Shri Pankaj Somabhai Prajapati, Ahmedabad V. The ACIT.,Cent.Circle-2(2), Ahmedabad

ITSSA 351/AHD/2012

• Counselvise Citation: [2016] 122 COUNSELVISE.COM (IT) 2158 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 20-07-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 16-06-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 20-07-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: R I PATEL
• Assessee Lawyers: PF JAIN
• Keywords: Business income; Income from undisclosed sources; Onus to prove
• Section: 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, AHMEDABAD BEFORE SHRI R.P. TOLANI, JUDICIAL MEMBER ASSESSEE(S) BY : SHRI P.F. JAIN, AR REVENUE BY : SHRI R.I. PATEL, CIT-DR / DATE OF HEARING : 16/06/2016 / DATE OF PRONOUNCEMENT: 20/07/2016 / O R D E R THESE APPEALS BY THE ASSESSEE ARE DIRECTED AGAINST COMMON ORDER OF THE LD. CIT(A)-III, AHMEDABAD DATED 07.05.2012 IN T HE CASE OF S/SHRI SOMABHAI A. PRAJAPATI & CHANDULAL AMBALAL PRAJAPATI AND AGAINST ORDER OF LD. CIT(A)-III, AHMEDABAD DATED 26.06.2012 IN THE C ASE OF SHRI PANKAJ SOMABHAI PRAJAPATI. SINCE ALL THESE APPEALS ARE I NTERCONNECTED AND RAISE COMMON GROUND, THESE WERE HEARD TOGETHER AND ARE BE ING DISPOSED OF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE . 2. THE RESPECTIVE GROUNDS RAISED IN ALL THESE APPE ALS ARE TO THE EFFECT THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN UPH OLDING THE ADDITION OF :- SN IT(SS)A NO. AY APPELLANT RESPONDENT 1-2 348 & 349/AHD/2012 2004-05 2005-06 SOMABHAI AMBAALAL PRAJAPATI, PROP. OF AAI SHRI KHODIYAR BRICKS, KHODAL BHUVAN, KHODIYAR KRUPA BUNGALOW, NEW VADAJ, AHMEDABAD-13 PAN : ABAPP 7646 Q ACIT, CENTRAL CIRCLE-2(2), AHMEDABAD 3 350/AHD/2012 2004-05 CHANDUBHAI AMBALAL PRAJAPATI, PROP. OF M/S. JAY KHODIYAR BRICKS WORKS, KHODIYAR KRUPA BUNGALOW, NR. SB TRUST VADI, NEW VADAJ, AHMEDABAD-13 PAN: AEIPP 9281 J ACIT, CENTRAL CIRCLE-2(2), AHMEDABAD 4 351/AHD/2012 2009-10 PANKAJ SOMABHAI PRAJAPATI, PROP. OF AAI SHRI KHODIYAR BRICKS, KHODAL BHUVAN, KHODIYAR KRUPA BUNGALOW, NEW VADAJ, AHMEDABAD-13 PAN : AIOPP 0311 K ACIT, CENTRAL CIRCLE-2(2), AHMEDABAD SMC-IT(SS)A NOS. 348 TO 351/AHD/2012 SOMABHAI AMBAALAL PRAJAPATI+2 OTHERS AYS: 2004-05, 2005-06, 2004-05 & 2009-10 2 (A) SHRI SOMABHAI AMBALAL PRAJAPATI: FOR AY 2004-05 - RS,1,66,666/- (1/3 RD OUT OF CASH FLOW) FOR AY 2005-06 - RS.3,54,800/- (UNACCOUNTED SALES) ( (B) SHRI CHANDULAL AMBALAL PRAJAPATI: FOR AY 