ACIT CENTRAL-2, INDORE vs. SHRI VINOD BANSAL, KHANDWA

The instant appeal filed by the Revenue is directed against the order dated 09.08.2021 passed by the Ld. CIT(A)-3, Bhopal (M.P.) (hereinafter referred to as ‘Ld. CIT(A)’) arising out of the order dated 28.12.2019 passed by the DCIT (Central)-2, Indore (hereinafter referred to as ‘Ld. AO’) under Section 143(3) of the Income-Tax Act, 1961 (hereinafter referred to as ‘the Act’) for Assessment Year (hereinafter referred to as ‘A.Y.’) 2018-19 with the following ground:

Brief facts leading to the issue is this that the assessee is a partner in the partnership firms, M/s Vinod Industries and M/s MG Oils and his main sources of income include interest, remuneration and share of profit from these partnership firms. A search and seizure operation under Section 132 of the Act was carried out at the business premises as well as residential premises of MG Oils Group of Khandwa including the assessee and other concerns/ business associates on 23.01.2018. Thereafter, notices under Section 153A of the Act were issued for the A.Y. 2012-13 to 2017-18 and notice under Section 143(2) of the Act was issued for the A.Y. 2018-19. The income-tax return of the assessee for the A.Y. 2018-19 was filed on 26.10.2018 declaring total income at Rs.38,93,740/-. The Ld. AO during the course of assessment proceedings on the basis of some suspicious messages found from the mobile phone of the assessee and his brother, Shri Sunil Bansal reached to a conclusion that the assessee was involved in hawala transactions. The Ld. AO worked out an amount of Rs. 1,97,85,430/- on the basis of photo of those suspicious messages which was inventorized at Page No. 1-33 of LPS-11 and made addition of Rs. 1,97,85,430/- to the total income of the assessee by treating it as undisclosed income under Section 69 of the Act which was, in turn, deleted by the Ld. CIT(A). Hence, the instant appeal has been filed before us by the Revenue.

During the course of assessment proceedings, the Ld. AO observed on perusal of messages found from the mobile phone of the assessee and inventorized at Page No. 1-33 of LPS-11 that the assessee was involved in hawala transactions. The assessee contended before the Ld. AO that some of the SS 213 of 2021 3 Vinod Bansal messages found from his mobile phone contained reference of the amounts received against sale of oil made by the firm, M/s MG Oils which was duly accounted for in the books of accounts of M/s MG Oils. However, the same, was, according to the Ld. AO, not found to be true and made addition of Rs. 1,97,85,430/- to the total income of the assessee on account of amount worked out on the basis of suspicious messages relating to hawala transactions found from the mobile phone of the assessee.

Before us, the Ld. DR vehemently supported the order of Ld. AO. Per contra Ld. Counsel for the assessee supported the findings of Ld. CIT(A). We have heard the respective parties and perused the relevant material available on record.

The Ld. Counsel for the assessee submitted that the Ld. AO separately considered the amounts mentioned in the messages found from the mobile phone of the assessee even though many of those messages were merely for exchange of information and did not contain any confirmation regarding receipt/ payment of funds and those messages represented the transactions ultimately did not materialize. The Ld. Counsel further submitted that few of such messages found from the mobile phone of the assessee contained reference of the amounts received against sale of oil made by the firm, M/s MG Oils which was duly accounted for in the books of accounts of M/s MG Oils. The Ld. Counsel drew our attention to Page Nos. 41-53 of the Paper Book wherein screenshots of the messages found from the mobile phone of the assessee and working prepared showing the correct amount computed on the basis of those messages was filed. The Ld. Counsel explained that the correct amount after removing the effect of various messages which ultimately did not materialize and also after removing

