DCIT-CENTRAL, BHOPAL vs. SHRI SUDHIR KUMAR AGRAWAL, BHOPAL

Feeling aggrieved by appeal-order dated 25.08.2020 passed by learned Commissioner of Income-Tax (Appeals)-3, Bhopal [“Ld. CIT(A)”], which in turn arises out of a consolidated assessment-order dated 27.02.2014 passed by learned DCIT, Central, Bhopal [“Ld. AO”] u/s 143(3) of Income-tax Act, 1961 [“the Act”], to the extent it concerns Assessment-Year [“AY”] 2012-13, the revenue has filed this appeal on following grounds:

Heard the learned Representatives of both sides at length and case- records perused.

The registry has informed that the present appeal is filed after a delay of 151 days and therefore time-barred. Ld. DR prayed that the delay has occurred due to Covid-19 Pandemic. Ld. DR further placed reliance on the order of Hon’ble Supreme Court in Suo Motu Writ Petition (C) No. 3 of 2020 read with Misc. Applications, by which suo motu extension of the limitation-period for filing of appeals w.e.f. 15.03.2020 under all laws has been granted and hence there is no delay in fact. We confronted Ld. AR who agreed to the submission of Ld. DR. In view of this, the appeal is proceeded for hearing, there being no delay.

Brief facts leading to present appeal are such that a search u/s 132 was conducted on 21.10.2011 upon one “Sagar Group” of Bhopal and the assessee is also clubbed as a part of that group. Pursuant to search, assessments of six years from AY 2006-07 to 2011-12 were framed u/s 153A/143(3) and AY 2012-13 was framed u/s 143(3). Present appeal relates to AY 2012-13 for which the AO made assessment u/s 143(3) at a total income of Rs. 5,65,65,450/- after making several additions. The assessee carried matter in appeal, contested those additions and succeeded. Now, the revenue has come in next appeal before us assailing the order of first appellate authority. We shall proceed to decide various grounds in seriatim one by one.

In this ground, the revenue claims that the CIT(A) has erred in deleting the addition of Rs. 4,71,000/- made by AO on account of unexplained cash.

During the course of search proceeding, the authorities found physical cash of Rs. 4,71,000/- available with the assessee, out of which cash of Rs. 4,00,000/- was seized. Thereafter, during assessment-proceeding, when the AO asked the assessee to explain the source of physical cash, it was submitted that the impugned cash was the residual amount of cash withdrawn from firm against imprest account for expenses. The assessee also filed cash-book of firm. But, however, the AO did not accept reply of assessee for the reason that during the course of search proceeding, no such explanation was given and moreover the cash-book of firm was not produced. During first-appeal, Ld. CIT(A) deleted addition by accepting assessee’s explanation after examination of cash-book produced by assessee which showed available cash balance of Rs. 13,50,334/-.

Before us, Ld. DR supported the order of AO as against which the Ld. AR defended the order of CIT(A). On a careful consideration, we find that the assessee has made an identical explanation before both of the lower- authorities i.e. the impugned physical cash was out of withdrawals made from firm for imprest a/c of expenses. Further, the assessee has also placed on record the copy of cash-book of firm which has been verified by Ld. CIT(A) according to which the firm had a total cash balance of Rs. 13,50,334/- on the date of search. This finding given by Ld. CIT(A) could not be controverted by revenue. We find that the balance of Rs. 13,50,334/- shown by cash-book is sufficient to cover the imprest cash of Rs. 4,71,000/- . Thus, there is no infirmity in the explanation given by assessee to lower- authorities. Therefore, in our view, the CIT(A) is fully justified in deleting the Shri Sudhir Kumar Agarwal Assessment year 2012-13 addition. We do not find anything wrong in the action of CIT(A). This ground is, thus, dismissed.

In this ground, the revenue claims that Ld. CIT(A) has erred in deleting the addition of Rs. 2,50,00,000/- made by AO in respect of income surrendered by assessee.

Apropos to this ground, Ld. DR submitted that the AO was right in making this addition because in the statement recorded u/s 132(4) on 24.10.2011 and 08.11.2011, the assessee himself admitted/surrendered undisclosed income of Rs. 12.75 crore in the hands of himself/his family members/business concerns and subsequently vide letter dated 08.11.2011, the assessee again confirmed the said surrender of Rs. 12.75 crores. Despite such admission/surrender, the assessee-group declared only Rs. 10.25 crores of income in their returns and did not offer differential of Rs. 2.50 crores. Ld. DR submitted that in the case of ACIT vs. Hukum Chand Jain (2010) 191 Taxmann.com 319 (Chhatisgarh), the Hon’ble High Court has held that the admission is one important piece of evidence but it cannot be said that it is conclusive. Ld. DR submitted that in that case, the Hon’ble High Court considered the judgement of Hon’ble Rajasthan High Court in the case of Ramjas Naval vs. CIT 183 CTR (Raj) 144 where it was held that if the assessee admits undisclosed income at his free will without any threat and expresses his inability to submit any documentary evidence during search- proceeding, then subsequent contention of assessee that the income found during search is genuine, is an afterthought. Therefore, the AO was right in making addition in this regard and the Ld. CIT(A) had deleted the same without any cogent reason. Therefore, the order of first appellate may kindly be set aside by restoring that of the AO.

