TaxTMI 
TaxTMI 
2013 (2) TMI 449
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....nsider the other six appeals. 3. Facts in brief: The assessee is a partnership firm and is in the business of a builder and developer. A search u/s 132(1) of the Income-tax Act, 1961 was conducted on 05- 01-2007 at the business and residential premises of one Shri Gurinder Singh Bawa, and his family members and also various family concerns, including the office premises of the company M/s Gunjyot Properties and M/s Bawa Developers P. Ltd. During the course of the search, a copy of the agreement dated 24-03-2003 pertaining to a joint venture between M/s Gunjyot Properties Pvt. Ltd., Shri Umesh Gandhi and assessee M/s Guruprerna Enterpriese was seized. As the assessee is a co-developer along with Gunjyot Properties P. Ltd. in the project called ELCO Arcade/ELCO Mall and Residency situated in Bandra, a survey u/s 133A of the I.T. Act, 1961 was carried out on05-01-2007, at the business premises of the assessee at B-103/104, Vrindavan, Rambaug Road, Borivali West, Mumbai. Consequent to the survey proceedings, Mr. Mansukhbhai Sureja, Senior Partner in the firm vide his statement recorded u/s 131 of the I.T. Act, 1961 dated 13-02-2007 offered an amount of Rs. 5.00 Crores being undis....
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....clusion that an amount of Rs.63,77,128/- in respect of 26 parties for the assessment year 2003-04 and Rs.1,09,00,000/- in respect of 29 parties for the assessment year 2004-05, are not genuine loans. He made an addition u/s 68. Further he disallowed interest on these loans for the assessment years 2003-04 and 2004-04 as well as for the assessment year 2005-06. 8. In appeal, the first appellate authority admitted fresh evidences from the assessee for these cash credits and forwarded the material to the AO for submission of the remand report. The assessee had pleaded that he was unable to get cooperation from the lenders for the reason that these were very old loans, and that repayment was done in most of the cases and in such circumstances there was a delay in obtaining the evidences. The AO gave him remand report and the first appellate authority considered the remand report of the AO dated 14-09-2006. On jurisdictional issue the first appellate authority rejected the contentions of the assessee on the validity of assessment framed u/s 143(3) read with section 153C. He held that the joint venture agreement between the assessee and Bawa Group of concerns was seized during the cou....
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.... facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in confirming the proportionate disallowance of Interest Expenses pertaining to the addition of loan u/s 68 which has been confirmed by the Ld. CIT(A). 9. The learned counsel for the assessee, Mr. Sashi Tulsiyan, vehemently contended that the assessment order framed u/s 153C read with section 143(3) is bad in law as no material whatsoever, belonging to the assessee, has been seized from the premises of M/s Gurvinder Singh Bawa and his family concerns, evidencing existence of undisclosed income. He read section 153C and drew the attention of the Bench specifically to the word "belong or belongs to person other than the person referred to in section 153A" and argued that none of the materials seized in the search in the Bawa group, belongs to the assessee. He pointed out that the only document found, was a joint venture agreement dated 24-03-2003, and submitted that the agreement does not belong to the assessee and it belongs to M/s Gunjyot Properties P. Ltd. Under these circumstances, he submits that the assessment is bad in law. He relied on the judgment of Hon'ble Gujarat High Court in the case of Vija....
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....er dated 23-02-2010. He reiterated his contentions that u/s 153C, only pending assessments abate and completed assessments remain unaffected, unless the Revenue discover and seizes any material justifying the reopening of the assessment. As no material is found, the assessee claimed that the proceedings u/s 153C have to be declared illegal and bad in law. 13. On merits of the case, Mr. Sashi Tulsian filed voluminous paper book running into 568 pages. He submitted that for the assessment years 2003-04 and 2004-05, the addition towards cash credits were made mainly for the reason that the lenders did not present themselves before the AO for confirmation of the credits. The assessee, he submitted, filed confirmation letters in all the cases. He pointed out that the deficiency in addresses in certain cases was made good by the assessee in the course of appellate proceedings. He submitted that the assessee has furnished confirmatory letters from the parties, Permanent Accountant Nos., copy of Income Tax returns of each of the parties for the relevant assessment years, copy of bank accounts in respect of all the lenders as well as the balance sheet and Profit & Loss account of thes....
