TaxTMI 
TaxTMI 
2022 (11) TMI 368
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....s the facts narrated in IT(SS)A No. 01/SRT/2020, for assessment 2011-12 have been taken into consideration for deciding both the Revenue's appeals en masse. 3. The grounds of appeal raised by the Revenue in "lead" case (in IT(SS)A No. 01/SRT/2020, for assessment year 2011-12, are reproduced below: "(i) On the facts and circumstances of the case and in Law, the Ld. CIT(A) has erred in deleting the addition amounting to Rs. 14,22,92,519/- on account of unaccounted income. (ii) On the facts and circumstances of the case and in Law, the Ld. CIT(A) has not appreciated the facts of the case properly, the notings in seized material decoded and deciphered by the assessing officer and more specifically the deliberate and complete failure on the part of the assessee to explain the content of the documents before Assessing Officer. (iii) On the facts and circumstances of the case and in Law, the Ld. CIT(A) has erred in holding commission income @ 0.50% as commission or khep charges on the total amount noted and treating it as already offered in undisclosed income without any plausible reasons do so. (iv) On the facts and circumstances of the case and....
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....venue in (IT(SS)A No. 03/SRT/2020, for assessment year 2014-15. 6. Succinct facts are that assessee-firm engaged in money courier services, known as "Angadia system" which is old practice of transferring money. The assessee-firm filed its return of income for assessment year 2011-12 on 26.09.2011 declaring total income at Rs. 12,22,410/-. Subsequently a search u/s. 132 of the Act was caried out at the business premises of assessee at Kolkata Branch office by Investigation Wing Kolkata on 27.03.2014. During the course of search proceedings, certain loose papers were found and seized as per Annexure-PSR/1 to PSR/3 of panchnama dated 27.03.2014. The Assessing Officer issued notice u/s. 153A(a) on 23.09.2015. In response to the said notice the assessee furnished the return of income on 08.10.2015 declaring total income of Rs. 12,22,410/-. In order to make assessment, notice under section 143(2) & u/s. 142(1) of the Act along with questionnaire was issued dated 21.12.2015 calling certain details and also requested to explain the page wise contents of the seized materials. 7. In response to the notices issued u/s. 153A and 142(1) of the Act, the assessee has attended and filed deta....
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....rch and seizure action was carried out at Kolkata branch office of M/s. Patel Somabhai Ramdas & Co., by Investigation wing Kolkata on 27.03.2014. The search warrant was executed in the name of S.R. Courier and M/s. Patel Somabhai Ramdas & Co on 27.03.2014 and Panchnama was drawn. During the course of search proceedings certain loose papers were found and seized as per Annexure-PSR/1 to PSR/3 of Panchnama dated 27.03.2014, 3. Statement u/s. 132(4) of Shri Upeshbhai Raman lal Patel, Fund Manager of M/s. Patel Somabhai Ramdas & Co. was recorded during the course of search proceedings on 27.03.2014. In answer to question No. 4, he has stated that he was fund manager of M/s. Patel Somabhai Ramdas & Co. since last 14 years and also admitted that he had been working in Kolkata Branch of the firm since years Further, he also stated that M/s. Patel Somabhai Ramdas & Co. is popularly known as S.R. Courier. In answer to question No. 5, he also admitted that the amount of' Rs. 29,81,300/- which was found from the above business premise was unaccounted and undisclosed in the books of M/s. Patel Somabhai Ramdas & Co. The cash seized from the premises was belonging to firm. As the se....
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....ounts summarized year-wise, which was written in the above seized materials should not be added to your total income. 8. Your case is fixed for hearing on 30.03.2016 at 11.30 a.m. You are o submit your explanation, if any, in the matter. In case of failure to comply to this show cause, assessment will be completed on the-material available on record." 9. In response to the show cause notice, the assessee submitted its reply vide letter dated 30.03.2016, the relevant portion is reproduced as under: "Vide above referred to show cause notice Your Goodself required assessee to show cause as to why Rs. 14,22,92,519/- for A.Y. 2011-12, Rs. 97,76,100/- for AY. 2012-13 and Rs. 20,39,80,040/- for A.Y. 2014-15 should not be treated as unexplained receipt in the respective assessment years and added to assessee's total income for reasons stated vide above refereed to letter. In this regard it is submitted as under: 1. In para 2 of the above referred to letter it is stated that the search warrant was executed in the name of S.R. Courier and M/s. Patel Somabhai Ramdas & Co. on 27/03/2014 at Kolkata. It is further stated that during the search proceedings certai....
