DCIT,CC-3, JAIPUR vs. SHRI PANNA LAL KUMAWAT, JAIPUR

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,’A’ JAIPUR Jh lanhi xkslkbZ] U;kf;d lnL; ,oa Jh jkBkSM deys’k t;arHkkbZ] ys[kk lnL; ds le{k BEFORE: SHRI SANDEEP GOSAIN, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;dj vihy la-@ITA No. 165/JP/2021 fu/kZkj.k o"kZ@Assessment Year :2018-19 cuke Deputy Commissioner of Income Shri Panna Lal Kumawat Vs. Tax, 411, Trimurty Luhadia Tower, Central Circle-03, Jaipur Ashok Marg, C-Scheme, Jaipur LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AJDPK4526F vihykFkhZ@Appellant izR;FkhZ@Respondent vk;dj vihy la-@ITA No. 84/JP/2021 fu/kZkj.k o"kZ@Assessment Year :2018-19 cuke Sh. Panna Lal Kumawat ACIT, Vs. 602, DCM, Ajmer Road, Central Circle-03, Jaipur Jaipur LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AJDPK4526F vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Sh. P. C. Parwal (CA) jktLo dh vksj ls@ Revenue by : Ms Manisha Chandra (CIT) lquokbZ dh rkjh[k@ Date of Hearing : 22/03/2022 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 05/05/2022 vkns'k@ ORDER

PER: RATHOD KAMLESH JAYANTBHAI, A.M.

These two cross appeals filed by the assessee as well as department for the same assessee and for same assessment year and

2 ITA No. 165/JP/2021 Shri Panna Lal Kumawat, Jaipur are arising out of the order of the learned Commissioner of Income Tax, Appeals-4, Jaipur [ Here in after referred to as ld. CIT(A) ] dated 14.07.2021 for the assessment year 2018-2019.

3 ITA No. 165/JP/2021 Shri Panna Lal Kumawat, Jaipur 5. The Ld. CIT(A) has erred in law and has committed a grave error of law in not giving notice to the Assessing Officer as contemplated within the meaning of provisions of section 250(1) of the Income Tax Act, 1961. In this connection, order of Hon'ble Supreme Court in the case of Amritlal Bhogilal & Co. [1958] 34 ITR 130 (SC) may be studied. 6. The Appellant craves leave or reserves right to amend, modify, alter, add or forgo any ground(s) of appeal at any time before or during the hearing of this appeal.

The grounds raised by the assessee in ITA No 84/JPR/2021 are as under: 1. The Ld. CIT(A) has erred on facts and in law in confirming the addition of Rs.88,68,913/- (1,51,92,382-63,23,469) u/s 68 of the Act by totaling both the advance given and advance received as noted in the pocket diary seized as Annexure AS, Exhibit 3 and Exhibit 5 ignoring that even as per her order the correct amount of outstanding advance given is Rs.43,76,901/- and advance taken is Rs.27,58,950/- (14,48,150+13,10,800) and therefore, the addition, if any sustainable is Rs.16,17,951/- (43,76,901 27,58,950) as the source of outstanding advance given is the outstanding advance taken.

1.1 The Ld. CIT(A) has erred on facts and in law in confirming the above addition by: (i) incorrectly holding that difference in the crossed entries of advance given Rs.31,58,541/- and advance taken Rs.18,65,030/- , i.e. Rs.12,93,511/- remains unexplained and liable to be taxed ignoring that even if it remains unexplained, the amount so given and realized become the source of outstanding advance given for which addition has been sustained. (ii) incorrectly sustaining the addition of Rs.4,49,080/- on account of repeat entries of advance given ignoring that the same is part of the outstanding advance of Rs.43,76,901/-, thus, resulting into double addition. (iii) sustaining the addition of Rs.27,58,950/- (14,48,150 + 13,10,800) on account of outstanding advance taken as per seized Annexure instead of allowing set off of the amount so

4 ITA No. 165/JP/2021 Shri Panna Lal Kumawat, Jaipur received against the outstanding advance given at Rs.43,76,901/- as per the said annexure. 1.2 The Ld. CIT(A) has erred on facts and in law in confirming the addition made by the AO u/s 68 of the Act by not deciding the ground of assessee that addition u/s 68 is not legally tenable. 2. The Ld. CIT(A) has erred on facts and in law in confirming the addition of Rs.4,67,000/- on the basis of Pg 2 of Exhibit 6 by not accepting the various contentions raised by assessee. 3. The Ld. CIT(A) has erred on facts and in law in confirming the addition of Rs.1,66,000/- on the basis of Pg 3 of Exhibit 6 ignoring that the two amounts noted on this paper for which addition is confirmed do not pertain to the year under consideration in as much as the other two amounts noted on this paper has been accepted as pertaining to FY 2014-15 & 2015-16. 4. The Ld. CIT(A) has erred on facts and in law in confirming the addition of Rs.74,000/- on the basis of noting at Pg 9 of Exhibit 6 by not accepting the contention of assessee that this amount is given towards advance at site out of withdrawal made from the bank account of M/s Bhivaram Pannalal Kumawat. 5. The Ld. CIT(A) has erred on facts and in law in confirming the addition of Rs.14,03,951/- on account of alleged unexplained jewellery found in search. 6. The Ld. CIT(A) has erred on facts and in law in not allowing the set off of trading addition confirmed in case 6. of M/s Bhivaram Pannalal Kumawat in which assessee is a partner against the additions confirmed by her on account of various investment/ advances as referred above. 5. The brief facts of the case are that the assessee is partner in the firm M/s Laxmi Constructions, M/s Om Kareshwar Construction and Developers and M/s Bhivaram Pannalal from which remuneration and profit and interest are received. He also earned income from house property, capital gain and other source being interest from savings bank. Assessee e-filed his return of income on 24.10.2018 for the AY 2018-19 declaring total income at Rs. 41,68,280/-. Assessee belongs to "Swaroop Narain Shiv Narain & Kumawat Group" of Jaipur on whose premises, a search u/s 132 of the Act was carried out on 28.09.2017.

5 ITA No. 165/JP/2021 Shri Panna Lal Kumawat, Jaipur Various assets/ books of accounts and documents were found and seized as per annexure prepared during the course of search. Finally, the AO completed the assessment u/s 143(3) r.w.s. 153B(1)(b) of the Act vide order dated 31.12.2019 at a total income of Rs. 2,22,90,610/- by making additions on account of unaccounted transactions mentioned in the small pocket diaries found and seized during search and also on account of unexplained cash and jewellery. The Ld. CIT(A) has partly allowed the appeal of the assessee and aggrieved from the said order of the Ld. CIT(A) both the parties have preferred this appeal on the various grounds raised in their respective appeal.

6 ITA No. 165/JP/2021 Shri Panna Lal Kumawat, Jaipur 13 to 21 of Exhibit 3 (APB 14-22) records the transaction of amount given under the title 'lene hai' and Pg 22 of Exhibit 5 (APB 12) & Pg 22- 24 of Exhibit 3 (APB 23-25) records the transaction of amount taken under the title 'dene hai'. Number of transactions noted in these exhibits are crossed which means that the transaction has materialized and not outstanding on the date of search and number of transactions which were outstanding has been carried forward from Exhibit 5 (old diary) to Exhibit 3 (new diary).

7 ITA No. 165/JP/2021 Shri Panna Lal Kumawat, Jaipur 8. The ld. AO after considering the reply of assessee accepted that out of total amount of Rs.1,75,35,872/- recorded in these diaries, transactions of Rs.23,43,490/- are through cheque which is verifiable from the books of accounts. He therefore, made an addition of Rs.1,51,92,382/- u/s 68 of the Act by giving the following findings: (a) The claim of assessee that noting from one diary was shifted to another diary and thus are repeat entries is not substantiated by any material evidence. (b) The claim that crossed entry should not be considered is not acceptable since such crossed amounts are also in form of cash transaction not recorded in books which remains unexplained. (c) The claim that difference between the amount 'lele hai' and 'dene hai' is of Rs.10,64,969/- which should be considered out of available cash balance with M/s Bhivaram Pannalal Kumawat is not acceptable since firm and individual are two separate entities and the seized documents belongs to the assessee and not to the firm. Further since these amounts relate to unaccounted cash borrowings and unaccounted cash advances, they can't be set off against each other.

