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Income Tax Appellate Tribunal, “C” BENCH,
Before: SHRI PRASHANT MAHARISHI, AM
PER PRASHANT MAHARISHI, AM:
The brief facts show that assessee is a partnership firm carrying on the business as builders and developers. A survey was conducted at the Vasai business premises of assessee on 16/10/2008 and there was a second survey at kandiwali office on 14th/9/2009. During survey, several papers and books were impounded. The AO came to conclusion that assessee has not accounted several cash receipts in the books of accounts.
Cash receipt entries with regard to the assessment year 2007 – 08 were also found and therefore original return filed by the assessee on 5/2/2008 declaring Rs Nil income, was reopened u/s 148 of the act, and reassessment order was passed on 28/12/2011 u/s 143 (3) rws 148 of The Income Tax Act, 1961 (The Act) whereby an addition of ₹ 48,867,846/– was made and income was assessed at that amount.
The assessee challenged the same the learned CIT – A deleted the above addition and allowed the appeal of
ITA number 4124/MUM/2012 filed by the learned assessing officer for assessment year 2007 – 08 has raised following grounds of appeal:- i. on the facts and in the circumstances of the case and in law, the learned CIT (A) erred in deleting the additions made by the AO of ₹ 48,867,850/– on account of unaccounted cash receipt found in books impounded during survey. ii. On the facts and in the circumstances of the case and in law, the learned CIT (A) erred in holding that the assessee was not liable for audit u/s 44AB.
6. For assessment year 2008 – 09 assessee filed its return of income on 28/9/2010 at total income of ₹ 1,315,235/–. As the survey was conducted on 16/10/2008, the assessee revised its return declaring a total income at ₹ 7,883,435/– on 5/5/2009 whereby assessee offered an additional income of ₹ 6,568,200/–. Learned assessing officer passed an order u/s 144 of the act on 28/12/2010 wherein the addition of ₹ 619,105,369/– was made on account of the cash receipts not accounted for in the books of accounts of the assessee and therefore the returned income of the assessee of ₹ 7,883,435/– per return dated 5/5/2009 was assessed at ₹ 626,988,804/–.
8. ITA number 4123/M/2012 [ AY 2008-09] the learned AO has raised a solitary ground that:-
On the facts and in the circumstances of the case and law, the learned CIT (A) erred in deleting the addition made by the AO of ₹ 522,791,692 – because of unaccounted cash receipts found in the books impounded during the survey.
Subsequently, the grounds of appeal were amended for changing the figure of ₹ 522,791,962/– to ₹ 609,968,556/–
10. For assessment year 2008 – 09, ITA number 1100/M/2013 is also filed by the learned assessing officer raising the grounds that learned CIT – A order in giving relief to the assessee on the issues which were rejected by the AO vide order u/s 154 dated 5/10/2012.
The facts relating to this appeal that on assessment order passed u/s 144 of the act dated 28/12/2010th, assessee preferred an application for rectification u/s
Assessee preferred an appeal against that order the learned CIT – A passed an order on 30/11/2012 allowing the appeal of the assessee. Therefore, the learned assessing officer is in appeal in ITA number 1100/M/2013 for assessment year 2008 – 09.
For assessment year 2009 – 10, assessee filed its return on 11/10/2010 at a total income of ₹ 1,079,970/–. Based on survey, assessee declared undisclosed income for assessment year 2009 – 10 of ₹ 33,558,200/–, however return of income filed by the assessee did not include the same. The learned AO passed an assessment order u/s 143 (3) read with Section 144 of The Act on 28/12/2011 assessing the total income of the assessee at ₹ 33,558,200/–.
The assessee preferred appeal before the learned CIT – A, who partly allowed the appeal of the assessee reading that the learned assessing officer has made the addition without any material evidence. Accordingly, the appeal of the assessee was partly allowed. Therefore, the learned AO has preferred this
The learned AO in has raised following grounds of appeal:-
“(i) On the facts and in the circumstances of the case and in law, the ld.CIT(A) erred in deleting the additions made by the A.O. of Rs. 4,88,67,850/- on account of unaccounted cash receipts found in books impounded during survey.
(ii) On the facts and in the circumstances of the case and in law, the ld.CIT(A) erred in holding that the assessee was not liable for audit u/s 44AB.
(iii) The appellant prays that the order of the Ld. CIT(A) on the above grounds be set aside and that of the A.O. be restored.
(iv) The appellant craves leave to amend or alter any ground or add a new ground.”