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....at the assessment is valid on the reasons given by the CIT(Appeals) in his order. He relied at para 44 of the CIT(Appeals)' order, wherein the CIT(Appeals) has held that section 153C speaks of the assessment of income of "any other person" where the AO is satisfied that money, bullion, jewellery or other valuable article or things or books of account or documents seized or requisitioned to belongs or belongs to a person other than the person referred to in section 153A, and when tested on this wording the joint venture agreement between the assessee and the Bawa group of concerns was seized, which shows that the assessee was also part of the agreement and, therefore, it was detected that the assessee was "any other person" whose case was required to be taken up for assessment or reassessment. The first appellate authority had further held that once the provisions of section 153C are attracted, initiation of proceedings against the other person is mandatory. The first appellate authority further referred to the fact that when the senior partner was questioned, he admitted to having sales transactions in cash and ultimately to having additional income of Rs.5 crores based on these do....
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....nt for issuing notice under s. 153C and assessing or reassessing income of such other person, is that the money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned should be belong to such person. If the said requirement is not satisfied, resort cannot be had to the provisions of s. 153C. The documents in question, namely, the three loose papers recovered during the search proceedings do not belong to the petitioner. It may be that there is a reference to the petitioner in as much as his name is reflected in the list under the heading 'Samutkarsh member details' and certain details are given under different columns against the name of the petitioner along with other members, however, it is nobody's case that the said documents belong to the petitioner. It is not even the case of Revenue that the said three documents are in the handwriting of the petitioner. In the circumstances, when the condition precedent for issuance of notice is not fulfilled, any section taken under s. 153C stands vitiated. For the foregoing reasons, the petition succeeds and is accordingly allowed." 19. On the second limb of his argument, that whe....
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....income. It is also admitted fact the none of the assessments in the present appeals were pending on the date of initiation of action under s. 153C i.e. on 14th April, 2006. Though the appeals before the CIT(A) or Tribunal were pending, the same do not come within the parameters of second proviso to s. 153C s those assessments shall not abate. Only the assessments or reassessments which are pending before the AO on the date of initiation of search shall abate." Reliance was also placed on the decision of the Tribunal, Visakhapatnam Bench, in the case of KGR Exports vs. JCIT in ITA No. 494/V/2007, wherein the Tribunal held as under : "Since section 153A overrides provisions of section 147 of and 148 can it be the intention of the legislature to give enormous powers on the Assessing Officer for opening a completed assessment time and again? In our opinion, the legal restrictions and conditions prescribed for reopening the assessment still applies to the cases reopened u/s 153A. The intention of the legislature could not have been otherwise lest it should lead to unnecessary harassment upon the assessee's. Though the completed assessments can be reopened under Section 153, the is....
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....account or documents belonging to other persons are seized then action under s. 153C can be taken against that person. In the instant case, books of account or documents do not belong to the assessee and, therefore, the Assessing Officer was not justified in initiating action under s. 153A rws. 153C. In the case of Anil Kumar Bhatia vs. ACIT in ITA No. 2660 to 2665/Del/2009, order dated 01-01-200, the Delhi Bench of the Tribunal held as follows: "We are of the considered view that since for all the assessment years in consideration, processing returns u/s 143(1)()(a) stood completed, for returns filed in due course before search, and no material being found in search thereafter, no addition can be made for agricultural income, gifts, unexplained deposit as stated in chart (supra)." 20. In the case on hand, what was found was a joint venture agreement in which the assessee is a party. The assessee has certain rights and duties as per terms and conditions of this agreement. It cannot be said that the agreement does not belong to him. In our humble opinion, the joint venture agreement belongs to all three parties. As the agreement which is seized also belongs to the assessee,....
