TaxTMI 
TaxTMI 
TaxTMI 
2025 (6) TMI 618
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....son of Ratnamani Group was also covered during search and seizure action. In the course of search incriminating documents in the form of handwritten diaries with notings of cash transaction were found and seized from the premises of the assessee as Annexure A-1 to Annexure A-14. Further, certain loose documents and papers were also found and seized vide other Annexures. During the course of search, statement of the assessee was recorded u/s.132(4) of the Act vis-à-vis the seized diaries & documents and the assessee had admitted that these diaries were books of accounts maintained by him regarding cash transactions made by him with other persons/entities. It was also admitted that these cash transactions were not recorded in the regular books of accounts. The seized materials revealed that the assessee was engaged in the business of land trading, ancestral sarafi business and other trading activities. Based on the analysis of the seized materials/documents and the statement of the assessee recorded during search, the AO noticed that the income escaping assessment had exceeded the threshold limit of Rs.50 Lakhs. The AO, therefore, issued notice u/s. 148 of the Act after record....
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.... the basis of notings in the seized ledger. 8. The learned CIT(A) has erred in confirming the addition of Rs. 4, 16,47,548/- by estimating profit @ 20% (out of the addition of Rs. 20,82,37,741/- made by the AO) on the basis of notings in the seized ledger "Shree Maal Khaate". 9. The learned CIT(A) has erred in confirming the addition of Rs. 76, 35,340/- made by the AO u/s 69A of the Act towards peak credit in various seized ledgers under the head 'Other Trading'. The learned CIT(A) has erred in confirming the action of the AO in invoking section 115BBE in respect of the said addition. 10. The learned CIT(A) has erred in not allowing Commission Expense of Rs. 1,59,76,100/- as noted in the seized ledger "Shree Commission Khaate". 11. The learned CIT(A) has erred in not allowing Other Expenses of Rs. 1,88,865.25/- as noted in the seized ledger "Shree Kharch Khaate". 12. The learned CIT(A) has erred in not allowing Bad Debts of Rs. 2,49,71,000/- written off as irrecoverable by the Appellant in the Tally Books." 13. The Appellant states that the search proceedings carried out in his case are beyond jurisdiction, illegal and void. The consequential assessment order pa....
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....appeal vary in the different years. 7. The Grounds in Revenue's appeal in ITA No.1184/Ahd/2024 for A.Y. 2021-22 are as under: 1. In the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in not appreciating the facts that AO has not proposed any substitution of additions related to Jamin Trading A/c in remand report. 2. In the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in considering the submission of the assessee in respect of figures of Rs. 49,90,49,59T/- as against addition of Rs. 72,11,40,520/- on account of payments noted in various Jamin accounts and addition of Rs. 8,11,89,833/- on account of receipts noted in various Jamin accounts and accordingly, deleted the addition of Rs. 72,74,72,913/-. 3. In the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in not appreciating the facts that diaries seized from the assessee is having entries of accrued interest, however the CIT(A) has deleted the addition of Rs. 21,79,98,3T3/- consider the same as notional interest. 4. In the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in not appreciating the....
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....m DGIT was invalid and bad in law. Therefore, the consequential reopening and re-assessment orders for A.Y. 2013-14 to 2017-18 were bad in law. In this regard, he placed reliance on the following decisions: (i) FIVES India Engineering & Projects (P)Ltd. v. ITO, (2024) 161 taxmann.com 79 (Madras) (ii) Ashok Kumar Makhija v. Union of India, 920240 162 taxmann.com 514 (Delhi) (iii) Twylight Infrastructure (P.) Ltd. vs. ITO, (2024) 158 taxmann.com 378 (Delhi) (iv) Cipla Pharma and Life Sciences Ltd. V. DCIT (2024) 164 taxmann.com 663 (Bombay) (v) Ravindra Reddy Katamreddy vs. DCIT,(2024) 159 taxmann.com 5 (Bombay) (vi) Gigantic Mercantile P. Ltd. vs. ACIT, (2024) 165 taxmann.com 646 (Bombay) (ii) The second challenge to the reopening was on the ground that the reopening for A.Ys. 2013-14 to 2015-16 was time barred in as much as u/s. 149 of the Act, the assessment years prior to 01.04.2021 cannot be reopened, if the same couldn't have been opened under the old law. Ld. Sr. Counsel explained that under the 4th Proviso of Section 153A of the Act, the relevant assessment year (7th to 10th assessment year) cannot be assessed pursuant to search unless the income escaped ass....
