RAJENDRA KUMAR GUPTA, Bhopal V. DCIT-2(1), BHOPAL, Bhopal

ITA 498/Ind/2023

• Counselvise Citation: [2024] 100 COUNSELVISE.COM (IT) 3079 (ITAT-INDORE)
• Duration Of Justice: 4 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-04-2024
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: DB
• Next Hearing Date: 02-04-2024
• Assessment Year: 2017-2018
• Appeal Filed On: 03-12-2023
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 68; 56; 143(3); 72; 13; 22

Judgement Text

Page 1 of 15 आयकर अपीलीय अिधकरण, इंदौर Ɋायपीठ, 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 No. 498/Ind/2023 Assessment Year : 2017-18 Shri Rajendra Kumar Gupta, B-72, Mansarovar, Shahpura, Bhopal बनाम/ Vs. DCIT/ACIT-2(1), Bhopal (Assessee/Appellant) (Revenue/Respondent) PAN: AAYPG6045M Assessee by Shri S.S.Deshpande, CA Revenue by Shri Ashish Porwal, Sr. DR Date of Hearing 03.04.2024 Date of Pronouncement 09.04.2024 आदेश / O R D E R Per B.M. Biyani, A.M.: Feeling aggrieved by appeal-order dated 06.11.2023 passed by learned Commissioner of Income-Tax (Appeals), NFAC, Delhi [“CIT(A)”], which in turn arises out of assessment-order dated 24.12.2019 passed by learned DCIT/ACIT-2(1), Bhopal [“AO”] u/s 143(3) of Income-tax Act, 1961 [“the Act”] for Assessment-Year [“AY”] 2017-18, the assessee has filed this appeal on following grounds: “(1) That on the facts and circumstances of the case, the Ld. CIT(A) erred in not giving any finding on the ground of appeal no. 1 as raised stating that the ground raised is non specific and vague though the Shri Rajendra Kumar Gupta, Bhopal ITA No. 498/Ind/2023 – AY 2017-18 Page 2 of 15 ground is purely statutory and legal as the additions were made without calling any information from the appellant and hence the Ld. CIT(A) must give the finding on this ground. (2) That on the facts and circumstances of the case, the Ld. CIT(A) erred in confirming the addition of Rs. 28,52,000/- made u/s 68 for unexplained cash being Rs. 22,02,002/- transferred from personal books of accounts and Rs. 6,49,998/- being amount received against the sale of petroleum products though necessary evidences viz. personal books of accounts from which fund transferred and copy of sale bill against which amount received is submitted during appellate proceedings as well as in assessment proceedings. Further, the income from machinery hire charges and other income were duly shown by the assessee in its personal books of accounts out of which cash was generated. Likewise, the cash receipt on sale of petroleum products was also incorporated in the business profit & loss account and further addition for the same amounts to double addition. (3) That under the circumstances, the Ld. CIT(A) erred in confirming the addition of Rs. 1,80,000/- being disallowance @ 30% of lease rent claimed u/s 24(1) of the Act without considering the facts properly and without appreciating that the rent received is for structure constructed under lease agreement and not for open land. (4) The Ld. CIT(A) has erred in maintaining the addition of Rs. 7,72,360/- on account of restaurant sale. The addition has been made and upheld on a wrong hypothesis that the purchases are more than the sales.” 2. The background facts leading to present appeal are such that the assessee-individual is engaged in three businesses, namely (i) petrol/diesel pump named “M/s RK Petroleum”; (ii) lodging & boarding business named “M/s RK Regency”, and (iii) hiring of machinery. For AY 2017-18, the assessee filed return of income declaring a total income of Rs. 47,56,146/-. The case of assessee was subjected to scrutiny-assessment wherein the AO passed assessment-order u/s 143(3) on 24.12.2019 after making certain additions and thereby determining total income at Rs. 93,32,866/-. Aggrieved, the assessee carried matter in first-appeal and succeeded partly. Still aggrieved, the assessee has come in next appeal before us on the Shri Rajendra Kumar Gupta, Bhopal ITA No. 498/Ind/2023 – AY 2017-18 Page 3 of 15 grounds mentioned earlier. We shall proceed to adjudicate grounds one by one in