TaxTMI 
TaxTMI 
2022 (6) TMI 769
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....fication in F. No.52/Tech/CIT/Mys/2012-13 dated: 07.12.2012. Consequent to the search a Notice u/s 153A was issued on 28.01.2014 requiring the Assessee to file his return of income for the A Y's 2008-09 to 2012-13. In response to the notice u/s. 153A of the Act the Assessee filed his returns & assessments were duly completed thereafter with certain additions being made to the Income Returned for the impugned assessment years. ITA No.1494/Bang/2018 (AY 2009-10) 3. The assessee has raised the following grounds of appeal:- "1. The order of the learned CIT [Appeals] Bengaluru-11, Bengaluru in as much as it is against the appellant is opposed to law, equity, weight of evidence, probabilities, facts of and the circumstances in the Appellant's case. 2. The appellant denies himself liable to be assessed on a total income of Rs. 1,49,53,420/- as confirmed by the learned CIT (Appeals), as against the total income declared by the appellant of Rs. 25,45,420/- on the facts and in the circumstances of the Appellants case. 3. The learned CIT [Appeals] is not justified in confirming the additions made by the learned A.O amounting to Rs. 61,08,000/- being the al....
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....ts and in the circumstances of the Appellant's case 3. The learned CIT [Appeals] is not justified in confirming the protective additions made by the A.O amounting to Rs. 7,88,909/- based on estimation of income on a substantive basis on the facts and in the circumstances of the Appellants case. 4. The learned CIT (Appeals) is not justified in confirming the additions made by the learned A.O amounting to Rs.7,50,000/- being the income arising from the alleged undisclosed sale of property under the fact and in the circumstances of the Appellant's case. 5. The learned CIT (Appeals) in not justified in confirming the erroneous additions made by the A.O of Rs. 40,75,000/- being the alleged undisclosed investment made in land under the facts and in the circumstances of the Appellant's case. 6. The Appellant denies himself liable to be charged interest under sections 234 A, 234 B and 234 C of the I.T. Act 1961 under the facts and in the circumstances of the Appellant's case. Further the levy of interest under sections 234 A, 234 B and 234 C of the Act is also bad in law as the period, rate, quantum and method of calculation adopted on wh....
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.... 2 & 5 are general in nature which do not require adjudication and dismissed accordingly. 16. Ground No.4 is consequential and mandatory in nature. 17. In the result, ITA No.1496/Bang/2018 is dismissed. ITA No.1497/Bang/2018 (AY 2012-13) 18. The assessee has raised the following grounds:- 1. The order of the learned CIT [Appeals] Bengaluru -11, Bengaluru in as much as it is against the appellant is opposed to law, equity, probabilities, weight of evidence, facts of and the circumstances in the Appellant's case. 2. The appellant denies himself liable to be assessed on a total income of Rs.3,40,23,811/- as confirmed by the learned CIT (Appeals), as against the total income declared by the appellant of Rs. 2,94,32,720/- on the facts and circumstances of the case. 3. The learned CIT [Appeals] is not justified in confirming the additions made by the learned A.O amounting to Rs.24,09,135/- being the alleged investment made in the name of the spouse under the facts and in the circumstances of the Appellant's case on the facts and in the circumstances of the Appellants case. 4. The learned CIT [Appeals] is not justified in confirming ....
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....(A) and we do not find any infirmity in the action of the lower authorities. The same is confirmed. This ground of appeal assessee is dismissed. 23. Next ground No.1, 2, 7 & 8 are general in nature which do not require any adjudication and dismissed accordingly. 23.1 Ground No.6 is consequential and mandatory in nature. 24. In the result, ITA No.1497/Bang/2018 is dismissed. REVENUE'S APPEALS ITA No.309/Bang/2018 (AY 2008-09) 25. The revenue has raised the following legal ground:- "1. Whether on the facts and the circumstances of the case, the Ld. CIT(A) is correct in accepting the ground of validity of digital evidence based on VC Shukla case rendered in 1998 however, the same has been overridden by provision of Information Technology Act 2000 and Section 2(22AA) of the I.T. Act and Section 292C of the IT Act. 26. We have heard both the parties on the issue. The main grievance of the ld. DR is that the CIT(A) overlooked the digital evidence procured during the course of search action and evidence itself shows the various incriminating transactions carried out by the assessee and same is the basis for addition and addition cannot be deleted on the reaso....
