ACIT(Central)-2, Indore V. Shri Sunil Bansal, Khandwa

ITSSA 157/Ind/2021

AI Insights

The case revolves around an appeal by the Revenue against the order of the CIT(A) which had deleted an addition made by the AO on the grounds of undisclosed income amounting to Rs. 2,08,10,930. This addition was based on suspicious messages found on the mobile phone of the assessee, Sunil Bansal, during a search operation. The AO alleged that these messages indicated involvement in hawala transactions. However, the CIT(A) and subsequently the Tribunal found that the amounts mentioned in the messages were related to legitimate business transactions of the partnership firms, M/s MG Oils and M/s Vinod Industries, and were already accounted for in their books. The Tribunal also noted that the AO had erroneously added the same amounts multiple times, leading to an inflated figure of undisclosed income.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 302882 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 3 month(s) 22 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 15-03-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 18-09-2022
• Assessment Year: 2018-2019
• Appeal Filed On: 23-11-2021
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Search and seizure; Source of fund
• Section: 69; 132; 10; 143(3); 153A; 143(2); 13; 22

Judgement Text

IT(SS)A No. 157 of 2021 Sunil Bansal 1 IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE (CONDUCTED THROUGH VIRTUAL COURT) BEFORE Ms. MADHUMITA ROY, JUDICIAL MEMBER & SHRI BHAGIRATH MAL BIYANI, ACCOUNTANT MEMBER IT(SS)A No . 157/Ind/20 21 (A sse ss men t Year: 2018-19 ) AC IT, Central-2, In dore Vs. Sunil Bansal, Khan dwa थायी लेखा सं./जीआइआर सं./P A N / G IR N o . : A B J P B 4 5 1 3 H (Appellant) . . (Respondent) Revenue by : Shri P. K. Mishra, CIT.D.R. Assessee by : Shri S.N. Agrawal, CA Date of Hearing 19.12.2022 Date of Pronouncement 16.03.2023 O R D E R PER Ms. MADHUMITA ROY - JM: The instant appeal filed by the Revenue is directed against the order dated 09.08.2021 passed by the Ld. CIT(A)-3, Bhopal (M.P.) (hereinafter referred to as ‘Ld. CIT(A)’) arising out of the order dated 28.12.2019 passed by the DCIT (Central)-2, Indore (hereinafter referred to as ‘Ld. AO’) under Section 143(3) of the Income-Tax Act, 1961 (hereinafter referred to as ‘the Act’) for Assessment Year (hereinafter referred to as ‘A.Y.’) 2018-19 with the following ground: IT(SS)A No. 157 of 2021 Sunil Bansal 2 “1. On the facts and in the circumstances of the case, the Ld. CIT(A) was not justified in law in deleting the addition amounting to Rs. 2,08,10,930/- on account of undisclosed income u/s 69 of the Income Tax Act 1961.” 2. The assessee is partner in the partnership firms, M/s Vinod Industries and M/s MG Oils and his main sources of income include interest, remuneration and share of profit from these partnership firms. On 23.01.2018, a search and seizure operation under Section 132 of the Act was carried out at the business premises as well as residential premises of MG Oils Group of Khandwa including the assessee and other concerns/ business associates. Thereafter, notices under Section 153A of the Act were issued for the A.Y. 2012-13 to 2017-18 and notice under Section 143(2) of the Act was issued for the A.Y. 2018-19. The income- tax return of the assessee for the A.Y. 2018-19 was filed on 26.10.2018 declaring total income at Rs.38,33,950/-. The Ld. AO during the course of assessment proceedings observed that some suspicious messages were found from the mobile phone of the assessee and his brother, Shri Vinod Bansal on the basis of which the Ld. AO reached to a conclusion that the assessee was involved in hawala transactions. The Ld. AO worked out an amount of Rs. 2,08,10,930/- on the basis of photo of those suspicious messages which was inventorized at Page No. 11-29 of LPS-10 made addition of Rs. 2,08,10,930/- to the total income of the assessee by treating it as undisclosed income under Section 69 of the Act which was deleted by the Ld. CIT(A) in appeal. Hence, the instant appeal has been filed before us by the Revenue. 3. The brief facts leading to the case are that the Ld. AO during the course of assessment proceedings observed on perusal of messages found from the mobile phone of the assessee and inventorized at Page No. 11-29 of LPS-10 that the assessee was involved in hawala transactions. The assessee submitted before the IT(SS)A No. 157 of 2021 Sunil Bansal 3 Ld. AO that most of the messages found from his mobile phone contained reference of the amounts received against sale of oil made by the firm, M/s MG Oils which was duly accounted for in the books of accounts of M/s MG Oils. However, the Ld. AO did not accept the contentions of the assessee and made addition of Rs. 2,08,10,930/- to the total income of the assessee on account of amount worked out on the basis of alleged suspicious messages relating to hawala transactions found from the mobile phone of the assessee. 4. Before us, the Ld. DR vehemently supported the order of Ld. AO. Per contra Ld. Counsel for the assessee supported the findings of Ld. CIT(A). We have heard the respective parties and perused the relevant material available on record. 