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Facts
During a search at Shri Jaipal Singh's residence, a diary was found containing details of loan transactions arranged by the appellant, Shri Kuldeep Kishore Sharma. The Assessing Officer (AO) made an addition of Rs. 10,00,000/- for unexplained loans and advances and Rs. 5,50,000/- for interest income based on this diary. The CIT(A) upheld these additions.
Held
The Tribunal found that the issue of unexplained loans and advances needed to be re-examined due to potential oversight of additional evidence by the CIT(A). Similarly, the issue of interest income addition lacked sufficient investigation and discussion by the lower authorities.
Key Issues
Whether the additions made by the AO for unexplained loans and advances and interest income are justified. Whether the CIT(A) properly adjudicated the grounds of appeal considering all evidence.
Sections Cited
69A, 153C, 143(3), 132(1), 131, 143(1)
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Income Tax Appellate Tribunal, JAIPUR BENCHES,”B” JAIPUR
Before: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;dj vihy la-@ITA. Nos. 601 & 602/JPR/2023
आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”B” JAIPUR Mk0 ,l- lhrky{eh] U;kf;d lnL; ,oa Jh jkBksM deys'k t;UrHkkbZ] ys[kk lnL; ds le{k BEFORE: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;dj vihy la-@ITA. Nos. 601 & 602/JPR/2023 fu/kZkj.k o"kZ@Assessment Years : 2017-18 & 2018-19 cuke Shri Kuldeep Kishore Sharma, Assistant Commissioner of E-189, Ram Nagar Extention, Vs. Income Tax, Shyam Nagar, Jaipur Central Circle-02, Jaipur LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AFMPS 8630 K vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Shri S. R. Sharma (CA) & Shri R. K. Bhatra (CA) jktLo dh vksj ls@ Revenue by : Shri Ajay Malik (CIT) a lquokbZ dh rkjh[k@ Date of Hearing : 07/02/2024 mn?kks"k.kk dh rkjh[k@Date of Pronouncement : 24/04/2024 vkns'k@ ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM These two appeals filed by assessee is arising out of the order of the Commissioner of Income Tax (Appeals)-4, Jaipur dated 06/07/2023 [here in after ‘CIT(A)’) ] for assessment year 2017-18 which in turn arise from the order dated 06.07.2021 passed under section 153C & 143(3) of the Income Tax Act, by ACIT, Central Circle-02, Jaipur. identical on facts and are almost common, except the difference in figure disputed in each year, therefore, these appeals were heard together with the agreement of both the parties and are being disposed off by this consolidated order.
At the outset, the ld. AR has submitted that the matter in may be taken as a lead case for discussions as the issues involved in the lead case are common and inextricably interlinked or in fact interwoven and the facts and circumstances of other cases are identical except the difference in the amount in dispute other cases. The ld. DR did not raise any specific objection against taking that case as a lead case. Therefore, for the purpose of the present discussions, the case of ITA No. 601/JP/2023 is taken as a lead case. Based on the above arguments we have also seen that for these appeals grounds are similar, facts are similar, and arguments were similar and therefore, were heard together and are disposed by taking lead case facts, grounds, and arguments from the folder in ITA No. 601/JP/2023.
Before moving towards the facts of the case we would like to mention that the assessee has assailed the appeal in on the following grounds;
“1. That on the facts and in the circumstances of the case the ld. CIT(A) is wrong, unjust and has erred in law in confirming addition of Rs. 10,00,000/- made by the ld. AO to the income of the appellant u/s 69A of the IT. Act, 1961 on account of alleged unexplained investment in loan by the appellant through Shri Jai Pal Singh on the basis of papers seized from him during course of search at his residence.
That on the facts and in the circumstances of the case the ld. CIT(A) is wrong, unjust and has erred in law in confirming addition of Rs. 550000/- made to the income of the appellant by the ld. AO on account of interest income allegedly erred on alleged investment in loan made by the appellant Shri Jai Pal Singh.
3. That assessee craves permission to add to or amend to any of grounds of appeal or to withdraw any of them.”
Succinctly, the fact as culled out from the records is that the assessee filed his original return of income for AY 2017-18 on 14.07.2017 declaring total income of Rs. 4,37,130/-. The return was processed u/s 143(1) of the Income Tax Act, 1961. A search & seizure action u/s 132(1) of the Act was conducted at the residential premises of Shri Jaipur Singh address, 35, Chitragupt Nagar 1st Imliwala Faatak, Jaipur on 02.08.2017.
