AI Drafter 
TaxTMI 
TaxTMI 
2022 (8) TMI 1274
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.... application for early hearing on 23.02.2021, but since then the assessee is not appearing before the Division Bench. When this appeal came up for hearing before DB on 24th August, 2022, none appeared on behalf of the assessee nor any adjournment applications were filed on behalf of the assessee. The DB decided to proceed to adjudicate thisappeal on merits in accordance with law, after hearing ld. CIT-DR and after perusing the material on record. ITA No.27/Vns/2020, AY 2017-18 3. The grounds of appeal raised by assessee in memo of appeal filed with Income Tax Appellate Tribunal, Varanasi Circuit Bench, Varanasi, in ITA no. 27/Vns/2020 for ay:2017-18, reads as under: "1. Because the Ld. Lower Authorities has erred on facts and under the law in assessing the income Rs.8,29,500/- instead of returned income of Rs.6,14,440/- by treating entire professional receipts as undisclosed income. 2. Because the addition are solely based on hypothetical situations, surmises, conjecture and personal presumptions as well as without proper verification/consideration of material and details available on record, hence the same is liable to be deleted. 3. Because the Ld....
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....s. 139, on 27.03.2018 for impugned assessment year 2017-18, showing total income of Rs.6,14,440/-. The AO issued notice's u/s. 143(2), on 14.09.2018, while notice u/s 142(1) was issued on 17/09/2018 and 30/10/2018, which were claimed by Revenue to have been duly served on the assessee. The assessee is a Private Limited Company and has claimed to be engaged in construction and other ancillary and related activities and it claimed to have derived income under the head business and profession. The Assessing Officer observed during course of assessment proceedings that for all the assessment years from 2011-12 to 2016-17, the assessee had not offered income to the scale offered in ay: 2017-18. Since there was a sudden rise in income which was found to be disproportionate to income offered in earlier years as compared to impugned ay: 2017-18 which is the year of demonetization, the AO asked assessee to provide justification for the cash deposits made during demonetization period. The assessee was asked by AO to furnish following details: (i) Bills and vouchers for cash receipts. (ii) TDS deducted by payer (iii) Cash Book (iv) Sales Ledger ....
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.... which as per the Assessing Officer, the assessee had failed to adduce evidence to proveidentity, creditworthiness and genuineness of the parties whose name appears in those receipts. Further, the Assessing Officer asked the assessee to justify the claim for expenses and to produce bills for expenses. The AO also asked assessee to justify the nature and scope for consultancyservices allegedly provided by the assessee. As per the Assessing Officer vide aforesaid show cause notice, claim of the assesseefor consultancy income was not genuine, and the cash deposited and credited in the books of accounts was generated out of unexplained and unaccounted sources and the same was brought in the books of accounts by the assessee under the garb of consultancy income. Thus, the Assessing Officer asked assesseeto justify deposit of cash of Rs.8,29,500/- credited in its books of account and why the same be not treated as unexplained cash credit and added as income of the assessee as unexplained income for the impugned assessment. The assesseesubmitted before AO that all the receipts vouchers in which full name of the person from whom receipt of consultancy income was received, was given. The as....
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....received, have not been justified. The Assessing Officer also observed that the assessee has not produced books of account during assessment proceedings, despite being given several opportunities. The Assessing Officer also doubted genuineness of the expense incurred by the assessee, and the AO observed that the expenses such as audit fee, ROC fee, Bank charges and professional charges have not increased in proportion to increase in income, while so far as staff salary expenses of Rs. 1,20,000/- claimed by the assessee, the AO observed that apart from this year under consideration, the assesse has not claimed salary and labourexpenses in any of the earlier years. The AO concluded that the expenditure was claimed by the assessee merely to disguise the receipt of credit of money in the books of accounts, as genuine. The Assessing Officer also observed that the registration with service tax department is mandatory once services provided exceeds Rs. 9 lacs and deduction of service tax become mandatory once the turnover of services crosses Rs.10.00 lacs. The AO observed that the assesseehas deliberately kept the turnover just below Rs.9.00 lacs in most of the cases, so that no regist....
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.... income, while as per AO the fact is that the assessee deposited cash in bank account out of unaccounted and undisclosed sources of income, under the garb of consultancy income. The Assessing Officer also observed that no documents relating to consultancy services for the financial year 2016-17 pertaining to relevant ay: 2017-18 was found, impounded or seized during the course of search, seizure and survey operations conducted by Revenue. It was also observed by the Assessing Officer that survey u/s. 133A of the Act was conducted by Revenue in the premises of ShriUdayKushwaha, CA of the assessee, but no document supporting the claim of the consultancy services were found. Thus, the AO concluded that the vouchers are all made up post search and/or demonetization merely to prove creditworthiness to consultancy income, whichinfact represents undisclosed cash credit. The AO also observed that the assessee did not deposit advance tax on these alleged consultancy income claimed to have been earned by the assessee, which also proves that it is only after search and demonetization that the assessee deposited the cash from unexplained and undisclosed sources and was coerced to submit tax wi....
