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Income Tax Appellate Tribunal, Hyderabad SM/DB-‘Bench, Hyderabad
Before: Shri Vijay Pal Rao, Vice- & Shri Manjunatha, G.
ORDER Per Bench: These two sets of cross appeals are directed against the two separate orders of the learned CIT (A)-12, Hyderabad both dated 29/04/2022, arising from the assessment framed u/s 143(3) r.w.s. 153A of the I.T. Act, 1961 for the A.Ys 2016-17 and Page 1 of 56 2017-18 respectively. For the A.Y 2016-17, the assessee and the Revenue have raised the following grounds of appeal:
– A.Y 2016-17 (Assessee) “1. The learned CIT (A) erred both in law and facts in deciding the appeal 2. The learned CIT(A) erred in coming to a finding that there was a search in the case of appellant-firm merely because its name appeared in the Panchanama drawn in the residential premises of the its partner Mr.Syed Akhtar 3. The learned CIT (A) ought to have appreciated that since it was joint warrant in the names of Syed Akhatar and M/s. S.A.Builder and Developers, both the names are required to be mentioned in Column-A of the Panchanama which refers to Warrant in the case of, Syed Akhatar and M/s. S.A.Builder and Developers. The learned CIT(A) misconstrued that merely because both names are mentioned, a survey can be understood as a search.
4. The learned CIT (A) should have appreciated that mere mention of the name in a proforma for drawing of Panchnama does not amount to conduct of actual search in the premises of the firm which is a separate and distinct entity.
5. The learned CIT(A) does not deny that the premises of the appellant- firm was actually covered under survey under section 133A on the face of evidences produced by the appellant.
6. The learned CIT (A) should have appreciated that a survey under section 133A is not a search under section 132 as both operate in their respective fields and it is legally not permissible to equate both the actions as same.
7. The learned CIT(A) should have appreciated that no valuable or books of account belonging to the firm were seized from the residential premises of Syed Akthar (partner).
8. The learned CIT (A) ought to have appreciated that the prerequisite for initiation of proceeding under section 153A is that a search under section 132 must be actually conducted in the premises of the person and a search is person specific.
9. In the light of the above legal principles since the initiation of proceeding under section 153A is bad in law, the assessment has no leg to stand and the same is required to be quashed.
Without prejudice to above legal contention the appellant contends that following additions are liable to be deleted on merits.
The learned CIT (A) erred in sustaining the above addition of Rs.1,44,86,500/- despite the undisputed fact that the amounts were credited in the bank account of the appellant firm by way of cheque/ RTGS and the said persons were absconding because of the criminal cases instituted against them. However, the appellant is ready to furnish the confirmation from the above parties.
The learned CIT(A) erred in sustaining the above addition of Rs.94,50,000/- despite the undisputed fact that the amounts were credited in the bank account of the appellant firm by way of cheque/ RTGS and subsequent transactions of amount received and repaid through banking channels only in subsequent years. 11. The appellant craves leave to add/alter/modify the grounds as may be required for adjudication of the case.”
Page 3 of 56 A.Y 2016-17 (Revenue) “1. The ld. CIT(Appeals) erred both in law and on facts of the case in granting relief to the assessee.
The ld. CIT(Appeals) erred in admitting additional evidences filed by the assessee as the assessee did not provide any sufficient cause for non-submission of the said evidences before AO as per Rule 46(A)(b).
3. The ld. CIT(Appeals) has erred in ignoring the statement recorded on oath u/s 132(4) of Sri Syed Akhtar, Managing Partner and subsequent affidavit filed by him almost 3 months after the conclusion of the search that on money of Rs.2.50 crores was received on sale of plots which was not recorded in the books of account.
4. The ld. CIT(Appeals) has erred in ignoring the statement recorded on oath u/s 132(4) of Sri Syed Afsar, Partner and subsequent affidavit filed by him almost 3 months after the conclusion of the search that Rs.1,83,84,000/- was received towards unaccounted sale consideration of plots.
The ld. CIT(Appeals) failed to appreciate the evidentiary value of an affidavit as held by the Hon'ble Supreme Court of India in the case of A.K.K. Nambabir Vs. Union of India & Anr. On 28-10-1969 [Equivalent citations :.1970 AIR 652, 197 SCr (3) 121].
6. The ld. CIT(Appeals) has erred in deleting the addition of Rs.1,31,46,000/- made towards unexplained cash credits, even though the assessee failed to prove the identity, creditworthiness and genuineness of the transaction.
7. The ld. CIT(Appeals) erred in deleting addition of Rs.12,76,50,000/- made towards disallowance u/s. 40(a)(ia) even though the assessee failed to remit the corresponding TDS to Govt. Account.