2004-05 - RS.1,66,666/- (1/3 RD OUT O F CASH FLOW) (C) SHRI PANKAJ SOMABHAI PRAJAPATI: FOR AY 2009-10 - RS.18,81,429/- ( OUT OF RS.30 LAKH) 3. THE BRIEF FACTS ARE ALL THE ASSESSEES ARE ENGA GED IN BRICKS MANUFACTURING AND SALE THEREOF. A SEARCH U/S 132 O F THE INCOME-TAX ACT WAS CARRIED OUT ON PRAJAPATI GROUP ON 08.12.2009. A JOINT DISCLOSURE OF UNDISCLOSED INCOME WAS MADE BY THESE ASSESSEES. HO WEVER, ASSESSING OFFICER FOUND VARIOUS DISCREPANCIES AND MADE THE AF ORESAID ADDITIONS. 3.1 AGGRIEVED, THE ASSESSEES PREFERRED FIRST APPEAL S WHERE THE ABOVE ADDITIONS QUA CASH FLOW WERE AGITATED AND IN CASE O F SOMABHAI FOR AY 2005- 06 TREATMENT OF ENTIRE UNACCOUNTED SALES AS INCOME WAS CHALLENGED WITH AN ALTERNATIVE PLEA THAT GP RATE MAY BE ADOPTED. 3.2 LD. CIT(A) DISMISSED THE CONTENTION QUA THE 1/ 3 RD DIFFERENCE OF CASH FLOW ENTRY BY FOLLOWING OBSERVATIONS IN THE CASE OF SHRI SOMABHAI A. PRAJAPATI AND SHRI CHANDULAL :- 4. I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELL ANT. IT MAY BE MENTIONED THAT THE APPELLANTS ARE NOT MAINTAINING ANY BOOKS O F ACCOUNTS TILL THE DATE OF SEARCH. DURING THE COURSE OF SEARCH, IT WAS FOUND T HAT THE APPELLANTS HAVE PURCHASED AND SOLD LAND BY MAKING CASH DEALS OVER A ND ABOVE THE CHEQUE AMOUNTS. IN ORDER TO EXPLAIN THE SOURCE OF INVESTME NT IN LAND, THE APPELLANTS TRIED TO REPAY THE CASH FLOW STATEMENT. THE ATTEMPT OF THE APPELLANT WAS TO SHOW THE INVESTMENT IN LAND OUT OF THE SALE PROCEED S OF THE AGRICULTURAL LAND HELD BY THE APPELLANTS. FOR THIS PURPOSE, AS ON 1/4 /2003 SUBSTANTIAL CASH BALANCE AMOUNTING TO RS.25.50 LACS WAS SHOWN IN THE CASH BOOK. THIS CASH BALANCE WAS SHOWN AS UTILISED BY THE APPELLANT FOR THE PURCHASE OF LAND IN SUBSEQUENT YEARS. THE AO HAD ALLOWED THE CREDIT OF T HE WITHDRAWALS OF SMC-IT(SS)A NOS. 348 TO 351/AHD/2012 SOMABHAI AMBAALAL PRAJAPATI+2 OTHERS AYS: 2004-05, 2005-06, 2004-05 & 2009-10 3 RS.20.50 LACS MADE IN THE MONTH OF MARCH, 2003 BUT DID NOT ALLOW THE CREDIT OF THE WITHDRAWALS OF RS.5 LACS MADE IN THE MONTH O F FEBRUARY 2003 ON THE GROUND THAT IF THE APPELLANTS HAD 5 LAKH IN THEIR P OSSESSION, THEN WHAT WAS THE NEED OF MAKING FURTHER WITHDRAWALS FROM THE BAN K. THE AO THEREFORE PRESUMED THAT THE AMOUNT OF RS. 5 LAKH WITHDRAWN IN THE MONTH OF FEBRUARY 2003 WAS UTILISED BY THE APPELLANTS SOMEWHERE ELSE. AS AGAINST THIS THE CONTENTION OF THE APPELLANT IS THAT THE AO SHOULD HA VE ALLOWED THE CREDIT OF THE