DCIT CIRCLE-3(1), GWALIOR V. SARTHI CONSTRUCTION, GWALIOR

ITA 349/AGR/2017

AI Insights

The case involves the Revenue's appeal against the order of the Ld. CIT(A), Gwalior, which deleted several additions made by the Assessing Officer (AO) during the assessment of M/s Sarthi Construction for the assessment year 2012-13. The additions were based on unexplained cash transactions, receipts, and disallowances under sections 40A(3) and 40(a)(i) of the Income Tax Act. The Tribunal examined the submissions and evidence presented, including the remand report from the AO, and found that the assessee had adequately explained the entries and that the additions were not justified.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 114066 (ITAT-AGRA)
• Duration Of Justice: 6 year(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-09-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 29-08-2023
• Assessment Year: 2012-2013
• Appeal Filed On: 17-08-2017
• Other Referred Cases: CIT vs. Alfa Toyo Ltd. (2008) 174 Taxman 427
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Loose papers; TDS
• Section: 40A(3); 143(3); 142(1); 40(a)(ia); 143(2); 69A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AGRA BENCH ‘DB-5’ : AGRA (Through Video Conferencing) BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER, AND SHRI ANUBHAV SHARMA, JUDICIAL MEMBER I.T.A. No. 349/AGRA/2017 A.Y.: 2012-13 DCIT, CIRCLE 3(1), GWALIOR VS M/S SARTHI CONSTRUCTION, 102, DREAM APARTMENT, SURESH NAGAR, GWALIOR (PAN: ABHFS6828A) (ASSESSEE) (RESPONDENT) Assessee by : Shri Rajendra Sharma, Adv. Department by : Shri Surendra Pal, CIT(DR) Date of hearing : 30.08.2023 Date of pronouncement : 13.09.2023 ORDER PER SHAMIM YAHYA, AM : The Revenue has filed this appeal against the order dated 09.05.2017 passed by the Ld. CIT(A), Gwalior relating to assessment year 2012-13 on the following grounds:- 1. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law and in fact in deleting the addition 2 of Rs. 1,37,35,000/- on account of unexplained cash transaction recorded in Annx-‘D’ impounding during the survey operation, in spite of the facts on records that the assessee has failed to produce any admissible evidence during the course of assessment proceedings before the AO as required. 2. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law and in fact in deleting the addition of Rs. 3,33,76,751/- on account of unexplained cash receipts recorded in Ann-‘A’ impounding during the survey operation, during relevant periods in spite of the facts on records that the assessee has failed to produce any admissible evidence during the course of assessment proceeding before the AO. 3. Whether on the facts and circumstances of the case, the Ld. CIT(A) has erred in law and in fact in deleting the addition of Rs. 1,25,85,510/- on account of disallowances u/s. 40A(3) and 40(a)(i), during relevant periods in spite of the facts on records that the assese has failed to produce any admissible evidence during the course of assessment proceeding before the AO. 4. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law and in fact in deleting the addition of Rs. 1,54,36,879/- on account of unexplained cash credit / undisclosed receipts, in spite of the facts on records that the assessee has failed to produce any admissible evidence during the course of assessment proceeding before the AO. 2. Briefly stated facts are that assessee is a partnership firm and during the year under consideration it was engaged in the business of civil construction and other government and private contracts. It filed its return of income on 3 08.02.2013 showing total income of Rs. 7,13,88,960/-. Later Assessee’s case was selected for scrutiny under the CASS and notice u/s. 143(2) of the Act was issued on 8.8.2013 which was served upon the assessee on 14.8.2013 through a notice server and the case was fixed for hearing on 22.8.2013 and notice u/s. 143(2) was issued on 13.9.2013 which was also served upon the assessee through a notice server on 20.9.2013. Subsequently, notice u/s. 142(1) of the Act was issued on 9.4.2014 alongwith the preliminary questionnaire which was duly served upon the assessee. In response to the notice issued, assessee’s AR attended the proceedings from time to time and represented the case and the books of accounts with bills and vouchers were produced which were test checked. At the business premises of the assessee, a survey operation was carried out on 07.08.2012 and some books of account and documents were impounded viz. loose papers, Yadaast memo, cash book at Annexure-I of Annexure ‘A’, Register being Annexure-2 of Annexure ‘B’ showing details of payments made during the period 1.4.2011 to 31.1.2012, Annexure ‘C’ showing cash payment made in violation of section 40A(3) TDS provisions, Annexure ’D’ showing some receipts and payments details recorded on page 24 of Annexure -18 which were impounded by the survey party. The AO found various discrepancies in the impounded documents and vide show cause order sheet dated 3.3.2015 asked the assessee as to why the additions be not made to the total income / expenditure as unexplained income as the same was not shown in the regular books. The assessee has submitted before the AO that 4 these papers are related with the amount given by the firm from Head Quarters and also the amount are being withdrawn from the bank. These loose papers and Yadasht register are also related with the expenditure incurred at various sites by the supervisors, managers, petty contractors and sub-contractors, some of the entries are related with the advances given to the laborers and small traders from whom the materials are purchased either by the assessee or by the sub contractors. During the assessment proceedings, the assessee filed an explanation in respect of each entry and papers and also filed the calculation of his peak amount of investment worked out from all the seized material and offered Rs. 5,28,50,428/- towards its extra income which were calculated after taking into consideration all the loose papers, diaries etc. and submitted that the amount either related with the expenses or with receipts are written in so many loose papers and Yadasht register, which are not unexplained amount so as to attract the provisions of Section 69A of the Act, but the AO was not