Income-tax Officer Central (1), Nashik V. Girish Bhagwat Chaudhari, Bhusawal

ITSSA 6/PUN/2021

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 2951 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 2 month(s) 27 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 04-09-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 28-08-2022
• Assessment Year: 2011-2012
• Appeal Filed On: 07-06-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bogus purchase; Unexplained investment; Search and seizure; Loose papers; Additional evidence; Set aside
• Section: 139; 143(3); 153A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH “A”, PUNE BEFORE SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER AND SHRI S. S. VISWANETHRA RAVI, JUDICIAL MEMBER आयकर अपील सं. / IT(SS)A Nos.4, 5 & 6/PUN/2021 िनधाᭅरण वषᭅ / Assessment Years: 2009-10, 2010-11 & 2011-12 ACIT, Central Circle-2, Nashik. Vs. Girish Bhagwat Chaudhari, 11, Swed Bindu, Shanti Nagar, Yawal Road, Bhusawal- 425201. PAN : AAQPC2000G Appellant Respondent आदेश / ORDER PER INTURI RAMA RAO, AM: These are the appeals filed by the Revenue directed against the different orders of ld. Commissioner of Income Tax (Appeals)-12, Pune [‘the CIT(A)’] dated 31.03.2021 for the assessment years 2009-10, 2010-11 and 2011-12. 2. Since the identical facts and common issues are involved in all the above captioned three appeals, we proceed to dispose of the same by this common order. Revenue by : Shri Sardar Singh Meena Assessee by : Shri Nikhil Pathak Date of hearing : 29.08.2022 Date of pronouncement : 05.09.2022 IT(SS)A Nos.4, 5 & 6/PUN/2021 2 3. First, we shall take up the appeal for the assessment year 2009-10 in IT(SS)A No.4/PUN/2021. IT(SS)A No.4/PUN/2021, A.Y. 2009-10 : 4. The Revenue raised the following grounds of appeal :- “1 On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in deleting the addition of Rs. 1,58,90,136/- made on account of unexplained transactions in notebooks seized during the course of search action on assessee’s group. 2 On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in deleting the addition of Rs. 1,58,90,136/- by accepting the additional evidence submitted by the assessee, without appreciating the fact that the assessee didn’t fulfill any of the condition as envisaged under Rule 46A(1) of the Income Tax Rules, 1962 ? 3 On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in deleting the addition of Rs. 1,58,90,136/- by accepting the additional evidence filed by the assessee in the form of cash books of Late Shri B. N. Chaudhari and BNC Power Projects Ltd, without appreciating the fact that such cash books has been submitted by the assessee first time before the Hon’ble CIT(A) after 6 ½ years from the date of finalization of assessment proceedings, therefore authenticity of the same is questionable. 4 It is humbly prayed to set aside the Order of CIT(A) and restore the Order of the AO. 5 The appellant prays to adduce such further evidence to substantiate his case. 6 The appellant prays leave to add, alter, clarify, amend and or withdraw any grounds of appeal as and when the occasion demands.” 5. Briefly, the facts of the case are as under :- The respondent-assessee is an individual deriving income under the head “salary” and is engaged in the business of dealing in Man Truck. The return of income u/s 139 of the Income Tax Act, IT(SS)A Nos.4, 5 & 6/PUN/2021 3 1961 (‘the Act’) for the assessment year 2009-10 was filed on 01.10.2009 declaring total income of Rs.2,38,350/- and agricultural income of Rs.45,680/-. Subsequently, there was search and seizure action in the residential and business premises of the respondent-assessee on 04.10.20211. During the course of search and seizure action, certain loose papers were found and seized in the form of notings and diary as A/2, A/4 and A/6. Based on the information or notings contained in the said seized material, the Assessing Officer made addition in the hands of the respondent-assessee vide assessment order dated 26.03.2014 passed u/s 143(3) r.w.s. 153A of the Act as follows :- AY A/2 A/4 A/6 A/1 Total Girish Chaudhari 2008-09 2687850 6806787 0 0 9494637 2009-10 