Mr. Ullal Kakketota Bava, Mangaluru V. The Deputy Commissioner Of Income Tax, Central Circle-1, Mangaluru

ITA 1015/BANG/2022

AI Insights

The case involves appeals by Mr. Ullal Kakketota Bava against the orders of the CIT(Appeals)-2, Panaji, Goa, for the assessment years 2016-17 and 2018-19. The primary issues pertained to additions made by the AO regarding undisclosed investments and income, which were contested by the assessee on grounds of lack of corroborative evidence and reliance on assumptions and presumptions. The Tribunal's decision highlighted the need for corroborative evidence in making additions to income and the proper allocation of tax liabilities between the individual and the partnership firm.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 124607 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 03-10-2023
• Assessment Year: 2018-2019
• Appeal Filed On: 20-10-2022
• Other Referred Cases: Emkay Hindustan Infrastructure vs. ITA Nos.979 to 983/Bang/2022, Shri Manoj Mandanlal Chhajed vs. ITA No. 91 to 96/Pun/2022, Sri Ganesh Trading Company vs CIT, 257 CTR 159, Goetz (India) Ltd vs. 284 ITR 323 (SC), A. CIT vs President Industries 258 itr 654 (guj), Pipush Kumar O Desai vs CIT 247 Itr 568 (Guj), S.R. Venkata Ratnam vs. [1981] 127 ITR 807 (Kar)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S.V.
• Keywords: Business income; Search and seizure
• Section: 131; 143(3); 133A; 153A; 143(1); 48; 13; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH : BANGALORE BEFORE SMT. BEENA PILLIA, JUDIIAL MEMBER AND SHRI LAXMI PRASAD SAHU, ACCOUNTANT MEMBER ITA Nos.1014 & 1015/Bang/2022 Assessment years : 2016-17 & 2018-19 Mr. Ullal Kakketota Bava, 20-8-464, Gujarath Sea Foods, Goods Shed Road, Bunder, Mangaluru – 575 001. PAN : ACZPK 8448F Vs. The Deputy Commissioner of Income Tax, Central Circle 1, Mangaluru. APPELLANT RESPONDENT Appellant by : Shri Ravi Shankar, S.V., Advocate Respondent by : Dr. G. Manoj Kumar, CIT(DR)(ITAT), Bengaluru. Date of hearing : 04.10.2023 Date of Pronouncement : 31.10.2023 O R D E R Per Laxmi Prasad Sahu, Accountant Member These two appeals are filed by the assessee against the DIN & Orders No.ITBA/APL/M/250/2022-23/1044604923(1) & 1044604791(1) dated 11.08.2022 of the CIT(Appeals)-2, Panaji, Goa for the AYs 2016-17 & 2018-19 respectively. AY 2016-17 2. The assessee has raised the following grounds:- ITA Nos.1014 & 1015/Bang/2022 Page 2 of 22 “1. The learned CIT(A)-2, Panaji erred in Passing the Order in the manner he did. 2. The learned CIT(A)-2, Panaji erred in upholding the additions made by the Assessing Officer amounting to Rs.4,42,89,894 as undisclosed investment in partnership firm Niyaz Sea Food towards capital credit, which is purely on assumptions and presumption based on loose sheet impounded and without any corroborative evidence. 3. The learned CIT(A)-2, Panaji has ought to have appreciated the fact that, an addition cannot be made on the basis of suspicion and guesswork and without bringing corroborative material on record. 4. The learned CIT(A)-2, Panaji, has failed to appreciate that, the Assessing Officer on has failed to cross verify the books of account of the firm for investment made by the appellant. 5. The leaned CIT(A)-2, Panaji has failed to note that, the above additions made by the Assessing Officer is purely on assumptions and presumptions based on the loose sheet found at the time of search and also on the oath statements made under section 132(4), which was later retracted by the Appellant. 5. The leaned CIT(A)-2, Panaji has erred in relying on various case laws, which are not at all applicable to the Appellant's case. 6. The Appellant craves leave to add, amend or alter any of the forgoing grounds. 7. For these and any other grounds that may be urged before the Hon'ble ITAT, it is prayed that the Hon'ble ITAT may allow the appeal with cost.” ITA Nos.1014 & 1015/Bang/2022 Page 3 of 22 3. The brief facts of the case are that the assessee filed return of income on 17.10.2016 declaring income of Rs.55,51,470 and return was processed u/s. 143(1) of the act. A search and seizure action u/s. 132 of the Act was carried out on 08.02.2018. Notice u/s. 153(1)(a) of the Act dated 14.01.2019 was served to the assessee requiring him to file return of income for the impugned AY. In response, the assessee filed return declaring income of Rs.55,41,600. Thereafter notice u/s. 143(2) and other statutory notices were issued to the assessee. The AO noticed that the assessee is wholesale dealer in fish and also partner in the following firms:- (i) M/s. Niyaz Sea Foods (ii) M/s. Jewel House (iii) M/s. U.K. Ice and Cold Storage (iv) M/s. Niyaz Sea Foods Export 4. The AO completed the assessment by observing as follows:- “5. Introduction of capital and loans advanced to Niyaz Sea Foods Exports: 5.1 During the course of survey at M/s Niyaz Sea Food Exports, a firm in which the assessee and his family members are the partners certain incriminating material was impounded. The impounded material marked as A/NSFE/S10/1 from page 142 to 143- "U.K. Bawa- capital" and pages 183 and 184 -"U.K. Bawa- loan" pertained to the assessee. 