The DCIT, Central Circle-2(3), Ahmedabad V. Shri Prakash S. Chandiramani, A

ITSSA 59/AHD/2016

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 0855 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 year(s) 8 month(s) 4 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 13-10-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 07-09-2022
• Assessment Year: 2011-2012
• Appeal Filed On: 08-02-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bogus loan
• Section: 132; 143(3); 153A

Judgement Text

आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरणआयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण, अहमदाबाद 瀈यायपीठ अहमदाबाद 瀈यायपीठअहमदाबाद 瀈यायपीठ अहमदाबाद 瀈यायपीठ ‘A’ अहमदाबाद। अहमदाबाद।अहमदाबाद। अहमदाबाद। IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, AHMEDABAD BEFORE SHRI P.M. JAGTAP, VICE-PRESIDENT AND MS. MADHUMITA ROY, JUDICIAL MEMBER IT(SS)A No. 59/Ahd/2016 Assessment Year : 2011-12 The Deputy Commissioner of Income-tax, Central Circle 2(3), Ahmedabad Vs Shri Prakash S. Chandiramani, Plot No. 139, Ward 4A, Adipur – 370205 PAN : ABJPC 0767 A / (Appellant) / (Respondent) Assessee by : Shri Vimal Desai, AR Revenue by : Shri Vijay Kumar Jaiswal, CIT-DR /Date of Hearing : 08/09/2022 /Date of Pr onouncement: 14/10/2022 आदेश/O R D E R PER P.M. JAGTAP, VICE-PRESIDENT : This appeal is preferred by the Revenue against the order of learned Commissioner of Income-tax (Appeals)-12, Ahmedabad [“CIT(A) in short]” dated 29.09.2015 on the following grounds:- “1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in law and/or on facts in deleting the addition of Rs.2,55,97,500/- made on account of undisclosed income on the loans and advances based on seized paper. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in law and/or on facts in deleting the addition of Rs.39,03,000/- made on account of undisclosed interest income on the brought forward unaccounted loans and advances based on seized paper.” 2. The assessee, in the present case, is an individual deriving income from rent and income from brokerage & commission. A search under section 132 of the Income-tax Act, 1961 (“the Act” in short) was conducted IT(SS)A No. 59/Ahd/2016 DCIT Vs. Shri Prakash S. Chandiramani AY : 2011-12 2 on 15.06.2011 in the cases belonging to Friends Group including the case of the assessee. Consequently, a notice under Section 153A of the Act was issued by the Assessing Officer on 02.01.2013; in response to which the return of income for the year under consideration was filed by the assessee on 11.02.2013 declaring total income at Rs.65,43,520/-. During the course of search, a paper dated 28.02.2011 was found wherein certain transactions in land and related activities were found to be recorded. On the front side of the said paper, transactions of receipts aggregating to Rs.1,55,97,500/- and payments aggregating to Rs.1,35,75,000/- were recorded. The balance amount of Rs.20,22,500/- was carried forward and recorded on the back side of the paper where there were more entries aggregating to Rs. 52,30,000/- recorded under the head “Int. Details”. This amount of Rs.52,30,000/- was added to the balance of Rs.20,22,500/- brought forward from front side of the paper and the total amount of Rs.72,52,500/- was shown. During the course of assessing proceedings, the assessee was called upon by the Assessing Officer to explain all these transactions/entries appearing in the relevant paper found during the course of search. In reply, the following explanation was offered by the assessee in writing vide letter dated 27.01.2014:- “As regard the explanation for the seized paper, it is to submit that noting of amount received and paid is found noted on a page which was seized during the course of search. The assessee had earned various amounts towards land dealing and brokerage and certain amounts were also received s broker, which were to be paid to the sellers of the properties and even amount is received from parties for making investment / payments on their behalf. As per the summery given on the paper, Rs.52,30,000/- was shown as interest bearing loans and advances which was given out of the income earned by the assessee from land dealing and brokerage. The said undisclosed amount is admitted as income earned by the assessee from land dealings and brokerage and has been offered for tax in the return filed u/s 153A during the month of February, 2013. The self assessment tax has also been paid on the said amount. Moreover, the assessee has earned interest on the said loans and IT(SS)A No. 59/Ahd/2016 DCIT Vs. Shri Prakash S. Chandiramani AY : 2011-12 3 advances and had earned interest in the A.Y. 2011-12, 2012-13 and 2013-14. The total interest earned on the said loans and advances amounts to Rs.19,85,982/- as per the list enclosed and the said amount is also offered to tax in the respective years.” 