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....se which is owned by Pallavi Ravi. The data, based on which this addition is made, is said to be found in this residence which belongs to Smt. Pallavi Ravi. The AO has made the addition substantially in the hands of Smt. Pallavi Ravi, in her assessment proceedings u/s 153C r.w.s 153A of the Act & has made the addition protectively in the hands of this assessee. The AO is not justified in bringing to tax the alleged undisclosed investment in site at Ramanahalli in the hands of the assessee under the facts and in the circumstances of the case more so when it is an undisputed fact that the alleged impugned investment is not owned by him. (ii) The AO has made addition based on the contents of a CD seized during search proceedings conducted on 8th of June 2012 at the residence owned by Smt. Pallavi Ravi. The Assessee submits that the data in the said CD is not pertaining to him. Further there is no evidence which corroborates the veracity of the data found in the search. This addition, which is made based upon a dumb data, without any corroborative evidence, cannot stand the scrutiny of law & the CIT (A) has rightly deleted the addition made on this count in such of those asses....
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....ree sources itself is Rs.97,85,000/-, which is sufficient to explain the cash deposit of Rs.74,59,500/-. (ii) The CIT(A) has rightly deleted this addition based on undisputed facts. 36. We have heard both the parties and perused the record. The CIT(A) deleted the addition on the reason that assessee has shown income at Rs.97,85,000 and that is sufficient to deposit cash to bank account. In our opinion, on the basis of gross receipt, the addition cannot be deleted and he must have seen the cash/fund flow statement of assessee for the relevant financial year before deleting the addition and accordingly we remit this issue to the file of AO with a direction to the assessee to explain the cash deposits in the bank account by producing the complete cash flow statement / fund flow statement for the relevant financial year. On that basis, the AO has to decide the issue afresh. 37. For A.Y. 2009-10 addition of Rs. 74,59,500/-: In this assessment year also, there is an addition on account of cash deposits into bank account. The ld.DR relied on the order of AO and prayed that issue may be remitted to the AO for fresh consideration. The ld. AR submitted as follows:- (i....
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....he ld.DR relied on the order of AO and prayed that issue may be remitted to the AO for fresh consideration. The ld. AR submitted as follows:- (i) The CIT A has given a clear finding that as stated in the return of Income and accepted by the AO in the assessment order, the Assessee has contract receipts of Rs.7,89,82,286/- in cash. The Assessee has sale of Jelly to the extent of Rs. 2,69,88,168/- to third parties. These are sufficient to explain the cash deposit of Rs. 3,30,99,500/-. (ii) The CIT A has rightly deleted this addition based on undisputed facts. 42. We have heard both the parties. As discussed in AY 2008-09, this issue is remitted to the AO to examine the cash flow statement for the relevant financial year. 43. For AY 2012-13 addition of Rs.82,64,280/-: : In this assessment year also, there is an addition on account of cash deposits into bank account. The ld.DR relied on the order of AO and prayed that issue may be remitted to the AO for fresh consideration. The ld. AR submitted as follows:- (i) The CIT A has given a clear finding that as stated in the return of Income and accepted by the AO in the assessment order, the Assessee has cont....
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....e receipts on which he has absolute right of ownership and the right to deal with it in any manner that he wants to, without any restrictions or obligations attached to the same, would constitute income of such person. 49. The Assessee submits that in the event an extreme view is taken that the amounts are received by him, even then these receipts would not constitute his income as he had no right of ownership over these receipts and nor did he have the right to decide how these receipts are to be dealt with. In view of this serious limitation, the receipts will not become his income. 50. In view of the above submissions, the CIT(A) held that, it is a fact that the Assessee has not contested in any Election. There is no evidence to show that the impugned election receipts are received by the Assessee. It is no doubt true that the Assessee is closely related to Sri. C.T. Ravi, the Sitting MLA who contested the elections. The data may be pertaining to the said C.T. Ravi. The mere fact that the data retrieved from the residence of the Assessee cannot be the sole criteria for making the addition in the hands of the Assessee, more so when the residence is actually owned by Smt. Pa....
