TaxTMI 
TaxTMI 
2022 (10) TMI 1314
X X X X Extracts X X X X
X X X X Extracts X X X X
....olved in the revenue's appeal and cross objections of the assessee for all the years are almost identical except the difference in figure of additions disputed, are common, all these appeals and cross objections were heard together with the agreement of both the parties and are being disposed off by this consolidated order. 3. At the outset, the ld. DR has submitted that the matter pertaining to Shree Bhagwati Machine Private Limited in ITA no. 296/JPR/2022 & Co. No. 17/JPR/2022 may be taken as a lead case for discussions as the issues involved in the lead case are common and inextricably interlinked or in fact interwoven and the facts and circumstances of other cases are exactly identical except the difference in the amount in other assessment year. The ld. AR did not raise any specific objection against taking that case as a lead case. Therefore, for the purpose of the present discussions, the case of ITA No. 296/JPR/2022 and CO/17/JPR/2022 are taken as a lead case of each party. Based on the above arguments we have also seen that for all these appeals and cross objections grounds are similar, facts are similar and arguments were similar and therefore, were heard together ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lso 115BBE of the Act while making additions of Rs. 3,98,12,270/- and Rs. 3,35,33,211/ as mentioned in Ground No.1 & 2 in grounds of appeal raised before CIT(A). 2. That the Ld CIT (A) has grossly erred on facts and in law in not adjudicating this ground whereas Id. AO has grossly erred on facts and in law in making addition of Rs. 3,98,12,270/- and Rs. 3,35,33,211/ u/s 68, without any incriminating material found during the course of search at the premises of the assessee. As per settled position of law no addition can be made u/s 153A in the cases of unabated assessments, without any incriminating material having been found during the course of search. Therefore, the addition made by the ld. AO deserves to be deleted and the assessment made by him deserves to be quashed. 3. That the impugned assessment order passed u/s 143(3) r.w.s. 153A of the Act is absolutely non speaking and passed making additions of Rs. 3,98,12,270/-. Rs.3,35,33,211/- and Rs. 1,48,320/- without giving any show cause notice or opportunity of being heard on these points, in gross violation of principle of natural justice. Ld CIT(A) has erred on facts and in law in stating that this ground ha....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... income under the head Business and profession. The assessee filed original return of income on 30.09.2015 declaring total income of Rs. 1,27,48,410/-. The assessee has not filed the return in response to notice u/s. 153A of the Act. 6.2 The main issues involved in this case, as found by the AO in the assessment proceedings is that during the course of search proceedings, various loose papers, documents, digital data etc. were found. During the course of assessment proceedings, it has been stated by the assessee company that after taking into account all the incriminating documents found from the various premises (business premise as well as residential premise of the Directors), prepared a memorandum cash book and offered year wise peak credit for taxation in the hands of the Director Sh. Yashwant Sharma. The contention of the assessee is not found acceptable by the AO due to the following reasons :- a) The nature of these loose papers prima facie appears to be business related transactions since name of various business concerns are mentioned therein. b) During the search proceedings while confronted Sh. Yashwant Sharma in his statements u/s 132(4) stated tha....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nly, therefore, the above given peak credit should be liable to be taxed in the hands of the assessee company. Accordingly, the above peak credit of Rs. 9,86,87,619/- is being added in the hands of the company in the respective year. However, the gold jewellery of Rs. 1.84 crores over and above the limits of CBDT Circular which is included in the above peak is being excluded from the total figure of peak of A.Y. 2020-21. In this way for the year under consideration the figure which is being added on this account is Rs. 3,98,12,270/- as per provisions of section 68 r.w.s. 115BBE of the 1.T. Act, 1961. Further, the year wise break up of total transactions mentioned in these papers is Income in cash mentioned below: A. Y Receipts of income in cash which is generated out of books Payments made in cash for income which is generated out of books 2014-15 1549000 5668000 2015-16 33533211 14825716 2016-17 39704312 19819025 2017-18 30356700 21334170 2018-19 59039051 41188500 2019-20 57544600 29847600 221726874 132683011 During the course of assessment proceedings, the assessee failed to verify the payment....