Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, MUMBAI BENCH “D”, MUMBAI
Before: D.T. GARASIA & SHRI N.K. PRADHAN
The above titled appeals by the Revenue and the cross objections by the assessee have been preferred against the order dated 20.08.2015 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment years 2008-09, 2009-10, 2010-11, 2011-12, 2012-13, 2013-14 & 2007-08.
2 & ors. Shri Dinesh Bhagji Sutar 2. The short facts of the case are that a search and seizure action u/s. 132 of the Income Tax Act, 1961 was conducted on 08/11/2012 by ADIT (Inv), Unit-V, Mumbai in the case of M/s. Gold Sukh Safety Vaults Ltd. wherein it was noticed that such vault company had issued the lockers to various parties without verifying the KYC details. The assessee was also covered under search and seizure action on 09/11/2012 since he was found as the holder of Locker No.574 held at M/s. Gold Sukh Safety Vaults Ltd. During course of search, the cash amounting to Rs.80,00,000/- was found from his Locker and in statement u/s 132(4) was recorded on 09/11/2012, the assessee admitted that the cash found of Rs.80,00,000/- is his unexplained and unaccounted money and consequently the entire cash of Rs.80,00,000/- was seized by the I.T department. The assessee, in response to notice u/s. 153A dated 13.03.2014 filed his return of income on 27.03.2014 for all the years disclosing the returned income as under: Asst. Year Returned Income 2007-08 Rs. 72,000/- 2008-09 Rs. 96,000/- 2009-10 Rs. 1,08,165/- 2010-11 Rs. 1,46,731/- 2011-12 Rs. 1,67,068/- 2012-13 Rs. 1,87,958/- 2013-14 Rs.76,75,201/- (Includes undisclosed income of Rs.75,00,000/-)
During the course of assessment, the Assessing Officer (hereinafter referred to as the AO) observed that the assessee in a statement recorded u/s 132(4) on 09.11.2012 has failed to explain the 3 & ors. Shri Dinesh Bhagji Sutar source of cash found from his locker. In reply to Q.No.13, the assessee confessed that the cash found was his unaccounted money and he had no objection for seizure of such cash. The assessee stated that he was involved in the business of money transfer wherein he had been delivering and collecting money as per the direction of his clients who are mostly in unorganized sector and he is charging commission of Rs.150 to 200 per Lac. The AO vide order sheet dated 06/01/2015 asked the assessee to substantiate and specify the manner in which the unaccounted cash found from his locker was earned by him and show cause as to why commission income from his business of money transfer should not be brought to tax for all 7 years relevant to A.Y.2007-08 to A.Y.2013-14. In response, the assessee filed his reply and relied on judicial decisions which had been reproduced in para 4.2 of the assessment order. The AO rejected the assessee’s submissions and made the addition of undisclosed commission income for all 7 years as under:
A.Y. Undisclosed Income offered Addition made income in return in assessment computed 2013-14 1,37,00,000 75,00,000 62,00,000 2012-13 1,14,00,000 90,000 1,13,10,000 2011-12 95,00,000 75,500 94,24,500 2010-11 79,00,000 55,500 78,44,500 2009-10 65,80,000 48,000 65,32,000 2008-09 54,80,000 44,000 54,36,000 2007-08 45,60,000 24,000 45,36,000
Matter carried to the Ld. CIT(A) and the Ld. CIT(A) has partly
4 & ors. Shri Dinesh Bhagji Sutar allowed the appeal by observing as under: “6. I have carefully considered the facts of the case, arguments advanced by Ld. AR and judicial decisions relied during course of appellate hearing and decide the grounds of appeal as under. 6.1 In ground No.1, appellant had disputed the validity of the assessment order since passed in an incorrect status of a "Company" on ignoring that the appellant is an "Individual". The Ld. AR argued that status of the appellant is an 'Individual' and return of income u/s 153A discloses the appellant's status as 'Individual', however, AO had incorrectly assessed the appellant in the capacity as a 'company' on disclosing, in column of status of the assessee, as a 'company', thus pleaded that the entire assessment order is bad in law.
6.2 I have carefully perused the assessment order, demand notice u/s.156 and facts of the case and do not agree to the arguments advanced by Ld. AR. It is true that AO at page-1 of the assessment order had disclosed the appellant as the "Company". However, it seems that it is a mere typographical error which cannot invalidate the entire assessment order. The PAN disclosed in the assessment order and also in demand notice u/s.156 as "CWUPS6156D" pertains to the appellant. The provision of Sec.29213 states that any mistake, defect or omission in the return of income, assessment, notices, summons or other proceedings which is in substance and effect in conformity with or according to the intent or purpose of IT Act shall not invalidate the assessment, notices, etc. Thus, following provision of Sec.292B and considering the typographical error of the assessing authority, I hold that the impugned assessment orders cannot be treated as invalid. Accordingly, Ground No.1 is hereby dismissed.