3. The explanation of the assessee was not found acceptable by the Assessing Officer. According to him, the entire amount of Rs.72,52,500/- reflected in the back side of the relevant paper represented interest income earned by the assessee. He held that the assessee, in order to earn interest income of Rs.75,52,500/-, required capital of Rs.4,83,50,000/- by taking a rate of interest at 15% per annum. Keeping in view that receipts aggregating to Rs.1,55,00,000/- were reflected on the front side of the seized paper, the Assessing Officer held that the balance amount of Rs.3,28,50,000/- was undisclosed income of the assessee. Since the assessee had already declared his undisclosed income of Rs.52,30,000/- in the return filed in response to notice under Section 153A of the Act, the balance amount of Rs.2,76,20,000/- was added by the Assessing Officer to the income of the assessee as his undisclosed income. On the said amount of Rs.2,76,20,000/- which was treated by him as undisclosed income of the assessee utilized for giving loans and advances on interest, interest income earned by the assessee on the said loans and advances calculated @ 15% was worked out by the Assessing Officer at Rs.41,43,000/-. Since the undisclosed income on account of interest on loans of Rs.2,40,000/- was already offered by the assessee in the return of income filed in response to notice under Section 153A of the Act, the balance amount of Rs.39,03,000/- on account of undisclosed interest income of the assessee was added by the Assessing Officer to the total income of the assessee. Total income of the assessee accordingly was determined by the Assessing Officer at Rs.3,80,66,520/- in the assessment completed under Section 143(3) of the Act read with Section 153A of the Act vide an order dated 24.03.2014. IT(SS)A No. 59/Ahd/2016 DCIT Vs. Shri Prakash S. Chandiramani AY : 2011-12 4 4. Against the order passed by the Assessing Officer under Section 143(3) r.w.s. 153A of the Act, an appeal was filed by the assessee before the learned CIT(A) challenging both additions of Rs.2,76,20,000/- and Rs.39,03,000/- made by the Assessing Officer to his total income. During the course of appellate proceedings before the learned CIT(A), the submission made before the Assessing Officer was mainly reiterated on behalf of the assessee in support of his case. After considering the submission made by the assessee as well as the material available on record, the learned CIT(A) restricted the addition of Rs.2,76,20,000/- made by the Assessing Officer on account of undisclosed income allegedly invested by the assessee in giving loans and advances to Rs.20,22,500/- for the following reasons given in paragraph nos. 5 to 7 of his impugned order:- “5. Discussion and decision: I firstly notice that the Ld.AR has more or less reiterated the submissions made to the AO on 19/3/2014, the copy of which is available on page 1.9 of the paper book. As per the explanation, the front side of the seized document depicts cash payments and cash receipts; both on clients' account and on account of self, and this fact or submission has not been dispelled or disbelieved by the AO. The contention of the AR is that had the amount of Rs. 42.30 lacs really been interest as held by the AO, the amount would also and necessarily appear on the LHS of the front page as receipt, which is indeed and obviously not the case as can be seen from the loose paper. On the contrary, my attention is drawn to the fact that the 9 entries on the back-side totaling to Rs. 42.30 lacs is clearly and exactly appearing on the RHS of the front page which would indisputably mean that the amount represents cash- outgo as unaccounted advances. It is further contended that the Ld. AO has conveniently not commented on or rebutted this submission, and has even refused to read the obvious. The purpose and logic of writings on the back- side have also been explained by the AR before me by taking me through the Written Submissions. It is explained that the effort on the back-side is to compute total unaccounted capital of the appellant from the picture of cash receipt and cash payments (which are on account of self as well as on clients account) noted on the front side. The only purpose of reproducing 9 entries totaling to Rs. 42.30 lacs appearing on the RHS of the front side is explained to be two-fold and evident from the very seized paper: IT(SS)A No. 59/Ahd/2016 DCIT