PRAKASH CHAND SHARMA,JAIPUR vs. ACIT, JAIPUR

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR Jh fot; iky jko] U;kf;d lnL; ,oa Jh foØe flag ;kno] ys[kk lnL; ds le{k BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM vk;dj vihy la-@ITA No. 919/JP/2016 fu/kZkj.k o"kZ@Assessment Year : 2007-08 cuke Prakash Chand Sharma, A.C.I.T., Vs. C-42, Gokul Path, Vaishali Nagar, Central Circle-2, Jaipur. Jaipur. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AGMPS 2776 H vihykFkhZ@Appellant izR;FkhZ@Respondent vk;dj vihy la-@ITA No. 932/JP/2016 fu/kZkj.k o"kZ@Assessment Year : 2007-08 cuke A.C.I.T., Prakash Chand Sharma, Vs. Central Circle-2, C-42, Gokul Path, Vaishali Nagar, Jaipur. Jaipur. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AGMPS 2776 H vihykFkhZ@Appellant izR;FkhZ@Respondent vk;dj vihy la-@ITA No. 920/JP/2016 fu/kZkj.k o"kZ@Assessment Year : 2008-09 cuke Prakash Chand Sharma, A.C.I.T., Vs. C-42, Gokul Path, Vaishali Nagar, Central Circle-2, Jaipur. Jaipur. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AGMPS 2776 H vihykFkhZ@Appellant izR;FkhZ@Respondent vk;dj vihy la-@ITA No. 933/JP/2016 fu/kZkj.k o"kZ@Assessment Year : 2008-09 cuke A.C.I.T., Prakash Chand Sharma, Vs. Central Circle-2, C-42, Gokul Path, Vaishali Nagar, Jaipur. Jaipur. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AGMPS 2776 H vihykFkhZ@Appellant izR;FkhZ@Respondent

ITA 919 to 924/JP/2016 & 932 to 938/JP/2016 2 Prakash Chand Sharma Vs ACIT vk;dj vihy la-@ITA No. 921/JP/2016 fu/kZkj.k o"kZ@Assessment Year : 2009-10 cuke Prakash Chand Sharma, A.C.I.T., Vs. C-42, Gokul Path, Vaishali Nagar, Central Circle-2, Jaipur. Jaipur. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AGMPS 2776 H vihykFkhZ@Appellant izR;FkhZ@Respondent vk;dj vihy la-@ITA No. 934/JP/2016 fu/kZkj.k o"kZ@Assessment Year : 2009-10 cuke A.C.I.T., Prakash Chand Sharma, Vs. Central Circle-2, C-42, Gokul Path, Vaishali Nagar, Jaipur. Jaipur. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AGMPS 2776 H

vk;dj vihy la-@ITA No. 922/JP/2016 fu/kZkj.k o"kZ@Assessment Year : 2010-11 cuke Prakash Chand Sharma, A.C.I.T., Vs. C-42, Gokul Path, Vaishali Nagar, Central Circle-2, Jaipur. Jaipur. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AGMPS 2776 H vihykFkhZ@Appellant izR;FkhZ@Respondent vk;dj vihy la-@ITA No. 935/JP/2016 fu/kZkj.k o"kZ@Assessment Year : 2010-11 cuke A.C.I.T., Prakash Chand Sharma, Vs. Central Circle-2, C-42, Gokul Path, Vaishali Nagar, Jaipur. Jaipur. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AGMPS 2776 H

ITA 919 to 924/JP/2016 & 932 to 938/JP/2016 3 Prakash Chand Sharma Vs ACIT vk;dj vihy la-@ITA No. 923/JP/2016 fu/kZkj.k o"kZ@Assessment Year : 2011-12 cuke Prakash Chand Sharma, A.C.I.T., Vs. C-42, Gokul Path, Vaishali Nagar, Central Circle-2, Jaipur. Jaipur. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AGMPS 2776 H vihykFkhZ@Appellant izR;FkhZ@Respondent

vk;dj vihy la-@ITA No. 936/JP/2016 fu/kZkj.k o"kZ@Assessment Year : 2011-12 cuke A.C.I.T., Prakash Chand Sharma, Vs. Central Circle-2, C-42, Gokul Path, Vaishali Nagar, Jaipur. Jaipur. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AGMPS 2776 H vk;dj vihy la-@ITA No. 924/JP/2016 fu/kZkj.k o"kZ@Assessment Year : 2012-13 cuke Prakash Chand Sharma, A.C.I.T., Vs. C-42, Gokul Path, Vaishali Nagar, Central Circle-2, Jaipur. Jaipur. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AGMPS 2776 H vihykFkhZ@Appellant izR;FkhZ@Respondent vk;dj vihy la-@ITA No. 937/JP/2016 fu/kZkj.k o"kZ@Assessment Year : 2012-13 cuke A.C.I.T., Prakash Chand Sharma, Vs. Central Circle-2, C-42, Gokul Path, Vaishali Nagar, Jaipur. Jaipur. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AGMPS 2776 H

ITA 919 to 924/JP/2016 & 932 to 938/JP/2016 4 Prakash Chand Sharma Vs ACIT vk;dj vihy la-@ITA No. 938/JP/2016 fu/kZkj.k o"kZ@Assessment Year : 2013-14 cuke A.C.I.T., Prakash Chand Sharma, Vs. Central Circle-2, C-42, Gokul Path, Vaishali Nagar, Jaipur. Jaipur. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AGMPS 2776 H

fu/kZkfjrh dh vksj ls@ Assessee by : Shri P.C. Parwal (CA) jktLo dh vksj ls@ Revenue by : Smt. Rolee Agarwal (CIT-DR) lquokbZ dh rkjh[k@ Date of Hearing : 25/05/2018 mn?kks"k.kk dh rkjh[k@ Date of Pronouncement : 30/07/2018 vkns'k@ ORDER

PER: BENCH

These are set of six cross appeals filed by the assessee and the

revenue for the A.Ys. 2007-08 to 2012-13 and an appeal filed by the

revenue for the A.Y. 2013-14 directed against the respective orders of the

ld. CIT(A) arising from the assessment framed U/s 143(3), read with

Section 153A and 153B(1)(b) of the Income Tax Act, 1961 (in short the

Act) pursuant to the search U/s 132 of the Act.

convenience and brevity, a common order is being passed.

that the assessee is individual and engaged in the business of financing.

He is also a director in two finance companies namely Shubhdeep Finance

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Co. Pvt. Ltd. and Prakash Deep Finance Co. Ltd. A search and seizure

operation was carried out U/s 132 of the Act in the case of assessee and group concerns/associates on 31st July, 2012. During the course of search

and seizure action, cash, jewellery, books of account and other

incriminating documents were found and seized. The documents found

and seized includes the documents relating to finance activities known as

“100 days scheme” containing the transactions from 01/6/2009 though

the assessee was engaged in this activity since long time. In the statement recorded U/s 132(4) of the Act dated 31st July, 2012, the

assessee disclosed and surrendered an income of Rs.10.00 crores on

account of cash, investment and other documents found and seized in the

search and seizure action. Subsequently, the A.O. issued noticed U/s

153A of the Act for the A.Y. 2007-08 to 2012-13 on 10/03/2013. In

response to which the assessee filed return of income for these five years

declaring income of Rs. 8,46,57,240/- divided into five years. The

assessee also filed return of income for the A.Y. 2013-14 on 29/7/2013

declaring total income of Rs. 14,87,160/-. The Assessing Officer while

completing the assessment U/s 143(3) read with Section 153A/153B(1)(b)

of the Act has made various additions in the returned income. The details

of the income declared by the assessee, addition made by the Assessing

Officer, which was reduced/deleted by the ld. CIT(A) are as under:

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AY Income Addition made by Addition sustained by the declared the AO CIT(A) 2007-08 17,29,650 46,63,770 26,63,770 2008-09 17,69,250 1,07,78,700 37,78,700 + + 13,26,600 13,26,600 2009-10 45,40,510 1,32,75,966 22,75,060 + + 8,32,800 8,32,800 2010-11 1,30,94,390 26,84,725 11,84,725 + + 29,75,859 29,75,859 2011-12 3,20,29,420 82,59,551 82,59,551 2012-13 3,00,06,860 69,54,913 69,54,913 2013-14 14,87,160 2,16,92,730 Nil

Since the ld. CIT(A) has allowed part relief to the assessee, therefore,

both the assessee as well as the revenue are aggrieved by the impugned

orders of the ld. CIT(A) and filed cross appeals for the A.Ys. 2007-08 to

2012-13. For the A.Y. 2013-14, the ld. CIT(A) has deleted the addition

made by the Assessing Officer, therefore, the revenue has filed the appeal

against the impugned order of the ld. CIT(A).

revenue have raised following grounds in the cross appeals:

Grounds of assessee’s appeal: “1. The ld. CIT(A) has erred on facts and in law in estimating the undisclosed interest income at Rs. 40,00,000/- as against Rs. 13,24,230/- declared by the assessee thereby confirming an addition of Rs. 26,63,770/-.

