ITO, UDAIPUR V. M/s. Roop Chand Nawal Chand Gandhi, UDAIPUR

ITSSA 1/JODH/2013

• Counselvise Citation: [2014] 122 COUNSELVISE.COM (IT) 0342 (ITAT-JODHPUR)
• Duration Of Justice: 1 year(s) 2 month(s) 27 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 09-09-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 26-08-2014
• Assessment Year: misc
• Appeal Filed On: 12-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P MEENA
• Assessee Lawyers: SHRAVAN KUMAR GUPTA
• Keywords: Depreciation; Search and seizure
• Section: 143(3); 132; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH: J ODHPUR ( BEFORE SHRI H ARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.K. SAINI, ACCOUNTANT MEMBER ) IT SS A. NO. 01 / JODH /201 3 ASSTT. YEAR - 1990 - 91 TO 1999 - 2000 ITO WARD - 1(4) VS M/S ROOP CHAND NAWAL CHAND GANDHI UDAIPUR SARAFA BAZAR, SALUMBER, UDAIPUR GIR NO: S - 305/ACIT/INV . CIR/UDR (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SHRAVAN KUMAR GUPTA DEPARTMENT BY : SHRI O.P. MEENA - CIT - D.R. DATE OF HEARING : 2 6 /0 8 /201 4 DATE OF PRONOUNCEMENT : 09 /0 9 /2014 O R D E R P E R HARI OM MARATHA, J.M. : THIS APPEAL OF THE REVENUE , FOR THE BLOCK PERIOD 1990 - 91 TO 1999 - 2000 (UP TO 24.06.1999) PASSED U/S 158 BC R.W.S 143(3) OF THE INCOME - TAX ACT, 1961 ['THE ACT' FOR SHORT] AND FILED AGAINST THE ORDER OF LD. CIT(A), UDAIPUR, DATED 28.03.2013, HAS CAME UP FOR HEARING IN THE THIRD - ROUND BEFORE THE ITAT, IN SO FAR AS THE IMPUGNED ISSUE REGARDING ADDITION OF RS. 65 LAKHS MADE ON ACCOUNT OF UNDISCLOSED EXPENSES/ 2 I NVESTMENT MADE BY THE ASSESSEE IN THE FIRM M/S SONIA GANDHI GRANITES & MARBLES COMPANY. 2. 1 THE NARRATIONS MADE BY LD. CIT(A), AT PAGES 2 TO 5, EXPLAIN THE FACTS AND THE PROCEEDINGS UNDERTAKEN RELATING TO TH E IMPUGNED ISSUE. IN THE FIRST ROUND BOTH THE ASSESSEE AS WELL AS REVENUE CAME INTO APPEAL BEFORE ITAT AGAINST THE ORDER OF LD. CIT(A) DATED 28.03.2003. T HE ITAT DECIDED BOTH APPEAL BY A COMMON ORDER DATED 24.05.2004 AND RESTORED THE MATTER TO CIT(A). T HE LD. CIT (A) PASSED HIS ORDER IN PURSUANCE OF TH E T RIBUNAL O RDER ON 21.01.2008 AND HAS DELETED THE ADDITION OF RS. 65 LAKHS. AGAINST THIS ORDER THE REVENUE PREFERRED APPEAL AND ITAT VIDE ITS ORDER DATED 30.10.2009 AGAIN REMITTED THE MATTER BACK TO CIT(A). T HIS ORDER WAS PASSED EX - PARTE. PURSUANT TO THI S ORDER, THE PRESENT