TaxTMI 
TaxTMI 
2021 (6) TMI 696
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....ls)-2, Chennai, dated 26.07.2019 and pertains 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 r....
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.... was mentioned that Rice stock - Rs. 17 lakh, Cash received from Minister - Rs. 16,23,90,000/- and at 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 ....
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....its 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. (reflected in loose sheet 77&78) 1,76,63,000 Cash received from KN Nehru (KNN) into SNR Rice Industries 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 assess....
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....s.68: A.Y. 2011-12 A.Y.2012-13 A.Y.2013-14 A.Y.2014-15 A.Y.2015-16 Based on an entries in the diary 1. Cash received from 'X1' 5,80,00,000 - - - - 2. Cash received - 6,50,00,000 - - - Based on an entries in Note Book 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 sheet....
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....d therefore, on the basis of dairy and loose sheets addition u/s 68 of the Act is unwarranted. The assessee further submitted that deleted entries retrieved from tally software pertains to amount received from True Value Homes Private Limited, a Company belongs to Brother of Managing Director of assessee Company. During the financial years 2011-12 to 2014-15 M/s TVH has paid a sum of Rs. 21.35 Crores and said amount has been used for various purposes other than the business of the assessee. Further, M/s TVH has paid money for their 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 entr....
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....relating to the said conference expenditure of Rs. 3,00,30,312/- were mistakenly left in the assessee's premises. Thus, the assessee claimed that the entire expenditure of Rs. 3,00,30,312/- relates to DMK 10th State level conference held in Trichy, and was met by the DMK party only. In support of this claim, the assessee also submitted a confirmation letter from Shri KN Nehru, the District Secretary of DMK party. 10. The ld. CIT (A) after considering relevant submissions of the assessee and also by taking note of various facts brought out by the ld. 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 cas....
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....ived from M/s TVH a group concern of assessee. He further held that the assessee could not explain source for sum found recorded in dairy for Asst Year 2011-12 amounting to Rs. 5.80 crores and sum of Rs. 1.50 crores for Asst. Year 2012-13. Accordingly, those entries have been treated as unexplained sale receipts for the relevant year. Further, after taking gross profit declared by the assessee for the relevant year, he has estimated GP on unaccounted sales and made addition of Rs. 1,58,45,600/- and Rs. 33,40,500/- for Asst. year 2011-12 and 2012-13 respectively. 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 i....
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....d from P Ltd CPU Shri KN Manivannan 30,00,000 Cash received from 1,76,63,000 KNN Total 24,12,55,000 6.1.1 Thus, the additions of unexplained cash credits u/s.68 of the Act were made on the above impounded diary, note book, retrieved data from CPU found from assessee's business premises. These impounded diary, note book, retrieved data from CPU etc are not the 'books of account' maintained by the assessee in its regular course of business. Nor these were the books considered by the assessee for preparing the final annual financial statements and filing of the returns, in any of the assessment years under consideration. These impounded diary, note book, retrieved data from CPU etc can only form source of information, and if the contents are proved to be correct 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. Appa....
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....s given by the respective person(s) stating that the contents belonged to the assessee company. Therefore, in the absence of any corroborative evidences and confirmations, it will be difficult to conclude that the assessee had actually received the amounts as noted in the diary, note book, retrieved data from CPU. More so, these are not the regular 'books of account' maintained by the assessee. Under these circumstances, it is not possible to invoke the provisions of section 68 of the Act. 6.1.6 Further, before invoking the provisions of section 68 of the Act, one has to understand the meaning of 'unexplained cash credits' within the meaning of section 68 of the Act. As per the provisions of section 68 of the Act, any credit found in the books of the assessee, if not explained to the satisfaction of the Assessing Officer, can be treated as unexplained cash credit, and assessed to tax. Provisions of section 68, for the 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 explan....
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....section 14, it would fall for the purposes of computation of total income for charging income-tax thereon. Thus, the term 'books of account' would mean those books of account whose main object is to provide credible data and information to file the tax returns. Though the judgment was with reference to the levy of penalty u/s.271(1)(c) of the Act, the meaning of 'books of account' observed by the Hon'ble court is with reference to the general and accounting principles and hence applicable for all provisions of the Act. 6.1.10 The Hon'ble Delhi Tribunal, in the case of Amitabh Bansal v. ITO (2019)(175 lTD 401) (Deihi-Trib.), has held that "Invocation of section 68 sans valid and proper books of account of assessee is invalid". The tribunal also observed that a mere 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. 6.1.11 Therefore, if objectively and dispassionately 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 'su....
