operated by one Shri Suresh D. Borwal. Based on the information recovered from the account opening form, the Department made further enquiries and observed that no concern by the name of M/s. Shittal Enterprises was found to be operating from the address in the bank records. Further, the Department also found that no person by the name of Shri Suresh D. Borwal was found residing at the address given in the bank records. Further, the phone number as mentioned in the bank details was
IT(SS)A Nos. 24 to 26/Ahd/2012 & IT(SS)A No. 129/Ahd/2012 Shri Jignesh K. Thakkar vs. ACIT and ACIT vs. Shri Jignesh K. Thakkar Asst. Years –2007-08 to 2009-10 - 4 - also found to be non-functional. The Department observed that the introducer of Mr. Suresh Borwal to the bank account was one M/s. Anand Corporation, Chokha Bazaar, Kalupur, Ahmedabad. The Department conducted further enquiries, which revealed that Shri Jignesh K. Thakkar, (proprietor of M/s. Anand Corporation) had introduced Mr. Suresh D. Borwal to the aforesaid bank and he was regularly operating the account in the name of M/s. Shittal Enterprises. In order to verify the genuineness of the transaction carried out in the bank accounts of M/s. Shittal Enterprises, a search under Section 132(1) of the Act was initiated at the residence of Shri Jignesh K. Thakkar (assessee) on 05.02.2009. The statement of the assessee was recorded on 05.02.2009 under Section 132(4) of the Act and the assessee admitted to have operated the bank accounts of M/s. Shittal Enterprises and M/s. Jain Enterprise. The assessee also admitted Rs. 40,00,000/- as his unaccounted commission income @ 0.1% against the transaction of Rs. 441 crores carried through the accounts of M/s. Jain Enterprise and M/s. Shittal Enterprises maintained in The Suvikas Peoples Co-operative Bank Ltd. However, during the post search proceedings, the assessee denied having carried out the operations and retracted his statement. On the basis of various details collated, statements taken and various documents found by the Department, the Department made additions amounting to Rs. 10,82,45,337/- to the returned income of the assessee.
The assessee filed appeal before CIT(A), wherein the assessee submitted that the additions in the hands of the assessee cannot be sustained for the reason that the additions have been made primarily on the basis of statement of the assessee taken by the Department during the course of search under Section 132 of the Act. The assessee submitted that the statement had been obtained from the assessee after creating undue pressure. Further, at the time the statement was taken from the assessee, he
IT(SS)A Nos. 24 to 26/Ahd/2012 & IT(SS)A No. 129/Ahd/2012 Shri Jignesh K. Thakkar vs. ACIT and ACIT vs. Shri Jignesh K. Thakkar Asst. Years –2007-08 to 2009-10 - 5 - was suffering from serious health issues and therefore, in view of the pressure put by the Department, the assessee was forced to make the statement during the course of search. However, the aforesaid statement was also later withdrawn / retracted by the assessee. The assessee submitted that during the course of search operation, no incriminating material was found, on the basis of which the aforesaid additions could be sustained. The assessee submitted that no evidence pertinent to bank accounts of Shri Suresh Borwal were found from the residential premises of the assessee. The assessee submitted that there is nothing on record to show that the bank accounts were operated by the assessee and not by Mr. Suresh Borwal. It was submitted that the assessee has given signature in the bank accounts operated by Shri Suresh Borwal since Shri Suresh Borwal was known to assessee’s ex-employee Shri Dikshit Bhai. Accordingly, the assessee’s submissions before Ld. CIT(A) was that the entire additions were made in absence of any incriminating material found during the course of search and hence the additions are clearly unsustainable in law.
Ld. CIT(A), however, rejected the argument of the assessee that the additions were not based on any incriminating material found during the course of search and after discussion on the basis for making additions and the materials / information collected by the Department on the basis of which the additions were made by the Department, Ld. CIT(A) came to the conclusion that the assessing authority had sufficient incriminating material to come to the conclusion that the assessee was in fact operating the bank accounts of M/s. Shittal Enterprises and M/s. Jain Enterprise. While dismissing the appeal on the issue of incriminating material, CIT(A) observed as under:-
“11.1 After careful consideration of the findings of the Assessing Officer and submissions of the appellant vis-a-vis other material available on record, I
IT(SS)A Nos. 24 to 26/Ahd/2012 & IT(SS)A No. 129/Ahd/2012 Shri Jignesh K. Thakkar vs. ACIT and ACIT vs. Shri Jignesh K. Thakkar Asst. Years –2007-08 to 2009-10 - 6 -
reached to the conclusion that the appellant is the real operator of the impugned bank accounts. Shri Suresh D. Borwal is only the name lender. The reason for which, I reached to this conclusion is as under:- Evidences to establish opening and operation of the account of M/s Jain Enterprise and M/s Shittal Enterprise by Shri Jignesh Kanaiyalal Thakkar. As elaborately discussed in the preceding paragraphs, extensive enquiries were carried out by the department to identify the real person behind the opening and operation of all the seven bank accounts discussed above. Post-search enquires and papers-seized from the residential and business premises of Shri Jignesh K. Thakkar resulted in gathering of following evidences that are going to establish that he is the operator of all accounts. (i) Self-statement of Shri Harish Gokani, General Manager of The Suvikas People's Co. op. Bank (placed on record): It was observed from the written submission by the General Manager of the Suvikas People's Co-op. Bank that the employees of Shri Jignesh K. Thakkar used to carry out the transactions in the accounts of M/s Jain Enterprise and M/s Shittal Enterprise. Copy of the Statement made by the General Manager is appended at Annexure -1 of the assessment order. (ii) Statement of Shri Manish Bhupendra Shah (placed on record): He is employed with M/s Anand Corporation and working under the instruction of Shri Jignesh K. Thakkar. During the course of survey carried out at the business premises of the Anand Corporation, he was confronted with the copies of cheques bearing of his signature which were utilized for withdrawal of cash from the account of M/s. Jain Enterprise, He had categorically admitted to have withdrawn the cash on the instructions of Shri Jignesh K. Thakkar. Copy of the Statement made by the Shri Manish B. Shah is appended at Annexure - 2 of the assessment order. (iii) It is further observed that the account opening form of M/s Jain Enterprise in The Suvikas People's Co-op. Bank Ltd., Bhuj Mercantile Co-op. Bank Ltd., and the Ahmedabad District Co- op. Bank is written in the handwriting of Shri Jignesh K:- Thakkar. Similarly, account opening form of M/s Shittal Enterprise was also written by Shri Jignesh K. Thakkar. (iv) Several counterfoils of bank deposit slips were found and impounded as per Annexure - A/1 from the business premises of M/s. Anand Corporation, 119/2, Chokha Bazar, Kabutarkhana Kalupur, Ahmedabad. These impounded deposit slips consists of three deposit slips relating to deposit of cheque issued by M/s. Jain Enterprise. Details of the same are given as under:
IT(SS)A Nos. 24 to 26/Ahd/2012 & IT(SS)A No. 129/Ahd/2012 Shri Jignesh K. Thakkar vs. ACIT and ACIT vs. Shri Jignesh K. Thakkar Asst. Years –2007-08 to 2009-10 - 7 -
Name of the A/c. Chequ Amount Name of the Date of clearing of holder and A/c. No. e No. Bank in which cheque as to whom cheque A/c. is held by appearing in bank issued M/s.Jain A/c. of M/s.Jain Enterprise. Enterprise
Chetna Anand Ashar, 65239 97,187/- The Suvikas 25.3.2008 A/c. No. 4 Peoples Co. op. 0082331320001 with Bank Ltd:, IndusInd Bank Dushyant L. Ashar, 65239 1,27,589/ The Suvikas 25.3.2008 A/c. No. 5 - Peoples Co. op. 0082381318001 with Bank Ltd., IndusInd Bank Jinal Jewellers, A/c. 15827 6,47, Ahmedabad 30.4.2008 No. 29849 with 8 648/- Dist. Co. op. Ahmedabad Distt. Bank Ltd. Co. op. Bank Ltd.
