MAHAVIR KUMAR JAIN, UJJAIN V. I.T.O. 1(1), UJJAIN

ITA 424/Ind/2023

• Counselvise Citation: [2024] 101 COUNSELVISE.COM (IT) 6812 (ITAT-INDORE)
• Duration Of Justice: 6 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-05-2024
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: DB
• Next Hearing Date: 29-05-2024
• Assessment Year: 2015-2016
• Appeal Filed On: 31-10-2023
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained investment; Peak credit; Bonafide belief; Period of limitation
• Section: 69; 148; 271(1)(c); 133A; 234B

Judgement Text

आयकर अपील य अ धकरण, इंदौर यायपीठ, इंदौर IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI B.M. BIYANI, ACCOUNTANT MEMBER ITA Nos.419 to 424/Ind/2023 (Assessment Years: 2009-10 & 2010-11, 2012-13 to 2015-16) Mahavir Kumar Jain D-27, V.D. Cloth Market Fajalpura Ujjain Vs. ITO 1(1) Ujjain (Appellant / Assessee) (Respondent/ Revenue) PAN: ABNPJ7754Q Assessee by Shri Ashish Goyal & N.D. Patwa, ARs Revenue by Shri Ashish Porwal, Sr. DR Date of Hearing 30.05.2024 Date of Pronouncement 31.05.2024 O R D E R Per Vijay Pal Rao, JM : These six appeals by the assessee are directed against composite order of Commissioner of Income Tax (Appeals) dated 23.06.2022 and 04.05.2023 for A.Y. 20091-0, 2010-11, 2012-13 to 2015-16 respectively. ITANos.419 TO 424/Ind/2023 Mahavir Kumar Page 2 of 11 2. There is a delay of 436 days in filing the appeals for A.Y.2009- 10 & 2010-11 and a delay of 121 days in filing the appeals for A.Y.2012-13 to 2015-16. The assesse has filed application for condonation of delay which is supported by the affidavit of the assessee. Ld. AR of the assessee has submitted that the substantive addition was made in the hands of Shri Manish Kothari, President of the Society, Vardhman Sakh Sahakarita Maryadit Ujjain and protective addition was made in the hands of the assessee. The CIT(A) has confirmed the substantive addition in the hands of Manish Kothari and protective addition in the hands of assessee thereafter, in the case of Manish Kothari the substantive addition has been deleted by this Tribunal and it was held that the income on account of unexplained cash deposit in the bank account of the Vardhman Sakh Sahakarita Maryadit Ujjain be assessed in the hands of the society though, the said addition was restricted to peak credit. Therefore, the assessee was under bonafide belief that once the substantive addition has been deleted by the Tribunal in the hands of Manish Kothari then a protective addition made in the hands of the assessee would be deleted by the AO as a consequence of the Tribunal order. The assessee filed a rectification application u/s 154 before the AO and thus the assessee did not file any appeal against the impugned orders of the CIT(A). The Ld. AR has thus submitted that since there was no tax demand involved as a result of protective addition the assessee was advised that the protective addition would be deleted in the hands of the assessee and thus the assessee acting on the bonafide advice did not file any appeal before ITANos.419 TO 424/Ind/2023 Mahavir Kumar Page 3 of 11 this Tribunal. Ld. AR has submitted that the delay in filing the appeal is neither willful nor deliberately but due to the reasons that the assesse was advised that no addition would survive in the hands of the assessee once the substantive addition was deleted by the Tribunal. Thereafter the assessee was advised that the only remedy now left with the assesse is to file the appeal before the Tribunal to get these protective additions deleted. Hence, the assessee has filed these appeals belatedly. Ld. AR has submitted that the delay in present appeals occurred due to bonafide belief of the assessee and acted on the advice of the tax consultants therefore, the delay is purely due to lack of understanding without any malafide intention for filing the appeals belatedly. He has pleaded that the delay in filing the appeals may be condoned. 