7. The next grounds No. 2.0 to 8.0 involves an identical issue relating to the addition of undisclosed commission income made in assessment orders, accordingly the same are hereby decided together.
7.1 It is an undisputed fact that during course of search and seizure action u/s.132 at appellant's premises on 09/11/2012, the unaccounted and unexplained cash of Rs.80,00,000/- was found and seized by the investigating authority. The appellant, in statement recorded
5 & ors. Shri Dinesh Bhagji Sutar u/s.132(4), in reply to Q.NO.8 admitted that such cash found of Rs.80,00,000/- is his unexplained and unaccounted money which have been kept in the vault held with M/s. Gold Sukh Safety Vault Ltd. In reply to Q.No.9, the appellant stated the Vault was opened only in last year for keeping the cash generated from his unaccounted activities. In reply to Q. No.10, the appellant stated that he was not very comfortable in keeping accounts as most of his clients are small ones who deals in cash and do not maintain the proper books. In reply to Q. No. 11, the appellant stated that he was involved in the business of money transfer commonly known as "Angadia" wherein he used to deliver and collect the money as per his clients' directions and charged the commission for providing such services at the rate Rs.150 to Rs.200 per lac. In reply to Q.No.12, the appellant stated that no records are maintained of the client and hence he cannot provide any details of the client. In reply to Q. No.13, the appellant consented for the seizure of unexplained money of Rs 80,00,000/-. Accordingly, it remains an admitted fact that the cash found and seized during search of Rs.80,00,000/- is the unexplained money belonging to the appellant and needs to be taxed in hands of the appellant. The appellant during course of search and even during assessment proceeding, failed to disclose the identities of his clients. Even if the cash seized is said to be belonging to his clients, then the onus is upon the appellant to say so. Though he admitted that he was in the business of money transfers and charges commission of Rs.150 to Rs.200 per lac, but he never said that cash seized of Rs. 80 lac belonged to his clients, and on the contrary he admitted that the cash seized could not be explained and is, therefore, it was his own unaccounted money. As per the provision of Sec.292C(1)(i), the entire money found in the possession of the appellant is presumed to be belonging to the appellant. It is true that Sec.292C is a rebuttable presumption, however, the onus is cast upon the appellant to rebut the same. The appellant had not made any efforts to discharge the onus cast upon him to rebut the presumption. In view of this fact that the appellant himself admitted the seized cash of Rs.80,00,000/- as unexplained and unaccounted income earned by him and also in view of the provisions of section 292 (c)(i) of this Act, the entire income of Rs. 80,00,000/- belonged to him. Thus, the entire cash found and seized during search of Rs.80,00,000/- is required to be taxed in hands of the appellant.
7.2 The appellant in return of income filed u/s.153A for AY 2013-14 had disclosed an additional income of Rs.75,00,000/- out of 6 & ors. Shri Dinesh Bhagji Sutar Rs.80,00,000/- seized and claimed that the balance amount of Rs.5,00,000/- had been earned out of salary and diamond brokerage income of earlier years. It is noted that appellant had surrendered during search, in statement recorded u/s.132(4), the entire cash found and seized of Rs.80,00,000/-, thus is not justified in claiming the credit of salary and other income relating to earlier years. Accordingly, I hold that the entire cash found and seized during search of Rs.80,00,000/- is to be taxed in hands of the appellant during A.Y.2013-14 being the specified year of search as against additional income disclosed by appellant of Rs.75,00,000/-. Accordingly, addition of Rs.5,00,000/- is hereby sustained for the A.Y.2013-14.
7.3 The next issue is regarding the estimation of income made by AO in assessment orders for A.Y-2007-08 to 2013-14. The AO at para 4.3(a) held that the cash found and seized on date of search viz. 9/11/2012 of Rs.80,00,000/- is the undisclosed commission income earned by the appellant during first seven months of A.Y-2013-14 (upto October,2012) and estimated the pro-rata income for balance 5 months (Nov'12 to March'13) of Rs.57,00,000/- and estimated the total income for the entire year ended 31/3/2013 at Rs.1,37,00,000/- (80,00,000 + 57,00,000). Thereafter, AO applied the same principle and assumed the growth rate @ 20% per year so as to reach an income of Rs.1,37,00,000/- and estimated the undisclosed income of the appellant as under:- Assessment year Undisclosed income computed 2013-14 Rs. 1,37,00,000 (Rs 80,00,000 + 57,00,000 equivalent to 120% of Rs 1,14,00,000) 2012-13 Rs. 1, 14,00,000 (120% of Rs 95,00,000) 2011-12 Rs. 95,00,000 (120% of Rs 79,00,000) 2010-11 Rs. 79,00,000 (120% of Rs 65,80, 000) 2009-10 Rs. 65,80,000 (120% of Rs 54,80, 000) 2008-09 Rs. 54,80,000 (120% of Rs 45,60,000) 2007-08 Rs. 45,60,000 7.4 It is observed that AO had arbitrarily and in proportionate manner had estimated the undisclosed income for post search period of 5 months viz, from 9/11/2012 to 31/3/2013. The AO had not brought any material or documentary evidence on record to justify that the appellant had earned the similar undisclosed income even during post search period. Even during course of search, no material was found to 7 & ors. Shri Dinesh Bhagji Sutar justify that the appellant had earned the similar undisclosed income in earlier years. It is observed that the appellant vide letters dated 22/01/2015 and 05/08/2015 requested AO to provide a copy of piece of contrary evidence on the basis of which AO had proposed to make the addition on estimation basis. However, AO did not provide any contrary evidence to the appellant which also proves that AO is not in possession of any documentary evidence on the basis of which the undisclosed income is estimated for post search period and earlier assessment years from A.Y.2007-08 to A.Y.2012-13. It is a trite law that the piece of evidence, if any, not provided to the appellant for confrontation cannot be used against the appellant. The AO, in assessment orders, had not relied on any contrary evidence on the basis of which the estimation of income had been made in post search period and in earlier assessment years. Thus, in absence of material and evidence, AO is not justified in making the addition of undisclosed income for post search period of 5 months relevant to A.Y-2013-14 and for earlier years A.Y2007-08 to A.Y-2012-13, accordingly the additions made in assessments on estimation basis deserves to be deleted.
