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Income Tax Appellate Tribunal, “A” BENCH, MUMBAI
Before: SHRI MAHAVIR SINGH, JM & SHRI N. K. PRADHAN, AM
PER MAHAVIR SINGH, JM: These cross appeals, by the assessee and by the Revenue, are arising out of the order of CIT(A), Mumbai, in Appeal No. CIT(A)-39/IT-342/09-10 dated 23.01.2012. The Assessment was framed by ACIT, Central Circle-24 & 26, Mumbai for the A.Y. 2005-06 vide his order dated 23.012.2009 under section 143(3) read with section 153A of the Income Tax Act, 1961(hereinafter ‘the Act’).
The first issue in this appeal of the assessee is as regards to the order of CIT(A) enhancing the addition to Rs.2,03,50,000/- from the addition made by A.O. of Rs.1,37,60,800/- on account of cash payments made for purchase of shop. For this, the assessee has raised following ground no. 3: & 2584/Mum/2012 (A.Y. 2005-06) Shri Lakhmichand D. Rohira
The learned CIT(A)(A) has erred in confirming the addition of Rs.1,37,60,800/- and further erred in enhancing the said addition to Rs.2,03,50,000/- alleged cash payment made by the assessee towards the purchase of shops. 3. Briefly stated facts are that a search and seizure action u/s. 132 of the Act was conducted on the residential and business premises of the Bindra Group of cases on 08.05.2007. The assessee was also covered in the search operations. As there was rough working for proposal for purchase of shops in loose papers found during the course of search, the A.O. noted that the assessee has paid his pro rata shares as cash payments to the builder for purchase of pro rata shares in the shops. Accordingly, placing reliance on entries in the loose papers, the A.O. made addition of Rs.1,37,60,800/-. Aggrieved, the assessee preferred an appeal before the ld. CIT(A), who enhanced the addition at Rs.2,03,50,000/-. Aggrieved, now the assessee is in second appeal before the Tribunal.
At the outset, the ld. Counsel for the assessee filed copies of Tribunal order in assessee’s co-partner in the firm Satnam Sakhi & Associates, namely Umesh I. Israni in for A.Y. 2005-06, wherein Tribunal after considering all the seized papers has deleted the additions vide para 11 to 15 as under:
11. The entire addition has been made on the analysis of the loose paper as exhibited at page-34 of the Paper Book is attached as Annexure-II 12. On the analysis of the aforementioned papers, the AO came to the conclusion that cash payment amounting to Rs. 3,44,02,000/- have been made out of which 24% share is of Shri Umesh I. Ishrani and his family, 36% is of Mr. Ghanshyam L. Bodani and his family and the balance of 40% is of Shri Laxmichand Rohira and his family. Accordingly, the AO made addition of Rs. 82,56,480/- being 24% of Rs. 3,44,02,000/- in the hands of Shri Umesh I. Ishrani and Rs. 1,23,84,720/- in the hands of Mr. Ghanshyam L. Bodani being 36% of Rs. 3,44,02,000/-. 12.1. When these loose papers were confronted to the assessee during the course of the assessment proceedings, the assessee completely denied of having any knowledge in respect of these loose papers. It was strongly contended that since these papers were not 8552/M/10 ITA No. 4022/M/14 & 507/M/2011 7 found from the possession of the assessee, no adverse inference can be drawn against the assessee. 13. We have given a thoughtful consideration to the impugned seized materials relied upon by the AO. The relevant documents have been exhibited elsewhere. A perusal of these documents shows that the entries made in these papers nowhere mentioned that they are payments made by some person, it can be vice versa also. Meaning thereby these entries may reflect the receipt of money.
