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Facts
A search was conducted on the assessee's business and residential premises, leading to the issuance of notices under Section 153A of the Income Tax Act. The assessee filed revised returns and declared excess income. Various additions were made by the Assessing Officer (AO) concerning alleged unaccounted cash payments to employees, redemption of reward points, and parking charges. The CIT(A) upheld some of these additions.
Held
The Tribunal held that the addition for unaccounted cash payments to employees was not justified as the source of expenditure was proved and the amounts were accounted for as salary/allowances. Regarding reward points, the Tribunal found no impact on the assessee's profitability and accepted the submission that they should not be treated as income. For parking charges, the Tribunal deleted the addition because the assessee had offered part of it as income and provided ledger details, and the AO's disallowance for lack of confirmation was not justified.
Key Issues
Whether additions made by the AO for alleged unaccounted cash payments, reward points redemption, and parking charges are justified. Whether seized documents and statements recorded under Section 132(4) can be the sole basis for additions without corroborative evidence.
Sections Cited
153A, 139(1), 132(4), 142(1), 69C, 271(1)(c), 131, 132
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “B” BENCH : BANGALORE
Before: SHRI. LAXMI PRASAD SAHU & SHRI. SOUNDARARAJAN K
All these 4 appeals are filed by the assessee against the Order passed by the CIT(A), for the Assessment Years 2011-12to 2014-15. These appeals were heard together and disposed off by way of this common Order for the sake of convenience. Grounds raised by the assessee are as follows:
Grounds raised for Assessment Year 2011-12: Grounds raised for Assessment Year 2012-13: Grounds raised for Assessment Year 2013-14:
Grounds raised for Assessment Year 2014-15: to 2152/Bang/2024 Page 10 of 31
2. During the course of hearing, from the above grounds, grounds 2 to 4, legal issues raised by the assessee were not pressed. Therefore, all these grounds for all these years are dismissed as not pressed. Assessee contested only on the merits of the case which has been sustained by the learned CIT(A) as stated in the grounds of appeal noted supra.
Briefly stated the facts of the case are that a search was conducted in the business premises and residential premises of the assessee. On 19.07.2017, the case was subsequently centralized vide Order F.No.29/Centralization/PCIT/05/2018-19 dated 01.11.2018. Accordingly, notice under section 153A of the Act was issued to the assessee on 04.07.2018. In response to the notice issued under section 153A of the Act, assessee filed return of income. Subsequently, other statutory notices were issued to the assessee. For the sake of convenience, we are reproducing return filed by the assessee under sections 139(1) and 153A of the Act and excess income declared in 153A of the Act is as under:
Excess income declared in the 153A return filed as under;- to 2152/Bang/2024 Page 11 of 31 AY AMOUNT Rs.) 2011-12 1,00,000 2012-13 1,00,000 2013-14 14,96,140 2014-15 1,08,98,170
During the course of search proceedings, it was found that assessee suppressed tour receipts of vehicles. The bookings are classified as “BB” and “QN”. Statement was recorded under section 132(4) of the Act. The addition made by AO towards suppression of tour receipts are as under AY AMOUNT (Rs.) 2011-12 60,00,000 2012-13 8,60,000 2013-14 No Addition 2014-15 No Addition
The above additions made regarding suppression of tour receipts which were not contested before us by the assessee.
Further during the course of search proceedings, material was found and seized from the business premises of the assessee marked as 03/SAM/T&T/132/2017-18, 05/SM/TNT 05/SM/TNT/06. The seized material was found which contained detailed of cash payments to various employees which are not recorded in the books of account. Statement under section 132(4) of the Act from the assessee in which assessee admitted to have made payments in cash which are not accounted in the books of accounts is reproduced for reference as per question and Answer No. 32 which is as under:
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 REWARD POINTS FROM IOCL NOT OFFERED TO TAX 15000 626817 825600 2308000 3007000 3431600 4071200 1741600 CASH ALLOWANCE TO EMPLOYEES 1776050 2477000 2658000 2427660 1972800 1965000 1604500 192000 UNACCOUNTED TOURIST RECEIPTS 6000000 860000 15333732 60282366 96834205 UNACCOUNTED EXPENDITURES ON SAM FARM HOUSE 4640000 12027504 UNACCOUNTED EXPENDITURES ON SAM CHAMBERS 1003803 9579040 PARKING CGARGES PAID IN CASH 908330 1222132 1990050 3417000 460600 UNACCOUNTED PROPERTY PURCHASEDIN FAVOUR OF RESHMA 953000 ONMOMEY PAID TO CHETAN GOPAL FOR PURCHASING OF THE PROPERTY 4900000 ONMOMEY PAID TO SMT NIRMLA FOR PURCHASING OF THE PROPERTY 4765000 CASH PAID OUTSIDE BOOKS FOR ELECTRICITY CONNECTION 1100000 UNACCOUNTED CASH FOUND IN THE OFFICE 3596000 UNACCOUNTED CASH FOUND IN THE RESIDENCE 330000 UNACCOUNTED JEWELLARY FOUND IN THE RESIDENCE 7479827 UNACCOUNTED EXPENDITURES ON SAM NATURE CAMP 10000000
Statement under section 131 of the Act was recorded from the assessee during the post search proceedings in which he had admitted that the cash paid was outside the books of accounts and would offer to tax the same for the respective Assessment Years. But while filling return in response to notice under section 153A of the Act, the entire offered income were not disclosed. to 2152/Bang/2024 Page 13 of 31 8. Unaccounted cash payments to employees:
The relevant seized materials were examined. As per the seized material, the persons named Sridhar and Gururaj are employees of the assessee. Assessee is making payments to the employees who makes payments to RTO and Police. The same is confronted to the assessee and had admitted the same in the statement recorded under section 132(4) of the Act. During the course of assessment proceedings, a notice under section 142(1) of the Act dated 18.11.2019 asking to explain whether cash paid outside the books are disclosed in the return of income filed under section 153A of the Act. On 28.11.2019, assessee replied as under:
The above submission of the assessee was examined. Assessee furnished salary ledger for the respective Assessment Years as proof for the payment of cash to various employees of the assessee. The AO examined submission and noted as under:
On the basis of above observation of the assessee, AO made addition under section 69C of the Act as unexplained expenditure for the Assessment Years as under Assessment Year Amount (Rs.) 2011-12 17,76,050 2012-13 24,77,000 2013-14 26,58,000 2014-15 24,27,660
Reward Points from IOCL Further, during the course of search proceedings, material found and seized marked as 16/SAM/T&T/132/82017-18 Pages 76 to 79 and 81 to 97. The seized material contained details of reward points which are redeemed but not disclosed in the books of accounts. Statement was recorded under section 132(4) of the Act from the assessee in which assessee admitted to have received reward points from IOCL for purchase of fuel from Nikhil & Co. but not disclosed in the return of income. The relevant part of the statement is as under:
During the course of search proceedings, sworn statement under section 132(4) of the Act in which assessee confirmed that the reward points are received but not accounted in the books of accounts, the seized material was examined. Assessee had received reward points for purchase of fuels for the operation of assessee’s vehicles. Assessee has received these reward points on monthly basis. Assessee confirmed receipt of reward points in the statement under section 132(4) of the Act as above. In this regard, a show cause notice was issued under section 142(1) of the Act on 18.11.2019 asking to explain whether reward points are offered in the return of income filed under section 153A of the Act. In reply on 28.11.2019 assessee stated as under:
The AO, on the basis of submissions made, observed as under:
After examining the above observation, the AO made addition as under Assessment Year Amount (Rs.) 2011-12 15,000 2012-13 6,26,817 2013-14 8,25,000 2014-15 23,08,000 2015-16 30,07,000 2016-17 34,31,600 2017-18 40,71,200 2018-19 17,41,600
Parking charges paid in cash Further, during the course of search, it was found that the assessee is paying parking charges in cash and it is unaccounted. The materials found were marked as (a) Page 12 of 06/SAM/T&T/132/2017-18 & (b) Page 2 of to 2152/Bang/2024 Page 17 of 31 05/SAM/T&T/132/2017-18 A statement under section 132(4) of the Act was recorded in which assessee admitted to have paid cash and it is unaccounted in the books of accounts. In this regard, statement of the assessee recorded is as under:
Further, sworn statement under section 131 of the Act was recorded from the assessee in the post search proceeding in which assessee confirmed cash paid for the parking charges are not accounted and offered the same for tax for the respective years. In this regard, notice under section 142(1) of the Act dated 18.11.2019 was issued to the assessee. Assessee replied on 28.11.2019 by stating that cash paid for parking charges are accounted under the head “rent” as explained for the respective Assessment Years. Assessee furnished ledger of the same as proof which were examined. The seized material contained regular payments made by the assessee entered in the diary which contained details of cash paid by the assessee for the parking space. The seized material contained names of the parking places and corresponding amounts paid. The seized material was reproduced. The AO further observed that the assessee has not proved whether cash paid as per the seized material pertains to the actual rents paid as per the ledger accounts. The ledger of rent of parking contains to 2152/Bang/2024 Page 18 of 31 individual names of persons. Assessee has not given any confirmation from the persons that the parking rents are collects by them on behalf of companies without documentary proof it is not proved that the parking charge paid in cash is accounted. Therefore, the parking charges remains unexplained. While filing return under section 153A of the Act, assessee himself offered for taxation of Rs.3,63,330/- for the Assessment Year 2013-14, Rs.2,66,132/- for Assessment Year 2014-15. The details of parking charges disallowed by Ao and offered as income by the assessee in return filed u/s 153A of the Act as under AY Amount offered Addition made Total In 153A return (Rs.) by Ao (Rs.) Addition(Rs.) 2013-14 3,63,330 5,46,000 9,08,330 2014-15 2,66,132 9,56,000 12,22,132 2015-16 Nil 19,90,050 19,90,050 2016-17 Nil 34,17,000 34,17,000 2017-18 Nil 4,60,000 4,60,000
Aggrieved from the above Order, assessee filed appeal before the learned CIT(A). The learned CIT(A) passed common Order against which assessee is in appeal before us.
The learned Counsel reiterated the submissions made before the lower authorities and submitted that the statements recorded during the course of search and post search proceedings, assessee was suffering from dengue fever and was admitted in hospital immediately during the course of search proceedings which is evident from the medical records placed at Paper Book Page Nos.32 to 71 and the statement recorded should not be considered because assessee conscience was not constant. Therefore, the entire statement recorded should not be taken as the basis for addition. He further reiterated the to 2152/Bang/2024 Page 19 of 31 submissions made before the learned CIT(A). For the sake of convenience, we are reproducing the same as under:
Learned DR relied on Order of AO for all these issues raised by the assessee in grounds of appeal and he further submitted that the additions made by the AO are based on incriminating materials which were found and seized during the course of search proceedings and the materials were confronted to the assessee and assessee had also confirmed the same as incriminating documents and he agreed to offer the same as income. In question answer No.32 the assessee has categorically quantified the disclosures made under various heads, but later on while filing return of income the same was not offered as income by the assessee and the same documents were confronted to the assessee under section 131 of the Act and in 131 statement the assessee had also accepted incriminating documents found during search proceedings and he relied on the judgment of Hon’ble Apex Court in the case of Roshan Lal Sancheti Vs. PCIT reported in [2023] 150 taxmann.com 228 (SC). He further submitted that the reward points are also not recorded by the assessee in the books of accounts. He further submitted that in respect of parking charges the assessee has not furnished any confirmation from the landlord where the vehicles are parked and the AO has made addition on the basis of seized documents. Therefore, the addition should be upheld.
to 2152/Bang/2024 Page 27 of 31 20. Considering the rival submissions and perusing the entire materials available on records and order of authorities below, we noted that unaccounted cash payments made to employees are based on the seized materials found during the course of search which is clear from the question and answer No.19. In this regard, a show cause notice was issued to the assessee on 18.11.2019 under section 142(1) of the Act. Assessee submitted reply on 28.11.2019. It was stated by the assessee that the amounts are paid in cash as allowances to various employees and supervisors for their services rendered and in the question & Ans. No. 19 the assessee has stated that “Page Nos.4 to 9 contains the amount paid in cash as allowances to various employees and supervisors for the services renders”. AO has noted that assessee has not given any confirmation from the employees. In this regard, we gone through the notice u/s 142(1) we noted that there was no direction issued to the assessee for submitting confirmation. from the concerned employees. During the course of hearing, the learned Counsel submitted that assessee has recorded these allowances under the head salary, wages and allowances but the AO did not ask for the confirmation from the concerned employees. In this regard, the learned Counsel submitted that, had it been asked by the AO during the course of assessment proceedings, the confirmation would have been given by the assessee. The AO has made addition only on the basis of observation that the assessee was unable to give confirmation which is not correct. The AO observed that assessee has furnished salary wages details for respective Assessment Years as proof of payment of cash to various employees. We noted that the AO has mentioned that “the source of the cash payments are proved by the assessee”. However, AO has made addition under section 69C of the Act. For the sake of convenience, we are reproducing section 69C of the Act as under: to 2152/Bang/2024 Page 28 of 31 “Section 69C in The Income Tax Act, 1961 69C. [ Unexplained expenditure, etc. [Inserted by Act 41 of 1975, Section 14 (w.e.f. 1.4.1976).] - Where in any financial year an assessee has incurred any expenditure and he offers no explanation about the source of such expenditure or part thereof, or the explanation, if any, offered by him is not, in the opinion of the ][Assessing Officer] [ Substituted by Act 4 of 1988, Section 2, for " Income-tax Officer" (w.e.f. 1.4.1988).][, satisfactory, the amount covered by such expenditure or part thereof, as the case may be, may be deemed to be the income of the assessee for such financial year: [Provided that notwithstanding anything contained in any other provision of this Act, such unexplained expenditure which is deemed to be the income of the assessee shall not be allowed as a deduction under any head of income. ] [Inserted by Act 41 of 1975, Section 14 (w.e.f. 1.4.1976).]”
From the above section, it is clear that once the source of expenditure is proved, no addition can be made under section 69C of the Act. Here, in the observation of the AO from the submission of the assessee, during the course of assessment proceedings, the AO himself has satisfied that source is proved therefore no addition can be made under this section. As during the course of hearing the learned Counsel stated that the payments made to employees are allowances as accepted during the course of statements recorded under section 132(4) of the Act which is clear from question anwer No.19 and the same amounts are included in the salary and allowances. The amounts of salary and allowances debited into the P & L Account are more than the addition made by the AO. Considering our entire observations, we delete the addition for the Assessment Years as under : Assessment Year Amount (Rs.) 2011-12 17,76,050 2012-13 24,77,000 2013-14. 26,58,000 2014-15 24,27,660 to 2152/Bang/2024 Page 29 of 31 22. In the result, grounds raised by the assessee on this issue are allowed for all the 4 years.
