Appeal details
Counselvise Citation
[2023] 140 COUNSELVISE.COM (IT) 125351 (ITAT-AHMEDABAD)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 2 month(s) 15 day(s)
Appellant
Respondent
Appeal Type
Income Tax (Search & Seizure) Appeal
Pronouncement Date
17-10-2023
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
C
Next Hearing Date
26-09-2023
Assessment Year
2020-2021
Appeal Filed On
02-08-2022
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, AHMEDABAD BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER & SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER I .T ( S S ) .A . N o . 0 7 / A h d/ 2 0 22 ( A s se ss m e nt Y e a r : 20 20- 21 ) D e p ut y C o m m i ss io n er o f I nc o m e Ta x , C e ntr al C ir cle - 1 ( 1 ) , A h m e d a ba d vs . M /s . Pr i ya B l ue I m p or t & Ex por t Pv t. L td ., 1 7- A, R a m N iw as , Ma r u ba i G a o n de v i R o ad , N e xt to D on B o s c o H ig h S c ho ol , M a tu n g a, C . R . Mu mb ai-40 00 1 9 [ P A N N o . AA FC P5 3 69 M ] (Appellant) .. (Respondent) Appellant by : Shri Tushar Hemani, Sr. Adv. & Shri P. B. Parmar, A.R. Respondent by: Shri Kamlesh Makwana, CIT DR D at e of H ea r i ng 27.09.2023 D at e of P r o no u n ce me nt 18.10.2023 O R D E R PER SIDDHARTHA NAUTIYAL, JM: This appeal has been filed by the Revenue against the order passed by the Ld. Commissioner of Income Tax (Appeals)-11, (in short “Ld. CIT(A)”), Ahmedabad vide order dated 30.05.2022 passed for the Assessment Year 2020-21. 2. The Revenue has raised the following grounds of appeal:- “1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition u/s 68 of Rs.92,27,000/- made on account of unexplained receipt despite the fact that the assessee has failed to explain the same during the course of assessment proceedings with supporting documentary evidences. IT(SS)A No. 07/Ahd/2022 DCIT vs. M/s. Priya Blue Import & Export Pvt. Ltd. Asst. Year –2020-21 - 2 - 2. 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 AO. 3. It is, therefore, prayed that the order of the Ld. CIT(A) be set aside and that of the A.O. be restored to the above extent.” 3. The brief facts of the case are that the assessee entered into business transactions with "VHCL Industries Pvt. Ltd." ("VHCL") for import of plastic granules and paid Rs. 99,00,000/- to VHCL. After a few transactions with VHCL, assessee was not able to smoothly work with VHCL and therefore, assessee decided to drop the venture. A sum of Rs. 99,00,000/- was receivable from VHCL since 31.03.2016. Earlier, a cheque of Rs. 1,25,00,00,000/- was received from VHCL but the same was also returned by the bank. However, subsequently VHCL became insolvent and the amount receivable from VHCL became irrecoverable. Consequent to several negotiations with VHCL, a cheque of Rs. 99,27,000/-was issued by VHCL in favour of the assessee from its sister concern named "UIC Corporation Pvt. Ltd." ("UIC"). The said cheque however was not deposited in the bank account and the same was lying with the assessee. The said cheque was found & seized during search carried out under Section 132 of the Act. The Ld. Assessing Officer made total addition of Rs. 92,27,000/- to the total income of the assessee under Section 68 of the Act. 4. In appeal, Ld. CIT(Appeals) allowed the appeal of the assessee with the following observations: “7.3 I have carefully considered the assessment order and the submission made by the appellant. The brief facts of the case are that during the course of search, undated cheque of Rs.92,27,000/- issued by UIC Corporation Pvt. Ltd. to appellant was found which is reproduced as above . During the course of) assessment proceedings, appellant had stated that its group concern Priya Blue Industries Pvt. Ltd had entered into business transaction with VHCL Industries Pvt. Ltd. and amount of Rs.99,89,875/- was recoverable since A.Y.2016-17. The said amount was not recovered subsequently. The appellant IT(SS)A No. 07/Ahd/2022 DCIT vs. M/s. Priya Blue Import & Export Pvt. Ltd. Asst. Year –2020-21 - 3 - has further explained that it has also carried out business transaction with said concern in A.Y.2015-16 and amount of Rs.39,06,330/- was recoverable since 31st March, 2015. The appellant and its group concern has not carried out transactions after such date. As VHCL Industries Ltd. became insolvent, amount receivable from them become bad and after negotiation with such party, appellant was able to obtain cheque from sister concern being UIC Corporation and same was found during the course of the search as it was never presented in the bank. The appellant has thus explained that cheque of UIC Corporation was against amount