5.1 On perusal of the capital account of the assessee as appearing in the books of the firm it was seen that the cheque amounts mentioned in the capital account sheet is reflected in the books of accounts but the cash amounts were not reflected in the books of the assessee or the firm. The amounts mentioned in the loan account were not reflected in the books of the assessee or the firm. ITA Nos.1014 & 1015/Bang/2022 Page 4 of 22 5.2 In view of this the assessee vide letter dated 21.11.2019 was requested to file its explanation on the issues referred to above. 5.3. In reply to this the assessee vide letter dated 10.12.2019 filed on 13.12.2019 has replied as follows: I had filed my return of income for the assessment year 2016-17, relevant to the year ended 31st March 2016 on 17th October 2016 vide E-filing Acknowledgement No.511336971171016 and again on 22.02.2019 in response to notice. While filing the original return I had not included a sum of Rs.4,42,89,894/-, which was invested by me in M/s.Niyaz Sea Food Exports. In the material found at the time of raid there were two account copies which were found at the premises. One is a loan account and other is a capital account. Both these accounts reflect amount introduced by me in Niyaz Sea Food Exports. The same has not been reflected in the books of Accounts of M/s.Niyaz Sea Food Exports. From the said loan account I have not included three Bank transactions aggregating to Rs.60,80,000/ - which has been explained at the time of hearing. In the capital account bank transactions have not been considered and only cash entries found have been offered to tax. I am voluntarily offering the same to tax and filing this revised income computation statement. 5.4. As can be seen from the reply of the assessee, in the revised computation filed during the course of assessment proceedings the assessee has offered to tax income of Rs. 4,42,89,894 as additional income under the head "Income from other sources". 5.5. Accordingly taking into consideration the incriminating material impounded, submission of the assessee and the details verified during assessment proceedings the additional income of Rs. 4,42,89,894 offered as income in the revised computation is added to the income of the assessee and assessed to tax under the head "Income from other sources". (Addition: Rs. 4,42,89,894)” ITA Nos.1014 & 1015/Bang/2022 Page 5 of 22 5. On appeal, the CIT(Appeals) after discussing in detail and relying on various case laws, dismissed the appeal of the assessee. Aggrieved, the assessee is in appeal before the Tribunal. 6. The ld. AR reiterated the submissions made before the lower authorities and filed written submissions as under:- “I. Addition of Rs.4,42,89,894/- towards amount introduced in M/s Niyaz Sea Food Exports: a. During the course of survey on the business premises of the firm, the learned assessing officer has found some loose sheets which contained details of cheques transactions as well as advances in cash for funding the purchases of the firm, by the appellant, in M/s Niyaz Sea Food Exports, a partnership firm wherein the appellant is also a partner. The appellant has introduced working capital into the firm through cheques and has also funded the partnership in cash for making purchases, in case of emergencies, which is refunded by the firm out of the withdrawals from bank and the entries have inadvertently not been recorded in both the books since the transactions have been squared off. b. The amount introduced through cheque were recorded in the audited books of the appellant as well as the firm, whereas the amount introduced in cash was not recorded. The appellant submits that the firm was established recently and did not have sufficient funds to make purchases in cash and hence the appellant utilised the cash on hand of the proprietorship business to make purchases for the firm and there used to be a running account for the amount introduced in the firm and received back from the firm. c. The learned assessing officer totalled the entire amount of cash entries and arrived at a figure of Rs.4,42,89,894/- as amount introduced in the firm by the appellant. d. The appellant submits that the sum of Rs.4,42,89,894/- is a cumulative total and not the amounts actually invested in the firm ITA Nos.1014 & 1015/Bang/2022 Page 6 of 22 as there was always a running account and the firm repays the money as and when there is cash in hand available out of withdrawals from