MRS. SHAMSHAD BEGUM,PUTTUR vs. THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE- 1, MANGALURU

At the very outset, it was submitted by learned AR of the assessee that in para 5.8 of his order passed by learned CIT(A) in Assessment Year 2010-11, this is the finding of learned CIT(A) that AO can make assessment under section 153A only in the case which is pending for regular assessment under section 143 but in the assessee’s case as submitted by learned AR of the assessee in letter dated 14.10.2019, order under section 143(1) stood completed and therefore, the assessee’s case squarely falls outside the purview of section 153A and he has Page 16 of 27 further noted that no new material was found or unearthed during the course of search and therefore, various judicial pronouncements noted by learned CIT(A) in para 5.7 of his order are squarely applicable to the assessee’s case but in spite of this decision in para 6 of his order, it is held by learned CIT(A) that the appeal of the assessee is partly allowed. He submitted that the order of CIT (A) in this para has attained finality as no appeal is filed by the revenue. He further submitted that in a similar case i.e. in the case of the husband of the assessee i.e. in case of Mr. M. A. Siddique Vs. DCIT in to 66/Bang/2020 dated 17.08.2020, (copy submitted), similar facts were noted by the Tribunal in para 5 on page 14 of this Tribunal order and it is held by the Tribunal in that case that after holding this that the case of the assessee squarely falls outside the purview of section 153A, learned CIT(A) should have held that the Assessment Order passed under section 153A is bad in law and he should have allowed the appeal of the assessee instead of holding that the appeal is partly allowed and in the same para, the Tribunal held that the Assessment Order passed by the AO in that case under section 153A is bad in law and therefore, other grounds regarding merit of various additions are academic and no adjudication is called for about those grounds. He pointed out that in the present case also, the facts are similar because in para 5.8 of his order, learned CIT(A) has given a similar finding that the assessee’s case squarely falls outside the purview of section 153A of the Act and no new material was found or unearthed during the course of search. He also pointed out that in para 5.7 of his order, learned CIT(A) has noted about the same 3 judgments of Hon’ble Karnataka High Court and Hon’ble Delhi High Court but in spite of this, in para 6 of his order, learned CIT(A) has held that the assessee’s appeal is partly allowed. It was submitted that in the present case also, it should be held that Assessment Order passed by the AO under section 153A of the Act is bad in law under present set of facts. Thereafter, it was submitted that in Assessment Year 2011-12 also, similar finding is given by learned CIT(A) in para 6 of his order for this year. Thereafter it was submitted that in Assessment Year 2013-14 to Assessment Year 2015-16, there is no such Page 17 of 27 finding of learned CIT(A) and therefore, in these three years, the appeal of the assessee is to be decided on merit. Learned DR of the Revenue supported the order of CIT(A) but he could not point out as to how this Tribunal order rendered in the case of Mr. M. A. Siddique Vs. DCIT (supra) is not applicable in the present case.

We have considered the rival submissions and first of all, we reproduce para 5.8 from the order of CIT(A) for Assessment Year 2010-11, which reads as under: “5.8. I have gone through the above, in the said section it is very clear that, AO can make assessment u/s.153A only in the case, which is pending for regular assessment u/s.143. In the appellant's case as stated in AR's letter dated 14.10.2019 order under section 143(1) stood completed. Therefore, appellant's case squarely falls outside the purview of section 153A. Further, no new materials were found or unearthed during the course of search. Therefore, the above decisions are squarely applicable to the appellant's case.”

Now we reproduce para 6 from the order of CIT(A) for Assessment Year 2011-12, which reads as under: “6. I have gone through the above, in the said section it is very clear that, AO can make assessment u/s.153A only in the case, which is pending for regular assessment u/s.143. In the appellant's case as stated in AR's letter dated 14.10.2019 order under section 143(1) stood completed. Therefore, appellant's case squarely falls outside the purview of section 153A. Further, no new materials were found or unearthed during the course of search. Therefore, the above decisions are squarely applicable to the appellant's case.”