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Grounds of revenue’s appeal:

“1. Whether on the facts and the circumstances of the case Id CIT(A), was right in restricting the addition from Rs 46,63,770/- to Rs 26,63,770/- made on account of undisclosed interest income without appreciating the fact that based on seized material and statements given by the assessee during the course of search/post search, the opening balance of Rs 8 Crore is taken as on 01.04.2006 and on such capital the assessee earned interest income by scheme floated in all the years.

revenue’s appeal are common regarding the addition made by the

Assessing Officer in respect of undisclosed interest income on estimate

basis of Rs. 46,63,770/- was restricted by the ld. CIT(A) to Rs.

26,63,770/-. From the seized material found during the course of search

and seizure action, the Assessing Officer observed that the assessee

floated a finance scheme which consists of 100 days duration and

members of the scheme are required to pay off a fixed sum of amount for

continuous 100 days, therefore, the amount given on loan was to be

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repaid by the members alongwith principal and interest within a period of

100 days on daily basis. The Assessing Officer has cited an illustration

that if a member took a loan of Rs. 10,000/- from the assessee, he is

required to repay principal alongwith interest total amounting to Rs.

12,000/- in 100 equal installments of Rs. 120/- each. Likewise for a loan

of Rs. 20,000/-, there will be 100 equal installments of Rs. 240/- each

total amounting to Rs. 24,000/-. Thus, the Assessing Officer estimated the

income from interest ranges from 60% to 72% as it was also disclosed by

one of the assessee’s employee Shri Mahaveer Prasad Sharma in his

statement recorded U/s 132(4) of the Act on 31/7/2012. Since the seized

record contains the entries of finance activity w.e.f. 19/6/2009

therefore, prior to the said date, there was no material disclosing any

income on this activity. The Assessing Officer took the balance sheet as

on 30/09/2009 showing capital of Rs. 8,72,54,810/- and estimated the

undisclosed income for the period 01/4/2006 to 17/06/2009. The

assessee in the return of income, declared the income from the finance

scheme on estimated basis which was not accepted by the Assessing

Officer and found to be on lower side considering the fund involved

in the financing business prior to 01/4/2006. The Assessing

Officer accordingly took opening balance of Rs. 8.00 crores as on

01/4/2006 and on said capital, the Assessing Officer

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estimated interest income for the A.Y. 2007-08 at Rs. 60.00 lacs. Since

the assessee declared the interest income of Rs. 13,26,230/-, accordingly,

the addition of Rs. 46,63,770/- was made by the Assessing Officer on

account of undisclosed interest income.

the ld. CIT(A) and submitted that the assessee was suffering from

Tuberculosis (TB) during these years and therefore,, the assessee could

not do any business of financing due to ill health. This fact was not

disputed by the Assessing Officer. Considering these facts, the ld. CIT(A)

estimated the interest income for the A.Y. 2007-08 at Rs. 40.00 lacs as

against Rs. 60.00 lacs estimated by the Assessing Officer and

consequently a relief of Rs. 20.00 lacs was granted to the assessee on

this account.

and seizure action, no evidence was found or seized relating to the

quantum of funds advanced or interest income earned by the assessee

prior to 01/04/2006. The ld AR has pointed out that the Assessing Officer

had admitted this fact that there was no record available for the period

covered by the three assessment years i.e. 2007-08, 2008-09 and 2009-

10 and part period of A.Y. 2010-11. The Assessing Officer has not given

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any reasonable basis for estimation of interest income but an ad hoc

estimation has been made by the Assessing Officer, which was sustained

by the ld. CIT(A) on ad hoc basis without having any material to support

the addition made by the Assessing Officer and sustained by the ld.

CIT(A). He has further contended that there is no scientific basis or sound

reasoning for estimation of income as the Assessing Officer made

estimation of interest income for three years at Rs. 60.00 lacs, 1.20 crores

and 1.70 crores, which is very inconsistent and arbitrary. The ld AR has

pointed out that the assessee has estimated income on actual earnings

which is supported by the application of income during the period w.e.f.

assessment year 2007-08 to 2009-10. The details of such investment is

verifiable from the inflow and outflow statement produced by the

Assessing Officer and is also enclosed with the impugned order of the ld.

CIT(A). The assessee has declared total interest income of Rs.

82,82,470/- for these assessment years, which is matching with the

application of income during the said period. Thus, the income declared

is more than the investment found for these periods. Hence, the ld AR

has submitted that the assessee has given all relevant details supporting

the claim of the assessee alongwith the fund flow statement that the

addition made by the Assessing Officer and sustained by the ld. CIT(A) on

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estimation basis without any tangible material is not justified and the

same may be deleted.

balance of Rs. 8.00 crores as on 01/4/2006 is not in dispute and

therefore, the Assessing Officer has estimated the interest income by

considering the said amount by taking a backward calculation of fund

available with the assessee deployed under 100 days scheme. The

Assessing Officer has duly given rebated on account of ill health of

assessee during the period and therefore, estimation made by the

Assessing Officer is not without any basis but it is very well passed on the

scientific method of computing the income by taking the opening balance

of Rs. 8.00 crores as on 01/4/2006 and then computing the backward

estimation of income from that date downwards, therefore, the Assessing

Officer has estimated only Rs. 60.00 lacs for the A.Y. 2007-08, which was

enhanced to Rs. 1.20 crores in the next subsequent years. The margin on

the scheme is so high that the amount estimated by the Assessing Officer

on the capital of Rs. 8.00 crores as very reasonable and rather

conservative. The ld CIT DR has further contended that as per the seized

material outstanding balances were found which shows that an

outstanding advance up to 31/3/2016 was Rs. 23.00 lacs comparing the

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said amount of outstanding advance with the data available in the seized

material the estimation of income made by the Assessing Officer is proper

and justified. The ld CIT DR has thus submitted that the ld. CIT(A) has

granted the relief to the assessee without any basis and the income

estimated by the Assessing Officer may be restored.

material on record. There is no dispute that prior to 19/6/2009, no

evidence was found during the search and seizure action regarding any

income on account of interest from 100 days finance scheme. Though,

the assessee has not disputed the fact that the assessee has been

carrying out this activity since long time and also shown the income in the

books of account, however, the income shown in the books of account is

not matching with the entries found in the seized material. The Assessing

Officer has estimated the income by taking the opening balance of capital

at Rs. 8.00 crores as on 01/4/2006, which was not disputed by the

assessee. However, the assessee contended that due to ill health of the

assessee during the said period, as the assessee was suffering from

Tuberculosis and therefore, was not able to do any business activity.

Hence, the assessee’s claim that the income declared by the assessee of

Rs. 13,36,237/- for the year under consideration is justified and even

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the total income declared by the assessee for the three assessment years

i.e. A.Y. 2007-08 to 2009-10 and part of the A.Y. 2010-11 up to

17/6/2009 is matching with the application of income. The assessee has

produced fund flow statement showing the income and application of

income for all these years. The ld. CIT(A) has annexed the fund flow

chart to the impugned order. It is pertinent to note that the assessment

framed by the Assessing Officer U/s 143(3) read with Section 153A for the

A.Y. 2007-08 to 2009-10 are falling in the category of reassessment as

original assessment as on the date of search were not pending and

therefore, in absence of abetment of assessments the orders passed by

the Assessing Officer are in the nature of reassessment pursuant to the

search and seizure action U/s 132 of the Act. It is settled proposition of

law that in the reassessment proceedings U/s 153A of the Act, the

Assessing Officer can assessee an income based on seized material. In

absence of any seized material regarding the interest income for the year

under consideration, no addition can be made on estimated basis. It is an

undisputed fact that the material found during the search and seizure

action contains the entries w.e.f. 19/6/2009 and therefore, prior to the

said period, no record or material was found to disclose or indicate any

income on account of interest on the scheme. Only fact which can be

ascertained from the documents is that the assessee was engaged in the

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business activity of finance under the scheme known as 100 days scheme.