7.5 The judicial decisions relied by Ld. AR as reproduced in para 9.0 further strengthens the case of the appellant wherein the Courts have held there is no scope for arbitrarily estimating the income on pro-rata, or proportionate estimation basis in the absence of documentary evidence.
7.6 Respectfully following those judicial decisions cited above, I hold that AO is not justified in estimating the income arbitrarily on pro-rata or proportionate basis for post search period of 5 months relevant to A.Y.2013-14 and for earlier years A.Y.2007-08 to A.Y.2012-13.lt is observed that apart from unaccounted cash of Rs.80,00,000/- found during search in the locker belonging to the appellant, there is no other material found during search on the basis of which it could be established that the appellant had earned any undisclosed commission income in money transfer activities during post search period of 5 months and in earlier assessment years, thus in absence of any evidence, the addition made in assessments cannot be sustained. Accordingly, I hold that AO is not justified in making the additions on pro-rata basis for post search period of 5 months and for A.Y.2006-07
8 & ors. Shri Dinesh Bhagji Sutar to A.Y.2012-13 and the same are hereby deleted. I direct AO to delete the addition made in assessment for A.Y.2006-07 to 2012-13. As regards A.Y.2013-14, I direct AO to sustain the addition made in assessment of undisclosed income of Rs.5,00,000I- (over and above the returned undisclosed income of Rs 75,00,000/-) and delete the balance addition.
8. In the result, the appeals for assessment years 2007-08 to assessment years 2013/14 are partly allowed.”
During the course of hearing, Ld. A.R. and D.R. submitted that the issue in controversy is covered by the decision of ITAT in the case of Pannalal Ukaram Prajapati in to 43/M/2016 & CO Nos.178 to 184/M/2016.
Having heard both the parties, we find that the issue in controversy is covered by the decision of ITAT in the case of Pannalal Ukaram Prajapati in to 43/M/2016 & CO Nos.178 to 184/M/2016 wherein the Tribunal has decided these appeals by observing as under: “13. Now we examine the facts of the present case on the anvil of aforesaid case law. We find that in the present case except for the cash found during search no other incriminating material was found. Assessee had stated that he was engaged in hawala money transfer and he was receiving commission for that. However, the assesee did not disclose the identity of any person in this regard. He also did not state the cash found was his income earned in any particular manner except that it was his undisclosed income, the cash found in the locker can only be presumed to be relating to the period from when it was opened. Upon this factual scenario we are of the considered opinion that Ld. CIT-A is correct in holding that there was no justification to make an estimate of income for the entire block period except for the assessment of the cash found during search as undisclosed income. Hence we agree with the Ld. CIT-A that apart from cash of Rs.79,50,000 found during search in the locker belonging to the assessee there is no other material found during search on the basis of which it could be 9 & ors. Shri Dinesh Bhagji Sutar established that the assessee had any undisclosed income in the post search period of five months or in earlier assessment year's. Accordingly, we uphold the Ld CIT-A direction that assessing officer is not justified in making the additions on pro rata basis for the post search period of five months and for assessment year 2007.08 to assessment year 2012-13. Ld.CIT- A sustained the undisclosed income of Rs.79,50,000 for assessment year 2013-14. In the background of aforesaid discussion and precedent we do not find any infirmity in the order of Ld. CIT-A as regards the merits of additions. Accordingly, we uphold the same.
In the result these appeals by the revenue stands dismissed.”
Respectfully following the above decision of the Tribunal, we dismiss all the Departmental appeals for all the years accordingly.
During the course of hearing, the Ld. A.R. has not pressed for cross objections as the Departmental appeals are dismissed. Therefore, we dismiss the cross objections of the assessee.
In the result, COs as well as Departmental appeals are dismissed.
Order pronounced in the open court on 18.09.2017.