recoverable from VHCL and does not represent any cash loan transaction. However, this contention of appellant was not accepted by AO on the ground that cash was exchanged against the cheque taken for security purpose and he made addition u/s. 68 of the Income Tax Act. 7.4 During the course of appellate proceedings, appellant has reiterated the contentions as were raised before AO and submitted that cheque from UIC Corporation Pvt. Ltd was taken as security purpose against amount receivable from VHCL Industries. The appellant had submitted the evidences from MCA website which show that Pankaj Harilal Valia is a common Director in both the concern. The appellant has contended that entire addition is made on presumptive basis as during the course of search no evidence was found which can prove that cash is exchanged against above referred undated cheque seized during the course of search. The appellant had relied upon various judicial pronouncement in support of its contention that addition cannot be made on suspicious basis. 7.5 On careful consideration of material facts on record, it is found that during, the course of search, undated cheque of UIC Corporation Pvt. Ltd. was found which is considered as cheque issued by such party against alleged cash loan given by appellant. The addition is made by AO merely on presumption as during the course of search, no evidence regarding alleged cash loan given by appellant is found. During the course of search, no cash trail was found which can support AO's presumption. The AO has not even made any inquiry with UIC Corporation or there is no evidence on record which can prove that such party has admitted that it has received cash loan against undated cheque. The cheque found during the course of search was undated and not corroborated by AO with his assumption of giving cash loan to such party by appellant. On the contrary, appellant has given explanation regarding receipt of such undated cheque against amount recoverable from VHCL Industries Pvt. Ltd., group concern of UCI Corporation Pvt. Ltd by appellant and its group concern Priya Blue Industries Ltd. The appellant has submitted independent evidences from MCA website which prove that VHCL Industries is under liquidation, cheque given by such party for Rs. 1,25,00,000/- was returned back and not honored by such party twice in IT(SS)A No. 07/Ahd/2022 DCIT vs. M/s. Priya Blue Import & Export Pvt. Ltd. Asst. Year –2020-21 - 4 - A.Y.2016-17. The explanation provided by appellant is not proved to be wrong by AO and even outstanding recoverable balance is still recoverable from such party as on 31 st March, 2021. The appellant has provided explanation which supports its contention whereas theory adopted by AO is without any basis, evidences hence cannot be accepted. Hon'ble Supreme Court in case of India and Others v. Playworld Electronics Pvt Ltd. and Another 184 ITR 308 (SC) held that assessment has to be based on evidence and not even on ‘a great deal of suspicion’. Similar view is also rendered by Hon'ble Supreme Court in the case of Omar Salay Mohamed Sait Vs. CIT 37 ITR 151. 7.6 During the course of appellate hearing, appellant has relied upon decision of Hon'ble Hyderabad ITAT in case of Laxmi Narayan Agarwal in ITA No. 1392/Hyd/2010 dated 17/06/2015 which squarely applies to present case: "All the above persons have confirmed that cheques have been handed over to the appellant only as a measure of security for supply of scrap or for the purpose of obtaining the loan, but all of them have denied having obtained any loan from the appellant. The statements given by those people remains uncontroverted. Though the AO is justified in entertaining doubt that the appellant is engaged in the business of money lending and the cheques have been obtained, only after the amounts were advanced since in the absence of any positive evidence in support of the appellant having lent money to the above persons, we are not in a position to; confirm the addition. Accordingly, the additions are deleted," 7.6.1 The Hon'ble Jurisdictional High Court of Gujarat in the case of CIT vs. Maulik Kumar K. Shah in Tax Appeals Nos. 1938-40 of 2006 dated 20/07/2017 [2008] 307 ITR 137 has decided the appeal in favour of the assessee. The head note of the decision is as under:- "Section 143 of the Income-tax Act, 1961 - Assessment - Additions to income -Assessment year 1995-96 - Mere entries in seized material are not sufficient to prove that assessee has indulged in such a transaction in which 'on money' has been received [In favour of assessee]" 7.6.2 Reliance is also placed on decision of the Hon'ble Jurisdictional High Court of