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Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: SHRI VIJAY PAL RAO & SHRI B.M. BIYANI & Shri Naresh Tharani
IT(SS)A No.108 /Ind/2021 & ITANo.113/Ind/2021 & CO No.18 & 19/Ind/2022 Naresh Tharani Page 2 of 27 These two appeals by the revenue and equal number of CO by the assesse are directed against composite order of Commissioner of Income Tax(Appeal), dated 03.03.2021 for A.Y.2014-15 & 2015-16 respectively.
First we take the appeal filed by the department for A.Y.2014-15 wherein the department has raised following grounds of appeal:
“1.1 On the facts and in the circumstances of the case, the Ld. CIT(A) erred in deleting the addition of Rs. 1,85,000/- made by the Assessing officer on account of estimation of commission income.
2. On facts and circumstances of the case, the Ld. CIT(A) erred in deleting the addition of Rs. 28,58,760/- made by the Assessing Officer on account of unexplained unsecured loan.
3. On the facts and in the circumstances of the case, the Ld. CIT(A) erred in deleting the addition of Rs. 1,33,13,124/- made by the Assessing officer on account of undisclosed investment.” These grounds are common for A.Y.2014-15 & 2015-16 except the quantum additions.
Ground no.1 is regarding the addition made by the AO on account of estimation on commission income was deleted by the CIT(A).
Ld. DR has submitted that the assesse is a partner in partnership firm M/s Kalyan Grain Merchant. On verification of the record the AO noted that the assessee has shown commission income inter alia for A.Y.2014-15 & 2015-16 at Rs.9,25,000/- & Rs.9,39,533/- respectively. The AO asked the assesse to furnish the details of the commission income along with documentary evidence. The AO further issued show cause notice vide letter dated 05.12.2016 as to why the income from commission should not be estimated on higher side for these two years in absence of any detail thereto. The assesse has produced only ledger account of commission and no other supporting details were submitted by the assesse before the AO. The AO further noted that the assesse group has been engaged in unaccounted transactions for a long time. One Vishan Das Tharani and the assesse are partners of M/s Kalyan Grain Merchant and admitted in the statement recorded on 3rd April 2014 in the search Page 2 of 27
IT(SS)A No.108 /Ind/2021 & ITANo.113/Ind/2021 & CO No.18 & 19/Ind/2022 Naresh Tharani Page 3 of 27 conducted by the department and also during the search and seizure action in the year 1998 undisclosed income of Rs.5,00,000/- was detected. Further in the year 2008 the Police also seized Rs.12,00,000/- as unaccounted cash which was later requisitioned by Income Tax Department. Thus, Ld. DR has submitted that as per the past history, the assesse indulged in unaccounted transaction and non-submissions of the supporting details and documents regarding commission income, the AO has estimated the commission income by increasing 20%. He has relied upon the order of the Assessing officer.
On the other hand, Ld. AR has submitted that the AO has made adhoc addition on account of estimation of the commission income by increasing 20% of the commission income already declared by the assesse. There was no incriminating material found during the course of search therefore, the addition made by the AO without any incriminating material is beyond the scope of proceedings u/s 153C. He has relied upon the various decisions as under:
1.CIT vs Continental Warehousing Corporation 58 taxmann.com 78 (Bom.) 2.CIT vs Kabul Chawla 380 ITR 573 (Del.) 3.CIT vs Lata Jain 384 ITR 543 (Del.) 4.Gahoi Dal Mills 117 Taxmann.com 117 MP 117 (SC) 5.Abhisar Buildwell P Ltd. [2017] 149 taxmann.com 399 (SC)
4.1. Ld. AR has further submitted that the assesse is in the business of brokerage of real estate transaction and working as an agent between buyers and sellers of properties. In this line of business normally commission charges are @1% of the transaction value and therefore, in absence of any material to show that the assesse has received more commission or conducted more transaction then declared by the assesse the addition made by the AO purely on estimation without any basis is not sustainable in law. Ld. AR has referred to the ledger account produced by the assesse which is duly supported by bills and vouchers as placed at page no.127 & 128 of the paper book. Therefore, in absence of any material to show the higher commission income the addition made by the Page 3 of 27
IT(SS)A No.108 /Ind/2021 & ITANo.113/Ind/2021 & CO No.18 & 19/Ind/2022 Naresh Tharani Page 4 of 27 AO is unlawful and unjustified. He has supported the impugned order of the CIT(A).
We have considered the rival submissions as well as relevant material on record. For A.Y.2014-15 & 2015-16 the assesse has declared commission income of Rs.9,25,000/- & Rs.9,39,533/- respectively. The AO issued show cause notice to the assessee for furnishing of details of commission income along with documentary evidence. The assesse filed the reply/written submission which are reproduced by the AO in the assessment order wherein the assesse has submitted that the commission income was received by the assesse in respect of transaction of various parties duly recorded in the books of account and income of the same is shown in the profit and loss account for the relevant assessment years. The assesse further submitted that the income from commission was offered to tax and therefore, no addition can be made on this account. The assesse also submitted that necessary documentary evidence enclosed in Annexure –II. The AO did not accept the reply of the assessee and made an adhoc addition @ 20% increase in the commission income as under:
“The submission of the assessee has been considered carefully, but not found acceptable because of the following reasons: (1) On verification of the documents submitted by the assessee, it is seen that the assessee has submitted only ledger account of commission for A.Y. 2012-13, A.Y. 2014-15 and A.Y. 2015-16. No other supporting details are submitted by the assessee in respect of these years. As regards the details of commission for remaining years, the assessee has not submitted any details. (ii)As regards the commission income received for A.Y. 2009-10 to A.Y. 2011- 12, the assessee has failed to produce any details or supporting evidences. The assessee has also failed to produce the books of accounts for A.Y. 2009-10 10 2011-12. (iii) In absence of any supporting documents, the correctness of commission income could not be verified. (iv) The addition of Rs 6,50,000/- has been made for A.Y. 2013-14, on account of suppression of commission receipts, on the basis of statement recorded of the assessee, as discussed in para 10 of this assessment order. Page 4 of 27
