PRADEEP K BUCH,VADODARA vs. THE DCIT, CENTRAL CIRCLE-3, VADODARA

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ITSSA 407/AHD/2019Status: DisposedITAT Ahmedabad07 February 2024AY 2012-138 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that the grounds challenging the validity of the assessment framed under Section 153A were dismissed as not pressed. Regarding the additions, the Tribunal observed that the seized ledger entries were plain and simple and did not require interpretation. It was held that the contents of the seized documents should be read without interpretation, and in pursuance to Section 292C/132(4A) of the Act, the transactions were essentially between UTL and other parties, with the assessee's name appearing only in the narration. Therefore, the assessee was not the beneficiary of these transactions, and the addition was not liable to be made in the assessee's hands. The Tribunal also noted that the opening balance in the ledger did not pertain to the years under dispute. Furthermore, the Tribunal referred to CBDT Instruction F.No. 286/98/2013-IT(Inv.III) dated December 18, 2014, which discourages additions based solely on statements obtained during search/survey proceedings without corroborating documentary evidence. The Tribunal found that the assessee could not be penalized merely for failing to furnish supporting documents when the seized entries themselves were explanatory. Consequently, the findings of the CIT(A) were set aside, and the AO was directed to delete the additions made. The appeals were allowed in favour of the assessee.

What were the facts?

The assessee, Pradeep K. Buch, an individual, was subjected to a search and seizure operation under Section 132 of the Income Tax Act, 1961, on August 2, 2016. During the search, copies of ledgers (pages 68-69 of Annexure A-1) were seized, containing financial transactions from January 1, 2012, to October 29, 2012. The Assessing Officer (AO) noted that the assessee received Tanzanian Shilling 28,43,12,550.00, including an opening balance, as per these ledgers. The assessee explained that these entries pertained to M/s Unoplast (T) Limited (UTL) and were for audit purposes, not personal transactions. The AO, however, treated Rs. 91,71,372/- as undisclosed income for AY 2012-13, a view upheld by the Commissioner of Income Tax (Appeals). A similar addition of Rs. 7,72,440/- was made for AY 2013-14.

What were the issues?

1. Whether the assessment framed under Section 153A of the Income Tax Act, 1961, is valid, concerning Assessment Years 2012-2013 and 2013-2014? (Mixed law and fact) 2. Whether the Commissioner of Income Tax (Appeals) erred in confirming the addition of Rs. 91,71,372/- (for AY 2012-13) and Rs. 7,72,440/- (for AY 2013-14) as undisclosed income, based on ledger entries found during search operations? Assessee's Contentions: - The assessee did not press grounds challenging the validity of the assessment framed under Section 153A. - The ledger entries pertained to M/s Unoplast (T) Limited (UTL) and were for audit purposes, not personal transactions of the assessee. The name of the assessee appeared merely for reference. - The confirmation from UTL stated that the transactions were for the company's business and not for the personal purpose of Mr. Pradeep K. Buch. - The AO made additions based on suspicion and rejected evidence furnished by the assessee without proper justification. - The entries in the seized documents were explanatory and did not require interpretation. - The opening balance in the ledger did not relate to the years in dispute. - The CBDT instruction dated December 18, 2014, discourages additions based solely on statements obtained during search/survey proceedings without corroborating documentary evidence. Revenue's Contentions: - The revenue argued that the ledger entries represented undisclosed income of the assessee, as a company would not maintain ledger accounts for audit purposes without business transactions. - The assessee failed to prove that the entries were not related to him and that the transactions were appropriately accounted for in UTL's books. - The confirmation from UTL was not supported by documentary evidence. - The presumption in favour of the revenue under Section 132(4A) read with Section 292C was not rebutted by the assessee's statement and UTL's confirmation.

Which sections of the Income-tax Act were involved?

Section 132,Section 153A,Section 132(4),Section 132(4A),Section 292C

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘’ C’’ BENCH, AHMEDABAD

Before: SHRI WASEEM AHMED & SHRI TR SENTHIL KUMAR

For Appellant: Shri Milin Mehta, AR
Hearing: 16/01/2024Pronounced: 07/02/2024

आदेश/O R D E R

PER WASEEM AHMED, ACCOUNTANT MEMBER:

The captioned two appeals have been filed at the instance of the assessee against the separate orders of Learned Commissioner of Income Tax (Appeals)-12, Ahmedabad, arising in the matter of assessment order passed under s. 143(3)

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r.w.s. 153A of the Income Tax Act, 1961 (here-in-after referred to as "the Act") relevant to the Assessment Years 2012-2013 & 2013-14.