seriatim. Ground No. 1: 3. In this ground, the assessee claims that the CIT(A) has erred in not giving any finding on the ground no. 1 of first-appeal raised by assessee before him. However, at the time of hearing none of the parties have made any submission qua this ground. Therefore, this ground is treated as non- pressed/non-pleaded and dismissed accordingly. Ground No. 2: 4. In this ground, the assessee claims that the CIT(A) has erred in upholding the addition of Rs. 28,52,000/- made by AO u/s 68 read with section 115BBE. 5. To understand the case of assessee, at the outset, we re-produce below the relevant portions of the orders of lower-authorities: (i) The AO made addition vide Para No. 4 of assessment-order as under: “4. Assessee has not submitted DSR registered regarding maintenance of day-to-day stock. Assessee has also not submitted complete cash book except cash-book from 08.11.2016 to 31.12.2016. It is seen that opening cash in hand shown as on 08.11.2016 of Rs. 34,08,348/-. But in absence of complete cash-book, the cash balance shown as on 08.11.2016 cannot be relied upon. During the demonetize period, assessee has deposited cash of Rs. 1,97,29,480/- in the bank account. It is also seen that assessee has introduced cash in the books starting from April to till the date of demonetization i.e. 08.11.2016. Assessee brought total capital in cash of Rs. 22,02,002/- but no source of cash introduction explained. It is further seen that assessee has brought the cash of Rs. 50,000/- to Rs. 2,00,000/- from Shri Rajendra Kumar Gupta, Bhopal ITA No. 498/Ind/2023 – AY 2017-18 Page 4 of 15 time to time till 16.11.2016. Assessee has stated it is brought from personal account. But no detail submitted as to how personal cash in hand derived. On perusal of record, question arises was the assessee firm M/s R.K. Petroleum in need of cash in that period and answer is no. This is nothing but assessee’s own unexplained cash in old currency notes of Rs. 500/- and Rs. 1000/- brought in books. Source of such cash of Rs. 22,02,002/- is not explained by assessee with supporting bank account or any other documents. Assessee does not file personal balance-sheet and therefore personal cash-book prepared cannot be relied upon. 4.1 It is further seen that in addition to cash sale, assessee has shown cash receipt from debtors M/s. Super Max. On perusal of ledger of M/s. Super Max, it is seen that the party never paid amount in cash before demonetized period or after demonetized period. But assessee shown cash receipt of Rs. 4,99,998/- during the 09.11.2016 to 03.12.2016. Assessee has no explanation for the such abnormal transaction. The government has not allowed to accept banned currency notes from debtor except against the sale of petrol/diesel at the time of filling. In addition to assessee received cash from S.D. (Aman Travel) Rs. 50,000/- on 12.11.2016 and Rs. 1,00,000/- from M/s. Shrishti Buildcon Pvt. Ltd. on 22.11.2016. Assessee has received cash from debtor Rs. 6,49,998/- which was not allowed to accept it in cash during the demonetized period and hence same is also stand unexplained. 4.2 From the above it is seen that capital introduction in cash of Rs. 22,02,002/-, cash introduced through debtors Rs. 6,49,998/- and cash in hand shown as on 08.11.2016 of Rs. 34,08,348/- is also not explained by the assessee. 4.3 In light of the above facts, assessee has introduced its unexplained cash of Rs. 28,52,000/- (22,02,002 + 6,49,998) by giving color of cash-sale from petrol and diesel. Therefore, an amount of Rs. 28,52,000/- is unexplained cash u/s 68 of the Act and to the total income of the assessee.” (ii) The CIT(A) upheld AO’s order by passing following order: “5.8:- The appellant has opposed the findings of the AO and has argued that it has enough cash in his personal account which has been transferred to the petroleum account in a routine business requirement. The appellant has filed the ledger account of his two proprietary concerns to support his contention. However, it is seen that appellant could not properly explain the