8. The appellant craves leave to amend or alter any ground or add any other grounds which may be necessary.”
First, we take up the appeal of the assessee for the A.Y 2016-17. Ground No.1 of the assessee is general in nature and does not require any specific adjudication.
4. Ground Nos.2 to 9 relates to the validity of the assessment orders framed u/s 153A of the I.T. Act, 1961 for want of valid search in case of the assessee. We will deal with this issue raised in Ground Nos.2 to 9 at a later stage.
5. Ground No.10 is the effective ground raised by the assessee against the additions made by the Assessing Officer and sustained by the learned CIT (A). In the first part of Ground No.10, the assessee is challenging the additions sustained by the learned CIT (A) on account of creditors appearing under loans & advances. The Assessing Officer has made the additions on this account in para 2.2 to 2.6 as under:
6. On appeal, the learned CIT (A) has confirmed the addition made by the Assessing Officer towards unaccounted sale consideration.
7. Before the Tribunal, the learned AR of the assessee has submitted that all these transactions are duly recorded in the books of account of the assessee and also shown in the balance sheet as credit balance due to advances given by the customers for purchase of the land from the assessee. The learned AR has submitted that at the time of finalizing the assessement proceedings, it was not possible for the assessee to submit the confirmation from these parties as they were not traceable due to some criminal cases registered against them. However, the identity of the parties are not in dispute as these transactions are through proper banking channels and received by the assessee as advances for future sale of the land. The learned AR has further submitted that the Assessing Officer has made this addition in the assessment framed u/s 153A of the Act without any incriminating material to show that this amount shown in the books of account as advances from the client represents sale consideration. He has further submitted that the Assessing Officer has doubted the genuineness of the advances shown in the books of account of the assessee solely on the ground that the assessee was not having stock of land to be sold to these parties and therefore, the question of making the advances by the parties is highly suspicious and unbelievable. He has submitted that in the Page 7 of 56 subsequent year, the assessee has sold the land to some of these parties from whom these advances were received and therefore, the addition made by the Assessing Officer on the basis of the suspicion is not sustainable in law. The Assessing Officer has not brought any material on record to disbelieve the credits shown in the books of account by way of advances when in the subsequent years, the assessee has sold land to some of the persons appearing in the list of these advances. In support of his contention, he has relied upon the following decisions:
7.1 The learned AR has further pointed out that for the A.Y 2017-18, the learned CIT (A) has deleted the addition made by the Assessing Officer on account of advances shown in the books of account.
On the other hand, the learned DR has submitted that the assessee failed to produce any evidence either before the Assessing Officer or before the learned CIT (A) as to how the advances received was actually converted into land transfer in the Page 8 of 56 subsequent year. This clearly indicates that the amounts shown as advances continue to be enjoyed by the assessee in the subsequent years. The assessee has not disputed this fact that it was not having sufficient land to transfer to these persons belonging to Heera Group and therefore, when the assessee was not having sufficient land in hand, the contention of the assessee cannot be accepted that they paid huge amount as advances. Moreover, the Assessing Officer has pointed out from the capital accounts of the partners of the assessee firm that the amounts were actually withdrawn by the Partners for their individual purpose. The learned DR has referred to the news report regarding cancellation of the bail by the Hon'ble Supreme Court of Nowhera Shaikh in a financial scam. He has relied upon the orders of the authorities below.
We have considered the rival contentions as well as the relevant material available on record. As it is clear from the details reproduced by the Assessing Officer that the assessee has shown the advances of Rs.1.44 crores from six persons as received against the sale of land. The Assessing Officer made the addition by citing the reason that these advances are nothing but the amounts are received as sale consideration from these parties over and above the sale consideration reported in the books of account. Thus, the Assessing Officer made the addition towards unaccounted sale consideration. It is pertinent to note that this is not a case of own money received by the assessee on sale of land
Page 9 of 56 but the assessee has shown these amounts as advances received from these persons through proper banking channels. The assessee has shown the helplessness to produce confirmation from these parties due to the reason that these persons were absconding due to criminal cases pending against them and this fact is not disputed by the Department and rather confirmed by the Department by producing this news material on a criminal case registered against the Managing Director of Heera Gold Exim (P) Ltd. In any case, when there was no material produced or brought on record to show that there was actual sale of land to these parties and the assessee has suppressed the sale consideration to avoid the tax, then the advances received through proper banking channel cannot be treated as unaccounted sale. At the most, if the Assessing Officer was satisfied that these advances are not a genuine transaction, then the addition could have been made u/s 68 of the I.T. Act, 1961 to the extent received during the year. However, the Assessing Officer has not doubted the transfer of money by these parties in favour of the assessee but the reporting of the transactions in the books of account by the assessee under advances from these parties was doubted by the Assessing Officer on the premise that the assessee is receiving the consideration over and above the consideration reported and declared in the books of account and sale deeds. It is pertinent to note that in the case of suppression of consideration, the excess amount is received as own money, not through banking channel. Once the Assessing Officer fails to Page 10 of 56 co-relate these amounts with specific sale indent between the assessee and these parties, then this cannot be treated as unaccounted sale consideration. The learned CIT (A) has confirmed the addition in para 9.5 as under:
10. Thus, the addition was confirmed by the learned CIT (A) for want of the documentary evidence to substantiate the loan and advances and to establish the identity, creditworthiness and genuineness of the transaction. These conditions as referred by the learned CIT (A) are required to be satisfied in case of cash credit u/s 68 of the I.T. Act, 1961 whereas the Assessing Officer has not doubted the transaction of transfer of the amounts by these persons but doubted the nature of payment. Thus, in the absence of any sale incident, title deed or any other material, the Page 11 of 56 advances shown by the assessee cannot be treated as sales. Therefore, in the absence of allegation of any own money received, these advances cannot be treated as unaccounted sale. Hence the addition made by the Assessing Officer on this account is deleted.
