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Income Tax Appellate Tribunal, MUMBAI BENCH “E”, MUMBAI
Before: SHRI KULDIP SINGH, HONBLE & SHRI S. RIFAUR RAHMAN, HONBLE
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “E”, MUMBAI BEFORE SHRI KULDIP SINGH, HON'BLE JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, HON'BLE ACCOUNTANT MEMBER ITA NOs. 883, 884, 885 & 886/MUM/2022 (A.Ys: 2005-06, 2006-07, 2007-08 & 2008-09) Shri Mukesh Gupta v. ACIT – Central Circle – 1 282, Boundary Road, Civil Line Thane Meerut-250001 Uttar Pradesh PAN: ALZPG7579A (Appellant) (Respondent) Assessee Represented by : None Department Represented by : Shri Yeshwant Kumar Bhaskar
Date of Hearing : 21.11.2022 Date of Pronouncement : 28.11.2022
O R D E R PER S. RIFAUR RAHMAN (AM) 1. These appeals are filed by the assessee against common order of the Learned Commissioner of Income Tax (Appeals), Pune-11, [hereinafter in short “Ld.CIT(A)”] dated 23.02.2022 for the A.Ys.2005-06, 2006-07, 2007-08 and 2008-09, passed u/s. 250 of Income-tax Act, 1961 (in short “Act”).
2 ITA NOs. 883, 884, 885 & 886/MUM/2022 Shri Mukesh Gupta 2. Since the issues raised in all the appeals are identical, therefore, for the sake of convenience, these appeals are clubbed, heard and disposed off by this consolidated order. We are taking Appeal in ITA.No.883/MUM/2022 for Assessment Year 2005-06 as a lead case.
Brief facts of the case are, during the course of action by police authorities, it was found that assessee residing at 101, Shiv Darshan Apartment, Chandanwadi, Thane(W). was in the possession of huge cash. Based on the information provided by the police authorities, a search action u/s. 132 of the Act was conducted on 22.08.2007 at the residence of the assessee. During the course of search, cash to the tune of ₹.4,66,73,200/- was found. When questioned about the source of the said cash, assessee stated that the cash lying in his residence was given to him by Shri Premchand Ashok Kamble (Mr. PAK), and Mr. PAK is the Proprietor of M/s. Unique Finance. Further, it was stated by the assessee that Mr. PAK was involved in various business activities but the exact details of the business activity from which the cash had come from were not known to him. It was also stated that the details of transactions/receipts of M/s.Unique Finance were being maintained on computers (Tally Package). The assessee also provided the office details of M/s. Unique Finance. Further, it was stated that his nature of duties
3 ITA NOs. 883, 884, 885 & 886/MUM/2022 Shri Mukesh Gupta includes looking after the cash and bank transactions of M/s.Unique Finance under the instructions of Mr. PAK.
Consequent to the information provided by the assessee a survey was immediately initiated at the office of M/s. Unique Finance at the address declared by the assessee and later it was converted into search action u/s 132 of the Act. During the course of search Mr. PAK was not present. At the office premises cash to the tune of ₹.45,15,615/- was found. None of the employees present at the office could not satisfactorily explain about the cash and accordingly ₹.43,00,000/- was seized and several books of accounts and documents and loose papers were seized from the premises.
During the course of search at the residence of the assessee following details were extracted from the assessee that he has joined M/s.Unique Finance in April, 2004 as a Receptionist and was later promoted as an Executive in 2005. His salary ranged from ₹.4000/- per month to ₹.12,000/- per month which was the salary last drawn by him. It was also submitted that he had no other source of income. A Number of books of accounts/documents were seized from the premises. The assessee has shown the details of transactions/receipts of M/s. Unique
4 ITA NOs. 883, 884, 885 & 886/MUM/2022 Shri Mukesh Gupta finance maintained by him on computers in Tally Package and assessee has confirmed that these were regular books of accounts of M/s.Unique Finance and the entries regarding the cash found at his residence were not reflected in the books of accounts. The assessee could not give satisfactory explanation on the cash found to the tune of ₹.4.65 Crores.
