PR COMMISSIONER OF INCOME TAX JAIPUR vs. SHRI VIBHISHEK PAL SINGH

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ITA/44/2018HC RajasthanRJHC02016122201802 April 20184 pages
AI SummaryDismissed

What did the High Court hold?

The High Court agreed with the view taken by the ITAT. Regarding the additions of Rs. 2,48,25,300/-, the Tribunal noted that the assessee, in his statements under Section 132(4), clarified that the cash receipts were for extra furnishing and finishing work, not linked to the business of the firms, and agreed to pay tax on the profit ratio. The assessee had also declared and offered income for furnishing work in past assessment years and had offered Rs. 10 lacs in AY 2009-10 and Rs. 20 lacs in AY 2010-11, indicating a profit rate of 12.08%. The Tribunal held that it is settled law that total receipt cannot be income, and only the profit margin should be taxed. The Tribunal also noted that if the receipts pertained to group concerns, they could not be taxed in the assessee's hands. Therefore, the addition of the entire amount was deleted. Consequently, the penalty imposed under Section 271AAA was also cancelled as the substantive appeal was decided in favour of the assessee. The ratio decidendi is that when an assessee admits to receiving amounts for extra work and agrees to pay tax on the profit margin, and has a history of offering such income, the entire receipt cannot be added to income; only the profit element is taxable. The High Court found no substantial question of law arising in the appeals.

What were the facts?

The appeals were filed by the Principal Commissioner of Income Tax, Jaipur-II, challenging the judgment and order of the Income Tax Appellate Tribunal (ITAT). The ITAT had allowed the assessee's appeal and dismissed the department's appeals. The assessee, Shri Vibhishek Pal Singh, was subjected to a search operation during which documents were seized. The Assessing Officer (AO) made additions to the assessee's income based on these seized documents, which were partly sustained by the CIT(A). The ITAT, however, deleted the additions. The assessment years are not explicitly stated for the additions, but the penalty appeal relates to Section 271AAA, which typically pertains to search and seizure.

What were the issues?

1. Whether, in the facts and circumstances, the ITAT was justified in deleting the additions of Rs. 2,48,25,300/- made by the AO on account of undisclosed cash receipts based on documents seized during a search. (Question of law) 2. Whether, in the facts and circumstances, the ITAT was justified in deleting the addition of Rs. 2,48,25,300/- made by the AO on account of undisclosed cash receipts, where the seized documents contained specific details like date of sale, cash and cheque consideration, area, total amount, and names, indicating composite transactions and cash received as 'on money'. (Question of law) 3. Whether, in the facts and circumstances, the ITAT was justified in holding that cash receipts shown in loose papers represented receipts from finishing job work and only net profit should be taxed, despite the assessee failing to furnish supporting evidence of engaging in the business of furnishing job work. (Question of law) 4. Whether, in the facts and circumstances, the ITAT was justified in cancelling the penalty amounting to Rs. 23,82,530/- imposed by the AO under Section 271AAA of the Act. (Question of law) Assessee's Contentions: The assessee, in his statement under Section 132(4), explained that cash receipts mentioned in seized documents might be out of books and would be offered for tax if not found recorded. He further stated that cash amounts were for extra furnishing and finishing work, not linked to the firms' business, and agreed to pay tax on profit ratio. The assessee had declared furnishing income for Assessment Years 2005-06 to 2007-08, which was accepted. He offered Rs. 10 lacs in AY 2009-10 and Rs. 20 lacs in AY 2010-11 on this account, representing a profit rate of 12.08%. The assessee argued that only the profit margin, not the total receipt, should be taxed, and if the receipts pertained to group concerns, they could not be taxed in his hands. Revenue's Contentions: The revenue argued that the seized documents clearly indicated composite transactions and cash received as 'on money'. The AO made additions based on these documents, and the assessee failed to furnish supporting evidence for engaging in the business of furnishing job work.

Which sections of the Income-tax Act were involved?

Section 271AAA,Section 132(4)

AI-generated summary — verify with the full judgment below

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Income Tax Appeal No. 44/2018 Pr. Commissioner Of Income Tax, Jaipur-Ii, Jaipur. ----Appellant Versus Shri Vibhishek Pal Singh, B-68, Yash Path, Tilak Nagar, Jaipur ----Respondent D.B. Income Tax Appeal No. 45/2018 Pr. Commissioner Of Income Tax, Jaipur-Ii, Jaipur. ----Appellant Versus Shri Vibhishek Pal Singh, B-68, Yash Path, Tilak Nagar, Jaipur ----Respondent For Appellant(s) : Mr. Prateek Kedawat for Mr. R.B. Mathur For Respondent(s) : HON'BLE MR. JUSTICE K.S.JHAVERI HON'BLE MR. JUSTICE VIJAY KUMAR VYAS Judgment 02/04/2018 By way of these appeals, the appellant has challenged the judgment and order of the Tribunal whereby the Tribunal has allowed the appeal of the assessee and dismissed the appeals of the department. Counsel for the appellant has framed the following substantial questions of law:- In DBITA No. 44/2018 i) Whether in the facts and circumstances of the case, the ITAT was justified in deleting the additions of Rs. 24825300/- made by the

