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Income Tax Appellate Tribunal, SURAT BENCH, SURAT
Before: SHRI PAWAN SINGH, Honble & SHRI ARJUN LAL SAINI, Honble
आदेश / O R D E R Per Dr. A. L. Saini, AM: Captioned cross appeals filed by the Revenue and Assessee, pertaining to assessment year 2010-11, are directed against the common order passed by Learned Commissioner of Income Tax (Appeals), which in turn arise out of common assessment order passed by Assessing Officer under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the ‘Act’), dated 21.03.2013.
Grounds of appeal raised by the Revenue are as follows: “1. On the facts and circumstances of the case and in law, the C.I.T. (A) erred in deleting addition of Rs.83,79,425/- out of addition of Rs.1,59,89,020/- being unaccounted income without appreciating that the issue involved did not pertain to payment of Rs.83,79,425/- made by the assessee to M/s Shree R.R. Construction, since the addition made by the A.O. represented the unexplained income for the assessee's failure to explain the source.
ITA No.724 & 778/SRT/2018 Assessment Year. 2010-11 Vinayk. R. Mehta 2. On the facts and circumstances of the case and in law, the C.I.T. (A) erred in deleting addition of Rs.21,50,000/- out of addition of Rs.76,09,595/- (Rs.1,59,89,020/- minus Rs.83,79,425/-), without appreciating that the assessee neither filed copy of agreement entered into by the assessee as partner of M/s Shree R.R. Construction and other partners of M/s. R.R. Construction, wherein it was agreed that M/s Shree R.R. Construction shall credit the amount of Rs.21,50,000/- received from Shri Tejas G Jani as unsecured loan, in the assessee's bank account and in lieu thereof, the assessee in his capacity as partner of M/s Shree R.R. Construction shall make payment of Rs.21,50,000/- to Shri Tejas G Jani. 3. On the facts and circumstances of the case and in law, the C.I.T. (A) erred in deleting addition of Rs.42,58,000/- out of addition of Rs.76,09,595/- (Rs.1,59,89,020/- minus Rs.83,79,425/-) by holding that Rs.42,58,000/- is to be allowed as deduction without appreciating that assessee neither explained the purpose of incurring expenditure of Rs.42,58,000/- nor established that the expenditure incurred of Rs.42,58,000/- was in relation to the income earned. 4. On the facts and circumstances of the case and in law, the CIT(A) erred in deleting the addition of Rs. 42,58,000/- without appreciating the fact that the assessee did not file evidence to ascertain the genuineness of the transaction and did not establish identity and creditworthiness of the person/parties who had lent above referred sum of money. 5. On the facts and circumstances of the case and in law, the C.I.T. (A) erred in deleting addition of Rs.54,87,073/- without proper appreciation of the A.O's findings given in assessment order and comments in the remand report submitted to C.I.T.(A). 6. On the facts and circumstances of the case and in law, the CIT(A) erred in deleting the addition of Rs.4,70,000/- out of Rs.54,87,073/- by holding that from the ledger account of assessee in the books of M/s Shree R.R. Construction it is verified that he has received sufficient cash out of which the cash of Rs.4,70,000/- was deposited, without appreciating that ledger account is merely narration of credit and debit entries and without appreciating that the assessee neither explained the source of receipt of cash of Rs.4,70,000/-, nor filed statement of details of withdrawal made from bank account, out of which the assessee had deposited Rs.4,70,000/- in cash in his bank account. 7. On the facts and circumstances of the case and in law, the C.I.T. (A) erred in deleting addition of Rs.50,17,873/- made u/s 68 of the Act by holding that the assessee has sufficiently and fully explained the source of credits in his bank accounts, without appreciating the findings given by the A.O. in assessment order as well as remand report, wherein he had reported that the assessee did not file evidence to ascertain the genuineness of the transaction and did not establish identity and creditworthiness of the persons/parties. 8. The assessee craves to add to, amend or alter the above ground as may be deemed necessary.”