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the aforesaid income offered by him in the return of income filed u/s 153A. Therefore legally speaking the same income cannot be taxed twice, firstly in the hands of the Director and secondly in the hands of the company. Thus it is evident that the Ld. AO has considered the aforesaid income to be pertaining to the Director of the appellant company and therefore sustaining such addition in the hands of the appellant company would lead to double addition. (v) As regards the contention of the AO that Sh. Yashwant Sharma has himself admitted in his statement recorded u/s 132(4) of the Act that the receipts & payments are against the booking of Machinery and that the alleged transactions are business transactions of the appellant company, it is observed that Sh. Yashwant Sharma has nowhere stated in his statement that the alleged transactions are with reference to the appellant company, though he has stated that the cash advance is received on sale of machinery and that there are entries of cash payments as well, the summary of which has been mentioned on Pages 45 to 59 of the Exhibit 2. Infact on perusal of the statement of Sh. Yashwant Sharma recorded u/s 132(4) of the Act, i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rch action and that too on the basis of material seized. On the other hand, it is also observed that the AO has again considered all the above papers and other transactions appearing in those papers to be business in nature and has considered them in the hands of the appellant company by rejecting the claim of the appellant company that the unaccounted transactions have already been incorporated by Sh. Yashwant Sharma in his memoranda cash book and offered the same for taxation. Thus, the action of the AO, considering the same income in the hands of the Director as well as the Company, is not justified. (vii) It has been brought to my notice that Sh. Yashwant Sharma is running a proprietorship concern under the name & style M/s Bhagwati Engineering and filing the income tax return declaring therein the income earned from that firm. It is observed that the aforesaid firm also deals in re-sale of machinery, machinery parts and job work. The appellant contended that the income earned out of books from that business was utilized and credited in the loose papers found in the mobile of Sh. Atmaram Sharma on the basis of which memoranda cash book was prepared and the peak credit ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of the appellant company, it has been stated by him that the documents saved in his phone are related to M/s Bhagwati Machines Pvt. Ltd. and to Sh. Yashwant Sharma and that the whatsapp chats, documents/data and photos pertain to various parties and thus from the statement of Sh. Atmaram Sharma, it is evident that the aforesaid documents found in his mobile phone pertain to the appellant company as well as to Sh. Yashwant Sharma. Further the same has already been offered and taxed in the hands of the Director of the company upon which penalty has also been levied by the AO. Therefore it is an admitted fact that the income pertains to Sh. Yashwant Sharma and not to the appellant company. It is a case of multiple addition without any corroborative evidence brought on record by the Ld. AO. Therefore, on consideration of the submissions of the appellant and the facts of the case, it was seen that the income was chargeable to tax in the hands of Sh. Yashwant Sharma and not in the hands of the company, as made by the AO. Thus the aforesaid peak credit cannot be sustained in the hands of the appellant company. Accordingly the addition of Rs. 3,98,12,270/- made by the AO in the hands of th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....consideration. Therefore in view of the above fact and the discussion made by me at para no. 4.2 of this order, wherein the transactions as per Exhibit A-2 incorporated in the memorandum cash book has been considered to be pertaining to Sh. Yashwant Sharma, Director of the appellant company and the fact that once the peak credit has already been offered and taxed in the individual hands of the Director which has also been accepted by the AO and penalty also levied on such amount in the case of the Director, therefore it is not logical to again tax the same amount offered in memorandum cash book on the basis of receipts mentioned in the above cash book. Further the fact also remains that the AO has considered the receipts but has not deliberated on either the payments made or recycling of the amount as mentioned in the seized Exhibit. (iv) Further, as regards the contention of the AO that the appellant has failed to verify the payments from books of accounts and that no supporting bills & vouchers were produced to prove that these payments were actually made by the appellant company, it is observed that it is only on this account that the Director of the appellant company h....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., (PAN AADCS1826L) for A.Y.2015-16 to 2020-21, ITA No.296 to 301/JPR/2022 Ref :- Letter No.CIT(DR)-1/ITAT/JPR/2022-23/297 dated 12.09.2022 Kindly refer to subject and reference cited. 2. As per reference mentioned (received on email) this office was asked to submit paper book containing copy of seized material and statements on the basis of which additions were made within 10 days. 3. The desired paper book is enclosed herewith. It includes a brief note, copies of relevant complete exhibits of seized papers part of which has been discussed in assessment order (Exhibit A-7 found from G-178, 179, RIICO, Parbatpura, Ajmer, Exhibit A-2 and Exhibit A-3 found from F-187, 188 RIICO, Parbatpura, Ajmer) and relevant statements as discussed in assessment order (statements u/s 132(4) dated 15.02.2020 of Shri Yashwant Sharma and statement u/s 131 dated 15.02.2020 of Shri Aatma Ram Sharma). Original Authorizations letters of PCIT (Central), Rajasthan, Jaipur, Form No.36, Orders of CIT(A), Form No.35, Assessment Orders, Grounds filed by the assessee before the CIT(A) were already submitted alongwith appeals. Copies of the same were also already provid....