IT(SS)A No.108 /Ind/2021 & ITANo.113/Ind/2021 & CO No.18 & 19/Ind/2022 Naresh Tharani Page 5 of 27 (v) It has also been found that the assessee group had been engaged in unaccounted transactions for a long time. Shri Vishan Das Tharani, the assessee and partner of M/s Kalyan Grain Merchant during his statement recorded on 03/04/2014 has stated on oath that business premise 72, Hanumanganj, Bhopal of M/s Kalyan Grain Merchant was earlier searched by the Income Tax Department in the year 1998 during which undisclosed income of Rs. 5,00,000/- was detected. Further, Bhopal Police also raided his premise in the year 2008 and seized Rs 12,00,000/- unaccounted cash, which was later requisitioned by Income Tax Department. These facts show that the assessee group is involved in unaccounted money transactions including Hawala transactions and commission income earned from these activities are not disclosed in regular books of account and return of income. Considering the above facts, the submission of the assessee is not acceptable and the commission income of the assessee is estimated on higher side by increasing it by 20% for the assessment year 2009- 10, 2010-11, 2011-12, 2012-13, 2014-15 and 2015-16.” 5.1. It is pertinent to note that there was search and seizure action u/s 132 of the Act on 3rd April 2014 in case of M/s. Kalyan Grain Merchant and these assessments were completed by the AO post search and seizure in the case of the partnership firm. As it is clear from the assessment order on this issue the AO has made ad hoc addition by estimating the commission income with increase of 20% of the income already declared by the assesse. The sole basis of the AO for increasing the commission income is the past unaccounted cash found during the search as well as in the raid of Police authorities in the year 1998 and 2008 respectively. Therefore, the AO suspected the unaccounted transactions of earning commission income by the assesse for these years also. Addition made by the AO is purely on the basis of the suspicion without any material or evidence to reflect any unaccounted commission income of the assessee for these years. On appeal the CIT(A) has deleted the addition in para no.4.4 of page 92 as under:
“4.4 Ground No 4 for AY 2010-11 & 2012-13, Ground No 3 for AY 2011-12, Ground No 5 for AY 2014-15 & 2015-16:- Through this ground, the appellant has challenged addition of Rs. 80,000/- in AY 2010-11, Rs. 1,29,000/-in AY 2011-12, Rs. 4,00,000/- in AY 2012- 13, Rs. 1,85,000/- in AY 2014-15 and Rs. 1,87,906/-in AY 2015-16 on account of estimation of commission income. The AO during Page 5 of 27
IT(SS)A No.108 /Ind/2021 & ITANo.113/Ind/2021 & CO No.18 & 19/Ind/2022 Naresh Tharani Page 6 of 27 assessment proceedings required the assessee to show cause as to why income from commission from sale of properties should not be further enhanced to 20% as against 1% shown by appellant. The assessee in reply submitted that the actual income earned by way of commission has been shown in books of accounts. The AO after considering reply of the assessee did not find the same acceptable and made addition in AYS 2010-11 to 2015-16. On perusal of assessment order passed by the AO, the AO has not brought on record any incriminating material showing suppression of commission income or showing unaccounted commission income earned by appellant. It is now settled legal principle that no addition can be made to the income of the appellant in absence of any incriminating material on record, which is completely missing in the instant case. Thus, the AO has made addition on sheer assumption and presumption basis. Thus, addition made by the AO amounting to Rs. 80,000/- in AY 2010-11, Rs. 1,29,000/- in AY 2011-12, Rs. 4,00,000/- in AY 2012-13, Rs. 1,85,000/- in AY 2014-15 and Rs. 1,87,906/- in AY 2015-16 are Deleted. Therefore, appeal on this ground is Allowed.” 5.2. As it is manifest from the assessment order that the AO has not referred to any incriminating material disclosing any undisclosed income of commission for these assessment year either found during the search and seizure action or even during the assessment proceedings. Therefore, the AO has not brought any material on record to show higher commission income earned by the assesse. The commission income duly recorded in the books of account and declared in the return of income cannot be disturbed in absence of any material. Accordingly we do not find any error or illegality in the impugned order of the CIT(A) qua this issue.
Ground no.2 is regarding the addition made by the AO on account of unexplained unsecured loan which was deleted by the CIT(A). This ground is also common for A.Y.2014-15 & 2015-16 except the quantum of addition made by the AO.
Ld. DR has submitted that during the course of assessment proceedings the AO asked the assessee to furnish the details of unsecured loans received by him inter alia for A.Y.2014-15 & 2015-16. The AO found that there are six to eight unsecured loan creditors for A.Y.2014-15 and IT(SS)A No.108 /Ind/2021 & ITANo.113/Ind/2021 & CO No.18 & 19/Ind/2022 Naresh Tharani Page 7 of 27 A.Y.2015-16, respectively. In response the assesse has produced incomplete supporting evidence and failed to produce the copy of the return of income balance sheet of the loan creditors and in some cases the assesse even not produce the bank statements, ITR, balance sheet of the loan creditor. Even the complete name and address of the loan creditors are not submitted by the assesse, therefore, the assesse failed to discharge its onus to prove identity, creditworthiness of the loan creditors as well as genuineness of the transactions. Ld. DR has relied upon the order of the AO and submitted that the AO has discussed each and every loan creditor and found that the assesse has not produced the supporting evidence to discharge its onus.
On the other hand, Ld. AR has submitted that the assessee has taken the loan through banking channel and by account payee Cheque and also repaid the same through banking channel. He has further submitted that before the AO, the assesse produced confirmation from the creditors but the AO did not accept the same for want of additional supporting documents in the shape of return of income, balance sheet and bank account statement of some of the loan creditors. Ld. AR has further submitted that the party wise explanation along with documents were submitted before the Ld. CIT(A) which were forwarded to the AO for remand report. The AO did not make any adverse comments for any documentary evidence forwarded for his examination and therefore, the same were considered to be correct and genuine. After considering the documentary evidence and remand report of the AO the CIT(A) has deleted the addition. He has further submitted that the onus cast upon the assesse was properly discharged by establishing identity, creditworthiness of the creditors and genuineness of the transactions. The loan was received by the assessee through banking channels and the same was also repaid with interest through banking channels therefore, the assessee proved with the relevant evidence that the said amount did not represent the unaccounted money. He has referred to loan creditor wise details of the documents/evidence produced by the assesse as under:
IT(SS)A No.108 /Ind/2021 & ITANo.113/Ind/2021 & CO No.18 & 19/Ind/2022 Naresh Tharani Page 8 of 27 For A.Y.2014-15 Name of Party Amount Identity Genuineness Creditworthiness Remarks Gopichand Rs. PAN: Confirmation ITR, Computation The advance commission Moolchandani 3,55,500/- ACVPM0229L letter,(PB 130) was received in A.Y. 2014-15 Ledger (PB in relation to a property 131-132). deal. This was rectified and offered in next year .The Ledger account of commission for A.Y. 2015-16 account,(PB Lajwanti Devi Rs. Loan Ledger Loan taken on 04.07.13 and Tharani 6,50,000/- Confirmation 138-141) bank repaid on 31.07.14 (PB 137) statement of assessee(PB 142-143) Loan taken from banking channel Ajit Chhabra Rs.43,260/ PAN: Loan Ledger account, bank Excess amount of - Confirmation statement of commission received, which ADCPC1559K letter(PB 134) assessee.(PB 135-136) was refunded bychq no 3 of HDFC on 26.0.2014 statement(PB YashasviTharani Rs. Loan Bank Loan raised and repaid 10,000/- confirmation 155) through Banking channel. letter(PB 154) Bank statement of assessee on PB 155. statement,(PB Kamlesh Rs. PAN: Loan Bank Loan raised and repaid Motwani 5,00,000/- ABHPM9519Q Confirmation 149) Balance Sheet through Banking channel. and P&L, (PB 147- and Aadhar letter Bank statement of assessee Card. 148) on PB 153 (PB 144) ITR (PB 152) (PB 145-146)
Naresh Tharani Rs. PAN: Loan Bank statement Loan raised and repaid ITR(PB 160-162) and (HUF) 13,00,000/ Confirmation through Banking channel. AACHN8207J - Letter(PB Balance Sheet(PB 163) Bank statement of assessee (PB 164) 156) on PB.,(PB 165-166) Ledger(PB 157-159)
Rs. 25,58,760/- For A.Y.2015-16 Name of Amount Identity Genuineness Creditworthiness Remarks Party Siddhartha 42,00,000 PAN: Confirmation letter Bank statement of Loan raised and repaid SiddharthSinha(PB Sinha through Banking channel. ASLPS8871M (PB 167-168) 175-184) Bank statement of assessee on PB 185-186. Ledger (PB 169-
IT(SS)A No.108 /Ind/2021 & ITANo.113/Ind/2021 & CO No.18 & 19/Ind/2022 Naresh Tharani Page 9 of 27
174)
Murlidhar 25,00,000 PAN: Confirmation letter Bank statement (PB Loan raised and repaid Kaluram AAYPH2251C 189-190) through Banking channel. (PB 187) Bank statement of assessee on PB 189-190 Ledger (PB 188)
Namanincy 35,00,000 PAN: Loan Confirmation Bank statement(PB Loan raised and repaid (Naman Ink) AFYPG1644R Letter (PB 191) 195) and ITR (PB 192- through Banking channel. 194) Bank statement of assessee on PB 196-197 (PB 198)
Bank statement (PB AmitTharani 10,00,000 PAN Confirmation letter Loan raised and repaid ACBPT1991J 207)ITR(PB 200-203) through Banking channel. (PB 199) Bank statement of assessee on PB 208 PB209-210 Ledger (PB 204- 206)
ChiragThara 12,00,000 PAN: Loan Confirmation Bank statement(PB Loan raised and repaid ni BSXPT1292D Letter (PB 211) 217-218) through Banking channel.
Bank statement, (PB Kavita 50,000 PAN:ABYPT007 Loan Confirmation Loan raised and repaid 232-235) Tharani 113 and Aadhar letter through Banking channel. Card Bank statement of assessee on (PB 219)&Ledger ITR (PB 220-223) PB 232-235 900739814333 (PB 224-229)
(PB 230-231)
Ravi 10,00,000 PAN: Loan Confirmation Audited Final Loan raised and repaid accounts and Wadhwani AACPW6705C. letter through Banking channel.
(PB 266) (PB 236)&Ledger ITR (PB 237-262) (PB 263-265)
Bank statement, (PB Grand 5,00,000 PAN: Loan Confirmation Loan raised and repaid 269) PahupatiInfr AAFCG5649B letter through Banking channel. atech Bank statement of assessee on (PB 268) (PB 267) PB 269
Thus, Ld. AR has submitted that the assesse produced ITR, confirmation etc. of the loan creditors which are placed at page 130 to 269 of the paper book.
We have considered the rival submissions as well as relevant material on record. During the assessment proceedings the AO asked the IT(SS)A No.108 /Ind/2021 & ITANo.113/Ind/2021 & CO No.18 & 19/Ind/2022 Naresh Tharani Page 10 of 27 assesse to furnish the details of the unsecured loan which were furnished by the assessee as in the statement of the affairs as under:
For A.Y. 2014-15 Name of Person Amount Gopichand Moolchandani 3,55,500 Lajwanti Devi Tharwani 650000 Ajit Chhabra 43260 Yashasvi Tharwani 10000 Kamlesh Motwani 500000 Naresh Tharwani HUF 1300000 Total 25,58,760 For A.Y.2015-16 Name of Person Amount Siddhartha Sinha 42,00,000 MurlidharKaluram 25,00,000 Namanincy (Naman Ink) 35,00,000 AmitTharani 10,00,000 ChiragTharani 12,00,000 KavitaTharani 50,000 Ravi Wadhwani 10,00,000 Grand PahupatiInfratech 5,00,000 Total 1,39,50,000
The AO made additions on account of unsecured loan by giving reasons that the assesse has not produced the copies of ITR, balance sheet and past bank account statements of the loan creditors. This shows
IT(SS)A No.108 /Ind/2021 & ITANo.113/Ind/2021 & CO No.18 & 19/Ind/2022 Naresh Tharani Page 11 of 27 that the AO was not satisfied with the evidence filed by the assessee and held that mere confirmation would not discharge the assesse from the onus of proving identity, creditworthiness of the creditors and genuineness of the transactions. Thus, in absence of ITR, balance sheet, bank account statements of the loan creditors the AO held that the assessee failed to prove creditworthiness of the lenders and genuineness of the transactions. It is pertinent to note that if the AO was not satisfied with the supporting evidence filed by the assesse he ought to have called for other supporting evidence from the assesse. But instead of confronting the assesse of insufficient evidence the AO has made the addition on this account. Before the CIT(A) the assesse produced additional evidence for want of which the AO had made the addition. The CIT(A) called for remand report of the AO and then deleted the addition in para 4.6 as under:
“4.6 Ground No 3 for AY 2010-11, 2012-13 & 2013-14 and Ground No 4 for AY 2014-15 & 2015-16:- Through these grounds of appeal, the appellant has challenged addition of Rs. 5,00,000/- in AY 2010- 11, Rs. 43,200/- in AY 2012-13, Rs. 5,75,000/- in AY 2013-14, Rs. 24,60,000/- (correctly Rs. 28,58,760/-) in AY 2014-15 and Rs. 1,39,50,000/- in AY 2015-16 on account of unexplained unsecured loans. The AO during the course of assessment proceedings required the assessee to explain the identity and creditworthiness of the lenders and genuineness of loan taken by him from various lenders. The assessee however, failed to furnish any documentary evidence before the AO. The appellant during appellate proceedings has furnished documentary evidences in support of his claim which were also forwarded to AO for remand report/comments. The AO vide remand report dated 15.02.2021 has not raised any doubt/remark on additional evidences submitted by the appellant. Therefore, it can be presumed that the same are found to be correct and genuine. 4.6.1 I have considered the facts of the case, plea raised by the appellant and findings of the AO. The appellant during the year AY 2010-11 has taken loan from Shri Kamal Kishore Kingrani of Rs. 5,00,000/- on 17.07.2009 and the same was repaid on 16.02.2011 through cheque. Appellant has also filed copies of bank account statement, ITR, confirmation, PAN no and ledger account of lender. The entire loan taken by appellant was repaid before search proceedings. Further, in AY 2012-13, appellant has taken loan from Mr Naresh Tharani HUF of Rs. 43,200/-. Appellant in support has filed copies of confirmation, ledger account, bank account statements and ITR of the lender. The lender has shown income of Rs. 2,85,180/- in ITR. Further, in AY 2013-14 appellant has taken loan of Page 11 of 27