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.... reassessment. Further, no income, which was already subjected to assessment under section 143(3) or under section 143(3)/147 of the Act completed prior to search in respect of six assessment years referred to in section 153A(b) of the Act and in the second proviso to section 153A, had been included in the assessment framed under section 153A of the Act. Hence, the Assessing Officer was perfectly justified in framing the assessment under section 153A of the Act for the assessment years under consideration." 22. In the case of M/s Shyamlata Kaushik 114 TTJ 940, the Delhi G-Bench of the Tribunal held as follows : "The contention of the assessee was that there was no seized material based on which the assessment was completed by the AO in the case of the assessee and, therefore, the assessment framed should be held to be null and void. It was also submitted that the provisions of s. 153A cannot be invoked to make an assessment or reassessment of income just because a search had taken place in the case of an assessee. This contention of the assessee cannot be accepted. There is no requirement for an assessment made under s. 153A being based on any material seized in the course of....
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....s which are pending in appeal or in revision cannot be said to be complete and therefore assessment/re-assessment pending in appeal/revision could also to be considered as pending on the date of search but the CBDT in the circular No.7 of 2003 dated 5.9.2003 has clarified that appeal, revision or rectification proceedings pending on the date of initiation of search under section 132 will not abate. In other words, only the assessments pending before the Assessing Officer for completion shall abate. In this case there is no dispute that on the date of search, the assessment in the case of assessee had already been completed by the AO and in terms of the circular of the CBDT, the regular assessment made in case of the assessee will not abate. Therefore in our view the points/ issues decided in the assessment cannot be re-considered in the proceedings under section 153A unless there is some fresh material found during the course of search in relation to such points/ issues. 4.3 In this case the claim of deduction under section 80HHC had already been decided by the Tribunal in the appeal against regular assessment for A.Y.2001-02 and no fresh material had been found during the cours....
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.... from each and every creditor. The assessee has also furnished permanent account number of each and every creditor and has also filed copies of the income-tax returns of the relevant assessment years of the creditors. The bank account copy of each of the lender/ creditor was filed. Before us the assessee filed voluminous paper book running into 568 pages wherein copies of all the above documents were enclosed. 25. We list out the documents furnished before us. For the assessment year 2003-04, the following are the persons on whom summons issued by the Department remain unserved : 1) Vaishali B. Joshi. 2) Aruna N. thakar. 3) Indumatid D. Gohil. 4) Jyoti Sunil Shah. 5) Sahdev Devrajbhai Patel. 6) Kokilaben K. Mehta. 7) Manish R. Vira. In all these cases the assessee has filed copies of: a) Confirmation letter. b) Permanent Account No. c) Income-tax return. d) Bank statement. e) Balance sheet/profit & loss account f) Address. In the case of following persons the assessee furnished the addresses before the CIT(Appeals): 1) Kamlesh R. Kothari. 2) Hashmukh Rasiklal Mehta. 3) Jyotsna R. Doshi. 4) M/s Rajni B. Doshi, HUF. 5) Mr. R....
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...., therefore, be for the assessee to explain further as to how or in which circumstances the third party obtained the money or how or why he came to make an advance of the money as a loan to the assessee. Once such identity is established and the creditors, s in the present case, have pledged their oath that they have advanced the amounts in question to the assessee, the burden immediately shifts on to the department to show as to why the assessee's case could not be accepted and as to why it must be held that the entry, though purporting to be in the name of a third party, still represented the income of the assessee from a suppressed source. And, in order to arrive at such conclusion, even the department has to be in possession of sufficient and adequate materials." 29. The Gujarat High court in the case of DCIT vs. Rohini Builders reported in 256 ITR 360 (Guj) observed as under : "On further appeal to the Tribunal the Tribunal held that the phraseology of section 68 of the Income-tax Act, 1961, was clear, that the legislature has laid down that in the absence of a satisfactory explanation, the unexplained cash credit may be charged to income-tax as the income of the assesse....
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....he Respondent had discharged the burden that lay on it, than it could not be said that such a conclusion was unreasonable or perverse or based on no evidence. 31. The Bombay High court in the case of CIT vs. U.M. shah, Proprietor, Shrenik Trading Co. reported in 90 ITR 396 held as follows : "It is not for the party to have produce the witnesses without a summons. The Income-tax Officer did summon afresh the parties concerned. They received the summons but did not appear. The assessee could not be blamed for all this." 32. The Patna High Court in the case of Adl. CIT vs. Bahri Bros. P. Ltd. reported in 154 ITR 244, held as follows : "The lenders advanced loan by means of account payee cheques in favour of the assessee from their bank accounts. The assessee encashed the cheques through his banker (Canara bank Ltd.) and the assessee gave the cheque numbers and all the details along with the certificate of the bank were also produced by the assessee. The assessee also submitted that the brokerage amount was also paid by account payee cheque, vide banker's certificate dated April 24, 1963. The assessee further submitted that the creditors were genuine persons and they had te....
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....out the addresses of the parties. The assessee in this case has done all that he could to provide documentary evidences, in support of his claim that the credits are genuine. In the case of Vaishali B. Joshi, the amount is shown as a loan in his balance sheet. Even in the bank account the amount has been given by way of two cheques. Similar is the case in the case of Arun N. Thakkar. Many other credits are identical. When a lender gives money by way of crossed cheques, reflects the same in his balance sheet and filed the balance sheets along with the returns of income with the Income-tax Department, the conclusion that the assessee is not able to explain the source of fund of the lender properly, is 26 not correct. The Hon'ble Supreme Court in the case of Umachand Shaw and Bros. vs. CIT 37 ITR 271 observes as follows. " That there was no material on which the Income-tax Officer or the Appellate Tribunal could come to the conclusion that the firm was not genuine; there were many surmises and conjectures, and the conclusions was the result of suspicion which could not take place of proof." 36. In the case of Sarogi Credit Corporation, the Hon'ble Patna High Court and in the cas....
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.... law, the Ld. CIT(A) erred in deleting the addition of Rs.20,50,000/- in aggregate in respect of 10 persons from whom the assessee has taken unsecured loan. 2. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in holding that despite the assessee had filed evidence such as confirmation, PAN, copy of bank account etc. the A.O. has not brought on record any new findings other than stating that no reply from parties were received. 3. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in overlooking the fact that the assessee has failed to file any evidence including confirmation, PAN, copy of bank account in respect of above 10 persons. 4. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in not appreciating the fact that the capacity, identity and genuineness of transaction in respect of above 10 persons from whom the assessee had taken unsecured loan remains unproved. Grounds for assessment year 2004-05: 1 Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs.31,25,000/- in aggregate in respect of 8 persons f....
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....me Court has held that an addition on account of cash credit cannot be justified without examination of creditworthiness of the lender or mere non-appearance in compliance to summons cannot justify an addition on the ground of non submission alone when it is in the knowledge of the Revenue that names and addresses of the creditors and their index numbers are there. In similar vein, in the latter case, the Hon'ble Bombay High Court has held that if the parties have received the summons and not appeared and the Income-tax Officer had not brought on record any evidence to show that the assessee's explanation was untrue, an addition of income as undisclosed sources cannot be justified. Tested on these touchstones, I see that in this category the addition has been made on only the non-submission of reply to summons without any specific adverse finding on the details and documents submitted by the appellant. In this light, the addition in respect of this category of depositors is not justified. Accordingly, the Assessing Officer is directed to delete the additions made in respect of these parties." 42. We have discussed the issue of cash credits and the nature of evidence filed by the....
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....rofit for the A.Y. 2007-08 is not acceptable and is rejected for the reasons mentioned hereunder. First being the statement of shri Mansukhbhai Sureja recorded u/s 131 on 05/01/2007 during the survey, the relevant portion is already reproduced above, in the statement Mr. Sureja has categorically accepted to pay advance tax on the said Rs. 5 Crores terming it as the income for the year. The argument of the assessee that the same is towards regular sales in the project is not entirely correct as the said amount was mnot recorded in the regular books of account maintained by the assessee at the time of survey and hence not earned in the regular circumstances of the business. It is evident for the fact that Mr. Mansukhbhai Sureja has accepted in his statement that the said amount was not recorded in the regular books of account and therefore the argument of the assessee that the said Rs. 5 Crore was on account of regular sales in the project is rejected. 8. Also the argument of the assessee that the said amount of Rs. 5 Crore is not taxable in the current year as the assessee is following project completion method is not acceptable. It is important to note here that the 31claim of a....