6402918 9696818 0 0 16099736 2010-11 0 0 4957000 33444000 38401000 2011-12 0 0 32817152 5746000 38563152 Total 9090768 16503605 37774152 39190000 102558525 6. Being aggrieved by the above additions, an appeal was filed before the ld. CIT(A) contending that the notings which are recorded in the seized material have been duly accounted either in the books of Late Shri B. N. Chaudhari or in the books of M/s. BNC Power Projects Ltd.. Secondly, the double additions in the hands of the respondent-assessee were made, as similar amount was added in IT(SS)A Nos.4, 5 & 6/PUN/2021 4 the hands of Shri Yashodhan Namdeo Chaudhari and Shri Rajesh Prakash Chaudhari. During the course of proceedings before the ld. CIT(A), the respondent-assessee had produced the cash books of M/s. B.N. Chaudhari Engineers & Contractors, a proprietary concern of Late Shri B. N. Chaudhari and M/s. BNC Power Projects Ltd. in an attempt to demonstrate that some of the notings found in the seized material were accounted in the books of account of the proprietary concern of Late Shri B.N. Chaudhari. The ld. CIT(A) had called for the remand report from the Assessing Officer. The Assessing Officer while observing that the cash books of Late Shri B. N. Chaudhari and M/s. BNC Power Projects Ltd. were not produced before the Assessing Officer during the course of assessment proceedings, however, confirmed that the notings found in the seized material were recorded in the books of accounts of either Late Shri B.N. Chaudhari or M/s. BNC Power Projects Ltd. to the extent of Rs.5,24,93,156/- as extracted by the ld. CIT(A) at page no.30 of his order. It is further found that out of total addition of Rs.10,25,58,525/- made in the hands of the assessee for the assessment years 2008-09 to 2011-12, additions to the extent of Rs.6,02,31,000/- were also made in the hands of Shri Yashodhan Chaudhari (Rs.3,26,68,500/-) and Shri Rajesh Chaudhari (Rs.2,75,62,500/- as extracted by the ld. CIT(A) at page no.31 and IT(SS)A Nos.4, 5 & 6/PUN/2021 5 32 of his order. The ld. CIT(A) on due consideration the remand report of the Assessing Officer, finally, summarised the position that emerged as under :- AY Additions made to the total income of the assessee Total matched entries Addition in the hands of Yashodhan Chaudhari which was also made in the case of appellant Addition in the hands of Rajesh Chaudhari which was also made in the case of appellant Total double addition Balance entries A B C D E F G 2008-09 9494637 8211820 2073500 2587500 4661000 1282817 2009-10 16099736 15840136 3538000 7802500 11340500 259600 2010-11 4957000 4831700 2332000 2360000 4692000 125300 2011-12 32817152 17613500 12290000 8953500 21243500 15203652 Total 63368525 46497156 20233500 21703500 41937000 16871369 7. For the assessment year under consideration i.e. 2009-10, the Assessing Officer had made a total addition of Rs.1,60,99,736/- based on the notings found in the diaries and seized material as result of search and seizure action. 8. On appeal before the ld. CIT(A), the ld. CIT(A) accepted the contention of the respondent-assessee that the notings found in the seized diaries were accounted in the books of accounts of Late Shri B.N. Chaudhari after calling for remand report from the Assessing Officer, who vide remand report dated 03.03.2021, while objecting to the production of books of accounts, for failure of the respondent- assessee to produce the same before him, during the course of assessment proceedings, had confirmed that the entries found in the IT(SS)A Nos.4, 5 & 6/PUN/2021 6 diaries are reflected in the cash books of said proprietary concern. Based on these findings, the ld. CIT(A) had granted relief of Rs.1,58,90,136/- and balance addition of Rs.2,09,600/- had been confirmed in the hands of the respondent-assessee. 9. Being aggrieved by the order of the ld. CIT(A), the Revenue is in appeal before us challenging the correctness of the decision of the ld. CIT(A). 