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.... to declare lesser incomes and reduce their tax burden. The income so suppressed becomes unaccounted income. The assessees utilize this unaccounted income for acquiring various assets / making investments, meeting various expenses etc; Sometimes, the unaccounted income so generated will be re-introduced into the books by way of loans, advances etc in various names and forms. Therefore, in order to curb thi practice and to tax the unaccounted income so generated, the legislature introduced deeming provisions under sections 68, 69, 69A to 69D etc. 6.1.14 Normally the unaccounted income generated will be invested by the assessees in various forms. It may be in acquiring various assets, making investments, keeping in the form of cash, bullion etc. Since these items are acquired with the unaccounted (undisclosed) income, normally the taxpayers tend to keep them undeclared, i.e. by not reflecting in the books of accounts or income tax returns. In other words, these unaccounted cash, assets, investments etc., are generally acquired out of the unaccounted income of the assessee from the unknown and undisclosed sources. Therefore, whenever the assessee is found wi....
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....unted income into the books, in the names of various persons, the accounts of the said persons is credited with the said amount. It is a creation of liability in the books, in order to match the total of the assets on the assets side of the balance sheet at the given point of time. These are the unexplained cash credits within the meaning of the provisions of section 68 of the Act. Therefore, any income from undisclosed sources, if credited in the books maintained by the assessee, is liable to be assessed under section 68. If such income from undisclosed sources, though invested, has not been recorded in the assessees books of account, such investment is liable to be assessed in terms of section 69 of the Act, has held by the Patna High Court, in the case of Laxmi Narain Gupta v. CIT [1980] (124 ITR 94) (Patna). 6.1.16 Normally, when an asset is acquired or investment/expenditure is made with unaccounted income, the same can be brought to tax based on the application / utilization of the unaccounted income. But in a complex scenario where the assets / investments, etc., are reflected in the books and acquired with mixed funds of accounted and unaccounted incomes, it is not....
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....6.1.20 In the present case, there are regular books of accounts are maintained by the assessee for all the five assessment years under consideration, subjected the same for compulsory auditing u/s.44A3 of the Act, prepared annual financial statements and filed the returns. None of the above amounts, assessed to tax by the Assessing Officer u/s 68 of the Act, were found in these books of accounts maintained by the assessee, as 'credit' entries. Hence the amounts written in the diary, note book, retrieved computer data etc, will not fit into the definition of 'unexplained cash credits' u/s 68 of the Act. Therefore, on this account alone, the additions made by the Assessing Officer, by way of unexplained cash credits u/s.68 of the Act, in all the five assessment years under consideration, needs to be deleted. 6.1.21 One of the explanations of the assessee is that there were cash receipts from M/s. True Value Homes P Ltd during the financial years 2011-12 to 2014-15, to the tune of Rs. 21.35 crores. These amounts were initially received by the managing director of the assessee company and hence the accountant of the assessee entered some of these amounts in the tally 'software....
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.... crores found in the diary, as 'cash received' during the financial year 2011-12, are accounted transactions. Perusal of the ledger extracts, bank statements etc., of the respective persons and also the assessee, shows that the first five transactions are the accounted transactions. The details are as under: Cash received (as contained in diary) 1 03.01.2012 75 Lakhs 2 11.01.20112 1C 3 23.01.2012 1C 4 31.01.2012 1.25 5 07.02.2012 1.00 6 11-1-12 50 lakhs 7 14-1-12 1C 6C 50 lakhs 1)Rs. 75 lakhs (03.01.2012): * Received from Shri KN Ravichandran by ch.no.00002360 (Indian Bank a/c.no.707493403), and accounted as receipt from M/s. True Value Homes P Ltd. * Reflected in the assessee's Indian Bank (A/c No. 823769016), Tiruchirapalli Cant. on the same date (03.01.20 12). * Also reflected in the assessee's books (ledger: M/s. True Value Homes P Ltd). 2)Rs. 1.00 Crore (11.01.2012): * Received from M/s. True Value Homes P Ltd. by ch.no.00930069 (Indian Bank a/c.no.709181550). * Reflected in the assessee's Indian Bank (A/c No. 823769016), Tiruc....
