Shubh Laxmi Buildcon Pvt. Ltd., UDAIPUR V. ITO, , UDAIPUR

ITA 167/JODH/2023

• Counselvise Citation: [2024] 130 COUNSELVISE.COM (IT) 2735 (ITAT-JODHPUR)
• Duration Of Justice: 9 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-03-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 29-01-2024
• Assessment Year: 2014-2015
• Appeal Filed On: 11-05-2023
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NIDHI NAIR
• Assessee Lawyers: YOGESH POKHARNA
• Section: 143(3); 73

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH, JODHPUR. BEFORE: DR. S. SEETHALAKSHMI, JJUDICIAL MEMBER & SHRI RATHOD KAMLESH JAYANTBHAI, ACCOUNTANT MEMBER I.T.A. No. 167/Jodh/2023 Assessment Year: 2014-15 Subh Laxmi Buildcon Private Limited 169, O Road Bhupalpura, Udaipur [PAN: AAJCS 0260 J] (Appellant) Vs. DCIT CPC (Respondent) Appellant by Sh. Yogesh Pokharna, CA Respondent by Ms. Nidhi Nair, Sr. DR Date of Hearing 30.01.2024 Date of Pronouncement 05.03.2024 ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM This appeal filed by assessee is arising out of the order of the Commissioner of Income Tax (Appeal), Udaipur-2 dated 27.03.2023 [here in after ‘CIT(A)’ ] for assessment year 2014-15 which in turn arise from the order dated 30.12.2016 passed under section 143(3) of the Income Tax Act, by ITO, Ward-2(1), Udaipur. I.T.A. No. 167/Jodh/2023 Assessment Year: 2014-15 2 2. In this appeal, the assessee has raised following grounds: - “1. That Learned CIT A has wrongly confirmed addition of Rs.1,00,73,000/- as undisclosed income of the on account of cash deposited in Bank. The addition confirmed is without fully considering facts and circumstances of the case. Hence confirmation of addition of Rs.1,00,73,900/- as undisclosed income is without any basis and be deleted. 2. That Learned CIT A has wrongly confirmed addition of Rs.1,76,76,000/- as undisclosed asset on account of difference in Cash in Hand in Opening Balance Sheet and Cash Book. The addition confirmed is without fully considering facts and circumstances of the case. Hence confirmation of addition of Rs. 1,76,76,700/- as undisclosed asset is without any basis and be deleted. 3. That Appellant reserves his right to add or amend grounds of appeal.” 3. Succinctly, the fact as culled out from the records is that assessee Shubh Laxmi Buildcon Pvt. Ltd. filed its return declaring nil income. The assessee company engaged in Toll Collection on a Road Built by it on Built Own and Transfer situated at Amet Kelwa Road awarded by PWD Rajasthan Government. Assessee company’s aforesaid work was completed in F Y 2012-13 in view of completion of period of contract. Assessee’s company could not start new work and as such there was no business activities carried out. A survey was conducted at the business premises of the company 27 th Aug 2013 and 28 th Aug 2013, wherein the statement of the director Shri Aakash Jain was recorded and some documents were impounded and print out of the some of the ledger were taken. During the assessment proceeding from the bank statement ld. AO noted that the assessee has deposited cash into their bank account I.T.A. No. 167/Jodh/2023 Assessment Year: 2014-15 3 for Rs. 53,00,000/- in Bank of Baroda, Rs. 33,10,000/- into Bank of India, Rs. 2,72,000/- into Kotak Mahindra Bank and Rs. 11,91,000/- into SBBJ totalling to Rs. 1,00,73,000/-. In this connection the assessee was issued the show cause notice asking to disclose the source of cash deposited into these bank accounts. In response the assessee vide letter dated 20.12.2016 submitted month wise cash summary. The ld. AO again issued an another notice stating that as assessee has issued only cash summary therefore, it was requested to submit the source of amount credited in cash book, as there is no turnover in the books of account of the assessee. The ld. AO noted that as per monthly summary of cash balance furnished it is noticed that the opening cash balance as on 01.04.2013 was Rs. 1,58,38,372/-. However, as per the books of account found in tally, the cash balance as on 31.03.2013 i.e. opening cash balance as on 01.04.2013 was Rs. 3,27,14,478/-. During the course of survey proceeding on 27.08.2013 the cash found was Rs. 6,800/- only. In this regard during the course of survey proceeding Shri Akash Jain Director, while answering to question no. 51 stated that this amount was given to Shri Ajay Sehagal Director. In this regards copy of ledger account of Shri Ajay Sengal from the books of the assessee was called for. In the assessment proceeding the ld. AO referring the statement recorded during the survey wherein the question 51 dealt that I.T.A. No. 167/Jodh/2023 Assessment Year: 2014-15 4 in case of group companies total cash balance should be Rs. 3,71,46,912/- [ Rs. 31,81,952/- Everest Ashiyan Business (P) Ltd., Rs. 3,09,24,478/- Shubh Laxmi Buildcon (P) Ltd. (assessee), Rs. 30,40,482/- Shri Akash Jain ] whereas physical case found amounts to Rs. 6,800/- only. In response director Akash Jain stated that money has been given to Shri Ajay Sehegal and on receipt of the account the same will be entered in the books of these concerns. As regards the deposit of cash into the bank account at the time of assessment proceedings the assessee filed the copy of cash book wherein they have submitted that the cash transaction are from opening cash in hand. Further as the company has long term obligation towards financial institution funder were arranged from the directors. As the director of the company Shri Ajay Sehgal was keeping the safe custody of sales no accounting entry was made. This explanation was not considered by the ld. AO, as the amount is from the opening cash the same could have been deposited at once whereas here the assessee has deposited cash with various bank and on various occasions. The ld. AO also noted that in the tally account the opening cash balance was Rs. 