In Appeal for assessment year 2008 – 09, assessee invoked the provisions of rule 27 of the ITAT rules and submitted that i. Assessee filed return of income on 28/9/2008 declaring total income of ₹ 3,015,235/– which was revised on 5/5/2009 at ₹ 7,883,435/–. This ii. Thereafter there was a survey u/s 133A conducted by AO i.e. ITO Ward – 4 (2), Thane on 16/10/2008 and thereafter, the second survey was also conducted by ITO 25 (3) (4) Mumbai on 14th/9/2009. iii. Based on the above survey proceedings return was picked up for scrutiny . iv. First notice u/s 143 (2) was issued on 23/9/2009 by The Income Tax Officer – 25 (3) (4), Mumbai. v. As per instruction number 5 and 6/2001 dated 19 January 2001 issued by CBDT where income returned by Non corporate assessee‟s up to Rs. 10 lakhs, that the jurisdiction will be of ITO and where the income declared returned by non- corporate assessee is above ₹ 10 lakhs the jurisdiction would be of Deputy Commissioner/assistant Commissioner. vi. Since the appellant has filed return of income which is higher than limits stated as per that instruction, the jurisdiction for issue of notice u/s 143 (2) lies with the Asst Commissioner and not with the income tax Officer. vii. Therefore Notice is issued u/s 143 (2) by the income tax Officer – 25 (3) (4) is without jurisdiction and bad in law. i. The assessee filed its return of income u/s 139 (1) declaring a total income of ₹ 1,079,970/– on 11/10/2012. ii. Return of income was assessed and the order was passed u/s 143 (3) read with Section 144 by ACIT – 25 – (3), Mumbai. iii. Return was selected for scrutiny and notice u/s 143 (2) was issued by ITO – 25 (3) (4), Mumbai. iv. However the order u/s 143 (3) dated 28/12/2011 is passed by another officer i.e. the Asst Commissioner of income tax – 25 (3), Mumbai. v. The assessment order passed u/s 143 (3) dated 28/12/2011 passed by the Asst Commissioner of income tax is bad in law since notice u/s 143 (2) which is essential for initiation of assessment proceedings is not issued by him but by The Income Tax Officer – 25 (3) (4) Mumbai . vi. The assessing officer who has passed the assessment order has not issued notice u/s 143 (2) of the act. vii. Notice u/s 143 (2) of the act was issued by a different assessing officer whereas the order was viii. Issuing of notice u/s 143 (2) by one officer and finalizing the assessment by the different officer is not permitted. ix. To support its contention the assessee relied on the decision of the honourable Bombay High Court in the case of Ashok Devichand Jain versus Union of India and others (Writ Petition number 3489 of 2019 dated 8/3/2022. x. It is further prayed that the provisions of Section 292BB cannot also come into the play in view of the decision of the coordinate bench in case of Bhagyalaxmi conclave private limited versus DCIT, Circle – 13 (1), Kolkata In ITA number 2517/KOL/2019.
For invoking the provisions of rule 27 of ITAT rules, assessee submitted that in form number 35 the assessee has raised specific grounds that the learned AO did not have jurisdiction to assess the income. He further referred statement of facts where it is stated that notice have been issued by a different assessing officer. He submitted that the learned CIT – A did not decide these grounds in favour of the assessee and therefore rule 27 of ITAT rules are invoked. He Relied on several judicial precedents of honourable Bombay High Court in case of Peter Vaz in tax appeal number
On the issue of merit assessment year 2008 – 09 was considered as lead appeal. We state the facts for that year. The return of income was filed on 28/9/2008 at ₹ 1,315,235 which was revised on 5/5/2009 at ₹ 1,783,435/– by assessee who is a partnership firm , engaged in construction activities. Survey u/s 133A conducted at the business premises of the assessee situated at Parmar techno house, Pelhar village, western express highway, Vasai (E) and Parmar estate, Parikh Nagar, Kandiwali (w) on 16/10/2008 by the income tax officer Ward 4 (2), Thane.
During the course of survey, statement of partner of the firm Shri Bakul Jayantilal Parmar was recorded “Q 12 :- from the above it is seen that the farmers has received cash component over and above agreement value in respect of sale of galas Under phase V at Pelhar during financial year 2007 – 08 and 2008 – 09 at ₹ 6,568,200/– and ₹ 33,558,200/– respectively. Please state whether these cash components have been shown are reflected in books of accounts maintained by from. If the same is not reflective, please state why cash component received by the firm during FY seven – 08 and thousand eight – 09 be considered as additional income over and above the regular income in respect of assessment year 2008 – 09 and 2009 – 10. You have stated that the firm has already filed the return for assessment year 2008 – 09, Under these circumstances the firm should filed revised return for assessment year 2008 – 09 showing additional income of ₹ 6,568,200/– for assessment year 2008 – 09. Ans:- the firm has not recorded the cash component in the books of accounts maintained by the firm has hit is related to payments over and above the agreement value. Therefore, the firm will file revised return for assessment year 2008 – 09 and include ₹ 6,568,200/– as additional income. The firm will file its revised return at the earliest. At present the firm has PAN number allotted by Mumbai jurisdiction. Necessary action would be taken to transfer that the permanent account number two income tax Officer Ward 4 (2) a jurisdiction and accordingly revised return would be filed. The forum has not recorded cash component even of the current financial year i.e. 2008 – 09 relevant to assessment year 2009 – 10. These cash components work out to ₹ 33,558,200/–. The farmer will show these amounts of ₹ 33,558,200/– as additional income for assessment serial description pages cash cash paid number of received impounded books 1 A – 1 1 – 80 43,83,29,873 9,07,25,148 Vasai Office 2 A-2 Vasai 1 – 146 4,01,26,400 5,80,08,457 Office 3 A-3 Vasai 1 Nil 46,02,616
Based on the above documents, Ld AO questioned the assessee which remained unanswered therefore an ex parte order was passed u/s 144 of the act by making addition of ₹ 619,105,369 on account of cash receipts over and
Assessee preferred an appeal before the learned CIT – A who passed an appellate order on 27 March 2012 wherein addition to the extent of ₹ 9,136,813 was upheld.