However, in absence of any seized material, the Assessing Officer cannot

make an addition on estimate basis. The assessee already declared and

surrendered an amount of Rs. 10 crores on account of cash, investment

and interest income. Hence, having regard to the facts and circumstances

of the case when the Assessing Officer as well as the ld. CIT(A) has

accepted the fact that the assessee was suffering from the ailment and

was undergoing the treatment of Tuberculosis during the period under

consideration then the estimation made by the Assessing Officer as well

as the confirmed by the ld. CIT(A) without any proper and reasonable

basis and particularly in the reassessment proceedings U/s 153A is not

permitted. Even the Assessing Officer has not worked out the income on

basis of the funds available with the assessee and employed in the

business activity by considering the corresponding application of income

which was found during the course of search and seizure action as well as

recorded in the books of account of the assessee. Therefore, when the

Assessing Officer has not found any significant discrepancy in the income

offered by the assessee and corresponding application of income then

there is no reason for not accepting the income offered by the assessee.

Accordingly, in facts and circumstances of the case when the addition was

made by the Assessing Officer purely on ad hoc estimation and without

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any tangible material, the same is not sustainable and consequently is

liable to be deleted. Hence we delete the addition made by the Assessing

Officer and sustained by the ld. CIT(A) on this account. Accordingly,

ground No. 1 of the assessee’s appeal is allowed and ground No. 1 of the

revenue’s appeal is dismissed.

the assessee by the ld. CIT(A) in respect of interest U/s 234B of the Act.

During the search and seizure action, the cash of Rs. 6.11 crores

belonging to the assessee was seized. The assessee filed applications on

21/3/2013, 27/5/2013, 3/7/2013 and 17/9/2013 for adjustment of the

above seized cash against the tax liability. The Assessing Officer though

adjusted the said amount but against the final tax liability after levy of

interest U/s 234B of the Act.

the ld. CIT(A). The ld. CIT(A) after considering the various decisions on

this issue directed the Assessing Officer to recomputed the interest

chargeable U/s 234B of the Act after giving the credit of the amount in

the PD account.

this issue before the ITAT. The ld CIT-DR had submitted that as per

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explanation-2 to Section 234B of the Act, no adjustment is allowed of

seized cash against the tax liability, therefore, the ld. CIT(A) has

committed error in allowing the relief on account of interest chargeable

U/s 234B of the Act.

the ld. CIT(A) has decided this issue by following various decisions on this

point. The explanation-2 to Section 132B of the Act has been introduced

in the statute by the Finance Act, 2013 w.e.f. 01/6/2013, therefore, the

said explanation is applicable prospectively and is not application for the

assessment year under consideration. The ld AR has also referred to the

CBDT Circular No. 20/2017 dated 12/06/2017 and submitted that the

CBDT has clarified that prior to 01/6/2013, the seized/requisitioned cash

can be adjusted against the advance tax liability as held by the various

courts and the department has accepted the judgments including the

judgment of Hon’ble Punjab & Haryana High Court in the case of Spaze

Towers Pvt. Ltd. dated 17/11/2016. Hence, the ld AR has submitted that

when the explanation is applicable only prospectively and not applicable in

the case prior to 01/6/2013 then the ld. CIT(A) is justified in allowing the

adjustment of the seized cash against the advance tax liability.

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record. The only dispute is regarding cash seized during the search and

seizure action is available for adjustment against the advance tax liability

and consequently chargeability of interest U/s 234B of the Act. The ld.

CIT(A) has considered this issue in para 3.2.3 as under:

“3.2.3 I have duly considered assessee's submission and also carefully gone through the assessment order. I have also taken a note of factual matrix of the case as well as applicable case laws relied upon. In this regard, AR contends that as per the law as applicable at that time, Section 132 B (l) of the Act provides for adjustment of assets seized against any existing liability. Further, AR has also relied upon the decision of Hon'ble ITAT Jaipur Bench in case of Sh. Johri Lal Sodhani in AY 2010-11 in ITA No 145/JP/2013 & CO No 09/JP/2013 and Rajan Jhiriwal Vs DCIT ITA No. 73/JP/2013. Now, in view of following judicial pronouncements, the liability to pay advance tax is an existing liability and cash seized during the search operation is adjustable against the existing liability: * Kesar Kimam Karyalaya ( High Court Delhi) * Kanishka Prints Pvt Ltd (ITATAhmadabad) * Sudhar MShetty (ITATMumbai) * Nikka Mai Babu Ram (SOT Chandigarh) In case of Nikka Mai Babu, Hon’ble ITAT Chandigarh has observed inter alia as under: "8. Quite clearly, it prescribes that the assets seized under s. 132 can be adjusted (a) against the amount of any existing liability under this Act; (b) against the amount of liability determined on completion of assessment under s. 153A; (c) against the amount of liability determined on completion of assessment under Chapter XIV-B for the block period; and (d) against any penalty levied or interest payable in connection with such

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assessment. In other words, s. 132B(1)(i) of the Act empowers the AO to recover the prescribed liabilities out of the assets seized under s. 132 of the Act. As per the CIT(A) and which has been supported by learned Departmental Representative, the liability towards advance tax does not form a part of the expression 'existing liability' appearing in s. 132B(l)(i) of the Act. In our considered opinion, even liability to pay advance tax is per the statutory provisions and we find no plausible reason to ascribe a restricted meaning to the expression 'existing liability' appearing in s. 132B(1)(i) of the Act, as being contended by the Revenue. The argument set up by the Revenue is that the expression 'existing liability' is referred in the context of the IT Act, 1961. The WT Act, 1957, The Expenditure tax Act, 1987, the GT Act, 1958, and the Interest-tax Act, 1974, and since in the other statutes, there is no concept of advance tax, therefore the expression 'existing liability' used in s. 132B(1)(i) cannot be understood to mean advance tax liability under the IT Act, 1961. In our considered opinion, interpretation placed by the Revenue is misplaced and would lead to absurd results.

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taxes and such liability definitely falls in the expression 'existing liability' used in s. 132B(l)(i) in the facts and circumstances of the case. The reliance pleaded by the CIT(A) on the judgment of the Hon'ble Madhya Pradesh High Court in the case of Ramjilal Jagannath & Ors. vs. Asstt. CIT (1999) 156 CTR (MP) 49: (2000) 241 ITR 758 (MP) is quite misplaced. As per the Revenue, in terms of the said judgment, the seized cash cannot be adjusted towards advance tax liability. We have carefully perused the said judgment and find that the same does not prohibit adjustment of seized assets towards liability to pay advance tax. In any case, we find that judgment of the Hon'ble Madhya Pradesh High Court is relevant in a situation when s. 132(5) was on the statute, which has since been deleted by the Finance Act, 2002 w. e.f. 1st June, 2002. Sec. 132(5) of the Act required the AO to make an enquiry and thereafter make an order to deal with the seized assets. Sec. 132(5) of the Act authorizes the AO to retain in his custody such assets as in his opinion were sufficient to satisfy the aggregate amounts referred to in cls. (ii), (iia) and (iii) of s. 132(5) and obligated him to release the remaining seized assets. In this background, the Hon'ble High Court, on the facts of the case before it, held that unless an order under s. 132(5) of the Act is passed, the AO could not direct that the assets seized be adjusted towards advance tax liability. The Hon'ble High Court specifically noted that it is only after an order under s. 132(5) is passed that the assessee can make a request that the seized amount which is sought to be released in his favour be adjusted or appropriated towards the liability to pay advance tax. Though, in the context of the present assessment year before us, the provisions of s. 132(5) are not applicable and therefore, strictly speaking, the ratio of the judgment of the Hon'ble Madhya Pradesh High Court does not apply, so however it is pertinent to observe that the Hon'ble High Court has not read any blanket prohibition in the Act against adjusting the seized assets against liability for payment of advance tax. Therefore, there is no justification for the CIT(A) to rely upon the order of the Madhya Pradesh High Court in the case of Ramjilal Jagannath (supra) and deny the claim of the assessee………..”

