Hiralal Kimatram Kalani, Nashik V. Income-tax Officer,

ITA 1985/PUN/2014

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 9241 (ITAT-PUNE)
• Duration Of Justice: 4 year(s) 10 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-09-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 16-08-2019
• Assessment Year: 2010-2011
• Appeal Filed On: 10-11-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N ASHOK BABU
• Keywords: Business expenditure; Salary income; Opportunity of being heard; Principle of natural justice; Additional evidence

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, PUNE . , , BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO.1985/PUN/2014 / ASSESSMENT YEAR : 2010-11 HIRALAL KIMATRAM KALANI, 101, PRIDE MONARCH, BEHIND MHASOBA MANDIR, NASHIK PUNE ROAD, NASHIK 422101. PAN : AGCPK5448G ....... / APPELLANT / V/S. ITO, CENTRAL 3, NASHIK. / RESPONDENT . / ITA NO.1994/PUN/2014 / ASSESSMENT YEAR : 2009-10 HIRALAL KIMATRAM KALANI, 101, PRIDE MONARCH, BEHIND MHASOBA MANDIR, NASHIK PUNE ROAD, NASHIK 422101. PAN : AGCPK5448G ....... / APPELLANT / V/S. ITO, CENTRAL 3, NASHIK. / RESPONDENT ASSESSEE BY : SHRI RAKESH JOSHI REVENUE BY : SHRI N. ASHOK BABU / DATE OF HEARING : 27.08.2019 / DATE OF PRONOUNCEMENT : 19.09.2019 / ORDER PER D. KARUNAKARA RAO, AM: THERE ARE TWO APPEALS UNDER CONSIDERATION. BOTH THE APPEALS ARE FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A)-1, NASHIK COMMONLY 2 ITA NO.1985/PUN/2014 ITA NO.1994/PUN/2014 DATED 29.09.2014 FOR THE ASSESSMENT YEARS 2009-10 AND 2010-11 RESPECTIVELY. 2. THE EFFECTIVE GROUND RAISED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2009-10 IS AS UNDER :- 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS GROSSLY ERRED IN CONFIRMING THE ADDITION OF RS.9,13,750.00 MADE BY THE LEARNED ASSESSING OFFICER ON THE GROUND OF ALLEGED UNACCOUNTED CASH RECEIPTS. THE VARIOUS REASONS GIVEN BY THE LEARNED CIT(A) FOR CONFIRMING THE SAID ADDITION BEING ARBITRARY, PERVERSE AND ILLOGICAL THE SAME MAY PLEASE BE VACATED AND CONSEQUENTLY THE IMPUGNED ADDITION OF RS.9,13,750.00 MAY PLEASE BE DELETED. THE GROUNDS RAISED BY THE ASSESSEE FOR ASSESSMENT YEAR 2010-11 IS SAME EXCEPT FOR THE AMOUNT OF ADDITION OF RS.25,67,450/-. OTHERWISE, THE FACTS ARE ALSO COMMON. 3. BRIEFLY STATED THE RELEVANT FACTS AS PER THE ASSESSEE INCLUDE THAT THE ASSESSEE BELONGS TO KALANI GROUP, NASHIK. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF WINE MANUFACTURING. THE ASSESSEE IS A PROPRIETOR OF HIRA WINES AND PARTNER WITH VARIOUS GROUP FIRMS. DURING THE YEAR UNDER CONSIDERATION, ASSESSEE RECEIVED INCOME FROM SALARY FROM GROUP COMPANIES WHERE HE IS DIRECTOR, INCOME FROM BUSINESS & PROFESSION AND INCOME FROM OTHER SOURCES. ASSESSEE IS ALSO HAVING INCOME FROM AGRICULTURAL ACTIVITIES. 