8 ITA No. 165/JP/2021 Shri Panna Lal Kumawat, Jaipur AO has considered the total amount mentioned in these Exhibits in the hands of the appellant as under: Particulars Amount Rs. 27,21,610 लेने हे of Exhibit-3 61,99,880 देने हे of Exhibit-3 71,42,132 लेने हे of Exhibit-5 14,72,250 देने हे of Exhibit-5 Total 1,75,35,872

Since Rs. 23,43,490/-, being cheque transactions were considered by the AO as appearing in the books of accounts of the appellant, therefore the remaining amount of Rs. 1,51,92,382/- was considered as unexplained income of the appellant and added back to his total income. (ii) However, the appellant has contended that the AO has made the addition for both the amounts given and amounts taken as per these diaries without considering the cross entries and repeat entries and that the assessing officer has taken the gross amount noted in this diary ignoring that in some cases against the amount given, part amount received back is also noted. (iii) The appellant has further contended that Exhibit 5 is an old diary and the transaction which have been materialized are crossed and some of the transactions which have not materialized are carried forward to the new diary at Exhibit 3. Further it was contended that in Exhibit 3, the transaction which have materialized are crossed and some of the un-materialized transactions of Exhibit 5 are also recorded in this exhibit with the same narration. (iv)The appellant on analysis of both the Exhibits has reproduced the position of crossed entries, outstanding entries of Exhibit 5 carried to Exhibit 3 where it is crossed, repeat entries, amount of outstanding advance given and the amount of outstanding advance taken in the form of tables (Table 1 to Table 6 ) furnished in the appellate proceedings and has submitted that at the most, the amount which can be treated as unexplained is at Rs. 16,17,951/- as against Rs. 1,51,92,382/- added by the AO. The appellant has also furnished the following table stating that he has incorporated the correct amount of the transactions of amounts given / taken and also bifurcated it

9 ITA No. 165/JP/2021 Shri Panna Lal Kumawat, Jaipur

between the cross transactions / repeat transactions / advance given / advance taken as under:

10 ITA No. 165/JP/2021 Shri Panna Lal Kumawat, Jaipur

Thus, as per the appellant, the following position emerges : As per AO As per appellant 27,21,610 18,46,140 लेने हे of Exhibit-3 61,99,880 45,99,880 देने हे of Exhibit-3 71,42,132 62,30,532 लेने हे of Exhibit-5 14,72,250 14,72,250 देने हे of Exhibit-5 1,75,35,872 1,41,48,802

The appellant has contended that the AO has considered only the cheque entries and has not considered the crossed entries, repeat entries, outstanding entries and entries outstanding in Exhibit 5 carried to Exhibit 3 & crossed while making the addition.

(i) I have perused the Table No.1 w.r.t. the Exhibit 3 & 5 submitted by the appellant as per his submission dated 10.03.2021 filed during the appellate proceedings, containing the details of the crossed entries. It is observed that as per appellant's own admission, the Exhibit 5 (old diary) contains such entries at Rs. 27,51,981/- and Exhibit 3 (new diary) contains such entries at Rs. 21,79,440/-. The crossed entries mentioned in Exhibit 5 & Exhibit 3 are unrelated entries and as these entries are crossed entries, it means that these entries have been materialized. Since such crossed entries are in the form of cash transactions not recorded in the books and during the course of appellate proceedings also, the appellant has not been able to explain and verify these entries with the books of accounts and therefore, these entries remain unexplained. (vi) Further, the appellant has produced Table no. 2, containing entries outstanding in Exhibit 5 carried to Exhibit 3 and crossed which shows

11 ITA No. 165/JP/2021 Shri Panna Lal Kumawat, Jaipur that the amount has been received. On perusal of the aforesaid table, it is observed that the narration of entries in Exhibit 5 carried to Exhibit 3 is identical i.e. with the same narration and amount. These entries are of an amount of Rs. 92,150/- being cash transaction and they remain unexplained as the appellant has not been able to verify these entries with the books of accounts. However, I agree with the contention of the appellant that the cross entries as per Table 1 & 2 cannot be added entirely to the income having been realized and therefore, it would be fair to assume that the amount given /taken in these tables are squared up which is source for giving further advance. The crossed entries as per Table 1 & 2 containing entries related to Exhibit-3 & Exhibit-5 are tabulated as under:

Exhibits Lene hai (advance Dene hai (advance given) taken) Exhibits-3 3,38,510 18,40,930 Exhibits-3 92,150 Exhibits-5 27,27,881 24,100

In view of the above, it is observed that since these entries have materialized, therefore it is fair to assume that the appellant had Rs. 18,65,030/- being advance taken, as the source available for giving the advance of Rs. 31,58,541/- which means that for the balance amount of Rs. 12,93,511/- (Rs. 31,58,541 - Rs. 18,65,030), the appellant has not been able to explain/ verify the source available for advancement of the aforesaid amount to other parties with any cogent evidence. Since the amount has been materialized and as it remains unexplained, the amount of Rs. 12,93,511/ is liable to be sustained. (vii) Table no. 3 produced by the appellant contains the entries of advance given 'lena hai' as per Exhibit-5 & Exhibit-3 and as per the appellant's submission, these entries are repeat entries. On perusal of Table no. 3 it is observed that the narration and amount mentioned in Exhibit 5 (old diary) is identical to Exhibit 3 (New Diary). The total of entries as per Table no. 3 is at Rs. 4,49,080/- each as per Exhibit 5 & Exhibit 3. Since these are cash

12 ITA No. 165/JP/2021 Shri Panna Lal Kumawat, Jaipur transactions, and as the appellant has not been able to explain the same, the amount of Rs. 4,49,080/- remains unverifiable. As these entries appear to be identical in both the diaries, I concur with the contention of the appellant that the repeat transactions as per Table No.3 & 5 are to be considered only once as these transactions are same as evident from the narration given against these transactions and therefore the addition as per one diary of only Rs. 4,49,080/- is liable to be sustained. (viii) As regards the notings of outstanding amount given 'lena hai' as mentioned by the appellant as per Table no. 4, it is observed that the narration and amount mentioned in Exhibit 5 (old diary) and Exhibit 3 (new diary) are different and not matching with each other. Therefore, it can be presumed that these entries are unrelated to each other and no benefit on that count is available to the appellant. The total as per Exhibit 5 & 3 as mentioned in Table no. 4 is at Rs. 34,10,501/- and Rs. 17,09,870/- respectively. However, out of Rs. 17,09,870/-, there are cheque transactions of an amount of Rs. 7,43,490/-. Therefore the balance amount of Rs. 9,66,400/- (Rs. 17,09,870 - 7,43,490) as per Exhibit 3 remains unverified. As per this table, the total outstanding amount given works out at Rs. 43,76,901/- (Rs. 34,10,501 + Rs. 9,66,400) which remains unverified and liable to be sustained. (ix) On perusal of the Table no. 5 produced by the appellant, it is observed that this table refers to repeat entries i.e. amount taken - 'dena hai' as per Exhibit 5 (old diary) and Exhibit 3(new diary) totaling to Rs. 14,48,150/- each. It is further observed that the narration of entries and the amounts mentioned in both the diaries are identical. Since these are cash transactions, and as the appellant has not been able to explain the same, the amount of Rs. 14,48,150/- being repeat entry in Exhibit 3 (New diary) remains unverifiable. As these entries appear to be identical in both the diaries, I concur with the contention of the appellant that the repeat transactions as per Table No. 3 & 5 are to be considered only once as these transactions are same as evident from the narration given against these transactions and therefore

