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Income Tax Appellate Tribunal, DELHI BENCH “F”: NEW DELHI
Before: SHRI AMIT SHUKLA & SHRI PRASHANT MAHARISHI
O R D E R PER AMIT SHUKLA, J.M.
Rakesh Mahajan vs. DCIT Iftikhar Ahmed vs. DCIT
The aforesaid appeals have been filed by the above mentioned assesses against separate impugned orders of even date, 7th October, 2014 in the cases of Shri Iftikhar Ahmed passed by Ld. CIT(A) II New Delhi ; and order dated 17th March, 2015 in the case of Shri Rakesh Mahajan passed by the Ld. CIT(A) XXVI New Delhi for the quantum of assessment passed u/s 143(3) for the assessment year 2012-13. Since the issues involved in both the appeals are common arising out of identical set of facts, therefore, they were heard together and are being disposed off by way of this consolidated order. As a lead case we are taking up the appeal in the case of Shri Rakesh Mahajan being ITA No.,1810/DEL/2015 wherein the assessee has challenged two additions, viz., firstly, addition of Rs. 5,34,000/- made on account of unexplained cash found during the course of search;: and secondly, addition of Rs. 10,52,124/- made on account of alleged unexplained jewellery found during search.
The brief facts qua the issue involved are that a search and seizure operation u/s 132 (4) was carried out on 4.8.2011 at the business and residential premises of Nirala group which also covered the premises of assessee. During the course of search at the residential premises of Shri Rakesh Mahajan, cash amounting to Rs. 5,34,000/- was found. In his explanation, the assessee before the AO submitted that he has received sum of Rs. 5 lacs from M/s. Nirala Developers Pvt. Ltd. as imprest on 3.8.2011 and in support, the assessee submitted a copy of cash book from the period 1.8.2011 to 31.8.2011 of the said company. The Ld. AO noted that there is no entry of Rs. 5 lacs in the name of imprest account of Shri Rakesh Mahajan as on 3.8.2011 and neither there is any entry of imprest in the name of any Director in the books of M/s. Nirala Developers Pvt. Rakesh Mahajan vs. DCIT Iftikhar Ahmed vs. DCIT Ltd. He held that, since assessee is director in various group companies and looking after day to day activities of the company and during the search he could not explained that he had received imprest money from M/s. Nirala Developers Pvt. Ltd. and therefore, he treated the said cash amounting to Rs. 5,34,000/- as unexplained money u/s. 69A.
Before the Ld. CIT (A), the assessee explained that cash found and seized from the group was as under :-
S. Premises of Assessees Cash found (Rs.) Cash seized (Rs.) No. 1. Rakesh Mahajan 5,34,000 5,00,000 2. Suresh Kumar Garg 7,48,000 6,48,000 3. Iftikhar Ahmed 42,50,000 42,50,000 4. Nirala Developers Pvt. 13,81,000 13,81,000 Ltd. Total 69,13,000 67,79,000 It was further submitted that in the entire Nirala group sum of Rs. 10 crores was disclosed and offered to tax out of which sum of Rs. 1,95,47,000/- was offered in the case of ‘Nirala Developers Pvt. Ltd.’ for the assessment year 2012-13 and submitted that the same should be telescoped with any kind of addition made. It was further submitted that the cash found from the residence of assessee and another Director, Shri Iftikhar Ahmed was part of cash shown as cash-in-hand as on 3.8.2011 in the cash book of the company and also the relevant entries therein was pointed out. For the sake of ready Rakesh Mahajan vs. DCIT Iftikhar Ahmed vs. DCIT reference the relevant extract of entries explained between the date 1.8.2011to 12.8.2011 is reproduced as under:-
Date Particulars Vch Type Vch/ Debit Credit Inv No. 01.08.2011 To Opening Balance 54,00,000 01.08.2011 To Bank of Baroda 02/09 Contra 62 1,00,000 01.08.2011 By Site Off.Imprest a/c-2 Journal 1273 1,00,000 01.08.2011 To F307 Abhishek Sindal Receipt 229 2,07,550 01.08.2011 By Bank of Baroeda 02/09 Contra 63 2,07,550 03.08.2011 To E701 Shishu Pal Receipt 234 59,500 03.08.2011 To F707 Sumit Vohra Receipt 235 182,350 03.08.2011 By(as per details) Payment 596 53,98,000 Imprest a/c Iftikhar Ahmed 42,50,000Dr Imprest a/c Rakesh Mahajan 5,00,000 Dr Imprest a/c SKG 6,48,000 Dr 03.08.2011 To Imprest a/c Receipt 236 10,17,371 06.08.2011 By Advacne Tax A.Y. 12-13 Payment 612 12,61,221 11.08.2011 To Bank of Baroda 02/09 Contra 65 1,00,000 12.08.2011 By SiteOff.Imprest a/c-2 Payment 652 1,00,000
Thus it was submitted that the cash found from the residence of the assessee stands fully explained out of cash-in-hand reflected in the books of the Nirala Developers Pvt. Ltd.; and are alternatively it is covered in the surrender of Rs.1,95,47,000/- made in the case of the said company.