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.... Pvt. Ltd. (sale of soil) Nil Nil Nil Nil Nil Nil 807100 Return not filed 800000 13.11. 2016 10 PawiniBuil dzone Pvt. Ltd. 0 0 25000 34300 24400 23350 879800 27800 800000 13.11. 2016 11 Sunshine Infrazone Pvt. Ltd. 0 0 27500 33300 25400 24160 895300 27900 800000 13.11. 2016 Chart of 11 group companies under consideration and comparison of similar pattern of receipts before and after demonetization month i.e. November, 2016 S.No. Name of the company Total receipts as shown by assessee during ay: 2017-18 Receipts as per ledger upto 13.11.2016 Receipts as per ledger 13.11.2016 to 31.3.2017 1. PawiniInfraventure Pvt. Ltd. 893100 813900 79200 2. Pawini Homes Pvt. Ltd. 891300 851200 40100 3. Grace Infrazone Pvt. Ltd. 859700 859700 0 4. Admire Infraprojects Pvt. Ltd. 882000 882000 0 5. Admire Infraheights Pvt. Ltd. 890700 852200 38500 6. Tulsiani Fitness and Healthcare Pvt. Ltd. 932400 892400 40000 7. Admire Realtors Pvt. Ltd. 829500 829500 0 8. PawiniInfr....
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.... g) Hon'bleITAT,Bombay decision in M/s Mont Blanc Properties and Industries Private Limited ( ITA No. 614/Bom/87) h) CIT v. Durga Prasad More (1971) 82 ITR 540(SC) i) SumatiDayal v. CIT 214 ITR 801(SC) j) Chuhar Mal v. CIT(1988) 172 ITR 250(SC) k) Dhakeshwari Cotton Mills v. CIT (1954) 261 ITR 775(SC) l) Hon'bleITAT,Delhi decision in the case of Harsh Win Chadha v. DDIT m) Hon'ble Supreme Court judgment and order in the case of McDowell v. CTO n) Hon'ble Supreme Court judgment and order in the case of CIT v. P. Mohankala Thus, the AO held that the consultancy receipt of Rs. 8,29,500/- shown by assessee is unexplained cash credit u/s. 68 of the 1961 Act, and is to be taxed @60% by invoking provisions of Section 115BBE of the 1961 Act, vide assessment order dated 27th December, 2018 passed by AO u/s 143(3) read with Section 153B of the 1961 Act. 5. Aggrieved by assessment order dated 27th December, 2018 passed by the AO u/s 143(3) read with Section 153B of the 1961 Act, the assessee filed first appeal before ld. CIT(A), which stood dismissed by ld. CIT(A) vide appellate order dated 03rd December, 2019, by holding ....
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....iod prior to demonetization and verylittle or no Income has been received post demonetization period. • The receipts do not disclose any detail, other than name and amount of theperson to whom it was issued. • No supporting evidence was produced in support of expense claimed by the appellant. • No receipt was found during the search and seizure operation. 11. A perusal of the submission made by the appellant shows that the appellant has not submitted anything with regards to the fact that there is abnormal increase in the professional receipt of the appellant. In the preceding years the appellant has disclosed receipts in the range of Rs. 31,000/- to 48,500/-. The receipt of the appellant has again dipped to Rs. 60,000/- in the next year, for the A.Y. 2018-19. 12. Thus it is clear that their is no rising trend in the trajectory of receipts of the appellant. The receipts disclosed by the appellant in the year under consideration are abnormally high in comparison to the overall trend of amount of receipts disclosed by the appellant. It is a fact that no document was found during the search and seizure operation conducted at the....
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....and succeeding years. There is abnormal increase in turnover during the year under consideration. Almost all the receipts have been accrued prior to date of deposit of cash and negligible amount has been received after the deposit in all the case. The amount has been received in cash for which no verification is possible except for the bills issued by the company. Thus it can be seen that all the group companies have followed a similar pattern, which is against the established norms and human probability. It is pertinent to note here that the eleven group companies have disclosed following turnover for the year under consideration S.No. Name of the Company Amount of turnover 1 PawiniInfraventure Pvt. Ltd. 813900 2 Pawini Homes Pvt. Ltd. 851200 3. Grace Infrazone Pvt. Ltd. 859700 4. Admire Infraprojects Pvt. Ltd 882000 5 Admire Infraheights Pvt. Ltd 852200 6 Tulsiani Fitness and healthcare Pvt. Ltd 892400 7. Admire Realtors Pvt. Ltd. 829500 8 PawiniInfrazone Pvt. Ltd. 857700 9 AvantikaInfraventuresPvt Ltd. (Sale of soil) 794600 10 PawiniBuildzonePvt Ltd, 859500 11 Sunshine Infraz....