(v) In the account opening form of M/s.Jain Enterprise in the Suvikas People's Cooperative Bank Ltd., Shri Jignesh K. Thakkar had given his own mobile number i.e., 9825609567 as contact number of Shri Suresh D. Borwal. Shri Jignesh K. Thakkar is the introducer of Shri Suresh D. Borwal to open this bank Account. (vi) The page no. 1 of the diary seized as Annexure BS-2 contains certain details of a bank account. The contents are verified by AO. This resulted in discovering of the following facts:
Description of the content Findings 08122010000915 Account of M/s Jain Enterprise, whose proprietor is Shri Suresh D. Bbnval held with the Kotak Mahindra Bank, JNP Satellite, Ahmedabad CR. NO. 11440456 Customer Identity Number allotted to M/s Jain Enterprise. Rekhaben-27501609 Contact number of the neighbour of Shri Suresh D. Borwal in 42, Subh-sonal Society, IOC Road, Chandkheda. CR. NO.-l 1446630 Customer Identification number allotted to Shri Suresh D. Borwal by the bank. Ph. No.- 66006022, Toll free numbers of Kotak Mahindra bank. 1800226022, 1800116022 RTGS- KKBK0000958 RTGS code of Kotak Mahindra bank. 5676788 Pass —word for mobile enquiry.
(vii) Above details clearly establishes the fact that Shri Jignesh K. Thakkar have been operating the account of M/s Jain Enterprise in Kotak Mahindra Bank. It is unlikely that any person in normal course of interaction will ever share the secret codes which are used to operate ones' bank account. Hfyen confronted with the above details, Shri Jignesh K. Thakkar has only given an evasive reply.
IT(SS)A Nos. 24 to 26/Ahd/2012 & IT(SS)A No. 129/Ahd/2012 Shri Jignesh K. Thakkar vs. ACIT and ACIT vs. Shri Jignesh K. Thakkar Asst. Years –2007-08 to 2009-10 - 8 -
(viii) Shri Jignesh K. Thakkar had himself withdrawn the cash from the account of M/s Jain Enterprise maintained in the Progressive Mercantile Co-op. Bank Ltd. on several occasions. This is ascertained from the signature of Shri Jignesh K. Thakkar appearing on the backside of "Self"' cheques being issued and presented to the bank. (ix) It was observed that the account of M/s. Anand Corporation, whose proprietor is Shri Jignesh K. Thakkar, is maintained in all banks where the bank accounts of M/s. Jain Enterpisc, and Shittal Enterprise are opened and operated. Further, there are substantial and regular transactions between the accounts of M/s. Anand Corporation and M/s.J, in Enterpise/ M/s.Shittal Enterprise. The volume of transactions is abnormally very high between the accounts of M/s.Jain Enterprise/ M/s.Shittal Enterprise and Anand Corporation. (x) On go ing. through the copies of cheque issued by M/s. Jain Enterprise and M/s.Shittal Enterprise, ii is seen that invariably in all cheques, be it Account Payee or bearer cheque, Shri Suresh D. Borwal had signed on the back side of each cheque. In normal course, only in the case of bearer cheque, signature of the issuer of cheque is obtained on the back of cheque. What is most striking is the phenomena of self bearer cheque encashed by Shri Jignesh K. Thakkar and his employees. (xi) On the examination of account of M/s Jain Enterprise in the Bhuj Mercantile Co-op. Bank Ltd. it is seen that amount credited into the account from M/s Anand Corporation was found immediately withdrawn in cash. For example, from the period from 21.09.2007 to 24.03.2008 total amount transferred from the account of M/s Anand Corporation to the account of M/s Jain Enterprise is Rs. 2,04, 60,000/-. Against this amount cash withdrawn is Rs.1,86,30,000/-. Copy of bank account statement for the relevant period is placed on record. 11.2 As mentioned above, the bank accounts in the name of M/s. Sheetal Enterprises and M/s. Jain Enterprises were operated by Shri Jignesh K. Thakkar and were used mainly for encashment of cheques of accommodation bills issued by Shri Jagdish Sheth. During investigation, it was also observed that the appellant is also engaged in the work of issuing bank drafts against cash to several clients and the impugned bank accounts were also used for depositing cash received from various clients and to get the draft issued from co-operative banks in the desired name of the clients. The appellant was asked at the assessment stage as well as during appellate proceedings to submit the details of beneficiaries by way of accommodation bills as well as by getting bank drafts against cash. The appellant reiterated the facts that the impugned bank accounts are neither owned nc r operated by him therefore, it is not possible for him to provide name and addresses of an/ beneficiary, and accordingly, the appellant did not provide any detail regarding the cash or cheques deposited in the impugned bank accounts. 11.3 I have already concluded in the preceding paras that the appellant is the real owner / operator of these impugned bank accounts and therefore, he is liable for giving the details of various cash transactions taken place through those bank accounts. As the appellant did not provide any such detail neither during
IT(SS)A Nos. 24 to 26/Ahd/2012 & IT(SS)A No. 129/Ahd/2012 Shri Jignesh K. Thakkar vs. ACIT and ACIT vs. Shri Jignesh K. Thakkar Asst. Years –2007-08 to 2009-10 - 9 - assessment proceedings nor during appellate proceedings, I am of the considered opinion that, the peak credit in these, bank accounts should be added as the income of the appellant.”
