SH. GURMAL SINGH H NO R-18 NEW GRAIN MARKET NEAR JAIN HOSPITAL, JALANDHAR BYEPASS ROAD, LUDHIANA,PUNJAB vs. THE DEPUTY COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-3 LUDHIANA, PUNJAB

आयकर अपील
य अ धकरण,चडीगढ़ यायपीठ , चडीगढ़
IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH
BENCH ‘A’ CHANDIGARH

BEFORE: SHRI VIKRAM SINGH YADAV, ACCOUNTANT MEMBER
AND SHRI PARESH M. JOSHI, JUDICIAL MEMBER,

आयकर अपील सं./ ITA No. 209/CHD/2024

नधारण वष / Assessment Year : 2021-22
Shri Gurmal Singh,
H.No. R-18, New Grain Market,
Central Circle-3,
Ludhiana.
थायी लेखा सं./PAN /TAN No: CFRPS7294N
अपीलाथ/Appellant
यथ/Respondent

नधारती क ओर से/Assessee by : Shri Sudhir Sehgal, Advocate
राज व क ओर से/ Revenue by : Shri Shakti Singh, JCIT, Sr.DR
तार ख/Date of Hearing : 20.11.2024
उदघोषणा क तार ख/Date of Pronouncement : 08.01.2025

PHYSICAL HEARING

आदेश/ORDER

PER PARESH M. JOSHI, JM

This is an appeal filed by the assessee under Section 253 of the Income Tax Act, 1961 (hereinafter referred to as Act) before this Tribunal. The assessee is aggrieved by the order dated 19.02.2024 passed by ld. CIT(A) in Appeal No.10132/2020-21/CIT(A)-5/Ldh/2022-23 which is hereinafter referred to as the “impugned order”. The relevant assessment year is 2021-22
and the ITA 209/CHD/2024
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corresponding previous year period is from 01.04.2020
to 31.03.2021. Factual Matrix
2. The assessee is engaged in the business of trading of Bananas which are received from the parties located far away like
Maharashtra,
Madhya
Pradesh,
A.P.,
Karnataka, etc.,. and these supplies of bananas are received on trucks load basis and that they reach the premises of the assessee during odd hours. And for that purposes, the labour is engaged by the assessee and that they are required at the business premises of the assessee, due to very nature of the business. It is required to be noted and appreciated that bananas are perishable in nature and that they are required to be unloaded and kept safely. They are kept for ripening in the “Ripening Chambers” too. The bananas are generally kept for a week for said purposes and thereafter sales are effected in city, nearby towns and villages. The staff is also deployed for collection of amount mainly from Rehriwala, small shopkeepers, fruit merchants etc.

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about nature of expenses and are then recorded in the regular books of accounts.
6. That the assessee filed his return of income for the assessment year
2021-22
on 31.03.2022
declaring income of Rs.6,67,720/-.
7. The assessee proprietorship concern operates under the name and style of “M/s Nehra Fruit Company”. The assessee belongs to “Nitesh Fruit Company Group of Ludhiana”.
8. That a search & seizure operation under Section 132(1) of the Act was carried out at the residential/business premises of “Nitesh Fruit Company”
on 08.09.2021 and that a warrant was issued in the name of the assessee. During the course of search &
seizure operation , various incriminating documents were found and seized by Department.
9. That notice under Section 143(2) is dated
24.08.2022. Notice(s) under Section 142(1) are dated
04.08.2022, 22.08.2022, 12.10.2022 and 31.10.2022. ITA 209/CHD/2024
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payment of salary in violation of provisions of section 40A(3) as per para 5.3 of his order.
2. That the Ld. C!T(A) has erred in confirming the addition of Rs.
36,85,400/-on account of alleged unexplained expenditure of the assessee u/s 69C of the Act on the basis of undated document, having no narration at all.
3. That the sustaining of addition by the Ld.CIT(A) and invoking of provisions of section 69 read with section, are against the facts and circumstances of the case.
4. That the appellant craves leave to add or mend the grounds of appeal before the appeal is finally heard or disposed off.

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order and the ld. AO has simply relied upon entries in the seized annexures without considering the split up of expenses.
14. The submission before CIT(A) is at pages 22 to 23
of the order of CIT(A).
15. The finding of CIT(A) is in para 5.3.3 at page 29
of the CIT(A) order and CIT(A) at page 29 has held as under :
“In view of the record seized during the course of search since no details of the expenses incurred by the assessee besides the salary have been mentioned therein, the plea of the assessee cannot be accepted”.

b).
The difference is that in the loose, sheet, consolidated sum has been mentioned in respect of payment made to employees and against such payment, only the name of the employees have been mentioned but details of each payment with nature is there in the cash book which has been completely ignored.