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....lected. Though the amounts were received through banking channels, it is mentioned as 'being cash transferred' in the narration. Probably, for this reason, Shri Krishnamoorthy might have written these amounts as 'cash received' in his diary. The ledger extract of M/s. True Value Homes P Ltd, in the books of the assessee company is as under: SNR RICE INDUSTRIES PRIVATE LIMITED - (2011-2012) True Value Homes India Pvt Ltd Ledger Account 1-Apr.2011 to 31-Mar.2012 Date Particulars ch Type Vch No. Debit Crec 28-7-2011 By INDIAN BANK 0CC A/C NO: 823769016 Receipt transfer. 65,00,000.0 3-1-2012 By INDIAN BANK 0CC A/C NO: 823769016 Receipt Being cash transferred. 642 75,00,000.0 11-1-2012 By INDIAN BANK 0CC A/C NO: 823769016 Receipt Being cash transferred. 1,00,00,000.0 23-1.2012 By INDIAN BANKOCC A/C NO: 823769016 Receipt Being RTGS received 1,00,00,000.0 31-1-2012 By INDIAN BANK 0CC A/C NO; 823769016 Receipt Being RTGS received 1,2500,000.0 7-2-2012 By INDIAN BANK 0CC A/C NO: 823769016 Receipt Being cash transferred. 1,00,00000.0 16-2-....
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....ritten by a third person, and hence the assessee was not aware of the notings in the said note book. Secondly, the notings in pages 28 and 31 of the note book do not contain any date(s) and hence it cannot be said that the amounts mentioned in the note book were the amounts received in the financial year 2012-13 only. Thirdly, there were cash receipts of Rs. 5,00,00,000/-, Rs. 4,50,00,000/-, Rs. 6,75,00,000/- and Rs. 5,10,00,000/- (totaling to Rs. 2 1.35 crores) received from M/s. True Value Homes P Ltd, during the financial years 20 11-12 to 2014-15, respectively. M/s. True Value Homes P Ltd is also a group company, and since all financial decisions and major transactions are under the guidance and supervision of Shri KN Nehru (the elder brother of family), the staff of the assessee company and also Sri Krishnamoorthy might have treated the above receipts from M/s. True Value Homes P Ltd as the amounts from the 'minister'. The assessee also claimed that 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 F.Ys.2011- 12, 2012-13 and 2013-14, t1ies with the amount of 16.24 crores found in the note book written by Shri Krishnamoorthy. ....
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.... joint family. Hence the assessee's claim that all the financial decisions and major business and other decisions are taken in the family through Shri KN Nehru, has certain credence. The total cash receipts from M/s. True Value Homes P Ltd, during the financial years 201 1-12 to 20 14-15, are Rs. 2 1.35 crores. The cash receipts of Rs.l6,25,00,000/- (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 Krishnamoorthy. Therefore, the present claim of the assessee that the 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. 6.1.32 Similarly, the other cash receipts shown in the retrieved data from computer CPU, etc., shown as cash receipts from the group persons are to be treated as the amount drawn from M/s. True Value Homes P Ltd. These ....
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...., these cash receipts shown in the diary, note book, retrieved data from CPU cannot be considered as unexplained cash credits u/s.68 of the Act. At the same time, these cash entries cannot be considered as source of funds for the assessee's investments / expenditure if any. Hence only the amounts of Rs. 2 1.35 crores given by M/s. True Value Homes P Ltd, and reflected as 'loans/advances' in its books, alone are considered as the source of funds for the assessee's investments / expenditure, if any. 6.1.36 At the same time the amounts mentioned as 'cash receipts in these diary, note book, retrieved computer data etc., cannot be ignored. It may be true some of the amounts received from M/s. True Value Homes P Ltd were entered at multiple places, i.e. in the diary, note book and also in the computer CPU. It may also be true that the diary and note book were in the hand writing of the One Mr. Krishnamoorthy and the assessee disowned the contents. But it is an admitted fact that Shri Krishnamoorthy has been assigned some work by the assessee group and, in fact, Shri Krishnamoorthy himself has admitted that he was supervising the business activities of the assessee company and M/....
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....s unaccounted sales of the year, especially in the absence of any explanation from the However, in the case of cash receipts of Rs. 6.5 crores during the financial year 2011-12, found in the diary, transactions to the extent of Rs. 5.00 crores are the accounted transactions (as detailed in paragraph Nos.6.1.24. to 6.1.26 above). Hence the only the balance of Rs. 1.50 crores is to be treated as the unaccounted sales of the year. This could be the only the possible interpretation for the entries found in the diary / note book maintained a person who is supposed to me managing the rice mill business affairs of the assessee. 6.1.41 The entire sale proceeds of the unaccounted sales cannot constitute the net profit of the assessee. Even unaccounted sales will have corresponding purchases. Also in the present case, the quantitative details of purchases, sales and stock of paddy/rice are maintained by the assessee, there are no discrepancies found in such quantitative details. Hence it is not possible to presume that the unaccounted sales are made from the accounted purchases. In other words, the unaccounted sales, in the present case, are from unaccounted purchases only. In such ....
