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Income Tax Appellate Tribunal, ‘C’ BENCH
आदेश / O R D E R PER SUNIL KUMAR SINGH (J.M): 1. This appeal has been preferred against the impugned order dated 25.10.2023 passed in Appeal no. NFAC/2012- 13/10121602 by the Ld. Commissioner of Income– tax(Appeals)/ National Faceless Appeal Centre (NFAC) [hereinafter referred to as the “CIT(A)”] u/s. 250 of the Income- Tax Act, 1961 [hereinafter referred to as "Act"] for the Assessment year [A.Y.] 2013-14, wherein learned CIT(A) has Parag Motilal Savla dismissed assessee’s appeal against assessment order dated 26.03.2022.
The brief facts state that the appellant assessee is an individual engaged in the business of professional photography. Assessee filed his return of income on 26.09.2013 for A.Y. 2013-14, declaring total income of Rs. 29,13,171/-. On the basis of an information uploaded by the investigation wing of the department, it came to the notice of learned assessing officer that a search and seizure action u/s. 132 of the Act was conducted in October 2017 in the case of M/s. Evergreen Enterprises. On the basis of documents found and seized during the course of search action, it was established that Shri. Nilesh Bharani has received cash loans from various individuals and concerns. The name of the assessee was appearing in the list of persons who gave cash loans of Rs. 2,00,00,000/- to Shri. Nilesh Bharani during the year under consideration. The case was reopened u/s. 147 of the Act and notice u/s. 148 dated 31.03.2021 was issued to the assessee. Assessee filed return of income in response to the notice u/s. 148 of the Act, declaring total income of Rs. 29,13,170/- without any modification. Statutory notices u/s. 143(2) and 142(1) of the Act were issued and served upon the assessee. Assessee uploaded his submissions and furnished the required details. After considering the submissions made by assessee, learned assessing officer made addition of Rs. 2,00,00,000/- as unexplained/unaccounted cash u/s. 69 of the Act.
Parag Motilal Savla 3. Aggrieved, assessee filed an appeal before learned CIT(A), who dismissed assessee’s appeal and approved AO’s action. 4. Appellant assessee has raised following grounds in this appeal:
1. The Hon. CIT(A) erred in not adjudicating the additional ground raised by the appellant challenging the reopening of assessment u/s 147 of the 1.T Act, 1961 by issue of notice u/s 148 dt. 31.03.2021, claiming that as per law, the assessment should have been as provided u/s section 153C of the I. T. Act, 1961, as the Id. AO held a belief that the documents seized from M/s. Evergreen Enterprises in the course of search action u/s 132, provided information relating to income of the appellant and accordingly the assessment framed in the case of the appellant u/s 147 r.w.s 144B was bad in law, void-ab-intio and is required to be struck down on that account.
2. The Hon. CIT(A) erred in upholding the re-opening the assessment u/s 147 of the I. Tax Act 1961, by issue of the notice u/s 148 dt. 31.03.2021, only on the basis of information received from the Investigation Wing, of the Income Tax Department, without there being any independent and valid reason to believe that any income chargeable to tax had escaped assessment and therefore the re-opening of assessment u/s 147 as well as the asst. order flowing therefrom was invalid and bad in law and was required to be quashed.
3. The Hon. CIT(A) erred in upholding the assessment framed u/s 147 r.w.s 144B of the I. Tax Act 1961, inspite of the Id AO failing to first dispose the objections raised by the appellant to reopening of assessment, which failure on the part of the Id AO results in the asst. order framed u/s 147 r.w.s 144B to be invalid and bad in law and required to be struck down on that account.
4. The Hon. CIT (A) erred in upholding the addition of Rs.2,00,00,000/- made u/s 69/69A of the LT Act, 1961, as unexplained cash, in respect of the alleged cash loan lent to Shri Nilesh Bharani/M/s. Evergreen Enterprises, without any concrete evidence incriminating the appellant nor considering the explanation that the appellant had not entered into any cash transaction with the said parties and accordingly the addition of Rs.2,00,00,000/- disputed in the present appeal may kindly be deleted.
