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Income Tax Appellate Tribunal, MUMBAI BENCH “E”, MUMBAI
Before: SHRI G.S. PANNU & SHRI AMARJIT SINGH
The captioned appeal by the Revenue is directed against the order of the CIT(A)-38, Mumbai dated 12.11.2013, pertaining to the Assessment Year 2009-10, which in turn has arisen from the order passed by the Assessing Officer dated 6.12.2010 under section 143(3) of the Income Tax Act, 1961 (in short ‘the Act’).
In its appeal, Revenue has raised the following Grounds of appeal:-
“1. On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in deleting the addition made of Rs. 20,63,465/ - as unexplained cash and Rs. 68,91,885/- on account of unexplained jewellery, by giving telescopic benefit, without appreciating the fact that the company and the Director are two separate entities and therefore benefit of availability of cash in the case of the company cannot be granted to the Director.
2. On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in deleting the addition made of Rs. 20,63,465/ - as unexplained cash and Rs. 68,91,885/- on account of unexplained jewellery, by giving telescopic benefit, without appreciating the fact that during the course of search, no loose paper/documents indicating any flow of cash from the company to the directors was found.
3. On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in deleting the addition made of Rs. 20,63,465/- as unexplained cash and Rs. 68,91,885/- on account of unexplained jewellery, by giving telescopic benefit, without appreciating the fact that that no element of unexplained cash and jewellery were found with the directors and any discussion regarding the cash found in the hands of partners and Directors were made in the assessment order in respect of the frims, M/s. Mahavir Shipping Agency and M/s Mulji Damji & Co Pvt. Ltd, wherein the assessee is one of the partner/ Director?" The appellant prays that the order of the CIT(A) on the above grounds be set aside and that of the Assessing Officer be restored.”
At the time of hearing, the learned representative for the respondent-assessee made a preliminary submission to the effect that the Grounds raised by the Revenue are on same footing as decided by the Tribunal in the case of Shri Vinod K. Dagha in dated 27.4.2016 wherein also similar grounds were raised by the Revenue. Notably, assessee before us and Shri Vinod K. Dagha are Directors of one M/s. Mulji Damji & Company Pvt. Ltd. M/s. Mulji Damji & Company Pvt. Ltd. and its associated concerns as well as the Directors were subject to a search action u/s 132(1) of the Act as well as survey u/s 133A of the Act on 24.6.2008. It transpires that in the course of search, cash amounting to Rs.20,63,465/- and jewellery of Rs.73,91,885/- were found in the premises of the captioned assessee, Shri Shamji Dand, out of which cash of Rs.18,00,000/- and jewellery of Rs.64,61,386/- were seized. In the course of the ensuing assessment, the Assessing Officer treated the cash of Rs.20,63,465/- as unexplained and added it to the returned income. In respect of the jewellery, an amount of Rs.68,91,885/- was treated as unexplained and also added to the returned income.
Before the CIT(A), assessee explained that out of cash of Rs.20,63,465/-, a sum of Rs.10,00,000/- belonged to M/s. Mulji Damji & Company Pvt. Ltd. and the balance of Rs.10,63,465/- belonged to M/s. Mahavir Shipping Agency, another group concern. It was also explained that the cash was kept for incurring expenditure on behalf of the company and/firm and that the said amount had already been taxed in the hands of the company and the firm as undisclosed income. Similarly, with respect to the jewellery of Rs.68,91,885/-, assessee explained that the jewellery of Rs.5,41,859/- was disclosed in the hands of the HUF where assessee is the Karta in Assessment Year 2003-04 and jewellery of Rs.1,32,750/- belonged to his wife, which has been duly disclosed by her in the return of income filed for Assessment Year 2003- 04. The balance of Rs.62,17,276/- was explained to be belonging to M/s. Mulji Damji & Company Pvt. Ltd. and M/s. Mahavir Shipping Agency and it was canvassed that the same has been taxed in their hands in the form of undisclosed income. The aforesaid explanations have been accepted by the CIT(A) and the additions have been deleted.
