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Income Tax Appellate Tribunal, KOLKATA BENCH “B” KOLKATA
Before: Hon’ble Shri A.T.Varkey & Shri Waseem Ahmed
आदेश /O R D E R
Per Waseem Ahmed, AM
Out of seven appeals – two appeal in by Revenue and other five appeals in ITA No.1218-1222/Kol/2013 by assessee. The assessee have also been filed Cross Objection (CO) No.92-93/Kol/2013 in appeals No.1201-1202/Kol/2013 against the common order of Commissioner of Income-tax (Appeals)-I dated 21-02-2013 for the assessment years 2004-05 to 2009-10 respectively.
Shri S. Jhajharia and Sri Sujoy Sen, Ld. Authorized Representative appeared on behalf of assessee and Shri Niraj Kumar, Ld. Departmental Representative represented on behalf of Revenue.
3. Since common grounds are involved in all these appeals and assessee’s Cos, therefore they were heard together and are being disposed of by this common order for the sake of convenience -02,1218-22/Kol/2013&CO.92&93/K/2013- Shree Prakash Bagla A.Y.05-06 to 08-09 3
Brief facts of the case are that a search & seizure operation u/s 132 of the Income Tax Act (hereinafter referred to as ‘the Act’) was conducted on SALTEE Group including the assessee dated 25.02.2009 and on subsequent dates by the Investigation Unit of Income Tax Department. The assessee is one of the directors in the group. The assessee in response to the notice u/s 153A of the Act filed its Income Tax return declaring its total income at Rs.6,75,110/-. Subsequently notices u/s 143(2) and 142(1) of the Act were issued upon the assessee and accordingly assessment was framed u/s 153A/143(3) of the Act at a total income of Rs.45,72,410/- after making certain additions / disallowances of the assessee which are discussed herein below in details. assessee’s appeal for A.Y. 07.08.
5. First we take up issue raised by the assessee in this appeal in ground No. 4 which is that ld. CIT(A) erred in confirming the order of AO by sustaining the disallowance of Rs.11,16,323/- on account of peak credit but without giving the effect of peak credit additions made in the earlier assessment years.
As a result of search, it was discovered that the assessee is engaged in the trading business of the soaps, damarbata furniture, wax oil which was not disclosed in the income tax return. The undisclosed turnover from the said business was ascertained at Rs.1,86,57,135/- pertaining to the year under consideration on the basis of seized documents marked SPB/20. Besides the turnover, the amount of peak credit was also ascertained at Rs.11,16,323/- towards the undisclosed investment in the said business on the basis of impounded documents at page 29 marked as SPB/20. The said peak credit was added to the total income of the assessee.
Aggrieved assessee preferred an appeal to the Ld. CIT(A). The assessee before the Ld. CIT(A) submitted that once the profit on the undisclosed sale has been added then there was no justification for the further addition of peak credit. If it is done so then it will result to double addition of the same amount. However, the ld CIT(A) disagreed with the contention of the assessee and confirmed the order of AO by observing as under:- -02,1218-22/Kol/2013&CO.92&93/K/2013- Shree Prakash Bagla A.Y.05-06 to 08-09 4
“9. The appellant has contested the addition made by the AO for the undisclosed investment made by the appellant in its bu. The AO has mentioned in the assessment orders that peak credit of Rs.11,16,233/- for the assessment year 2007-08 appears at page 29 of the impounded document SPB/20. Similarly, peak credit of Rs.19,17,196/- for the assessment year 2008-09 appears at page 17 of the impounded document SPB/19. The AO added the peak credit in the respective assessment years on account of undisclosed investment in the business. The Ld. AR submitted that the AO was not justified in addition the peak credit when the entire undisclosed sales as recorded in the impounded documents have already been considered and the profit thereon has already been assessed. It was argued that the action of the AO has resulted in double addition. I do not find merit in the contentions of the appellant. The AO has only assessed the profit on the total undisclosed sales as recorded in the impounded documents. But then, there has to be some investment in the unaccounted business. The Ld. AR submitted that the AO was not justified in adding the peak credit when the entire undisclosed sales as recorded in the impounded documents have already been considered and the profit thereon has already been assessed. It was argued that the action of the AO has resulted in double addition. I do not find merit in the contentions of the appellant. The AO has only assessed the profit on the total undisclosed sales as