THE ACIT 4 (1) INDORE, INDORE vs. SHRI LAKHAN LAL JAISWAL, INDORE

The assessee, an individual filed its return of income on 12.12.2012 declaring total income at Rs.23,82,868/- for A.Y. 2012-13 showing agricultural income of Rs.2,26,983/-.

On the basis of the report received from the Addl. DIT(investigation), Indore in respect of cash deposits in the bank account of third person Shri Suresh Solanki, concluding that the assesses is the actual owner of all the shops allotted to Shri Solanki by the State Excise Department and the income should be clubbed in the hands of the assessee, the case of the assessee was reopened under Section 148 of the Act and finalised upon making addition on substantive basis in the following manner: Total income as per return of income :- Rs. 23,82,868/- Add:- Addition on a/c of income assessed in :- Rs. 2,48,41,210/- the case of Suresh Solanki to be assessed on substantive basis in the case of assessee Total Income Assessed :- Rs. 2,72,24,078/- Round Off :- Rs. 2,72,24,080/-

The said addition made by the Ld. AO was, however, stood deleted by the First Appellate Authority. Hence, the instant appeal before us.

We have heard the rival submissions made by the respective parties, and we have also perused the relevant materials available on record.

Upon careful consideration of the order passed by the Ld. AO it appears that the Ld. AO basically relied upon the enquiry conducted by the ITO (Inv.), Indore who in his report concluded that the said Suresh Solanki is a dummy person, whose name was used by the assessee who is a big liquor contractor of that particular area. Though initially licences was given to Shri Solanki later &354/Ind/2020 ACIT vs. Shri Lakhan Lal Jaiswal Asst. Years–2012-13 & 2013-14 - 3 – the same were transferred in the name of the assessee in the records of the State Excise Departments. The said Suresh Solanki never appeared before the Department during the course of investigation neither he was found in the given address by the Income Tax Inspector at his native village of Bhagyapur. The house belongs to Shri Suresh Solanki was found to be a small Kaccha house situated in a slum in the Tribal Area. It was informed by the wife of the said Suresh Solanki that he is working as a labour somewhere in Indore. On the basis of this fact the Ld. AO came to a finding that the actual owner of the liquor business and the transaction reported in STR is the assessee and not the said Suresh Solanki. This mode has been adopted to avoid taxation and to infuse unaccounted money in the liquor business.

The fact of filing returns since A.Y. 2008-09 by the said Suresh Solanki has been treated as dubious in nature by the Ld. AO since he is not a man of any means. The income to the extent of Rs. 2,48,41,210/- in A.Y. 2011-12 has escaped from assessment on account of unexplained cash deposit in the bank account and income offered in the return of income by the said Suresh Solanki as he is a dummy person of the assessee before us has escaped assessment within the meaning of Section 147 of the Act. A notice, therefore, under Section 148 of the Act was issued by the Ld. AO. He has further relied upon an affidavit affirmed by the said Solanki who has stated that he was working with the assessee as an employee. In that view of the matter, the addition was made by the Ld. AO treating the said Suresh Solanki as dummy person of Lakhan Jaiswal and therefore, the impugned income of Rs. 2,48,41,210/- as remained unexplained has been added on protective basis in the case of the Shri Suresh Solanki and substantive basis in the case of the assessee. &354/Ind/2020 ACIT vs. Shri Lakhan Lal Jaiswal Asst. Years–2012-13 & 2013-14 - 4 –

It appears from the record that Ld. CIT(A) while deleting the addition made by the Ld. AO observed as follows: “4.10 It is clear from the above and judicial so discussed above that the investigation wing had forwarded information to the AO. The AO on the basis of that information had reopened the case of the appellant. The AO had not conducted any independent inquiry or investigation on his own and just relied on the report of ITO(Inv.). Thus, it was a borrowed satisfaction and not independent satisfaction by the AO as mandated by the law. He was not having any reason to believe to reopen the case of the appellant. The AO had also failed to provide the copy of reasons to the appellant. The AO had also not provided the opportunity of cross objection to the appellant. Further, Shri Suresh Solanki had offered its income from liquor shops in his return of income and had also filed audited financial statements for the year under consideration. The entire cash deposit was made in the bank account of third party and the AO had made the addition for the same in the appellant’s income which is technically incorrect. The AO had made the addition without bringing on record any corroborative evidence. The said income was already reflected by Shri Solanki in his return of income. The law mandates that the same income can’t be taxed twice. Further, the said income was not earned by the appellant. Hence, in light of the above facts, the addition so made by the AO is hereby deleted and accordingly, these grounds of appeal are allowed.”