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....al 1,12,62,925 A.Y.2013-14 Impounded diary Impounded Note-book Data retrieved from CPU - - Cash paid to KNM for purchase of agril.land Cash paid for land purchase - -1,84,84,000 54,09,234 Total 2,38,93,234 A.Y. 2014-15 Impounded diary Impounded Note-book Data retrieved from CPU - - Cash paid to KNM for purchase of agril.land Cash paid for land purchase - - 2,86,63,000 4,80,000 Total 2,91,43,000 A.Y. 2015-16 Impounded diary Impounded Note-book Data retrieved from CPU - - Cash paid to KNM for purchase of agril.land Cash paid for land purchase Difference in bank ledger - - 2,25,17,000 51,00,000 5,00,000 Total 2,81,17,000 6.2.1 Thus, the above additions of unexplained investments u/s.69 of the Act, were made based on the retrieved data from CPU found from the assessee's premises. As narrated in the foregoing paragraphs, the impounded diary, note book, retrieved data from CPU etc., are not the 'books of account' maintained by the assessee in its regular course of business. Nor these were the books considered by the assessee for prepa....
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....rores received from M/s. True Value Homes P Ltd. 6.2.5 The above explanation seems to be reasonable. As detailed in the foregoing paragraphs, there were cash receipts to the tune of Rs. 21.35 crores from M/s. True Value Homes P Ltd. The amounts are clearly shown in the audited financial statements of M/s. True Value Homes P Ltd for the respective years. In the books of M/s. True Value Homes P Ltd, these amounts were shown as cash paid to the assessee company. However, these amounts, though reflected in the retrieved CPU data to some extent, were not reflected in the assessee's regular books of accounts. The assessee's explanation for this non-reflection of these cash receipts in its books, is that the amounts were not utilized by the company for its business purposes. Instead, these amounts were utilized for various purposes of the other persons in the group. Hence the assessee's explanation that these unaccounted investments, if considered as actually invested, are out of the above 21.35 crores, is logical and needs to be accepted. Further, there were no contrary evidences on record to show that the above amounts of Rs. 2 1.35 crores received from M/s. True Value Homes P ....
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....e as on 7,90,29,941 Total 10,29,23,175 Total 10,29,23,175 A.Y. 2014-15 1. Opening 1.4.2013 Balance as on 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 purchase paid for land 4,80,000 Closing 31.3.2014 Balance as on 11,73,86,941 Total 14,65,29,941 Total 14,65,29,941 A.Y. 2015-16 1. Opening 1.4.2014 Balance as on 11,73,86,941 1. Cash paid to KNM for purchase of agril.land 2,25,17,000 2. Cash received from M/s. True Vale Homes P Ltd 5,10,00,000 2.. Cash purchase paid for land 51,00,000 Closing 31.3.2015 Balance as on 14,07,69,941 Total 16,83,86,941 Total 16,83,86,941 6.2.7 Thus, from the above cash flow, it is clear that all the unaccounted investments etc., made by the group, in various financial years, are within the limits of funds received from M/s. True Value Homes P Ltd in the respective years. In other words, there ....
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....n the bank account. Therefore, the Assessing Officer is not justified in concluding that there was difference of Rs. 5,00,000/-. The addition of Rs. 5,00,000/- made by the Assessing Officer u/s.69 of the Act is deleted. 6.3. Unexplained expenditure u/s.69C of the Act: (A.Y.2014-15): The next issue is regarding the addition made by way of unexplained expenditure on account of DMK 10th State level conference held in Trichy in 2013-14. Perusal of the impounded documents (loose sheets) clearly shows that the expenses are in relation to' the conducting of DMK 10th State level conference only. There are no disputes in this regard. It is also a fact that Shri KN Nehru, who was the District Secretary of DMK for Trichy district, is one of the brothers of the Managing Director of the assessee company. Therefore, Shri KN Nehru, being the District Secretary of the party, is required to make arrangements for the conference. Further, since Shri Nehru is the brother of the assessee company's managing director, Shri Nehru and his party workers using the company's premises to chalk-out the strategies and logistics for the conference is quite natural and cannot be ruled out. In suc....
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.... 6.3.3 It may also be true that the headquarters of DMK party, at state level, has not reflected the collections/receipts or the expenses relating to the DMK 10th State level conference held in Trichy in 20 13-14. In this regard, the explanation of Shri 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 reflected in the DMK party state head office, has some merits and needs to be given credit. 6.3.4 Thus, from the above facts, it is clear that - (i) the expenses belonged to the DMK Conference's expenses, (ii) Shri KN Nehru, being the District Secretary, has confirmed that the expenses were borne by the party, (iii) data retrieved from CPU, also showed cash receipts from Shri KN Nehru to the tune of Rs. 3,78,00,000/- during the same financial year 2013- 14. Under these circumstances, I am of the considered opinion that the above conference expenses of Rs,3,00,30,312/- belonged to the DMK party, and the expenses are met by DMK District Secreta....