Rakesh Mahajan vs. DCIT Iftikhar Ahmed vs. DCIT
However, the Ld. CIT(A) rejected the assessee’s contention on the ground that:- � Firstly, the assessee’s explanation gives contradictory claim of ownership and does not lead to inference that cash found from the residence of the assessee belonging to Nirala Developers Pvt. Ltd.; � Secondly, the assessee’s contention that cash of Rs. 5,34,000/- was included in the disclosure of Rs.1,95,47,000/- made in the case of Nirala Developers Pvt. Ltd. is not correct, because there is no linkage of such claim given by the assessee; � Thirdly, the entries of the cash book of Nirala Developers Pvt. Ltd., filed before the AO gives a different narration and do not match entries appearing in the cash book of the said company. It was filed during the course of assessment proceedings. � Fourthly, he also highlighted following discrepancies from the entries in the cash book of the company:-
• The appellant has claimed that Rs. 53,98,000 (comprising of Rs. 5 lakhs debited to his account, Rs. 42.50 lakhs debited to the account of Iftikhar Ahmed and Rs. 6.48 lakhs debited to Suresh Kumar Garg), was paid into their respective ‘Imprest a/c through voucher no. 596 on 03.08.2011, whereas, the cash book filed in the assessment proceedings of Nirala Developers P Ltd. shows payment of Rs. 53,98,000 towards advance tax for A.Y. 12-13 by voucher no. 611 on 06.08.2011. • Contrary to the appellant’s claim, no imprest accounts of directors appear in the cash book of Nirala Developers P Ltd. (though there is an Imprest account for site office)
Rakesh Mahajan vs. DCIT Iftikhar Ahmed vs. DCIT
• As per the document relied by the director, advance tax paid by Nirala Developers P Ltd. on 06.08.2011 as per voucher no. 612 was only Rs. 12,61,221 whereas Nirala Developers P Ltd has claimed as per its cash book, advance tax of Rs. 53,98,000 and Rs. 13,81,000, paid as per voucher no. 611 and 612 respectively on 06.08.2011. • There is also discrepancy in respect of the receipt of Rs. 10,17,371 in Imprest a/c which is shown in the document relied by the appellant to have been received on 03.08.2011 by voucher no. 236, whereas the cash book filed by Nirala Developers P Ltd. shows that the sum was received on 06.08.2011 by voucher no. 245.” � Lastly, he came to the conclusion that document relied by the assessee is patently incorrect, fabricated and unreliable, therefore, same is reliable to be rejected and thus, assessee’s explanation on the cash seized from his residence found is unexplained.
