TaxTMI 
TaxTMI 
2021 (6) TMI 696
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....ns to assessment year 2016-17. Since facts are identical and issues are common, for the sake of convenience, these appeals were heard together and are being disposed of by this consolidated order. 2. The Revenue has more or less raised common grounds of appeal for all Assessment Years, therefore, for the sake of brevity, grounds of appeal raised for the Asst. Year 2011-12 are reproduced as under:- The Order of the learned Commissioner of Income Tax (Appeals) is contrary to the Law and facts of the case. 1.1 CIT(A) erred in deleting the addition made u/s 68 of the Act, by holding that the addition was made on the cash receipts as per contents in diary/notebook and the retrieved data from the computer CPU which was disowned by the assessee and these are not the regular "books of accounts" maintained by the assessee. In such a case, the provisions of section 68 have no application 1 .2 CIT(A) ought to have appreciated the fact that as per section 68 of the Act, nowhere it is mentioned 'regular' books of accounts. The intention of the legislature to mention as 'books' is to include all the books whether it is regular or irregular: disclosed or undisclosed. 1.3 CIT(A) relying ....
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....Page no.31 Money from Minister - Rs. 16,24,00,000/-. Similarly, Loose sheets marked as (Ann.SNR/PVD/B&D/LS-1 - 44&45) contained details of expenditure Rs. 3,00,30,312/- relating to DMK 10th Maanila Maanadu (DMK 10th State level conference) held in 2013-14. The Computer CPU was sent to Forensic examination and Forensic imaging of the CPU was done and the deleted data was retrieved and analyzed. The retrieved data was relating to the assessee transactions, maintained in 'Tally' software. The data was compared with the assessee regular books of accounts and found that the following transactions (found in the retrieved 'tally' software) were not reflected in the regular books of accounts. Asst. Year: 2012-13: Nature Amount Reference evidence Unexplained cash credits 1,25,00,000 Cash received from True Value Homes P Ltd. Ledger - True Value Homes P Ltd - in the books of accounts of SNR Rice Industries P Ltd. 4,49,50,000 Cash received from KN Manivannan into SNR Rice Industries P Ltd Ledger - KN Manivannan-Capital-in the books of account of SNR Rice Industries P Ltd Unexplained Investments 76,78,250 Payments made for acquiring Agricultural land by KN Manivannan. Ledg....
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....ndustries P Ltd (including Rs. 25 lakhs in loose sheet numbered 77&78) Ledger - KNNI RAVI - in the books of accounts of SNR Rice Industries P Ltd 30,00,000 Cash received from KN Manivannan into SNR Rice Industries P Ltd Ledger - KN Manivannan-Capital-in the books of account of SNR Rice Industries P Ltd Unexplained Investments 2,25,17,000 (cash) 22,00,000 (cheque) Payments made for acquiring Agricultural land by KN Manivannan. Ledger-KN Manivannan-Agri Land - in the books of account of SNR Rice Industries P Ltd 51,00,000 (cash) 16,50,000 (cheque) Payments made for Land purchase by SNR Rice Industries P Ltd Ledger - Land purchase - in the books of account of SNR Rice Industries P Ltd Total 5,46,30,000 4. During the course of survey and post survey investigation, sworn statements of Shri. V Krishnamurthy, was recorded, where he had admitted that he works for the assessee as Manager and looks after total administration. He, further, stated that he had maintained the dairy, but could not recollect the contents. Further, sworn statement of K. N. Maninavvan, Managing Director of Assessee Company, was also recorded where he had explained that diary (Ann.S....
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....sp; 1. Cash received from Minister - - 16,24,00,000 - - Based on CPU 'tally' accounts 1. Cash recd. from True-Value-Home - 1,25,00,000 1,10,00,000 - 25,00,000 2. Cash recd. from KN Manivannan - 4,49,50,000 98,00,000 - 30,00,000 3. Cash recd. from Janani Minerals - - 50,00,000 - - 4. Cash recd. from KNN - - 5,30,55,000 3,78,00,000 1,76,63,000 TOTAL 5,80,00,000 12,24,50,000 24,12,55,000 3,78,00,000 2,31,63,000 6. As the assessee could not furnish necessary evidences to prove expenditure of Rs. 3,00,30,312/- relates to DMK 10th State level conference held in Trichy in 2013-14, and the expenditure was borne by the party, the Assessing Officer treated the same, as contained in the loose sheets, as unexplained expenditure and brought to tax u/s.69C of the Act. Similarly, when the assessee could not explain the transactions of payments for agricultural land or land purchases properly, as contained in the said books/documents, the Assessing Officer treated the same as unexplained investments u/s.69 of the Act, and brought to tax. The amounts so brought to tax, u/s.69 of the Act, are as under: Unexplained cash credits u....
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....r business purpose and the amount has been spent for their business purpose only. Further, M/s TVH has recorded amount given to us in their books of accounts under the head loans and advances. The Accountant who maintains books in tally software has entered the receipt of money in our books in their name and once amount is spent for the intended purpose, the entries were deleted from tally software, because said amount is not utilised in our business. This fact has been confirmed by M/s TVH and has filed confirmation letters along with their financial statements. Therefore, when source has been explained, no addition can be made towards entries found in deleted tally software u/s 68 of the Act. 8. The assessee further submitted that, as regards additions made towards unexplained investments u/s 69 of the Act, first up all deleted entries in tally software cannot give raise to any investment which can be brought to tax u/s 69 of the Act. Further, the accountant who has maintained accounts in tally software entered those receipts from M/s TVH in our books for his reference and finally deleted from our books, when he realised that said money is not belongs to our Company. Further....
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....d. AO held that Dairy, note book and deleted data in CPU are not books of accounts of the asseseee in course of its business and thus, no addition could be made towards entries found in those dairy, note book and deleted entries of tally software as unexplained cash credits u/s 68 of the Act. The ld. CIT(A) further held that in order to consider any credit within the ambit of section 68 of the Act, it should fulfilled requirement of law that the credit should be emanate from books of accounts maintained by an assessee for that year and further the assessee fails to offer an explanation about source and nature of such credit. In this case, the AO has invoked section 68 of the Act, to entries found in dairy, note book and deleted entries of tally software retrieved from CPU without understanding the fact that those seized documents are not books within the meaning of books as defined under the Act. The ld. CIT(A) further noted that entries in dairy and note book are not in the handwriting of the director or his accountant. Further, neither the assessee nor the person who wrote the entries in dairy and note book did confirm that the transactions belong to the assessee. Further, no cor....