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....regular books of accounts of the assessee which clearly proves nexus between transactions of the assessee and unrecorded receipts in the impounded diary and notebook. He, further submitted that Shri Ramesh claims to be accountant of assessee company has entered various transactions including amount received from Minister (Shri K.N. Nehru, Ex-Minister of DMK Government) and later the same has been deleted from computer. The said transactions were further recorded in notebook by Shri V.Krishnamurthy. Therefore, there is a clear nexus between retrieved data from computer CPU and entries recorded in notebook and hence, the assessee cannot claim that entries recorded in diary and notebook does not belong to his business affairs. The ld. DR further submitted that books of accounts including diary and notebook were found in the business premises of the assessee and as per provisions of section 292C of the Act, presumption is always on the assessee that said books of accounts which belongs to the person from whose custody said books of accounts were found and further, entries recorded in said books of accounts are true and correct unless the assessee rebuts the presumption. In this case, a....
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....ly erred in holding that said dairy and notebook and retrieved data from computer CPU are not books of accounts and said entries cannot be considered as cash credits u/s.68 of the Act. 14. The ld.AR for the assessee, on the other hand strongly supporting order of the ld.CIT (A) submitted that stand taken by the AO is self-contradictory, because for the purpose of section 68 of the Act, the AO has considered diary, notebook and deleted entries from computer CPU data as books of accounts, whereas the same diary, notebook and deleted entries of CPU data was not considered as books for the purpose of section 69 of the Act. The AO's stand is inconsistent as both the provisions of section 68 and 69 do not operate simultaneously on the same material. The ld.AR for the assessee further referring to the provisions of section 68 of the Act, submitted that in order to invoke said provision, certain conditions to be fulfilled as per which any sum is found credited in the books of 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, satisfacto....
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....son. In this case, the AO has considered diary, notebook and deleted entries of computer CPU as books of accounts maintained by the assessee for any previous year to treat said entries as unexplained cash credits within the meaning of section 68 of the Act, without bringing any evidence to prove that said books of accounts are maintained by the assessee and entries contained in said books of accounts are business transactions of the assessee. The ld.AR for the assessee further referring to paper-book filed for this purpose submitted that if you see the documents found during the course of survey, including impugned diary, those documents are maintained by some third person, where various transactions were recorded including disclosed transactions of the assessee and said transactions does not show whether entries represents credits or debits. Further, name of persons connected to entries are not found. Entries found in the notebook do not contain any date. There are no details about transactions. Therefore, said diary and notebook do not constitute books as contemplated u/s.68 of the Act, and further, on that basis no addition could be made u/s.68 of the Act. In this regard, he ....
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....pose of group. In this regard, M/s. TVH has filed confirmation letter along with their financial statements to prove that it has paid a sum of Rs. 21.35 crores to assessee and same were recorded in the books of accounts of the assessee. In spite of filing various evidences, the AO has rejected account statement of M/s. True Vale Homes Pvt Ltd by relying upon statement of Shri S. Ramesh without appreciating the fact that Shri S. Ramesh was not an Accountant of assessee company but was an Assistant of Chartered Accountant and he do not aware of the facts of the assessee business transactions. The ld.AR further submitted that the ld.CIT(A) after considering relevant facts has rightly deleted additions made by the AO u/s.68 of the Act, by holding that diary, notebook and deleted accounts in CPU are not books of accounts and AO did not bring any corroborative evidences to show that transactions represents undisclosed income of the assessee. 17. The ld.AR further submitted that the AO has made additions towards payments made for acquisition of agricultural lands u/s.69 of the Act, as unexplained investment on the basis of entries recorded in loose papers, deleted data of computer CPU ....
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....9. We have heard both the parties, perused materials available on record and gone through orders of the authorities below. We have also carefully considered various case laws relied upon by both sides. The facts borne out from record indicate that a survey u/s.133A of the Act was conducted in the business premises of the assessee. During the course of survey, certain material including diary, notebook and computer CPU was found and seized. As per seized documents, diary was maintained by one Shri V. Krishnamurthy, who claims to have worked as 'Manager' for Assessee Company. The computer CPU was examined and data from computer CPU was retrieved as per which certain entries were recorded and deleted. The retrieved data from computer CPU indicate that the assessee has received some amounts from one Minister. During the course of survey, a statement was recorded from Shri K.N. Manivannan, the Managing Director of assessee company, Shri V. Krishnamurthy, claims to be the Manager of Assessee Company and Shri Ramesh, claims to be Accountant of assessee company. During the course of survey, in the sworn statement recorded Shri K.N. Manivannan, Managing Director disowned diary and its conte....