3,27,12,478/- whereas the cash book presented in the assessment proceeding wherein the opening cash balance was available for Rs. 1,58,38,472/-. This shows that the cash balance shown as on 31.03.2013 in the audited accounts are not I.T.A. No. 167/Jodh/2023 Assessment Year: 2014-15 5 as per the tally accounts. The balance in the tally account as on the date of search for Rs. 3,09,24,478/- found acceptable and considered as given to Shri Ajay Sehagel for safe custody. Thus, based on these ld. AO noted that if that is correct then there is no source for the cash amount deposited into the bank account for Rs. 1,00,73,000/- and same was considered as unexplained cash deposited into the bank accounts. The ld. AO also made an addition of Rs. 1,76,75,996/- on account of assets(cash) not declared in the balance sheet [ cash as per tally records Rs. 3,09,24,478/-less cash balance as per cash book given in the assessment proceeding Rs. 1,32,48,482/-.]. Thus, against the Nil income returned income assessment was completed at Rs 2,77,48,996/- 4. Aggrieved from the order of the AO, the assessee preferred an appeal before the ld. CIT(A). Apropos to the grounds so raised by the assessee, the relevant finding of the ld. CIT(A) is reiterated here in below: “4.3. I have considered the facts of the case and written submissions of the appellant as against the observations/findings of the AO in the assessment order of the Income tax act, 1961 for the year under consideration. It is noticed from assessment order that the appellant deposited Rs. 1,00,73,000/- in cash various bank accounts of the company during the year. The AO added this amount as Income from Undisclosed Source on following two grounds: (i) Physical Cash Balance on the date of survey is not found in the office of the company. I.T.A. No. 167/Jodh/2023 Assessment Year: 2014-15 6 (ii) There is difference in opening cash Balance in tally data seized during survey operation. (iii) That is difference in reasons provided for not having cash at the time of survey, (iv) During assessment proceeding Cash Book is not produced for verification. Therefore, the AO added Cash Deposit made in Bank Account amounting to Rs. 1,00,73,000/- as unexplained cash deposits in the bank account. The appellant argued that learned AO has not disputed the fact the there is no business activity, duly supported by the fact that no incriminating documents confirming existence of any business activities of this company relating to this period were found during survey at the premises of the company. It is argued that survey at the premises of the assessee was carried out on 27th Aug 2013 and at that time audit for financial year 2012-13 was pending, which was completed on 01.09.013. In view of aforesaid major fact about non completion of audit implies that cash book and other books of accounts at that time were incomplete. The assessee was under mental pressure due to survey operation and danger of expected burden of heavy tax liability and construction of office building was incomplete explained the reason for not having cash balance at the business premises was that it was lying with other director Shree Ajay Sehgal who was at that time is already proven and accepted during survey operation. No inquiry of any type was made by the department from Mr Ajay Sehgal Director of the company, for verification of statement of Directors that money was with Mr. Ajay Sehgal to final arriving at conclusion that whether the money was with him or not, of yes, than for which purposes it was given to him. It is respectfully submitted assessee has withdrawn Rs. 20,61,000/- from various current account of the company and deposited the same in current account of the company in other bank. I have considered the facts of the case. The AO in the assessment order mentioned the reasons for not accepting the explanation furnished by the appellant. The appellant has not explained that if the opening cash was available then why the deposit was made in fragments. The reasons for giving cash to Mr. Ajay Sahgal are also not found to be satisfactory in the assessment proceedings. The AO has noted many contradictions in the reply of the appellant and concluded that the explanation by the appellant are not justified. I find that the appellant has not explained the source of deposit made I.T.A. No. 167/Jodh/2023 Assessment Year: 2014-15 7 in the bank account with verifiable, credible and independent evidence during the appellate proceedings also. Therefore, the addition made by the AO is upheld. This ground of appeal is treated as dismissed.” 5.3. I have considered the facts of the case and written submissions of the appellant as against the observations/findings of the AO in the assessment order of the Income tax act, 1961 for the year under consideration. The AO has noted inconsistencies in the accounts and the statement recorded during the survey and concluded that the cash balance is shown Rs. 1,32,48,482/- as on 31.03.2014 while it was Rs. 3,09,24,478/-. Therefore, it is less by Rs. 1,76,75,996/-. The appellant has not produced any satisfactory explanation with regard to this difference. The appellant has not tried to explain the facts with evidences. The arguments of the appellant do not bring clarity about the transactions. The appellant argued that the excess cash balance was due to opening cash balance, then it cannot be treated income of current year. The AO stated that the capital of the appellant will increase by this amount if this shortage is added. In view of these facts, the addition made by the AO for this year is found to be justified. Therefore, the addition made by the AO is upheld. This ground of appeal is treated as dismissed.” 