Manoj Kishorkumar Gurlani, Ahmedabad V. The Dy. CIT, Central Circle-2(2), Ahmedabad

ITA 461/AHD/2023

• Counselvise Citation: [2023] 101 COUNSELVISE.COM (IT) 9561 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-12-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: SMC
• Next Hearing Date: 04-10-2023
• Assessment Year: 2020-2021
• Appeal Filed On: 04-06-2023
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Income from undisclosed sources; Principle of natural justice
• Section: 132; 142(1); 143(2); 69A; 44AB; 22

Judgement Text

ITA No.461/Ahd/2023 Assessment Year: 2020-21 Page 1 of 5 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “SMC” BENCH, AHMEDABAD BEFORE Ms. SUCHITRA KAMBLE, JUDICIAL MEMBER ITA No.461/Ahd/2023 Assessment Year: 2020-21 Manoj Kishorkumar Gurlani, Shop No.A-313, 3 rd Floor, City Centre – 1, Idgah Circle, Ahmedabad – 380 016. [PAN – AIPPG 7488 K] Vs. Dy. Commissioner of Income Tax, Central Circle – 2(2), Ahmedabad. (Appellant) (Respondent) Assessee by Shri S.K. Sadhwani, AR Revenue by Shri Sanjay Jain, Sr. DR Da te o f He a r in g 05.10.2023 Da te o f P ro n o u n ce m e n t 13.12.2023 O R D E R This appeal is filed by the Assessee against order dated 17.04.2023 passed by the CIT(A)-12, Ahmedabad for the Assessment Year 2020-21. 2. The Assessee has raised the following grounds of appeal :- “1.1 Ld. CIT(A) is unjustified and has erred both in law and on facts, in confirming the addition made by Ld. AO of Rs.17,30,200/- for cash found from possession of the appellant at Ahmedabad airport on 23.10.19 when he returned from Delhi, after completing his business trip, treating the same as unaccounted income, without appreciating the fact that no incriminating material was found from his possession. The impugned addition is solely founded on his statements recorded u/s. !31/132[4] on dt. 23.10.2019, in complete disregard of the explanation about source and audited books of account produced by the appellant. The cash belonged to the proprietary business concerns of M/s. Nanak Traders and M/s. Nanak Enterprise [Prop. Rekha Gurlani], regularly assessed to income tax and reflected in their books of accounts. 1.2 Ld. CIT(A) is unjustified and has erred in law, in not appreciating the fact that, Ld. AO before making the above addition, has not issued proper Show Cause Notice [SCN], in order to afford just and fair opportunity of explanation to the appellant. The SCN dt. 02.09.2021 issued by Ld. AO was not supported by any evidence/material, as required by para 4 of CBDT Instruction no.20/2015 and as per the ITA No.461/Ahd/2023 Assessment Year: 2020-21 Page 2 of 5 binding decision of jurisdictional Gujarat High Court in the case of Vageesh Umesh Jaiswal v/s. State of Gujarat [SCA No.19176 of 2021], brought to the kind notice of Ld. CIT(A). 1.3 The Ld. CIT (A) has not appreciated the fact that appellant has denied the admission of any of any undisclosed income in his statement recorded, by filing the affidavit executed on oath, immediately after he came to know that, in the assessment order addition is solely founded on selected portion of statement recorded u/s.132[4] on 23.10.19 at 11.15 pm, i.e. at late night hours, when appellant was exhausted and not taken proper rest and confined to the Airport for more than 22 hours for interrogation. Despite repeated requests by the appellant to the Ld AO, he was not provided with copies of his statements during the assessment proceedings, based on which addition is made. 1.4 Ld. CIT(A) is unjustified and has erred both in law and on facts, in confirming the above addition of Rs.17,30,200/- as an undisclosed income without appreciating the fact that the impugned assessment order has been passed by Ld. AO, without providing the appellant, information/documents/copies of statements recorded repeatedly requested by him and making the addition without providing the opportunity of personal/oral hearing specifically requested by the appellant. Thus, the impugned order is passed in violation of the principles of Natural Justice. 1.5 Without prejudice to the other grounds of appeals, Ld. CIT(A) is unjustified and has erred both in law and on facts, in treating the total amount of cash found of Rs.17,30,200/- as business income of appellant. In the appellate order, Ld. CIT(A) has held that amount of Rs.17,30,200/- found from appellant's possession was on account of undisclosed business of the handkerchief and liable to be taxed under the head of 'Income from business or profession' only and not as undisclosed investment under section 69A of the Act, as deemed income assessed by Ld. AO; Ld. CIT (A) ought to have appreciated the fact that gross receipts/turnover of the business do not constitute the income. 2. The appellant craves leave to add, amend, alter, edit, delete, modify, change all or any of the above grounds of appeal, which are without prejudice to each other, at the time of or before the hearing of the appeal.” 