3. On the other hand, Ld. DR has submitted that the delay in filing the appeals for A.Y.2009-10 & 2010-11 is inordinary delay of more than 400 days and therefore, the assessee cannot taken the excuse of lack of knowledge of law. 4. We have considered rival submission as well as relevant material on record. The assessee has explained cause of delay that after order of this tribunal dated 11.02.2021 the substantive addition in the hands of Manish Kothari was deleted and ordered substantive addition in the hands of the society. In view of the said development the assessee was advised that the protective addition would not survive once the corresponding substantive addition has been deleted by tribunal. Therefore, the assessee has acted on the ITANos.419 TO 424/Ind/2023 Mahavir Kumar Page 4 of 11 bonafide advice and believed that the protective addition made in the hands of the assessee would be deleted by tax authorities after substantive addition was deleted by tribunal and the income was directed to be assessed in the hands of the society. All these facts as explained by the assessee as a cause of delay in filing the appeal are not in dispute and therefore, there was a bonafide reason with the assessee to believe that the protective addition having no tax impact would be deleted by the AO in pursuant to the order of the tribunal deleting substantive addition in the hands of Shri Manish Kothari and directing the assessment of the said income in the hands of the society. The assesse also took steps in this respect by filing a rectification application u/s 154 before the AO but no avail. Thus, it is clear that by filing these appeals belatedly there was no malafide intention to take any undue advantage by assessee. The assessee has acted on the advice of the tax consultant for not filing the appeal within the period of limitation and therefore, in the facts and circumstances of the case where the protective addition made by the AO has not resulted any tax demand against the assessee the delay in filing these appeals is not found to be deliberate or due to negligence or on account of malafide on the part of the assesse. Accordingly having regard to peculiar facts of this case and in the interest of justice we condoned the delay in filing these appeals. 5. The assessee has raised common grounds in these appeals. The grounds raised for A.Y.2010-11 are reproduced as under: ITANos.419 TO 424/Ind/2023 Mahavir Kumar Page 5 of 11 “1. The delay in filing in appeal may please be condoned since the assesse was under the bonafide belief that the protective assessment would automatically be cancelled since the Hon. Tribunal has upheld the substantive assessment. 2. The Ld. CIT (A) NFAC has erred in passing the order ex-parte since majority of the notices were uploaded on portal during the pandemic period. No proper opportunity was given and hence the order passed by the Ld. CIT (A) NFAC is bad in law. 3. The Ld. CIT (A) NFAC has erred in upholding the addition of Rs.182295/- being the addition made on protective basis for transaction of Vardhman Sakh Sahkarita Maryadit Ujjain (herein after referred to as Vardhman Society). 4. It was proved before the Ld. AO that the assesse did not have any transaction with the said Vardhman Society. The addition made on protective basis is bad in law. The Hon. Tribunal has confirmed the substantive addition in the case of Vardhman Society and as such the addition upheld in the hands of the assessee is bad in law and hence be deleted. 5. In majority of the cases the Ld. CIT (A) has deleted the addition made on the protective basis. 6. The Ld. CIT (A) NFAC has erred in upholding the addition of Rs. 4,926/- being 5% gross profit on the transaction with Vardhman Society. 7. The additions made by the Ld. AO and upheld by the Ld. CIT (A) NFAC may please be deleted.” 6. At the time of hearing Ld. Counsel for the assessee has stated at bar the assessee does not press ground no.2 for all the assessment years and ground no.6 for A.Ys.2010-11 to 2015-16 as no ground no.6 is raised for A.Y.2009-10. Therefore, the Ld. Counsel pleaded that these grounds may be dismissed as not pressed. Ld. DR has raised no objection if ground no.2 & 6 of the ITANos.419 TO 424/Ind/2023 Mahavir Kumar Page 6 of 11 assesse’s appeals are dismissed being as not pressed. Accordingly ground no.2 & 6 of the assesse’s appeals are dismissed being not pressed. 