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Income Tax Appellate Tribunal, “A” BENCH : BANGALORE
Before: SHRI A. K. GARODIA & SMT. BEENA PILLAI
IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH : BANGALORE BEFORE SHRI A. K. GARODIA, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER ITA No.62 to 66/Bang/2020 Assessment years : 2012-13 to 2016 – 17 Mr. M. A. Siddique, Door No. 17 – 23 – 1625 – 2, DCIT, Central Circle – 1, Supreme Cottage, D’Silva Lane, Vs. Mangaluru High Land, Falnir, Mangaluru – 575002. PAN : AKWPS8837R APPELLANT RESPONDENT ITA No.67 & 68/Bang/2020 Assessment years : 2015-16 to 2016 – 17 Mr. Mohammed Safwan, S/o M. A. Siddique, DCIT, Central Circle – 1, Door No. 17 – 23 – 1625 – 2, Vs. Mangaluru Supreme Cottage, D’Silva Lane, High Land, Falnir, Mangaluru – 575001. PAN : ASMPM1652L APPELLANT RESPONDENT ITA No.88 & 89/Bang/2020 Assessment years : 2014-15 to 2015 – 16 DCIT, Central Circle – 1, Mr. Mohammed Safwan, Mangaluru S/o M. A. Siddique, Vs. Door No. 17 – 23 – 1625 – 2, Supreme Cottage, D’Silva Lane, High Land, Falnir, Mangaluru – 575001. PAN : ASMPM1652L APPELLANT RESPONDENT
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Assessee by : Smt. Sheetal Borkar, Advocate Revenue by : Ms Neera Malhotra, CIT DR Date of hearing : 04.06.2020 Date of : 14.08.2020 Pronouncement O R D E R Per Bench: Out of this bunch of nine appeals, there are five appeals of the assessee only in the case of the assessee Mr. M. A. Siddique for A. Ys. 2012 – 13 to 2016 – 17, and remaining four appeals are in the case of his son Mr. Mohammed Safwan. Out of these four appeals in the case of Mr. Mohammed Safwan, two appeals are filed by the assessee for A. Ys. 2015 – 16 & 2016 – 17 and the remaining two appeals are filed by the revenue for A. Ys. 2014 – 15 & 2015 – 16. All these appeals are directed against nine separate orders of learned CIT (A) – 2, Panaji and all are dated 18.10.2019. All these appeals were heard together and are being disposed of by way of this common order for the sake of convenience.
The grounds raised by the assessee Mr. M. A. Siddique for A. Ys. 2. 2012 – 13 to 2016 – 17 are as under: -
For Assessment Year 2012-13:
The learned CIT(A)-2, Panaji erred in Passing the Order in the manner he did. 2. UNDISCLOSED PROFIT FROM INDORE BUSINESS OPERATIONS: a) The learned CIT(A)-2, Panaji on the facts and circumstances of the case, and in law, has erred in partly upholding the additions made by the Assessing
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Officer amounting to 44,57,669/- as undisclosed profit from supari business operations at Indore, based on the piece of paper found during the course of search wherein certain figures were written, by overlooking the case laws relied on by the appellant. b) The learned CIT (Appeals)-2,Panaji has erred in law in coming to the conclusion that, evidences unearthed were from the appellant’s residential cum business premises, which are direct evidences for unexplained income. c) The learned CIT(A)-2, Panaji on the facts and circumstances of the case, and in law has failed to comprehend the fact that, the appellant did not have the bank account maintained with Renuka Matha Multi state Urban credit co-operative society and cash deposits made by Mr. Shamshuddin Abdul Khader were did not pertain to his business turnover. The additions made by the assessing authority arbitrary in nature and also contrary to the evidence on hand and therefore against the law. d) The learned CIT(A)-2, Panaji on the facts and circumstances of the case, and in law, has failed to appreciate that, the assessment of the assessment year 2012-2013 do not abate under Section 153A in so far as there are no incriminating material found pointing out any undisclosed income belonging the appellant during the course of search pertaining to the assessment year 2012-2013 and therefore order passed by the assessing authority in so far it amounts to the items disclosed in the return of income already filed by the appellant is against the law. e) The learned CIT(Appeals)-2, Panaji has failed to comprehend the fact that, the evidences unearthed were loose sheets and digital evidenceswhich has got no evidentiary value and legally inadmissible under Section 34 of the Indian Evidence Act as held by the Supreme Court in the case of Common Cause (A Registered Society) Vs. Union of India (394 ITR 220/ 245 Taxman 214). f) Without prejudice to the above, the learned CIT(Appeals)-2, Panaji has erred in law and also on facts by upholding the estimation of profits at 4% which is not backed by any evidence or comparable cases, while in the case of supari business profits does not cross 2%. 3. CASH DEPOSITS IN BANK ACCOUNT AMOUNTING TO Rs.18,80,167/- TREATED AS UNDISCLOSED INCOME: a) The learned CIT(A)-2, Panaji on the facts and in the circumstances of the case, and in law, erred in upholding the additions made by the Assessing Officer amounting to Rs.18,80,167/- by stating that, no compelling evidence has been produced before him by overlooking the various case laws relied on by the Appellant. b) The learned CIT(A)-2, Panaji on the facts and in the circumstances of the case has failed to appreciate the fact that, the books of accounts of the appellant
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were seized at the time of search proceedings and all the sources of cash deposits were available with the assessing authority since those transactions were recorded in the books of accounts. Therefore, assessing officer erred in law and on facts by making additions towards the cash deposits made to bank amounting to Rs.18,80,167/- as unexplained money. c) The learned CIT(A)-2, Panaji on the facts and in the circumstances of the case has grossly ignored that, the entire cash deposits of the year may not be the turnover of particular year, it may contains cash receipts from the credits sales of the earlier years also as well as some are contra entries in the bank pass book (cash deposits and cash withdrawal) d) The learned CIT(A)-2, Panaji on the facts and in the circumstances of the case has failed to comprehend the fact that, Assessing Officer fails to cross verify the transaction between the appellant’s and her spouse and other parties/contra entries 4. The Appellant craves leave to add, amend or alter any of the forgoing grounds. 5. For these and any other grounds that may be urged before the Hon'ble ITAT, it is prayed that the Hon'ble ITAT may allow the appeal with cost. For Assessment Year 2013-14
The learned CIT(A)-2, Panaji erred in Passing the Order in the manner he did. 2. UNDISCLOSED PROFIT FROM INDORE BUSINESS OPERATIONS: a) The learned CIT(A)-2, Panaji on the facts and circumstances of the case, and in law, has erred in partly upholding the additions made by the Assessing Officer amounting to 55,65,560/- as undisclosed profit from supari business operations at Indore, based on the piece of paper found during the course of search wherein certain figures were written, by overlooking the case laws relied on by the appellant. b) The learned CIT (Appeals)-2,Panaji has erred in law in coming to the conclusion that, evidences unearthed were from the appellant’s residential cum business premises, which are direct evidences for unexplained income. c) The learned CIT(A)-2, Panaji on the facts and circumstances of the case, and in law has failed to comprehend the fact that, the appellant did not have the bank account maintained with Renuka Matha Multi state Urban credit co-operative