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....thority giving the approval must have the jurisdiction over the concerned case. In the present case, since the PCCIT did not have jurisdiction over Central charge cases of Ahmedabad, he could not have given the approval u/s. 151 of the Act. 11. As regarding the second contention that for A. Ys. 2013-14 to 2015-16, no reopening could have been done under the old provision of Section 153A of the Act in the absence of any asset, the Ld. CIT-DR submitted that this issue was considered by the Ld. CIT(A) and dealt properly in his order. He, therefore, placed reliance on the order of the Ld. CIT(A) in this regard. On the third issue of proceeding initiated by the JAO and not by the FAO, the Ld. CIT.DR submitted that this issue was covered in favour of the Revenue by the decision of the Jurisdictional High Court. Our Findings on Reopening: 12. We have carefully considered the rival submissions. The first objection of the assessee is that sanction for issue of notice u/s. 148 of the Act was accorded by the DGIT(Inv.) and not by the PCCIT for the A.Ys. 2013-14 to 2017-18. The provision of Section 151 of the Act at the relevant point of time was as under: Sanction for issue of notice. ....
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.... contemplated u/s 151(ii) of the Act. We have to, therefore, examine whether the PCCIT was having jurisdiction over the Central charge cases. 15. In this case the proceeding for reopening u/s 147 of the Act was initiated by AO of Central charge. The Revenue has brought on record a copy of the Notification No. 70/2014 [F. No. 187/37/2014 (ITA-I)]/SO 2915(E) dated 13th November, 2014 issued by CBDT, as per which Director General of Income-tax (Investigation), Ahmedabad was having jurisdiction over Principal Commissioner/Commissioner of Income-tax (Central), Ahmedabad. The jurisdiction of PCCIT, Ahmedabad was specified in the Notification S.O. 2753(E) dated 22nd October, 2014 issued by CBDT, as per which the jurisdiction of PCCIT, Ahmedabad was as under: NOTIFICATION New Delhi, the 22nd October, 2014 (Income-Tax) S.O. 2753(E)-In exercise of the powers conferred by sub-sections (1) and (2) of Section 120 of the Income- tax Act, 1961 (43 of 19611 and in supersession of the notification of the Government of India, Central Board of Direct Taxes number S.O.733(E), dated the 31 July, 2001, published in the Gazette of India, Extraordinary, Part II., Section 3. Sub-section (u), dated ....
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....lhi-10, who did not fall within the specified authority outlined in section 151(ii) of the Act. Similarl y, in the case of Twylight Infrastructure (P.) Ltd. (supra), the approval was sought from authority specified in clause (i), as against in clause (ii) of section 151 of the Act, although 3 years had elapsed from the end of the relevant assessment year. Therefore, the Hon'ble Delhi High Court had held that there was no approval of the specified authority as indicated u/s.151(ii) of the Act. In the other cases of Cipla Pharma and Life Sciences Ltd. (supra), Ravindra Reddy Katamreddy (supra) and Gigantic Mercantile P. Ltd. (supra) also the sanction was accorded by the Principal Commissioner of Income Tax, who was not the competent authority to accord sanction u/s 151(ii) of the Act. Thus, the facts of all the cases relied upon by the assessee are found to be different. Therefore, the ratio of those decisions cannot be imported to the facts of the present case. 18. In view of the above facts and considering the position of law as well as the Notifications of CBDT regarding the jurisdiction over the Central charge cases, we are of the considered opinion that the sanction u/s 151(ii)....
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....se (b) of section 148A or the period during which the proceeding under section 148A is stayed by an order or injunction of any court, shall be excluded: Provided also that where immediately after the exclusion of the period referred to in the immediately preceding proviso, the period of limitation available to the Assessing Officer for passing an order under clause (d) of section 148A is less than seven days, such remaining period shall be extended to seven days and the period of limitation under this sub-section shall be deemed to be extended accordingly. Explanation - For the purposes of clause (b) of this subsection, "asset" shall include immovable property, being land or building or both, shares and securities, loans and advances, deposits in bank account. 7[(1A) Notwithstanding anything contained in sub-section (1), where the income chargeable to tax represented in the form of an asset or expenditure in relation to an event or occasion of the value referred to in clause (b) of sub-section (1), has escaped the assessment and the investment in such asset or expenditure in relation to such event or occasion has been made or incurred, in more than one previous years relevant....