The Ld. Counsel vehemently argued that the messages found from the mobile phone of the assessee were related to SHARMAJI of Delhi/ RAJESH NATH of Mumbai with whom the assessee had business relationship in connection with sale of oil. He further argued that the assessee was not engaged in carrying out any oil business in his individual capacity but the partnership firms, M/s MG Oils and M/s Vinod Industries, wherein the assessee represented as one of the partners, were engaged in such oil business. The Ld. Counsel argued that if the amount received and mentioned in the messages was linked with the sale of oil, then, it ought to be appreciated that the entire amount of sale of oil was duly recorded in the books of accounts of the partnership firms, M/s MG Oils and M/s Vinod Industries and consequently, there was no justification for making separate addition to the total income of the assessee on account of amount worked out on the basis of alleged suspicious messages found from the mobile phone of the assessee. The Ld. Counsel further submitted that the amount worked out on the basis of messages found from the mobile phone of the assessee which was treated as unrecorded cash in his hands was nothing but the amount of cash deposited in the bank accounts of the suspicious firms which was treated by the Ld. AO herself as pertaining to M/s MG Oils. Hence, it was vehemently argued that there was no rationale behind making separate addition of Rs. 1,97,85,430/- to the total income of the assessee merely on the basis of alleged suspicious messages found from the mobile phone of the assessee, particularly when the Ld. AO herself while passing the assessment order in the SS 213 of 2021 5 Vinod Bansal case of M/s MG Oils concluded that the amount of cash deposited in the bank accounts of the suspicious firms pertained to M/s MG Oils.

We have considered each and every plea raised by the Ld. Counsel during the course of hearing before us. We find that the Ld. CIT(A) while allowing the appeal preferred by the assessee observed as follows:

The above findings of the Ld. CIT(A) have not been controverted by the Ld. DR. The facts discussed above squarely reveal that the Ld. AO simply made addition in respect of all the amounts mentioned in the messages found from the mobile phone of the assessee, irrespective of the fact as to whether those amounts represented income of the assessee or not and also as to whether those

Further, we find strong force in the contentions of the Ld. Counsel that messages found from the mobile phone of the assessee were related to SHARMAJI of Delhi/ RAJESH NATH of Mumbai with whom the assessee had business relationship in connection with sale of oil. It can be seen that the assessee was not engaged in carrying out any oil business in his individual capacity but the partnership firms, M/s MG Oils and M/s Vinod Industries, wherein the assessee represented as one of the partners, were engaged in carrying out oil business. Hence, if the amount received and mentioned in the messages is linked with the sale of oil, then, we are inclined to accept the contention of the Ld. Counsel that the entire amount of sale of oil was duly recorded in the books of accounts of the partnership firms, M/s MG Oils and M/s Vinod Industries and henceforth, there was no justification for making separate addition to the total income of the assessee. The Ld. Counsel has categorically explained the fact that the messages found from the mobile phone of the assessee contained the amounts which were received by the assessee against sales made by the firm, M/s MG Oils which was duly accounted for in the books of accounts of M/s MG Oils. Hence, considering the totality of the facts, we are of the considered

It was the duty of the Ld. AO to explain as to how the amounts found noted in those messages represented the real income of the assessee which should have been subject to tax. In this regard, we have considered the judgment passed in the matter of CIT v. Excel Industries Ltd. [2013] 358 ITR 295 (SC) is wherein the Hon’ble Supreme Court categorically held that income accrues when it becomes due but it must also be accompanied by a corresponding liability of the other party to pay the amount. We find in the instant case, the Ld. AO utterly failed to do so and simply summed up each and every amount found noted in those messages and added the same to the total income of the assessee which was not justified.

Thus, considering the entire aspect of the matter, we are of the considered opinion that there was no justification for making addition of Rs. 1,97,85,430/- to the total income of the assessee on account of amount worked out on the basis of alleged suspicious messages relating to hawala transactions found from the mobile phone of the assessee by treating it as undisclosed income under Section 69 of the Act. The addition made by the Ld. AO on account of amounts noted in SS 213 of 2021 9 Vinod Bansal the alleged suspicious messages found from the mobile phone of the assessee cannot be said to be justified in view of the observations made hereinabove. Hence, we do not find any infirmity in the findings of the Ld. CIT(A) and accordingly, the deletion of addition of Rs. 1,97,85,430/- made by the Ld. CIT(A) is just and proper so as to warrant no interference. Hence, this ground of the appeal preferred by Revenue is found to be devoid of any merit and, thus, dismissed.

In the result, appeal filed by the Revenue is dismissed.