Vs. Shri Prakash S. Chandiramani AY : 2011-12 5 a. Firstly the outgo is on own account, representing appellant's own unaccounted capital outstanding in the "market" and earning interest, as would be amply clear from the very back-side of the seized document by noticing "market" and "total market". b. Secondly, as the totaling would show, this outgo of Rs. 42.30 lacs is a part of total such interest bearing ("total market") out-go of Rs.52.30 lacs. Based on these reiterations, the AR pleaded that the AO has acted with pre- determined mind and has neither read the seized document holistically and in its entirety nor dispelled or dealt with the valid contentions of the appellant. He has chosen to conveniently pick the words "int. details" on the back-side of the page and read the same arbitrarily and totally out of context to come to a desired and pre-decided conclusion. 5.2 I have given a careful consideration to the matter, Ld. AO's observations in the assessment order and the submissions made on behalf of the appellant. I have also minutely perused the seized document, the construction of which is in controversy. Having done so, I have to agree with the Ld. AR that the Ld. AO has only partially and conveniently read the seized document for arriving at his rather far-fetched conclusions. He has exclusively read the heading "int. details" for concluding that the amount as noted against 9 names on the backside of the document represent interest income. He is silent about his interpretation of whether, even by his own logic, the amount is received or receivable. The AR is fully right when he submits that the Ld. AO has not at all cared to deal with even the explanation offered and also available in the seized document itself. Moreover, the AO either could not see or intentionally avoided seeing that all the 9 names, as explained and demonstrated before me, also appear on the right hand side of the front page also, with specific mention of "int" in the brackets, clearly meaning that the amounts on RHS of the front page and those noted under "int. details" on back side not only represent the same information, but also indicate that the amounts have been paid in cash ( because noted on RHS on front page) and are therefore either advances or if at all interest, it is payment and certainly not the receipt of interest. But the fact that the front page represents the total picture of unaccounted funds transacted in by the appellant till and as on 28/2/2011, the only valid conclusion is what is explained by the appellant that the amount of Rs.42.30 lacs represent unaccounted advances outstanding as on 28/2/2011. The Ld. AO also conveniently closed his eyes to the exact matching of names and amounts on front and back-side of the paper with regard to these 9 entries under "int. details" and further marking of the total of Rs. 42.30 lacs as "market". This would doubtlessly not only be immediately noticeable from the conjoint reading of front and back-side of the document, but also IT(SS)A No. 59/Ahd/2016 DCIT Vs. Shri Prakash S. Chandiramani AY : 2011-12 6 further conclusively establish that being on the RHS of the front page, the amounts are unaccounted advances and nothing else. Further, as explained, arid even, apparent without any explanation, the purpose of calculation on the back-side and the logic therein would also indicate that the amounts noted under "int. details" are only unaccounted advances. First, the AO should have noted that the balance of front-side of Rs.20,22,500/-, representing net unaccounted advances/receivables, which has also subsumed the nine entries of advances on the front-side, has been carried forward on next page. The nine entries have been picked up from front side and totaled up to be further added to the amount of Rs. 10,00,000/- (which as per noting "Prakash" is deployed by appellant himself) to get to the "Total Market" of Rs. 52,52,500/- . At the end, the total unaccounted funds of the appellant himself, out-of the total transactions of Rs. 1,55,97,500/- noted on the front side depicting even clients' transactions, has been calculated at Rs. 72,52,500/- Thus, the inherent logic and purpose of the notings on front and the back-side of the document, which is evident to be to arrive appellant’s own unaccounted funds, leave no doubt in my mind that the amounts noted as "int. details" represent, as rightly submitted by the AR, neither receipt or receivable on account of interest nor represent any additional advance not noted on the front side. Thus, the coherent construction as explained and evident is that the amount of Rs. 42.30 lacs further noted on the