The ACIT, Central Circle-2(3), Ahmedabad V. Bharatkumar Rasiklal Shah, Mehsana

ITSSA 67/AHD/2021

• Counselvise Citation: [2024] 100 COUNSELVISE.COM (IT) 1446 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 23 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 25-06-2024
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 10-06-2024
• Assessment Year: 2016-2017
• Appeal Filed On: 01-06-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained expenditure; Document seized; Documents seized; Set aside
• Section: 69; 69C; 143(3); 133A; 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 “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 1. IT(ss)A No.61/Ahd/2021 & 2. IT(ss)A No.67/Ahd/2021 Assessment Year : 2016-17 1. Bharatkumar Rasiklal Shah 41, Krishna Society Outside Gopi Nala Jail Road, Mehsana – 384 002 2. The ACIT Central Circle-2(3) Ahmedabad Vs 1. The ACIT Central Circle-2(3) Ahmedabad 2. Bharatkumar Rasiklal Shah Mehsana -384 002 (address same as above) PAN: ADIPS 1398 C / (Appellants) ..... / (Respondents) Assessee by : Shri K.C. Thaker, AR Revenue by : Shri Sudhendu Das, CIT-DR /Date of Hearing : 11 /06/2024 /Date of Pronouncement: 26 /06/2024 आदेश/O R D E R PER SHRI MAKARAND V. MAHADEOKAR, AM: These two appeals are filed by both the Assessee and the Revenue against the order dated 31-3-2021 passed by the Ld.Commissioner of Income Tax (Appeals)-12, Ahmedabad [hereinafter referred to as “the Ld.CIT(A)”] arising out of an order of the Assessing Officer (hereinafter referred to as IT(ss)A Nos.61 & 67/Ahd/2021 . Bharatkumar Rasiklal Shah vs. The ACIT & . The ACIT vs. Bharatkumar Rasiklal Shah (respectively) Asst. Year : 2016-17 2 “the AO”) passed under Section 143(3) read with Section 153A of the Income Tax Act, 1961 (hereinafter referred to as "the Act"), for the Assessment Year Assessment Year (AY) 2016-17. 2. In IT(SS)A No.61/Ahd/2021, for AY 2016-17, the following grounds have been taken by the Assessee: “1.The learned CIT(A) has erred in law and on facts in upholding disallowance of Rs.52,40,000/- being the claim towards booking cancellation and partial confirming of disallowance of Rs.1,15,000/- out of claim of site expenses. 2. The learned CIT(A) ought to have deleted the disallowance of Rs.52,40,000/- and the partially confirmed disallowance of Rs.1,15,500/-. 3. It is therefore prayed that the disallowances of Rs.52,40,000/- and Rs.1,15,000/- may be deleted.” 2.1. In IT(SS)A No.67/Ahd/2021 for AY 2016-17, the following grounds have been taken by the Revenue: “1. On the facts and circumstances of the case and in law, the Ld.CIT(A) has erred in law and on facts in deleting the addition of Rs.16,44,423/- made by the AO treating the same is unexplained expenditure u/s. 69C of the Act. 2. On the facts and in the circumstances of the case and in law, the Id.CIT(A) has erred in law and facts in restricting the addition of site expenses to Rs.1,15,000/- out of total addition of Rs.2,65,000/-. 3. On the facts and in the circumstances of the case and in law, the Id.CIT(A) has erred in law and on facts in deleting the addition of Rs.76,34,91,720/- made by the AO on account of unexplained income on protective basis when the addition on substantial basis was made in the hands of Shri Hiteshkumar Ishvarlal Shah for the same amount for the same AY has not reached finality. IT(ss)A Nos.61 & 67/Ahd/2021 . Bharatkumar Rasiklal Shah vs. The ACIT & . The ACIT vs. Bharatkumar Rasiklal Shah (respectively) Asst. Year : 2016-17 3 4. 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. 5. It is, therefore, prayed that the order of the La. CIT(A) be set aside and that of the A.O. be restored to the above extent.” 