In case of ACIT Central Circle-23 New Delhi Vs. Sh Arun Kumar Gupta, Hon'ble ITAT New Delhi in ITA No 4108/Del/2010 by respectfully following the decision of Nikka Mai Babu(supra) and K K Marketing( Delhi High Court 278 ITR 596) has upheld the decision of CIT(A) and finally directed the AO to re-compute the interest chargeable u/s 234 B &

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234C of the Act accordingly after giving credit of amount seized against the advance tax liability fallen due on 15th March 2009.

In case of ACIT Vs Hans Raj Gandhi reported in 37 ITR 418, Hon'ble ITAT Chandigarh has held that assessee was entitled to adjustment of seized cash against advance tax liability and therefore no interest could be charged u/s 234A & 234B in the event of department not responding to assessee's request for adjustment of cash seized against advance tax liability.

Here I would like to refer decision of Hon ITAT Agra Bench in case of ACIT Vs. Sunil C Gupta [ITA No 290/Agra/2013 Dt of pronouncement 28/02/2014] wherein Hon’ble ITAT Agra has held that cash seized to be adjusted against advance tax liability as Explanation-2 to Section 132B of the Act is enacted with effect from 1st June 2013. In this case, Hon’ble ITAT has upheld the observations of Id CIT(A) which are as under - “—

“……I have carefully considered the assessment order as well as the written submission of the appellant, Remand report and the rejoinder on this issue remand report and the rejoinder, in this case Search and Seizure Operation was carried out in the premises of Shri Sunil Chand Gupta on 10.03.2010 wherein cash amounting to Rs.4,31,36,000/- was seized from the residence and locker and was deposited by the department in the PD account on 10.03.2010 and 19.03.2010. During the course of search the assessee’s statement was recorded u/s 134 of the I.T. Act wherein the assessee offered to pay tax on an income of Rs.10 crore for the F.Y. 2009-2010. The estimated tax liability on an income of Rs.10 crore worked out to about Rs.3 crore approx. Since the liability to pay tax had arisen and the cash being seized by the department, the appellant requested the department to adjust Rs.3 crore out of the Rs.4,31,36,000/- seized and deposited in the PD account, it is seen that the assessee made a written request on 29.03.2010 to the Chief Commissioner of income Tax which was duly received and also to the Additional Director of income Tax Investigation, Agra, it also seen that similar request for adjustment letters were written to the DCIT Circle- 1, Agra on 29.03.2010 which was duly received in the office on the same day. Further, another letter was written to the CiT-1 on 21.03.2010. Letter dated 05/07/2010 was also written to the DC IT Central Circle stating that

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return of income for A.Y. 2010-11 had been filed on 30/6/10 with tax payable of Rs.2,92,25,240/- and therefore requesting the AO once again for adjustment of tax liability with the cash lying in the PD account, in the circumstances, the assessee had done all it could do so as to ensure that cash tying in the PD account would be adjusted towards the advance tax liability. However, it seen that no action was taken on the assessee’s petition by any of the authorities before whom the assessee has filed the petition. To my mind, it is an apparent injustice to the appellant to hold on the cash belonging in the assessee in the Government Account and at the same time charge interest for non-payment of advance tax on the due dates, it is dear that the appellant’s application for adjustment has been submitted before the various authorities, the seized cash should have been either been adjusted as requested by the assessee to meet the advance tax obligations or the Assessee should have been informed the reasons why the request made by the assessee cannot be acceded to. The Hon’ble Bombay High Court in the case of CiT Vs. Shri Jyotindra B. Modi in order dated 21.09.2011 has clearly held that once the assessee offers to tax the undisclosed income including the amount seized during search, then the liability to pay advance tax in respect of that amount arises even before completion of the assessment. The Hon’ble High Court further held that section 132B(1) of the Act, thus not prohibit the utilization of amount seized during the course of search towards the advance tax liability. The Hon'bie High Court of Punjab & Haryana in the case of CIT Vs. Ashok Kumar reported in 334 ITR 355 has also held on similar facts that the assessee was entitled to adjustment of seized cash against advance tax liability and therefore, no interest could be charged u/s 234A & 234B in the event of the department no responding to assessee’s request for adjustment of cash seized against advance tax liability, in view of the following judgments, the action of the AO in charging interest under 234A, 234B & 234C is not justified and hence, directed to be deleted... ”

In view of facts and circumstances of the case as discussed above and respectfully following the decisions of aforementioned judicial pronouncements, AO is directed to re-compute the interest chargeable u/s 234 B accordingly after giving credit of amount of Rs. 7,77,400/= being claim made by the assessee in the computation appended with the return (out of seized cash lying in PD A/c date of search 31/07/2012) against the tax liability. Assessee's appeal stands allowed.”

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We further note that the CBDT vide circular No. 20/2017 dated 12/6/2017

has explained the applicability of the explanation-2 to Section 132B of the

Act in para 2 to 4, which is reproduced as under:

“2. Dispute arose between the Department and the assessees with regard to adjustment of such seized/requisitioned cash against advance tax liability etc. Several Courts held that on an application made by the assessee, the seized money is to be adjusted against the advance tax liability of the assessee. Subsequently, Explanation 2 to Section 132B of the Act was inserted by the Finance Act, 2013 w.e.f. 01-06-2013, clarifying that "existing liability" does not include advance tax payable in accordance with the provisions of Part C of Chapter XVII of the Act. However, the dispute continued on the issue as to whether the amendment was clarificatory in nature having retrospective applicability or it has only prospective applicability. 3. Several Courts have held that the insertion of Explanation 2 to section 1328 of the Act, is prospective in nature and not applicable to cases prior to 01.06.2013.The SLPs filed by the Department against the judgement of the Hon'ble Punjab and Haryana High Court in the case of Cosmos Builders and Promoters Ltd. 1 and the Hon'ble Allahabad High Court in the case of Sunil Chandra Gupta2 , have been dismissed. Subsequently, the CBDT has also accepted the judgment of the Hon'ble Punjab & Haryana High Court in the case of Spaze Towers Pvt. Ltd. 3 dated 17.11.2016, wherein it was held that the Explanation 2 to Section 132B of the Act is prospective in nature. 4. Accordingly, it has now been settled that insertion of Explanation 2 to Section 132B of the Act shall have a prospective application and so, appeals may not be filed by the Department on this issue for the cases prior to 01.06.2013 and those already filed may be withdrawn/ not pressed upon”. Accordingly in view of the binding precedents as well as the CBDT

circular, we do not find any error or illegality in the impugned order qua

this issue. Hence, this ground of revenue’s appeal is dismissed.

the revenue’s appeal are general in nature and does not require any

adjudication.

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appeals the assessee as well as the revenue have raised following

grounds of appeal:

Grounds of assessee’s appeal: “1. The ld. CIT(A) has erred on facts and in law in estimating the undisclosed interest income at Rs. 50,00,000/- as against Rs. 12,21,300/- declared by the assessee thereby confirming an addition of Rs. 37,78,700/-.

Grounds of revenue’s appeal:

“1. Whether on the facts and the circumstances of the case Id CIT(A), was right in restricting the addition from Rs 1,07,78,700/- to Rs. 37,78,700/- made on account of undisclosed interest income without appreciating the fact that based on seized material and statements given by the assessee during the course of search/post search, the opening balance of Rs 8 Crore is taken as on 01.04.2006 and on such capital the assessee earned interest income by scheme floated in all the years.

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revenue’s appeal are common and identical to the ground No. 1 involved

in the cross appeal filed for the A.Y. 2007-08, therefore, in view of our

finding on this issue for the A.Y. 2007-08, ground No. 1 of the assessee’s

appeal stands allowed and ground No. 1 of the revenue’s appeal stands

dismissed.

ground No. 2 of the revenue’s appeal for the A.Y. 2007-08, therefore, in

view of our finding on this issue for the A.Y. 2007-08, ground No. 2 of the

revenue’s appeal stands dismissed.

made by the Assessing Officer on account of cash deposits in the bank

account of employees of the assessee. During the course of assessment

proceedings, the Assessing Officer noted that during the search and

seizure action, signed cheque books of the various persons were found.