It was also observed during search/survey operation that various incriminating documents and cash of ₹.4.65 Crores was seized from the residential premises of the assessee, a trusted employee of Mr. PAK and cash of ₹.43 lacs was also seized from the office premises of M/s Unique Finance a proprietary concern of Mr. PAK and there was no cash book maintained to ascertain the cash balance as on the date of search and there was no satisfactory explanation for the cash found.
Since the entries in the diaries and documents were stated to be related to the business of Mr. PAK and the contents of the diaries and materials seized from the various premises need to be co-related with the business activities of each of the associated concerns involved in the search and complexity. Therefore, a special audit u/s. 142(2A) of the Act was proposed in order to arrive at the correct book results and the profit of the assessee.
5 ITA NOs. 883, 884, 885 & 886/MUM/2022 Shri Mukesh Gupta 8. After obtaining the proper approval an order u/s. 142(2A) of the Act was passed requiring the assessee to get its books of accounts and documents audited by M/s Agrawal & Chajjed, Chartered Accountants appointed for this purpose.
Consequent to the search action notice u/s.153A(a) of the Act, was issued on 10.03.2008 to the assessee (who was lodged at Central jail, Thane) requiring the assessee to file the return of income within 30 days of service of the notice. Subsequent to the issue of notice, notice u/s.142(1) of the Act was issued and served on the assessee.
In response assessee filed the return of income on 31.03.2009 declaring total income of ₹.90,160/- alongwith the computation of total income and balance sheet as at 31.03.2005. Thereafter notice u/s. 143(2) of the Act were issued and served on the assessee.
Subsequent to serving of various notices, as observed by the Assessing Officer that assessee failed to comply with the notices, the assessment is finalized on the basis of the material available on record, material seized during the course of Search & Seizure action and the Special Audit Report u/s. 142(2A) dated 30.04.2010.
6 ITA NOs. 883, 884, 885 & 886/MUM/2022 Shri Mukesh Gupta 12. The Assessing Officer observed from the return of income filed u/s.153A of the Act that assessee has declared income from salary at ₹.1,20,000/- and has claimed standard deduction u/s 16(1) at ₹.30,000/, thereby offering taxable salary at ₹.90,000/-. Assessing Officer observed from the audit report that assessee has received salary of ₹.48,000/- for the year under consideration based on the verification of the bank statement and data given by M/s Unique Finance. In the absence of any supporting evidence to confirm the receipt of above said salary the difference of ₹.72,000/- (₹.1,20,000 – ₹.48,000) is treated as income from unexplained sources and also disallowed the corresponding standard deductions claimed by the assessee to the extent of ₹. 19,200/-.
Further, as per the balance sheet / capital account furnished by the assessee, assessee has shown drawings amounting to ₹.40,945/- for the year. Assessing Officer observed that taking into consideration the place of stay in the city of Thane and the living conditions therein, the drawings appear to be on the lower side and hence an amount of ₹.12,000/- is added as income.
Assessing Officer observed from the seized materials found during the search in the residence of the assessee which is a diary written and
7 ITA NOs. 883, 884, 885 & 886/MUM/2022 Shri Mukesh Gupta maintained by him and as per Annexure “N" of the audit report, the assessee made payment of ₹.3,04,000/- to Shri Sanjay Chavan and ₹.11,00,000/- to Abhay Sir's wife on 07.01.2005. The Assessing Officer issued show cause notice and asked the assessee to explain these entries.
Since no reply was furnished the Assessing Officer observed from the search proceedings that assessee had stated that the transactions in the diary are related to Mr. PAK and he had written the same in the diary on his instructions of Mr. PAK. Accordingly, the above addition of ₹.14,04,000/- relating to these entries was made in the hands of Mr. PAK and in the interest of revenue the same amount was added in the hands of the assessee on protective basis.
Further, Assessing Officer observed from Annexure D of the Special Audit report that during the current assessment year i.e., A.Y. 2005-06, the assessee has made cash payments of ₹.31,50,400/- to three persons as per the details below: - i. Sanjay Chavan ₹.3,69,000/- ii. Abhay’s Wife ₹.21,00,000/- iii. Premchand Kamble ₹.6,81,400/-
8 ITA NOs. 883, 884, 885 & 886/MUM/2022 Shri Mukesh Gupta 17. The above said entries were not accounted in the Books of Accounts and since no explanation was given by the assessee to the Assessing Officer, an amount of ₹.31,50,400/- was made in the hands of the assessee.
