ITO, Ward-1, Anand V. Shri Pravinbhai Jayantibhai Kapasi, Anand

ITA 431/AHD/2019

AI Insights

The case revolves around an appeal by the Revenue against the decision of the CIT(A) which had deleted the addition of Rs. 15,50,000 to the income of Shri Pravinbhai Jayantibhai Kapasi, the respondent. This amount was initially added by the AO following a search and seizure operation under section 132 of the Income Tax Act, 1961, where cash was recovered from the respondent's premises. The AO later rectified this addition under section 154, believing there was a mistake in the original assessment order. The CIT(A) found that the cash represented the application of undisclosed income of M/s M.K. Ceramics, a partnership firm, and thus deleted the addition. The Tribunal upheld the CIT(A)'s decision, emphasizing that the rectification did not qualify as a mistake apparent from the record.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 134519 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 9 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-01-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 01-01-2023
• Assessment Year: 2011-2012
• Appeal Filed On: 12-03-2019
• Other Referred Cases: PCIT v/s Aura Securities Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Search and seizure; Opportunity of being heard
• Section: 132; 143(3); 69A; 153C

Judgement Text

आयकर अपीलीय अिधकरण, अहमदाबाद ᭠यायपीठ IN THE INCOME TAX APPELLATE TRIBUNAL, ‘’ A” BENCH, AHMEDABAD BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER And MS MADHUMITA ROY, JUDICIAL MEMBER आयकर अपील सं./ITA No.431/AHD/2019 िनधाᭅरण वषᭅ/Asstt. Year: 2011-2012 Income-tax Officer, Ward-1, Anand. Vs. Shri Pravinbhai Jayantibhai Kapasi, 37, Vaishnav Township, Anand Bakrol Road, Anand. PAN: AEMPK9056N (Applicant) (Respondent) Revenue by : Shri Mukesh Sharma, Sr.D.R Assessee by : Shri Parin Shah, A.R सुनवाई कᳱ तारीख/Date of Hearing : 02/01/2023 घोषणा कᳱ तारीख /Date of Pronouncement: 11/01/2023 आदेश/O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: The captioned appeal has been filed at the instance of the Revenue against the order of the Learned Commissioner of Income Tax (Appeals)-11, Ahmedabad dated 20/12/2018 arising in the matter of assessment order passed under s. 143(3) of the Income Tax Act, 1961 (here-in-after referred to as "the Act"), relevant to the Assessment Year 2011-2012. ITA no.431/AHD/2019 A.Y. 2011-12 2 2. The Revenue has raised the following grounds of appeal: 1. On the facts and circumstances of the case and in law, the learned CIT(A) has erred in deleting the addition made by the AO by no appreciating the fact that the assessee has failed to substantiate the source of cash found from his possession and therefore, the AO was right in taxing the amount in the hands of assessee as per the provisions of section 69A of the Income-tax Act, 1961. 2. On the facts and circumstances of the case in law, the Ld.CIT(A) has erred in deleting the addition made by the AO of Rs.15,50,000/- on account of cash found from the assessee’s premises during the search proceedings, by not appreciating the findings of the AO in order u/s.154 of the Income Tax Act,1961. 3. The appellant craves leave to add, modify, amend or alter any grounds of appeal at the time of, or before, the hearing of appeal. 3. The only interconnected issue raised by the Revenue is that the Ld. CIT(A), erred in deleting the addition made by the AO for Rs. 15,50,000/- on account of cash found during the search proceedings from the premises of the assessee. 4. The briefly stated facts are that the assessee in the present case is an individual and was subject to search and seizure operation u/s 132 of the Act, dated 26/10/2010. In the course of search, the cash of Rs. 16,48,850/- was recovered from the premises of the assessee. On question by the AO in the notice issued u/s 142(1) of the Act, the assessee vide letter dated 22/02/2013 replied that out of such cash, the sum of Rs. 98,850/- belongs to the family members and balance amount of Rs. 15,50,000/- belongs to the partnership firm namely M/s MK Ceramics. As per the assessee the element of cash found from his premises has been considered in the assessment proceedings initiated in case of M/s MK Ceramics under the provision of section 153C of the Act, therefore, the amount of cash to the tune of Rs. 15,50,000/- cannot be added to the total income of the assessee. The AO in the assessment framed u/s 143(3) of the Act, after considering the submission of the assessee has not made any addition on account of cash found from the premises of the assessee in his order dated 2/02/2013. ITA no.431/AHD/2019 A.Y. 2011-12 3 5. However, the AO subsequently found that the element of cash found from the premises of the assessee for Rs. 15,50,000/- has not been accepted by the partnership firm namely M/s MK Ceramics in the assessment framed for the Assessment Years 2005-06 to 2011-12. Thus, the AO was of the view that there is a mistake apparent from the record, crept in the order which requires to be rectified u/s 154 of the Act. Accordingly, the AO sought an explanation from the assessee by issuing notice u/s 154 of the Act, dated 08/01/2015. The assessee in response to such notice reiterated his submission as made during the assessment proceedings by contending that the cash belongs to the firm namely M/s. MK Ceramics which has been duly considered in the assessment of M/s M.K. Ceramics. 