Reward points from IOCL:
Assessee has raised issue regarding reward points received which are not recorded in the books of accounts of Rs.15,000/- Rs.6,26,817/-, Rs.8,25,600/- and Rs.23,08,000/- for the Assessment Years 2011-12, 2012-13, 2013-14and 2014-15. During the course of statement recorded under section 132(4) of the Act, based on the seized material i.e., page Nos.76-79, 81 to 97 of diary No.16/SAM/T&T/132/2017-18 which is as per question and answer No.25 of the statement noted supra, during the course of post search investigation, assessee had stated that it will be offered in the income tax return under section 153A of the Act. However, same was not offered. It was noted that there is arrangement with the petrol bunk M/s. Nikhil and Co. Assessee is purchasing fuel for his vehicles in bulk quantity from time to time. Therefore, IOCL has given reward points on monthly basis. As per submission of the assessee, these reward points are redeemed in the next purchase as payments made towards purchase of fuel. The purchase made out of redemption points are also not recorded in the books of accounts and not debited into the P & L Account. Had the reward points recorded as income in the books of accounts, the assessee would have debited the corresponding figures under the fuel expenses accordingly, there is no impact on the profitability of the assessee. Applying the principle of real income theory. we noted that no reward points had reached the assessee by any other mode i.e. cash or bank credit except utilization for purchase of fuel. The learned Counsel fairly conceded that the reward point has not been credited into the bank account of the assessee and Revenue has also not objected on this argument of the learned Counsel. It cannot be considered as income. We accept the submission of the assessee and we are allowing this ground because there is no impact on the profitability of the assessee. to 2152/Bang/2024 Page 30 of 31 24. Parking charges paid in cash:
The issue raised by the assessee is related to the Assessment Years 2011- 12, 2012-13, 2013-14and 2014-15 of Rs.15,06,26,817/-, Rs.8,25,6000/-, Rs.23,08,000/- respectively. During the course of search proceedings, as per question and answer No.19 of the statement recorded under section 132(4) of the Act, the following materials were seized page No.12/06/SAM/T&T/132/2017-18/64 and Page 2/05. During the course of return filed under section 153Afo the Act, assessee himself has offered a income in his return of Rs.3,63,330/- for Assessment Year 2013-14 and Rs.2,66,132/- for Assessment Year 2014-15. During the course of search proceedings, statement recorded under section 132(4) of the Act, assessee has made declaration as noted above.
Considering the submission from both the sides and seized material noted in the Assessment Order by the AO, we noted at the bottom of the page that date mentioned is 30.06.2015 and during the course of statement recorded under section 132(4) of the Act, assessee has stated that it is included in the rent and the ledger account was produced in which parking charges paid to the individual names are mentioned and the AO has noted that assessee has not given confirmation from the persons that the parking rates are collected by them on behalf of the company. Only for this reason, AO has disallowed. However, while issuing notice under section 142(1) of the Act, the AO did not ask the assessee to give confirmations from the recipients as the learned Counsel submitted that had it been asked by the AO or was given chance to the assessee to file confirmation, assessee would have filed confirmation from the recipients and AO has also noted that this amount is not recorded in the books of account of the assessee for this reason the AO has disallowed but as per statement under section 132(4) of the Act, assessee himself has accepted as per question and answer No.19. We noted that parking charges less than the rent debited. As per to 2152/Bang/2024 Page 31 of 31 the notice under section 142(1) of the Act dated 18.11.2019 as per Annexure C, assessee produced documents which is clear from the written submissions. Assessee has offered as income in 153A of the Act of Rs.3,63,330/- and Rs.2,66,132/- for the Assessment Years 2013-14 and 2014-15 which has been accepted by the AO and no further question/clarifications has been asked for basis of accepting the additional income offered by assessee. In the ledger account produced the details of recipients are recorded. Merely for not submitting confirmation, disallowance made by the AO is not justified. Accordingly, we delete addition for Assessment Years 2013-14 and 2014-15.
To sum up, we partly allow appeal of the assessee for Assessment Years 2011-12, 2012-13, 2013-14 and 2014-15 as per above terms.
A common Order passed shall be kept in respective case files.
Pronounced in the court on the date mentioned on the caption page.