Assistant Commissioner of Income-Tax, Cen Cir -2, , Nashik V. Shri Parvez Mohd. Yusuf Kokani, Nashik

ITSSA 13/PUN/2021

AI Insights

The case involves multiple appeals by both the assessee, Shri Parvez Mohd. Yusuf Kokani, and the Revenue against the orders of the Commissioner of Income Tax (Appeals)-12, Pune, concerning the assessment years 2011-12, 2012-13, and 2015-16. The appeals primarily dealt with issues arising from search and seizure operations under section 132 of the Income Tax Act, 1961, followed by assessments under section 153A. The Tribunal's decisions were influenced by the lack of incriminating material for certain assessment years and the application of legal principles such as the benefit of telescoping of additions.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 137432 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 10 month(s) 12 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 19-10-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 18-10-2023
• Assessment Year: 2012-2013
• Appeal Filed On: 07-12-2021
• Other Referred Cases: PCIT vs. Abhisar Buildwell (P.) Ltd., 454 ITR 212 (SC)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained investment; Search and seizure; Principle of natural justice; Cost of acquisition
• Section: 132; 144; 44AD; 139; 153A; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH “B”, PUNE BEFORE SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER AND SHRI PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER Sl. No. IT(SS)A No. Name of Appellant Name of Respondent Asst. Year 1 30/PUN/2022 Shri Parvez Mohd. Yusuf Kokani, 23, Delta Royal, Pakhal Road, Nashik- 422011. PAN : AHXPK5901A ACIT, Central Circle-2, Nashik. 2011-12 2 13/PUN/2021 ACIT, Central Circle-2, Nashik. Shri Parvez Mohd. Yusuf Kokani, 23, Delta Royal, Pakhal Road, Nashik- 422011. PAN : AHXPK5901A 2012-13 3 31/PUN./2022 Shri Parvez Mohd. Yusuf Kokani, 23, Delta Royal, Pakhal Road, Nashik- 422011. PAN : AHXPK5901A ACIT, Central Circle-2, Nashik. 2012-13 4 32/PUN/2022 Shri Parvez Mohd. Yusuf Kokani, 23, Delta Royal, Pakhal Road, Nashik- 422011. PAN : AHXPK5901A ACIT, Central Circle-2, Nashik. 2015-16 आदेश / ORDER PER BENCH : These are the cross appeals filed by the assessee as well as by the Revenue against the combined order of ld. Commissioner of Income Tax (Appeals)-12, Pune [‘the ld. CIT(A)’] dated 30.09.2021 Assessee by : Shri Pramod Shingte Revenue by : Shri Ajay Kumar Kesari Date of hearing : 19.10.2023 Date of pronouncement : 20.10.2023 Shri Parvez Mohd. Yusuf Kokani 2 for the assessment years 2011-12, 2012-13 and 2015-16 respectively. 2. Since the identical facts and common issues are involved in all the above captioned appeals, we proceed to dispose of the same by this common order. 3. First, we shall take up the appeal of the assessee in IT(SS)A No.30/PUN/2022 for A.Y. 2011-12. IT(SS)A No.30/PUN/2022, A.Y. 2011-12 – By Assessee : 4. Briefly, the facts of the case are that the assessee is an individual engaged in the business of running a Hotel at Trimbakeshwar and also engaged in agricultural activities. The original Return of Income under the provisions of section 139 of the Income Tax Act, 1961 (‘the Act’) for the assessment year 2011-12 was filed on 31.03.2023 declaring total income of Rs.9,80,600/- and agricultural income of Rs.4,97,800/-. Subsequently, the search and seizure operations u/s 132 of the Act were carried out in the residential as well as business premises of the assessee on 08.09.2015. Thereafter, a notice u/s 153A of the Act was issued on 07.06.2016 calling upon the assessee to file the return of income. The said notice was returned by the postal authority returned unserved with remark “Unclaimed”. However, the said notice was Shri Parvez Mohd. Yusuf Kokani 3 personally served on 22.10.2016. No return of income in response to notice u/s 153A was filed by the assessee. Subsequently, the assessment was completed by the Assistant Commissioner of Income Tax, Central Circle-2, Nashik (‘the Assessing Officer’) vide order dated 29.12.2017 passed u/s 144 r.w.s. 153A of the Act at total income of Rs.60,22,520/-. While doing so, the Assessing Officer made addition on account of unexplained business expenditure of Rs.5,40,920/- and unexplained investments of Rs.25,00,000/- and cash of Rs.20,01,000/-. 