THE ITO, WARD-6(1)(4), AHMEDABAD vs. BHARATGIRI MAHAGIRI GOSWAMI, AHMEDABAD

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ITSSA 308/AHD/2019Status: DisposedITAT Ahmedabad10 November 2023AY 2010-119 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 CIT(A) correctly restricted the protective additions. Regarding the Revenue's first ground, the Tribunal noted that the CIT(A) had considered the cash deposits in the bank account, including those belonging to the Sanjay Thakkar Group which were settled before the Settlement Commission. The CIT(A) also considered the remaining deposits as pertaining to the assessee's cheque discounting business. The Tribunal found that the CIT(A) had analyzed the flow of funds, noting that after cash deposits, funds were transferred to group entities of Sanjay Thakkar or third parties other than the Sanjay Thakkar Group. The Tribunal agreed with the CIT(A) that the AO had not filed any writ petition against the Settlement Commission's order. The Tribunal also observed that the assessee's modest living conditions and the absence of any unaccounted assets found during the search supported the assessee's claim that the cash deposits did not belong to him, but were made for earning commission. The Tribunal cited the Supreme Court judgments in Omar Salay Mohammed Sait and CIT vs. Dolat Ram Rawatmul, stating that additions cannot be made on surmises and that the onus to prove apparent is not real is on the party claiming it. Therefore, the entire cash deposits could not be taxed as undisclosed income of the assessee, and only a percentage of commission income was liable to be taxed. Regarding the second and third grounds concerning Rule 46A, the Tribunal held that no new documents were placed before the CIT(A) that necessitated a remand report, as the cash deposits were already part of the assessment. The Tribunal rejected these grounds as devoid of merit. Consequently, both appeals filed by the Revenue were dismissed.

What were the facts?

The Revenue filed appeals against the order of the CIT(A) for Assessment Years 2009-10 and 2010-11. A search action under Section 132 of the Income Tax Act, 1961, was conducted on 04-01-2013, leading to the issuance of notices under Section 153A. The assessee, an individual, filed returns declaring incomes of Rs. 3,63,570/- and Rs. 6,32,700/- for the respective assessment years. During the search, it was found that the assessee operated five current accounts where cash deposits totaling Rs. 51,56,34,668/- were made, allegedly belonging to the Dev Group of Companies. The Assessing Officer (AO) made protective additions of Rs. 7,65,31,600/- for AY 2009-10 and Rs. 11,05,60,950/- for AY 2010-11 in the assessee's hands, as the bank accounts were in his name.

What were the issues?

1. Whether, on the facts and in law, the CIT(A) was correct in deleting the addition of Rs. 5,03,55,173/- made on a protective basis without recording any finding about the source, genuineness, creditworthiness, and identity of the cash deposits beyond doubt? (Revenue's Ground 1) 2. Whether the CIT(A) erred in law and facts by accepting the assessee's claim of 'Cheque discounting business' when no such claim was made during search or assessment proceedings, no evidence was produced, and Rule 46A of the IT Rules was violated? (Revenue's Ground 2 & 3) Assessee's Contentions: - The cash deposits in the bank account were utilized for receiving cash and transferring it to members of the Dev Group, and for receiving cash from third parties and issuing cheques against commission income. - The assessee admitted that cash deposits related to the Dev Group income were Rs. 3,64,29,000/-, which were settled before the Hon'ble Settlement Commission. - The remaining cash deposits were related to the assessee's cheque discounting business, for which commission income was offered. - The assessee stated that he never deposited cash himself, and pay-in slips were not in his handwriting. The work related to the Dev Group was handled by Ghanshyambhai. - The assessee admitted to not having filed returns or maintained books for his cheque discounting business prior to the search but agreed to provide details. Revenue's Contentions: - The CIT(A) erred in deleting the protective addition without proper findings on the source, genuineness, creditworthiness, and identity of the cash deposits. - The CIT(A) wrongly accepted the cheque discounting business claim, as it was not made earlier and no evidence was produced, violating Rule 46A.

Which sections of the Income-tax Act were involved?