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....ectively. The relevant findings of the ld.CIT(A) are reproduced as under:- "6.0. I have perused the assessment order and the contents assessee's submissions carefully. The entire assessments of A.Ys.2011-12 to 2015-16 are based on certain entries in a diary, note book, loose sheets and the data retrieved from the computer CPU, only. The Assessing Officer treated the amounts shown as cash receipts in the diary, note book, retrieved data as unexplained cash credits in the respective years and brought to tax u/s.68 of the Act. Similarly, the Assessing Officer also treated the notings shown as 'payments made' as unexplained investments and brought to tax u/s.69 of the Act. While, the expenses of DMK conference shown in the loose sheets have been treated as unexplained expenditure u/s,69C of the Act and brought to tax. In this regard, let us examine the relevance of the contents of the diary, note book, loose sheets and the retrieved data from the CPU, visà- vis the applicability of sections 68, 69 and 69C of the Act, etc. 6.1. Unexplained cash credits u/s 68 of the Act: (A.Ys.2011-12 to 2015-16): The first issue is regarding the additions made by way of unexplained cash cr....
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....rrect with corroborative facts, can become evidences. 6.1.2 Further, neither the diary nor the note book was in the hand writing of the managing director or any of the directors. The 'diary' and the 'note book', found during the survey, are in the hand writing of one Mr. V. Krishnamoorthy. Apparently, Shri Krishnamoorthy is not in the pay rolls of the assessee company, though he was called as 'manager' by other staff of the assessee. As per the assessee, Mr. V. Krishnamoorthy was entrusted the work of identifying the 'lands' for the assessee and its group persons. However, as could be seen from the statement of Mr. V. Krishnamoorthy, vide answer to Q.Nos.3 and 5 of his statement dated 31.01.2018, he stated that he was working as manager of M/s. GSNR Rice Industries P Ltd (i.e. the assessee company) and M/s. Narayana Reddiyar Modern Rice Mill (a proprietary concern of Shri KN Manivannam), without receiving any salary and he was looking after the business affairs of these two concerns. Hence the assessee's claim that Shri Krishnamoorthy is not in the pay rolls of the company, is of little relevance and hence not taken into cognizance. 6.1.3 In any case, the assessee disowned th....
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....he sake reference, are reproduced as under: Cash credits. 68. Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year. 6.1.7 Thus, from the provisions of section 68, it is clear that a 'credit entry' must be found in the books of the assessee maintained for the previous year for the purpose of invoking the provisions of section 68. Only if a credit entry is found in the books of the assessee, the assessee needs to explain the nature and the source thereof to the satisfaction of the Assessing Officer. Therefore, for the purpose of invoking the provisions of section 68 of the Act, there should be books of accounts maintained by the assessee and in such books the 'sum' must be credited. This is the prerequisite for invoking the provisions of section 68 of the Act. Only then, the second limb of the provisions i.e. explanation of the assessee to the satisfaction of the Asse....
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....nately section 68 is dissected, the key ingredients would be that it requires that where any sum is found credited in the books of an assessee maintained for any previous year' that is there is a 'sum' found to have been credited in books of assessee for previous year which mandates existence of books of account of assessee sans which section 68 cannot be pressed into service. Thus, it is crystal clear that mere bank statement which is issued by bank to its client etc., can't be elevated to status of books maintained by assessee within the meaning .of section 2(12A) and section 44AA. The judicial analysis of books of account and the dictum given by the Bombay High Court in case of Sheraton Apparels v. ACIT [2002] (256 ITR 20) (Bom.), leaves no room for any possible doubt that credit in bank account simply or any other raw information available to Assessing Officer cannot be loosely called as books of account under section 68. 6.1.12 Therefore, the first two pre-requisites for invoking the provisions of section 68 are - (i) presence of regular 'books of account' maintained by the assessee, and (ii) credit entries in such books. Only when these two prerequisites are existing, the A....
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.... etc., are generally acquired out of the unaccounted income of the assessee from the unknown and undisclosed sources. Therefore, whenever the assessee is found with such unaccounted investments, cash, bullion, assets etc., the same are deemed to have been acquired out of the unaccounted income of the assessee and brought to tax as unexplained investments, cash, assets etc., u/s.69, 69A, 693 etc., unless the assessee explains the sources to the satisfaction of the Assessing Officer. Similarly, when an assessee is found to have incurred certain expenses (like marriage expenses etc), and the same are not reflected in the books and/or the sources for such expenses are not furnished by the assessee, the same is treated as unexplained expenditure and brought to tax u/s.69C of the Act. In all these cases the basic presumption is that these investments/cash/assets or expenses are deemed to have been made out of the unaccounted income from the undisclosed sources. Though the basic principle of the IT Act is to tax the income earned during the previous year, in these situations the tax liabilities of the assessee are, determined based on the application of unaccounted income as and when su....
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.... where the assets / investments, etc., are reflected in the books and acquired with mixed funds of accounted and unaccounted incomes, it is not possible to identify any specific assets/ investments/ expenditure which are acquired/met with the unaccounted income and the extent of such application. Therefore, in all these situations, the only way is to identify the bogus (non-genuine) credits introduced into the books. Once non-genuine credits are identified and eliminated from the balance sheet, there will be a net 'excess of assets over liabilities' and such net excess assets are deemed to have resulted on account of utilization of the assessee's unaccounted income. Therefore, in order to tackle this situation, the legislature introduced the provisions of section 68 in the statutes to treat such nongenuine (bogus) credits as unexplained cash credits u/s.68 of the Act and assess to tax. 6.1.17 Thus, non-genuine or unexplained cash credits means the liabilities claimed in the books of account, by way of creating credit entries in the names of various person (either existing or fictitious), with the aim of explaining and matching the investments/ assets/expenses claimed in the books....