back-side after already having been noted on the front side on RHS, represents the total interest-bearing advances outstanding in "the market", as against other outgoes or advances also noted on the RHS of the front side. 5.3 Further, had the Ld.AO asked some simple questions to himself or to the appellant before finalizing the assessment, it would have helped him a lot in rightly appreciating the nature of jottings on the seized document. For example, what is the purpose of the appellant in arriving at balance of Rs.20,22,500/- and carrying it forward to next page? Why there are "int." notings in brackets against only some names on RHS of front side, and what does it signify? Why only such entries with such brackets are again noted on the backside? Does it represent advance or interest? If at all it represents interest, what 011 the LHS of the front side represent if not interest, and in that case what does 72,52,500/- represent? Answer to all these questions, when either attempted or contemplated would have required the explanation as offered by the appellant to be accepted because that is the only reality as emerging from the document. Any other interpretation leads either to result inconsistent with notings or to ridiculous outcomes. For example, if 52.30 lacs represents interest as held by the AO, it also represents payment of interest when noted on front side. But the total picture of unaccounted transactions as noted on the front side does not show such advances on RHS or such receipt of interest on LHS. This clearly is a fatal and inherent IT(SS)A No. 59/Ahd/2016 DCIT Vs. Shri Prakash S. Chandiramani AY : 2011-12 7 contradiction in AO's construction of the document. Additionally, there is neither any enquiry nor any corroborative material to support the AO's construction of the document and further stretching the same to a conclusion of unaccounted advances of Rs.2,76,20,000. Thus, there does not appear to be any basis for rejecting the explanation as offered by the appellant with regard to entries on. the seized document. Consequently, there is no merit in the action of the Ld. AO in interpreting the seized document by reading the same selectively and in overlooking the other parts of the same document. Such a selective and convenient reading of seized document has been disapproved in a series of judicial authorities as relied upon by the Ld AR: 1. Delhi High Court in the case of CIT Vs. D.D. Gears Ltd. - 25 Taxmann.com 562 2. Pune ITAT in the case of Mahendra J. Yeole - ITA No.293 & 321/PN/2010 3. Jodhpur ITAT in the case of Suresh Chandra Bhansali - 115 TTJ 116 6. Therefore, in view of the discussion as above, it is held that the 9 entries appearing on the back-side of the document arc not amounts of unaccounted interest received or receivable as held by the Ld. AO but are in fact entries of advances already noted on the front side of the document representing unaccounted outgo/advance but on which interest is being earned as distinguished from other outgoes noted on the front page RHS on which interest is not earned. On the basis of careful and holistic reading of the document it is further held that the total of Rs. 52,30,000/- with narration "total market" represents total unaccounted capital of the appellant earning interest from the market. In view of the findings contained in the above para, it is crystal clear that the relevant entries of the seized paper on which addition is based are held not to represent the interest receipt. Thus, no question of working back the unaccounted advances, or sustaining such advances would arise. Accordingly, subject, to the discussion in next para, the amount of Rs.2,76,20,000/- added by the Ld. AO as unaccounted advances is hereby deleted. 7. When the Ld. AR- explained the entries on the seized paper to me, it was immediately brought to his notice, that as explained to me and as appearing to be the inescapable fact, the amount of Rs. 52.30 lacs on the back-side represents unaccounted funds "in the market" and earning interest. The total of such unaccounted funds, however, is clearly Rs. 72,52,500/- as noted on the same page. The Ld. AR, on reading the document with me, immediately and fairly admitted of the error in disclosing only Rs. 52.30 lacs as unaccounted capital in the return of income, and agreed that further unaccounted capital of Rs.20,22,500/- as noted on the back-side of the same seized page, would need to be further brought to tax and thus confirmed. IT(SS)A No. 59/Ahd/2016 DCIT Vs. Shri Prakash S. Chandiramani AY : 2011-12 8 Accordingly, addition of amount of Rs. 20,22,500/- is upheld and confirmed out of the additions made by the AO, and the balance is deleted. Such deletion therefore comes to Rs. 2,55,97,500/-.” 