First, we take up IT(SS)A No. 407/Ahd/2019, an appeal by the assessee for AY 2012-13

2.

At the time of hearing, the Ld. AR for the assessee submitted that he has been instructed not to press the ground Nos. 1 and 2 challenging the validity of the assessment framed u/s 153A of the Act. Therefore, the same are dismissed as not pressed. Hence, the ground number and 1 and 2 are dismissed as not pressed.

3.

The only effective issue raised by the assessee is that the Ld. CIT(A) erred in confirming the order of the AO by sustaining the addition of Rs. 91,71,372/- on account of undisclosed income of the assessee.

4.

The necessary facts arising out of the order of the authorities below are that the assessee in the present case is an individual and was subject to search and seizure operation u/s 132 of the Act, conducted at the premises of the assessee dated 02/08/2016. As a result of search, certain documents were seized and inventoried including copies of ledgers bearing page numbers 68 and 69 of annexure A-1. Such copy of ledger was bearing the name of the assessee and containing the various financial transactions for the period beginning from 01/01/2012 to 29/10/2012. As per the AO, the assessee has received Tanzanian Shilling 28,43,12,550.00 including the opening balance. On question by the AO about seized documents, the assessee vide letter dated 12/12/2018 replied that the ledger contains various transaction of the company namely M/s Unoplast (T) Limited pertaining to different parties and the name of the assessee was appearing merely for the sake of reference so as to carry out audit of such transactions. The AO also noted that the assessee has not shown any salary from the company namely Unoplast (T) Limited except the remuneration/professional

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fees received from Kayke International. Accordingly, the AO was of the opinion that the transaction recorded in the ledger represent the undisclosed income of the assessee by observing as under: Further in basic accounting concepts, any company will not bear any name/entity in its ledger accounts merely for audit purpose and without having any business transactions/professional receipts-payments. PKB ledger account indicates the cash transactions between the assessee and the company i.e. UTL in lieu of the specific purpose. However, unavailability of records from the foreign company and no specific answer from the assessee on this issue on statement, it is hard to unearth the actual source/nature of said transaction. Though, the assessee has submitted the confirmation of said company in which it is stated from the company that "this paper lists the transactions of the said entity carried out through Mr. Pradeep K Buch for the purpose of the Company's business and not for the personal purpose of Mr. Pradeep K. Buch or any other person" but such statement without justifying the logic and without adhering to the basic principles of cause and effect, only one inference can be drawn that PKB A/c is nothing but the undisclosed income/receipts of the Assessee received in cash from UTL for his various overt/covert services provided to the Company. Therefore, the transaction amount of Rs. 91,71,372/- (28,43,12,550 Tanzanian Shilling*@ Rs. 031) received during the financial year is added to the income of the assessee. 4.1 Aggrieved assessee preferred an appeal to the ld. CIT-A who also confirmed the order of the AO by observing as under: 5.9 The Appellant has challenged the action of the AO in making All Rs.91,71,372/- as undisclosed income of the Appellant based on ledger showing the entries in the books of accounts of Unoplast (1) Limited ("UTL"), a company in Tanzania. In this regard, it is a matter of record that neither during the post search proceedings nor during the assessment proceedings the appellant has proved that the entries appearing in the PKB A/C were not at all related to him and that the respective transactions were entered into the books of UTL under the respective appropriate heads. The confirmation of UTL vide dated 15/12/2018 is totally silent about these aspects whereas the clarification / ownership of the transaction would have been completed only when the documentary evidences of these having been accounted for in its regular books were also submitted. During the appeal proceedings also, the Ld. AR was requested to prove that the entries in the PKB A/C as per the seized papers are properly entered in the books of UTL but the appellant has not done so even after 3 months between two hearings ( 29/4 / 2019 & 25/07/2019).