Section 132,Section 153A,Section 131

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, AHMEDABAD “B” BENCH

Before: Smt. Annapurna Gupta & Shri T.R. Senthil Kumar

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “B” BENCH Before: Smt. Annapurna Gupta, Accountant Member And Shri T.R. Senthil Kumar, Judicial Member

IT(SS)A No: 307 & 308/Ahd/2019 Assessment Years: 2009-10 & 2010-11

The I.T.O., Bharatgiri Mahagiri Ward-6(1)(4), Goswami, Ahmedabad Vs 292/11, Dungarjini Chali, Khokhra, Ahmedabad (Appellant) PAN: AVAPG6381R (Respondent)

Revenue Represented: Shri Sudhendu Das, CIT-DR Assessee Represented: Shri Biren Shah, A.R. & Shri Dhrunal Bhatt, A.R. Date of hearing : 09-10-2023 Date of pronouncement : 10-11-2023 आदेश/ORDER PER : T.R. SENTHIL KUMAR, JUDICIAL MEMBER:-

These appeals are filed by the Revenue as against common appellate order dated 29-03-2019 passed by the Commissioner of Income Tax (Appeals)-6, Ahmedabad, arising out of the assessment order passed under section 144 r.w.s. 153A of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to the Assessment Years (A.Ys) 2009-10 & 2010-11. Since common issues are involved in these appeals the same are disposed of by this common order.

I.T.(SS)A Nos. 307 & 308/Ahd/2019 A.Ys. 2009-10 & 2010-11 Page No 2 ITO Vs. Bharatgiri Mahagiri Goswami

2.

The brief facts of the case is the assessee is an individual. There was a search action u/s. 132 of the Act carried out in the group cases of Dev Company Ltd. Following that the assessee’s premises was also searched on 04-01-2013 consequently notice u/s. 153A were issued on 19-11-2013. In response, the assessee filed his Return of Income on 26-09-2014 declaring total income of Rs. 3,63,570/- and Rs. 6,32,700 relating to the Assessment Years 2009-10 & 2010-11. During the course of search, it was found that five current accounts at Mahila Vikas Co-operative Bank Ltd. operated by the assessee wherein cash deposits to the tune of Rs. 51,56,34,668/- were deposited which belong to Dev Group of Companies of Shri Sanjay H. Thakkar and Shri Dipak A. Thakkar. The A.O. ultimately found cash deposit of Rs. 7,65,31,600/- in the current account of the assessee during the Assessment Year 2009- 10 and Rs. 11,05,60,950/- during the Assessment Year 2010-11.

2.1. During the course of assessment proceedings, a statement of Oath was recorded on 05.02.2013 wherein the assessee admitted that all the transactions in the current Account No. CR-1685 belong to Dev Group of Shri Sanjay H. Thakkar. So substantive additions had to be made in the hands of Shri Sanjay H. Thakkar. A show cause notice dated 09.12.2014 was issued to Shri Sanjay H. Thakkar, as there was no reply from him. As no explanation have been offered regarding cash deposit in the account. Therefore to protect the interest of Revenue Rs. 7,65,31,600/- is added to the total income of the assessee, as the bank account stands in the name of the assessee. Similarly for the Assessment Year 2010-11,

I.T.(SS)A Nos. 307 & 308/Ahd/2019 A.Ys. 2009-10 & 2010-11 Page No 3 ITO Vs. Bharatgiri Mahagiri Goswami

a sum of Rs. 11,05,6,950/- added as protective addition in the hand of the assessee.

3.

Aggrieved against the same, the assessee filed appeals before Commissioner (Appeals). The assessee submitted that the cash deposits in the bank account bearing current account no. 1685 utilized for (i) receiving cash and subsequently transferring the same to members of Dev Group and (ii) receiving cash from third parties and issuing cheques in the name against the commission income. Thus the assessee admitted as follows: A.Y. Amount of cash Cash deposits for Commission deposits relating to Dev commission income offered in Group income ROI 2009-10 2,35,26,000 5,30,05,600 2,67,528 2010-11 1,29,03,000 9,76,57,950 4,88,643 Total 3,64,29,000 15,12,14,250 7,56,171

3.1. Further in the statement recorded u/s. 131 of the Act, reply given by the assessee reads as follows: “…..Q.7 State the source of all the cash deposited in your a/c. CR-1685 Ans. I have never deposited any cash in this bank account. According to my memory none of the pay-in-slip has been filled in my handwriting. The entire work related to Dev Group was the responsibility of Ghanshyambhai and whatever cash entries of Dev Group in my account was deposited by Ghanshyambhai and cheques (of Dev Groups) were also deposited by him. I would like to state on oath that the whatever cash either dr./cr. Or deposit or withdrawal relevant to any direct or indirect credit-debit entries of cheque whatsoever of Dev Group are seen in my A/c CR- 1685 are only and only of Dev Group. Means said cash either deposited in my A/c by Dev Group or the withdrawals have been done by Dev Group. The entries other than these are of my cheque discounting business. Q.8 As you have stated that you yourself have done business of cheque discounting, so show the documents, books related to this, and show the income in your return of income. Ans. So far I have not filed any income tax return, I have never maintained any books. However I will produce description of this before you within 10 days."

