TaxTMI 
TaxTMI 
2026 (9) TMI 1550
X X X X Extracts X X X X
X X X X Extracts X X X X
....for Assessment Year 2019-20 : "Tax Appeal No.436 of 2026: (a) Whether, on the facts and circumstances of the case and in law, the learned ITAT has erred in considering the facts of the case and in ignoring that the substantive addition was made on account of investment in land as recorded in the Diary survey impounded during the course of proceedings at the business premises of Shri Bhagwanjibhai P Amrutiya? (b) Whether, on the facts and circumstances of the case and in law, the learned ITAT has erred in deleting the addition of Rs. 6,77,34,130/- made u/s. 69A of the Income Tax Act, 1961 ignoring the fact that the amounts reflected in the diary impounded during the course of survey proceedings? (c) Whether, on the facts and circumstances of the case and in law, the learned ITAT has erred in ignoring the fact that Shri Bhagwanjibhai P. Amrutiya admitted that in the diary impounded during the course of survey proceedings, the name "Bank" is mentioned in the narration of all the bank transactions and accounted for in the books of the Firm and remaining transactions mentioned in diary are cash transactions? (d) Whether, on the facts and circ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....at corresponding sales were also unrecorded? Tax Appeal No.437 of 2026: (a) Whether, on the facts and circumstances of the case and in law, the learned ITAT has erred in considering the facts of the case and in ignoring that the protective addition was made on account of investment in land as recorded in the Diary impounded during the course of survey proceedings at the business premises of the assessee? (b) Whether, on the facts and circumstances of the case and in law, the learned ITAT has erred in deleting the addition of Rs. 1,48,89,125/- made on account of unexplained investment u/s. 69B of the Income Tax Act, 1961 ignoring the fact that the partner (Shri Bhupendra B Patel) himself admitted that he along with his partners purchased a land at Ravapar Nadi village for establishing the factory premises of Expert Particle Board and the total consideration for the said transaction was decided for Rs. 1,55,89,125/- and sale deed (document) was executed only for Rs. 7,00,000/-, for which payment has been made through demand draft no.013955 on 21/04/2018 and remaining payment for Rs. 1,48,89,125/- was paid by cash? (c) Whether, on the facts and circ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ther related parties in post-search investigation and the lack of finality on substantive additions in the case of M/s. Expert Particle Board? (i) Whether, on the facts and circumstances of the case and in law, the learned ITAT has erred in deleting the protective addition of Rs. 54,04,130/- made on account of unaccounted bogus purchases ignoring the facts that these were cash purchases which were not recorded in the regular books of the assessee and the corresponding sales have also not been recorded by the assessee?" 4. As the issue involved in these Appeals is common, both the Appeals are heard analogously and are being disposed of by this common Judgment. For sake of convenience, Tax Appeal No.436 of 2026 is treated as a lead matter. 5. The brief facts of the case are under : 5.1. The assessee-Shri Bhagwanjibhai P Amrutiya @ Bhupat Amrutiya filed Return of Income electronically on 30th August, 2019 declaring total income at Rs. NIL declaring loss of Rs. 2,72,94,013/- and has earned income from manufacturing and trading in particle board and other interior decorative products. 5.2. A search was conducted on the group of 'Coral Group of Morbi' which was comme....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d Rs.67,89,125/- was paid on 6th November, 2018 and the balance payment of Rs.31,00,000/- was shown payable at that time. He further stated that as per condition of agreement (satakhat), the seller will charge interest @ 1% per month for balance amount. He also admitted in his statement that the above cash transactions are not reflected in the books of accounts of the firm and accordingly, the source of the differential amount, paid in cash of Rs. 1,48,89,125/- remains unexplained and in this regard, the assessee has not furnished any cogent reply to explain the source of investment made in cash of Rs. 1,48,89,125/-for purchase of said land. 5.5. The Assessing Officer further noticed that during the course of survey proceedings under Section 133A of the Act at the office of the assessee, a diary was found and impounded as amexure A-1. Further, a statement of Shri Bhupendra B. Patel, partner of Expert Particle Board, on oath under Section 131(1) read with Section 131(1A) of the Act was recorded and the contents of the diary (Annexure A-1) was confronted to him and when the contents of the above cash book were confronted to Shri Bhupendra B. Patel, who is one of the managing partn....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... entire notebook in the hands of the assessee could not have been made in the hands of the partnership firm as the assessee-firm had not started the commercial production and therefore, it was not possible for the partnership firm to have such large cash transactions. 5.10. With regard to the disallowance of Rs. 1,48,89,125/-, the CIT(Appeals) held that entire basis of the addition was the seized diary. The CIT(Appeals) arrived at the finding of fact that no cash has been paid on purchase of land, can be proved from the agreement entered into by the partnership firm wherein, it is mentioned that the balance amount of Rs.98,89,125/-was payable on or before 6th November, 2018, whereas, registered conveyance deed of the land was executed on 26th April, 2018 and therefore, such covenant in the agreement cannot be relied upon to make an addition. 5.11. Being aggrieved by the order passed by the CIT(Appeals), the Revenue has preferred Appeals in case of the partnership firm as well as the partner-assessee before the Tribunal. The Tribunal upheld the order of the CIT(Appeals) by observing as under: "25. We note that assessing officer also relied upon various judicial pronou....
