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Income Tax Appellate Tribunal, JAIPUR BENCHES “B”, JAIPUR
Before: SHRI SANDEEP GOSAIN, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;dj vihy la-@ITA No. 67/JP/2021
ORDER PER: SANDEEP GOSAIN, J.M. This is an appeal filed by the assessee against the order of ld. CIT(A)- 4, Jaipur dated 28/05/2021 for the A.Y. 2012-13 in the matter of order passed U/s 143(3) read with Section 153A of the Income Tax Act, 1961 (in short, the Act), wherein following grounds have been taken.
1. The ld. CIT(A) has erred on facts and in law in confirming the addition of Rs.50 lacs u/s 69 on account of alleged unaccounted advances given to Sh. Vikas Sharma on the basis of blank receipt found in search. 1.1 The ld. CIT(A) has further erred on facts and in law in holding that cancellation receipt filed during the course of assessment proceedings is a fake document and afterthought.
2 ITA 67/JP/2021_ Dr. Shiv Gautam Vs DCIT 1.2 The ld. CIT(A) has further erred on facts and in law in confirming the addition in the hands of assessee by relying on the statement of Sh. Vikas Sharma but at the same time not considering that as per this statement he has requested for loan from Sh. Manaswi Gautam and therefore, addition if any, could be made only in the hands of Sh. Manaswi Gautam.
2. The ld. CIT(A) has erred on facts and in law in not considering the amount of Rs.30 lacs received back from Sh. Ram Gopal Surolia as recorded at Pg 100 of Annexure AS-5 against the loan given to him in May, 2008 against the addition of Rs.50 lacs confirmed by her.
3. The appellant craves to alter, amend and modify any ground of appeal
4. Necessary cost be awarded to the assessee.”
2. The hearing of the appeal was concluded through video conference in view of the prevailing situation of Covid-19 Pandemic.
3. The brief facts of the case are that a search and seizure operation u/s 132(1) of the Act was carried out on 21/07/2016 at the residential as well as business premises of the assessee. Statutory notices were issued by the A.O. to the assessee and in response to the same, the assessee filed his return of income U/s 139 of the Act on 30/09/2012 declaring total income of Rs. 54,20,020/-. The A.O. finally completed the assessment U/s 143(3) r.w.s. 153A of the Act vide order dated 28/12/2018 determining total income of Rs. 1,07,20,020/- by making various additions.
4. Being aggrieved by the order of the A.O., the assessee carried the matter before the ld. CIT(A), who after considering the submissions of both 3 ITA 67/JP/2021_ Dr. Shiv Gautam Vs DCIT the parties and material placed on record, partly allowed the appeal filed by the assessee by deleting the addition of Rs. 30,00,000/- and upheld the action of the A.O. with regard to making addition of Rs. 50,00,000/-. Against the said order of the ld. CIT(A), the assessee is in further appeal before the ITAT on the grounds mentioned above.
All the grounds raised
by the assessee are interrelated and interconnected and basically relates to challenging the order of the ld. CIT(A) in confirming the addition of Rs. 50.00 lacs. In this regard, the ld. AR appearing on behalf of the assessee has reiterated the same arguments as were raised before the ld. CIT(A) and also relied on the written submissions filed before the Bench and the contents of the same are reproduced as under: “1. It is submitted that Shri Vikas Sharma is the Managing Director of M/s Royal Terrace Hotels Pvt. Ltd. Sh. Manaswi Gautam, son of the assessee has made investment of Rs.1.21 crore in the share capital of the company. As Vikas Sharma was in need of funds for construction of hotel, he approached Manaswi Gautam, son of the assessee to provide funds and for such arrangement he was required to give blank receipts and unnamed undated cheques. However, the funds could not be arranged. The cheques and the receipts were to be returned back to Shri Vikas Sharma but at that point of time they were misplaced and could not be traced. Therefore, Shri Vikas Sharma, in order to safeguard his interest obtained a cancellation receipt from the assessee on stamp paper dated 21.03.2012 where it was stated that cheques and receipts has been misplaced, the same has not been used, no 4. ITA 67/JP/2021_ Dr. Shiv Gautam Vs DCIT transaction was carried out on the basis of these cheques and receipts and if the same is found it will be returned back to him. It is for this reason that in search cancellation receipt was not found from the assessee as it was given to Vikas Sharma but the cheques and receipts which were misplaced could be located by the search party in course of search.