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....sessee company and hence the accountant of the assessee entered some of these amounts in the tally 'software' in the computer as amounts received from M/s. True Value Homes P Ltd or Shri KN Manivannan etc. However, these amounts were not utilized for the assessee's activities. Instead, these amounts were utilized for the requirements of the other persons of the group. Thus, since the amounts received from M/s. True Value Homes P Ltd were not finally utilized for the assessee's activities, the same are not reflected in the regular books of accounts maintained. In the process, even entries in the 'tally' software were also deleted from the computer as they do not represent the true affairs of the assessee company. 6.1.22 The above explanation of the assessee seems to be correct. In fact, as could be seen from the audited financials of M/s. True Value Homes P Ltd for the financial years 2011-12 to 20 14-15, there were payments (advances) made to the assessee company to the tune of Rs. 21.35 crores, as reflected in the 'loans and advances' category on the assets side of the balance sheets. Also, the ledger extracts of the assessee company in the books of M/s. True Value Homes P Ltd a....
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....in the assessee's books (ledger: M/s. True Value Homes P Ltd). 3)Rs. 1.00 Crore (23.01.2012): * Received from M/s. True Value Homes P Ltd. by RTGS (Axis Bank a/c.no.7648). * Reflected in the assessee's Indian Bank (A/c No. 823769016), Tiruchirapalli Cant. on the same date (23.01.2012) * Also reflected in the assessee's books (ledger: M/s. True Value Homes P Ltd). 4) Rs. 1.25 Crore (31.01.2012): * Received from M/s. True Value Homes P Ltd. by ch.no.00930078 (Indian Bank a/c.no.70918 1550). * Reflected in the assessee's Indian Bank (A/c No. 823769016), Tiruchirapalli Cant. on the same date (31.01.2012). - * Also reflected in the assessee's books (ledger: M/s. True Value Homes P Ltd). 5)Rs. 1.00 Crore (07.02.2012): * Received from M/s. True Value Homes P Ltd. by ch.no,00452258 (Indian Bank a/c.no.709181550). * Reflected in the assessee's Indian Bank (A/c No. 823769016), Tiruchirapalli Cant. on the same date (07.02.20 12). * Also reflected in the assessee's books (ledger: M/s. True Value Homes P Ltd). 6) Rs. 50 Lakhs (11.01.2012) (CBE): * Reflected in Indian Bank account of Sri Narayana Reddiar Modem Rice Mill - A/c No. 823769209, Tiruchirapalli Cantonment B....
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....eived from True Value Homes Chennai. 2,00,00,000.0 9,15,00,000.0 9,1 5,00,000.00 To Closing Balance 9,15,00,000.00 9,15,00,000.0 6.1.26 Thus, out of the above seven transactions considered by the Assessing Officer as unaccounted / unexplained receipts in A.Y.2012-13, the first five transactions (totaling to Rs. 5.00 crores) are the accounted transactions in the regular books of the assessee and stands explained. This leaves the balance of only Rs. 1.50 crores to be explained by the assessee. In the case of sixth transaction of Rs. 50 lakhs, the assessee claimed that it was the cash deposited into the bank of M/s. Sri Narayana Reddiar Modern Rice Mill (Prop: Shri KN Manivannan). But the assessee has not furnished the details of sources for the said deposit. Similarly, the assessee has no explanation for the seventh transaction of cash receipt of Rs. 1.00 crores. Therefore, these two transactions of Rs. 1.50 crores (i.e. Rs. 50 lakhs + Rs. 1.00 crores) are treated as unaccounted cash receipts. 6.1.27 The additions of unexplained cash credits u/s.68 made by the Assessing Officer in v....
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....bserving that the dates mentioned in the starting page no.21 was 01.04.2012 and date mentioned in the page 32 was 25.12.2012, and hence the contents of the pages in between pages of 28 & 31 should be between these two dates. This observation of the Assessing Officer is not correct. Perusal of the copy of the note book shows entries are not only relating to the financial year 2012-13, but also other years. Various dates of the transactions found in the note book are as under: Page no.(of note book) Dates mentioned 21 01.04.2012 to 01.08.20 12 23 01.09.2010 & 01.10.2010* 25 01.04.2012 to 02.10.2012 32 25.10.2012 (or 25.12.2012-month not clear) (*the details on page 23 are relating to the purchase of K.Ponni and BPT varieties of paddy, on 02.09.2010 and 01.10.2010) 6.1.30 The above details and facts clearly show that the note book (or the entries) was neither maintained chronologically nor the contents (entries) relate to any particular year. The entries relate to different years. Therefore, the Assessing Officer's conclusion that the entries of amounts mentioned as 'received from minister', noted at page nos.28 & 31, pertain to the period between 01.04.2012 and 2....
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....recd. from True- Value-Home - 1,25,00,000 1,10,00,000 - 25,00,000 2. Cash recd. from KN Manivannan - 4,49,50,000 98,00,000 - 30,00,000 3. Cash recd. from Janani Minerals - - 50,00,000 - - 4. Cash recd. from KNN - - 5,30,55,000 3,78,00,000 1,76,63,000 6.1.33 Careful analysis of the above shows that most of amounts drawn from M/s. True Value Homes P 'Ltd were not entered in the computer CPU directly or as such. For example, the total amount drawn from M/s. True Value Homes P Ltd in F.Y.2011-12 was Rs. 5.00 crores. But, in the retrieved data from computer CPU reflected Rs. 1,25,00,000/- as the cash receipts 'from M/s. True Value Homes P Ltd and Rs. 4,49,50,000/- shown as cash received from Shri KN Manivannan. Similarly, in the case of F.Y.2012-13, the total amount drawn from M/s. True Value Homes P Ltd in F.Y.2011-12 was Rs. 4.50 crores. But the retrieved data from computer CPU reflected Rs. 1,10,00,000/- as the cash receipts from M/s. True Value Homes P Ltd, Rs. 98,00,000/- shown as cash received from Shri KN Manivannan, Rs. 50,00,000/- from M/s. Janani Minerals, Rs. 5,30,55,000/- from KNN. 6.1.34 ....