ORDER OF LD. CIT(A) HAS C O ME UNDER CHALLENGE. THE LD. CIT(A) HAS AGAIN DELETED THE ADDITION OF RS. 65 LAKHS AND REVENUE HAS FILED THIS APPEAL, WHICH IS THIRD ROUND BEFORE THIS APPELLATE TRIBUNAL, BY RAISING THE FOLLOWING GROUND : ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 65 LAKHS MADE ON ACCOUNT OF UNDISCLOSED EXPENSES/INVESTMENT MADE BY THE ASSESSEE IN THE FIRM M/S SONI A GANDHI GRANITES & MARBLES CO. IGNORING THE FACT T HAT THE ADDITION WAS MADE ON THE BASIS OF SEIZED DIARY FOUND DURING THE COURSE OF SEARCH. 3 2.2. T HE FACTS OF THE C ASE ARE THAT A SEARCH AND SEIZURE ACTION WAS TAKEN AGAINST THE ASSESSEE FIRM U/S 132 OF THE ACT AT ITS BUSINESS PREMISES AND AT THE RESIDENCES OF ITS PARTNERS ON 24.06.1999. S IMULTANEOUS ACTION U/S 132 WAS ALSO UNDERTAKEN AT THE BUSINESS AND RESIDENTIAL PREMISES OF SH RI KAMAL KUMAR GANDHI WHO IS THE EX - PARTNER OF THE ASSESSEE FIRM. DURING THESE SEARCHES CERTAIN INCRIMINATING EVIDENCE WERE FOUND AND SEIZED, WHICH LED TO ISSUING OF NOTICE U/S 158BC TO THIS ASSESSEE. THIS NOTICE WAS COMPLIED WITH BY THE ASSESSEE FIRM WHO HAS RETURNED UNDISCLOSED INCOME OF RS.1,00,000/ - IN THE ROI FILED ON 22.11.2009. SEPARATE P ROCEEDINGS WERE CARRIED OUT IN THE HAND S OF THE PARTNERS. DURING SEARCH A DIARY MARKED AS ANNEXURE A - 52 WAS FOUND AND SEIZED FR O M THE BUSINESS PREMISES OF THE ASSESSEE FIRM. IN THIS DIARY TOTAL EXPENSES TO THE TUNE OF RS. 65 LAKHS MADE BY THIS ASSESSEE IN THE FIRM M/S SONIYA GANDHI GRANITES & M ARBLES COMPANY (SGGMC) ARE FOUND RECORDED. THE ASSESSEE FIRM EXPLAINED THAT ONLY BECAUSE SOME PARTNERS ARE COMMON IN BOTH THE FIRMS RAISING SEPARATE BUSINESS OF MARBLE MINING AND TRADING ETC . THE CONNECTION OF THE ASSESSEE FIRM WITH THIS INVESTMENT CANNOT BE PRESUMED. T HE PARTNERS HAD MADE INVESTMENT IN SGGMC BY WAY OF THEIR CAPITAL CONTRIBUTION FOR WHICH THEY HAVE E XPLAINED SOURCES FROM WITHDRAWALS MADE FROM THE ASSESSEE FIRM. IN FACT ONE ENTRY IS IN THE NAME OF MR.BASSIWALA WHOSE 4 NAME IS ALSO FOUND IN THE LIST OF DEBTORS OF THE FIRM. THE AO HAS TREATED THIS A S ASSESSEES UNDISCLOSED INVESTMENT AND HAS ADDED IT TO ITS TOTAL INCOME. A PROTECTIVE ADDITION HAS BEEN MADE IN THE HANDS OF ITS PARTNERS. THE LD. CIT(A ) VIDE HIS ORDER DATED 27.09.2001 RESTORED THIS ISSUE TO AO, AS AT THAT TIME HE HAD THE POWER OF RESTORING THE IMPUGNED ISSUES RAISED IN APPEAL BEFORE