10. The ld. CIT-DR submits that the ld. CIT(A) ought not to have deleted the addition of Rs.1,58,90,136/- based on the entries found in the books of accounts of proprietary concern of Late Shri B.N. Chaudhari, inasmuch as, the respondent-assessee never took this plea before the Assessing Officer during the course of assessment proceedings. He further submits that the ld. CIT(A) ought not to have given any credence to entries found in the cash books of proprietary concern of Late Shri B.N. Chaudhari and M/s. BNC Power Projects Ltd., inasmuch as, the books of accounts were produced for the first time before the Assessing Officer after 6 and ½ years from the date of finalization of the assessment order. 11. On the other hand, ld. AR submits that no double addition can be made in the hands of the respondent-assessee. The ld. CIT(A) had come to the conclusion that the notings found in the seized material were found in the books of account of concern family IT(SS)A Nos.4, 5 & 6/PUN/2021 7 members after calling for remand report from the Assessing Officer, there is no violation of the provisions of section 46A by the ld. CIT(A) . 12. We heard the rival submissions and perused the material on record. It is a matter of record that the respondent-assessee, during the course of assessment proceedings, had not taken a plea that these notings are found in the books of accounts of the concern of family members of the respondent-assessee. It is only during the course of proceedings before the ld. CIT(A), the respondent- assessee took a plea that the notings found in the seized material are reflected in the books of accounts of concern family members of the respondent-assessee. The ld. CIT(A) after due consideration of the remand report of the Assessing Officer held that notings found in seized material were reflected in the cash book of M/s. B.N. Chaudhari Engineers & Contractors proprietary concern of Late Shri B. N. Chaudhari and M/s. BNC Power Projects Ltd.. We have carefully gone through the remand report, which is placed in the Paper Book at page no.1 to 19 filed by the respondent- assessee company wherein, the Assessing Officer in response to the query made by the ld. CIT(A) on issue no.2 i.e. whether the entries appearing in the diaries are reflected in cash book, had clearly stated on verification that, entries found in the seized material are reflected IT(SS)A Nos.4, 5 & 6/PUN/2021 8 in the books of accounts of M/s. B.N. Chaudhari Engineers & Contractors a proprietary concern of Late Shri B.N. Chaudhari and M/s. BNC Power Projects Ltd. except to the extent of cash entries details of which are extracted at sl. No.III. 13. In the present case, the entries to the extent of Rs.1,58,90,136/- were found to be reflected in the cash books maintained by Late Shri B.N. Chaudhari. During the course of remand proceedings, the Assessing Officer had not doubted the veracity of the entries found in the cash books of Late Shri B.N. Chaudhari and M/s. BNC Power Projects Ltd.. He only objected to production of books of accounts for the first time before the ld. CIT(A). The objection raised by the ld. DR to produce to books of accounts for the first time before the ld. CIT(A), cannot be entertained for the reason that the ld. CIT(A), at the time of hearing of appeal, can make such further enquiry as it deem fit and even ask the Assessing Officer to make further enquiry. The power to make further enquiry includes the power to produce further evidence in accordance with procedure and manner as laid down under Rule 46A of the Income Tax Rules, 1962. In the present case, the ld. CIT(A) had allowed the respondent-assessee to produce the necessary evidence in accordance with procedure prescribed under Rule 46A, it cannot be said that he had no jurisdiction, if allows an IT(SS)A Nos.4, 5 & 6/PUN/2021 9 assessee-appellant to produce or file additional paper or additional evidence in the manner as deem it fits as laid down by the Hon’ble Supreme Court in the case of Keshav Mills Co. Ltd. vs. CIT, 56 ITR 365 (SC). The contention of the ld. CIT-DR the cash books of Late Shri B.N. Chaudhari are dubious, is not based on any material on record and, therefore, ipse dixit allegation cannot be permitted to be raised against the assessee. If the Assessing Officer doubts the veracity of the entries found in the cash books of the family