3. The assessee is engaged in the business of dealing/manufacturing of handkerchiefs in the name of proprietary concern M/s. Nanak Traders, since 2005. An information was received on 22.10.2019 from the Air Intelligence Unit, Delhi that the assessee Shri Manoj Kishorkumar Gurlani was carrying cash of Rs.17,30,200/- in his handbag. He was interrogated by the Income Tax ITA No.461/Ahd/2023 Assessment Year: 2020-21 Page 3 of 5 Department, Air Intelligent Unit, Ahmedabad, while coming from Delhi to Ahmedabad on 23.10.2019. During the course of proceedings, the assessee failed to substantiate the source of such cash found from his possession as per the observation made by the Assessing Officer in the Assessment Order. A warrant of authorisation under Section 132 of the Income Tax Act, 1961 was issued on 23.10.2019. The original return was filed on 13.02.2021 under Section 139(1) of the Act declaring total income at Rs.6,25,170/- by the assessee. Notice under Section 143(2) of the Act was issued and served to the assessee on 13.03.2021. Notice under Section 142(1) of the Act with detailed questionnaire was issued on 01.09.2021 and on subsequent dates/ In response to the same, the Ld. AR of the assessee appeared from time to time before the Assessing Officer. The assessee filed its reply on 06.09.2021. The Assessing Officer observed that the assessee failed to substantiate the source of cash found from this possession which was seized on 23.10.2019 by the Air Intelligent Unit of Income Tax Department. In response to the same, the assessee vide letter dated 05.04.2021 has sought copy of statement recorded under Section 131A of the Act. After taking cognisance of the submissions and the statement during the search, the Assessing Officer made addition of Rs.17,30,200/-under Section 69A being unaccounted cash seized from the possession of the assessee. 4. Being aggrieved by the Assessment Order, the assessee filed appeal before the CIT(A). The CIT(A) partly allowed the appeal of the assessee. 5. The Ld. AR submitted that the assessee after completing his business trip when he was returning from Delhi to Ahmedabad, cash balance of Rs.17,30,200/- belonging to proprietary business of M/s. Nanak Traders & M/s. Nanak Enterprise (Prop. Rekha Gurlani) which was seized by Income Tax Department at the Ahmedabad Airport. The assessee furnished the information/details//documents called and produced audited books of account/bills/vouchers vide submission dated 04.09.2021. The assessee has a turnover of Rs.663.97 Lakhs as per audited accounts furnished under Section 44AB of the Act. The Ld. AR submitted that due to limitation of turnover/profits and labour work involved in existing business of handkerchief coupled with competition, family was considering to expand the business by entering into the business of socks, napkins etc. As they ITA No.461/Ahd/2023 Assessment Year: 2020-21 Page 4 of 5 were having cash liquidity in business, assessee planned a business rip to Delhi to explore the possibility of expansion of business. The Ld AR further submitted that copy of statement recorded during the seizure was never provided to the assessee despite repeated requests. The Ld. AR further submitted that the assessee has retracted his statement which was coercively taken by the Authorities during the seizure. The assessee never admitted that the cash balance of Rs.17,30,200/- is unaccounted income from undisclosed source as same was dully reflected in the books of account of Nanak Traders and Nanak Enterprises and there was no incriminating material found from assessee’s possession and hence Section 69A is not applicable in assessee’s case. In alternate, the Ld. AR submitted that as per the decision of Hon’ble Gujarat High Court in the case of CIT vs. President Industries, 258 ITR 654, only 1% of the profit should have been added if the amount found to be unaccounted. The cash sales were never disputed by the CIT(A) as well as by the Assessing Officer. 6. The Ld. DR submitted that the assessee has not filed any details of buyers and in fact the sales were in credit. The post sales details were not reflected that the cash seized by the Income Tax Authorities during the seizure was accounted and reflected in the books of accounts. The Ld. DR relied upon the Assessment Order and the order of the CIT(A). 7. Heard both the parties and perused all the relevant material available on record. It is pertinent to note that the assessee was not submitted with copy of the statement recorded during the seizure conducted by the Air Intelligent Unit, Delhi. Besides this, the assessee has produced books of accounts wherein the details of cash balance in the hands of the assessee firm i.e. M/s. Nanak Traders as well as the partnership concern of M/s. Nanak Enterprise of Smt. Rekha Gurlani was well entered into books of account. In fact, the cash sales as explained by the Ld. DR was not in credit but the same was properly accounted for in the books of accounts. Evidence to that effect was there before the Assessing Officer as well as before the CIT(A). The cash books produced by the assessee was never doubted by the Assessing Officer as well as by the CIT(A). Thus, the assessee has fully explained the cash found during the seizure action by the Air Intelligent Unit of Income Tax Department and thus it cannot be treated as incriminating ITA No.461/Ahd/2023 Assessment Year: 2020-21 Page 5 of 5 material. Purview of section 69A will not be applicable in assessee’s case and hence the finding given by the CIT(A) as well as by the Assessing Officer is not justifiable. As regards to alternate submission of the Ld. AR, it does not sustain as the main addition herein does not sustain as per the observations made in this paragraph. Hence, appeal of the assessee is partly allowed. 8. In the result, appeal filed by the assessee is partly allowed. Order pronounced in the open Court on this 13 th December 2023. Sd/- (SUCHITRA KAMBLE) Judicial Member Ahmedabad, the 13 th December, 2023 PBN/* Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order UE COPY Assistant Registrar Income Tax Appellate Tribunal Ahmedabad benches, Ahmedabad