Shri Bharatbhai Manubhai Baldha, Surat V. The Deputy Commissioner of Income Tax, Central Circle-2, Surat

ITSSA 69/AHD/2017

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The case involves Shri Bharatbhai Manubhai Baldha, who appealed against the order of the Commissioner of Income Tax (Appeals)-4, Surat, which confirmed the additions made by the Assessing Officer. The additions included Rs.9,35,200 treated as unexplained cash credit for brokerage income and Rs.48,00,000 as unexplained money under section 69A of the Income Tax Act. The Tribunal found that the commission income should not be treated as unexplained cash credit, referencing similar cases and decisions. However, for the addition under section 69A, the Tribunal noted the need for a detailed examination and remanded the matter back to the Assessing Officer.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 302052 (ITAT-SURAT)
• Duration Of Justice: 5 year(s) 10 month(s) 12 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 29-12-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: DB
• Next Hearing Date: 20-12-2022
• Assessment Year: 2013-2014
• Appeal Filed On: 16-02-2017
• Other Referred Cases: Kishanchand Chellaram Vs CIT, Andaman Timber vs. CIT, CIT vs. Sunita Dhadda
• Laws Referred To: Income Tax Act
• Result in Favour of: Matter Remanded
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Business income; Depreciation; Principle of natural justice; Tangible material; Set aside
• Section: 131; 68; 132; 144; 44AD; 139; 133(6); 69A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND DR. ARJUN LAL SAINI, ACCOUNTANT MEMBER IT(SS)A No. 69/AHD/2017 (AY 2013-14) (Physical Hearing) Shri Bharatbhai Manubhai Baldha, 13-18, Shiv Raw House, Aai Mata Chowk, Nr. Parvat Jakat Naka, Surat PAN : AHWPB 3830 G Vs Deputy Commissioner of income Tax, Central Circle-2, Aaykar Bhavan, Majuragate, Surat-395 001 Assessee / appellant Revenue /respondent Assessee by Shri Mitish Modi & Akshay Modi, C.A Revenue by Shri Ashok B. Koli, CIT-DR Date of hearing 21.12.2022 Date of pronouncement 30.12.2022 Order under section 254(1) of Income Tax Act PER PAWAN SINGH, JUDICIAL MEMBER: 1. This appeal by assessee is directed against the order of ld. Commissioner of Income tax (Appeals)-4, Surat dated 14.12.2016 for assessment year (AY) 2013-14. The assessee has raised following grounds of appeal:- “(1) On the facts and in the circumstances of the case as well in law, the learned CIT (Appeals) erred in confirming the order of Dy,. CIT, Central Circle 2, Surat (for the sake brevity “The AO") treating the accounted and disclosed in the return of income filed u/s 139 of the Act the brokerage income of Rs.9,35,200/- as unexplained cash credit u/s 68 of the Act and hence, not justified. (2) On the facts and in the circumstances of the case as well in law, the learned CIT (Appeals) erred in confirming the order of the AO making addition of Rs.48,00,000/- in aggregate on gross misleading, baseless, IT(SS)A No.69/AHD/2017 (A.Y.13-14) Sh.Bharatbhai M Baldha 2 unwarranted of facts, arbitrary and perverse observations and hence, liable to be quashed. (3) On the facts and in the circumstances of the case as well in law, the learned CIT (Appeals) erred in confirming the action of the AO in making addition of Rs.48,00,000/- purely on presumptions, assumptions, allegations of undisclosed income based on the materials gathered at the back of the appellant, without providing to the appellant to controvert the same and hence, the action of the AO passing the ordered u/s 144 of the Act is patently in violation of the principles of natural justice and contrary to the provisions of the law and therefore, liable to be annulled in toto. (4) On the facts and in the circumstances of the case as well in law, the learned CIT (Appeals) ought to have found and considered that there is no materials gathered during the search action for the allegation that the appellant has earned the undisclosed income/money for Rs.48,00,000/- during the relevant year and hence, the order of the CIT (Appeals) confirming the action of the AO making addition of Rs.48,00,000/-, being purely imaginary, illusory, misconceptual, irrational inferences based on scanty information gathered at the back of the appellant, by invoking the provisions of Section 69A of the Act is without jurisdiction, illegal, bad in law, perverse and hence, deserves to be set aside. (5) On the facts and in the circumstances of the case as well in law, both the lower authorities have grievously failed to consider in the right and proper perspectives the detailed explanations furnished for the brokerage income earned, the expenditures incurred there from and the household expenses incurred from the genuine and explained sources and hence, not justified. (7) On the facts and in the circumstances of the case as well in law, both the lower authorities ought to have found that the expenses claimed u/s 37(1) of the Act for the income earned out of the brokerage activities for which the crucial and credible evidences furnished by the appellant and therefore, the addition of Rs.48,00,000/- confirmed without appreciating the IT(SS)A No.69/AHD/2017 (A.Y.13-14) Sh.Bharatbhai M Baldha 3 very nature of brokerage activity and the past history of the appellant is ultra wires, bad in law, unjustified and deserves to be set aside.” 