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.... to his relatives who are in politics and social activities. Thus in this way, the assessee received various amounts which are prima facie not business related, however since these amounts are appearing as part of assessee, these are basically receipts in the hands of assessee and the onus is on the assessee to explain the amounts received. One such account of income & outgoing amount, seized during the search in the case of assessee is hbs incoming and outgoing amounts from the laptop. These amounts were not received from people having business dealing with the persons, but may be officials, political persons etc." 56. Thus on the basis of seized material, the very additions are made on this count in these assessment years. 57. The objection of the ld. DR is that the CIT(A) ought to have sustained the assessment order which are based on seized material. 58. The ld. AR submitted as follows:- (i) The AO is not justified in bringing to tax the alleged unexplained miscellaneous Receipts as mentioned below for the assessment years 2008-09 & 2009-10, which are not exigible to income-tax under the facts and in the circumstances of the Assessee's case. AY Receipts ....
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.... a possibility of there being undisclosed income but in view of the decision of the Hon'ble Supreme Court in the VC Shukla case, relied upon by the Assessee, the data contained in the said CD will not by itself constitute evidence to foist a liability on this Assessee. There is no corroborative evidence available on record to lend credence to the conclusion that the receipts which are taxed as unexplained miscellaneous receipts do in fact constitute the income of the Assessee. (vii) According to the CIT(A), as rightly pointed out by the Assessee, the data retrieved indicates that that the receipts mentioned therein to the extent of RS. 1,08,26,400 for AY 2008-09 & Rs.1 75,00,000/- for AY 2009-10 and income, if any, arising out of the same belong to a Partnership Firm called RN Developers which had two persons namely C.T. Ravi and Nagesh as its partners. The assessee is in no way connected to this partnership firm or its business. (viii) The contention of the Assessee that a Receipt becomes the Income of the recipient only when the recipient has right of ownership over the said receipt and the right to deal with the same in any manner he so likes and not in any....
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....and transportation of the same etc. The Assessee has offered a sum of Rs. 7,54,657/-, by way of profit to tax which he says is reasonable. He has offered Rs.6,70,250/- as profit from timber business which amounts to 8.46 % of the turnover. (iii) The Assessee has not maintained any books of accounts with regard to this business for the F Y 2008-09. In view of the facts that it is not possible to get bills, invoices and vouchers in this line of business. The Assessee deals with small and marginal coffee planters who are willing to sell the old shade trees in their plantations. And further the Appellant employs the local laborers for cutting, loading and carting purposes to whom on the spot payment in cash is made. And further he engages the transporter available on hand locally and makes the payment in cash. (iv) Therefore, in view of this it is not possible or feasible for the Assessee to maintain regular books of accounts in this regard. It should be noted that the Assessee has offered a sum of Rs. 7,54,657/-, by way of profit to tax which is reasonable in this line of business. (v) Therefore, in view of the above it is stated that the AO is not justified....
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....e CIT(A) observed that the lender is an income tax assessee and capacity to lend the money to assessee. Being so, there is no infirmity in the order of CIT(A). The same is confirmed. This ground of appeal of the revenue in both the AYs is dismissed. DISALLOWANCE OF DEPRECIATION CLAIM on JCB (AY 2008-09 to 2012-13) 68. The assessee claimed depreciation on JCB which was let out on hire. The assessee not able to produce the bills and the depreciation is denied. However, on appeal, the CIT(A) allowed depreciation by observing that assessee has let out the same on hire and offered income from same to tax. Against this revenue is in appeal before us. 69. The ld.DR submitted that assessee has to prove the ownership of JCB by producing valid invoices which he failed to do so, hence addition to be sustained. 70. The ld. AR submitted as follows:- (i) The AO is not justified in disallowing the depreciation claimed by the Assessee for the following Assessment years which is not disallowable under the facts and in the circumstances of the Assessee's case. AY Amount 2008-09 6,37,500 2009-10 11,57,798 2010-11 21,82,139 2011-12 64,11,813 2012-1....