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society and cash deposits made by Mr. Shamshuddin Abdul Khader were did not pertain to his business turnover. The additions made by the assessing authority arbitrary in nature and also contrary to the evidence on hand and therefore against the law. d) The learned CIT(A)-2, Panaji on the facts and circumstances of the case, and in law, has failed to appreciate that, the assessment of the assessment year 2013-2014 do not abate under Section 153A in so far as there are no incriminating material found pointing out any undisclosed income belonging the appellant during the course of search pertaining to the assessment year 2013-2014 and therefore order passed by the assessing authority in so far it amounts to the items disclosed in the return of income already filed by the appellant is against the law. e) The learned CIT(Appeals)-2, Panaji has failed to comprehend the fact that, the evidences unearthed were loose sheets and digital evidenceswhich has got no evidentiary value and legally inadmissible under Section 34 of the Indian Evidence Act as held by the Supreme Court in the case of Common Cause (A Registered Society) Vs. Union of India (394 ITR 220/ 245 Taxman 214). f) Without prejudice to the above, the learned CIT(Appeals)-2, Panaji has erred in law and also on facts by upholding the estimation of profits at 4% which is not backed by any evidence or comparable cases, while in the case of supari business profits does not cross 2%. 3. CASH DEPOSITS IN BANK ACCOUNT AMOUNTING TO Rs.90,99,450/- TREATED AS UNDISCLOSED INCOME: a) The learned CIT(A)-2, Panaji on the facts and in the circumstances of the case, and in law, erred in upholding the additions made by the Assessing Officer amounting to Rs.90,99,450/- by stating that, no compelling evidence has been produced before him by overlooking the various case laws relied on by the Appellant. b) The learned CIT(A)-2, Panaji on the facts and in the circumstances of the case has failed to appreciate the fact that, the books of accounts of the appellant were seized at the time of search proceedings and all the sources of cash deposits were available with the assessing authority since those transactions were recorded in the books of accounts. Therefore, assessing officer erred in law and on facts by making additions towards the cash deposits made to bank amounting to Rs.90,99,450/- as unexplained money. c) The learned CIT(A)-2, Panaji on the facts and in the circumstances of the case has grossly ignored that, the entire cash deposits of the year may not be the turnover of particular year, it may contains cash receipts from the credits sales of the earlier years also as well as some are contra entries in the bank pass book (cash deposits and cash withdrawal)
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d) The learned CIT(A)-2, Panaji on the facts and in the circumstances of the case has failed to comprehend the fact that, Assessing Officer fails to cross verify the transaction between the appellant’s and her spouse and other parties/contra entries e) Without prejudice to the above, the learned CIT(Appeals)-2, Panaji has erred in law and also on facts by upholding the entire cash deposits as undisclosed income, which is not backed by any evidence or comparable cases, while in the case of supari business profits does not cross 2%. 4. UNEXPLAINED INVESTMENT AMOUNTING TO Rs.17,00,000/-: a) The learned CIT(A)-2, Panaji on the facts and in the circumstances of the case, and in law, erred in upholding the additions made by the Assessing Officer amounting to Rs.17,00,000/- as unexplained investment based on the dumb documents seized, which is unregistered, undated and unseized. b) The learned CIT(A)-2, Panaji on the facts and in the circumstances of the case has failed to appreciate that, the Additions made by the Assessing Officer without cross verifying with recipient of the money, Mr.Nasiruddin Ansari. 5. The Appellant craves leave to add, amend or alter any of the forgoing grounds. 6. For these and any other grounds that may be urged before the Hon'ble ITAT, it is prayed that the Hon'ble ITAT may allow the appeal with cost. For Assessment Year 2014-15
The learned CIT(A)-2, Panaji erred in Passing the Order in the manner he did. 2. UNDISCLOSED PROFIT FROM INDORE BUSINESS OPERATIONS: a) The learned CIT(A)-2, Panaji on the facts and circumstances of the case, and in law, has erred in partly upholding the additions made by the Assessing Officer amounting to 12,03,481/- and Rs.5,84,228/- as undisclosed profit from supari business operations at Nagpur and Indore respectively, based on the piece of paper found during the course of search wherein certain figures were written, by overlooking the case laws relied on by the appellant. b) The learned CIT (Appeals)-2,Panaji has erred in law in coming to the conclusion that, evidences unearthed were from the appellant’s residential cum business premises, which are direct evidences for unexplained income.
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c) The learned CIT(A)-2, Panaji on the facts and circumstances of the case, and in law has failed to comprehend the fact that, the appellant did not have the bank account maintained with Renuka Matha Multi state Urban credit co-operative society and cash deposits made by Mr. Shamshuddin Abdul Khader were did not pertain to his business turnover. The additions made by the assessing authority arbitrary in nature and also contrary to the evidence on hand and therefore against the law. d) The learned CIT(A)-2, Panaji on the facts and circumstances of the case, and in law, has failed to appreciate that, the assessment of the assessment year 2014-2015 do not abate under Section 153A in so far as there are no incriminating material found pointing out any undisclosed income belonging the appellant during the course of search pertaining to the assessment year 2014-2015 and therefore order passed by the assessing authority in so far it amounts to the items disclosed in the return of income already filed by the appellant is against the law. e) The learned CIT(Appeals)-2, Panaji has failed to comprehend the fact that, the evidences unearthed were loose sheets and digital evidenceswhich has got no evidentiary value and legally inadmissible under Section 34 of the Indian Evidence Act as held by the Supreme Court in the case of Common Cause (A Registered Society) Vs. Union of India (394 ITR 220/ 245 Taxman 214). f) Without prejudice to the above, the learned CIT(Appeals)-2, Panaji has erred in law and also on facts by upholding the estimation of profits at 4% which is not backed by any evidence or comparable cases, while in the case of supari business profits does not cross 2%. 3. CASH DEPOSITS IN BANK ACCOUNT AMOUNTING TO Rs.84,51,948/- TREATED AS UNDISCLOSED INCOME: a) The learned CIT(A)-2, Panaji on the facts and in the circumstances of the case, and in law, erred in upholding the additions made by the Assessing Officer amounting to Rs.84,51,948/- by stating that, no compelling evidence has been produced before him by overlooking the various case laws relied on by the Appellant. b) The learned CIT(A)-2, Panaji on the facts and in the circumstances of the case has failed to appreciate the fact that, the books of accounts of the appellant were seized at the time of search proceedings and all the sources of cash deposits were available with the assessing authority since those transactions were recorded in the books of accounts. Therefore, assessing officer erred in law and on facts by making additions towards the cash deposits made to bank amounting to Rs.84,51,948/- as unexplained money. c) The learned CIT(A)-2, Panaji on the facts and in the circumstances of the case has grossly ignored that, the entire cash deposits of the year may not be the turnover of particular year, it may contains cash receipts from the credits sales of
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the earlier years also as well as some are contra entries in the bank pass book (cash deposits and cash withdrawal) d) The learned CIT(A)-2, Panaji on the facts and in the circumstances of the case has failed to comprehend the fact that, Assessing Officer fails to cross verify the transaction between the appellant’s and her spouse and other parties/contra entries e) Without prejudice to the above, the learned CIT(Appeals)-2, Panaji has erred in law and also on facts by upholding the entire cash deposits as undisclosed income, which is not backed by any evidence or comparable cases, while in the case of supari business profits does not cross 2%. 4. The Appellant craves leave to add, amend or alter any of the forgoing grounds. 5. For these and any other grounds that may be urged before the Hon'ble ITAT, it is prayed that the Hon'ble ITAT may allow the appeal with cost.
For Assessment Year 2015-16
The learned CIT(A)-2, Panaji erred in Passing the Order in the manner he did. 2. UNDISCLOSED PROFIT FROM INDORE BUSINESS OPERATIONS: a) The learned CIT(A)-2, Panaji on the facts and circumstances of the case, and in law, has erred in partly upholding the additions made by the Assessing Officer amounting to Rs.1,09,05,178/- as undisclosed profit from supari business operations at Nagpur, based on the piece of paper found during the course of search wherein certain figures were written, by overlooking the case laws relied on by the appellant. b) The learned CIT (Appeals)-2,Panaji has erred in law in coming to the conclusion that, evidences unearthed were from the appellant’s residential cum business premises, which are direct evidences for unexplained income. c) The learned CIT(A)-2, Panaji on the facts and circumstances of the case, and in law has failed to comprehend the fact that, the appellant did not have the bank account maintained with Renuka Matha Multi state Urban credit co-operative society and cash deposits made by Mr. Shamshuddin Abdul Khader were did not pertain to his business turnover. The additions made by the assessing authority arbitrary in nature and also contrary to the evidence on hand and therefore against the law.