2. Brief facts of the case are that the assessee is an individual, filed his return of income for A.Y 2013-14 on 30.03.2014 declaring amount of Rs.2,64,730/-. The case was selected for scrutiny. The Assessing Officer while passing the assessment order made addition of Rs.9,35,200/- on account of disallowance of brokerage commission and treated the same as unaccounted cash credit. The Assessing Officer made addition by taking view that assessee failed to provide sufficient documentary evidence; name and address of the parties from whom brokerage commission income was received. The Assessing Officer further made addition of Rs.38,64,400/- on account of unexplained money under section 69A of the Act. 3. The facts leading to the addition under section 69A is that a search action was carried on the residence of assessee on 25.07.2012. Statement of assessee was recorded under section 132(4). In his statement recorded under section 132(4), the assessee stated that his house hold expenses and education expenses of two kids is Rs. 14 lacks, which is bore by his younger brother Bhagirathbhai Baldha. In order to verify the claim of assessee, the assessing officer issued notice under section 133(6) to G D Goenka School to furnish admission form, fee paid by the assessee and bifurcation thereof, where the kids of assessee was getting education. In response to such notice, G D Goenka School informed IT(SS)A No.69/AHD/2017 (A.Y.13-14) Sh.Bharatbhai M Baldha 4 that the assessee has paid fee of Rs. 7,89,800/- for his two sons namely Shivam and Shubham in current financial year in cash only. On perusal of school form, the assessing officer noted that in School admission form, the assessee has mentioned his monthly income as Rs. 4.00 lakhs per months. The assessee and his wife signed a declaration wherein they certified that information given in the admission form are true to their knowledge and belief for incorrect information supplied in the admission form jeopardized selection and enrolment. Thus, the Assessing Officer took his view that assessee was having annual income of Rs.48.00 lakhs per annum, since the Assessing Officer already made addition of Rs.9,35,200/- accordingly set off of such addition, and accordingly amount of Rs.38,64,800/- ( 48,00,000 – 9,35,200) was treated as unexplained money under section 69A of the Act. 4. Aggrieved by the addition in the assessment order, the assessee filed appeal before the ld.CIT(A). Before Ld. CIT(A) assessee filed detailed written statement. The submission of assessee are recorded in para-9.1 of the order of Ld. CIT(A). In the written statement, the assessee on the addition under section 69A of the Act, the assessee stated that Assessing Officer solely made addition on the basis of copy of form filled up by assessee to get the admission of children in G D Goenka School. The information was gathered by Assessing Officer directly from the school. There is no tangible evidence that assessee IT(SS)A No.69/AHD/2017 (A.Y.13-14) Sh.Bharatbhai M Baldha 5 actually earned this much income. The entry in the form was filled up under the instruction of school management to show the income truly on estimated basis. The prime object of assessee at the time of filling applications for was got the admission only. The Assessing Officer ignored the books of account and all expenses incurred on the education of children is Rs.4,82,800/-. It is not a case that the assessee has not shown in the books of account, the actual educational expenses incurred for the relevant year. From his books of account, the assessee explained that total household expenses were of Rs.6,49,479/-, his family consists of himself, his wife and two children. The assessee further stated that there is nothing on record that assessee has not discharged his onus. The capital accumulates to the assessee on 31.03.2013 is Rs.12,72,511/- and the assessee is not having any high value fixed asset for investment. This permit, the Assessing Officer to travel for presumption of unexplained money of Rs.48.00 lakh. On the disallowance of brokerage commission, the assessee submitted that assessee is being regularly assessed year-to-year, having income earned from business activity of diamond commission / brokerage. A search was carried out under section 132 in group case of Dalia group. The assessee was also covered under the said search. The assessee is maintaining books of account consistently. The assessee furnished the income tax return for AYs 2003-04 to 2006-07 wherein the assessee has shown commission income, IT(SS)A No.69/AHD/2017 (A.Y.13-14) Sh.Bharatbhai M Baldha 6 which has been accepted by Assessing Officer in all years. For this year, the Assessing Officer has taken a flimsy/ imaginary view that source of income from diamond dalali / commission is unaccounted or undisclosed income. There is no material seized during the search to presume that assessee having any other source of income or any tangible material so as to establish that the explanation to the nature of source of the income of very business activity, is for the first time to evade the tax or concealed the income. 