The case made out by the assessee before the First Appellate Authority and before us as well is this that the assessment proceeding was completed without providing the copy of the reasons recorded under Section 148(2) giving a go bye to the mandatory provision of same to be provided to the assessee in order to enable the assessee to file objection against the reopening of assessment.

There is no independent application of mind by the Ld. AO. The satisfaction is a borrowed satisfaction. The assessee has not been given the opportunity to cross-examine the said Suresh Solanki on the basis of whose affidavit addition has been made by the Ld. AO as one of the contentions of the assessee.

The assessment order was only on the basis of the Report of the Investigation Wing and no independent application of mind of the Ld. AO is &354/Ind/2020 ACIT vs. Shri Lakhan Lal Jaiswal Asst. Years–2012-13 & 2013-14 - 6 – reflecting in the order passed by him as the case of the assessee. We note that no enquiry and/or verifications were made by the Ld. AO. Neither any separate reason to believe in regard to escapement of income by the assessee is found to be demonstrated from the assessment orders. Thus, the proceeding completed on presumption basis and thus borrowed satisfaction which cannot be justified in the absence of logic interference and proper enquiries and therefore, the order deleting the addition made by the Ld. CIT(A) is to be affirmed as the one of the arguments and/or the case made out by the assessee before us seems to be justified.

It was further the case made out by the assessee that without giving a proper opportunity of cross-examination of the said Suresh Solanki the addition on account of cash deposit in the bank account of the said third party has been made. The affidavit affirmed by the said Solanki though has been relied upon by the Ld. AO the assessee has not been given an opportunity to confront the same. We find that the said affidavit was though prepared on 06.10.2018 the same was notarized after two months i.e. on 06.12.2018 which shows that the document is either fabricated one or the entire thing is an afterthought. Though all the relevant materials being the license allotment, cash deposit, bank statement, audited books, ITR found to be pertaining to the said Suresh Solanki we failed to find any reason and/or basis in relying upon the affidavit so-called affirmed by the said Suresh Solanki by the Ld. AO which has never provided and confronted to the assessee.

The addition of third party bank account cash deposit tantamount to double taxation which has no nexus with the assessee. The fact of Suresh Solanki himself an independent liquor contractor and having his own bank account for the same cannot be brushed aside. The audited books of accounts &354/Ind/2020 ACIT vs. Shri Lakhan Lal Jaiswal Asst. Years–2012-13 & 2013-14 - 7 – and the Return of Income as annexed in the Paper Book filed before us has not been taken into consideration by the Ld. AO in its proper perspective. Further that it was also the case made out by the assessee that the liquor license allotted by the Statutory Bodies in the name of the said Solanki shows that the assessee has nothing to do with the said third person operation neither having any legal right on his business.

In this regard, we have perused the documents being the license allotted to the said Solanki annexed to the Paper book at Page 39 to 54 and 160 to 165. It is also a fact that Suresh Solanki filed an audited financial statement duly incorporating the receipt from the business. Upon perusal of the bank statement and the Return of Income of the said Solanki it is found that the receipts incorporated in the return of income were at Rs. 16,96,01,602/- and the credits in Bank Statement were of Rs. 2,27,05,000/- which is also mentioned in the Assessment Order.

Thus, considering the entire aspect of the matter we could come to a conclusion that when no independent enquiry and/or investigation has been carried out by the Ld. AO rather the entire determination of escapement of income and addition has been made on the basis of the report of the ITO, the satisfaction recorded by the Ld. AO is a borrowed one in reopening to the case of the appellant which is deserves to quashed. Moreso, no opportunity to cross-examine of the said Solanki has been provided to the assessee. Neither the affidavit has been allowed to be controverted by the assessee. Furthermore, the cash deposit in third party account has been considered while making substantive addition in the hands of the assessee when the said third party has already offered its income from the liquor shops in his return and also filed audited financial statement for the year under consideration. &354/Ind/2020 ACIT vs. Shri Lakhan Lal Jaiswal Asst. Years–2012-13 & 2013-14 - 8 – Considering the entire aspect of the matter we do not find any ambiguity in the order passed by the Ld. CIT(A) in deleting the addition made by the Ld. AO on the irregularities/shortcomings made therein so as to warrant interference. Thus, the order passed by the Ld. CIT(A) is upheld. Revenue’s appeal is, thus, found to devoid of any merit and thus, dismissed. (A.Y. 2013-14):- 16. The identical issue involved in the case has already been dealt with by us in A.Y. 2012-13 and in the absence of any changed circumstances the same shall apply mutatis mutandis. Hence, the appeal preferred by the Revenue is dismissed.

In the combined result, both the appeals filed by the Revenue are dismissed.