The various reasons given by the lower authorities for not accepting the contention of assessee is dealt as under:-
(a) It is true that in the receipts it is mentioned that Rs.50 lacs have been received by Sh. Vikas Sharma and against such cash, cheques of Rs.50 lakhs have been given as security by him but name of the person from whom it is received, cheque no. and date of cheque is not mentioned. It is not an abnormal practice to obtain advance receipt & cheque for arrangement of funds. Thus, on the basis of these receipts it cannot be presumed that Sh. Vikas Sharma has received Rs.50 lacs from the assessee. (b) The cancellation agreement could not be found during search as it was given to Vikas Sharma but the cheques and receipts were found as they were misplaced and could be located by the search party in course of search. (c) The cancellation receipt is dt. 21.03.2012 whereas statement of assessee was recorded on 21.07.2016, i.e. after more than 4 years. Therefore, it is possible that at the time of search the fact of execution of cancellation receipt was not in his memory more so when assessee has very limited knowledge of this transaction and he has executed this cancellation receipt only on behalf of his son. (d) The observation of Ld. CIT(A) that statement of Sh. Vikas Sharma is contradictory is incorrect in as much as on Pg 7 & 8 of Ld. CIT(A) order where his statement is reproduced, it can be noted that he has stated that these receipts which are in relation to the amount received from Manaswi Gautam are signed by him, the same were signed and given by him on the assurance of Manaswi Gautam that he would provide the funds but later on he could not provide the same. Therefore, when 5 ITA 67/JP/2021_ Dr. Shiv Gautam Vs DCIT the statement is read in whole there is no such contradiction as assumed by the Ld. CIT(A). (e) So far as the statement of Sh. Vikas Sharma as to the signing of receipt for the funds to be arranged by Manaswi Gautam and the cancellation receipt having been made with the assessee is concerned, it may be noted that since Manaswi Gautam has misplaced the cheque and receipt which could not be traced out even reminding him 4-5 times, Sh. Vikas Sharma obtained the cancellation receipt from the assessee who is father of Manaswi Gautam and a person of repute in the society so that such receipt is not misutilised. This fact all the more establishes the genuineness of the cancellation receipt which has been presumed by the lower authorities as fake document. (f) The lower authorities without any basis only on assumption and presumption stated that the cancellation receipt is a fake document. No material is brought on record in support of his allegation to prove that the cancellation receipt is a fake document. They have ignored that stamp paper on which cancellation receipt is given is duly notarised. The veracity of stamp paper and its notarisation is not questioned by them. The fact of such cancellation receipt is accepted by Vikas Sharma in his statement recorded by ADIT on 23.11.2016.The cancellation receipt was not found in search as it was given to Vikas Sharma. Therefore, it cannot be inferred that the cancellation receipt is a fake document. (g) The presumption u/s 292C is that any document found in the possession or control of person in course of search u/s 132 is presumed to be true. It is a rebuttable presumption. The assessee is not denying the availability of receipt and cheque but he has rebutted the presumption drawn by the lower authorities on the basis of these documents that he has arranged funds of Rs.50 lacs to Sh. Vikas Sharma in as much as Sh. Vikas Sharma in his statement recorded by ADIT on 23.11.2016 has explained that no funds were provided to him on the basis of these receipts and the cancellation agreement duly executed on the non judicial stamp paper and notarised on 21.03.2012 is not established to be a fake document as alleged.
In search of assessee no other material was found to indicate that he or any of his family members has given any cash advance to Vikas Sharma except 6 ITA 67/JP/2021_ Dr. Shiv Gautam Vs DCIT that his son Manaswi Gautam has made investment of Rs.1.21 cr. by cheque in M/s Royal Terrace Hotel Private Limited. Thus, when no transaction took place against the above undated cheques and receipts it cannot be presumed that the assessee has provided cash loan to Shri Vikas Sharma. Similar issue came before the Hon’ble ITAT Jaipur Bench in case of R.K. Verma Vs. ACIT 03.07.2019.