The learned CIT – A further passed an order u/s 154 of the act in appeal of the assessee against the order passed by the learned AO u/s 154 of the act dated 5/10/2012 wherein the addition was confirmed to the extent of ₹ 9,136,813/-. 026. Therefore the learned assessing officer is aggrieved and is in appeal before us where the only challenge is the deletion of the addition of ₹ 609,968,556/– by the learned CIT – A which was added by the learned assessing officer on account of unexplained cash receipts found in the books/documents impounded during survey.
The learned departmental representative vehemently supported the order of the learned assessing officer. The learned departmental representative submitted that the addition deleted by the learned CIT – A is not proper. the learned CIT [A] obtained the remand i. report of the learned assessing officer on 20/9/2011 as per para number 5 of the order wherein the complete details were examined. In the remand report, in paragraph number 7, the learned AO has categorically noted that during the remand proceedings it was accepted that ₹ 9,136,813/– has not been accounted by the assessee and the same may be treated as unaccounted cash receipts for the assessment year 2008 – 09 and for that the assessee has also submitted a post dated bank cheque of ₹ 50 lakhs as tax payment towards 91,36,813 undisclosed income declared during the proceedings.
The learned AO further requested the ii. learned CIT – A to verify the above details on his part.
He further referred to paragraph number 7 iii. of the order of the learned CIT – A where the complete description of each and every seized material was given which was placed After submission of the assessee, the iv. learned CIT – A asked for second remand report from the learned assessing officer by letter dated 11/11/2011 for verification of some further information which he wanted to get clarification on his examination of the impounded material. The terms of reference of the same second remand report is mentioned in paragraph number 8 of his order. Learned CIT – A wanted to know the exact details with respect to the amount refunded to the customers of Rs 285344319/- as project was scrapped for want of government approval. v. The learned AO submitted another Remand report on 5/3/2012.
He further referred to the reply of the vi. assessee in response to the above remand report mentioned at paragraph number 13 of the order of the learned CIT – A and reiterated the same. He referred to paragraph number 15 of the order of the learned CIT – A wherein the advance received from various parties for certain He further stated that the additions made by vii. the learned assessing officer of certain amounts are without having any cogent materials to substantiate.
He further held that whatever has not been viii. received cannot be considered for taxing for various projects. learned CIT – A deleted the addition with ix. respect to cash advances of ₹ 31,692,383/– and ₹ 64,621,024 for assessment year 2007 – 08 and 2009 – 10 respectively from addition made in assessment year 2008 – 09.
He further found that there is a duplicate x. entry of ₹ 13,493,471/– which needs to be deleted.
He further referred to the second remand xii. report wherein the addition of ₹ 378,796,697/– was considered. The learned CIT held above sums are not appearing in impounded books and the learned assessing officer has taken so merely on basis of balancing figure of amount receivable and received. Therefore as there is no evidence of having received any such amount the addition was deleted to that extent.
It was further stated that the learned CIT – xiii. A has considered each and every item of the impounded document after considering the two remand reports of the learned assessing officer, two rejoinders of the assessee and he himself examining the impounded materials , sustained addition only to the extent of ₹ 9,136,813/– and therefore the He further referred to the chart submitted by xiv. him showing each item considered in the order of the learned CIT – A and added by the learned assessing officer. He tabulated the same with respect to the relevant paragraph of the order of the learned CIT – A. He further referred paper book submitted containing 220 pages.
The learned departmental representative in rejoinder referred to the second remand report submitted by the learned assessing officer dated 5/3/2012.
We have carefully considered the rival contention and perused the orders of the lower authorities. The learned assessing officer has made certain addition which were deleted by the learned CIT – A after obtaining 2-remand report of the assessing officer, rejoinder of the assessee and then deciding the issue on the merits of the case.
Reasons why the ld CIT [A} has deleted the addition are apparent . The learned CIT – A held as Under:-
“15. I have considered Assessment Order, 1st Remand order, 1st Remand Report, letter of AO dated 11/11/2011, 2nd Remand order, 2nd Remand Report and appellant 15.1 It was an exparte order & the seized material was before AO. It has been mentioned by the AR that the AO has been constantly changing and vascillating his contention regarding quantum of alleged cash receipts. It can be seen from the Assessment Order, Remand Reports and letter of A.O. i.e. a) Assessment order dated 28/12/2010 b) Explanation letter of AO dated 11/11/2011 for Remand report 1. c) The second remand report dated 05/03/2012 15.2.1. Similarly it has been alleged by the AO that the appellant has been changing the stand. Since there was lot of submissions and counter submissions by the AO and AR, I thought it prudent to verify the facts from impounded papers and not the mere allegations or the submissions. Accordingly, letter dated 09.03.2012 was issued to the 15.2.2. On 19.03.2012, Shri Abhyuday Anand, ACIT.25(3) appeared along with Shri Santosh Kumar Jha, Inspector of Income-tax and produced the original impounded materials. Similarly, Shri Jayesh Kala, FCA and A.R. of the appellant appeared along with Ms. Radhika Agarwal, C.A. and his Junior and produced Xerox copies of impounded materials.