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....aintained for any previous year, and the assessee offers no explanation about the nature and source thereof or explanation offered by the assessee, in the opinion of the AO, satisfactory, then sum so credited may be charged to income-tax as the income of the assessee of that previous year. Thus, from the provisions of section 68 of the Act, it is clear that credit must be found in the books of the assessee maintained for any previous year. In the present case, what has been considered by the AO is diary, notebook and retrieved deleted entries of computer CPU. Therefore, whether those diary, notebook and retrieved data of computer CPU can be considered as books of accounts in order to invoke section 68 of the Act or not has to be seen. 21. The Income Tax Act, 1961 has defined books and books of accounts u/s.2(12A) of the Act, as per which books and books of accounts includes, ledgers, day-books, cash books, account books and other books, whether kept in the written form or as printouts of data stored in a floppy, disk, tape or any other form of electro-magnetic data storage device. Therefore when books of accounts are clearly defined under the Act, then diary, notebook and ret....
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....income', as understood in the Act, is to identify or classify income so as to determine under which head, out of the various heads of income referred to in section 14, it would fall for the purposes of computation of total income for charging income-tax thereon. Thus, the term 'books of account' would mean those books of account whose main object is to provide credible data and information to file the tax returns. Though the judgment was with reference to the levy of penalty u/s.271(1)(c) of the Act, the meaning of 'books of account' observed by the Hon'ble court is with reference to the general and accounting principles and hence applicable for all provisions of the Act. Similarly, Delhi Tribunal, in the case of Amitabh Bansal v. ITO (2019)(175 ITD 401) (Deihi- Trib.), has held that "Invocation of section 68 sans valid and proper books of account of assessee is invalid". The tribunal also observed that a mere 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 of the Act. 22. In this case, the AO has considered diary, notebook and deleted entries of computer CPU as books of ac....
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....see's auditor's firm) had stated that as and when cash received from M/s. True Value Homes Pvt. Ltd., same was entered by him into computer in tally software in the ledger KNN1, etc., Further, once cash received has been spent for the purpose, the entry is deleted at the end of the financial year. These facts are confirmed by Shri Ramesh in the statement recorded on 01.02.2018. 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 cash credit of the assessee to bring those entries within the ambit of section 68 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 other corroborative evidences to show that the contents of the diary, notebook and retrieved data from CPU are actually receipts of t....
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....tered those cash receipts in tally software. However, when it comes to know that those cash receipts are not utilized for the business activities of the assessee, accountant has deleted those entries from the computer software. We have gone through explanation given by the assessee in light of entries considered by the AO from computer CPU and find that above explanation of the assessee appears to be correct. In fact, as could be seen from the audited financials of M/s. True Value Homes Pvt. Ltd., for the relevant financial years, there were payments (advances) to the assessee company to the tune of Rs. 21.35 crores and said payments are reflected under 'loans and advances' in the balance sheet of M/s. TVH. The assessee has filed ledger extract of M/s. SNR Rice Industries - KNM in the books of M/s. True Value Homes Pvt. Ltd. We have gone through said ledger extract and find that the assessee has received a sum of Rs. 5 crores in financial year 2011-12 and further a sum of Rs. 4.5 crores in financial year 2012-13. Similarly, a sum of Rs. 6.75 crores and Rs. 5.10 crores was received in the financial year 2013-14 and 2014-15 respectively. The assessee has further explained that delete....
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.....CIT(A) to hold that out of Rs. 6.5 crores cash receipts recorded in diary, a sum of Rs. 5 crores was explained with known source of income and remaining sum of Rs. 1.5 crores is still unexplained. 25. Coming back to another set of cash receipts considered by the AO on the basis of notebook. The AO has considered entries recorded in notebook on pages 28 to 31 as unexplained cash credits of the assessee on the ground that said entries was recorded in the name of Ex-Minister, but the assessee could not explain the nature and source of such credits. We find that in the notebook in pages 28 to 31, a sum of Rs. 16.24 crores shown as money from minister. The assessee explained that said notebook was written by third person and hence, he was not aware of the noting in the notebook. The assessee further claimed that noting in pages 28 to 31 did not contain any dates and hence, it cannot be attributed to any financial years. Thirdly, it was further claimed that these cash receipts recorded in diary may be the same amounts, which were received from M/s. True Value Homes Pvt. Ltd., in the financial year 2012-13 & 2013-14 amounting to Rs. 16.25 crores. We have gone through explanation given....