5. Being aggrieved by the above additions, an appeal was filed before the ld. CIT(A), who vide impugned order deleted the addition made on account of disallowance of expenditure of Rs.5,40,920/- and addition on account of unexplained investments of Rs.25,00,000/-. However, he confirmed the addition made on account of cash deposit in bank to the extent of Rs.14,61,400/- thereby granting relief of Rs.5,39,600/-. 6. Being aggrieved, the assessee is in appeal before us in the present appeal. 7. At the outset, the assessee raised the additional ground of appeal, which reads as under :- “On the facts and in the circumstances of the case and in law the Learned Assessing Officer erred in passing an order under section Shri Parvez Mohd. Yusuf Kokani 4 153A of the IT Act especially in view of the fact that no incriminating material was found for the relevant A.Y. 2011-12 as the additions made by Learned Assessing Officer are either on the basis of return filed and addition made if any on the basis of alleged incriminating material is being deleted by learned CIT (Appeal).” 8. Since the additional ground of appeal raised by the assessee goes to the root of the matter, first, we shall deal with the additional ground of appeal. 9. The appellant contends that in the absence of any incriminating material qua the addition made on account of unexplained cash deposits of Rs.20,01,000/-, the Assessing Officer had no jurisdiction to make addition u/s 153A of the Act. It is the contention of the assessee that no incriminating material was found or impounded or unearthed as result of search and seizure operations to show that the cash deposits were made out of the unexplained income. In this connection, he submits that he had filed the return of income for the assessment year 2011-12 and his bank account was disclosed to the Department. Thus, he submits that no addition can be made on account of unexplained cash deposits in the bank in the absence of any incriminating material. This submission of the assessee had not been controverted by the ld. CIT-DR. Now, it is settled position of law that in the absence of any incriminating material, the completed assessment cannot be disturbed. In the present case, the return of income for the Shri Parvez Mohd. Yusuf Kokani 5 assessment year 2011-12 was filed on 31.03.2013 and the prescribed time limit for issuance of notice u/s 153A was 30.09.2014, whereas, the search and seizure operations were taken place on 08.09.2015, which means that as on date of search and seizure operations, the assessment proceedings for the assessment year 2011-12 was not open. Therefore, in view of well settled position of law as held by the Hon’ble Supreme Court in the case of PCIT vs. Abhisar Buildwell (P.) Ltd., 454 ITR 212 (SC) in the case of unabated assessment, completed assessment cannot be disturbed in the absence of any incriminating material. Therefore, we quash the assessment order passed by the Assessing Officer and direct the Assessing Officer to delete the addition of Rs.14,61,400/- as confirmed by the ld. CIT(A). Thus, the ground of appeal filed by the assessee stands allowed. 10. In the result, the appeal filed by the assessee in IT(SS)A No.30/PUN/2022 for A.Y. 2011-12 stands allowed. 11. Now, we shall take up the assessment year 2012-13 in cross appeals filed by the Revenue as well as by the assessee in IT(SS)A No.13/PUN/2021 and IT(SS)A No.31/PUN/2022. 12. Briefly, the facts of the case are that the assessee is an individual engaged in the business of running a Hotel at Shri Parvez Mohd. Yusuf Kokani 6 Trimbakeshwar and also engaged in agricultural activities. No return of income for the assessment year 2012-13 was filed under the provisions of section 139 of the Act. Subsequently, the search and seizure operations were conducted in the business as well as residential premises of the assessee on 08.09.2015 and, thereafter, a notice u/s 153A was issued on 07.06.2016. In response of the said notice u/s 153A, no return of income was filed by the assessee. Subsequently, the assessment was completed by the Assessing Officer vide order dated 29.12.2017 passed u/s 144 r.w.s. 153A of the Act. While doing so, the Assessing Officer made addition of Rs.76,00,000/- disbelieving the agricultural income of Rs.81,00,000/- shown in the return of income by the assessee. The Assessing Officer also made addition by disallowing of expenses of Rs.24,37,514/- on account of unexplained business expenditure. The Assessing Officer made addition of Rs.55,00,000/- on account of undisclosed income declared u/s 132(4) of the Act. The Assessing