HIM. THIS ORDER DATED 27.09.2001 OF LD. CIT(A), UDAIPUR, WAS SUBJECTED TO APPEAL BY BOTH THE PARTIES. MEANWHILE VIDE AMENDMENT IN SECTION 251 OF THE ACT, W.E.F. 01.06.2001, THE POWER OF LD. CIT(A) TO SET - ASIDE ANY ISSUE HAD BEEN WITHDRAWN BY THE LAW - MAKERS. ACCORDINGLY, ON AN APPLICATION FILED U/S 154 OF THE ACT ON 18.02.2003, BY THE AO , THE LD CIT(A) RECALL ED HIS ORDER OF SETTING ASIDE OF GROUND NO.(5) RE LATING TO THE IMPUGNED ISSUE. THEREFORE, THE LD. CIT(A) PASSED HIS ORDER ON MERITS ON 28.03.2003, BY REDUCING THE ADD ITION TO RS.26, 76,729/ - FROM RS.65 LAKHS. BOTH PARTIES PREFERRED APPEALS BEFORE THE APPELLATE TRIBUNAL. THIS WAS THE FIRST GROUND AND THE T RIBUNAL RESTORED THE ISSUE TO LD.CIT(A), WHO VIDE HIS ORDER DATED 21.01.2008 HAD DELETED THE ENTIRE ADDITION. T HEREFORE, THE REVENUE FILED APPEAL AND THE APPELLATE TRIBUNAL PASSING AN EX - PARTE ORDER, AGAIN RESTORED THE ISSUE TO THE FILE OF LD. CIT(A), VIDE ORDER DATED 30.10.2009. PURSUANT TO THE ABOVE DIRECTIONS THE LD. 5 CIT(A) HAS PASSED THIS ORDER DATED 28.03.2013 , WHICH IS UNDER CHALLENGE BEFORE US. 3. WE HAVE HEARD RIVAL SUBMISSION S AND HAVE CAREFULLY EXAMINED THE ENTIRE RECORD. AFTER COGITATING RIVAL SU BMISSIONS VIS - - VIS FACTS AND EVIDENCE AVAILABLE ON RECORD, WE HAVE FOUND IT FOR A FACT THAT SGGMC IS A SEPARATE AND DISTINCT ENT IT Y. FOR ARISING AT THE SIMILAR CALCULATION THE LD.CIT(A) HAS EXAMINED IN DETAIL THE PARTNERSHIPS DEEDS, THE DOCUMENTS BEFORE S ALES - TAX DEPARTMENT, SSI REGISTRATIONS, LEASE & LICENSE ISSUED BY THE MINING DEPARTMENT, BANK ACCOUNTS, SEPARATE BOOKS OF ACCOUNTS FOR THE TWO ASSESSES. WE HAVE ALSO EXAMINED THEM AS THEIR COPIES ARE ALSO ENCLOSED IN RECORD. BOTH BUSINESS ES ARE OF DIFFEREN T NATURE. THIS ANNEXURE A - 52 WAS EXPLAINED BY SH. MANOJ GANDHI RECORDED U/S 132(4) OF THE ACT AND HE HAD CATEGORICALLY ADMITTED IT TO BEL ONG TO HIMSELF. THUS , THE PRESUM PTION OF SECTION 132(4A) OF THE ACT ALSO GETS REBUTTED . T HE SGGMC HAS NOT BEEN TREATED AND HELD AS A BENAMIDAR OF THE ASSESSEE FIRM. THE INVESTMENTS ARE FOUND TO BE CAPITAL CONTRIBUTION OF THE PARTNERS, AND THEIR RESPECTIVE SOURCES FROM THEIR WITHDRAWALS FROM OTHER FIRM. FOR READY REFERENCE, WE WOULD LIKE TO EXTRACT FINDING OF LD. CIT(A), W ITH WHICH WE ARE ALSO AGREED. THE RELEVANT FINDING OF LD.CIT(A) IS AS UNDER: - 6 I HAVE CONSIDERED THE RECORDS, OBSERVATIONS