concerns of the respondent-assessee, it was open to the Assessing Officer to cross verify the genuineness of the books of accounts with the assessment record of those concerns. Failure of the Assessing Officer to cross verify the entries with the assessment records of those concerns, does not lead to the conclusion that the entries made in the books of accounts are not true. Thus, the findings of the ld. CIT(A) are based on the findings given in the remand report of the Assessing Officer. We do not find that the conclusion reached by the ld. CIT(A) is perverse. Therefore, we do not find any reason to interfere with the order of the ld. CIT(A). Accordingly, we do not find any merit in the grounds of appeal filed by the Revenue. 14. In the result, the appeal filed by the Revenue in IT(SS)A No.04/PUN/2021 for A.Y. 2009-10 stands dismissed. IT(SS)A Nos.4, 5 & 6/PUN/2021 10 15. Now, come to the next appeal of the Revenue in IT(SS)A No.5/PUN/2021 for A.Y. 2010-11. IT(SS)A No.5/PUN/2021, A.Y. 2010-11 : 16. The present appeal relates to the assessment year 2010-11, wherein the assessment was completed on 26.03.2014 after making addition based on notings found in the seized material of Rs.3,22,44,000/- which includes an addition of Rs.49,57,300/- on account of notings founds in the A/6 and notings in A/1 amounting to Rs.3,22,44,000/-. During the course of assessment proceedings, the respondent-assessee had failed to offer any convincing explanation, as regards to the notings found in the seized material. However, during the course of proceedings before the ld. CIT(A), the respondent-assessee took a plea that out of addition of Rs.49,57,300/-, a sum of Rs.23,32,000/- was already made in the hands of the Yashodhan Chaudhari and Rs.23,60,000/- made in the hands of Rajesh Chaudhari. As regards to the balance of addition, the ld. CIT(A) granted relief giving benefit of telescoping the cash generated by M/s. BNC Power Projects Ltd. on account of bogus bills which was available with the respondent-assessee. Challenging the correctness of this findings of the ld. CIT(A), the Revenue is in appeal before us in the present appeal. IT(SS)A Nos.4, 5 & 6/PUN/2021 11 17. The ld. CIT-DR submits that the Assessing Officer had made addition based on the notings founds in the seized material as per A/2, A/4 and A/6 to the extent of Rs.38,41,000/- and the plea taken by the assessee during the course of proceedings before the ld. CIT(A) that the notings reflected the payment made through Late Shri B.N. Chaudhari and M/s. BNC Power Projects Ltd. for the purpose of meeting the expenses at the site. This explanation was not substantiated by any material. He further submits that the ld. CIT(A) ought not to have placed reliance on the cash books of Late Shri B.N. Chaudhari and M/s. BNC Power Projects Ltd., inasmuch as, the cash books were produced for the first time after 6 and ½ years from the conclusion of the assessment proceedings. He further submits that the ld. CIT(A) ought not to have granted the benefit of telescoping of addition of Rs.84,12,007/- made in the hands of M/s. BNC Power Projects Ltd., in the absence of any material on record establishing nexus between the cash available with the respondent-assessee and the onus of establishing such nexus always lies with the respondent-assessee company, which he had failed to discharge. 18. On the other hand, ld. AR submits that the various additions made by the Assessing Officer basically represents business expenses of M/s. BNC Power Projects Ltd. or the notings indicated IT(SS)A Nos.4, 5 & 6/PUN/2021 12 the cash kept for safe custody by M/s. BNC Power Projects Ltd.. The said M/s. BNC Power Projects Ltd. was owned by family members of the respondent-assessee company. In the hands of the said company, the addition made by the Assessing Officer on account of bogus purchase was accepted by the said company by filing application under The Direct Tax Vivad Se Vishwas Act, 2020. It is submitted that the cash generated by M/s. BNC Power Projects Ltd. on account of claim of bogus purchase was made available to the assessee since the notings in the seized material clearly indicate either business expenses or cash kept for safe custody. Thus, he submits that there was clear nexus between cash generated by M/s. BNC Power Projects Ltd. on account of bogus purchase and availability of such cash with the assessee company and, therefore, the ld. CIT(A) had rightly granted the claim for benefit of telescoping. He also placed reliance on the decision of the Hon’ble Allahabad High Court in the case of CIT vs. Singhal Industrial Corpn., 303 ITR 225 (All.). 