RAMESHKUMAR SHANKARLAL & CO.,AHMEDABAD V. THE ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2(3), AHMEDABAD

ITSSA 139/AHD/2023

AI Insights

The case involves Rameshkumar Shankarlal & Co., a firm engaged in the Angadia business, which faced income tax assessments for the years 2017-18 and 2018-19 following a search operation. During the search, undisclosed cash and loose papers detailing commission incomes were found. The Income Tax Department added these undisclosed commissions to the firm's income for the respective assessment years. The firm appealed against these additions, arguing that the commission incomes were already included in the undisclosed cash surrendered for A.Y. 2018-19. The Tribunal's decision partially upheld the additions, distinguishing between the two assessment years based on the timing of the income surrender.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 312835 (ITAT-AHMEDABAD)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 30-04-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2018-2019
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B. P. SRIVASTAV
• Assessee Lawyers: TUSHAR HEMANI; PARIMALSINH B. PARMAR
• Keywords: Principle of natural justice; Loose papers
• Section: 143(3); 153A; 2

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, AHMEDABAD BEFORE: SMT. ANNAPURNA GUPTA, ACCOUNTANT MEMBER AND SHRI T.R. SENTHIL KUMAR, JUDICIAL MEMBER आयकर अपील (एस.एस.) सं./I.T(SS).A. Nos. 138 & 139/Ahd/2023 (Ǔनधा[रण वष[ / Assessment Years : 2017-18 & 2018-19) Rameshkumar Shankarlal & Co. 4, Kalgi Apartment, Tambolino Khancho, Doshivada ni Pole, Kalupur, Ahmedabad, Gujarat - 380001 बनाम/ Vs. Assistant Commissioner of Income Tax Central Circle-2(3), Ahmedabad Öथायी लेखा सं./जीआइआर सं./PAN/GIR No. : AADFR8798K (Appellant) .. (Respondent) अपीलाथȸ ओर से /Appellant by : Shri Tushar Hemani, Sr. Advocate & Shri Parimalsinh B. Parmar, AR Ĥ×यथȸ कȧ ओर से/Respondent by : Shri B. P. Srivastav, Sr. DR Date of Hearing 06/02/2025 Date of Pronouncement 30/04/2025 (आदेश)/ORDER PER SMT. ANNAPURNA GUPTA, AM: Both appeals pertain to the same assessee and have been filed against the common order of the Commissioner of Income- Tax (Appeals)-12, Ahmedabad (in short ‘the CIT(A)’), dated 08.09.2023 pertaining to two different Assessment Years 2017-18 & 2018-19. 2. At the outset, it was stated that a common issue was involved in both the appeals relating to addition made to the income of the assessee on account of alleged undisclosed commission income IT(SS)A Nos. 138 & 139/Ahd/2023 [Rameshkumar Shankarlal & Co. vs. ACIT] A.Ys. 2017-18 & 2018-19 - 2 – u/s.69A of the Income Tax Act, 1961 (in short ‘the Act’) to be taxed at the rate prescribed in Section 115BBE of the Act. 3. The background of the case leading to the addition in both the issues, it was stated, was identical, with the facts being that the assessee firm being engaged in the activity as Angadia, transferring cash from one place to another for various persons, was subjected to survey proceedings u/s.133A of the Act on 13.07.2017 at its business premises. During the course of survey, cash of Rs.71,29,230/- was found and the employee on the spot failed to explain the source of the same. Accordingly, the survey was converted into search action u/s.132 of the Act and the cash was seized. Thereafter, jurisdiction was assumed to frame assessment u/s.153A of the Act by issuing notice under the said Section, in response to which the assessee filed return of income declaring income of Rs.4,41,090/- for A.Y. 2017-18 and Rs.73,29,230/- for A.Y. 2018-19. The cash found during search was offered/surrendered by the assessee as his undisclosed income and included in the return of income filed for A.Y.2018-19. During course of search, certain loose papers were found and seized as AS-1 consisting of page nos. 1 to 81. These were day- to-day hand written paper of daily cash received and disbursed. Page-wise commission as computed from the said loose paper was as under: Sr. no. Dates Page no. Commission as per Loose Papers Commission as per return of income Difference F.Y. A.Y. 1 1/10/26 to 1 to 79 9,34,945 53,311 8,81,634 2016-17 2017-18 IT(SS)A Nos. 138 & 139/Ahd/2023 [Rameshkumar Shankarlal & Co. vs. ACIT] A.Ys. 2017-18 & 2018-19 - 3 – 01/03/2017 2 01/04/2017 to 11/07/2017 80 to 81 13,41,930 44,033 12,97,897 2017-18 2018-19 4. The AO noted from the same that the assessee had earned commission income amounting to Rs.8,81,634/- and Rs.12,97,897/- pertaining to A.Ys. 2017-18 & 2018-19; respectively, which had not been disclosed in the return of income filed. Accordingly, after confronting the same to the assessee, and finding no proper explanation given for the same, the AO added the impugned income of Rs.8,81,634/- & Rs.12,97,800/- for A.Y. 2017-18 & 2018-19 respectively, to the income returned by the assessee. 