15.2.3. The original impounded materials (produced by the A.0.) were tallied with reference to the Xerox copies of the impounded materials (produced by the appellant) and both the parties were allowed to cross check the contents of the impounded materials. Thereafter, the same were examined by me. Further, the case was adjourned for filing written 15.3. Shri Jayesh Kala, FCA and AR of the appellant appeared on 20.03.2012 to file written submissions along with copies of submissions filed before the A.O. during the assessment/remand stage. The Ld. A.R. also produced Xerox copies of impounded materials and explained the same with reference to the second Remand Report of the A.O. and the appellant’s submissions. The case was adjourned for 21.03.2012. On 21.03.2012, the Ld. A.R. of the appellant further filed legal submissions and produced Xerox copies of impounded materials and explained the same with reference to Remand Report and submissions. Thereafter, the case was concluded.
15.4.1. One of the feature of these contents in the impounded materials are that these are in the nature of advances received from various parties by the appellant for certain projects which could not fructify because these projects were scraped for want of Government approval (which is not under dispute by either party). Because of this order, the appellant is obliged to refund back each penny of the advances or face the music from the respective parties. Naturally, 15.4.2. However, there are certain amounts reflected in the impounded materials and which the appellant have put their own money in the name of relatives, cannot get away and has to be considered as appellant's money and can be taxed accordingly. In the above referred Remand Report of the A.O. dated 20.9.2011, the A.O. have concluded such amount at Rs.91,36,813/- and the appellant also failed to rebut the same during the appellate proceeding, needs to be sustained and, therefore, the amount of addition made to the extent of Rs.91,36,813/- is upheld. 15.5. I have further considered the stand taken by the A.O. in the letter dated 18/08/2011, 11/11/2011, second remand report dated 05/03/2012 as well as submissions of the A.R. It is seen that without having any cogent materials to substantiate & just to prove his point the AO concluded in his remand report dated 05/03/2012 and concluded that appellant has received Rs. 7,93,93,324/-, Rs. 13,17,910/- and Rs. 4,18,02,252/-.
15.5.1.1. As per the existing law, whatever has not been received cannot be even considered for taxing. Therefore, I direct the A.O. to delete the additions in respect of Rs. 7,93,93,324/- pertaining to Kandivali A-8, Rs.13,17,910/- pertaining to Kandivali- A-9 15.5.2. I have further considered the stand taken by the A.O. in the letter dated 18/08/2011, 11/11/2011, second remand report dated 05/03/2012 as well as submissions of the A.R. I have also gone through the facts mentioned in original impounded papers and from there I observed that advances of Rs.3,16,92,383/- and Rs.6,46,21,024/- pertains to AY 2007- 08 and AY 2009-10 respectively and cannot be considered in the A.Y.2008-2009. Even otherwise this amount is in the nature of advance from the customers which is liability and cannot be taxed.
Therefore keeping the principles of natural justice in mind, I hereby order that additions pertaining to alleged cash advances of Rs.3,16,92,383/- and Rs.6,46,21,024/- of AY 2007-08 and AY 2009-10 respectively should be deleted from AY 2008-09. Accordingly, the A.O. is directed to delete amounts of Rs.3,16,92,383/- and Rs.6,46,21,024/ 15.5.3. I have further considered the stand token by the A.O. In the letter dated 18/08/2011, 11/11/2011, second remand report dated 05/03/2012 as well as 15.5.4. As regards Rs. 3,89,03,965/-, it may be mentioned that in the Audited Balance Sheet for A.Y.2008-09 reflects the amount of advances received from customers at Rs.19,13,85,396/- which is higher than Rs.3,89,03,965/-. Since it is already a part of liability by the appellant therefore the same shall not be considered as income of the appellant. Also the AO has never denied that the alleged cash receipt is pertaining to the projects which have not been started / completed as of 31 March 2008. The AR has also mentioned that the projects against which the advance has been recd has been scrapped for want of Government approval. The necessary documents have been submitted by him. I have pursued the same. Based on the factual observations and the 15.5.5. The AO in his second remand report (para 4.4.4) has mentioned about enhancement of income. However after taking in account para 8 of AO's first remand report dated 20/09/2011 i.e "The above factual findings made during the remand proceedings is hereby placed before your goodself for necessary action. However, it is requested that the above facts may be verified once again by your goodself from the impounded books independently before arriving at any conclusion.", his apprehension in letter dated 11/11/2011, AR submissions & due verification of original impounded papers I come to the conclusion - 15.5.5.1. That Rs. 4,67,68,927/- (refer para 4 last line of page 2 of A.0.'s First Remand Report dated 20.09.2011- wherein this amount was not proposed for any addition by the A.O.) pertains to duplicate entries therefore keeping the principles of natural justice in mind come to the conclusion that the same amount cannot be considered twice for the purpose of taxation. Therefore, 15.5.5.2 That, the working of amount of Rs. 37,87,96,697/- by the A.O in Second Remand Report (Also refer Second page para 4 of First Remand Report and the last page of para 4of Second Remand Report) were not appearing in impounded books, and the same was taken by AO merely on the basis of balancing figure of amount receivable and received. However, whatever has not been received cannot be taxed. Therefore, the proposal of the A.O in the second Remand Report to consider the above amount in calculation and working for the enhancement, cannot be accepted and, therefore, is rejected. 15.5.5.3 That, amount of Rs. 66,64,617/- (refer para 4 page 2 of the First Remand Report where the A.O. did not consider the same for any addition) and also were not appearing in impounded books. Further, in the Second Remand Report the A.O. has proposed to include the amount in enhancement, cannot be accepted because the same has been taken by AO 15.5.5.4 That, Rs. 3,08,77,221/- Is duly reflected in books of the accounts under the head "Advance Received from Customers which is duly appearing in the books of accounts for year ended 31/03/2008 (refer Table in para 6 of page 3 of First Remand Report, where the A.O. has not made any suggestion addition/inclusion of this amount).