Officer also made addition of Rs.96,00,000/- on account of undisclosed credits in the bank account. The Assessing Officer also made addition on account of unexplained assets of Rs.1,29,26,710/-. The Assessing Officer also made addition on account of cash in hand of Rs.16,20,288/-. Shri Parvez Mohd. Yusuf Kokani 7 13. Being aggrieved by the above additions, an appeal was filed before the ld. CIT(A), who vide impugned order confirmed the addition to the extent of Rs.66,00,000/- and granted relief to the extent of Rs.10,00,000/-. The ld. CIT(A) also granted relief on account of deposit in bank account by telescoping the addition against the addition made on account of agricultural income of Rs.55,00,000/-. The ld. CIT(A) also deleted the addition on account of credits in the bank account by holding that the entire credits stood explained and, therefore, no addition was called for. As regards to the addition made on account of fixed assets, the ld. CIT(A) after analysing of the opening and closing Balance Sheet found that the sources for additions made to the fixed assets stood explained by additions made during the year, as the entire addition to fixed asset by way of payments through banking channels. 14. Being aggrieved by that part of the order of the ld. CIT(A), which is against the Revenue, the Revenue is in appeal before us in IT(SS)A No.13/PUN/2021 and the assessee is in appeal in IT(SS)A No.31/PUN/2022 challenging the confirmation of disallowance of agricultural income to the extent of Rs.10,00,000/-. Shri Parvez Mohd. Yusuf Kokani 8 IT(SS)A No.13/PUN/2021, A.Y. 2012-13 – By Revenue : 15. Ground of appeal nos.1 and 2 challenges the correctness of the decision of the ld. CIT(A) in deleting the addition made on account of disallowance of business expenditure of Rs.24,37,514/- by resorting to the provisions of section 44AD of the Act. The ld. CIT(A) following his earlier order for the assessment year 2010-11 held that no disallowance of expenditure can be made since the profits shown are higher than the profit prescribed u/s 44AD of the Act. It cannot be said that an assessee who is engaged in the business, can earn 100% profit without incurring any expenditure, no such presumption under law can be drawn. In our considered opinion, the disallowance of entire expenditure would amount to the taxing entire gross receipts of business which is not sustainable in law. Therefore, we do not find any reasons to interfere with the order of the ld. CIT(A). Accordingly, the ground of appeal nos.1 and 2 filed by the Revenue stands dismissed. 16. Ground of appeal nos.3 to 5 challenges the correctness of the decision of the ld. CIT(A) in giving relief of Rs.10,00,000/- against Rs.76,00,000/- made by the Assessing Officer disbelieving the agricultural income. The factual background of the additions is as under : Shri Parvez Mohd. Yusuf Kokani 9 The assessee had claimed agricultural income of Rs.81,00,000/-. However, the Assessing Officer had believed agricultural income only to the extent of Rs.5,00,000/- based on the agricultural income shown in the earlier assessment years. Out of this amount, an amount of Rs.55,00,000/- was stated to have been earned from the cultivation of the land belonging to the friends which was accepted by the assessee himself as he failed to substantiate the same. Out of the balance amount of Rs.26,00,000/-, ld. CIT(A) considering the fact that the agricultural produce was sold through APMC Market to the extent of Rs.37,43,725/- proceeded to hold that 50% of the gross receipts can be treated as “agricultural income”. However, considering the fact that income shown in the earlier assessment year was ranging from Rs.5,00,000/- to Rs.9,00,000/- and the entire agricultural income was estimated at Rs.15,00,000/- after reducing Rs.5,00,000/- relief granted by the Assessing Officer. Further, relief of Rs.10,00,000/- thereby sustained as addition to the extent of Rs.66,00,000/-. We find that the ld. CIT(A) had discussed threadway the evidence filed in support of the agricultural activities carried out by the assessee and also the evidence produced in support of the sale proceeds of the agricultural produce and concluded that 50% of the sale Shri Parvez Mohd. Yusuf Kokani 10 proceeds of the agricultural produce sold to APMC can be treated as net income. However, the ld. CIT(A) restricted the agricultural income to the extent of Rs.15,00,000/- considering the quantum of agricultural income shown in the earlier years. We find that the findings of the ld. CIT(A) is quite reasonable and based on proper appreciation of evidence on record. Therefore, we do not fine any perversity in the order of the ld. CIT(A). Accordingly, the findings of the ld. CIT(A) are sustained. Thus, the ground of appeal nos.3 to 5 filed by the Revenue stands dismissed. 