The Assessing Officer noted that there is a deposit of Rs. 1.87 crores on

different dates in their bank accounts. The assessee filed explanation in

respect of deposits in the bank account of these persons. The Assessing

Officer finally made the addition of Rs. 1.10 lacs on account of deposit in

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the bank account of Shri Rajendra Jain, Rs. 5,65,400/- on account of

deposit in the bank account of Shri Ashok Sharma and Rs. 6,51,200/- on

account of deposit in the bank account of Shri Mahaveer Prasad Sharma

total amounting to Rs. 12,36,600/-. The assessee challenged the action of

the Assessing Officer before the ld. CIT(A), but could not succeed.

three persons are working with the assessee and since they are dealing

the financial matters and cash, therefore, in order to protect and secure

the interest of the assessee, the assessee has taken the cheques from

these persons as a security for any misappropriation of fund by these

persons. Merely because cheque books of these persons were found with

the assessee, cannot be a reason to consider the cash deposit in these

accounts as undisclosed income of the assessee. The ld AR has further

contended that the statement of Shri Mahaveer Prasad Sharma was

recorded U/s 132(4) of the Act at the time of search, however, no such

question was asked or any statement was made in this respect. There is

no dispute that these bank accounts belonging to the respective persons.

The Assessing Officer has accepted all other entries in these bank

accounts as belonging to the respective persons except for those deposits

made in cash. These persons are assessed to tax and deposits in the bank

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account is a subject matter of assessment in their hands. The ld AR has

referred to the return of income filed by these persons and submitted that

they have declared the income which is sufficient to cover the cash

deposit made by these persons in the bank accounts. Return of income

was filed prior to search and therefore, the same cannot be doubted by

the department. He has further contended that the assessee had

produced all relevant records as source of income and deposits made in

the bank accounts of these persons. Thus, merely because, the cheque

books found at the place of the assessee, the deposits made in these

bank accounts cannot be treated as undisclosed income of the assessee.

simple case of cheque book found with the assessee but the cheque

books were duly signed by these persons, therefore, the assessee was

operating the bank accounts of these persons for the purpose of

depositing cash. He has relied upon the orders of the authorities below.

material on record. The Assessing Officer has made addition of Rs.

13,26,600/- on account of cash deposits in the bank account of three

persons namely Shri Rajendra Jain, Shri Ashok Sharma and Shri Mahaveer

Prasad Sharma. The Assessing Officer treated the deposits made in the

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bank accounts of these persons as undisclosed income of the assessee on

the basis of signed cheques of these persons were found during the

search and seizure action at the place of the assessee. Though, the

signed cheque book found with the assessee can be a ground for further

investigation and inquiry regarding any undisclosed income of the

assessee by using the accounts of these persons, however, the cheque

book itself cannot be considered as an evidence for undisclosed income.

The Assessing Officer has picked up the entries in the bank accounts of

these persons where the cash was deposited. All other entries in these

bank accounts were accepted by the Assessing Officer as carried out by

these persons and not by the assessee, therefore, it is not a case of the

Assessing Officer that these accounts were fully operated by the

assessee. The assessee has contended that the cheque books were taken

from these persons to protect the assessee’s interest as these persons

were working with the assessee and handling the cash and therefore, in

order to protect any loss due to misappropriation of fund by these

persons, the assessee has taken signed cheques of these persons. We

further note that the assessee produced return of income of all these

three persons wherein the incomes were declared for the A.Y. 2007-08

and 2008-09. The ld. CIT(A) while rejecting the contention of the

assessee has observed that the income declared by these persons is only

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equal to the amount deposit in the bank and therefore, it cannot be

accepted that those deposits were made from the declared income of

these persons as there must be some household expenses by these

persons. Thus, the explanation and supporting evidence produced by the

assessee was not accepted by the authorities below on the ground that

the income declared by these persons in their return of income is only

matching with the deposits and therefore, the entire source of deposit is

not explained. It is pertinent to note that the assessment under

consideration is reassessment U/s 153A of the Act and therefore, the

addition of income can be made only on the basis of seized material. The

cheque books found during the search and seizure action is not an

evidence to disclose any undisclosed income of the assessee in the form

of deposits of cash in the bank accounts of these persons. Only inference

which can be drawn from the availability of cheque books with the

assessee is that the assessee might have used the bank accounts of these

persons. However, in absence of any documentary evidence of operating

of the bank accounts by the assessee, the mere availability of cheque

books with the assessee cannot be an evidence for making addition of the

cash deposits in the accounts of these persons specifically when all these

persons are regularly assessed to income tax. The assessee filed the

return of income in support of explanation. Further the statement of one

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of these persons namely Shri Mahaveer Prasad Sharma was recorded by

the search party U/s 132(4) of the Act and no such question was asked

from the said person regarding the deposits in the bank account.

Therefore, when the assessee has discharged its onus by producing the

return of income of these persons wherein the declared income was

sufficient to cover the deposits made in the bank accounts, then in the

absence of any direct evidence or tangible material to disclose the fact

that the cash deposit in the bank accounts of these persons belongs to

the assessee, the addition made by A.O. is not sustainable. The said

deposit is subject matter of assessment in the hands of these persons,

accordingly, in the facts and circumstances of the case, we delete the

addition made by the Assessing Officer on this account.

the revenue’s appeal are general in nature and does not require any

adjudication.

appeals the assessee as well as the revenue have raised following

grounds of appeal:

Grounds of assessee’s appeal: “1. The ld. CIT(A) has erred on facts and in law in estimating the undisclosed interest income at Rs. 60,00,000/- as against Rs.

ITA 919 to 924/JP/2016 & 932 to 938/JP/2016 30 Prakash Chand Sharma Vs ACIT

37,24,940/- declared by the assessee thereby confirming an addition of Rs. 22,75,060/-.

Grounds of revenue’s appeal:

“1. Whether on the facts and the circumstances of the case Id CIT(A), was right in restricting the addition from Rs 1,32,75,966/- to Rs. 22,75,966/- made on account of undisclosed interest income without appreciating the fact that based on seized material and statements given by the assessee during the course of search/post search, the opening balance of Rs 8 Crore is taken as on 01.04.2006 and on such capital the assessee earned interest income by scheme floated in all the years.

revenue’s appeal are common and identical to the issued raised in ground

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No. 1 in the cross appeal filed for the A.Y. 2007-08, therefore, in view of

our finding on the issue for the A.Y. 2007-08, ground No. 1 of the

assessee’s appeal stands allowed and ground No. 1 of the revenue’s

appeal stands dismissed.

ground No. 2 of the revenue’s appeal for the A.Y. 2007-08, therefore, in

view of our finding on this issue for the A.Y. 2007-08, ground No. 2 of the

revenue’s appeal stands dismissed.

made on account of cash deposit in bank accounts of various persons.

The identical issue was involved in the ground No. 2 of the assessee’s

appeal for the A.Y. 2008-09. The facts and circumstances are identical for

both the assessment years. The assessee has produced the evidence in

support of the source of cash deposit in the bank being return of income

of these persons, in whose bank accounts, cash was found deposited.

Accordingly, in view of our finding on this issue for the A.Y. 2008-09, the

addition made by the Assessing Officer is deleted. Hence ground No. 2 of

the assessee’s appeal stands allowed.

ITA 919 to 924/JP/2016 & 932 to 938/JP/2016 32 Prakash Chand Sharma Vs ACIT

the revenue’s appeal are general in nature and does not require any

adjudication.

appeals the assessee as well as the revenue have raised following

grounds of appeal:

Grounds of assessee’s appeal: “1. The ld. CIT(A) has erred on facts and in law in estimating the undisclosed interest income for the period 01/4/2009 to 19/06/2009 at Rs. 25,00,000/- as against Rs. 13,15,275/- declared by the assessee thereby confirming an addition of Rs. 11,84,725/-.

Grounds of revenue’s appeal:

“1. Whether on the facts and the circumstances of the case Id CIT(A), was right in restricting the addition from Rs 40,00,000/- to Rs. 25,00,000/- made on account of undisclosed interest income

ITA 919 to 924/JP/2016 & 932 to 938/JP/2016 33 Prakash Chand Sharma Vs ACIT

without appreciating the fact that based on seized material and statements given by the assessee during the course of search/post search, the opening balance of Rs 8 Crore is taken as on 01.04.2006 and on such capital the assessee earned interest income by scheme floated in all the years.

revenue’s appeal are common and identical to the issued raised in ground

No. 1 in the cross appeal filed for the A.Y. 2007-08, therefore, in view of

our finding on the issue for the A.Y. 2007-08, ground No. 1 of the

assessee’s appeal stands allowed and ground No. 1 of the revenue’s

appeal stands dismissed.

ground No. 2 of the revenue’s appeal for the A.Y. 2007-08, therefore, in

view of our finding on this issue for the A.Y. 2007-08, ground No. 2 of the

revenue’s appeal stands dismissed.

