TaxTMI 
TaxTMI 
2026 (8) TMI 678
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....is aggrieved. Hence, these four appeals have been filed before us. As all these appeals revolve around a common issue, the appeals are taken up together for the sake of convenience and disposed of by way of common order. The grounds of appeal are as under:- IT(SS)A No.300/LKW/2024 "1. That on the facts and circumstances of the case and in law, the order dated 14-03-2024 passed by the Learned Commissioner of Income-tax Appeals ("Ld. CIT(A)"] is erroneous and bad in law. 2. That the Ld. CIT(A) has erred in confirming the addition of Rs. 4,34,831/-made by the Assessing Officer ("Ld. AO") on account of unexplained investment u/s. 69 of the Act, alleged that the appellant had given cash loan of Rs. 4,34,831/ during the year to Shri Kanchi Lal Shastri Smarak Sansthan and the source of which could not be explained by the appellant. 3. That on the facts and circumstances of the case and in law, the Ld. CIT(A) has failed to appreciate the documentary evidences and detailed explanations submitted during the course of first appeal proceedings. 4. That the appellant reserve the right to add to, alter or modify the above grounds before or during the ....
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....ide on the grounds raised by the appellant as per Law. 5. Any other relief which Hon'ble Tribunal may deem fit in the case. IT(SS)A No.318/LKW/2024 "1. That on the facts and circumstances of the case and in law, the order dated 14-03-2024 passed by the Learned Commissioner of Income-tax Appeals ("Ld. CIT(A)"] is erroneous and bad in law. 2. That the Ld. CIT(A) has erred in confirming the addition of Rs. 22,03,480/-made by the Assessing Officer ("Ld. AO") on account of unexplained investment u/s. 69 of the Act, alleged that the appellant had given cash loan of Rs. 22,03,480/- during the year to Shri Kanchi Lal Shastri Smarak Sansthan and the source of which could not be explained by the appellant. 3. That on the facts and circumstances of the case and in law, the Ld. CIT(A) has failed to appreciate the documentary evidences and detailed explanations submitted during the course of first appeal proceedings. 4. That the appellant reserve the right to add to, alter or modify the above grounds before or during the hearing before the Hon'ble Tribunal so as to enable the Hon'ble Tribunal to decide on the grounds raised by th....
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....Some of the cash was sent to KLS Nursing College through Shri Sunil Srivastava, Office Assistant, which he had recorded in the tally for some learning or other purposes. The assessee submitted that Shri Sunil Srivastava could be examined in this regard. The learned AO did not find the said reply of the assessee to be acceptable. He held that, on perusal of the printouts of tally data, it was found that two tally accounts were being prepared in the name of Shri Kanchi Lal Shastri Smarak Sansthan and KLS Nursing College and there was no connection between the two. The books purporting to be the books of KLS Nursing College revealed that unsecured loans had been raised from Shri M.C. Sharma and Smt. Usha Sharma in both cash and cheque, year to year. Shri Sunil Srivastava, accountant at KLS Nursing College, had not disowned these books. Scanned copies of his statement recorded during the survey proceedings were pasted in the assessment order. In the said statement, he had said that the books recovered from him had been made by one Shri Anant Kumar, who happened to be his staff member and a tally learner, and the entries had been made for learning purposes and had no relation with the b....
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....018-19, the assessee, Shri. Mahesh Chandra Sharma, filed an appeal before the learned CIT(A). Before the ld. CIT(A), it was submitted that the assessee was the husband of Smt. Usha Sharma, who was the Trustee and Secretary of Sh. Kanchi Lal Shastri Smarak Sansthan, which was engaged in educational activities and was running a nursing college at Kanpur and Lucknow. On the same date as the search i.e., 17.01.2019, a survey took place at KLS Pharmacy College, Lucknow and during the course of survey, one pen drive was impounded from the possession of Shri Sunil Srivastava, an Accountant, and his statement was recorded. From the said seized pen drive, one ledger account in the name of the assessee, alleged to be extracted from the tally data prepared in the name of KL Shastri Smarak Nursing College, was recovered and based upon the same, it was alleged that the assessee had given a cash loan of Rs. 4,34,831/- to Shri Kanchi Lal Shastri Smarak Sansthan, the source of which could not be explained by the assessee and it was, therefore, added to the income of the assessee under section 69 of the Act. It was submitted that the learned Assessing Officer had erred in law because, during the co....