Otherwise also, when Sh. Vikas Sharma in reply to Q. No.5 & 6 of the statement dt. 23.11.2016 recorded u/s 131 of the Act has stated that receipts at Pg1-5 and 146-150 of Annexure AS-3 is signed by him and that these are the receipts of money which he has given to take borrowings from Dr. Manaswi Gautam and the assessee has denied giving any such advance nor any material is found in search that assessee has given such advance, no addition in the hands of assessee can be made.
5. Without prejudice to above, it is submitted that in search a paper at page no. 100 of Annexure AS-5(PB 76) was seized. At the upper portion of this page, certain amounts are noted with date. All these dates are of May, 2008. After these figures on the left hand side, Rs.63,00,000/- given is noted in the bracket as (‘63L given’). On the right hand side, the date of 01-08-08 is noted. On the bottom portion of this page it is noted that Rs.30,00,000/- received back upto 19-12-2011.It is also noted that Rs.33,00,000/- is due and the interest from 19-12-2011 is outstanding. The assessee explained that he has advanced Rs.63,00,000/- to RGS between 01.05.2008 to 31.05.2008 out of which Rs.30,00,000/- was received back upto 19.12.2011. Thus, it is the realisation of advance given in 2008 and therefore, the same is not a receipt of loan rather it is repayment of advance earlier given to RGS. The Ld. CIT(A) has also accepted this contention of assessee. Thus, as per this paper assessee has availability of funds of Rs.30,00,000/- prior to 19.12.2011. Therefore, if any addition on the basis of blank receipts is sustained, the set off of Rs.30 lacs available with the assessee be allowed. This was also 7 ITA 67/JP/2021_ Dr. Shiv Gautam Vs DCIT submitted to the AO vide letter dt. 26.12.2018 (PB 73-75) but the same was not considered. Therefore, even if an adverse inference is drawn on the basis of these documents, the addition at the most can be of Rs.20 lacs. In view of above, addition of Rs.50 lacs confirmed by Ld. CIT(A) be directed to be deleted.”
On the other hand, the ld. CIT-DR has vehemently supported the orders of the authorities below.
We have considered the rival contentions and carefully perused the material placed on record. From perusal of the record, we observed that, as per facts of the present case, a search u/s 132(1) of the Act was carried out on 21.07.2016 at the residential and business premises of assessee. In response to notice u/s 153A of the Act, the assessee filed his return of income declaring total income of Rs.54,20,020/- which was same as declared in the return filed u/s 139(1) of the Act. During the course of search, 10 original undated and unnamed cheques of Rs.5,00,000/- each issued by Vikas Sharma, authorised signatory of M/s Royal Terrace Hotels Pvt. Ltd. was found at Page 162 to 171 of Annexure AS-3 which are available at page No. 11-20 of the paper book from the residential premises of the assessee. This apart 10 blank receipts of Rs.5,00,000/- each signed by Vikas Sharma on non judicial stamp papers of Rs.10/- each was found at Page 1 to 5 and 146 to 150 of Annexure AS-3 which are at page No. 21-30 of the paper book. These receipts were on stamp paper purchased on 8 ITA 67/JP/2021_ Dr. Shiv Gautam Vs DCIT 29.12.2011 and 25.01.2012. In these receipts it was stated by Shri Vikas Sharma, Director of M/s Royal Terrace Hotel Pvt.Ltd. that he had received Rs.5,00,000/- in cash and would return it in 6 months along with interest @ 1% per annum. For security of this amount, cheques of Rs.5,00,000/- of HDFC Bank, Station Road, Jaipur has been given. However, name of the person from whom the amount received was not filled.