15.5.5.5 As regards amount of Rs.91.36,813/- (refer para 7 page 3 of the First Remand Report of the A.O.), it has been explained by the A.O. in the Remand Report that "After going through the submission of the A.R. and the various entries in the impounded materials, the assessee and his AR were confronted with various entries which the assessee and Authorised Representative had claimed to double entries or either as those which did not exist. During this process, it was
in view of the above facts it is crystal-clear that the amount of addition made by the learned assessing officer in the assessment order is ₹ 619,105,369/–. As per the remand report the learned assessing officer has worked out addition of ₹ 75,19,81,580/–. Out of
Accordingly, appeal of the learned assessing officer in ITA number 4123/M/2012 for assessment year 2008 – 09 is dismissed.
on the issue of invocation of Rule 27 of The Income Tax Appellate Tribunal Rules 1963, the fact clearly shows that the assessee has mentioned all these facts in the statement of facts as well as in the grounds of appeal before the learned CIT – A. The learned CIT – A decided the issue on the merits of the case. Before us the assessee says that this is a jurisdictional issue which can be raised at any time of pendency of the appeal which goes to the root of the matter. For this proposition the decision of the honourable Bombay High Court in case of Mr. Peter Vaz is relied upon. In view of the fact that the issue has been raised before the learned CIT – A mentioned in form number 35 in statement of facts as well as in the grounds of appeal, the issue is a jurisdictional issue, goes to the root of
Now coming to the facts for assessment year 2008 – 09, tax at the cost of repetition shows that return of income was filed on 28/9/2008 for ₹ 1,315,235. Same was revised on 5/5/2009 at ₹ 7,883,435/ –. There were two survey conducted on the assessee. On 16/10/2008 survey was conducted by Income Tax Officer Ward 4 (2) of the act. The second survey was conducted by The Income Tax Officer – 25 (3) (4), Mumbai on 14th/9/2009. The return of income of the assessee was selected for scrutiny and notice u/s 143 (2) was issued on 23/9/2009 by ITO 25 (3) (4) Mumbai. The said notice was received by the assessee on 23/9/2009 itself. Instruction number 5 and 6/2001 dated 19 January 2001 , the Central Board Of Direct Taxes states that where any non-corporate assessee files return of income above ₹ 10 lakhs, jurisdiction would be of the Deputy Commissioner or the Assistant Commissioner. Therefore it is apparent that assessee has filed original return of income of ₹ 1,315,235/– on 28/9/2008 which is higher than ₹ 10 lakhs threshold, therefore the notice should have been issued by the Assistant Commissioner of Income Tax and not The Income Tax Officer. In this case notice u/s 143 (2) of The Act was issued by the Income tax Officer. Identical issue arose before the honourable Bombay High Court in case of Ashok Devichand Jain where in it held as under :-
As decision of the honourable jurisdictional High Court binds us, we do not have any other alternative but quash assessment order passed by the learned assessing officer u/s 144 of the income tax act dated 28/12/2010.
The learned assessing officer has also filed an appeal in ITA number 1100/M/2013 for assessment year 2008 – 09 which is consequential in nature filed against the rectification order u/s 154 passed by the learned CIT – A – squarely covered in the appeal of the learned AO for assessment year 2008 – 09 in the above appeal in ITA number 4123/M/2012. Therefore, the appeal of the learned assessing officer is dismissed.
Accordingly both the appeals for assessment year 2008 – 2009 filed by the learned assessing officer in ITA number 123/M/2012 and 1100/M/13 are dismissed.