5.1 Nevertheless, the AO found that the element of cash has not been owned up by M/s M.K. Ceramics and therefore the cash found during search has not been explained by the assessee. As such the cash represents unexplained money u/s 69A of the Act. Thus, the AO made the addition of Rs. 15,50,000/- to the total income of the assessee in the order passed u/s 154 of the Act, dated 07/06/2015. 6. Aggrieved assessee preferred an appeal before the Ld. CIT(A). 7. The assessee before the Ld. CIT(A), submitted that there was undisclosed turnover of the partnership firm which has been assessed to tax in the Assessment Years 2005-06 to 2011-12 in the assessment framed u/s 153C of the Act. It was the contention of the assessee that his son Shri Kamal Kapasi was acting as a manager in the firm M/s M.K. Ceramics, and he was maintaining records and other documents of the undisclosed/unaccounted business activity of the firm. This fact was also admitted in the assessment framed u/s 153C of the Act, in case of M/s. M.K. Ceramic. As such, the income determined in the assessment framed u/s 153C of the Act represent the cash available with the assessee. To this effect, the assessee furnished the necessary details of the income offered by the firm i.e. M/s M.K. ITA no.431/AHD/2019 A.Y. 2011-12 4 Ceramic in different Assessment Years which is placed on page 3 of the CIT(A) order. The Ld. CIT(A), after considering the submission of the assessee has deleted the addition made by the AO by observing as under : 5. Submission of the appellant and order u/s.154 of the Act have been carefully considered. The appellant filed return of income on 29.3.2013 showing income of Rs.2,25,650/. The assessment u/s. 143(3) of the Act was completed on 28.2.2013 and returned income was accepted. The AO found later on that during the course of search on 16.10.2010 at appellant's premises, cash of Rs.16,48,850/- was found out of which 15.50 lakhs were seized. The appellant stated that this money belong to M/s. M.K. Ceramics and the same has been offered by M/s. M.K. Ceramics in the return of income filed u/s.153C of the Act. However, the AO noticed that M/s. M.K. Ceramics did not show the cash found during the course of search at appellant's premises as its income and therefore, after giving opportunity of being heard, the appellant passed order u/s. 154 of the Act considering cash of Rs.15.50 lakhs as income of the appellant. The appellant is in appeal against the above mentioned order. The appellant contended that the return of income filed has been accepted by the AO while passing the order u/s. 143(3) of the Act, in which the appellant's contention that the cash found during the course of search belong to M/s. M.K. Ceramics, was accepted and no addition was made. That was the decision of the AO after application of mind, hence, this addition cannot be made by passing the order u/s. 154 of the Act, as it is not a mistake apparent from the record. On going through the facts of the case, the contention of the appellant is found factually correct that it is not a mistake apparent from record which can be rectified by passing order u/s.154 of the Act. Hence, additions made by the AO by passing order u/s.154 are deleted. 5.1 Moreover, it is a fact that the appellant stated that his son was working as manager with M/s. M.K. Ceramics and the cash belong to M/s. M.K. Ceramics. His statement was accepted by the AO while passing the order u/s. 143(3) of the Act. Regarding non showing of this income by M/s. M.K. Ceramics, the appellant contended that M/s, M.K. Ceramics has shown profit on unaccounted sales for various years as mentioned below > - A.Y. Unaccounted turnover as per seized document Profit on unaccounted turnover disclosed in the return of income filed u/s. 153C 2005-06 28,97,047 5,79,409 2006-07 43,65,598 8,73,120 2007-08 42,10,656 8,42,131 2008-09 70,98,672 14,19,734 2009-10 77,52,118 15,50,424 2010-11 80,05,255 16,01,051 2011-12 36,23,119 7,24,624 Total 3,79,52,465 75,90,493 ITA no.431/AHD/2019 A.Y. 2011-12 5 The assessment of M/s. M.K. Ceramics made by the AO and the income offered by the appellant was accepted. The cash found from the appellant's premises against the total income at Rs.75.90 lakhs returned by M.K. Ceramics. Therefore, it stand explained, hence, additions may be deleted. On going through the submissions of the appellant and orders of M/s. M.K. Ceramics filed alongwith the submission, it is found that M/s. M.K. Ceramics returned income of Rs.75.90 lakhs on unaccounted turnover of Rs.3.79 crores from A.Y. 2005-06 to A.Y. 2011-12. Hence, cash found during the course of search is application of the income disclosed, hence, additions made by the AO are deleted. This ground of appeal is allowed. 