19. We heard the rival submissions and perused the material on record. The ground of appeal no.1 to 3 challenges the correctness of the decision of the ld. CIT(A) deleting the addition of Rs.48,31,700/- on the ground that the addition made on account of notings found in the seized diaries are accounted in the books of IT(SS)A Nos.4, 5 & 6/PUN/2021 13 brothers of respondent-assessee, namely, Yashodhan Chaudhari and Rajesh Chaudhari of Rs.23,32,000/- and Rs.23,60,000/-. We find from the material on record that the findings of the ld. CIT(A) is based on the findings of the Assessing Officer given in the remand report in response to query no.3. 20. The contention raised by the ld. CIT-DR cannot be accepted for the reasons given by us in appeal of the Revenue in IT(SS)A No.4/PUN/2021 for A.Y. 2009-10. 21. Admittedly, in the present case, the assessee has explained the additions made based on the notings found in the seized material that indicates incurring of expenditure and that expenditure was incurred out of cash generated on account of bogus purchases made by the said company, the addition came to be accepted by the assessee company under The Direct Tax Vivad Se Vishwas Act, 2020. It is also matter of record that as a result of search and seizure action, the seized documents had revealed that the respondent-assessee had been incurring the expenditure and the some cash was kept for safe custody with the respondent-assessee. Therefore, the presumption should be drawn that the cash generated by the said company M/s. BNC Power Projects Ltd. by claiming the bogus bills was available with the respondent-assessee and it should be presumed that the expenditure was incurred by the respondent- IT(SS)A Nos.4, 5 & 6/PUN/2021 14 assessee as found in the notings in loose sheets/seized material had been incurred out of this cash. Though, in our considered opinion that the principle of telescoping have no application, it can be said that the addition made based on the notings in the seized material stood explained, and, therefore, no addition is warranted. Therefore, though the finding of the ld. CIT(A) is based on principle of telescoping, in view of our finding that the notings found in the loose sheets should be treated as explained and no addition is warranted. The order of ld. CIT(A) is upheld. In these circumstances, we do not find any merits in the appeal filed by the Revenue, hence, dismissed. 22. In the result, the appeal filed by the Revenue in IT(SS)A No.5/PUN/2021 for A.Y. 2010-11 stands dismissed. 23. Now, come to the next appeal of the Revenue in IT(SS)A No.6/PUN/2021 for A.Y. 2011-12. IT(SS) No.6/PUN/2021, A.Y. 2011-12 : 24. The Assessing Officer completed the assessment for the assessment year 2011-12 vide order dated 26.03.2014 passed u/s 143(3) r.w.s. 153A at total income of Rs.5,19,37,558/-. While doing so, the Assessing Officer made addition based on the notings found in the seized material. IT(SS)A Nos.4, 5 & 6/PUN/2021 15 25. Being aggrieved by the above addition, an appeal was preferred before the ld. CIT(A) who vide impugned order deleted the addition on the ground that the notings found in the seized material based on the additions were reflected in the entries made in the books of M/s. BNC Power Projects Ltd. after calling for remand report from the Assessing Officer, sustained addition of Rs.15,23,650/- out of addition of Rs.3,28,17,152/- made based on the seized material which are A/2, A/4 and A/6. The ld. CIT(A) had granted the benefit of telescoping the addition made in the hands of M/s. BNC Power Projects Ltd.. As regards to the addition made on account of unexplained notings of Rs.96,86,500/- and unexplained expenditure of Rs.57,46,000/-, the ld. CIT(A) had deleted the addition giving the benefit of telescoping addition made in the hands of M/s. BNC Power Projects Ltd. As regards to the unexplained investment of Rs.12,07,716/-, the ld. CIT(A) had deleted the addition based on the findings that the said investment was duly accounted in the books of accounts. 