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d) The learned CIT(A)-2, Panaji on the facts and circumstances of the case, and in law, has failed to appreciate that, the assessment of the assessment year 2015-2016 do not abate under Section 153A in so far as there are no incriminating material found pointing out any undisclosed income belonging the appellant during the course of search pertaining to the assessment year 2015-2016 and therefore order passed by the assessing authority in so far it amounts to the items disclosed in the return of income already filed by the appellant is against the law. e) The learned CIT(Appeals)-2, Panaji has failed to comprehend the fact that, the evidences unearthed were loose sheets and digital evidences, which has got no evidentiary value and legally inadmissible under Section 34 of the Indian Evidence Act as held by the Supreme Court in the case of Common Cause (A Registered Society) Vs. Union of India (394 ITR 220/ 245 Taxman 214). f) Without prejudice to the above, the learned CIT(Appeals)-2, Panaji has erred in law and also on facts by upholding the estimation of profits at 4% which is not backed by any evidence or comparable cases, while in the case of supari business profits does not cross 2%. 3. UNEXPLAINED CASH CREDITS AMOUNTING TO Rs.75,00,000: a) The learned CIT(A)-2, Panaji on the facts and in the circumstances of the case, and in law, erred in upholding the additions made by the Assessing Officer amounting to Rs.75,00,000/- as unexplained cash credits under section 69 of the Income tax Act, 1961 by overlooking the fact that, loans and advances received during the year were received through the banking channels. b) The learned CIT(A)-2, Panaji on the facts and in the circumstances of the case has failed to comprehend the fact that, the loans and advances received during the year were received through the banking channels and names and addresses of the parties who had advanced the loan was submitted to the assessing authority during the assessment proceedings and therefore Assessing Officer concluded such loans as undisclosed income for the assessment year under question, is bad and erroneous in law. 4. CASH DEPOSITS IN BANK ACCOUNT AMOUNTING TO Rs.65,68,862/- TREATED AS UNDISCLOSED INCOME: a) The learned CIT(A)-2, Panaji on the facts and in the circumstances of the case, and in law, erred in upholding the additions made by the Assessing Officer amounting to Rs.65,68,862/- by stating that, no compelling evidence has been produced before him by overlooking the various case laws relied on by the Appellant. b) The learned CIT(A)-2, Panaji on the facts and in the circumstances of the case has failed to appreciate the fact that, the books of accounts of the appellant were seized at the time of search proceedings and all the sources of cash deposits
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were available with the assessing authority since those transactions were recorded in the books of accounts. Therefore, assessing officer erred in law and on facts by making additions towards the cash deposits made to bank amounting to Rs.65,68,862/- as unexplained money. c) The learned CIT(A)-2, Panaji on the facts and in the circumstances of the case has grossly ignored that, the entire cash deposits of the year may not be the turnover of particular year, it may contains cash receipts from the credits sales of the earlier years also as well as some are contra entries in the bank pass book (cash deposits and cash withdrawal) d) The learned CIT(A)-2, Panaji on the facts and in the circumstances of the case has failed to comprehend the fact that, Assessing Officer fails to cross verify the transaction between the appellant’s and her spouse and other parties/contra entries e) Without prejudice to the above, the learned CIT(Appeals)-2, Panaji has erred in law and also on facts by upholding the entire cash deposits as undisclosed income, which is not backed by any evidence or comparable cases, while in the case of supari business profits does not cross 2%. 5. The Appellant craves leave to add, amend or alter any of the forgoing grounds. 6. For these and any other grounds that may be urged before the Hon'ble ITAT, it is prayed that the Hon'ble ITAT may allow the appeal with cost.
For Assessment Year 2016-17
The learned CIT(A)-2, Panaji erred in Passing the Order in the manner he did. 2. UNDISCLOSED PROFIT FROM INDORE BUSINESS OPERATIONS: a) The learned CIT(A)-2, Panaji on the facts and circumstances of the case, and in law, has erred in partly upholding the additions made by the Assessing Officer amounting to Rs.98,48,665/- as undisclosed profit from supari business operations at Nagpur, based on the piece of paper found during the course of search wherein certain figures were written, by overlooking the case laws relied on by the appellant.
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b) The learned CIT (Appeals)-2,Panaji has erred in law in coming to the conclusion that, evidences unearthed were from the appellant’s residential cum business premises, which are direct evidences for unexplained income. c) The learned CIT(A)-2, Panaji on the facts and circumstances of the case, and in law has failed to comprehend the fact that, the appellant did not have the bank account maintained with Renuka Matha Multi state Urban credit co-operative society and cash deposits made by Mr. Shamshuddin Abdul Khader were did not pertain to his business turnover. The additions made by the assessing authority arbitrary in nature and also contrary to the evidence on hand and therefore against the law. d) The learned CIT(A)-2, Panaji on the facts and circumstances of the case, and in law, has failed to appreciate that, the assessment of the assessment year 2016-2017 do not abate under Section 153A in so far as there are no incriminating material found pointing out any undisclosed income belonging the appellant during the course of search pertaining to the assessment year 2016-2017 and therefore order passed by the assessing authority in so far it amounts to the items disclosed in the return of income already filed by the appellant is against the law. e) The learned CIT(Appeals)-2, Panaji has failed to comprehend the fact that, the evidences unearthed were loose sheets and digital evidences, which has got no evidentiary value and legally inadmissible under Section 34 of the Indian Evidence Act as held by the Supreme Court in the case of Common Cause (A Registered Society) Vs. Union of India (394 ITR 220/ 245 Taxman 214). f) Without prejudice to the above, the learned CIT(Appeals)-2, Panaji has erred in law and also on facts by upholding the estimation of profits at 4% which is not backed by any evidence or comparable cases, while in the case of supari business profits does not cross 2%. 3. UNEXPLAINED INVESTMENT IN HIGH END VEHICLE – MERCEDES BENZ AMOUNTING TO Rs.35,36,740/-: a) The learned CIT(A)-2, Panaji on the facts and in the circumstances of the case, and in law erred in upholding the additions made by the Assessing Officer amounting to Rs.35,36,740/-,being is purely based on assumptions and presumptions and also contrary to the evidence on hand. b) The learned CIT(A)-2, Panaji on the facts and in the circumstances of the case has failed to appreciate the fact that, the Car Mercedes Benz belonged to Mr. V.K. Abdul Gafoor, who had disclosed the said transaction in his books of accounts and RC copy of the vehicle is in his name. c) The leaned CIT (A)-2, Panaji on the facts and in the circumstances of the case has failed to comprehend the fact that, as per the information from the
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financier, the loan is not in the name of the appellant and hence, the down payment of the loan as well as repayment installment is not at all made by the appellant. 4. UNEXPLAINED CASH CREDITS AMOUNTING TO Rs.35,66,300: a) The learned CIT(A)-2, Panaji on the facts and in the circumstances of the case, and in law, erred in upholding the additions made by the Assessing Officer amounting to Rs.35,66,300/- as unexplained cash credits under section 69 of the Income tax Act, 1961 by overlooking the fact that, loans and advances received during the year were received through the banking channels.
b) The learned CIT(A)-2, Panaji on the facts and in the circumstances of the case has failed to comprehend the fact that, the loans and advances received during the year were received through the banking channels and names and addresses of the parties who had advanced the loan was submitted to the assessing authority during the assessment proceedings and therefore Assessing Officer concluded such loans as undisclosed income for the assessment year under question, is bad and erroneous in law.
c) Without prejudice to the above, the learned CIT(Appeals)-2, Panaji has erred in law and also on facts by upholding the entire cash deposits as undisclosed income, which is not backed by any evidence or comparable cases, while in the case of supari business profits does not cross 2%.
The Appellant craves leave to add, amend or alter any of the forgoing grounds.
For these and any other grounds that may be urged before the Hon'ble ITAT, it is prayed that the Hon'ble ITAT may allow the appeal with cost.
Both sides were heard. After that, learned AR submitted that she wants to file written submissions along with copy of relevant seized Materials. Time was granted to her for doing the same up to 11.06.2020 with a copy of the same to learned DR of the revenue. Accordingly, she has filed the same. Learned DR of the Revenue supported the Assessment Orders in
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respect two appeals of the revenue and in respect of the remaining seven appeals of the assessee, she supported the orders of AO and CIT (A) both. Learned AR of the assessee supported the order of learned CIT(A) in respect two appeals of the revenue and in respect of the remaining seven appeals of the assessee, she reiterated the submissions made before CIT (A) and also submitted that the written submissions to be filed by her on or before 11.06.2020 should also be considered in addition to oral submissions made by her. In the written submissions filed by her in respect of ITA No. 62 to 64/Bang/2020, it is submitted that on page 22 para 6 of the order of CIT (A), this is the finding of CIT (A) that the AO can make the assessment u/s 153A only in those cases where assessment is pending on the date of search and/or new material was found or unearthed during the course of search but in these cases, the assessment was not pending and therefore, these three assessments fall outside the purview of section 153A because no new material was found or unearthed during the course of search.
First, we decide the appeal of the assessee for A. Y. 2012 – 13 in the case of Mr. M. A. Siddique in ITA No. 62/Bang/2020. As per one of the grounds raised by the assessee i. e. Ground No. 2 (d), this is the grievance of the assessee that the assessment order passed by the AO in this year u/s 153A is bad in law because the assessment has not abated and no incriminating material was found. In this regard, Para No. 5.6 and 6 of the
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relevant order of CIT (A) are relevant and therefore, we reproduce these two paras from the order of CIT (A). The same read as under:-
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 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
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squarely applicable. These findings of CIT (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.
In the result, the appeal of the assessee for A. Y. 2012 – 13 in the case of Mr. M. A. Siddique in ITA No. 62/Bang/2020 is allowed.
Now we decide the appeal of the assessee for A. Y. 2013 – 14 in the case of Mr. M. A. Siddique in ITA No. 63/Bang/2020. In this year also, as per one of the grounds raised by the assessee i. e. Ground No. 2 (d), the grievance of the assessee is same that the assessment order passed by the AO in this year also u/s 153A is bad in law because the assessment has not abated and no incriminating material was found. In this regard, Para No. 5.9
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and 6 of the relevant order of CIT (A) are relevant and these paras are identical to para Nos. 5.6 and 6 in A. Y. 2012 – 13 as reproduced in para 4 above and therefore, in line with our decision in A. Y. 2012 – 13 in para 5 above, we hold that the assessment order passed by the AO u/s 153A is bad in law in A. Y. 2013 – 14 also and therefore, other grounds regarding merit of various additions in this year also are academic and no adjudication is called for about those grounds.