The 2nd addition confirmed by the learned CIT (A) is regarding the advances received from the customers. The Assessing Officer has made the addition u/s 68 of the I.T. Act, 1961 in para 2.1 as under:
Thus, the addition was made by the Assessing Officer on the basis of the entries in the books of account and without any incriminating material found or seized during the course of the search & seizure action. The Assessing Officer issued a show cause notice to the assessee to furnish the confirmation from these persons to establish the identity, creditworthiness and genuineness of the transaction. The assessee furnished confirmation from some of the parties; however, the Assessing Officer has treated the advances as unexplained cash credit u/s 68 of the I.T. Act, 1961.
On appeal, the assessee furnished the confirmation and other supporting evidences which were sent to the Assessing Officer for verification and submitting of the remand report. After considering the remand report of the Assessing Officer, the learned CIT (A) has deleted the substantial addition made by the Assessing Officer and confirmed the addition to the extent of Rs.94,50,000/-. Thus, both the assessee and the Department have challenged the impugned order of the learned CIT (A). The Department has raised this issue in Ground No.6 of its appeal.
Before the Tribunal, the learned AR of the assessee has submitted that at the time of finalizing the assessment, the assessee could not submit the confirmation and other supporting evidence, however, when the Assessing Officer has made these additions for want of confirmation and other supporting evidences, the assessee has produced the same before the learned CIT (A) along with an application under Rule 46A of the Income Tax Rules, 1962. The parties have duly confirmed the advances given to the assessee for purchase of land. Therefore, once the assessee has produced the documentary evidence, there is no question of doubt that the advances represents part of the sale consideration. In some of the cases, despite the best efforts, the assessee could not produce the confirmation due to the reason of criminal cases pending against those persons. The learned AR has submitted that the assessee has produced the ledger copies of these persons appearing in the books of account as well as bank account statement where the amounts received from them through cheques/RTGS are duly reflected and therefore, the genuineness of the transaction cannot be doubted. Once the transactions are duly recorded in the books of account and also reflected in the bank account of the assessee, then the assessee has discharged its primary onus. The Assessing Officer has not brought on record any contrary material to show that these transactions are not genuine.
On the other hand, the learned DR has submitted that the Assessing Officer has given a finding that the advances shown by the assessee did not appear to be the advance against any sale of land. The assessee failed to produce or explain any justified reason which prevented him from filing the information before the Assessing Officer. Therefore, filing of the information before the learned CIT (A) is nothing but an afterthought. Even the information furnished before the learned CIT (A) does not establish the creditworthiness of the parties. He has reiterated his contention that in the absence of any land in the hand of the assessee, the claim of advances received by the assessee cannot be accepted. The assessee has shown a huge amount of advances from Heera Group which are found to be involved in the financial scam as referred in the news article reported regarding the cancellation of bail by the Hon'ble Supreme Court in case of Managing Director of Heera Gold Exim (P) Ltd. He has relied upon the order of the Assessing Officer.