ITA No.724 & 778/SRT/2018 Assessment Year. 2010-11 Vinayk. R. Mehta 3. Grounds of appeal raised by the assessee in ITA No. 778/SRT/2018 read as under:
“1. Ld. CIT(A) erred in law and on facts confirming Rs.12,01,595/- credit balance from total credit entries in the name of proprietary concern R R Construction of Rs.1,59,89,020/- in the books of the partnership firm M/s Shree R R Construction in which assessee is partner. 2. Ld. CIT(A) erred in law and on facts confirming addition made by AO of Rs.1,01,400/- on account of suppression of income based on Form 26AS. 3. Levy of interest u/s 234A, 234B, 234C & 234D of the Act is unjustified. 4. Initiation of penalty proceedings u/s 271(1)(c) of the Act is not justified. The assessee craves leave to add, amend, alter, edit, delete, modify or change all or any of the grounds of appeal at the time of or before the hearing of the appeal.”
The appeal filed by assessee for Assessment Year 2010-11, is barred by limitation by 26 days. The assessee has moved a petition requesting the Bench to condone the delay. We have heard both the parties on this preliminary issue. Having regard to the reasons given in the petition, we condone the delay and admit the appeal for hearing. 5. Ground nos. 1 to 4 raised by the Revenue in ITA No.724/SRT/2018 and ground no.1 raised by the assessee in ITA No.778/SRT/2018, are common therefore, we adjudicate these grounds together.
Briefly stated, the relevant material facts are as follows. During the assessment year under consideration, the assessee had shown income from the partnership firm M/s Shree R R Construction as a partner of 50% share and after claiming deduction under section 10(2A) of the Act of share of profit of Rs.53,62,318/- from the firm. The return of income was filed by assessee showing at “Rs. Nil” income. The assessee has shown share income from partnership firm M/s Shree R.R. Construction only. Up to assessment year 2008-09, the assessee had shown income from its proprietary concern M/s R.R. Construction also and thereafter, no activity in its proprietorship concern R.R. Construction has been shown. During assessment proceedings, it was found that in the books of accounts of M/s Shree R. R. Construction where the assessee is a partner of 50% share, there were transactions recorded in the name of R.R. Construction which is 3
ITA No.724 & 778/SRT/2018 Assessment Year. 2010-11 Vinayk. R. Mehta proprietorship concern of the assessee. In view of the above, vide note sheet dated 28/12/2012, the assessee was asked to produce all bill and voucher and books of accounts of R.R. Construction and to explain why no income had been shown for the R.R. construction in the return of income filed for the year under consideration. However, there was no compliance from the assessee. Thereafter statement under section 131(1) of the I.T. Act. 1961 was recorded at the business premises of the assessee on 27/02/2013. The assessee had not given any clarification regarding the entries in the name of R.R. Construction in the books of M/s Shree R.R Construction. As per balance sheet of R.R Construction as on 31/03/2008, total asset/liabilities were at Rs.77,14,558/- only. This included liability shown of Rs.42,27,546/- in the name of M/s Shree R.R Construction as on 31/03/2008. Therefore, assessing officer observed that huge amount of credits in subsequent years without income/business activity is next to impossible. From the account of R.R. Construction in the books of Shree R.R. Construction, it can be seen that total credits during the assessment year 2010-11 corresponding to the F.Y. 2009-10 stood at Rs.1,59,89,020/- which was mainly on account of either cash or journal entries in the name of various parties. The assessing officer observed that in the books of account of M/s Shree R.R Construction, amount in the name of R.R. Construction has been shown under the head unsecured loan. It is worth mentioning here that substantial debit entries are also there in the name of R.R. Construction in the books of Shree R.R. Construction under the head payment /Journal entries in the name of various parties. From the transactions, there is no doubt that there were business transaction of R.R. Construction during the year, while no income has been shown by the assessee of his proprietorship concern R.R. Construction in the return of income filed. Opening balance shown of Rs.1,56,58,923/- as on 01/04/2009 in the name of R.R. Construction was also on account of similar transactions in the earlier year and no income of R.R. Construction had been shown by the assessee in the return of income filed for A.Y. 2009-10 also. During the assessment stage, the assessee had submitted its reply. However, assessing officer rejected the contention of the assessee and held that amount credited during the year of Rs.1,59,89,020/- in the name of R.R. Construction in the books of Shree
ITA No.724 & 778/SRT/2018 Assessment Year. 2010-11 Vinayk. R. Mehta R.R. Construction is treated as unexplained income of the assessee. Accordingly, amount of Rs.1,59,89,020/- was added to the total income of the assessee. 7. Aggrieved by the order of assessing officer, the assessee carried the matter in appeal before the Ld. CIT(A) who have partly deleted the addition made by the assessing officer. Aggrieved, the Assessee as well as Revenue are in appeal before us.
