M/s. Shivam Investment, Mehsana V. The ACIT, Mehsanad Circle, Mehsana

ITSSA 56/AHD/2015

• Counselvise Citation: [2021] 104 COUNSELVISE.COM (IT) 6416 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 year(s) 8 month(s) 15 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 14-12-2021
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2004-2005
• Appeal Filed On: 29-03-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Income from undisclosed sources; Search and seizure; Document seized; Principle of natural justice; Opportunity of cross examination; Additional evidence; Documents seized; Set aside
• Section: 132; 250; 22; 153C

Judgement Text

आयकर अपीलीय अिधकरण, अहमदाबाद ᭠यायपीठ IN THE INCOME TAX APPELLATE TRIBUNAL, ‘’ D’’ BENCH, AHMEDABAD (CONDUCTED THROUGH VIRTUAL COURT AT AHMEDABAD) BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER And Ms MADHUMITA ROY, JUDICIAL MEMBER आयकर अपील सं./IT(SS)A No.56/AHD/2015 िनधाᭅरण वषᭅ/Asstt. Year: 2004-2005 M/s Shivam Investment, C/o Vijya P. Patel, 29, Umiya Nagar Society, Dairy Road, Mehsana. PAN: AAHFS1665G Vs. A.C.I.T., Mehsana Circle, Mehsana. (Applicant) (Respondent) Assessee by : Shri S.N. Divetia, A.R Revenue by : Shri Mohd. Usman, CIT.D.R सुनवाई कᳱ तारीख/Date of Hearing : 26/10/2021 घोषणा कᳱ तारीख /Date of Pronouncement: 15/12/2021 आदेश/O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: The captioned appeal has been filed at the instance of the Assessee against the order of the Learned Commissioner of Income Tax (Appeals), Ahmedabad, dated 08/01/2015 arising in the matter of assessment order passed under s.144 r.w.s 153C of the Income Tax Act, 1961 (here-in-after referred to as "the Act") relevant to the Assessment Year 2004-2005. IT(SS)A no.56/AHD/2015 Asstt. Year 2004-05 2 2. The assessee has raised the following grounds of appeal: 1.1 The order passed u/s. 250 on 08-01/2015 for A.Y.2004-05 by CIT(A)-GNR Abad upholding the addition of Rs.61,01,104/- as unexplained made by AO is wholly illegal, unlawful and against the principles of natural justice. 1.2 The Ld. CIT(A) has grievously erred in law and or on facts in not considering fully and properly the submissions made and evidence produced by the appellant with regard to the impugned addition. 1.3 The Ld CIT(A) has erred in not holding that the order passed on 22-3-2013 was barred by limitation of time. 2.1 The Ld. CIT (A) has grievously erred in law and on facts in confirming the addition of RS.61,01,104/-. 2.2 That in the facts and circumstances of the case as well as in law, the Ld. CIT(A) ought not to have upheld the addition of Rs.61,01,104/- 2.3 The Ld.CIT (A) has erred in upholding that the appellant had failed to prove by producing the evidence that the impugned amount belonged to the firm and the partners had withdrawn from it so that it was not liable to tax. It is, therefore, prayed that the addition of Rs. 61,01,104/- upheld by the CIT(A) may kindly be deleted. 3. The interconnected issue raised by the assessee is that the learned CIT (A) erred in confirming the addition of Rs. 61,01,104/- on account of undisclosed income. 4. The facts in brief are that the assessee in the present case is a partnership firm and engaged in the business of Share trading & Investment. The firm comprises four partners namely Shri Mukesh R Modi, Shri Kaushik P Patel, Shri Rakesh Patel and Shri Himanshu Patel. Some dispute happened among the partners on account of the fraud committed by the partners namely Mukesh R Modi and Shri Kaushikbhai P Patel. As a result of dispute among the partners, the remaining partners proposed to retire from the firm. Accordingly, a settlement deed was made among all the partners in writing dated 14 February 2004 in the presence of the mediator/arbitrator namely Shri Lilachand Patel who happened to be the father in- law of Shri Hinmashu Patel, one of the partner of the firm. In the settlement paper dated 14 February 2004, all the partners under their signature have agreed up-to the date for withdrawal of the money for Rs. 61,01,104/- only. The names of the IT(SS)A no.56/AHD/2015 Asstt. Year 2004-05 3 three witnesses along with their signatures were also appearing on such settlement paper. 4.1 There was a search and seizure operation under section 132 of the Act dated 20 August 2004 at “VIMAL GROUP”. In the course of search operation the impugned settlement paper was found from the premises of Shri Lilachand Patel who is the father-in-law of Shri Himanshu Patel and mediator to the dispute as discussed above. 4.2 Based on the seized document, the proceedings were initiated under section 153C of the Act against the assessee but the assessee has neither filed any income tax return in response to the notice issued under section 153C of the Act nor cooperated during the assessment proceedings. Thus the AO framed the ex parte assessment to the assessee by treating the amount of withdrawal by the partners of the firm as unaccounted income of the firm distributed among partners and added the same to the total income of the assessee vide order dated 19 December 2006 which was subsequently confirmed by the learned CIT (A) vide order dated 25 January 2008. 4.3 On appeal to the ITAT, the issue on merit as well as on technical ground was set aside to the file of the AO for fresh adjudication in ITA No. 2069/AHD/2008 vide order dated 30 December 2011. 4.4 The assessee again failed to appear before the AO in the set-aside proceedings and therefore the AO left with no option except to confirm the addition of ₹ 61,01,104/- vide order dated 22 March 2013. 