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....ated that for issue of notice u/s. 153A of the Act "for the relevant assessment year" (i.e., 07th to 10th assessment year prior to the year of search) one of the conditions was that the AO was in possession of books of accounts or other documents or evidence which revealed that the income represented in form of asset, which had escaped assessment, amounted to Rs. 50 Lakhs or more in the relevant assessment year or in aggregate in the relevant assessment years. According to the assessee, this condition was not fulfilled and, therefore, no notice u/s. 153A of the Act could have been issued for the relevant assessment years under the old provision of the Act. The Ld. Sr. Counsel has contended that no asset was found in the course of search nor any addition was made by the AO in respect of assets in the relevant assessment years. Therefore, the condition as stipulated in this proviso, was not satisfied. 22. We have carefully considered the contentions of the assessee. The Explanation-2 to Section 153A of the Act defines "asset" for the purpose of 4th Proviso, as per which assets include immovable property being land or building or both, shares & securities, loans & advances, deposits ....
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....n 149(1A) of the Act, income chargeable to tax amounting to Rs. 9,93,31,948/- represented in form of an assets is more than Rs. 50,00,000/- from F.Ys. 2011-12 to 2016-17. Even during the F.Y. 2012-13, relevant to A.Y. 2013-14 as per section 149(1A) of the Act, income chargeable to lax amounting to Rs. 1,08,39,155/- represented in form of an assets is more than Rs. 50,00,000/-. 23. It is, thus, found that the AO had recorded the satisfaction for escapement of income to the extent of Rs. 50 Lakhs or more in the relevant assessment years, which was represented in the form of asset. The contention of the assessee that no asset was found and that no addition was made in respect of asset is not found correct. As per the definition of "asset" as appearing in section 149 of the Act as well as in section 153A of the Act, the asset includes not only immovable property but also shares & securities, loans & advances, deposits in bank accounts etc. The AO had recorded specific satisfaction that the assessee had received cash payments in excess of Rs. 50 lakhs in the F.Ys. 2011-12 to 2016-17. These cash receipts were recorded in the seized diaries (Annexure A-3 to A-8) and were represented in t....
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....the seized diary belonged to all the family members collectively and not to the assessee in his individual capacity. He submitted that though the diary was found at the residence of the assessee and the entries in the diaries were also in the handwriting of the assessee, nevertheless, the transactions recorded in the diaries belonged to all the family members. To buttress this contention, the Ld. Sr. Counsel placed reliance on the following specific facts: (i) Ledger account of the assessee was appearing in the seized diaries and the same was not in the form of a capital account. (ii) Ledger account of all the brothers were appearing in the seized diaries and that too in the order of seniority. The ledger accounts contained details of withdrawals of all six brothers and closing balances were not carried forward from year-to-year. (iii) Ledger account of sons, daughter-in-laws and grand children of all six brothers were appearing in the seized diaries. It was inconceivable that the assessee would keep records of money given to his own wife and grand-children and also charged interest thereon. (iv) The ledgers titled as MNS Nafa Khaate, MNS Kharch Khaate, MNS Commission Khaat....
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....ad stated that any HUF business was being run by the assessee on behalf of all the family members. Neither the reference of HUF was anywhere appearing is the seized diaries. There was no separate bank account or demat account of the HUF even though shares transactions were recorded in the seized diaries. The Ld. CIT.DR further submitted that the seized diaries/documents also contained certain cheque entries, which were recorded in the books / bank account of the assessee only. Therefore, other entries in the diaries were rightly considered by the AO as belonging to the assessee. The Ld. CIT.DR submitted that the affidavit and subsequent contention of the assessee were only an after-thought, which was rightly rejected by the AO as well as by the Ld. CIT(A). He further submitted that the reason as to why the HUF had not filed any Income Tax return, even though it was having its separate PAN, was not explained by the assessee. The Ld. CIT.DR strongly supported the findings of the AO and the ld. CIT(A) that the seized diaries/documents belonged to the assessee only. 29. We have carefully considered the rival submissions. There is no dispute to the fact that the seized diaries and docu....
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....od F.Ys. 01.04.2010 to 31.03.2021. It was also explained that the diary for the current year was not complete. 32. In response to Question No.12, the assessee had stated that Diary No. A-12 contained the details of transactions made by the assessee only for the F.Y. 2020-21. Then in reply to Question No.14 also the assessee had stated that the diary A-14 had the details of transactions made by the assessee with different persons. In the course of search, certain loose papers were also found, which were inventorized as Annexure A-15 to A-22. In reply to Question No.15, the assessee had explained that the loose papers contained transactions with different persons which were duly entered in diary A-1 to A-12. Though, the assessee had earlier stated that the transactions in the seized diary belonged to him, family members and group, in reply to Question No.22, the assessee had categorically stated that all the transactions recorded in those seized diaries and documents A-1 to A-22 were in his individual capacity. The said question and the reply of the assessee is reproduced below: The assessee had categorically stated that all the transactions appearing in the seized diary and the do....