recorded in the impounded documents. But then, there has to be some investment in the unaccounted business of the appellant. I am therefore of the opinion that the AO was justified in adding the peak credit on account of undisclosed investment in the business. However, once the addition of Rs.11,16,233/- on account of peak credit was made in the assessment year 2007-08, then corresponding set-off has to be allowed while adding the peak credit in the subsequent year. In other words, the addition of peak credit in the assessment year 2008-09 is justified only to the extent of rs.2,00,963/- (Rs.19,17,196/- minus Rs.11,16233/-). In result, the addition of peak credit of Rs.11,16,233/- in the assessment year 2007-08 is confirmed; and, the addition of peak credit in the assessment year 2008-09 is restricted to Rs.8,00,963/-” Being aggrieved by the order of ld CIT(A) the assessee is in second appeal before us on the following ground of appeal:-
4. For that in view of the facts and in the circumstances, the Ld. CIT(A) failed to appreciate the fact that the peak credit of Rs. 11,16,323/- for A.Y 2007-08 confirmed by the Ld. CIT(A) was required to be reduced from the income so assessed and confirmed by the Ld. CIT(A) for A.Ys 2004-05, 2005-06 and 2006-07 and the Ld. CIT(A) having failed to appreciate the same, direction may kindly be given for reducing the peak credit for A.Y 2007-08 by the income so assessed in the preceding years and in view of facts and Circumstances It may kindly be held accordingly.
8. The ld AR before us filed a paper book which is running from pages 1 to 184 and submitted that peak addition made by the lower authorities in the earlier assessment years 2004-05, 2005-06 and 2006-07 should be eligible for deduction -02,1218-22/Kol/2013&CO.92&93/K/2013- Shree Prakash Bagla A.Y.05-06 to 08-09 5 from the amount of peak credit of the subsequent years. The ld CIT(A) has directed the AO for providing relief to the assessee for all the subsequent assessment years but omitted to give the direction for the year under consideration. As such the ld AR before us prayed to give the direction to the lower authorities for the relief as suggested by the ld CIT(A).
On the other hand, the ld DR submitted that there is no evidence that it is the same amount of money which has been used in the undisclosed business of the assessee on rotational basis. The ld DR further submitted that there is hardly any debit or credit entries suggesting that the same fund was rotated in the undisclosed business of the assessee. The money from the undisclosed business has been withdrawn for the personal expenses such as telephone expense, driver salary, air tickets expenses or the same has been withdrawn for the unaccounted investment. As such, the assessee is not eligible for the deduction on account of investment in rotational basis. The ld DR vehemently supported the order of lower authorities.
We have heard the rival contentions and perused the materials available on record. The issue in the present ground of appeal is arising as alleged by the assessee that the lower authorities have not given the effect of telescoping for determining the undisclosed investments. As a result of search conducted u/s 132 of the Act, the assessments for 6 years were framed u/s 153A of the Act which beginning from AYs 2004-05 to 2009-10. Accordingly, the undisclosed business of the assessee was unearthed and the additions were made inter-alia for the profit and undisclosed investment in such business. The AO has made the addition against such undisclosed business in AYs 2007-08, 2008-09 and 2009-10 towards undisclosed profit for Rs.7,46,285/- Rs.30,69,434/- and Rs.32,57,057/- respectively. At the same time, the AO made the addition towards undisclosed investment in such business for the AY 2007-08 only for Rs.11,16,233/- for the year under consideration. However, the ld CIT(A) has given relief to the assessee in part for the addition based on the profit from undisclosed business. The ld. CIT(A) has confirmed the order of the AO for the year under consideration with regard to the addition of the peak credit with the direction to set off the impugned peak credit while adding the peak credit in the subsequent year. -02,1218-22/Kol/2013&CO.92&93/K/2013- Shree Prakash Bagla A.Y.05-06 to 08-09 6 Now the assessee has agitated before us that the addition made in the assessment years 2004-05, 2005-06 and 2006-07 should be set off against the impugned peak credit i.e. Rs.11,16,323/- pertaining to the year under consideration. In this background of the facts of the case, the question before us for our adjudication arises as to whether the setoff of the peak credit of the earlier year is justifiable in the above facts & circumstances.