5. As the assessee has not received any favour from the finding of the ld. CIT(A) has preferred the present appeal on the grounds as stated herein above. Apropos to the grounds so raised the ld. AR of the assessee relied upon the written submission as reiterated here in below : OUR SUBMISSION 1. It is respectfully submitted that during the year there were no business activity carried out by the company. 2. It is respectfully submitted that during survey operations carried out at the of premises of the company no incriminating documents were found. I.T.A. No. 167/Jodh/2023 Assessment Year: 2014-15 8 3. It is respectfully submitted that books of account of the company is audited as per the provisions of the Companies Act and during survey operation nothing was found against these audited financial statements or double books of account. 4. It is respectfully submitted that in any assessment year from 2007-08 to 2014- 15 books of account of the company was rejected. 5. It is respectfully submitted that company was engaged in operation of toll road till last financial year and its entire receipt was in cash through toll collection. 6. It is respectfully submitted that prior to this not a single penny was added to the income of company on account cash deposited into bank. A. 1 st Ground of Appeal Ist Ground of Appeal reads as under : “That Learned CIT A has wrongly confirmed addition of Rs 1,00,73,000/- as undisclosed income of the on account of cash deposited in Bank. The addition confirmed is without fully considering facts and circumstances of the case. Hence confirmation of addition of Rs 1,00,73,900/- as undisclosed income is without any basis and be deleted.” 1. IT is respectfully submitted that Ld AO made this addition on basis of following: a) That appellant deposited cash in various current accounts of the company i.e. Rs 53,00,000/- in Bank of Baroda, Rs 33,10,000/- in Bank of India, Rs 2,72,000/- in Kotak Mahindra Bank , Rs 11,91,000/- in SBBJ , thus total Rs 1,00,73,000/- b) That there is difference between opening cash balance in tally data seized during the survey operation. c) That there is variation in explanation given during survey for non availability of physical cash . d) That during the year there is no business activities. e) That no physical cash was found at the time of survey at the office premises of the company. f) That no Cash book was produced before the Ld AO. g) That opening cash in hand was consumed by the company in advancing the same to one of its director. h) That appellant has produced only monthly summary of cash book. i) That opening Cash Balance as on 01.04.2013 as per summary is Rs 1,58,38,372/- while in the tally data found during the survey opening cash balance is Rs 3,27,14,478/-. j) No entry was found in books of account regarding amount given as advance to its director. I.T.A. No. 167/Jodh/2023 Assessment Year: 2014-15 9 2. LD CIT A also confirm the aforesaid addition with following observation : Para 4.3 Page 7 & 8 of CIT A Order- 4.3 I have considered the facts of the case and written submissions of the appellant as against the observations/findings of the AO in the assessment order of the Income tax act, 1961 for the year under consideration. It is noticed from assessment order that the appellant deposited Rs. 1,00,73,000/- in cash various bank accounts of the company during the year. The AO added this amount as Income from Undisclosed Source on following two grounds: (i) Physical Cash Balance on the date of survey is not found in the office of the company. (ii) There is difference in opening cash Balance in tally data seized during survey operation (iii) That is difference in reasons provided for not having cash at the time of survey, (iv) During assessment proceeding Cash Book is not produced for verification. Therefore, the AO added Cash Deposit made in Bank Account amounting to Rs. 1,00,73,000/- as unexplained cash deposits in the bank account. “ The appellant argued that learned AO has not disputed the fact the there is no business activity, duly supported by the fact that no incriminating documents confirming existence of any business activities of this company relating to this period were found during survey at the premises of the company. It is argued that survey at the premises of the assessee was carried out on 27 th Aug 2013 and at that time audit for financial year 2012-13 was pending, which was completed on 01.09.013. In view of aforesaid major fact about non completion of audit implies that cash book and other books of accounts at that time were incomplete. The assessee was under mental pressure due to survey operation and danger of expected burden of heavy tax liability and construction of office building was incomplete explained the reason for not having cash balance at the business premises was that it was lying with other director Shree Ajay Sehgal who was at that time is already proven and accepted during survey operation. No inquiry of any type was made by the department from Mr. Ajay Sehgal Director of the company, for verification of statement of Directors that money was with Mr. Ajay Sehgal to final arriving at conclusion that whether the money was with him or not, of yes, than for which purposes it was given to him. It is respectfully submitted assessee has withdrawn Rs. 20,61,000/- from various current account of the company and deposited the same in current account of the company in other bank. I have considered the facts of the case. The AO in the assessment order mentioned the reasons for not accepting the explanation furnished by the appellant. The appellant has not explained that if the opening cash was available then why the I.T.A. No. 167/Jodh/2023 Assessment Year: 2014-15 10 deposit was made in fragments. The reasons for giving cash to Mr. Ajay Sahgal are also not found to be satisfactory in the assessment proceedings. The AO has noted many contradictions in the reply of the appellant and concluded that the explanation by the appellant are not justified. I find that the appellant