13 ITA No. 165/JP/2021 Shri Panna Lal Kumawat, Jaipur

the addition as per one diary of only Rs. 14,48,150/- is liable to be sustained. (x) Table no. 6 refers to notings of outstanding amount taken 'dena hai'. As per notings in Exhibit 3 (new diary) carried forward from Exhibit 5 (old diary), the total amount is at Rs. 14,48,150/- which contains the same narration and amount as given in Table No. 5. Further amount of Rs. 29,10,800/- are the outstanding notings as per Exhibit 3 other than Rs. 14,48,150/- out of which Rs. 16,00,000/- are the cheque transactions. Therefore, the net total is at Rs. 13,10,800/- (29,10,800 16,00,000) which is liable to be sustained. Rs. 14,48,150/- are the repeat entries as per table no. 5 which are outstanding. (xi) In view of the above discussion, it is observed that the outstanding amount as per appellant's own submissions as per Exhibit-3 and Exhibit-5 are as under: S. Particulars Table No. 3 Table No. 4 ‘Lena Table No. 5 ‘Dena Table No. 6 ‘Dena Total No. ‘Lena Hai’ hai’ (advance hai’ (advance hai’ (advance (advance given) taken) taken) given) 1. Repeat entries Rs. 4,49,080/- - Rs. 14,48,150/- - Rs. 18,97,230/- 2. Outstanding Rs. 43,76,901/- Rs. 13,10,800/- Rs. 56,87,701/- entries Rs. 75,75,402/-

Since the repeat transactions as per Exhibit -3 & Exhibit-5 and as mentioned in Table No. 3 and Table No. 5 amounting to Rs. 4,90,080/- and Rs. 14,48,150/- are to be considered only once, it is observed that these entries are still outstanding and are unverifiable. Besides, the outstanding entries being unverifiable are amounting to Rs. 56,87,701/-. (xii) Therefore, as discussed above, the unverifiable crossed entries are amounting to Rs. 12,93,511/- and the unverifiable outstanding entries are at Rs. 75,75,402/- (Rs. 56,87,701+18,97,230). Therefore, total addition on account of Exhibit-3 & Exhibit-5 is sustained at Rs. 88,68,913/- (Rs. 75,75,402 + Rs. 12,93,511). The contention of the appellant that the amount given /taken has been squared up being source for giving further advance cannot be accepted since these amounts are outstanding entries and the appellant has not given any cogent evidence in support of his contention. Further there are no date mentioned in the memoranda diaries seized as Exhibit-3 & Exhibit-5 to

14 ITA No. 165/JP/2021 Shri Panna Lal Kumawat, Jaipur justify the claim of the appellant. Accordingly, the appellant gets a relief of Rs. 63,23,469/- (Rs. 1,51,92,382 - Rs. 88,68,913). Ground of Appeal No. 1 is treated as partly allowed.

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16 ITA No. 165/JP/2021 Shri Panna Lal Kumawat, Jaipur

17 ITA No. 165/JP/2021 Shri Panna Lal Kumawat, Jaipur

18 ITA No. 165/JP/2021 Shri Panna Lal Kumawat, Jaipur

19 ITA No. 165/JP/2021 Shri Panna Lal Kumawat, Jaipur

20 ITA No. 165/JP/2021 Shri Panna Lal Kumawat, Jaipur

21 ITA No. 165/JP/2021 Shri Panna Lal Kumawat, Jaipur

Therefore, assessee in the working given in the above table has taken the correct amount of the transactions of amounts given/ taken and also bifurcated it between the cross transactions/ repeat transactions/advance given/advance taken. This has been verified and accepted by the Ld. CIT(A). Therefore, addition of Rs.1,51,92,382/- made by the AO is arithmetically incorrect.

22 ITA No. 165/JP/2021 Shri Panna Lal Kumawat, Jaipur against these transactions. Further these repeat entries are considered in Table No.4 and Table No.6 as part of outstanding entries. Hence, no separate addition for entries at Table No.3 & 5 is required. The Ld. CIT(A) has accepted that entries of Table No.5 of amount taken is part of Table No.6 and thus has not made any addition for such amount in Table No.6 but he ignored that entries of Table No.3 of amount given of Rs.4,49,080/- is part of outstanding amount given as per Table No.4 on the basis of which addition of Rs.43,76,901/- has been considered and therefore, addition confirmed on the basis of Table No.3 of Rs.4,49,080/- has been incorrectly sustained by her which needs to be deleted.

23 ITA No. 165/JP/2021 Shri Panna Lal Kumawat, Jaipur given to Shrawan kaka ji at the time of marriage of his daughter Manju held on 15.05.2014. Amount of Rs.2 lacs in the name of chittar chella as per Pg 14 of Exhibit 5 (PB 4) was given in the year 2013. Amount of Rs.2 lacs in the name of Phoolchand as per Pg 15 of Exhibit 5 (PB 5) was given in the year 2011. Similarly number of other entries i.e. Rs.25,000/- in name of Hemraj baba ji at Pg 15 of Exhibit 5 (PB 5), Rs.25,000/- in the name of Mohini bua at Pg 17 of Exhibit 5 (PB 7), Rs.90,000/- in name of Babu lal ke sasur at Pg 15 of Exhibit 5 (PB 5), Rs.50,000/- at Pg 14 of Exhibit 5 (PB 4) are old outstanding of the year 2011 to 2014 given to various relatives. Therefore, even the difference of Rs.16,17,951/-stated above do not pertain to the year under consideration and thus, no addition can be made in the year under consideration. The Ld. CIT(A) has not given any finding on this contention raised by the assessee.

Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited year. may be charged to income-tax as the income of the assessee of that previous year.

From the plain reading of this section it can be noted that this section applies when any sum is found credited in books of accounts. Therefore, if the credit is not in the books of accounts, section 68 cannot be invoked. The definition of the books of accounts is given u/s 2(12A) of the Act as under:

24 ITA No. 165/JP/2021 Shri Panna Lal Kumawat, Jaipur "Books or books of account" includes ledgers, day-books, cash books, account-books and other books, whether kept in the written form or as print-outs of data stored in a floppy, disc, tape or any other form of electro-magnetic data storage device"

The definition of books of accounts is an inclusive definition. However, notepad, loose papers and diaries which can be easily detached and replaced cannot be termed as books. The AO in the assessment order has accepted that the transaction of amount given/ taken is recorded in the diary. This diary cannot be construed as books of accounts in as much as recording in loose sheets, notepads and diaries cannot be regarded as the sum found credited in the books of the assessee for the purpose of section 68. Hence, on the basis of entries in the diary, addition u/s 68 cannot be made. In this connection reliance is placed on the following decisions:

Aruna Sankhla Vs. DCIT ITA No.484/JP/2016 dt. 01.12.2017 (Jaipur) (Trib.) In this case Hon'ble ITAT at Para 7.4 of its order held as under:

"After considering the rival submissions and the materials available on record, we are of the considered opinion that the seized papers cannot be treated as books of account. Furthermore, only the commission income can be assessed in the hands of the assessee @ 0.10% on a total of the credits of Rs. 91,67,81,272/-. The addition u/s 68 of the Act can be made only if any sum is found credited in the books of the assessee. A book means a collection of sheets of papers bound together with the intention that such binding shall be permanent and papers used are kept collectively in one volume. A book which contains successive entries of items maybe a good

25 ITA No. 165/JP/2021 Shri Panna Lal Kumawat, Jaipur memorandum book but until those entries are totaled or balanced or both as the case may be, there is no reckoning and no accounts. A book which merely contains entries of items of which no account is made at any time, is not a "book of account" in a commercial sense. Thus the addition made u/s 68 is not justified. It is noticed that over and above the peak credit, the AO has further made an addition of Rs. 52,40,137/- on account of debtors exceeding the creditors. We have found that the peak determined by the AO is not correct, otherwise also, when once peak amount has been added then no separate addition is required. It seems that the AO has not properly prepared the list of debtors and creditors based on any logic. The Ld. CIT(A) has confirmed the addition of Rs. 52,40,137/- under the Provisions of Section 69B of the Act. This section relates to investment made by the assessee in the acquisition of bullion/jewellery or other valuable articles but it does not speak about any investment in debtors. Moreover, Section 69B also stipulates the position where the investment exceeds the amount shown in the books of account. Since the assessee does not maintain any books of account wherein the debtors and creditors are reflected, therefore, this addition has also been wrongly made and upheld u/s 69B of the Act. Hence, in our considered opinion, only commission income has to be determined in this case and nothing more. Accordingly, we reverse the findings of the Ld. CIT(A) and order to delete the entire addition so made. Thus Ground Nos. 3 and 4 of the assessee are allowed.

DCIT Vs. Smt. Manishaben N. Mashru ITA No.958/RJT/2010 dt. 04.01.2018 (Rajkot) (Trib.)

"89. In the third ground, the Revenue challenges deletion of addition of Rs. 27.00 lakhs by the ld. CIT(A) on account of disallowance of fictitious liability.