3. First, we take up the appeal of the assessee in IT(SS)A No.61/Ahd/2021 for AY 2016-17.. Facts of the Case: 3.1. The Assessee filed the original return of income on 31-03-2017 declaring a total income of Rs.27,00,510/-. Subsequently, a search and survey action under section 132/133A of the Act was conducted on 15-02-2017 at the premises of Rameshbhai Chaturbhai Prajapati & Others Group, in which the Assessee was also covered. The search action triggered the provisions of Section 153A of the Act, and accordingly, a notice under section 153A of the Act was issued on 09-04-2018 and the same was served upon the assessee on 10/04/2019. The Assessee filed the return of income on 30-09-2019 in response to the said notice under Section 153A of the Act, declaring a total income of Rs.1,56,95,510/-. The assessment order was passed under section 143(3) read with Section 153A of the Act on 28-12-2019, determining a total income of Rs.79,22,16,950/-, after making various/protective additions. 4. The Assessee preferred an appeal before Ld.CIT(A) against the order of AO, who partly allowed the appeal of the Assessee. IT(ss)A Nos.61 & 67/Ahd/2021 . Bharatkumar Rasiklal Shah vs. The ACIT & . The ACIT vs. Bharatkumar Rasiklal Shah (respectively) Asst. Year : 2016-17 4 4.1. Aggrieved by the order of Ld.CIT(A), both the Assessee and the Revenue are in appeal(s) before us. On Ground Nos. 1 to 3 of Assessee’s appeal and Ground No. 2 of Revenue’s appeal: 5. These grounds of appeal(s) relate to the addition of Rs.55,05,000/- that comprises Rs.52,40,000/- towards booking cancellation and Rs.2,65,000/- towards site expenses. The Ld. Counsel for the assessee explained that – - During the course of assessment proceedings, the assessee submitted cash flow chart showing following details relating to a scheme called “Anmol Sahara-2” for the Financial Year (FY) 2015-16: o Gross booking collection Rs. 2,78,20,500/- o Booking Cancellation Rs. 99,90,000/- o Site Expenses Rs. 2,65,000/- o Net Booking Collection Rs.1,75,65,500/- - Out of refund on account of booking cancelation of Rs.99,90,000/-, Rs.47,50,000/- was relating to Plot No. 34 which could be substantiated and thus an amount of Rs.52,40,000 was added to the income along with the site expenses of Rs.2,65,000/- by the AO. - The Ld.CIT(A) in his order gave relief of Rs.2,65,000/- relating to expenditure of the project. IT(ss)A Nos.61 & 67/Ahd/2021 . Bharatkumar Rasiklal Shah vs. The ACIT & . The ACIT vs. Bharatkumar Rasiklal Shah (respectively) Asst. Year : 2016-17 5 5.1. The Ld.Counsel for the assessee contented that, when all the receipts as per cash books are considered for addition, expenses and refund should also be considered and Ld.CIT(A) has granted relief only relating to site expenses. The Ld. Departmental Representative (DR) relied on the order of AO. 6. We have heard the contentions of both the parties and perused the material available on records. The assessee has not provided documentary evidence for the refund of Rs.52,40,000/- due to booking cancellation or the site expenses of Rs.2,65,000/-. The only basis for the claimed expenses is the assessee's declaration during the assessment process. However, the AO has taken into consideration refund of Rs.47,50,000/- 6.1. Section 69C of the Act allows for the addition of unexplained expenditures, if the assessee fails to provide satisfactory explanations. The language of Section 69C of the Act stipulates two conditions necessary for deeming the expenditure incurred by the assessee to be his income for the said year, (i) where no explanation is offered; and (ii) where the explanation offered is not found to be satisfactory. At the same time, the use of the word “may” in the aforesaid provision makes the deeming provision discretionary and not mandatory. In other words, even if no explanation is offered or it is found to be unsatisfactory, it is not mandatory to treat such unexplained expenditure to be the income of the assessee. 