9.1 Admittedly the assessee was engaged in the business activity which was not disclosed to the income tax Department. Therefore the profit from such business activity and the fund invested in such business activity should be brought to tax. However on the examining the order of lower authorities we find that the addition on account of profit on undisclosed business was made in the assessment years 2007- 08 to 2009-10 only. But the addition on account of undisclosed investment was only made in the assessment year 2007-08. Therefore, there is no question of the set off of the peak credit added to the taxable income in the earlier years as no such addition was made in earlier years i.e. AYs 2004-05, 2005-06 and 2006-07. Therefore, we find no infirmity in the order of ld CIT(A). Hence, this ground of appeal of assessee is dismissed.
The 2nd issue raised by the assessee in ground No. 5 is that ld CIT(A) erred in 10. confirming the order of AO by sustaining the disallowance of Rs.6,57,328/- on account of undisclosed investment in the land.
During the course of assessment proceedings, the AO observed on the basis of page 37 and 1 of the seized documents marked as SPB/6 that the investment in the land for Rs.18,79,488.00 and Rs.26,65,918/- has been made in the year under consideration. Thus, the total investment was of Rs.45,45,406/-. Out of the said investment the amount disclosed in the books of accounts of M/s Sanyal Engineers (P) Ltd. was of Rs.8,78,090/- and Rs.9,12,118/- respectively. Accordingly the difference of Rs. 27,55,198/- was observed which was added to the total income of the assessee.
Aggrieved, assessee preferred an appeal to the Ld. CIT(A). The assessee before Ld. CIT(A) submitted that the impugned investment has been made out of the receipt of the money which has been duly considered by the AO while working out -02,1218-22/Kol/2013&CO.92&93/K/2013- Shree Prakash Bagla A.Y.05-06 to 08-09 7 the undisclosed profit on the undisclosed sale pertaining to the assessment years 2007-08 to 2009-10. Thus the separate addition on the basis of same impounded documents cannot be made. The AO in the remand report has clearly admitted that the payment recorded in the impounded documents represents the personal expenses as well as unaccounted investment. The ld CIT(A) after considering the submission of the assessee has given relief to the assessee in part by observing as under:-
“The AO has admitted in his remand report that the rotation statement by the appellant in course of the appellate proceedings incorporates all the debit and credit entries recorded in the seized documents SPB/19, SPB/20,SPB/21 and SPB/23. The AO has also admitted that the cash payments recorded in the impounded documents represent personal expenses as well as unaccounted investment. I find from the assessment order that the AO has considered all the receipts as appearing in the impounded documents SPB/19, SPB/20, SPB/21 and SPB/23 while computing the undisclosed sales for the assessment years 2007-08, 2008-09 and 2009-10. It was explained before me that cash payments totalling to Rs.28,08,425/- as given in the table contained in para 14 above are recorded in the impounded document SPB/19, SPB/20 and SPB/23. I find merit in the argument that when the AO has considered all the receipts recorded in the impounded document while computing the undisclosed sales, then no separate addition can be made on account of payments, recorded in such impounded document as they have come out of the receipts already considered by the AO. I have already confirmed undisclosed sales of Rs.1,86,57,135/-, Rs.7,6'7,35,863/- and .Rs.8,14,26, 433/- in the assessment years 2007-08, 2008-09- and ,2009-10 as - computed" by the AO in his assessment orders. I have also upheld the order of the AO in assessing the gross profit on such undisclosed .sales as well as addition on account of undisclosed investment. Under the circumstances, the cash payments as recorded in the impounded documents have to be treated as made out of the receipts recorded in such documents which have already been considered by the AO. In other words, the cash payments as recorded in the impounded documents have to be treated as explained in view of the receipts recorded in such documents which have already been considered by the AO. I agree with the appellant that no separate addition can be made on account of payments recorded in the impounded documents as they have come out of the receipts recorded in such documents which have already been considered by the AO for the purposes of taxation. However, I find that the AO has pointed out undisclosed investment of Rs.27,55,198/- (Rs.17,53,800/- + Rs.10,01 ,398/-) in the financial year relevant to the assessment year 2007-08. As the payments recorded in the impounded documents SPB/19 and SPB/23 fall beyond the period of the financial year 2006-07, they cannot be considered to cover the payments made in the financial year 2006-07. But then, the payments recorded in SPB/20 totalling to Rs.20,97,870/- pertain to the financial year 2006-07; and, to that extent, the undisclosed investment made in the land at Siliguri and Raiarhat has to be treated as explained in view of the receipts recorded in SPB/20. The addition on account of the undisclosed investment made in the land at Siliguri and Raiarhat is therefore restricted to Rs.6,57,328/- (Rs.27,55,198/- minus Rs.20,97,870/-).”