OF THE LD. AO, SUBMISSIONS OF THE LD. AR AND DECISIONS RELIED ON REGARDING TO THE ISSUE UNDER CONSIDERATION. I HAVE ALSO CONSIDERED THE DIRECTIONS GIVEN BY THE HONBLE ITAT, JODHPUR IN THIS REGARD & PERUSED THE PAGE NOS. 303 TO 373 OF THE PAPER BOOK SUBMITTED BY THE APPELLANT. THE APPELLANT HAD ALSO FURNISHED ENGLISH VERSION OF THE ENTRIES APPEARING AT PAGE NOS. 303 - 373 OF THE FIRST P APER BOOK IN THE FORM OF CASH BOOK LEDGER, JOURNAL AND FINAL ACCOUNT ETC WHICH ARE AVAILABLE AT PAGE NOS. 108 - 178 IN THE PAPER BOOK FURNISHED BEFORE THE HONBLE ITAT , JODHPUR. I HAVE SEEN THAT MY PREDECESSOR HAS ALSO CONSIDERED THE DIRECTIONS OF THE HONB LE ITAT DURING THE APPELLATE PROCEEDINGS BUT IN THE ORDER THIS FACTS WAS NOT MENTIONED THOUGH THE RECORDS EVIDENCED THAT THE ISSUE HAS BEEN CONSIDERED BY HIM ALONGWITH THE FACTS CONTAINED IN THE PAPER BOOK AT PAGES 303 TO 373. THE ADDITION WAS MADE BY THE LD. AO ON THE BASIS OF THE NOTING APPEARING IN THE A DIARY PLACED AT ANNEXURE A - 52 SEIZED DURING THE COURSE OF SEARCH FROM THE PREMISES OF APPELLANT FIRM AND ITS PARTNERS. I HAVE OBSERVED THAT PAGE NO.303 TO 373 OF THE PAPER BOOK ARE A CCOUNTS IN HINDI RELA TED TO THE TRANSACTIONS OF MINING BUSINESS OF M/S. SONIYA GANDHI GRANITE AND MARBLE CO. & THE SAME ARE MATCHING WITH THE BANK ACCOUNTS OF M/S SGGMC IN UDAIPUR URBAN COOPERATIVE BANK, SALUMBER BRANCH (A/C NO.27, 46 & 60). THE SAID ACCOUNTS ALSO CONTAIN THE DETAILS OF SALES MADE BY THE PARTNERSHIP FIRM M/S. SGGMC WHICH WAS CROSS VERIFIABLE FROM THE COPY OF SALE BILLS AND SALES TAX RETURNS FILED WITH THE COMMERCIAL TAXES DEPARTMENT. FROM THE VARIOUS DOCUMENTS FILED BY THE LD. AR DURING THE PREVIOUS APPELLATE P ROCEEDINGS IT 7 IS OBSERVED THAT THE FIRM M/S. SGGMC IS A SEPARATE PARTNERSHIP FIRM. IN THIS RESPECT I HAVE SEEN THE FOLLOWING DOCUMENTS AVAILABLE IN THE PAPER BOOK AS UNDER: (1) THE PARTNERSHIP FIRM M/S. SGGMC IS SEPARATELY CONSTITUTED VIDE PARTNERSHIP DEED D ATED 19/1/1995 IN WHICH SHRI BADAMILAL GANDHI, SHRI KAMAL KUMAR GANDHI, SHRI ABHAY KUMAR GANDHI, SHRI KAILASH CHANDRA GANDHI AND SHRI MANOJ KUMAR GANDHI BECOMES PARTNER. (2) THE BUSINESS OF THE FIRM M/S. SGGMC WAS THAT OF MARBLE MINES AND ALLIED ACTIVITIES. (3) COPY OF PARTNERSHIP DEED IS AVAILABLE AT PAGE NO. 98 TO 100 OF THE SAME PAPER BOOK. (4) COPY OF BANK STATEMENTS OF SGGMC IS ALSO PLACED ON RECORDS AND AVAILABLE