5. The Ld. CIT(A) after considering the submission of assessee upheld both the additions. On the disallowance of commission income, the Ld. CIT(A) held that assessee failed to disclose a single party from whom the diamond was claim, purchase or sold but no record of any consigner sale was found during the search not a single stock was found. No evidence in the form of percentage of commission or any agreement is produced. Thus, the Ld. CIT(A) concurred with the disallowance made by the Assessing Officer. On the addition of section 69A, the Ld. CIT(A) held that the assessee has not disclosed his true business income or source of income. The assessee is maintained high standard of living. The ward of assessee are admitted in a very costlier school at Surat. The Ld. CIT(A) also relied on his observation that assessee is having a TV and movie-kit for valuation of Rs.1.46 lakh as discussed in the earlier paragraph. Further three luxurious cars were found park at the parking lot of the assessee. IT(SS)A No.69/AHD/2017 (A.Y.13-14) Sh.Bharatbhai M Baldha 7 Further aggrieved against the order of ld CIT(A), the assessee has filed present appeal before us. 6. We have heard the Ld. Authorized Representative (AR) of the assessee and the Ld. Departmental Representative represented CIT-DR for Revenue. Ground No.1 relates to addition of Rs.9,35,20/- in treating the commission income as unexplained cash credit. The Ld. AR of the assessee submits that this ground of appeal is covered by the decision of Tribunal in assessee’s own case for AYs 2011-12 and 2012-13 in IT(SS)A No.67-68/AHD/2017 dated 04.03.2021. The Ld. AR of the assessee furnished the copy of order of Tribunal. 7. On the other hand, Ld. CIT-DR of the Revenue supported the order of lower authorities 8. We have considered the rival submission of the parties and have gone through the order of lower authorities. We have also seen the contents of order of Tribunal in assessees own case for AYs 2011-12 and 2012-13 (supra). We have noticed that on similar treatment of commission income, the coordinate bench of Tribunal passed the following order:- “13. We have considered the rival submission of both the parties and have gone through the orders of authorities below. We have also deliberated of various case laws relied by the learned AR of the assessee. The assessing officer treated the commission income as unexplained cash credit by taking view that assessee has not given any explanation and evidence. On the contrary, in para 4 of the assessment order, the assessing officer recorded that the filed submission dated 10.02.2015, wherein it was IT(SS)A No.69/AHD/2017 (A.Y.13-14) Sh.Bharatbhai M Baldha 8 submitted that he is not covered within the provision of section 44AD of the Act, he is maintaining all regular books of accounts and other records for commission income. He is also incurred certain expenses, which can be verified. The ledger account of commission income was also furnished, along with party wise details and the available addresses and the amount of commission. No finding was given on such explanation furnished and evidenced by the assessee. Moreover, the ASSESSING OFFICER has not doubted the various expenses claimed against commission income. 14. We have noted that for A.Y. 2011-12, the assessee has furnished Profit and Loss Account of commission income [as per page 38 of paper book] wherein the assessee has claimed stationary expenses of Rs.250/-, Miscellaneous Expenses of Rs.6550/-, Vehicle Expenses of Rs.30,826/-, Bank Charges of Rs.21/-, Bank Loan Interest Expenses Rs.1283/-, Accountant Fee of Rs.1500/-, Advocate Fee of Rs.500/-, Motorcar Depreciation of Rs.30,889/- and Motorcycle Depreciation of Rs.6560/-. The assessing officer without doubting the expenses incurred for earning commission income treated the said commission income as an unexplained cash credit. No adverse evidence was brought on record. The assessee furnished available address of the purchaser and seller. No investigation against those parties on available address was carried out. Moreover, the assessing officer nowhere in the assessment order recorded that any incriminating material for non-genuine commission income was seized during the search carried out on the premises of assessee. Further, we have noted that