5. The Hon. CIT (A) erred in relying upon the statements of certain third parties without granting to the appellant any opportunity to cross examine the said persons nor appreciating that the alleged incriminating evidence was never shared with the appellant, thereby breaching the salient principles of equity, fair play and natural justice and for this reason the assessment was bad-in-law and void-ab-initio”
5. We have perused the records and heard learned representative for the appellant assessee and learned DR for respondent revenue.
Parag Motilal Savla 6. Learned AR has submitted that the learned assessing officer has not recorded the reasons for reopening the assessment. The objection of the assessee against the reasons were not disposed of by the learned assessing officer. No incriminating evidence was shared with assessee before making the quantum addition. The addition has been made merely on the basis of unauthenticated documents found in search and on the basis of statements of Nilesh Bharani, (Partner), Ashwin Amritlal Rathod (Accountant) and Vibha Sachin Rawate (Account assistant) of M/s. Evergreen Enterprises. No opportunity to cross examine these persons was afforded to assessee. It was further submitted by the learned AR that the assessment order passed u/s. 147 r/w section 144B is bad in law as the assessment should have been u/s. 153C of the Act. Learned AR has further submitted that the issue in the present case is directly covered by the order dated 29.04.2024 passed by ITAT Mumbai bench in in assessee’s own case. Learned AR has thus prayed to delete the addition and set aside the impugned order.
Learned DR has vehemently supported the impugned order passed by learned CIT(A).
We notice that the co-ordinate bench of this Tribunal vide order dated 29.04.2024 passed in for A.Y. 2012-13 had an occasion to consider the issue under appeal in assessee’s own case. The relevant paras 8 to 10 read as under: “8. We heard the parties and perused the material on record. There was a search and seizure operations in M/s. Evergreen Enterprises and during the course of Parag Motilal Savla search certain documents were seized and statements were recorded. In the documents seized there were entries in a certain format and in the statement recorded the accountant has explained the way in which the entries were to be read. The AO based on the above information was of the view that the entries as tabulated in the earlier part of this order pertains to the cash loans given by the assessee to Shri Nilesh Bharani and accordingly issued notice reopening the assessment. The assessee submitted before the AO that the cash loans as alleged by the AO do not pertain to the assessee and that the assessee has not entered into any such transactions. The assessee has also requested for cross examining the parties from whom statements were recorded. However the AO has relied on the statements recorded proceeded to make addition towards the alleged cash loans given by the assessee as unexplained under section 69A of the Act. Before the CIT(A), the assessee raised legal issues with regard to the addition and also contended the issue on merits stating that the AO has not brought anything incriminating the assessee to substantiate the addition. We in this regard notice that the CIT(A) has not given any specific findings regarding the contentions on merits while dismissing the appeal.
9. From the perusal of seized material and the statements recorded, we notice that the accountant in the statements recorded has explained how the entries are to be decoded for understanding what each entry means really. A sample entry has been considered and explained i.e. how to read the alphabets and the number in the entry. The AO based on the said explanation proceeded to interpret the impugned entries as pertaining to the assessee. However we notice from the assessment order that the AO has not brought out any specific finding on how the impugned entries are linked to the assessee and whether any other seized material other than what is shared with the assessee have been used to aid the interpretation. We further notice that other than decoding the entries as pertaining to the assessee the AO has not brought any other material on record to substantiate that the assessee has given the cash loans to Shri Nilesh Bharani. We also notice that the assessee has furnished the audited financial statements for the year ended 31.03.2012 before the AO during assessment proceedings and that the AO has not recorded any adverse findings with regard to the same. From the perusal of the findings of the CIT(A), we notice that the CIT(A) has not gone into the merits of the issue and has merely confirmed the addition relying on AO's findings. In this regard, it is relevant to note here that the coordinate bench while considering the issue of addition made based on similar entries found during the search of M/s Evergreen Enterprises pertaining to another assessee namely Mayur Kanjibhai Shah (ITA No.3243/Mum/2023 dated 31.01.2024) has held that - 9. Heard the parties and perused the material available on record and given thoughtful consideration to the rival claims of the parties and peculiar facts and circumstances of the case. It is very much clear from the impugned order that the same is an un-reasonable order and passed in cryptic manner, therefore, on this aspect itself, the impugned order is liable to be set aside.