Now we reproduce para 5 from page 14 of the Tribunal order rendered in the case of Mr. M. A. Siddique Vs. DCIT (supra). This para reads as under: “5. We have considered the rival submissions. We find that in these two paras, learned CIT (A) has noted several judicial pronouncements cited by the learned AR of the assessee before him and have given a categorical Page 18 of 27 finding that the case of assessee squarely falls outside the purview of section 153A because the assessment has not abated and no new material was found or unearthed during the course of search and hence, these judgments are squarely applicable. These findings of C1T (A) are in favour of the assessee and the same have attained finality because no appeal is filed by the revenue against these findings of CIT (A). But in spite of this finding in para 6 of his order, the learned CIT (A) has held in para 7 of his order that the appeal of the assessee for A. Y. 2012 — 13 is partly allowed. In our considered opinion, after holding this in para 6 that the case of assessee squarely falls outside the purview of section 153A, learned CIT (A) should have held that the assessment order passed by the AO u/s 153A is bad, in law and he should have allowed the appeal of the assessee instead of holding that the appeal is partly allowed. Therefore, we hold that the assessment order passed by the AO u/s 153A is bad in law and therefore, other grounds regarding merit of various addition are academic and no adjudication is called for about those grounds.”

We find that in the facts of the present case, this Tribunal order is squarely applicable and hence, respectfully following this Tribunal order, we hold that in the present case also, the Assessment Order passed by the AO under section 153A for Assessment Years 2010-11 and 2011-12 are bad in law and therefore, other grounds regarding merits of various additions in these two years are academic and no adjudication is called for about those grounds in these two years.

In the result, the appeals of the assessee for Assessment Years 2010-11 and 2011-12 are allowed.

Now we take the appeal of the assessee for Assessment Year 2012-13 in ITA No.57/Bang/2020. In this year, arguments were raised by learned AR of the assessee regarding ground No.2 (g) as per which this is the contention of the assessee that learned CIT(A) was not justified in upholding the estimation of profits at 4% which is not backed by any evidence of comparable cases while in the case of supari business, profits are not above 2%. Regarding this issue, it is submitted by learned AR of the assessee that on this issue also, the same Tribunal order is relevant and our attention was drawn to para 20 on pages 27 and 28 of this Page 19 of 27 Tribunal order and it was pointed out that in that case also, the Tribunal has held that the income from supari business should be assesseed by adopting the profit rate at 2% and the same will meet hands of justice. He submitted that in the present case also, the issue is to be decided on similar line. It was submitted by learned AR of the assessee that there is no other issue on merit in this year and regarding various other issues raised by the assessee as per ground Nos.2a to 2f, no arguments were raised by learned AR of the assessee and therefore, we infer that these grounds are not pressed and these grounds are rejected as not pressed.

Now we decide ground No.2(g) and in this regard, we reproduce para 20 from pages 27 and 28 of the Tribunal order rendered in the case of Mr. M. A. Siddique Vs. DCIT (supra). This para reads as under:

Learned DR of the Revenue could not point out any difference in facts in the present case and in that case. In para 5.2.8 of his order, it is noted by learned CIT(A) that the AO has taken the profit percentage at 12% but he has held that in such a business, the normal profit percentage is 2 – 3% and he held that the ends of justice would be met if profit percentage is computed at 4% as in unaccounted transaction, the profit would be more as government taxes and levies are not paid and on this basis, he sustained the profit to the extent of 4% instead of 12%. In the case of Mr. M. A. Siddique Vs. DCIT (supra), the facts are similar as noted by the Tribunal in para 20 reproduced above and respectfully following the same, we hold that in the present case also, for Assessment Year 2012-13, profit from arecanut business should be computed by applying profit rate of 2% and this will meet the ends of justice in the facts of the present case. This ground is partly allowed.

In the result, the appeals of the assessee for Assessment Years 2012-13 is partly allowed.