5. The matter was carried in appeal before the Ld. CIT(A) where the assessee contended that since it had already surrendered undisclosed income of Rs.71,29,230/-, no separate addition needed to be made on account of commission income noted from loose papers found from the assessee’s premises and the addition proposed by the AO needed to be set off against the income surrendered by the assessee. This plea of the assessee was rejected by the Ld. CIT(A) for both the years holding at para 6.3 of his order as under: “6.3 The argument of the appellant is not acceptable as the cash that was found and seized was explained to be pertaining to unknown persons which was supposed to be handed over to other parties, as part of the business of the appellant as Angadia or Hawala operator. The disclosure of the cash as its own income was due to the fact that the appellant was not willing to give the details of the person/s from whom this cash was received and the circumstances forced it to accept the entire cash as its own income. This does not alter the fact about the IT(SS)A Nos. 138 & 139/Ahd/2023 [Rameshkumar Shankarlal & Co. vs. ACIT] A.Ys. 2017-18 & 2018-19 - 4 – nature of activity of the appellant. In this business cash is received from a particular party and handed over immediately to the person for whom it is meant. The basic income of an angadia is from commission. It is the daily cash which was received to be handed over that was found during the course of search. The addition of commission income is based on the documents that were seized during the search proceedings which reflected the earlier activities of the firm from which it has already earned the commission income. No cash book was found during the course of search that linked the commission earned earlier to the cash found during the course of search. In fact during the assessment proceedings the appellant itself calculated the correct amount of commission income earned for the two AYs and filed before the AO. Now it is in appeal against that calculation. Addition was made by the AO of the balance amount that was not reflected in the return of income. There is no evidence on record to support the plea of the appellant that the commission income is part of the cash found during search. The case law cited by the appellant is on completely different set of facts and not applicable here. Accordingly, I uphold the action of the AO and confirm the addition of Rs. 8,81,634/- and Rs. 12,97,897/- for AY 2017-18 and 2018-19 respectively in the hands of the appellant firm. Main ground of appeal is dismissed.” 6. Aggrieved, the assessee has came up in appeal before us for both the years by raising the following grounds: IT(SS)A No. 138/Ahd/2023 – A.Y. 2017-18 “1. The Ld. CIT(A) has erred in law and on facts of the case in upholding the assessment order u/s. 153A r.w.s. 143(3) of the Act which is passed without any independent application of mind as well as in violations of provisions of the Act and against the scheme of assessment related to search cases. 2. The Ld. CIT(A) has erred in law and on the facts of the case in confirming the addition of Rs.8,81,634/-u/s. 69A r.w.s. 115BBE of the Act. In the facts and in law, both authorities have erred in invoking S. 69A and S. 115BBE of the Act and also made the addition without bringing any corroborative and cogent evidence, material, etc. on record. 3. Alternatively, and without prejudice the benefit of telescoping may kindly be granted. 4. Both the lower authorities have passed the orders without properly appreciating the facts and they further erred in grossly ignoring various submissions, explanations and information IT(SS)A Nos. 138 & 139/Ahd/2023 [Rameshkumar Shankarlal & Co. vs. ACIT] A.Ys. 2017-18 & 2018-19 - 5 – submitted by the appellant from time to time which ought to have been considered before passing the impugned order. The action of the lower authorities is in clear breach of law and Principles of Natural Justice and therefore deserves to be quashed. 5. The Ld. CIT(A) has erred in law and on facts of the case in confirming action of the Ld. AO in charging interest u/s.234A/B/C/D of the Act. 6. The Ld. CIT(A) has erred in law and on the facts in confirming the action of Ld. AO in initiating penalty u/s. 270A of the Act. 7. The Appellant craves leave to add, amend, alter, edit, delete, modify or change all or any of the grounds of appeal at the time of or before the hearing of the appeal.” IT(SS)A No. 139/Ahd/2023 – A.Y. 2018-19 “1. The Ld. CIT(A) has erred in law and on facts of the case in upholding the assessment order u/s 153A r.w.s. 143(3) of the Act which is passed without any independent application of mind as well as in violations of provisions of the Act and against the scheme of assessment related to search cases. 2. The Ld. CIT(A) has erred in law and on the facts of the case in confirming the addition of Rs.12,97,879/- u/s. 69A r.w.s. 115BBE of the Act. In the facts and in law, both authorities have erred in invoking S. 69A and S. 115BBE of the Act and also made the addition without bringing any corroborative and cogent evidence, material, etc. on record. 3. Alternatively, and without prejudice the benefit of telescoping may kindly be granted. 4. Both the lower authorities have passed the orders without properly appreciating the facts and they further erred in grossly ignoring various submissions, explanations and information submitted by the appellant from time to time which ought to have been considered before passing the impugned order. The action of the lower authorities is in clear breach of law and Principles of Natural Justice and therefore deserves to be quashed. 5. The Ld. CIT(A) has erred in law and on facts of the case in confirming action of the Ld. AO in charging interest u/s. 234A/B/C/D of the Act. IT(SS)A Nos. 138 & 139/Ahd/2023 [Rameshkumar Shankarlal & Co. vs. ACIT] A.Ys. 2017-18 & 2018-19 - 6 – 6. The Ld. CIT(A) has erred in law and on the facts in confirming the action of Ld. AO in initiating penalty u/s. 270A of the Act. 7. The Appellant craves leave to add, amend, alter, edit, delete, modify or change all or any of the grounds of appeal at the time of or before the hearing of the appeal.” 7. Before us, Ld. Counsel for the assessee contended that his plea against the order of the Ld. CIT(A) was reiteration of the plea made before the Ld. CIT(A) that the commission income added in the two years needed to be set off against the income surrendered by the assessee in lieu of cash found and seized during search action undertaken on the assessee. 8. Since, a common argument is being made before us against the addition made to the income of the assessee in both the years, both the appeals are being decided together by way of this common consolidated order. 9. We have heard both the parties and gone through the orders of the authorities below and have also considered case laws referred to before us. The issue in dispute before us is the addition made to the income of the assessee in both the impugned assessment years on account of commission income. The undisputed fact is that this commission income amounting to Rs.8,81,634/- for A.Y. 2017-18 & Rs.12,97,800/- for A.Y. 2018- 19 was revealed by way of notings found during search on the assessee and which the assessee has also admitted to pertain to these two years. Another pertinent fact to be noted is that cash found during search on the assessee amounting to Rs.71,29,230/- IT(SS)A Nos. 138 & 139/Ahd/2023 [Rameshkumar Shankarlal & Co. vs. ACIT] A.Ys. 2017-18 & 2018-19 - 7 – was surrendered by the assessee as undisclosed income in the return of income filed for A.Y. 2018-19. The above facts are not in dispute. 10. The contention of the Ld. Counsel for the assessee is that since the assessee has already surrendered the cash found during search as its undisclosed income, the addition made on account of commission income in both the years is only a duplicate addition and needs to be set off against the cash already surrendered by the assessee. 11. We have gone through the finding of the Ld. CIT(A)for rejecting this contention of the assessee and we have noted that his reason for not accepting this explanation of the assessee is that the assessee has surrendered the cash found during search as its undisclosed income only because he was not able to substantiate his explanation of the cash belonging to parties for whom he was doing Hawala transactions. The Ld.CIT(A) held that the surrender made by the assessee being for the aforesaid reason, it does not take away the fact that he carries out business of Angariya, and the cash found with him therefore relates to other parties only and in the absence of any cash book maintained by the assessee, there is no evidence of attributing the cash found to the commission income earned by the assessee. In short or to summarize the reasoning of Ld. CIT(A), he rejected the assessee’s contention of setting off addition made on account of commission income IT(SS)A Nos. 138 & 139/Ahd/2023 [Rameshkumar Shankarlal & Co. vs. ACIT] A.Ys. 2017-18 & 2018-19 - 8 – against the undisclosed income surrendered by him on the ground that it was never the case of the assessee that the cash found was from the earning of his commission income nor was any such evidence found or furnished by the assessee to the Revenue authorities and in the line of business carried out by the assessee cash generally related to that received from the parties for whom assessee was carrying hawala transaction. 