In the result, the appeal of the assessee for A. Y. 2013 – 14 in the case of Mr. M. A. Siddique in ITA No. 63/Bang/2020 is also allowed.
Now we decide the appeal of the assessee for A. Y. 2014 – 15 in the case of Mr. M. A. Siddique in ITA No. 64/Bang/2020. In this year also, as per one of the grounds raised by the assessee i. e. Ground No. 2 (d), the grievance of the assessee is same that the assessment order passed by the AO in this year u/s 153A is also bad in law because the assessment has not abated and no incriminating material was found. In this regard, Para No. 5.8 and 6 of the relevant order of CIT (A) are relevant and these paras are identical to para no. 5.6 and 6 in A. Y. 2012 – 13 as reproduced in para 4 above and therefore, in line with our decision in A. Y. 2012 – 13 in para 5 above, we hold that the assessment order passed by the AO u/s 153A is bad in law in A. Y. 2014 – 15 also and therefore, other grounds regarding merit
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of various addition in this year also are academic and no adjudication is called for about those grounds.
In the result, the appeal of the assessee for A. Y. 2014 – 15 in the case of Mr. M. A. Siddique in ITA No. 64/Bang/2020 is also allowed.
Now we decide the appeal of the assessee for A. Y. 2015 – 16 in the case of Mr. M. A. Siddique in ITA No. 65/Bang/2020. In this year also, as per one of the grounds raised by the assessee i. e. Ground No. 2 (d), same grievance is raised by the assessee that the assessment order passed by the AO in this year u/s 153A is also bad in law because the assessment has not abated and no incriminating material was found. But in this year, this grievance is unfounded because the search has taken place on 24.11.2015 and although the return of income was filed on 07.11.2015 i.e. before search but even the intimation u/s 143 (1) is dated 26.02.2016 and therefore, the assessment was pending on the date of search and hence, it has abated. Therefore, in this year, this ground is rejected.
In this year, three issues are raised on merit of various additions. As per Ground No. 2, the grievance is about of addition of Rs. 109,05,178/- made by the AO to the extent of 12% of the alleged undisclosed sales turnover of Rs. 908,76,485/- based on data retrieved from the impounded materials, PC of the assessee’s business premises at Nagpur, SMS in the cell
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phones of the employees of at Nagpur wherein contents were mentioned in coded words and numbers. As per para 5.2.9 of his order in this year, although learned CIT (A) has noted that in the business of Arecanut, the books of accounts disclose profit @ 2 – 3% but while computing income of unaccounted turnover, taxes and levies etc. are evaded and therefore, the profit will be higher and he directed the AO to assess income @ 4% of undisclosed turnover as against 12 % rate adopted by the AO. In the written submissions dated 11.06.2020 filed by the learned AR of the assessee for A. Y. 2015 – 16, this is one of the submissions that the coded words and figures found noted in impounded materials were disclosed in audited books of accounts and therefore, no addition is justified in this regard but no evidence was filed before us in support of this contention and therefore, this argument is rejected. This was an alternative oral argument that having noted that in the business of Arecanut, the books of accounts disclose profit @ 2 – 3%, learned CIT (A) was not justified in directing the AO to assess income @ 4% of undisclosed turnover as against 12 % rate adopted by the AO. It was the submission that it should be @ 2 % only. We find force in this alternative submission because the only basis adopted by CIT (A) to adopt higher percentage is this that in unaccounted business, taxes and levies etc. are evaded but the taxes i.e. VAT etc. are collected from the customer separately when the bill is issued and it is paid to government. In
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unaccounted sales, no bill is issued and therefore, no customer will pay taxes and levies which will result into higher profit to the seller. Therefore, we hold that adopting the profit rate of 2% will meet the ends of justice in the facts of the present case and we direct the AO accordingly. On this issue, the assessee gets a part relief. Ground No. 2 is partly allowed.
As per Ground No. 3, the grievance is about the addition of Rs. 75 Lacs made by the AO by alleging that Cash Credit received by the assessee of this amount in the present year is unexplained and the same was confirmed by CIT (A) by holding in Para 5.4.5 of his order that the assessee is well to do person and the claim of receipt of gifts is from relatives and employees of comparatively smaller means. In this regard, learned AR of the assesssee has submitted in the written submissions that these are through banking channel and duly recorded in books. Reliance is placed on the judgment of Hon’ble Karnataka High Court rendered in the case of CIT vs. Manisha Sadhwani, 41 Taxman .com 495. Learned DR of the revenue supported the orders of lower authorities.
We have considered the rival submissions. We find that in Para 8 on page 52 of the assessment order, the AO has noted that one of the gifts claimed to have received by the assessee in this year is of Rs. 50 Lacs from Mrs. Haleema, sister of the assessee. This is also noted by the AO in the same para that in course of search, Mrs. Haleema was summoned and a
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statement on oath was recorded in which she admitted to have given a gift of Rs. 50 Lacs by way of cash but she was not able to recall the actual period of payment of gift. The AO has reproduced the relevant portion of her statement and as per the same, it is seen that although she has confirmed the giving of gift of Rs. 50 lacs to the assessee and has also stated that returns of income are being filed by her although details were not known to her. Regarding the details of gift, she stated that she does not know the details. Merely on this basis that the details of income tax returns and details of gifts are not in the memory of the donor at the time of statement, no adverse inference can be drawn by the AO. Thereafter, on pages 54 to 58, the AO has noted the facts about various gifts and his findings. In the said chart, the AO has noted about the submissions of the assessee about source of gifts and it is noted that as per the assessee, the source of this gift of Rs. 50 Lacs is sale proceeds received on sale of property and loan repaid by Abdul Gaffur.The AO had drawn adverse inference on this basis alone that cash was deposited in the bank account of Mrs. Haleema and came to this conclusion that this cash was deposited in the bank account of Mrs. Haleema by the assessee Mr. M. A. Siddique without giving any finding about the claim of the assessee about source of gift being sale proceeds received on sale of property and loan repaid by Abdul Gaffur. no basis is indicated by him about his conclusion that cash was deposited by the assessee in the bank
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account of Mrs. Haleema. In the order of CIT (A) also, there is no basis indicated about this allegation of the AO that cash was deposited by the assessee in the bank account of Mrs. Haleema and there is no finding about this claim of the assessee also that the source of this gift of Rs. 50 Lacs is sale proceeds received on sale of property and loan repaid by Abdul Gaffur. Hence, the order of CIT (A) on this issue is not sustainable because there is no valid basis of adverse conclusion of AO and CIT (A) But the assessee also has not produced any evidence before us in support of this explanation that the source of this gift of Rs. 50 Lacs is sale proceeds received on sale of property and loan repaid by Abdul Gaffur.
Second gift claimed in this year is of Rs. 15 Lacs claimed to have been received from sister Khadeejamma. About this gift, the findings of the AO are on page 56 of the assessment order but the findings are vague. The AO has noted that initially the amount was transferred from har BUCB Account 3475 on 16.03.2015 to the assessee Mr. M A Siddiqque and it was routed through M A Siddique account only. Various account transfers are noted and adverse inference was drawn without any concrete adverse finding. There is no concrete adverse finding of CIT (A) either about this gift also and therefore, about this gift also, the order of CIT (A) on this issue is not sustainable because there is no valid basis of adverse conclusion of AO and CIT (A) But the assessee also has not produced any explanation or
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evidence about source of funds of Rs. 15 Lacs in the hands of the Donor sister Khadeejamma . Under these facts, we feel it proper to remand this matter to AO for a fresh decision by way of a speaking and reasoned order after considering the explanation and facts to be brought on record by the assessee in support of credit worthiness of both these donors because only credit worthiness of donor is challenged by the AO and there is no challenge to Identity of these two donors being relative of the donee assessee and genuineness of transactions.
In this year, the balance addition of Rs. 10 lacs out of total addition of Rs. 75 Lacs is in respect of the claim of the assessee that he received loan of Rs. 10 Lacs from one Mr. Moosa Kunhi. The AO has stated on page 57 of the assessment order that no explanation is offered by the assessee and he has drawn adverse inference on this basis that he is an employee of the assessee for last 29 years and is aged 72 years and therefore, this loan is highly suspicious. There is no specific finding of CIT (A) about this loan. Under these facts, we feel it proper to remand this matter also to AO for a fresh decision by way of a speaking and reasoned order after considering the explanation and facts to be brought on record by the assessee in support of credit worthiness of this loan creditor because only credit worthiness of the loan creditor is challenged by the AO and there is no challenge to Identity of
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the loan creditor being an old employee of the assessee of the age of 72 years and genuineness of transaction.