Before us, the Ld. Counsel drew our attention to the cash book of the Nirala Developers Pvt. Ltd. for the period of 1st of April, 2011 to 30th September 2011 and specifically drew our attention to the entries made from 3rd August to 6th August, 2011 and pointed out that on the credit side an amount of Rs.53,98,000/- was appearing which mentioned imprest account and this imprest account contained the cash lying with the directors namely; (i) Iftikhar Ahmed – Rs. 42,50,000/-; (ii) Rakesh Mahajan - Rs. 5,00,000/-; and iii) Suresh Kumar Garg - Rs, 6,48,000/-. During the course of search and seizure the cash in hand of Rs. 53,98,000/- as reflected in the company’s account was not found from the premises of the company as these cash were lying with the Director of the company. At the time of search only and also before the AO it was categorically stated and Rakesh Mahajan vs. DCIT Iftikhar Ahmed vs. DCIT submitted that the cash found from the residence of these Directors were the cash belonging to the company and duly reflected in the cash book of the company. The observation and findings of the Ld. CIT (A) to point out that the entries do not match and there discrepancy is absolutely erroneous, because Rs. 53,98,000/- was on account of imprest account and not the advanced tax because the advanced tax on the same date was separately shown as Rs. 13,81,000/- and it was on after two days of offer of undisclosed income cash was to be deposited for advance tax. Thus, the amount of cash found duly stands duly explained from the cash-in-hand of the assessee company.
On the other hand Ld. CIT DR strongly relied upon the order of the Ld. CIT(A) and pointed out that the explanation given by the Ld. Counsel is again not correct, as Ld. CIT(A) has clearly brought out that the sum of Rs. 53,98,000/- is appearing on the date 6.8.2011 and shows the payment of advance tax. Thus such a cash cannot be said to be available as source of cash found at the premises of the assessee.
We have heard the rival submissions, perused the relevant findings given in the impugned order as well the material referred to before us. The main issue involved here is that, whether the cash amounting to Rs. 5,34,000/- found from the residence of two directors namely, Shri Rakesh Mahajan and Shri Iftikhar Ahmed (cash of Rs. 42,50,000/-) is from the source of cash-in-hand of the company M/s.Nirala Developers Pvt. Ltd. in which these two person were directors. The contention of the assessee is that, as on the date of search, i.e., 4.8.2011 there was cash available in the books of Nirala Rakesh Mahajan vs. DCIT Iftikhar Ahmed vs. DCIT Developers and these cash amount were kept at the residence of the directors. Thus, the cash found stands explained from the source of cash-in-hand with the company. From the perusal of the relevant cash book of the company, the copy of which is appearing at page 16 of the paper book for the period 30th June 2011 to 7.9.2011, we find that there is a huge opening balance up till 3.8.2011 and as on that date the availability of cash in the cash book is Rs. 53,98,000/-. Out of this cash, advance tax has been paid towards the income offered during the course of search on 6.8.2011. The cash of Rs. 53,98,000/- as on 3.8.2011 has been stated to be lying with the three directors of the company. It is not the case of the department at all that the cash-in- hand as recorded in the said books of accounts was found from the premises of the company, i.e., M/s. Nirala Developers Pvt. Ltd. If the cash recorded in the company’s book has been stated to be lying with the directors which was not found from the premises of the company and also at the time of the search and during the course of the assessment proceedings explanation was given that the same cash was found from them, then without their being any contrary material to rebut such explanation, it can be safely inferred that the cash of the company was lying with the directors. Otherwise, the question would be arise that, if one day prior to the search the cash-in-hand of Rs. 53,98,000/- as recorded in cash book of the company is not found during the course of search then where has it gone. If the explanation was given that it debited to the interest account of the directors and the same amount has been found from the possession of the directors, then the preponderance of the probabilities lies in favour of the assessee that, it is the same cash of the company which has been found from their premises. Rakesh Mahajan vs. DCIT Iftikhar Ahmed vs. DCIT
Coming to the various observations of the Ld. CIT(A) pointing out the various discrepancy in the entries in the cash book, in our humble opinion, such observations are not correct from the very face of the cash book, because he has completely missed the point a very vital fact, whether any cash in hand was available on the date of search or not. He is only going by the fact that an amount of Rs. 53,98,000/- has been shown against advance payment of tax on 6.8.2011. The payment of advance tax on 6.8.2011 is merely utilisation of cash for the payment of tax for the amount offered by the company during the course of the search. He has not rebutted that on date of search, whether this much amount of cash was available in the cash book or not; and whether at the time of search the cash recorded in the cash book was either found from the premises of the company or from somewhere else, especially when global search was carried out at various places of the Nirala group. So far as his allegation that assessee has been giving varied explanation that, firstly, the said cash found should be included in the disclosure of Rs. 1,95,47,000/-; and secondly, the source of cash is explained from cash-in-hand of the company, in our opinion it does not tantamount to changing of stand, albeit the assessee has explained that whatever cash has been found, the same should be considered to be covered under the huge disclosure made by the company as ultimately the cash found belong to the company only. Nowhere the assessee had stated that the cash belongs to the assessee and then he has changed the stand that it is out of the cash book of the company. Consistently assessee has been stating that the cash found is from the company’s account which is duly recorded in its book. Thus, we do not find any reason to disbelief the assessee that the source of the cash found is out of the cash-in- Rakesh Mahajan vs. DCIT Iftikhar Ahmed vs. DCIT hand of the company as recorded in its books of account. Accordingly, the addition of Rs. 5 lacs is directed to be deleted.