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expenses found recoded in the seized material. This ground is common

for A.Y. 2010-11, 2011-12 and 2012-13. During the course of search and

seizure action, certain incriminating documents were found containing the

entries of transaction of 100 days finance scheme. The seized material

also contains the entries of expenditure pertaining to A.Y. 2010-11, 2011-

12 and 2012-13 of Rs. 29,75,859/-, Rs. 82,59,551/- and Rs. 69,54,914/-

respectively. The assessee in the return of income has claimed these

expenses against the undisclosed income offered to tax. The Assessing

Officer disallowed claim of assessee on the ground that these expenses

are already recorded in the regular books of account. The assessee

challenged the action of the Assessing Officer before the ld. CIT(A), but

could not succeed.

dispute as to the fact that these expenses are found recorded in the

seized documents. The AO has simply mentioned that the same are

recorded in the regular books but has not specified how these expenses

are recorded in the regular books. In fact, these are the expenditure other

than those recorded in the regular books. The Ld. CIT(A) has also

incorrectly mentioned that assessee has not filed any correlation chart

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indicating that these expenses are not claimed in the regular books

ignoring that when these expenditure are not recorded in the regular

books, how any correlation chart can be filed by the assessee. As per

Section 292C where any document is found in search then it is to be

presumed that the contents of such documents are true. Thus, when

expenses are found recorded in the seized material, the same has to be

allowed for computing the undisclosed income. It is submitted that

neither the AO nor the Ld. CIT(A) required the assessee to furnish any

correlation chart of the expenses recorded in the regular books of

accounts of the two companies vis-a-vis that recorded in the seized

material. However, both the records were available before the AO from

which he could have ascertained whether the expenses recorded in the

regular books of accounts also find place in the seized documents.

Therefore, such correlation chart of the expenses as recorded in the

seized documents vis-a-vis that recorded in the regular books of accounts

of these two companies is enclosed for FYs 2009-10 to 2011-12. From this

chart, it can be noted that none of the expenses noted in the seized

record tally with that recorded in the books of accounts. In fact, various

expenses mentioned in the seized records are not at all recorded in the

regular books of accounts and the expenses which are recorded in the

seized record has wide variation with the similar nature of expenses

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recorded in the regular books of accounts. This proves that the expenses

as per the seized records are altogether different than that recorded in

the regular books of accounts of these two companies.

claimed the expenditure, which is found to be already recorded in the

books of account. The Assessing Officer as well as ld. CIT(A) has given

the finding of fact that these expenses are already recorded in the regular

books of account and claimed against the income recorded in the books

of account. Therefore, the claim of the assessee would be a double

deduction of the same expenditure one against the income recoded in the

books and again against the undisclosed income found during the search

and seizure action. He has relied on the orders of the authorities below.

material available on the record. There is no dispute that the amount of

expenditure as claimed by the assessee against the undisclosed income

for these three assessment years i.e. 2010-11 to 2012-13 were found

recorded in the seized material. The undisclosed income offered by the

assessee is also based on the same seized material and therefore, once

the income and expenditure both are recorded in the same material,

which is found and seized during the course of search and seizure action

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then the entire record and entries found in the seized material has to be

taken into consideration and not a part of the seized material is accepted

and part can be rejected. Thus, the seized material cannot be considered

or accepted in piecemeal but the evidence which is the basis of

undisclosed income has to be considered as a whole. However, the

question arises whether the expenses found recorded in the seized

material is already taken into account as part of the expenses recorded in

the books of account or not. Neither the Assessing Officer nor the ld.

CIT(A) has examined the relevant record and details to find out this fact

that the expenditure which is found recorded in the seized material is also

part of the expenditure claimed in the regular books of account. On the

direction of the Bench, the assessee has filed a complete and comparative

details of all the expenditure found recorded in the books of account as

well as the expenditure which is recorded in the seized material. The year

wise comparative statement shows that the some of the expenditure

found recorded under common head in both i.e. the books of account as

well as seized material. However, many items which were recorded in the

seized material are not claimed in regular books of account. Therefore, it

is evident from the comparative details of the expenditure that the entire

expenditure which is recorded in the seized material has not been claimed

in the books of account. We find that about 50% of the items which are

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recorded in the seized materials are not recorded in the books of account.

However, the remaining items which are recorded in both seized material

as well as books of account are under common heads, therefore it

requires the verification and examination of further details of each and

every sub-head of expenditure under a particular head. Hence, we find

that the disallowance of the entire claim of the expenditure by the

authorities below is contrary to the record and therefore uncalled for,

though the possibility of some of the expenditure found in the seized

material may also be claimed in the regular books of account cannot be

ruled out. Therefore, to the extent of the expenditure, which is not

claimed in the books of account and found recorded in the seized

material, the same is an allowable claim and cannot be denied. Remaining

claim of expenditure which is recorded under common heads is required

further examination and verification. Accordingly in the facts and

circumstances, we set aside this issue to the record of Assessing Officer

for conducting a proper enquiry of the details of the expenditure and to

find out whether any part of the expenditure which is found in the seized

material has been claimed in the books of account and then only to that

extent the claim of the assessee can be disallowed. Needless to say that

the assessee to be given an appropriate opportunity of hearing before

deciding this issue.

ITA 919 to 924/JP/2016 & 932 to 938/JP/2016 39 Prakash Chand Sharma Vs ACIT

made on account of sale of jewellery by mother-in-law of the assessee

treating the same as undisclosed income. During the course of search and

seizure action, the bills relating to sale of jewellery was found and seized

as annexure AS-39. In the statement U/s 132(4) of the Act, the assessee

explained these bills pertains to sale of jewellery by Smt. Saraswati Devi

Sharma, mother in law of the assessee. In the post search statement

dated 19/10/2012, the assessee further explained that because of ill

health, his mother in law Smt. Saraswati Devi Sharma was residing with

him and she kept her valuables and papers at his residence. Thus, the

assessee claimed that she had sold the jewellery from time to time and

the sale proceeds were received by cheque and credited in her bank

account. In the assessment proceedings, the Assessing Officer rejected

the explanation of the assessee by holding that the assessee has routed

his undisclosed income through sale of jewellery of his mother in law. The

Assessing Officer has observed that Smt. Saraswati Devi Sharma never

filed her return of income or net wealth. The assessee has not produced

any evidence of her holdings of such huge quantity of jewellery. Further

she had four daughter and one son and therefore, the Assessing Officer

was of the view that it is beyond human probability that she would not

given anything to her other daughters and son. Her signed cheque book

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was found with the assessee, which shows that the assessee channelzed

his undisclosed income through sale of jefwellery and gift to his family

members. The summons issued to the purchaser of the jewellery could

not be served and returned back by the postal authorities. The assessee

challenged the action of the Assessing Officer before the ld. CIT(A) but

could not succeed.

the lower authorities have not appreciated the following facts which

establish the availability of the jewellery in the hands of Smt. Saraswati Devi

Sharma and sale of the same by her:-

(i) Smt. Saraswati Devi Sharma is mother-in-law of assessee. She hailed from a reputed agricultural-cum-business family of Fatehpur, District Churu, Rajasthan. On the occasion of her marriage and subsequently from time to time on various social occasions, she received gold jewellery from her parental side and also from in-laws side. Further, she also received gold ornaments towards her share on sale of certain parental properties.

(ii) Smt. Saraswati Devi was married to Shri Hanuman Prasad Sharma in the year 1958. Shri H.P. Sharma did his diploma in Mechanical engineering and qualified as an instructor from Central Training Institute of Instructors, Calcutta. He retired in the year 1997 as instructor from Industrial Training Institute (ITI), Govt. of Rajasthan, Jaipur. In course of her married life, Smt. Saraswati Devi also acquired certain jewellery out of her savings and stridhan.

(iii) Smt. Saraswati Devi along with her husband and only son was residing at Shastri Nagar, Jaipur. However due to her ill health, in the last two years before her death on 18.08.2009 she was residing with her

ITA 919 to 924/JP/2016 & 932 to 938/JP/2016 41 Prakash Chand Sharma Vs ACIT

daughter Smt. Kalawati Sharma, wife of assessee at Vaishali Nagar. Smt. Kalawati Sharma and the assessee were taking care of her as she was suffering from heart and kidney problem. In these circumstances, Smt. Saraswati Devi had brought with her all the jewellery and valuables to the residence of assessee and developed a close affection towards her daughter and her grandchildren.