5. On appeal, the assessee before the learned CIT (A) submitted that as a result of dispute all the books of accounts and computers are in the possession of the police department and Magistrate Court of Mehsana. Thus, it was prayed by the assessee to keep the proceedings under abeyance. IT(SS)A no.56/AHD/2015 Asstt. Year 2004-05 4 5.1 However, the assessee further by letter dated 23 rd of September submitted certain additional evidences in the form of profit and loss account, statement of income and copies of ITR for the years ending as on 31 March 2001, 2002 and 2003. 5.2 Likewise the assessee has also filed the balance sheet, profit loss account, capital account of the partners, and other ledgers for the year under consideration and the bank statement for the period from 2001 to 2004. Based on these financial statements, it was contended that the amount of withdrawal shown in seized paper have no bearing on the income of the assessee firm. As such the amount represent the understanding between partners in relation to their personal share trading and outstanding amount of outside customer brought by them on which assessee firm earned only brokerage. As per the assessee, the aforesaid details i.e. the profit and loss account and statement of income filed establish the fact that firm has not earned such income. Therefore the AO was wrong in treating the same as distribution of profit of firm among partners. Further it is nowhere written on the seized document that the amount related to the year under consideration. The assessee also submitted reconciliation statement of profit loss account and bank statement. 5.3 The assessee also contended that the document seized from the premises of the 3 rd party namely Shri Lilachand Patel in the search proceeding in case of Vimal Group being a third party does not belong to assessee firm which is the mandatory requirement for proceeding under section 153C of the Act. Thus the proceedings under section 153C of the Act cannot be initiated. 5.4 The learned CIT (A) called for the remand report from AO who in turn submitted vide letter dated 26 November 2014 that there were certain documents found in the course of survey and it was also admitted by Shri Lialchand Patel the father-in-law of Shri Himanshu Patel one of the partner of the firm that these IT(SS)A no.56/AHD/2015 Asstt. Year 2004-05 5 documents belong to the firm. The contents of the seized documents were duly signed by all the partners along with the witnesses. The withdrawal from the firm is possible only out of the income. Such income is liable to tax in the hands of the firm and not in the hands of the partners. Further the assessee has not disputed the taxability of the amount noted in the seized paper. As such, during remand proceeding it was submitted the amount withdrawal represent outstanding amount of customer and personal share trading. Accordingly, the AO in the remand report proposed to confirm the addition made in the assessment order. The assessee in rejoinder to the remand report made similar arguments as discussed above. 5.5 However, the learned CIT-A rejected the contention of the assessee by observing that there was no evidence brought on record by the assessee suggesting that the impugned amount of withdrawal was settled among the partners for their personal accounts. It was submitted by the assessee that the partners have given money to the firm for share activities which came back to the partners. In this process, the firm being the assessee has retained only part of fees which is a very nominal amount. But the CIT (A) was not convinced with the submission of the assessee for the reason that assessee firm has not brought any documentary evidences that such transactions were recorded in books of account either of the firm or personal books of accounts maintained by the partners. Likewise, there was no document brought on record suggesting that the impugned amount was not the income of the assessee but of the partners. Similarly, there was no detail furnished about the fact that the impugned amount shown as withdrawal was the capital of the partners in their individual capacity. Thus the learned CIT(A) confirmed the addition made by the AO in view of seized document found and statement furnished by the Shri Lilachand Patel that amount represents distribution of profit between partners. 6. Being aggrieved by the order of the learned CIT (A), the assessee is in appeal before us. IT(SS)A no.56/AHD/2015 Asstt. Year 2004-05 6 7. The learned AR before us filed a paper book running from pages 1 to 283 and contended that the documents found in the course of such from the 3 rd party do not belong to the assessee. Therefore, proceedings under section 153C of the Act cannot be initiated. 7.1 The learned AR also submitted that the amount of withdrawal shown in the seized document does not represent the income of the assessee. As such, the transactions recorded in the seized document represent the personal transactions of the partners which do not have any bearing on the income of the firm. 7.2 The learned AR also contended that there was no opportunity of cross verification extended to the assessee of the statement of Shri Lialchand Patel the father-in-law of Shri Himanshu Patel one of the partner of the firm. 7.3 The learned AR also contended that the onus lies upon the Revenue under the provisions of section 153C of the Act to justify that the transactions recorded in the seized documents represent the income of the assessee. 8. On the contrary, the learned DR before us contended that there were seized documents found in the course of search which were containing name of the firm along with the partners which were duly signed by the partners along with the witnesses. Thus, there remains no ambiguity to the fact that these documents belonged to the assessee only. 8.1 The amount of withdrawal shown in the seized documents is possible only against the income but the same was not offered to tax by the assessee in the income tax return. The learned DR vehemently supported the order of the authorities below. 