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....d and undisclosed in the books of M/s. Patel Somabhai Ramdas & Co. As the seized documents were recovered from the premise belonging to firm, they also belong to firm. In this regard it is submitted that Shri Upeshbhai Ramlal Patel is not an employee of the assessee firm. In support of the same the assessee firm had produced the books of accounts and the particulars relating to salaries paid to employees. It is found that the assessee has/had no employee namely Upeshbhai Ramlal Patel on its payroll. The amount of Rs. 29,81,300/- also does not belong to the assessee firm. In the above referred to letter the observation made by Your Goodself that he stated that the amount of Rs. 29,81,300/- which was found from the above premise was unaccounted and undisclosed in the books of M/s. Patel Somadas Ramdas & Co. is factually incorrect and the words "In the books of Patel Somabhai Ramdas & Co." are substituted in place of Nature". He never said that it is unaccounted for and in the books of M/s. Patel Somabhai Ramdas & Co. for the sake of convenience answer No. 5 is reproduced below: "A. 5. The amount of Rs. 29,81,300/- (Rupees Twenty Nine Lakhs Eighty One Thousand Three ....
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....ar Ramdas wherein he explained the modus operandi of angadia system. It is alleged that neither Shri Patel Rajendrakumar Ramdas nor Shri Upeshbhai Ramanlal Patel raised any objection to the execution of warrant in the name of firm M/s. Patel Somabhai Ramdas & Co. Explanation of modus operandi of the angadia system by partner Shri Patel Rajendrakumar Ramdas does not change the fact that operation at that office run by him and that the cash and loose paper seized from the said premises does not belong to the assessee firm. Regarding the observation that neither the employee Shri Upeshbhai Ramanlal Patel nor the partner Shri Patel Rajendrakumar Ramdas raised any objection to execution of warrant in the name of firm, it is submitted that they are laymen having no knowledge of accounting, taxation, Income Tax Act and particularly search proceeding. Not raising the objection on execution of warrant in name of the assessee firm will not change the fact that the assessee firm is not having branch or office at Kolkata. Moreover in response to notices u/s. 153A of the Act, in his case, he has filed the returns income. In the return of income filed for 2014-15, he has shown the incom....
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....nce the assessee failed to appear to explain the contents of this documents, Your Goodself is constrained to apply the prevalent practice applied in this type of business to decode the amount and to make addition as referred to in para 7 of the letter in respect of the notings in seized material. In this regard it is submitted as under: a) At the outset it is submitted in para 1 above that the said premises from where the said materials were found and seized is not office/branch of the assessee firm and therefore the seize material cannot be presumed to be belonging to assessee firm. b) When Shri Patel Rajendrakumar Ramdas appeared before the investigation officers at the said premises and accept the ownership of the unaccounted cash of Rs. 29,81,300 from the said premises and also offers, discloses an amount of Rs. 50,00,000 including the said cash and covering the transactions carried on by him form that office, allegation that the loose paper found from the said premises does not belong to Shri Patel Rajendrakumar Ramdas and to the assessee firm is not justified. It is worth noting that in the case of Shri Patel Rajendrakumar Ramdas notices are issued ....
