SHRI KANTILAL HARILAL MAKATI, RAJKOT V. THE ACIT, CENTAL CIRCLE-1, RAJKOT, RAJKOT

ITA 261/RJT/2022

AI Insights

The case involves Shri Kantilal Harilal Makati, the appellant, who appealed against the order of the Commissioner of Income Tax (Appeals)-11, Ahmedabad, which partly confirmed an addition of Rs. 7,00,000 to his income for the Assessment Year 2019-20. The addition was initially made by the Assessing Officer under section 143(3) of the Income Tax Act, 1961, following a survey action under section 133A at M/s. Swastik Finance Corporation, where a substantial amount of cash was found. The Tribunal's decision to set aside the issue to the Assessing Officer was based on the need for a thorough examination of the evidence and submissions related to the cash balance of M/s. Falcon Enterprise, a partnership firm involved in trading prepaid recharge vouchers.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 138255 (ITAT-RAJKOT)
• Duration Of Justice: 10 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-09-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 16-07-2023
• Assessment Year: 2019-2020
• Appeal Filed On: 08-11-2022
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Set aside
• Section: 143(3); 133A; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT (Conducted Through Virtual Court) Before: Smt. Annapurna Gupta, Accountant Member And Shri T.R. Senthil Kumar, Judicial Member Shri Kantilal Harilal Makati, Flat No. 21, Maharshi Tower-2, Jalaram Plot, Rajkot PAN: AFJPM0350B (Appellant) Vs The ACIT, Central Circle-1, Rajkot (Respondent) Assessee Represented: Shri Mehul Ranpura, A.R. Revenue Represented: Shri Shramdeep Sinha, CIT-D.R. Date of hearing : 17-07-2023 Date of pronouncement : 13-09-2023 आदेश/ORDER PER : T.R. SENTHIL KUMAR, JUDICIAL MEMBER:- This appeal is filed by the Assessee as against the Appellate order dated 22.09.2022 passed by the Commissioner of Income Tax (Appeals)-11, Ahmedabad arising out of the assessment order passed under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to the Assessment Year (A.Y) 2019-20. ITA No. 261/RJT/2022 Assessment Year 2019-20 I.T.A No. 261/Rjt/2022 A.Y. 2019-20 Page No Shri Kantilal Harilal Makati Vs. ACIT 2 2. The brief facts of the case is that the assessee is an individual and partner in the partnership firms and derived remuneration, interest and profit from said firms and also income from agricultural activities, rental income and income from other sources. 2.1. There was a survey action u/s. 133A of the Act on 26.09.2018 at the office premises of one M/s. Swastik Finance Corporation. The assessee through his Representative Mr. Pranav Makadia sent cash of Rs. 28,60,000/- belonged to him and family members to the partner of M/s. Swastik Finance Corporation (hereinafter referred as SFC) during the course of survey proceedings. This cash amount of Rs. 28,60,000/- was accepted by the partner and the assessee was asked to explain the details of cash deposits with SFC. The assessee explained the cash amount from various sources as follows: Sr. No. Name of Assessee Amount Amount 1 Falcon Enterprise (partnership firm) Partners: Keny Makati & Shreya Makati PAN: AACFF7821Q Cash on Hand as on 26/09/2028 Cash being part of seizure from Swastik Finance 7,45,484 7,00,000 2 Kantilal Makati PAN: AFJPM0350B Cash on Hand as on 26/09/2028 Cash being part of seizure from Swastik Finance 8,85,610 5,00,000 3 Kanchanben Makati Cash on Hand as on 26/09/2018 Cash being part of seizure from Swastik Finance 2,12,393 2,00,000 I.T.A No. 261/Rjt/2022 A.Y. 2019-20 Page No Shri Kantilal Harilal Makati Vs. ACIT 3 4 Kenykumar Makati Cash on Hand as on 26/09/2018 Cash being part of seizure from Swastik Finance 8,71,157 8,00,000 5 Shreya Kenykumar Makati Cash on Hand as on 26/09/2018 Cash being part of seizure from Swastik Finance 6,21,871 6,00,000 Total 28,60,000 3. The Assessing Officer held that the assessee was holding three bank accounts namely in Punjab National Bank, Raj Bank and Rajkot District Co-operative Bank. However the assessee has not deposited the above cash deposit of Rs. 28,60,000/- in the above bank accounts, but deposited with SFC and thereby rejected the explanation offered by the assessee and treated the same unexplained money in the hands of the assessee chargeable u/s. 69A r.w.s. 115BBE of the Act. 4. Aggrieved against the same, the Assessee filed an appeal before Commissioner of Income Tax (Appeals). The Ld. CIT(A) after verification of the submissions and the details furnished by the assessee deleted an addition of Rs. 21,60,000/- but retained balance addition of Rs. 7,00,000/- which is said to be belonged to the partnership firm M/s. Falcon Enterprise belong to the assessee son and daughter-in-law. Thus the Ld. CIT(A) partly allowed the assessee appeal observing as follows: “....6.2 It is further observed that during the course of assessment proceedings the appellant vide letter dated 25.08.2021 had furnished the evidence related to opening cash balance, cash withdrawn and deposited in bank accounts during the year, holding of agricultural land, nature of produce, and sale bills etc. The summary of the cash on hand has been I.T.A No. 261/Rjt/2022 A.Y. 2019-20 Page No Shri Kantilal Harilal Makati Vs. ACIT 4 reproduced by the AO at para 8 of the assessment order. However, the AO did not accept the appellant's explanation on the ground that (i) in the statement recorded u/s 131(1A) on 26.09.2018 it was stated that the sale proceeds is deposited in Rajkot District Cooperative Bank, (ii) the funds are from his own agricultural receipts however, while explaining the source he include family member and family firm M/s Falcon enterprise and (iii) the appellant has three bank account but choose to keep amount with M/s. Swastik Finance Corporation. 6.3 It is also observed that during the course of appellate proceedings, the appellant submitted summary of availability of cash as on the date of survey in his case as also in the case of the family members/firm. The appellant further submitted that all the family members had filed return of income for immediately preceding year Le.2018-19 before the date of survey on 26.09.2018, wherein, it is found that total cash balance as on 31.03.2018 was at Rs.15,08,957/-. Such cash on hand was represented by their corresponding capital as per books of account. However, this cash balance includes cash of Rs.4,59,784/- belonging to the partnership firm M/s. Falcon Enterprise, which is though as per audited balance sheet of said firm, however, since the appellant during the course of survey/search, never uttered a word about the firm's cash, the appellant's contention that cash seized during the search also belongs to M/s. Falcon Enterprise cannot be accepted. Therefore, opening cash balance belonging to the appellant and his family members namely Smt. Kanchanben Makati, Shri Kenny Makati and Smt. Shreya Makati to the extent of Rs. 10,49,173/- appears to be genuine. 6.4 It is further observed that the appellant has claimed that during the year under search, he and his family members had withdrawn cash from bank accounts at different interval aggregating to Rs. 12,60,370/- and in support of his claim, the appellant have submitted the bank passbooks and ledger accounts. Therefore, I have no hesitation in accepting the same as genuine cash withdrawals from bank. Similarly, the appellant has also claimed that credit of cash receipts from sale of agricultural produces of Rs. 12,34,856/- in his return of income and Rs.44,143/- in case of his son Shri Kenny Makati and in support of his claim, the appellant furnished agricultural sale bills and relevant ledger accounts. It is also observed that the AO nowhere in the assessment order doubted the appellant's claim of agricultural income. Therefore, such agricultural receipts cannot be doubted and treated as genuine cash receipts. Thus, out of total opening balance as well as cash withdrawn from bank accounts/agricultural receipts, total cash inflow works out to Rs.35,88,542/-. 6.5 Out of the above, the appellant submitted that during the year, he and his family members had deposited cash to the extent of Rs.4,10,786/- in bank accounts and incurred cash expenses for agricultural activities at Rs.5,86,726/-. Both these transactions are verifiable and also accepted by the AO. Therefore, out of the total cash inflow of Rs.35,88,542/-, if the I.T.A No. 261/Rjt/2022 A.Y. 2019-20 Page No Shri Kantilal Harilal Makati Vs. ACIT 5 cash outflow of Rs.9,97,512/- (4,10,786 + 5,86,726) is reduced, the resultant cash balance on the date of survey comes to Rs.25,91,030/-. 6.6 I further find that the appellant in the written submission filed claimed that out of total cash seized of Rs.28,60,000/-, the sum of Rs.21,60,000/- belonged to himself and his family members. The source of such cash in the hands of family members is accepted as the same appears to be genuine. So far as cash of Rs.7,00,000/- claimed to be belonging to partnership firm M/s. Falcon Enterprise, as held above, such claim of the appellant cannot be accepted as it appears to an afterthought. Therefore, addition of Rs.21.60,000/- is deleted out of total addition made of Rs.28,60,000/- and remaining addition of amount Rs.7,00,000/- is confirmed. Thus, the ground of appeal no. 2 is partly allowed.” 5. Aggrieved against the same, the Assessee is in appeal before us raising the following Grounds of Appeal: 1. The grounds of appeal mentioned hereunder are without prejudice to one another. 2. The Ld. Commissioner of Income-tax (Appeals)-11, Ahmedabad (hereinafter referred to as the "CIT(A)"] erred on facts as also in law in retaining addition of Rs.7,00,000/- on the alleged ground that cash on hand claimed to be belonging to the firm is afterthought. The addition made and confirmed is totally unjustified and uncalled and therefore the same may kindly be directed to be deleted. 