Shri Jayanatilal Dalsukhbhai Panchal, Vadodara V. The Dy.CIT.,Cent.Circle-1, Vadodara

ITSSA 270/AHD/2019

• Counselvise Citation: [2024] 130 COUNSELVISE.COM (IT) 0549 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 month(s) 30 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 03-09-2024
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 21-08-2024
• Assessment Year: 2015-2016
• Appeal Filed On: 04-04-2024
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: TRUPTI PATEL
• Assessee Lawyers: ASTHA MANIAR
• Keywords: Business income; Reassessment proceedings; Unexplained expenditure; Document seized; Documents seized; Search and seizure
• Section: 143(3); 143(1); 132; 153A; 69C; 92CA

Judgement Text

आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरणआयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण, अहमदाबाद 瀈यायपीठ अहमदाबाद 瀈यायपीठअहमदाबाद 瀈यायपीठ अहमदाबाद 瀈यायपीठ “ए“, अहमदाबाद अहमदाबादअहमदाबाद अहमदाबाद । ।। । IN THE INCOME TAX APPELLATE TRIBUNAL “ A ” BENCH, AHMEDABAD .आर. र, एवं रं व ंत ह व र, ] ] BEFORE SHRI T.R. SENTHIL KUMAR, JUDICIAL MEMBER AND SHRI MAKARAND V. MAHADEOKAR, ACCOUNTANT MEMBER आयकर (SS) अपील सं /IT(SS)A No.22/Ahd/2024 र /Assessment Year : 2015-16 The DCIT Circle-1(2) Ahmedabad बन / v/s. Plastene India Ltd. 13 HB Jirawala Houe Avnarat ociety Umanpura Ahmedabad ल े ख सं./PAN:AAACO 3087 C (%& '/ Appellant) (() '/ Respondent) Assessee by : Ms. Astha Maniar, AR Revenue by : Smt. Trupti Patel, Sr.DR स क र /Date of Hearing : 22/08/2024 क र /Date of Pronouncement: 04/09/2024 आ श/O R D E R PER SHRI MAKARAND V. MAHADEOKAR, AM: This appeal by the Revenue is directed against the order of the Commissioner of Income Tax (Appeals)-11, Ahmedabad (hereinafter referred to in as “CIT(A)”), dated 08-01-2024, for the Assessment Year (AY) 2015-16, wherein the ld. CIT(A) deleted the addition of Rs. 4,00,31,858/- IT(ss)A No.22/Ahd/2024 The DCIT vs. Plastene India Ltd. Asst. Year : 2015-16 2 made by the Assessing Officer (hereinafter referred to in as “AO”) on account of undisclosed cash receipts in the assessment order passed under section 143(3) r.w.s.153A(1)(b) r.w.s. 92CA of the Income Tax Act,1961 (hereinafter referred to in as “the Act”). Facts of the Case: 2. The assessee-company filed its original return of income declaring a total income of Rs.3,84,30,360/-, which was processed under Section 143(1) of the Act. Subsequently, a search and seizure operation were conducted under Section 132 of the Act at the premises of assessee and key persons/ associates of M.R. Shah and Champalal Group of cases on 20-09-2016. During the course of search, certain documents were found and seized with regard to modus operandi adopted by the assessee and its related concerns regarding unaccounted cash sales and cash expenses. During the course of search, in case of Shri Sanjay Salecha, Senior Manager of the assessee- company, on verification of digital data of his HP laptop, e-mails of cash book consisting of unaccounted cash receipts and expenses of various periods pertaining to FYs 2012-13 to 2015-16 were found. The calculations of unaccounted receipts and unaccounted payments provided by the assessee in response to show cause notice dated 10-10-2018 were accepted by the Revenue, after removing duplicate figures and thus there was no dispute about the quantification of unaccounted receipts and payments. For the year under consideration these amounts were – IT(ss)A No.22/Ahd/2024 The DCIT vs. Plastene India Ltd. Asst. Year : 2015-16 3 Unaccounted cash Receipts Rs.4,00,31,858/- Unaccounted cash Payments/ Expenditure Rs.4,08,19,879/- 3. During the reassessment proceedings under Section 153A of the Act, the AO made an addition of Rs.4,00,31,858/- on account of undisclosed cash receipts and Rs.7,88,021/- as unexplained expenditure under Section 69C of the Act. While arriving at the amount of unexplained expenditure, the AO treated excess of expenditure over receipts i.e. Rs.4,08,19,879/- less Rs.4,00,31,858/-. The AO also disallowed an amount of Rs.17,24,709/- u/s. 36(1)(va) of the Act. 4. The assessee preferred an appeal before CIT(A), who deleted the addition made by the AO, observing that the AO incorrectly treated the entire unaccounted cash receipts as undisclosed income without considering the corresponding unaccounted expenses. The ld.CIT(A) relied on the decision of the Tribunal in assessee’s own case for the A.Y. 2014-15 and A.Y. 2016-17 [IT(SS)A Nos.406 & 399/AHD/2019] dated 11-12-2023, where the Tribunal relied on the decision of Hon’ble Gujarat High Court in CIT vs. President Industries (258 ITR 654), where it was held that only the profit element embedded in the unaccounted sales could be brought to tax and not the entire sales amount. The Ld.CIT(A) confirmed the addition of Rs.7,88,021/- on account of unexplained expenditure u/s.69C of the Act and deleted the addition of Rs. 4,00,31,858/- on account of undisclosed cash receipt. 