The ACIT, Central Circle-2(3), Ahmedabad V. M/s. Swastik Pipe Industries, Mehesana

ITSSA 514/AHD/2019

• Counselvise Citation: [2024] 100 COUNSELVISE.COM (IT) 1653 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 7 month(s) 13 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 13-06-2024
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 10-06-2024
• Assessment Year: 2017-2018
• Appeal Filed On: 31-10-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Unexplained investment; Set aside
• Section: 68; 69; 44AD; 143(3); 142(1); 143(2); 153C

Judgement Text

आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरणआयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण, अहमदाबाद 瀈यायपीठ अहमदाबाद 瀈यायपीठअहमदाबाद 瀈यायपीठ अहमदाबाद 瀈यायपीठ “B”, अहमदाबाद अहमदाबादअहमदाबाद अहमदाबाद । ।। । IN THE INCOME TAX APPELLATE TRIBUNAL “ B ” BENCH, AHMEDABAD ] ] BEFORE MS. SUCHITRA KAMBLE, JUDICIAL MEMBER AND SHRI MAKARAND V. MAHADEOKAR, ACCOUNTNAT MEMBER IT(ss)A No.514/Ahd/2019 Assessment Year : 2017-18 The ACIT Central Circle-2(3) Ahmedabad V s M/s.Swastik Pipe Industries 44-45, GIDC, Nirmal Industrial Park Gozariya, Mehesana382 825 PAN: ACQFS 1147 Q / (Appellant) / (Respondent) Assessee by : Shri K.C. Thaker, AR Revenue by : Shri Sudhendu Das, CIT-DR /Date of Hearing : 11/06/2024 /Date of Pronouncement: 14/06/2024 आदेश/O R D E R PER SHRI MAKARAND V. MAHADEOKAR, AM: This appeal by the Revenue is directed against the order of the Ld.Commissioner of Income Tax (Appeals)-12, Ahmedabad (hereinafter referred to as “the Ld.CIT(A)”), dated 29-8-2019, for the Assessment Year (AY) 2017-18, whereby the Ld.CIT(A) deleted the additions made by the Assessing Officer (hereinafter referred to as “AO”) under sections 68 and 69 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) in his order passed u/s 143(3) r.w.s. 153C of the Act. Facts of the Case: IT(ss)A No.514/Ahd/2019 The ACIT vs. M/s.Swastik Pipe Industries Asst. Year :2017-18 2 2. The assessee is a partnership-firm that filed its return of income for AY 2017-18 on 17/10/2017, declaring a loss of Rs.52,96,388/-. Search and survey actions were conducted in the case of Rameshbhai Chaturbhai Prajapati and Other Group, which included Shri Dignesh R Patel, a family member of Shri Rajeshbhai Kanjibhai Patel and a Director in M/s. R K Jewels (Visnagar) Pvt. Ltd. During the search, incriminating images were extracted from the I-Phone of Shri Dignesh R Patel. 2.1. The AO having jurisdiction over Shri Dignesh R Patel recorded satisfaction for initiating assessment proceedings u/s.153C of the Act in the case of M/s. Swastik Pipe Industries. Accordingly, a notice u/s 153C of the Act dated 28/09/2018 was issued to the assessee, followed by notices under sections 143(2) and 142(1) of the Act. The Assessee submitted replies and explanations during the assessment proceedings. 2.2. The AO relied on various pieces of evidence extracted from the I- Phone and other digital data, which included scanned images and statements recorded during the search. The AO concluded that the assessee had received unexplained cash credits of Rs.2,58,00,000/- u/s. 68 of the Act and made unexplained investments of Rs. 76,17,000/- u/s. 69 of the Act. The AO treated the amount of Rs.2,58,00,000/- as “unexplained cash credits” u/s.68 of the Act based on entries in the extracted images, purportedly related to the assessee-firm. While concluding so, the AO rejected the explanations provided by the assessee, which claimed the transactions were related to donations for constructing a Shamshan Ghat (cremation site) at Visnagar. Further, the AO treated Rs.76,17,000/- as “unexplained investment” u/s.69 of the Act based on the ledger account IT(ss)A No.514/Ahd/2019 The ACIT vs. M/s.Swastik Pipe Industries Asst. Year :2017-18 3 retrieved from digital data, which indicated unaccounted sales and purchases by the assessee-firm. 3. Aggrieved by the order of AO, the assessee filed an appeal before Ld.CIT(A), who deleted the additions made by the AO. Therefore, the Revenue is in appeal before us on following grounds: “1. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting addition of Rs.2,58,00,000/- made on account of unexplained cash credit u/s 68 of the I.T. Act, 1961. 2. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting addition of Rs.76,17,000/- being unexplained investment. 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) ought to have upheld the order of the A.O. 4. It is, therefore, prayed that the order of the Ld. CIT(A) be set aside and that of the A.O. be restored to the above extent.” On the Grounds of appeal: 4. The Ld.Departmental Representative (DR) contended that the Ld.CIT(A) erred in deleting the additions made by the AO and relied on the order of AO. It was argued that the evidence extracted from the digital data clearly indicated unaccounted transactions by the assessee-firm and that the Ld.CIT(A) failed to appreciate the incriminating nature of the seized material. IT(ss)A No.514/Ahd/2019 The ACIT vs. M/s.Swastik Pipe Industries Asst. Year :2017-18 4 5. The Ld.Counsel for the assessee submitted that the AO made the additions based on assumptions without properly considering the documentary evidence provided. It was argued that the transactions were related to expected donations for the Shamshan Ghat. He relied on the order of the Ld.CIT(A). 