source of capital introduction in the form of cash. In this regard, I am inclined to accept the findings of the AO and it is held that appellant has failed to properly explain the source of cash introduced in the capital by depositing in the bank account. Similarly, the findings of the AO with regard to business transaction in SBN (cash) during demonetization period by the AO is also correct in the eyes of law because banned currency were not legal tender to business transactions during the period of demonetization. Hence considering the totality of the fact the findings of the AO with regard to addition of Rs. 28,52,000/- u/s 68 is upheld and confirmed. Therefore, this ground of appeal is dismissed.” Shri Rajendra Kumar Gupta, Bhopal ITA No. 498/Ind/2023 – AY 2017-18 Page 5 of 15 6. Thus, the impugned addition of Rs. 28,52,000/- has two components, viz. (i) Rs. 22,02,000/- introduced as cash capital in M/s RK Petroleum by assessee, and (ii) Cash receipts of Rs. 6,49,998/- shown by M/s RK Petroleum during demonetization period – Rs. 4,99,998/- from M/s Super Max + Rs. 50,000/- from M/s SD (Aman Travels) + Rs. 1,00,000/- from M/s Shristi Buildcon Pvt. Ltd. 7. Regarding cash capital of Rs. 22,02,000/-, Ld. AR for assessee drew our attention to the letter dated 23.12.2019 filed by assessee to AO during assessment-proceeding re-produced below: Shri Rajendra Kumar Gupta, Bhopal ITA No. 498/Ind/2023 – AY 2017-18 Page 6 of 15 Shri Rajendra Kumar Gupta, Bhopal ITA No. 498/Ind/2023 – AY 2017-18 Page 7 of 15 7.1 Referring to the contents of above letter, Ld. AR submitted that out of total capital contribution of Rs. 22,02,000/-, a sum of Rs. 3,50,000/- was contributed by transfer of funds available in personal bank a/c No. 53023561150 of assessee with State Bank of India, copy of bank-book maintained by assessee alongwith bank pass-book is filed at Page 66-67 of Paper-Book. Further, remaining moneys were contributed in cash out of personal funds available with assessee which are duly recorded in personal cash-book titled “R.K. GUPTA INDIVIDUAL – CASH IN HAND Book” separately maintained by assessee, copy filed at Page No. 62-65 of Paper-Book. Drawing our attention to entries in cash-book, Ld. AR pointed out that the cash was generated from machinery hire charges and cash-withdrawals made from time to time from proprietary concerns M/s R.K. Agency and M/s R.K. Petroleum run by assessee. Thus, Ld. AR contended, the sources of cash contributed by assessee as capital in M/s RK Petroleum are duly explained and must be accepted. 7.2 Ld. DR for revenue re-iterated the observations made by AO. He submitted that the AO has noted in Para 4 of assessment-order “...Assessee brought total capital in cash of Rs. 22,02,002/- but no source of cash introduction explained. It is further seen that assessee has brought the cash of Rs. 50,000/- to Rs. 2,00,000/- from time to time till 16.11.2016. Assessee has stated it is brought from personal account. But no detail submitted as to how personal cash in hand derived.” Thus, Ld. DR submitted, the assessee has not submitted or explained the details of sources available in his personal hands and hence in absence of submission or explanation, the AO has rightly made addition. 7.3 We have considered rival submissions of both sides. After a careful consideration, we find that out of total contribution of Rs. 22,02,002/-, the Shri Rajendra Kumar Gupta, Bhopal ITA No. 498/Ind/2023 – AY 2017-18 Page 8 of 15 assessee is claiming to have made contribution of Rs. 3,50,000/- from personal bank a/c and only balance amount in cash. Regarding contribution of Rs. 3,50,000/- from bank a/c, the assessee has only filed a copy of “bank-book”, which is assessee’s own document, and first page of bank pass-book showing name of assessee, etc. But the assessee has not filed complete bank pass-book/statement to show the transfer of funds or sources thereof. Regarding rest of the moneys contributed in cash, the assessee has filed a copy of personal cash-book which shows time-to-time inflow of funds from ‘machinery hire