AT PAGE NO. 101 TO 114 OF THE SAME PAPER BOOK. (5) COPY OF CERTIFICATE ISSUED BY REGISTRAR OF FIR M JAIPUR IN MATTER OF SGGMC DATED 27/1/1995 IS ALSO AVAILABLE ON RECORDS AND PLACED PAGE NO.115 OF THE PAPER BOOK. (6) COPY OF TRADING ACCOUNT PREPARED AND SIGNED BY SHRI KAMAL KUMAR GANDHI IN THE CASE OF SGGMC IS AVAILABLE AT PAGE NO.116 OF THE PAPER BOOK. COPY OF SALES BILLS ARE PLACED AT 117 TO 140. 8 (7) COPY OF APPLICATION FOR REGISTRATION UNDER RST AND CST ACT PLACED AT PAGE NO. 141 TO 143. (8) COPY O F CERTIFICATE ISSUED BY THE GEOLOGY DEPARTMENT PAGE NO.279 AND 280. ACCORDINGLY I HOLD THAT THE SAID M/S. SONIY A GANDHI MARBLE AND GRANITE CO. WAS A SEPARATE BUSINESS CONCERN AND THERE WAS NO SEARCH WARRANT ISSUED IN ITS CASE AND CONSEQUENTLY THE DOCUMENTS PERTAINING TO THIS FIRM SHOULD NOT BE CONSIDERED IN THE HANDS OF THE APPELLANT. FROM THE TRANSACTIONS RECORDE D ON PAGE NOS. 303 TO 373 OF THE PAPER BOOK IT IS OBSERVED THAT PAGE NOS. 304 TO 352 CONTAINS MEMORY RECORDING OF TRANSACTIONS RELATED TO MINING BUSINESS OF M/S. SGGMC. SUCH TRANSACTIONS ARE CROSS VERIFIABLE FROM THE BANK ACCOUNT OF M/S. SGGMC AND FROM THE SALES TAX RETURN FILED BY M/S. SGGMC. PAGE NO.353 TO 356 ALSO CONTAINS JOURNAL NATURE OF ENTRIES LIKE INTEREST, DEPRECIATION ETC. IN CONNECTION WITH THE BUSINESS OF M/S. SGGMC. SIMILARLY PAGE NO. 357 TO 373 IS NOTHING BUT LEDGER ACCOUNTS PREPARED FROM THE CASH BOOK AND JOURNAL AVAILABLE AT PAGE NO.303 TO 356. THE CASH BOOK, LEDGER AND JOURNAL ARE PLACED ON RECORDS AND ENTRIES THEREIN ARE CROSS VERIFIABLE. IT IS SEEN THAT FINAL ACCOUNTS HAVE BEEN PREPARED AND SUBMITTED DURING THE COURSE OF EARLIER APPELLATE PROCEEDINGS WHICH ULTIMATE RESULT OF THE MINING BUSINESS OF M/S SGGMC IS REFLECTED AS CUMULATIVE LOSS. IT IS ALSO AN ADMITTED FACT ON THE DATE OF SEARCH THAT THE BUSINESS OF M/S 9 SGGMC WAS ALREADY CLOSED AND LIABILITIES TO BANK AGAINST LOANS WERE THERE ON THE DATE OF SEARCH. THE BANKS HAVE FILED SUITS AGAINST THE FIRM M/S SGGMC FOR RECOVERY OF OUTSTANDING AMOUNT. COPIES OF RELEVANT DOCUMENTS ARE ALSO AVAILABLE AT PAGE NO.261 TO 278 OF THE PAPER BOOK. THE CONTENTIONS OF LD. AR THAT THERE WAS A LOSS SUFFERED IN THE MINING BUSINESS OF M/S SGGMC BY THE PARTNERS ARE SUPPORTED BY THE OUTSTANDING LOANS AND COURT CASES AGAINST RECOVERY BY THE BANK ETC. IT IS OBSERVED THAT THE NOTING ON PAGE NO.36 OF ANNEXURE