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c).
The Assessing Officer admitted that all such persons as per seized record are employee of the assessee as per page 70 of the order of the Assessing Officer.

d).
The basis of making the addition by the Assessing Officer is on account of seized papers, in which, consolidated sum against the name of employee has been mentioned and, whereas, in the regular books of accounts, the split up of the amount has been mentioned, because the employees had incurred certain expenses, which were mentioned and which detail have been given in the regular books of accounts.

e).
The said detail was explained to the Assessing Officer as mentioned in the order of Assessing Officer at pages 60 to 69 and the same has also been mentioned by the Assessing Officer at page 70 of his order.

f).
Our books of accounts have not been rejected u/s 145(3) and same have been accepted by the Assessing Officer and, thus, when as per our books of accounts, there is no payment exceeding Rs. 10,000/- and, thus, no disallowance u/s 40A(3) can be made because section 40A (3) states that where the assessee incurs an expenditure more than Rs. 10,000/-, then the same shall be disallowed.

g).
Further, when our books of accounts have not been rejected, no such addition can be made on account of disallowance of expenses u/s 40A

(3) as per the following judgments:- a) CIT vs. Anil Kumar & Co. in ITA No. 200001 & 200002 vide order dated
25.02.2016 (Karnataka HC) wherein it has been held as under:
"The tribunal has rightly held that when the books of account of the assessee had not been rejected and assessment having not been framed under section 144, the Assessing Officer and the Commissioner (Appeals) were in error in resorting to an estimation of income and such exercise undertaken by them was not sustainable."

b)
ITO vs. Amit Verma in ITA No. 4558/Del /2011 vide order dated
19.12.2012 (Del Bench):
"Assessing Officer has not pointed out any specific defects in the books/records. Moreover the books of accounts have been duly audited, the details were submitted before the Assessing Officer. The Assessing Officer has not invoked section 145(3) and he has not rejected the books of account.
Under the circumstances, adhoc disallowance is without any basis. Hence, we do not find any infirmity in the order of the Ld. Commissioner of Income Tax
(A) and therefore, we uphold the same."

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c)
ITO vs. Pranab PrakaSh Dutta in ITA No 1492/Kol/2011 vide order dated 25.06.2012. "10. We have considered the rival submissions. A perusal of the decision of the Hon'ble Supreme Court in the case of Sargam Talkies (refer to supra) clearly shows that in absence of rejection of books of account maintained by the assessee in respect of cost of construction, no addition on estimate basis can be made. In the present case, a perusal of the assessment order clearly shows that the books of account in respect of cost of construction of the lodge,
Dhruva Tara has not been rejected. In the circumstances, we are of the view that in view of principle laid down by the Hon'ble Supreme Court in the case of Sargam Talkies (refer to supra), no addition is called for in the hands of the assessee. In the circumstances, the addition of Rs. 1 lakh as confirmed by the learned Commissioner of Income-tax (Appeals) stands deleted."
"On perusal of the impugned judgment and order of the Tribunal dated
27.10.2009 reveals that the assessee has maintained the books of accounts in accordance with the prescribed standard as per Section 145 of 'the Act'. The account books have not been rejected by the assessing officer. In view of the above, the Tribunal formed an opinion where once the account books are expected to be maintained in the prescribed, accounting standard, the assessing officer could not have made any additions towards the sale of rice treating it to be outside the books of accounts or towards investing in stock of rice and wheat outside the books of accounts. In view of the above, the controversy as raised above in this appeal stands duly covered by the Tribunal and it cannot be said that any investment was done beyond the books of accounts."
e).Further reliance in this regard is placed on the following judgements of the Hon'ble Apex Court, wherein on exactly similar lines as that in case of the assessee, it has been held that where the cash deposited was out of the books of account & cash book and where such books had not been rejected u/s 145 of the Act, then part addition for cash deposits was not sustainable, namely:
Lalchand Bhagat Ambica Ram vs. CIT [1959] 37 ITR 288 (SC)
Section 143 of the Income-tax Act, 1961 - Assessment - Addition to income -
Assessment year 1946-47 - Assessee carried on extensive business in grain as merchant and commission agent - Assessee maintained its books of account according to mercantile system and there were maintained in its cash books two accounts: one showing cash balances from day to day and other known as "Almirah account" wherein were kept large balances which were not required for day-today working of business - It filed its return showing loss in business
-However, ITO noticed that assessee had encashed high denomination notes of value of Rs. 2.91 lakhs on 19- 1-1946 - Assessee's explanation that those notes formed part of its cash balances including cash balances in Almirah account was rejected by ITO who took into account several surrounding circumstances and included said sum in its total income - ITO also found that portions of entries in assessee's accounts to effect that money's had been received in high