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.... by the group concerns. No flow of funds from any other family member or from the HUF's bank account towards share transactions have been brought on record. In fact, there was no bank account or any demat account of HUF and, therefore, no trading in shares could have been done by the HUF. The entries appearing in the seized diaries had to be read in its entirety. When the cheque entries appearing in the seized diaries and documents were recorded in the books of accounts/bank of the assessee, the other entries should also have to be considered in the hands of the assessee only. Therefore, the AO had rightly rejected the subsequent plea of the assessee and other family members that the diary belonged/pertained to HUF/joint family business. The contention of the assessee that the family members were not confronted with the seized diaries had no relevance. Even if the seized diaries were not confronted with the family members, they would have been aware about the HUF business, if it was actually carried on. None of the family members, in their statements recorded during the search, had stated that there was a common HUF/joint family business which was being looked after by the assessee....
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....iaries do not necessarily reflect the income liable to tax. It was explained that the assessee had made an attempt to decipher the nature of entries in the seized diaries. For this purpose, the assessee had copied all the transactions noted in the seized diaries and prepared books of accounts for F.Y. 2009-10 to 2020-21 in Tally Software (referred as "Seized Diary Books") which was submitted before the AO. Further, based on the entries recorded in the seized diaries and also based on his memory, the assessee also prepared another set of books of accounts in the Tally Software for F.Y. 2009-10 to 2020-21 (referred as "Tally Books") which also was submitted before the AO. The contention of the assessee was that the seized diaries were not in the form of systematic books of accounts neither they were prepared following any accounting principles. They were mere notings for assessee's reference purposes. On the other hand, the Tally Books were prepared following matching principles. Further that the Tally Books were on the basis of cash system of accounting following real income theory. The assessee had requested the AO to accept the net income for different years as per the Tally B....
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....dditions. 39. The ground taken by the assessee regarding determination of profit on the basis of reconstructed seized document (Tally Books) is dismissed. Ground No. 5 - Addition on account of Interest (Shree Vyaaj Khaate) 40. In the seized diaries there were recordings of interest earned by the assessee in cash for the A. Ys. 2012-13 to 2021-22 which were appearing in 'Vyaaj Khaate/ShreeVyaaj Khaate' account, the details of which is reproduced in the assessment order. The AO had made addition of Rs. 11,36,95,718/- in respect of interest received during the A.Y.2013-14 which was upheld by the ld. CIT(A). Shri S. N. Soparkar, the ld. Sr. Counsel submitted that the income in respect of interest (Shree Vyaaj Khaate) was incorporated in the profit & loss account prepared by the assessee. His only contention was that the expenditure claimed against the same should be allowed as deduction. 41. Per contra, Sri A P Singh, the ld. CIT-DR submitted that the AO had made addition of only net interest as appearing in the seized diary and, therefore, there was no question of allowing deduction for any other expenditure. 42. We have considered the rival submissions. The AO has reprod....
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....ounsel submitted that the addition sustained @ 15% by the ld. CIT(A) was high and needs to be suitably reduced for the following reasons: (i) Since this is a trading activity the profit cannot be as high as 15%. (ii) Reliance was placed upon section 44AD of the Act which provides a presumptive taxation @ 8% in the case of real estate activity. (iii) There was no corresponding asset found during the search as compared to the huge additions made by the AO. In view of above facts, the ld. Sr. Counsel requested that the estimation of percentage of profit in respect of land trading should be suitably reduced, for which reliance was also placed on various decisions placed in the paper book. 45. Per contra the ld. CIT-DR submitted that the assessee was not required to incur regular expenses in the nature of registration charges, stamp duty, property and other taxes etc. in respect of the land transactions undertaken by him. Considering these factors, the AO had rightly estimated the income from land dealing @ 35%. The ld. CIT-DR submitted that the reduction of estimation of profit to 15% by the ld. CITA was not correct considering the facts of the case. He, therefore, requested th....
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....n the seized diaries, in the rejoinder to the remand report of the AO. At the same time, the ld. CIT(A) also has not given any reason for estimating the profit @ 15% when the average profit rate as per seized document was 13.14% only. All the factors of passive investment, no overhead expense etc. were already taken into account in the average profit rate as reflected in the seized document. Therefore, it will be reasonable to estimate the profit of Jamin/land trading account by applying the average profit rate of 13.14%. Accordingly, the AO is directed to work out the profit from Jamin/land trading by applying the average profit rate of 13.14% on the total credits received during the year. 48. Accordingly, the ground taken by the Revenue in this respect is dismissed whereas the ground of the assessee is partly allowed. Ground No. 7 - Addition on account of Share Trading 49. In the seized diaries, the AO found recording in respect of trading in certain shares. The contention of the assessee was that income from all trading activities was already recorded in his nafakhaate account, which was rejected by the AO. The total credits in respect of share trading for the year under cons....