IT(SS)A No.108 /Ind/2021 & ITANo.113/Ind/2021 & CO No.18 & 19/Ind/2022 Naresh Tharani Page 12 of 27 Rs. 1,75,000/- from Smt Monika Jain and Rs. 4,00,000/- from Shri Ravi Wadhwani. The appellant submitted that sum of Rs. 1,75,000/- from Smt Monika Jain and Rs. 4,00,000/- from Shri Ravi Wadhwani was commission received against a real estate transaction. The appellant submitted that he was in deficit of funds and has taken commission before execution of deal as an advance. However, the same has been shown in return for AY 2014-15. On perusal of ITR for AY 2014-15 appellant has shown the said commission income. Further, in AY 2014-15, appellant has received advance commission from Shri Gopichand Moolchandani & Family against real estate transaction and has been offered for taxation in AY 2015-16. Further, sum of Rs. 43,260/- was excess commission received against real estate transaction from Shri Ajeet Chhabra which was returned vide cheque no 00003 of HDFC bank dated 26.05.2014. Further, appellant has received sum of Rs. 6,50,000/- from Smt Lajwanti Devi Tharani, Rs. 10,000/- from Mrs Yashasvi Tharani, Rs. 5,00,000/- from Shri Kamlesh Motwani and Rs. 13,00,000/- from Shri Naresh Tharani (HUF) as unsecured loans. The appellant has filed copies of loan confirmation, ITR, bank account statements and copies of ledger accounts of lender. On perusal of evidences on record it is seen that the appellant has taken loan from Smt Lajwanti Devi Tharani on 04.07.2013 and the same was repaid on 31.07.2014. Similarly loan taken from Mrs Yashasvi Tharani on 08.05.2013 was repaid on 01.11.2013. Also loan taken from Mr Kamlesh Motwani on 03.07.2013 was repaid on 09.07.2013 and loan taken from Naresh Tharani HUF on 04.09.2013 was repaid on 04.10.2013. Further, in AY 2015-16, appellant has taken loan of Rs. 42,00,000/- from Shri Siddarth Sinha, Rs. 25,00,000/- from Shri Murlidhar Kaluram, Rs. 35,00,000/- from Shri Naman Ink, Rs. 10,00,000/- from Shri Amit Tharani, Rs. 12,00,000/- from Shri Chirag Tharani, Rs. 50,000/- from Smt Kavita Tharani, Rs. 10,00,000/- from Shri Ravi Wadhwani and Rs. 5,00,000/- from M/s Grand Pashupati Infratech. Appellant in support has filed copies of ITR, PAN card, bank account statement, ledger account of lenders. On perusal of evidences on record it was found that loan taken from Mr Siddharth Sinha on various dates were repaid o by appellant o various dates through his bank account which are clearly mentioned in confirmation provided by lender. Loan taken from M/s Naman Ink on 08.05.2013 and was repaid on 01.11.2013. Further Prop. of M/s Naman Ink has shown returned income of Rs. 90,31,630/-. Thus, the creditworthiness is fully explained. Loan taken from Mr Amit Tharani on 19.02.2015 and was repaid on 27.02.2015 through cheque. Also the lender Shri Amit Tharani has filed return of income showing income of Rs. 14,09,560/- . Thus, the creditworthiness is fully explained. Loan taken from Mr Chirag Tharani on 20.02.2015 and was repaid on 02.03.2015. Loan taken from Mrs Kavita Tharani on 27.02.2015 and was repaid on 02.03.2015. Also the lender Smt Kavita Tharani has filed return of income showing income of Rs. 15,17,530/-. Thus, the creditworthiness is fully explained. Loan taken from Mr Ravi Page 12 of 27
IT(SS)A No.108 /Ind/2021 & ITANo.113/Ind/2021 & CO No.18 & 19/Ind/2022 Naresh Tharani Page 13 of 27 Wadhwani on 27.02.2015 and was repaid on 16.03.2015. Loan taken from M/s Grand Pashupathi Infratech on 05.03.2015 and was repaid on 16.03.2015. 4.6.2 As discussed above, the appellant has furnished all details such as documents relating to identity, creditworthiness of the lender and genuineness of the transactions. Thus, prima facie liability of the assessee to prove the genuineness of the transaction and to establish the identity and credit worthiness of the lender stands discharged. Thus considering the fact that the lenders are regular tax assessee's, and have given the loan through account payee cheque and have confirmed the transaction the liability of the assessee of explaining the genuineness of the transaction stands discharged and the addition cannot be made on mere suspicion how so strong the reasons of suspicion may be. Also, the appellant has repaid the loan. Hon'ble Gujarat High Court in the case of Ayachi Chandrashekhar Narsangji (2014) 42 Taxmann.com 251 (Guj HC) has held that "It has also come on record that the said loan amount has been repaid by the assessee to Shri Ishwar Adwaniin the immediate next FY and the Deptt has accepted the repayment of loan without probing into it. In the aforesaid facts and circumstances of the case, when the Tribunal has held that the matter is not required to be remanded as no other view would be possible we see no reason to interfere with the impugned order passed by ITAT". Similar view was taken by Hon'ble ITAT Mumbai I the case of HK Pujara Builders (2019) 33 NYPTTJ186 (Mumbai Trib.). Similar view was taken by Hon'ble Delhi ITAT in the case of Supreme Buildcap Pvt Ltd(2020) 34 NYPTTJ 418 (Del Trib.). The amount of loan has been squared up before the date of search, therefore, the addition madeby the AO is devoid of merit as held by Hon'ble Mumbai ITAT in the case of Vashu Bhagnani (2018) 32 NYPTTJ 599 (Mumbai Trib.) 4.6.3 The lenders has furnished the loan confirmation, copy of bank account and proof of filing of the return. By filing the above documents the appellant is able to establish the – i. Identity of the creditors -the creditors are income tax payer and filed the loan and capital introduction confirmations. Genuineness of the transaction- the appellant has taken the loan through banking channel. The appellant is in the receipt of loan by cheque. Copies of bank statements of lender persons are placed on record and perused. Appellant has made repayments of the loan taken per his convenience of fund availability as is evident from loan confirmation letters and ledger statements of the lenders duly accompanied by bank statements. Creditworthiness of the creditors -the lenders are income tax payer and filing the income tax return. The persons have not only given the loan to the appellant but to other parties also.