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.... the seized material. The next best person to explain the seized material is again Shri Patel Rajendrakumar Ramdas during the assessment proceedings u/s. 153A of the Act. Instead of pursuing the explanation from the right person at the right time at right place your goodness is seeking the explanation from the partner of the assessee who never visited the said premises 1800 kms away from its working place and has never seen the said seized material before it was furnished by your goodself as late as in February 2016. In view of this inability of the assessee firm to explain the seized material should be accepted to serve the natural justice. 7. Regarding the proposal the decode the amounts by applying prevalent practice in the angadia business it is submitted that without prejudice to above the figures on the loose papers cannot be and should not be estimated assuming that they are noted after removing 3 zeros. There is no evidence even remote to presume that the said figures are coded. Has those figures been coded the authorized officers would have definitely decoded the same and would have taken a confession from the persons present at the time of the search and or appea....
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....m Rs. 100 to Rs. 200 per every Rs. 1,00,000/- for the services rendered by it. The rate of commission can be verified from the regular books of account. Applying only one part of prevalent trade practice and custom in angadiya business to the assessee (to determine real figure of transaction) and ignoring the other/later part to apply rate of commission prevalent in trade practice and custom in angadiya business to determine correct income is against the principles of natural justice. In view of above, without prejudice to earlier submission, applying the practice prevailing in the angadia business the addition if any is to be made in respect of the notings in seized material it should be calculated @ 100 to 200 per 100000. In this case subject to the accuracy of the details worked by your goodself addition should be arrived at by applying the rate of commission to figure work out. In this regard the assessee relies in the decision of Honourable ITAT, Ahmedabad in the case, of M/s. Patel Somabhai Kanchanlal & Co. (ITA No. 842/Ahd/1984) "in case of courier i.e. angadia the provisions of section 68, 69, & 132(4A) are not applicable in the same way as is applicable i....
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.... u/s. 132(4) of the I.T. Act of Shri Upeshbhai Ramanlal Patel, the fund manager of M/s. Somabhai Ramdas Patel was recorded and he accepted that he was working for the firm for last 14 years and at Kolkata branch for last four years and stated that cash found and documents seized are of M/s. Somabhai Ramdas Patel. Statement of Shri Patel Rajendrakumar Ramdas was recorded u/s. 131 of the I.T. Act wherein he accepted that the firm has branches across India including this branch at Kolkata. Learned DR further pointed out that during the course of search proceedings at Branch Office Kolkata, certain loose papers were found and seized as per Annexure-PSR/1 to PSR/3 of Panchnama dated 27.03.2014. The Statement u/s. 132(4) of the I.T. Act, 1961 of Shri Upeshbhai Ramanlal Patel, the fund Manager of M/s. Patel Somabhai Ramdas & Co. was recorded and he accepted that cash found at branch office at Kolkata is unaccounted and undisclosed in books of accounts of firm. Learned DR further pointed out that Assessee firm has not produced one partner Shri Rajendrakumar Ramdas Patel as One Partner Shri Dashrathbhai Hargovanbhai Patel denies to have any knowledge about search proceedings and expressed h....
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.... of the remand report also. Even after holding that assessee firm is engaged in angadia business or money courier business, the Ld. assessing officer does not analyze the transactions in that light. On the contrary, he just adds up all the amounts noted after supplying 3 zeroes (000s) to them. Analysis of seized materials keeping in mind the business activity will lead to conclusion that the amounts noted in the incriminating seized material is the cash moved/transferred for earning commission or khep charges. So only the commission/khep charges at 0.50% (of Rs. 15,00,000/-) on the total amount noted can be faxed. However, an amount of Rs. 50 Lacs has already been offered as undisclosed income on the same and assessed as such. No effort was made by assessing officer to do a concerted investigation into modus operandi of firm as a whole to ascertain the total undisclosed income earned by firm by such activities in all its branches & HO. Hence there is no reason to further make any addition and therefore Ld. CIT(A) has rightly deleted the high pitched addition. This way, Ld. Counsel prays the Bench that Ld. CIT(A) has passed a reasoned and speaking order therefore, the same may be up....
