THE ITO, WARD-1(3)(1), AHMEDABAD V. CHIRAGBHAI HASMUKHBHAI SONI, AHMEDABAD

ITSSA 137/AHD/2021

AI Insights

The case involves an appeal by the Revenue against the order of the Commissioner of Income Tax (Appeals)-12, Ahmedabad, which had partly allowed the appeal filed by the assessee, Chirag Hasmukhlal Soni, for the Assessment Year 2017-18. The original assessment order was passed under section 153C read with section 144 of the Income Tax Act, 1961, following a search operation that revealed incriminating material related to the assessee. The Assessing Officer made several additions to the assessee's income, which were partly deleted by the CIT(A). The Revenue challenged the CIT(A)'s decision, but the appeal was dismissed based on the low tax effect as per the revised CBDT Circular.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 472310 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 1 month(s) 25 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 29-10-2024
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 24-10-2024
• Assessment Year: 2017-2018
• Appeal Filed On: 03-09-2021
• Other Referred Cases: Karimtharuvi Tea Estate Ltd vs State of Kerala, Commissioner of Income-tax v. Scindia Steam Navigation Co. Ltd, CIT vs Vatika Township (P) Ltd
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B.P. SRIVASTAVA
• Assessee Lawyers: HARDIK VORA
• Keywords: Set aside; Unexplained cash credit; Rejection of books of accounts; Tax effect; Accommodation entries
• Section: 144; 68; 69C; 153C; 145(3)

Judgement Text

" आयकर अपीलीय अिधकरण, अहमदा बा द \u0012ा यपीठ “ए“, अहमदा बा द । IN THE INCOME TAX APPELLATE TRIBUNAL “ A ” BENCH, AHMEDABAD सु\u0018ी सुिच\u001aा का \u001bले, \u0012ा ियक सद\u001d एवं \u0018ी मकरंद वसंत महा देवकर, लेखा सद\u001d क े सम\"। ] ] BEFORE MS. SUCHITRA KAMBLE, JUDICIAL MEMBER AND SHRI MAKARAND V. MAHADEOKAR, ACCOUNTANT MEMBER आयकर(SS) अपील सं /IT(SS)A No.137/Ahd/2021 िनधा \u0010रण वष\u0010 /Assessment Year : 2017-18 The ITO Ward-1(3)(1) Ahmedabad – 380 051 बनाम/ v/s. Chirag Hasmukhlal Soni Prop. Of Swayam Trading 2297, 1st Floor, Karelia Building Nr. Girish Cold Drinks Manekchowk, Ahmedabad \u0014थायी लेखा सं./PAN: BEEPS 4524 L अपीलाथ%/ (Appellant) &' यथ%/ (Respondent) Assessee by : Shri Hardik Vora, AR Revenue by : Shri B.P. Srivastava, Sr.DR सुनवाई की तारीख/Date of Hearing : 24/10/2024 घोषणा की तारीख /Date of Pronouncement: 29/10/2024 आदेश/O R D E R PER MAKARAND V. MAHADEOKAR, AM: This appeal by the Revenue arises from the order of the Commissioner of Income Tax (Appeals)-12, Ahmedabad [hereinafter referred to as “CIT(A)”], dated 24.06.2021, for the Assessment Year (AY) 2017-18, wherein the CIT(A) partly allowed the appeal filed by the assessee. The original assessment order was passed by the Assessing Officer [hereinafter referred to as “AO”] under section 153C read with section 144 of the Income Tax Act, 1961. IT(SS)A No. 137/Ahd/2021 ITO vs. Chiragbhai Hasmukhbhai Soni Asst. Year : 2017-18 2 Facts of the case: 2. The assessee, proprietor of M/s.Swayam Trading, filed his original return of income on 31.10.2017 declaring a total income of Rs.3,74,320/- for the AY 2017-18. The return was subjected to scrutiny under section 153C of the Act due to incriminating material seized during a search operation on 06.02.2017 conducted on the MS Patel Group. The search revealed significant cash deposits and accommodation entries involving the assessee. The AO made several additions in the assessment order passed under section 153C read with section 144 of the Act, resulting in the total assessed income being determined at Rs.1,32,39,516/-. The key additions were: • Rs.93,00,000/- under section 68 for unexplained cash credits, mainly accommodation entries received from SVP Corporation. • Rs.22,17,100/- under section 68 for unexplained cash deposits made during the demonetization period. • Rejection of books of accounts under section 145(3) of the Act due to inconsistencies in the gross profit ratio and cash flow patterns, leading to the estimation of gross profit at Rs.13,48,096/-. 3. The assessee preferred an appeal before the CIT(A), who granted partial relief to the assessee by deleting the additions related to above mentioned additions. 4. Aggrieved by the order of the CIT(A), the Revenue filed an appeal before us with following grounds of appeal: 1. Whether CIT(A) has erred in law and facts in holding that there is no justification for initiating the proceedings u/s 153C of Act despite the fact that AO has duly recorded his satisfaction for initiating the proceedings u/s. 153C of the Act? IT(SS)A No. 137/Ahd/2021 ITO vs. Chiragbhai Hasmukhbhai Soni Asst. Year : 2017-18 3 2. Whether the CIT(A) has erred in law and on facts in deleting the addition of Rs.93,00,000/- u/s. 68 of the Act in respect of amount received from SVP Corporation against sales? 3. Whether the CIT(A) has erred in law and on facts in deleting the addition of Rs.22,17,100/- u/s. 68 of the Act on account of excess cash sales made up to 8th Nov. 2016? 4. Whether the CIT(A) has erred in law and on facts in deleting the addition made of Rs.13,48,096/- on account of estimation of gross profit at 1% after rejecting the books of accounts u/s 145(3) of the Act? 5. It is, therefore, prayed that the order of Id. CIT(A) may be set aside and that of the Assessing Officer be restored. 5. During the course of 23rd hearing on 18-09-2024, the Authorised Representative (AR) of the assessee submitted that the Revenue’s appeal should be dismissed on the grounds of low tax effect, in accordance with revised CBDT Circular No. 09/2024 dated 17-09-2024, which prescribes a monetary threshold of Rs.60,00,000/- for filing appeals to the Income Tax Appellate Tribunal (ITAT). The AR presented a calculation showing that the tax effect in the present case was Rs.43,64,360/-, which is below the prescribed limit. The Departmental Representative (DR) requested time to verify the tax effect, and the case was adjourned to 14.10.2024 for verification. The Revenue requested an adjournment on that day and the hearing was fixed on 17-10-2024. During the 25th hearing on 17.10.2024, both the AR and DR submitted their respective calculations of the tax effect. The AR maintained that the tax effect was Rs.43,64,360/-, whereas the AO calculated it at Rs.83,58,234/-, considering the application of section 115BBE of the Act for a higher tax rate. The AR contended that the CIT(A) had already dealt with Ground No. 8, concerning the imposition of tax at a higher rate under section 115BBE of the Act, and had decided in favor of the assessee. Since the IT(SS)A No. 137/Ahd/2021 ITO vs. Chiragbhai Hasmukhbhai Soni Asst. Year : 2017-18 4 Revenue did not raise this issue in its appeal, the tax effect should be calculated without applying the higher tax rate under section 115BBE of the Act. On 17.10.2024, the bench directed the DR to clarify whether the Revenue intended to challenge the CIT(A)’s findings in paragraph numbers 12 and 12.1 regarding section 115BBE of the Act. However, no additional or revised grounds challenging the application of section 115BBE of the Act were filed by the Revenue. 5.1. Based on the facts and submissions, it is evident that the Revenue has not challenged the CIT(A)’s decision regarding the application of section 115BBE of the Act. As such, the tax effect calculated by the AO at Rs.83,58,234/- is incorrect because it includes the higher tax rate under section 115BBE of the Act, which was not applied in this case following the CIT(A)’s order. 5.2. For the sake of clarity, we reproduce the relevant paras of the CIT(A)’s order – “11. Ground of appeal No. 8 is in respect of imposition of tax at higher rate(s) by invoking provisions of section 115BBE in respect of additions made u/s 68. The submission of the appellant is as under: \"4.5 Ground Nos 8 Imposition of tax at higher rates) by invoking provisions of section 115BBE in respect of additions made u/s 68. As a consequence of additions made us 68 of the Act, the Assessing Officer has computed tax liability at enhanced rates specified in section 115BBE of the Act. Appellant while responding to Ground Nos 1 to 5 has demonstrated that no addition us 68 is permissible and therefore, such additions are liable to be deleted. Consequently, provisions of section 115BBE cannot be applied against for the purpose of computing tax liability at higher rate in the case of appellant and therefore, appellant cannot be made subjected to higher rate of tax. Without prejudice to this, it is submitted that higher rate of tax was brought on the Statute Book by introducing Taxation Laws (Second IT(SS)A No. 137/Ahd/2021 ITO vs. Chiragbhai Hasmukhbhai Soni Asst. Year : 2017-18 5 Amendment) Bill, 2016 in Parliament on 28th November, 2016 and which got ascent of the President on 15th December, 2016 and therefore, Parliament had no intention to tax transactions undertaken prior to 28th November, 2016 at higher rate and said amendment could be pressed into service only w.e.f. 15th December, 2016 and not prior to that. Had it been an intention of legislature, such amendment would have been made by Finance Act, 2016 by which set of loss was withdrawn against incomes assessed u/s 69, 69, 69A1 69B, 69C or 69D of the Act. Law on the issue is well settled, no one can be fasten with liability which was not existing on the date of execution of transaction undertaken by him as held by Hon'ble Supreme Court in Karimtharuvi Tea Estate Ltd us State of Kerala (1966) 60 ITR 262 (SC) and Commissioner of Income-tax v. Scindia Steam Navigation Co. Lid. /1962/ 42 ITR 589 (SC). Law explained in these case laws has been subsequently reaffirmed by Hon'ble Supreme Court in most recent judgement in the case of CIT us Vatika Township (P) Ltd 367 ITR 466 (SC)” DECISION: 12. I have considered the facts and submission of the appellant. As a consequence of additions made u/s 68 of the Act, the Assessing Officer has computed tax liability at enhanced rates specified in section 115BBE of the Act. Appellant while responding to Ground Nos 1 to 5 has demonstrated that no addition u/s 68 is permissible and therefore, such additions are liable to be deleted. Consequently, provisions of section 115BBE cannot be applied against for the purpose of computing tax liability at higher rate in the case of appellant and therefore, appellant cannot be made subjected to higher rate of tax. 12.1 Without prejudice to this, it is submitted that higher rate of tax was brought on the Statute Book by introducing Taxation Laws (Second Amendment) Bill, 2016 in Parliament on 28th November, 2016 and which got ascent of the President on 15th December, 2016 and therefore, Parliament had no intention to tax transactions undertaken prior to 28th November, 2016 at higher rate and said amendment could be pressed into service only w.e.f. 15th December, 2016 and not prior to that. Had it been an intention of legislature, such amendment would have been made by Finance Act, 2016 by which set of loss was withdrawn against incomes assessed u/s 69, 69, 69A1 69B, 69C or 69D of the Act. Law on the issue is well settled, no one can be fasten with liability which was not existing on the date of execution of transaction undertaken by him as held by Hon'ble Supreme Court in Karimtharuvi Tea Estate Ltd vs State of Kerala (1966) 60 ITR 262 (SC) and Commissioner of Income-tax v. Scindia Steam Navigation Co. Ltd. [1962] 42 ITR 589 (SC). Law explained in these case laws has been subsequently reaffirmed by Hon'ble Supreme Court in most recent judgement in the case of CIT vs Vatika Township (P) Ltd 367 ITR 466 (SC).\" IT(SS)A No. 137/Ahd/2021 ITO vs. Chiragbhai Hasmukhbhai Soni Asst. Year : 2017-18 6 Even otherwise also the additions made by the AO have been deleted. Therefore, this ground of appeal become academic in nature. The ground of appeal is decided accordingly.” 5.3. Since the Revenue did not file any additional or revised grounds challenging the CIT(A)’s conclusion on section 115BBE of the Act, the CIT(A)’s decision remains unchallenged, and the higher tax rate under section 115BBE cannot be applied for calculating the tax effect in this case. 5.4. Considering the tax effect as calculated by the AR at Rs.43,64,360/-, which is below the threshold of Rs.60,00,000/-, and in line with revised CBDT Circular No. 09/2024 dated 17-09-2024, the Revenue’s appeal is dismissed on the grounds of low tax effect. 5.5. In light of the CBDT Circular and considering the uncontested decision of the CIT(A) regarding the non-applicability of section 115BBE of the Act, we hereby dismiss the Revenue’s appeal due to low tax effect. 6. In the result, the appeal filed by the Revenue is dismissed. Order pronounced in the Open Court on 29 October, 2024 at Ahmedabad. Sd/- Sd/- (SUCHITRA KAMBLE) JUDICIAL MEMBER (MAKARAND V. MAHADEOKAR) ACCOUNTANT MEMBER अहमदाबाद/Ahmedabad, िदनांक/Dated 29/10/2024 टी.सी.नायर, व.िन.स./T.C. NAIR, Sr. PS IT(SS)A No. 137/Ahd/2021 ITO vs. Chiragbhai Hasmukhbhai Soni Asst. Year : 2017-18 7 आदेश की #ितिलिप अ$ेिषत/Copy of the Order forwarded to : 1. अपीलाथ% / The Appellant 2. #&थ% / The Respondent. 3. संबंिधत आयकर आयु' / Concerned CIT 4. आयकर आयु' ) अपील ( / The CIT(A)-12, Ahmedabad 5. िवभागीय #ितिनिध , अिधकरण आयकर अपीलीय , राजोकट/DR,ITAT, Ahmedabad, 6. गाड\u0010 फाईल / Guard file. आदेशानुसार/ BY ORDER, स&ािपत #ित //True Copy// सहायक पंजीकार (Asstt. Registrar) आयकर अपीलीय अिधकरण, ITAT, Ahmedabad 1. Date of dictation (word processed by Hon’ble AM in his laptop) : 25.10.2024 2. Date on which the typed draft is placed before the Dictating Member. : 28.10.2024 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. : 29.10.24 7. Date on which the file goes to the Bench Clerk. : 29.10.24 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 : "