The CIT(A) has recorded specific findings while deleting the additions, which we reproduce hereinafter so as to appreciate the same. The discussion with regard to the addition of Rs.20,63,465/- as unexplained cash is as under :-
“10.4 In ground No.1 the appellant submitted that the cash of Rs.20,63,465/- found in his residence at the time of search belongs to his two concerns namely M/s.Mahavir Shipping Agency and M/s. Mulji Damji & Company Pvt. Ltd. Out of the total cash found of Rs.20,63,465/-, cash of Rs.10,63,465/- pertains to M/s. Mahavir Shipping Agency in which the appellant is one of the partners and cash of Rs. 10,00,000/- pertains to M/s.Mulji Damji & Company Pvt. Ltd. in which the appellant is the director. It was submitted that the cash belonging to the two concerns was kept in the appellant's residence so as to meet the expenses on behalf of the concerns. The cash balance in the books of M/s. Mahavir Shipping Agency as on the date of search is Rs.52,87,081/- and the cash balance in the books of M/s. Mulji Damji & Company Pvt. Ltd. as on the date of search is Rs.15,18,521/-. The undisclosed income admitted in the case of M/s. Mulji Damji & Company Pvt. Ltd and in the case of M/s. Mahavir Shipping Agency has been offered for tax either in the case of the two concerns or in the case of the individuals as salary drawn from the concerns. In essence, the appellant is requesting for the telescoping benefit for the undisclosed income admitted as against the asset found at the time of search. The assets which are in the form of cash and jewellery are recorded in the rewritten books of accounts of the individuals by drawing salary from the above two concerns whose books of accounts are also rewritten to account for the undisclosed income admitted at the time of search and filed the returns of income in response to the notice u/s.153A. The appellant also filed several decisions in support of his claim as mentioned in para 9.3 above. The telescoping benefit for the undisclosed income admitted as against the asset found is required to be given as long as the nexus between the income and the asset is established. In this case there is nothing to suggest that the undisclosed income was utilized for some other purpose, therefore the telescoping benefit as sought by the appellant is given. Accordingly the cash found is treated as the undisclosed income admitted which is reflected in the form of cash balance in the books of M/s.Mahavir Shipping Agency in which the appellant is one of the partners and M/s. Mulji Damji & Company Pvt. Ltd. in which the appellant is the director. The addition of Rs. 20,63,465/- made on account of unexplained cash is hereby deleted.”
The relevant discussion by the CIT(A) with regard to the addition of Rs.68,91,885/- on account of unaccounted jewellery is as under :-
“10.5 The second ground of appeal pertains to the addition of Rs.68,91,885/- made on account of unaccounted jewellery. In the returns of income filed in response to the notice issued u/s.153A jewellery of Rs.8,05,100/- was reflected in the case of the appellant, jewellery of Rs. 5,41,859/- is reflected in the hands of HUF in which the appellant is the Kartha and jewellery of Rs.41,53,240/- was reflected in the hands of Smt. Priti Shamji Dand, wife of the appellant. The value of the jewellery shown in the returns of income was based on the cost of the jewellery invested in the relevant assessment year as shown in para 9.2 above. However the appellant has not produced any evidence including the bills if any to support the cost as shown by him in the balance sheet filed along with the return of income filed in response to the notice u/s.153A. Therefore the value of the jewellery at cost as taken by the appellant is not accepted. The value of the jewellery as per the inventory drawn at the time of search is Rs.73,91,885/- and the Assessing Officer himself considered Rs.5,00,000/- towards customary gifts on social occasions and brought to tax the balance jewellery of Rs.68,91,885/- as unexplained jewellery. Therefore, it is decided to give the benefit of telescoping of the undisclosed income with the value of jewellery taken at the time of inventory and not on the basis of the cost adopted by the assessee.
Prior to telescoping the undisclosed income with the asset, the appellant is required to be given the following benefit.