Hence, the entire matter about this addition of Rs. 75 Lacs including two gifts of Rs. 65 lacs and one loan of Rs. 10 Lacs is remanded to AO for a fresh decision by way of a speaking and reasoned order after considering the explanation and facts to be brought on record by the assessee in support of credit worthiness of both donors and one loan creditor because only credit worthiness of the donors and loan creditor is challenged by the AO and there is no challenge to Identity of the donors being two sisters of the assessee and the loan creditor being an old employee of the assessee of the age of 72 years and there is no challenge to genuineness of these three transactions also. Ground No. 3 is allowed for statistical purposes.
As per Ground No. 4, the grievance is about of addition of Rs. 65,68,862/- made by the AO by alleging that Cash deposit in bank account is higher than declared turnover. In Para 5.6.5 of his order, learned CIT (A) has noted that the entire cash deposit of the year may not the turnover of the particular year and he observed that it may contain cash receipts from the credit sales of the earlier years, contra entries, loans and advances etc. After making these observations, he jumped to this 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.
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In the written submissions dated 11.06.2020 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 the 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. 2015 – 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 undisputed fact that the books of account of the assessee are audited. This is also the claim of the assessee that all the entries in the various bank accounts
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are duly entered in the books and there is no concrete adverse 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. 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 bank 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
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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.
In the result, the appeal of the assessee for A. Y. 2015 – 16 in the case of Mr. M. A. Siddique in ITA No. 65Bang/2020 is partly allowed in the terms indicated above.
Now we decide the appeal of the assessee for A. Y. 2016 – 17 in the case of Mr. M. A. Siddique in ITA No. 66/Bang/2020. In this year also, as per one of the grounds raised by the assessee i. e. Ground No. 2 (d), same grievance is raised by the assessee that the assessment order passed by the AO in this year u/s 153A is also bad in law because the assessment has not abated and no incriminating material was found. But in this year, this grievance is unfounded because this year is the search year as the search has taken place on 24.11.2015 and the assessment order is passed u/s 143 (3) and not u/s 153A and therefore, in this year, this ground is rejected.
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In this year also, three issues are raised on merit of various additions. As per Ground No. 2, the grievance is about of addition of Rs. 98,48,665/- made by the AO to the extent of 12% of the alleged undisclosed sales turnover of Rs. 820,72,201/- based on data retrieved from the impounded materials, PC of the assessee’s business premises at Nagpur, SMS in the cell phones of the employees of at Nagpur wherein contents were mentioned in coded words and numbers. As per para 5.2.9 of his order in this year also, although learned CIT (A) has noted that in the business of Arecanut, the books of accounts disclose profit @ 2 – 3% but while computing income of unaccounted turnover, taxes and levies etc. are evaded and therefore, the profit will be higher and he directed the AO to assess income @ 4% of undisclosed turnover as against 12 % rate adopted by the AO. In the written submissions dated 11.06.2020 filed by the learned AR of the assessee for A. Y. 2016 – 17 also, similar submission is that the coded words and figures found noted in impounded materials were disclosed in audited books of accounts and therefore, no addition is justified in this regard but no evidence was filed before us in support of this contention and therefore, this argument is rejected. In this year also as in A. Y. 2015 – 16. This was also an alternative oral argument in this year also that having noted that in the business of Arecanut, the books of accounts disclose profit @ 2 – 3%, learned CIT (A) was not justified in directing the AO to assess income @
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4% of undisclosed turnover as against 12 % rate adopted by the AO. It was the submission that it should be @ 2 % only. We find force in this alternative submission because the only basis adopted by CIT (A)to adopt higher percentage is this that in unaccounted business, , taxes and levies etc. are evaded but the taxes i.e. VAT etc. are collected from the customer separately when the bill is issued and it is paid to government. In unaccounted sales, no bill is issued and therefore, no customer will pay taxes and levies which will result into higher profit to the seller. Therefore, we hold that adopting the profit rate of 2% will meet the ends of justice in the facts of the present case in this year also in line with our decision in A. Y. 2015 – 16 and we direct the AO accordingly. On this issue, the assessee gets part relief. Ground No. 2 is partly allowed.
As per Ground No. 3, the grievance is about of addition of Rs. 35,36,740/- made by the AO by alleging that a Mercedes Benz car found in course of search as parked in the parking place of the assessee is belonging to the assessee by disregarding this explanation of the assessee that the said car belongs to one Mr. V. K. Abdul Gaffur, brother in law of the assessee and it was parked for his convenience but the AO did not accept this explanation by stating that the assessee has made payment of down payment in cash of Rs. 10,23,340/- and has also paid monthly instalments of the vehicle loan amounting to Rs. 2,09,450/- per month by way of cash deposit
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in the bank account of Mr. V. K. Abdul Gaffur and the basis of this allegation is this that Mr. V. K. Abdul Gaffur does not have the ability to buy the high-end vehicle. In para 7 of the assessment order, these facts are noted by the AO. The AO has also observed in the same para that Mr. V. K. Abdul Gaffur was summoned and his statement was recorded on oath. The AO has observed that initially, Mr. Gafur denied having any Benz Vehicle but later admitted that he has purchased the vehicle on loan. On page 54 of the assessment order, the AO has noted the details of the returned income of Mr. V. K. Abdul Gaffur for A. Ys. 2010 – 11 to 2015 – 16 as per which, the agricultural income was declared by him in the range of Rs. 8.75 Lacs in A. Y. 2012 – 13 to Rs. 15.64 Lacs in A. Y. 2015 – 16 in addition to taxable income in the range of Rs. 1.68 Lacs in A. Y. 2011 – 12 to Rs. 2.71 Lacs in A. Y. 2015 – 16. If total declared agricultural income and taxable income of these 6 years is aggregated, the same will amount to about Rs. 78.50 Lacs. In spite of this much income of Mr. V. K. Abdul Gaffur, the AO concluded that he did not have ability to buy Mercedez Benz car and made addition of the down payment Rs. 10,23,340/- and Rs. 25,13,400/- paid towards 12 instalments of Rs. 209,450/- per month totalling Rs. 25,13,400/-. In para 5.3.4 of his order, learned CIT (A) had observed that merely seeing a vehicle parked in the assessee’s premises and repayment of loan pertaining to the said vehicle in cash, one cannot come to the conclusion that the vehicle
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belonged to the assessee and repayments were made by the assessee but then he observed that Mr. V. K. Abdul Gaffur is a man of small means and in view of this fact that the car was found parked in the premises of the assessee, he is confirming this addition.
In the written submissions dated 11.06.2020 filed by the learned AR of the assessee for A. Y. 2016 – 17, this is the submission that the car does not belong to him and it belongs to his brother in law Mr. V. K. Abdul Gaffur and the copy of registration of the car and certificate of the financier are enclosed in the paper book showing that car is registered in the name of Mr. V. K. Abdul Gaffur and car loan is also in his name and therefore, this addition is not justified. Learned DR of the revenue supported the orders of the lower
We have considered the rival submissions. We find that the main objection of the AO and CIT (A) is this that Mr. V. K. Abdul Gaffur is a man of small means and in view of this fact that the car was found parked in the premises of the assessee, this addition is justified but we find that the AO himself has noted the amount of income declared by Mr. V. K. Abdul Gaffur for A. Ys. 2010 – 11 to 2015 – 16 as per which, the agricultural income was declared by him in the range of Rs. 8.75 Lacs in A. Y. 2012 – 13 to Rs. 15.64 Lacs in A. Y. 2015 – 16 and in addition to it, taxable income was also declared in the range of Rs. 1.68 Lacs in A. Y. 2011 – 12 to Rs. 2.71 Lacs in
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A. Y. 2015 – 16 and If total declared agricultural income and taxable income of these 6 years is aggregated, the same amounts to about Rs. 78.50 Lacs. In spite of this much income of Mr. V. K. Abdul Gaffur, the conclusion that he did not have ability to buy Mercedez Benz car is without any valid basis because a person having aggregate income of Rs. 78.50 Lacs in last six years can very much pay Rs. 35,36,740/- in the present year and parking of car in the premises of the assessee being brother in law is not unusual even if the car in question is used by the assessee. Hence, we delete this addition and Ground No. 3 is allowed.