has not explained the source of deposit made in the bank account with verifiable, credible and independent evidence during the appellate proceedings also. Therefore, the addition made by the AO is upheld. “ 3. It is respectfully submitted that Ld CIT A confirmed the addition made by the learned AO on account of suspicion only without having proof or document to support it. 4. It is respectfully submitted that Learned CIT A has also accepted the facts that : a) That during the year no business activities were carried out. b) That no incriminating documents were found. c) That audit is pending on the date of survey. d) That no further inquiry about the handing over of the cash to Ajay Sehgal for safe keeping is made by the learned AO despite having ample time to do so. e) That Ld AO has not rejected books of accounts , f) That Ld AO has not accepted the fact the cash withdrawn from one bank to other bank is used for cash deposits made. g) That Ld CIT ‘A’ has disregarded Cash Book submitted before him without assigning any reasons to do so. h) That variation in statement of director during survey is only to the extent that money was handed over for business purpose and while in assessment proceeding it is stated as given for safe keeping. i) A great reliance is placed on the fact that money was not deposited in single shot if it is available. 5. It is respectfully submitted that LD AO is suspicious that company is not in possession of opening cash balance stated in the audited Balance Sheet of 31.03.2013 is only based on the fact that physical cash balance was not found at the time of survey, by disregarding the fact that office and residence of the director is in renovation state and cash is lying with other director for safe keeping. 6. It is respectfully submitted that as the company’s major source of cash collection was toll tax, company held that much cash in hand. 7. It is respectfully submitted that Company is not maintaining any cash credit or overdraft account , in which it is incurring interest liability. 8. It is respectfully submitted that there is legal binding about depositing of entire cash at a one go in Bank Account . company’s 9. It is respectfully submitted that tally data seized during the Survey operation is of partly completed tally written by part time accountant and the opening balance of I.T.A. No. 167/Jodh/2023 Assessment Year: 2014-15 11 2013-14 is the same as of F Y 2012-13 as per audited Balance Sheet. The reason for variation of difference in opening cash balance tally data is its incomplete nature. 10. IT is respectfully submitted that during survey operations no incriminating document about use of this balance was found at all. 11. It is respectfully submitted that assessee deposited Rs 1,00,73,000/- from out of Opening Cash in Hand of Rs 1,58, 38,372/- and some cash withdrawn from these accounts. There is nothing found about the use of this cash balance during survey. 12. It is respectfully submitted that Ld. AO is relying on the fact that appellant company is having excess cash balance on the basis of ceased tally data Rs 1,68,76,106/- i.e. Rs 3,27,14,478/- minus Rs 1,58,38,372/-, , he is not accepting the Cash Book and Bank Statement in which aforesaid Rs 1,00,73,000/- was found deposited. 13. It is respectfully submitted that addition of Rs 1,00,73,000/- by treating Cash Deposits in bank is made only on the basis of mere suspicion by the learned AO. 14. It is respectfully submitted that honourable Supreme Court in case of DHAKESWARI COTTON MILLS LTD. vs. COMMISSIONER OF INCOME TAX reported at (1954) 26 ITR 0775 held that mere suspicion is not sufficient to arrive at conclusion : “Assessment—Validity—ITO is not barred by technical rules of evidence and pleadings, and he is entitled to act on material which may not be accepted as evidence in a Court of law, but in making the assessment under sub-s. (3) of s. 23 the ITO is not entitled to make a pure guess and make an assessment without reference to any evidence or any material at all—There must be something more than bare suspicion to support the assessment under s. 23(3)—ITO and the Tribunal in estimating the gross profit rate on sales did not act on any material but acted on pure guess and suspicion—In arriving at its estimate of gross profits and sales Tribunal should give full opportunity to the assessee to place any relevant material on the point that it has before the Tribunal, whether it is found in the books of account or elsewhere and it should also disclose to the assessee the material on which the Tribunal is going to found its estimate and then afford him full opportunity to meet the substance of any private inquiries made by the ITO if it is intended to make the estimate on the foot of those enquiries” 15. It is respectfully in following decisions of ITAT/High Courts the same principle is followed : a) ADITYA JHANWAR vs. INCOME TAX OFFICER reported at (2024) 38 NYPTTJ 26 (Jp) b) IRIS CLOTHINGS LTD. vs. DEPUTY COMMISSIONER OF INCOME TAX reported at (2024) 38 NYPTTJ 19 (Kol) I.T.A. No. 167/Jodh/2023 Assessment Year: 2014-15 12 c) ASSISTANT COMMISSIONER OF INCOME TAX vs. BUSINESSMATCH SERVICES (INDIA) (P) LTD reported at (2024) 38 NYPTTJ 5 (Del) 16. It is respectfully submitted these balance sheet were duly audited and accepted by the Department in scrutiny assessment proceedings regularly. In view of above submission, we request your honour to kindly delete the addition of Rs 1,00,73,000/- made on account of cash deposited in bank and oblige. b. Second Ground of Appeal Second Ground of appeal reads as under : “ That Learned CIT A has wrongly confirmed addition of Rs 1,76,76,000/- as undisclosed asset on account of difference in Cash in Hand in Opening Balance Sheet and Cash Book . The addition confirmed is without fully considering facts and circumstances of the case. Hence confirmation of addition of Rs 1,76,76,700/- as undisclosed asset is without any basis and be deleted. “ 1. It is respectfully submitted that Ld. AO made aforesaid addition as under : Particulars Amount Cash Balance as per Survey Question on the date of Survey - Rs 3,09,24,478/- Cash Balance as produced on the date of Survey -Rs 1,32,48,432/- Difference -Rs 1,76,76,046/- 2. It is respectfully submitted Ld AO relied on the incomplete tally data found at the time of survey in arriving at the conclusion of difference. 