IT(SS)A No.108 /Ind/2021 & ITANo.113/Ind/2021 & CO No.18 & 19/Ind/2022 Naresh Tharani Page 14 of 27 4.6.4 From the above it is clear that the appellant has satisfied all the three conditions required for genuineness of the transaction. The same view has been upheld by Honb'le ITAT in the following cases:- i.Umesh Electricals v/s Asst. CIT(2011) 18 ITJ 635 (Trib.- Agra): (2011) 131 ITD 127 : (2011) 141 TTJ Establishment of identity and credit-worthiness proved- Assessee produced the bank account of creditor in his bank account on the same day on which loan was given- Assessee furnished the cash flow statement of creditor-Based on inquiry, AO noted that creditor was engaged in providing accommodation entries-HELD- In group cases, it has been held that there was no evidence against the creditor to prove that he was providing accommodation entries-Further, mere deposit of money by the creditor on the same day, does not establish that the loan is not genuine-Assessee has proved the source of credit and also the source of source -Addition cannot be made. ii. Aseem Singh v/s Asst. CIT (2012) 19 ITJ 52 (Trib.-Indore) Identity and credit-worthiness proved-Assessee took loan of Rs.1,00,000/- confirmation of creditor was filed-Lower authorities made addition u/s 68 holding that amount was deposited in cash in the bank account of lender immediately prior to date of loan - HELD- Assessee has established the identity- The party has confirmed the transaction- If AO doubted the transaction, AO should have called creditor u/s 131-Addition cannot be made. Thus, appellant has furnished all the required details in order to prove identity of lenders, genuineness of the transaction and creditworthiness of the lenders. 4.6.5 Therefore, in view of the above discussion, the AO was not justified in making addition on account of unsecured loan received from various individuals and firms. Thus, addition made by the AO amounting to Rs. 5,00,000/- in AY 2010-11, Rs. 43,200/- in AY 2012-13, Rs. 5,75,000/- in AY 2013-14, Rs. 28,58,760/- in AY 2014- 15 and Rs. 1,39,50,000/- in AY 2015-16 is Deleted. Therefore, the appeal on these grounds is Allowed.”
There is no dispute that the loans were received by the assesse through banking channels as evident from the bank account statement of the assesse as well as the loan creditors. Further, it is also evident that most of the loans were repaid by the assessee in the very next year as reflected in the bank account statement and ledger accounts produced by the assesse. Accordingly in view of the documentary evidence produced by the assesse showing the transactions through banking channel and subsequent repayment of loan amounts through banking channel and in Page 14 of 27
IT(SS)A No.108 /Ind/2021 & ITANo.113/Ind/2021 & CO No.18 & 19/Ind/2022 Naresh Tharani Page 15 of 27 the absence of any defect pointed out by the AO in the evidence produced by the assesse, we do not find any error or illegal in the impugned order of the CIT(A) who has duly considered the supporting evidence produced by the assesse as well as the remand report of the AO before passing impugned order.
Ground No.3 is regarding addition on account of undisclosed investment which was deleted by the CIT(A). The Ld. DR has submitted that the AO has recorded the fact that there was a search and seizure action u/s 132 of the Act in case of M/s Tanya Jewellers Pvt. Ltd. Gwalior on 19.02.2014. The text messages from mobile of Shri Narendra Kumar Gupta, director of M/s Tanya Jewellers Pvt. Ltd. show that multiple massages were sent from the mobile of assesse and this fact was also accepted by Shri Narendra Kumar Gupta. It is clear from the text massages found in the mobile of Shri Narendra Kumar Gupta that the assesse was involved in typical Hawala transactions with code word such as ‘kg’ which stands for one laksh rupees, beneficiary and Sr. No. of currency notes. Ld. DR has submitted that all these details were found in the text messages sent by the assessee to Shri Narendra Kumar Gupta. Therefore, the assessee was involved in the Hawala transactions to the tune of Rs.1,34,47,600/-. Ld. DR has submitted that in reply the assessee denied sending alleged massages to Shri Narendra Kumar Gupta and also denied any relation with Shri Narendra Kumar Gupta or M/s Tanya Jewellers Pvt. Ltd. He has contended that once the massages found in the mobile and mobile number of the assesse as well as Shri Narendra Kumar Gupta are not in dispute then in absence of any explanation on the part of the assesse regarding the transactions found in these mobile massages. AO has rightly made addition on account of unexplained investments through the Hawala transactions. She has also referred to the scan copy of the papers as produced in the assessment order showing 10 (ten) rupees currency notes numbers which are generally used in the Hawala transactions. She has relied upon the order of the AO.
IT(SS)A No.108 /Ind/2021 & ITANo.113/Ind/2021 & CO No.18 & 19/Ind/2022 Naresh Tharani Page 16 of 27
On the other hand, Ld. AR of the assessee has submitted that the statements of the assesse was recorded during the search on 16.05.2014 wherein the assessee has explained and denied having sent any massages which were found in the mobile of Shri Narendra Kumar Gupta. The assessee also denied that he knows Shri Narendra Kumar Gupta, director of M/s Tanya Jeweller Pvt. Ltd. as the assesse never communicated with him either through Sms or call or any other mode. Without prejudice the Ld. AR has submitted that even if it is accepted that the assesse was involved in the transactions alleged in the massages only the commission income on such transactions can be assessed to tax and not the quantum of the transactions which is assumed by the AO. He has relied upon the order of the CIT(A) as well as the order of this Tribunal dated 1.12.2022 in case of ACIT vs. Narendra Kumar Gupta, Guwalior in ITANo.795/Ind/2018.