5. The Ld. Counsel for the assessee submitted that the Ld. AO separately considered the amounts mentioned in the messages found from the mobile phone of the assessee on multiple occasion even though many of those messages were related to the same transaction. The Ld. Counsel further submitted that most of the messages found from the mobile phone of the assessee contained reference of the amounts received against sale of oil made by the firm, M/s MG Oils which was duly accounted for in the books of accounts of M/s MG Oils. The Ld. Counsel demonstrated his contention by drawing our attention at Page Nos. 42- 60 of the Paper Book wherein screenshots of the messages found from the mobile phone of the assessee and working prepared showing the correct amount computed on the basis of those messages was filed. The Ld. Counsel explained that the correct amount after removing the double effect of various messages linked to the same transaction and also after removing the effect of messages IT(SS)A No. 157 of 2021 Sunil Bansal 4 containing the reference of the amounts which were received against sale of oil by M/s MG Oils came to Rs. 89,33,930/- as against the amount of Rs. 2,08,10,930/- worked out by the Ld. AO. 6. It is the case of the assessee that messages found from the mobile phone of the assessee were related to SHARMAJI/ PANDITJI of Delhi with whom the assessee had business relationship in connection with sale of oil. He further argued that the assessee was not engaged in carrying out any oil business in his individual capacity but the partnership firms, M/s MG Oils and M/s Vinod Industries, wherein the assessee represented as one of the partners, were engaged in oil business. The Ld. Counsel argued that if the amount received and mentioned in the messages was linked with the sale of oil, then, it ought to be appreciated that the entire amount of sale of oil was duly recorded in the books of accounts of the partnership firms, M/s MG Oils and M/s Vinod Industries and consequently, there was no justification for making separate addition to the total income of the assessee on account of amount worked out on the basis of alleged suspicious messages found from the mobile phone of the assessee. The Ld. Counsel further demonstrated that the Ld. AO herself while passing the assessment order in the case of M/s MG Oils observed that cash deposited in the bank accounts of the alleged suspicious firms (i.e. buyers) pertained to the firm, M/s MG Oils. The Ld. Counsel further submitted that the amount worked out on the basis of messages found from the mobile phone of the assessee which was treated as unrecorded cash in his hands was nothing but the amount of cash deposited in the bank accounts of the suspicious firms which was treated by the Ld. AO herself as pertaining to M/s MG Oils. Hence, it was vehemently argued that there was no rationale behind making separate addition of Rs. 2,08,10,930/- IT(SS)A No. 157 of 2021 Sunil Bansal 5 to the total income of the assessee merely on the basis of alleged suspicious messages found from the mobile phone of the assessee more so when the Ld. AO herself while passing the assessment order in the case of M/s MG Oils concluded that the amount of cash deposited in the bank accounts of the suspicious firms pertained to M/s MG Oils. 7. The Ld. Counsel thereafter contended that the amounts mentioned in those messages could not have been taxed as income of the assessee without first establishing that the amounts mentioned therein represented income which had actually accrued to or earned by the assessee. The Ld. Counsel also relied upon a catena of judicial precedents in support of his aforesaid contention. 8. We have considered each and every plea raised by the Ld. Counsel during the course of hearing before us. We find that the Ld. CIT(A) while allowing the appeal preferred by the assessee observed as follows: “ 4.2. Ground Nos 1 to 3 for A.Y. 2018-19: - Through these grounds of appeal the appellant has challenged the addition made by the AO amounting to Rs: 2,08,10,930/- on account of undisclosed income u/s 69 of the IT Act, 1961 and charging of tax liability thereupon by invoking the amended provision of section 115BBE of the Act. The assessing officer while passing the assessment order added the entire amount as found in the mobile messages as income of the appellant. Detail of amount as added in the case of the appellant was provided on Page Nos 6 & 7 of the Assessment order. The assessing officer observed that the appellant during the course of search stated that these messages are related to the sale of oil but in post search proceeding the appellant claimed that these messages also related to the sale of Arbi by the farmers through local transporter. The appellant merely facilitates to receive an amount on behalf of Transporter. The appellant further claimed that the ownership of the amount as received in the messages were never belonging to him. The assessing officer however, rejected the contention of the appellant as explained in the post search proceeding. The appellant during the course of search assessment as well as appellate proceeding has clarified that these messages related to Shri Sharma ji ( Pandit Ji ) of Delhi with whom the appellant having regular business transactions of sale of Oil. The appellant is not engaged in any oil business in his Individual capacity but the partnership firm M/s M G Oil and IT(SS)A No. 157 of 2021 Sunil Bansal 6 M/s Vinod Industries in which the appellant represent as a partner engaged in the Manufacturing and trading of oil. During the course of scrutiny assessment as well as appellate proceeding it was clarified that some of the customers of M/s M G Oils sent cash directly