We have considered the rival contention as well as the relevant material available on record. The Assessing Officer has made the addition for want of the confirmation from these parties. On appeal, when the assessee furnished the confirmation and other record, the same was forwarded to the Assessing Officer for examination and submitting a remand report. After receiving the remand report, the learned CIT (A) has deleted a substantial
Page 15 of 56 addition and confirmed the addition to the extent of Rs.94,50,000/- in para 7.5 to 7.7.3 as under:
Page 16 of 56 Page 17 of 56 Page 18 of 56
Thus, it is clear from the record and the evidence submitted by the assessee that the assessee produced ledger account, bank account statement and confirmation of these parties to show that the amounts were received from these parties as an advance through banking channels. The assessee also Page 19 of 56 furnished the PAN of some of these parties and therefore, the learned CIT (A) has accepted the claim of the assessee in respect of the parties for which the assessee has furnished confirmation, PAN and other supporting evidences. The learned CIT (A) has confirmed the addition to the extent of Rs.94,50,000/- for want of confirmation. It is pertinent to note that the assessee produced the sale deeds to show the actual sale of the land to these parties in subsequent years and the sale consideration was adjusted against the advances received by the assessee. Once the sale deed is registered, then the identity and creditworthiness of the parties cannot be disputed as the amounts were received by the assessee against the sale of land. Only in respect of some of the persons belonging to the Heera Group, the assessee could not submit confirmation due to the reason that criminal cases were registered against those persons and therefore, the assessee was unable to file the confirmation from those persons. Once the identity of these persons are not in dispute and the amounts were received through banking channels, then not filing confirmation in some isolated cases due to a Bonafide reason explained by the assessee would not lead to the conclusion that the transaction of advances are not genuine when the other records prima facie establish the genuineness of the transaction. Accordingly, when the assessee has produced the supporting evidence including the confirmation in majority of the cases, then non-production of the confirmation in 2 or 3 cases cannot change the nature of the transaction. Hence, in the totality of the facts and circumstances,
Page 20 of 56 the additions sustained by the learned CIT (A) merely on the ground of non-furnishing of the confirmation of some of the parties due to unavoidable circumstances for the assessee, the addition is not justified. Hence, the same is deleted. Accordingly, this ground of the assessee is allowed and the ground of the Revenue appeal is dismissed.
Ground Nos. 2 to 5 of appeal by the Revenue are regarding the addition made by the Assessing Officer towards unaccounted sale consideration of plots was deleted by the learned CIT (A). The Assessing Officer has made the addition of Rs.1,83,84,000/- in para 1.3 to 1.5 as under:
On appeal, the learned CIT (A) has deleted the addition by considering the fact that some of the sales are not related to the A.Y under consideration, but pertains to the A.Y 2018-19 and for remaining sales, the assessee has filed the revised computation wherein only the profit or loss element was considered as income of the assessee as against the entire sale consideration.
Before us, the learned DR has submitted that the assessee has offered the additional income in the statement recorded on 13/03/2018. Even in the affidavit filed by the assessee, it was voluntarily disclosed income including an amount of Rs.1,83,00,000/- declaring for transaction of sale omitted to be considered in the books of account in the year under consideration. The learned DR has further submitted that the additional evidence furnished by the assessee before the learned CIT (A) is an afterthought and against the admission and surrender made by the assessee during the course of search and survey proceedings as well as in the post search and survey inquiries. He has further submitted that this claim of the assessee that the assessee has incurred loss on these transactions cannot be accepted once the assessee has not only admitted the sale consideration but also filed the affidavit confirming the same. The statements as well as the affidavits filed by the assessee are admissible evidence making the voluntary disclosure. He has relied upon the order of the Assessing Officer.
On the other hand, the learned AR has submitted that due to an inadvertent mistake, the assessee has not reported some of the sales, but the amounts were shown as advance against the sale. However, once the assessee realized this mistake, it has filed the revised computation of income and declaring these sales as part of the income of the assessee. However, part of these transactions are not related to the assessment year under consideration but the same are for the A.Y 2018-19 and rest of the transaction has resulted a loss instead of profit. Thus, the learned AR has submitted that non-reporting of these transactions is having no revenue loss as these transactions are finally resulting the loss of Rs.14,08,330/-. The defect in the books of account was rectified immediately and therefore, the learned CIT (A) has rightly deleted the addition by considering the correct facts. He has supported the impugned order of the learned CIT (A).
We have considered the rival submission as well as relevant material available on record. The learned CIT (A) has discussed all the relevant facts regarding the addition of Rs.1,83,84,000/- towards unaccounted sales in para 8.3 to 8.5 as under:
Page 23 of 56 Page 24 of 56 Page 25 of 56
Thus, it is clear that the assessee has duly admitted in the statement recorded u/s 132(4) of the Act that there was a mistake in reporting the sale and consequently disclosed sales of Rs.1,83,84,000/-. The assessee has filed the details of all the transactions of sales which are reproduced by the learned CIT (A) in para 8.4 of the impugned order reproduced above. Thus, it is clear that out of six transactions, the first transaction of sale was registered on 31/05/2017 does not pertain for the year under consideration but it pertains to the A.Y 2018-19 and the assessee has declared the same for the A.Y 2018-19. For the rest of the transactions, the assessee has given the details and calculations of the income and arrived at a loss of Rs.14,08,330/-. All these details and records were forwarded to the Assessing Officer for examination and remand report. As it is clear from the assessment order that the assessee has filed the revised computation including the transactions in question and also declaring the loss of Rs.14,03,330/-. The Assessing Officer has simply rejected the said factual details filed by the assessee and revised the computation solely on the ground that the assessee has admitted additional income in this regard in the statement and affidavit filed by the assessee. It is pertinent to note that if a statement recorded u/s 132(4) or u/s 131 of the I.T. Act, 1961 as well as statement made in the affidavit is contrary to the actual facts, then the facts which are duly supported by the undisputed evidence in the shape of registered sale deed are required to be considered and not the statement which is found to be incorrect
Page 26 of 56 and contrary to the actual facts. Further, it is not in dispute that this amount of Rs.1,83,84,000/- is shown as advances by the assessee and duly reflected in the balance sheet and since the assessee has not reported this amount as sale, the same was shown as part of the closing stock of the assessee. Therefore, only the profit element could be assessed as income of the assessee from these transactions because the cost of the land was already part of the closing stock. Accordingly, when the facts brought on record as well as undisputed documentary evidence are considered by the learned CIT (A) while deciding this issue, then we do not find any reason to interfere with the findings given by the learned CIT (A) based on correct facts. Hence, the ground of appeal Nos.2 to 5 by the Revenue are dismissed.