Now we take up the appeal of the assessee for Assessment Year 2013-14. In this year also, although various grounds are raised by the assessee but the arguments were advanced by learned AR of the assessee regarding ground No.2 (g) only which is similar to ground No.2 (g) raised by the assessee in Assessment Year 2012-13. Hence, in this year also, we hold and infer that ground Nos.2a to 2f are not pressed by learned AR of the assessee and accordingly, these grounds are rejected as not pressed and regarding ground No.2 (g) we decide the issue on similar line as decided by us in Assessment Year 2012-13 as per above para and AO is directed to compute the income from unaccounted arecanut business @ 2% Page 21 of 27 of unaccounted sales and accordingly ground No.2 (g) is partly allowed in this year also.

In the result, the appeals of the assessee for Assessment Years 2013-14 is partly allowed.

Now we take up the appeal of the assessee for Assessment Year 2014-15 in ITA No.59/Bang/2020. Regarding this year, it was submitted by learned AR of the assessee that in para 6 of his order, learned CIT(A) has given the same finding as were given by him in Assessment Year 2010-11 and 2011 – 12 that the AO can make assessment under section 153A only in the case which is pending for regular assessment under section 143 and as per the letter dated 14.10.2019 submitted by the assessee before learned CIT(A), it was submitted that the order was passed by the AO under section 143(1) and therefore, it was held by learned CIT(A) that the assessee’s case squarely falls outside the purview of section 153A because no new material was found or unearthed during the course of search. Same three judgments are noted by learned CIT(A) in this year also in para 5.6 of his order but in spite of this, it was held by learned CIT(A) that the assessee’s appeal for Assessment Year 2014-15 is partly allowed. In line with the decision in Assessment Year 2010-11 and 2011-12 as per para above, we hold that in Assessment Year 2014-15 also, the Assessment Order passed by AO under section 153A is bad in law and therefore, no adjudication on merit of any addition is called for in this year because that issue has become academic.

In the result, assessee’s appeal in Assessment Year 2014-15 is allowed.

We have considered the rival submissions. First of all, we reproduce paras 15 to 17 of the Tribunal order rendered in the case of Mr. M. A. Siddique Vs. DCIT (supra). These paras are as under:

In the written submissions dated 11.066.2020 filed by the learned AR of the assessee, this is the submission that books of accounts of the assessee are audited u/s 44AD and addition is made without rejecting, the books of accounts which are audited and covered all 1he bank accounts and each and every entry therein. This is an alternative argument raised that even if it is held that there is some unaccounted cash receipts, then also, entire such receipts cannot be added and only the profit element @ 2% may be added. Learned DR of the revenue supported the orders of lower authorities.

We have considered the rival submissions. We find that in Para 10 on page 61 of the assessment order, the AO has noted that total deposits in the blank accounts of the assessee in the form of cash deposit and by way of clearing in the A. Y. 201 5 — 16 is Rs. 120,89,582/- and declared turnover is Rs. 55,20,720/- and he concluded that such excess deposit in the bank account Rs. 65,68,862/- is unaccounted income of the assessee. The AO has observed on the same page of the assessment order that cash deposit in Bhatkal Urban Cooperative Bank and IDBI Bank include those made under the duplicate PAN of the assessee Rs. 56,02,200/- although the assessee claims that the said PAN was never used. In our considered opinion, the basis adopted by the AO to make this addition is not a valid basis. This is also the claim of the assessee that all the entries in the various bank accounts AO that a particular bank account .is not appearing in the books of the assessee or that some specific entries of the declared bank accounts is not appearing in the books of the assessee. If all the bank accounts of the assessee opened with original PAN or duplicate PAN are appearing in the books and all entries in such hank account is appearing in the books, it cannot be said that there is any unexplained deposit in bank merely for this reason that it exceeds the declared turnover. Learned CIT (A) has very correctly observed that the entire cash deposit of the year may not be the turnover of the particular year and he also observed very correctly that it may contain cash receipts from the credit sales of the earlier years, contra entries, loans and advances etc. But after making these correct observations, he jumped to this incorrect conclusion that the assessee has failed to lead any evidence in this regard before him or before the AO and therefore, He has no option but to confirm this addition. In our considered opinion, when there is no specific finding of the AO that a particular bank account is not appearing in the books of the assessee or that some specific entries of the declared bank accounts is not appearing in the books of the assessee, this cannot be said that that there is any unexplained deposit in bank merely for this reason alone that it exceeds the declared turnover. In this regard, these observations of CIT (A) clinches the issue in favour of the assessee that entire cash deposit of the year may not be the turnover of the particular year and he also observed very correctly that it may contain. cash receipts from the credit sales of the earlier years, contra entries, loans and advances etc. Under these facts, we hold that there is no valid basis of this allegation of the AO that there is unaccounted cash income simply on this basis that deposits in bank accounts exceed the declared turnover. We delete this addition. This Ground No. 4 is allowed.”