Being aggrieved by the order of ld CIT(A) the assessee is in 2nd appeal before us on the following ground of appeal:- -02,1218-22/Kol/2013&CO.92&93/K/2013- Shree Prakash Bagla A.Y.05-06 to 08-09 8
5. For that in view of the facts and in the circumstances, the Ld. CIT(A) failed to appreciate and consider the amount of Rs.5,46,926/- already disclosed and considered and assessed by the AO in respect of alleged undisclosed investment in land and as such the action of the Ld. CIT(A) in confirming the addition in such respect to the extent of Rs. 6,57,328/- suffers infirmity and in view of the facts and in the circumstances direction may kindly be given for reducing the said amount by the amount already disclosed by the appellant in the assessment proceedings and it may kindly be held accordingly.
13. The ld AR before us the reiterated the same submissions as made before the ld CIT(A) and on the other hand the ld DR vehemently supported the order of authorities below.
We have heard the rival contentions and perused the materials available on record. The issue in this ground of appeal relates to the investment made by the assessee out of the books of accounts which was treated by the AO as undisclosed investment and liable to tax. However, the ld CIT(A) has given relief to the assessee in part by observing that double addition cannot be made on the basis of same impounded documents.
Thus, it is also pertinent to note that once the addition has been made on the basis of impounded documents towards the profit and undisclosed investment as discussed above, then in our considered view the new addition on the basis of same impounded documents cannot be made. However, it is important to note that the impugned undisclosed investment for Rs.27,55,198/- was made in the year under consideration whereas the amount in the impounded documents is of Rs.20,97,870/- only. Thus from the above it is clear that the investment was made over and above the amount shown in the impounded documents in the year under consideration. Therefore, the balance amount of Rs.6,57,328/- does not arise out of the impounded documents. Hence, we find no infirmity in the order of ld CIT(A) and therefore this ground of appeal of the assessee is dismissed.
Coming to next issue in ground no. 1,2 & 3 has challenged the validity of the proceedings initiated & completed u/s 153A/143(3) of the Act. For this, the assessee has raised the following grounds of appeal:-
“1. For that in view of the facts and in the circumstances the Ld. CIT(A) was wholly unjustified in confirming the legality of order passed by the AO u/s 153A/143(3) and in view of the facts and in the circumstances the action of -02,1218-22/Kol/2013&CO.92&93/K/2013- Shree Prakash Bagla A.Y.05-06 to 08-09 9 the Ld CIT(A) in such respect is wholly bad & illegal and such order is liable to be quashed / cancelled / set aside and it may kindly be held accordingly.
2. Without prejudice to ground No.1 above and in view of the facts and in circumstances, the Ld. CIT(A) failed to appreciate the fact that no valid search having taken place in respect of the appellant, the proceedings so initiated by the AO u/s. 153A is void abinitio and the Ld. CIT(A) without appreciating the fact dismissed the appellant’s ground in such respect and in view of the facts and in the circumstances the ordered so passed u/s.153A may kindly be quashed / cancelled / set aside.