5.1 During the course of search proceedings, a diary and some loose papers containing cash/cheque loan receipts and payments were found and seized and inventorized as Annexure AS, Exhibit-
3. This diary contained details of transactions of cash loan from various persons with details of interest including the name of the appellant. As per the statement of Sh. Jaipal Singh recorded u/s 131 on 18.12.2017, the identity and transactions of Sh. Kuldeep Kishore Sharma (assessee/appellant) were confirmed. The AO made an addition of Rs. 10,00,000/- on account of alleged unexplained loans and advances u/s 69A of the Act and also assessed the interest income of Rs. 5,50,000/-. The AO finally assessed the total income of Rs. 19,87,130/-.
Aggrieved from the order of Assessing Officer, the assessee preferred an appeal before the ld. CIT(A). Considering the submission and the arguments raised, the appeal of the assessee was dismissed by the ld. CIT(A). Apropos to the grounds so raised the relevant finding of the ld. CIT(A) is reiterated here in below:
“5.2 I have considered the facts of the case and written submissions of the appellant as against the observations/findings of the AO in the assessment order for the year under consideration. The contention/submission of the appellant are being discussed and decided as under:-
(i) The contention of the appellant is that the entry of Rs. 10,00,000/- as on 03.07.2016 is not a fresh advance but is the balance which remained outstanding after return of Rs. 5,00,000/- on 10.07.2016 and Rs. 4,65,000/- on 18.07.2016. (ii) I have gone through the assessment order and the chart made at page no. 2 of the assessment order. For ready reference relevant portion of the same is produced as under:-
It is very much clear from the said seized record and the summary made by the AO in a tabulated form that total amount received by Sh. Jaipal Singh is Rs. 20,00,000/- on 13.05.2016 out of which Rs. 5,00,000/- is returned in cash on 10.07.2016 and Rs. 4,65,000/- on 18.07.2016. This means that out of the advance given to Sh. Jaipal Singh, the balance that remains with him would be Rs. 10,35,000/- as on 18.07.2016 whereas the addition that has been made by the AO is in respect of Rs. 10,00,000/- received in cash as on 03.07.2016. (iii) The second contention of the appellant is that originally the date mentioned against the said entry was 03.05.2016 which was corrected by over-writing as 03.07.2016. This is a fact which I have verified from the seized record also but this does not help the appellant. The appellant is in agreement that the said amount was actually advanced on 03.07.2016 and the AO in the chart at page no. 2 of the assessment order, reproduced as above is also taking the date of advance as 03.07.2016. (iv) The contention of the appellant that the amount of loans and advances were only Rs. 20,35,000/- and not Rs. 30,35,000/- is incorrect as is evident from the tabulation of the seized material, as reproduced by the AO in the assessment order.
(v) From the above discussed facts, it is clear that the appellant has brought nothing on record to show any infirmity in the order viz-a-viz the addition of Rs. 10,00,000/- u/s 69A of the Act and according addition of Rs. 10,00,000/- is upheld and this Ground of Appeal No. 3 is treated as dismissed. 7.2 I have considered the facts of the case and written submissions of the appellant as against the observations/findings of the AO in the assessment order for the year under consideration. The contentions/submissions of the appellant are being discussed and decided as under:-
(i) The crux of the submissions of the appellant is that he has received interest of Rs. 2,00,000/- only (Rs. 1,00,000/- on 11.06.2016 and Rs. 1,00,000/- on 13.07.2016) and that he has filed an affidavit during the course of assessment proceedings stating that he has received no interest from Sh. Jaipal Singh.
(ii) There are contradictions in the submissions of the appellant. On the one hand, the appellant is accepting the receipt of interest of Rs. 2,00,000/- and at the same time denying the receipt of interest. The affidavit is a self-serving document and cannot come to the aid of the appellant. The AO, by placing reliance on specific seized records has arrived at the figures of the interest received by the appellant as per details in para 10.2, 10.3 and para 10.5 of the assessment order and I do not find any infirmity in the said working. During the course of appellate proceedings, the appellant has not brought anything on record to show how the working made by the AO is incorrect. After carefully considering the facts of the case, I hold that addition of Rs. 5,50,000/- as interest income has rightly been made and this Ground of Appeal No. 5 is treated as dismissed.”
