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Income Tax Appellate Tribunal, MUMBAI BENCH “B”, MUMBAI
Before: SHRI G.S.PANNU & SHRI RAVISH SOOD
ORDER PER G.S.PANNU,A.M:
The captioned appeal filed by the assessee pertaining to assessment year 2005-06 is directed against the order passed by CIT(A)-36, Mumbai dated 30/05/2011, which in turn arises out of an order passed by the Assessing Officer under section 143(3) r.w.s. 153A of the Income Tax Act, 1961 (in short ‘the Act’) dated 31/12/2010.
The Grounds of appeal raised by the assessee read as under:-
“1. The learned CIT (A) has erred in law and on facts in upholding the order passed by the Assessing Officer u/s. 1 43(3) r.w.s. 153A of the Income-tax Act, 1961 .
2.The learned CIT (A) has erred in law and on facts in sustaining the addition of Rs.1,00,000/- on account of profit on unaccounted purchase and sale of gold.
3. The learned CIT (A) has erred in law and on facts in confirming the disallowance made by the Assessing Officer of Rs.1,40,678/- , being 1/6th of total car and telephone expenses for alleged personal use of car and telephone.
4. The learned CIT (A) has erred in law and on facts in sustaining the disallowance @15% of entertainment expenses for alleged personal user element imbibed in the, expenses.
The learned CIT (A) has erred in law and on facts in sustaining levy of interest u/s. 234B of the Income-tax Act.”
Before we proceed to take up the Grounds of appeal in seriatim, it may be noted that the appellant is a part of NIBR Bullion Group, wherein a search operation was carried out under section 132(1) of the Act on 25/09/2008. Consequent to the search, an assessment was finalized under section 143(3) r.w.s. 153A of the Act dated 31/12/2010 and the total income has been assessed at Rs.18,07,730/- as against an income of Rs.6,95,340/- as declared by the assessee in the return of income filed on 23/09/2009 in response to the notice issued under section 153A of the Act. Some of the additions have been deleted by the CIT(A) and not being satisfied with the order of the CIT(A), assessee is in further appeal before us by raising the above Grounds of appeal.
Grounds of appeal No.1 has not been pressed by the assessee, therefore, the same has been dismissed as not pressed.
5. The second Ground is with regard to the action of the CIT(A) in partly sustaining an addition Rs.1,00,000/-on account of profit on unaccounted purchases and sale of gold of Rs.12,00,000/- made by the Assessing Officer. In this context, the relevant facts are that assessee is a dealer in silver bars and gold bullion. The Assessing Officer referred to a pen drive seized in the course of search and as per discussion discussed in paras 8 to 8.7, he concluded that as on 07/12/2004 assessee was in possession of 2 kgs of gold valued at Rs.12,00,000/-. The Assessing Officer further noted that since assessee had offered Rs.2,60,000/- as an additional income for unaccounted trading in gold during assessment year 2004-05, he assessed the balance of Rs.9,40,000/- (Rs.12,00,000 minus Rs.2,60,000) as unexplained investment under section 69 of the Act. The CIT(A) has reduced the addition to Rs.1,00,000/- lac primarily on the ground that the seized material referred by the Assessing Officer contained certain transactions. The CIT(A) has noted that the quantity is purchased and sold on the same day and, therefore, assessee could not be assessed for 2 kgs of gold as on a single day on 17/12/2004; however, the CIT(A) noted the profit and the initial investment on this transaction could be taxed, and he accordingly sustained an addition of Rs.1,00,000/- and deleted the balance.
Before us, the Ld. Representative for the assessee pointed out that the pen drive relied upon did not belong to the assessee and in fact it does not refer to any dealing in gold bullion, rather the transactions reflected there are in yarn trading, etc., which obviously is not the line of business of the assessee. The Ld. Representative for the assessee explained that the pen drive was left behind by assessee’s Software Consultant and the contents itself show that they do not reflect the transaction of the gold bullion by the assessee.
On the other hand, the Ld. Departmental Representative has merely relied upon the order of the Assessing Officer in support of the case of the Revenue.
We have carefully considered the rival submissions. On this aspect we may briefly refer to para 17 & 18 of the order of the CIT(A). We find that after sustaining addition of Rs.1,00,000/- on estimation, the CIT(A) thereafter records that there was no material on record to prove that assessee had made investment in 2 Kgs. of gold in assessment year 2005-06. The CIT(A) further records that there is no evidence found that 2 Kgs of gold was purchased by the assessee and the value of such investment stand at Rs.12,00,000/-. The CIT(A) also gives a finding that the data in the pen drive was with reference to purchase and sale of yarn, which obviously is not the line of business of the assessee. Therefore, the CIT(A) came to a finding that ‘the AO was not justified in assuming that this data is relating to purchase and sale of gold.’ In our view, if such like findings were arrived at by the CIT(A) and which are not in challenge before us, no addition is maintainable based on the contents of the pen drive. Therefore, we delete the addition of Rs.1,00,000/- sustained by the CIT(A) also.
8.1 In the result, we direct the Assessing Officer to delete the addition of Rs.1,00,000/- also.
Grounds of appeal No.3 & 4 are against disallowance made out of car, telephone and entertainment expenses for alleged personal use on estimate basis. Quite clearly, the discussion in the assessment order on these aspects is contained in paras 6 & 7 of the assessment order. The entire discussion clearly suggest that there is no reference made to any incriminating material found in the course of search, which would justify such disallowances; and, the same have been made purely on an adhoc basis. Such like disallowances, which are de-hors any incriminating material found in the course of search are outside the scope and purview of an assessment made under section 153A of the Act, a proposition which is directly supported by the judgment of Hon'ble Bombay High Court in the case of CIT vs. All Cargo Global Logistics Ltd., 374 ITR 645(Bom), since the original assessment made under section 143(3) of the Act dated 26/4/2007 does not abate on the date of search. Therefore, following the said decision, such additions are directed to be deleted.
Before parting, we may make a note that so far as the disallowance made in the assessment originally finalized under section 143(3) dated 26/4/2007 are concerned, the same would not be effected by our aforesaid decision. Thus, in so far as the Ground of appeal No.3 &4 are concerned, the same are allowed as above.
11. The last Ground is with regard to levy of interest under section 234B of the Act, which is consequential in nature and does not require any specific adjudication.
In the result, appeal of the assessee is allowed, as above.
Order pronounced in the open court on 16/02/2018.