26 ITA No. 165/JP/2021 Shri Panna Lal Kumawat, Jaipur proceedings, the AO formed an opinion that the assessee was having credit balance of Rs. 8,05,000/-with M/s. Divya Travels, and in the books of the assessee the assessee has shown liability of Rs. 18,95,000/-. The AO held the same to be fictitious liability and taxed accordingly. Assessee challenged this addition before the ld.CIT(A) who deleted the addition on the ground that rough papers found from the premises of wife of the assessee were mere notebooks and diaries and not books of accounts of the assessee. Besides, he observed that wife of the assessee has owned up the noting in the rough diary and taxed accordingly. The ld. CIT(A) has also observed that there is no documents or material evidence with the Revenue to link flow of unrecorded transactions with the assessee. Since there is no contrary material brought before us by the Revenue to convince us to take a different view, we do not find any merit in this ground of appeal. It is dismissed."

DCIT Vs GSNR Rice Industries Pvt Limited (2021) 90 ITR (Trib.) 114 Chennai

The relevant para 21 of this decision reads as under:

"21. The Income Tax Act, 1961 has defined books and books of accounts u/s.2(12A) of the Act, as per which books and books of accounts includes, ledgers, day-books, cash books, account books and other books, whether kept in the written form or as print- outs of data stored in a floppy, disk, tape or any other form of electro-magnetic data storage device. Therefore when books of accounts are clearly defined under the Act, then diary, notebook and retrieved data of computer CPU can be considered as books of accounts or not is a question that needs to be considered. From the definition of books' or 'books of accounts', it is abundantly clear that books of accounts means regular books of accounts maintained by the assessee for any previous year to record day to day transactions of its business including ledgers, day-books, cash books, account books and other books. The term other books does not mean to include some

27 ITA No. 165/JP/2021 Shri Panna Lal Kumawat, Jaipur dumb/documents like diary, notebook or deleted entries of computer CPU. The term other books refers to any other books which are relevant and in consonance with ledgers, day-books, cash books, account books, etc. Therefore, in order to include any other books of accounts maintained by the assessee within the ambit of term 'other books', those books must be relevant in the business of the assessee to keep track of transactions Hence, other books refers to in the ordinary course of any business of the assessee are stock books maintained in the ordinary course of business to record movement of stocks, books of accounts maintained for recording salary and wages as required under the Wages Act and other statutory books prescribed under any other law. But, it does not include diary, notebook and some other dumb documents maintained by any person for any reason. Therefore, in our considered view books refer to under section 68 means, regular books of accounts maintained by an assessee in the ordinary course of business to record its business affairs and also to prepare financial statements for the relevant years Any other documents, including, loose sheets, dairy, note book and other unconnected documents cannot be considered as books, unless the same is part of books of accounts maintained by the assessee.

S.P. Goyal Vs. DCIT (2002) 82 ITD 85 (Mum.) (Trib.) In this case the Hon'ble Tribunal held that loose sheet of paper torn out of a diary could not be construed as books for the purpose of section 68 and further held that addition could not be made simply on the basis of certain notings on loose sheets of a diary without any corroborative evidence in the form of extra cash, jewellery or investment outside the books.

28 ITA No. 165/JP/2021 Shri Panna Lal Kumawat, Jaipur Thus, addition made u/s 68 is legally not tenable. The Ld. CIT(A) has not given any finding on this specific contention raised before her.

In view of above, addition made by AO and confirmed by Ld. CIT(A) be directed to be deleted by allowing the ground of assessee and dismissing the ground of department.

“5. In our considered opinion, the reasoning adopted by the Tribunal is correct while that adopted by the Commissioner was perverse. Once the assessee accepted that documents which were seized from his premises, and once he had owned the entries and undertaken to explain them in the next financial year and had not offered any explanation whatsoever the amount representing were rightly added to other income of the assessee.”

In addition to the above the Ld. DR argued that the loan transaction which are given and taken cannot be adjusted as both the are separately required to be considered as they are incurred in cash and no set off is permissible. Even the cross entries are really cross entries or not are not confirmed as they are not legible. As regards the arguments of the

29 ITA No. 165/JP/2021 Shri Panna Lal Kumawat, Jaipur AR of the assessee that the entries are of repeat in nature is the contention without proof and it may be the different transactions and that possibility cannot be denied. Thus, there are two different transactions as considered by the AO is correct and heavily relied upon the order of the AO. As regards the temporary advance / transactions not materialized, it was submitted these all are after thought of the assessee. Thus, the action of the AO taxing all those transactions listed should be considered as unexplained transactions should taxed in the hands of the assessee. The section 68 of the Act is inclusive definition and therefore, these transactions are definitely covered in that provision of the Act. In the light of these arguments the ld. DR argued that the addition made by the AO at Rs. 1,51,92,382/ should sustain the action of the CIT(A) giving the benefit to the extent of Rs. 63,23,469/- should be reversed based on these arguments.

30 ITA No. 165/JP/2021 Shri Panna Lal Kumawat, Jaipur assessee’s submission and also gone through the submission made before us and after going through these charts the following facts emerges: As per AO Table A

Particulars Amount

Amount given as per Exhibit 3 27,21,610/-

Amount taken as per Exhibit 3 61,99,880/-

Amount given as per Exhibit 5 71,42,132/-

Amount taken as per Exhibit 5 14,72,250/-

Total 1,75,35,872/-

Less:- Amount verifiable 23,43,490/-

Amount added by AO 1,51,92,382/-

As per CIT(A) Table B Particulars Amount Remarks Difference between crossed 12,93,511/- Para 4.3(vi) at Pg 14 of entries of amount given and CIT(A) order amount taken as per Exhibit 3 & Exhibit 5 Amount given as per Exhibit 5 4,49,080/- Para 4.3(vii) at Pg 14-15 & repeated in Exhibit 3 Para 4.3(xi) at Pg 16 of CIT(A) order

31 ITA No. 165/JP/2021 Shri Panna Lal Kumawat, Jaipur Amount given as per Exhibit 5 43,76,901/- Para 4.3(viii) at Pg 15 & and Exhibit 3 which remained Para 4.3(xi) at Pg 16 of outstanding CIT(A) order Amount taken as per Exhibit 5 14,48,150/- Para 4.3(ix) at Pg 15 & which remained outstanding Para 4.3(xi) at Pg 16 of CIT(A) order Amount taken as per Exhibit 3 13,10,800/- Para 4.3(x) at Pg 15-16 & which remained outstanding Para 4.3(xi) at Pg 16 of CIT(A) order Total 88,78,442 ** /- Less:- Totaling error 9,529/- Para 4.3(xi) at Pg 16 of CIT(A) order where the total is incorrectly taken at Rs.75,75,402/- instead of Rs.75,84,931/- Amount added by CIT(A) 88,68,913 /-

** Ld. CIT(A) should have taken the figure at 88,78,442 instead of 88,68,913 As per assessee Table C Particulars Amount Remarks Difference between crossed 0 Since these are crossed entries of amount given and entries, no addition amount taken added by CIT(A)- required.

32 ITA No. 165/JP/2021 Shri Panna Lal Kumawat, Jaipur Rs.12,93,511/- Amount given as per Exhibit 5 0 This is included in the repeated in Exhibit 3 added by addition of Rs.43,76,901/-, CIT(A)- Rs.4,49,080/- hence, amount wrongly added. Amount taken as per Exhibit 5 (14,48,150 This is amount taken and which remained outstanding /-) hence source of amount added by CIT(A)- given which is required to Rs.14,48,150/- be set off Amount taken as per Exhibit 3 (13,10,800 This is amount taken and which remained outstanding /-) hence source of amount added by CIT(A)- given which is required to Rs.13,10,800/- be set off Addition as per assessee 16,17,95 1/-

Note:- Even the amount as per assessee cannot be added since such amount given in earlier years and outstanding and thus, in this year provision of section 68 is not applicable.