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.... found to be apparently correct. Considering the totality of facts of the case, we deem it appropriate to restrict the addition in respect of profit from share trading by applying presumptive rate of 8% as specified u/s.44AB of the Act. The said section also provides that the income can be computed @ 6% where the amount of total turnover or gross receipt was received by account payee cheque or bank draft or by use of electronic mode. Since, the assessee had not fulfilled this condition, the profit rate @ 6% cannot be applied in this case. Accordingly, the AO is directed to re-compute the income from share trading by applying net profit rate of 8% on the total credits of share trading during the year. 53. Accordingly, the ground taken by the Revenue is dismissed, whereas, the ground of assessee is partly allowed. Ground No.8 - Addition on account of Maal Khaate 54. This ground pertains to addition of Rs. 20,82,37,741/- made by the AO on account of income from "Shri Maalkhaate account". In the seized diaries, the assessee had maintained a ledger of "Maalkhaate/Shri Maalkhaate" which according to the AO, reflected net profit received from a trading activity. In the course of assess....
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....g as given by the Ld. CIT(A) in respect of nature of entries in the Maalkhaate ledger account is found to be correct and, therefore, the contention of the Revenue in this regard is rejected. 59. As regarding estimation of income in respect of entries appearing in Maalkhaate ledger account, the Ld. CIT(A) had restricted the addition @ 20% of total credits as appearing in this ledger. However, the Ld. CIT(A) has not given any basis for estimating the profit @ 20%. Even if the assessee had not explained the nature of trading activities or the transactions as appearing in this ledger account, the net profit @ 20% in any kind of trading activity is too high to be accepted. The provision of Section 44AD of the Act gives a guideline for computing profit and gain of business on presumptive basis. As per that section profit rate of 8% is required to be applied on the total turnover or gross receipts. However, the said section is applicable only in respect of turnover or gross receipt of Rs.1 Crore earlier, which was increased to Rs.2 Crores w.e.f. 01.04.2017. The turnover of the assessee in all the years was much higher than the limit as specified in the Act for application of presumptive ....
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....The Ld. Sr. Counsel further submitted that after finding out the combined peak, the set-off of the income finally determined till the preceding year should be given. In other words, the assessee sought benefit of telescoping of income already taxed in earlier years against the peak credit in any year. The Ld. Counsel submitted that the Ld. CIT(A) had rejected the ground for allowing the benefit of telescoping without assigning any reason. 63. Per contra, Shri A. P. Singh, the Ld. CIT.DR supported the orders of the AO and the Ld. CIT(A) in respect of this addition. 64. We have carefully considered the rival submissions. The first contention of the assessee is that the income from trading activity as recorded in the remaining ledger accounts were carried to Nafakhaate account. This contention was rightly rejected by the AO as no such nexus was established between the trading accounts and Nafakhaate account. As regards, working out the peak credit in respect of all residual ledger accounts, the contention of the assessee is that the peak credit should be worked out after merging all such ledger accounts and that the peak should not be determined for individual ledger accounts, as do....
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....in A. Y. 2012-13 but has to be considered in the subsequent years. Accordingly, the ground taken by the assessee for allowing benefit of telescoping of income already taxed in the earlier year with the peak addition of the following year(s) is allowed. 66. In the result, the ground of the assessee is partly allowed. Ground Nos. 10 & 11 - Disallowance of Commission & Other Expenses 67. Ground No.10 pertains to not allowing commission expense of Rs. 1,59,76,100/- and Ground No.11 pertains to not allowing other expense of Rs. 1,88,865.25/-, as noted in the seized ledgers Shree Commission Khaate and Shree Kharch Khaate, respectively. The assessee had taken a ground before the Ld. CIT(A) that the AO while passing the assessment order did not grant deduction for commission and other expenses as recorded in Shree Commission Khaate and Shree Kharch Khaate, which was appearing in the seized diaries. The ground taken by the assessee was rejected by the Ld. CIT(A). 68. Shri S. N. Soparkar, Ld. Sr. Counsel submitted that the expenses recorded in the seized diaries cannot be disbelieved and that the seized material had to be read and believed in entirety. According to the Ld. Sr. Counsel, i....