5. Having deleted substantially the addition made by the Assessing Officer on account of undisclosed income allegedly invested by the assessee in giving loans and advances on interest, the learned CIT(A) also allowed the consequential relief to the assessee by deleting the addition of Rs.39,03,000/- made by the Assessing Officer on account of interest income allegedly earned by the assessee on the loans and advances. 6. Aggrieved by the order of the learned CIT(A), the Revenue has preferred this appeal before the Tribunal. 7. We have heard the arguments of both the sides and also perused the relevant material available on record. As submitted on behalf of the assessee before the authorities below as well as before us, the assessee is a real estate agent and the receipts reflected on the front side of the seized paper mainly represented the amounts collected by him from the purchasers of the properties for making payments to the corresponding sellers of the properties. As pointed out by the learned Counsel for the assessee, the said payments were also duly reflected in the front side of the seized paper and even the learned Departmental Representative has not been able to rebut or controvert this factual position which is evident from the contents of the relevant seized paper and which is accepted by the learned CIT(A) in his impugned order. It is no doubt true that all the receipts as reflected on the front side of the relevant seized paper were not meant for making payments against the relevant transactions of properties and there were certain amounts which actually constituted income of the assessee from brokerage and commission as well as interest. Such receipts IT(SS)A No. 59/Ahd/2016 DCIT Vs. Shri Prakash S. Chandiramani AY : 2011-12 9 representing income of the assessee were actually utilized by the assessee for giving loans and advances and the same aggregating to Rs. 52,30,000/- as duly reflected on the back side of the relevant seized paper was duly declared by the assessee as his income in the return filed in response to notice under Section 153A of the Act. Moreover, the difference between the receipts and payments amounting to Rs.20,22,500/- as reflected on the front side of the seized paper and carried over to the back side of the said paper was also treated by the learned CIT(A) as income of the assessee and the addition made by the Assessing Officer to that extent was sustained by him vide his impugned order. Having regard to all these facts of the case, we find merit in the contention of the learned Counsel for the assessee that the entire income as reflected in the entries found recorded in the relevant seized paper has already been taxed in the hands of the assessee and the addition made by the Assessing Officer over and above the said amount on account of undisclosed income allegedly invested by the assessee in giving loans and advances as well as on account of interest allegedly earned by the assessee on such loans and advances is rightly deleted by the learned CIT(A) being not sustainable. We, therefore, uphold the impugned order of the learned CIT(A) giving relief to the assessee on both the issues involved in this appeal and dismiss the appeal of the Revenue. 8. In the result, the appeal of the Revenue is dismissed. Order pronounced in the open Court on 14 th October, 2022 at Ahmedabad. Sd/- Sd/- (MADHUMITA ROY) (P.M. JAGTAP) JUDICIAL MEMBER VICE-PRESIDENT Ahmedabad, Dated 14/10/2022 *Bt IT(SS)A No. 59/Ahd/2016 DCIT Vs. Shri Prakash S. Chandiramani AY : 2011-12 10 /Copy of the Order forwarded to : 1. ! / The Appellant 2. "# ! / The Respondent. 3. $%$&' # # ( / Concerned CIT 4. # # ( ) (/ The CIT(A)- 5. + , # &' , # # &' /DR,ITAT, Ahmedabad, 6. , ./ 0 /Guard file. / BY ORDER, TRUE COPY ह # $ज (Asstt. Registrar) # # &' ITAT, Ahmedabad 1. Date of dictation- 11.10.2022......five pages dictation pad attached ...... 2. Date on which the typed draft is placed before the Dictating Member ...12.10.2022............ Other member....12.10.2022 .......... 3. Date on which the approved draft comes to the Sr.P.S./P.S. - ...12.10.2022 ............... 4. Date on which the fair order is placed before the Dictating Member for Pronouncement ...14.10.2022 5. Date on which the file goes to the Bench Clerk...14.10.2022 ............ 6. Date on which the file goes to the Head Clerk.................................. 7. The date on which the file goes to the Assistant Registrar for signature on the order..................... 8. Date of Despatch of the Order..................