Particulars Amount Rs. The figure of addition as per findings of Ld. CIT(A) [ figure 88,78,442 should have been based on the figure see Table B Repeated entries and same is considered in the (4,49,080)

33 ITA No. 165/JP/2021 Shri Panna Lal Kumawat, Jaipur outstanding figure of Rs. 43,76,901 as amount given so required to be deducted. Since, the amount given /taken or taken or given (12,93,511) considered in the amount of outstanding amount as income earned from that transaction, assessee explained is considered and required to be deducted. Amount outstanding as per Exhibit 5 (14,48,150) Amount outstanding as per Exhibit 3 (13,10,800) Being the amount outstanding as per Exhibit 3 & 5 43,76,901 outstanding as lene hai ( This amount is the total amount of lene hai which is consist of outstanding of dene hai and income earned out of repeat or crossed transaction therefore, same should be considered as unexplained money and shall met with the end of justice)

Having persuaded all the Tables and reconciliation of the figure with the findings of the AO, CIT(A) and assessee we are of the view that the addition of Rs. 43,76,901 being the balance outstanding as per the seized records should be considering as income of the assessee as outstanding entries emerging from seized diary as unrecorded transactions and are required to be taxed which will meet with the end of the justice in respect of these seized diaries, as this amount is earned and available with the assessee as out of this lene hai and dene hai activities. We are also of the view that either the loan given or loan taken balance as on the date of search can be taxed since in this case the loan given balance and outstanding is Rs. 43,76,901/- is required to be taxed in the hands of the assessee and will take care of the earning that has been made out of books by the assessee. Thus, we hold that ground no. 1 is partly

34 ITA No. 165/JP/2021 Shri Panna Lal Kumawat, Jaipur allowed in respect of revenue appeal and ground no. 1, 1.1 and 1.2 related to the addition of seized Exhibit 3 & 5 are partly allowed as we have considered the alternative arguments of the AR of the assessee.

13.1 The AO on the basis of Pg 2 of Exhibit 6 (PB 27) observed that on this page an amount of Rs.4,67,000/- is noted as 'kharcha uchanti-bande balaji se lena hai'. He referred to the statement of assessee on this paper recorded u/s 132(4) and held that it is an unexplained expenditure u/s 69C of the Act and thus, made addition for the same.

13.2 The Ld. CIT(A) in Para 5.3(iii) held that the contention of assessee that this amount is duly recorded in the books of 'Kumawat Samaj Samuhik Vivah Evam Vikas Samiti' is not verifiable as no date is mentioned against the amount of Rs.4,67,000/- on the seized paper. In the statement recorded in search assessee stated that the diary contains the unrecorded transaction of M/s Bhiviram Pannalal Kumawat. However, certain transactions in this diary are recorded in books of accounts of assessee which establishes that transaction in this diary are related to the assessee. She therefore, confirmed the addition made by AO.

13.3 It is submitted that this diary is of 2015 containing 9 pages (26-31). Against most of the entries noted in this diary, dates are mentioned which even pertain to the year 2014-15 & 2015-16. However, on Page 2 there is no date. In fact from the contribution of local person, the assessee being engaged in construction work has carried out certain construction work at Dharamshala situated at ancient Balaji temple near village Boraj, Gram Panchayat Ugariya was in the year 2013-14. On such renovation which is carried out by Kumawat Samaj Samuhik Vivah Evam Vikas Samiti, the total expenditure incurred on construction recorded in its books of accounts is Rs.62,10,925/- out of which expenditure incurred in cash is Rs.28,56,237/-. Copy of income tax return, Balance Sheet, P&L A/c of the samiti registered u/s 12AA and building construction account for FY 2013-14 is at PB 32-63.

35 ITA No. 165/JP/2021 Shri Panna Lal Kumawat, Jaipur Thus, the amount of Rs.4,67,000/- noted on this paper is covered by the expenditure recorded in books but inadvertently it was left to be crossed as marked on other pages of this diary. Therefore, simply because of a noting, without any corroborative evidence of assessee having incurred such expenditure, no addition u/s 69C can be made.

13.4 It is submitted that the assessee in his statement u/s 132(4) in reply to Q. No.7 (reproduced at Pg 10 of the assessment order) has stated that expenditure of Rs.4,67,000/- was incurred by M/s Bhivaram Pannalal Kumawat out of the unaccounted income generated by claiming bogus labour expenses but the same stood retracted by filing a detailed affidavit dt.11.10.2017 (PB 64-71). Therefore, simply on the basis of this statement addition cannot be made in the hands of assessee. In case the statement is considered to be true and correct, then also no addition can be made in the hands of assessee as the source of such expenditure is M/s Bhivaram Pannalal Kumawat.

13.5 The Ld. CIT(A) has not accepted the above contention for the reason that amount of Rs.4,67,000/- is not linked with the entries recorded in the books of samiti ignoring that during FY 2013-14 through the assessee certain expenditure were incurred in the said construction work against which payment is recorded in the books of samiti between 15.08.2013 to 30.08.2013 as cash paid. In any case, when the noting on the paper clearly states that this amount is to be taken from Bande Balaji and assessee has also stated in the statement that it is in respect of expenditure incurred on at Bande Balaji and the address of samiti is also bande ke balaji where construction was carried out at Dharmshala during FY 2013-14, addition confirmed in the year under consideration is unjustified. In view of above, addition made by AO and confirmed by Ld. CIT(A) be directed to be deleted.

13.6 The Ld. AR of the assessee argued that the expenses incurred are duly recorded in the books of account of Samiti. He has filed the income tax return, Computation of income, From No. 10B , Balance Sheet, Income and Expenditure account and copy of ledger account of building under construction account of Kumavat Samaj Samuhik Vivah Evam Vikas Samaiti. The Ld. AR of the assessee argued before us that since in the expenses are duly accounted in the samiti’s account no separate addition is required to be made in the case of assessee. He has further argued that the finding of the CIT(A) is erroneous as when the transactions are explained and purpose of

36 ITA No. 165/JP/2021 Shri Panna Lal Kumawat, Jaipur incurring such transactions is explained and in the light of these facts no addition can be made in the case of the assessee.

13.7 The learned CIT(A) has given her finding on page 18 para 5.3(iii) which reads as under:

5.3(iii) I have considered the impugned additions made by the AO and on perusal of the Page 2 of Exhibit-6 it is observed that there is specific noting of Rs. 4,67,000/- on account of expenditure notes as “kharch uchanti-bande Balaji se lena hai”. The narration itself explains the expenditure is out of books of accounts. On perusal of balance sheet of Kumawat Samaj Samuhik Vivah Evam Vikas Samiti', as on 31.03.2014, it is observed that there is building under construction. The appellant has furnished the ledger account of construction by the aforesaid Samiti. As the appellant is a contractor and he has incurred expenditure on the construction work at Bande Balaji Temple and also clarified by the noting on Page 2 of Exhibit-6, it is evidently clear that the appellant has incurred the expenditure in cash. The contention of the appellant that this amount is duly recorded in the books of the aforesaid Samiti-does not prove that the aforesaid transaction is explained in the hands of the appellant. In fact, no direct link or entry in the name of the appellant is found recorded in the books of the Samiti. Further, the balance sheet of the above Samiti is as on 31.03.2014, whereas no date is mentioned in page 2 of Exhibit 6 against the amount of Rs. 4,67,000/-. On the contrary, the appellant himself in the statement recorded during the search proceedings has clearly stated that this diary contains the details of unaccounted transactions and is related to unaccounted loan & advances of firm M/s Bhivaram Pannalal Kumawat. However, since certain transactions as mentioned in diary are recorded in the books of accounts of the appellant himself establishes the fact that these transactions are related to the appellant and not to the firm. Therefore, the noting mentioned in the diary is the unaccounted transaction of the appellant. In view of the above facts, it is observed that the appellant has not been able to file any corroborative and cogent evidence to explain and verify the noting of Rs. 4,67,000/ with his books of accounts. Therefore, the amount of Rs. 4,67,000/- has rightly been considered by the AO to be undisclosed cash expenditure incurred by the appellant.

37 ITA No. 165/JP/2021 Shri Panna Lal Kumawat, Jaipur Accordingly, the addition of Rs. 4,67,000/- is confirmed and the Ground of Appeal No. 2 is treated as dismissed.

13.8 We have considered the rival contentions raised in respect of the addition of Rs. 4,67,000/- made by the assessing officer. On careful consideration of the facts and submission made before us we also inclined to agree with the views of the Ld. CIT(A) so far as there is no corroborative and cogent evidence to explain and verify the noting of Rs. 4,67,000/- and in the absence of any evidence contending the amount is payable to the assessee and in the absence of evidence the addition made by the assessing officer is sustained and ground no. 2 raised by the assessee is dismissed.