the bank account, and the amount received back by the appellant is again introduced as and when required. e. It is an admitted fact that the appellant is always having cash on hand to make purchases of fish, which is the settled norm for making purchases, in this nature of business. Thus, the appellant is always in possession of cash, which is out of withdrawals made from bank accounts. The credits in bank are all out of the sale proceeds, which is not in dispute and thus the cash on hand stood explained and consequently the advances made in the firm, was out of funds which were from explained sources and no amount was to be considered as being unexplained. f. The appellant on erroneous advise has also agreed to offer the said amounts as income, without appreciating that the amounts advanced were already out of known sources and cash withdrawals from bank accounts. Thus, the addition of Rs.4,42,89,894/- is not justified for the above and following reasons; 1. Addition is based on loose sheets: a. The appellant submits that the addition of Rs.4,42,89,894/- is solely based on loose sheets and on the statement of the appellant, consenting to offer the said total as income in his hands, without any corroborative evidence, that the investment was indeed out of unexplained sources. b. The appellant submits that such sum is neither recorded in the books of appellant or the partnership firm, as having been transacted and that it is settled principle of law that additions made solely relying upon the statement of the assessee and without any corroborative evidence is impermissible. Reliance is placed on the decision of the Jurisdictional Bangalore Tribunal in the case of Emkay Hindustan Infrastructure, ITA No. 979 to 983/Bang/2022 (Page No. 24 & 25, Para 3.7 & 3.8), in the decision of the Hon’ble Pune bench in the case of Shri Manoj Mandanlal Chhajed in ITA No. 91 to 96/Pun/2022, dt:28/06/2023 and also on the decision in the case of the High ITA Nos.1014 & 1015/Bang/2022 Page 7 of 22 Court of Jharkhard in case of Sri Ganesh Trading Company vs CIT, 257 CTR 159. 2. Only profit element is taxable: a. Without prejudice and not conceding that the entries in cash were not to be considered as unexplained or added as income of the appellant and further not conceding that no addition can be made on the basis of loose sheets, the appellant submits that the sum introduced in the firm and received back, is out of the appellant`s proprietorship business and the addition if any has to be restricted to the net profit margin of 1.51% (Pg.37 of the common paper book), and considered as a turnover achieved by the appellant, though no profits have accrued to the appellant. 3. Addition to be made in the hands of the firm: a. Without prejudice to the above, the appellant submits that the loose sheets were found during the course of survey at M/s Niyaz Sea Foods Exports (Pg. 2 of the assessment order, Para 5.1) and the addition if any, has to be made in the hands of the firm and not in the appellants hand as done by the learned assessing officer. b. The appellant submits that merely because he has admitted additional income by way of a letter, no additions could be made even on first principles, since the purported investment is explained as being out of known sources and there has been no adverse inference that the appellant did not possess the resource to make the investment, apart from the inference that the said transaction was not recorded in his individual books. c. The appellant submits that it is settled position of law that “consent does not confer jurisdiction” and no additions shall be made on the mere admission by the appellant. Thus, there could be no additions in the hands of the appellant. d. The appellant submits that the revenue shall not blow hot and cold, in so far as rejecting a computation filed during assessment, seeking relief, stating that no valid return of income has been filed to allow relief, relying on the decision in Goetz ITA Nos.1014 & 1015/Bang/2022 Page 8 of 22 (India) Ltd, 284 ITR 323 (SC), while considering the computation as being an irrevocable admission of income, without there being a valid return of income, for the purpose of making additions to income. 