Assessment year 2007 – 08
The assessee agitated the same before the learned CIT – A wherein assessee submitted that a sum of ₹ 1,913,000 is amount in nature of the bank balance in cash countered by the appellant, ₹ 11 lakhs have been considered by the AO by adding 2 zeros,, a sum of ₹ 8,790,058 – is not in the nature of income but is the amount of expenditure incurred for purchase of land and no basis was found during the course of assessment proceedings with respect to the balance in figure of ₹ 1,751,440/–. It was also contended that a sum of Rs 156,09,472/– is amount already recorded in the books of accounts and therefore no addition can be made to that extent. With respect ₹ 28 lakhs it was stated that it is not related to the appellant and further a sum of ₹ 121,001/– is in the nature of the duplication entries. Assessee further contended that a sum of ₹ 2,862,000/– is the amount pertaining to “I have considered the stand of the AO, submission of the Appellant and the impounded materials and my observations can be summed up as under :
5.1. Another feature of these contents in the impounded materials are that these are in the nature of advances received from various parties by the appellant for certain projects. Naturally, the receipt is in the form of advance and is a liability and cannot be taxed u/s.68 or 69 of the Income-tax Act, 1961. Such receipts cannot even be taxed u/s.56 because as per the impounded materials, the amounts have been received from various parties for certain consideration and the consideration was booking of gala/shops Therefore, I am of the considered opinion that such liabilities as reflected in the impounded materials, which again is neither regular books of accounts nor any systematic write up which can be turned as duplicate set of books of accounts. Undisputedly, except for the loose papers, 5.2. On verification of the impounded papers, it is found that amount of Rs.14,18,000/- comprises of bank balance while sum of Rs. 4,95,000/ represents the total of number of notes along with denominations counted by the appellant. Therefore in no case the same can be considered as cash receipt. Consequently, the AO is directed to delete the additions of Rs. 14,18,000/- and Rs 4,95,000/-.
5.4. On verification of the impounded papers it is found that amount of 87,90,058/- has been paid by the appellant towards purchase of land or expenses while basis of addition in respect of Rs. 17,51,440/- is not reflected in impounded papers receivable as actual receipt. However on verification of the original impounded papers, it was found that the top of header of the pages of the As per the existing law, whatever has not been received cannot be even considered for taxing. Therefore, I direct the A.O. to delete the additions in respect Rs. 1,39,20,875/-.”
Therefore, the learned assessing officer is aggrieved and is in appeal before us. The learned departmental representative vehemently supported the order of the learned AO.
We have Carefully considered the rival contention and perused the orders of the lower authorities. The facts clearly show that the learned assessing officer has made an addition of Rs. 488,67,850/ –. On careful consideration we find that the assessee has shown advances of Rs. 1,56,09,472/– in its books of accounts Under the head advance received from customers. Therefore, it is apparent that the amount has already been recorded in the books of accounts the addition has been correctly deleted by the learned CIT – A. The amount of ₹ 1,418,000/– was found to be the bank balances and Rs. 495,000/– is cash on hand. Both the items are related to regular books of accounts and therefore there could not have been added as undisclosed income of the assessee which is rightly deleted by the learned CIT – A. Secondly, a sum of ₹ 11,000/– written in the seized material, have been extrapolated by the learned AO by adding 2 zeros in making at ₹ 11 lakhs. We find that such extrapolation is unwarranted unless it is mentioned in the impounded material. There is no mention of such extrapolation in the impounded material and therefore the addition to the extent of ₹ 11 lakhs could not have been made and therefore same is deleted by the learned CIT – A the addition to the extent of ₹ 11,000/– is sustained. Further a sum of ₹ 1,751,440/– is not reflected in the impounded troopers and
Now we find that the learned CIT – A has deleted the addition of ₹ 2,862,000 holding that same is pertaining to assessment year 2008 – 09 and therefore same cannot be considered in assessment year 2007 – 08. This finding has been given by the learned CIT – A without first ensuring that the same has been added in the assessment year 2008 – 09 or not. Therefore, we direct the learned assessing officer to examine that if the amount of ₹ 2,862,000 has been already added in assessment year 2008 – 09 then same may be deleted in this year is there cannot be any addition of the same amount in two different assessment years.
Further, the addition of ₹ 8,790,058/– made by the learned assessing officer with respect to the own money is not in fact the receipt of the money but the payment for purchase of land and other brokerage expenses which are already accounted for in the books of accounts of the assessee and therefore they are not own money and cannot be added as income of the assessee. Those are correctly deleted by the learned CIT – A.
Coming to the addition of ₹ 28 lakhs – wherein the learned CIT – capital has deleted the addition stating
In the result, the solitary ground raised by the learned assessing officer with respect to the addition of ₹ 48,867,850/– is partly allowed.
The second ground raised in the appeal of the learned assessing officer is merely academic in nature as assessee does not have any turnover. Therefore ground number 2 is dismissed.
Accordingly appeal of the learned AO for assessment year 2007 – 08 in ITA number 4124/M/2012 is partly allowed.
Now we come to the rule 27 in by the assessee during the course of hearing before us. The assessee filed return of income declaring nil income on file/2/2008 whereas the case of the assessee was reopened u/s 148 of the act by the learned Asst Commissioner of income tax (25) (3), Mumbai. This is in violation of instruction number 1/2011 dated 31 January 2011. According to that instruction the same should have been assessed by the learned assessing officer. The issue is squarely covered in favour of the assessee by the decision of the honourable Bombay High Court in case of Ashok Devichand Jain (supra) dated 8 March 2022 which is already been considered by us in deciding the similar issue for assessment year 2008 – 09. Therefore, the order of the learned assessing officer deserves to be quashed.
