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Facts
A survey operation was conducted on the Kaveri Group in Ranchi on 04/10/2017, leading to the impounding of documents, books, and computer data. Statements were recorded from various Directors/Proprietors/Partners, and the assessees declared additional income totaling ₹ 6.40 crores. The Assessing Officer (AO) subsequently made protective and substantive additions, treating the entire receipts from impounded diaries/registers as undisclosed income, leading to total additions of ₹ 52.10 crores and an overall assessment of ₹ 63.20 crores. The CIT(A) reduced these additions, estimating income at 25% of the receipts found.
Held
The Tribunal largely upheld the CIT(A)'s view that assessees were entitled to claim expenses and only gross profit (GP) should be added. For Kaveri Restaurant (AY 2012-13, 2013-14, 2016-17), the AO was directed to assess GP at 15% of the difference between impounded figures and book entries. For Kaveri Restaurant (AY 2017-18), additions based on extrapolation were deleted due to lack of evidence, and for AY 2018-19, the issue of cash and stock found during the survey was remanded to the AO for verification against books, with no addition to be made if recorded. Protective additions were deleted, and substantive ones modified. An addition for delayed PF/ESI payment for Dinanath Hotels (AY 2018-19) was accepted.
Key Issues
The key legal issues involved the validity of income additions based on seized handwritten documents, the appropriate method for estimating undisclosed income (percentage of receipts versus full amount), the treatment of protective additions, and the verification of cash and stock found during the survey.
Sections Cited
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Income Tax Appellate Tribunal, RANCHI BENCH, RANCHI
Before: SHRI GEORGE MATHAN & SHRI RATNESH NANDAN SAHAY
Assessee represented by Shri R.R. Mittal, A.R. Department represented by Smt. Rinku Singh, CIT-DR Date of hearing 13/06/2025 Date of pronouncement 13/06/2025 O R D E R PER: BENCH 1. All these appeals filed by the assessees and the revenue against the orders of the ld. CIT(A)-3, Patna dated 16/06/2023, 19/06/2023, 03/07/2023, 05/07/2023 and 07/07/2023 for the A.Ys. 2012-13, 2013-14, 2016-17, 2017- 18 and 2018-19 respectively. As all these appeals relate to the Kaveri group and have foundation on the survey statement and survey documents found in the course of survey, the appeals are being disposed off by this common order.
Shri R.R. Mittal, ld. AR is represented on behalf of assessee and Smt. Rinku Singh, ld. CIT-DR is represented on behalf of the revenue.
The facts in the present group of cases are that there was survey operation on so called Kaveri Group in Ranchi on 04/10/2017. The survey was conducted on the business premises covered being Hotel Capitol Hill and Hotel Capitol 3 Baljeet Bhatia Vs ACIT & Ors appeals (Kaveri Group) Residency, these are two hotels, Punjab Sweet House which is a sweet shop, new Kathi kabab, which is a takeaway and Kaveri restaurant, which is also a restaurant. During the course of survey, various documents, books of account and computer datas were found and impounded. A survey statement had been recorded from various Directors, Proprietors, and partners of the said Kaveri Group. It was submitted by the ld. Authorised Representative that interestingly, all the statements recorded were inverbatim same. There were also impounded documents found which are handwritten. On the basis of impounded document, various assessees declared income at the time of statement. It was a submission that he did not wish to go any further than making so much of the statement. It was a further submission that in the course of survey, in all the premises surveyed, old diary/register containing one page/ several pages having written in respect of banquet receipts/sales were found for the period November, 2016 to June 2017 and for other periods, nothing else was found in any of the premises except in the case of Kaveri Restaurants where certain details and receipts were found. It was a submission that the diary/register entries were only in regard to the banquet receipts or catering receipts or restaurant receipts. Each of those old diary/register entries of one page had the names of the various Directors individually or the proprietors or the partners. It was a submission that consequent to the survey, the assessees had declared additional income of ₹ 6.40 crores. The assessees had filed their returns in their individual status and in respect of the proprietorship concerns disclosing the agreed disclosure totaling to ₹ 6.40 crores and paid taxes. The assessments came to be completed as shown in the chart as follows:
Baljeet Bhatia Vs ACIT & Ors appeals (Kaveri Group)
Baljeet Bhatia Vs ACIT & Ors appeals (Kaveri Group) It was a submission that the Assessing Officer had made protective additions in the hands of the firms and substantive addition in the hands of the Directors/Partners/Proprietors where declarations had been made. The Assessing Officer treated the entire receipts as per the said diary/register as the undisclosed income of the assessee. The total addition made was to an extent of ₹ 52.10 crores resulting into total assessment of ₹ 63.20 crores. It was a submission that the so called diary/register entries and the statement recorded showed that the assessees had agreed in the statement that the receipts were in their entirety the income and no expenses was allowable. The samples of the statements and the seized materials are as follows:
Baljeet Bhatia Vs ACIT & Ors appeals (Kaveri Group) Baljeet Bhatia Vs ACIT & Ors appeals (Kaveri Group) Baljeet Bhatia Vs ACIT & Ors appeals (Kaveri Group) Baljeet Bhatia Vs ACIT & Ors appeals (Kaveri Group) Baljeet Bhatia Vs ACIT & Ors appeals (Kaveri Group)
It was a submission that on appeal the ld. CIT(A) had accepted the contention of the assessee that the total receipts could never be the income in so far as the entries in the diaries would give the impression that in respect of the banquets and the catering, the assessee is charging nearly ₹ 20,000/- per plate when considering the capacity of the banquets and this too during the Baljeet Bhatia Vs ACIT & Ors appeals (Kaveri Group) assessment year 2017-18 and 2018-19 and more so in a place like Ranchi. It was a submission that consequently, the ld. CIT(A) had reduced the additions made by the Assessing Officer in the substantive hands and had estimated the income of the assessee by estimating the same to be 25% of the receipt found in the impounded documents. It was a submission that in respect of the protective additions the ld. CIT(A) held that as the additions have been modified and adjusted in the hands where the substantive additions have been made no additions were required to be made in the hands where such protective additions have been made. It was a submission that this addition at 25% of the alleged banquet receipts, restaurant receipts and catering receipts as made by the ld. CIT(A) was in affected enhancement and this was done without issuing an enhancement notice to the assessee and therefore, the same is liable to be deleted. It was a submission that in the case of Kaveri Restaurant for the A.Y. 2018-19, the issue of closing stock of ₹ 4.79 lacs and the addition representing the cash found in the course of survey, though challenged was not adjudicated by the ld. CIT(A), it was a submission that the assessee has shown the said stock in his closing stock in the books and the cash was also as accorded in the books of assessee and therefore, the additions were liable to be deleted. It was a further submission that in respect of Dinanath Hotels Pvt. Ltd. for the A.Y. 2018-19, the Assessing Officer had made an addition under head delayed payment of PF and ESI to an extent of ₹ 6,94,602/- and the same is not challenged by the assessee and the same stands accepted. It was a further submission that in respect of Kaveri restaurants for the A.Y. 2012-13, 2013-14 and 2016-17, certain additional Baljeet Bhatia Vs ACIT & Ors appeals (Kaveri Group) papers had been found and the Assessing Officer had made additions on the basis of such materials taking the total amount as receipts and the ld. CIT(A) had reduced the same to 25% of such value of the documents found. It was a submission that the assessee has declared an income at lean than 15% and therefore, the rate of 25% applied is far excessive. The assessee had declared a 12% profit. It was submission that 25% estimated by the ld. CIT(A) is excessive and the same may be reduced. It was a further submission that the additions as made by the ld. CIT(A) is liable to be deleted.