We have considered the rival submissions as well as relevant material on record. The AO has made the addition on account of undisclosed investment in the Hawala transactions on the basis of the text massages found in the mobile number of Narendra Kumar Gupta director of M/s Tanya Jeweller Pvt. Ltd. The AO has reproduced the details of the massages at page no. 17 of the assessment order. These massages were in coded form and translated into amounts in Rs. by the AO as under:
Ram Bpl 18.2.2014 Amit 45kg Naresh 8821000413 2371037963 Tharani S/o Late SL Tharani Mr. Naresh Tharani E- 2/149 Arera Colony, Behind BJP Office Ram Bpl 8821000413 18.2.2014 Amit 45 kg Mr. Naresh 2371037963 Tharani E- 2/149 Arera Page 16 of 27
IT(SS)A No.108 /Ind/2021 & ITANo.113/Ind/2021 & CO No.18 & 19/Ind/2022 Naresh Tharani Page 17 of 27
Colony, Behind BJP Office Ram Bpl 10/_64c489578 7554257293 8821000413 18.2.2014 Kundan 35 dhi Mr. Naresh Tharani E- 2/149 Arera Colony, Behind BJP Office
5kg Delhi Ram Bpl 7554257296 8821000413 17.2.2014 Bhala Mr. Naresh Tharani E- 9810035104 2/149 Arera Colony, Behind BJP Office Ram Bpl 10;18 m510718 7554257296 8821000413 15.2.2014 Manish/ 2kg/2kg Mr. Naresh 10.60e.253766 Tharani E- Abishik 2/149 Arera Colony, Behind BJP Office Ram Bpl 11B911330 7554257296 14.2.2014 8821000413 Mr. Naresh Tharani E- 2/149 Arera Colony, Behind BJP Office Ram Bpl Mana 7554257296 8821000413 07.2.2014 Mr. Naresh 9826015931 Tharani E- 2/149 Arera Colony, Behind BJP Office Ram Bpl 50 kg not Shubham 7554257296 8821000413 04.2.2014 1.50 kg 5CE692558 (Nagpur) Mr. Naresh Tharani E- 9595575589 2/149 Arera Colony, Behind BJP Office
IT(SS)A No.108 /Ind/2021 & ITANo.113/Ind/2021 & CO No.18 & 19/Ind/2022 Naresh Tharani Page 18 of 27
Ashok Ji Ram Bpl 7554257296 8821000413 03.2.2014 Mr. Naresh 9302181818 Tharani E- 2/149 Arera Colony, Behind BJP Office Ram Bpl Mr. CS Baby 7554257296 01.2.2014 3.97.600.h.bad 8821000413 Mr. Naresh 9848993295 Tharani E- 2/149 Arera Colony, Behind BJP Office 14.1. Further the AO has also referred to the seized material contains the details of number of ten rupees currency notes found during the course of search in case of M/s Tanya Jewellers Pvt. Ltd. So far as the currency notes numbers found at the place of M/s Tanya Jewellers Pvt. Ltd. is concerned the same can be regarded as a relevant document to the extent of involvement of such party in the Hawala transactions. But those details of the currency notes cannot be related to the assesse in absence of any material evidence or statement in this regard. Even otherwise this tribunal in case of Shri Narendra Kumar Gupta in ITANo.795/Ind/2018 has upheld the order of the CIT(A) accepting the involvement of the said party in the Hawala transactions but the addition has been restricted only to the commission income of the Hawala transactions in para 8 as under:
“8. We have considered rival submissions of both sides and also perused the material held on record. Regarding first tranche of addition on account of “unexplained-transactions” of Rs. 8,25,03,772/-, the crux of assessee’s submission is that those transactions are at par with the “explained- transactions” of Rs. 7,04,89,360/- in every respect and there is no difference whatsoever. Firstly, the revenue-authorities have loudly and unambiguously identified, found and understood (in Para No. 8.1 to 8.4 of the assessment-order) the nature of activity done by assessee which is just a courier/transfer of money for earning a commission of Rs. 100/- to Rs. 200/- per lac. This activity remains same in all transactions. Secondly, all transactions have been retrieved/decoded from the same set of evidences, namely the same mobile phones. Thirdly, the details of all transactions as retrieved/decoded, such as Page 18 of 27
IT(SS)A No.108 /Ind/2021 & ITANo.113/Ind/2021 & CO No.18 & 19/Ind/2022 Naresh Tharani Page 19 of 27 names/mobile numbers of senders/receivers, serial numbers of currency notes, amount of money transacted in code words like “Kg”, “@”, “P”, “Peti”, etc. and in some cases the full amounts itself or in lacs or after omitting zeros, were exactly identical. Fourthly, the assessee had provided complete postal addresses, phone numbers and PANs of the persons of all transactions which is clearly evident from Para No. 10.2 and 10.3 of the assessment-order. However, the only difference is such that out of 79 transactions, the persons of 43 transactions did not turn up and persons of 36 transactions only responded. Ld. AR pointed out that though the Ld. AO has made a casual remark that the persons of 43 transactions either did not turn up or denied transactions, but their statements are neither mentioned in the assessment-order nor provided to the assessee. Ld. AR pleaded that even if it is believed that summons were issued by revenue to those 43 persons, it may be a case that the persons did not turn up, but certainly it cannot be a case that they denied having made transactions. We find weightage in the submission of Ld. AR since the revenue has not brought on record any statements of those persons. That brings us to observe that the two tranches of transactions are quite identical in all respect except the responsive/non-responsive attitude of the persons concerned on behalf of whom the moneys were transferred/couriered by the assessee. Moreover it is highly probable that those persons have actually availed services of assessee for courier/transfer of money but when it comes to enquiry by income-tax department, they did not respond to avoid hassles of tax authorities. Be that as it may, the activity of assessee in all transactions is clearly manifest from the details of transactions retrieved/decoded from the mobile phones seized during search-proceeding, which is one single activity i.e. courier/transfer of money on behalf of clients with an objective to earn commission. Therefore, there is no reason to distinguish the two categories of transactions merely on the basis of responsive/non-responsive attitude of those persons. We feel that the taxation-authorities must assess the income of assessee in a proper and judicious manner so as to charge a proper amount of tax, neither a penny less nor a penny more. We also observe that there is no evidence on record brought by revenue, despite search-proceeding, that the impugned “unexplained transactions” of 43 persons were different in any manner or structure than the “explained transactions” of 36 persons. We observe that the various reasons cited in the beginning of this paragraph clearly reveal that all transactions were at par. Being so, we do not find any merit in the claim of revenue that the so-called “unexplained transactions” should be accorded a different treatment than the “explained transactions”. We observe that the Ld. CIT(A) has given a careful thought to the facts of case and validly held that the assessee must have earned only commission of Rs. 36,71,832/- on all transactions of Rs. 15,29,93,132/-. Having said so, Ld. CIT(A) was justified in applying a commission-rate of Rs. 200/- per lac on 8,25,03,772/- which results in estimated commission-income of Rs. 1,65,007/- for 1 month and extrapolating Page 19 of 27