We also observed that in search, statement of assessee was recorded on 21/22.07.2016 on these papers wherein reply to Q. No. 18-20 which are at page No. 43-44 of the paper book the assessee had stated that according to his knowledge, Dr.Manaswi has invested Rs.1.21 crores in the share capital of M/s Royal Terrace Hotels Pvt. Ltd. through cheque. He does not have any knowledge about any further investment made by him in the company and the same can be explained only after talking to Dr.Manaswi Gautam and Shri Vikas Sharma. We further observed that on post search proceedings, statement of Shri Vikas Sharma was also recorded by the ld. ADIT on 23.11.2016. In his statement which are at page No. 67-68 of the paper book, Shri Vikas Sharma in reply to Q.No.5 & 6 accepted that receipts at Pg1-5 and 146-150 of Annexure AS-3 is signed by him. He was in need of funds for construction of hotel for which he approached Sh. Manaswi Gautam for loan. Sh. Manaswi Gautam asked him to give the signed cheques and receipts and he will provide the funds but later on could not 9 ITA 67/JP/2021_ Dr. Shiv Gautam Vs DCIT provide the same. Therefore, against the receipts and cheques given to Sh. Manaswi Gautam, a cancellation agreement dated 21.03.2012 which are at page No. 71-72 of the paper book was executed as the original receipts and cheques were misplaced by him.
We further observed that the AO during course of assessment proceedings on the basis of above papers presumed that assessee has advanced cash loan of Rs.50,00,000/- to Shri Vikas Sharma and accordingly issued show cause notice dated 24.12.2018 requiring assessee to furnish the source of such advance. The assessee vide letter dated 26.12.2018 which are at page No. 73-75 of the paper book as reproduced at page 3 & 4 of assessment order explained that Shri Vikas Sharma, Managing Director of M/s Royal Terrace Hotels Pvt. Ltd. was in need of funds and requested to arrange fund for him and as security he kept these documents with the assessee. However, the transaction did not materialize and no money was given to Vikas Sharma. These documents could not be traced at that point of time and a cancellation receipt on stamp paper was given that these will not be used and be returned back as and when found. The AO, however, rejected the explanation of assessee by holding that the cancellation receipt produced by the assessee is nothing but a fake document and result of an afterthought as no such cancellation receipt was found in search. If the deal between assessee and Vikas Sharma was cancelled then why the undated 10 ITA 67/JP/2021_ Dr. Shiv Gautam Vs DCIT cheques and receipts are still in the possession of the assessee which were found in search. The Ld. CIT(A) has confirmed the addition by holding that from the affidavits it is evident that Rs.50 lacs have been received by Sh. Vikas Sharma in cash @ 1% p.a. which would be returned by him within 6 months. Against such cash, cheques of Rs.50 lakhs have been given as security by him to the assessee. Thus, it is evident that Rs.50 lacs have been received by Sh. Vikas Sharma in cash. In this regard, the contention of the assessee was that the transaction did not materialize and no money was given to Sh. Vikas Sharma and a cancellation agreement was made is not acceptable due to following reasons:-
(a) The affidavits and the unsigned cheques were found during the search proceedings, however, no such cancellation agreement was found during search on 21.07.2016. (b) Dr. Shiv Gautam in his statement has stated that the documents relate to Dr. Manaswi Gautam and Sh. Vikas Sharma and that as on date he is unaware of any such transactions and he has very limited knowledge on this count. However, on perusal of the so called cancellation agreement it is observed that the agreement has been made between Dr. Shiv Gautam and Sh. Vikas Sharma on 21.03.2012 which was produced before the ADIT(Inv.) after the search proceedings. Therefore, contention of the appellant that he is not aware of such transaction in contradictory and no believable.
11 ITA 67/JP/2021_ Dr. Shiv Gautam Vs DCIT (c) As per reply to Q. No.5 & 6 of the statement of Sh. Vikas Sharma recorded u/s 131 of the Act on 23.11.2016, it has been categorically mentioned by him that he has signed on Pg 1 to 5 & 146 to 150 of Exhibit 3 and that these are receipt of money taken from Dr.Manaswi Gautam and that these documents relate to him. However, he stated that he did not receive the money for which he obtained cancellation from Dr.Manaswi Gautam. Therefore, statement of Sh. Vikas Sharma is itself contradictory.