17. Ground of appeal nos.6 and 7 challenges the addition of Rs.55,00,000/- made on account of unexplained investments on the basis of statement recorded u/s 132(4) of the Act. It is submitted that the statement was made on account of the agricultural income claimed by the assessee. However, considering the difficulties to substantiate the agricultural income, the assessee had agreed for the addition of Rs.55,00,000/- u/s 132(4) of the Act. During the proceedings before the ld. CIT(A), the assessee sought the benefit of telescoping the addition against the addition made towards the agricultural income of Rs.55,00,000/-. After calling for the remand report from the Assessing Officer, the ld. CIT(A) proceeded to hold that since the addition made on account of agricultural income, is Shri Parvez Mohd. Yusuf Kokani 11 made available to the assessee for subsequent application and, therefore, no further addition on account of unexplained investment is required to be made. This findings of the ld. CIT(A) is based on proper appreciation of evidence filed before him and also the appreciation of settled principle of law. Therefore, we do not find any reason to interfere with the order of the ld. CIT(A). Accordingly, this ground of appeal nos.6 and 7 filed by the Revenue stands dismissed. 18. Ground of appeal nos.8 and 9 challenges the correctness of the decision of the ld. CIT(A) deleting the addition of Rs.96,00,000/- made on account of deposits in the bank account. The ld. CIT(A) granted relief by considering the fact that out of Rs.96,00,000/-, the cheque of Rs.10,00,000/- was reversed on account of dishonour of the cheque and, therefore, there was the total deposit of Rs.86,00,000/-. Out of which cash deposit of Rs.61,00,000/- an amount of addition made on account of agricultural income of Rs.55,00,000/- was treated as available for depositing in the bank account and Rs.25,00,000/- was received from one Nishikant Phadke as advance against the land as per registered agreement and balance amount is treated as available out of the addition confirmed by the ld. CIT(A) on account of agricultural income. Thus, the ld. Shri Parvez Mohd. Yusuf Kokani 12 CIT(A) held that no addition is called for. Thus, the findings of the ld. CIT(A) are based on proper appreciation of evidence and application of correct principle of law governing the benefit of telescoping of addition. Therefore, we do not find any perversity in the findings of the ld. CIT(A) and, therefore, the order of the ld. CIT(A) is sustained. Thus, the ground of appeal nos.8 and 9 filed by the Revenue stands dismissed. 19. Ground of appeal no.10 and 11 challenges the decision of the ld. CIT(A) deleting the addition on account of availability of unexplained cash in hand. The ld. CIT(A) based on the cash flow statement furnished before him and after calling for the remand report from the Assessing Officer had only reduced the available cash in hand by Rs.13,50,696/-. From reading of the remand of the Assessing Officer, it is crystal clear that the Assessing Officer had not pointed out any discrepancy in the working of availability of cash on hand. Thus, the decision of the ld. CIT(A) is based on material evidence and the Assessing Officer also concurred with the findings of the ld. CIT(A). Therefore, we do not find any reason to interfere with the order of the ld. CIT(A). Accordingly, the ground of appeal nos.10 and 11 filed by the Revenue stands dismissed. Shri Parvez Mohd. Yusuf Kokani 13 20. Ground of appeal nos.12 and 13 challenges the decision of the ld. CIT(A) in giving relief on account of unexplained investments of Rs.1,29,26,710/-. The Assessing Officer made addition on account assets shown in the Balance Sheet of the assessee. However, during the course of proceedings before the ld. CIT(A), the assessee submitted that the addition made during the previous year relevant to the assessment year under consideration is only to the tune of Rs.33,42,000/- and the sources for the addition of assets can be explained from the income declared and the additions be deleted. Considering the submissions of the assessee, the ld. CIT(A) held that no addition on account of unexplained source for acquisition of assets can be made. Therefore, the findings of the ld. CIT(A) is based on the proper appreciation of evidence and we do find any perversity in the findings of the ld. CIT(A). Accordingly, this ground of appeal nos.12 and 13 filed by the Revenue stands dismissed. 