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.... assessee as approved by the Department. He submitted that the AO was wrong in relying on selected portion of the Annexure given by the partner of the assessee firm in reply to a query and that the CIT(Appeals) had rightly held that the entire reply and the context in which the reply was given is to be considered. He relied on the following case laws : a) Mehta Parikh & Co. vs. CIT 30 ITR 14 (Cal.) b) Taradevi Goenka vs. CIT 122 ITR 14 (Cal.). c) Mohanlal M. Patel vs. DCIT 90 TTJ 57 (ITAT,Mumbai). d) Ramanlal & Chordia vs. ACIT 87 TTJ (ITAT, Pune). 48. The learned counsel further supported the order of the CIT(Appeals) by submitting that admissions made at the time of survey, which are not supported by documentary evidences collected during the course of survey, do not have any evidentiary value and the departmental authorities have been advised against obtaining such admissions in Circular dated 10-03-2003. Thus he submitted that the mere statement, without any documentary evidence, cannot be the basis of addition. 49. The learned counsel further submitted that it is wrong on the part of the Department to state that the assessee is not following accounting Standard ....
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....ash is lying in hand in different forms like investments in different assets, details of which will be submitted in due course. I will ensure that the cash is brought to regular books of account pursuant to out offering to show the same as our income as above. 52. It is also not disputed that the assessee has in fact increased the sales figures declared by him with the amount of Rs. 5 crores and has disclosed the same in the profit & loss account for the financial year ended 31st March, 2009. On this factual matrix, we are of the considered opinion that the order of the first appellate authority has to be upheld. 53. The first appellate authority at pages 4, 5 and 6 of its order held as follows : "As may be noted from the contents of the answers, while giving his version on the receipts in question, Shri Mansukhbhai Sureja has not only admitted to the receipts on sale of flats, he has also referred to the fact that the receipts will be shown on completion basis as the appellant firm is following the work completion method. Seen in this context, I find that the Assessing Officer is not fair in relying only on the last sentence in Shri Sureja's answer to question No.9 to the to....
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....d flats and the method of accounting for the cash proceeds and it is in the backdrop of these questions that Mr. Sureja disclosed the facts of the total receipts received, the cash element for the proceeds and the method of accounting to be followed by the appellant in accounting for the cash receipts. Seen against this backdrop, I find that the Assessing Officer has failed to interlink all these facts flowing together from the specific questions into a whole while giving his decision. As a result, his interpretation of the statement has turned lopsided. In this respect I find that vide its letter dtd. 3.4.2007, the appellant had reiterated this position to the DDIT (Inv) Unit 1(3), Mumbai. This has also been ignored by the Assessing Officer without any specific finding. The Assessing Officer has also held that since the cash receipts were not recorded in the books of account, the method of project completion cannot be applied. This is also misplaced in the totality of the facts and circumstances of the case. In this respect, I find the appellant's reliance on the decision quoted by it as apt and appropriate. Further, the Assessisng Officer's finding in this respect is also not bas....
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....assessment years, has to be necessarily followed and the income computed only in accordance with that method of accounting. In the case on hand the assessee is following project completion method and the income from the extra sale receipt, has to be computed only in accordance with that method of accounting. 54. The Hon'ble Gujarat High Court in the case of CIT vs. President Industries 258 ITR 654 (Guj) held as under : 37" Having perused the assessment order made by the Assessing Officer, the order made by the Commissioner of Income-tax (Appeals) and the Income-tax Appellate Tribunal, we are satisfied that the Tribunal was justified in rejecting the application under section 256(1). It cannot be matter of an argument that the amount of sales by itself cannot represent the income of the assessee who has not disclosed the sales. The sales only represented the price received by the seller of the goods for the acquisition of which it has already incurred the cost. It is the realization of excess over the cost incurred that only forms part of the profit included in the consideration of sales. Therefore, unless there is a finding to the effect that investment by way of incurring th....