For that in view of the facts and in the circumstances and without prejudice to Grounds No.1 & 2above, the entire asst and all the additions in the hands of your appellant having been made by the AO on the basis of papers and documents impounded during survey carried out on at the office of Magna Dealers (P) Ltd. On 25.02.2009 such survey not being on Shree Prakash Bagla and your appellant and such papers having been found and impounded from the possession / custody of Magna Dealers (P) Ltd. And not your appellant any such asst. And addition made u/s 153A/ 143(3) in the hands of your appellant without examining the persons surveyed and bringing any evidence on record is wholly bad, illegal and valid abinitio and is liable to be quashed / cancelled and in view of the facts and in the circumstances it may kindly be held accordingly.”
At the outset, it was observed that the ld AR in its appeal has challenged the reassessment proceedings initiated and completed u/s 153A of the Act. Accordingly the ld AR made his arguments in length at the time of hearing but at the conclusion of the hearing on this issue the ld AR agreed to the order of ld CIT(A) and did not challenge the validity of assessment framed u/s 153A of the Act.
On the other hand, the ld AR relied on the order of authorities below.
In view of above submissions made by both the side, we find no merit in the argument placed of the ld AR before us. Hence, the issue of the legality of the order passed by AO u/s 153A/143(3) of the Act in the aforesaid grounds of appeal are hereby dismissed. Hence, these grounds of assessee’s appeal are dismissed.
In the result, assessee’s appeal is dismissed.
Now coming to the appeal filed by Revenue in ITA 1201-1202/Kol/2013 for A.Ys. 07-08 & 08-09.
At the outset, we note that tax effect in both the cases filed by the Revenue are below the limit of ₹ 10 lakh fixed by the CBDT vide Circular No. 21 of 2015 dated 10.12.2015 for not filing the appeal before the Tribunal. There are certain exceptions -02,1218-22/Kol/2013&CO.92&93/K/2013- Shree Prakash Bagla A.Y.05-06 to 08-09 10 carved out in the said Circular and Ld. DR could not point out that the present appeal falls under any of the exceptions mentioned in the said Circular. Under these circumstances, these appeal filed by the Revenue are dismissed in limine on account of low tax effect.
In the result, Revenue’s appeals are dismissed in limine.
Now coming assessee’s CO No.92/Kol/2013 for A.Y. 08-09.
“1. For that in view of the facts and circumstances of the case the Ld. CIT(A) was wholly wrong and unjustified in confirming the initiation of the proceeding u/s 153A of the Act and the consequential order passed by the AO u/s. 153A / 143(3) inspite of the fact that there was no specific search warrant against the appellant assessee and as such there was no valid search and further that the survey operation u/s. 133A of the Act was conducted at the premises of a third party. The proceeding us/s 153A as well as the order u/s. 153A / 143(3) of the Act are liable to be quashed / cancelled.
For that in view of the facts and circumstances of the case the Ld. CIT(A) was wholly wrong and unjustified in confirming the arbitrary determination of the undisclosed sales at Rs.1,86,57,135/- made by the AO in the search assessment on the basis of certain entries in the diaries marked SPB-19, 20, 21 & 23 impounded from the premises of a third party without properly examining and verifying the authenticity / veracity of such diaries and their ownership (not found in assessee’s premises) and all the debit & credit entries recorded therein and furthermore without considering the rotation statement filed by the assessee. The action of the Ld. CIT(A) was wholly unreasonable, uncalled for and bad in law.
3. For that in view of the facts and circumstances of the case the Ld. CIT(A) was wholly wrong and unjustified in simple estimating without any basis the Gross Profit rate @ 1.5% and determining the undisclosed profit at Rs.2,79,857/- wrongly accepting the undisclosed sales of Rs.1,86,57,135/- determined by the AO on the basis of entries in the said diaries without at all considering the assessee’s written submission made in this regard that there was no undisclosed sale during the year. The action of the Ld. CIT(A) was wholly unreasonable, uncalled for and bad in law.