6.2. As held by the Hon’ble Apex Court in the case of Sumati Dayal v. CIT [(1995) 214 ITR 801 (SC)], the principle of preponderance of IT(ss)A Nos.61 & 67/Ahd/2021 . Bharatkumar Rasiklal Shah vs. The ACIT & . The ACIT vs. Bharatkumar Rasiklal Shah (respectively) Asst. Year : 2016-17 6 probabilities can be applied in such cases, where direct evidence is not available, and the circumstances surrounding the transaction are taken into account. This principle suggests that a fact is considered proven, if it is more likely than not to be true. 6.3. In the present case, the assessee submitted that such amounts relating to refund of booking amounting to Rs.52,40,000/- and construction/site expenses of Rs.2,65,000/- in Financial Year (FY) 2015-16 were necessary to be accounted for in the cash flow statement as it has actually reduced cash in hand. 6.4. After considering the overall circumstances and patterns surrounding the assessee's claim, we are of the opinion that the AO was not justified in adding the total amount of Rs.55,05,000/- u/s. 69C of the Act. When the AO accepts the refund of one plot and does not accept the refund of other two plots, he neglects the principle of preponderance of probabilities. The cash balance in hand as presented by the assessee in the cash flow statement arrived after considering the refund and expenses and thus needs to be considered. While making additions based on seized documents, it is necessary to consider the complete picture, including both income and expenses. Ignoring the expenditure part would lead to an incomplete and potentially unjust assessment. Therefore, an addition of Rs.55,05,000/- relating to refund of Rs.52,40,000/- and site expenses of Rs. 2,65,000/- made by AO u/s.69C of the Act is hereby deleted. Therefore, we allow Ground Nos.1 to 3 of assessee’s appeal and dismiss the Ground No.2 of Revenue’s appeal. IT(ss)A Nos.61 & 67/Ahd/2021 . Bharatkumar Rasiklal Shah vs. The ACIT & . The ACIT vs. Bharatkumar Rasiklal Shah (respectively) Asst. Year : 2016-17 7 Ground No.1 of Revenue’s appeal: 7. The first ground of appeal concerns the addition of Rs. 16,44,423/-. This addition was made by AO based on the digital image retrieved from the laptop of Shri Atul Mansukhlal Mehta, an Accountant of the assessee during the survey proceedings u/s.133A of the Act at the office premises of Apna Associates. The AO concluded that this total amount of Rs.16,44,423/- is a loan given to various parties and added to the income of assessee u/s 69 of the Act. 8. During the course of hearing before us, the Ld.Counsel for the assessee explained that this amount added by the AO relates to the cash booking collection for Anmol Sahara – 2 Scheme and not relating to cash loan as concluded by the AO. He further clarified that out of the total amount of Rs. 37,74,440/- received as booking amounts Rs.3,00,000/- was considered in A.Y. 2015-16 and Rs. 34,74,440/- in A.Y. 2016-17 in the return filed u/s 153A of the Act. The Ld.CIT(A) while deciding the matter for AY 2016-17 has dealt with this and deleted the addition stating that this amount is standing as receivable and not received. The relevant para from the order of Ld.CIT(A) is reproduced here – “6. The first ground of appeal relates to addition of Rs.16,44,423/ - which involves the same issue leading to addition of Rs.21,29,917/- made in A. Y. 2015-16.I have dealt with the issue in the appellate order for A. Y. 2015-16 allowing the ground of appeal contesting the addition of Rs.21,29,917/- and have deleted the said addition. Since the facts relating to the issue, AO'S contentions for the addition, and the assessee's submissions against the addition are the same, my conclusions reached in the appellate order remains unchanged that the IT(ss)A Nos.61 & 67/Ahd/2021 . Bharatkumar Rasiklal Shah vs. The ACIT & . The ACIT vs. Bharatkumar Rasiklal Shah (respectively) Asst. Year : 2016-17 8 impugned receipts of Rs.34,74,440/- having been considered in the disclosure made in the return filed u/s. 153A of the Act, the addition made by the AO amounts to the same receipts being assessed twice. For the reasons discussed in the appellate order for A. Y. 2015-16, the addition of Rs. 16,44,423/- is deleted.” 