9. So far as the cash amounting of Rs. 34,000/- is concerned which is not part of the imprest account, we are of the opinion that since it is very small amount of cash and which could be out of personal savings etc. from the source of income earned by the assessee, no adverse inference should be drawn. Thus, we direct the deletion of entire cash of Rs. 5,34,000/-.
As regard the second issue is concerned, i.e., addition on account of unexplained jewellery, the brief facts are that, during the course of search and seizure carried at the residential premises of the assessee and his locker, jewellery weighing 1182 grams was found, which was valued at Rs. 30,80,840/-. The details of which is appearing at page 2 of the assessment order. It was accepted by the assessee that neither he nor his family members were filing wealth tax return nor could the assessee substantiate with the documentary evidence the source of acquisition, except for stating that all these jewelleries were received on the occasion of marriages, birth of the children and other social ceremonies over the period of time. The jewellery found belongs to his wife, mother and his unmarried daughter and minor children. However, the AO held that out of the said value of jewellery of Rs. 30,80,840/-, jewellery to the extent of Rs. 10,52,124/- can be treated to be unexplained and after giving benefit of other jewellery in view of the instruction No. 1916 issued by CBDT 11.05.1994. Rakesh Mahajan vs. DCIT Iftikhar Ahmed vs. DCIT
Ld. CIT (A) too has confirmed the said addition and held that the shelter sought by the assessee on CBDT instruction No. 1916 dated 11.5.94, is only for the purpose of seizure of jewellery and not for explaining the source of acquisition. In support, he also relied upon the judgment of Hon’ble Madras High Court in the case of VGP Ravidas and V.G. Selvaraj vs. CIT, 2014 – TIOL-1731-HC-MAD-IT.
Before us, Ld. Counsel submitted that looking to the fact that total jewellery found was 1236.24 grams and assessee has family members consisting of two married women, i.e., wife and mother and one unmarried daughter and two minor children. If one goes by the circular issued by the CBDT then almost the entire jewellery stands explained. If the total jewellery of the entire family members as per the CBDT instruction is to be presumed, then it comes to 1700 grams as against this, only 1236.24 grams have been found. Thus, such a jewellery cannot be treated as unexplained.
13 On the other hand, Ld. CIT DR strongly relied upon the order of the Ld. CIT(A) and submitted that the CBDT instruction are only for the purpose of seizure and not to explain the source. Nowhere the assessee before the AO or Ld. CIT(A) could explain the source of acquisition of jewellery and Ld. AO has already given a huge benefit of the jewellery found based on the CBDT instruction. Hence, no further relief should be given.