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....uthority was satisfied with the owning up of cash by Shri Rajendrakumar Ramdas Patel & offer of additional income. (iv) No question was asked to him regarding connection of seized material with the additional income disclosed by him. Pursuant to this notice u/s. 153A was issued in case of Shri Patel Rajendrakumar Ramdas, by his assessing officer, the CCIT, Circle-2(2), Ahmedabad and assessment was completed on 23.03.2016 assessing the income at Rs. 68,21,820/-. From the assessment order it can be seen that the Shri Patel Rajendrakumar Ramdas filed ITR showing amount disclosed of Rs. 50 Lacs against which he has claimed bad debts, showing returned income of Rs. 31,21,428/-. The Ld. assessing officer has disallowed the bad debts and also made certain other additions to arrive at above assessed income. 4. Meanwhile in case of the assessee firm also notice u/s. 153A was issued. In response to the same ITR was filed on 08.10.2015 showing same income as in original ITR. In response to show-cause notice dated 28.03.2016, assessee filed reply dated 30.03.2016. The assessee in para 5(a) claimed that the said premises from where the materials were found & seized is....
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.... specifically stated that the firm is engaged in business of money courier, popularly known as angadia which is old practice of delivery money for commission. The Ld. assessing officer has not rebutted these statements on the contrary the Ld. assessing officer has relied fully on these statements in his show cause notice. The search warrant also mentioning the name as SR Couriers. It is clear from assessment order that the Ld. assessing officer has also treated the assessee as 'money courier' or angadia and the loose papers are related to business of the assessee firm. So the natural corollary for Ld. assessing officer should have been to treat the notings as business transactions of the assessee firm and estimate the income earned by assessee from the same. The Ld. assessing officer instead has totaled the amounts & added the entire amount as income of assessee, this displaying lack of consistency. 6. During assessment, the assessee filed copies of the typical records maintained in course of business. Assessee also made its without prejudice claim, that even if the impugned loose sheets are treated as pertaining to assessee, the amounts mentioned therein cannot be....
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....ed enquires, investigation and possible actions u/s. 133A. But Ld. assessing officer has not done so. This shows that Ld. assessing officer has not really comprehended the seized material. The assessment order also suffers from complete absence of any linkage or connection of assessed income to assets. The Ld. assessing officer before making addition of such big amounts ought to have made some efforts to find out, where the impugned undisclosed income is channelized. This is very much required to fortify & corroborate the estimation of income and also for recovering of tax demand. Collection of tax demand raised is the objective of assessment procedure, hence the above exercise is a pre-requisite before making addition of big amounts, otherwise this results in creation of hollow demands. 9. From the above facts & circumstances and the discussion made it is clear that (i) the cash & seized material is accepted by ADIT (Inv.) & Higher Officer in Investigation Wing to belong to Shri Rajendrakumar Ramdas Patel in his individual capacity and disclosure made by him covers the same, (ii) Even if the seized material is treated to pertain to business of assessee, then the income is....
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....wn. During the course of search proceedings certain loose papers were found and seized as per Annexure-PSR/1 to PSR/3 of Panchnama dated 27.03.2014. During the course of search proceedings, a statement on oath U/s. 132(4) of Shri Upeshbhai Ramanlal Patel, Fund Manager of M/s. Patel Somabhai Ramdas & Co. was recorded on 27.03.2014. In answer to question No. 4 he has stated that he was fund manager of the company since last 14 years and also stated that M/s. Patel Somabhai Ramdas & Co. is also known as S.R. Courier. 5.1 Further, statement of Shri Patel Rajendrakumar Ramdas, one of the partner of the assessee firm was recorded U/s. 131 of the I.T. Act on 22.04.2014. In his statement he has stated that he is a partner of M/s. Patel Somabhai Ramdas & Co. which is engaged in the business of money courier also known as "Angadia System" which was old practice of transferring money, prevalent mostly in Gujarat, Maharashtra and across North India and also confirmed that his firm has branches across the country including this branch at Kolkata. It is pertinent to mention here that at the time of execution of warrant on 27.03.2014 and subsequently during the course of statement of the....