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denomination notes were subsequent interpolations - Before Tribunal assessee stated that said entries were made in nervousness after coming into force of High Denomination Bank Notes (Demonetization) Ordinance, 1946 on 12-1-
1946, as it did not know it had specific proof in its possession of having high denomination notes as part of its cash balances-Tribunal accepted assessee's explanation in respect of said interpolations and held that there was no other reason to suspect genuineness of account books - It was also found that as per book entries cash balance on 12-1-1946 aggregated to more than Rs. 3.1 lakh
- However, examining cash book and taking into account all circumstances adverted to by ITO, Tribunal held that assessee might be expected to have possessed as part of its business cash balance of at least Rs. 1.5 lakhs in shape of high denomination notes on date when said ordinance was promulgated but nature of source from which it derived remaining high denomination notes remained unexplained - Accordingly, Tribunal reduced addition - Whether when entries in books of account in regard to cash balances were held to be genuine, there was no escape from conclusion that assessee had offered reasonable explanation as to source of all high denomination notes which it encashed on 19-1-1946 and it was not open to Tribunal to accept genuineness of those books and accept assessee's explanation in part and reject same in regard to balance sum -Held, yes - Whether, therefore, it was clear that Tribunal in arriving at its conclusion indulged in suspicions, conjectures and surmises and acted without any evidence or upon a view of facts which could not reasonably be entertained or finding was perverse which could not be sustained and Supreme Court was entitled to interfere with such finding - Held, yes - Whether, therefore, addition made was liable to be deleted - Held, yes.”

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that there is apparent violation of Section 40A(3) as all payments are less than Rs.10,000/- at one give time.
18. Without prejudice to the aforesaid contention that all payments are less than Rs.10,000/- and are appearing in books of account regularly maintained in course of trade, it was stated that in the seized documents as found during the course of search, certain payments were reflected in respect of freight but the details were there in the regular books of accounts, where the payments were made less than Rs.35,000/- per day and in the impugned order (Para 5.2.3 pages 26-
27). No disallowance was sustained and therefore, addition of Rs.21,44,420/- is contrary to the finding given by the ld. CIT(A) in the impugned order in respect of issue of freight.
19. The next contention and submission is on addition of Rs.36,85,400/- relates to alleged unexplained expenditure of the assessee under Section 69C (Page 24
of impugned order and page 76 of ld. AO order). It is contended that actually it is a fact that the assessee is ITA 209/CHD/2024
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staying on the first floor, whereas the business premises is on ground floor and certain cash was sent to the proprietor through himself or the family member, which has been mentioned in the seized documents and also certain amount had been sent to proprietor or through the family members etc. and that notings had been made only for the purposes of “yadhast” only and as such addition on surmises and conjectures without any application of mind. The notings on the documents (the seized document) is clear and on that day as per books of account, there was sufficient cash in hand which fact finds mention at page 24 of the “impugned order” and which is not disputed. In the impugned order (at page
30, 31 and 32) there is a failure to appreciate that when there are sufficient cash in hand in the books of account it cannot be a case of unexplained expenditure. It was further contended and submitted that the provisions of Section 69C read with 115BBE are clearly not applicable, since the amount is related to business. Further, one noting of Rs.2,33,000/- recorded in personal books has not been doubted by ld. AO himself, copy whereof in ITA 209/CHD/2024
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Paper Book (page 3). Lastly it was contended and submitted that assessee's books of account have not been rejected and confirmation of addition of Rs.36,85,400/- is bad in law. Per contra, ld. DR has placed reliance on impugned order and has contended that it is legal and proper. It’s findings are conclusive and it should not be disturbed by this Tribunal. The impugned order is well reasoned and speaking. It has taken into consideration all aspects of submissions made by assessee and merely because two additions have gone against the assessee, it cannot be dubbed and labeled as bad in law and illegal. The additions are made basis records of case documents seized. No irrelevant and extraneous material have been considered in the impugned order.
20. Findings & Conclusions
20.1
We now have to adjudge and adjudicate whether the impugned order with regard to above two additions is correct in law or not.