4. THERE WAS A SEARCH ACTION ON THE ASSESSEE ON 02.02.2012 U/S 132(1) OF THE ACT. DURING THE COURSE OF SEARCH, TOTAL DISCLOSURE OF 3 ITA NO.1985/PUN/2014 ITA NO.1994/PUN/2014 RS.7.60 CRORES WAS MADE IN THE HANDS OF VARIOUS GROUP ENTITIES. RELEVANT TO THE ASSESSEE, THE DISCLOSURE OF ADDITIONAL INCOME PERTAINING TO THE ENTRIES IN ROUGH NOTE AMOUNTS TO RS.60,61,996/- AFTER SET OFF OF RS.7,75,000/- OF CASH WITHDRAWN FROM BANK FOR BOTH THE A.Y. 2009-10 TO 2011-12. OUT OF THE ABOVE DISCLOSURE, ASSESEE OFFERED IN THE RETURN OF INCOME OF RS.25,81,396/- ONLY IN THESE YEARS. REMAINING AMOUNT OF RS.34,80,600/- WAS ADDED BY THE LD. ASSESSING OFFICER, DETAILS OF WHICH ARE AS UNDER :- A.Y. DISCLOSURE INCOME OFFER IN ROI ADDITION MADE REMARK 2009 - 10 10,70,696 1,57,546 9,13,150 - 2010 - 11 42,23,700 16,56,250 25,67,450 - 2011 - 12 7,67,600 7 ,67,600 - (1542600 - 775000) TOTAL 60,61,996 25,81,396 34,80,600 5. MAIN REASON OF NOT OFFERING INCOME AS PER DISCLOSURE WAS THAT THE PART OF THE AMOUNT REPRESENTS RECODED TRANSACTION OF ONE OF THE GROUP COMPANY I.E. KARAN DISTILLERY PVT. LTD. (KDPL), WHERE THE AMOUNT DULY REFLECTED IN THEIR REGULAR BANK ACCOUNT. DURING THE COURSE OF ASSESSMENT, ASSESSEE EXPLAINED THAT THE CASH TRANSACTION BELONGS TO HIM AND HIS COMPANY. HOWEVER, THE ASSESSING OFFICER DID NOT CONSIDER THE DEPOSIT ENTRIES OF CASH AND THEREFORE, MADE THE ADDITION BASED ON DISCLOSURE MADE BY THE ASSESSEE AT THE TIME OF SEARCH. AS FAR AS TRANSACTION OF GROUP KDPL IS CONCERNED, THESE ARE THE RECORDED BANK TRANSACTIONS WHICH ARE NOTED DOWN BY MR. HIRALAL K. KALANI IN HIS DIARY. THESE RECORDED TRANSACTION RELATED TO PAYMENT TO LABOUR, WHEREIN TO 4 ITA NO.1985/PUN/2014 ITA NO.1994/PUN/2014 AVOID ISSUE OF LABOUR UNION ETC., THE GROUP IS FOLLOWING A PARTICULAR MODUS OPERANDI, WHICH IS DESCRIBED AS UNDER: (I) KDPL WITHDRAW CASH FROM BANK WHICH IS BEING USED FOR PAYMENT TO VARIOUS LABOURERS. THESE PAYMENTS NOT RECORDED IN REGULAR BOOKS TO AVOID SHOWING THESE LABOUR ON PAYROLL OF KDPL. THIS CASH WITHDRAWAL RESULTED INTO INCREASE OF CASH BALANCE AS PER BOOKS. (II) KDPL ISSUE CHEQUES TO TRIPATHI & COMPANY & ALOK LABOUR ORG. TO RECORD LABOUR PAYMENTS. THERE PAYMENT DULY RECORDED IN REGULAR BOOKS OF ACCOUNTS AS LABOUR EXPENSES. (III) KDPL RECEIVED CASH BACK FROM THE ABOVE LABOUR CONTRACTORS WHICH WAS EITHER USED FOR BUSINESS EXPENSES IN CASH OR DEPOSITED IN BANK ACCOUNT. CASH RECEIVED BACK NOT RECORDED IN BOOKS BUT CASH DEPOSITED IN BANK DULY RECORDED TO COVER CASH BALANCE AS PER BOOKS WHICH WAS RESULTED DUE TO CASH WITHDRAWAL FROM BANK AS MENTIONED IN ABOVE. 