5. Aggrieved by the order of the Ld.CIT(A), now the Revenue is in appeal before us with following ground – IT(ss)A No.22/Ahd/2024 The DCIT vs. Plastene India Ltd. Asst. Year : 2015-16 4 Whether, in facts and on the circumstances of the case and in law, the ld. CIT(A) has erred in deleting the addition made on account of undisclosed cash receipts of Rs.4,00,31,858/-“. 6. Before us the Ld.Authorised Representative (AR) of the assessee, stated that the issue under appeal is covered by the decision of this Bench of Tribunal in assessee’s own case in IT(SS)A Nos.406 & 399/Ahd/2019 dated 11-12-2023. The Ld.Departmental Representative did not controvert to the contention of the Ld.AR. 7. We have heard the rival submissions, perused the material available on record, and carefully considered the findings of the lower authorities. 8. It is noted that in the assessee's own case for the Assessment Years 2014-15 and 2016-17, Co-ordinate Bench of this Tribunal had already adjudicated upon an identical issue in IT(SS)A Nos. 406 & 399/AHD/2019, wherein it was held that when unaccounted business receipts are discovered, only the element of profit embedded in those receipts should be brought to tax. It was further observed that the seized documents containing details of both unaccounted cash receipts and payments must be read in their entirety, and it is not permissible to pick and choose parts of the documents as per the convenience of the Revenue. Thus, the Co- ordinate Bench upheld the principle that only the net income, after adjusting the unaccounted payments against the unaccounted receipts, should be taxed. In holding so, the Tribunal drew support and guidance from the judgement of Hon’ble Jurisdictional High Court in the case of CIT vs. President Industries reported at 258 ITR 654 and in case of M/s. IT(ss)A No.22/Ahd/2024 The DCIT vs. Plastene India Ltd. Asst. Year : 2015-16 5 Navjivan Oils Mills vs. CIT reported in 252 ITR 417. For the sake of clarity, we reproduce the relevant paras of the decision of the Tribunal – “11. We have heard the rival contention of both the parties and perused the materials available on record. Admittedly, the search proceedings under section 132 of the Act were carried out at the premises of the assessee, its associates, and key persons. As a result of search, certain excel sheets were found from the laptop/email of senior manager and cashier of the assessee company evidencing that the assessee has indulged into unaccounted cash transactions of revenue nature. The AO treated the gross receipt as income of the assessee from undisclosed sources whereas the learned CIT(A) held that the only real income i.e. receipts after netting off payments shall be treated as income of the assessee. We note that the excel sheets containing the details of unaccounted cash receipts and payments were found during a search proceeding under section 132 of the Act. The provisions of subsection 4A of section 132 and 292C of the Act provide legal presumption that any books of accounts or other documents found in the course of search, then it is to be presumed that the contents of such books of accounts or other documents are true. Thus, it means that whatever the contents noted in the search documents shall be presumed as true. As such it is not open for the revenue to presume part of the contents as true. Further it settled position of law by the various Competent Court including the Hon’ble Jurisdictional High Court of Gujarat that the seized documents shall be read in its entirety and accordingly income arising from such document shall treated as income of the assessee. The revenue cannot pick or choose the content as per its convenience from same set of seized materials/documents. One such judgment of the Hon’ble Gujarat High Court in case of M/s Navjivan Oils Mills vs. CIT reported in 252 ITR 417 where it was held as under: “13. It is settled legal position that the seized material has to be read and accepted as a whole and it is not permissible to pick and choose or make further estimates therefrom unless and until there is cogent material in support of undertaking such an exercise.” 11.1 In the case of the present assessee, the seized excel sheets contained receipts as well as payments and it is also not in dispute that such cash transactions were unaccounted business transactions. Therefore, in our considered opinion, when business receipt and payments noted on same sheets/materials then such receipt and payment cannot be treated or held or IT(ss)A No.22/Ahd/2024 The DCIT vs. Plastene India Ltd. Asst. Year : 2015-16 6 read separately. As such the excel sheets shall be read in entirety and real income arising out of such sheets shall be brought to tax. 11.2 It is also pertinent to note that several competent courts time and again have held that in case where unaccounted business receipts are discovered then only the element of profit