23.1 Ground No.6 of the appeal by the Revenue stands disposed off along with Ground No.10 of the appeal by the assessee.
Ground No.7 by the Revenue is regarding the addition made by the Assessing Officer towards the disallowance u/s 40(a)(ia) of the Act and the same was deleted by the learned CIT (A).
We have heard the learned DR as well as the learned AR and considered the relevant material available on record. The Page 27 of 56 Assessing Officer has made this addition in para 2.7 to 2.8 as under:
Thus, the Assessing Officer noted that the assessee has purchased the land from M/s. Neelanchal Roadways (P) Ltd and also shown as TDS payable of Rs.42,55,000/-. Since the assessee has not deposits this amount in the Govt. Account, the Assessing Officer invoked the provisions of section 40(a)(ia) of the Page 28 of 56 Act and disallowed 30% of the purchase consideration amounting to Rs.12,76,50,000/-.
On appeal, the learned CIT (A) has deleted this addition in para Nos. 10.3 to 10.
Page 29 of 56 Page 30 of 56 Page 31 of 56 Page 32 of 56 Page 33 of 56
The Revenue has not disputed this fact that the seller of the land M/s. Neelanchal Roadways (P) Ltd has considered the sale consideration as part of its income for the A.Y 2016-17 and paid the tax on the same. The assessee furnished the certificate/information regarding the return of income filed by the seller and therefore, once the recipient of the amount has offered the said amount to tax, then in view of the 2nd proviso to section 40(a)(ia) r.w.s. 1st proviso to section 201(1) of the I.T. Act, 1961, no disallowance is called for u/s 40(a)(ia) of the Act. Even
Page 34 of 56 otherwise, when the assessee has not paid the TDS amount in the govt. account, then the recipient of the amount cannot avail the TDS credit being not reflected in 26AS. Accordingly, we do not find any error or illegality in the impugned order of the learned CIT (A) and the same is upheld. This ground of the Revenue appeal is dismissed.
For the A.Y, 2017-18, the assessee and the Revenue have raised the following grounds of appeal:
– A.Y 2017-18 (Assessee) “1. The learned CIT (A) erred both in law and facts in deciding the appeal.
2. The learned CIT(A) erred in coming to a finding that there was search in the case of appellant-firm merely because its name appeared in the Panchanama drawn in the residential premises of the its partner Mr.Syed Akhtar.
3. The learned CIT (A) ought to have appreciated that since it was joint warrant in the names of Syed Akhatar and S.A.Builder and Developers, both the names are required to be mentioned in Column-A of the Panchanama which refers to Warrant in the case and S.A.Builder and Developers. The learned CIT (A) misconstrued that merely because both names are mentioned, a survey ca n be understood as a search.
4. The learned CIT (A) should have appreciated that mere mention of names are the name in a proforma for drawing of Panchnama does not amount to conduct of actual search in the premises of the firm which is a separate and distinct entity.
5. The learned CIT(A) does not deny that the premises of the appellant- firm was actually covered under survey under section 133A on the face of evidences produced by the appellant.
The learned CIT (A) should have appreciated that a survey under section 133A is not a search under section 132 as both operate in their respective fields and it is legally not permissible to equate both the actions as same.
7. The learned CIT(A) should have appreciated that no valuable or books of account belonging to the firm were seized from the residential premises of Syed Akthar (partner). 8 The learned CIT (A) ought to have appreciated that the prerequisite for initiation of proceeding under section 153A is that a search under section 132 must be actually conducted in the premises of the person and a search is person specific. 9. In the light of the above legal principles since the initiation of proceeding under section 153A is bad in law, the assessment has no leg to stand and the same is required to be quashed. 10. Without prejudice to above legal contention the appellant contends that following additions are liable to be deleted on merits.