As per Ground No. 4, the grievance is about of addition of Rs. 35,66,300/- made by the AO by alleging that Cash Credit received by the assessee of this amount in the present year is unexplained and the same was confirmed by CIT (A) by holding in Para 5.4.5 of his order that the assessee is well to do person and the claim of receipt of gifts is from relatives and employees of comparatively smaller means. In this regard, learned AR of the assesssee has submitted in the written submissions that these are through banking channel and duly recorded in books. This is also a submission that this amount may be considered as undisclosed turnover and profit @ 2% can be brought to tax and in support of this contention, reliance is placed on the tribunal order rendered in the case of V R Textile vs. JCIT, 20 Taxman .com 154 and also on a judgment of Hon’ble Gujarat High Court rendered in the
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case of CIT vs. President Industries as reported in 124 Taxman 654 and on a judgment of Hon’ble Madhya Pradesh High Court rendered in the case of CIT vs. Balchand Ajit Kumar as reported in 135 Taxman 180. Learned DR of the revenue supported the orders of lower authorities.
We have considered the rival submissions. We find that in Para 8.3 on page 59 & 60 of the assessment order, the AO has noted that one of the loans claimed to have been received by the assessee in this year is of Rs. 20 Lacs from M/s Swadesh Trading Company and has noted that this concern is a firm with Mr. V. K. Gafoor and Khateejamma as partners. This is also noted by the AO in the same para that this firm has filed its return of income for A. Y. 2016 – 17 on 30.09.2017 declaring total income of Rs. 36,526/- u/s 44AD out of Gross Turnover of Rs. 389,120/-. Thereafter, the AO has noted that an amount of Rs. 15,66,300/- has been introduced in the name of Supari Centre Mahe, a proprietary concern of Mr. V. K. Gafoor. Thereafter, the AO noted that the assessee was asked to produce evidence in support of the sources for the loans and gifts from friends and relatives reflected in the accounts and then observed that no evidence has been furnished and thereafter concluded that this is brought to tax as unexplained cash credits. As per para 5.4.5 of his order, learned CIT (A) confirmed this addition by giving a vague finding that the assessee is a well to do person and is receiving gift from relatives and employees who are persons of
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comparatively smaller means but the dispute is about claimed receipt of loans and not gifts. Hence, it is seen that the identity of both loan creditors is not under challenge and the genuineness of the transaction is also not challenged by the AO and the AO is doubting only the credit worthiness of these loan creditors but there is no finding of the AO on this aspect as to whether the said loan creditors have shown these loans as asset in their respective balance sheet. The AO has noted that the firm from whom loan of Rs. 20 lacs is claimed to have been received by the assessee was examined by him or not particularly, when he knows the details of income tax return filed by that firm. Learned CIT (A) has confirmed this addition of loan by giving a totally unconnected finding that the claim of gift from a friend and relative of comparatively smaller means is not acceptable but the issue in dispute is about loan and not gift.
Hence, in our considered opinion, the entire matter about this addition of Rs. 35,66,300/- being two loans should be remanded to AO for a fresh decision by way of a speaking and reasoned order after considering the explanation and facts to be brought on record by the assessee in support of credit worthiness of both loan creditors. The AO is directed that if the assessee makes a claim before him that these amounts in question are not loans but undisclosed turnover, the same claim should be examined and decided and if the assessee is able to satisfy the AO on this aspect then only reasonable
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profit only on such turnover should be added instead of adding the entire turnover. We hold accordingly and Ground No. 4 is allowed for statistical purposes.
In the result, the appeal of the assessee for A. Y. 2016 – 17 in the case of Mr. M. A. Siddique in ITA No. 66Bang/2020 is partly allowed in the terms indicated above.
Now we take up and decide the appeals of the revenue in the case of Mr. Mohammed Safwan for A. Ys. 2014 – 15 & 2015 – 16 in ITA Nos. 88 & 89/Bang/2020 and two appeals of the assessee in the case of the same assessee for A./ Ys. 2015 – 16 & 2016 – 17 in ITA Nos. 67 & 68/Bang/2020. First, we take the appeal of the revenue for A. Y. 2014 – 15 in ITA No. 88/Bang/2020. The grounds raised by the revenue are as under:-
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First, we take note of relevant facts in respect of Ground Nos. 10 to 12. We find that the AO has noted in the assessment order that search has taken place on 24.11.2015 and original return of income was filed by the
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assessee on 02.01.2015 disclosing a taxable income of Rs. 750,820/-. The AO also noted that this return was processed u/s 143 (1) 02.03.2015. There is no mention that any notice u/s 143 (2) was issued prior to the date of search and hence, it is apparent that assessment was not pending on the date of search and hence, it has not abated. As per Para 6 of the order of CIT (A), this is the finding given by CIT (A) that no new material were found or unearthed during the course of search and as per Grounds No. 10 to 12 raised by the revenue, there is no ground that this finding of CIT (A) is incorrect. As per Ground No. 10, this is the grievance of the revenue that u/s 153A, addition can be made in respect of an income not emanating from any seized material also. As per Ground No. 11, this is the grievance of the revenue that as per a subsequent judgment of Hon’ble Karnataka High Court rendered in the case of PCIT vs. GMR Energy Ltd. In ITA No. 358 of 2018 dated 08.01.2019, the earlier judgment of Hon’ble Karnataka High Court rendered in the case of CIT vs. Lancy Construction cannot be applied and as per Ground No. 12, this is the grievance of the revenue that there was no assessment u/s 143 (3) in which the various issues could have been verified by the AO. Hence, it is seen that this is not a claim of the revenue as per these grounds that any incriminating material was in fact found in course of search and therefore, the order of CIT (A) is bad in law because it is based
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on this finding that the assessment has not abated and no new material was found or unearthed during the course of search.
On this issue, learned DR of the revenue supported the assessment order and learned AR of the assessee supported the order of CIT (A). Reliance is placed on the judgment of Hon’ble Karnataka High Court rendered in the case of CIT vs. Manisha Sadhwani, 41 taxman.com 495.
We have considered the rival submissions. We find that in Para 5.7 of his order, learned CIT (A) has noted three judgments including two judgments of Hon’ble Karnataka High Court rendered in the case of CIT vs. Lancy Construction, 237 Taxman &28 and in the case of Canara Housing Development Co. vs. CIT, 49 taxman.com 98 and one judgment of Hon’ble Delhi High Court rendered in the case of CIT vs. Kabul Chawla, 234 taxman 300. The first judgment of Hon’ble Karnataka High Court rendered in the case of CIT vs. Lancy Construction (Supra) is no more a good law in view of a subsequent judgment of Hon’ble Karnataka High Court rendered in the case of PCIT vs. GMR Energy Ltd. (Supra) and therefore, we ignore this judgment and consider only the remaining two judgments considered by CIT (A) and one judgment cited by the learned AR of the assessee being the judgment of Hon’ble Karnataka High Court rendered in the case of CIT vs. Manisha Sadhwani (Supra). We find that the
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judgment in the case of CIT vs. Manisha Sadhwani (Supra) is not applicable because it was rendered in respect of block assessment but in the present case, the assessment is completed u/s 153A. Hence, we have to consider the applicability of only two judgments out of which one judgment is of Hon’ble Karnataka High Court having been rendered in the case of Canara Housing Development Co. vs. CIT (Supra) and one judgment of Hon’ble Delhi High Court rendered in the case of CIT vs. Kabul Chawla (Supra). In respect of the judgment of Hon’ble Karnataka High Court rendered in the case of Canara Housing Development Co. vs. CIT (Supra), we find that this judgment is not applicable in the present case because in that case, this is the finding of Hon’ble Karnataka High Court that incriminating material was found in course of search and under these facts, it was held that addition can be made in assessment u/s 153A even in respect of that issue also for which no incriminating material was found in course of search. We have already noted above that this is not a claim of the revenue as per grounds raised by it that any incriminating material was in fact found in course of search and therefore, the order of CIT (A) is bad in law because it is based on this finding that the assessment has not abated and no new material was found or unearthed during the course of search. Hence, it
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transpires that this fact is accepted by the revenue also that no incriminating material was found in course of search and we proceed with this understanding. Since, in the case of Canara Housing Development Co. vs. CIT (Supra), incriminating material was found in course of search and no such material was found in the present case, this judgment is not applicable in the present case. There is one more reason due to which, this judgment is not applicable in the present case and this reason is this that in that case, the dispute was about the powers of CIT to revise the assessment order u/s 263 after a search in which incriminating material was admittedly found whereas in the present case, the dispute is about power of the AO to make addition in the assessment order passed by him u/s 153A in a case where no incriminating material was found in course of search. On this aspect, we feel that it is a different case to make addition in respect of an issue for which no incriminating material is found in a case where some incriminating material is also found and it is altogether a different case to make addition in respect of an issue for which no incriminating material is found in a case where no incriminating material is found as the present case. This view of us finds support from the judgment of Hon’ble Bombay High Court rendered in the case of CIT vs. Jet Airways (I) Ltd., 331 ITR 236. In
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this judgment, it was held that an addition made by the AO is not valid in a case of reassessment where no addition is made on that account for which reasons were recorded and reopening was made although such addition is valid if addition is made on that account for which reasons were recorded and reopening was made. The
following para of this judgment is relevant and therefore, reproduced
for ready reference:-
“21. Explanation 3 lifts the embargo, which was inserted by judicial interpretation, on the making of an assessment or reassessment on grounds other than those on the basis of which a notice was issued under s. 148 setting out the reasons for the belief that income had escaped assessment. Those judicial decisions had held that when the assessment was sought to be reopened on the ground that income had escaped assessment on a certain issue, the AO could not make an assessment or reassessment on another issue which came to his notice during the proceedings. This interpretation will no longer hold the field after the insertion of Expln. 3 by the Finance Act (No. 2) of 2009. However, Expln. 3 does not and cannot override the necessity of fulfilling the conditions set out in the substantive part of s. 147. An Explanation to a statutory provision is intended to explain its contents and cannot be construed to override it or render the substance and core nugatory. Sec. 147 has this effect that the AO has to assess or reassess the income ("such income") which escaped assessment and which was the basis of the formation of belief and if he does so, he can also assess or reassess any other income which has escaped assessment and which, comes to his notice during the course of the proceedings. However, if after issuing a notice under s. 148, he accepted the contention of the assessee and holds that the income which he has initially formed a reason to believe had
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escaped assessment, has as a matter of fact not escaped assessment, it is not open to him independently to assess some other income. If he intends to do so, a fresh notice under s. 148 would be necessary, the legality of which would be tested in the event of a challenge by the assessee.”