4. For that in view of the facts and circumstances of the case the Ld. CIT(A) was wholly wrong and unjustified in confirming the addition of peak credit of Rs.11,16,233/- made in assessment on a/c of alleged undisclosed investment made by the assessee merely relying on certain entries in the diaries SPB-19 -02,1218-22/Kol/2013&CO.92&93/K/2013- Shree Prakash Bagla A.Y.05-06 to 08-09 11 & 20 impounded from the premises of a third party without taking into account and considering the rotation statement and the assessee’s submission. The action of the Ld. CIT(A) was wholly unreasonable, uncalled for and bad in law.
For that in view of the facts and circumstances of the case the Ld. CIT(A) was wholly wrong and unjustified in partially confirming the addition of Rs.6,57,328/- (out of total addition of Rs.27,55,198/- made in assessment on a/c of alleged investment made by the assessee in land at Siliguri and Rajarhat merely relying on certain entries in the diaries SPB-6 impounded from the premises of a third party) without considering and further allowing deducting from Rs.6,57,328/- a sum of Rs.5,46,726/- representing investment in the said land made during the year which was already disclosed. The action of the Ld. CIT(A) was wholly unreasonable, uncalled for and bad in law.
6. For that your petitioner craves the right to put additional grounds and/or to alter / amend / modify the present grounds at the time of hearing.”
We have already discussed the above issue in assessee’s appeal in ITA 1221/Kol/2013 in para-17 of this order and taking a consistent view we dismiss the issues raised by assessee in its CO. We hold accordingly.
In the result, assessee’s CO is dismissed.
Coming to assessee’s appeal in for A.Y 08-09.
At the outset it was observed that we have already discussed the issue of legality of the order passed by the AO u/s 153A/143(3) of the Act in of assessee’s appeal in para-17 of this order. Hence, both parties are agreed whatever view taken in assessee’s appeal (ITA No.1221/Kol/2013) may be taken in this appeal also. We hold accordingly.
Next issue raised by assessee in Ground No. 4 is that Ld. CIT(A) failed to give the effect of the peak credit added in earlier years while determining the peak credit for the current year.
At the outset, it was observed that the instant issue raised by the assessee is not arising out of the order of AO. Therefore the same is dismissed as infructuous.
Last issue is general in nature and needs no separate adjudication.
In the result, assessee’s appeal is dismissed. -02,1218-22/Kol/2013&CO.92&93/K/2013- Shree Prakash Bagla A.Y.05-06 to 08-09 12 Coming to assessee’s CO No.93/Kol/2013 for A.Y.08-09.
At the time of hearing, the Ld. AR of assessee submitted that he is not advancing any arguments in CO and prayed to treat the same as not pressed. Accordingly, CO of assessee is dismissed as not pressed.
In the result, assessee’s CO is dismissed as not pressed.
Coming to assessee’a appeal in for A.Ys. 04-05 to 06-07. 30. In all the assessee’s appeal the issue raised in grounds No. 1 to 3 are the legality of order passed by the AO u/s 153A/143(3) of the Act.
At the outset it was observed that we have already discussed the issue of legality of the order passed by the AO u/s 153A/143(3) of the Act in of assessee’s appeal in para-17 of this order. Hence, both parties are agreed whatever view taken in assessee’s appeal (ITA No.1221/Kol/2013) may be taken in these appeals also. We hold accordingly.
Last common grounds in all the appeals are general in nature and do not require any separate adjudication.
In the result, assessee’s appeals are dismissed.
We summarise the result as under:-
(1) Revenue’s appeals in are dismissed in limine. (2) assessee’s appeals in ITA No.1218-1222/Kol/2013 are dismissed (3) assessee’s CO No.92/Kol/2013 is dismissed and that of CO No.93/Kol/2013 is dismissed as not pressed. Order pronounced in the open court 26/04/2017 Sd/- Sd/- (�या�यक सद�य) (लेखा सद�य) (A.T.Varkey) (Waseem Ahmed) (Judicial Member) (Accountant Member) *RG.PS/Dkp* �दनांकः- 26/04//2017 कोलकाता । -02,1218-22/Kol/2013&CO.92&93/K/2013- Shree Prakash Bagla A.Y.05-06 to 08-09 13