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....In fact the loose sheets have code numbers, to understand and to identify the transaction in a coded manner, which the prevalent practice applied in this type of business to decode the noting. Factually, the onus upon the assessee firm that the documents seized from the branch office belonged to the assessee and the responsibility to explain the contents of seized documents/loose sheets lies upon the assessee firm. 5.5 As per the assessment order it is revealed from the part of the statement of Shri Upeshbhai Ramanlal Patel stated that during the course of search proceedings the authorised officers did not ask single word regarding the seized documents to Shri Patel Rajendrakumar Ramdas while recording his statement. Since the cash found from the searched premises and transaction carried on there from is owned by him. 6. The above mentioned facts and circumstances, during the course of assessment proceedings, the A.O. has not refused to accept the any submissions of the assessee, there is no such sufficient cause of the assessee (as per case records) for non-producing the required documents/evidences, and the A.O. had given sufficient opportunities during the cour....
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....ted that a search & seizure was carried by the investigation wing, Kolkata on 27/03/2014 at Kolkata branch office of M/s. Patel Somabhai Ramdas & Co., Kolkata. The search warrant was executed in the name of 'S.R. Courier' and M/s. Patel Somabhai Ramdas & Co. During the course of search proceedings loose papers were found and seized as per Annexure-PSR/1 to Annexure PSR/3. A statement on oath u/s. 132(4) of Shri Upeshbhai Ramanlal Patel, fund manager of M/s. Patel Somabhai Ramdas & Co. was recorded. In answer to question No. 4 he stated that he was fund manager of the company since last 14 years and also stated that M/s. Patel Somabhai Ramdas & Co. is also known as S.R. Courier. ASSESSEE'S COMMENTS: (i) The above comments/observation were made in the assessment order and are repeated in this report. In this regard it is submitted that the assessee contended that Upeshbhai Patel who was present at the premise at the time of search and whose statement was recorded, was not an employee of the assessee firm. In support of the same the assessee firm had produced its books of accounts and the particulars relating to salary paid to employees. It was found that....
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....he course of assessment a statement of Shri Dashratbhai Hargovindbhai Patel, one of the partner of the firm was recorded u/s. 131 on 1.03.2016. He was asked to explain the contents of the materials seized during the course of search at the branch office of M/s. Patel Somabhai Ramdas & Co. at Kolkata, he expressed his inability to explain the same and stated that the same can be explained by his partner. Therefore, the assessing officer had asked to him to produce Shri Patel Rajendrakumar Ramdas, whose statement was recorded by ADIT (Inv) Unit-III (1), Kolkata on 22.04.2014, where he had accepted the ownership of the unaccounted cash of Rs. 2981300/- seized from the said premises and also offers, discloses an amount of Rs. 5000000 including the cash and covering the transactions carried on by him from that office. ASSESSEE'S COMMENTS: (i) The Assessing officer himself have accepted the fact that vide his statement Shri Patel Rajendrakumar Ramdas accepted the ownership of the unaccounted cash of Rs. 29,81,300/- seized from S.R. Courier and also offered Rs. 50,00,000/- including the cash and covered all the transaction carried by him from S.R. Courier. Even the A....
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....Dashratbhai Hargovindbhai Patel has stated that Shri Patel Rajendrakumar Ramdas is not well and admitted at the Hospital in Ahmedabad. Under the facts and circumstances of the case, the Ld. A.O. found that the assessee has failed to produce its partner Shri Patel Rajendrakumar Ramdas and all the contents/entries of the materials seized remains unexplained. On the basis of findings the assessing officer has constrained to decode the amounts of Rs. 14,22,92,519 for AY 2011-12 and Rs. 97,76,100 for A.Y. 2012-13 according to prevalent practice applied in this type of business as unexplained business receipts of the assessee firm. Penalty proceedings u/s. 271(1)(c) of the I.T. Act are separately initiated for furnishing inaccurate particulars and concealment of income. ASSESSEE'S COMMENTS: (i) In the first part of para 5.3 the assessing officer has reported that the assessee could not produce Shri Patel Rajendrakumar Ramdas and all the contains/entries remained unexplained. The said observation was made in the assessment order and is repeated in this report. In this regard it is once again stated that the assessee firm was required to produce Shri Patel Rajendrakum....