26. Being aggrieved by the order of the ld. CIT(A), the Revenue is in appeal before us challenging the correctness of decision of the ld. CIT(A). IT(SS)A Nos.4, 5 & 6/PUN/2021 16 27. The ld. CIT-DR submits that the ld. CIT(A) ought not to have accepted the additional evidence in the form of books of account of M/s. BNC Power Projects Ltd. without appreciating the fact that the books of accounts were furnished before the ld. CIT(A) merely after 6 and ½ years from the date of completion of the assessment order. The ld. CIT-DR further submits that the ld. CIT(A) ought not to have allowed the benefit of telescoping the income declared under The Direct Tax Vivad Se Vishwas Act, 2020 without appreciating the fact that the declaration is not entitled for any benefit in any proceedings other than those in relation to the declaration has been made. 28. On the other hand, ld. AR submits that the seized material clearly indicated that the respondent-assessee has been incurring the expenditure on behalf of M/s. BNC Power Projects Ltd. and the cash generated by the said M/s BNC Power Projects Ltd. on account of bogus purchases is clearly available with the respondent-assessee company. Therefore, the ld. CIT(A) was justified in giving benefit of telescoping the addition made in the hands of M/s. BNC Power Projects Ltd.. Further, he submits that the findings of the ld. CIT(A) that out of addition of Rs.3,28,17,152/-, a sum of Rs.1,76,13,500/- was recorded in the books of account of M/s. BNC Power Projects Ltd. is based on the remand report of the Assessing Officer who had IT(SS)A Nos.4, 5 & 6/PUN/2021 17 clearly concurred that entries to the extent of Rs.1,76,13,500/- were found in the notings of the seized material had clearly were recorded in the books of said M/s. BNC Power Projects Ltd.. Thus, he submits that the order of the ld. CIT(A) based on the proper appreciation of material on record and does not require any interference by this Tribunal. 29. We heard the rival submissions and perused the material on record. The issue in the present appeal challenges the correctness of the decision of the ld. CIT(A) granting relief of Rs.4,94,57,368/-. Out of which a sum of Rs.1,76,13,500/- granted by the ld. CIT(A) on the ground that the entries aggregating to Rs.1,76,13,500/- was recorded in the books of M/s. BNC Power Projects Ltd. after calling for remand report. The findings given by us for the assessment year 2009-10 in IT(SS)A No.4/PUN/2021 are clearly holds good to the facts of the present year. 30. As regards to the deletion of balance amount of Rs.1,52,03,652/-, Rs.96,86,500/- and Rs.57,46,000/-, the finding given by us for the assessment year 2009-10 are clearly applicable to the facts of the present case. For the parity of reasoning, we uphold the order of the ld. CIT(A) though on the ground that the telescoping of benefit is not available but it can be treated entries in IT(SS)A Nos.4, 5 & 6/PUN/2021 18 the notings in the seized material, stood explained. Accordingly, no addition is called for. 31. In the result, the appeal filed by the Revenue in IT(SS)A No.6/PUN/2021 for A.Y. 2011-12 stands dismissed. 32. To sum up, all the above three appeals filed by the Revenue stands dismissed. Order pronounced on this 05 th day of September, 2022. Sd/- Sd/- (S. S. VISWANETHRA RAVI) (INTURI RAMA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER पुणे / Pune; ᳰदनांक / Dated : 05 th September, 2022. Sujeet आदेश कᳱ ᮧितिलिप अᮕेिषत / Copy of the Order forwarded to : 1. अपीलाथᱮ / The Appellant. 2. ᮧ᭜यथᱮ / The Respondent. 3. The CIT(A)-12, Pune. 4. The Pr. CIT Central, Nagpur. 5. िवभागीय ᮧितिनिध, आयकर अपीलीय अिधकरण, “A” बᱶच, पुणे / DR, ITAT, “A” Bench, Pune. 6. गाडᭅ फ़ाइल / Guard File. आदेशानुसार / BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे / ITAT, Pune.