METAL TUBE AND ROLLING MILSS,MUMBAI vs. INCOME TAX OFFICER 24(2)(1), MIUMBAI

The appellant assessee has approached this tribunal on the following grounds:

Addition of Rs. 49,69,802/- u/s 69A under the head of "Undisclosed Cash Deposits" on cash deposits to the account of Mahendra Vora. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in partly confirming the addition made by Ld. AO on account of cash deposit of Rs. 49,69,802 out of Rs. 88,79,022/-.

In response to the notice issued by the tribunal, learned DR appeared and participated in the proceedings.

None responded for the assessee, however learned DR is present on behalf of revenue. Perused the records and heard learned DR. The appeal is being disposed off ex-parte on merit.

As regards first issue raised in this appeal, it is noticed that the assessee made purchases of raw materials for an amount of Rs. 4,07,597/- from four entities tabulated in para 2(i) above. These entities were found to be bogus entities on the basis of the information received by assessing officer from DGIT, Mumbai. These entities are said to have never sold any goods, but have issued bogus bills to the beneficiary on commission basis. The bogus bills have been raised by the said Hawala operators and upon receipt of cheque against the bogus bills, the amounts have been withdrawn by these entities in cash and is said to be returned to the beneficiary in cash. Learned CIT(A) has noticed that assessee made similar 6 Metal Tube and Rolling Mills purchases from tainted entities for a much bigger volume in the immediately preceding assessment year. It was further found by learned CIT(A) that one of the group entities namely M/s. Rasiklal Kantilal & Co. had also resorted to such purchases from these tainted entities. According to revenue, assessee has purchased goods from grey market. We notice that the assessee failed to furnish details regarding the transport of such goods such as Toll tax receipts, Weigh bridge receipts etc. Appellant assessee has also failed to point out any error in the impugned order, hence, learned CIT(A) has rightly upheld the above addition. The first issue is thus decided against the assessee.

As regards the second issue raised in the second ground of appeal, the relevant part of impugned order passed by learned CIT(A) reads as under: “ 2.2. The assessee has explained before the AO that there is no denial of the fact that cash was paid in the bank account of that individual. However, it also claimed that the entire cash deposited of Rs. 88,79,220/-, was made by Group entity M/s. Rasiklal Kantilal & Co. The said Group entity has not only owned up such cash deposit, but also has offered the same as unaccounted income before the Hon'ble Settlement Commission in a petition u/s. 245C of the Act. Such application was also accepted by the Hon'ble Commission and an order u/s. 245D(4) was passed accepting such offer. The assessee claimed the same cash had been rotated through that of the assessee firm and therefore, since it has already been taxed, so any further addition would tantamount to double taxation. Therefore, such addition may be deleted. 2.3. I have perused the extract of cash deposit and withdrawal in the bank account of Shri Mahendra Vora and I have also seen the individual ledger of that gentleman in the accounts of the assessee firm. From the individual ledger, I find that the said individual had a credit balance of Rs. 4,00,000/- as on on 01/04/2009. During the year, the assessee received further Rs. 41,70,000/- from the individual on various dates and the assessee had deposited Rs. 49,70,000/- in the bank account of Shri Vora on various dates. The closing balance as on 31st March was a debit balance of Rs. 4,00,000/- in the account. I have further perused the extract of deposits as submitted before me, being the extract of savings bank account of Shri Vora and compared the same with the ledger of Shri Vora with the assessee firm. On such comparison, I find most of the entries of receipt and payments in cash by the assessee 7 Metal Tube and Rolling Mills firm from Shri Vora is not matching with the bank account extract of Shri Vora, as submitted by the assessee firm themselves during the appeal proceedings. 2.4. Therefore, I have grave doubt that the amount offered before the Hon'ble Settlement Commission and the amount found in the ledger of the assessee firm with Shri Vora are the same. Therefore, I do not find merit in the submission of the assessee firm to accept that the cash deposited in the bank account of Shri Vora was of the Group Associate Entity, M/s. Rasiklal Kantilal & Co. 2.5. Therefore, I am ready to accept the proposition of the AO. However, I also find that during the year, as per the ledger, the amount of cash paid to Shri Mahendra Vora by the assessee to be Rs. 49,70,000/- and therefore, I propose to sustain the addition only for Rs. 49,70,000/- u/s. 69A and the balance amount of Rs. 39,09,220/- may be deleted. 2.6. Therefore, the ground of appeal

This appeal has been preferred against the impugned order dated 10.04.2024 (impugned order wrongly mentioned as assessment order dated 28.03.2014 in form-36) passed in Appeal no. CIT(A), Mumbai-36/10211/2014-15 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.] 2011-12, wherein learned CIT(A) as partly allowed assessee’s appeal by deleting 10 Metal Tube and Rolling Mills the addition of Rs. 90,36,611/- but confirmed the addition of Rs. 1,26,55,000/- (enhanced addition Rs. 1,27,20,000/-) u/s. 68 of the Act against which, the appellant assessee is under appeal before this Tribunal.