21. Ground of appeal no.14 is not pressed during the course of hearing of appeal, therefore, the same is dismissed as not pressed. 22. In the result, the appeal filed by the Revenue in IT(SS)A No.13/PUN/2021 for A.Y. 2012-13 stands dismissed. Shri Parvez Mohd. Yusuf Kokani 14 IT(SS)A No.31/PUN/2022, A.Y. 2012-13 – By Assessee : 23. The assessee challenges the findings of the ld. CIT(A) confirming the addition of Rs.10,00,000/-. In the appeal filed by the Revenue, we upheld the findings of the ld. CIT(A) in estimating the agricultural income of Rs.15,00,000/- and we also find that the benefit of telescoping of addition made on account of agricultural income was granted to the assessee against the other addition made. Therefore, we do not find any merits in the grounds of appeal filed by the assessee. Accordingly, the grounds of appeal filed by the assessee stand dismissed. 24. In the result, the appeal filed by the assessee in IT(SS)A No.31/PUN/2022 for A.Y. 2012-13 stands dismissed. IT(SS)A No.32/PUN2022, A.Y. 2015-16 – By Assessee : 25. Briefly, the facts of the case are that the assessee is an individual engaged in the business of running a Hotel at Trimbakeshwar and also engaged in agricultural activities. No return of income was filed by the assessee for the assessment year 2015-16 under the provisions of section 139 of the Act. Subsequently, the search and seizure operations were conducted in the business as well as residential premises of the assessee on 08.09.2015 and, thereafter, a notice u/s 153A was issued on Shri Parvez Mohd. Yusuf Kokani 15 07.06.2016. In response of the said notice u/s 153A, no return of income was filed by the assessee. Against the said return of income, the assessment was completed by the Assessing Officer vide order dated 29.12.2017 passed u/s 144 r.w.s. 153A of the Act after making addition of Rs.1,03,80,800/-. One of the addition made by the Assessing Officer is that the assessee had sold a plot jointly held with some other person and the share of the assessee in the said land is Rs.19,75,000/-. The Assessing Officer made addition of Rs.19,75,000/- without giving the benefit of cost of acquisition etc. The appellant had only shown 30% of the gross receipt as income, whereas, the ld. CIT(A) estimated the profit at 40% of the gross receipts of sale of plot. 26. Being aggrieved, the assessee is in appeal before us in the present appeal. 27. We had carefully gone through the order of the ld. CIT(A) and find that the finding of the ld. CIT(A) is based arbitrary. The Assessing Officer also made addition on the presumptions and conjectures. Therefore, we find that the principle of natural justice would be met if the orders of the lower authorities are set-aside and remit to the file of Assessing Officer to compute the profit arising on sale of land considering the actual cost of acquisition and other Shri Parvez Mohd. Yusuf Kokani 16 expenses incurred on the sale of plot. Thus, the grounds of appeal filed by the assessee stand partly allowed. 28. In the result, the appeal filed by the assessee in IT(SS)A No.32/PUN/2022 for A.Y. 2015-16 stands partly allowed. 29. To sum up, the appeal filed by the assessee in IT(SS)A No.30/PUN/2022 for A.Y. 2011-12 stands allowed, the cross appeals filed by the Revenue as well as by the assessee in IT(SS)A No.13/PUN/2021 and IT(SS)A No.31/PUN/2022 for A.Y. 2012-13 stands dismissed and the appeal filed by the assessee in IT(SS)A No.32/PUN/2022 for A.Y. 2015-16 stands partly allowed, as indicated above. Order pronounced on this 20 th day of October, 2023. Sd/- Sd/- (PARTHA SARATHI CHAUDHURY) (INTURI RAMA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER पुणे / Pune; ᳰदनांक / Dated : 20 th October, 2023. Sujeet आदेश कᳱ ᮧितिलिप अᮕेिषत / Copy of the Order forwarded to : 1. अपीलाथᱮ / The Appellant. 2. ᮧ᭜यथᱮ / The Respondent. 3. The CIT(A)-12, Pune. 4. The Pr. CIT, Central, Nagpur. 5. िवभागीय ᮧितिनिध, आयकर अपीलीय अिधकरण, “B” बᱶच, पुणे / DR, ITAT, “B” Bench, Pune. 6. गाडᭅ फ़ाइल / Guard File. आदेशानुसार / BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे / ITAT, Pune.