Ground No. 3 (Assessee) The Ld. CIT(A) has erred on facts and in law in confirming the addition of Rs.1,66,000/- on the basis of Pg 3 of Exhibit 6 ignoring that the two amounts noted on this paper for which addition is confirmed do not pertain to the year under consideration in as much as the other two amounts noted on this paper has been accepted as pertaining to FY 2014-15 & 2015-16.

Ground No.4 (Assessee)

The Ld. CIT(A) has erred on facts and in law in confirming the addition of Rs.74,000/- on the basis of noting at Pg 9 of Exhibit 6 by not accepting the contention of assessee that this amount is given towards advance at site out of withdrawal made from the bank account of M/s Bhivaram Pannalal Kumawat.

Ground No.2 (Department)

38 ITA No. 165/JP/2021 Shri Panna Lal Kumawat, Jaipur The Ld. CIT(A) has erred in law and on facts & in the circumstances of the case in restricting the addition to Rs.2,40,000/- from Rs.7,34,000/- made by AO on account of unexplained income u/s 68 of IT Act, 1961.

14.1 The relevant finding in relation to this issue is given in assessment order Pg 10-12 and in order of Ld. CIT(A) it is on page 19- 22. The AO observed that at Pg 3 of Exhibit 6 (PB 28) there is a noting of Rs.6,60,000/- (correct amount Rs.6,66,000/-) and on Pg 9 (PB 31) there is a noting of Rs.74,000/- (50,000+24,000). She therefore, made an addition of Rs.7,34,000/- u/s 68 of the Act.

14.2 The Ld. CIT(A) at Para 6.3(ii) held that against the 4 amounts totaling to Rs.6,66,000/- noted at Pg 3 of Exhibit 6, specific dates are mentioned against the amount of Rs.4 lacs & Rs.1 lacs which pertain to the year 2014-15 and 2015-16 respectively. She therefore, deleted the addition to this extent and confirmed the addition for balance amount of Rs.1,66,000/-. Further at Para 6.3(iii) where two amounts of Rs.50,000/- and Rs.24,000/- are noted at Pg 9 of Exhibit 6 (PB 31) she did not accept the explanation of assessee and confirmed the addition of Rs.74,000/-. Thus, addition to the extent of Rs.2,40,000/- (1,66,000+74,000) is confirmed and the balance addition is deleted by the Ld. CIT(A).

14.3 It is submitted that Pg 3 of Exhibit 6 pertain to the year 2014-15 & 2015-16 as evident from the date noted on this paper against the amount of Rs.4 lacs and Rs.1 lacs. On the other two amount of Rs.1,46,000/- and Rs.20,000/- the dates are not there but considering that on the earlier two notings the date of 08.12.2014 and 28.09.2015 is noted, the same is to be considered as pertaining to the year 2015-

39 ITA No. 165/JP/2021 Shri Panna Lal Kumawat, Jaipur 16. Therefore, this paper do not relate to the year under consideration. Hence, the addition of Rs.6,60,000/- made by the AO in the year under consideration is incorrect. The Ld. CIT(A) has partly accepted the contention of assessee and deleted the addition to the extent of Rs.5 lacs (4 lacs+1 lacs) where the specific dates were noted but confirmed the addition of Rs.1,66,000/- ignoring that when the earlier two entries on this paper pertain to FY 2014-15 & 2015-16, the reasonable presumption is that immediately succeeding amount noted on this paper also relates to FY 2015-16. Therefore, the addition of Rs.1,66,000/- confirmed by Ld. CIT(A) is not justified. Hence, Ground No.2 of the department be dismissed and Ground No.3 of assessee be allowed.

14.4 The addition of Rs.74,000/- (50,000+24,000) has been confirmed by Ld. CIT(A) on the basis of notings on Pg 9 (PB 31). On this paper 7 transactions are noted and on the top of the paper there is a noting of PNB-030028. This is the bank account of M/s Bhivaram Pannalal Kumawat. All other notings on this paper was verified by the AO from the said bank account. In fact against the amount of Rs.50,000/- dt. 05.06.2017 and Rs.24,000/- dt. 27.06.2017 against the name 'bhaisahab', there is indication of 'Rajendra ji'. This indicates that out of the cash withdrawn from the bank account of M/s Bhivaram Pannalal Kumawat for site advance, the assessee has taken this amount and given it to Rajendra ji who is working at the site. It may be noted that from the said bank account of M/s Bhivaram Pannalal Kumawat, Rs.5 lacs was withdrawn on 01.06.2017 (PB 73) and Rs.25 lacs was withdrawn on 06.06.2017 (PB 74). Out of the said amount, Rs.74,000/- was given to Rajendra ji. From the ledger account of Advance to site

40 ITA No. 165/JP/2021 Shri Panna Lal Kumawat, Jaipur (PB 72-76) it can be noted that in the month of June, 2017, the balance available at site is ranging from Rs.3,99,178/- to Rs.17,53,015/-. Therefore, the amount of Rs.74,000/- on this paper is covered by the amount available at site. The Ld. CIT(A) has not accepted the explanation of assessee by simply stating that no cogent and corroborative documentary evidence has been provided ignoring that when on the paper itself PNB A/c No. is mentioned which is of M/s Bhivaram Pannalal Kumawat and from said bank account cash has been withdrawn just before the dates noted against the amount of Rs.74,000/-, no further corroborative evidence is required. Hence, the addition of Rs.74,000/ confirmed by Ld. CIT(A) be deleted by allowing Ground No.4 of the assessee.

14.5 The Ld. AR submitted that otherwise also, AO has made addition u/s 68 which is not as per law as discussed in Ground No.1 above. In view of above, ground of assessee be allowed and ground of department be dismissed.

14.6 We have gone through the rival submission and contention in the grounds raised by both the litigant based on the evidences and arguments placed on record. As regards the sustained addition of Rs. 1,66,000/- we have persuaded the relevant seized page which was filed by the assessee in his paper book page 28, where in the Ld. CIT(A) has considered that the the contention of assessee and deleted the addition to the extent of Rs.5 lacs (4 lacs+1 lacs) where the specific dates were noted but confirmed the addition of Rs.1,66,000/- as there is no dates mentioned against the said two amount of Rs. 1,46,000/- and Rs. 20,000 on that page. On the contrary the Ld. AR of the assessee argued

41 ITA No. 165/JP/2021 Shri Panna Lal Kumawat, Jaipur that the CIT(A) has ignored that when the earlier two entries on this paper pertain to FY 2014-15 & 2015-16, the reasonable presumption is that immediately succeeding amount noted on this paper also relates to FY 2015-16. We have gone through the contentions of the AR of the assessee that considering the set of facts available on records and in the absence of any date the benefit goes to the assessee that the said page entries pertains to the financial year 2015-16 and therefore, the addition of Rs.1,66,000/- confirmed by Ld. CIT(A) is not justified and the same is deleted and thus, the grounds no. 3 raised by the assessee is allowed. 14.7 As regards the ground no 4 of the assessee we have persuaded the rival contentions and also the written submission filed by the Ld AR of the assessee. The ld. CIT(A) has stated that assessee failed to file any cogent and corroborative documentary evidence to support their contentions to confirm that the money has been advanced to site supervisor Shri Rejendra ji he has neither placed accounting entry in the books of the firm nor filed any confirmation of the said employee confirming this contentions raised and thus, on this issue we are inclined agree with the finding of the Ld. CIT(A) that assessee failed substantial his version by filling the supportive evidence and in the absence of evidence the addition confirmed by the CIT(A) is sustained and the grounds of appeal no. 4 raised by the assessee is dismissed.

14.8 The department has raised ground no. 2 for addition of Rs. 7,34,000/- made by the assessing officer which was reduced by the CIT(A) at Rs. 2,40,000/- and the department has challenged the to the extent of Rs. 5 lac given by the CIT(A). Based on the finding given here

42 ITA No. 165/JP/2021 Shri Panna Lal Kumawat, Jaipur in above that the transactions are related to two entries on this paper pertain to FY 2014-15 & 2015-16 one if dated 08.12.2014 for Rs. 4,00,000/- pertains to F. Y. 2014-15 no addition can be made in the year under consideration and on the same page another transaction of Rs. 1,00,000/- is dated 23.09.2015 related F. Y. 2015-16 the relief granted by the Ld. CIT(A) is correct and thus, based on the above finding the ground no. 2 of the department appeal is dismissed.