4. Telescoping of income offered by the firm: a. The appellant during the course of arguments before this Hon’ble Tribunal, has produced the assessment order for the AY 2017-18, in the case of M/s Niyaz Sea foods, wherein the appellant in the capacity of partner has offered an amount of 7.5 crores as income on account of cessation of liabilities of sundry creditors. b. The appellant submits that the goods purchased in the AY 2016-17 were reflected as sundry creditors in the books of the firm, which was funded by the appellant, who thereafter received back the funds out of cash withdrawn. c. The goods from whom the purchases were made was recorded in the books of the firm as a creditor and the same has been carried forward to the next financial year, i.e. AY 2017-18, as an opening balance and remained as a closing balance for the AY 2017-18, with a marginal difference, in a few instances. d. The appellant submits that during the assessment year 2017-18, the firm has offered a sum of Rs.7.5 crores as cessation of liability under section 41(1) of the Act. (Page 2, Para 4.2 & 4.3 of the assessment order of the firm for AY 2017-18). e. The appellant, subsequent to the passing of the assessment order and upon being educated that the income offered of Rs. 4,42,89,894/- was already offered in the hands of the firm, has preferred an appeal, since the income offered in the hands of the firm is essentially the same income offered in the hands of the appellant in his individual capacity, thus amounting to taxing the same income twice, which is impermissible. f. The appellant submits that a substantial portion of the sundry creditors offered to tax by the firm is carried forward from last year (Pg.62, Q-12) and that the sum of Rs.4,42,89,894/- is subsumed in the creditors which is offered to tax by the firm and ITA Nos.1014 & 1015/Bang/2022 Page 9 of 22 the telescoping of such income offered by the firm has to be made in the appellant`s case and no addition is warranted on the facts and circumstances of the case. g. Thus, the income offered by the appellant is already offered in the hands of the firm and the entire addition of Rs. 4,42,89,894/- was required to be deleted.” 7. The ld. AR further submitted that the addition should not be made in the hands of the assessee, it should be made in the hands of the firm because the survey was carried out on the partnership firm and not in the hands of the assessee and documents relied by the AO marked as A/NSFE/S10/1 from page 142 to 143- "U.K. Bawa- capital" and pages 183 and 184 -"U.K. Bawa-loan" completely belongs to the partnership firm and cannot be utilized for making assessment in the hands of the assessee. He submitted that it is duty of the revenue officer to make correct assessment in the right hand who are actually liable for the income tax payable as per the provisions of the Income Tax Act 1961. He further submitted that as per the judgment of the Hon’ble Supreme Court in the case of Goetze (I) Ltd. (supra), the AO cannot travel beyond the income tax return filed by the assessee. The voluntary income offered by the assessee during the course of assessment on the basis of documents found in the other premises u/s 133A cannot be considered by the AO for completing the assessment u/s 143(3) r.w.s. 153A and accordingly he requested that the addition should be deleted. 8. On the other hand, the ld. DR strongly supported the orders of lower authorities and further submitted that the AO has made addition only on the basis of voluntary income offered by the assessee on the ITA Nos.1014 & 1015/Bang/2022 Page 10 of 22 basis of impounded material found during the course of survey in respect of transactions made in the capital account of the assessee and it was confronted to the assessee during the course of assessment proceedings. The assessee objected to the addition before the CIT(Appeals) after a lapse of more time much after the survey/completion of assessment which is not permissible as per the various judicial precedents relied by the CIT(Appeals). 9. After hearing the rival contentions, we note that the search proceedings was carried out on 08.02.2018 in the residential premises of the assessee and survey was conducted in the partnership firm M/s. Nyas Sea Foods. We note that no addition has been made by the AO on the basis of searched material unearthed during the course of search. The addition is made only on the basis of documents found during the course of survey in the partnership firm in which debit and credit transactions were found in the capital account which is clear from the statement recorded u/s. 131 of the Act dated 10.07.2018. The relevant part of the statement is as under:- “8. I am showing you Blue colour loose sheet folder marked as A/NSFE/S10/1 impounded during the course of survey at office of Niyaz Sea Food Exports. Holge Bazar, Mangalore on 09/02/2018. Pages 142-143 contain details of your capital account at Niyaz Sea Food Exports. As per your capital ledger account at Niyaz Sea Food Exports you have introduced cash as capital in this above mention firm. Please explain the source of this cash. Ans. These pages belong to rough account in the books of M/s. Niyaz Sea Food Exports prepared by previous clerk/accountant. The cash entries mentioned in ... capital are connected to the ITA Nos.1014 & 1015/Bang/2022 Page 11 of 22 transactions which were done through me but by ......... it was credited and debited in my capital account. Sir, I have given an explanation in this regard in my letter dated 03.07.2018. Please see point no.10 of that letter.” 