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....the remand report to decide himself. Instead of this, he remitted the issue to the AO for fresh consideration. We vacate that findings of CIT(A) and remit the issue to the file of AO for de novo consideration. 74. AY 2010-11 : The assessee sold a plot No.MP 8, KSSISC Industrial Area to one Nazeeruddin for Rs.7.50 lakhs vide sale deed dated 11.8.2009 which was not disclosed by the assessee to the department. Hence the AO made the addition. On appeal, the CIT(A) remitted the issue to the file of AO for which he has no power. Hence the department is in appeal before us. The ld. DR relied on the order of AO. 75. The ld. AR submitted as follows:- (i) The AO states that the Assessee has sold a special plot No.MP 8 (KSSISC Industrial Area) to on Nazeeruddin for Rs.7,50,000/- and has brought the entire sale consideration to tax as income from the sale. The Assessee has denied any knowledge of this transaction and is at a loss to understand how this addition is made. The AO has purportedly relied upon a registered sale deed dated 11/08/2009 in support of his addition. The same has however not been made available to the Assessee for his comments /rebuttal, which is opposed to ....
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....allegedly representing the unaccounted cash portion of the consideration paid in this regard. (iv) The Assessee states that he was not confronted with the above referred statements recorded u/s 131 at any point of time during the assessment proceedings to rebut the same with the correct facts in his possession. (v) The CIT(A) erroneously held that the additions made by the AO are based on an independent inquiry conducted by him and the sellers have confirmed on oath that they have received cash over and above what it recorded in the registered sale deed & has confirmed the addition made by the AO on this count. (vi) However, in view of the fact he confirmed the sale of agricultural land, the CIT(A) agreed with the contention of the assessee that the proceeds received therefrom to the extent not considered as hitherto disclosed i.e., 45,00,000/- is available for telescoping and will therefore reduce the unexplained investment made herein to that extent. He therefore restricted the addition by way of Unexplained Investments to Rs. Rs.16,08,000/- and delete the balance addition of Rs.45,00,000/-. (vii) In view of the fact that, he was not given an o....
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....d both the parties and perused the record. In our opinion, on the basis of gross receipt, the addition cannot be deleted and he must have seen the cash/fund flow statement of assessee for the relevant financial year before deleting the addition and accordingly we remit this issue to the file of AO with a direction to the assessee to explain the investment by producing the complete cash flow statement / fund flow statement for the relevant financial year. On that basis, the AO has to decide the issue afresh. Unsubstantiated liability of Rs. 11,50,000/- for the AY 2009-10 85. The assessee shown a liability of Rs.16.50 lakhs payable as on 31.3.2009 to Conc Shade Constructions Pvt. Ltd. As per balance sheet of that company, it was only Rs.5 lakhs. As such difference of Rs.11.50 lakhs brought to tax by AO. 86. The ld. DR relied on the order of AO. 87. The ld. AR submitted as follows:- (i) It is submitted that the AO is not justified in making the impugned addition on account of unsubstantiated liability of Rs. 11,50,000/- being the difference in the balance outstanding in the name of M/s. Conc Shade Constructions Pvt. Ltd., in the Assessee's books of account as on 3....
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....held that from the seized documents that most of the receipts and payments do not pertain to this Assessee, but to others, who are either known to or related to him. The AO has proceeded to treat the same as amounts spent by the Assessee as the data is retrieved from a CD found in the premises of the Assessee. This fact certainly warrants further investigation in as much as they constitute prima facie evidence of a possibility of there being undisclosed income but in view of the decision of the Hon'ble Supreme Court in the VC Shukla case, relied upon by the Assessee, the data contained in the said CD with not by itself constitute evidence to foist a liability on this Assessee. (vi) The CIT(A) has rightly concluded that the addition, though made protectively, is not warranted based on the facts and circumstances of this case and deleted the same accordingly. 92. We have heard both the parties and perused the material on record. The CIT(A) deleted addition in wholesome manner by passing cryptic order without going through the actual seized material. In our opinion, the issue to be examined by AO by co-relating the seized material to the investment made by the assessee....