The assessee is in appeal before us against the order passed by CIT(A) holding that there was sufficient incriminating material with the Department to come to the conclusion that the assessee was in fact operating the bank accounts referred to in the earlier paragraphs and Mr. Suresh Borwal was only a name lender / benami of the assessee in the whole scheme of transactions. Before us, the Counsel for the assessee primarily reiterated the submissions made before the Ld. CIT(A), which are to the effect that the statement had been obtained from the assessee under coercion, the statement was later withdrawn by the assessee and therefore, such statement could not form the basis of making the additions and the Ld. CIT(A) erred in facts and in law in holding that in the instant facts, the assessee could not be permitted to retract the statement. No incriminating material was found during the course of search which could establish any link between the operation of the bank accounts with the assessee. The assessee was not the owner of these bank accounts and the bank accounts were being operated by Shri Suresh Borwal, who was not in any way connected to the assessee and no documents have been found which could establish any connection between the assessee and Mr. Suresh Borwal. It was submitted that in the instant facts, Mr. Suresh Borwal, who is a regular filer of Income Tax Returns and whose identity is well known to the Department, should be pursued by the Department directly and the additions cannot be made in the hands of the assessee, without any incriminating material to establish a live link between the assessee and the bank accounts, referred to above. Accordingly, to sum up the Counsel for the assessee submitted that in absence of any incriminating material found during the course of search, the operations of the bank accounts cannot be
IT(SS)A Nos. 24 to 26/Ahd/2012 & IT(SS)A No. 129/Ahd/2012 Shri Jignesh K. Thakkar vs. ACIT and ACIT vs. Shri Jignesh K. Thakkar Asst. Years –2007-08 to 2009-10 - 10 - attributed to the assessee and no additions are sustainable in the hands of the assessee.
In response, Ld. D.R. reiterated the observations made by Ld. Assessing Officer and Ld. CIT(A) in their respective orders and submitted that based on the various documents which are on the record of the Department, there are adequate evidences to hold that the above bank accounts were operated by the assessee and Shri Suresh Borwal was only the benamidar / name lender of the assessee. Accordingly, the additions are liable to be sustained in the hands of the assessee, since the Department had enough incriminating material come to the considered conclusion that the assessee was the operator / beneficiary of the bank accounts, which were being operated in the name of Shri Suresh Borwal.
We have heard the rival contentions and perused the material on record.
In light of the above arguments, we need to analyze, whether in the instant facts, there was adequate incriminating material with the Department so as to sustain the additions in the hands of the assessee on the ground that the assessee was, in fact, operating the bank accounts and Mr. Suresh Borwal was only a name lender / benamidar in the aforesaid transactions.
Firstly, let us understand what is mean by the term “incriminating evidence” for the purpose of additions made as a consequence of search conducted on the assessee. The expression “incriminating evidence” is not defined in the Income Tax Act. Generally speaking, it refers to evidence tending to establish guilt or actions from which a guilt can be established. In taxation term, it could be said to refer to an act of manipulation of accounts / documents / flow of events by a taxpayer by creating evidence in
IT(SS)A Nos. 24 to 26/Ahd/2012 & IT(SS)A No. 129/Ahd/2012 Shri Jignesh K. Thakkar vs. ACIT and ACIT vs. Shri Jignesh K. Thakkar Asst. Years –2007-08 to 2009-10 - 11 - his favour or by accepting certain evidence against him, so as to reduce his tax liability. Incriminating evidence, by it’s very nature is secretive and is usually unearthed in the course of search or survey. Therefore, whether the documents which have been unearthed can be held to be “incriminating documents” would depend / vary on the facts of each case separately. In the instant facts, the Department, on the basis of investigation carried out observed that no concern by the name of M/s. Shittal Enterprises was found to be operating. Further, the whereabouts of Mr. Suresh Borwal, who is said to be the proprietor of M/s. Shittal Enterprises and was said to be operating the bank accounts held with Suvikas Peoples Co-operative Bank Ltd., Ahmedabad was also not known (Page 2 of the Assessment Order). The Department, on the basis of assessment records of Shri Suresh D. Borwal has observed that the said person is a man of little means and for various assessment years 2005-06, 2006-07, 2007-08 and 2008-09, he has filed a meagre return of income with “NIL Taxes”. Further, the Department observed that none of the bank accounts discussed in the assessment order found mention in the return of income filed by Shri Suresh Borwal. Therefore, from the facts placed on record, it is evident that Shri Suresh Borwal is a man of meagre income, and his creditworthiness is under serious doubt. This is coupled with the fact that he is not residing at the addresses mentioned in the bank account details and further, M/s. Shittal Enterprises, of whom Mr. Suresh Borwal is the proprietor, is not found to be in existence at the address mentioned in the bank account (refer Page 6-7 of the Assessment Order).
Secondly, extensive search conducted of various banks shows that M/s. Anand Corporation, of which the assessee is the proprietor has introduced Mr. Suresh Borwal to this bank account (refer Pages 8-9 of the Assessment Order).
IT(SS)A Nos. 24 to 26/Ahd/2012 & IT(SS)A No. 129/Ahd/2012 Shri Jignesh K. Thakkar vs. ACIT and ACIT vs. Shri Jignesh K. Thakkar Asst. Years –2007-08 to 2009-10 - 12 - 13. Thirdly, on the basis of survey carried out by the Department at the addresses mentioned in the bank account opening forms, neither was Shri Suresh Borwal found to be residing at this address and no related business activity was found to be carried out, which could be connected with the transactions shown in the bank accounts (refer Para 9 of the Assessment Order). The statement of Shri Harish Gokani, General Manager of M/s. Suvikas Peoples Cooperative Bank was taken in which he has stated that the employees of the assessee used to carry out transactions in the accounts of M/s. Jain Enterprises and M/s. Shittal Enterprises (though such statement was not taken under oath in terms of Section 132(4) of the Act). Further, statement under Section 132(4) of the Act was taken from Shri Manish Shah in which he has admitted to have withdrawn cash on the instructions of the assessee (refer Page 15 of the Assessment Order) from these bank accounts. Further, it is observed that the Department has also found out that the account opening form of M/s. Jain Enterprises in Suvikas Peoples Co- operative Bank Ltd. and account opening form of M/s. Shittal Enterprises are also in the handwriting of the assessee. Notably, in the account opening form of M/s. Jain Enterprise with Suvikas Peoples Co-operative Bank Ltd., the assessee had given his own mobile number as contact number of Shri Borwal. The assessee is the introducer of Shri Borwal to open this bank account (refer Page 16 of the Assessment Order).