3. It is respectfully submitted that Closing Cash Balance as per tally ceased data is arrived as under : Particulars Dr Cr Balance Opening Cash Balance 3,27,12,478/- 3,27,12,478/- Cash Withdrawn from Bank (Dr) 8,10,000/- 3,35,22,478/- Cash Deposited in to Bank **26,00,000/- 3,09,22,278/-* • This is mentioned as 3,09,24,478/- ** Entry in Ceased Cash Book is up to 31 st July. 4. Cash Balance as per actual audited Books of Account is as under : Particulars Dr Cr Balance Opening Cash Balance 1,58,58,372/- 1,58,58,372/- I.T.A. No. 167/Jodh/2023 Assessment Year: 2014-15 13 Cash Withdrawn from Bank (Dr) 8,11,010/- 1,66,69,482/- Cash Deposited in to Bank 34,01,000/- 1,32,68,482/-* 5. It is respectfully submitted that Entries in ceased cash Book is found only up to 31 st July 2013, 2hich was also incomplete. 6. It is respectfully submitted that Ld. AO completely disregarded cash balance accepted of Rs 1,58,38,372/- in audited books of account and indirectly added Rs 1,68,74,106/- being difference in Opening Balance as per Audited Books and Tally Data found during survey. 7. It is respectfully submitted that Ld AO also added in difference Rs 8,00,000/- of amount withdrawn in Aug minus amount deposited in Bank Rs 1,010/- due to non completion of cash book and reached the difference of Rs 1,76,76,046/-. 8. It is respectfully submitted that LD AO also relied on the reply of the assessee , which were given during the survey period that a Rs 3,09,24,478/- . The difference is calculated by Survey team as per tally books found during survey. 9. It is respectfully submitted during survey no document about specific amount given was found out . 10. It is respectfully submitted Ld AO has not any inquiry that how much amount was handed over to the director. 11. It is respectfully submitted LD CIT A also confirmed aforesaid addition with following remark : Para 5.3 (CIT A Order Page No 10) I have considered the facts of the case and written submissions of the appellant as against the observations/findings of the AO in the assessment order of the Income tax act, 1961 for the year under consideration. The AO has noted inconsistencies in the accounts and the statement recorded during the survey and concluded that the cash balance is shown Rs. 1,32,48,482/- as on 31.03.2014 while it was Rs. 3,09,24,478/-. Therefore, it is less by Rs. 1,76,75,996/-. The appellant has not produced any satisfactory explanation with regard to this difference. The appellant has not tried to explain the facts with evidences. The arguments of the appellant do not bring clarity about the transactions. The appellant argued that the excess cash balance was due to opening cash balance, then it cannot be treated income of current year. The AO stated that the capital of the appellant will increase by this amount if this shortage is added. In view of these facts, the addition made by the AO for this year is found to be justified. Therefore, the addition made by the AO is upheld. 12. It is respectfully submitted that Ld AO relied heavily on the difference is opening balance in tally data, which was unaudited at the time of Search/Survey and this fact is undisputed. 13. It is respectfully submitted that aforesaid the opening balance in audited books of account is coming from the opening balance of audited Balance Sheet. I.T.A. No. 167/Jodh/2023 Assessment Year: 2014-15 14 14. It is respectfully submitted that in view of non activities from long time possibility of having undisclosed income is very remote in real life, further during survey operation no incriminating documents disclosing such activities were found . 15. It is respectfully submitted entire additions made by the learned AO is based on suspicion only and does not have any documentary evidences. 16. At the cost of repetition , we would like to submit that addition made merely on the basis of suspicion is not allowable. 17. It is respectfully submitted that honourable Supreme Court in case of DHAKESWARI COTTON MILLS LTD. vs. COMMISSIONER OF INCOME TAX reported at (1954) 26 ITR 0775 held that mere suspicion is not sufficient to arrive at conclusion : “Assessment—Validity—ITO is not barred by technical rules of evidence and pleadings, and he is entitled to act on material which may not be accepted as evidence in a Court of law, but in making the assessment under sub-s. (3) of s. 23 the ITO is not entitled to make a pure guess and make an assessment without reference to any evidence or any material at all—There must be something more than bare suspicion to support the assessment under s. 23(3)—ITO and the Tribunal in estimating the gross profit rate on sales did not act on any material but acted on pure guess and suspicion—In arriving at its estimate of gross profits and sales Tribunal should give full opportunity to the assessee to place any relevant material on the point that it has before the Tribunal, whether it is found in the books of account or elsewhere and it should also disclose to the assessee the material on which the Tribunal is going to found its estimate and then afford him full opportunity to meet the substance of any private inquiries made by the ITO if it is intended to make the estimate on the foot of those enquiries” 18. It is respectfully in following decisions of ITAT/High Courts the same principle is followed : a) ADITYA JHANWAR vs. INCOME TAX OFFICER reported at (2024) 38 