(d) On one hand Sh. Vikas Sharma has stated that the cancellation agreement was made between him and Dr.Manaswi Gautam whereas on the other hand it is observed that cancellation agreement produced by the assessee is between Dr. Shiv Gautam and Sh. Vikas Sharma. The so called cancellation agreement was not found at the residential premises of the assessee during search proceedings. The search was conducted on the Gautam Group on 21.07.2016 whereas the fact of cancellation agreement emerged in the statement of Sh. Vikas Sharma u/s 131 on 23.11.2016. Therefore, cancellation agreement appears to be an afterthought and it is nothing but a fake document and cannot be relied upon.
Having considered the rival contentions and carefully perused the material placed on record and we found that Shri Vikas Sharma is the Managing Director of M/s Royal Terrace Hotels Pvt. Ltd. Sh. Manaswi Gautam, son of the assessee has made investment of Rs.1.21 crore in the share capital of the company. As Vikas Sharma was in need of funds for 12 ITA 67/JP/2021_ Dr. Shiv Gautam Vs DCIT construction of hotel, he approached Manaswi Gautam, son of the assessee to provide funds and for such arrangement he was required to give blank receipts and unnamed undated cheques. However, the funds could not be arranged. The cheques and the receipts were to be returned back to Shri Vikas Sharma but at that point of time they were misplaced and could not be traced. Therefore, Shri Vikas Sharma, in order to safeguard his interest obtained a cancellation receipt from the assessee on stamp paper dated 21.03.2012 where it was stated that cheques and receipts has been misplaced, the same has not been used, no transaction was carried out on the basis of these cheques and receipts and if the same is found it will be returned back to him. It is for this reason that in search cancellation receipt was not found from the assessee as it was given to Vikas Sharma but the cheques and receipts which were misplaced could be located by the search party in course of search. The various reasons given by the lower authorities for not accepting the contention of assessee is dealt as under:-
(a) It is true that in the receipts it is mentioned that Rs.50 lacs have been received by Sh. Vikas Sharma and against such cash, cheques of Rs.50 lakhs have been given as security by him but name of the person from whom it is received, cheque no. and date of cheque is not mentioned. It is not an abnormal practice to obtain advance receipt & cheque for arrangement of funds. Thus, on the basis of these receipts it cannot be presumed that Sh. Vikas Sharma has received Rs.50 lacs from the assessee.
13 ITA 67/JP/2021_ Dr. Shiv Gautam Vs DCIT (b) The cancellation agreement could not be found during search as it was given to Vikas Sharma but the cheques and receipts were found as they were misplaced and could be located by the search party in course of search.
(c) The cancellation receipt is dated 21.03.2012 whereas statement of assessee was recorded on 21.07.2016, i.e. after more than 4 years. Therefore, it is possible that at the time of search the fact of execution of cancellation receipt was not in his memory more so when assessee has very limited knowledge of this transaction and he has executed this cancellation receipt only on behalf of his son. (d) The observation of Ld. CIT(A) that statement of Sh. Vikas Sharma is contradictory is incorrect in as much as on Pg 7 & 8 of Ld. CIT(A) order where his statement is reproduced, it can be noted that he has stated that these receipts which are in relation to the amount received from Manaswi Gautam are signed by him, the same were signed and given by him on the assurance of Manaswi Gautam that he would provide the funds but later on he could not provide the same. Therefore, when the statement is read in whole there is no such contradiction as assumed by the Ld. CIT(A). (e) So far as the statement of Sh. Vikas Sharma as to the signing of receipt for the funds to be arranged by Manaswi Gautam and the cancellation receipt having been made with the assessee is concerned, it may be noted that since Manaswi Gautam has misplaced the cheque and receipt which could not be traced out even reminding him 4-5 times, Sh. Vikas Sharma obtained the cancellation receipt from the assessee who is father of Manaswi Gautam and a person of repute in the society so that such receipt 14 ITA 67/JP/2021_ Dr. Shiv Gautam Vs DCIT is not misutilised. This fact all the more establishes the genuineness of the cancellation receipt which has been presumed by the lower authorities as fake document.