The learned CIT (A) erred in sustaining the Rs.48,00,000/- despite the undisputed fact that the amounts were credited in the bank account of the appellant firm through normal banking channels only. 11. The appellant craves leave to add/alter/modify the grounds as may be required for adjudication of the case.”
Page 36 of 56 A.Y 2017-18 (Revenue) 1. The ld. CIT(Appeals) erred both in law and on facts of the case in granting relief to the assessee.
2. The learned CIT(Appeals) erred in admitting additional evidences filed by the assessee as the assessee did not provide any sufficient cause for non-submission of the said evidences before AO as per Rule 46(A)(b).
3. The ld. CIT(Appeals) has erred in ignoring the statement recorded on oath u/s 132(4) of Sri Syed Akhtar, Managing Partner and subsequent affidavit filed by him almost 3 months after the conclusion of the search that on money of Rs.2.50 crores was received on sale of plots which was not recorded in the books of account.
The ld. CIT(Appeals) failed to appreciate the evidentiary value of an affidavit as held by the Hon'ble Supreme Court of India in the case of A.K.K. Nambabir Vs. Union of India & Anr. On 28-10-1969 [Equivalent citations : 1970 AIR 652, 197 SCr (3) 121).
5. The ld. CIT(Appeals) has erred in deleting the addition of Rs.23,00,000/- made towards unexplained cash credits, even though the assessee failed to prove the identity, creditworthiness and genuineness of the transaction.
6. The ld. CIT(Appeals) erred in deleting addition of Rs.83,35,88,440/- made towards an unaccounted sale proceeds holding that the said amount was refundable excess advance received from customers ignoring the fact that the transaction of sale of land is complete and the partners withdrew the amount for making investments.
Whether in the facts and circumstances of the case, and in law, the ld.CIT(Appeals) is correct in deleting the addition made towards unaccounted sale considerations to the tune of Rs.83,35,88,400/- holding it as advances when no purchaser would pay more than the agreed sale consideration.
8. The appellant craves leave to amend or alter any ground or add any other grounds which may be necessary.”
Ground No.,10 of the assessee’s appeal and Ground No.5 of Revenue’s appeal are common being part relief granted by Page 37 of 56 the learned CIT (A) in respect of the addition made by the Assessing Officer towards unexplained cash credit. The Assessing Officer has made the addition towards unexplained credit u/s 68 of the Act for the amount shown by the assessee as advance from the customers in para No.1.6 to 1,7 as under:
The Assessing Officer has made the addition of Rs.71,00,000/- towards the advances shown from the customers on the ground that these advances are not shown against any sale agreement for any identified plots of land.
On appeal, the learned CIT (A) has deleted the addition made in respect of one of the parties and confirmed the addition in respect of the other party. The learned AR has submitted that the said advances were accepted through proper banking channels and the assessee has submitted confirmation letter from Smt. Gausia Begum and PAN of Shri Mohammed Shaik Hussain during the course of assessement proceedings. The learned AR has submitted that before the learned CIT (A) the assessee has also furnished the confirmation from Shri Mohammed Shaikh and of Smt. Gausia Begum Aadhar to prove the identity and genuineness of a transaction. These amounts were received towards advance for sale of land, then the same cannot be treated as income of the assessee u/s 68 of the I.T. Act, 1961. The learned AR has submitted that once the assessee has furnished the confirmation as well as PAN No. of Shri Mohammed Shaik Hussain, then the addition confirmed by the learned CIT (A) is unjustified and highly arbitrary. The learned CIT (A) has not considered the PAN submitted by the assessee before the Assessing Officer and also the bank account details showing the receipt of the amount by the assessee through proper banking channels.
On the other hand, the learned DR has submitted that the additional evidence furnished by the assessee before the learned CIT (A) is an afterthought and against the admission and surrender made by the assessee during the course of search and survey proceedings as well as in the post search and survey inquiries. He has further submitted that the Assessing Officer failed to discharge its onus of proving the identity, creditworthiness of the creditors as well as the genuineness of the transaction. He has relied upon the order of the Assessing Officer.