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....ted from the aforesaid tally data, was held to be genuine and representative of actual transactions on the basis of which penalty proceedings were initiated under section 271D after concluding that the increase in the aforesaid loan accounts represented the receipt of loan in cash, by the Trust from the respective persons. The assessee submitted that other than these no other entries were considered to be genuine, as they did not form the subject matter of disallowances or additions. During the course of assessment proceedings, the assessee had explained the modus operandi of holding of cash as well as expenditures incurred for operation and capital expenditure of the Trust and during survey and post survey proceedings, Sh. Sunil Srivastava had affirmed that cash collected from operations of the Trust was only deposited in bank account, as per fund required for making payments through banks and the balance cash was kept at the office, or at home with Dr. M.C. Sharma, Dr. Usha Sharma and Dr. Sudhir Sharma, who incurred expenditure on behalf of the Trust and gave him details of expenditure / deposits in the bank account, based on which the transactions were entered into the regular b....
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....ough single voucher at the end of the year. Statement of Sh. Sudhir Sharma had also been recorded on the above matter and in response, he had submitted that all these expenditures have actually been incurred during the year, but recorded in the cash book at the fag end of the year. Thus, the aforesaid facts showed that expenditure / payment recorded in the ledger accounts of the assessee in the impounded tally data during survey, were incurred by the assessee for and on behalf of the Trust and that too out of cash belonging to the Trust, which were handed over for safe custody and for incurring the said expenditures out of fees collected by the Accountant and the Principal of the KLS Nursing College. It was therefore, submitted that the assessee had not provided any loan in cash from undisclosed sources to the Trust as alleged by the ld. AO. Attention of the ld. CIT(A) were invited to the expenditures incurred on behalf of the Trust to electricians, suppliers of building materials, plumbers, canteen supervisors and contractors as proof of credits in the said ledger being made out of the cash of the Trust, which were kept in the home of the assessee as an imprest account. Furthermor....
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....t all the entries posted by him in the account of Sh. M.C. Sharma (cash) were the cash expenses incurred by Dr. M.C. Sharma for KL Shastri Smarak Nursing College, 334 Muttakipur, Lucknow. The ld. CIT(A) also pointed out that the statement of Sh. Sudhir Sharma S/o Sh. M.C. Sharma, was full of inconsistencies. The tally account found had been stated to be made by one Sh. Anant Kumar who happens to be his staff, however Sh. Anant Kumar had never been produced, from whom it could be conclusively ascertained that he had posted the entries for learning purposes. Furthermore, the ld. CIT(A) submitted that since the payments made by the assessee through the bank had also been found to be entered in the bank statement of M/s Kanchi Lal Shastri Smarak Sansthan therefore, ld. CIT(A) held that the assessee could not disown the remaining entries, which have been shown as cash loan to KLS Nursing College. He documented the cash amount that had been received by the assessee from KL Shastri Smarak Nursing College and after perusal of ledger accounts, he came to the conclusion that the assessee had been spending cash from his own sources on behalf of the KLS Shastri Smarak Nursing College and recor....