Aggrieved assessee preferred an appeal before the Ld.CIT(A) and before the Ld.CIT(A) assessee has raised various grounds of appeal and Ld.CIT(A) allowed the addition on account of low drawing of ₹.12,000/- and deleted the protective addition made by the Assessing Officer to the extent of ₹.14.04 lakhs and with regard to unexplained payment of ₹.31,50,400/- Ld.CIT(A) remitted this matter back to the file of the Assessing Officer and in remand report the Assessing Officer differentiated the addition of ₹.31,50,400/- and addition of ₹.14.04 lakhs informing that Mr. PAK has not owned up these transactions. After considering the submissions of the assessee that addition cannot be made on the basis of diary unless it is proved that transactions were actually took place and remand report of the Assessing Officer, Ld.CIT(A) sustained the addition made by the Assessing Officer in the hands of the assessee.
9 ITA NOs. 883, 884, 885 & 886/MUM/2022 Shri Mukesh Gupta 19. Aggrieved assessee preferred an appeal before us raising following grounds in its appeal: - “1. On facts in circumstances of the case and in law the Ld.A.O. has erred in making addition of Rs. 72,000/- towards income from undisclosed sources being salary received and CIT(A) is in error in confirming the same. 2. On facts and in circumstances of the case and in law the Ld. A.O. has erred in making addition of Rs. 31,50,400/- as unexplained payments made to parties treated as income and CIT(A) is in error in confirming the same. 3. That the assessee has right to add, delete or modify any grounds of appeal during the proceedings.” 20. This appeal was instituted on 05.05.2022, We observed from the record that the hearing was posted since 21.07.2022. The hearing was posted 4 times and none appeared on behalf of assessee despite notices sent for 04.07.2022 and 07.10.2022 through registered post with acknowledgement due (RPAD). Since period of more than one month has already elapsed the notices sent to the assessee are presumed to have been served, but the assessee has not preferred to put in appearance to prosecute this appeal. Consequently, the Bench has decided to dispose of the appeal on the basis of documents available on record with the assistance of the Ld. D.R. for the Revenue.
At the time of hearing, Ld.DR brought to our notice basic facts of the present case and findings of the lower authorities for the A.Y.2005-06, 2006-07, 2007-08 and 2008-09 in detail and grounds raised by the assessee.
Considering the submissions made by the Ld. DR and various material available on record, we have verified the various informations available on Assessment orders and First Appellate orders, we observe
10 ITA NOs. 883, 884, 885 & 886/MUM/2022 Shri Mukesh Gupta from the record that there is huge cash seizure by the Police Department in the hands of the assessee to the tune of ₹.4,66,73,200/- and subsequent search/survey actions on the premises of the assessee as well as Mr. PAK and business premises of M/s Unique Finance. Further, we observe that assessee is only a salaried employee and trusted employee of Mr. PAK and assessee has followed the instructions and carried the transactions at the direction and behest of the proprietor of M/s. Unique Finance. We also observe from the record that assessee was given a meager salary of ₹.4,000/- in the year 2004-05 and subsequently per month salary was drawn by the assessee of ₹.12,000/- per month.
After careful consideration of the submissions of the assessee as well as findings of the tax authorities that based on the informations found during search and in the diary maintained by the assessee it was observed that assessee has received income from undisclosed sources to the extent of ₹.14.04 lakhs and other unexplained payments treated as income of the assessee of ₹.31,50,400/-. The income from undisclosed sources of ₹.14.04 lakhs were added in the hands of the assessee on protective basis. However, it was later on deleted by Ld.CIT(A).
11 ITA NOs. 883, 884, 885 & 886/MUM/2022 Shri Mukesh Gupta 24. Further, with regard to unexplained payments treated as income of the assessee to the extent of ₹.31,50,400/- based on the observation that these payments were not substantiated by the assessee. After considering the various informations available on record, we observe that it is fact on record that assessee is only an employee of M/s. Unique Finance and having no established source of income, except that he has handled the cash on behalf of Mr. PAK and it is also fact on record by the investigating authority as well as assessing authority that assessee has handled all the cash on behalf of Mr. PAK and he is one of the trusted employee of Mr. PAK. Therefore, it clearly indicates that assessee has no means to make such undisclosed payments and any addition has to be made only in the hands of his employer or the Assessing Officer has to bring on record a cogent material in support of making the addition that assessee has direct relationship with above said parties. Considering the fact on record it can only be presumed that assessee has acted on the behest of Mr. PAK only, therefore these payments are also to be added in the hands of the employer not in the hands of the employee, who does not have any means.