We have heard the rival submissions, perused the relevant findings given in the impugned orders as well as material referred to before us. The entire details of jewellery found from the premises and locker of the assessee as well as his mother were as under:- Rakesh Mahajan vs. DCIT Iftikhar Ahmed vs. DCIT Persons Search at Jewellery Jewellery Jewellery Jewellery found- found- seized seized – weight value (Rs.) weight value (Rs.) (grams) (grams) Rakesh Residence 209.43 4,49,765 - - Mahajan Bank Locker 405.17 10,52,124 405.17 10,52,124 (appellant)
Renuka Bank Locker 232.17 5,93,128 - - Mahajan (wife) Kaushalya Bank Locker 319.00 8,30,464 - - Mahajan Residence (mother) Total 1236.24 30,80,840 405.17 10,52,124 Admittedly the assessee could not give any evidence in the form of purchase vouchers or bills for acquisition of jewellery. However, the assessee’s contention has been that these jewelleries have been acquired over the period of time and also received at the time of marriages and various social functions. The AO has given part benefit of CBDT instruction No.1916 dated 11thMay, 1994 which lays down the guidelines for seizure of jewellery and ornaments in the course of search. The Ld. CIT (A) has held that the said circular is not meant for proving the source of acquisition but it is merely lays down guidelines for seizure of the jewellery and in support he has also refereed to judgment of Hon’ble Madras High Court. On the contrary, we find that Hon’ble Gujarat High Court in the case of CIT vs. Ratan Lal Vyapari Lal Jain, 339 ITR 351 (Guj.), while interpreting the same CBDT No.1916 (supra) the Hon’ble High Court observed and held as under :-
“10. Though it is true that the CBDT Circular No. 1916, dated 11th May, 1994 lays down guidelines for seizure of jewellery and Rakesh Mahajan vs. DCIT Iftikhar Ahmed vs. DCIT ornaments in the course of search, the same takes into account the quantity of jewellery which would generally be held by family members of an assessee belonging to an ordinary Hindu household. The approach adopted by the Tribunal in following the said circular and giving benefit to the assessee, even for explaining the source in respect of the jewellery being held by the family is in consonance with the general practice in Hindu families whereby jewellery is gifted by the relatives and friends at the time of social functions, viz. marriages, birthdays, marriage anniversary and other festivals. These gifts are customary and customs prevailing in a society cannot be ignored. Thus although the circular had been issued for the purpose of non-seizure of jewellery during the course of search, the basis for the same recognizes customs prevailing in Hindu society. In the circumstances, unless the Revenue shows anything to the contrary, it can safely be presumed that the source to the extent of the jewellery stated in the circular stands explained. Thus, the approach adopted by the Tribunal in considering the extent of jewellery specified under the said circular to be a reasonable quantity, cannot be faulted with. In the circumstances, it is not possible to state that the Tribunal has committed any legal error so as to give rise to a question of law.”
Applying the ratio of the aforesaid judgement on the facts of the present case and looking to the assessee‘s family consisting of assessee himself, his wife, his mother, one major unmarried daughter, one minor daughter and one minor son and the status of the assessee being owner and director of various companies then it has to be presumed that certain amount of jewellery would be available. If the availability of jewellery especially in the concept of Indian tradition and general practice in Hindu families whereby jewellery is gifted by the relatives and friends at the time of social functions, viz. marriages, birthdays, marriage anniversary and other festivals, such gifts in the form of jewellery are customary and such practice prevailing in our Rakesh Mahajan vs. DCIT Iftikhar Ahmed vs. DCIT society cannot be ignored. It was for this prevalent norm and practice in the Indian families where jewelleries are gifted at time of marriage and birth of children and the married ladies receiving ‘stridhan’ from both side of the family, it is presumed that family having certain status will have some jewellery. That is why, CBDT vide it aforesaid instruction, has laid down a criteria of availability of jewellery with various category of family members. Here in this case total jewellery weighing of 1236.24 grams was found and if one goes by the quantity laid/ prescribed per category of family members by the CBDT Instruction, then it works out to 1700 grams, which is lower than the total jewellery found. We therefore, following the ratio laid down by the Hon’ble Gujarat High Court hold that the jewellery of 1236.24 cannot be treated as unexplained. This judgment of Hon’ble Gujarat High Court has also been followed by this bench in catena of cases. Thus, we hold that the jewellery treated to unexplained jewellery of Rs. 10,52,124/- is directed to be deleted.
Now coming to the appeal of Shri Iftikhar Ahmed, the only addition which has been challenged before us is, unexplained cash of Rs. 42,50,000/- found from his residence at the time of search. Assessee is one of the Director in Nirala Developers Pvt. Ltd. and we have already discussed this issue in detail while discussing the appeal of Shri Rakesh Mahajan that the source of cash found stands explained from the cash book of Nirala Developers Pvt. Ltd. The finding given therein will apply mutatis mutandis in this appeal also Rakesh Mahajan vs. DCIT Iftikhar Ahmed vs. DCIT and accordingly, the addition of Rs. 42, 50,000/- is deleted and accordingly appeal of the assessee is allowed.
In the result both the appeals of the assessee are allowed.