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....d by the Assessee and has estimated the net profit from the business at 44% of the turnover and has arrived at a total net profit of Rs.3,43,97,926 /- and reduced the amount of Rs.31,12,980/- returned by the Assessee from the same and made a net addition of Rs.3,12,84,946/- to the income of the Assessee. (iii) The Assessee is in the business of Asphalting of roads. He is also in the business of stone crushing in the name of Shree Deveeramma Stone Crushers, where the stones are crushed to manufacture the jellies of different shapes and sizes required in asphalting the roads. (iv) The Assessee is owning a tar (Bitumen) mixing unit where the process of mixing of the hot molten tar with the jelly stone is carried out. It needs to be noted that Shree Deveeramma Stone Crushers does not carry on the tar mixing business, it has restricted itself to stone crushing only. (v) It is now alleged by the AO that the Assessee has not offered the income to tax with regard to the sale of Rs. 7,81,77,105/- carried on by Shree Deveeramma Stone Crushers during the financial year 2010-11 pertaining to the Assessment year 2011-12, based on the digital data that was seized durin....
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....by the tar component erroneously included in the alleged sale recorded by the Unit in-charge. If the tar component purchased in the names of the Assessee, Conc Shade Constructions Private Limited and Shree Deveeramma Stone Crushers is eliminated the resultant figure approximates to the actual sales of Shree Deveeramma Stone Crushers. (xi) In this regard it is further stated that the Assessee owned during the FY 2010-11 the least capacity machinery, which was capable of achieving a maximum production of 25 tons per hour. (xii) The Assessee operated 2 shifts of 8 hours each. Therefore, the maximum production that could be achieved was 25 tons X16 times= 400 Tons per day. The average rate per ton of Jelly produced is Rs.425/-. At this rate the maximum sale the unit was capable of achieving was Rs.6,20,50,000/- assuming that the unit worked throughout the year all 365 days. (xiii) However, it may be seen from the seized digital data itself that there is no uniform sales throughout the year. Therefore, it may be safely assumed that the plant is capable of running at the capacity of only about 70% ie.,0.7 X 365 (Days) X 25 (tones) X 16 (Hours) X 425 (Rs.) = 4,3....
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.... Gross Profit applicable to the same to tax. (xxi)Further the estimate of Net Profit @ 44% appears to be highly unreasonable and not supported by any comparative cases in the same line of business. (xxii) The decision of the CIT A to delete this addition is based on the facts of the case & does not need any interference. On the contrary the addition made by the AO is not based on factual circumstances but is one which purely based on suspicion. 96. We have heard both the parties and perused the material on record. The CIT(A) deleted the addition only on the proposition that jelly movement register is a record for movement of tar mixed jelly and pure jelly. Tar mixed jelly is used in the business of sister concern, Conc Shade Constructions P. Ltd. There is no basis for such conclusion and also his finding is contradictory in nature as he observed that only gross profit to be taxed in A.Y. 2008-09. However, in the A.Y. 2011-12 he deleted the addition. Hence, we vacate his findings and remit the issue to the file of AO with a direction to assessee to establish how the undisclosed turnover is not relating to his business and it is disclosed in the books of accounts....
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....the duly audited books of account being present. (v) The CIT A confirmed the addition substantively, as against the protective addition made by the AO. This decision of the CIT A in confirming the addition substantively has been accepted by the Revenue. 100. We have heard both the parties. The plea of the assessee is that the assessee is maintaining regular books of accounts and it was subject to audit u/s 44AB of the Act. In view of this, the assessee's income has to be computed as per books of accounts subject to verification. Further, the assessee is entitled for depreciation on assets if the conditions laid down u/s 32 of the Act were satisfied. Accordingly, this issue is remitted to AO for fresh consideration in accordance with law. Unconfirmed liability of Rs. 2,36,20,498/- for AY 2011-12 101. The AO on going through the balance sheet of assessee as on 31.3.2011 has added entire amount of current liabilities as on 31.3.2011 at Rs.2,36,20,498. However, CIT(A) deleted the addition holding that the income has been estimated @ 8% on a substantive basis. 102. The ld. DR submitted that assessee has not produced the books of account, liabilities to be substantia....