charges’, ‘M/s RK Agency’ and ‘M/s RK Petroleum’. The ‘machinery hire charges’ are also declared by assessee as part of total income and duly assessed by AO. Therefore, prima facie there is a credence in submission by assessee that the funds were available from machinery hire charges, M/s RK Agency and M/s RK Petroleum. But the AO has made a noting in assessment-order that no details were filed to show how the personal cash was derived. Thus, at the stage of assessment, the examination of funds available in personal hands/personal cash-book is not done. Being so, the bank- pass book of assessee in support of receipt of contribution of Rs. 3,50,000/- and the entries of inflow in support of cash contribution, are required to be examined/verified by AO. Being so, we remand this part to AO for carrying out an apt scrutiny and adjudication afresh. 8. Regarding cash-receipt of Rs. 4,99,998/- from M/s Super Max, the assessee has filed a Ledger A/c of M/s Super Max at Page No. 68 to 72 of Paper-Book. On perusal of same during hearing, it emerged that the assessee has shown 18 entries of cash-receipts and each entry of cash- receipt is against equivalent amount of sale-invoice made at the very same time during demonetization period. Thus, the assessee has shown cash- Shri Rajendra Kumar Gupta, Bhopal ITA No. 498/Ind/2023 – AY 2017-18 Page 9 of 15 receipts against sales. However, the AO has rejected such cash-receipts on two-fold reasons, viz. (i) the assessee has never shown any entry of cash- receipt from M/s Super Max either before or after demonetization. Therefore, the cash-receipts shown during demonetization period were abnormal; and (ii) the Govt. has not banned to accept currency notes from debtors except against sale of petrol/diesel. So far as first reasoning is concerned, Ld. AR for revenue submitted that during demonetization period, everyone wanted to off-load his cash and that is why M/s Super Max also made payments to assessee in cash although the payments before or after demonetization were not made in cash. Ld. AR submitted that the AO is wrong in treating this as ‘abnormal’, rather the AO must have treated it ‘normal’. Regarding second reasoning, Ld. AR submitted that the AO has missed to consider that M/s RK Petroleum, proprietary concern, was engaged in sale of petrol/diesel only. We find weightage in the submissions of Ld. AR. But, however, it is noteworthy that the assessee was having regular dealings with M/s Super Max before, during and after demonetization but still the assessee has not filed A/c Confirmation of M/s Super Max to AO; the assessee has only filed Ledger A/c extracted from his own books. The AO is also justified in suspecting cash-receipt shown by assessee from M/s Supermax because M/s Super Max had never paid cash before or after demonetization and it is only during demonetization that certain receipts are shown in cash. Therefore, in the situation, it would be more appropriate to remand this part also to AO to enable the assessee to file A/c Confirmation of M/s Supermax Shri Rajendra Kumar Gupta, Bhopal ITA No. 498/Ind/2023 – AY 2017-18 Page 10 of 15 or the AO can directly collect evidence from M/s Supermax under the provisions of the act to ascertain the correctness of cash-receipts shown by assessee. Accordingly, we remand this part also to AO. 9. Regarding cash-receipt of Rs. 50,000/- from M/s SD (Aman Travels), the assessee has not filed any evidence in Paper-Book but subsequently, after hearing, Ld. AR filed a Ledger A/c duly extracted from books of account of assessee. In this Ledger A/c, there is a credit entry of Rs. 50,000/- on 12.11.2016 with the narration “receipt amt against security’. Therefore, the receipt is not against sale of petrol/diesel. Being so, we agree with Ld. AO’s observation that such kind of receipt was not allowed during demonetization period. Consequently, we uphold the addition made by AO. 10. Regarding cash-receipt of Rs. 1,00,000/- from M/s Shristi Buildcon Pvt. Ltd., the assessee has not filed any evidence in Paper-Book but subsequently, after