X X X X Extracts X X X X
X X X X Extracts X X X X
....26. Therefore, Learned CIT(A), observed that no search or survey was carried out at the premises of the assessee. During the course of survey at the office of Shri Bhagwanjibhai Amrutiya, a notebook was found and impounded, which contained some cash transactions. The first date of the diary / starting point precedes the date on which the firm came into existence and hence, it is clear that the notings are also started for the period prior to the establishment of the firm. Shri Bhagwanjibhai Amrutiya had stated in his statement u/s 132(4) that the notings are rough. From the submission of the assessee, it is found that Shri Bhagwanjibhai Amrutiya is an accountant by profession, who managed accounts of various firms and companies, including the Coral group, The AO had already made the addition of the entire notebook in the hands of Shri Bhagwanjibhai Amrutiya and thus, he had discharged the presumption laid in section 292C, by presuming that the said notebook belongs to the person from whom it was found and impounded. The assessee firm had not even started commercial production and hence, it was not possible for the assessee-firm to have such large cash transactions. Neither the AO n....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n the proposal sent to the bank. Based on these facts, the ld. CIT(A) noted that perusal of the assessment order reveals that, the AO has not rebutted any of the claims of the appellant. It is further seen that, similar addition has also been made in the hands of the person who had signed the agreement to sale, viz., Shri Bhagwanjibhai Amrutiya. 31. Considering these facts, the learned CIT (A) was of the view that the impugned agreement to sale has not been found from the premises of the appellant Neither there was any search or survey proceedings at the premises of the appellant. The impounded Satakhat (agreement to sale) shows transfer of cash on subsequent dates. Thus, at the time of transfer of property, more than 60% of the cash was yet to be paid. It is obvious that no farmer would allow his land to be sold without getting full consideration, If the consideration is in cash, then the proceeds would be collected first, Besides, the signatory to the deal is only Bhagwanjibhai Amrutiya, from whose office, the said document was impounded and the same has been added in his hands as well. Importantly, the diary impounded from the office premises of Shri Bhagvanjihai Amnuty....
X X X X Extracts X X X X
X X X X Extracts X X X X
....seller. On this ground, the addition made in the case of Expert Particle Board on substantive basis has been deleted. 40. The Ld. CIT(A) further notice that the assessee himself in his affidavit admitted that he has earned unaccounted commission income on sales of vitrified files of Coral Group, which is supported by the documents seized during the course of search at his residential premises. During the assessment proceeding also, the assessee admitted that the unaccounted commission income eared by him has not been offered to tax. Further, the assesse in his letter filed before Investigation Wing also confessed that he had made some initial investment in Expert Particle Board out of his unaccounted commission income as well as realization of funds from partnership firm, wherein he is a partner. Not only that, the AO also in the last para of page 8 of the assessment order categorically observed that in the post-search investigation, it revealed that the assessee has earned undisclosed income, out of which some investment is made in the firm Expert Particle Board. Further, it is also seen that the assessee is one of the partners, in M/s. Kishan Minerals, Morbi and during t....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... firm have denied having carried out transactions as per the noting in the impounded diary and the same averments made in the individual assessment proceeding of partners by filing an affidavit. In post-search investigation, it is revealed that the assessee earned unaccounted business income and as per provision of Section 292C, he is liable to explain the noting in the impounded diary. 42. The assessee submitted before the learned CIT(A) that the statement of Shri Bhupendra Balubhai Patel recorded w/s 133A of the Act dated 03.01.2019, was a non-connected party, as he is neither subjected to survey action nor he is owner of the premises surveyed from which the material was found. In fact, survey was conducted at the office premises of the assessee, accountant of the Coral Group for verification of their data / materials if any lying at accountant's office premises. As the said premises was closed therefore, his friend Shri Bhupendra Balubhai Patel who was engaged in the business of videography was called upon to open the said office premises. The Bhupendra Patel was unavare about the data lying at surveyed premises and was not competent to reply questions or queries ra....
X X X X Extracts X X X X
X X X X Extracts X X X X
....) of the Act and in the affidavits made in post-search investigation. In this context, the assessee submitted that the noting in the impounded diary containing his name as contributor of fund to the extent of Rs. 97,40,000/-, may be considered as his unaccounted investment and the same may be telescoped against the unaccounted income of M/s Kishan Minerals and the assessee's unaccounted commission income, which estimated at Rs. 10,00,000-. The assessee also submitted that peak balance working of the impounded diary as per which peak credit comes to Rs. 64,15,000/-, which is lower than the unaccounted investment in his name of Rs. 97,40,000/-. The assessee further argued that name of other persons and partners in the impounded diary is nothing but rotation of same funds and thus, the same cannot be subject matter of addition in the hands of the assessee. At last, the assessee contended that if the entire receipt in the impounded diary would be treated as unaccounted business receipts, then also considering the estimated profit of 2% in the trading activities, net unaccounted income comes to Rs. 14,62,765/-only. 43. Based on the above facts, the Ld. CIT(A) noticed that t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eepbhai Ughreja 1,43,00,000 11 Umeshbhai Merja 25,00,000 12 Others (Unreconciled) 1,80,130 Total 6,77,34,130 44. The Ld.CIT(A) noted that it is apparent from the above table that the cash introduction has been made on different dates by various persons including the assessee. It has been noticed that the cash deposits in respect of the assessee was at Rs. 97,40,000/- on various dates as per the notings in the seized diary, In respect to the source of such cash deposits, it has been submitted by the assessee that he was one of the partners in M/s Kishan Minerals having share of 15% therein. During the course of search at the place of M/s Kishan Minerals, various incriminating documents showing unaccounted sales were found and seized. Such incriminating documents of M/s Kishan Minerals claimed to have been maintained by the assessee. The Id.CIT(A) found merit in the contention of the assessee to allow telescoping of the unaccounted income of M/s Kishan Minerals against unaccounted investment as in the statement recorded during the search, the assessee categorically stated that entire affairs of unaccounted activities of M/s Kishan Mineral....