& 2584/Mum/2012 (A.Y. 2005-06) Shri Lakhmichand D. Rohira
The Hon’ble Jurisdictional High Court in the case of Miss Lata Mangeshkar 97 ITR 696 has held that some entries in the accounts regarding payments was not sufficient as there was no guarantee that the entries were genuine. The entire addition have been made on the basis of the entries found in loose sheets being alleged payment on account of shop purchased from one M/s. Everest Developer. Surprisingly and for the reasons best known to the Revenue authorities, no enquiries have been made from M/s. Everest Developer. There is not even a whisper of any reference to any enquiry/verification from the seller of the shops and that is M/s. Everest Developer. Thus, it can be safely concluded that the entries found in the loose sheet have not been corroborated by the Revenue by any cogent material evidence on record. On identical set of facts, it would not be out of place to refer to the decision of the Tribunal, Delhi Bench in the case of Amarjit Singh Baskhi HUF Vs ACIT 263 8ITR 75 (Del.)(Trib.)™ wherein the majority view held as under : “ Held, per R.M. Mehta (Vice President) and R.K. Gupta (Judicial Member) (Sikander Khan (Accountant Member) (dissenting) that the provisions of the Indian Evidence Act are not strictly applicable to the proceedings under the Income-tax Act, 8552/M/10 ITA No. 4022/M/14 & 507/M/2011 8 but the broad principles of the law of evidence apply to such proceedings. Further an entry in the books of account maintained in the regular course of business is relevant for purposes of considering the nature and impact of a transaction, but notings on slips of paper or loose sheets of paper cannot fall in this category. Notings on loose sheets of paper are required to be supported/corroborated by other evidence which may include the statement of a person, who admittedly is a party to the notings. A further distinction had to be drawn between slips of paper or loose sheets found from the possession of the assessee and similar documents found from a third person. In case the statement of the third person is recorded with reference to the notings, then such a statement undoubtedly has to be confronted to the assessee and he is to be allowed an opportunity of cross-examination. In the present reference the document in question had not been found from the assessee’s possession, but from the possession of A and undoubtedly no opportunity of cross examination had been allowed to the assessee and it had clearly emerged from the record that the testimony of A was not credible at all since in three separate statements he had indicated different figures, his secretary, G, had given yet another figure and in proceedings before the two different courts at Delhi and Dhanbad, he had given a different picture altogether and, lastly, in his income-tax assessment he had retracted from all his earlier statements and had categorically stated that the document which had been signed both by him and by the assessee contained only projections and purported figures in respect of the property in question. In other words, the entire addition in the hands of the assessee was based on the document found, but there was no evidence to support the Revenue’s case that a huge figure & 2584/Mum/2012 (A.Y. 2005-06) Shri Lakhmichand D. Rohira whatever be its quantum over and above the figure booked in the records and accounts changed hands between the parties. No addition could therefore be made to the income of the assessee.”
15. Considering the peculiar facts of the case that the impugned loose papers were found from the premises of a third party, in our considered opinion, the additions made in the hands of the assessees without bringing any corroborative evidence on record and without there being any enquiry from the seller M/s. Everest Developers, the additions made cannot be sustained as the Revenue has grossly failed in discharging the onus cast upon it for the simple reason that the presumption raised vide provisions of Sec. 132(4A) and 292(C) of the Act do not apply in the case of the assessee . We, therefore, do not find any force in the additions made by the AO and confirmed by the 8552/M/10 ITA No. 4022/M/14 & 507/M/2011 9 Ld. CIT(A) in the light of the decision of the Hon’ble Jurisdictional High Court in the case of Miss Lata Mangeshkar (supra). We, therefore, set aside the findings of the Ld. CIT(A) and direct the AO to delete the impugned additions from the hands of the assessee.
In view of the above, the ld. Counsel for the assessee stated that the issue is covered in favour of the assessee by the decision of the Tribunal in the case of other partner and according to him the same should be followed. When this was confronted to the ld. CIT-DR, he also agreed that the issue has been decided by the tribunal in other partner’s cases, but he relied on the orders of the lower authorities.
As the issue is covered in favour of the assessee by Tribunal’s decision in other partners cases, namely Umesh I. Israni in vide order dated 14.10.2015, respectfully following the same we also delete the addition and allow this issue of the assessee’s appeal.
7. The next common issue in these appeals of assessee and of Revenue, is against the order of CIT(A) confirming the addition made by the A.O. of Rs.50,18,750/- out of total addition of Rs.1,82,50,000/- made on account of cash receipts from clubbing income. For this, the assessee has raised following ground no. 4:
4. The learned CIT(A), has erred in upholding an addition of Rs.50,18,750/- out of total addition of Rs.1,82,50,000/- made by the Assessing Officer on the ground that the assessee has received income Rs.13,750/- per day from the social club.