The Ld. CIT(A) has erred in law and on facts & in the circumstances of the case in deleting the addition of Rs.3,25,000/- by ignoring the admission of assessee in the statement recorded w/s 132(4) of the IT Act, 1961 during the search.

15.1 The relevant finding in relation to this issue is given in assessment order Pg 12-14 and in order of Ld. CIT(A) it is on page 22- 25. The learned AO observed that in search cash of Rs.5,07,380/- was found at assessee's residential premises inventoried as Annexure CF-2 out of which cash of Rs.3,25,000/- was seized as per Annexure CS-2. In the statement recorded u/s 132(4) dt. 29.09.2017, the assessee in reply to Q. No.22 (reproduced at Pg 12-13 of assessment order) submitted that out of the cash found, Rs.57,340/- found from the bedroom of his daughter-in-law Daisy Kumawat is her savings, Rs.44,170/- found from the bedroom of another daughter-in-law Mona Kumawat is her savings, Rs.80,000/ is of the firm M/s Bhivaram Pannalal Kumawat and balance amount is small savings of family members for which there is no evidence.

43 ITA No. 165/JP/2021 Shri Panna Lal Kumawat, Jaipur 15.2 The AO, however, held that assessee has not furnished any supporting evidence for his claim that the cash was out of his savings and that of his family members. However, considering cash of Rs.1,82,380/- to be reasonable possession, the remaining cash of Rs.3,25,000/- is considered as undisclosed income earned from unexplained sources. Accordingly, she made addition of Rs.3,25,000/- u/s 68 of the Act.

15.3 The Ld. CIT(A) after considering the denomination of notes ranging from Rs.10/- to Rs.2,000/-, out of which the major denomination of notes were of Rs.10/- to Rs.100/- and statement of assessee recorded u/s 132(4) held that out of cash found of Rs.5,07,380/-, an amount of Rs.2,74,880/- consists of small denomination notes and Rs.1,81,510/ (57,340+44,170+80,000) pertains to savings of two daughter-in-law and of firm M/s Bhivaram Pannalal Kumawat. Thus, cash of Rs.4,56,390/- (2,74,880+1,81,510) pertains to savings of two daughter-in-law, M/s Bhivaram Pannalal Kumawat and small savings of family of assessee. The balance cash of Rs.50,990/- is reasonable possession looking to the size of family and status of assessee. Accordingly, she deleted the addition.

15.4 It is submitted that assessee's family consists of himself, his wife Smt. Norati Devi, two sons namely Manish Kumawat & Manoj Kumawat, two daughter-in-laws namely Mona Kumawat & Daisy Kumawat and two grandsons namely Kovid Kumawat and Tanush Kumawat. The Ld. CIT(A) therefore, correctly held that the cash found pertains to the firm M/s Bhivaram Pannalal Kumawat and savings of family members, pin money of ladies members/ children which further evident from small

44 ITA No. 165/JP/2021 Shri Panna Lal Kumawat, Jaipur denomination notes of as Rs.10/- to Rs.100/-, aggregating to Rs.2,74,880/- and also stated in the statement recorded u/s 132(4). The department in its Ground of Appeal has incorrectly stated that assessee has admitted the cash found to the extent of Rs.3,25,000/- as unexplained ignoring that in reply to Q. No.22 & 23 of the statement as reproduced on Pg 12 & 13 of the assessment order the assessee has nowhere accepted any part of cash found as unexplained but only stated that he has no objection if cash of Rs.3,25,000/- is seized. This has been wrongly interpreted to be admission whereas in the immediately previous question assessee has categorically stated that the balance cash found is small savings of family members.

15.5 Otherwise also, AO has made addition u/s 68 which is not as per law as discussed in Ground No.1 above. In view of above, addition of Rs.3,25,000/- made by AO u/s 68 is rightly deleted by CIT(A) and therefore, the ground No. 3 of department be dismissed.

15.6 We have gone through the rival submission and contentions raised by both the parties in respect of this ground. The ld. DR has not controverted any of the facts submitted by the ld. AR of the assessee and has also not raised any contention against the finding of the Ld. CIT(A) that AO has made the addition without any basis he has not considered the status & standing of the assessee and his family members who are filling their regular tax returns and the income that declared by the family more than 40 lacs, cash found considering the size and stature of the family can be considered as reasonable and thus, we concurred the views of the Ld. CIT(A). Whereas, the Ld. DR vehemently relied upon the findings of the AO. Considering the detailed

45 ITA No. 165/JP/2021 Shri Panna Lal Kumawat, Jaipur findings and arguments given by the Ld. CIT(A) we find no error or facts or of law in deleting the addition of 3,25,000/- and thus the ground no. 3 raised by the department is dismissed.

On the similar issues department has raised Ground no. 4 which is as under

The Ld. CIT(A) has erred in law and on facts & in the circumstances of the case in restricting the addition to Rs.13,97,042/- from Rs.14,03,951/- made by AO on account of unexplained investment in jewellery w/s 69 of IT Act, 1961.

Since, both the grounds related to one addition taken by each party same is decided together.

16.1 The relevant finding in relation to this issue is given in assessment order Pg 14-16 and in order of Ld. CIT(A) it is on page 25- 29. The learned assessing officer has observed that in search gold jewellery weighing 1399 gms valued at Rs.38,27,039/- was found at the bedroom of assessee and his two sons marked as Annexure JF-I to JF- III (PB 78-80) and gold jewellery weighing 1061.52 gms valued at Rs.29,36,474/- was found in his locker marked as Annexure LJF. Thus, total jewellery found is 2461.07 gms out of which jewellery weighing

46 ITA No. 165/JP/2021 Shri Panna Lal Kumawat, Jaipur 461.007 gms was seized. In the statement recorded u/s 132(4) dt. 29.09.2017, the assessee in reply to Q. No.15 to 21 (reproduced at Pg 14-15 of the assessment order) stated that the jewellery found is received on various occasions like marriage, functions of the children, birthday and some jewellery is ancestral. However, the search party considering the CBDT circular treated 2000 gms jewellery as explained and remaining 461.07 gms as unexplained valued at Rs.13,97,042/-.

16.2 During the course of assessment proceedings assessee explained that as per CBDT Instruction No.1916 dt. 11.05.1994, 2000 gms of gold jewellery is a reasonable possession and the balance of 461.07 gms is a minor difference which is due to holding of parental jewellery and actually receipt at the time of marriage and other functions. Thus, jewellery found during search is fully verifiable. The AO, however held that assessee failed to furnish evidence for remaining jewellery weighing 463.35 gms valued at Rs.14,03,951/- and thus, made addition for the same u/s 69 of the Act.

16.3 The Ld. CIT(A) at Para 8.3(iii), Pg 28-29 held that for the balance jewellery of 461.07 gms assessee has not furnished any evidence regarding the source of acquisition of the aforesaid jewellery and therefore, she confirmed the addition at Rs.13,97,042/- as the AO has wrongly taken the quantity of unexplained jewellery at 463.35 gms as against 461.07 gms.

16.4 It is submitted that the lower authorities after considering the CBDT Instruction has considered jewellery weighing 2000 gms as reasonable and balance 461.07 gms (wrongly taken by AO at 463.35

47 ITA No. 165/JP/2021 Shri Panna Lal Kumawat, Jaipur gms) as unexplained. While doing so it is ignored that the jewellery found is a reasonable possession considering the status and standing of the assessee and his family members. In this connection reliance is placed on the decision of Hon'ble Delhi Court in case of Ashok Chaddha Vs. ITO 69 DTR 82 where gold jewellery weighing 906 gms found in search was held to be not substantial as being 'Stri Dhan' of the assessee's wife and accordingly addition u/s 69A was deleted. Again the Hon'ble ITAT Delhi Bench in case of Vibhu Aggarwal Vs. DCIT (2018) 170 ITD 580 where jewellery of 2531.50 gms was found at the assessee's residential premises, considered the same as reasonable by holding that in view of CBDT Instruction No. 1916 dt. 11th May, 1994, the excess jewellery found in the case of assessee, his parents, his wife, their children and the HUF was very nominal and was very much reasonable keeping in mind the riches and high status and more customary practices. Therefore, only considering 2000 gms of jewellery as reasonable possession in view of CBDT Instruction No.1916 dt. 11.05.1994 is not justified. The Ld. CIT(A) has not considered these two decisions while confirming the addition for alleged unexplained jewellery and therefore, the addition confirmed by her be deleted.

16.5 It may be noted that in search no evidence is found that assessee has purchased any jewellery. As against this the assessee in his statement u/s 132(4) has specifically pointed out that some jewellery is ancestral. Therefore, jewellery of 461.07 gms without any incriminating material found in search cannot be considered as unexplained.

16.6 The department in its Grounds of Appeal has challenged the reduction of Rs.6,909/- from the addition on account of unexplained

48 ITA No. 165/JP/2021 Shri Panna Lal Kumawat, Jaipur jewellery made by AO by not considering the fact that AO has wrongly considered the unexplained jewellery at 463.35 gms valued at Rs.14,03,951/ whereas as per her own discussion the same is 461.07 gms valued at Rs.13,97,042/-. During the course of hearing the Ld. DR has not raised any contentions nor filed any evidence that the finding of the Ld. CIT(A) that the figure taken by the Ld. AO is incorrect and thus, she has corrected the figure of the addition of the AO. Looking to the facts and arguments placed before us and in the absence of any supporting arguments or evidence the ground raised by the department deserved to be dismissed and the thus, ground no. 4 raised by the department is dismissed.

16.7 As regards the ground no. 5 taken by the assessee we have gone through the written as well as oral arguments placed before us. The assessee filed his explanation in respect of jewelry found and the same is extracted here in below for the sake of brevity; "During the course of search gold jewellery weighing 2461.07 gms. were found. Assessee's family consist of himself, his wife Smt. Norati Devi, his two son Shri Manish Kumawat & Shri Manoj Kumar, his sons's wife Smt. Mona Kumawat & Smt. Daisy Kumawat, his two grandson namely Kovidh Kumawat & Tanush Kumawat. As per the CBDT Instruction No. 1994 dated 11.05.20194, reasonable possession of jewellery in the hand of various family members works out to 2000gms. (500*3+100*5). Thus, the jewellery found is more or less equal to the reasonable possession as per CBDT Instruction and the minor difference is due to holding of parental jewellery and actual receipt at the time of marriage and other function. Thus the jewellery found during the course of search is fully verifiable hence same be accepted as such."

16.8 The Ld. CIT(A) corrected the mistake apparent and that is why he gave relief to the extent of Rs. 6,909/- only and has confirmed the

49 ITA No. 165/JP/2021 Shri Panna Lal Kumawat, Jaipur addition for Rs. 13,97,042/- being the excess 461.07 gms found during the course of search.

16.9 In respect of this addition the Ld. DR has argued that there is specific guidelines about the jewelry and the AO and CIT(A) both absolutely given their finding and based on that the addition should sustain.

16.10 On the contrary the Ld. AR argued that Ld. CIT(A) on one hand agree that the family member of the assessee is higher tax payer and regularly assessed to tax and holding of the cash was considered genuine, whereas the excess 461.07 gms jewelry was not considered and relief was granted as per board circular and here the Ld. CIT(A) has not considered the size and stature of the family. Since, the lower authority has relied upon the CBDT’s instruction is better to have look on that instruction no. 1994 dated 11-05-1994 issued by the CBDT which is extracted here in below CBDT Instruction 1994 dated 11-05-1994 Instances of seizure of jewellery of small quantity in the course of operation under section 132 have come to the notice of the Board. The question of a common approach to situation where search parties come across items of jewellery has been examined by the Board and following guidelines are issued for strict compliance.

(ii) In the case of a wealth-tax assessee, gold jewellery and ornaments found in excess of the gross weight declared in the wealth-tax return only need to be seized.

50 ITA No. 165/JP/2021 Shri Panna Lal Kumawat, Jaipur (iii) In the case of a person not assessed to wealth-tax gold jewellery and ornaments to the extent of 500 gms. per married lady 250 gms per unmarried lady and 100 gms. per male member of the family, need not be seized. (iv) The authorized officer may having regard to the status of the family and the customs and practices of the community to which the family belongs and other circumstances of the case, decide to exclude a larger quantity of jewellery and ornaments from seizure. This should be reported to the Director of Income- tax/Commissioner authorising the search all the time of furnishing the search report. (v) In all cases, a detailed inventory of the jewellery and ornaments found must be prepared to be used for assessment purposes.

On plain reading of the above instruction it is evident that the instruction is for not seizure where the assessee are not filling their tax return. Whereas in the present case all the family member of the assessee are regularly assessed to tax and there are as agreed by the Ld. CIT(A) are in higher tax slab. Thus, the CBDT’s instruction can not be applied a straight and is mere guidelines for seizure where the assessee is not filling the tax return. Thus, following the consistent view that the assessee is a higher tax payer, no evidence for unaccounted purchase of jewelry found and looking to the number of family member residing together the holding of the family found reasonable and looking to the fact that there are no evidence of any fresh jewelry purchased by the family the holding of the jewelry is required to be considered as genuine and explained and have been acquired on various occasion such as marriage of assessee and his two sons, birth of sons and grand

51 ITA No. 165/JP/2021 Shri Panna Lal Kumawat, Jaipur sons other various family occasions. Thus, the ground no. 5 raised by the assessee is allowed.

52 ITA No. 165/JP/2021 Shri Panna Lal Kumawat, Jaipur 18. Ground No.6 (Assessee)

The Ld. CIT(A) has erred on facts and in law in not allowing the set off of trading addition confirmed in case of M/s Bhivaram Pannalal Kumawat in which assessee is a partner against the additions confirmed by her on account of various investment advances as referred above.

“It is submitted that Ld. CIT(A) has confirmed certain additions on account of profit of M/s Bhivaram Pannalal Kumawat in which assessee is a partner. These additions have been challenged by the assessee before the Hon'ble Bench. Therefore, if any addition is sustained in case of firm, the same should be considered towards source of alleged unexplained cash, jewellery and unexplained expenditure/ income for which addition, if any, is confirmed to avoid double addition.”

“9.1 I have considered the arguments of the appellant that in view of the statement of Shri Pananlal Kumawat recorded u/s. 132(4) of the IT Act during the course of search on 28.09.2017, it has been admitted that whatever un accounted investment is recorded ma be considered that of M/s. Bhivaram Pannalal Kumawat, the source of which is out of inflated labour expenses of the firm. However, this contention of the appellant is not acceptable in view of the fat that Shri Panalal Kumawat has subsequently retracted from this statement. Further no evidence has been submitted by the appellant in favour of his contention that the source of investment made by the appellant is from the firm of M/s. Bhivaram Pannalal and therefore, set off the same cannot be allowed against the addition made in the

53 ITA No. 165/JP/2021 Shri Panna Lal Kumawat, Jaipur hands of the appellant. Therefore, the appellant does not succeed on this ground and the Ground of appeal no. 6 is treated dismissed.

In the result, the appeal of the assessee is partly allowed in ITA No. 84/JPR/2021 and appeal of the department in ITA No. 165/JPR/2021 is also partly allowed.

Order pronounced in the open court on 05/05/2022

Sd/- Sd/- ¼ lanhi xkslkbZ ½ ¼ jkBkSM deys’k t;arHkkbZ ½ (Sandeep Gosain) (Rathod Kamlesh Jayantbhai) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 05/05/2022 *Ganesh Kr. आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. vihykFkhZ@The Appellant- DCIT, Central Circle-03, Jaipur 2. izR;FkhZ@ The Respondent- Shri Panna Lal Kumawat, Jaipur ACIT, Central Circle-03, Jaipur 3. vk;dj vk;qDr@ CIT 4. vk;dj vk;qDr@ CIT(A) 5. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत. 6. xkMZ QkbZy@ Guard File {ITA Nos. 165 & 84/JP/2021} vkns'kkuqlkj@ By order, सहायक पंजीकार@Aेेज. त्महपेजतंत