In reply, the ld. CIT-DR submitted that in the case of Kaveri restaurant, only for the A.Y. 2017-18, the projection has been done by the Assessing Officer and for the A.Y. 2012-13, 2013-14 and 2016-17, the Assessing Officer has treated the entire receipts as per the seized documents as the income of the assessee. It was a further submission that for the A.Y. 2012-13, 2013-14 and 2016-17, the difference between the impounded documents in the case of Kaveri restaurant and the amounts has recorded in their regular books was treated as income of the assessee. It was a further submission that in regard to the claim of the assessee that there is enhancement made by the ld. CIT(A), the same is not acceptable. It was a submission that the ld. CIT(A) has reduced the income assessed by the Assessing Officer which is based on the seized material and the statements recorded in the course of survey. It was a submission that it is not a case of enhancement but it is a case of reduction of the addition. It was a submission that the revenue is in challenge against such reduction. It was a submission that the amounts as assessed substantially by the Assessing Officer is liable to be upheld. It was a submission that in respect Baljeet Bhatia Vs ACIT & Ors appeals (Kaveri Group) of Kaveri restaurant for the A.Y. 2018-19, the cash and stock as recorded in the book may be verified and if the same have been found to be recorded as on the date of survey the same may be deleted.
We have considered the rival submissions. A perusal of the chart as submitted by the ld. Authorised Representative which have been extracted above, clearly shows that the claim of the ld. AR that there has been enhancement does not stand substantiated. A perusal of the statement recorded also clearly gives the indication that all the statements have been prepared together and it is not a statement recorded in the course of the survey. The claim of the ld. Authorised Representative that if the statements as found in the diary is considered and the banquet hall capacity is only 300 person admittedly it would have to be considered that the entire amounts mentioned in those diaries cannot be treated as the undisclosed income of the assessees. To this extent we are of the view that the ld. CIT(A) is right in holding that the assessee is entitled to a claim of expenses and only the GP is liable to be added. Here we notice that on the basis of such claim of expenses, the assessee group itself has disclosed ₹ 6.40 crores in various hands as has been shown in the chart. A perusal of the additions as confirmed by the ld. CIT(A) clearly shows that the additions in respect of the income estimated are much higher than the income disclosed by the assessee in its returns as additional income as these the additions as confirmed by the learned. CIT(A) is higher than the amounts as disclosed by the assessee in their returns admitting the additional income on the basis of such recordings in the diary. In short, in the chart, the column marked as additions confirmed by the ld. CIT(A) would stand deleted except in the case of Baljeet Bhatia Vs ACIT & Ors appeals (Kaveri Group) Dinanath Hotels Pvt. Ltd. for the A.Y. Year 2018-19 to an extent of ₹ 6,92,602/- representing the delayed payment of PF and ESI.
Coming to the appeals in the case of Kaveri restaurant for the A.Y. 2012-13, 2013-14 and 2016-17, it is noticed that the Assessing Officer has added the difference between the figures as determined in the impounded documents and as recorded in the books of the assessee. In regard to the same, as it is noticed that the impounded documents showed a higher figure and there is a difference between the impounded documents and the amounts as recorded in the books, the Assessing Officer is directed to assess the GP on the same at 15% of the difference between the amounts disclosed in the books and as recorded in the impounded documents. In short, for the A.Y. 2012-13, 2013-14 and 2016-17 in the case of Kaveri restaurant, the Assessing Officer shall estimate an additional income at 15% of ₹ 12,10,005/- for the A.Y. 2012-13, 15% of ₹ 85,58,763/- for the A.Y. 2013-14 and 15% of ₹ 1,50,87,663/- for the A.Y. 2016-17. For the A.Y. 2017-18, in the case of Kaveri restaurant, as the undisclosed income has been estimated by extrapolation without any documents, the addition as made stands deleted in its entirety. No presumption of undisclosed sales can be made without there being any iota of evidence. In regard to Kaveri restaurant for the A.Y. 2018-19, the issue of addition representing the cash found in the course of survey and the stock found in the course of survey is restored to the file of the Assessing Officer to examine from the books of account of the assessee the amounts that have been disclosed by the assessee in its books. If the cash is found recorded as on the date of