to the appellant and the said amount of cash was deposited by the appellant or by the staff of M/s M G Oils in their bank account and therefore the said amount was transferred in the bank account of M/s M G Oils against sales. It was further explained that the nature of cash as received by the appellant was duly explained to the assessing officer and the same was deposited in the bank account of the customer to whom oil were sold by M/s M G Oils. It was also explained that appellant also received cash on behalf of farmers against the sale of Arbi Crop. The appellant further stated that message as found in the mobile was added twice. Since, the appellant in the communication stated to collect certain amount and then confirmation was received for collection of the amount. The assessing officer added both these figures which was not correct. The appellant further draw attention to S.No 12 , LPS-10 on Page No 18, Page No 7 of the assessment order, message was written with Telephone Number with a instruction to collect an amount of Rs 14,77,000/- and in next message on S.No. 13 LPS 10, Page No 19, it was stated that an amount of Rs 1,47,7000/- was received but both these figures were added by the assessing officer. Similarly on S. No. 15, LPS 10 on Page No 21 , inner Page No 7 of the assessment order, it was stated to collect Rs 15,00,000/- and in next message at S.No. 16, LPS 10 on Page No 22 confirmation was in respect of amount of Rs 15,00,000/- received but the assessing officer added both these amounts. The appellant provided complete list of the transactions considered twice or thrice by the assessing officer on Page Nos 58 & 59 of the Compilation. On perusal of the said list, the contention of the appellant seems correct. The correct amount calculated as per message was of Rs 89,33,930/- only and not of Rs 2,08,10,930/- as added by the assessing officer. 4.2.1. The appellant further contended that in any case entire amount of message cannot be constituted as income of the appellant. The assessing officer simply stated that cash was received by the appellant and therefore the same was taxed as income of the appellant. If the assessing officer rejected the contention of the appellant, in that case, it is the duty of assessing officer to explain the correct nature of transactions as recorded in the messages but the assessing officer failed to do so. Considering the overall facts of the case and submission as filed by the appellant, it is evident that the assessing officer added the entire amount as found recorded in the message which in any case is not justifiable. The amount received in small denomination on different dates. The amount as added also includes repetition in respect of same amount which need to be ignored, the correct amount therefore calculated which comes to Rs 89,33,930/- only. If the appellant fail to explain the correct nature the correct re-course with the assessing officer was to tax the net profit and not the entire amount as added by her to the total income of the appellant. In the present case in hand, the appellant is not engaged in any business activities in his Individual capacity. The assessing officer and authorised officer during the course of search and post search inquiry not found any thing about any business activities carried out by the appellant. The appellant during the course of search explained IT(SS)A No. 157 of 2021 Sunil Bansal 7 that he has business connection of oil sale with Pandit ji of Delhi. Oil business was carried out by the firm M/s M G Oil and M/s Vinod Industries. It was also noticed by the assessing officer that cash was deposited in the bank account of few of the customers by the appellant or by the staff of M/s M G Oils which itself proved that entire amount of cash as received by the appellant as noticed through the mobile messages related to the customers of M/s M G Oils to whom oils were sold by the firm. The sales as executed to all the customers were duly accounted for in the regular books of account of the firm and therefore there was no justification for adding the said amount merely on the basis of mobile messages to the total income of the appellant. Therefore, the addition made by the assessing authority is not justified. Therefore, the addition made by the AO amounting to Rs 2,08,10,930/- on account of undisclosed income u/s 69 of the IT Act is Deleted. Thus, the appeal on these grounds is Allowed. Since the additions as made by the assessing officer on account of undisclosed income u/s 69 of the I.T. Act, 1961 have already been deleted on merit. Therefore, the charging of tax liability as per amended provisions of section 115BBE on these grounds is academic in nature and having no impact on the fate of these grounds.” 