Accordingly the appeal of the learned assessing officer is partly allowed and application Under rule 27 of the assessee is allowed.
Assessment year 2009 – 10
Assessment year 2009 – 10, assessee filed its return of income u/s 139 (1) at ₹ 1,079,970 on 11/10 2010. The Return of Income Was Assessed in the Order Was Passed U/s 143 (3) read with Section 144 of the act by the Asst Commissioner of income tax – 25 (3), Mumbai for order dated 28/12/2011. The learned assessing officer made an addition of ₹ 32,478,230/– which has been challenged before the learned CIT – A, who passed an order on 29/3/2012 deleting the above addition. Therefore the learned assessing officer is in appeal before us.
Assessee in the provisions of rule 27 stating that according to the instruction number 1/2011 dated 31 January 2011 the income of the assessee (a non- corporate assessee) is about ₹ 20 lakhs then only the notice is required to be issued by the Asst Commissioner or deputy Commissioner of income tax. The return income of the assessee is merely ₹ 1,079,970 and therefore such notice should have been issued by the income tax Officer. It is not done in that manner and therefore according to the decision of
Identically we have heard the rule 27 application of the assessee for assessment year 2007 – 08 and 2008 – 09 wherein we have as the orders of the assessing officer as they were in violation of the above instruction following the decision of the honourable Bombay High Court. Similarly we also as the order of the learned assessing officer for assessment year 2009 – 10.
However for the completeness of the appeal, the controversy in old in this appeal has been decided by the learned CIT – A as Under:-
“5. Ground no.3.
On the facts & in the circumstances of the case the Id Assessing Officer erred in making an addition of Rs.3,24,78.230/- without understanding the facts & circumstances of the case & the reasons assigned for doing so are wrong & contrary to the provisions of the Income tax Act & the rules made there under.
5.1 Briefly the case of AO is that:
"The assessee has declared undisclosed income of Rs.3,35.58,200/- during the survey conducted on 16-10-2008. By this time the "2 During survey action, inventory of Note Book Loose Papers was made at Sr. No.1 & 2 of the Inventory. The statement of Shri Bakul J.Parmar one of the partners was also recorded on oath in the presence of another partner Shri Nitesh J Pannar Based on the notings in Note Book and Loose Papers, with regard to cash component received by the firm, the additional income was offered for taxation as under:
Sr. No. FY. Additional Income offered 1) 2007-08 Rs 65,68,200/ 2) 2008-09 Rs.3,35,58,200/ "The undisclosed income of Rs.3,35,58.200/- declared during the survey held on 16.10.2008 is shown as undisclosed income in the Profit and Loss Account for the AY 2009-10. However various expenses and costs of work in progress have been debited against this undisclosed income and other income and finally Rs.11,39,264/- is shown as net profit. The AR for the assessee was asked to submit details of all expenses claimed, the working/calculation of WIP of various projects and calculation to prove that cash receipts found in the books impounded have been accounted. Reply to the working of cash receipts found in books of accounts and details called for in the notice under section 142(1) was not submitted till 1 week of December 2010. The assessee had produced various ledgers to support his claim for the expenses debited in P&L account. When asked to produce the bills, the same were also produced. It could be seen that majority of the bills and vouchers were handmade and appeared to be self-made and non-genuine.
5.2 During the appellate proceedings, Shri Jayesh Kala, CA authorized representative of the appellant attended and filed the written submissions which is reproduced hereunder:
"The Ld. Assessing Officer rejected the books of accounts & made the addition of Rs. 3,35,58,200/- on the basis of declaration made by the appellant at the time of survey. However, your Honor shall appreciate that such declaration was made on 16/10/2008 i.e. at the middle of the assessment year 2008-09 and the appellant not being the technical person was not in the position to judge as to what would be his income for the assessment year under review & estimated its gross receipts at Rs 3,35,58,200/-.
The Ld. Assessing Officer merely acted on only one ground i.e., he made the addition on the basis of declaration made by the The ld. Assessing Officer did not appreciated the fact that the accounts of the appellant have been audited under the section 44AB of the Income Tax Act, 1961, and all the expenses debited to P/L account have been duly verified and certified by the auditors. Further, all the expenses incurred are supported with proper documentation. The appellant had declared revenue of Rs. 3,35,58,200/- in his books of accounts & has claimed expenses incurred for generating the revenue. The Net profit of Rs. 10,79,970/ after deducting all the expenses was reflected in the Return of Income filed by the appellant for the relevant assessment year. The books of accounts of the appellant were duly audited by the Chartered Accountant u/s 44AB as per the provision of the Income Tax The Ld. Assessing Officer was of the opinion that the declaration made by the appellant was final and that no other facts can be considered. He failed to appreciate that an admission made at the time of survey, although is an extremely 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 it has incorrectly been made and the person, making the statement should be given proper opportunity to show that it does not show the correct state of facts.