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....ble by the assessee in the Tally Books, which was not allowed by the AO. The Ld. CIT(A) too did not agree with the claim of deduction made by the assessee in respect of bad debts. The Ld. Sr. Counsel submitted that the claim of bad debts was in respect of Sarafi business and there was no requirement of debt having been considered as income in the earlier years. Further, the assessee had written off the debt in the Tally Book produced before the AO in the course of assessment proceedings. He, therefore, requested that the claim for deduction in respect of bad debt may kindly be allowed. Per contra, the ld. CIT-DR supported the order of the lower authorities. 73. We have carefully considered the rival submissions. In the seized diaries, there was no reference of any bad debts. Further, no amount was found written off as irrecoverable bad debt in the seized diaries. The assessee had contended that on the basis of the entries in the seized diaries, he had identified the entries which had become bad and such entries were written off as irrecoverable in the Tally Books prepared on the basis of seized diaries and presented before the AO in the course of assessment proceedings. Thus, the ....
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....s. In essence, the assessee had written of the bad debts as irrevocable in the previous year 2022-23 and, therefore, he was eligible for deduction of bad debts in the subsequent assessment year. The deduction for the same could not have been allowed in the earlier years. 75. The other condition to be fulfilled for deduction of bad debt is enshrined in section 36(2) of the Act which reads as under: (2) In making any deduction for a bad debt or part thereof, the following provisions shall apply- (i) no such deduction shall be allowed unless such debt or part thereof has been taken into account in computing the income of the assessee of the previous year in which the amount of such debt or part thereof is written off or of an earlier previous year, or represents money lent in the ordinary course of the business of banking or money-lending which is carried on by the assessee; (Emphasis supplied) As per this section the bad debt being claimed as deduction has to be taken into account in computing the income of the assessee of the previous year in which the bad debt is written off or of an earlier previous year. The contention of the assessee is that this provision was not applicab....
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....hese grounds are dismissed. 79. In the result, appeal of the assessee in ITA No. 1138/Ahd/2024 is partly allowed. ITA No. 1148/Ahd/2024 (A.Y. 2013-14) Ground No. 1 - Notional Interest 80. The first ground taken by the Revenue is against deletion of addition of Rs. 16,39,02,055/- on account of accrued interest. In the seized diaries, the assessee had recorded entries for accrued interest in respect of sarafi as well as trading accounts. The AO had considered the net accrued interest of Rs. 16,39,02,055/- as income of the assessee following the mercantile system of accounting and accordingly made the addition. In the first appeal, the Ld. CIT(A) had deleted the addition by holding that the entries for accrued interest were only notional entries and that no income had accrued to the assessee. Aggrieved with the order of the Ld. CIT(A) on this issue, the Revenue is in appeal before us. 81. Shri A. P Singh, the Ld. CIT.DR submitted that when the entries for accrued interest were duly recorded in the seized diaries, the AO had rightly made the addition. He, therefore, strongly supported the order of the AO. 82. Per contra, Shri S. N. Soparkar, Ld. Sr. Counsel submitted that the sei....
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....essee in this respect. The finding recorded by the Ld. CIT(A) is found to be as under: "10.5 I have carefully considered the submissions made by the appellant and the assessment order passed by the AO. The appellant has made entries related to interest across all types of account which can be broadly categorized as under. a. Interest provided in accounts that represent transactions related to land. b. Interest provided in accounts that represent transactions related to family members. c. Interest provided in accounts that represent transactions related to parties wherein there is no debit/credit transaction is reflected over long period except the interest entry passed by the Appellant. 10.6 So far as entries of interest passed by the appellant in category a) above is concerned, I find there is merit in contentions raised by the Appellant. After the land is purchased, no one provides/pays interest thereon. It is the assumption of the Assessing Officer that such interest provided on land was pursuant to terms of agreement or that transaction related to trading of land. AO has not referred to any such agreements found or seized during the search proceedings. Further, after ....
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....amounts payable to the family members over a period of time so that each member can get his due unpaid share with adequate compensation. The members who withdraw the amounts will have lesser amount due to them whereas the members who do not withdraw any amount would be duly rewarded with compensatory interest for not flushing out the funds from the family. Obviously, those who withdraw funds will receive lesser interest and if they overdraw, they would be charged interest for overdrawing the amount. This appears to be rational consistent approach adopted by the Appellant and it is apparent from the notings made in seized diaries. The Assessing Officer has not doubted the credit / debit balances of members of the Appellant's family appearing in the seized diaries. The Assessing Officer has in the cases of various family members accepted the fact that such interest has not been paid by the appellant nor received by such family members and the same reflects like journal entries. In the assessment order for A. Y. 2013-14 in the case of appellant's son Jigar P. Sanghvi (the appeal for which pending and being disposed off separately), the Assessing Officer has stated as follows: ....