WITHDRAWALS OF RS.5 LAKH MADE IN THE MONTH OF F EBRUARY, 2003. IN MY OPINION, IN THE ABSENCE OF THE ORIGINAL BOOKS OF AC COUNTS, THE CONTENTION OF THE APPELLANT CANNOT BE ACCEPTED. IT MAY BE MENTIONED T HAT THE BOOKS OF ACCOUNTS WERE NOT MAINTAINED BY THE APPELLANTS. IT WAS ONLY AFTER THE DATE OF SEARCH THAT THE APPELLANT TRIED TO PROVE THE SOURCE OF INV ESTMENTS IN LAND OUT OF THE SALE PROCEEDS OF THEIR AGRICULTURAL LAND. FOR DOING SO, AN ATTEMPT HAS BEEN MADE TO SHOW MAXIMUM CASH BALANCE AVAILABLE WITH TH EM IN THE FORM OF OPENING CASH BALANCE ON THE CASH RECEIVED BY WAY OF SALE OF LAND SO THAT THEY CAN EXPLAIN THE INVESTMENTS IN LAND. IF THE CONTENT ION OF THE APPELLANT IS ACCEPTED THEN ALL THE WITHDRAWALS MADE PRIOR TO APR IL 2003 SHOULD ALSO HAVE BEEN CONSIDERED AS OPENING CASH BALANCE AS ON 1/4/2 003. NON-MAINTENANCE OF BOOKS OF ACCOUNTS CANNOT BE ADVANTAGEOUS TO THE APP ELLANTS AS AGAINST THOSE PERSONS WHO ARE MAINTAINING BOOKS OF ACCOUNTS. THE FACT THAT IN THE MONTH OF FEBRUARY 2003 THE APPELLANTS HAVE WITHDRAWN RS.5 LA KH CLEARLY SHOWS THAT IT MUST HAVE BEEN UTILISED FOR SOME PURPOSES IN THE MO NTH OF FEBRUARY 2003 ITSELF AND THEREFORE THE APPELLANTS HAD TO WITHDRAW FURTHER THE AMOUNT OF RS.20.50 LACS IN THE MONTH OF MARCH, 2003. IN MY OP INION, THE AO HAD BEEN GENEROUS ENOUGH TO TREAT ALL THE WITHDRAWALS IN THE MONTH OF MARCH 2003 AS THE CASH BALANCE AS ON 31 ST MARCH 2003. IN THE ABSENCE OF THE MAINTENANCE OF BOOKS OF ACCOUNTS BY THE APPELLANTS, I ALSO HOLD TH AT THE WITHDRAWALS OF RS.5 LACS MADE IN THE MONTH OF FEBRUARY 2003 DOES NOT RE PRESENT THE CASH BALANCE AS ON 1.4.2003. IN OTHER WORDS, THE ADDITION OF RS .166,666/- MADE BY THE AO IN THE HANDS OF THE EACH APPELLANT IS HEREBY CONFIR MED. 3.3 IN CASE OF SOMABHAI FOR AY 2005-06 THE ADDITI ON QUA THE UNACCOUNTED SALES WERE HELD TO BE NET PROFIT BY LD. CIT(A) AS A LL THE EXPENSES WERE ALREADY CLAIMED BY THE ASSESSEE, BY FOLLOWING OBSER VATIONS: 5.1 IT WAS ADMITTED BY THE AR THAT AS PER THE SEIZ ED PAPER ONLY UNACCOUNTED SALES AND NOT THE UNACCOUNTED PURCHASES WERE FOUND RECORDED. THIS MEANS THAT THERE WAS EVIDENCE OF UNACCOUNTED S ALES BUT THERE IS NO EVIDENCE ON RECORD WHICH SHOWS THAT THE APPELLANT H AS ALSO MADE UNACCOUNTED PURCHASES. IN CASE THE EVIDENCE OF UNA CCOUNTED PURCHASE AND UNACCOUNTED SALES IS FUND FROM THE SEIZED MATERIAL, IN THAT CASE, ONLY THE SMC-IT(SS)A NOS. 348 TO 351/AHD/2012 SOMABHAI AMBAALAL