Replying to above. Ld. AR strongly supported the first appellate order and submitted that the AO has made addition which was not sustainable

Ld. AR, supporting the first appellate order, vehemently pointed out that the AO has failed to bring on record any positive or adverse evidence having nexus with the assessee or any asset/investment/transaction carried out by assessee or by pointing out anything incriminating in assessee’s name or otherwise which could be linked with the “miscellaneous surrender” of Rs. 2.50 crore; still the AO has made addition of Rs. 2.50 crore without considering that the surrender by assessee to that extent was purely conditional or contingent. Therefore, it was rightly concluded by Ld. CIT(A) that the addition of Rs. 2.50 crore made by the AO was not on the basis of any incriminating material found during the course of search but only on the basis of statement of assessee. Ld. AR also pointed out that during post- search enquiries no irregularity or adverse material has been brought on record qua the impugned “miscellaneous surrender”. Ld. AR placed reliance on following decisions:

Ld. AR submitted that without making any reference to any incriminating material found during search-proceeding suggesting of unaccounted income, Ld. CIT(A) was right in deleting the addition by following the order of ITAT Indore Bench in the case of M/s Ultimate Builders (supra) and other judgments including judgment of Hon’ble Gujarat High Court in the case of Kailash Ben Manharlal Choksi (supra).

On careful consideration of the above submissions of both sides, first of all we note that the AO made addition on the basis of statement of assessee recorded on 24.10.2011 and 08.11.2011 and the assessee’s letter dated 08.11.2011. On perusal of letter dated 08.11.2011, which is scanned by AO on Page No. 10 of the assessment-order, we find the submission made by assessee as under:

Turning to the relevant part of the first appellate order, we note that the learned first appellate authority after extensively considering the statements, letter, reply and explanation of the assessee concluded that the assessee has made the deduction of Rs. 2.50 crores by submitting that no such undisclosed income was earned and therefore no such income was required to be offered to tax. For the sake of completeness, we find it appropriate to reproduce the relevant operative part of the first appellate order which reads as follows:-

On being asked by Bench, the Ld. DR, except taking basis of the statements of assessee recorded during the course of search and seizure operation on 24.10.2011 & 08.11.2011 and the letter dated 08.11.2011, could not show us any positive, adverse or cogent documentary evidence or incriminating material to show that the remaining amount of surrender of Rs. 2.50 crores, which was not included in the return of income was, in fact, earned by the assessee from undisclosed sources. That brings us to find that the AO has made impugned addition solely on the basis of statement of the assessee alongwith his whims, wrong assumptions and presumption by arising suspicion and doubt over the statements and explanation of the assessee. At this juncture, we take respectful cognizance of the judgment of Hon’ble Supreme Court in the case of Umacharan Shaw & Bros. Company vs CIT (supra) wherein it was held that the suspicion, however, strong cannot take a place of proof. In the subsequent judgment in the case of K.P Verghese vs. ITO (supra), the Hon’ble Supreme Court again held that the assessee must be shown to have received more than what is disclosed by him.

On careful consideration of stand of the AO and basis taken by the Ld. CIT(A) for deleting the addition, we may point out that the Hon’ble High Court of Gujarat in the case of Kailasben Mangarlal Choksh vs. CIT(supra) held that merely on the basis of admission of assessee, the assessee could not have been subjected to addition, unless and until some collaborative evidence is found in support of such admission. Meaning thereby addition on the standalone basis of statement of assessee u/s 132(4) of the Act cannot be held as sustainable in absence of collaborative evidence found in Shri Sudhir Kumar Agarwal Assessment year 2012-13 support of such addition. Further, the Hon’ble Jharkhand High Court in the case of Shri Ganesh Trading Company vs. CIT(supra) held that mere reading of statement of assessee is not the assessment of evidentiary value of the evidence when such statement is self-incriminating. In this case the Hon’ble High Court noted that the authorities below have not considered a fact that in a case where there was a search operation, no asset or cash was recovered from the assessee, in such a situation what had prompted the assessee to make declaration of undisclosed income of Rs. 20 lakhs.

In the present case also the assessee during the course of search operation in the statement and subsequently by way of letter dated 08.11.2011, as has been reproduced above, was sure about the surrender of Rs. 10.25 crores under various heads, however regarding remaining Rs. 2.50 crore, the assessee in the said letter clarified that the said amount pertaining to miscellaneous surrender shall be confirmed after study of all papers. Subsequently at the time of filing return u/s 153A of the Act, the assessee-group included Rs. 10.25 crore leaving the amount of Rs. 2.50 crore for the precise reason, which has been clearly accepted by Ld. CIT(A), that the assessee right from search and seizure operation till filing of return could not find any substantive material or investment which could be considered for supporting the surrender of remaining amount Rs. 2.50 crore. Therefore the Ld. CIT(A) was right in deleting the unsustainable addition made by the AO by relying various judicial rulings as narrated by him. We are unable to see any ambiguity, perversity or any other valid reason to interfere with the findings arrived by the Ld. CIT(A) in this regard. Therefore, we uphold the same. Accordingly, this ground of Revenue is dismissed.