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3.2. The assessee further submitted that Shri Sanjay H. Thakkar owned up cash deposit of Rs. 3,64,29,000/- in his application before Hon’ble Settlement Commission which have been accepted by Income Tax Settlement Commission vide order dated 29.09.2016.

4.

After considering the above submissions, the Ld. CIT(A) determined the commission income of the assessee at 5% of the cash deposits and determined the income observing as follows: “….3.10. It is observed that various courts have discussed the above issue wherein they have estimated commission income from such business around 0.10%, to 0.5% as reasonable and Appellant has also offered commission income @ 0.5% of cash deposited in his bank account which is used towards cheque discounting/cheque accommodation business. These entries were pertaining to AY 2009-10 and 2010-11 and as Appellant has not offered such commission income in his return of income prior to search, it is reasonable to estimate commission income in the case of Appellant at 5% of cash deposit other than amount owned by Sanjay Thakkar in his settlement petition. On this basis commission income for AY 2009-10 is worked out at Rs.26,50,000/-(5% of Rs. 5,30,00,000) as against which Appellant has offered commission income of Rs.2,67,528/- hence addition to the extent of Rs 23,82,472/- is confirmed. Similarly, in AY 2010-11, commission is worked out at Rs. 48, 82, 350/-(5% of 9,76,57,950) as against which Appellant has offered income of Rs. 4,88,543/- hence addition to the extent of Rs. 43,93,807/- is confirmed. In the nutshell, aggregate protective addition made in AY 2009-10 for Rs.7,65,31,600/- is restricted to Rs.23,82,472/- and protective addition made in AY 2010-11 for Rs. 11,05,60,950/- is restricted to Rs.43,93,807/- on substantive basis hence, the grounds of appeal in both the appeals are partly allowed.” 5. Aggrieve against the same, the Revenue is in appeal before us raising the following Grounds of Appeal: “1. Whether on facts of the case and in law Ld. CIT(A) is correct to delete the addition to the tune of 5,03,55,173/- made on protective basis without recording any finding about the source of cash deposited and its genuineness, creditworthiness and identity beyond doubt? 2. The Ld.CIT(A) has erred in law and in facts of the case in accepting the assessee's claim that he was doing" Cheque discounting business" when no such claim was made either during the course of search proceedings or

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stage of assessment proceedings and also no such evidence has been produced and violated the principles of Rule 46A of the I.T. Rule? 3. The Ld.CIT(A) has erred in law and in facts of the case in admitting the assessee's claim that he was engaged in the cheque discounting business? 4. It is therefore, prayed that the order of the Ld.CIT(A) be set aside and that of the assessing officer be restored to the above extent. 5. The appellant craves leave to add, alter and/or to amend all or any of the ground before the final hearing of the appeal.” 6. Heard rival submissions and perused the materials available on record. The Revenue’s first ground that Ld. CIT(A) erred in deleting addition of Rs. 5,03,55,173/- made on protective basis without recording any finding about the source of cash deposit identity, genuineness and creditworthiness of the transaction. It is seen from the Page Nos. 18 to 22 of the appellate order that the cash deposit of Rs. 5.3 crores received as part of the cheque discounting business of the assessee and offered only 0.5% as the commission income thereon, relying upon various case laws of the Hon’ble High Courts and Tribunals. However the Ld. CIT(A) worked out the commission income for the Assessment Year 2009-10 at 5% namely Rs. 26,50,000/- and after deducting the commission income of Rs. 2,67,528/- offered by the assessee, determined the commission income of the assessee as Rs. 23,82,472/- and for the Assessment Year 2010-11 commission income of Rs. 48,82,350/- which in our considered opinion will meet the ends of justice. Revenue could not produce any material to uphold the order of the A.O. Thus we do not find any infirmity in the findings of the Ld. CIT(A) and the Ground No. 1 raised by the Revenue is devoid of merits and the same is dismissed.

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7.

The next Ground Nos. 2 & 3 of appeal by the Revenue is that the assessee has not admitted cheque discounting business during search proceedings or assessment proceedings and no evidence produced by the assessee, which is violation of Rule 46A of the I.T. Rules.

