SHRI ASHOK BHAWARLAL JAIN,PUNE vs. ACIT CENTRAL CIRCLE 1(1), PUNE, PUNE

These are the appeals filed by the assessee directed against the common order of ld. Commissioner of Income Tax (Appeals)-11, Pune [‘the CIT(A)’] dated 30.08.2023 for the assessment years 2014-15, 2018- 19 2017-18, respectively.

Since the identical facts and common issues are involved in all the above captioned three appeals of the assessee, we proceed to dispose of the same by this common order.

For the sake of convenience and clarity, the facts relevant to the appeal of the assessee in for the assessment year 2014-15 are stated herein.

Briefly, the facts of the case are that the appellant-assessee is an individual engaged in the business of trading of electric items under the name and style as “M/s. Master Sales”. He also engaged in the business of broker in various commercial activities. The Return of Income for the assessment year 2014-15 was filed on 30.11.2014 declaring a total income of Rs.9,59,410/-. Subsequently search and seizure action was conducted in the business premises of the appellant- assessee on 04.11.2017. During the course of search and seizure operation the statement of the appellant-assessee was recorded and certain incriminating material relating to dabba trading were found and seized. The statement of the appellant-assessee was recorded u/s. 132(4) of the Act on 05.11.2017, wherein, the appellant-assessee admitted having indulged in dabba trading, he also worked out the income offered form such trading business in the form of brokerage income of Rs.60,00,000/- for A.Ys. 2014-15 to 2017-18, total income of Rs.3,00,00,000/- was offered to tax.

Subsequently, a notice u/s. 153A of the Act was issued on 01.03.2018. In response to the said notice, the appellant-assessee shown income only of Rs.30,00,000/-. Against the said return of income, the assessment was completed by the Assessing Officer vide order dated 30.12.2019 passed u/s 153A r.w.s. 143(3) of the Income Tax Act, 1961 (‘the Act’) at a total income of Rs.2,41,03,967/-. While doing so, the Assessing Officer made addition of Rs.30,00,000/- on account of income from brokerage income from dabba trading by placing reliance on the statement of appellant-assessee u/s. 132(4) of the Act and also the Assessing Officer made addition of Rs.51,00,000/- based on the notings found in the diary seized during the course of search and seizure operation, wherein, the seized page No. 3 of bundle No. 6 of scanned copy which are reproduced hereunder :

According to the Assessing Officer, the appellant-assessee had paid on-money consideration of Rs.51,00,000/- at the time of purchase of property which is situated at Plot No. 622, Sector 25 of Pradhikaran, Akurdi in the name of one Shri Dilip K. Parakh and Smt. Kajal Arun Jain. The Assessing Officer also reproduced the statement recorded from the appellant-assessee u/s. 132(4) of the Act on 06.11.2017, wherein he admitted to have paid consideration of Rs.51,00,000/- in cash. Based on this noting in the diary as well as statement of appellant-assessee, the AO had made addition of Rs.51,00,000/- rejecting the explanation of the appellant-assessee that the property was purchased in the name of only Shri Dilip K. Parakh and Smt. Kajal Arun Jain.

The Assessing officer also made addition of Rs.1,12,00,000/- for purchase of land at Mulshi in project known as Serrano Farm from one Shri Manoj Chhajed. The appellant-assessee also admitted in the statement recorded u/s. 132(4) of the Act 05.11.2017, the Assessing Officer also made addition of Rs.8,44,560/- on account of interest income on unsecured loan.

Being aggrieved by the above action of the Assessing Officer, an appeal was filed before the ld. CIT(A) contending that the additions were made solely on the basis of statement recorded u/s. 132(4) of the Act cannot be sustained in the eye of law without bringing a conclusive evidence. The statement recorded u/s. 132(4) of the Act is not valid in law as it was recorded under coercion, threat and undue influence etc. However, the said submissions were rejected by the CIT(A) by holding that there was no evidence to show that the statement recorded u/s. 132(4) of the Act was under duress.