Fourthly, The Department further observed that the diary seized as Annexure BS-2 from the assessee contains certain confidential details of bank account operated by Shri Suresh Borwal including the Customer Identification Number (in short “CIN”) allotted to M/s. Jain Enterprise and Customer Identification Number allotted to Shri Suresh Borwal, which clearly point to the fact that the assessee has been operating the account of M/s. Jain Enterprise in Kotak Mahindra Bank. Normally, the Customer Identification Number of one person is a very personal information of such
IT(SS)A Nos. 24 to 26/Ahd/2012 & IT(SS)A No. 129/Ahd/2012 Shri Jignesh K. Thakkar vs. ACIT and ACIT vs. Shri Jignesh K. Thakkar Asst. Years –2007-08 to 2009-10 - 13 - person in relation to the bank account and only the bank account owner has details of such Customer Identification Number. The fact that the Customer Identification Number of M/s. Shittal Enteprises and Shri Suresh Borwal were found from the notings in the assessee’s diary, also raise a strong presumption as to the fact that the assessee itself is operating the bank accounts which have been opened in the name of Shri Suresh Borwal (the identity and creditworthiness and even the whereabouts or genuineness of business transactions of Shri Suresh Borwal are under serious doubt). Notably, the assessee has not disputed that he had introduced Mr. Suresh Borwal to the bank account. Further at certain places, the mobile number of the assessee has been given in the contact details of the customer. The CIN of Mr. Borwal has been found to be in possession of the assessee. In our view, details like CIN of the assessee is a very personal detail and there is no reason why such details should be found to be in the possession of the assessee. Further, both during the course of assessment proceedings, and during the course of appellate proceedings and even before us, the assessee could not give any concrete reason as to why such personal details like Customer Identification Number of Shri Suresh Borwal were found in the possession of the assessee. The Counsel for the assessee submitted that these details are not confidential and the fact that these were found from the assessee’s diary should not raise any presumption that the accounts were operated by the assessee. However, in our considered view, Customer Identification Number of any bank account holder is a very personal and confidential information and normally such information is not shared by account holders and such information is not expected to be found with any other person, other than the bank account holder, in the normal course of banking business (refer Page 16 of the Assessment Order).
Fifthly, the Department has further observed that there have been recurring withdrawals of cash from accounts of Shri Shittal Enterprises and
IT(SS)A Nos. 24 to 26/Ahd/2012 & IT(SS)A No. 129/Ahd/2012 Shri Jignesh K. Thakkar vs. ACIT and ACIT vs. Shri Jignesh K. Thakkar Asst. Years –2007-08 to 2009-10 - 14 - Jain Enterprises, and the assessee has admitted that the assessee had provided assistance to the proprietor of these concerns in making the bank transaction (though the assessee had submitted that this does not imply without the assessee was operating the said bank accounts) (refer Page 18 of the Assessment Order).
In the assessment order, the Assessing Officer has pointed out that the additions have not been made in the hands of the assessee on the basis of any stand alone statement made by the assessee or on the basis that the assessee was the introducer of Shri Suresh Borwal, but the sum total of enquiries and resulting evidences, clearly point to the fact that assessee is maintaining / operating the bank accounts in the name of Shri Suresh Borwal. Accordingly, in our considered view, there are various evidences unearthed during the course of search which indicate that the assessee was operating the bank accounts of Mr. Suresh Borwal viz. confidential details regarding the bank account of Shri Suresh Borwal have been found with the assessee, the fact that the assessee has suo moto admitted that he has been assisting Shri Suresh Borwal in cash withdrawals from the bank account, the statement made by Shri Suresh Borwal, (though later retracted), the fact that the assessee was introducer of Mr. Suresh Borwal to the various bank accounts in which substantial banking transactions have been carried out, the fact that both the identity, creditworthiness and even the genuineness of Shri Suresh Borwal is under serious doubt, the fact that in some account applying form of Mr. Borwal mobile number of assessee has been mentioned, the fact that confidential bank details like CIN Number of Mr. Borwal and M/s. Jain Enterprises has been found in possession of the assessee etc. all point to the fact that the assessee is in fact operating the bank accounts held with Suvikas Peoples Co-operative Bank Ltd., Kotak Mahindra Bank etc. referred to above. The Counsel for the assessee has sought to take certain technical pleas that statement of the assessee was
IT(SS)A Nos. 24 to 26/Ahd/2012 & IT(SS)A No. 129/Ahd/2012 Shri Jignesh K. Thakkar vs. ACIT and ACIT vs. Shri Jignesh K. Thakkar Asst. Years –2007-08 to 2009-10 - 15 - later retracted, the assessee was not given the opportunity of cross- examination of the Manager of Suvikas Peoples Co-operative Bank Ltd., the original statement was taken under duress, the fact that bank account number and Customer Identification Number of Shri Suresh Borwal which were found in the diary notings of the assessee do not establish that the assessee is operating the bank accounts of Shri Suresh Borwal. However, we are unable to accept the argument of Ld. Counsel for the assessee that the substantial material which has been unearthed by the Department does not qualify as “incriminating material” and in our considered view, the sum totality of all the evidences found during the course of search clearly establishes a live link between the assessee and the operations being carried out in the aforesaid bank accounts, in the name of Shri Suresh Borwal. The fact that the assessee subsequently retracted his statement given during the course of search or the allegation that the statement (refer pages 69-100 of Paper Book) was taken under coercion cannot lead us to ignore that sum totality of facts placed before us. There are certain undeniable facts which have been placed on record before us viz. the assessee is the introducer of Shri Suresh Borwal in these bank accounts, the assessee has himself admitted of assisting Mr. Suresh Borwal in withdrawal of cash from the aforesaid bank accounts, confidential information related to Shri Suresh Borwal with respect to bank account details (CIN Number and Bank Account Number) were found in the diary notings of the assessee, Shri Suresh Borwal is a man of meagre means declaring NIL taxable income, Mr. Suresh Borwal is not found to be residing at the premises stated in the bank account, M/s. Shittal Enterprises is found not to be operating from the address given to bank, in certain bank account opening forms the mobile number of the assessee has been furnished to the bank as part of contact details etc., all taken together, in our view, demonstrates that the assessee is in fact the beneficiary of / operating the aforesaid bank accounts and Mr.
IT(SS)A Nos. 24 to 26/Ahd/2012 & IT(SS)A No. 129/Ahd/2012 Shri Jignesh K. Thakkar vs. ACIT and ACIT vs. Shri Jignesh K. Thakkar Asst. Years –2007-08 to 2009-10 - 16 - Suresh Borwal is only a name lender. Looking at the sum totality of all the facts placed on record, we are of the considered view that the Department had sufficient “incriminating material” in it’s possession to come to the conclusion that the assessee was operating the various bank accounts and Shri Suresh Borwal was only a name lender / benamidar in the entire scheme of things.
In the result, the additional grounds of appeal raised by the assessee that the additions were not based on any “incriminating material”, is hereby dismissed.
In the result, the additional ground raised by the assessee is dismissed.
Ground No.2:- Ld. CIT(A) erred in upholding the order of Assessing Officer rejecting the books of accounts of the assessee.
In view of our observations in the preceding paragraph, wherein we have held that Shri Suresh Borwal was acting as the benamidar / name lender for the assessee and in fact, it was the assessee who was operating the aforesaid bank accounts through which substantial transactions were carried out, we find no infirmity in the order of Ld. CIT(A) upholding the order of Ld. AO rejecting the books of accounts of the assessee.
In the result, Ground No. 2 of the assessee’s appeal is dismissed.