5.10 It is true that the onus to prove that the apparent is not the real is on the party who claims it to be so. It is the case of the appellant that it is apparent from ledger account and from the confirmation from UTL that no payment has been made to the Appellant and hence the onus had shifted to the AO to prove that apparent is not real. But in my considered opinion this is not the case because the statement given by the appellant during the course of search and the explanation given during the course of assessment are only one sided and cannot qualify to be an explanation because the statement of the appellant was required to be owned up by the UTL but not only that the confirmation of the UTL does not convey much but also is not supported by the documentary evidences. It is not justified in the part of the appellant to allege that the AO has made a pure guess while making the assessment and that the AO has made the addition by rejecting on suspicion to reject the evidences furnished by the Assessee merely on suspicion. In this

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regard, I am of the considered view that the presumption in favour of the Revenue by virtue of section 132(4A) 292C was required to be rebutted by the appellant and mere statement of the appellant and the bland confirmation of UTL are not of the nature that it can be held that the onus has been discharged by the appellant and the onus has shifted to the Revenue so that the AO was required to disprove the evidences/submissions filed by the Appellant, the AO has made the addition without discharging this burden. 5.11 Thus I do not find much substance in the appellant's submission made before me during the appeal proceedings. As the appellant is resident during the year, it was required to furnish the details of global income and assets and to satisfy the Department that both the income in India and income from outside India has been offered to tax in India. In this regard, what is glaring is that the relationship between the appellant and UTL has not been established and it is not the case of the appellant that he has received fees/remuneration from the UTL and that the seized papers were as it has been claimed in the statement during the search and before the AO during the assessment proceedings. To me the entire issue is of primary onus of rebuttal and discharge of such onus and shifting of the onus and in the case under consideration the primary onus of rebuttal on the appellant has not been discharged by the appellant. I find no basis to interfere with the assessment made. 5.12 However to end with it appears appropriate that Pages 68 & 69 of Annexure A/1 in the PKB A/C (ledger account) be analyzed which in my view is as under: a. The ledger account of the appellant from books of account of UTL PK was found which means that transaction of the appellant with UTL was recorded by UTL in Tanzanian currency. Debit in ledger account represent payment received by the appellant from UTL and credit represent payment made to UTL. On perusal of the ledger account it is found that on many occasions, payment is made through appellant which is debited in ledger account and payment is made from cash book of Dave hence credit is "Dave's cash book". The appellant has stated that Dave is director of UTL PK in whose account UTL was maintaining separate cash book in their local currency when payment is made from Dave's cash book such balance was credited and when payment is made from Mwanza branch (a city in Tanzania) such account was credited. The ledger account found in search represents actual transaction which is systematically recorded in the account of the appellant by UTL PK. Even transactions are for US $ and such amount is converted into Tanzanian currency which is reflected as narration in each entry. As the appellant was unable to reconcile such transaction with his books of accounts, the AO was justified in treating such transaction as unexplained in the hands of the appellant. b. Also the account appear to be in Tally which is used in India only. Thus probably the PKB A/C is made in India 5.13 In view of some of the findings and observations as abve, the addition of Rs.91,71,372/- deserves to be confirmed and the appeal for A.Y. 2012-13 is dismissed. 5. Being aggrieved by the order of the Ld. CIT(A), the assessee is in appeal before us.

6.

The Ld. AR before us filed a paper book running from pages 1 to 149 and reiterated the contentions made during the assessment proceedings.

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7.

On the other hand, the Ld. DR submitted that the transaction recorded in the seized documents pertain to the assessee which is nothing but undisclosed income of the assessee. The Ld. DR vehemently supported the order of the authorities below.

8.

We have heard the rival contention of both the parties and perused the materials available on record. The primary issue before us is whether the seized documents found during the search operation represent the undisclosed income of the assessee. For this purpose, we have perused the seized document placed on pages 86 and 87 of the paper books. There is no doubt that the name of assessee is very much appearing in the ledger account of the company namely Unoplast (T) Limited. But all the entries shown therein are journal entries meaning thereby there was no transaction of cash and bank as evident from the ledger copy. Likewise, we also note that though the ledger was in the name of the assessee, but the amount was debited in the account of other parties and not in the name of the assessee except the fact that the name of the assessee was appearing in the narration. Thus, the finding of the AO that the assessee has received the amount of Tanzanian Shilling 28,43,12,550.00 is misplaced. It is for the reason that all the entries recorded in the ledger were journal entries which implies there was no involvement of any cash or bank.

8.1 It is the trite law that the seized document should be read without any interpretation particularly in a situation where the transactions in the seized document are not complex requiring the aid of rule of interpretation. The entries recorded in the documents are plain and simple and does not require any aid of interpretation. Accordingly, we hold that the contents of the seized documents are true in pursuance to the provision of section 292C/132(4A) of the Act. Thus, we can safely hold that the transaction in essence was between the UTI and other parties and the name of the assessee was appearing in the narration. Thus, we

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are inclined to hold that the assessee was not the beneficiary of the transaction recorded in the seized documents and therefore the addition is not liable to be added in the hands of the assessee.