12. We are not in agreement with the reasoning of the Ld. CIT(A) for rejecting assessee’s plea of set off of commission income added against the income disclosed by the assessee on account of cash found during search. The reason for the same is that the fact remains that the assessee had surrendered cash found during search as its undisclosed income and the same also stands accepted by the Department. In the light of the same, the Department having accepted the cash found during search to be attributable to the undisclosed income of the assessee, it cannot now go back on this stand which it has admittedly taken and say that the cash found pertains to that received from parties. It virtually amounts to department blowing hot and cold on its stand regarding the nature of cash found during search. Having accepted the surrender of the assessee attributing the cash to its income, there is no case for the department to go back on this stand taken and hold that the cash does not represent its income. Therefore, the reasoning of the Ld. CIT(A) that the cash found during search is attributable to that received from the parties is IT(SS)A Nos. 138 & 139/Ahd/2023 [Rameshkumar Shankarlal & Co. vs. ACIT] A.Ys. 2017-18 & 2018-19 - 9 – not acceptable, since, it tantamounts to going back to the admitted stand of the department accepting the same as income of the assessee. 13. Having said so, we have noted that the cash was found during survey conducted on the assessee on 13th July, 2017. This cash was surrendered as undisclosed income of the assessee for A.Y. 2018-19 and accepted by the department. Therefore, for all purposes the department has accepted the assessee having earned income to the tune of the cash surrendered of Rs.71,29,230/- in A.Y 18-19. The notings of commission income earned for A.Y. 2018-19 and on account of which addition has been made to the income of the assessee for A.Y. 2018-19 of Rs.12,97,897/- reveal the said commission income to the period 01.04.2017 to 11.07.2017 i.e. the same period for which the assessee had already surrendered income of Rs.71,29,230/-. The department having accepted the surrendered income as income from its business and notings in the loose papers reveal the commission income to be relating to the same period during which the cash found was stated to be earned as commission, we see no reason why the commission income for A.Y. 2018-19 needs to be added separately to the income of the assessee in the absence of any evidence in the possession of the Department establishing that there is no link/ connection between the surrendered income and that found in notings. We therefore hold that on the basis of facts on record, both the income surrendered and the income noted in the loose IT(SS)A Nos. 138 & 139/Ahd/2023 [Rameshkumar Shankarlal & Co. vs. ACIT] A.Ys. 2017-18 & 2018-19 - 10 – paper pertaining to the same period are nothing but duplicate and the plea of the Ld. Counsel for the assessee to this effect for A.Y. 2018-19 is acceptable that making addition of commission income in A.Y. 2018-19 would tantamount to duplicate addition being made in the hands of the assessee. Therefore, as far as commission income added in the hands of the assessee for A.Y. 2018-19 is concerned, to the tune of Rs. 12,97,897/-, same is not sustainable and we direct deletion of the same. 14. Coming to A.Y. 2017-18, we see no reason for allowing any benefit of set off of the commission income revealed from the loose papers, against the income surrendered by the assessee on account of cash found. The reason being that the income has been surrendered by the assessee in A.Y. 2018-19. Therefore, as per the assessee itself, the income pertains to the said assessment year i.e. A.Y. 2018-19, pertaining to F.Y. 2017-18. The fact remains therefore that this income was not admittedly earned in A.Y. 2017- 18. No question arises therefore for accepting the assesses plea that the commission income added in A.Y 17-18 already stood disclosed by the assessee by way of income surrendered on account of cash seized, which income was surrendered in A.Y 18- 19. As per the assessee itself the surrendered income was not earned in A.Y 17-18, but in A.Y 18-19. Therefore no question arises of giving any benefit of the surrender to the commission income added in A.Y 17-18, to which year the surrender did not relate. IT(SS)A Nos. 138 & 139/Ahd/2023 [Rameshkumar Shankarlal & Co. vs. ACIT] A.Ys. 2017-18 & 2018-19 - 11 – 15. This plea of the assessee, therefore, cannot be accepted for A.Y. 2017-18 and the addition, therefore, made of commission income of Rs. 8,81,634/- for the A.Y. 2017-18 is confirmed. 16. In view of the above, while the appeal of the assessee for A.Y. 2017-18 is dismissed in IT(SS)A No.138/Ahd/2023 and that for A.Y. 2018-19 is allowed in IT(SS)A No. 139/Ahd/2023. 17. In the combined result, the appeal of the assessee for A.Y. 2017-18 in IT(SS)A No.138/Ahd/2023 is dismissed, whereas appeal of the assessee for A.Y. 2018-19 in IT(SS)A No. 139/Ahd/2023 is allowed. This Order pronounced on 30/04/2025 Sd/- Sd/- (T.R. SENTHIL KUMAR) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad; Dated 30/04/2025 S. K. SINHA True Copy आदेश कȧ ĤǓतͧलͪप अĒेͪषत/Copy of the Order forwarded to : 1. अपीलाथȸ / The Appellant 2. Ĥ×यथȸ / The Respondent. 3. संबंͬधत आयकर आयुÈत / Concerned CIT 4. आयकर आयुÈत(अपील) / The CIT(A)- 5. ͪवभागीय ĤǓतǓनͬध, आयकर अपीलȣय अͬधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड[ फाईल / Guard file. आदेशानुसार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपीलȣय अͬधकरण, अहमदाबाद / ITAT, Ahmedabad "