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....ion which varies from Rs. 100 to Rs. 200 per every Rs. 1,00,000/- for the services rendered. The income offered by Shri Patel Rajendrakumar Ramdas of Rs. 50,00,000/- is in respect of such commission income from such Angadia service by the Kolkatta office searched by the department and the notings in seized material and seized cash. (iv) Without prejudice to above, it is most respectfully submitted that even if it is accepted that the said seized material belonged to assessee and are relating to angadia business and in coded figures, the addition of the total sum of the figures cannot be made. As a logical extension of the prevalent trade practice and custom in angadia business, the addition can only be made of commission earned from the transfer of money and valuables of the customers which varies from Rs. 100 to Rs. 200 per every Rs. 1,00,000/- which is verifiable from the regular books of accounts. The assessing officer only applied the prevalent trade practice and custom in angadia business at the time of decoding the figures of seized records and on the very next moment he ignores the income which Angadia derives from the said business i.e. commission. Thus adding the ....
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....documents/loose sheets lies upon the assessee ASSESSEE'S COMMENTS: (i) The contention of the assessee against the above observation is covered by para No. 2.3 and 2.6 above and therefore to avoid duplication the same are not repeated here. (ii) Your Honour observed vide para No. 7 of the letter dtd 23.08.2019 as under and called for report for the same. "It stands to reason that the ADIT, Kolkata and higher officers investigation wing Kolkata did not feel that the seized material pertains to assessee firm because if they had thought so they would have covered the head office in Surat and branches at other places. After all if a branch can have 36 crs of undisclosed income what will be the total undisclosed income of the assessee firm as a whole. It only shows that ADIT (Inv) Kolkata and higher officers in investigation wing were of opinion that the cash & seized material belongs to Shri Rajendra Ramdas Patel & the disclosure made fairly covers both the cash & the seized material." The Assessing officer failed to offer any clarification or comments in its report on the above observation. The assessee has already discharged its onus by....
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....s on basis of cogent evidences, and the assessing officer has merely reiterated the observations made in assessment order in few places. Therefore, based on the remand report and assessee's submissions, the Ld. CIT(A) reached on the following conclusions: (i) Shri Rajendrakumar Ramdas Patel (herein after RRP) appeared before the Ld. ADIT (Inv.) Kolkata and owned up the cash found in searched premises. He admitted & offered Rs. 50 Lacs as undisclosed income earned in his individual capacity from the activities carried out from that premises (including Rs. 29,81,300/- cash found). The Ld. ADIT(Inv.) has not probed, further, nor has he questioned in detail on seized material etc, implying that, he was satisfied that Rs. 50 Lacs declared adequately covers the undisclosed income earned from business activities carried on from the said premises in Kolkata including the notings found in incriminating seized material. The search action is minutely monitored by Addl. DIT (Inv.) and DIT(Inv.), hence absence of further enquiry, and absence of any consequent action u/s. 132 etc, shows that the higher authorities in the Investigation Wing Kolkata were of same considered opinion. ....
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....officer, in his own analysis & interpretation of the incriminating seized materials. This view is further strengthened by fact that, though fax demand of Rs. 9 Cr has been raised, demand recovered till date is nominal. (v) It can be seen that the show cause notice was issued to assessee by Ld. assessing officer on 28.03.2016, assessee's reply was obtained on 30.03.2016 & same day order was passed (30.03.2016). Hence, it appears that impugned addition is made due to inadequate understanding, lack of conviction and as a last minute hurried decision as a matter of abundant precaution. 19. Therefore, Ld. CIT(A) held that income arising from business activities carried out at the premises at Kolkata, subjected to search action u/s. 132, has been owned up and offered to tax by Shri Rajendrakumar Ramdas Patel for relevant assessment years and this has been accepted by both Investigation-Wing & assessing officer at Ahmedabad. The assessing officer of assessee firm at Surat has deviated from this view, however, he has not given/placed on record any cogent evidences or given any discernible line of reasoning. There is no whisper in assessment order, as to the reason for not a....