We have heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials brought on record. Learned Counsel for the assessee pleads at macro level stating that assessing officer made addition at Rs. 1,59,89,020/-. Out of the said addition, ld CIT(A) deleted the substantial addition except Rs.12,01,595/-. If the substantial addition has been deleted and the amount of Rs. 12,01,595/- is part of the total addition of Rs. 1,59,89,020/-, why it should not be treated as genuine? Therefore, she prays that based on the same set of evidences, the small addition of Rs.12,01,595/- may also be deleted. On the other hand, the Ld. DR for the Revenue has primarily reiterated the stand taken by the Assessing Officer, which we have already noted in our earlier para and is not being repeated for the sake of brevity. We note that it is an undisputed fact that assessee is proprietor of R.R. Construction and also partner in M/s Shree R.R. Construction with 50% share in profit/loss of the Firm. Further, the assessee has received/paid money from/to M/s Shree R.R. Construction. All the debit/credit transaction the books of M/s Shree R.R. Construction are through banking channel except credit of Rs.76,09,595/- and debit of Rs.42,58,000/-. The ld CIT(A) noted that during the year M/s Shree R.R. Construction has (debited a sum of Rs.1,98,04,023/- in its books to the assessee's account which in turn mostly credited in the bank account; of the assessee. Further, M/s Shree R.R. Construction has credited a sum of Rs.1,59,89,020/- in its books in the name of assessee which is mostly paid by assessee-from his bank accounts. The assessee has submitted the entry-wise statement of financial transaction and also reconciled all 5
ITA No.724 & 778/SRT/2018 Assessment Year. 2010-11 Vinayk. R. Mehta the debits and credits in the ledger account of M/s Shree R.R. Construction with his bank statements. Further, the books of M/s Shree R.R. Construction are audited by Chartered Accountant who has also submitted his Report in Form 3CB and 3CD. The A.O. while finalizing the assessment considered Rs.1,59,89,020/- as unexplained which is credited to R.R. Construction (Assessee) in the books of M/s Shree R.R. Construction. During the appellate proceedings, the assessee has submitted the bank statement of his current account with ICICI Bank Ltd, Bank of India and Prime Co-op. Bank Ltd, along with the detailed explanation for each debit and credit entry in these accounts. The submission of assessee and all bank/financial statements have been verified by the A.O. and he has not taken any adverse view in his remand except that the assessee is only repeating his argument that various additions are from known and identified persons, creditworthiness is established and amount is towards business transaction. If the A.O. is not satisfied with details /explanation during remand proceeding, he could have called assessee for further clarification/explanation. The A.O. has not objected any source/explanation/ details submitted by the assessee during the remand. Further, the assessee has disclosed income of Rs.53,63,318/- from M/s Shree R.R- Construction as his share of profit from firm. 9. The ld CIT(A) observed that nexus between the assessee and M/s Shree R.R. Construction is proved and the argument of the assessee that the customers of M/s Shree R.R. Construction erroneously issued payment cheques favouring R.R. Construction instead of M/s Shree R.R. Construction, the assessee has deposited those payments in his bank account as he is proprietor of R.R. Construction. The ld CIT(A) noted that addition of Rs.1,59,89,020/- made by the A.O. is divided into two parts. One is Rs.83,79,425/- which is paid by the assessee from his bank accounts to M/s. Shree R.R. Construction and another is Rs.76,09,595/- which is credit to the assessee account by M/s Shree R.R. Construction through journal entries. The assessee has sufficiently demonstrated the sources of payments made to M/s Shree R.R. Construction and it is also verified by the A.O. during remand proceedings. The A.O. has not found any defect in the sources submitted by the assessee during remand proceedings. Therefore, ld CIT(A) deleted addition of