similar addition was made against the assessee for A.Y. 2007-08 to 2010-11 and on appeal before the Tribunal, the Co-ordinate Bench deleted additions/ reverse the treatment in ITA No.83 to 86/AHD/2017 dated 14.05.2019. The Co-ordinate Bench further held in the order dated 14.05.2019 that no incriminating material was found during the course of search to make addition under section 68 of the Income Tax Act. 15. The assessee has shown commission income in original return of income. We find convincing force in the submissions of learned AR of the IT(SS)A No.69/AHD/2017 (A.Y.13-14) Sh.Bharatbhai M Baldha 9 assessee that the assessee has already filed Return of Income under section 139 of the Act before the date of initiation of assessment proceeding and much less after completion of investigation carried out by Investigation Wing of Revenue, it could not in any way be termed as unexplained income, the addition of unexplained income is purely guess work of assessing officer. In view of the aforesaid factual and legal discussion, we do not find any justification in treating the commission income as unexplained cash credit, accordingly appeal of the assessee is allowed. No contrary law is brought to our notice. 16. In the result the appeal of the assessee is allowed. IT(SS)A No.88 & 89/AHD/2017 for A.Y. 2012-13 & 13-14 and IT(SS)A.No.61, 67 & 68/AHD/2017 for A.Y. 2011-12, 11-12 & 12-13 respectively: 17. As noted above the facts in IT(SS)A No.87/AHD/2017, the assessee’s have raised identical grounds of appeal from facts in this appeal is also identical, therefore, following the principal of consistency, these five (05) appeals i.e. IT(SS)A No.88 & 89/AHD/2017 for A.Y. 2012-13 & 13-14 and IT(SS)A.No.61, 67 & 68/AHD/2017 for A.Y. 2011-12, 11-12 & 12-13 are also allowed with similar direction.” 9. Considering the decision of Tribunal on similar treatment of commission income as unexplained cash credit, we respectfully following the decision of Tribunal allowed ground No.1 of the assessee. In the result, ground No.1 is allowed. 10. Ground No.2 to 8 of the appeal relates addition of Rs,48,00,000/-. The Ld. AR of the assessee submits that during the assessment detailed written statement were furnished before the Assessing Officer. The assessee explained against the presumption of his income @ Rs.4.00 lakh per month on the basis for filing of admission forms of his sons at the time of their admission. The assessee, as IT(SS)A No.69/AHD/2017 (A.Y.13-14) Sh.Bharatbhai M Baldha 10 a matter of fact, under the instruction of school principal with a view to get admission as per their norms filed up the form, which in no way indicates income to the extent of Rs.4.00 lakh per month. The education expenses were paid out of assessee-HUF accounts, which is duly recorded in the books of account. The Assessing Officer solely relied upon the information gathered under section 133(6) of the Act. The information was gathered at the back of assessee. The ld. AR of the assessee submits that it is settled position under law, if assessment is being completed on the basis of search, there is no place of any presumption, but it must be basis of incriminating material. The Assessing Officer gathered information directly from the school, thereto at the back of assessee. The assessee has incurred educational expenses of Rs.4,82,800/- as shown in the return of income. The lower authorities has not proved anything contrary to the explanation furnished by the assessee. The Ld. AR of the assessee a close reading of reply given by assessee explained to Q,.No.5, replied that household expense of the assessee are incurred by his brother for whole of the family which is at Rs.14 lakh. The brother of assessee is also within the jurisdiction of this Assessing Officer. The Assessing Officer himself accepted the household expense incurred by all other family members. The Assessing Officer arbitrarily and prejudicially presumed that assessee earned Rs.4.00 lakh per month as undisclosed income merely on the basis of IT(SS)A No.69/AHD/2017 (A.Y.13-14) Sh.Bharatbhai M Baldha 11 information gathered at the back of assessee. The Assessing Officer has not provided cross-examination of the person from whom such information was gathered and violated of principle of natural justice. To supports his submission, the Ld. AR of the assessee relied upon the decision of Hon'ble Supreme Court in the case of Kishanchand Chellaram Vs CIT (1980) 125 ITR 713 (SC) and Andaman Timber vs. CIT 62 taxman.com 3 (SC) and decision of Hon'ble Rajasthan High Court in the case of CIT vs. Sunita Dhadda 100 taxmann.com 525 (Raj). 