(f) The lower authorities without any basis only on assumption and presumption stated that the cancellation receipt is a fake document. No material is brought on record in support of his allegation to prove that the cancellation receipt is a fake document. They have ignored that stamp paper on which cancellation receipt is given is duly notarised. The veracity of stamp paper and its notarisation is not questioned by them. The fact of such cancellation receipt is accepted by Vikas Sharma in his statement recorded by ADIT on 23.11.2016.The cancellation receipt was not found in search as it was given to Vikas Sharma. Therefore, it cannot be inferred that the cancellation receipt is a fake document.
(g) The presumption u/s 292C is that any document found in the possession or control of person in course of search u/s 132 is presumed to be true. It is a rebuttable presumption. The assessee is not denying the availability of receipt and cheque but he has rebutted the presumption drawn by the lower authorities on the basis of these documents that he has arranged funds of Rs.50 lacs to Sh. Vikas Sharma in as much as Sh. Vikas Sharma in his statement recorded by ADIT on 23.11.2016 has explained that no funds were provided to him on the basis of these receipts and the cancellation agreement duly executed on the non judicial stamp paper and notarised on 21.03.2012 is not established to be a fake document as alleged.
15 ITA 67/JP/2021_ Dr. Shiv Gautam Vs DCIT We also observed that in search of assessee no other material was found to indicate that he or any of his family members has given any cash advance to Vikas Sharma except that his son Manaswi Gautam has made investment of Rs.1.21 cr. by cheque in M/s Royal Terrace Hotel Private Limited. Thus, when no transaction took place against the above undated cheques and receipts it cannot be presumed that the assessee has provided cash loan to Shri Vikas Sharma. In this regard, we draw strength from the decision of the Coordinate Bench of this Tribunal in case of R.K. Verma Vs. ACIT in order dated 03.07.2019 wherein on the basis of such advance receipt and blank cheque it was presumed that assessee has raised loan on which penalty u/s 271D was imposed by the AO. When the matter came before the ITAT, the penalty of Rs.15 crores imposed by the AO was deleted by giving the following findings at Page 34 of the order:-
In the case in hand, when the documents seized during the course of search in case of Shri DP Sehgal do not establish conclusively the fact of alleged loan of Rs. 15 crores, then the said material can be a relevant evidence but in the absence of any other corroborative material to show the actual transaction and movement of money, it is not established that the transaction of loan of Rs. 15 crores in cash has actually taken place between the assessee and Shri DP Sehgal. We have already discussed the contents of the acknowledgment and arrived at the conclusion that these documents itself do not establish the transaction of loan but these are only submitted in advance for proposal of loan which was not materialized and this fact is also corroborated by the subsequent sanction of loan by AU 16 ITA 67/JP/2021_ Dr. Shiv Gautam Vs DCIT Finance Ltd. Accordingly, in the facts and circumstances of the case as discussed above, we hold that the revenue has failed to establish conclusively and beyond doubt that the actual transaction of Rs. 15 crores has taken place between the assessee and Shri DP Sehgal, hence the penalty levied under section 271D is not sustainable and the same is liable to be deleted.
Otherwise also, when Sh. Vikas Sharma in reply to Q. No.5 & 6 of the statement dated 23.11.2016 recorded u/s 131 of the Act has stated that receipts at Pg 1-5 and 146-150 of Annexure AS-3 is signed by him and that these are the receipts of money which he has given to take borrowings from Dr.Manaswi Gautam and the assessee has denied giving any such advance nor any material is found in search that assessee has given such advance, thus no addition in the hands of assessee can be made. Therefore, considering the totality of facts and circumstances, we direct to delete the addition made and sustained qua this issue. We direct accordingly.
In the result, this appeal of the assessee stands allowed.
Order pronounced in the open court on 31March, 2022. ¼jkBkSM+ deys'k t;arHkkbZ½ ¼lanhi x®lkÃa½ (RATHOD KAMLESH JAYANTBHAI) (SANDEEP GOSAIN) ys[kk lnL;@Accountant Member U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 31/03/2022 *Ranjan