hearing, Ld. AR filed a Ledger A/c duly extracted from books of account of assessee. In this Ledger A/c, the assessee has shown a cash recovery of Rs. 1,00,000/- on 22.11.2016 against sales made before declaration of demonetization. Therefore, the receipt is not against sale of petrol/diesel made during demonetization period. Being so, we agree with Ld. AO’s observation that such kind of receipt was not allowed during demonetization period. Consequently, we uphold the addition made by AO. 11. To sum up, the issue of capital contribution of Rs. 22,02,000/- and receipt of Rs. 4,99,998/- from M/s Supermax are remanded back to AO for Shri Rajendra Kumar Gupta, Bhopal ITA No. 498/Ind/2023 – AY 2017-18 Page 11 of 15 adjudication afresh. The additions of Rs. 50,000/- from M/s SD (Aman Travels) and Rs. 1,00,000/- from M/s Shristi Buildcon Pvt. Ltd are, however, upheld. Thus, the assessee succeeds partly for statistical purposes in this ground. Ground No. 3: 12. In this ground, the assessee claims that the CIT(A) has erred in upholding the deduction of Rs. 1,80,000/- u/s 24(1) claimed by assessee but disallowed by AO. 13. The assessee declared rental income of Rs. 6,00,000/- from M/s Hindustan Petroleum Corporation Ltd. The assessee offered this income u/s 22 as “Income from House Property” and claimed standard deduction of 30% amounting to Rs. 1,80,000/- and offered net taxable income of Rs. 4,20,000/-. During assessment-proceeding, the AO observed that the assessee has received rent for open plot of land having area of 625 square meter at Khasra No. 460/1/4, Bhopal. Therefore, the AO assessed rental income u/s 56 as “Income from Other Sources” and disallowed standard deduction claimed by assessee. During first-appeal, the CIT(A) passed following order upholding the AO’s action: “5.10 I have carefully examined and considered the facts of the case, issue raised vide this ground of appeal, reply of the appellant alongwith documentary evidence filed during the appellant proceedings. From the perusal of assessment-order, it is seen that AO has made addition by disallowing 30% of standard deduction claimed by the appellant on open plot of land. The AO has noted that assessee received Rs. 600000/- as lease rent for the open plot of land and has wrongly claimed deduction of Rs. Shri Rajendra Kumar Gupta, Bhopal ITA No. 498/Ind/2023 – AY 2017-18 Page 12 of 15 1,80,000/- u/s 24(1) of the IT Act. Further AO has noted that lease rent of the open plot of land is assessed u/s 56 of the IT act where no such standard deduction is allowed. The appellant has opposed the findings of the AO and has claimed that the land has also some structure on it. I have perused the lease agreement deed and it is seen that lease agreement was executed for a vacant land in the city of Bhopal and there was no permanent structure on it. Hence in my considered opinion the action of the AO with regard to disallowance of standard deduction on vacant plot of land is correct in the eyes of law. Accordingly, the disallowance of Rs. 1,80,000/- is hereby confirmed. Therefore, this ground of appeal is dismissed.” 14. Thus, both of the lower-authorities have made a concurrent finding that the assessee has received rent of land. The CIT(A) has given a much stronger finding by saying that he has perused the lease-agreement and it is seen that the lease-agreement was executed for a vacant land in the city of Bhopal. Before us, the assessee has not filed rent-agreement. Further, Ld. AR of assessee has merely stated in Para No. 7 of the Written-Submission “the assessee has given the piece of land with some structure”. The claim of assessee is quite vague. Further, there is no evidence from assessee’s side to substantiate that there existed any structure in the nature of “building” so that the case of assessee can fall u/s 22 justifying taxability under the head “Income from House Property”. Faced with this situation, we agree with the lower-authorities’ observation that the rent was relatable to land and taxable as “Income from Other Sources”. Consequently, the standard