9. We also noted that Ld.CIT(A) has dealt with the provision relating to addition u/s.153A of the Act on the basis of impounded material during the survey proceedings u/s.133A of the Act. Considering the factual and legal position, Ld.CIT(A) deleted the addition of Rs.16,44,423/- u/s.69 of the Act. The Ld. DR relied on the order of AO. 9.1. Upon careful examination of the facts and submissions presented, we find that the assessee has contended during the appellate proceedings that the Assessing Officer (AO) misconstrued the jottings as indicative of the assessee’s investment by way of loans, whereas these jottings were, in fact, calculations of receipts towards the booking of plots on an installment basis. Specifically, the assessee has pointed out (referencing page 4 of the AO's order) that the entire receipt of Rs.37,74,440/- noted at the last stage in November-2015 was accounted for in the cash-flow statement used to calculate the additional income declared in the returns filed under Section 153A of the Income Tax Act, 1961. 9.2. The assessee received Rs.3,00,000/- during FY 2014-15, which has been duly recorded in the assessment year (AY)2015-16. The remaining amount of Rs.34,74,440/- was considered in the subsequent AY 2016-17. This division of receipts aligns with the assessee’s submission. IT(ss)A Nos.61 & 67/Ahd/2021 . Bharatkumar Rasiklal Shah vs. The ACIT & . The ACIT vs. Bharatkumar Rasiklal Shah (respectively) Asst. Year : 2016-17 9 9.3. The AO’s conclusion that the amounts noted in the jottings were investments by way of loans lacks a logical basis. The actual receipt of Rs.3,00,000/- during AY 2016-17 has already been disclosed by the assessee, and the remaining amount of Rs.34,74,440/-, appearing in November-2015, has been considered for additional income declaration under section 153A of the Act in AY 2016-17. Therefore, adding the Rs.34,74,440/- again for AY 2016-17 results in double addition, which is not justified. 9.4. The amount of Rs.16,44,423/-, which appears as receivable but not actually received, is part of the Rs.34,74,440/- considered in the additional income disclosure under section 153A of the Act in AY 2016-17. 9.5. The Ld.CIT(A) thoroughly examined the provisions relating to additions under section 153A of the Act, particularly in the context of material impounded during the survey proceedings under section 133A of the Act. The Ld.CIT(A), after considering the factual and legal position, deleted the addition of Rs.16,44,423/- made under section 69 of the Act. The Ld. DR relied on AO’s order without providing substantial evidence to counter Ld.CIT(A)'s findings. 9.6. Based on the detailed analysis of the records and submissions, we find merit in the assessee's arguments. The AO's approach of treating the amounts noted as investments by way of loans is flawed. The actual receipt of Rs.3,00,000/- during AY 2015-16 has been duly accounted for, and the remaining amount of Rs.34,74,440/- has been correctly considered in AY IT(ss)A Nos.61 & 67/Ahd/2021 . Bharatkumar Rasiklal Shah vs. The ACIT & . The ACIT vs. Bharatkumar Rasiklal Shah (respectively) Asst. Year : 2016-17 10 2016-17. Consequently, the addition of Rs.16,44,423/- made by the AO for AY 2016-17 amounts to duplication and is not warranted. Additionally, the balance amount of Rs.18,29,917/- forms part of the disclosure under section 153A of the Act for AY 2016-17 as a part of total Rs.34,74,440/- hence, should not be added again in AY 2016-17. Therefore, the order of Ld.CIT(A) deleting the addition of Rs.16,44,423/- under section 69 of the Act is upheld. Thus, Ground No. 1 of Revenue’s appeal is dismissed. Ground No.3 of Revenue’s appeal: 10. The third ground of the Revenue pertains to the addition of Rs.76,34,91,720/- made on protective basis by AO, which is deleted by the Ld.CIT(A). The facts about this issue are such that a survey action was conducted on the office premises of M/s.J. P. Angadia on 15.02.2017, during which certain loose papers and diaries were found and impounded. Statements of Mr. Hitesh Ishwarlal Shah were recorded during and after the survey. 10.1. Mr.Hitesh Shah, in his letter dated 28.04.2017, denied being the proprietor of M/s.J.P. Angadia, stating he was merely an employee. Further, in his statement recorded on 18.07.2018, he reiterated that he worked as an employee, with the administration and management handled by Mr. Bharatbhai Shah and his son Mr. Vishal B. Shah. 10.2. The Assessing Officer (AO) issued a show-cause notice to the assessee, seeking an explanation as to why the amounts reflected in the IT(ss)A Nos.61 & 67/Ahd/2021 . Bharatkumar Rasiklal Shah vs. The ACIT & . The ACIT vs. Bharatkumar Rasiklal Shah (respectively) Asst. Year : 2016-17 11 diaries, totaling to Rs.75,30,56,025/- and commission income of Rs.1,04,35,695/-, should not be considered as the assessee's income. 