6. We have heard the contentions of both the parties. The Ld.CIT(A) has recorded his observations before passing his order. The Ld.CIT(A) has considered the substantial evidence submitted before the AO, including: i. The physical photos of the cremation site known as Antim Visamo of Visnagar Sarvajanil Smashan were provided. ii. The press notes detailing various donation collections by efforts of Shri Rajesh K Patel and Swastik Mitra Mandal, published in the local newspaper Prachar from 26.09.2016 to 15.05.2017 iii. The documents including trust resolution regarding promises of donation and the estimated cost of renovation/development. iv. The entries in the images were promises of donations against the proposed renovation/development cost of Rs.400 lakhs estimated by Shri Rajeshbhai and his team. 6.1. The Ld.CIT(A) noted that under Sections 132(4A) and 292C of the Act, there is an initial presumption in favour of the Department, and the primary onus is on the person searched and the other person to whom the documents/assets belong to rebut this presumption. If the explanation is IT(ss)A No.514/Ahd/2019 The ACIT vs. M/s.Swastik Pipe Industries Asst. Year :2017-18 5 reasonable and plausible, the AO cannot reject it without any evidence to the contrary. 6.2. The Ld.CIT(A) further observed that the addition of Rs. 2,58,00,000/- was based on noting in an image found on the I-Phone of Shri Dignesh Patel. During the search, Shri Dignesh Patel stated that the images related to the Shamshan Gruh of Visnagar and would be explained by his father, Shri Rajeshbhai Patel. Shri Rajeshbhai Patel confirmed that the images detailed donations to be collected for the construction/renovation of the Shamshan Gruh. A confirmation dated 13.12.2018 from Antim Visamo Trust supported this explanation. 6.3. The Ld.CIT(A) found no contradiction in the statements of Shri Dignesh Patel, Shri Rajeshbhai Patel, and the Trust. There was no indication that the seized image related to M/s.Swastik Pipe Industries. Moreover, the AO failed to confront any partner/employee of M/s. Swastik Pipe Industries regarding the seized image. 6.4. During the appeal proceedings, the assessee provided minutes of the Trust's meetings, audited accounts, and donation receipts, which were also submitted to the AO. The Ld.CIT(A) found that the assessee had discharged the primary onus of explaining the seized image and that the AO's inference that the image pertained to M/s. Swastik Pipe Industries was without basis. The Ld.CIT(A) concluded that the evidence overwhelmingly supported the assessee's explanation. IT(ss)A No.514/Ahd/2019 The ACIT vs. M/s.Swastik Pipe Industries Asst. Year :2017-18 6 6.5. Regarding the addition made u/s.69 of the Act of Rs.76,17,000/-, the AO contended that images from the I-Phone of Shri Dignesh Patel and the laptop of Shri Jaimin Patel (brother of Shri Dignesh Patel) related to transactions with M/s.Vijay Engineering Stores and M/s.Amardeep Plastics, which were not accounted for in the books of M/s. Swastik Pipe Industries. The AO treated the amount as “unexplained investment” under section 69 of the Act. The assessee argued that these transactions were declared under section 44AD of the Act in the cases of Shri Dignesh R Patel and Shri Rajesh K Patel and were not related to M/s. Swastik Pipe Industries. The Ld.CIT(A) observed that the transactions were from Financial Year (FY) 2015-16 and, if at all liable for addition, could only be added in AY 2016-17 and not AY 2017-18. Thus, the addition was not justified. 6.6. Upon careful consideration of the facts, evidence, and contentions of both parties, we find that the Ld.CIT(A) correctly deleted the additions made by the AO. The assessee provided substantial documentary evidence to support their claim that the transactions were related to expected donations for the Shamshan Ghat. The AO's rejection of this explanation without conducting an independent inquiry is not justified. 6.7. Regarding the addition made u/s.69, the evidence indicates that the transactions were related to AY 2016-17. The AO's acceptance of similar transactions in the case of Rajeshbhai K Patel further supports the assessee's contention. IT(ss)A No.514/Ahd/2019 The ACIT vs. M/s.Swastik Pipe Industries Asst. Year :2017-18 7 6.8. In view of the above findings, the appeal filed by the Revenue is dismissed, and the order of the Ld.CIT(A) is hereby upheld. Order pronounced in the Open Court on 14 th June, 2024 at Ahmedabad. Sd/- Sd/- (SUCHITRA KAMBLE) JUDICIAL MEMBER (MAKARAND V.MAHADEOKAR) ACCOUNTANT MEMBER Ahmedabad, Dated 14/06/2024 . ी. य , . . ./T.C. NAIR, Sr. PS ! "# /Copy of the Order forwarded to : 1. "!ी $% / The Appellant 2. &य$% / The Respondent. 3. '(')* य य + / Concerned CIT 4. य य + )"!ी (/ The CIT(A)-12, Ahmedabad 5. . /ीय )* , य "!ी य ")* , ज /DR,ITAT, Ahmedabad, 6. / 12 3 /Guard file. / BY ORDER, &य ! //True Copy// ह य !'जी (Asstt. Registrar) य "!ी य ")* , ITAT, Ahmedabad 1. Date of dictation (word processed by Hon’ble AM in his laptop) : 12.6.2024 2. Date on which the typed draft is placed before the Dictating Member. : 12.6.2024 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. : 14.6.24 7. Date on which the file goes to the Bench Clerk. : 14.6.24 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 :