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.... third parties or between the assessee and the minister and hence, we are of the considered view that there is no error in the findings recorded by the ld.CIT (A). 27. Similarly, other cash receipts shown in retrieved data of the computer shown as cash receipts from the group persons are considered as amount drawn from M/s. True Value Homes Pvt. Ltd. These amounts include cash received from M/s. True Value Homes Pvt Ltd, cash received from Shri K.N. Manivannan and cash received from M/s. Janani Minerals. A careful analysis of the above, show that most of the amounts drawn from M/s. True Value Homes Pvt. Ltd., were not entered in computer CPU directly as such. Further, entries found in retrieved data from the CPU are incomplete and not depicts any particular nature of credits and further name from whom such credits were received. Therefore, based on some entries recorded in computer and later deleted for some purpose or for no reasons, the same cannot be considered as some cash receipts which are not disclosed in the regular books of accounts, unless the AO brought on record some evidences to show that said cash receipt was received from particular source and for particular pu....
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....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. 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 are no evidences to show that there were any capital asset transactions. Hence, the 'cash receipts' reflected in the diary and note book cannot be presumed as capital receipts. Therefore, the only possibility could be that these cash receipts are on account of business transactions, and can constitute business receipts of the assessee company. As could be seen from the records, the assessee is running a rice mill. Therefore, in absence of any explanation, the above cash receipts of Rs. 5.80 ....
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....sh 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 are deleted. The facts remain unchanged. The Revenue has failed bring on record any evidence to prove that findings of fact recorded by the ld. CIT(A) is incorrect. Hence, we are inclined to uphold findings of the ld. CIT(A) and reject grounds taken by the Revenue. 30. The next issue that came up for our consideration is addition towards unexplained investment u/s 69 of the Income Tax Act, 1961 for Asst. years 2012-13 to 2015-16. The additions made by the Assessing Officer in these assessment years, by way of unexplained investments u/s.69 of the Act, are as under: Source of information Investments made in the form of Amount (Rs.) A.Y. 2012-13 Impounded diary Impounded Note-book Data retrieved from CPU - - Cash paid to KNM for purchase of agril.land Cash paid for land purchase - - 76,78,250 35,84,675 Total 1,12,62,925 A.Y.2013-14 Impounded diary Impounded Note-book Data retrieved from CPU - - Cash paid to KNM for purchase of agril.land Cash paid for land purchase - - 1,84....
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....ent for purchase of Agricultural land in the name of various persons of the group. Therefore, the assessee claimed that the above investments, in the form of (i) cash paid to Shri KNM for purchase of agricultural lands, and (ii) cash paid for lands, if at all to be considered as actual investments, then the same should be considered as the investments made out of the above amount of Rs. 21.35 crores received from M/s. True Value Homes Pvt. Ltd. 33. Having heard both sides, we find that above explanation seems to be reasonable. As detailed in the foregoing paragraphs, there were cash receipts to the tune of Rs. 21.35 crores from M/s. True Value Homes P Ltd. The amounts are clearly shown in the audited financial statements of M/s. True Value Homes P Ltd for the respective years. In the books of M/s. True Value Homes P Ltd, these amounts were shown as cash paid to the assessee company. Hence the assessee explanation that these unaccounted investments, if considered as actually invested, are out of the above 21.35 crores, is logical and needs to be accepted. Further, there were no contrary evidences on record to show that the above amounts of Rs. 21.35 crores received from M/s. T....
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....rchase 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. Cash received from M/s. True Vale Homes P Ltd 5,10,00,000 2.. Cash paid for land purchase 51,00,000 Closing Balance as on 31.3.2015 14,07,69,941 Total 16,83,86,941 Total 16,83,86,941 34. Thus, from the above cash flow statement, it is clear that all unaccounted investments etc., made by the group, in various financial years, are within the limits of funds received from M/s. True Value Homes P Ltd in the respective years. In other words, there are no unexplained investments in the hands of the assessee in any of the assessment years under consideration. Instead, there is excess funds (sources) over the investments etc., as on 31.03.2015, to the tune of Rs. 14,07,69,941/-, in the hands of the assessee or its managing director or the group. The Ld. CIT(A) after considering relevant explanation and cash flow statement, had record....