7. Since, the appeal of the assessee was dismissed, the assessee feeling dissatisfied with the order of the ld. CIT(A) preferred the present appeal on the grounds as raised by the assessee as reiterated here in above. To support the various grounds so raised by the assessee, the ld. AR appearing on behalf of the assessee has placed their written submission which is reiterated here in below;
“The appellant is a second grade Government School teacher. He filed his return of income declaring income of Rs. 4,37,130/-. The said return was processed under section 143(1) of the I.T. Act, 1961. A search and seizure action under section 132 of the IT Act, 1961 was carried out in the case of Shri Jaipal Singh, a school teacher and colleague of Shri Kuldeep Kishore Sharma on 02-08-2017. During the course of search and seizure action, a handwritten diary was found from Shri Jaipal Singh and in the said handwritten diary some interest bearing loan transactions arranged by the appellant to help relative of Shri Jaipal Singh were found recorded. Based on the said notings, a notice under section 153C was issued to the assessee and the Ld. AO calculate interest amount at her own assumptions/estimations (vide para no. 10.1 to 10.6 of the impugned assessment order) at Rs 5,50,000/- in spite the facts that Shri Jaipal Singh has admitted/stated that no interest has been paid to the appellant. The Ld. AO in determining the total assessable income assessed the said alleged interest as undisclosed income of the appellant. In spite of the fact that the Ld. AO has accepted the facts that the loans and advances on which alleged interest is calculated/estimated by the Ld. AO are pertain/advanced through Shri Jaipal Singh by some other party and family members from their respective own sources. The Ld. AO made an addition of Rs. 10,00,000/- on account of alleged unexplained loans and advances under section 69A of the IT Act, 1961 after considering/taken in to account the said amount twice and Rs.5,50,000/- as alleged interest income. The Ld. AO finally assessed the total income of Rs. 19,80,130/-. Order of CIT (A) The assessee filed appeal before CIT (A) against said assessment order and in course of hearing filed written submissions which reproduced in appeal order of CIT (A). The Ld. CIT(A)-IV in her order dated 06-07-23 after giving the findings in Para 5.2 and 7.2 upheld the additions made by Ld. Assessing officer. The appellant challenged the said additions in the appeal filed before your Honour’s raising the following grounds of appeal:-
1. That on the facts and in the circumstances of the case the Ld. CIT(A) is wrong, unjust and has erred in law in confirming addition of Rs. 1000000/- made by the Ld. AO to the income of the appellant u/s 69A of the IT Act, 1961 on account of alleged unexplained investment in loan by the appellant through Shri Jai Pal Singh on the basis of papers seized from him during course of search at his residence.
2. That on the facts and in the circumstances of the case the Ld. CIT(A) is wrong, unjust and has erred in law in confirming addition of Rs. 550000/- made to the income of the appellant by the Ld. AO on account of interest income allegedly erred on alleged investment in loan made by the appellant through Shri Jai Pal Singh.
3. The assessee craves permission to add to or amend to any of grounds of appeal or to withdraw any of them.
Now the appellant submits ground-wise submissions as follows:-
The First Ground of appeal is challenging the addition of Rs. 10,00,000/- made by the AO on account of alleged unexplained loans and advances through Shri Jaipal Singh to Shri Bhanu Pratap. A detailed date wise particulars of the loans and advances advanced by the appellant through Shri Jaipal Singh is also given by drawing a chart at page no. 2 of the impugned assessment order by the Ld. AO. In this connection it is submitted that actually a loan of Rs. 20,35,000/- (Rs. 10,35,000/- by cheque on 3.05.2016/13.05.2016 and Rs. 10,00,000/- in cash on 03.07.2016) was advanced by the appellant. The AO has accepted the investment sources of the said loan as explained by the appellant during the course of assessment proceedings. Further, during the post search enquiry in case of Shri Jaipal Singh, a statement of the appellant was also recorded by the Investigation Wing and in the said statement, the appellant has explained/clarified that he advanced a sum of Rs. 