(2 of 4) [ITA-44/2018] Assessing Officer on account of undisclosed cash receipt which was based upon documents seized during the course of search. ii) Whether in the facts and circumstances of the case, the ITAT was justified in deleting the addition of Rs. 24825300/- made by the AO on account of undisclosed cash receipt which was based on documents seized during the course of search. Such documents contained specific details such as ate of sale, cash consideration and the cheque consideration, area, total amount, name of persons etc. which clearly indicate that transaction are composite and cash amount received on account of on money. iii) Whether in the facts and circumstances of the case, the ITAT was justified in holding that cash receipt sown in loose papers represent the receipt from finishing job work and only net profit should be taxed without appreciating the fact that assessee failed to furnish any supporting evidence that he is indulging in business of furnishing job work.” In DBITA No. 45/2018 i) Whether in the facts and circumstances of the case, the ITAT was justified in cancelling the penalty amounting to Rs. 2382530/- imposed by Assessing Officer u/s 271AAA of the Act.” While considering the matter, the Tribunal has observed as under:- “8.5. We have heard the rival contentions and perused the materials available on record. In this case, it is noted the AO made the addition of Rs.2,48,25,300/- on account of seized material found during the course of search which has been reduced by the ld. CIT(A) by Rs.10.00 lacs and balance was sustained. It is noted from the seized documents available at paper book pages 51 to 56 that on these papers, certain details like flat no, amount received through cheques, amount received in cash, the name of the persons from whom the amount is received etc. are mentioned. On these papers available at Annexure A-2/19 and Annexure A-6/20-24, the statement of the assessee u/s 132(4) were recorded. In statement dated 28.01.2009, in reply to question no. 14 (PB 41), the assessee with reference to Annexure A-2/19 explained that the cash receipt mentioned on this paper may be out of books and if after verification of accounts, these receipts are not found recorded in books,

(3 of 4) [ITA-44/2018] the same would be offered for tax. Thereafter, in statement dated 11.02.09, in reply to Q.No.6 (PB 44), he stated that the cash amount mentioned on this paper is not recorded in the books. Some person give him the extra amount for carrying out the furnishing and finishing work. This amount has no link with the business of the firms and on such amount he agreed to pay the tax by applying the profit ratio. Again in Q. No. 19 (PB 47-48) with reference to Annexure A-6/20-24, assessee stated that the cash amount mentioned on these papers is towards the furnishing of the flats which has nothing to do with the business of the firm and this amount has been received for carrying out the extra work on which he would pay the tax considering the percentage of profit. It is also noted that the assessee has declared the furnishing income in the return of income for assessment year 2005-06 to 2007-08 as mentioned at page 4 of the order of the ld. CIT(A). Income so offered had been accepted. These fact establishes that assessee had been carrying out furnishing work in his individual capacity. In the statement at Paper Book Pages 44 & 48, the assessee has also stated that he received the amount for furnishing work for which he would pay the tax by applying the profit rate. The assessee has offered Rs.10 lacs in A.Y.2009-10 and Rs.20 lacs in A.Y. 2010-11 on this account. Thus the assessee has offered Rs.30 lacs which gives a profit rate of 12.08%. It is also a settled law that total receipt cannot be income. Further, if Revenue’s contention is accepted that these receipts pertains to the business of various Group Concerns then these cannot be taxed in the hands of assessee. During and after the search, assessee states that these receipts are of extra or additional work done by him to certain purchaser of flats. These receipts have to be taxed in the hands of assessee by Revenue then total receipts cannot be added to the total income. Only profit margin has to be taxed. Therefore, we are of the view that entire amount cannot be added to the income of the assessee considering the statement of the assessee u/s 132(4) of the Act. It is also pertinent to note that the assessee has declared income of Rs.10 lacs in A.Y. 2009-10 and Rs.20 lacs in A.Y.2010-11 in respect of such receipt which is also assessed by the AO, therefore, the addition made by the AO and partly confirmed by the ld. CIT(A) is deleted. Thus Ground No.2 of the assessee is allowed and that of the Revenue in Ground No.1 (I & II) is dismissed.

(4 of 4) [ITA-44/2018] We are in complete agreement with the view taken by the Tribunal. No substantial question of law arises in appeal no. 44/2018. Hence, the same stands dismissed. In view of the disposal of substantive appeal, penalty appeal (DBITA No. 45/2018) also will not survive. Hence, both the appeals stand dismissed. (VIJAY KUMAR VYAS),J (K.S.JHAVERI),J A.Sharma/181-182

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