IT(SS)A No.108 /Ind/2021 & ITANo.113/Ind/2021 & CO No.18 & 19/Ind/2022 Naresh Tharani Page 20 of 27 the same for 12 months arriving at commission of Rs. 19,80,088/- for the whole year. Finally, Ld. CIT(A) has rightly ordered the Ld. AO to assess commission-income of Rs. 19,80,088/- and thereby granted a relief of Rs. 8,05,23,676/- (Rs. 8,25,03,764/- minus Rs. 19,80,088/-) to the assessee. We do not find any infirmity in the action of Ld. CIT(A) and the same is hereby upheld. Therefore, Revenue’s Ground No. 1 is devoid of merit. 14.2. Once it is found that such party was involved in the Hawala transactions then the text massages found from the mobile of such party send from the mobile of the assesse lead to a safe inference that the involvement of the assesse in the Hawala transactions cannot be ruled out. Even otherwise the searched party as well as assesse did not dispute the ownership of the respective mobile numbers. However, the question arises whether the involvement of the assessee in Hawala transaction would attract the addition of the entire quantum of the transactions or only the commission income as would have been earned by the assessee on such transactions. The CIT(A) has considered this issue in para 4.9.1 as under:
“4.9.1 I have considered the facts of the case, plea raised by the appellant and findings of the AO. As discussed in the body of assessment order, during the course of search at premises of M/s Tanya Jewellers, mobile phone of Shri Narendra Gupta (Director) was found and seized. On investigation it was found that various messages were sent from mobile phone of appellant to mobile phone of Shri Narendra Gupta. Data from these mobiles were retrieved which showed that appellant have made hawala transaction through the Shri Narendra Gupta assessee and total money involved in these transactions was worked out to Rs. 1,34,47,600/-. The messages retrieved from seized mobiles were recorded in coded manner e.g. Sr. No of currency note, Name of person, Mobile No., kg, etc. written for amount after removing two zeros. After decoding, it was deciphered that 'kg' written in message as coded figure is actually Rs. 1,00,000/- . The AO has made addition of Rs. 1,34,47,600/- for the reason that assessee failed to satisfactorily explain the source of such funds and therefore, concluded that the sum belongs to the assessee. I have given my thoughtful consideration to the facts and findings of the AO inter alia material brought on record. At the outset there is no denying of the fact that on retrieval of data/information from the mobiles (hand-sets) used by the Shri Narendra Gupta was for "hawala business". Hence, it can be said that appellant was involved in hawala transaction. However, law does not empowers AO to made Page 20 of 27
IT(SS)A No.108 /Ind/2021 & ITANo.113/Ind/2021 & CO No.18 & 19/Ind/2022 Naresh Tharani Page 21 of 27 addition of whole amount rather addition ought to have been made for commission income earned for doing hawala transaction. Onus is on the department to prove that amount which is being added is assessee's income. Interestingly, even after search & seizure operation, department could not find the assets/investments having worth of such huge amount to justify the rationality of this addition. I find a considerable force in the argument of the Id. AR that if the appellant has earned such huge income then it would have been found during search in some or other form. Appellant has also contended that the AO neither provided the copies of the statements of Shri Narendra Gupta nor any opportunity of cross-examination was also provided to him. It is settled law that in absence of cross- examination, any addition made behind the back of the assessee is not sustainable. Hon'ble Supreme Court in the case of Andman Timber Industries v/s CCE (SC) civil Appeal No. 4228 of 2006 dated 02.09.2015 has held that failure of give the assessee the right to cross-examine witnesses whose statements are relied upon results in breach of principles of natural justice. It is a serious flaw which renders the order a nullity. Nevertheless, the AO has failed to discharge his onus of proving that actually Rs. 1,34,47,600/- represents the income of the assessee.” 14.3 Therefore, in the facts and circumstances of the case as well as in view of the decision of Coordinate Bench of this tribunal in case of ACIT vs. Narendra Gupta (supra), we concur with the view of the CIT(A) that only the commission income in the hand of the assesse is assessable to tax. Hence, we uphold the impugned order of the CIT(A) qua this issue.
For A.Y.2015-16 the department has raised following grounds of appeal:
1.On the facts and in the circumstances of the case, the ld. CIT(A) erred in deleting the addition of Rs. 1,87,906/- made by the A.O. on account of estimation of commission income. 2.On the facts and in the circumstances of the case, the ld. CIT(A) erred in deleting the addition of Rs. 1,39,50,000/- made by the A.O. on account of unexplained unsecured loan. 3.On the facts and in the circumstances of the case, the ld. CIT(A) erred in deleting the addition of Rs. 13,00,000/- made by the A.O. on account of estimation of commission income on hawala transaction.
15. Ground no.1 & 2 are common to the ground no.1 & 2 of the assessment year 2014-15 and stands disposed of along with our finding for A.Y.2014-15.
IT(SS)A No.108 /Ind/2021 & ITANo.113/Ind/2021 & CO No.18 & 19/Ind/2022 Naresh Tharani Page 22 of 27 16. Ground no.3 is regarding the addition made by the AO on account of estimation of commission income on Hawala transactions.
We have heard Ld. DR as well as Ld. AR and considered the relevant material on record. This issue is now covered and subsumed in the issue of addition made on account of undisclosed investment on account of Hawala transactions as the CIT(A) has restricted the addition to the extent of commission income of the hawala transactions. In view of our finding on the said issue this ground of revenue’s appeal stands disposed of as only commission @ 1% is sustained.
CONo.18 & 19/Ind/2022 The assessee has raised common grounds of appeal as under:
“1. That the ld CIT(A), NFAC was not justified in confirming the assessment order, which is bad-in-law, void ab initio, barred by limitation, illegal, contrary to the facts and circumstances of the case, liable to be annulled.
2. The Id CIT(A), NFAC erred in confirming the assessment order when it was evident from satisfaction note that the documents found during search and seizure operations, "pertains" to assessee and do not "belong" to assessee.
3. The Id CIT(A), NFAC was not justified in confirming the assessment order and notice u/s. 153C when no proper reasons were recorded.
4. The ld CIT(A), NFAC was not justified in confirming the assessment order and notice u/s. 153C when the requirement of issuing two satisfaction note was not fulfilled as the AO of the searched person M/s. Tanya Jewellers Pvt. Ltd, Gwallior and assessee are different.”
We have heard Ld. AR as well as Ld. DR and considered the relevant material on record. Ground no.1 of the CO is general in nature and assesse has not pointed out any specific infirmity and illegality in the impugned order of the CIT(A). Accordingly the same is dismissed.
Ground no.2 regarding validity of assessment order: The Ld. AR of the assessee has fairly submitted that this issue is now covered by the Hon’ble Supreme Court in case of ITO vs. Vikram Sujitkumar Bhatia 149
IT(SS)A No.108 /Ind/2021 & ITANo.113/Ind/2021 & CO No.18 & 19/Ind/2022 Naresh Tharani Page 23 of 27 taxmann.com 123. Accordingly in view of the judgment of Hon’ble Supreme Court as well as fair statement of Ld. AR of the assesse ground no.2 is dismissed being devoid of any merit.
Ground No.3 & 4 are regarding no satisfaction note recorded by the AO of searched person. Ld. AR of the assesse has relied upon the various decisions on this point including judgment of Hon’ble Supreme Court in case of Super Malls (P. ) Ltd. vs. PCIT 115 taxmann.com 105 (SC).