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....Smt. Usha Sharma for the Assessment Year 2018-19, the learned CIT(A) recorded similar findings and sustained the addition of Rs. 18,84,410/- made under Section 69 of the Income Tax Act. In the assessment year 2019-20, he similarly sustained the addition of Rs. 22,03,480/- that was made under section 69 of the Act on similar facts. In addition to the aforesaid issue, in the assessment year 2019-20 in the matter of Shri Mahesh Chandra Sharma, the Assessing Officer had examined a loan ofRs. 2,00,000/- taken from Shri Jomet George and found that Shri Jomet George was an employee of M/s KLS Shastri Smarak Nursing College. He further observed that as on 23-6-2019, there was a credit balance of Rs. 35,940/- and cash of Rs. 1,80,000/- was deposited on 29-3-2019. On the same day Rs. 2,00,000/- had been paid to the assessee, Shri Mahesh Chandra Sharma. In view of the same, he held that the assessee had failed to prove the creditworthiness of the lender and the genuineness of the transaction, and therefore, he added back a sum of Rs. 2,00,000/- that was so received by way of loan as unexplained money under section 69A of the Income Tax Act. Before the learned CIT(A), the assessee submitted th....
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....ion 133A of the Income-tax Act, 1961, at the premises of Shri Kanchi Lal Smarak Sansthan, Lucknow on 17.01.2019, a pen drive containing tally data of the Sansthan was found and impounded. From the extracted tally data, the Assessing Officer observed that the assessee had allegedly advanced unsecured loans of Rs. 4,34,831/- to the Sansthan which was added to the income of the assessee under section 69. Similarly, in Assessment Year 2019-20, an addition of Rs.33,85,611/- was added whereas in the case of Smt. Usha Sharma, on the basis of the same material, sums of Rs. 18,84,410/- were added in the A.Y. 2018-19 and Rs. 22,03,480/- for AY 2019-20 were added in A.Y. 2019-20. The learned CIT(A) had confirmed these additions. It was submitted that the alleged trial balance reflected a credit balance of Rs. 1,53,04,523/- in the M.C. Sharma (Cash Account) with fresh credits of Rs. 18,85,831/- and debits of Rs. 14,51,000/- during the year. The trial balance also shows a drawings account with a debit balance of Rs. 3.04 Crores. It was contended that the credits in the said account were recorded as expenses in the regular cash book of the Trust maintained at Kanpur. It was further submitted tha....
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....ad been confronted with the trial balance and the credit balance standing in the name of Sh. M.C. Sharma and had clearly pointed out that Sh. M.C. Sharma, had not given any loan to the Trust and any such indication was on account of an incorrect entry made by the accountant. The learned AR further submitted that, in the assessment proceedings of Sh. K.L. Shastri Smarak Sansthan, no adverse inference had been drawn with respect to the aforesaid trial balance, and no addition had been made in the case of the Trust. It was further explained that the trial balance contained capital account, a drawing account and entries were accounted for in a haphazard manner. There could not be any capital or drawing accounts in the books of the Trust. The assessment of the Trust had been completed on the basis of the regular books of accounts maintained at Kanpur. Since in the case of the Trust, the AO did not find any entries in the alleged tally accounts as part of or being of the parallel books of accounts of the Trust, no additions were made in this regard. Only the cash account of Sh. M.C. Sharma, were held to be correct for the purposes of initiating penalty under section 271D. However, the le....
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.... the society or for meeting other expenses. Then how could any amount be considered as loans given by the assessee to the society. Accordingly, it was prayed that since there was no evidence found during the course of the search and survey that the assessee had any unaccounted income which could have been utilized for making of these loans and since the statement of the person from whom the pen drive had been found itself indicated that these expenditures and deposits were out of the funds of the Trusts, held by the assessee in fiduciary capacity, there was no scope for making any addition under section 69 in the hands of the assessee. The ld. AR submitted that the facts of the assessee's case in A.Y. 2018-19 were identical to the facts of the assessee's case in A.Y. 2019-20 and to the cases of Smt. Usha Sharma in the A.Y. 2018-19 and 2019-20. With respect to the unsecured loan of Rs. 2,00,000/- taken from Ms. Jomet George, which had been added back under section 69A, our attention was invited to the submissions made before the learned Commissioner of Income-tax (Appeals). It was submitted that Shri Jomet George had deposited cash into his own bank account for making the payment of....