As per this judgment, it was held that if the AO accepts that the income which escaped assessment as per reasons recorded by the AO for reopening has not in fact escaped assessment then it is not open to him to independently assess some other income. The assessment proceedings u/s 153A regarding unabated assessments are also in fact the reopening of completed assessment mainly to assess undisclosed income found in course of search based on incriminating material found in search although not limited to those income alone and in a case where, the assessment has abated, he has to make complete assessment and in unabated assessments also, he has to consider and add returned income and undisclosed income found in course of search based on incriminating material found in search along with any other addition made by the AO in original assessment and also any other item of income which comes to the notice of the AO in course of these proceedings but if no incriminating material was found in search then the very basis of reassessment is not there and in line with this judgment of Hon’ble Bombay High Court, it is not open to the AO to independently assess some other income.
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Now we examine and decide the applicability of the judgment of Hon’ble Delhi High Court rendered in the case of CIT vs. Kabul Chawla (Supra). We find that this judgment is squarely applicable in the present case and respectfully following this judgment, we decline to interfere in the order of CIT (A) because no contrary judgment of Hon’ble Jurisdictional High Court or of Hon’ble apex court is cited by the learned DR of the revenue.
In view of our decision in above para, other grounds raised by the revenue do not require any separate adjudication.
In the result, the appeal of the revenue in the case of Mr. Mohammed Safwan for A. Ys. 2014 – 15 in ITA Nos. 88/Bang/2020 is dismissed.
Now we take up the appeal of the revenue in the case of Mr. Mohammed Safwan for A. Ys. 2015 – 16 in ITA Nos. 89/Bang/2020. The grounds raised by the revenue are as under:-
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Learned DR of the revenue supported the assessment order and learned AR of the assessee supported the order of CIT (A)
We have considered the rival submissions. We find that in para 5.1 of his order, learned CIT (A) has noted that the assessee has raised in respect of five additions. First three additions so noted by him are in respect of various companies/firms of abroad Rs. 58,58,136/-, 40,18,689/- and Rs. 147,68,009/- Total Rs. 246,44,834/- and as per Para 5.2.7 of his order addition of this much amount is deleted by CIT (A). The remaining two addition disputed by the assessee before CIT (A) are of Rs. 5.99 Lacs and Rs. 103.68 lacs. These two additions are confirmed by the learned CIT (A)
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as per para 5.3.6 and 5.5.4 respectively. Hence, we proceed on this basis that in this appeal of the revenue, the grievance of the revenue is about deletion of first three additions in respect of various companies/firms of abroad Rs. 58,58,136/-, 40,18,689/- and Rs. 147,68,009/- Total Rs. 246,44,834/- although in the grounds raised by the revenue as reproduced above, it is not specifically mentioned. We find that in Para 6.3 of the assessment order, the AO has discussed and noted year wise alleged undisclosed income and as per the same, it is the allegation of the AO that in A. Y. 2012 – 13, there is undisclosed income is Rs. 18,07,240/-, in A. Y. 2013 – 14, there is undisclosed income is Rs. 41,38,211/- and in A. Y. 2014 – 15, there is undisclosed income is Rs. 58,36,825/-. Total alleged undisclosed income for these three years comes to Rs. 117,81,587/-. The AO has also noted in the same para that initial investment in A. Y. 2014 – 15 was Rs. 17,69,320/- and if this amount is also added to the total alleged undisclosed income of three years, the total comes to Rs. 135,50,907/-. Thereafter the AO has noted two figures of Rs. 58,58,136/- and Rs. 40,18,689/- and alleged that these are incomes of the A. Y. 2015 – 16. He made addition of these two figures noted by him as income of the present year and also made one more addition of Rs. 147,68,009/- by alleging that this much is net worth as on 08.02.2015. About this 3rd addition of Rs. 147,68,009/-, we find that this is not sustainable even if all allegations of the AO are accepted as correct because
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Net worth as on 08.02.2015 will include initial investment in A. Y. 2014 – 15 of Rs. 17,69,320/-and alleged undisclosed income of Rs. 18,07,240/- in A. Y. 2012 – 13, undisclosed income of Rs. 41,38,211/- in A. Y. 2013 – 14 and alleged undisclosed income is Rs. 58,36,825/- in A. Y. 2014 – 15 and addition in respect of these can be made in the respective year i.e. A. Y. 2012 – 13, 2013 – 14 and 2014 – 15 but not in the present year i.e. A. Y. 2015 – 16. The total of such addition comes to Rs. 135,51,596/-. If we reduce this amount from Rs. 147,68,009/-, the balance left is Rs. 12,16,413/- Net worth as on 08.02.2015 will also include alleged net profit of F. Y. 2014 – 15 for which separate addition is made by the AO which is more than Rs. 12,16,413/- and therefore, separate addition of Rs. 147,68,009/- based on net worth as on 08.02.2015 is not valid at all even if all the allegations of the AO are accepted as correct.
We therefore hold that for the deletion of the third addition of Rs. 147,68,009/-, there is no infirmity in the order of CIT (A) and now we examine and decide about deletion of remaining two additions of Rs. 58,58,136/- and Rs. 40,18,689/-. Regarding these two additions made on the basis of alleged incomes of the current year of various concerns abroad i.e. M/s MAFR and M/s Shath Asaia Trading and Contracting and in Para 6.1 of the assessment order, the AO also noted that these allegations are on the basis of scanned copies of company Statement and thereafter in Para 6.2 of
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the assessment order, names of various other concerns of abroad are noted i.e. M/s Abdullah Marhool Al-Shammary Trading Est., and M/s Al Shifa. In para 5.2.4 of his order, learned CIT (A) has noted that this is the argument raised before him that these are companies incorporated in kingdom of Saudi Arabia and these companies are separate entities and income if any of a company has to be assessed in the hands of the company only and only if dividend is declared and paid by the company, such dividend only can be taxed in the hands of any individual shareholder. This was also argued that in the present case, profit is not distributed by the company amongst the shareholders and therefore, question of taxing such profit of the company in the hands of the present assessee does not arise. Learned DR of the revenue has not established before us that any dividend was declared/paid by these overseas companies. This is a settled position of law that income of a company whether a domestic company or a foreign company is taxable in the hands of the company only and only dividend paid by a company if any can be taxed in the hands of the shareholder. Hence, on this aspect of these two additions also, we find no infirmity in the order of CIT (A) We decline to interfere in the order of CIT (A) in respect of deletion of various additions as discussed above and in view of this, various grounds raised by the revenue do not require separate specific adjudication.
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In the result, the appeal of the revenue in the case of Mr. Mohammed Safwan for A. Ys. 2015 – 16 in ITA Nos. 89/Bang/2020 is also dismissed.