During search proceeding, a document inventorised as “LPS-4/51- Page No. 164” was seized which is scanned by AO on Page No. 85 of the assessment-order. This document is a “Receipt” signed by one Mr. Vishal Chouhan in which Mr. Vishal Chouhan has acknowledged having taken a loan of Rs. 10,00,000/- from assessee on 05.07.2011 with a promise to return back within a week. During assessment-proceeding, when the AO confronted assessee qua this document, the assessee submitted following reply dated 17.02.2014 which is re-produced by AO in Para No. 31.2 of assessment-order:

During first-appeal, Ld. CIT(A) deleted addition by observing as under:

Per contra, Ld. AR strongly supported the order of CIT(A). He submitted that the assessee has given sufficient explanation for non- recording of the impugned loan in cash-book. He submitted that even otherwise the assessee was having cash balance of Rs. 26,40,918/- as on Shri Sudhir Kumar Agarwal Assessment year 2012-13 05.07.2011 which is more than enough to cover the impugned cash loan of Rs. 10,00,000/- in any case. Therefore, Ld. CIT(A) has rightly deleted the addition made by AO and his action must be upheld.

We have considered rival submissions of both sides and perused the orders of lower-authorities. On a careful consideration, we find that in the seized-document which is in the form of a “Receipt”, Mr. Vishal Chouhan has clearly acknowledged having received a loan of Rs. 10,00,000/- from assessee. Further, in his reply dated 17.02.2014 submitted to AO, the assessee himself admitted that he has given a loan to Mr. Vishal Chouhan which was returned back after one week. However, during first appellate proceeding, the assessee has taken a grossly deviating stand that no loan was given to Mr. Vishal Chouhan and therefore no entry was made in the books of account. On perusal of order of first-appeal, we observe that the CIT(A) has concluded “The AO on other hand failed to bring on record any evidence showing the said amount was actually paid by appellant”. We are unable to understand how such irresponsible conclusion blaming the AO has been noted by CIT(A) when the AO has categorically re-produced assessee’s own submission in Para No. 31.2 of assessment-order which reads thus “The assessee vide reply dated 17/02/2014 stated that – Regarding the receipt of Vishal Chouhan the submission of the asessee is that the assessee had given temporary loan to Mr. Vishal Chouhan and as mentioned in the receipt itself it was returned by him after one week.” Be that as it may, we are confined to adjudicate the controversy. For that, in the scenario before us, we are certainly in agreement with Ld. DR that the assessee’s explanation before CIT(A) is deceptive/false/contradictory to assessee’s own explanation before AO and hence the same cannot be given any credence. From the aforesaid reply dated 17.02.2014 filed by assessee to AO, we find that the assessee has himself admitted having given a loan of Rs. 10,00,000/- to Vishal Chouhan. Further, it is also an undisputed fact that the impugned loan was not recorded in cash-book of assessee. Faced with these categorical facts, we are of the considered view that the AO has Shri Sudhir Kumar Agarwal Assessment year 2012-13 rightly taken a conclusion that impugned loan was given out of unexplained sources. Therefore, the addition made by AO is very much legal and justified. Ld. CIT(A) has wrongly given relief to assessee; we reverse his action and uphold the addition made by AO. The revenue succeeds in this ground.

In this ground, the revenue claims that the CIT(A) has erred in deleting the addition of Rs. 3,50,000/-, Rs. 3,50,000/-, Rs. 17,04,000/- and Rs. 8,52,000/- made by AO on account of on-money payment against land purchase.

Taking lead in the matter, Ld. AR instantly pointed out that these additions were made in the hands of assessee on protective basis and the same were substantively added in the assessment of M/s Sagar Manufacturers Pvt. Ltd. However, on appeal by M/s Sagar Manufacturers Pvt. Ltd, the CIT(A) has already deleted all these additions fully and the order of CIT(A) has also been upheld by ITAT Indore in IT(SS)A No. 112/Ind/2019 dated 31.08.2022; therefore the protective additions made in the hands of assessee cannot survive. Ld. DR could not object to this submission of Ld. AR.

On perusal of the order in IT(SS)A No. 112/Ind/2019 (supra), we find that the impugned additions made substantively in the hands of M/s Sagar Manufacturers Pvt. Ltd. stand fully deleted by Hon’ble Co-ordinate Bench of ITAT, Indore. For the sake of immediate reference, we re-produce below the said order:

Resultantly, this appeal of revenue is partly allowed in terms indicated above.