Ground No.3:- Ld. CIT(A) erred in upholding addition of Rs. 2,61,93,832/- as peak credit.
The brief facts in relation to this ground of appeal are that after holding the assessee to be the true beneficiary of the deposits made in
IT(SS)A Nos. 24 to 26/Ahd/2012 & IT(SS)A No. 129/Ahd/2012 Shri Jignesh K. Thakkar vs. ACIT and ACIT vs. Shri Jignesh K. Thakkar Asst. Years –2007-08 to 2009-10 - 17 - various bank accounts, the Ld. A.O. proceeded to make addition of Rs. 10,45,24,561/- as unaccounted income of the assessee.
In appeal, Ld. CIT(A) for detailed reasons cited in the appellate order, upheld the finding of the Assessing Officer that the assessee is the real owner / operator of various bank accounts as mentioned in the assessment order and therefore, the assessee is liable for giving details of various cash transactions which have taken place through these bank accounts. The CIT(A) held that since the assessee did not provide any such details either during the course of assessment proceedings and nor during the course of appellate proceedings, Ld. CIT(A) held that peak credit in the bank accounts should be added as income of the assessee. Accordingly, Ld. CIT(A) confirmed the findings of the Assessing Officer to the extent that the cash deposited in the impugned bank accounts should be added to the assessee’s income on peak basis. However, on going through the peak credit calculation done by the Assessing Officer, the Ld. CIT(A) observed that the Assessing Officer has calculated the peak credit for each assessment year separately for each bank, but did not allow any adjustment of such peak in the next assessment year. Therefore, Ld. CIT(A) observed that the Assessing Officer had calculated the peak of each bank for each assessment year independently and made additions for all such peaks with reference to all bank accounts, to the total income of the assessee without giving benefit of any adjustment of such peak in the next assessment year. Accordingly, the Ld. CIT(A) asked the assessee to submit the working of consolidated peak credit for the impugned bank accounts. The assessee submitted the computation of peak credit, which the Ld. CIT(A) broadly found to be in order. Accordingly, Ld. CIT(A) restricted the addition to Rs. 2,61,93,832/- for the impugned assessment year. However, the Assessing Officer was also directed to re-verify the entire working of peak submitted by the assessee.
IT(SS)A Nos. 24 to 26/Ahd/2012 & IT(SS)A No. 129/Ahd/2012 Shri Jignesh K. Thakkar vs. ACIT and ACIT vs. Shri Jignesh K. Thakkar Asst. Years –2007-08 to 2009-10 - 18 - 23. The assessee is in appeal before us against the additions made by the Ld. CIT(A) confirming the addition of peak credit in the bank accounts held by the assessee.
Once having confirmed that the assessee is the real owner / operator of the impugned bank accounts, in the preceding paragraphs in our considered view, Ld. CIT(A) has not erred in facts and in law in confirming the addition of peak credit in the bank accounts held by the assessee. The assessee would be at liberty to check the correctness of the working of peak credit for each of the impugned assessment years and give necessary inputs to the Assessing Officer in this regard.
In the result, Ground No. 3 of the assessee’s appeal is dismissed.
Ground No.4:- Ld. CIT(A) erred in upholding addition of Rs. 27,47,117/- as commission income.
The brief facts in relation to this ground of appeal are that during the course of search, the assessee in his statement under Section 132(4) of the Act recorded on 05.02.2009 admitted to have earned commission income to the tune of Rs. 40,00,000/- which is not accounted for in his books of accounts. However, vide affidavit dated 22.02.2009 file before DGIT (Investigation), Ahmedabad the assessee retracted his statement and admission of undisclosed income on the ground that he had done so under pressure and threat from Revenue Authorities at the time of search. The Assessing Officer did not accept the retraction on the grount that the assessee had under Question No. 51 clearly stated that the statements recorded had been read by him carefully and he has understood the statement properly. Each page of the impugned statement as well as confirmation of his wife has been signed by the witness and the assessee himself in person. In appeal, CIT(A) was of the view that rejection of
IT(SS)A Nos. 24 to 26/Ahd/2012 & IT(SS)A No. 129/Ahd/2012 Shri Jignesh K. Thakkar vs. ACIT and ACIT vs. Shri Jignesh K. Thakkar Asst. Years –2007-08 to 2009-10 - 19 -
retraction letter by the Assessing Officer is fully justified. Accordingly, CIT(A) observed that in the assessment order there were total unaccounted transactions in the impugned bank accounts to the tune of Rs. 750 crores. The Assessing Officer had given the finding in the assessment order (Para 5.7) that the assessee had declared unaccounted income only with reference to transactions in the bank accounts to the tune of Rs. 441 crores. It is an undisputed fact that total unaccounted transactions in all the bank accounts were to the tune of Rs. 750 crores. As such the assessee has not declared unaccounted commission income @ 0.1% on the balance amount of Rs. 309 crores (750 crores – 441 crores). Accordingly, the Assessing Officer further added unaccounted income of Rs. 30.90 lakhs to the total income of the assessee by estimating the unaccounted commission @ 01% on transactions of Rs. 309 crores. The Assessing Officer made total additions of Rs. 75,12,328/-, bifurcating the same in three assessment years and Rs. 27,47,117/- pertaining to the impugned assessment year. In appeal, Ld. CIT(A) upheld the additions with the following observations:-
“15.2. As mentioned, supra, I have already decided that the impugned bank accounts were owned / operated by the appellant. The unaccounted transactions in the impugned bank accounts were to the tune of Rs.750 Crores. The appellant himself admitted the unaccounted income of Rs.40 lacs on the transactions of Rs.441 Crores. From the investigation of seized documents and other inquiries, it is revealed that the appellant is engaged in the business of encashment of cheques issued for accommodation -bills as-well-as getting-draft from co- operative banks against cash for several clients. There is no reason that the appellant will get the commission only, with reference to the transactions of Rs.441 Crores as against the undisputed unaccounted transactions to the tune of Rs.750 Crores. After careful consideration of entire material available on record, I reached to the conclusion that unaccounted commission @ 0.1% by the Assessing Officer on entire unaccounted transactions of approximately Rs.750 Crores is fully justified and does not need any interference. I, accordingly, confirm the entire addition of Rs.75,12,328/- on account of unaccounted commission for all the three years bifurcated as below: (i) A.Y. 2007-08 Rs.27,47,117/- (ii) A.Y. 2008-09 Rs.27,47,117/- (iii) A.Y. 2009-10 Rs.20,18,094/- Total Rs.75,12,328/-
IT(SS)A Nos. 24 to 26/Ahd/2012 & IT(SS)A No. 129/Ahd/2012 Shri Jignesh K. Thakkar vs. ACIT and ACIT vs. Shri Jignesh K. Thakkar Asst. Years –2007-08 to 2009-10 - 20 - 27. The assessee is in appeal before us against the aforesaid commission income and argued that the whole basis of the affidavit itself is incorrect. The Counsel for the assessee has pointed out before us that the statement of the assessee taken on oath under Section 132(4) of the Act has no value since it has been retracted by the assessee and therefore no additions can be sustained on the basis of this statement.
