TaxTMI 
TaxTMI 
2022 (11) TMI 368
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....20, 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 in Law, the Ld. CIT(A), Surat ought to have upheld the order of the Assess....
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....y 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 details and other documents before the Assessing Officer. The assessing officer noticed from the Form No. 3CD of Audit Report tha....
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....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 seized document were recovered from the premises belonging to firm, they also belong, to M/s. Patel Somabhai Ramdas & Co. 4. Statement of Shr....
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.... 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 certain loose papers were found and seized as per Annexure PSR/1 to PSR/3. In this regard it is submitted that the assessee has already produced before Your Goodself copy of the partnership deed, its visiting car....
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.... 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 Hundred) only found from the business premise today is unaccounted for and undisclosed in nature. I do not have any books of accounts. Therefore, I have no objection to the seizure of the same." Regarding this cash found Shri Patel Rajendrakumar Ra....
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....adia 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 income of Rs. 50,00,000/- which includes cash found and seized during the course of the search. Income tax department also believes, accepts the fact that (a) search was in the case of shri Patel Rajendrakumar Ramdas, (b) cash found during the cause of search belonged, owned by him (c) the material found during the c....
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....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 u/s. 153A of the Act and the proceedings in his case are in progress. He has already filed his return of income for 2014-15 showing undisclosed income of Rs. 50,00,000/- owning the transactions carried out from the said premises. The assessee is not able to understand the stand taken by your goodself that the cash found from the said premises and the di....
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....es 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 appeared before them. The said figures could not be decoded, deciphered till 6 pm on 28/03/2016. This is evident from the fact that a show cause notice was issued to the assessee firm as to why the case of the assessee be not referred for special audit mainly and only for decoding deciphering and understanding properly the entries recorded in the seized material. The relevant po....
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.... 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 in respect of loans and deposits as courier service is akin to postal services. Once it is proved that the parcels were received during the ordinary course of angadia business, no addition can be made" In view of above your goodself is requested to not make addition as proposed in the show cause notice and oblige." 10. However, assessing officer rejected the contention of the assessee and observed that during the course of sea....
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....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 his inability to explain the contents of seized documents and stated that same can be explained by other partner of the firm but not produced the partner during assessment proceedings, therefore in these circumstances addition made by the assessing officer may be sustained. 13. On the other hand, Shri Vartik Chokshi, Learned Counsel for the assessee vehemently argued that Shri Rajendrakumar Ramdas Patel appeared before the Ld. ADIT (Inv.) Ko....
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....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 upheld. 15. We have heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the Ld. CIT(A) and other materials brought on record. We note that assessee submitted before us the remand report under Rule 46A(1)/46A(3) of the Rules dated 01.10.2019, vide Page No. 69 to 71 of assessee....
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....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 not office/branch of the assessee firm and therefore the seized material cannot be presumed to be belonging to assessee firm. The Ld. assessing officer discussed this in para 6.3. The Ld. assessing officer mentions that Shri Patel Rajendrakumar Ramdas admitted that the firm has branches across the country including this branch at Kolkata. The Ld. assessing officer mentions that no explanation was offered regarding contents of seized material when the fact is, no question was asked to concern on....
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....r 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 totaled up and added as income. The assessee is in business of money courier service, the amounts noted in alleged loose sheets are the moneys received from consigners and paid to consignees. The assessee only gets the charges it collects over the amounts moved by it. He claimed that couriers services or angadia's charged Rs. 100-200 per Rs. 1 Lac moved by them. The Ld. assessing officer has not accepted this explanation, I have examined the same and I find typical records maintained by assessee in its b....
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....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 to be estimated at Rs. 200 per Rs. 1 Lacs noted in seized material (without pre-judice plea of assessee). 10. The Ld. assessing officer is directed to examine seized materials, reports of ADIT and Investigation wing Kolkata & assessment records and give factual findings regarding the facts, circumstances and arguments made in all the above paragraphs along with your comments. Your report may be furnished on or before 09.09.2019." 16. Then after, Ld. CIT(A) received the remand report from the assessing officer, vide assessing ....
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....tner 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 partners, nobody raised any objection to execution of warrant in the name of firm M/s. Patel Somabhai Ramdas & Co. 5.2 During the course of assessment proceedings, a statement of Shri Dashratbhai Hargovindbhai Patel, one of the partner of the firm was recorded u/s. 131 on 01.03.2016, on being asked, to explain the content 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 contents of the seized documents and stated that same can be explained by his partner whose statement was recor....
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....gle 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 course of assessment proceedings. Therefore, the assessing officer has correctly made additions for the both assessment years on account of unaccounted income. In view of the above facts and circumstance, the justification arrived by the Assessing Officer is reasonable and most judicious and therefore requires to be upheld. Therefore, your honour is kindly requested to dispose off the appeal on merits." 17. Then after, Ld. CIT(A) forwarded the Copy of Remand report dated 09.09.2019 to the assessee for comments/rejoinder. The Reply on the remand report furnished by the assessee, is reproduced below: "1. With regard to the above s....