Similar view is also held in the case of S. Khadar Khan (2008) 300 ITR 157 (Mad), wherein the honorable Madras High Court held that "A statement u/s 133A is not given any evidentiary value because the officer, taking the statement, is not authorized to Further, the appellant also relies on the decisions given in the following cases - The Mumbai Tribunal in the case of Unitex Products Ltd V ITO (22 SOT 429) held that during the course of survey, the officer can record the statement of a person under sub section 3 (iii) of section 133 A, this sub section authorizes the income tax authority to record the statement of any person which may be useful for or relevant to any proceedings under the Act, however the officer is not authorized to record the statement on oath and hence the statement taken during the course of survey has no evidentiary value.
The Mumbai Tribunal in the case of Dy CIT VIS Premsons (130 TTJ 159) held that no ITO vs. Bajrang Trading Company (2011) [Tax World Vol. XLV Part-1 Page 33 (January, 11)] wherein it was held that adhoc disallowance cannot be made simply holding that self made vouchers cannot be taken as correct and proved, unless some of such vouchers are proved as bogus or fake Mumbai Bench of ITAT in Pearl Farben Chem. Pvt. Ltd. (order dated: 12th November, 2010.) wherein it was held that the Assessing officer has to give basis for disallowance. The disallowance has to be based on some material and cannot be arbitrary. The round figure estimated additions without giving any basis cannot be sustained.
The Nagpur Tribunal in the case Elite Developers vs. Deputy Commissioner of Income-tax [2000] 73 ITD 379 (NAG.) held that the Assessing Officer had completely ignored the fact that there was no solid However, the Assessing Officer preferred to apply Nelson's eye only to assess Rs. 40 lakhs in the hands of the assessee only as against nil income declared by the assessee in the return. No reason had been given for assessing the entire amount of Rs. 40 lakhs as undisclosed income of the assessee and, therefore, such assessments could not legally sustained in the eyes of law.
On perusal of above explanation & case law above, your Honour shall appreciate that the Ld. Assessing Officer erred in not allowing the expenditure incurred for generating the revenue of Rs. 3,35,58,200/- Therefore, we have to request your Honour to delete the 5.3. I have considered the appellant's submissions, stand of the AO and the impounded materials. From perusal of the order of the AO it appears that the AO disregarded the books of accounts produced by the assessee during assessment proceedings under section 145(3) of the Act and other primary records in the form of purchase bills, vouchers etc solely on the ground that the assessee had made confessional statement during survey proceedings. The Assessing Officer had completely ignored the fact the accounts of the appellant have been audited under the section 44AB of the Income Tax Act, 1961, and all the expenses debited to P/L account have been duly verified and certified by the auditors. Further, all the expenses incurred are supported with proper documentation.
Further the AO erred in rejecting the books of accounts without appreciating the fact that the books of accounts have been duly audited & the return of income have been filed within the time allowed as per the provision of the Income Tax Act, 1961. Moresoever if he was not satisfied with the books of accounts he should have conducted an enquiry in order to On perusal of AO order it has been also observed that before rejecting books of accounts he had called for Balance Sheet, P/L account, various ledgers, bills and vouchers etc. Thereafter he rejected the same as according to him they were handmade and hence appeared to be self-made and non- genuine. However, even for time being it is assumed that the vouchers and bills are self made and non genuine then also it can only raise a doubt about validity of expenses claimed by the appellant. In no circumstances rejection of vouchers can lead to rejection of books of accounts. Further to made the addition he had solely relied upon the statement given by one of the partner at the time of survey. He failed to appreciate that an admission made at the time of survey, although is an extremely 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 it has incorrectly been made and the person, making the statement should Therefore looking at the issue from any angle, the Assessing Officer was absolutely wrong in arriving at the conclusion; without any material and evidence that the expenditure incurred for generating the turnover of Rs. 3,35,58,200/- should be disallowed. The best course of action available before the AO was to prove that the expenses claimed by the Appellant in the P & L Account were bogus and to that extent he could have disallowed. But without proving the same he could not have done so. When there is a receipt of Rs. 3,35,58,200/-, there definitely to have certain expenses. Since the expenses in the P & L Account have not been proved as bogus, the action of the AO cannot be sustained. Consequently the AO is directed to delete the addition.”
The learned departmental representative supported the order of the learned assessing officer whereas the learned authorised representative supported the order of the learned CIT – A.
We have carefully considered the rival contentions. During the course of survey on 16/10/2008 assessee declared undisclosed income of ₹ 33,558,200. This income was shown by the assessee in the profit and
The second issue raised by the learned assessing officer is with respect to audit u/s 44 AB of the act. As assessee does not have any turnover, there is no question of audit of accounts Under that Section. Therefore same is also deserves to be dismissed.
Accordingly appeal of the learned AO for assessment year 2009 – 10 in ITA number 4122/M/2012 is dismissed.
Accordingly, all 4 appeals of the learned assessing officer are disposed of by this common order.
Order pronounced in the open court on 12.09.2022.