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....ition 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 (loose sheets) clearly shows that the expenses are in relation to' the conducting of DMK 10th State level conference. It is also a fact that Shri. KN Nehru, who was the District Secretary of DMK for Trichy district, is one of the brothers of the Managing Director of the assessee company. Further, Shri KN Nehru, being the District Secretary of the party, is admitted that he had made arrangements for the conference. Further, the argument of the assessee that Shri KN Nehru used to visit its business premises to chalk-out the strategies and logistics for the conference and during his visit he might have left the paper containing details of expenditure incurred for party expenses is quite natural and cannot be ruled out. In such a case, the assessee claim that the above expenditure of Rs. 3,00,30,312/- relates to DMK 10th State conference, is to be ....
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....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 reflected in the DMK party state head office, has some merits and needs to be given credit. Thus, from the above facts, it is clear that - (i) the expenses belonged to the DMK party Conference (ii) Shri KN Nehru, being the District Secretary, has confirmed that the expenses were borne by the party, (iii) data retrieved from CPU, also showed cash receipts from Shri KN Nehru to the tune of Rs. 3,78,00,000/- during the same financial year 2013-14. Under these circumstances, we are of the considered view that conference expenses of Rs. 3,00,30,312/- belonged to the DMK party, and the expenses are met by DMK District Secretary Shri KN Nehru. Hence, these expenses cannot be considered as expenses of the assessee, leave alone whether it is explained or unexplained. In addition, there are evidences in the very same retrieved data from CPU, to show tha....
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....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 explaining cash payment out of amount received from M/s True Value Homes Pvt. Ltd and hence, if an isolated cash payment entry between proprietary concern and proprietor is treated as true, then the source available in the form of amount received from M/s TVH is also needs to be considered as genuine, because both transactions are from same retrieved data from computer CPU. Therefore, we are of the considered view that the assessee has explained source for cash credit of Rs. 24,14,000/- out of known source and hence, the same cannot be brought to tax u/s 68 of the Act. The ld. CIT(A) after considering relevant facts has rightly deleted addition made by the AO and hence, we are inclined to uphold findings of ld. CIT(A) and reject ground taken by the revenue. 42. The next issue that came up for our consideration is addition of ....
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....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 who maintained the tally software, but the AO has disregarded all the evidences and brought those entries within the ambit of section 69C of the Act, without bringing on record any other evidences to prove that said entries are in fact taken place. Further, in order to bring any expenditure within the ambit of section 69C of the Act, there must be some expenditure which was not recorded in the books of accounts of the assessee and further, the assessee fails to explain source for such expenditure. In this case, what was considered by the AO was some irrelevant entries which are nowhere connected to the assessee and his office and hence, those entries can only be treated as dumb documents and from those documents, no additions can be made u/s.69C of the Act. We, further noted that the ld. CIT(A) has also recorded a catego....
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....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, he had also categorically explained nature and source of such entries and the reason for deletion of entries in the computer software, then those deleted entries cannot be considered as unexplained investments to bring those entries within the ambit of section 69 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 actual investments 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 who maintained the tally software, but the AO has disregarded ....
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....terest 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 regular books of accounts of M/s Ramjay Trading Company, a proprietorship concern of the assessee. The ld. CIT(A) has further noted that none of these loans are advanced in the financial year 2015-16, relevant to Asst year 2016-17. He further noted there is no details as to how interest of Rs. 1,181,58,712/- was calculated for a loan amount of Rs. 1,88,49,400/-. He further noted that out of total loan amount shown in excel sheet, a sum of Rs. 1,28,79,400/- was accounted in regular books and further entire amount was repaid in earlier financial year. Further, if accounted loans are excluded from total advances as per excel sheet, the balance unaccounted advances is comes to Rs. 59,70,000/. On this balance unaccounted loans, interest @24% is calculated, then it works out to Rs. 14,32,800/-. Therefore, the ....
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....yana 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 received any such amounts from Shri. KN Manivannan. 51. Having heard both sides, we find that section 69A deals with unexplained money of which an assessee is found to be owner. Therefore, the primary condition for invoking section 69A is to establish ownership of money. In this case, the AO has considered certain entries retrieved from computer CPU which shows cash payment of Rs. 49,00,181/- from KN Manivannan to KN Nehru. The alleged ledger account "KNN-1 cash" apparently shows cash payment, but there is no other corroborative evidence to link alleged deleted entry to the assessee, because both parties have denied impugned payment. Therefore, we are of the considered view that ownership of money as required u/s 69A is not established and hence, we are of the view that there is no erro....
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....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 transaction had been taken place between the parties. There is no iota of evidences with the AO to prove that said payments were made and any asset is acquired. Further, deleted entries retrieved from computer did not give rise to any investment or assets. 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. 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 explai....