deduction of Rs. 1,80,000/- claimed by assessee @ 30% of rent u/s 24(1) is rightly disallowed by lower-authorities. The same is hereby upheld and this ground is dismissed. Ground No. 4: Shri Rajendra Kumar Gupta, Bhopal ITA No. 498/Ind/2023 – AY 2017-18 Page 13 of 15 15. In this ground, the assessee claims that the CIT(A) has erred in upholding addition to the extent of Rs. 7,72,360/- out of total addition of Rs. 15,44,720/- made by AO. 16. During assessment-proceeding, the AO observed that the assessee’s expenditure on restaurant was Rs. 12,21,178/- while the receipts from restaurant were Rs. 9,55,280/- only. Considering these figures, the AO observed that there cannot be loss in restaurant business. Therefore, the AO estimated receipts of restaurant at Rs. 25,00,000/- and made addition of differential of Rs. 15,44,720/- (Rs. 25,00,000 – Rs. 9,55,280). During first- appeal, the assessee explained to CIT(A) that he runs a lodging & boarding/ hotel business and as per prevailing practice of such business, the assessee has to provide complimentary tea and breakfast to hotel guests as also to staff. Therefore, the expenditure on restaurant was higher than the receipts of restaurent. The CIT(A) accepted assessee’s stand but still observed that the restaurant receipts must be more than expenditure, accordingly he allowed part-relief of 50% and thereby reduced addition to Rs. 7,72,360/-. 17. Before us, Ld. AR for assessee strongly objected to the orders of lower- authorities. He submitted that it is not the case that the assessee is solely running restaurant; the assessee is carrying lodging & boarding business alongwith restaurant. He submitted that the assessee has provided complimentary tea, food, etc. to guests staying in hotel as also to staff, which is a genuine fact and in line with established practice in this type of business. He submitted that the CIT(A) has also accepted this practice of Shri Rajendra Kumar Gupta, Bhopal ITA No. 498/Ind/2023 – AY 2017-18 Page 14 of 15 assessee but still upheld addition partly to support the AO’s version that the receipts must exceed expenditure. Ld. AR submitted that had the assessee been solely engaged in the business of restaurant, the point made by authorities might have been good enough but the case of assessee is totally different. He submitted that the authorities are very much wrong in not only disregarding the submission of assessee without any sound reasoning but also estimating the receipts without any basis. Ld. DR for revenue supported the orders of lower-authorities but, however, could not show any reason to rebut or controvert the submissions of assessee. Admittedly, it is a fact that the assessee is carrying business of hotel and shown receipts of Rs. 49,37,522/- including receipts of Rs. 9,55,280/- from restaurant. The claim of assessee that tea, food, etc. has to be provided to hotel guests as part of their package as also to staff is also meritorious and acceptable. Therefore, we are inclined to accept the submissions of assessee that the authorities should have not taken adverse view. We find that the facts and figures explained by assessee do not warrant any addition. The CIT(A) has, though found strength in assessee’s very explanation and granted relief to assessee but still upheld part addition to approve AO’s version that expenditure cannot be more than receipt. We find no merit in lower-authorities’ such stand when the assessee has explained his nature of business and the reasoning of expenditure being higher than the receipts. Consequently, we delete the addition of Rs. 7,72,360/- sustained by CIT(A). This ground is allowed. Shri Rajendra Kumar Gupta, Bhopal ITA No. 498/Ind/2023 – AY 2017-18 Page 15 of 15 18. Resultantly, this appeal is partly allowed for statistical purposes. Order pronounced in open court on 09.04.2024 Sd/- sd/- (VIJAY PAL RAO) (B.M. BIYANI) JUDICIAL MEMBER ACCOUNTANT MEMBER Indore िदनांक /Dated : 09.04.2024. CPU/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 Assistant Registrar Income Tax Appellate Tribunal Indore Bench, Indore