At the outset, we would like to clarify that our observations in the preceding paragraphs with regards to the fact that assessee was the owner / operator of various bank accounts and Shri Suresh Borwal was only a name lender / benamidar of the assessee is not on the basis of the evidentiary value of the present statement by the assessee. We have given our finding on the basis of various other evidences / incriminating documents which have been unearthed by the Department during the course of search, which point to the fact that assessee was in fact the beneficiary / owner / operator of the bank accounts and Shri Suresh Borwal was only a name lender / benamidar in whole scheme of transactions.
Now, the issue for consideration before us is whether the assessee should be allowed to retract his statements by taking shelter of various grounds that the statement (refer pages 69-100 of Paper Book) was taken under coercion, the assessee had ill-health and only with a view to buy peace of mind, the statement was signed by the assessee etc. It is a well accepted fact that search proceedings cause a lot of stress to the assessee / taxpayers whose premises are searched. It is also an accepted fact that many times statements are given by the assessee only with a view to buy peace of mind. However, it has also observed that on many occasions, it has become a regular practice by assessees to withdraw the statements given by them, under oath during the course of search, by citing various reasons such ill-health, statement having been given under pressure /
IT(SS)A Nos. 24 to 26/Ahd/2012 & IT(SS)A No. 129/Ahd/2012 Shri Jignesh K. Thakkar vs. ACIT and ACIT vs. Shri Jignesh K. Thakkar Asst. Years –2007-08 to 2009-10 - 21 - coercion by the tax authorities, statement given only with a view to buy peace of mind etc. Though, an admission under Section 132(4) of the Act is an important piece of evidence, but it cannot be said that it is conclusive and it is open to the person who made it to show that the impugned statement has been incorrectly made and the person making the statement should be given proper opportunity to show that it does not show the correct state of facts / affairs. At the same time, it has to be kept in mind that merely because a statement is retracted, it cannot become a statement which was involuntarily and unlawfully obtained from the assessee. For any retraction to be successful, the assessee has to show as to how the recorded statements do not state the true facts or that there was circumstances which indicated coercion, inducement or threat while recording the statement. We observe that it has become a common practice that after having admitted certain facts in a statement made under Section 132(4) of the Act during search and seizure operation, the assessee retracts their admission made by denying the facts admitted, claiming that the admissions were obtained under duress by applying mental pressure or under mistaken belief of facts and of law. Although, law permits retraction of a statement, any statement recorded under Section 132(4) statutorily deemed to have evidentiary value cannot be retracted at the free will of the party. A statement made under oath deemed and permitted to be used an evidence, by express statutory provision has to be taken as true unless there is contra evidence to dispel such assumption.
The Division Bench of the Kerala High Court in CIT v. Hotel Meriya [2011] 332 ITR 537 / [2010] 195 Taxman 459 (Ker.) considered the scope of a statement recorded under Section 132(4) and found that such statement recorded by the officer as well as the documents seized would come within the purview of evidence under the Income Tax Act read with Section 3 of the Evidence Act. The necessary corollary is that such an
IT(SS)A Nos. 24 to 26/Ahd/2012 & IT(SS)A No. 129/Ahd/2012 Shri Jignesh K. Thakkar vs. ACIT and ACIT vs. Shri Jignesh K. Thakkar Asst. Years –2007-08 to 2009-10 - 22 - evidence should be admissible for the purpose of search assessments too. The Explanation to Section 132(4) of the Income Tax Act was also noticed by the Division Bench to further emphasize that the evidence so collected would be relevant in all purposes connected with any proceedings of the Income Tax Act. A self-serving retraction, without anything more cannot dispel this statutory presumption. Once a statement was recorded under Section 132(4), such a statement can be used as evidence against the assessee in assessing the income and the burden lies on the assessee to establish that the admission made in the statements are incorrect / wrong and that burden has to be discharged by an assessee at the earliest point in time.
The Hon’ble Apex Court in the case of Bannalal Jat Constructions (P.) Ltd. vs. ACIT 106 taxmann.com 128 (SC) held that where High Court upheld addition made by authorities below relying upon statement made in course of search proceedings by director of assessee company, since assessee failed to discharge its burden that admission made by director in his statement was wrong and said statement was recorded under duress and coercion, SLP filed against decision of High Court was to be dismissed.
In the case of Nayyar Patel vs. ACIT (Inv.) 137 taxmann.com 149 (Kerala), wherein the Kerala High Court held that where pursuant to search conducted at assessee's premises, his statement was recorded under section 132(4), however later assessee retracted statement, but, had not adduced any evidence to substantiate his allegations to retract from his statements under section 132(4), retraction was to be ignored and additions based on statement originally recorded were justified.
IT(SS)A Nos. 24 to 26/Ahd/2012 & IT(SS)A No. 129/Ahd/2012 Shri Jignesh K. Thakkar vs. ACIT and ACIT vs. Shri Jignesh K. Thakkar Asst. Years –2007-08 to 2009-10 - 23 - 33. In the case of Dr. S.C. Gupta vs. CIT 118 252 (Allahabad- High Court) wherein the Allahabad High Court observed as under:-
“7. As regards the assessee’s contention that the statement having been retracted the assessing officer should have independently come to a conclusion that there was additional income as sought to be assessed and that there was no material to support that there was such income, this contention in our view is not correct. As held by the Supreme Court in Pullan-gode Rubber Produce Co. Ltd. v. State of Kerala, (1973) 91 ITR 18 (SC) an admission is an extremely important piece of evidence though it is not conclusive. Therefore, a statement made voluntarily by the assessee could form the basis of assessment. The mere fact that the assessee retracted the statement could not make the statement unacceptable. The burden lay on the assessee to establish that the admission made in the statement at the time of survey was wrong and in fact there was no additional income. This burden does not even seem to have been attempted to be discharged. Similarly, P.K. Palwankar v. CGT, (1979) 117 ITR 768 (MP-HC) and CIT v. Mrs. Doris S. Luiz, (1974) 96 ITR 646 (Ker-HC) on which also learned counsel for the assessee placed reliance are of no help to the assessee. The Tribunal’s order is concluded by findings of fact and in our view no question of law arises. The applications are, accordingly, rejected.”
In the case of Commissioner of Income Tax, Kozhikode vs. O. Abdul Razak 20 taxmann.com 48 (Ker.) the Kerala High Court held that a self-serving retraction, without anything more cannot dispel statement made under oath under Section 132(4). A statement made under oath deemed and permitted to be used in evidence, by express statutory provision, has to be taken as true unless there is contra evidence to dispel such assumption.