(iv) Due to her falling health, she decided to dispose off her jewellery and valuables and accordingly, sold most of her jewellery/valuables through the assessee in the month of April and May 2009 and deposited the same in her bank account with Central Bank of India, Vaishali Nagar, Jaipur. The assessee’s wife Smt. Kalawati Sharma was nominee in this bank account. In this bank account which was opened on 15.09.2008 she deposited her savings and also the sale proceeds of the jewellery. This amount remained in her bank account for four months. Thereafter, from this bank account she issued cheque of Rs. 1 crore in the name of her daughter Smt. Kalawati Sharma, Rs. 35 lakhs each in the name of Saurabh Sharma and Himanshu Sharma, two sons of Kalawati Sharma and Rs. 40 lakhs in the name of Shruti Sharma, daughter of Kalawati Sharma on 12.08.2009 as gift from her. In the meanwhile, her health deteriorated and she was hospitalised in Soni Hospital, Sikar Road, Jaipur and therefore neither the cheques could be deposited in the bank account of donee nor the gift deed could be prepared though the stamp paper for gift declaration was purchased in her name. She ultimately expired on 18.08.2009 and therefore, cheques were deposited by the donee in their bank account on 19.08.2009. These facts were also stated by the assessee in reply to question no. 1 of his statement u/s 131 dated 19.10.2012 recorded by ADIT (Inv.) - II, Jaipur. Thus, it is evident that gift of Rs. 2.10 crores was genuinely received by the family members of the assessee from Smt. Saraswati Devi.

(v) It may be noted that the bills of sale of jewellery and valuables by Smt. Saraswati Devi were also found and seized at Annexure-39 pages 9-62 from the residence. As per these bills, the jewellery and valuables has been sold to 5 parties, namely M/s Karni Enterprises (Prop. Shri. Abhay Bum), M/s Pankaj Jewels (Prop. Pankaj Yadav), M/s Sai Kripa Gem Stones (Prop. Uma Shankar Sharma), M/s M. R. Enterprises (Prop. Jitendra Kumar Daga) and M/s Shri Jee Jewels & Arts (Prop.

ITA 919 to 924/JP/2016 & 932 to 938/JP/2016 42 Prakash Chand Sharma Vs ACIT

Akhil Bum). It is possible that these parties may have shifted to other place and therefore summons could not be served.

(vi) Though Smt. Saraswati Devi had four daughters and a son, she gifted the amount received from sale of jewellery to Smt. Kalawati Sharma and her three children as they were looking after her in the last two years during her illness and thus, she developed a close affection with the family of assessee. It is for this reason that even in the bank account only Smt. Kalawati Sharma is made nominee. Therefore, only because she has not given any part of the sale proceeds of the jewellery to her other three daughters and son cannot be viewed adversely.

(vii) Smt. Saraswati Devi Sharma has not filed any return of income but the fact remains that she owned substantial jewellery which was sold by her for which evidence was also found in search.

In view of above, the sale of jewellery by Smt. Saraswati Devi and the

subsequent gift made by her to the family members of the assessee is fully

verifiable. The order of lower authorities holding that gift so made by Smt.

Saraswati Devi is an application of undisclosed income of assessee is thus

erroneous and on surmises and conjectures. Hence, the same be directed to

be excluded from application of income in the fund inflow / outflow

statement.

authorities below and submitted that the Assessing Officer has raised

certain questions such as Smt. Saraswati Devi Sharma never filed return

of income or net wealth and in absence of any evidence to show her

ITA 919 to 924/JP/2016 & 932 to 938/JP/2016 43 Prakash Chand Sharma Vs ACIT

holdings such a huge quantity of jewellery, the claim of the assessee

cannot be accepted. She had four daughters and one son and therefore, it

is beyond human probability that a mother would give entire belongings

and wealth only to one daughter excluding other three daughters and one

son. Signed cheque book found with the assessee clearly shows that the

assessee has manipulated and has channelized his undisclosed income

through sale of jewellery.

material on record. There is no dispute that the sale bills of jewellery was

found during the course of search and seizure action and seized as

Annexure-AS-39, therefore, it is a seized material and cannot be held as a

bogus claim or document manipulated or manufactured by the assessee

being afterthought cooked story. Therefore, when the sale of jewellery is

found as per the bills seized during the search then the transaction of sale

cannot be disputed by the department. The sale proceeds of the jewellery

was also undisputedly received by cheque and credited in the bank

account of mother in law of the assessee. The only doubt which is raised

by the Assessing Officer is that it is beyond human probability that she

would not give anything to other daughters and son and had given entire

her belongings to the assessee. Even if, this apprehension of the

ITA 919 to 924/JP/2016 & 932 to 938/JP/2016 44 Prakash Chand Sharma Vs ACIT

Assessing Officer is turned out to be correct the issue is only whether the

assessee has mischievously taken the entire amount of his mother in law

from the bank account by using the signed cheque book with the

assessee. Thus, this itself will not change the character of income and

source of that amount which was found credited in the bank account of

mother in law as a sale proceeds of jewellery. The mother in law of the

assessee already expired on 18/8/2009 and even if she had never filed

return of income or wealth tax, the same would not impute the tax

liability in the hands of the assessee when this is not the income of the

assessee but only the amount which was transferred from the bank

account of the mother in law to the account of the assessee. The non-

sharing of this amount with other daughters and son can be a family

dispute and can be settled mutually between themselves and has no

bearing on the taxability of the income in the hands of the recipients.

Therefore, once the amount was found duly credited in the bank account

of Smt. Saraswati Devi Sharma and subsequently it was transferred in the

account of the assessee then the transaction cannot be doubted. Even the

source of credit in the account of mother in law is found during the search

and seizure action. The assessee explained that during the last days of

her life, she was residing with the assessee and her daughter Smt.

Kalawati Sharma, wife of assessee and thus it is natural that all her

ITA 919 to 924/JP/2016 & 932 to 938/JP/2016 45 Prakash Chand Sharma Vs ACIT

belongings and valuables would be at the place of assessee. Accordingly,

in view of the above facts and circumstances of the case, we are of the

considered opinion that when the seized material itself shows the source

of amount deposited in the bank account of Smt. Saraswati Devi Sharma

by cheque and subsequent transfer from her account to the account of

assessee, the same cannot be treated as undisclosed income of the

assessee. Accordinlgy, we delete the addition made by the Assessing

Officer on this account.

the revenue’s appeal are general in nature and does not require any

adjudication.

appeals the assessee as well as the revenue have raised following

grounds of appeal:

Grounds of assessee’s appeal: “1. The ld. CIT(A) has erred on facts and in law in confirming the action of A.O. is not allowing the expenses of Rs. 82,59,551/- claimed by the assessee in earning the interest income of Rs. 3,86,42,943/- by holding that the same is recorded in the regular books of account.

Grounds of revenue’s appeal:

ITA 919 to 924/JP/2016 & 932 to 938/JP/2016 46 Prakash Chand Sharma Vs ACIT

“1. Whether on the facts and the circumstances of the case Id CIT(A) was right in allowing the appeal of the assessee without appreciating the facts that amount lying in the PD account has to be adjusted against the existing liability of the assessee but as per explanation-2 of the section 132B of the I.T. Act 1961, it has been clarified that the “existing liability” does not include advance tax payable in accordance with the provisions of part-C of chapter XVII.

the issued raised in ground No. 2 in the appeal filed by the assessee for

the A.Y. 2010-11, therefore, in view of our finding on the issue for the

A.Y. 2010-11, this ground of assessee’s appeal stands disposed of and set

aside to the record of the Assessing Officer for the same terms.

adjustment of seized cash against the tax liability. This ground of

revenue’s appeal is also common to ground No. 2 of the revenue’s appeal

for the A.Y. 2007-08, therefore, in view of our finding on this issue for the

A.Y. 2007-08, ground No. 1 of the revenue’s appeal stands dismissed.

the revenue’s appeal are general in nature and does not require any

adjudication.

ITA 919 to 924/JP/2016 & 932 to 938/JP/2016 47 Prakash Chand Sharma Vs ACIT

appeals the assessee as well as the revenue have raised following

grounds of appeal:

Grounds of assessee’s appeal: “1. The ld. CIT(A) has erred on facts and in law in confirming the action of A.O. is not allowing the expenses of Rs. 69,54,913/- claimed by the assessee in earning the interest income of Rs. 3,54,04,242/- by holding that the same is recorded in the regular books of account.