NYPTTJ 26 (Jp) b) IRIS CLOTHINGS LTD. vs. DEPUTY COMMISSIONER OF INCOME TAX reported at (2024) 38 NYPTTJ 19 (Kol) c) ASSISTANT COMMISSIONER OF INCOME TAX vs. BUSINESSMATCH SERVICES (INDIA) (P) LTD reported at (2024) 38 NYPTTJ 5 (Del) 19. It is respectfully submitted these balance sheet were duly audited and accepted by the Department in scrutiny assessment proceedings regularly. In view of above submission, we request your honour to kindly delete the addition of Rs 1,76,76,700/- made on account of asset not found be deleted and oblige. ” I.T.A. No. 167/Jodh/2023 Assessment Year: 2014-15 15 5.1 To support the various contentions so raised in the written submission and in support of the arguments made he also filed a paper book containing following documents/ records: S. No Particulars From To 1 Written Submission 1 16 2 Audited Balance Sheet 31.03.2014 17 29 3 Cash Book from Ceased Tally Data 30 30 4 Cash Book from Audit Book 31 33 5 Bank of Baroda Bank Statement 34 36 6 Kotak Mahendra Bank Statement 37 44 7 Bank of India Statement 45 52 8 State Bank of India Statement 53 66 9 Dhakeshwari Cotton Mills Case 67 73 10 Aditya Jhanwar VS ITO Ita no 660/JP/2023 74 88 11 Iris Clothing Ltd vs DCIT-1015/kol/2023 89 106 12 ACIT Vs Business Services Pvt Ltd-1136/mum/2023 107 120 5.2 The ld. AR of the assessee in addition to the written submission vehemently argued that the ld. AO has relied upon only on the incomplete tally data recovered and there is no other incriminating material found. The assessee being the private limited company regularly assessed to tax. In past years all the records maintained by the assessee company has been accepted. The ld. AR of the assessee drawing our attention to page 24 of the paper book wherein the cash cash balance as on 31.03.2013 as per audited accounts reported at Rs. 1,58,40,373/-. The same is reconciled in the written submission and placed before the lower authority and the same was not appreciated. The I.T.A. No. 167/Jodh/2023 Assessment Year: 2014-15 16 ld. CIT(A) at page 10 has simply stated that the assessee has not tried to explain the facts with evidence and there is no clarity about the transactions and therefore, the finding of the ld. CIT(A) is without appreciating the facts already placed on record. 6. On the other hand, the ld. DR representing the revenue has relied upon the finding recording in the orders of the assessing officer and that of the ld. CIT(A). 7. We have heard the rival contentions and perused the material placed on record. The brief fact of the case is that assessee Shubh Laxmi Buildcon Pvt. Ltd. filed its return declaring nil income. The assessee company engaged in Toll Collection on a Road Built by it on Built Own and Transfer situated at Amet Kelwa Road awarded by PWD Rajasthan Government. Assessee company’s aforesaid work was completed in F Y 2012-13 in view of completion of period of contract. Assessee’s company could not start new work and as such there was no business activities carried out. A survey was conducted at the business premises of the company 27 th Aug 2013 and 28 th Aug 2013, wherein the statement of the director Shri Aakash Jain was recorded, and some I.T.A. No. 167/Jodh/2023 Assessment Year: 2014-15 17 documents were impounded and print out of the some of the ledger were taken. 8. From the bank statement of the assessee ld. AO noted that the assessee the assessee deposited cash into their bank account for Rs. 53,00,000/- in Bank of Baroda, Rs. 33,10,000/- into Bank of India, Rs. 2,72,000/- into Kotak Mahindra Bank and Rs. 11,91,000/- into SBBJ, totalling to Rs. 1,00,73,000/-. The ld. AO issued a show cause notice asking to disclose the source of cash deposited into these bank accounts. In response the assessee submitted month wise cash summary. Since, that summary was not sufficient the ld. AO again issued another notice requesting to submit the source of amount credited in cash book, as there is no turnover in the books of account of the assessee. The ld. AO noted that as per monthly summary of cash balance furnished it is noticed that the opening cash balance as on 01.04.2013 was Rs. 1,58,38,372/-. However, as per the books of account found in tally, the cash balance as on 31.03.2013 i.e. opening cash balance as on 01.04.2013 was Rs. 3,27,14,478/-., whereas at the time of survey proceeding on 27.08.2013 the cash balance found was for Rs. 6,800/- only. The ld. AO noted that total cash balance should be Rs. 3,71,46,912/- [ Rs. 31,81,952/- Everest Ashiyan Business (P) Ltd., Rs. I.T.A. No. 167/Jodh/2023 Assessment Year: 2014-15 18 3,09,24,478/- Shubh Laxmi Buildcon (P) Ltd. (assessee), Rs. 30,40,482/- Shri Akash Jain ] whereas physical case found amounts to Rs. 6,800/- only. Shri Akash Jain Director, was confronted during the survey vide question no. 51 stated that this amount was given to Shri Ajay Sehagal Director and on receipt of the account the same will be entered in the books of the assessee. As regards the deposit of cash into the bank account at the time of assessment proceedings the assessee filed the copy of cash book wherein they have submitted that the cash transaction are from opening cash in hand available and duly reported in the audited accounts. This explanation was not considered by the ld. AO, as the amount is from the opening cash the same could have been deposited at once whereas here the assessee has deposited cash with various bank and on various occasions. The ld. AO also noted that in the tally account the opening cash balance was Rs. 3,27,12,478/- whereas the cash book presented in the assessment proceeding wherein the opening cash balance was available for Rs. 1,58,38,472/-. This shows that the cash balance shown as on 31.03.2013 in the audited accounts are not as per the tally accounts. The balance in the tally account as on the date of search for Rs. 3,09,24,478/- found acceptable and considered as given to Shri Ajay Sehagal for safe custody and therefore, ld. AO noted that if that is correct then there is no source for the cash amount deposited into I.T.A. No. 167/Jodh/2023 Assessment Year: 2014-15 19 the bank account for Rs. 1,00,73,000/- and same was considered as unexplained cash deposited into the bank accounts. The ld. AO also made an addition of Rs. 1,76,75,996/- on account of assets(cash) not declared in the balance sheet [ cash as per tally records Rs. 3,09,24,478/-less cash balance as per cash book given in the assessment proceeding Rs. 1,32,48,482/-.]