11. On the other hand, Ld. CIT-DR of the Revenue supported the order of lower authorities. Ld. CIT-DR for the Revenue further submits that the search was conducted on Dalia group and the case of assessee was also covered. The statement of assessee was also recorded under section 132(4) of the Act. In reply to the Q.No.5 the assessee stated that his household expense is at Rs.14 lakh. During search five luxurious cars model of i-10, Mercedes, jaguar as recorded in Q.No. 8 were found. In answer to a specific question, the assessee stated that he does not know in whose name or vehicle are registered .Further the assessee admitted that he is of all five vehicle were found at the house of assessee. However, the assessee tried to explain that vehicle has to be taken out from the parking i.e. wife and all keys are lying with him. Further a huge cash was recovered more than Rs.2.00 lakh were found, out of which the IT(SS)A No.69/AHD/2017 (A.Y.13-14) Sh.Bharatbhai M Baldha 12 assessee explained that out of which Rs.30 lakhs is of his sister-in-law and about Rs. 34,000/- of his wife and for knowledge and further he has no account. These expenses are given by his brother and as and when the amounts are incurred I demand from his brother. The Ld. CIT-DR of the Revenue submits that assessee has shown a very meagre income in his return of income. The assessee has shown income of Rs.2.64 lakh only. The assessee himself admitted his expense more than Rs.14 lakh. The Ld. CIT-DR submits that the evidence which was gathered by Assessing Officer was confronted with the assessee. It is not the case of assessee that he was kept in dark about the evidence collected by Assessing Officer. The assessee has not filed any contrary evidence except to make a claim all his household expenses are borne by his brother. Further the assessee could not explain the documentary evidence about five luxurious cars parked at his residential. Ld. CIT-DR prayed for dismissal of this ground of appeal. 12. We have considered the rival submission of the parties and have gone through the order of lower authorities. It is also deliberated on the various case laws relied by the ld AR for the assessee. We find that the assessing officer made estimated the income of assessee solely on the basis of school admissions form of his children, wherein the assessee filled up his monthly income of Rs. 4.00 lakhs per month. Before, ld CIT(A) the assessee explained that the entry on the IT(SS)A No.69/AHD/2017 (A.Y.13-14) Sh.Bharatbhai M Baldha 13 school admission form was made only to secure admission of his children and that in the search no tangible material or evidence was found that the assessee has unaccounted income. The ld CIT(A) discarded the contention of the assessee by taking view that the assessee is not showing his true source of income and avoid his examination under section 131 and that his house hold expenses are very much. Before us, the ld AR for the assessee vehemently submitted that the Assessing Officer solely relied upon the information gathered under section 133(6) gathered at the back of assessee. And that if assessment is being completed on the basis of search, there is no place of any presumption, but it must be basis of incriminating material. The Assessing Officer gathered information directly from the school, thereto at the back of assessee. The assessee has incurred educational expenses of Rs.4,82,800/- only which is shown in the return of income. 13. We find that neither the assessee has shown his true source of income nor the assessing officer brought on record the evidence regarding source of income of assessee. The only evidence, on the basis of which the income of assessee is estimated in the school admission form. It is settled position under law that only real income accrued or earned by individual, can only be brought to tax. Therefore, considering the decision of Hon’ble Supreme Court in Kishan Chand Chellaram Vs CIT (supra) and Andaman Timber Vs CIT (supra) there IT(SS)A No.69/AHD/2017 (A.Y.13-14) Sh.Bharatbhai M Baldha 14 grounds of appeal is restored back to the file of assessing officer with the direction to grant opportunity to the assessee to explain the nature and relevance of school admission form and to lead any other evidence if so desired by the assessee to disprove the contents of such school admission form. It is made clear that as the copy of said school admission form is scanned by assessing officer in the assessment order the assessee shall not insist for supply of fresh copy thereof. The assessing officer is also given liberty to investigate on the issue and pass order afresh in accordance with law. Needless to direct that before passing the order afresh, the assessing officer shall grant opportunity to the assessee. 14. In the result, these set of grounds of appeal is allowed for statistical purpose. 15. In the result, the appeal of the assessee is partly allowed. Order announced in open Court on 30 December 2022. Sd/- Sd/- (Dr ARJUN LAL SAINI) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Surat, Dated: 30/12/2022 Dkp. Sr.P.S. O.S Copy to: 1. Appellant- 2. Respondent- 3. CIT(A)-4, Surat 4. CIT By order 5. DR 6. Guard File True copy/ Sr P.S/ Assistant Registrar ITAT, Surat