PRAJAPATI+2 OTHERS AYS: 2004-05, 2005-06, 2004-05 & 2009-10 4 ADDITION OF GP CAN BE MADE AS THE INCOME OF THE APP ELLANT. HOWEVER, IF ALL THE PURCHASES ARE ACCOUNTED FOR BY THE APPELLANT AN D SOME OF THE SALES ARE NOT ACCOUNTED FOR, IN THAT CASE, THE UNACCOUNTED SALES WILL FORM PART OF THE TOTAL SALES AND ACCORDINGLY THE INCOME WOULD BE INCREASED BY THE AMOUNT OF UNACCOUNTED SALES. SINCE IN THIS CASE, THERE IS EV IDENCE OF ONLY UNACCOUNTED SALES, IN MY CONSIDERED VIEW, THE WHOLE UNACCOUNTED SALE IS LIABLE TO BE ADDED AS THE UNACCOUNTED INCOME OF THE APPELLANT. THE DE CISIONS RELIED UPON BY THE APPELLANT ARE IN RESPECT OF THOSE CASES WHERE THE E VIDENCE OF UNACCOUNTED PURCHASES AS WELL AS UNACCOUNTED SALES WERE FOUND. THEREFORE, THE CASE LAWS RELIED UPON BY THE APPELLANTS, ARE NOT APPLICABLE H ERE. 3.4 IN THE CASE OF SHRI PANKAJ SOMABHAI PRAJAPATI, THE ADDITION WAS REDUCED FROM RS.30 LACS TO RS.18,81,429/- BY FOLLOW ING OBSERVATIONS:- 6.1. IN THE ASSESSMENT YEAR 2010-11, THE AO HAS MAD E ADDITION OF UNACCOUNTED INTEREST INCOME OF RS.670,000/- IN THE CASE OF THE APPELLANT. THIS ADDITION HAS BEEN ACCEPTED BY THE APPELLANT. T HIS MEANS THAT THE APPELLANT HAS ACCEPTED THAT THE FUND BELONGS TO THE APPELLANT ON WHICH INTEREST INCOME OF RS 670,000 WAS EARNED BY HIM DUR ING ASSESSMENT YEAR 2010-11. IN MY CONSIDERED VIEW, THE INTERPRETATION OF THE AO THAT ONLY LOAN OF RS.30 LAKHS WAS GIVEN BY THE APPELLANT AND THE O THER LOANS SHOWN IN THE PAPER ARE OUT OF THE RETURN OF THE LOAN OF RS. 30 L ACS IS NOT CORRECT BECAUSE THE LOAN OF RS.30 LACS HAS BEEN GIVEN FOR FOUR MONT HS, THE LOAN OF RS. 25 LACS FOR THREE MONTHS, LOAN OF RS. 10 LACS FOR THREE MON THS, LOAN OF RS.5 LACS FOR THREE MONTHS, LOAN OF RS.5 LACS FOR THREE MONTHS AN D ANOTHER LOAN OF RS. 10 LACS FOR TWO MONTHS. IN OTHER WORDS, IF THE INTERPR ETATION OF THE AO IS ACCEPTED TO BE CORRECT, IN THAT CASE THE LOAN WAS G IVEN FOR TOTAL 18 MONTHS AND THEREFORE THE INVESTMENT SHOULD HAVE BEEN CONSIDERE D IN TWO DIFFERENT ASSESSMENT YEARS AND NOT IN ASSESSMENT YEAR. THIS M EANS, THE APPELLANT HAD GIVEN LOANS OF RS. 30 LAKHS, RS.25 LACS, RS.10 LACS , RS.5 LACS, RS.5 LACS AND RS.10 LACS TOTALING RS. 85 LACS SIMULTANEOUSLY. INS TEAD OF THE FIGURE OF RS. 30 LAKHS, THE AO SHOULD HAVE ADOPTED THE FIGURE OF R S.85 LACS. 6.2. EVEN IF IT IS ACCEPTED THAT THE APPELLANT HAD HIS SHARE OF INCOME OF RS.36,52,071 + RS.19,66,500+RS.10,00,000 = RS. 66,1 