10.3. The assessee contended that the allegations made by Mr. Hitesh Shah were baseless and contrary to verifiable facts. It was stated that M/s. J. P. Angadia operated from premises purchased by Mr. Hitesh Shah's relative just before starting the business. Mr. Hitesh Shah obtained the necessary registration under the Establishment of Shops Act and entered into a franchise agreement to run the business. The assessee argued that no rent was paid for the premises nor salary to Mr. Hitesh Shah, challenging him to prove his claim of being an employee. The assessee also explained the presence of his son's handwriting on some records, attributing it to occasional assistance provided to Mr. Hitesh Shah. 10.4 Despite the assessee's submissions, the AO made the addition of Rs.76,34,91,720/- on a protective basis, relying on Mr. Hitesh Shah's statements and letters. The AO acknowledged that the franchise agreement was in Mr. Hitesh Shah's name and that a substantive addition should be made in his hands, yet a protective addition was made to safeguard the revenue's interest. 10.5 The Ld.CIT(A) noted that Mr. Hitesh Shah had indeed entered into the franchise agreement and obtained registration under the Establishment of Shops Act. The premises were owned by Mr. Hitesh Shah's relative, and IT(ss)A Nos.61 & 67/Ahd/2021 . Bharatkumar Rasiklal Shah vs. The ACIT & . The ACIT vs. Bharatkumar Rasiklal Shah (respectively) Asst. Year : 2016-17 12 there was no evidence of rent or salary payments between the appellant and Mr. Hitesh Shah. The Ld.CIT(A) highlighted the lack of documentary evidence to support the AO's protective addition and the failure to confront the appellant with Mr. Hitesh Shah's statements. 10.6, The Ld.DR, on the other hand, relied on the order of AO. 10.7. Upon careful review of the assessment order, the assessee’s submissions, and the Ld.CIT(A)'s observations, it is clear that the addition of Rs.76,34,91,720/- was primarily based on unsubstantiated statements and allegations by Mr. Hitesh Shah. The documentary evidence provided by the assessee, including the franchise agreement and the registration certificate, supports the assessee’s contention that M/s. J. P. Angadia was operated by Mr. Hitesh Shah. The absence of rent or salary payments further corroborates the assessee’s claim that Mr. Hitesh Shah was not an employee but the proprietor of the business. The AO's reliance on statements without corroborating evidence and failure to address the assessee’s contentions render the protective addition unsustainable. 10.8. In light of above findings, we concur with Ld.CIT(A) that the protective addition was not justified either on facts or in law. Ld.CIT(A) correctly deleted the addition, recognizing that the substantive addition, if any, should be made in the hands of Mr. Hitesh Ishwarlal Shah. The protective addition of Rs.76,34,91,720/- is hereby deleted. Thus, Ground No.3 of Revenue’s appeal is hereby dismissed. IT(ss)A Nos.61 & 67/Ahd/2021 . Bharatkumar Rasiklal Shah vs. The ACIT & . The ACIT vs. Bharatkumar Rasiklal Shah (respectively) Asst. Year : 2016-17 13 11. In the combined result, Assessee’s appeal is allowed, whereas Revenue’s appeal is dismissed. Order pronounced in the Open Court on 26 June, 2024 at Ahmedabad. Sd/- Sd/- (SUCHITRA KAMBLE) JUDICIAL MEMBER (MAKARAND V.MAHADEOKAR) ACCOUNTANT MEMBER Ahmedabad, Dated 26/06/2024 . ी. 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) : 1476.2024 2. Date on which the typed draft is placed before the Dictating Member. : 17.6.2024 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. : 26.6.’24 7. Date on which the file goes to the Bench Clerk. : 26.6.’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 :