8. The Revenue has also raised following ground: a. On the facts and the circumstances of the case and in law, the Ld. CIT(A) erred in directing the A.O. to reduce the addition & 2584/Mum/2012 (A.Y. 2005-06) Shri Lakhmichand D. Rohira
made in the hands of Shri Lakhmichand Rohira from Rs.50,000/- p.m. to Rs.13,750/- p.m. as receipts from the business activity of M/s. Shree Ram Social Club.
8. Brief facts in this issue are that the Assessing Officer after going through the statements of employees and assessee’s statement recorded u/s. 132(4) of the Act concluded that the assessee must be having 50% share in daily income of the club amounting to Rs.50,000/- and, accordingly, he extrapolated this amount from A.Y. 2002-03 till the date of search. Accordingly, he made addition of Rs.1,82,50,000/-. Aggrieved, the assessee preferred appeal before the CIT(A).
The CIT(A) after going through the submissions and documents restricted the addition at Rs.13,750/- per day as against estimated by the A.O. at Rs.27,500/- per day. Aggrieved, both the Revenue as well as the assessee came in appeal before Tribunal.
At the outset, ld. Counsel for the assessee filed copy of Tribunal’s order in assessee’s own case for other assessment years, i.e., A.Y. 2002-03 to 2004-05 and A.Y. 2006-07 to 2007-08 in to 2463/Mum/2012 and also ITA No. 2465 to 2467/Mum/2012 vide order dated 30.11.2015. According to the ld. Counsel the tribunal had restricted the addition to Rs.31,89,550/- after adopting a formula at pg. 27 para 8, 9.1 & 9.2 as under:
We have considered the rival submissions and perused the materials on records. We find that the assessee in his statement before the search team stated on oath that the daily income ranges between Rs. 45,000/- per day to Rs 55,000/- and the ld CIT(A) took Rs. 55,000/- to extrapolate the income for the entire year. Besides the income was estimated for all 365 day without giving any allowance for holidays/closed days during which the club was closed. As stated above the assessee submitted before us that the allowance should be given for 30 days in year. Ld AR for the assessee also submitted that the income estimated on particular day is for the current year and same formula cannot be applied for all the preceding years covered under the search. On the basis of arguments of both the sides we find that some more fairness has to be there in estimating the income in question. Accordingly the income is calculated by taking Rs. 50,000/- as gross receipt, allowing 15 days to the assessee in each year for non functional days in a year as per Table-A and also by taking income by 10% progressive basis as per Table-B as under:- TABLE – A & 2584/Mum/2012 (A.Y. 2005-06) Shri Lakhmichand D. Rohira
Sr. Particulars Rs. No. 1 Average receipts per day 50,000 2 Less : 50% of the gross receipt spent on 25,000 account of expenditure viz. salary to employees, rent of premises paid to Mr. D. S. Bindra, tea & snacks to the members and some other incidental expenses. 3 Net receipts per day 25,000 4 50% share of the assessed 12,500 5 Net income per day of the assessee. 12,500
9.1. Calculation of income on progressive basis @ 10% as under:- TABLE-B Sr. Assessment Income per Income per annum Relief granted to No. Year day (Rs.) by taking 350 the assessee working days (Addition (Rs.)(365 days- 15 confirmed by days) CIT(A) Rs. 50,18,750-C) A B C D 1 2008-09 12,500 4,43,750* 1,94,300* 2 2007-08 11,250 39,37,500 10,81,250 3 2006-07 10,125 35,43,750 14,75,000 4 2005-06 9,113 31,89,550 18,29,200 5 2004-05 8,202 28,70,700 21,48,050 6 2003-04 7,382 25,83,700 24,35,050 7 2002-03 6,644 23,25,400 26,93,350 Total 1,88,94,350
(Figure marked * is arrived at by taking period from 1.4.2007 to 07.05.2007 after reducing 3 non-working days i.e. 37-1.5=35.5 days and Addition confirmed by CIT(A) was Rs. 6,38,050/-.) 9.2 In view of the above the addition is deleted to the extent of Rs.26,93,350/- out of Rs. 50,18,750/- by sustaining the addition of Rs. 23,25,400 and thus the ground is partly allowed. The AO is directed to compute the tax accordingly. This will take care of the corresponding appeal of the revenue.