10. The assessee relied on the order of the Tribunal in the case of Emkay Hindustan Infrastructure in ITA Nos.979 to 983/Bang/2022 dated 16.06.2023, the relevant para 3.7 & 3.8 is reproduced as under:- “3.7 Further, on going through the answer to question no.47, it is abundantly clear that answer to question no.47 purport the statement of assessee and his declaration obtained by search team towards undisclosed income for the period covering the assessment year 2017-18 only and it looks like this is an obtained statement without bringing any material on record to support the same. It is well settled principle of law that when any document like present scribbling pad/loose slips are recovered during the course of search action and the revenue wants to make use of it, the onus is on the revenue to collect cogent evidence to corroborate the noting in alleged documents. In this case, revenue has failed to bring on record any cogent evidence to prove conclusively that the noting in the seized documents refer to the unaccounted cash receipts of the assessee. Further, no circumstantial evidence in the form of unaccounted assets and liabilities outside the books of accounts were found in the course of search action except physical cash of Rs.55 lakhs. In our opinion, the impugned additions made by AO on the basis of seized materials in the form of entries in the loose slips/scribbling pad is an in-advocate material. As such, since it cannot stand on its own legs. 3.8 The main contention of ld. D.R. is that the statement recorded u/s 132(4)/131 of the Act is self-speaking document and it cannot be overruled. In our opinion, reliability of these statements depends upon the facts of each case and particularly surrounding circumstances and in this case, the lower authorities reached to the conclusion on the basis of assumption resulting into fostering liability on the assessee on the basis of in-advocate material ITA Nos.1014 & 1015/Bang/2022 Page 12 of 22 coupled with statement recorded during the course of search since there is no corroborative material to support the contention of the AO. In the absence of corroborative evidence, merely on the basis of admission in the statement recorded u/s 132(4)/131 of the Act, no addition could be made by AO. The AO failed to bring on record any materials to support his view to make an addition and there was no reason as to why AO did not proceed further to enquire into the unaccounted income as admitted by assessee in statement recorded u/s 132(4) of the Act. This fact was also not taken care of and also no corresponding assets with reference to unaccounted cash receipt of Rs.4,93,05,000/- was brought on record. In such circumstances, we are not in a position to sustain this addition. For this proposition, we rely on the following judgement: a) Sri Ganesh Trading Company Vs. CIT 257 CTR 159 (Jharkhand).” 11. On going through the above order of assessment, it is clear that the document marked as A/NSFE/S10/1 from pages 142 to 143 & 183 to 184 which was marked as capital and loan respectively. The AO has observed that the cheque amount has been noted in the capital account and the cash transactions are not reflected in the books of account or the firm. Since the documents were found during the course of survey in the case of partnership firm, therefore, the addition should have been made in the partnership firm, not in the hands of the assessee. The partnership firm is a separate entity. The documents found can be utilized for the purpose of assessment under the other section of the I.T. Act. but not for the purpose of section 153A of the I. T. Act. The assessee offered as income when the AO sought for explanation vide letter dated 21.11.2019. We further note that the AO has accepted the declaration made by the assessee without verification of revised ITA Nos.1014 & 1015/Bang/2022 Page 13 of 22 computation and without giving reason by the AO. During the course of hearing the ld. AR has submitted that it was a running capital account and the cash is contributed and withdrawn as per the need of the assessee/partnership firm. We find substance in the submissions of the ld. AR. The ld. AR has also relied on the judgment of the Hon’ble Supreme Court in the case of Geotze India Ltd. reported in 284 ITR 323 (SC), which supports to the case of the assessee.. Considering both the points, we delete the addition made by the AO. The appeal is allowed. AY 2018-19 12. The assessee has raised the following grounds:- “1. The learned CIT(A)-2, Panaji erred in Passing the Order in the manner he did. 2. Undisclosed Commission received from Niyaz Sea Food: 2.1 The learned CIT(A)-2, Panaji erred in upholding the additions made by the Assessing Officer amounting to Rs.43,21,251, as undisclosed commission received from Niyaz Sea Food, on the assumptions and presumption based on estimation made on loose sheets impounded and without any corroborative evidence 2.2. The learned CIT(A)-2, Panaji has failed to appreciate the fact that, the Assessing Officer has failed to cross verify the cross verify the books of account of the firm for expenditure incurred by the payer. 2.3. The learned CIT(A)-2, Panaji has failed erred in law in entertaining the alternative plea of the appellant that, the Assessing Officer ought to have been taxed only the profit ITA Nos.1014 & 1015/Bang/2022 Page 14 of 22 element on Rs.43,21,251 at gross profit ratio of 2 to 3 percent as prevailing the fishing business. 2.4 The learned CIT(A)-2, Panaji has ought to have appreciated the fact that, an addition cannot be made on the basis of suspicion and guesswork and without bringing corroborative material on record. 3. Seized cash treated as unexplained money: 3.1 The learned CIT(A)-2, Panaji erred in upholding the additions made by the Assessing Officer amounting to Rs. Rs.66,00,000 as unexplained money as business income of the appellant. 3.2 The learned CIT(A)-2, Panaji has failed erred in law in entertaining the alternative plea of the appellant that, the Assessing Officer ought to have been taxed only the profit element on Rs.66,00,000 at gross profit ratio of 2 to 3 percent as prevailing the fishing business. 4. The leaned CIT(A)-2, Panaji has failed to note that, the above additions made by the Assessing Officer is purely on assumptions and presumptions based on the loose sheet found at the time of search and also on the oath statements made under section 132(4), which was later retracted by the Appellant. 5. The leaned CIT(A)-2, Panaji has erred in relying on various case laws, which are not at all applicable to the Appellant's case. 6. The Appellant craves leave to add, amend or alter any of the forgoing grounds. 7. For these and any other grounds that may be urged before the Hon'ble ITAT, it is prayed that the Hon'ble ITAT may allow the appeal with cost.” 13. Briefly stated, the facts are that assessee filed return of income on 08.03.2019 declaring total income of Rs.59,14,372. The case was selected for scrutiny and statutory notices were issued to the assessee. ITA Nos.1014 & 1015/Bang/2022 Page 15 of 22 During the course of search u/s. 132(1) on 08.02.2018, documents containing entries under the head “UKB Commission” were found in the impounded material marked as “12/A/NSF/2017-18 from pages 35 to 39. On perusal of return filed in response to notice u/s. 153A, the AO noted that commission earned of Rs.43,21,251 was not offered in the return. Accordingly, show cause notice was issued and the assessee furnished reply on 06.11.2019. The AO noted that the assessee has not been able to demonstrate even in respect of single entry the correlation between commission earned and how the same is reflected in the sales offered to tax. Even during the assessment proceedings, the assessee was given opportunity to show how the commission is excluded in sales which was not established by the assessee. Accordingly, the commission earned during the year was treated as unaccounted commission detected during the course of survey and assessed to tax as business income. 14. Further, during the search on 08.02.2018, cash of Rs.66.00 lakhs was found in Flat No.203, Classique Arcade, Bikarnakatta, Mangalore which was not explained by the assessee and seized. This cash was also not offered to tax in the return filed by the assessee. Accordingly show cause notice was issued to the assessee and assessee furnished reply. The AO, after analysing the reply and statements recorded during search and post-search, was not convinced with the reply of the assessee and added it to the income. Aggrieved, the assessee filed appeal before the CIT(Appeals). ITA Nos.1014 & 1015/Bang/2022 Page 16 of 22 15. During the course of appellate proceedings, notices were issued to the assessee but he did not appear and a final opportunity was also granted and case fixed for hearing on 08.08.2022. However, the assessee did not avail this opportunity also. Accordingly, the CIT(Appeals) deiced the appeal on the basis of details available on record and written submissions filed by the assessee and dismissed the appeal of the assessee. Aggrieved, the assessee is in appeal before the Tribunal. 16. The ld. AR reiterated submissions made before the lower authorities and filed written synopsis which is as under:- “1. Addition of Rs.43,21,251/- towards commission: .......... b. The appellant vide letter dated 06.11.2019 (reply extracted at page 2 of the assessment order) submitted that the said amount was included in the sales of Rs.22,85,42,710/- (Pg.37 of the common paper book, Sl No.40a) offered as part of turnover for the assessment year 2018-19 and any addition would result in double taxation. c. Without prejudice, the appellant submits before your Honours that only the net profit margin on the sum of Rs.43,21,251/- could be added and not the entire turnover. The appellant submits that during the relevant assessment year, the net profit margin is 1.51% (Pg.37 of the common paper book, Sl No. 40c) and this rate may be adopted to arrive at the income from commission. d. Without prejudice and not conceding that the values recorded were the turnover and not income, the profit of Rs. 43, 21, 251/- to be earned, the turnover to be achieved was at least Rs. 28,61,75,563/-, considering that the profit margin was 1.51 % of gross turnover. ITA Nos.1014 & 1015/Bang/2022 Page 17 of 22 e. The revenue have not made a whisper that the turn over to the above said extent has escaped and was over and above the turnover declared, thus resulting in a commission income of Rs. 43,21,251/-, which would infer that the values recorded is the sales turnover and the same have been considered in arriving at the total turnover, reported and that there was no turnover escaping assessment and consequently, the profits on the turnover of Rs. 43,21,251/- has already been offered to tax and no addition was called for. f. The appellant places reliance on the parity of reasoning on the decision in the case of ; A. CIT vs President Industries 258 itr 654 (guj) B. Pipush Kumar O Desai vs CIT 247 Itr 568 (Guj) g. Without prejudice and not conceding that no additions were warranted, the addition if any shall be restricted to the profit percentage achieved by the appellant, i.e. @1.51% of turnover, resulting in an addition of Rs. 65,251/-. 2. Addition of Rs.66,00,000/- on account of cash seized during search: a. The appellant states that during the course of search a sum of Rs.66,00,000/- was found and the appellant has provided the details of source of cash. The appellant submits that the cash found was out of bank withdrawals of the firm along with the cash of the appellant (Pg 49 of common paper book, Q No.7). b. The appellant submits that he issues bearer cheques to his employees (individual and the firm) who withdraw the cash and hand it to the appellant (Pg 4 of the assessment order). The appellant submits that since the entire sale receipts is through bank, the appellant frequently withdraws cash to meet the requirements of the business which is a common trade practice. c. The firm has three bank accounts, apart from a loan account (OD account) and there are periodical withdrawals from the loan account of an average of Rs 35 to 40 lacs per month. A chart depicting only the cash transaction from the month of June2017 to January 2018, i.e. a week prior to the search action is ITA Nos.1014 & 1015/Bang/2022 Page 18 of 22 enclosed and the cash is purportedly a buffer of a two month withdrawal, which is kept as a stand by, for making purchases and emergencies. d. The appellant encloses herewith the statement of cash withdrawals made and the bank account statement for your Honours consideration, along with the financials for AY 2017-18, wherein the turnover achieved was Rs. 49 crores odd and the purchases was Rs. 48 crores approximately. Thus the inference is that the cash withdrawal is to the extent of Rs. 35 crores, considering that fact that the closing creditors were Rs. 13 crores. e. The appellant submits that, though the cash withdrawal chart has been prepared for the convenience of demonstrating to the Hon’ble Bench, all the bank statements were already submitted before the assessing officer and explanations were offered, which the AO has not appreciated and additions of Rs. 66 lacs were made, which is bad in law and unjustified and there is no addition in the hands of the firm. (copy of assessment order of the firm for AY 2018-19 is enclosed for ready reference) f. Thus, with a cash withdrawal of Rs. 35 crores, a cash buffer of Rs. 66 lacs was a viable proposition and a distinct possibility, which could not be doubted. g. The appellant submits that it is a settled principle that once there is sufficient proof that the cash in hand balance is out of the withdrawals and that there no evidence with the revenue that the appellant has expended the cash, no addition on account of unexplained cash is warranted. Reliance is placed on the decision of the Hon’ble Karnataka High Court in the case of S.R. Venkata Ratnam reported in [1981] 127 ITR 807 (Kar) wherein the withdrawals made two years prior to the deposit was considered and it was held; “Once the petitioner-assessee disclosed the source as having come from the withdrawal made on a given date from a given bank, it was not for respondents Nos. 1 and 2 to concern themselves with what the assessee did with that money, i.e., whether he had kept the same in his house or utilised the services of a bank by depositing the same.” ITA Nos.1014 & 1015/Bang/2022 Page 19 of 22 h. Without prejudice and not conceding that no addition shall be made since the cash withdrawn has been sufficiently demonstrated with proof, the cash withdrawn belonged to the firm and no addition ought to be made in the hands of the appellant.” 