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....not fit into the definition of 'unexplained cash credits' within the meaning of section 68 of the Act. Then what could be the probable nature of these transactions? 6.1.38 In business organizations the receipts of monies are generally two types, i.e., (i) receipts of loans / advances (including recovery of loans/advances made by the assessee); and (ii) business receipts (either revenue receipts or capital receipts). In the former case, the receipts of loans / advances, the amounts will not be taxable as the entry itself acts a source of liability. However, it can be considered u/s.68, only if the assessee claims a credit for such entries. In the present case, the assessee disowned the contents of the diary, note book and the retrieved data from the computer CPU. In such a case, the provisions of section 68 have no application. 6.1.39 The only alternative possibility is that the entries could be of the second category, i.e. business receipts, especially in the absence of any other explanations offered by the assessee, or the corroborative evidences available on record. Again the business receipts could be either revenue receipts or capital receipts. In the present case, there ar....
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....336 3,55,94,233 Gross Profit (%) 27.32% 22.27% Indirect Expenses 2,64,30,727 3,58,34,462 Net Profit 18,63,609 -2,40,229 Net Profit (%) 1.80% -0.15% 6.1.42 Therefore, by applying the above gross profit ratios, the profit from the assessee's unaccounted sales of Rs. 5.80 crores and Rs. 1.50 crores, in the F.Ys.2010-11 and 20 11- 12 will be Rs. 1,58,45,600/- and Rs. 33,40,500/- , respectively. Therefore the Assessing Officer is directed to treat the cash receipts of Rs. 5.80 crores and Rs. 1.50 crores, shown in the diary / note book, in F.Ys.2010-l1 and 2011-12, as unaccounted sales and adopt the .probable profit from such unaccounted sales, at Rs. 1,58,45,600/- and Rs. 33,40,500/-, respectively, in the A.Ys.2011-12 and 2012-13. Thus, additions to the extent of Rs. 1,58,45,600/- and Rs. 33,40,500/-, respectively, in the assessments of A.Ys.2011-12 and 20 12-13 are confirmed, in place of unexplained cash credits. The remaining amounts of cash credits assessed in A.Ys.2011-12 and 2012-13 and the total amounts of cash credits assessed in A.Ys.2013-14 to 2015-16 stands deleted. 6.2. Unexplained investments u/s.69 of the Act: (A.Ys.2012-13 to 2015- 16): The next i....
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....d by the assessee, and the assessee fails to explain the nature and source of the investments to the satisfaction of the Assessing Officer, such investments becomes the deemed income of the assessee. The provisions of section 69 are reproduced as under: Unexplained investments. 69. Where in the financial year immediately preceding the assessment year the assessee has made investments which are not recorded in the books of account, if any, maintained by him for any source of income,' and the assessee offers no explanation about the nature and source of the investments or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the value of the investments may be deemed to be the income of the assessee of such financial year. 6.2.4 Therefore, the assessee is required to explain the nature and source for these investments. When this fact was brought to the notice of the assessee, the assessee's representative before the undersigned submitted that the company has not made any such investments. The assessee's representative also stated that there were cash receipts of to the tune of Rs. 21.35 crore,s received from M/s. True Value Homes P Ltd., ....
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....ts, shows the following scenario. While doing so, the estimated GP (by considering the cash receipts of Rs. 5.80 crores and Rs. 6.50 crores of F.Ys.20 10-11 and 2011-12, reflected in the impounded diary) is also considered as the source funds for subsequent investments etc., by the assessee and its group. Source of Income Amount (Rs.) Application Amount (Rs.) A.Y. 2011-12 1. Opening 1.4.2010 Balance as on 0 1. Unaccounted investments, expenditure in A.Y.2011-12 0 2. Additional Income brought to tax, by estimating income, by treating cash receipts as unaccounted sales 1,58,45,600 Closing 31.3.2011 Balance as on 1,58,45,600 Total 1,58,45,600 Total 1,58,45,600 A.Y. 2012-13 1. Opening 1.4.2011 Balance as on 1,58,45,600 1. Cash paid to KNM for purchase of agril.land 76,78,250 2. Additional Income brought to tax, by estimating income, by treating cash receipts as unaccounted sales 33,40,500 2.. Cash purchase paid for land 35,84,675 3. Cash received from M/s. True Vale Homes P Ltd 5,00,00,000 Closing 31.3.2012 Balance as on 5,79,23,175 Total 6,91,86,100 Total 6,91,86,100 A.Y. 2013-14 ....
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....ank ledger, of Rs. 5,00,000/-, in the assessment of A.Y.2015-16. The assessee claimed that during the financial year 2014-15 (A.Y.2015-16) the company made investments (amounts paid for purchase of lands) of Rs. 38,50,000/- (Rs. 22,00,000 + Rs. 16,50,000) through cheques. However the Assessing Officer in his order observed that the amounts paid through cheques was only Rs. 33,50,000/-. Hence, restricted the accounted investments to only Rs. 33,50,000/-, and brought the difference of Rs. 5,00,000/- found in the bank ledger, to tax as unexplained investments u/s.69 of the Act. 6.2.10 The assessee before the undersigned claimed that the entire investment of Rs. 38,50,000/- (Rs. 22,00,000 + Rs. 16,50,000) is fully accounted for in its books and the entire amount was paid through banking channels only. In support of the claim the assessee also furnished the bank extracts. The details of payments are as under: Date Amount Cheque No. Bank name / account no 20.09.2014 5,00,000 00104871 Indian Bank, Tiruchirapalli Cant 6.2.11 Perusal of the above bank extracts clearly shows that the entire amount of Rs. 38,50,000/- (Rs. 22,00,000 + Rs. 16,50,000) was paid through banking c....
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....ion of meeting such expenditure, it is not possible to arrive at a conclusion that the expenses are borne by the assessee company. 6.3.2 It may be true that the data retrieved from the computer CPU, in the books of M/s. Narayana Reddiyar Modern Rice Mill, showed the details of the above payments "as DMK conference expenses" in the ledger copy of KNN- 1. But as mentioned earlier, the company's accountant entered all the transactions in the computer 'tally' software, whether belonged to the assessee company, or other persons in the group. In fact, the retrieved data from CPU, itself showed cash receipts of Rs. 5,30,55,000/- and Rs. 3,78,00,000/-, respectively, during the financial years 2012-13 and 2013-14, in the name of Shri KN Nehru. In fact, the Assessing Officer himself treated the said cash receipts as 'unexplained cash credits' u/s.68 of the Act and brought to tax. These cash receipts from Shri KN Nehru, as reflected in the very same data retrieved from CPU, also stands as sources for the above DMK conference expenses. Further, if the cash receipts from Shri KN Nehru are not to be believed, meeting of the above expenses by the assessee company also to be 'discarded because b....
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....slature to mention as books is to include all the books whether it is regular or adhoc books of accounts and further those disclosed or undisclosed. In this case, seized diary, notebook and retrieved data from computer CPU clearly indicate credit entries pertain to assessee and its business affairs. Although, the assessee disowned said diary, notebook and retrieved data from computer CPU, but fact remains that entries recorded in diary, notebook and deleted entries in computer CPU also contains some of the entries recorded in regular books of accounts, which clearly suggest that those entries which are outside books of accounts of the assessee are clearly unexplained credit which needs to be brought to tax u/s.68 of the Act. The ld. DR further referring to various documents including statements recorded from Managing Director of the assessee company, Shri. K N Manivannan, one Shri. Krishnamurthy and Shri S. Ramesh, Accountant of the assessee company who looks after overall business affairs, argued that diary and notebook was maintained in his own handwriting. Although, he stated that he could not recollect details of entries recorded in books, but the AO has brought out various fa....
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....t contain date and name of the person from whom said money was received without appreciating the fact that in this diary, it was clearly mentioned that said money was received from Minister and Minister refers to Shri K.N. Nehru, Ex-Minister and brother of Managing Director of assessee company. The ld. DR further referring to page No.34 of ld.CIT(A) order submitted that the ld.CIT(A) has grossly erred in treating a sum of Rs. 5.8 crores for assessment years 2011-12 and further Rs. 1.5 crores for Asst. year 2012-13 as unaccounted sales and further estimating gross profit by taking gross profit declared by the assessee for relevant assessment years without appreciating the fact that said transactions are cash receipts outside regular books of accounts and does not form part of sales transactions of the assessee. He further submitted that the assessee has voluntary offered a sum of Rs. 5.77 crores as undisclosed income when it was unable to explain source for credits found in diary and notebook, but the same was not offered to tax without filing any valid retraction with evidence. He, further submitted that when assessee itself voluntarily accepts that entries in diary and notebook re....
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....ata storage device. From the definition of 'books' or 'books of accounts', it is abundantly clear that books of accounts means regular books of accounts maintained by the assessee for any previous year to record day to day transactions of its business including ledgers, day-books, cash books, account books and other books. The term other books does not mean to include some dumb documents like diary, notebook or deleted entries of computer CPU. The term other books refers to any other books which are relevant and in consonance with ledgers, day-books, cash books, account books, etc. Therefore, in order to include any other books of accounts maintained by the assessee within the ambit of term 'other books', those books must be relevant in the business of the assessee to keep track of transactions. Hence, other books refers to in the ordinary course of any business of the assessee are stock books maintained in the ordinary course of business to record movement of stocks, books of accounts maintained for recording salary and wages as required under the Wages Act and other statutory books prescribed under any other law. But, it does not include diary, notebook and some other dumb docum....
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....ade entries in deleted files but the AO has failed to examine Shri Ramesh, who know about the nature of entries recorded in tally software and the purpose of such entries. Similarly, the AO does not examine Shri V. Krishnamurthy as regards to persons against entries found in his diary and notebook. The AO has failed to bring on any corroborative evidence on record to find out whether transactions representing entries actually took place, whether money was actually received and if received, how such money was utilized. 16. The ld. AR for the assessee further submitted that further assuming that said diary and notebook constituted books of accounts and entries are corroborated, still the AO could not have made addition, as he did not consider evidences regarding receipts from M/s. True Value Homes Pvt Ltd, a group concern of assessee and owned by brother of Managing Director of assessee company. The ld.AR submitted that the assessee has filed various evidences to prove that the group has received a sum of Rs. 21.35 crores from M/s. True Value Homes Pvt. Ltd., (TVH) on various dates and said amount has been utilized for acquiring agricultural lands and making payments for various pur....
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....ntains business transactions of the assessee. The assessee has explained reasons for keeping said documents in his possession as per which, Shri K.N. Nehru, a DMK functionary was brother of assessee company Managing Director and he used to visit business premises when state level conference was held at Trichy. The said documents may be left in his office by his brother unknowingly. However, Shri K.N. Nehru has admitted the fact that said expenditure was incurred by him on behalf of DMK party and source was out of collections from party functionaries. The AO has also made enquiries with various persons including Shri K.N. Nehru, Treasurer of DMK party, where they have categorically accepted that expenditure was incurred out of voluntary donations collected from party units / cadre in the District. The AO has ignored all evidences filed by the assessee and had made additions u/s.69C of the Act, as unexplained expenditure without understanding that said expenditure is neither incurred by the assessee nor belongs to business activity of the assessee. The ld.CIT(A) after considering relevant facts has rightly deleted additions made by the AO and his order should be upheld. 19. We have....
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.... additions towards certain entries found recorded in diary and notebook and also retrieved data from computer CPU u/s.68 of the Act, on the ground that said credits are unexplained credits and assessee is unable to explain nature and source for such credits. The AO has also made additions towards certain payments recorded for purchase of agricultural land u/s.69 of the Act as unexplained investment on the ground that said entries are not recorded in regular books of accounts of the assessee and the assessee is unable to explain source for said investments. The AO had also made additions towards expenditure incurred for 10th state level DMK conference 'Maanila Manadu' u/s.69C of the Act, on the ground that the assessee is unable to explain source for such expenditure. 20. In this factual background, if we examine reasons given by the AO to invoke provisions of section 68 of the Act, to treat entries in diary and notebook and deleted entries from computer CPU as unexplained cash credit, one has to first understand provisions of section 68 of the Act. The provisions of section 68 deals with the cases where any sum is found credited in books of accounts of the assessee maintained for ....
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....y other law. But, it does not include diary, notebook and some other dumb documents maintained by any person for any reason. Therefore, in our considered view books refer to under section 68 means, regular books of accounts maintained by an assessee in the ordinary course of business to record its business affairs and also to prepare financial statements for the relevant year. Any other documents, including, loose sheets, dairy, note book and other unconnected documents cannot be considered as books, unless the same is part of books of accounts maintained by the assessee. Further, perusal of section 68 shows that in relation to the expression 'books' the emphasis is on the word 'assessee'. In other words, such books have to be the books of the assessee himself and not of any other person, as held by the Hon'ble Punjab and Haryana High Court in the case of Smt. Shanta Devi v. CIT (1981) 171 ITR 532 (Punj.&Har). Even the Hon'ble Bombay High Court, in the case of Sheraton Apparels v ACIT [2002] (256 ITR 0020((Bom), has held that the term 'books of account' means 'books of account' which have been maintained for determining any source of income. The term 'source of income', as understo....
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....corded therein and further neither diary nor notebook was in the handwriting of the Managing Director or any of the Directors. The diary and the notebook are in the handwriting of one Shri V. Krishnamurthy and in fact, he had admitted the fact of maintaining said notebook and diary, however, categorically stated that he is unable to recollect the contents recorded in said diary and notebook. Moreover, the assessee very categorically stated that Shri Krishnamurthy is not a regular employee of the assessee and whatever recorded by him in his diary and contents cannot be considered as transactions pertains to business of the assessee. Further, Shri V. Krishnamurthy, who has written the entries in diary and notebook have confirmed these facts vide his reply to Q.No.6 of his statement, dated 12.02.2018. In the statement, Shri V. Krishnamurthy admitted that relevant pages were written by him. Therefore, from the above, it is very clear that neither the assessee nor the person who has written the diary and notebook has confirmed that transactions belong to the assessee company. 23. As regards entries in the retrieved data from CPU, Shri Ramesh (employee of assessee's auditor's firm) had ....
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....ssee and further, credit entries must be found from such books of accounts. In this case, what was considered by the AO was some irrelevant documents which are nowhere connected to the assessee and his office and hence, those documents can only be treated as dumb documents and from those documents, no additions can be made u/s.68 of the Act. The ld. CIT(A) after carefully considered relevant fact has rightly held that no addition could be made u/s 68 of the Act, towards credit found in dairy, note book and retrieved data from computer CPU and hence, we do not find any reason to interfere with findings of ld. CIT(A). 24. Be that as it may. The assessee has also made an alternative argument and explained that during the financial years 2011-12 to 2014-15, there were cash receipts to the tune of Rs. 21.35 from M/s. True Value Homes Pvt. Ltd., and those cash receipts matched with entries recorded in note book and retrieved data from computer CPU. The assessee has further explained that these amounts were initially received by the Managing Director of the assessee company for the purpose of other group companies and hence, the accountant of the assessee entered those cash receipts in t....
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....n transactions recorded in diary, first five transactions are receipts of amounts from Shri K.N. Ravichandran and M/s. True Value Homes Pvt. Ltd. Although, these amounts were received through banking channels but because it is mentioned as being cash transferred in the narration, particularly for these reasons, Shri Krishnamurthy might have written these amounts as cash received in his diary. Therefore, the ld.CIT(A) categorically recorded that out of Rs. 6.5 crores recorded in diary, a sum of Rs. 5 crores are explained transactions and the balance Rs. 1.5 crores is unexplained transactions and the same has been treated as unaccounted cash receipts. The assessee before us, neither produced any evidence to prove that said cash receipts are explained credits nor proved any evidence to that said entries are not belongs to its business affairs except stating that third party has recorded entries in diary and he is not aware of the facts. Therefore, we are of the considered view that the findings recorded by the ld.CIT(A) was not confronted with any evidence and hence we are of the considered view that there is no error in the findings recorded by the ld.CIT(A) to hold that out of Rs. ....
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....s entered by the accountant in the computer. We, further, noted that amounts received from M/s. True Value Homes Pvt. Ltd, are almost matched with the entries recorded in notebook. The total cash receipts from M/s. True Value Homes P Ltd, during the financial years 201 1-12 to 20 14-15, are at Rs. 21.35 crores. The cash receipts of Rs. 16,25,00,000/- (i.e. Rs. 5,00,00,000 + Rs. 4,50,00,000 + Rs. 6,75,00,000) in the first three financial years i.e. F Ys 2011-12, 2012-13 and 2013-14 almost tallies with the amount of 16.24 crores found in the note book written by Shri. V Krishnamurthy. Therefore, the claim of the assessee that amount of Rs. 16.24 crores recorded in the note book as 'money received through minister', could be the amount withdrawn from M/s. True Value Homes P Ltd and made available to the group, appears to be correct and needs to be accepted, especially in the absence of any contrary evidences / information available on record. Even before us, the ld. DR failed to bring on record any evidence to prove that said explanation of the assessee is incorrect and further, said entries are in fact really taken place between assessee and some third parties or between the assessee....
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....ssigned some work by the assessee group and, in fact, Shri Krishnamurthy himself has admitted that he was supervising the business activities of the assessee company and M/s. Shri Narayana Reddiar Modern Rice Mill (vide answers to Q.Nos.3&5 of his statement dated 31.01.2018). Therefore, un-reconciled entries of 'cash receipts' found in the diary and the note book are to be treated as transactions of the assessee company, since they were found in the business premises of the assessee. However, as detailed in the foregoing paragraphs, the above entries of 'cash receipts' found in the diary and the note book and also the credits found in the retrieved computer data cannot fit into the definition of 'unexplained cash credits' within the meaning of section 68 of the Act. Then what could be the probable nature of these transactions? In business organizations the receipts of monies are generally two types, i.e., (i) receipts of loans / advances (including recovery of loans/advances made by the assessee); and (ii) business receipts (either revenue receipts or capital receipts). In the former case, the receipts of loans / advances, the amounts will not be taxable as the entry itself acts a....
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...., the fair way is to estimate and determine the possible income from such unaccounted sales, is by adopting the gross profit ratio. The ld. CIT(A) has adopted gross profit as the basis for arriving at profit from business. The gross profit ratios of the assessee in accounted business of the rice mill for the Asst. year 2011-12 is about 27% and for Asst. year 2012-13 is about 22%. Therefore, if above gross profit rate is applied, the profit from unaccounted sales of Rs. 5.80 crores and Rs. 1.50 crores, for the A.Ys.2011-12 and 20 12- 12 will be Rs. 1,58,45,600/- and Rs. 33,40,500/-, respectively. Hence, he has directed the Assessing Officer to treat cash receipts of Rs. 5.80 crores and Rs. 1.50 crores, shown in the diary / note book, in F.Ys.2010-l1 and 2011-12, as unaccounted sales and adopt profit from such unaccounted sales, at Rs. 1,58,45,600/- and Rs. 33,40,500/-, respectively, in the A.Ys.2011-12 and 2012- 13. Thus, additions to the extent of Rs. 1,58,45,600/- and Rs. 33,40,500/-, respectively, in the assessments of A.Ys.2011-12 and 20 12-13 are confirmed, in place of unexplained cash credits. The remaining amounts of cash credits assessed in A.Ys.2011-12 and 2012-13 and the ....
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....e, if the assessee fails to explain the nature and source for said investments, they can be considered as 'unexplained investments' u/s.69 of the Act and brought to tax. 32. The provisions of section 69 of the Act, deals with unexplained investments. As per the provisions of section 69 of the Act, if an assessee is found to have made any investments during the previous year, which are not recorded in the books of account maintained by the assessee, and the assessee fails to explain the nature and source of the investments to the satisfaction of the Assessing Officer, such investments becomes the deemed income of the assessee. Therefore, the assessee is required to explain the nature and source for these investments. Admittedly, impugned note book entries refer to certain payments made for purchase of agricultural lands. The assessee explained that there were cash receipts to the tune of Rs. 21.35 crores from M/s. True Value Homes P Ltd., through Shri. KN Manivannan, the company managing director, which in-turn, was used for various purposes including payment for purchase of Agricultural land in the name of various persons of the group. Therefore, the assessee claimed that the ab....
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....agril.land 76,78,250 2. Additional Income brought to tax, by estimating income, by treating cash receipts as unaccounted sales 33,40,500 2.. Cash paid for land purchase 35,84,675 3. Cash received from M/s. True Vale Homes P Ltd 5,00,00,000 Closing Balance as on 31.3.2012 5,79,23,175 Total 6,91,86,100 Total 6,91,86,100 A.Y. 2013-14 1. Opening Balance as on 1.4.2012 5,76,23,175 1. Cash paid to KNM for purchase of agril.land 1,84,84,000 2. Cash received from M/s. True Vale Homes P Ltd 4,50,00,000 2.. Cash paid for land purchase 54,09,234 Closing Balance as on 31.3.2013 7,90,29,941 Total 10,29,23,175 Total 10,29,23,175 A.Y. 2014-15 1. Opening Balance as on 1.4.2013 7,90,29,941 1. Cash paid to KNM for purchase of agril.land 2,86,63,000 2. Cash received from M/s. True Vale Homes P Ltd 6,75,00,000 2.. Cash paid for land purchase 4,80,000 Closing Balance as on 31.3.2014 11,73,86,941 Total 14,65,29,941 Total 14,65,29,941 A.Y. 2015-16 1. Opening Balance as on 1.4.2014 11,73,86,941 1. Cash paid to KNM for purchase of agril.land 2,25,17,000 2.....
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....tments u/s.69 of the Act. 36. We have heard both the parties, perused materials on record and gone through orders of the authorities below. Having considered relevant fact, we find that the. Ld. CIT(A) has recorded categorical findings that entire investment of Rs. 38,50,000/- (Rs. 22,00,000 + Rs. 16,50,000) is fully accounted for in its books and the entire amount was paid through banking channels, including sum of Rs. 5,00,000/- considered as unexplained investment by the AO. We further note that the impugned payment of Rs. 5,00,000/- has been paid on 20-09-2014 by cheque number 00104871 of Indian Bank, Trichy Branch. Therefore, we are of the considered view that the Assessing Officer is not justified in adding sum of Rs. 5,00,000 as unexplained investment u/s.69 of the Act. The ld. CIT(A) after considering relevant fact has rightly deleted addition and hence, we are inclined to uphold findings of the ld. CIT(A) and reject grounds taken by the Revenue. 37. Coming to the issue of addition made u/s 69C towards unexplained expenditure on account of DMK 10th State level conference held in Trichy in the financial 2013-14. Having heard both sides, we find that the impounded documents....
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....cash receipts of Rs. 5,30,55,000/- and Rs. 3,78,00,000/-, respectively, during the financial years 2012- 13 and 2013-14, in the name of Shri KN Nehru. In fact, the Assessing Officer himself treated said cash receipts as 'unexplained cash credits' u/s.68 of the Act and brought to tax. These cash receipts from Shri KN Nehru, as reflected in the very same data retrieved from CPU, also stands as sources for the above DMK conference expenses. Further, if cash receipts from Shri KN Nehru are not to be believed, meeting of the above expenses by the assessee company also to be 'discarded because both of these entries are found in the same data retrieved from CPU. 38. It may also be true that the headquarters of DMK party, at state level, has not reflected collections/receipts or the expenses relating to the DMK 10th State level conference held in Trichy in 2013-14. In this regard, the explanation of Shri KN Nehru / the assessee company that since the collections were locally made at the time of conference, for the purpose of conference and expended for the conference locally, the details of the conference collections and its expenses were squared up locally and hence, the same are not re....
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....8 and 69/69A/69C of the Act. Further, addition made by the AO towards entries recorded in dairy, note book and retrieved data from CPU u/s 68 and 69/69A/69C of the Act, as unexplained cash credits, unexplained investments and unexplained expenditure has been deleted. The reason given by us in preceding paragraphs in ITA No. 2407 to 2411/Chny/2019 shall mutatis mutandis apply to this appeal as well. Therefore, for similar reasons addition made u/s 68, 69 and 69C of the Act cannot be sustained. 41. As regards addition made towards unexplained cash credit u/s 68 of the Act, for Rs. 24,14,400/-, the ld. CIT(A) has recorded categorical finding that it is a payment by self, because the amount shown to have made from the books of proprietary concern to the proprietor and hence, it cannot be considered as cash credit which can be brought to tax u/s 68 of the Act. Because, proprietary concern is not a separate legal entity for income tax purposes. Further, said entry is a debit entry and hence, it cannot be brought tax u/s 68 of the Act as cash credit. The ld. CIT(A) has further recorded a finding of fact that there is sufficient source available with the assessee to explain source for e....
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....ace and represents unexplained expenditure which can be brought to tax u/s 69C of the Act. We further noted that the person who maintained accounts in tally software had explained the reason for entering and later deleting those entries from tally software. Therefore, when the person who entered the entries in computer software had clarified that said entries are not belongs to business affairs of the assessee and further, he had also categorically explained nature and source of such entries and the reason for deletion of entries in the computer software, then deleted entries cannot be considered as unexplained expenditure of the assessee to bring those entries within the ambit of section 69C of the Act. No doubt, it is for the assessee to explain each and every entry recorded in its books of accounts to the satisfaction of the AO. But, once the assessee has offered his explanation, then it is for the AO to bring on record some corroborative evidences to show that retrieved data from CPU are actually expenditure of the assessee. In this case, although the assessee has disowned deleted entries from tally software and which was further strengthened by the statements of the persons wh....
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....s of the authorities below. Having considered relevant materials, we find that except retrieved deleted entries, the AO has not brought on record any corroborative evidence to prove that said transaction had been taken place between the parties. There is no iota of evidences with the AO to prove that said payments were made for purchase of agricultural lands. Further, impugned entries were retrieved from the tally software books of accounts of M/s GSNR Rice industries Pvt. Ltd and those books are nothing to do with assessee and M/s Narayana Reddiyar Modern Rice Mill. Further, the assessee has denied those entries and any cash payments. Under these facts, it is difficult to accept findings of the AO that said deleted entries of cash payments did actually took place and represents unexplained investments which can be brought to tax u/s 69 of the Act. We further noted that the person who maintained accounts in tally software had explained the reason for entering and later deleting those entries from tally software. Therefore, when the person who entered the entries in computer software had clarified that said entries are not belongs to business affairs of the assessee and further, h....
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.... The Revenue has failed to bring on record any evidences to prove the findings of fact recorded by the ld. CIT (A) is incorrect or we can take a different view other than view taken by the ld. CIT (A). Hence, we do not find any reason to interfere with findings of ld. CIT (A). Accordingly, the ground taken by the revenue is rejected. 46. As regards estimated notional interest u/s 56 amounting to Rs. 1,18,58,712/-, we find that once again addition is based on excel sheet found from the laptop of Mr. S Ramesh, which was recovered subsequent to survey. The AO has made addition based on excel sheet as per which the assessee is engaged in money lending business and has advanced loans to various persons. Therefore, he opined that the assessee has advanced loans @24% interest per annum and hence, worked out interest of Rs. 1,18,58,712/- and brought to tax u/s 56 of the Income Tax Act, 1961. 47. We have heard both parties, perused materials available on record and gone through orders of the authorities below. Having heard both parties, we find that the ld. CIT(A) has recorded categorical findings that all most all advances claimed to have been given to various persons are accounted in re....
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....ecorded in dairy, note book and retrieved data from CPU u/s 69/69A of the Act, as unexplained Investments and unexplained money has been deleted. The reason given by us in preceding paragraphs in ITA No. 2407 to 2411/Chny/2019 shall mutatis mutandis apply to this appeal as well. Therefore, for similar reasons addition made by the AO u/s 69 and 69A of the Act cannot be sustained. 50. The first addition made by the AO is cash payment of Rs. 49,00,181/- purportedly paid by M/s Narayana Reddiyar Modern Rice Mill to the assessee as unexplained money u/s 69A of the Act. The AO has considered certain deleted entries of tally software from retrieved data of computer CPU to make addition u/s 69A of the Act. As per retrieved data, one cash payment of Rs. 49,00,181/- from KN Manivanna, prop: Shri. Narayana Reddiyar Modern Rice Mill account to Shri. KN Nehru was considered as unexplained money. The impugned entry is retrieved from computer CPU. According to the AO, above payment was made from the account of M/s Narayana Reddiyar Modern Rice Mill to KN Nehru for house construction/work. The assessee has disowned deleted data from computer software. The assessee further claimed that he has not ....
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.... Pvt. Ltd and further, sum of Rs. 77,18,431/- towards alleged payment for KN Nehru house construction. The AO has made addition u/s 69 of the Income Tax Act, 1961 on the ground that the assessee has made an investment which is not recorded in books of accounts and further source for investment is not explained. We find that once again above addition is based on two deleted entries from computer CPU. The AO had retrieved deleted entries from computer CPU as per which one cash payment of Rs. 4,25,60,000/- was made by the assessee to GSNR Rice Industries Pvt. Ltd. Similarly, another entry of Rs. 77,18,431/- alleged to be cash paid for house construction. According to the AO, the assessee has made certain payments, but could not explain the entries and source for said investment. Hence, he has treated those deleted entries as unexplained investment and brought to tax u/s 69 of the Income Tax Act, 1961. 53. We have heard both parties, perused materials available on record and gone through orders of the authorities below. Having considered relevant materials, we find that except retrieved deleted entries, the AO has not brought on record any corroborative evidence to prove that said tra....