We have considered the rival submission as well as relevant material available on record. The Assessing Officer has not disputed the fact that the assessee has filed the confirmation from Smt. Gausia Begum without mentioning PAN and in case of Shri Mohd.Shaik Hussain, the confirmation was not filed by the assessee. The assessee has stated in the submission before the learned CIT (A) that the assessee filed PAN of Shri Mohd. Shaik Hussain during the course of assessement proceedings, however, the confirmation was filed before the learned CIT (A) which was also forwarded to the Assessing Officer for examination and remand report. In the remand report, the Assessing Officer has stated that the assessee has submitted confirmation letter along with ledger account as additional evidence. The only objection reiterated by the Assessing Officer was that the assessee could not produce any sale/purchase document/agreement to substantiate the claim that this amount was received as advance
Page 41 of 56 against the same. The learned CIT (A) has considered this issue in para 7.5 to 7.7.2 as under:
Thus, the addition made in respect of Smt. Gausia Begum was deleted by the learned CIT (A) by considering the confirmation and Aadhar details, whereas the addition in respect of Shri Mohd. Shaik Hussain was confirmed on the ground that Page 43 of 56 the assessee failed to establish the identity, creditworthiness and genuineness of the transaction with the said person. Once the identical documents were submitted by the assessee in respect of both these persons, then the additions sustained by the learned CIT (A) is contrary to the record. The learned CIT (A) has stated that the assessee has not submitted any confirmation letter, PAN details and bank account statement of Shri Mohd. Shaik Hussain whereas the learned CIT (A) has recorded the submissions of the assessee in para 7.2 of the impugned order as under:
Thus, the PAN of Shri Mohammad Shaik Hussain was submitted by the assessee during the course of assessement proceedings and thereafter, the assessee has taken confirmation letter from Shri Mohd.Shaik Hussain and Aadhar No. of Smt.
Page 44 of 56 Gausia Begum which were annexed to the application made under Rule 46A of the I.T. Rules, 1962 which were forwarded to the Assessing Officer for remand report, then this statement of the learned CIT (A) while confirming the addition is found to be contrary to the record. Accordingly, the addition sustained by the learned CIT (A) of Rs.48,00,000/- is deleted. It is pertinent to note that this addition was made by the Assessing Officer based on the transaction recorded in the books of account and not on the basis of any incriminating material. Hence, ground No.10 of the assessee’s appeal is allowed and Ground No.2 of the Revenue’s appeal is dismissed.
Ground Nos. 3 & 4 of the Revenue’s appeal is regarding addition of Rs.2.5 crores surrendered in the statement made u/s 132(4) of the Act. The learned DR has submitted that during the search & seizure operation, the Managing Partner of the assessee has admitted various deficiencies and unaccounted income and accordingly, surrendered a sum of Rs.2.50 crore in the hand of the assessee firm. This was a voluntary disclosure made by the Managing Partner and also confirmed by subsequent affidavit. Therefore, not offering the said income to the tax in the return of income has resulted the addition made by the Assessing Officer based on the voluntary disclosure of the assessee. The learned CIT (A) has deleted this addition by ignoring the statement of the Managing Partner recorded u/s 132(4) as well as the Page 45 of 56 affidavit filed subsequently. He has relied upon the order of the Assessing Officer.
On the other hand, the learned AR has submitted that it was an induced confession and not a voluntary disclosure. Further, when there was no incriminating material of any undisclosed income in the hand of the assessee, then the addition made by the Assessing Officer is not sustainable and liable to be deleted. In support of his contention, he has relied upon the judgment of the Hon'ble Supreme Court in the case of Pullangode Rubber Produce Co. Ltd vs. State of Kerala (1973) 91 ITR 18 (S.C) and submitted that though an admission is a good piece of evidence, but it cannot be said to be conclusive and the maker can show that it was incorrect. When there is no incriminating evidence found either during the search or survey relating to the admission of Rs.2.5 crores, then the said disclosure itself is incorrect. The learned AR has relied upon the CBDT Circular dated 10/03/2023 and 18/12/2014 and submitted that the CBDT has time and again has issued the instructions and directions that the Department Officer shall refrain from undue emphasis on admission either during the survey or search rather focus on collecting the sustainable evidence to make the assessment. In support of his contention, he has relied upon the decision of the Delhi Benches of the Tribunal in the case of DCIT vs. Bansal Credits Ltd (2016) 74 taxmann.com 225 (Del.). Thus, the addition cannot be made merely on the basis of the statement
Page 46 of 56 in the absence of any incriminating material. He has relied upon the decision of the Hon'ble Delhi High Court in the case of CIT vs. Shri Raj Pal Bhatia in of 2009, dated 29.11.2010 as well as in case of Harjeev Aggarwal (24 Taxmann 199). He has supported the impugned order of the learned CIT (A).
We have considered the rival submission as well as relevant material available on record. There is no dispute that in the statement recorded u/s 132(4) of the Act, the Managing Partner of the assessee has offered the total income of Rs.25 crores which was subsequently modified to Rs.22.18 crores included a sum of Rs.2.5 crores in the hand of the assessee firm. We have gone through all the statement recorded u/s 132(4) and 131 of the I.T. Act, 1961 wherein except one or two questions, there was nothing either confronted or asked or a statement made by the Partner of the assessee firm regarding the activities of the assessee firm or any transaction of the assessee firm. The entire statement was only in respect of the transactions and activities of the partners of the assessee firm. We further note that the partners have also approached the Settlement Commission to settle all the disputes by filing declaration u/s 245D. There is an order of the Settlement Commission u/s 245D(4) of the Act dated 24/07/2023. Thus, except some vague reference of the assessee firm, the entire proceedings u/s 132 and the statement recorded u/s 132(4) of the Act were restricted to the business activities and transactions of the partners as well as undisclosed income of the Page 47 of 56 partners and not of the assessee firm. The learned CIT (A) has considered this issue in para 6.5 of his order as under: “6.5 I have considered the submissions of the AR. It is seen that the appellant has offered Rs.2.5 crores as unaccounted sale consideration for sale of plots for the A.Y 2017-18 in the statements recorded u/s 132(4) of the Act during search proceedings and also filed a notarized affidavit regarding voluntary disclosure of Rs.2.5 crores. Later, during the assessment proceedings, the appellant retracted from this admission by not including Rs.2.5 crores as income in the ITR filed for AY 2017-18. There is merit in the AR'S Contention that the statement recorded u/s 132(4) of the Act cannot become the sole basis of assessment and the addition cannot be made in absence of incriminating material related to the admission of Rs.2.5 crores. It is observed that no incriminating evidence having a bearing on the computation of undisclosed income of the appellant firm with relation to the amount of Rs.2.5 crores was found in the course of survey/search proceedings. The AO made the addition solely based on the admission of the appellant, which was later retracted during the assessment proceedings and has not conducted any further enquiry to verify the correctness of the admission. In the case of Pullangode Rubber Produce Co. Ltd. Vs. State of Kerala [1973] 91 ITR 18 (SC) it was held by the Hon'ble Supreme Court that "Although the admission is a valuable piece of evidence, however the same is not conclusive". Also, in the case of CIT v. Shri Ramdas Motor Transport[1999] 238 ITR 177(AP) it was held that mere confessional statement, in the absence of any documentary proof, shall not be used in evidence against the person who has made the statement. The CBDT in its Circular in F.No.286/2/2003-1 T dated 10-03-2003 has directed the departmental officers that undue emphasis should not be placed on admission either during search or survey. Since the Assessing Officer made the addition solely on the basis of statement recorded u/s 132(4) of the Act, which was later retracted by the appellant and no incriminating material pertaining to the addition was found during survey/search proceedings and no further enquiry was conducted to verify the correctness of the admission, mere admission of income to buy peace of mind cannot sustain the addition. Therefore, the AO is directed to delete the addition of Rs.2.5 crores made in the hands of the appellant.
Accordingly, the appeal of the appellant on this ground i.e., Ground Nos.6 & 7 are ALLOWED.”
The learned CIT (A) has deleted the addition while considering the fact that there was no incriminating material to show any undisclosed income in the hand of the assessee resulting the disclosure of Rs.2.5 crores as income as well as relying upon the various judgments and CBDT Circular dated 10/03/2003. When the Department has failed to refer any incriminating material to corroborate the amount surrendered by the Partner of the assessee firm, then the addition made solely on the basis of the statement of the partner without any description of the nature of the undisclosed income or any transaction resulting any undisclosed income is not sustainable in law. Accordingly, we do not find any error or illegality in the impugned order of the learned CIT (A). Thus, ground No.3 of the Revenue’s appeal is dismissed.
Ground Nos.6 & 7 are regarding the addition made by the Assessing Officer on account of unaccounted sale which was deleted by the learned CIT (A). The Assessing Officer has made the addition towards unaccounted sales in para No.1.8 to 2.1 as under:
On appeal, the learned CIT (A) has deleted the said addition by considering the details of opening balance of the Page 51 of 56 advances as well as the actual sale transaction of land against which the adjustment of the sale consideration was made.
42.1 We have heard the learned DR as well as the learned AR and considered the relevant material on record. This issue is identical to the issue involved for the A.Y 2016-17. The learned DR as well as the learned AR have reiterated their respective contention as advanced on this issue for the A.Y 2016-17. The learned CIT (A) has considered this issue in para 8.3 to 8.5 as under:
Page 52 of 56 Page 53 of 56 Page 54 of 56
As it is apparent from the details of the transaction itself that the Assessing Officer has made the addition of this Page 55 of 56 amount without excluding the opening balance of the advances. We have considered an identical issue for the A.Y 2016-17 in para Nos. 9 & 10 of this order. Therefore, in view of our findings on this issue for the A.Y 2016-17, we do not find any error or illegality in the impugned order of the learned CIT (A).
In the result, Ground Nos.6 & 7 of Revenue’s appeal stands dismissed. Since we have decided the cross appeals on merits, therefore, we do not propose to take up the legal issues raised by the assessee in Ground Nos. 1 to 9 in appeals for the A.Y 2016-17 and 2017-18 being academic in nature.