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....e was duplication of interest in the seized diaries. The notional interest recorded in the seized diaries pertained to transactions related to land trading, related to family members and also to other parties. The ld. CIT(A) has analyzed the nature of the notional interest in respect of these three categories in detail and given a categorical finding as to why the notional interest as recorded in the seized diaries cannot be subjected to tax. The Revenue has been unable to controvert the findings as recorded by the ld. CIT(A). 85. So far as the accrued interest pertaining to land transactions is concerned, it had not been made out by the Revenue as to who had paid or from whom the interest was payable. As rightly observed by ld. CIT(A) no third party's name was appearing in the documents who will pay interest to the assessee, after investments in the land as made by the assessee. The land accounts were mere investments and did not represent advances given, on which interest could be earned. The ld. CIT(A) had rightly held that there cannot be any question of payment of interest after acquisition / investment in the land. As explained by the assessee the notional entries in lan....
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....on income. No doubt, the Income-tax Act takes into account two points of time at which the liability to tax is attracted, viz., the accrual of the income or its receipt; but the substance of the matter is the income. If income does not result at all, there cannot be a tax, even though in book-keeping, an entry is made about a 'hypothetical income', which does not materialise. Where income has, in fact, been received and is subsequently given up in such circumstances that it remains the income of the recipient, even though given up, the tax may be payable. Where, however, the income can be said not to have resulted at all, there is obviously neither accrual nor receipt of income, even though an entry to that effect might, in certain circumstances, have been made in the books of account." In the present case also, there was neither accrual nor receipt of interest income even though an entry to the effect of notional interest was made in the seized diaries. Under the circumstances, the income cannot be said to have resulted in this case. And if income doesn't result at all, there cannot be a tax; even though in book-keeping, an entry is made about a hypothetical income, w....
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....on of addition made by the AO in respect accrued interest is, therefore, upheld. The ground taken by the Revenue is dismissed. Other Grounds: 89. The other three grounds taken by the Revenue in this appeal have already been adjudicated while deciding the assessee's appeal for this year in ITA No.1138/Ahd/2024, and dismissed. 90. In the result, the Revenue's appeal in ITA No.1148/Ahd/2024 for A.Y. 2013-14 is dismissed. ITA No. 1139/Ahd/2024 to ITA No.1146/Ahd/2024 (A.Ys. 2014-15 to 2021-22) 91. Grounds of appeal taken by the assessee in ITA Nos. 1139 to 1146/Ahd/2024 are same as in ITA No. 1138/Ahd/2024, except that an additional ground in respect of addition for negative peak balance has been taken in the A.Ys. 2014-15, 2016-17, 2017-18 & 2018-19 and also that some of the grounds are not involved in these years. Since the facts and the common grounds taken in ITA Nos. 1139 to 1146/Ahd/2024 are identical; the finding and the decision of ITA No.1138/Ahd/2024 on merits, is applicable mutatis mutandis to the appeals pertaining to A.Ys. 2014-15 to 2021-22. Additional Ground - Negative Peak in Cash Book 92. We will now adjudicate the additional ground take by the assessee ....
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.... the action of the AO to take the cash balance as on 01.04.2011 as Nil cannot be held as correct. The seized diaries have to be considered in their entirety and the cash balance as per the seized diaries for the earlier years has also to be taken into account to correctly work out the quantum of negative peak balance for different years. The Ld. CIT(A) has given a finding that since the assessment proceedings for earlier years were barred by limitation and income for those years cannot be brought to tax, even though the diary for those years were seized; the entries for the earlier years cannot be taken into account to work out the negative peak balance. This finding of the Ld. CIT(A) is not found to be based on sound and correct legal and accounting principle. The income of the assessee for the years prior to A. Y. 2013-14 could not have been taxed due to legislative intent to tax the income of not more than ten years. Merely because the proceedings for the earlier year had become barred by limitation, this doesn't negate the entries of the seized diaries for the earlier years. When the diaries for the earlier years were seized, the cash balance available for the prior period ....