8,571, THEN THE SOURCE OF THE LOAN OF RS. 85 LAKH GIVEN BY THE APPELLANT C AN BE TREATED AS EXPLAINED UP TO RS.66,18,571/-. IN OTHER WORDS, THE SOURCE OF LOAN OF RS.18,81,429/- REMAINS UNEXPLAINED. IN SHORT, EVEN THOUGH THERE CO ULD HAVE BEEN CASH BALANCE WITH THE FAMILY OF THE APPELLANTS ON 1/6/20 08 AS PER THE FUND FLOW STATEMENT, THE AVAILABLE CASH BELONGING TO THE APPE LLANT WAS ONLY RS.66,18,571/- (WHICH IS THE SHARE OF THE APPELLANT ), THE APPELLANT CAN AT THE MOST GET THE BENEFIT OF THIS AMOUNT OF RS.66,18,571 /- IN HIS FUND FLOW SMC-IT(SS)A NOS. 348 TO 351/AHD/2012 SOMABHAI AMBAALAL PRAJAPATI+2 OTHERS AYS: 2004-05, 2005-06, 2004-05 & 2009-10 5 STATEMENT. IN OTHER WORDS, THE ADDITION OF RS.30 LA KH MADE BY THE AO IS DIRECTED TO BE REDUCED TO RS.18,81,429/- (RS. 85 LA CS MINUS RS.66,18,571). 4. LD. COUNSEL FOR THE ASSESSEE CONTENDS AS UNDER:- I) THE INCRIMINATING PAPER BASED ON WHICH THE ADDITION WAS MADE WAS A DUMP DOCUMENT AND A ROUGH PAPER; II) EXACT CONTENTS OF THE PAPER WERE NEITHER OPINION OF THE ASSESSEE NOR THE ASSESSING OFFICER COULD EXPLAIN THEM; III) THIS AMOUNT WAS DEDUCTED FROM OPENING CASH BALANCE WHICH HAS ARISEN ON ACCOUNT OF CASH RECEIPTS ON SALE OF LAND. 4.1 LD. COUNSEL FOR THE ASSESSEE FURTHER CONTENDS T HAT THE JOINT CASH FLOW STATEMENT OF THREE BROTHER VIZ. S/SHRI SOMABHAI AMB ALAL PRAJAPATI, CHANDUBHAI AMBALAL PRAJAPATI & VISHNUBHAI AMBALAL P RAJAPATI WAS FILED, OUT OF WHICH JOINT WITHDRAWAL OF RS.5 LAKHS IN THE MONTH OF FEBRUARY 2003 WAS NOT ACCEPTED AS CASH IN HAND ON THE POINT THAT WHEN THE ASSESSEE WAS HAVING CASH IN HAND, THERE WOULD BE NO REASON TO WI THDRAW THE FUNDS FROM THE BANK. THEREFORE, THE AMOUNT OF RS.5 LAKHS WAS SPLIT INTO RS.1,66,666/- AND DISALLOWED IN THE HANDS OF THREE BROTHERS. 4.2 APROPOS UNACCOUNTED SALES IT IS CONTENDED THAT ENTIRE SALES CANNOT BE TREATED AS NET PROFIT AND THE GP SHOULD BE APPLIED. RELIANCE IS PLACED ON FOLLOWING JUDGMENTS OF HONBLE JURISDICTIONAL HIGH COURT:- I) CIT VS. PRESIDENT INDUSTRIES, (2002) 258 ITR 0654 ( GUJ.) II) PIPUSH KUMAR O. DESAI VS. CIT, (2001) 247 ITR 0568 (GUJ.) 5. LD. DR RELIED ON THE ORDERS OF LD. CIT(A). IT IS CONTENDED THAT THE FINDINGS OF CIT(A) ARE PURE FINDING OF FACTS ON THE PECULIAR FACTS AND SMC-IT(SS)A NOS. 348 TO 351/AHD/2012 SOMABHAI AMBAALAL PRAJAPATI+2 OTHERS AYS: 2004-05, 2005-06, 2004-05 & 2009-10 6 CIRCUMSTANCES OF THESE CASES, THEREFORE, THE CASE L AWS CITED BY ASSESSEE BEING ON DIFFERENT FACTS CANNOT BE APPLIED IN THE ABSENCE OF FACTUAL PARITY. 