Now we take the cross appeal of the assessee Mr. Mohammed Safwan for A. Ys. 2015 – 16 in ITA Nos. 67/Bang/2020. As per Ground No. 2, the assessee is disputing the addition made by the AO of Rs. 5.99 Lacs which is upheld by CIT (A) and as per Ground No. 3, the assessee is disputing the addition made by the AO of Rs. 103.68 Lacs which is upheld by CIT (A). We first discuss and decide Ground No. 2. We find that the AO has noted in Para 7.3 of the assessment order that the assessee has claimed receipt of loans and advances from Mr. V. K. Gafoor Rs. 3.49 lacs and from Mr. Shakir Suleman Rs. 2.50 Lacs total Rs. 5.99 Lacs and the AO has stated that the assessee was asked to produce evidence in support of the source for the loans but no evidence was produced and AO added it by saying that it is unexplained cash credit. Learned CIT (A) has upheld this addition by giving a vague finding in Para 5.3.6 of his order where he is discussing about some gifts but this addition is not for gift but for loan. This addition was confirmed by CIT (A) by holding in Para 5.3.6 of his order that the assessee has obtained gifts largely by depositing cash in the accounts of the alleged donors and the claim of receipt of gifts is from relatives and employees of comparatively smaller means. In this regard, learned AR of the assesssee has submitted in the written submissions that these loans are through banking
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channel and duly recorded in books. Reliance is placed on the judgment of Hon’ble Karnataka High Court rendered in the case of CIT vs. Manisha Sadhwani, 41 Taxman .com 495. Learned DR of the revenue supported the orders of lower authorities.
We have considered the rival submissions. We find that as per the orders of the lower authorities, out of three ingredients i.e. identity of the loan creditors, genuineness of the transaction and credit worthiness of the loan creditors, the challenge of the AO is to 3rd ingredient i.e. credit worthiness of the loan creditors only and earlier two ingredients are not under challenge. On similar issue in the case of the father of this assessee Mr. M. A. Siddique as per para 25 above, we have remanded similar issue to the file of the AO for fresh decision with the direction that he should decide this issue afresh by way of a speaking and reasoned order after considering the explanation and facts to be brought on record by the assessee in support of credit worthiness of both loan creditors. In the present case only, we remand this matter to the AO for a fresh decision with similar direction. Ground No. 2 is allowed for statistical purposes.
As per Ground No. 3, the dispute is about addition of Rs. 103.68 Lacs made by the AO as per para 8 on page 23 of the assessment order by alleging that this amount is deposited by the assessee in Bhatkal Urban
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Cooperative Bank but the turnover declared by the assessee is of only Rs. 95.25 Lacs from sale of apartments and it was received by the assessee by way of cheques. The AO held that the assessee could not explain the source of this cash deposit and he added the full amount of cash deposit as assessee’s unexplained income. Before CIT (A), this was the submission of the learned AR of the assessee as noted by CIT (A) in para 5.5.2 of his order that this is surprising that this addition is made by the AO without rejecting the books of account and the AO arrived at this figure of cash deposit without detailed discussion and by ignoring this aspect that the cash deposit in bank may not be turnover of the same year and it may be out of cash receipts from the credit sales of the earlier years and the AO has totally ignored the contra entries about cash deposit and cash withdrawal. This was an alternative contention raised before CIT (A) as noted by him in Para 5.5.3 of his order that even if source of cash deposit is not accepted as explained, it should be accepted that this is unaccounted turnover of the assessee and only profit element should be taxed but in para 5.5.4 of his order, learned CIT (A) upheld this addition without any discussion about various arguments raised before him. Before us, learned AR of the assessee reiterated the same arguments and in support of the alternative contention raised before CIT (A) as noted by him in Para 5.5.3 of his order that even if source of cash deposit is not accepted as explained, it should be accepted
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that this is unaccounted turnover of the assessee and only profit element should be taxed, reliance is placed on the tribunal order rendered in the case of V. R. Textiles vs. JCIT, 20 Taxman 154 (Ahmedabad) and copy of this tribunal order is filed. Reliance is also placed on a judgment of Hon’ble Gujarat High Court rendered in the case of CIT vs. President Industries as reported in 124 Taxman 654 and on a judgment of Hon’ble Madhya Pradesh High Court rendered in the case of CIT vs. Balchand Ajit Kumar as reported in 135 Taxman 180. Learned DR of the revenue supported the orders of lower authorities.
We have considered the rival submissions. We find that as per para 8 of the assessment order, the AO states that this cash deposit by the assessee in bank account is in excess of the declared turnover not deposited by way of cheques. Hence, as per the AO also, the allegation is this that this is unaccounted turnover. Therefore, in our considered opinion, the tribunal order rendered in the case of V. R. Textiles vs. JCIT (Supra) is applicable. In this case, the tribunal held that entire undisclosed sales cannot be treated as profit of the assessee and only the profit element by applying Profit rate of 6.09% should be added. We find that it is noted by the AO that the income from business is declared by the assessee at Rs. 619,750/- and it is accepted by the AO and only addition made in business income is of Rs. 58,58,136/- which is regarding income of a foreign company and therefore, declared
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profit on domestic turnover is accepted by the AO and the domestic turnover as noted by the AO in para 8 of the assessment order is Rs. 95.25 Lacs from sale of apartments. This results into profit rate of 6.50%. Respectfully following this tribunal order, we hold that only profit element @ 6.50% of undisclosed turnover of Rs. 103.68 Lacs should be added instead of addition of Rs. 103.68 Lacs being total cash deposit in bank. This ground is partly allowed.
In the result, the appeal of the assessee in the case of Mr. Mohammed Safwan for A. Ys. 2015 – 16 in ITA Nos. 67/Bang/2020 is partly allowed in the terms indicated in the order.
Now we take the appeal of the assessee Mr. Mohammed Safwan for A. Y. 2016 – 17 in ITA Nos. 68/Bang/2020. As per Ground No. 2, the assessee is disputing the addition made by the AO of Rs. 4.25 Lacs which is upheld by CIT (A) and as per Ground No. 3, the assessee is disputing the addition made by the AO of Rs. 63,18,600/- which is upheld by CIT (A). We find that these two issues raised by the assessee in this year are similar to Ground No. 2 & 3 raised by the assessee in A. Y. 2015 – 16. As per Para 7 and 8 of the assessment orders for the A. Y. 2016 – 17, it is seen that same reasonings are given by the AO. In respect of the second addition of Rs. 63,18,600/-, the AO has stated in para 8 of the assessment order, the AO has stated that Rs. 63,18,600/- was deposited in cash in Bhatkal Urban
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Cooperative Bank and the declared turnover is Rs. 49 Lacs from sale of apartments which is received by way of cheques. The order of CIT (A) is also similar and the arguments of the learned AR of the assessee in written submissions are also similar. Learned DR of the revenue supported the orders of lower authorities in this year also.
We have considered the rival submissions. In view of this fact that the orders of both the lower authorities are similar to their orders in A. Y. 2015 – 16 and the arguments before us by both sides are also similar to their arguments in A. Y. 2015 – 16, we decide both these issues in this year in line with our decision in A. Y. 2015 – 16 and we remand this matter involved in Ground No. 2 to the AO for a fresh decision with similar direction. Ground No. 2 is allowed for statistical purposes. Similarly, regarding the issue involved in Ground No. 3, we hold that the tribunal order rendered in the case of V. R. Textiles vs. JCIT (Supra) is applicable. We find that in this year, it is noted by the AO that the income from business is declared by the assessee at Rs. 707,890/- and it is accepted by the AO and the domestic turnover as noted by the AO in para 8 of the assessment order is Rs. 49 Lacs from sale of apartments. This results into profit rate of 14.45%. Respectfully following this tribunal order, we hold that only profit element @ 14.45% of undisclosed turnover of Rs. 63,18,600/- should be
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added instead of addition of Rs. 63,18,600/- being total cash deposit in bank. This ground is partly allowed.
In the result, the appeal of the assessee in the case of Mr. Mohammed Safwan for A. Ys. 2016 – 17 in ITA Nos. 68/Bang/2020 is partly allowed in the terms indicated in the order.
In the combined result, out of five appeals of the assessee Mr. M. A. Siddique in ITA No. 62 to 66/Bang/2020 for A.Ys. 2012 – 13 to 2016 – 17 three appeals for first three years are allowed and remaining two appeals for A. Ys. 2015 – 16 and 2016 – 17 are partly allowed. In the case of Mr. Mohammed Safwan, both appeals of the revenue are dismissed and both appeals of the assessee are partly allowed.
Pronounced in the open court on the date mentioned on the caption page.
Sd/- Sd/- (BEENA PILLAI) (A.K. GARODIA) Judicial Member Accountant Member
Bangalore, Dated: 14th August, 2020. /NS/*
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Copy to: 1. Appellants 2. Respondent 3. CIT 4. CIT(A) 5. DR, ITAT, Bangalore. 6. Guard file
By order
Assistant Registrar, ITAT, Bangalore.