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....assessment. The assessee had submitted a copy of Seized Diary Books and Tally Books before the Ld. CIT(A) in the course of appeal proceeding, who had called for a remand report from the AO. The matter was decided by the Ld. CIT(A) after considering the remand report of the AO as well as the rejoinder of the assessee on the remand report. 99. The first two grounds taken by the Revenue in this appeal pertain to addition of Rs. 72,11,40,520/- on account of payments noted in various Jamin account and addition of Rs. 8,11,89,833/- on account of receipts noted in the Jamin accounts. The AO noticed that various accounts in the seized diary of the assessee reflected investment in land and other properties, ledgers for which were appearing as 'Jamin acc', 'flat acc', 'jamin khatu', 'land account' etc. The total investment in the properties made by the assessee was tabulated in Table-1A & Table-1B in the assessment order which was to the extent of Rs. 8,11,89,833/- and Rs. 72,11,40,520/- respectively. The AO had made the addition in respect of the total investments as appearing in respect of these assets. Before the Ld. CIT(A), the assessee had submitted the ....
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....to Ld. CIT-DR, the addition for investment in the property stands deleted by the order of Ld. CIT(A) due to its substitution with profit in land trading account, which was not correct. He, therefore, requested that the addition as made by the AO, be restored. 102. Per contra, Shri S. N. Soparkar, Ld. Sr. Counsel submitted that the AO had made the addition without considering the real nature of the transactions. He explained that the addition for the total investments could not have been made in this year, as the investments did not pertain solely to the current year. Ld. Sr. Counsel explained that the real nature of transactions recorded in the seized diary was land trading as held by the Revenue itself in the earlier years. He submitted that in the remand report, the AO had inadvertently overlooked the addition made in the earlier years in respect of trading in land/Jamin trading and the assessee, in the rejoinder to the remand report, had pointed out this omission to the Ld. CIT(A). Accordingly, the Ld. CIT(A) had confirmed the addition to the extent of 15% of the credits of Rs. 49,90,49,597/- in the land trading account, while deleting the additions as made by the AO; which als....
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....62,87,454 5 Other ledgers 33,83,370 33,83,370 6 Negative peak in cash book - - 7 Received from family members 13,14,035 13,14,035 7. In view of the above mentioned facts and circumstances and stand taken by the AO in assessee's own case for all A. Ys. other than AY 2021-22 in which figures related to A.Y. 2021-22 was also mentioned, it is proposed that figures mentioned in para-6 & 7 above in respect of A. Y. 2021-22 may be treated as authentic as the same has been verified from seized diary and tally books. " 105. It is noted from the above recommendation of the AO in the remand report that no addition was proposed in respect of profit from trading in land/Jamin trading, as made in the earlier years. The contention of the Revenue is that the AO did not propose for substitution of addition related to investment in properties in the remand report. In fact, the AO had neither recommended for any addition in respect of investment in properties nor in respect of profit in land trading account in the remand report. Even if the AO did not propose for substitution of addition related to Jamin trading account in the remand report, the addition for total investment in the....
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....essment order and that he had deleted the addition without giving any categorical finding. He further submitted that the Ld. CIT(A) had erred in considering the entries in miscellaneous categories as 'other ledgers' mentioned in the remand report. 110. Per contra, the Ld. Sr. Counsel supported the order of the Ld. CIT(A). He submitted that the nature of miscellaneous categories transactions was duly examined by the ld. CIT(A) and thereafter he had not deleted the entire addition but had confirmed the part of the addition. 111. We have considered the rival submissions. The Ld. CIT(A) has given the following finding in this regard: "165.1 In ground no. 8, the appellant has challenged the addition made u/s.69A towards entries in the miscellaneous category. The addition on account of miscellaneous transactions is dealt with by the AO in para 6.7 of the assessment order. The AO has stated that a large number of entries could not be placed under any category without further clarification from the assessee. The AO has tabulated such transactions and made addition in respect of the same. The details tabulated by the AO in Table 5 on page nos. 43 to 45 of the assessment order co....
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.... partly allowed. " 112. It is found that the AO had made addition of Rs. 196,80,35,013/- being credit entries in the diaries, which were not explained and were treated as miscellaneous transaction. All the credit entries in the nature of miscellaneous transactions couldn't have been considered as income without taking into account the debit entries of miscellaneous nature as well. The AO had not mentioned about the debit entries of miscellaneous transactions in the assessment order. In the remand report also, the AO did not propose any addition for miscellaneous credits of Rs. 196.80 Crores. Rather the AO had segregated the entries of miscellaneous category into the identifiable heads of land trading account, share trading account, interest received and interest accrued account, maal-khate account etc. in respect of which additions were made in the earlier years. The Ld. CIT(A) had considered the transactions of miscellaneous nature and found that many of them were already taken into account in Bhagidari (land trading account), share account, sarafi account etc., the profit of which, was already estimated separately. After excluding such entries, for which the profit was separ....