10.6 The appellant also shown that the jewellery of Rs.5,41,859/- was admitted by HUF in which the appellant is the Kartha in the original return of income filed for the A.Y.2003-04 which includes Rs.4,49,009/- declared in VDIS'97. Similarly, jewellery of Rs.1,32,750/- is reflected in the balance sheet of the original return of income filed by Smt. Priti Shamji Dand for the assessment year 2003-04. The total value of the jewellery of Rs.6,74,609/- (Rs.5,41,859 + Rs.1,32,750/-) is allowed as disclosed before search action. Out of the jewellery of Rs. 68,91,885/-, jewellery worth Rs. 6,74,609/- is allowed and the balance jewellery of Rs.62,17,276/- which is reflected in the return of income filed by the appellant and his wife smt. Geeta Vinod Dagha is telescoped into undisclosed income of Rs.1,40,72,279/- since as per rewritten books of accounts the investment in the jewellery is sourced out of the salary drawn from undisclosed income of Rs.1,40,72,279/- admitted in two concerns M/s.Mulji Damji & Co. Pvt. Ltd. and M/s.Mahavir Shipping Agency. The addition of Rs.68,91,885/- made on account of unexplained jewelley is hereby deleted, otherwise such addition will amount to double taxation. Accordingly, the Ground No.2 is allowed.”
Against the aforesaid, Revenue is in appeal before us. The Grounds of appeal raised by the Revenue are indeed specifically directed against the telescopic benefit allowed by the CIT(A), which is discussed by him in para 10.7 of his order, which reads as under :-
“10.7 As against the undisclosed income of Rs.1,40,72,279/- telescoping benefit is given for the jewellery of Rs.62,17,276/- and the cash of Rs.20,63,465/-. The balance undisclosed income of Rs.57,91,538/- [Rs.1,40,72,279/- - (Rs.62,17,276/- + 20,63,465/-)] is taken into consideration for similar telescoping benefit in the case of Shri Vinod K. Dagha who is also one of the directors in the case of M/s. Mulji Damji & Co. Pvt. Ltd. As against the undisclosed income of Rs.1,40,72,279/-, a sum of Rs.___74,032/- (sic) is telescoped into the assets as discussed in the case of Shri Vinod K. Dagha and a sum of Rs.82,80,741/- is telescoped into the assets as discussed in the case of Shri Shamji Narsi Dand.”
The aforesaid discussion reveals that the undisclosed income of Rs.1,40,72,279/- was admitted in the two concerns, M/s. Mulji Damji & Company Pvt. Ltd. and M/s. Mahavir Shipping Agency. The CIT(A) has noted that as per the rewritten books of account, the investment in jewellery has been sourced out of salary drawn from undisclosed income of Rs.1,40,72,279/- admitted in the two concerns. Similarly, the CIT(A) also records while deleting the addition on account of unexplained cash that there was nothing to suggest that the undisclosed income admitted in the two concerns was utilized for any other purpose and, therefore, he proceeded to hold that the undisclosed income admitted in the hands of the two concerns was reflected in the form of cash found and allowed the telescopic benefit.
Against the aforesaid findings of the CIT(A), Revenue has made very generalised arguments, as is manifested in the Grounds of appeal raised before us. One of the points raised by the Revenue is that the company/firm and the Directors/Partners are two different entities and, therefore, the availability of cash in the form of admitted undisclosed income in the case of the company/firm cannot be available to the individual Directors/Partners. Secondly, it is pointed out that in the course of search, no loose papers/documents were found to indicate any flow of cash from the company to the Directors. In our considered opinion, both the aforesaid assertions by the Revenue are not cogent so as to disregard the order of the CIT(A). In fact, the CIT(A) refers to the rewritten books of account wherein investment in jewellery is noted to be sourced out of salary drawn by the assessee out of the undisclosed income admitted in the hands of the two concerns. Similarly, the CIT(A) has also recorded a finding that there is no material found in the course of search which could suggest that the undisclosed income admitted was utilised for any other purpose and, therefore, he proceeded to allow the telescoping benefit to the assessee vis-a-vis the undisclosed income admitted in the case of the two concerns. We find no reason to interfere with the conclusion of the CIT(A), especially considering the fact that in a similar situation the Tribunal in the case of other Director/Partner (i.e. Shri Vinod K. Dagha) in M/s. Mulji Damji & Company Pvt. Ltd. and M/s. Mahavir Shipping Agency vide order dated 27.4.2016 (supra) has affirmed similar decision of the CIT(A). Therefore, for all the above reasons, we hereby affirm the order of CIT(A) and Revenue fails in its appeal.
In the result, appeal of the Revenue is dismissed.
Order pronounced in the open court on 31st May, 2017.