As per these paras reproduced from the Tribunal order, it is seen that in that case also, this was the objection of the AO that cash deposit in bank account is higher than declared turnover. In the present case also, it is noted by the AO on page 44 of the Assessment Order that total cash deposited in the Bank account is Rs.55,63,420/- and the same is in excess of declared turnover by Rs.20,79,353/- because the declared turnover in Financial Year 2014-15 is only Rs.34,84,067/-. In para 5.3.2 of his order, learned CIT(A) has noted about the relevant written submissions submitted by learned AR of the assessee regarding this issue in which it is submitted by the assessee before learned CIT(A) that it is surprising, how additions can be made without rejecting the audited books of accounts which cover all the bank accounts and each and every entries therein. In the case of Mr. M. A. Siddique Vs. DCIT (supra) in para 17 reproduced above, this is the finding of the Tribunal that when there is no specific finding of the AO that a particular bank account is not appearing in the books of assessee or that specific entries of the declared bank account is not appearing the books of assessee, it cannot be said that there is any unexplained deposit in bank merely for this reason alone that it exceeds the declared turnover. In that case, the Tribunal has noted the finding of learned CIT(A) in that case that entire cash deposit of that year may not be only out of the turnover of the particular year and it was also observed by learned CIT(A) in that case that it may contain cash receipts from the credit sales of the earlier years, contra entries, loans and advances, etc., and ultimately, the Tribunal held in that case that there is no valid basis of this allegation of the AO that there is unaccounted cash income simply on this basis that deposits in bank accounts exceeded the declared turnover and this addition was deleted by the Tribunal. In the present case also, this is not the allegation of the AO that any bank account is unaccounted or that any deposit entry of such declared bank account is not accounted for in the books of assessee. Learned DR of the Revenue also could Page 26 of 27 not point out any difference in facts in present case and in that case and hence, respectfully following this Tribunal order, we hold that in the present case also, there is valid basis of this allegation of the AO that there is unaccounted cash income simply on this basis that deposits in bank account exceeds the declared turnover and therefore, we delete this addition. Ground No.3 of the assessee’s appeal for Assessment Year 2015-16 is allowed.

In the result, assessee’s appeal in Assessment Year 2015-16 is partly allowed.

Now we take up the appeal of the assessee for Assessment Year 2016-17 in . In this year also, the assessee has raised ground Nos.2a and 2f but regarding these grounds, no argument was raised by learned AR of the assessee and therefore, it is inferred that these grounds are not pressed and dismissed accordingly. As per ground No.2 (g), the issue in dispute in this year also is same that the income from arecanut business should be computed at 2% as against 12% by AO and 4% by learned CIT(A). In line with our decision in Assessment Years 2015-16 as per above para, in this year also, we direct the AO to compute income from arecanut business @ 2% of turnover instead of 12% by AO and 4% by CIT(A). Ground No.2 (g) is partly allowed.

In this year, the assessee has raised one more ground No.3 regarding addition of Rs.4,04,000/- in respect of alleged cash deposit in bank accounts. In course of hearing, learned AR of the assessee submitted that this ground is not pressed and accordingly, ground No.3 for Assessment Year 2016-17 is also rejected as not pressed.

In the result, assessee’s appeal in Assessment Year 2016-17 is partly allowed.