20,35,000/- (Rs. 10,35,000/- by cheque and Rs. 9,65,000/- + Rs. 35,000/- in cash) on 03.07.2016 vide page no. 2 of assessment order (item no. 4 of chart appearing there). On the said page it is also mentioned that on 10th July, 2016 and 18th July, 2016 a sum of Rs. 5,00,000/- and Rs. 4,65,000/- were returned back vide item nos. 2 & 3 of the said chart at page no. 2 of the assessment order. Thus a sum of Rs. 10,35,000/- were remained outstanding and the entry appearing on 03.07.2016 of Rs. 10,00,000/- is not a fresh advance but the same is part of Rs. 20,00,000/-. The facts are verifiable after giving a close look-over the said entry appearing in the seized diary of Shri Jaipal Singh on which basis the impugned addition has been made by the ld. AO. It is verifiable from the said noting that originally the date mentioned against the said entry was 03.05.2016 which was corrected by over-writing as 03.07.2016 for the reason that initially the amount was decided to be advanced on 03.05.2016 as per corresponding entry on the other side of the diary, but actually the amount of Rs. 10,00,000/- was not advanced on that date and the same was advanced on 03.07.2016. Thus it is evident and verifiable from the seized record itself and also from the statement of the appellant recorded by the investigation wing that the amount of loans and advances were only Rs. 20,35,000/- and not Rs. 30,35,000/- as determined and assessed by the ld. AO. In view of the above facts and circumstances of the case a sum of Rs. 10,00,000/- has been added twice and accordingly the addition made by the Ld. AO is apparently wrong and bad in law. The appellant prays for relief on this account
and request to delete the addition of Rs. 10,00,000/- made by the AO on account of the same loan and advances. 2. The Second Ground of appeal is challenging the addition of Rs. 5,50,000/- on account of alleged income. In this connection it is submitted that as per the noting in the seized diary, interest received by the appellant was Rs. 2,00,000/- (Rs. 1,00,000/- on 11.06.2016 and Rs. 1,00,000/- on 13.07.2016). The appellant also filed an Affidavit during the course of assessment proceedings that he received no interest from Shri Jaipal Singh. The facts and submissions are also supported by the facts that the Ld. AO has himself accepted that the appellant arranged the loans and advances from some other persons and the Ld. AO also accepted sources of investment of the said loans and advances by said persons. In view of the above facts and instance of the case the impugned addition of Rs 5,50,000/- made on account of alleged interest income deserve to be deleted as such.
3. The Third Ground of appeal is a general ground. The appellant prays for relief accordingly”
The ld. AR of the submitted that the diary was not found from the assessee but was found from Shri Jai Pal Singh colleague of the assessee. The ld. AR of the assessee submitted that the assessee has advanced a sum of Rs. 10 lac by RTGS on 03.05.2016 whereas, on the seized material the same date was written but that month was corrected as 03.07.2016 and therefore, the addition cannot be made in the hands of the assessee. The ld. AR of the assessee in support of this contention invited our attention to the statement recorded 21.11.2017 wherein the assessee has explained that he has given loan of Rs. 20 lac only and therefore, the addition made for an amount of Rs. 10 lac is AR of the assessee submitted that the assessee has received the interest of Rs. 2 lac only each on 1 lac on 11.06.2016 and 13.07.2016 respectively. The assessee also filed an affidavit of Shri Jai Pal Singh stating that he has not received interest. Therefore, even that addition of Rs. 2 lac can also not be sustainable.
The ld DR is heard who relied on the findings of the lower authorities and more particularly advanced the similar contentions as stated in the order of the ld. CIT(A). The ld. DR vehemently submitted that the assessee is educated and is engaged in the educational activities. Thus, the assessee cannot take the benefit of having ignorant of the facts written in the seized material.
Considering the fact that the assessee did not place on record the controverting fact that he has not advanced the money that the ld. AO observed in the assessment order. The interest is already mentioned in the seized material and therefore, that addition of interest is also required to be sustained.