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....e are reasons to believe that the apparent is not the real, in a case of the present kind a party who relies on a recital in a deed has to establish the truth of those recitals otherwise it will be very easy to make selfserving statements in documents either executed or taken by a party and rely on those recitals. If all that an assessee who wants to evade tax is to have some recitals made in a document either executed by him or executed in his favour then the door will be left wide open to evade tax. A little probing was sufficient in the present case to show that the apparent was not the real. The taxing authorities were not required to put on blinkers while looking at the documents produced before them. They were entitled to look into the surrounding circumstances to find out the reality of the recitals made in those documents. It is well settled principle of law as declared by the Hon'ble Supreme Court in the case of SumatiDayal Vs. CIT (214 ITR 801) (SC) that the true nature of transaction have to be ascertained in the light of surrounding circumstances. It needs to be emphasized that standard of proof beyond reasonable doubt has no applicability in determination ....
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....estment. The relevant sections which enable the AO to assess suchincome/expenditure/investment are contained in sections 68,69,69- A, 69-B,69-C,69-D 18. Section 1158BE was amended vide Finance Act 2016w.e.f. 01.04.2017 to the effect that no setting off of any loss shall be allowed against Income of the nature referred to in the specified sections. This section was further amended vide Taxation Laws (Second Amendment) Act 2016 w.e.f. 01.04.2017 (A.Y 201718). The section as amended as on today reads as under: "(1) Where the total income of an assessee, (a) Includes any income referred to in section 68, section 69, section 69A, section 69B, section 69C or section 69D and reflected in the Return of Income furnished under section 139, or (b) determined by the Assessing Officer includes any income referred to in section 68, section 69, section 69A, section 69B, section 69C or section 69D, if such income is not covered under clause (a), the income-tax payable shall be the aggregate of (i) the amount of Income-tax calculated on the income referred to in clause (a) and clause (b), at the rate of sixty per cent; and (ii) the amount of inc....
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....ll have also to prove the nature and source of his receipts in a definite manner by maintaining the record on the basis of some norms. 19. Thus considering the facts of the case I find that the AO has correctly applied the provisions of section 1158BE in this case. The appellant has failed to correctly explain the source of receipts disclosed by it and in such cases the application of provisions of section 11588E are warranted." 6. Still aggrieved by appellate order dated 03rd December, 2019 passed by ld. CIT(A), the assessee filed second appeal with tribunal. None appeared when this appealwas called for hearing before the Division Bench, on 24th August, 2022. The assessee filed appeal in the year 2020 and despite opportunities granted to the assessee, the assesseechose not to enter appearance before tribunal. Notices for hearing were sent by Registry by email as well as speed post, which remains un-complied with by the assessee. In-fact, it is the assesseewho moved an application filed on 23.02.2021 with tribunal for early hearing of the appeal, but later on the assessee never appeared before the tribunal. Now, when this appeal came up for hearing before the Division B....
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....ed and unaccounted money which wasdeposited by the assessee in its bank account, and which was camaflouged by way of consultancy income of small denomination in its books of account. The ld. CIT-DR submitted that it is against all human probability that such smallsmall amount of consultancy averaging Rs. 14000/- each will be rendered by the assessee, which was done to cover up cash deposit of Rs. 8,00,000/- in the bank accounts by the assessee. It was submitted that in all eleven companies belonging to the same group exhibited similar pattern of deposit of cash in their bank account between 13.11.2016 to 16.11.2016, during the period of demonetization which was camaflouged as consultancy income with an intent to evade taxes. It was submitted by ld. CIT-DR that similar explanation was given by all the assessee in all the eleven cases. It was also submitted that for earlier years, the consultancy income shown was negligible and also for subsequent period post deposit of cash in bank account between 13.11.2016 by the assessee, the alleged consultancy income was NIL, and even for subsequent assessment year, the assessee has shown negligible consultancy income. It was submitted that the....