8. Being aggrieved by the order of the Ld. CIT(A), the Revenue is in appeal before us. 9. The Ld. DR, before filed a paper book running from pages 1 to 26 and contended that the assessee in the statement furnished u/s 132 of the Act, has nowhere stated that the cash belongs to the partnership firm M/s M.K. Ceramics. Thus, the contention of the Ld. AR cannot be accepted in view of the fact that the cash has not been own up by the partnership firm. 9.1 The Ld. DR in support of his contention drew our attention on pages 12 and 13 of the paper book where the relevant portion of the statement recorded u/s 132(4) of the Act, was placed. 10. On the contrary, the Ld. AR submitted that the mistake which can be rectified u/s 154 of the Act, are limited to the glaring, patent mistake and not those mistake where long drawn process is to be adopted. 10.1 The Ld. AR further submitted that the undisclosed turnover was worked out in the case of M/s M.K. Ceramics and accordingly the income was determined to the ITA no.431/AHD/2019 A.Y. 2011-12 6 tune of Rs. 75,90,493/- of the firm pertaining to the different Assessment Year. The cash found from the premises of the assessee represents the application of the undisclosed income of the firm and therefore, no separate addition is warranted. 11. Both the Ld. DR and the Ld. AR vehemently supported the order of the authorities below as favourable to them. 12. We have heard the rival contentions of both the parties and perused the materials available on record. The Hon’ble High Court of Gujarat in the case of PCIT v/s Aura Securities Ltd. reported in 96 taxmann.com 417 has held as under: “When the original assessment order was passed the same was after long drawn process of reasoning and as per catena of decisions powers under Section 154 of the Income Tax Act are not required to be exercised. As rightly observed, powers under Section 154 of the Income Tax Act can be exercised only when the mistake, which is sought to be rectified is an obvious mistake, which is apparent from the record and not a mistake, which is required to be established by long drawn process of reasoning on points. Under the circumstances, in the facts and circumstances of the case and considering the original assessment order passed by the learned Assessing Officer as well as the subsequent order passed by the learned Assessing Officer under Section 154 of the Income Tax Act, we see no reason to interfere with the impugned order passed by the learned Tribunal. No substantial question of law arises in the present Tax Appeal. Under the circumstances, present Tax Appeal deserves to be dismissed and is accordingly dismissed.” 12.1 From the above judgment, it is apparent that the provision of section 154 of the Act, can be invoked in case there is a mistake which is apparent from the record and about the same two views are not possible. In the case on hand, the AO in the rectification proceedings u/s 154 of the Act, has made independent addition which was not consciously made while framing assessment u/s 143 of the Act. Thus, can such mistake be said as a mistake apparent from the record? Admittedly, a long drawn process is required to be adopted to reach to the conclusion where the cash found from the premises of the assessee representing the unexplained money u/s 69A of the Act, in the given facts and circumstances. ITA no.431/AHD/2019 A.Y. 2011-12 7 12.2 Even on merit, we note that the assessee in the statement furnished u/s 132(4) of the Act, has categorically stated about the documents found during the search proceedings that the same represent the undisclosed transaction of the firm namely M/s. M.K. Ceramics based on that undisclosed income of the firm was determined. Therefore, the AO has taken one of the possible view for holding that such undisclosed cash represent the application of undisclosed income determined in the hands of the firm. 12.3 In view of the above, and after considering the facts in totality we do not find any reason to interfere in the order of the Ld. CIT(A). Hence, the ground of appeal of the Revenue is hereby dismissed. 13. In the result, the appeal filed by the Revenue is hereby dismissed. Order pronounced in the Court on 11/01/2023 at Ahmedabad. Sd/- Sd/- (MADHUMITA ROY (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER (True Copy) Ahmedabad; Dated 11/01/2023 Manish