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y supporting Bills and Vouchers, which can prove that the said transactions were actually made by the assessee company. In absence of proper verification, all the Receipts are held as unexplained cash credits of the assessee company and benefit of payment was not extended to the assessee without proper verification. Therefore, total receipts were added in respective A.YS 2014-15 to 2019-20. i) Further in A.Y.2015-16, on perusal of P & L A/C, it is found that an amount of Rs. 13,48,320/- was debited on account of rent paid to M/s Mahalaxmi machine tools, Ajmer whereas as per details available in Form No. 26AS, the payment made on account of Rent was only Rs. 12,00,000/-. Accordingly, excess claim of Rs. 1,48,320/- made on account of rent payment was also added to the total income of the assessee. Findings of CIT(A) in brief: The Id. CIT(A)-2, Udaipur has observed that AO has not objected to the peak credit offered by Shri Yashwant Sharma, the Director of appellant company and return of income of Director has been accepted by the same AO. The same income cannot be taxed twice. As far as admission of Directors in statement recorded u/s 132(4) in concern Id. CIT(A) ob....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lated to unaccounted business transactions in cash. Entries related to both receipt and payment side were found in these papers. Assessment year wise working of the same made by AO are as under: A.Y Receipts of income in cash which is generated out of books Payments made in cash for income which is generated out of books 2014-15 1549000 5668000 2015-16 33533211 14825716 2016-17 39704312 19819025 2017-18 30356700 21334170 2018-19 59039051 41188500 2019-20 57544600 29847600 221726874 132683011 AO found that assessee failed to verify these payments from the books of account and did not produce any supporting evidences to justify them. Being unaccounted business transactions AO made additions in the respective A. Ys. (A. Y.2014-15 to 2019-20), according to the receipt side as per above table in the hands of assessee company. On the other hand Director of the assessee company Shri Yashwant Sharma claimed to be prepared a memorandum cash book after taking into account all the incriminating documents found and offered yearwise peak credit for taxation in the hands of the Director Sh. Yashwa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hip concern M/s Bhagwati Engineering in his original returns filed u/s139 in any of ITR filed prior to search for any AYS (2014-15 to 2019-20). It is only after search action when return were filed by him u/s 153A he has shown business income in AY 2014-15, 2015-16 & 2016 17 and AY 2020-21 filed u/s 139 after search. It is important to note that in these AYS also business income has been shown only to the extent of income offered on the basis of above said peak based on incriminating seized material. If Shri Yashwant Sharma was actually doing any business from so called proprietorship concern under the name & style M/s Bhagwati Engineering, then there should have been normal business income also which is other than income offered on the basis of said peak based on incriminating seized material. How it can be relied that shri Yashwant Sharma was not having any normal business income under his so called proprietorship concern. It is also surprising to note even in search year AY 2020-21 any normal business income except disclosure hasn't been shown by him. It is further to note that even in revised ITRS u/s 153A he has not shown any business income from his so called proprietorsh....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... The income has to be taxed in the right hand i.e. in whose hand it was taxable irrespective of admission made during search. Here as per material on record Shri Yashwant Sharma doesn't have any business concern in his individual capacity. Hence, income should be charged in the hand of assessee company. As far as observation of Ld CIT(A) that AO has not objected to the peak credit offered by Shri Yashwant Sharma, the Director of appellant company and return of income of Director has been accepted by the same AO. The same income cannot be taxed twice is concern it is to mention here that AO had clearly objected the peak theory of Shri Yashwant Sharma and therefore made addition in the hand of assessee company as can be seen from the assessment order in the case of assessee company. Return of income has been accepted by AO in the case of Shri Yashwant Sharma in the assessment order in his case because as per settled position of law/ guidelines that assessed income cannot be less than returned income. Ld. CIT(A) had grossly erred on the facts & its finding and failed to appreciate the findings of AO made by him in assessment order. Inspite of the fact that Shri ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of P & L A/c, it is found that an amount of Rs. 13,48,320/- was debited on account of rent paid to M/s Mahalaxmi machine tools, Ajmer whereas as per details available in Form No. 26AS, the payment made on account of Rent was only Rs. 