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....as claimed to have earned consultancy income of small small denominations averaging Rs. 14,000/-, in cash, and that too the majorily the alleged consultancy income was claimed to have been received before 13.11.2016, while subsequent to 13.11.2016 till the end of financial year on 31.03.2017, again the income level fell sharply, so much so alleged consultancy income of Rs. 8,29,500/- was stated to be received from 01.04.2016 to 13.11.2016, while no alleged consultancy income was claimed to received from 14.11.2016 to 31.03.2017, and all alleged consultancy income were stated to be received in cash. Thus, none of the allegedconsultancy income was received by cheque, and despite the assessee having bank account, these alleged consultancy income received in cash, were not deposited in bank account, until 13.11.2016, when in one tranche the assessee deposited Rs. 8,00,000/- in its bank account. For earlier years, the assessee declared meager income and subsequent to ay:2017-18, the assessee declared meager income of Rs. 60,000/- for ay:2018-19, which is evident from chart reproduced below, in this order. The assesseeallowed cash to built up until 13.11.2016 through these small small de....
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.... of demonetization of old bank notes of denomination of Rs. 500 and Rs. 1000 by withdrawing its legal tender character, was to curb themenace of fake notes and black money. The assessee deposited cash of Rs. 8,00,000/- in its bank account with Federal Bank in one tranche, on 13.11.2016, which is just within five days of demonetization of bank notes of Rs. 500 and Rs. 1000 announced by GOI. However, to allow genuine and bonafidepeople not to suffer due to the sudden demonetization of old bank notes of Rs. 500 and Rs. 1000wherein these old bank notes ceased to be legal tender, government allowed a window to exchange for value such demonetized old bank notes notesof denomination of Rs. 500 and Rs. 1000 as well allowed deposit ofsuch demonetized bank notes in bank accounts, during specified period. In the case of this group as many as 11 companies deposited Rs. 8,00,000/- each in their respective bank accounts between 13.11.2016 to 16.11.2016, and in all these 11 entities belonging to Tulsiani Group, similar pattern of explanation is offered that consultancy income was earned by these eleven companies which were all of small small denomination averaging Rs. 14000/-. Only name of per....
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....S.No Name of the company 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 Cash deposit during demonetization Date of deposit 1 PawiniInfrav enture Pvt. Ltd. 58000 46000 0 45000 33500 31160 893100 31400 800000 13.11. 2016 2 Pawini Homes Pvt. Ltd. Nil Nil 25500 40800 27400 26560 891300 25200 800000 13.11. 2016 3 Grace Infrazone Pvt. Ltd. 0 0 24500 35400 25000 26600 859700 26550 800000 13.11. 2016 4 Admire Infraprojects Pvt. Ltd. 0 32000 40500 30500 33400 33800 882000 35500 800000 16.11. 2016 5 Admire Infraheights Pvt. Ltd. 0 30000 92000 34500 36900 32600 890700 34500 800000 16.11. 2016 6 Tulsiani Fitness and Healthcare P. Ltd. 0 33000 42000 40500 36500 34650 932400 34100 800000 13.11. 2016 7 Admire Realtors Pvt. Ltd. 0 34000 48500 31000 33800 32200 829500 60000 800000 13.11. 2016 8 PawiniInfr azone Pvt. Ltd. 0 0 26000 36400 11500 0 978600 17000 800000 13....
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....ng that it is not under any obligation either to maintain books of accounts or to furnish any such details such as address of person, PAN of the person from whom consultancy income was received or the scope of work rendered. The argument is fallacious, as it is the amount stood credited in its books of accounts, and the onus is on theassessee to substantiate by evidence that apparent is real, and has also to prove the identity and credit worthiness of the payer, as also the genuineness of the transaction. All the eleven assessee'sof the Tulsiani group including assesseehave shown the income from consultancy below threshold limit of Rs. 10 lacs, so that obligations under service tax law does not fall on them. None of these companies are registered under service tax laws. None of the eleven entities deposited any advance tax for the impugned assessment year, despite the fact that major portion of income was received prior to 13.11.2016, and advance tax installments fell due on 15.06.2016, 15.09.2016, 15.12.2016 and 15.03.2017, but no advance tax was deposited. It is also against human probabilities, that with practically no infrastructure available, all these eleven assessee's render....
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....ion announced on 08th November, 2016, legal tender character of the old bank notes in the denomination of Rs. 1000 and Rs. 500 were withdrawn. Further, As many as eleven companies belonging to Tulsiani Group of Companies, deposited cash of exactly Rs. 8,00,000/- in their respective bank accounts, between 13.11.2016 to 16.11.2016. This group has interests in real estate business. Thus, in our considered view, the assessee has failed to justify that consultancy income claimed by it to have earned during the year under consideration was genuine consultancy income earned by it, and rather the assessee has converted unaccounted and undisclosed cash under the garb of alleged consultancy income and we hold that no such consultancy services were rendered by the assessee. The assessee failed to provide identity and creditworthiness of the persons giving cash to it towards alleged consultancy services and genuineness of the transaction could also not been proved by the assessee, and we have no hesitation in holding that it is the unaccounted and undisclosed money/income which has been brought into the books of the assessee under the garb of consultancy income, and this entire transaction of ....