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278 (Kar) in support. We have perused the said judgement where in para 11, following is recorded :
“11. Insofar as the estimation of gross profit made by the Assessing
Officer modified by the CIT(Appeals), tribunal has rightly held that when the books of account of the assessee had not been rejected and assessment having not been framed under section 144 of the Income
Tax Act the said authorities were in error in resorting to an estimation of income and such exercise undertaken by them was not sustainable.
Section 145(3) of the Act lays down that the Assessing Officer can proceed to make assessment to the best of his judgement, under Section 144 of the Act only in the event of not being satisfied with the correctness of the accounts produced by the assessee. In the instant case the Assessing Officer has not rejected the books of account of the assessee. To put it differently the Assessing Officer has not made out a case that conditions laid down in Section 145(3) of the Act are satisfied for rejection of the books of account. Thus, when the books of account are maintained by the assessee in accordance with the system of accounting, in the regular course of his business, same would form the basis for computation of income. In the instant case it is noticed that neither the Assessing Officer nor CIT(Appeals) have rejected the books of account maintained by the assessee in the course of the business. As such tribunal has rightly rejected or set aside the partial addition made by Assessing Officer for arriving at gross profit and sustained by the CIT(Appeals) and rightly held that entire addition made by the Assessing Officer was liable to be deleted. The said finding is based on sound appreciation of facts and it does not give rise for framing substantial question of law.

Reliance was also placed on the judgement of ITAT,
Calcutta
Bench in and CO
No.70/Kol/2011 in case of ITO, Ward-4, Bankura Vs
Pranab Prakash Dutta wherein in para 10, following is held :
10. We have considered the rival submissions. A perusal of the decision of the Hon'ble Supreme Court in the case of Sargam Talkies (refer to supra) clearly shows that in absence of rejection of books of account maintained by the assessee in respect of cost of construction, no addition on estimate basis can be made. In the present case, a perusal of the assessment order clearly

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shows that the books of account in respect of cost of construction of the lodge,
Dhruva Tara has not been rejected. In the circumstances, we are of the view that in view of principle laid down by the Hon'ble Supreme Court in the case of Sargam Talkies (refer to supra), no addition is called for in the hands of the assessee. In the circumstances, the addition of Rs. 1 lakh as confirmed by the learned Commissioner of Income-tax (Appeals) stands deleted.
(Allahabad High Court ) wherein following is held in their order dated 04.05.2017 :
“On perusal of the impugned judgment and order of the Tribunal dated
27.10.2009 reveals that the assessee has maintained the books of accounts in accordance with the prescribed standard as per Section 145 of 'the Act'. The account books have not been rejected by the assessing officer.
In view of the above, the Tribunal formed an opinion where once the account books are expected to be maintained in the prescribed accounting standard, the assessing officer could not have made any additions towards the sale of rice treating it to be outside the books of accounts or towards investing in stock of rice and wheat outside the books of accounts.
In view of the above, the controversy as raised above in this appeal stands duly covered by the Tribunal and it cannot be said that any investment was done beyond the books of accounts.
We find no substance in this appeal and the questions raised above require no adjudication.
Accordingly, the appeal is dismissed.”

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to the Revenue, the Revenue has to accept the explanation alongwith books unless books of account are rejected as per Section 145 of the Act. In the instant case since books of account are not rejected under Section 145 where all entries are less than Rs.10,000/- per person, the addition made is unjustified.
20.4 In so far as 2nd addition of Rs.36,85,400/- is concerned under Section 69C r.w.s. 115BBE on account of alleged unexplained expenditure of the assessee, we find that contention and submission of ld. AR are untenable. On the contrary, we conquer with the following finding of ld. CIT(A) in the impugned order which remain unrebutted by the assessee before us :
“5.4.3 I have considered the reasoning given by the AO in assessment order, submissions & documents submitted by the appellant, facts of the case and legal position.
I is a fact that in the noting of the seized document, there is no mention of cash being sent to the residence. Therefore, the contention of the assessee cannot be accepted that the said cash as noted in the seized record was meant to be sent at the first floor of his residence. It is a settled law and presumption in 292C of the Act that any document/money/bullion etc. found during search belongs to the assessee and the content are true. As per law onus is on the assessee to explain the contention with the evidence. But in present case, the submissions of the appellant are not convincing and are devoid of valid reasoning. Therefore, the addition made by the AO is upheld as the AO has passed a well-reasoned order after giving property opportunity of being heard and therefore the addition of Rs. 36,85,400/- is confirmed.
Accordingly, this ground of appeal is dismissed.”

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JUDICIAL MEMBER

“Poonam”

आदेश क ितिलिप अ ेिषत/ Copy of the order forwarded to :

आदेशानुसार/ By order,
सहायक पंजीकार/