satisfied with the explanation offered by the Assessee and has completed the assessment at income of Rs. 14,65,18,140/- as against Rs.7,13,88,960/- disclosed by the assessee and made additions of Rs. 1,37,35,000/-; Rs. 3,33,71,791/-; Rs. 1,25,85,510/- and Rs. 1,54,36,879/- made vide para no. 9, 10, 11 & 12 of the assessment order 25/3/2015 passed u/s. 143(3) of the Act by the Assessing Officer. Against the assessment order dated 25.3.2015, assessee appealed before the Ld. CIT(A) who after calling the Remand Report dated 21.3.2017 which was obtained from the Assessing Officer, vide his impugned order dated 5 09.05.2017 has deleted the aforesaid additions by partly allowing the appeal of the Assessee by observing that the assessee has filed all the details which are being filed before the AO like detailed calculation in respect of the peak amount of investment as worked out by the assessee and also explanation in respect of entries written in Yadasht register and sent all these replies and calculation of peak amount to the AO for his comments while obtaining his Remand Report wherein, the AO has not disputed the peak investment as calculated by the assessee. 3. Against the above order of the Ld. CIT(A), Revenue is in appeal before us. We have heard both the parties and perused the records. 4. At the time of hearing, Ld. DR relied upon order passed by the AO and reiterated the contention raised in the grounds of appeal of the Revenue and stated that with regard to discrepancies pointed out by the AO, the assessee has not furnished satisfactory explanation, hence, the additions were rightly added to the total income of the assessee. Therefore, he requested that appeal of the Revenue may be allowed accordingly. 5. On the contrary, Ld. Counsel for the assessee relied upon the order of the Ld. CIT(A) and stated that Ld. CIT(A) has passed a well reasoned order on the basis of the facts and circumstances of the case; in accordance with provisions of law and after taking into consideration of the remand report and the replies of the assessee and rightly deleted the additions in dispute, which does not need 6 any interference. Therefore, he requested to dismiss the Revenue’s appeal by upholding the order of the Ld. CIT(A), Gwalior. 6. We have heard both the parties and perused the impugned order of the Ld. CIT(A) and found that Ld. CIT(A) has elaborately discussed the issues in dispute and deleted the additions. 6.1 So far as addition of Rs. 1,37,35,000/- is concerned, we note that the assessee has surrendered Rs. 5,28,50,428/- in the assessment year 2012-13 and a sum of Rs. 2,12,96,080/- in the assessment year 2013-14 which the Ld. CIT(A) has taken into consideration that while making the offer of Rs. 5,28,50,428/- as additional income by the assessee, entries in Annexure-D of the impounded material has also been considered and after taking into consideration the additional income offered by the assessee which was on the basis of peak level of Hulyati book, which fact has not been disputed by the AO in the remand report, thus, the addition of Rs. 1,37,35,000/- which is covered by the additional income offered by the assessee has been rightly deleted by the Ld. CIT(A), by relying upon the various decisions mentioned in his order, which in our opinion does not need any interference on our part. Therefore, we affirm the finding of the Ld. CIT(A) on the issue in dispute and dismiss the ground no. 1 raised by the Revenue. 6.2 As regards addition of Rs. 3,33,76,791/- is concerned, we note that Ld. CIT(A) on the basis of remand report filed by the AO and the rejoinder thereof 7 has observed that after taking into consideration the additional income offered by the assessee which was on the basis of peak amount calculated and after taking into consideration the entire documents seized during the survey which is covered by the additional income offered by the assessee, the addition made by the AO of Rs. 3,33,76,791/- has been rightly deleted by the Ld. CIT(A), by relying upon the various decisions mentioned in his order, which does not need any interference on our part. Hence, we affirm the finding of the Ld. CIT(A) on the issue in dispute and dismiss the ground no. 2 raised by the Revenue. 6.3 As regards addition of Rs. 1,25,85,150/- on account of disallowance u/s. 40A(3) of the Act is concerned, we note that the provisions of section 40(a)(ia) and section 40A((3) is applicable only if the assessee has claimed the cash payment as expense, however, in the instant case the assessee has not claimed the payment of Rs. 1,25,85,510/- as expenses and this submission has not been disputed by the AO in the remand report. Hence, by relying upon the decision of the CIT vs. Alfa Toyo Ltd. (2008) 174 Taxman 427, of the Hon’ble Punjab and Haryana High Court by the Ld. CIT(A), wherein it has been held that the provision of section 40A(3) does not apply to repayment of loan in cash because the loan repayment is of capital nature. Hence, the addition of Rs. 1,28,85,510/- was not justified and therefore, has been rightly deleted by the Ld. CIT(A), which does not need any interference on our part. Hence, we affirm the finding 8 of the Ld. CIT(A) on the issue in dispute and dismiss the ground no. 3 raised by the Revenue. 6.4 As regards addition of Rs. 1,54,36,879 is concerned, we note that the AO has given the detailed working of amount of Rs. 1,54,36,879/- in Annexure-’B’ of the assessment order. We further note that the assessee has considered the entries in cash delivery which is part of Hulyati book while working out the amount surrendered as income and this fact has not been disputed by the AO in the remand report. Hence, the addition made by the AO of Rs. 1,54,36,879/- is not tenable and thus has been rightly deleted by the Ld. CIT(A), by relying upon the various decisions mentioned in his order, which does not need any interference on our part. Hence, we affirm the finding of the Ld. CIT(A) on the issue in dispute and dismiss the ground no. 4 raised by the Revenue. 7. In the result, the Revenue’s Appeal is dismissed in the aforesaid manner. Order pronounced on 13/09/2023. Sd/- Sd/- (ANUBHAV SHARMA) (SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTANT MEMBER SRB Copy forwarded to:- 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR, ITAT Assistant Registrar