Being aggrieved by the direction of the ld. CIT(A), the appellant- assessee is in appeal before us in the present appeal.

The appellant-assessee contended that no addition can be made solely on the basis of statement given u/s. 132(4) of the Act. He further submitted that the documents found are dumb documents, therefore, no addition can be made by the Assessing Officer solely on the basis of statement which has retracted.

On the other hand, the ld. DR opposed the submissions made by the appellant-assessee by placing reliance on the decision of Hon’ble Supreme Court in the case of Bannalal Jat Constructions (P.) Ltd. reported in 106 taxmann.com 128 (SC).

We heard both the parties and perused the material on record. The submissions made on behalf of the appellant-assessee that no addition can be made merely on the basis of statement recorded u/s. 132(4) of the Act which was retracted subsequently, cannot be accepted, in view of the fact that the entries found in the diary which was found during the course of search and seizure operation, when confronted with the appellant-assessee, he has clearly stated that he had indulged in dabba trading wherein, undisclosed brokerage income also paid on- money consideration at the time of purchase of property etc. No doubt, an admission during the course of search can be disputed by the appellant-assessee by leading evidence to show the correct states of affairs and mere fact that the appellant-assessee retracted the statement, subsequently does not render the statement invalid especially; retraction was made after lapse of long time. The mere assertion statement was recorded under coercion and duress cannot be accepted in the absence of evidence on record. In this regard reliance can be made on the decision of Co-ordinate Bench of Tribunal in the case of Sinhagad Technical Education Society vs. DCIT [2022] 139 taxmann.com 270 (Pune – Trib.), where in it was held as under:

Further more it is well settled position of law that additions made to the returned income should be taken as real income of the assessee and available for subsequent application. It is not open to the department to contend that the addition was only for the purpose of taxation and it is not the real income. Regard can be made on the decision of the Hon’ble Supreme Court in the case of Anantharam Veerasinghaiah & Co. vs. CIT (1980) 123 ITR 457 (SC). Similarly, if addition is made by the AO in the absence of plausible explanation for the source of payment of bishes (chits) is made, then, it is not open to the AO to disregard the amount received on account of bidding the bishes (chits). Similarly, if the addition is made on account of alleged repayment of loan, then, it is incumbent upon the AO to consider the receipt of the loan amount as available for application. Thus, the approach adopted by the AO suffer from the above flaws.

On the direction of the Bench, the Ld. AR of the appellant had submitted a cash flow statement based on the case set up by the AO and taking into consideration the entire entries found in diary during the course of search and seizure operation. The said cash flow statement filed by the assessee is extracted below:

The ld. CIT-DR had not pointed out any deficiency in the working of the above cash flow statement. The Ld. CIT-DR’s only objection is that the benefit of telescoping cannot be granted to the appellant-assessee as no such plea was taken in the grounds of appeal, but it is admitted fact that during the course of proceedings before the CIT(A), the ld. CIT(A) has given the benefit of telescoping of addition made in the earlier assessment years and current year, against which the department is not in appeal before the Tribunal. However, the benefit of loans borrowed, the availability of funds on bidding the bishes (chits) was ignored by the CIT(A), though this is very much evident from the entries found in the diaries.

In the result, the appeal filed by the assessee in for A.Y. 2014-15 stands partly allowed. & IT(SS)A No. 22/PUN/2023, A.Ys. 2018- 19 & 2017-18 :

Since the facts and issues involved in remaining two appeals of the appellant-assessee are identical, therefore, our decision in for A.Y. 2014-15 shall apply mutatis mutandis to the remaining two appeals of the appellant-assessee in ITA No. 1123/PUN/2023 and IT(SS)A No. 22/PUN/2023 for A.Ys. 2018-19 and 2017-18, respectively. The findings given in ITA No.1122/PUN/2023 for A.Y. 2014-15 that there was no cash deficit for making undisclosed investment equally holds good for the AYs. 2017-18 and 2018-19.

To sum up, all the above captioned three appeals of the assessee stand partly allowed.