7. The effective grounds which are pressed by the assessee are ground no.3 to 5. Thus, the solitary common issues raised by the assessee in these appeals are regarding an addition on protective basis made by the assessee on account of cash deposit transactions with Vardhman Sakh Sahkarita Maryadit Ujjain. The AO made protective addition of the amounts found in the pocket diary during the survey proceedings in case of Vardhman Sakh Sahkarita Maryadit Ujjain and the substantive addition was made in the hands of Shri Manish Kothari, President of the said society. The assessee challenged the action of the AO before the CIT(A) who has confirmed the protective addition in the hands of the assessee on the ground that the substantive addition was also confirmed in the hands of Shri Manish Kothari, President of Vardhman Sakh Sahkarita Maryadit Ujjain. 8. Before the Tribunal Ld. AR of the assessee has submitted that in case of Shri Vardhman Sakh Sahkarita Maryadit Ujjain as well as Manish Kothari in ITANo.286 to 289/Ind/2018 and in ITAT No.719 to 722/Ind/2017 & 862 to 865/Ind/2018 this tribunal vide order dated 11.02.2021 has held that the addition on account of these cash deposits is liable to be made in the hands of the society and not in the hands of Shri Manish Kothari. He has then referred to the decision of this Tribunal in case of Smt. Sonal Chhablani vs. ITO ITANos.419 TO 424/Ind/2023 Mahavir Kumar Page 7 of 11 in ITANo.17/Ind/2013 wherein he Tribunal vide order dated 31 st May 2023 after considering earlier decision of the Tribunal in case of Shri Manish Kothari & Vardhman Sakh Sahkarita Maryadit Ujjain has deleted the addition made on protective basis in the hands of the said assessee Smt. Sonal Chhablani. Thus, Ld. AR has submitted that this issue is now covered by decision of this Tribunal dated 31.05.2023 wherein the identical protective addition was made by the AO on the basis of the same survey proceedings and entries in the pocket diary found from Vardhman Sakh Sahkarita Maryadit Ujjain has been deleted by this Tribunal. 9. On the other hand, Ld. DR has relied upon orders of the authorities below. 10. We have considered rival submission as well as relevant material on record. The AO has made protective addition for all these six years on account of cash deposit of the respective amounts as per the entries in the pocket diary found during the survey of Vardhman Sakh Sahkarita Maryadit Ujjain and a substantive addition was made by the AO in the hands of Manish Kothari, President of the said society. The CIT(A) has upheld the protective addition in the hands of the assessee on the ground that the First Appellate Authority has confirmed the substantive addition in the hands of Shri Manish Kothari. However, on further appeal this tribunal vide order dated 11.02.2021 in case Vardhman Sakh Sahkarita Maryadit Ujjain as well as Manish Kothari vs. ITO (supra) has held that the said income on account of unexplained ITANos.419 TO 424/Ind/2023 Mahavir Kumar Page 8 of 11 cash deposit is liable to be assessed in the hands of the society by taking peak credit and not in the hands of Shri Manish Kothari, President of the society. After the said decision of the Tribunal an identical issue has been considered by this tribunal in case of Smt. Sonal Chhablani vs. ITO (supra) vide order dated 31 st May 2023 in para 4 to 7 as under: “4. Having considered the rival submissions and carefully perusal of the record, we note that the AO reopened the assessment of the assessee by issuing notice dated 29.03.2016 u/s 148 of the Act on the basis of details and record impounded during the survey u/s 133A of the Act carried out by DIT, Bhopal at the premises of Vardhman Sakh Sahakarita Maryadit, Ujjain on 29.09.2014. During the survey proceeding pocket note book marked as BI-1 was impounded having entries of cash deposits including Rs.16,26,110/- in the name of the assessee. The AO has made addition of the said amount as under: “1. During the survey proceedings a pocket note book BI-1 was found and impounded in which entries from 14.03.2009 to 23.04.2009 were found in the names of different persons of different amounts, for the same the then manager of the Society Shri Nitin Saini stated that in this note the name of persons entered who have deposited cash with the society and got cheques/DD issued to names of outstation traders. In this pocket note book entry an amount of Rs.16,26,110/- was also found in the name of the assessee, the same was asked to explain. However, the assessee has stated that she has not made any financial transactions with the society Vardhman Sakah Sahakarita Maryadit, Ujjain, during the year under consideration but he could not explain the entries in the pocket note book as BI-1 found and impounded during the course of survey at the premises of Vardhman Sakh Sahakarita, Maryadit, Ujjain. Therefore, an amount of Rs. 16,26,110/- is added to the total income of the assessee protectively as the same has to be added substantively in the hands of Shri Manish Kothari, the then president Vardhman Sakh Sahakarita Maryadit, Ujjain. Penalty proceedings u/s 271(1)(c) are being initiated for which notice shall be issued separately 5. Thus, it is clear that these were the entries found in the pocket diary as cash deposit in the name of different persons including the assessee. The assessee denied to have made any financial transactions with the society or deposit of any cash with the society. The AO consequently made addition of Rs.16,26,110/- on protective basis as a substantive addition of the said amount was made in the hands of Shri Manish Kothari, the president of Vardhman Sakh Sahakarita Maryadit, Ujjain. The assessee ITANos.419 TO 424/Ind/2023 Mahavir Kumar Page 9 of 11 challenged the action of the AO before the Ld. CIT(A) however, the appeal of the assessee was dismissed in limine for non-prosecution. 6. At the outset, we find that this tribunal in case of ITO vs. Vardhman Sakh Sahakarita Maryadit, along with the case of Manish Kothari vs. ITO (supra) has deleted the substantive addition made in the hands of Shri Manish Kothari are as under: “29. Now we take up the appeals of the assessee namely Shri Manish Kothari for Assessment Year 2008-09 to 2015-16 vide ITA No.719 to 722/Ind/2017 & 862 to 86/Ind/2019. Though the assessee has raised detailed grounds of appeal challenging the relevant finding of Ld. CIT(A), however they can be summarized in to following effective grounds:- (i) Challenging the reopening of the completed assessments for Assessment Years 2008-09 to 2015-16; (ii) Challenging the substantive addition for unexplained investment u/s 69 of the Act made for the alleged cash ITA Nos. 286 to 289/Ind/2018 ,719 to 722/Ind/2017 & 862 to 865/Ind/2019 Shri Vardhman Sakh Sahakarita Maryadit & Manish Kothari deposits in the bank account of the society namely Shree Vardhman Sakh Skarita Maryadit. The yearwise addition is mentioned below:- ASST.YEAR AMOUNT 2008-09 9,23,93,228/-) 2015-16 13,90,35,137/- (A.Y. 2009-10) 17,69,03,922/- (A.Y 2010-11) 26,21,59,360/- (A.Y 2011-12) 34,48,78,938 & 2,53,43,026 (37,02,21,964) (A.Y 2012-13) 36,54,12,434 & 15,85,15,839 (52,39,28,273) (2013-14) 65,07,34,968 & 9,42,00,954 (2014-15) 35,16,71,541 & 14,14,62,089 (49,31,33,63) (A.Y 2015-16) (iii) Additions made on the basis of documents found during the course of survey u/s 133 A of the Act at the premises of assessee Shri Manish Kothari. (iv) Apart from the above the remaining grounds are either consequential in nature relating to interest u/s 234A & 234B of the Act or premature and others are general in nature. 30. As regards the first common issue challenging the reassessment proceedings and the issuance of notice u/s 148 of the ITA Nos. 286 to 289/Ind/2018 ,719 to 722/Ind/2017 & 862 to 865/Ind/2019 Shri Vardhman Sakh Sahakarita Maryadit & Manish Kothari Act commonly raised for all the assessment years 2008-09 to 2015- 16, at the outset Ld. Sr. Counsel for the assesee requested for not pressing this legal ground. Since the legal ground challenging the reopening of the assessment and the legality of issuance of notice u/s 148 of the Act is not pressed the same is dismissed as not pressed. 