9. We have heard the rival contentions of both the parties and perused the materials available on record. The facts of the case have already been discussed in IT(SS)A no.56/AHD/2015 Asstt. Year 2004-05 7 details which are not in dispute. Therefore, for the sake of brevity and convenience, we are not inclined to repeat the same. The following issues arise for our adjudication: i. Whether the documents seized from the premises of Shri Lilchand Patel of ‘Vimal Group’ belongs to the assessee as provided under section 153C of the Act. ii. Whether the amount shown as withdrawals in the name of the partners of the firm represents the unaccounted income of the firm. 9.1 As regards the 1 st issue whether these documents belong to the assessee, we find that the seized document was containing the name of the firm and the partners which was duly dated & signed by all of them along with the witnesses. Thus, it appears that the firm is the owner of the documents and thus it is safe to infer that the document in question belongs to the assessee as envisaged under section 153C of the Act. 9.2 As regards the contention of the assessee on merit that the amount of withdrawal shown in the seized documents represents the amount belonging to the partners in their personal capacity. As per the assessee, the settlement was made among the partners for settling their individual accounts of the investments made in the shares through the partnership firm. Thus, the impugned amount does not represent the income of the firm. In this regard, we find that the provisions of section 292C of the Act contains the assumption with respect to the documents found in the course of search. The assumption says that the contents of the documents found during the course of search are true. Indeed this presumption is rebuttable by the assessee based on the documentary evidence. The relevant provisions of section 292 reads as under: 292C. (1) Where any books of account, other documents, money, bullion, jewellery or other valuable article or thing are or is found in the possession or control of any person in the course of a search under section 132 or survey under section 133A, it may, in any proceeding under this Act, be presumed— (i) XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX ii) that the contents of such books of account and other documents are true; and IT(SS)A no.56/AHD/2015 Asstt. Year 2004-05 8 9.3 In view of the above, there remains no ambiguity that the onus lies upon the assessee to prove that the transactions shown in the seized paper do not represent the true contents. 9.4 On examination of the seized document, we note that it was duly signed and dated not only by all the partners but also by three witnesses. The name of the partnership firm along with partners was appearing. It was discernible from the seized document that there was withdrawal of money from the partnership firm. Generally, the withdrawal from the firm represents the withdrawal of the capital by the partners. This capital can either be in the form of money contributed by the partner or maybe the share of profit/remuneration/interest on the capital of the partner generated from the partnership firm. Likewise, all these transactions should have been duly recorded in the books of accounts of the firm as well as in the individual ledger of the partners maintained by the firm. But, on perusal of the financial statement of the firm and the capital account of the partners, we note that such figures are not appearing herein. The necessary details of the financial statement of the assessee and capital account of the partners are placed on pages 12 to 20 of the paper book. Thus, we find difficult to believe the version of the assessee that the impugned withdrawal represents the settlement of the partners account in their individual capacity. 9.5 It is also significant to note that the addition in the present case was made based on the seized documents. In other words, the addition was not made solely on the basis of the statement recorded in the course of search of Shri Lialchand Patel the father-in-law of Shri Himanshu Patel one of the partner of the firm. Therefore, it is not necessary to provide the opportunity of cross examination to the assessee of statement as discussed above. 9.6 Be that as may be, let us assume that these transactions were not recorded in the books of accounts of the firm. But in that situation, at least such transactions IT(SS)A no.56/AHD/2015 Asstt. Year 2004-05 9 was to be reflected in the individual accounts of the partners which are maintained by them in personal capacity to support the contention. But, we note that there is nothing brought on record that such amount of transactions were recorded in the books of accounts of the individual partners. In other words, we find that the assessee has not brought anything on record even in the present proceedings which is the 2 nd innings. The assessee cannot escape from its liability in discharging the onus cast upon it under the provisions of law in the garb of the matter sub-judice in the court of law. In view of the above, we are of the opinion that the assessee failed to discharge its onus imposed under the provisions of law by furnishing the necessary documentary evidence. Thus, in such facts and circumstances, we are constrained and have no alternative except to confirm the order of the authorities below. Hence the ground of appeal of the assessee is dismissed. 10. In the result the appeal of the assessee is dismissed. Order pronounced in the Court on 15/12/2021 at Ahmedabad. Sd/- Sd/- (MADHUMITA ROY) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER (True Copy) Ahmedabad; Dated 15/12/2021 Manish