In view of the above view taken by the Tribunal, wherein Tribunal has restricted the addition at Rs.31,89,550/- in other years, ld. Counsel for the assessee fairly agreed that the same can be followed in assessee’s case also. When this was confronted to the ld. CIT-DR, he relied on the orders of the lower authorities. & 2584/Mum/2012 (A.Y. 2005-06) Shri Lakhmichand D. Rohira
We find that this issue is squarely covered by Tribunal’s decision in assessee’s own case for earlier year and future years, which were the subject matter of search and documents were found, respectfully following the same, we also restrict the addition at Rs.31,89,550/- as computed by Tribunal. This issue of assessee is partly allowed and that of the Revenue is dismissed.
The next common issues in this appeal of assessee is raised by way of following ground nos. 5, 6, 7 and additional ground is regarding not allowing telescoping benefit by the AO or by the CIT(A) in respect of unexplained investment made in shops against income from social club, not giving benefit of telescoping as income on account of cash discrepancies, not giving benefit of telescoping in respect of gift received amounting to Rs.6,81,937/-. For this, the assessee has raised following ground nos. 5, 6 and 7:
5. The learned CIT(A) has erred in not giving benefit of telescoping in respect of unexplained investments in shops against income from social club as confirmed by him for current and previous assessment years.
6. The learned CIT(A) has erred in not giving benefit of telescoping in respect of Rs.4,56,290/- declared by the assessee as income on account of cash discrepancies.
The learned CIT(A) has erred in not giving benefit of telescoping in respect of gifts received against income from social club for current and previous assessment years.
14. At the outset, ld. Counsel for the assessee only requested for telescoping of the income admitted by the assessee as well as addition sustained by CIT(A) on account of cash receipts from clubbing income. According to the ld. Counsel, this issue is covered in assessee’s own case for other assessment years A.Y. 2002-03 to 2004-05 and A.Y. 2006-07 to 2007-08, wherein Tribunal vide para 10, 10.1, 10.2: 10. The next issue raised in the assessee’s appeal for AY 2002- 03 is with regard to not giving the benefit of telescoping in respect of Rs.3,94,689/- declared by the assessee as income on account of cash discrepancies. 10.1 In this regard, the stand of the assessee has been that the assessee in his return of income declared an amount of Rs.3,94,689/- u/s. 132(4) of the Act as income on account of cash discrepancies. This income was offered as there were cash shortfall, source of which could not be explained. In this regard, the stand of the assessee has been that for AY 2002-03, the assessee has estimated his club income of Rs.9,87,915/- as per submissions before us. Since there was no other income, the cash discrepancy of Rs.3,94,689/- was out of club income only, which has already been offered in his return of income. Hence, he submitted that telescoping benefit should be given & 2584/Mum/2012 (A.Y. 2005-06) Shri Lakhmichand D. Rohira
and taxable income should be reduced upto the extent of Rs.3,94,689/-. The ld DR relied on the orders of authorities below. 10.2. We have heard the rival submissions and perused the material available on record. In the earlier issue , the income of the assessee from the club as sustained by us is Rs. 23,25,400/- and since the assessee has no other income as found during the search, order of CIT(A) rejecting the telescoping benefit to the assessee cannot be sustained. In our view the income of the assessee for the instant year is sufficient to take care of the short fall of Rs. 3,94,689/- and therefore we delete the addition of Rs. 3,94,689/-. In result the this ground is allowed in favour of the assessee. The AO is directed to compute the taxable income accordingly.
Respectfully following the Tribunal’s finding above, we direct the A.O. to allow telescoping in the above grounds in this year also. We direct the A.O. accordingly.
In the result, the assessee’s appeal is partly allowed and the Revenue’s appeal is dismissed. Order pronounced in the open court on 27-09-2017.