A - 52 WAS DULY CONSIDERED IN DETAIL BY MY PREDECESSOR AND HAS GIVEN THE DECISION ON THE SAME WITH REASONING. I FOUND NO REASONS TO DEVIATE FROM HIS DECISION IN THIS RESPECT AND ALSO HAVE SAME OPINION ON SUCH NOTING THAT IMAGINARY FIGURES NOTED DOWN BY ONE OF THE PARTNER TO CONVENIENCE HIS FATHER WITHOUT ANY CORRO BORATIVE EVIDENCE THAT THE FINANCIAL TRANSACTIONS OF SUCH NATURE EVER BEEN EXECUTED, CANNOT BE MADE A BASIS FOR MAKING ANY ADDITION IN THE HANDS OF APPELLANT FIRM. IT I S ALSO FOUND THAT THE RECORDS SUGGEST THAT THE MANAGEMENT OF M/S. SGGMC WAS IN THE HAND S OF SHRI KAMAL KUMAR GANDHI WHO WAS NEVER CONFRONTED BY THE LD. AO BEFORE MAKING ADDITION IN THE HANDS OF APPELLANT FIRM. NO PROCEEDINGS INITIATED AGAINST THE SH. KAMAL KUMAR GANDHI OR AGAINST THE FIRM M/S. SGGMC BY THE DEPARTMENT EVEN THOUGH MY PREDECESS OR IN APPEAL NO. 134 DATED 27/9/2001 AT PARA NO.37 & 38 ON PAGE 16 OF ORDER CLEARLY STATED THAT NEEDLESS TO SAY THAT THE AO IS ALSO FREE TO TAKE BASIS OF SEIZED MATERIAL IN ACCORDANCE WITH LAW. 10 FROM THE ABOVE DISCUSSIONS AND AFTER CONSIDERING THE DETA ILS OBSERVATIONS AND REASONING IN THE ORDER OF MY PREDECESSOR IN THIS RESPECT, I AM ALSO OF THE OPINION THAT NO ADDITIONS CAN BE MADE IN THE HANDS OF THE APPELLANT FIRM ON THE BASIS OF DOCUMENTS RELATED TO OTHER PERSONS & FOUND DURING THE COURSE OF SEARCH. THE ISSUE SHOULD HAVE BEEN CONSIDERED EITHER IN THE HANDS OF M/S. SGGMC OR IN THE HANDS OF THE PARTNERS OF M/S. SGGMC IF ANY UNDISCLOSED INVESTMENT WOULD HAVE BEEN FOUND. ACCORDINGLY THE ADDITION MADE BY THE AO IN THE HANDS OF THE APPELLANT FIRM IS NOT JU STIFIED . I ORDER ACCORDINGLY AND DELETE THE ADDITION OF RS. 65,0 0, 000/ - . 4. WE HAVE ALSO EXAMINED ALL THE DETAILS OF THIS ISSUE AND WE ARE OF THE CONSIDERED OPINION THAT THE IMPUGNED ADDITION HAS BEEN CORRECTLY DELETED AS IT CANNOT BE ADDED IN THE HANDS OF THE ASSESSEE FIRM. THEREFORE , WE CANNOT ALLOW THIS APPEAL. 5. I N THE RESULT, WE DISMISS THE APPEAL OF THE REVENUE. (ORDER PRONOUN CED IN THE OPEN COURT ON 09 TH SEPTEMBER, 2014) SD/ - SD/ - (N.K. SAINI) (HARI OM MARATHA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 09 TH SEPTEMBER, 2014 11 VL/ COPY FORWARDED TO : - 1. M/S ROOP CHAND NAWAL CHAND GANDHI, UDAIPUR 2. ITO, WARD - 1 ( 4 ), UDAIPUR. 3. CIT, UDAI PUR. 4. CIT (A), UDAIPUR. 5. CIT,DR, ITAT, JODHPUR. BY ORDER, AR, ITAT, JODHPUR.