. 9. In the first appeal the ld. CIT(A) has not considered the submission of the assessee on the merits on account of the reasons that (i) Physical Cash Balance on the date of survey is not found in the office of the company. As against this contention we note that the ld. CIT(A) has not considered the statement of Shri Aakash Jain, director of the company who has already submitted that the cash is with Mr. Shri Ajay Sehagal Director. The ld. AO has not disputed the fact the there is no business activity, not only that the search team has not reported to have found any incriminating documents confirming existence of any business activities or the use of the opening cash by the company or their directors. We also take note that survey was carried out on 27 th August 2013 and at that time audit for financial year 2012-13 was pending, which was completed on 01.09.013. The balance reported in the audit report is after undertaking the audit whereas the tally records found at the time survey I.T.A. No. 167/Jodh/2023 Assessment Year: 2014-15 20 before the conduct of the audit. This has resulted the alleged difference the assessee has in his written submission explained the difference as alleged in their written submission in a tabular form: Particulars Amount Cash Balance as per Survey Question on the date of Survey Rs 3,09,24,478/- Cash Balance as produced on the date of Survey Rs 1,32,48,432/- Difference Rs 1,76,76,046/- Closing Cash Balance as per tally ceased data is arrived as under : Particulars Dr Cr Balance Opening Cash Balance 3,27,12,478/- 3,27,12,478/- Cash Withdrawn from Bank (Dr) 8,10,000/- 3,35,22,478/- Cash Deposited in to Bank **26,00,000/- 3,09,22,278/-* • This is mentioned as 3,09,24,478/- ** Entry in Ceased Cash Book is up to 31 st July. Cash Balance as per actual audited Books of Account is as under : Particulars Dr Cr Balance Opening Cash Balance 1,58,58,372/- 1,58,58,372/- Cash Withdrawn from Bank (Dr) 8,11,010/- 1,66,69,482/- Cash Deposited in to Bank 34,01,000/- 1,32,68,482/-* 10. On careful perusal of the record and above reconciliation that the assessee has explained all the alleged difference with the bank record and the fact that these transaction are reflected in the bank statement is not disputed. We note that the ld. AO or that of the ld. CIT(A) has not appreciated the fact that entries in ceased cash Book is found only up to 31 st July 2013, which was also incomplete and the transaction after that is recorded in above chart, which reconciled with he audited accounts. I.T.A. No. 167/Jodh/2023 Assessment Year: 2014-15 21 The ld. AO in disregard of the fact accepted cash balance of Rs. 1,58,38,372/- in audited books of account and added Rs. 1,68,74,106/- being difference in Opening Balance as per Audited Books and Tally Data found during survey. The ld. AR with the chart supported with the cash book explained that ld. AO also added in difference Rs 8,00,000/- of amount withdrawn in August minus amount deposited in Bank Rs 1,010/- due to non-completion of cash book and reached the difference of Rs 1,76,76,046/-. These averments get also supported on the facts that no document about specific amount given or utilised was found out in the survey conducted by the revenue. We also note that no inquiry that how much amount was handed over to the director even the same was submitted at the time survey itself and no enquiry till the date of survey to the date of assessment completed were conducted. It is also not under dispute that the case book found at the premises in the tally was upto 31 st July and thereafter while conducting the audit the same has been correctly reported in the audited accounts. All these contentions were very well available in the paper book filed by the assessee has not been controverted by the ld. AO through the ld. DR and therefore, since all these entries reflected in the reconciliation chart cannot be ignored and it is not under dispute that the assessee in his previous income tax report and audit report disclosed the cash balance. I.T.A. No. 167/Jodh/2023 Assessment Year: 2014-15 22 It is also not under dispute that the assessee has not undertaken any business activity and thus the source of the cash deposited into the bank account cannot be considered as from the out of the undisclosed source, but it is very well from the opening balance available and out of the money safely kept with Shri Ajay Sehagal Director. The explanation / reconciliation and the fact that balance of cash has been found in tally data recorded up to 31 st July and after that the transaction done though the bank statement cannot be ignored, and the ld. AO has merely based on the surmises and conjectures made the addition which is against the all the records already available on record and therefore, we find no merits in the contentions recorded in the orders of the lower authority and we direct the ld. AO to delete the addition of Rs.1,00,73,000/- as undisclosed income of the assessee on account of cash deposited in Bank account. In terms of these observation ground no. 1 raised by the assessee is allowed. 