3. Your Honour's appellant craves leave to add, to amend, alter, or withdraw any or more grounds of appeal on or before the hearing of appeal. 6. Ld. Counsel Mr. Mehul Ranpura appearing for the assessee submitted that M/s. Falcon Enterprise is a partnership firm wherein the assessee’s son and daughter-in-law are the Partners. The said firm was engaged in the business of trading in prepaid recharge voucher of ‘Airtel’ which was being sold to small retailers/shops and all such sales are used to happen in cash only. As on the date of survey in SFC on 26.09.2018, there was a cash balance of Rs. 7,45,484/- available in M/s. Falcon Enterprise, out of which Rs. 7,00,000/- given to SFC (which is inclusive of Rs.28,60,000). The Ld. CIT(A) has confirmed the addition of I.T.A No. 261/Rjt/2022 A.Y. 2019-20 Page No Shri Kantilal Harilal Makati Vs. ACIT 6 Rs.7,00,000/- since during the course of survey/search, the assessee has never uttered any word about “M/s. Falcon Enterprise” firm cash. Therefore it is an afterthought which cannot be accepted and therefore sustained the addition. 6.1. The Ld. Counsel further submitted that all the family members had filed their respective Return of Income for the Assessment Year 2018-19 well before the date of survey namely 26.09.2018 and declared their income and total cash balance as on 31.03.2018. In the case of M/s. Falcon Enterprise, the books are audited with cash balance of Rs. 4,59,784/- as closing balance. Thus the Ld. CIT(A) is not justified in retaining the addition of Rs. 7,00,000/- and the same is liable to be deleted and allow the assessee appeal. 7. Per contra, the Ld. CIT-DR Shri Shramdeep Sinha appearing for the Revenue supported the order passed by the Lower Authorities and submitted that when the assessee himself is holding three bank accounts namely Punjab National Bank, Raj Bank and Rajkot District Co-operative Bank. There is no necessity for the assessee to give/deposit huge cash of Rs. 26,80,000/- to SFC for safe custody. Further during the course of survey/search proceedings, the assessee has not offered any explanations of the source of cash from M/s. Falcon Enterprise, therefore Ld. CIT(A) considered the same to be an afterthought and confirmed the addition of Rs. 7,00,000/- as the assessee failed to furnish relevant materials and documents. Thus the additions confirmed by the Ld. CIT(A) does not require any interference and thereby assessee appeal is liable to be dismissed. I.T.A No. 261/Rjt/2022 A.Y. 2019-20 Page No Shri Kantilal Harilal Makati Vs. ACIT 7 8. We have given our thoughtful consideration and perused the materials available on record. As against the addition made of Rs.28,60,000/-, the Ld. CIT(A) after considering the explanations with relevant materials and books of accounts, deleted an addition of Rs. 21,60,000/- and however sustained balance of Rs.7,00,000/- which was said to be received from M/s. Falcon Enterprise. As it can be seen from the assessment order, vide assessee’s written submission dated 25.08.2021, the assessee explained cash of Rs.21,60,000/- belong to himself and his family members, balance cash of Rs. 7,00,000/- belong to M/s. Falcon Enterprise and also submitted copy of the balance sheet, cash book of the said firm. It is seen from the assessment order, the Assessing Officer has not verified the same and made enquiries regarding the partnership firms of M/s. Falcon Enterprise. Though the assessee could not have uttered any word about M/s. Falcon Enterprise, but during the assessment proceedings vide written submission dated 25.08.2021 explained the same. Further it is seen from the submission of the assessee, that there was cash balance of Rs.7,45,484/- available as on 26.09.2018, which is the date of survey/search in the premises of M/s. Swastik Finance Corporation. However the assessee has taken Rs. 7,00,000/- cash only from the M/s. Falcon Enterprise and the same was deposited with SFC. Thus in our considered view, the Ld. CIT(A) has confirmed the addition on the ground that it is an afterthought. As the Assessing Officer has also not considered the written submission dated 25.08.2021 filed by the assessee, we deem it fit to set aside this limited issue to the file of the Assessing Officer for verification and pass orders in accordance with law. I.T.A No. 261/Rjt/2022 A.Y. 2019-20 Page No Shri Kantilal Harilal Makati Vs. ACIT 8 9. In the result, the appeal filed by the Assessee is allowed for statistical purpose. Order pronounced in the open court on 13 -09-2023 Sd/- Sd/- (ANNAPURNA GUPTA) (T.R. SENTHIL KUMAR) ACCOUNTANT MEMBER True Copy JUDICIAL MEMBER Ahmedabad : Dated 13/09/2023 आदेश कȧ ĤǓतͧलͪप अĒेͪषत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से, उप/सहायक पंजीकार आयकर अपीलȣय अͬधकरण, राजकोट