With regard to addition of salary income it is fact on record that Special Audit has brought on record that assessee has earned only
12 ITA NOs. 883, 884, 885 & 886/MUM/2022 Shri Mukesh Gupta ₹.4000/- per month during this period and any additional income declared by the assessee can only be treated as income from undisclosed sources. Therefore, only to the extent we sustain the above addition made on salaries and all other additions made by the Assessing Officer are to be properly verified and investigated. For the sake of overall justice, we are inclined to remit these issues back to the file of the Assessing Officer to verify all the informations found during the search and if the Assessing Officer able to bring on record cogent material relating to these transactions which has direct connection with the assessee alone should be added in the hands of the assessee otherwise all the additions have to be made in the hands of the employer. Accordingly, the grounds relating to all other additions made by the Assessing Officer are allowed for statistical purpose and it is needless to say that the Assessing Officer shall give adequate opportunity of being heard to the assessee. Accordingly, appeal filed by the assessee is partly allowed as per above directions.
ITA.No. 884/MUM/2022 (A.Y. 2006-07)
With regard to other Assessment Years, we observe in A.Y.2006-07 that Assessing Officer has made following additions: - (Figures in ₹.) Income from Salary (Para 15) 56000
13 ITA NOs. 883, 884, 885 & 886/MUM/2022 Shri Mukesh Gupta (Figures in ₹.) Income from Undisclosed Sources (claimed as salary received) (Para No. 15) 142000 Addition on account of low drawings (Para No.16) 18000 Addition on account of unexplained cash credit u/s.68 (Para 17) 350000 Addition on account of income from unexplained sources on protective basis (Para 18) 2343782 Addition on account of deposits of treated as unexplained cash credits u/s 68 (Para 19) 500000 Addition on account of unexplained expenditure (Para 20) 190000 Payment to Mr.Sham Bali treated as income from undisclosed sources (Para 21) 245000 Addition on account of income from unexplained sources (Para 22) 118868 Income from Undisclosed Sources (Para No.23) 535000 GROSS TOTAL INCOME 25592690 Less Deductions under Chapter VI-A Nil Assessed Total Income 25592960
From the above additions, we observe that Assessing Officer has disallowed part of the salary income declared by the assessee, additions on account of unexplained cash credit u/s. 68 of the Act, unexplained expenditure, payment to undisclosed sources etc., as discussed in Para Nos. 22 to 25, the additions can only be made in the hands of the employer not in the hands of the assessee. With regard to all the additions proposed by the Assessing Officer u/s. 68 and 69 etc., except undisclosed source of income declare by the assessee as part of the salary. Therefore, the direction given in the Para No. 25 mutatis-mutandis applicable to the present assessment year also.
14 ITA NOs. 883, 884, 885 & 886/MUM/2022 Shri Mukesh Gupta ITA.No. 885/MUM/2022 (A.Y. 2007-08) ITA.NO. 886/MUM/2022 (A.Y. 2008-09)
Coming to the appeals relating to A.Ys. 2007-08 and 2008-09, since facts in these cases are mutatis mutandis for the A.Y. 2005-06, therefore the decision taken in A.Y. 2006-07 is applicable to these Assessment Years also. Accordingly, these appeals are partly allowed for statistical purpose.
To sum-up, all the appeals filed by the assessee are partly allowed for statistical purpose.
Order pronounced in the open court on the 28th November, 2022
Sd/- Sd/- (KULDIP SINGH) (S. RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai / Dated 28/11/2022 Giridhar, Sr.PS Copy of the Order forwarded to: 1. The Assessee 2. The Respondent. 3. The CIT(A), Mumbai. 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. //True Copy// BY ORDER (Asstt. Registrar) ITAT, Mum