Gujarat in the case of PCIT vs. Kamlesh Prahladbhai Modi [2018] 194 taxmann.com 356 (Gujarat) has decided the appeal in favour of the assessee. The head note of the decision is as under:- IT(SS)A No. 07/Ahd/2022 DCIT vs. M/s. Priya Blue Import & Export Pvt. Ltd. Asst. Year –2020-21 - 5 - "Unexplained investment (Land dealings) - Block assessment period 2003-04 to 2008-09 - Assessee was engaged in business of land development and other real estate development activities - A search was carried out at business premises of assessee - At same time, a parallel search was also conducted in premises of one 'D', in course of which certain loose papers were seized which contained a description 'Projections' - From basis of documents seized from premises of assessee as well as from premises of 'D', Assessing Officer undertook task of ascertaining assessees' cash transactions in such land deals - In course of block assessment, assessee sought to bifurcate two sets of deals, one where land deals were completed and sales executed and in such set of cases, assessee accepted receipt of on-money in eventual transactions – However, with respect to rest of deals, assessee pointed out that they merely proposed deals and documents themselves suggested that figures on projected basis - Assessing Officer rejected assessee's explanation and made addition on basis of documents seized in course of search - Tribunal noted that documents were dumb documents and they were not found from premises of assessee but from that of 'D' - Moreover Assessing Officer did not dislodge evidence produced by assessees in form of affidavit of proposed sellers of /and that eventually land deals fell through - Tribunal thus deleted addition in respect of profits earned on projected basis - Whether finding recorded by Tribunal being, a finding of fact, no substantial question of law arose therefrom - Held, yes] [Paras 10 and 11] [In favour of assessee]" 7.7 The following important points have been noticed by the undersigned, which are as under: - (i) No cash trail is found during the course of search which substantiates the argument of Assessing Officer. (ii) No loose paper found during the course of search which proves that cash was received paid in lieu of cheques. (iii) Even the other party has not confirmed of making or receiving cash from the appellant. (iv) On the basis of undated cheque found in the possession of the appellant, it cannot be said that any Cash credit in the books of account was unexplained which warranted addition u/s 68 by the AO. (v) Reason for making alleged addition in the current FY on the basis of undated cheque is not explained by the AO. 7.8 In view of the above discussions and factual matrix of the case and I respectfully following the decisions of the Hon'ble Jurisdictional High Court IT(SS)A No. 07/Ahd/2022 DCIT vs. M/s. Priya Blue Import & Export Pvt. Ltd. Asst. Year –2020-21 - 6 - of Gujarat & other decisions as mentioned above and also as relied upon by the appellant on the similar issue, find that the claim of the appellant is correct. Therefore, the AO is directed to delete the addition of RSection92,27,000/-. Thus, the ground of appeal no. 1 is allowed. 8. The Ground of appeal no. 3 is against the AO charging interest under Section 234A, 234B and 234C of the Act. Since, charging of interest is mandatory and consequential in nature, hence, this ground of appeal is dismissed. 9. The Ground of appeal no. 4 is against initiation of Penalty Proceedings under Section 271AAB(IA)(b) of the Act being premature is not entertained and are dismissed. 10. The Ground of appeal no. 5 is general in nature, hence the same is dismissed. 11. In the result, the appeal is partly allowed.” 5. The Department is in appeal before us against the aforesaid relief granted by the Ld. CIT(Appeals) in the appellate order. Before us, the Ld. DR relied on the observations made by the Assessing Officer during the course of assessment proceedings (more specifically at Page 2, 3 of the assessment order). The Ld. DR submitted that the aforesaid cheque was clearly connected to search carried out at the premises of the assessee and looking into the facts of the instant case, there is a clear presumption that cash was given by the assessee in lieu of the aforesaid cheque. In response, the Counsel for the assessee submitted that no such presumption can be drawn from the instant set of facts, for the simple reason that the aforesaid cheque was never deposited by the assessee in the first place in its bank account. It was submitted that there is no question of invocation of Section 68 of the Act, when the aforesaid cheque has not been