Grounds of revenue’s appeal:

“1. Whether on the facts and the circumstances of the case Id CIT(A) was right in allowing the appeal of the assessee without appreciating the facts that amount lying in the PD account has to be adjusted against the existing liability of the assessee but as per explanation-2 of the section 132B of the I.T. Act 1961, it has been clarified that the “existing liability” does not include advance tax payable in accordance with the provisions of part-C of chapter XVII.

the issued raised in ground No. 2 in the cross appeal filed by the assessee

for the A.Y. 2010-11, therefore, in view of our finding on the issue for the

A.Y. 2010-11, this ground of assessee’s appeal stands disposed of and set

aside to the record of the Assessing Officer for the same terms.

ITA 919 to 924/JP/2016 & 932 to 938/JP/2016 48 Prakash Chand Sharma Vs ACIT

adjustment of seized cash against the tax liability. This ground of

revenue’s appeal is also common to ground No. 2 of the revenue’s appeal

for the A.Y. 2007-08, therefore, in view of our finding on this issue for the

A.Y. 2007-08, ground No. 1 of the revenue’s appeal stands dismissed.

the revenue’s appeal are general in nature and does not require any

adjudication.

the revenue has raised following grounds of appeal:

“1. Whether on the facts and the circumstances of the case Id CIT(A) has erred in deleting the addition of Rs. 2,16,92,726/- made on account of undisclosed investment excess over the income without appreciating the facts and a detailed cash flow statement for the relevant period was prepared which clearly shows that there was undisclosed investment excess over the income.

made addition of Rs. 2,16,92,726/- on account of undisclosed investment

ITA 919 to 924/JP/2016 & 932 to 938/JP/2016 49 Prakash Chand Sharma Vs ACIT

being excess amount of investment over the undisclosed income for the

year under consideration as estimated by the Assessing Officer. The

Assessing Officer as per the revised fund flow statement prepared after

considering various additions for all the years work out the opening

balance as on 01/4/2012 at Rs. 22,25,416/- as against the application of

income for the year is Rs. 2,39,18,142/- resulting a short fall of Rs.

2,16,92,726/-.

the ld. CIT(A). The ld. CIT(A) after considering the certain additions which

were recasted the undisclosed income and application statement and

accordingly deleted the addition made by the Assessing Officer.

Officer and submitted that the addition made by the Assessing Officer is

an outcome of the assessment framed for the earlier five assessment

years and therefore, this addition is direct consequence of the additions

made by the Assessing Officer in the earlier year.

the ld. CIT(A) has deleted the application of undisclosed income on

account of sale of jewellery of Rs. 1,99,49,786/- and on account of

investment in shares of Rs. 2,42,29,675/- for the A.Y. 2009-10 and 2010-

ITA 919 to 924/JP/2016 & 932 to 938/JP/2016 50 Prakash Chand Sharma Vs ACIT

11 respectively. The deletion made by the ld. CIT(A) have not been

challenged by the revenue, therefore, after deletion of these amounts, the

alleged excess investment computed by the Assessing Officer will not

survive.

material on record, we note that the Assessing Officer has made this

addition on the basis of a revised fund flow statement prepared after

considering the various additions made in the earlier years and thereby

the Assessing Officer arrived to the amount of Rs. 22,25,416/- as an

opening cash balance on 01/4/2012. It is pertinent to note that this

opening cash balance was worked out by the Assessing Officer by

considering the investment by the assessee as application of undisclosed

income on account of sale of jewellery and investment in shares as well

as other items of addition made by the Assessing Officer. The ld. CIT(A)

has considered this issue in para 3.1.2 as under:

“3.1.2 I have duly considered assessee's submission and carefully gone through assessment order. I have also taken a note of factual matrix of the case as well as applicable case laws relied upon. The only issue in this ground is that if there is any shortfall after considering the outcome of appeals on various additions / application of income made in AY 2007-08 to 2012-13, then the same is to be added. In this case, I have decided appeals for AY 2007-08 to 2012-13 wherein certain additions have been

ITA 919 to 924/JP/2016 & 932 to 938/JP/2016 51 Prakash Chand Sharma Vs ACIT

deleted. After considering these, u a revised cash flow chart is prepared and annexed herewith as per Annexure-A. For the sake of clarity,

relevant extracts of revised cash flow statement is reproduced here as

under: Assessment Year 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 AO's Cash Flow Chart: Estimated op cash capital as on 01.04.06 8,00,00,000 8,58,50,000 9,35,83,400 8,16,68,227 4,22,08,139 7,37,62,067 15,53,049 add : income as above 60,00,000 1,20,00,000 1,70,00,000 1,72,99,094 3,86,42,943 3,54,04,242 0 Total 8,60,00,000 9,78„50,000 11,05,83,400 9,89,67,321 8,08,51,082 10,91,66,309 15,53,049 Less: Drawings 1,50,000 2,40,000 3,00,000 4,80,240 14,41,583 6,72,367 0 Less: Application of income as above 0 40,26,600 2,86,15,173 5,62,78,942 56,47,432 10,69,40,893 2,39,18,142 Closing balance 8,58,50,000 9,35,83,400 8,16,68,227 4,22,08,139 7,37,62,067 15,53,049 -22365093

Revised Cash Flow Chart Estimated op cash capital as on 01.04.06 80000000 83850000 84583400 81618013 64887600 96441528 24232510 add : income as above 6000000 12000000 17000000 17299094 38642943 35404242 0 Less: Relief allowed in estimated income -2000000 -7000000 -11000000 -1500000 0 0 0 Total 84000000 88850000 90583400 97417107 103530543 131845770 24232510 Less: Drawings -150000 -240000 -300000 -480240 -1441583 -672367 0 Less: Application of income as above 0 -4026600 -28615173 -56278942 -5647432 -106940893 -23918142 Add: Relief allowed in application of income 0 0 19949786 24229675 0 0 0

Closing Balance 8,38,50,000 8,45,83,400 8,16,18,013 6,48,87,600 9,64,41,528 2,42,32,510 3,14,368

On the basis of this cash flow chart, there is no shortfall in the year under

consideration. Therefore, the addition of Rs. 2,16,92,726/- made by the

AO on account of negative balance is hereby deleted. Assessee’s appeal

on this ground is allowed.”

Therefore, the ld. CIT(A) has recasted cash flow statement and found

that there is no short fall of fund as per the revised fund flow statement.

Moreover when we have already decided the issue of jewellery in favour

of the assessee, then the question of disallowance on account of short fall

of fund and making excess investment does not arise. Accordingly, in

ITA 919 to 924/JP/2016 & 932 to 938/JP/2016 52 Prakash Chand Sharma Vs ACIT view of the facts and circumstances of the case, we do not find any error

or illegality in the impugned order of the ld. CIT(A). Hence, the grounds

No. 1 and 2 raised in the revenue’s appeal is dismissed.

not require any adjudication.

921/JP/2016 are allowed and revenue’s appeal being ITA No. 932, 933

and 934/JP/2016 are dismissed. Assessee’s appeal being ITA No.

922/JP/2016 is partly allowed and revenue’s appeal being ITA No.

935/JP/2016 is dismissed. Assessee’s appeal being ITA No. 923 &

924/JP/2016 are allowed for statistical purposes only and revenue’s

appeal being ITA No. 936 & 937/JP/2016 are dismissed and the revenue’s

appeal being ITA No. 938/JP/2016 is dismissed.

Order pronounced in the open court on 30/07/2018.

Sd/- Sd/- ¼foØe flag ;kno½ ¼fot; iky jko½ (VIKRAM SINGH YADAV) (VIJAY PAL RAO) ys[kk lnL;@Accountant Member U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 30th July, 2018 *Ranjan आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू vihykFkhZ@The Appellant- Shri Prakash Chand Sharma, Jaipur. 1.

ITA 919 to 924/JP/2016 & 932 to 938/JP/2016 53 Prakash Chand Sharma Vs ACIT izR;FkhZ@ The Respondent- The A.C.I.T., Central Circle-2, Jaipur. 2. vk;dj vk;qDr@ CIT 3. vk;dj vk;qDr¼vihy½@The CIT(A) 4. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत 5. xkMZ QkbZy@ Guard File (ITA No. 919 to 924/JP/2016 & 932 to 6. 938/JP/2016) vkns'kkuqlkj@ By order,

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