In the case of Thiru. A.J. Ramesh Kumar vs. DCIT 139 taxmann.com 190 (Madras) the Madras High Court held that statement made under Section 132(4) has a strong evidentiary value and is binding on a person, who makes it. Where in statement recorded under Section 132(4) assessee admitted gold jewellery found during search, later assessee's assertion that said jewellery belonged to his wife could not displace strong evidentiary value attached to a statement recorded under Section 132(4); therefore it should be presumed that jewellery found during course of search belonged to assessee.
IT(SS)A Nos. 24 to 26/Ahd/2012 & IT(SS)A No. 129/Ahd/2012 Shri Jignesh K. Thakkar vs. ACIT and ACIT vs. Shri Jignesh K. Thakkar Asst. Years –2007-08 to 2009-10 - 24 -
Accordingly, in light of the judicial precedents stated above, normally, statements recorded under during the course of search are an important piece of evidence, but in case the circumstances suggest that the statement was taken under duress, pressure of coercion and only with a view to buy peace of mind, such statement cannot be permitted to be withdrawn. The burden is on the assessee to prove that such statement was taken under coercion / stress and on a misunderstanding of the correct state of facts, and in such circumstances, any addition based solely on the statement of the assessee made during the course of search which was later retracted cannot solely be the basis of addition in the hands of the assessee. However, the present case, in our considered view, does not fall under such category. Firstly, it is observed that the Department had collected substantial incriminating documents which clearly indicate that the assessee was the owner / operator of substantial transactions taking place in various bank accounts, under the name of Shri Suresh Borwal who was acting in the capacity of assessee’s name lender / benamidar. The additions have not been sustained on the basis statement of the assessee alone, but on the basis of substantial enquiries / documents unearthed during the course of search which indicate that the bank accounts were actually operated and owned by the assessee himself. The statement of the assessee only supported the findings made by the tax authority on the basis of search conducted and various evidences collected with regard to the transactions being carried on by the assessee under the name of Shri Suresh Borwal. The assessee, in the instant facts, has not brought forth any substantive evidence to demonstrate that the statement was taken under duress or coercion or the statement does not represent the correct state of affairs or that the additions were made solely on the basis of the statement made by the assessee without any corrective evidence. Accordingly, in light of the instant facts and the judicial precedents of the subject, we are of the considered view that this is
IT(SS)A Nos. 24 to 26/Ahd/2012 & IT(SS)A No. 129/Ahd/2012 Shri Jignesh K. Thakkar vs. ACIT and ACIT vs. Shri Jignesh K. Thakkar Asst. Years –2007-08 to 2009-10 - 25 - not a fit case where the assessee can be permitted to withdraw his statement.
We also observe that in the instant facts, the retraction of statement cannot be allowed to the assessee also in view of the fact that in appeal before Ld. CIT(A), while dealing with respect to the ground of interest income added to the income of the assessee by the Assessing Officer on the basis of a diary and loose papers found during the course of search, the Counsel for the assessee himself submitted before Ld. CIT(A) that the notings in the loose papers / diary unearthed during the course of search in fact pertains to unaccounted commission income received by the assessee and therefore, once unaccounted commission income has been taxed in the hands of the assessee it would amount to double deduction in the hands of the assessee if the same income is added as interest income (we have dealt with this ground of appeal raised by the assessee relating to interest income in the succeeding paragraphs). Therefore, in our view, the statements made by the Counsel for the assessee before Ld. CIT(A) to the effect that the notings made in the loose papers / diary found during the course of search represents unaccounted commission income, is clearly contrary to the retraction sought to be made by the assessee of his statement recorded during the course of search under Section 132(4) of the Act on the ground that such statement was given under duress / coercion and that the assessee did not earn any unaccounted commission income during the year under consideration. While on one hand, the assessee is seeking to retract his statement on the ground that he had earned no unaccounted commission income and the statement was given under coercion and duress whereas during the course of appellate proceedings, the Counsel for the assessee has himself stated before the Ld. CIT(A) that the notings made in the diary / loose papers represents unaccounted commission income, which has already been added by the Assessing Officer and if the same is again added
IT(SS)A Nos. 24 to 26/Ahd/2012 & IT(SS)A No. 129/Ahd/2012 Shri Jignesh K. Thakkar vs. ACIT and ACIT vs. Shri Jignesh K. Thakkar Asst. Years –2007-08 to 2009-10 - 26 - under the head interest income, then the same would amount to double disallowance. Therefore, these facts also run counter to the statement made by the assessee that he had earned no unaccounted commission income during the year under consideration. Therefore, looking into the instant facts, Ld. CIT(A) has not erred in facts and in law that in holding that in the instant facts, the assessee cannot be allowed to retract his statement given during the course of search, under Section 132(4) of the Act. Therefore, looking into the instant facts, once the contents of statement represent the correct state of affairs and also in light of statement made by the Ld. A.R. of assessee that notings in loose papers / diary represents unaccounted commission income (which again cannot be added as interest income), in our view the addition as amounting to Rs. 27,47,117/- are liable to be sustained.
37.1 Further, vide Para 11.7 of CIT(A) order, while holding that unaccounted commission income represents income of the assessee on the basis of income theory, whereas the addition of peak credit in the bank accounts is on the basis of investment theory, Ld. CIT(A) directed that peak credit of each assessment year was to be reduced to the extent of unaccounted commission income held to be taxable in the hands of the assessee for the respective assessment years, with a view to avoid double taxation of the same amount in the hands of the assessee. Accordingly, we also direct that while computing the peak credit for each assessment year, the appropriate adjustment of unaccounted commission income is granted to the assessee, so that the same amount does not get taxed in the hands of the assessee twice.
In the result, Ground No. 4 of the assessee’s appeal is dismissed.
IT(SS)A Nos. 24 to 26/Ahd/2012 & IT(SS)A No. 129/Ahd/2012 Shri Jignesh K. Thakkar vs. ACIT and ACIT vs. Shri Jignesh K. Thakkar Asst. Years –2007-08 to 2009-10 - 27 - 39. The other grounds raised by the assessee are general in nature do not require any specific adjudication.
Now we shall take up the Department’s appeal for A.Y. 2009-10
The Department has raised the following grounds of appeal:-
“1. The Ld. CIT(A) has erred in law and on facts in deleting the addition on account of unaccounted interest income of Rs.1,86,13,639/-. 2. On the fats and in the circumstances of the case and in law, the CIT(A) ought to have upheld the order of the A.O. 3. It is, therefore, prayed that the order of the CIT (A) be set aside and that of the A.O. be restored to the above extent.”
Ground No.1:- Ld. CIT(A) has erred in deletion of unaccounted interest income of Rs. 1,86,13,639/-
The brief facts in relation to this ground of appeal are that during the course of search proceedings, one diary and some loose papers were seized from the residence and office premises of the assessee. On analysis of the diary / loose papers, the Assessing Officer observed that these entries are relating to assessee’s sarafi business and assessee received interest income on various loans given by the assessee. Accordingly, the Assessing Officer made addition of interest income in the hands of the assessee.