6. I HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITI ES BELOW. ADVERTING TO THE APPEALS OF SOMABHAI AMBAALAL PRAJAPATI & CHANDU BHAI AMBALAL PRAJAPATI FOR AY 2004-05, THE ASSESSEES COULD NOT E XPLAIN AS TO HOW THE AMOUNT OF RS.5 LAKHS WITHDRAWN FROM THE COMMON BANK ACCOUNT WAS UTILIZED. LOOKING AT THE ENTIRE FACTS AND CIRCUMST ANCES, THE ISSUES WERE TO BE DECIDED ON SURROUNDING CIRCUMSTANCES AND HUMAN COND UCT. THE BURDEN TO PROVE THE CASH ENTRIES IS ON THE ASSESSEE SINCE THE REQUISITE BURDEN HAS NOT BEEN DISCHARGED BY THE ASSESSEE IN THIS BEHALF. IN VIEW THEREOF, THE ORDERS OF THE LD. CIT(A) ON THIS ISSUE ARE UPHELD. THUS, ASS ESSEES APPEALS ARE DISMISSED. 6.1 APROPOS SOMABHAI AMBAALAL PRAJAPATI FOR AY 2005 -06, IT HAS NOT BEEN DISPUTED THAT THE CORRESPONDING PURCHASES ARE NOT S HOWN IN THE SEIZED RECORD. CONSEQUENTLY THEY REMAINED UNACCOUNTED. IN VIEW THEREOF, LD. CIT(A) HAS RIGHTLY APPRECIATED THE ISSUE AND HELD T HE ENTIRE UNACCOUNTED SALES TO BE UNACCOUNTED INCOME AS THE PURCHASES EXP ENDITURE ARE NOT FOUND RECORDED. THE CASES OF PRESIDENT INDUSTRIES & PIPU SH KUMAR O. DESAI (SUPRA) ARE DISTINGUISHABLE AS THE FACTS OF THESE C ASES STAND ON DIFFERENT FOOTINGS. CONSEQUENTLY, THE ORDER OF LD. CIT(A) IS UPHELD. ACCORDINGLY, THIS APPEAL OF THE ASSESSEE IS ALSO DISMISSED. 6.2 APROPOS PANKAJ SOMABHAI PRAJAPATI, LD. CIT(A) I N HIS ORDER VIDE PARAGRAPH 6.2 HAS GIVEN PROPER CALCULATION AND ESTA BLISHED THAT THE SOURCE OF LOAN OF RS.18,81,429/- REMAINED UNEXPLAINED. LD. COUNSEL FOR THE ASSESSEE, EXCEPT MAKING GENERAL COMMENTS, COULD NOT OBJECTIVELY PROVE THAT SMC-IT(SS)A NOS. 348 TO 351/AHD/2012 SOMABHAI AMBAALAL PRAJAPATI+2 OTHERS AYS: 2004-05, 2005-06, 2004-05 & 2009-10 7 THE ASSESSEES PRIMA FACIE ONUS IN RESPECT OF THIS LOAN WAS SATISFACTORILY DISCHARGED. CONSEQUENTLY I SEE NO INFIRMITY IN THE ORDER OF LD. CIT(A) IN THIS APPEAL ALSO. THUS, THE ORDER OF THE CIT(A) IS UPHELD AND THE APPEAL OF THE ASSESSEE IS DISMISSED. 7. IN THE RESULT, ALL THE APPEALS FILED BY THE ASSE SSEES ARE DISMISSED. ORDER PRONOUNCED IN THE COURT ON 20 TH JULY, 2016 AT AHMEDABAD. SD/- R.P. TOLANI (JUDICIAL MEMBER) AHMEDABAD; DATED 20/07/2016 *BIJU T. / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A) 5. , , / DR, ITAT, AHMEDABAD 6. / GUARD FILE . / BY ORDER, TRUE COPY / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD