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Assessee by : Shri R. C. Jain (AR) Revenue by : Shri N. P. Singh (CIT-DR) Date of hearing : 01.05.2017 Date of Pronouncement : 05.05.2017 Order Under Section 254(1) of Income Tax Act PER PAWAN SINGH, JUDICIAL MEMBER: 1. These two cross appeal u/s 253 of the Income-tax Act (the Act) are filed against the order of ld. CIT(A)-41, Mumbai dated 03.03.2011. Since both the appeal are the facts are common thus, both the appeal were clubbed, heard together and is being decided by a consolidated order to avoid the conflicting decision. The assessee has raised the following grounds of appeal:
1. The Assessing Officer has erred in adding a sum of Rs. 2,50,000/- as unexplained cash loan and further the Ld. Commissioner of Income Tax (Appeals)-41 has erred in confirming the disallowance made by the Assessing Officer.
& 4502/M/2011- M/s Genesis Motels P. Ltd.
The Revenue in its cross appeal raised the following grounds of appeal: I. "Whether, on facts and in the circumstances of the case and in law, CIT(A) is justified in admitting additional evidences filed at the appellate stage in spite of the fact that the assessee has not fulfilled the conditions mentioned in rule 46A(3) of income tax rules and CIT(A) has not passed order to this effect in writing." II. "Whether, on facts and in the circumstances of the case and in law, CIT(A) is justified in restricting the addition to the income of the assessee to Rs. 13,55,299/- when there are no evidence that any part construction expenses mentioned in the loose paper is accounted for in regular books of account." III. Whether, on facts and in the circumstances of the case and in law, CIT(A) is justified in reducing the addition made on account of profit worked out from the seized papers from Rs. 27,82,522/ - to Rs. 3,74,064/ -, holding that profit worked out in the seized paper is provisional figure, when the assessee had not be able to reconcile the figures with the profit as per profit and loss account.”
3. Brief facts of the case are that a search and seizure action u/s 132 of the Act was carried on 26.11.2007 in case of Mr. Nand Kumar Kale and his group entities and the assessee is one of them. During the search and seizure action u/s 132 certain documents belonging to the assessee and his family were found from their residential premises. Consequent upon notice u/s 153A dated 16.11.2009 was served upon the assessee. As assessee has not filed return of income till 08.12.20109, the Assessing Officer (AO) issued notice u/s 143(2) of the Act as the case was getting time barred. The AO again issued a show-cause notice dated 16.12.2009 and proposed the addition u/s 144 for non-compliance within the stipulated time. In response to the notice u/s 153A, the assessee filed return of income on 29.12.2009. The AO completed the assessment u/s 144 r.w.s. 153A on 31.12.2009. The AO while framing the assessment order besides the other addition made the addition of Rs. 5,00,000/- ,out of which 2,50,000/- as unexplained cash loan from Rajendra Kale and Rs. 2,50,000/- cash loan from Smt. Sarita Kale. The addition of Rs. 27,50,418/- on account of unexplained investment and Rs. 27,82,522/- on account of unexplained profit. On appeal before the ld. CIT(A), the addition of Rs. 5,00,000/- on account of unexplained loan from Rajendra Kale and Sarita Kale was sustained. Out of Rs. 27,50,418/- the addition on account of unexplained investment Rs.13,59,299/- was sustained. Out of addition of Rs. 27,82,522/- on account of unexplained profit, the addition was restricted to Rs. 3,74,064/- thereby deleted Rs. 23,98,458/-. Thus, aggrieved by the order of ld. CIT(A) both the parties have filed their cross appeal. The assessee has challenged & 4502/M/2011- M/s Genesis Motels P. Ltd. the confirmation of addition of Rs. 5,00,000/- on account unexplained cash loan. Similarly, the Revenue has filed its cross appeal against the partial relief granted on account of unexplained investment and unexplained profit.
4. First we are taking Appeal filed by assessee. The ld. Authorized Representative (AR) of the assessee argued that the AO passed the assessment order without giving sufficient opportunity, the order was passed u/s 144 r.w.s. 153A, the AO acted in a hasty manner as the assessee was getting time barred. The assessee was issued notice only on 16.12.2009 and the assessment was passed on 29.12.2009. Before the ld. CIT(A), the assessee filed his submission and the necessary evidences. The ld. CIT(A) by exercising its power under subsection(4) of section 250 referred the evidence to the AO. The AO submitted its remand report. In the remand report, the AO not objected about the admission of evidences furnished before the ld. CIT(A). The ld. AR of the assessee further submitted that the assessee is engaged in the business of Hotel/Motel at village Nagothane, District-Raigad. The assessee has explained before the ld. CIT(A) that Rajendra Kale has not given any loan to the assessee to represent the amount of cash in hand being sale proceed of the Hotel which were taken away by Rajendra Kale for day to day business and for safety and security purpose. The said cash was carried by Rajendra Kale and Ms Sarita Kale to their home and used to bring back on the next date or and when required. On the other hand, ld. DR for the Revenue supported the order of authorities below. The ld. DR for the Revenue argued that it is the self-serving story of the assessee.
5. We have considered the rival contention of the parties and gone through the order of authorities below. The AO during the assessment proceedings observed that the assessee has received unexplained cash loan of Rs. 2,50,000/- from Rajendra N. Kale and Smt. Sarita N. Kale, as no detailed was furnished nor any explanation given nor any document was produced. The AO made the addition on account of unexplained cash loan of Rs. 5,00,000/- (Rs. 2,50,000/- each from Rajendra N. Kale and Sarita N. Kale). During the appellate proceeding before the ld. CIT(A) the assessee furnished explanation along with his letter dated 28.04.2010. The assessee explained that the amount was not loan and represents the amount of cash in hand. 3 & 4502/M/2011- M/s Genesis Motels P. Ltd.
It was further explained that the assessee is in the business of Hotel which is situated at far away in an isolated location and whenever substantial cash was received from the customer, the Kale family used to take the cash to their home to bring back as and when required and to give the same to the cashier. The explanation submitted by assessee was referred to the AO. The AO submitted his remand report. In the remand report, the AO contented that the contention of the assessee is not acceptable as no cash book was produced. After considering the explanation of assessee and remand report furnished by AO, the ld. CIT(A) not accepted the contention of assessee holding that the noting on the loose paper relating to the cash taken from the Hotel premises to the residence only. However, no evidence was submitted to substantiate the claim in the shape of cash-book or bank-book and dismissed the ground.
We have noticed that the assessee has not substantiated its claim, no documentary evidence with regard to the contention that the alleged cash was taken over by Kale family. No confirmation of Rajendra N. Kale and Sarita N. Kale is filed either before the AO or before the ld. CIT(A). Even before us except making the submission that the cash was carried away from the Hotel premises for the security reasons. The contention of assessee is not plausible one. Thus, we do not find any reason to interfere with the finding of ld. CIT(A). Hence, the ground of appeal
raised by assessee is rejected.
7. In the result, appeal of the assessee is dismissed.
8. Ground No.1 relates to admit the additional evidence in violation of Rule 46A(3) of Income Tax Rules. The ld. DR for the Revenue submitted that the ld. CIT(A) accepted the additional evidence furnished by assessee during the course of appellate proceeding in violation of Rule 46. The ld. DR for the Revenue prayed that since the ld. CIT(A) accepted the additional evidence in violation of Rule 46A. Thus, the order passed by ld. CIT(A) may be set-aside and matter be remanded before the ld. CIT(A) or AO for considering the matter afresh. On the other hand, ld. AR of the assessee argued that no fair and sufficient opportunity was given by AO. The AO passed the assessment order in a hasty manner as the matter was 4 & 4502/M/2011- M/s Genesis Motels P. Ltd.
getting time barred. The AO passed the order on 29.12.2009 u/s 144 r.w.s. 153A of the Act. It was further argued that on furnishing the additional evidence before the ld. CIT(A), the ld. CIT(A) referred the evidences to the AO and only after remand report of the AO, the additional evidence was considered by ld. CIT(A). The ld. CIT(A) by exercising its power under subsection(4) of section 250 referred the evidence to the AO. The AO submitted its remand report. In the remand report, the AO not objected about the admission of evidences furnished before the ld. CIT(A).
We have considered the rival contention of ld. representatives of the parties and gone through the orders of authorities below. We have seen that the ld. CIT(A) considered the additional evidence only on furnishing remand report by AO, on such additional evidences. As per our considered view, the ld. CIT(A) provided sufficient opportunity to the AO before admitting the additional evidence. Thus, the ground no.1 raised by AO/Revenue has no force in the eyes of law and the same is rejected.
Ground No.2 relates to restricting the addition of Rs. 27,50,418/- on account of unexplained investment of Rs. 13,59,299/-. The ld. DR for the Revenue argued that the AO restricted the addition on account of unexplained investment without evidence. It was further argued that the addition was made on the basis of seized document. On the other hand, ld. AR of the assessee argued that AO after considering the contention of assessee and the remand report restricted the addition to Rs. 13,59,299/-.
We have considered the contention of both the parties and perused the record. The AO made the addition holding that from the seized material in the search which is marked as Annexure-A2, page no. 39 to 52, the assessee made the investment of Rs. 27,50,418/- in construction work. The assessee was asked to explain as to why the same should not be added to the total income. The assessee has not furnished any explanation nor to adduce any evidence in support of source of income. Thus, the AO made the addition of Rs. 27,50,418/- on account of unexplained investment. Before the ld. CIT(A), the assessee submitted that the assessee accounted the construction expenses in its books of account. The assessee further explained that entries in the lose paper are only a rough calculation and the assessee in an audited 5 & 4502/M/2011- M/s Genesis Motels P. Ltd.
report has shown the addition to the building account of Rs. 13,91,119/-. This submission and the account books were referred to the AO for his remand report. The AO furnished his remand report. The AO in its remand report contended that assessee has not reconciled the expenses in the seized paper except to audited report wherein the addition to the building account as shown to Rs. 13,91,119/-. The ld. CIT(A) after considering the remand report, entries in the seized paper and audited balance-sheet conclude that a difference of Rs. 13,59,289/- is seems to be unexplained. The ld. CIT(A) further concluded that entries shown in the loose paper clearly shows the investment in building only to Rs. 13,91,119/- which has been reflected in the balance-sheet. The ld. CIT(A) accepted the figure of balance-sheet and treated the difference of Rs. 13,59,299/- as unexplained investment and the addition was confirmed to that extent.
We have seen that the ld. CIT(A) granted partial relief only after considering the seized paper, audited balance-sheet and the explanation furnished by assessee. As per our view, the ld. CIT(A) considered the material available before him and granted partial relief. The finding of ld. CIT(A) is reasoned one and does not require any interference. Hence, Ground No.2 raised by Revenue is dismissed.
Ground No.3 relates to sustaining the addition of unexplained profit to the extent of Rs. 3,74,064/-. The Ld. DR for the Revenue argued that the CIT(A) deleted the substantial addition without giving opportunity to the AO. The AO made the addition on the basis of seized material. The ld. DR for the Revenue prayed for reversing the order of ld. CIT(A) and to restore the order of AO. On the other hand, ld. AR of the assessee supported the order of ld. CIT(A) and would argue that ld. CIT(A) restricted the addition only after giving opportunity to the AO.
We have considered the rival contention of the parities and seen the order of authorities below. The AO made the addition on the basis of seized document (Annexure-A2). During the assessment. The AO asked the assessee to show-cause as to why profit of Rs. 27,82,522/- be not added to the total income. The AO further observed that the assessee has neither furnished any explanation nor filed any evidence. Hence, unexplained profit of Rs. 27,82,522/- was added to the total income of the assessee. During the appellate proceeding before the ld. CIT(A), the 6 & 4502/M/2011- M/s Genesis Motels P. Ltd.