12,00,000/-. Accordingly, excess claim of Rs. 1,48,320/- made on account of rent payment was also added to the total income of the assessee. The Ld. CIT(A)-2, Udaipur, has stated that the assessee company paid only Rs. 12,00,000/- on which TDS was deducted and balance amount is the Service Tax and Cess on which TDS has not been deducted in view of Circular No. 4/2008 dated 28.04.2008. Further, it has been mentioned in the Circular that TDS u/s 1941 of the Act, would be required to be made on the amount of Rent paid/payable without including the Service Tax. in view of aforesaid Circular, the ld. CIT (A)-2, Udaipur has opined that, the Service Tax paid by the Tenant does not partake the nature of "Income of the Landlord, who acts as a Collecting Agency for Government for collection of Service Tax only. Accordingly, deleted the addition. Ld CIT(A) failed to appreciate the finding of AO made by him in assessment order. ⮚ The decision of th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....vehemently argued that the addition made by the AO is not only factually correct but on the basis of the facts of the case in law also the same is required to be taxed in the hands of the company. As regards plea of the assessee that the disclosure made in the search may be considered with respect to these papers is not correct as the same is not bifurcated and therefore, the same is separate and cannot be linked with this loose paper found and thus not covered by the disclosure made. The ld. DR submitted that the statement of Shri Atmaram Sharma, employee of the assessee in question no 11 stated that the documents saved in his phone are related to the assessee and Shri Yashwant Sharma and that the whatsapp chats, documents / data photo pertains to various parties and thus these are related to the assessee. Based on these arguments he supported the findings of the ld. AO for an amount of Rs. 3,98,12,270/-. As regards the addition of Rs. 3,35,33,211/- being the amount of receipts in cash generated out of books even the payment were made in cash but the credit of the same was not allowed considering the provision of section 40(A)(3). Based on these arguments he supported the order of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....2 of B-10 and vide letter dated 30.09.2021 copy already submitted with the earlier reply) it was submitted that these annexure belongs to Sh. Yashwant Sharma he has given advances to different person on their booking the machines on Shri Bhagwati Machines Pvt Ltd. and when they return it duly recorded in the diary along with the commission charged there on for this advance made and the learned AO was silent on this issue. Ground No 3 raised by department is against the principle of natural justice and decided law by the various judicial courts and hence on the peak credit can be taxed and in the case of Sh. Yashwant Sharma department itself has taxed the peak amount. Ground No 4 It is also incorrect to say that the in the AY 2017-18, AY 2018-19, AY 2019-20 that Yashwant Sharma has not offered peak credit. A cash book was prepared and submitted before the Learned AO and Learned CIT (A) -2 Udaipur by which peak of every year was worked out and offered for taxation on the basis of the documents recovered during search. Even the Ld. DCIT Central Ajmer was also present during the appellate proceedings and he was fully satisfied with the peak worked out on the basis of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ocuments at Exhibit-2, it may be appreciated that it does not contain the name of the assessee or any other person. It is merely a memoranda diary containing the details of payments received and paid. Based on these documents director Shri Yashwant Sharma offered year wise peak credit for taxation in his hands. Even penalty proceedings were also initiated against him for disclosure of this income in his return of income. The ld. AR further submitted that Shri Yashwant Sharma is running a proprietorship concern under the name & style M/s. Bhagwati Engineering and filling the income tax return regularly. This firm is also engaged in the resale of machinery, machinery parts and job work income so the offering of the income in his hands once taxed same income cannot be taxed in the hands of the assessee. Based on these arguments the ld. AR of the assessee submitted that the addition of Rs. 3,98,12,270/- correctly deleted. As regards the addition of Rs. 3,35,33,211/- made on account of cash receipts on the same papers for which even the credit of the payments were not given considering the provision of section 40A(3) of the Act the ld. AR of the assessee submitted that the addition were....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he relevant income is already considered in the hands of Shri Yashwant Sharma. During the AY 2017-18, 2018-19 & 2019-20 no peak was materialized and thus question of offering the peak amount during these period does not arise and this fact is accepted by the ld. AO before the ld. CIT(A). Even in the submission made in this appellate proceeding the ld. AO not commented on the working of the peak and thus this ground of the revenue has no merits. As regards the ground no. 5 of the revenue the ld. AR of the assessee relying on the findings of the ld. CIT(A) submitted that the alleged difference is on account of the service tax on rent and the service tax is not subjected to TDS as per circular no. 4/2008 dated 28.04.2008 this fact is not disputed and thus the said 5th ground has also no merits. 