8.2 Without prejudice to the above, it is also important to note that there was opening balance in the ledger account which was also accepted by the AO in the assessment order. In other words, the opening balance does not relate to the year in dispute. As such, the amount written as opening balance pertains to the earlier year, and therefore no interference can be drawn in the name/against the assesee with respect to the opening balance for the year under consideration.

8.3 Even the CBDT by way of instruction bearing number F.No. 286/98/2013- IT(Inv.III) dated 18th December 2014 has discouraged its officers to make any addition based on the statement obtained during survey/search proceedings until and unless it is corroborated by the documentary evidence. The relevant extract of the instruction of the CBDT reads as under:

Instances/complaints of undue influence/coercion have come to notice of the CBDT that some assessees were coerced to admit undisclosed income during Searches/Surveys conducted by the Department. It is also seen that many such admissions are retracted in the subsequent proceedings since the same are not backed by credible evidence. Such actions defeat the very purpose of Search/Survey operations as they fail to bring the undisclosed income to tax in a sustainable manner leave alone levy of penalty or launching of prosecution. Further, such actions show the Department as a whole and officers concerned in poor light. 2. I am further directed to invite your attention to the Instructions/Guidelines issued by CBDT from time to time, as referred above, through which the Board has emphasized upon the need to focus on gathering evidences during Search/Survey and to strictly avoid obtaining admission of undisclosed income under coercion/undue influence. 3. In view of the above, while reiterating the aforesaid guidelines of the Board, I am directed to convey that any instance of undue influence/coercion in the recording of the statement during Search/Survey/Other proceeding under the I.T.Act,1961 and/or recording a disclosure of undisclosed income under undue pressure/ coercion shall be viewed by the Board adversely. 4. These guidelines may be brought to the notice of all concerned in your Region for strict compliance. 5. I have been further directed to request you to closely observe/oversee the actions of the officers functioning under you in this regard. 6. This issues with approval of the Chairperson, CBDT.

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8.4 Undeniably, the statement furnished u/s 132(4) of the Act, states that the assessee shall file the supporting documents demonstrating the transaction recorded in the seized document that these were pertaining to the different parties. To our understanding assessee cannot be penalized merely if he fails to furnish the supporting documents in the given facts and circumstances for the reason that the entries recorded in the seized documents are itself explanatory. In view of the above and after considering the facts in totality, we set aside the findings of the Ld. CIT(A) and direct the AO to delete the addition made by him. Hence, the ground of appeal of the assessee is hereby allowed.

8.5 In the result, the appeal filed by the assessee is partly allowed.

Coming to IT(SS)A No. 408/Ahd/2019 an appeal by the assessee for A.Y. 2013-14

9.

At the time of hearing the Ld. AR for the assessee submitted that he has been instructed not to press the ground Nos. 1 and 2 challenging the validity of the assessment framed u/s 153A of the Act. Therefore, the same is dismissed as not pressed. Hence, the ground numbers 1 and 2 are dismissed as not pressed.

10.

The only effective issue raised by the assessee is that the Ld. CIT(A) erred in confirming the order of the AO by sustaining the addition of Rs. 7,72,440/- treating the same as the undisclosed income of the assessee.

11.

At the outset, we note that the issues raised by the assessee in its ground appeal for the AY 2013-14 are identical to the issue raised by the assessee in IT(SS)A No. 407/AHD/2019 for the assessment year 2012-13. Therefore, the findings given in IT(SS)A No. 407/AHD/2019 shall also be applicable for the year under consideration i.e. AY 2013-14. The appeal of the assessee for the assessment 2012-13 has been decided by us vide paragraph No. 8 of this order in

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favour of the assessee. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 2012-13 shall also be applied for the year under consideration i.e. AY 2013-14. Hence, the ground of appeal filed by the assessee is hereby allowed.

11.1 In the result, the appeal filed by the assessee is partly allowed.

12.

In the combined result, both the appeals filed by the assessee are partly allowed.

Order pronounced in the Court on 07/02/2024 at Ahmedabad. Sd/- Sd/- Sd/- Sd/- (TR SENTHIL KUMAR) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER (True Copy) Ahmedabad; Dated 07/02/2024 Manish

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