6. EFFECT OF ABOVE TRANSACTION IN THE BOOKS OF KDPL WILL BE AS UNDER :- EVENT EFFECT IN BOOKS OF KDPL 1 CASH WITHDRAWAL FROM BANK INCREASE CASH BALANCE AND REDUCED BANK BALANCE 2 PAYMENT TO LABOUR CONTRACTOR LABOUR EXPENSES RECORDED IN BOOKS AND REDUCES BANK BALANCE 3 CASH RECEIVED FROM LABOUR CONTRACTOR USED FOR BUSINESS EXPENSES OR DEPOSITED IN BANK REDUCES CASH BALANCE AND INCREASE BANK BALANCE 5 ITA NO.1985/PUN/2014 ITA NO.1994/PUN/2014 7. FROM THE ABOVE, IT IS THE CASE OF THE ASSESSEE THAT THE TRANSACTION RELATED TO KDPL ARE DULY RECORDED IN ITS BOOKS OF ACCOUNTS AND DOES NOT REQUIRE ANY ADDITION IN THE HANDS OF THE ASSESSEE. TO FURTHER SUBSTANTIATE THESE TRANSACTIONS RELATED TO KDPL, IT IS EVIDENT FROM THE SEIZED MATERIAL, WHICH ARE REPRODUCED BY CIT(A) AT PAGE 5 TO 11 OF THE HIS ORDER, THAT ON TOP OF THESE SEIZED MATERIAL NAME OF KDPL IS MENTIONED ON ALL THESE PAPERS. FURTHER, TOTAL OF INFLOW TRANSACTION WAS RS.68,36,996/-, HOWEVER DISCLOSURE WAS MADE OF RS.60,61,996/- AFTER CONSIDERING BANK WITHDRAWAL ENTRY OF RS.7,75,000/- (ON 08.06.2010 RS.6,50,000/- AND ON 12.11.2010 RS.1,25,000). THESE WITHDRAWAL ENTRIES ARE ALSO AS PER BANK STATEMENT OF KDPL. HENCE, ASSESSING OFFICER AS WELL AS SEARCH TEAM WAS WELL AWARE THAT THESE TRANSACTIONS ARE DULY REFLECTED IN THE BOOKS OF KDPL. THEREFORE, THE ASSESSEE DID NOT OFFER PART OF THE DISCLOSURE WHICH WAS DULY RECORDED IN BOOKS OF KDPL, WHICH IS SUMMARIZED AS UNDER :- A.Y. DISCLOSURE CASH DEPOSITED IN BOOKS OF KDPL INCOME OFFER IN ROI DIFFERENCE IF ANY 2009 - 10 10,70,696 7,20,000 1,57,546 1 , 93 ,150 2010 - 11 42,23,700 25,55,000 16,56,250 12,450 2011 - 12 7,67,600 80,000 11,42,900 (4,55,300) TOTAL 60,61,996 33,55,000 29,56,696 (2,74,600) 8. THE ASSESSEE FILED AN AFFIDAVIT TO SUPPORT THE ABOVE MODUS AND BANK STATEMENTS, TO SHOW THESE TRANSACTIONS. A RECONCILIATION OF THESE STATEMENT ARE ENCLOSED WITH APPEAL MEMO AND THE ASSESSEE REQUESTED TO 6 ITA NO.1985/PUN/2014 ITA NO.1994/PUN/2014 DELETE ADDITION TO THE EXTENT THESE TRANSACTION REFLECTED IN THE BANK STATEMENT, SUMMARY OF WHICH IS AS UNDER :- ASST. YEAR AS PER SEIZE MATERIAL AS PER BANK STATEMENT INFLOW OUTFLOW SOURCE DEPOSIT IN BANK 2009 - 10 4,90,200 7,20,000 6,27 ,361 7,20,000 2010 - 11 20,28,700 25,20,000 22,07,851 25,20,000 TOTAL 25,18,900 32,40,000 28,35,212 32,40,000 9. IGNORING THE ABOVE, THE ASSESSING OFFICER MADE ADDITION OF RS.9,13,150/- FOR THE ASSESSMENT YEAR 2009-10 AND RS.25,67,450/- FOR THE ASSESSMENT YEAR 2010-11. THE CIT(A) CONFIRMED THE SAME. 10. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US WITH THE ABOVE EXTRACTED GROUND. 11. BEFORE US, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE SOURCE OF THE CASH DEPOSITS IS VERY MUCH EXPLAINABLE AND PROVIDED ADDITIONAL EVIDENCES IN THIS REGARD ARE ADMITTED AND CONSIDERED MEANINGFULLY. EXPLAINING THE REASONS FOR FAILURE TO SUBMIT THE BANK STATEMENTS OF THE COMPANY AND OTHER RELATED DOCUMENTS BEFORE THE ASSESSING OFFICER/CIT(A), LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE SAME MAY BE NOW ADMITTED AND REMANDED TO THE FILE OF THE ASSESSING OFFICER FOR FRESH ADJUDICATION ON THE BASIS OF THESE ADDITIONAL EVIDENCES FILED FOR BOTH THE ASSESSMENT YEARS. IN THIS REGARD, LD. COUNSEL FILED THE PAPER BOOK CONTAINING THE ADDITIONAL EVIDENCES PAGES 1 TO 30 AND SUBMITTED 7 ITA NO.1985/PUN/2014 ITA NO.1994/PUN/2014 THAT THE AFFIDAVIT EXECUTED BY DHARAMPAL KIMATRAM KALANI, DIRECTOR OF KDPL, THE BANK STATEMENT OF BUSINESS BANK ACCOUNT NO.CD2031 AND ALSO BANK STATEMENT OF BUSINESS BANK ACCOUNT NO.SB7393, ARE ENCLOSED. AS PER THE LD. COUNSEL FOR THE ASSESSEE, IF THE SAID BANK ENTRIES ARE CONSIDERED BY THE ASSESSING OFFICER AND UNDERSTAND THE SAME, THE SCHEME OF THE ASSESSEE IN ACCOUNTING LABOUR PAYMENTS, SHOWING CASH FLOW STATEMENTS, RECEIVING CASH FROM LABOUR CONTRACTORS USED FOR BUSINESS EXPENSES ARE DEPOSITED IN THE BANK, THE SUBSTANTIAL ADDITION WILL NOT BE MADE. WITH THE PRAYER OF REMANDING, THE LD. COUNSEL SUBMITTED THAT ALL THE ISSUES IN BOTH THE APPEALS NEED TO BE REMANDED TO THE FILE OF THE ASSESSING OFFICER FOR FRESH ADJUDICATION. 12. ON THE OTHER HAND, LD. DR FOR THE REVENUE HAS DUTIFULLY REQUESTED FOR CONFIRMING THE ADDITION AND NOT ADMITTING THE ADDITIONAL EVIDENCES. 13. ON HEARING BOTH THE SIDES, WE ARE OF THE OPINION, IT IS IN THE INTEREST OF ADMINISTRATION OF JUSTICE, THE ADDITIONAL EVIDENCES FURNISHED BY THE ASSESSEE NOW SHOULD BE ADMITTED AND ENTIRE DOCUMENTS AS WELL AS THE ISSUES ARE REMITTED TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFICER SHALL ADMIT THE SAME AND EXAMINE THE CASH FLOW STATEMENT INVOLVING LABOUR CONTRACTORS COMPANY, KDPL AND ASSESSEES BANK ACCOUNTS AND SCRUTINIZE THE SAME THOROUGHLY AND OTHER ISSUES. THE ASSESSING OFFICER IS DIRECTED TO PASS A SPEAKING ORDER AFTER GRANTING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE IN ACCORDANCE WITH 8 ITA NO.1985/PUN/2014 ITA NO.1994/PUN/2014 SET PRINCIPLES OF NATURAL JUSTICE. THUS, ALL THE GROUNDS RAISED BY THE ASSESSEE IN BOTH THE APPEALS ARE ALLOWED FOR STATISTICAL PURPOSES. 14. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 19 TH DAY OF SEPTEMBER, 2019. SD/- SD/- ( /VIKAS AWASTHY) ( . /D. KARUNAKARA RAO) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / PUNE; / DATED : 19 TH SEPTEMBER, 2019. SUJEET / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE CIT(A)-1, NASHIK. 4. THE CCIT, NASHIK. 5. , , , / DR, ITAT, A BENCH, PUNE. 6. / GUARD FILE. / BY ORDER, // TRUE COPY // SENIOR PRIVATE SECRETARY , / ITAT, PUNE.