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....s it may in view of the fact that the CIT(A) upheld the determination of income @ 8% of the total turnover, he deleted this addition on the ground that when the books are rejected & income is estimated as a percentage of turnover, no addition can be made by holding certain liabilities as unexplained. The decision of the CIT(A) is in consonance with his decision to uphold the estimation of income. 108. We have heard both the parties on the issue. The main grievance of the department is that assessee has not produced the books of account so as to compute the income. In our opinion, the issue to be examined by AO after going through books of account. Accordingly issue is remitted to AO with a direction to assessee to produce books of accounts. Thereafter AO has to decide the issue afresh in accordance with law and there cannot be any double addition one as sundry payables and other as sundry creditors. UNDISCLOSED LOAN ADVANCE OF RS. 2,44,71,632/- (AY 2012-13) 109. The AO relying solely upon the contents of an excel Sheet to make the addition. The CIT(A) held that the addition is not made based on evidence which will stand the test of law & deleted the same in the absence of ....
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....n turn was paid to the Bitumen supplier companies through RTGS. This fact is evidenced by the very bank statement. (iv) It is an undisputed fact that the assessee has duly accounted the transactions in his own books of account & offered the income from the same to tax. 116. We have heard both the parties and perused the record. The CIT(A) deleted the addition on the basis of submission of assessee without calling for comments from the AO. In our opinion, it is appropriate to remit the issue to AO to examine the books of account along with the bank account and decide the issue accordingly. UNDISCLOSED CONTRACT RECEIPTS OF RS. 15,68,725/- FOR AY 2012-13 117. The AO on noticing a difference in the Contract Receipts as per P&L account filed and the receipts as per Form 26AS in as much as the receipts as per P&L a/c are lesser than the receipt as per Form 26AS by Rs.15,68,725/- added the same to the income of the Assessee. 118. The ld. AR submitted that the correct amount of Contract Receipts of the Assessee for the F.Y 2011-12 pertaining to the A.Y 2012-13 is Rs. 13,93,06,0451 which is also disclosed in the in the Profit & Loss A/c. The Contract Receipts as per For....
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....extent of Rs.1,25,498/- and delete the balance addition of Rs.14,43,227/-. The AO was also directed to give balance of credit of TDS of Rs.3,88,601/-, in the event the Assessee is found to have not actually claimed the same in his returns. 120. We have heard both the parties. The CIT(A) in certain years estimated income @ 20% and in this AY he estimated 8% which are contradictory. In our opinion, to meet the ends of justice, it is appropriate to remit the issue to the file of AO to decide the issue after examining books of accounts. Unconfirmed liabilities of Rs. 7,95,50,099/- for AY 2012-13 121. The AO on going through the Balance sheet of the Assessee as on 31/03/2012, has added the entire amount of Current liabilities as on 31/03/2012 of Rs. 7,95,50,099/, holding the same to be unsubstantiated for want of confirmations from the concerned creditors. 122. The CIT(A) upheld the determination of income @ 8% of the total turnover, he deleted this addition on the ground that when the books are rejected & income is estimated as a percentage of turnover, no addition can be made by holding certain liabilities as unexplained. The decision of the CIT A is in consonance with his de....
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....urchase some of those properties and instead they were. purchased by Tejaswini Sudarshan, w/o the Assessee. He has further stated that the advance for these properties to make advances while entering into agreements with those parties were made out of monies received from this Assessee. The AO has then come to infer that the Assessee had a modus operandi where he would enter into agreements thro Anil Kumar and finally purchase the property by a sale deed made directly from the concerned vendor. The AO has thus made the addition of advances made by Anil Kumar, said to have been received from the Assessee to the tune of Rs.1,05,82,000/- as Undisclosed investment made with Anil Kumar. 129. In this regard it is stated that the AO has made the impugned addition of Rs. 1,05,82,000/- based on alleged evidence which do not form part of seized material and alleged to have been found with a third party, not connected to the Assessee. 130. The addition made cannot be made u/s 153 A in as much the same is not forming part of any seized material. Further if it is gathered during the course of search conducted on another person, the same could only be added in a proceeding u/s 153C initiat....