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....NTS: (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 the assessee had no employee namely Upeshbhai Ramanlal Patel in its payroll. Therefore his statement cannot be relied upon. (ii) Regarding the seized documents found from the premises of the firm, the assessee produced the copy of the partnership deed, its visiting card, its books of accounts in support of the fact that the assessee is/was not having any branch or office at Kolkata. As the assessee proved beyond doubt that the said premises was neither office nor branch of the assessee firm, the question that the seized documents belong to assessee firm does not arise at the first place. 2.4. assessing officer's COMMENTS: Vide para No. 5.1 it is reported that the statement of Shri Patel Rajendrakumar Ramdas, one ....
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....he 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 Assessing officer of Shri Patel Rajendrakumar Ramdas accepted the fact that (a) search was in the case of Shri Patel Rajendrakumar Ramdas, (b) cash found during the course of search belonged to & owned by him (c) the material found during the course of search belonged to him, and on that basis initiated proceedings, completed assessments, and assessed cash and seized documents U/s. 153A in his case. The assessment of Shri Patel Rajendrakumar Ramdas was completed accordingly assessing the cash found & unaccounted income of seized materials. (ii) No. 2 of the calling report dtd. 23.08.2019. Your Honour have observed and called report for the same. Perusal of the statement of Shri Rajendra Kumar Ramdas reveals that 1. No question was asked to him regarding incri....
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....er 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 Rajendrakumar Ramdas by the second week of March 2016. During that period only Shri Patel Rajendrakumar Ramdas fell seriously ill as his kidneys were failed and he was on dialysis. Gradually due to many complications he went in coma and was on ventilator. Thus, he could not attend due to serious illness and ultimately died on 19.07.2016. (ii) With the regards to the assessee's submission regarding the reasons for not presenting Shri Rajendra Ramdas Patel, Your Honour has called for report for the following vide letter dtd 23.08.2019. "The Ld. assessing officer did not make any effort to record the statement of Shri Rajendrakumar Ramdas either by travelling to Ahmedabad himself or by issuing commission. It transpires that Shri Rajendrakumar Ramdas passed away on 19/7/2016 so in effect the only person who could have explained the notings in the seized material was....
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....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 entire sum of figures to determine income is unfair, unjust and against the principles of natural justice. (iii) Further Your Honour has vide para No. 6 of letter dtd. 23.08.2019 called for the report for the following. "During assessment the assessee filed copies of the typical records maintained in course of business. The assessee also claimed that if the impugned loose sheets are treated as pertaining to assessee the amounts mentioned therein cannot be totalled up and added as income. The amounts noted in the alleged loose sheets are the money received from consigners and money paid to consignees. The assessee only gets the charges it collects over the amounts moved by it. He claimed that courier services or angadias charge Rs. 100-200 per Rs. 1 lac moved by them. The Ld. assessing officer has not accepted this explanation, I have examined the same and I find typical records maintained by asse....
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....isclosure 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 proving beyond doubt that the seized documents did not belong to assessee firm and the said fact was also accepted by the investigation wing Kolkata and therefore no adverse action was taken by them. 2.8 Your Honour observed vide para No. 9 of the letter dtd 23.08.2019 as under and called for report for the same from the Assessing officer. "From the above facts and circumstances and the discussion made it is clear that 1. 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. 2. Even if the seized material is held to pertain to business of assessee then the income is to be estimated at Rs. 200 per Rs. 1 lac noted in seized material (without prejudice plea of assessee)" The Assessing officer failed to offer any explanation or comments in its report with reference to the above observation. In this regar....
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....f 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. (ii) Shri RRP filed ITR disclosing this income & Jurisdictional assessing officer at Ahmedabad has made assessment accordingly as discussed in para 3 of my letter dated 23.08.2019 supra. So it is clear that cash found & seized material found in searched premises at Kolkata have been owned up and resultant income is offered to tax and assessed accordingly in hands of Shri RRP as concluded in para 7 of my letter dated 23.08.2019 (supra). The Ld. assessing officer in his remand report vide para 5.2 and again in 5.5 has also given the same finding. (iii) The Ld. assessing officer of assessee firm gives finding that the assessee firm is engaged in business of 'angadia' or money courier services as evident from his interpretation of figures noted in seized material (ref para 6.1 show cause notice of Ld. assessing officer). The same is discussed in details in para 5 of my letter referred above. The finding is reiterated in para 4 & 5.4 of the remand report (supra). Even after holding that assessee firm is eng....
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.... 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 accepting the above view. Therefore, Ld. CIT(A) held that there is no reason to make any addition in hands of assessee-firm, as the addition in the hands of Shri Rajendrakumar Ramdas Patel (one of the partners of the assessee firm) was deleted. Accordingly, the impugned additions for assessment years 2011-12 and assessment year 2014-15 were deleted. That being so, we decline to interfere with the order of Ld. CIT(A) in deleting the aforesaid additions. His order on this addition is, therefore, upheld and the grounds of appeal of the Revenue of both appeals, are dismissed. 20. In ground No. 4 in the Revenue's appeal in (IT(SS)A No. 03/SRT/2020, for assessment year 2014-15, the main grievance of the revenue is that the Ld. CIT(A) has erred in deleting the addition made by the assessing officer on protective basis amounting to Rs. 29,81,300/- on account of cash seized without analysing the actual effect of ROI filed in the case of Shri Rajendra Ramdas Patel for A.Y. 2014-15 wherein the income offered to tax on account of disclosure u/s. 132....