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....hand, Sh. Atesham Ansari, CIT DR (hereinafter referred to as the ld. DR) took us through the orders of the Assessing Officer and the orders of the ld. CIT(A). He pointed out that the assessee had not been able to show a co-relation between the money that was recorded in the ledger and the regular books of the assessee to demonstrate that the money reflected in the trial balance was actually money that have been received from the assessee Trust. Since the assessees had not been able to satisfactorily explain the source of the cash, it could not be held that the cash that was being deposited into the accounts of the Trust was the Trust's own money and furthermore, since there were mis-matches between the amounts deposited and the amounts recorded in the books of the Trusts and amounts spent and expenditures recorded in the books of the Trust, the ld. AO was perfectly justified in treating the cash deposited as unexplained loans made by the assessee in cash from unexplained sources which merited disallowance under section 69. He pointed out that the ld. CIT(A) had discussed the matter very elaborately in his orders and he placed reliance upon the same. 10. We have duly considered t....
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....though no additions have been made in the hands of the Trust, the cash loans have been held to have been advanced out of the assessees' own funds and, since the assessees have been unable to explain the source of such funds with supporting evidence, the same have been treated as unexplained and added back. Consequently, penalty proceedings have also been initiated against the assessees under section 271D. 11. On an examination of these rival contentions, it is important to analyse the Tally account found during the course of the survey conducted at M/s KLS Nursing College, Lucknow, on 17.01.2019. The said Tally account contains a trial balance for the period from 1.04.2017 to 31.03.2018, wherein Dr. M.C. Sharma is shown to have given loans to the extent of Rs. 1,53,04,523/- by way of cash and Rs. 53,12,977/- by cheque and Smt. Usha Sharma is shown to have given loans of Rs. 2,83,20,720/- to Sh. K L Shastri Nursing Smarak College. However, perusal of the ledger accounts of Dr. M.C. Sharma (cash) and Smt. Usha Sharma, show that the figure of Rs. 1,53,04,523/- is arrived at by subtracting the debit balance of Rs. 14,51,000/- from the credit balance of Rs. 1,67,55,523/-. Further....
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....stava states that Dr. M.C. Sharma, from time to time told him that he has made certain expenditures under certain heads and Sh. Sunil Srivasatava would make those entries in the accounts maintained by him under the head M.C. Sharma (Cash) and that the closing balance of Rs. 1,86,90,134/- was on account of such entries. He further elaborated that these entries were account of expenditures made by Dr. M.C. Sharma for K.L. Shastri Smarak Nursing College in cash. In response to question no. 13, Sh. Sunil Srivastava pointed out that he and the principal were collecting fees on behalf of the college for certain courses and when the principal was on leave or busy in other works, he would also collect fees for certain other courses and give receipts to the children for them. Furthermore, if any payments were required to be made to Ram Manohar Lohiya Awadh University, Faizabad or U.P. State Medical Faculty, he would make such payments but for construction work of KLS Shastri Smarak Nursing College, MSC Building and Resort (Girls Hostel) that was being undertaken, the majority payments would be made on the instructions of Dr. M.C. Sharma, Dr. Sudhir Sharma and Dr. Usha Sharma. In response to....
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....e. In the circumstances, there does not appear to be any reason to conclude that the cash receipt entered represent cash loans made by the Trustee or Dr. M.C. Sharma from their own funds to the Trust and that being the case the addition under section 69 for the purported loan of Rs. 4,34,831/- is unexplained under section 69. Therefore, in view of the aforesaid findings, the addition made by the AO of Rs. 4,34,831/- in the A.Y. 2018-19 is held to be unsustainable and is accordingly deleted. Similarly, when looking at the ledger and trial balance of Dr. M.C. Sharma for the A.Y. 2019-20, it is observed that the closing balance of Rs. 1,86,90,134/- is almost entirely on account of payments made for construction work on behalf of the Trust. Similarly, examination of ledgers of Smt. Usha Sharma for the said period also revealed payments being made for the construction activities of the Trust, which would lead us to conclude that all these accounts are reflective of funds of the Trust being handled by Dr. Usha Sharma and Dr. M.C. Sharma which were later brought into the accounts of the Trust. Furthermore, no corroborative material has been brought on record to suggest unaccounted income ....