The relevant part of para-5 of the impugned order, confirming addition reads as under: “……..On the second ground of addition for which assessee was aggrieved, was treatment of Rs. 1,26,55,000/-, alleging the said sum to be deposited by the assessee firm in the savings bank account of one Shri Mahendra Vora. The AO in his assessment order have found that the assessee has received a total sum of Rs. 1,26,55,000/- from Mr. Vora on different dates, as deposited through self cheques in assessee's bank account with Dena Bank, Gulalwan Branch. The assessee has also paid back to Shri Vora, the aggregate sum of Rs. 1,27,20,000/- through self cheques by depositing it in Mr. Voras savings bank account. On analysis of the said transactions and after examination of Shi Vora u/s. 131, the AO concluded that the money received by the assessee firm through the bank account of Mr. Vora belonged to assessee himself and he went on to add Rs. 1,26,55,000/- in the hands of the assessee u/s. 68 of the Act. The assessee before the AO also pleaded that Mr. Vora himself has admitted that the money advanced by him to the assessee firm belonged to M/s. Rasiklal Kantilal and Co. which was rotated through his bank account and extended to the assessee. The assessee also stated that the said Rasiklal Kantilal and Co. has already owned up such cash in its application for settlement of income before Hon'ble Settlement Commission and the Commission had accepted such offer. However, the AO was not convinced with such submission of the assessee and concluded that such money belongs to the assessee. I have perused the ledger of Shri Mahendra Vora as appearing in the accounts of the assessee along with the extract of cash deposits in the savings bank account of Shri Vora. As found in AY 2010-11, where similar issue was examined, I find that exactly in similar way, the dates of payments as reflected in the ledger with amounts of receipts as well as payment, as reflected in the books of accounts of the assessee is not exactly matching with that of the extract of the savings bank account passbook of Shri Vora. And, therefore, the statement that the deposits made in the bank account of Shri Vora is of cash of Rasiklal Kantilal and Co. and such cash was rotated through the bank account of Shri Vora to pass on to the assessee firm is not accepted. As per the ledger, the assessee made payment of Rs, 1,27,20,000/- in cash to Shri Vora. As per the ledger of AY 2010-11, there was closing debit balance of Rs. 4,00,000/- standing against the name of Shri Vora, receivable by the assessee firm from him. However, in the ledger submitted for AY 2011-12, the opening balance is shown as NIL. Therefore, the transaction seems very dubious and I hold that the entire payment made to Shri Mahendra Vora is nothing but unaccounted cash of the assessee, passed on to Shri Vora from time to time. Therefore, I propose to enhance the addition from Rs. 1,26,55,000/- to Rs. 1,27,20,000/- and treat such payment as unaccounted money in the hands of the assessee u/s. 69A. Therefore, ground of appeal of the assessee is rejected.”

The relevant part of para-4 of the impugned order confirming the above referred addition reads as under: “ During the course of the appeal, the assessee has submitted full details of the ledgers of the account heads of expenditures and each item has been explained properly. On perusal of the furnished document, it seems that the adhoc disallowance is unreasonable on part of the AO. Having said so, it is also seen from the submitted ledgers that the assessee have debited a sum of Rs. 6,17,855/- towards fees expense. Such fees expense is mostly towards consultancy fees paid to advocates. From the details of the ledger, I find that at least in six occasions of payment to different parties, inspite of the payment exceeding the maximum limit, for which the tax is not to be deducted at source u/s. 194J, the assessee firm has failed to deduct such tax at source. The amount involved in payment to these six entities/individuals was Rs. 4,22,080/-. Therefore, I find that the said sum qualifies for disallowance for deduction u/s. 40(a)(ia). Further, in the ledger of discounts allowed for a total sum of Rs. 6,31,682/-, I find that there are certain entries where no mention of the party to whom such discounts were allowed. The aggregate sum of such discount without the name of the buyer is found to be Rs. 3,62,491/-. Therefore, such discount is treated as doubtful. The rest of the expenditures claimed in the P/L account are accepted and allowed to be deducted as legitimate expenditure. Therefore, out of the disallowance of Rs. 27,40,947/-, a sum of Rs. 7,84,571/- is sustained and the balance amount of Rs. 19,56,376/- is deleted. The ground is, therefore, partly allowed.”

We find that learned CIT(A) has passed speaking and well- reasoned order and has confirmed part of addition of Rs. 4,22,080/- only to the extent of payment exceeding the 13 ITA no.3115,3114,3116/MUM/2024 Metal Tube and Rolling Mills maximum limit for which the TDS was not deducted u/s. 194J. This apart, partial confirmation of Rs. 362,491/- has been made only against specific entries, where the parties were not identified and to whom discount were allowed. Learned CIT(A) has left no stone unturned in taking out the grain from the chaff. We accordingly uphold the impugned order. The appeal is liable to be dismissed.

In the result, the assessee’s appeals no. 3115/MUM/2024, 3114/MUM/2024 and 3116/MUM/2024 are dismissed. Let the copy of this order be placed on the records of each appeal. Order pronounced on 29.10.2024.