deposited by the assessee in its bank account. It was submitted that Section 68 of the Act starts with the words "where any sum is found credited in the books of an assessee maintained for any previous year”. IT(SS)A No. 07/Ahd/2022 DCIT vs. M/s. Priya Blue Import & Export Pvt. Ltd. Asst. Year –2020-21 - 7 - Therefore, a bare perusal of Section 68 of the Act would indicate that the pre- requisite for invoking Section 68 is that a particular sum must be "credited in the books of the assessee for the relevant previous year" in respect of which, assessee offers no explanation about the nature and source thereof or explanation so offered by assessee is not found to be satisfactory by AO. In the present case, it was submitted that the impugned addition has been made merely on the basis of an "undated cheque" found and seized during the course of search. The amount in question (i.e. amount reflected in the said undated cheque) is not at all credited in the books of accounts of the assessee. Thus, the very pre-requisite for invoking provisions of Section 68 of the Act is not satisfied in the present case. Further, it was submitted that from the above facts placed on record, it is evident that the assessee has given sufficient explanation in respect of underlying amount which has not at all been found to be false by AO. It was further submitted that the AO had no basis for making the impugned addition for the AY 2020-21, since the addition is based on an "undated cheque". Without any date being mentioned on cheque, AO could not have presumed that that the said cheque pertained to "AY 2020-21". Thus, it was submitted that looking into the instant facts, the AO was not justified in invoking provisions of Section 68 of the Act so as to make the impugned addition in the case of the assessee for the year under consideration. 6. We have heard the rival contentions and perused the material on record. In our considered view, we are in agreement with the observations made by Ld. CIT(Appeals) in the appellate order and the arguments put forward by the Counsel for the assessee that no such additions can be made in the hands of the assessee on the basis of an undated cheque, which has never been deposited in the bank account of the assessee in the first instance. Further, we are also an IT(SS)A No. 07/Ahd/2022 DCIT vs. M/s. Priya Blue Import & Export Pvt. Ltd. Asst. Year –2020-21 - 8 - agreement a bare perusal of Section 68 of the Act would indicate that the pre- requisite for invoking Section 68 is that a particular sum must be "credited in the books of the assessee for the relevant previous year" in respect of which, assessee offers no explanation about the nature and source thereof or explanation so offered by assessee is not found to be satisfactory by AO. Therefore, if no such sum is found credited in the books of account the assessee/bank account, Section 68 of the Act cannot be invoked. Further, we are also of the considered view that it cannot be presumed on the basis of an undated cheque which has never been deposited, that the assessee would have given cash in lieu of the same, which remains unaccounted for. Accordingly, looking into the instant facts, we are of the considered view that Ld. CIT(Appeals) has not erred in facts and in law in allowing the appeal of the assessee. 7. In the result, the appeal of the Department is dismissed. This Order pronounced in Open Court on 18/10/2023 Sd/- Sd/- (WASEEM AHMED) (SIDDHARTHA NAUTIYAL ) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 18/10/2023 TANMAY, Sr. PS TRUE COPY आदेश क त ल प अ े षत/ Copy of the Order forwarded to : 1. अपीलाथ / The Appellant 2. यथ / The Respondent. 3. संबं धत आयकर आय ु त / Concerned CIT 4. आयकर आय ु त(अपील) / The CIT(A)- 5. वभागीय त न ध, आयकर अपील!य अ धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड' फाईल / Guard file. आदेशान ु सार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील य अ धकरण, अहमदाबाद / ITAT, Ahmedabad
AI Insights
The case involves the Deputy Commissioner of Income Tax, Central Circle - 1, Ahmedabad as the appellant and M/s. Priya Blue Import & Export Pvt. Ltd. as the respondent. The dispute arose from an addition of Rs. 92,27,000 made by the Assessing Officer under Section 68 of the Income Tax Act, which was later deleted by the CIT(Appeals). The addition was based on an undated cheque from UIC Corporation Pvt. Ltd., a sister concern of VHCL Industries Pvt. Ltd., which was allegedly linked to unexplained receipts. The Tribunal's decision focused on the lack of evidence that the cheque was linked to any cash transactions and the fact that it was never deposited or credited to the assessee's books.