11. In the ground no. 2 the assessee has challenged the addition made and sustained by the ld. CIT(A) for an amount of Rs. 1,76,76,000. The fact related to the addition under dispute is that the ld. AO has calculated the assets(cash) not disclosed in the balance sheet and the he has computed the amount added as under : I.T.A. No. 167/Jodh/2023 Assessment Year: 2014-15 23 Particulars Amount Cash Balance as per Survey Question on the date of Survey Rs 3,09,24,478/- Cash Balance as produced on the date of Survey Rs 1,32,48,482/- Difference Rs 1,76,75,996/- The ld. AO added this amount on the reasons that in the audited books the cash balance available shown at Rs. 1,32,48,482/- whereas the in the tally date found at the time of survey having the cash balance in the tally records amounted to Rs. 3,09,24,478/-. Therefore, the ld. AO treated the difference as assets not declared appropriately and therefore the same was added. The bench noted that when the assessee has contended that they are having the opening cash balance available and deposited into the bank account out of that cash available at that time the ld. AO contended that since the said cash balance available is given to Shri Ajay Sehegal the assessee not in possession of any cash and even the physical cash found is for Rs. 6,800/- only. Here the ld. AO has totally taken a contrary view and not accepted the fact that the cash has been given to Shri Ajay Sehegal. When the ld. AO while adding the same has already considered that the amount has been given to the director of the company and therefore, the cash deposited into the bank account was not considered. Whereas while making the addition of Rs. 1,76,75,996/- he has taken a complete contrary stands to the stand taken by him while making the addition of Rs. 1,00,73,000/-. Thus, the I.T.A. No. 167/Jodh/2023 Assessment Year: 2014-15 24 choose and pick up reasons for making the addition is not permitted. Not only that in the survey proceeding no incriminating documents found and the assessee has tallied the cash books with the audited accounts by filling the reconciliation statement and submitting that the when the survey took place the audit of the accounts were not completed and the cash book found was updated till 31 st July and therefore, after July till the completion of the audit transaction was not recorded which the assessee has reconciled and filed with the chart reconciling the figure of the cash book found in tally with that of the cash book. It is also submitted at the time of survey that no entry has been made in the cash book for the amount given to director and therefore, that cash books is not updated and in the audited books the necessary entries were passed in the accounts. This once the assessee has already passed the consequential entries and by that passing the cash balance has been reduced in the audited accounts cannot be considered as unexplained assets. Since, the assessee has already explained that in the tally account necessary entry for the cash given to Shri Sehegal is not accounted and in the audited accounts the necessary entries were passed. Not only that in the year under consideration the assessee has not undertaken any activities of business or profession and no incriminating documents were found suggesting the available cash available and not disclosed. But in fact the I.T.A. No. 167/Jodh/2023 Assessment Year: 2014-15 25 same has been accounted for appropriately and therefore, the tally cash book which was already considered as ceased and the difference as alleged in the order of the assessing officer has already been explained by way of chart that the cash book found was updated till 31 st July were as the audited accounts completed in August and the same has been appropriately correct and reconciled. The issue of cash book and its reconciliation has already been considered by the bench while deciding the ground no. 1. The bench noted that during the year no business activities were carried out. That no incriminating documents were found. That audit is pending on the date of survey. That no further inquiry about the handing over of the cash to Ajay Sehgal for safe keeping is made by the learned AO despite having ample time to do so. That Ld AO has not rejected books of accounts. That Ld AO has not accepted the fact the cash withdrawn from one bank to other bank is used for cash deposits made. That Ld CIT ‘A’ has disregarded Cash Book submitted before him without assigning any reasons to do so. That variation in statement of director during survey is only to the extent that money was handed over for business purpose and while in assessment proceeding it is stated as given for safe keeping. Based on these facts and the fact that merely the cash book written upto 31st July was reporting higher cash balance and in the audited accounts the same is shown as has been utilised I.T.A. No. 167/Jodh/2023 Assessment Year: 2014-15 26 there is no basis to make the addition in the hands of the assessee as undisclosed cash (assets) in the hands of the assessee. Based on these observations the ground no. 2 raised by the assessee is allowed. 12. In the result, the appeal of the assessee is allowed. Order pronounced under Rule 34(4) of the Income Tax (Appellate Tribunal) Rules, 1963 by placing the details on the notice board. Sd/- Sd/- (Dr. S. Seethalakshmi) (Rathod Kamlesh Jayantbhai) Judicial Member Accountant Member Ganesh Kumar, PS Copy of the order forwarded to: (1)The Appellant (2) The Respondent (3) The CIT (4) The CIT (Appeals) (5) The DR, I.T.A.T. True Copy By order I.T.A. No. 167/Jodh/2023 Assessment Year: 2014-15 27 Date Initial 1. Draft dictated on Sr.PS/PS 2. Draft placed before author Sr.PS/PS 3. Draft proposed & placed before the Second Member JM/AM 4. Draft discussed/approved by Second Member JM/AM 5. Approved Draft comes to the Sr. P.S./P.S. Sr.PS/PS 6. Kept for pronouncement on Sr.PS/PS 7. File sent to the Bench Clerk Sr.PS/PS 8. Date on which file goes to the Head Clerk 9. Date on which file goes to the AR 10. Date of dispatch of Order