embedded therein shall be brought to tax. In holding so, we draw support and guidance from the judgment of Hon’ble Jurisdictional High Court in the case of CIT vs. President Industries reported in 258 ITR 654 where it was held as under: “The amount of sales by itself cannot represent the income of the assessee who has not disclosed the sales. The sales only represent the price received by the seller of the goods for the acquisition of which it has already incurred the cost. It is the realisation of excess over the cost incurred that only forms part of the profit included in the consideration of sales. Therefore, unless there is a finding to the effect that the investment by way of incurring cost in acquiring goods which have been sold has been made by the assessee and that has also not been disclosed, the question whether entire sum of undisclosed sales proceeds can be treated as income, answers by itself in the negative.” 11.3 In the present case, the seized excel sheets itself contain the details of the unaccounted business receipts and payments. Therefore, considering the above principles laid down by the Hon’ble Gujarat High Courts, only the net amount i.e. receipts adjusted by the amounts of payments shall be treated as income of the assessee in the given facts and circumstances. 11.4 Thus, in view of the above elaborate discussion and judicial views, we do not find any infirmity in the finding of the learned CIT(A). Therefore, we hereby confirm the same. Hence, the ground of appeal raised by the revenue is hereby dismissed. 11.5 In the result, the appeal of the Revenue is hereby dismissed.” 9. After considering the rival submissions, perusing the material available on record and carefully examining the findings of the lower IT(ss)A No.22/Ahd/2024 The DCIT vs. Plastene India Ltd. Asst. Year : 2015-16 7 authorities, it is observed that the issue under consideration is squarely covered by the decision of the Co-ordinate Bench of this Tribunal in assessee’s own case for the Assessment Years 2014-15 and 2016-17 cited supra and followed judgement of Hon’ble Jurisdictional High Court in the case of CIT vs. President Industries (supra), held that when unaccounted business receipts are discovered, only the profit element embedded in those receipts should be brought to tax, rather than the entire amount of unaccounted receipts. The Tribunal further held that the seized documents containing details of unaccounted cash receipts and payments must be considered in their entirety, and it is not permissible for the Revenue to selectively treat portions of the documents as convenient. The principle established in the case law cited is that only the net income, after adjusting unaccounted payments against unaccounted receipts, should be taxed. The Tribunal's findings, supported by consistent judicial precedents, particularly the order in the assessee's own case for earlier years, leave no room for doubt. 9.1. Applying the same principle to the present case, we concur with the findings of the ld.CIT(A), who rightly deleted the addition of Rs. 4,00,31,858/- made by the AO on account of undisclosed cash receipts. The Ld.CIT(A) correctly applied the law laid down by the Hon'ble Gujarat High Court and this Tribunal, ensuring that only the net profit element is subjected to tax. 9.2. In view of the foregoing, and in alignment with the consistent judicial precedents, the appeal filed by the Revenue is devoid of merit. IT(ss)A No.22/Ahd/2024 The DCIT vs. Plastene India Ltd. Asst. Year : 2015-16 8 10. In the result, the appeal filed by the Revenue is dismissed. Order pronounced in the Open Court on 04 th September,2024 at Ahmedabad. Sd/- Sd/- (T.R. SENTHIL KUMAR) JUDICIAL MEMBER (MAKARAND V. MAHADEOKAR) ACCOUNTANT MEMBER अहमद ब द/Ahmedabad, $द ंक/Dated 04/09/2024 % .सी. यर, . .स./T.C. NAIR, Sr. PS आद() क * +ल,प अ-(, /Copy of the Order forwarded to : 1. अपील ./ / The Appellant 2. *0य./ / The Respondent. 3. संबं1 आयकर आय 2 / Concerned CIT 4. आयकर आय 2 )अपील (/ The CIT(A)-11, Ahmedabad 5. , 3 4ीय * 1 ,आयकर अपील य अ1 कर ,र ज क%/DR,ITAT, Ahmedabad, 6. 4 6 7 ल /Guard file. आद() स र/ BY ORDER, स0य ,प * //True Copy// सह यक पंजीक र (Asstt. Registrar) आयकर अपील य अ1 कर , ITAT, Ahmedabad 1. Date of dictation (word processed by Hon’ble AM in his laptop) : 02.09.2024 2. Date on which the typed draft is placed before the Dictating Member. : 02.09.2024/3.9.24 3. Date on which the approved draft comes to the Sr.P.S./P.S : 4. Date on which the fair order is placed before the Dictating Member for pronouncement. : 5. Date on which fair order placed before Other Member : 6. Date on which the fair order comes back to the Sr.P.S./P.S. : 04.9.24 7. Date on which the file goes to the Bench Clerk. : 04.9.24 8. Date on which the file goes to the Head Clerk. : 9. The date on which the file goes to the Assistant Registrar for signature on the order. : 10. Date of Despatch of the Order :