ITA No.724 & 778/SRT/2018 Assessment Year. 2010-11 Vinayk. R. Mehta Rs.83,79,425/- out of Rs.1,59,89,020/-. In respect of the another part of the addition of Rs.76,09,595/-, the Ld.A.R. of the assessee had argued before ld CIT(A) that a sum of Rs.21,50,000/- was received from Mr. Tejas G. Jani as unsecured loan by M/s Shree R.R. Construction and it was agreed amongst the partners of the firm that assessee will make payment to Mr Tejas G. Jani and accordingly the sum of Rs.21,50,000/- is credit to the assessee's account in the books of M/s Shree R.R. Construction. Further, the Ld. A.R. of the assessee had argued during appellate proceedings that if the source of balance credit entries of Rs.54,59,595/- in the books of M/s Shree R.R. Construction by journal entry is not accepted then debit journal entry in the assessee's account by M/s Shree R.R. Construction amounting to Rs.42,58,000/- should also be deducted from the credit amount and balance of Rs.12,01,595/- is to be considered as unexplained. Therefore, based on the facts narrated above, the ld CIT(A) held that out of the addition of Rs.54,59,595/-, a sum of Rs.42,58,000/- is to be allowed as deduction and balance sum of Rs.12,01,595/- only is to be confirmed. Accordingly, out of the total addition of Rs.1,59,89,202/- (83,79,425/- + 76,09,595/-), the addition of Rs.1,47,87,425/- was deleted and balance addition of Rs.12,01,595/- was confirmed by ld CIT(A). Learned Counsel submitted before the Bench a complete reconciliation among the contra entries/journal entries. The ld Counsel explained the balance sum of Rs.12,01,595/- , being addition sustained by ld CIT(A). We find force in the arguments of ld Counsel, therefore, we delete the addition of Rs.12,01,595/-. Thus, ground No.1 raised by the assessee in ITA No.778/SRT/2018, is allowed and Ground nos. 1 to 4 raised by the Revenue are dismissed. 10. Ground nos. 5 to 7 relates to addition of Rs. 54,87,073/-. We note that assessing officer has not denied that corresponding debits in the books of M/s Shree R.R. Construction from where the assessee has received the amounts which are credited in the bank accounts of the assessee. From the ledger account of the assessee in the books of M/s Shree R.R. Construction, it is verified that assessee has received sufficient cash out of which the cash amounting to Rs.4,70,000/- has been deposited in the bank account of the assessee. Therefore, we note that assessee has explained the source of credits in his bank accounts and therefore, ld CIT(A)
ITA No.724 & 778/SRT/2018 Assessment Year. 2010-11 Vinayk. R. Mehta has rightly deleted the addition. That being so, we decline to interfere with the order of Id. CIT(A) in deleting the aforesaid additions. His order on this addition is, therefore, upheld and the ground nos. 5 to 7 of appeal of the Revenue are dismissed. 11. Coming to ground no.2 raised by the assessee in ITA No.778/SRT/2018, we note that M/s ABG Shipyard has made payment of Rs.1,01,400/- to the assessee and neither the assessee nor M/s Shree R. R. construction has offered this receipt as income in their return of income. It is also not disputed that Form 26AS of the assessee shows the payment. The ld Counsel pleads that assessee is ready to submit the reconciliation before the assessing officer therefore this issue requires verification by the assessing officer. Based on this factual position, we are of the view that the issue should be remitted back to the file of the Assessing officer to reconcile the difference between Form no. 26AS and assessee’s own income. Assessee is also directed to submit the necessary reconciliation statement before Assessing Officer. For statistical purposes the ground no. 2 raised by the Assessee is allowed. 12. In the result, appeal of the Assessee and Revenue are allowed to the extent indicated above. The order announce on 06/01/2022 as per Rule 34(5) of Income tax (Appellate Tribunal) Rules1963.
Sd/- Sd/- PAWAN SINGH DR. A. L. SAINI (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) सुरत/ Surat, �दनांक Dated: 06/01/2022 Rajesh Kumar, Sr.PS(on tour)/SS Copy of order sent to- Assessee/AO/Pr. CIT/ CIT (A)/ ITAT (DR)/Guard file of ITAT. By order // TRUE COPY // Assistant Registrar, Surat