9. The above findings of the Ld. CIT(A) have not been controverted by the Ld. DR. The facts discussed above squarely reveal that the Ld. AO simply made addition in respect of all the amounts mentioned in the messages found from the mobile phone of the assessee, irrespective of the fact as to whether those amounts represented income of the assessee or not and also irrespective of the fact as to whether those amounts were being taxed on multiple occasions or not. The Ld. AO was also not mindful of the fact that some amounts mentioned in those messages pertained to a single transaction which were being taxed multiple times. For instance, on going through the screenshots of the messages found from the mobile phone of the assessee and working prepared showing the correct amount computed on the basis of those messages as annexed on Page No. 42-60 of the Paper Book, it shall appear that several amounts were being taxed twice i.e. at S. No 12, LPS-10 on Page No. 18, Page No. 7 of the assessment order, message was written with Telephone Number with a instruction to collect an amount of Rs. 14,77,000/- and in next message on S. No. 13, LPS-10 on Page IT(SS)A No. 157 of 2021 Sunil Bansal 8 No. 19, it was stated that an amount of Rs. 14,77,000/- was received but both these amounts were added by the Ld. AO. Similarly on S. No. 15, LPS-10 on Page No. 21, inner Page No. 7 of the assessment order, it was stated to collect Rs. 15,00,000/- and in next message at S. No. 16, LPS-10 on Page No. 22, there was a confirmation in respect of the amount of Rs. 15,00,000/- as received but the Ld. AO again added both these amounts. Likewise, there were other transactions as well wherein the Ld. AO added the same amount twice or even thrice to the total income of the assessee which in our opinion, was not justified. The assessee prepared a working on the basis of these messages wherein the correct amount after removing the double effect of various messages linked to the same transaction and also after removing the effect of messages containing the reference of the amounts which were received against sale of oil by M/s MG Oils came to Rs. 89,33,930/- as against the amount of Rs. 2,08,10,930/- worked out by the Ld. AO. Having regard to the particular fact, considering the working made by the assessee, we find that the amount in dispute should have been Rs. 89,33,930/- only as against the amount of Rs. 2,08,10,930/- added by the Ld. AO to the total income of the assessee. 10. Further, we find strong force in the contentions of the Ld. Counsel that messages found from the mobile phone of the assessee were related to SHARMAJI/ PANDITJI of Delhi with whom the assessee had business relationship in connection with sale of oil. It can be seen that the assessee was not engaged in carrying out any oil business in his individual capacity but the partnership firms, M/s MG Oils and M/s Vinod Industries, wherein the assessee represented as one of the partners, were engaged in carrying out oil business. Hence, if the amount received and mentioned in the messages is linked with the IT(SS)A No. 157 of 2021 Sunil Bansal 9 sale of oil, then, we are inclined to accept the contention of the Ld. Counsel that the entire amount of sale of oil was duly recorded in the books of accounts of the partnership firms, M/s MG Oils and M/s Vinod Industries and there was no justification for making separate addition to the total income of the assessee. The said contention of the assessee also finds force from the fact that the Ld. AO herself while passing the assessment order in the case of M/s MG Oils observed that cash deposited in the bank accounts of the alleged suspicious firms (i.e. customers) pertained to the firm, M/s MG Oils and therefore, it seems that the amount noted in the messages found from the mobile phone of the assessee, who was one of the partners in the firm, was nothing but the said amount of cash which was alleged by the Ld. AO to be pertaining to M/s MG Oils. The Ld. Counsel has categorically explained the fact that the messages found from the mobile phone of the assessee contained reference of amounts which were received by the assessee against sales made by the firm, M/s MG Oils which was duly accounted for in the books of accounts of M/s MG Oils. Hence, considering the totality of the facts, we are of the considered opinion that since the Ld. AO herself while passing the assessment order in the case of M/s MG Oils observed that cash was deposited in the bank account of few of the customers by the assessee or by the staff of the firm, M/s MG Oils, this in itself proves that the entire amount of cash received by the assessee as noticed through the messages found from his mobile phone was related to the customers of M/s MG Oils to whom sales were made and duly accounted for in the books of accounts of M/s MG Oils and accordingly, there was no justification for making separate addition to the total income of the assessee on this count. IT(SS)A No. 157 of 2021 Sunil Bansal 10 11. Thus, considering the entire aspect of the matter, we are of the considered opinion that there was no justification for making addition of Rs. 2,08,10,930/- to the total income of the assessee on account of amount worked out on the basis of alleged suspicious messages relating to hawala transactions found from the mobile phone of the assessee by treating it as undisclosed income under Section 69 of the Act and the Ld. CIT(A) rightly deleted the impugned addition without any ambiguity so as to warrant interference. This ground of appeal preferred by Revenue is found to be devoid of any merit and, thus, dismissed. 12. In the result, appeal filed by the Revenue is dismissed. This Order pronounced on 16/03/2023 Sd/- Sd/- (BHAGIRATH MAL BIYANI) (MADHUMITA ROY) ACCOUNTANT MEMBER JUDICIAL MEMBER Indore; Dated 16/03/2023 S. K. Sinha, Sr. PS TRUE COPY आदेश क ितिलिप अ ेिषत/Copy of the Order forwarded to : 1. अपीलाथ / The Appellant 2. यथ / The Respondent. 3. स ं ब ं िधत आयकर आय ु / Concerned CIT 4. आयकर आय ु (अपील) / The CIT(A)- 5. िवभागीय ितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Indore 6. गाड फाईल / Guard file. आदेशान ु सार/ BY ORDER, (Sr.PS) ITAT, Indore