17. In addition to the above, the ld. AR submitted that the entire commission received of Rs.43,21,251 cannot be taxed as profit element earned by the assessee and it may be taxed only @ 1.51%. He further submitted that it is part of turnover. 18. In respect of cash seized in the course of search and seizure, the net cash cannot be added since the assessee had not updated the books of account and cash was withdrawn by the employee towards payment of raw fish and other expenditures. He requested that a chance may be given to the assessee for proving that the amount was withdrawn from the bank and it was not updated and recorded in the books of account. 19. The ld. DR relied on the order of the AO. He submitted that the during the course of assessment proceedings, neither the assessee has been able to explain how and in what manner the commission has been included when the documents found during the course of search was available with the assessee and he could not co-relate the documents with the sales shown in the books of account of the assessee. The assessee also accepted that the profit element can be taxed, but not the entire commission. 20. Further, in respect of cash seized, the ld. DR submitted that the lower authorities have rightly decided the issue after examining the ITA Nos.1014 & 1015/Bang/2022 Page 20 of 22 statements recorded during the course of search and post-search enquiry. During the assessment, the assessee was not able to prove the source of cash and before the CIT(Appeals) he could not establish, whereas the CIT(Appeals) gave chances for proving the claim of the assessee. 21. Considering the rival submissions, we note that during the course of search, document marked as 12/A/NSF/2017-18 from pages 35 to 39 relating to commission earned under the head “UKB Commission” was impounded and not offered to tax in the return. The assessee has taken dual stand one before the AO that it is included in the turnover of the assessee and the other that he has requested before us that the net profit margin @ 1.51% may be adopted to arrive at the income from commission. If the amount is included in the turnover, taxing the same on net profit margin would amount to double taxation. Before the CIT(Appeals), the assessee did not comply with the notices and present his case. Considering the totality of facts and arguments advanced by both the sides, in the interest of justice, we think it fit to send the matter to the AO for further verification. 22. Further, in respect of cash seized during the course of search, the assessee has taken different stand that cash was withdrawn from the bank through employees by cheque and in the post-search enquiry, it is stated that Rs.66 lakhs was part of cash in hand of M/s. Niyaz Sea Foods and that they had taken the said amount to their flat to secure the same at night time. The assessee has also raised a ground that the ITA Nos.1014 & 1015/Bang/2022 Page 21 of 22 entire cash seized shall not be taxed and only the net profit margin element as prevailing in the fishing business may be taxed. The ld. AR submitted that the books of account were not updated at the time of search. Therefore, in the interest of justice, we think it fit to send the matter back to the AO for further verification as to who is the actual owner of the cash, M/s. Nayaz Sea Foods or the assessee. 23. Thus, the above issues are remitted to the AO for fresh decision as per law after reasonable opportunity to the assessee. The assessee is also directed to produce all the relevant documents to substantiate its claim and avoid seeking unnecessary adjournment for early disposal of the case. 24. The appeal for AY 2018-19 is allowed for statistical purposes. 25. In the result, the appeal of the assessee for AY 2016-17 is allowed and for AY 2018-19 allowed for statistical purposes. A common order passed shall be kept in the respective case files. Pronounced in the open court on this 31 st day of October, 2023. Sd/- Sd/- ( BEENA PILLAI ) (LAXMI PRASAD SAHU ) JUDICIAL MEMBER ACCOUNTANT MEMBER Bangalore, Dated, the 31 st October, 2023. /Desai S Murthy / ITA Nos.1014 & 1015/Bang/2022 Page 22 of 22 Copy to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR, ITAT, Bangalore. By order Assistant Registrar ITAT, Bangalore.