12. We have considered the rival contentions, perused the material available on record and also gone through the findings of the lower authorities recorded in their respective orders. The bench noted the ground no 1 & 6 raised by the revenue being general in nature therefore, the same is not require any adjudication. Apropos ground no 2 & 3 the bench note that the ld. AO has made an addition....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the same is found from the premises of the company cannot be prima facie considered as belonging to the assessee company, when the director of the company already running a proprietary concern in the name and style as M/s. Bhagwati Engineering. This fact is accepted and not controverted. The firm is also engaged in the business of resale of machinery, sale of parts and job work. c) The ld. AO has not pinpointed that which of the specific transaction of the company recorded in that material is not recorded in the books. d) The working out of the peak is not in dispute. e) The peak as worked out and agreed has already been taxed in the hands of the director of the assessee Shri Yashwant Sharma and the same is also not in dispute. f) Based on the offering of the income by Shri Yashwant Sharma penalty was levied in the year 2014-15 where in the relevant income was offered. g) How can the same income can be taxed twice which is arising from the same seized material. h) Shri Yashwant Sharma has accepted this transaction and while recording the statement u/s. 132(4) no where it is stated by him that these transaction are related to the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nt of the employee of the assessee. Therefore, we see no reason to interfere in the reasoned findings given by the ld. CIT(A) as revenue did not controvert any of the factual aspect related to the detailed findings of facts of ld. CIT(A) as detailed in his order. Moreover, we also concur the view of the ld. CIT(A) that the same income cannot be taxed twice in the case of Shri Yashwant Sharma and in the case of assessee. We also support the view that once the cash receipt is already considered while working out the peak the same income cannot be taxed u/s. 68 as receipt. Therefore, the order passed by the ld. CIT(A) could not be found fault with and therefore, we see no reason to intervene in the findings of the ld. CIT(A). Based on these facts we hold the view of the ld. CIT(A) as correct and appeal of the revenue on ground no 2 & 3 is dismissed. 14. As regards the ground number four we concur the arguments of the ld. AR of the assessee that the revenue cannot take a plea that in the AY 2017-18, 2018-19 & 2019-20 Shri Yashwant Sharma has not offered peak credit. A cash book was prepared and submitted before the ld. AO and ld. CIT(A) which is not disputed even by the AO when he w....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssessee. 18. The cross objection ground no. 1 & 2 is related to invoking of provision of section 68 & 115BBE of the I.T. Act, as the addition has already been deleted by the ld. CIT(A) the same was not decided by the ld. CIT(A). Ground no. 4 is related to challenging the proceeding on account of mechanical approval u/s. 153D of the Act, since we have concurred the findings of the ld. CIT(A) on merits therefore, these ground No. 1, 2 & 4 being technical are infructuous and does not require any adjudication. As regards ground no. 5 related to charging of interest u/s. 234B which is consequential in nature for which AO is directed to give the necessary effect as per law. Ground no. 6 is related to levy of the penalty and the levy of penalty is not subject matter of challenge before us. Therefore, the same is premature which does not require adjudication. 19. The only ground no. 3 which is related to the issue of the show cause not being given while making the addition for which the ld. AR of the assessee filed a detailed submission the same is extracted here in below ; "That the impugned assessment order passed u/s 143(3) r.w.s. 153A of the Act is absolutely non speakin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ous. It should appraise the party determinatively the case he has to meet. Time given for the purpose should be adequate so as to enable him to make his representation. In the absence of a notice of the kind and such reasonable opportunity, the order passed becomes wholly vitiated. Thus, it is but essential that a party should be put on notice of the case before any adverse order is passed against him' Thus, in the present case, it is argued that assessing officer has clearly failed in issuing appropriate show cause notice and has clearly vitiated principles of natural justice by making addition of Rs. 4.625 crore as against Rs. 1.25 crores as stated in the show cause notice. The appellant is of the opinion as to how the initial amount as stated in show cause notice of Rs. 1.25 crore was derived and how the same went up to Rs. 4.625 crores, is not apparent from assessment order. The contention raised by the appellant found to be correct." In view of above addition made by Ld AO deserves to be deleted." 20. Since, the disputed addition has already been allowed by the ld. CIT(A) and we have also concurred with the findings of the ld. CIT(A) on merits, therefo....