We have heard the rival contentions and perused the material placed on record. Ground no. 1 raised by the assessee account of alleged unexplained loans and advances through Shri Jaipal Singh to Shri Bhanu Pratap. A detailed date wise particulars of the loans and advances advanced by the assessee through Shri Jaipal Singh is also given by drawing a chart at page no. 2 of the impugned assessment order by the Ld. AO. In this connection it is submitted that actually a loan of Rs. 20,35,000/- (Rs. 10,35,000/- by cheque on 3.05.2016/13.05.2016 and Rs. 10,00,000/- in cash on 03.07.2016) was advanced by the assessee. The ld. AO has accepted the investment sources of the said loan as explained by the appellant during assessment proceedings. Further, during the post search enquiry in case of Shri Jaipal Singh, a statement of the assessee was also recorded by the Investigation Wing and in the said statement, the assessee has explained / clarified the investment of Rs. 20,35,000/- (Rs. 10,35,000/- by cheque and Rs. 9,65,000/- + Rs. 35,000/- in cash) [ vide question no. 9 ] vide page no. 2 of assessment order. On the said page it is also mentioned that on 10th July, 2016 and 18th July, 2016 a sum of Rs. 5,00,000/- and Rs. 4,65,000/- were returned vide item nos. 2 & 3 of the said chart at page no. 2 of the assessment order. The assessee thus contended that a sum of Rs. 10,35,000/- were Rs. 10,00,000/- is not a fresh advance but the same is part of Rs. 20,00,000/-. Whereas on this aspect of the matter the ld. AO in the remand report submitted that since the amount of Rs. 10 Lac was given before the dates on which the assessee received cash of Rs. 5 lac and Rs. 4.65 lac and thus he justified the addition. On the contrary on the said remand report the ld. AO stated that “ the assessee has not mentioned the dates on which such cash of Rs. 9,65,000/- was received by the assessee and the assessee has also not substantiated the source of cash of Rs. 10,00,000/- in its statement recorded on 21.11.2017. Here it is to mention that investment account of Kuldeep Sharma was not filed during the assessment proceeding therefore, it may be accepted as additional evidence as per the provisions of Rule 46A of the Income Tax Rules, 1962.” On this aspect of the matter we have gone through the order of the ld. CIT(A) and found that there is no discussion on the remand report submitted in that the furnishing of investment account by the assessee as an additional evidence. Even there is no discussion whether this additional evidence was considered by the ld. CIT(A) or not. In the light of this set of facts as emerges from the records the contention so raised by the assessee has not additional evidence has been overlooked while deciding the merits of the addition, we deem it fit in the interest of the justice to set aside this ground to the file of the ld. AO who will decide the issue in accordance with the relevant material placed on record by the assessee.
Ground no 2 raised by the assessee is in respect of addition of Rs. 5,50,000 being the alleged interest received by the assessee from Shri Jaipal Singh. The assessee contended that he has received interest of Rs. 2,00,000/- (Rs. 1,00,000/- on 11.06.2016 and Rs. 1,00,000/- on 13.07.2016). The assessee filed an Affidavit while assessment proceedings that he received no interest from Shri Jaipal Singh. Whereas the addition has been made for an amount of Rs. 5,50,000/- on this aspect of the matter even in the remand report there is no discussion on this amount whether it is 2 lac [ interest ] or 5.50 or based on the affidavit it is Rs. Nil. Thus, since there is no sufficient investigation or discussion to that effect in the order of the lower authority, we remand back this issue also before the ld. AO to bring the necessary evidence on record and do sufficient enquiry so as to charge the correct interest if any received by the assessee.
In the light of the discussion so recorded the Bench feels that the assessee raised by the assessee on both the grounds need to be reheard based on the evidence or arguments placed on record so far and therefore, we feel that the assessee should be given one more opportunity to submit the evidences concerning the issue in question. Thus, with grounds so raised by the assessee, we set aside the issue to the file of the ld. AO who will decide the issue afresh by providing one more opportunity of hearing to the assessee. Thus, the matter is restored back to the file of the ld. AO who will decide the issue based on evidence and submission of the assessee. However, the assessee will not seek any adjournment on frivolous ground and remain cooperative during proceedings before the ld. AO.
Before parting, we may make it clear that our decision to restore the matter back to the file of the ld. AO shall in no way be construed as having any reflection or expression on the merits of the dispute, which shall be adjudicated by the ld. AO independently in accordance with law. is allowed for statistical purposes.
The fact of the case in is similar to the case in ITA No. 601/JP/2023 and we have heard both the parties and persuaded the materials available on record. The bench has noticed that the issues raised by the assessee in this appeal No. 601/JP/2023 is equally similar on set of facts and grounds.
Therefore, it is not imperative to repeat the facts and various grounds raised by both the parties. Hence, the bench feels that the decision taken by us in for the Assessment Year 2017-18 shall apply mutatis mutandis in the case of Kuldeep Kishore Sharma in ITA No. 602/JP/2023 for the Assessment Year 2018-19.
In terms of these observations, the appeal of the assessee in is allowed for statistical purposes.