On the other hand, ld. DR has relied upon the order of the CIT(A) and submitted that when the assessing officer of the search person as well as the assesse is same there is no need of recording the satisfaction note twice.
We have considered rival submission and careful perused the impugned order of the CIT(A). The CIT(A) has considered this issue in para 4.1 as under: “4.1 Ground No. 6 & 7 for AYS 2010-11 & 2013-14, Ground No 5 & 6 for AYS 2011-12 & 2012-13 and Ground No 8 & 9 for AY 2014-15 & 2015- 16:- Through these grounds of appeal the appellant has challenged legality of assessment order passed by the AO stating that no satisfaction note has been drawn by the AO in the case of search person and in the case of appellant. The appellant has also placed reliance on decision of Hon'ble Apex Court in the case of M/s Calcutta Knitwares dated 12.03.2014. In the said judgment, hon'ble court has held that there ought to have been two different satisfaction note before initiating proceedings u/s 153C of the Act, one in the case of assessee concerned and other in the case of searched person. However, in a recent judgment of Hon'ble Supreme Court in the case of M/s Super Malls Pvt Ltd vs PCIT dated 07.03.2020, the hon'ble court has clarified that if the AO of the searched person is different from assessee, both the AO are required to recorded satisfaction before issuing notice u/s 153C of the Act. However, if the AO of the search person and AO of the assessee is same, the AO does not require to record two different satisfaction note. In such case, the satisfaction note would be qua the other person. In the case of appellant, the AO of the appellant and the AO of the searched person are common and has recorded satisfaction note and therefore, the light of recent judgment of Super Malls (supra), plea raised by appellant has no merit and is therefore, rejected. Therefore, appeal on these grounds is Dismissed.” Page 23 of 27
IT(SS)A No.108 /Ind/2021 & ITANo.113/Ind/2021 & CO No.18 & 19/Ind/2022 Naresh Tharani Page 24 of 27 23. Thus, when the satisfaction was recorded by the AO who is having jurisdiction over the assessee as well as search person then there is no infirmity in the recording of satisfaction for want of separate satisfaction by the AO of search person as well as by the AO of the assessee. Accordingly we do not find any reason to interfere with the impugned order of the CIT(A) qua this issue.
Additional Ground
Ld. Sr. counsel has submitted that the additional ground raised by the assessee for both years is purely legal ground and was also raised before the Ld. CIT(A) and also decided against the assesse but due to inadvertence the same was not raised in the original grounds of CO filed by the assesse. Thus, Ld. AR has submitted that the additional ground raises by the assesse regarding disallowance of foreign travel expenses may be admitted and decided on merits. He has relied upon the judgment of Hon’ble Supreme Court in case of NTPC vs. CIT 229 ITR 383 (SC).
On the other hand, ld. DR has not disputed the fact that this issue of disallowance of foreign travel expenses was decided by the CIT(A) against the assesse.
We have considered the rival submissions as well as relevant material on record. The issue raised in the additional ground by the assesse emanates from the impugned order of the CIT(A). Therefore, it is not the case of an issue raised first time before the Tribunal. Accordingly in the facts and circumstances of the case and in view of the judgment of Hon’ble Supreme Court in case of NTPC vs. CIT (supra) the additional ground raised by the assessee is admitted.
The assesse has raised common additional grounds for the A.Ys. 2014-15 & 2015-16 which read as under:
"5. On the facts and in the circumstances of the case, the id CIT(A) erred on facts and law in confirming the addition of Rs. 2,00,000/- on IT(SS)A No.108 /Ind/2021 & ITANo.113/Ind/2021 & CO No.18 & 19/Ind/2022 Naresh Tharani Page 25 of 27 estimated basis on account of unexplained expenditure on foreign trips.
6. The Id CIT(A) was not justified in confirming the assessment order where no addition can be made in proceedings under section 153C in absence of any incriminating material found during the course of search."
The additional ground raised by the assesse is common in both the assessment years. The AO during the assessment proceeding asked the assesse to furnish the details of foreign travel expenditure. In response the assessee filed copy of the pass-port. The AO found that the assessee undertaken two foreign trips of 8 days and 7 days respectively. The assessee has not shown any expenditure incurred on the foreign trips and therefore, the AO has treated the expenditure of various trips as unexplained expenditure and estimated amount of Rs.2 lac each for assessment years 2014-15 and 2015-16 in respect of foreign trips. On appeal the CIT(A) has confirmed the addition made by the AO on this account. Before the Tribunal the Ld. AR of the assesse has submitted that the AO has made addition in absence of cogent material available on record. The addition is purely based on suspicion and surmises and not on the basis of any cogent material. He has further submitted that no incriminating material was found during the course of search. Therefore, the addition made by the AO on the basis of the passport details is not justified and liable to be deleted. Ld. AR has referred to the certificate of M/s. Grand Agencies who has confirmed the sponsoring of foreign trips of the assesse and bearing the expenditure. Thus, ld. AR has submitted that when the assessee has not incurred any expenditure on the foreign trips then the addition made by the AO on the basis of assumption is not justified.
On the other hand, Ld. DR has relied upon the order of the authorities below and submitted that the assesse has failed to explain the source of the expenditure incurred on foreign trips.
We have considered the rival submissions as well as relevant material on record. There is no dispute that the assesse undertook the Page 25 of 27
IT(SS)A No.108 /Ind/2021 & ITANo.113/Ind/2021 & CO No.18 & 19/Ind/2022 Naresh Tharani Page 26 of 27 foreign trips during the two assessment years i.e. 2014-15 & 2015-16. The assesse has also not claimed any expenditure incurred on these foreign trips and therefore, the AO has made addition for expenditure of Rs.2 lac for each year. The assesse has produced the certificate of M/s Grand Agencies, Indore who has confirmed the fact of sponsoring foreign trip of the assessee and bearing expenses. Once the assessee has produced the certificate of M/s. Grand Agencies Indore claiming and confirming the expenditure incurred on foreign trips of the assesse then the AO ought to have conducted further inquiry to ascertain the correctness of said claim of the assesse. Even otherwise the AO has only estimated the expenditure and not even referred any basis for such estimation of the expenditure. Accordingly, in the facts and circumstances of the case and when the assessee has explained source of the expenditure and also produced confirmation/certification of sponsoring entity then the addition made by AO without conducting further inquiry is not justified. Hence, in the interest of justice this issue is set aside to the record of the AO for fresh adjudication after conducting a fresh verification and enquiry on the evidences filed by the assesse.
In the result, the appeals of revenue are dismissed and COs of the assessee are partly allowed for statistical purposes.
Order pronounced in the open court on 30 .10.2023