31. Now we take up second common issue for the substantive addition confirmed in the hands of the assessee for the unexplained investment u/s 69 of the Act made for the alleged cash deposit in the bank account of the society namely Shree Vardhman Sakh Skarita Maryadit of which the assessee is holding the post as President. We observe that the impugned additions of Rs 9,23,93,228/-, Rs. 13,90,35,137/-, Rs. 17,69,03,922/-, ITANos.419 TO 424/Ind/2023 Mahavir Kumar Page 10 of 11 Rs.26,21,59,360/-, Rs. 37,02,21,964/- (Rs. 34,05,94,493 & Rs.2,53,43,026/)-, Rs. 52,39,28,273/- (Rs. 36,54,12,434/- & Rs. 15,85,15,839/-), Rs.74,49,35,922/- (Rs.65,07,34,968/- & Rs.9,42,00,954/-) and Rs.49,31,33,630/- (Rs.35,16,71,541/- & Rs.14,14,62,089/-) for Assessment Years 2008-09 to 2015-16 respectively was made by the Ld. A.O to the income of the assessee ITA Nos. 286 to 289/Ind/2018 ,719 to 722/Ind/2017 & 862 to 865/Ind/2019 Shri Vardhman Sakh Sahakarita Maryadit & Manish Kothari on account of cash deposited in the bank account of the society namely Shree Vardhman Sakh Skarita Maryadit. Protective addition was made in the hands of the society and the substantive addition was made in the hands of the assessee for unexplained investment u/s 69 of the Act. 32. We observe that while adjudicating the revenue's appeal in the case of assessee namely Shree Vardhman Sakh Skarita Maryadit we have already dealt with this issue and have held that firstly the addition if any to be made for the alleged cash deposits in the bank account of the society are to be made only in the hands of the society and not in the hands of the office bearer namely Shri Manish Kothari since the society is a "seperately legal entity" having its Permanent Account Number and working under the registered bye laws since last many years. Secondly we have held that the alleged transactions of cash deposits and corresponding entries of cheque issued were not in the nature of any business activity but it was a mere facilitation services being provided by the society to its members and other persons in lieu of service charge at Rs.100/- per lakh and thirdly the addition for the alleged cash deposits ITA Nos. 286 to 289/Ind/2018 ,719 to 722/Ind/2017 & 862 to 865/Ind/2019 Shri Vardhman Sakh Sahakarita Maryadit & Manish Kothari should be higher of the two namely peak bank balance during the year or the services charged at Rs.100 per lakh on the alleged cash deposit during each of the year. 33. In view of our above findings we hereby hold that all the additions made on substantive basis in the hands of the assessee u/s 69 of the Act for unexplained cash deposits at Rs 9,23,93,228/- , Rs. 13,90,35,137/-, Rs. 17,69,03,922/-, Rs.26,21,59,360/-, Rs. 37,02,21,964/- (Rs. 34,05,94,493 & Rs.2,53,43,026/)-, Rs. 52,39,28,273/- (Rs. 36,54,12,434/- & Rs. 15,85,15,839/-), Rs.74,49,35,922/- (Rs.65,07,34,968/- & Rs.9,42,00,954/-) and Rs.49,31,33,630/- (Rs.35,16,71,541/- & Rs.14,14,62,089/-) for Assessment Years 2008-09 to 2015-16 respectively deserves to be deleted. We accordingly order so and delete the impugned addition made by Ld. A.O for unaccounted investment made u/s 69 of the Act for Assessment Year 2008-09 to Assessment Year 2015-16 in the hands of assessee namely Manish Kothari. However we would like to make it clear that our this decision of deleting the additions made in the hands of the assessee for Assessment Year 2008-09 to Assessment Year 2015-16 with regard to the alleged cash deposit in ITA Nos. 286 to 289/Ind/2018 ,719 to 722/Ind/2017 & 862 to ITANos.419 TO 424/Ind/2023 Mahavir Kumar Page 11 of 11 865/Ind/2019 Shri Vardhman Sakh Sahakarita Maryadit & Manish Kothari the bank account held in the name of society shall have no bearing on the additions made by the Ld. A.O but which have not been agitated or challenged by the assessee before Ld. CIT(A) or before us. We accordingly order so and allow this common ground of appeal raised by the assessee for Assessment Years 2008-09 to 2015-16.” 7 Accordingly when the substantive addition is deleted by this tribunal then the protective addition made in the hands of assessee will not survive and consequently the same is deleted.” 10.1 Thus, when the substantive addition in the hands of Shri Manish Kothari was deleted by Tribunal then the protective addition in the hands of these individuals would not survive. Accordingly by following earlier decisions of the Tribunal in case of Smt. Sonal Chhablani vs. ITO (supra) the protective addition made in the hands of the assessee for all these years is deleted. 12. In the result, All appeals of the assessee are partly allowed. Order pronounced in the open court on 31.05.2024. Sd/- Sd/- (B.M. BIYANI) (VIJAY PAL RAO) Accountant Member Judicial Member Indore,_ 31 .05.2024 Patel/Sr. PS Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order UE COPY Sr. Private Secretary Income Tax Appellate Tribunal Indore Bench, Indore