7.1. It is seen from the assessment order the only addition made in the hands of the assessee based on the cash deposits made in different bank accounts handled by the assessee. In fact the entire cash deposits in bank account CR No. 1685 to the extent of Rs.7,65,31,600/- is reproduced in Para 2.3 of the assessment order. The assessee also shown his commission income from the above bank account in the Return of Income filed u/s. 153A of the Act. The assessee explained commission income and the extent of cash deposits belong to Sanjay H. Thakkar Group which was settled before Hon’ble Income Tax Settlement Commission. However the Assessing Officer made the entire cash deposits as income as protective addition in the hands of the assessee. After considering the above documents and details, The Ld. CIT(A) passed the following order:

“……3.8. It is further observed that written submission reproduced herein above along with extracts of bank statement, it is clear that when bank account was used by Sanjay Thakkar group, immediately after cash deposits, funds are transferred to group entities of Sanjay Thakkar and such fact is also accepted by Hon'ble Settlement Commission. Further, when remaining cash deposits are claimed to be pertaining to appellant's own cheque discounting business, it is found that immediately after cash deposits, funds are transferred to third parties other than Sanjay Thakkar Group. Though, department is of the view that transactions in the bank account of appellant are entirely pertaining to Sanjay Thakkar, such view is not accepted by Hon'ble Settlement Commission as stated supra and from records, it is clear that department has not filed any writ petition against such order of Hon'ble Settlement Commission, Mumbai in case of

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Sanjay Thakkar. It is also observed that AO in the proceedings before Hon'ble Settlement Commission in case of Sanjay Thakkar has not brought anything on record to prove that cash deposited in the bank account of appellant and transferred to third parties as claimed by appellant have come to the accounts of Sanjay Thakkar group or they were beneficiaries of such transactions From the details of cheque discounting business along with tabular chart submitted by appellant in his written submission, it is found that cash is deposited in his bank account which is equivalent to cheque issued to third party which also support the contention of appellant that such entries are related to transactions pertaining to cheque discounting business of appellant as claimed in statement recorded during the course of search proceedings It is also observed that Appellant is residing in a predominantly low class locality in a small house which is evident from panchnama prepared during the course of search it is evident from panchnama that no cash, jewellery, silver articles or other valuables were found in the course of search which clearly proves that Appellant has no means to earn such a huge cash of Rs. 19 crores in his bank account for the period of significant amount of cash 1 April, 2005 to 1 January, 2013. It is observed that during the course of search no evidences were found which can prove that cash deposited in Appellant's bank account is arising out of any unaccounted business. No prudent business man would deposit cash frequently ie on daily basis and transfer equivalent amounts to various persons in his business. The transactions flowing in the bank account of Appellant as discussed herein above along with other circumstantial evidences, there is force in argument of Appellant that cash deposited in his bank account does not belong to him but, only for earning certain commission, he has made such transactions When bank account of Appellant was used for depositing cash and transferring to Dev Group, which is the prime allegation of Department during the course of search as well as in Assessment Proceedings, there is credence in the argument of Appellant that remaining entries in his bank accounts are pertaining to his cheque accommodation business. The Hon'ble Supreme Court in the case of Omar Salay Mohammed Sait 37 ITR 151 has held that addition cannot be made on surmises, suspicion and conjecture. Once again the Hon'ble Supreme Court in the case of CIT VIS Dolat Ram Rawatmul 87 ITR 349 has held that onus to prove that apparent is not real is on the party who claims it to be so Considering these facts entire cash deposits in his bank account, though considered as protective addition by AO, cannot be taxed as undisclosed income of Appellant more particularly when no corresponding assets in the name of Appellant is found in exhaustive search hence only percentage of certain commission amount is required to be taxed.”

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7.2. In our considered view, there is no new document placed before Ld. CIT(A) which called for application of Rule 46A and calling for Remand Report from the Assessing Officer. Since the Ld. CIT(A) has considered only the cash deposits in the bank account, it is not a new document before the First Appellate Authority. Thus the Ground No. 2 raised by the Revenue that violation of Rule 46A is devoid of merits and the same is also hereby rejected.

8.

Further it is clearly seen from the statement recorded u/s. 131 of the Act, which is extracted at Para 3.1 of this order, wherein the assessee clearly admitted that he has not filed any Return of Income before search and admitted to produce the details before the Authorities. The assessee filed Return of Income pursuant to 153A notice, declaring business income of Rs. 2,67,528/- and Rs. 4,88,543/- relating to Assessment Years 2009-10 & 2010-11. Thus the Ground No. 3 raised by the Revenue is devoid of merits and the same is hereby rejected.

9.

In the result, both the appeals filed by the Revenue are hereby dismissed.

Order pronounced in the open court on 10-11-2023

Sd/- Sd/- (ANNAPURNA GUPTA) (T.R. SENTHIL KUMAR) ACCOUNTANT MEMBER True Copy JUDICIAL MEMBER Ahmedabad : Dated 10/11/2023 आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue

I.T.(SS)A Nos. 307 & 308/Ahd/2019 A.Ys. 2009-10 & 2010-11 Page No 9 ITO Vs. Bharatgiri Mahagiri Goswami

3.

Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से, उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, अहमदाबाद

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