Parag Motilal Savla However still we want to go to the merits of the case. We observe that the Assessing Officer made the additions mainly on the ground that Shri Nilesh Bharani in his statement recorded under section 132(4) of the Act has admitted that he was in the business of lending/ borrowing money in cash (unaccounted and undisclosed business). Further, in the course of search, a diary has been seized wherein inter-alia following entries have been recorded and the Assessee"s name is also appearing in the same diary in coded word. For clarity ready reference, we are again reproducing the entries relied upon by the Assessing Officer- "i) Code 'E/11/N'- ii) Name as per Ledger 'NENSIBHI ELLA' iii) Coded Amount (in '000)-32500 iv) Contact person 'NANCYBHAI - v) F.Y. 2011-12
10. It is an admitted fact that the Assessing Officer has not entertained the Assessee’s request for cross examination of Shri Nilesh Bharani / M/s Evergreen Enterprises and also it is a fact that Shri Nilesh Bharani subsequently retracted his statement. Therefore, his statement made earlier become doubtful as claimed by the Assessee and cannot be relied as substantive evidence. Even otherwise, we have failed to understand that how the name as mentioned in the said diary, as 'NENSIBHI ELLA' can be attributed to the Assessee"s name. Further, how the coded amount of Rs.32,500 can be construed as Rs.3.25.000,00/- Further, how the Assessee is connected with the said narration of entries written in diary. Further, as per Assessee"s claim, the mobile number noted in said diary is even otherwise do not belong to the Assessee and the Assessing Officer also failed to verify the owner of the said number to connect with the Assessee.
11. We by giving thoughtful consideration to specific facts and circumstances of the case, are of the considered view, that retracted statement of Shri Nilesh Bharani/ M/s Evergreen Enterprises who otherwise neither named nor specified the role and also not connected the Assessee specifically and the aforesaid facts/entries made in the diary as noted above by us, in fact, is not at all substantive material to make and sustain the addition as done by the authorities below in this case and, therefore, we are inclined to delete the addition. Consequently, the addition under consideration stands deleted. 10. The facts and circumstances of assessee's case is identical, where the AO has interpreted the alphabets and the figures in the similar manner to hold that the assessee has given cash loans to Shri Nilesh Bharani. Further in assessee's case nothing has been brought on record by the AO to substantiate the allegation that the assessee has entered into the impugned transactions. In view of the above discussion and considering the facts and circumstances of the present case, we are of the view Parag Motilal Savla that the addition made by the AO without bringing any concrete evidence on record incriminating the assessee is not sustainable. Accordingly we hold that the addition of Rs.21,50,000 made by the AO is hereby deleted.”
The facts and issues involved in the present case are identical as the quantum addition in the present case has also been made on the basis of same disclosure from seized documents and on the basis of the statements of the partner, accountant and account assistant of M/s. Evergreen enterprises. We further notice that learned CIT(A) has made no endeavour to logically elaborate the issues and give finding in the spirit of section 250(6) of the Act. We are in respectful agreement with the findings arrived at by the co-ordinate bench of this Tribunal in assessee’s own case for A.Y. 2012-13. We accordingly delete the aforesaid addition made on account of unexplained cash u/s. 69 of the Act. The issue relating to the quantum addition raised through ground no. 4 and 5 is decided in favour of the assessee.
As the main issue of quantum addition has been determined in favour of the assessee on merit. We are thus not inclined to adjudicate the remaining legal issues arising out of ground no. 1 to 3.
In the result, the assessee’s appeal is partly allowed. Order pronounced in open court on 06.01.2025.