In appeal, the assessee submitted that the notings in the seized dairy / papers related to unaccounted commission income and for which the assessee has already declared a total of Rs. 38,33,379/-. Accordingly, the assessee argued before Ld. CIT(A) that whatever commission income, disclosed as well as undisclosed, has been added by the Assessing Officer has again been added by the Assessing Officer, as interest income in the hands of the assessee. The assessee submitted that during the course of assessment proceedings, books of accounts of the assessee and contra confirmation were given to the Assessing Officer, who wrongly added the
IT(SS)A Nos. 24 to 26/Ahd/2012 & IT(SS)A No. 129/Ahd/2012 Shri Jignesh K. Thakkar vs. ACIT and ACIT vs. Shri Jignesh K. Thakkar Asst. Years –2007-08 to 2009-10 - 28 -
explained entries as unaccounted interest income. Accordingly, the Counsel for the assessee submitted before Ld. CIT(A) that seized papers / diary was with the reference to working of unaccounted commission income for which declaration has already been made by the assessee. Accordingly, the Counsel for the assessee reiterated that unaccounted commission income has been added twice by the Assessing Officer, both as commission income as well as interest income. Ld. CIT(A) observed that on random verification of seized material, it is observed that there is no mention about interest income or commission income in the notings. Therefore, on this issue, the CIT(A) was of the view that the seized papers are with reference to calculation of unaccounted commission for which addition of Rs. 75.12 lakhs has been confirmed in the earlier part of his order. Accordingly, CIT(A) deleted the addition with the following observation:-
“19.4. In view of these facts, I am of the opinion that most of the notings in the seized documents are with reference to unaccounted commission income for which the addition of Rs.75.12 lacs has already been confirmed in my earlier findings. If there is any other small portion of unaccounted interest income then that will be treated as application of unexplained cash credits in banks for which addition has already been confirmed on the basis of peak theory. Any separate addition on account of unaccounted interest will amount to double addition which is not permitted under the I.T. Act. In view of these findings, the addition made by the Assessing Officer for unaccounted interest is deleted. Addition on the basis of BS-1 is of Rs.2,29,10,269 and addition on the basis of BS-2 is of Rs.12,72,451/-, the total addition is Rs.2,42,82,720/-, but the total addition is only Rs.2,32,24,123/-. There appears to be some mistake in totaling. As such, the appellant gets the relief in three A.Ys. as under: (i) A.Y.2007-08 Rs. 5,96,209/- (ii) A.Y.2008-09 Rs. 40,14,275/- (iii) A.Y.2009-10 Rs. 1,86,13,639/- Total Rs.2,32,24,123/-”
On going through the facts of the instant case, we observe that the Ld. CIT(A) correctly noted that from the notings / diary made in the loose papers, it is not coming out that this income represents the interest income earned by the assessee. Further, the A.R. of the assessee has also admitted
IT(SS)A Nos. 24 to 26/Ahd/2012 & IT(SS)A No. 129/Ahd/2012 Shri Jignesh K. Thakkar vs. ACIT and ACIT vs. Shri Jignesh K. Thakkar Asst. Years –2007-08 to 2009-10 - 29 -
before Ld. CIT(A) that these notings represent undisclosed commission income, for which no separate addition can be made as interest income, once additions have been made under the head undisclosed commission income. Accordingly, looking into the instant facts and the observations made by the CIT(A), we find no infirmity with respect to these additions and the observations made by the Ld. CIT(A) do not call for any interference.
In the result, Ground No. 1 of the Department’s appeal is dismissed for A.Y. 2009-10.
The other grounds of appeal raised by the Department are general in nature and do not require any specific adjudication.
The grounds raised by the assessee in A.Y. 2008-09 and 2009-10 are as under:-
A.Y. 2008-09:- “1) The order passed by the Ld CIT(A) is against law equity and justice and same is wholly illegal, unlawful and bad in law. 2) The Ld C1T (A) has erred in law and/or facts in upholding the order of the Ld. A.O. of rejection of books of accounts of the appellant ignoring the submission made by the appellant. 3) The Ld CIT (A) has erred in law and/or facts in upholding the order of the Ld. A.O. in considering the bank account of M./S Jain Enterprises/Shittal Enterprise as benami account of the appellant and thus upholding the addition of Rs.5327988/- as peak credit ignoring the submission of the appellant. 4) The Ld CIT (A) has erred in law and/or facts in upholding the order of the Ld. A.O. in considering the bank account of M./S Jain Enterprises as benami account of the appellant and thus upholding the addition of Rs.2747117/- as commission income from bank accounts of Shri Suresh Borwal. 5) The appellant craves liberty to add, amend alter or modify all or any grounds of appeal before final disposal.” A.Y. 2009-10:- “1) The order passed by the Ld CIT(A) is against law equity and justice and same is wholly illegal, unlawful and bad in law.
IT(SS)A Nos. 24 to 26/Ahd/2012 & IT(SS)A No. 129/Ahd/2012 Shri Jignesh K. Thakkar vs. ACIT and ACIT vs. Shri Jignesh K. Thakkar Asst. Years –2007-08 to 2009-10 - 30 -
2) The Ld C1T (A) has erred in law and/or facts in upholding the order of the Ld. A.O. of rejection of books of accounts of the appellant ignoring the submission made by the appellant. 3) The Ld CIT (A) has erred in law and/or facts in upholding the order of the Ld. A.O. in considering the bank account of M./S Jain Enterprises/Shittal Enterprise as benami account of the appellant and thus upholding the addition of Rs.10504121/- as peak credit ignoring the submission of the appellant. 4) The Ld CIT (A) has erred in law and/or facts in upholding the order of the Ld. A.O. in considering the bank account of M./S Jain Enterprises as benami account of the appellant and thus upholding the addition of Rs.2018094/- as commission income from bank accounts of Shri Suresh Borwal. 5) The appellant craves liberty to add, amend alter or modify all or any grounds of appeal before final disposal.”
The grounds raised by the assessee in relation to A.Ys. 2008-09 and 2009-10 are identical to A.Y. 2007-08 and our observations for A.Y. 2007- 08 would apply to grounds of appeal raised by the assessee for A.Ys. 2008- 09 and 2009-10 as well.
In the result, the appeals of the assessee are dismissed for the impugned A.Ys. 2007-08, 2008-09 and 2009-10 and the appeal of the Department is also dismissed for A.Y. 2009-10. This Order pronounced in Open Court on 21/03/2024
Sd/- Sd/- (ANNAPURNA GUPTA) (SIDDHARTHA NAUTIYAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 21/03/2024 TANMAY, Sr. PS TRUE COPY आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त(अपील) / The CIT(A)- 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील�य अ�धकरण, अहमदाबाद / ITAT, Ahmedabad
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