TaxTMI 
TaxTMI 
2025 (8) TMI 1873
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....e appeals have been clubbed and heard together and a consolidated order is being passed for the sake of convenience and brevity. 3. We shall first take Revenue's appeal in ITA No.139/Ahd/2021 for the AY 2019-20 in the case of Expert Particle Board. The Revenue has raised the following grounds of appeal: "1. On the facts and in the circumstances of the case and in law, learned Commissioner (Appeals) erred in considering the facts of the case and in ignoring that the substantive addition were made on account of investment in land as recorded in the Diary impounded during the course of survey at the business premises of the assessee. 2. Ld. CIT(A) has deleted the addition of Rs.6,77,34,130/- made u/s 69A of the I.T. Act erred in ignoring the facts that the amount reflects in the impounded diary are credit side of diary impounded during the course of search/survey proceedings and it reflects unexplained receipt in cash u/s 69A of the I.T. Act. 3. Ld. CIT(A) erred in deleting the addition made u/s 37 of the Act amounting to Rs.54,04,130/- considered as the assessee has not claimed any deduction of alleged figure of purchases in the books, however, the f....
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....u/s 143(2) of I.T Act, 1961 was issued and served on 28.09.2020, through ITBA. A notice u/s 142[1] of the Act, was issued along with a questionnaire dated 25.01.2021, requesting to furnish the compliances in the matter as required, on-line electronically in e-proceeding facility. The Assessee has complied with the notice/questioner issued time to time electronically. The submission made by the assessee were examined by the assessing officer. 5. During the course of survey proceedings u/s. 133A at office of Bhagwanjibhai P, amrutiya alias BhupatAmrutiya at Shop No- F-4, First Floor, Darshan Plaza, Near Vardhaman residency, Morbi, a satakhat (agreement) (in original) containing heading of "avejrakamnipahonch" was found. On verification it was noticed by the assessing officer that a land bearing survey number -111, situated at Vill- Ravapar Nadi and on which the premises of expert particle board is located, was purchased in the name of Expert Particle Board with a total purchase consideration of Rs. 1,55,89,125/-. However, the sales registration deed was executed for Rs. 7,00,000/- only. Further, during the course of survey proceedings, Statement of Bhupendra B Patel, partner of Ex....
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....is statement, he was asked to explain the details of transactions mentioned in above diary, which is impounded as annexure A-1, during the course of survey action at his office premise. In his reply, he has categorically stated that wherever, the name BANK is mentioned in the narration of transaction, they are all bank transactions and accounted in the books of accounts of the firm and the remaining transactions are cash transactions. He had further stated in his statement that the cash transactions mentioned in the diary are unaccounted transactions and no tax has been paid on this amount. On perusing of the above mentioned seized data, it was noticed that firm has total cash receipt of Rs. 6,77,34,130/-, and assessee has made unaccounted bogus purchase of Rs. 2,00,000/- from Alpha Entech (Guj) and 52,04,130/- from Anuradha Oil, Mumbai, totaling to Rs. 54,04,130/-. 7.In this regard, the reply was submitted by assessee that the above transaction is not related to M/s. Expert Particle Board. 8. However, the assessing officer did not accept the reply of the assessee and noticed that assessee has also submitted the copies of affidavits of the partners to the effect that partners....
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....e Act. In this connection, we in addition to our earlier replies in the same issue further submit as under: As regard the allegation of unexplained investment in land of Rs. 1,48,89,125/- on the basis of alleged Satakhat (agreement) impounded during the survey action carried out at the office of Shri Bhagwanjibhai Amrutiya, it is to submit that we have not paid any amount for purchase of land situated at Survey No. 111, Village RavaparNadi, Morbi over and above the consideration of Rs. 7,00,000/- reflected in the registered sale deed. Therefore, allegation of cash payment made on the basis of so-called Satakhat impounded from the premises of Shri Bhagwanjibhai Amrutiya is strongly objected. Without prejudice to the above, on verification of copy of impounded agreement provided to us, it is seen that said agreement was signed by Shri Bhagwanjibhai Prabhubhai Amrutiya alone and not by any other partner(s) of the firm. Here, it needs mention that the assessee firm has not given any authority or power of attorney to Shri Bhagwanjibhai Amrutiya to enter into any such agreement and hence, in absence of signature of other partners in the said agreement, the same cannot b....
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....rutiya is in itself contradictory and lacks legal support and hence, addition proposed merely on the basis of such agreement without having any other circumstantial evidence related to exchange of cash between parties is strongly objected. As regard the reliance placed on the statement recorded from Shri Bhupendra Patel, it is to submit that Shri Bhupendra Patel in the post-survey proceeding in his reply dated 08.05.2019 in response to summons dated 01.05.2019 categorically clarified that he is not aware regarding any noting made in the material impounded from the office premises of Shri Bhagwanjibhai Amrutiya. Further, he had in his affidavit dated 17.05.2019 (on record) categorically clarified the facts and circumstances in which his statement was recorded and also stated that he is not aware regarding any documents impounded from the office premises of Shri Bhagwanjibhai Amrutiya. Therefore, reliance made by your good self on the retracted statement is totally misplaced. It is also submitted that on being discussed with Shri Bhagwanjibhai Amrutiya regarding such document, he had stated that such agreement was drafted and managed to signed for the purpose of sho....
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....xistence at the time of inception of diary. Actual cash received by the assessee firm from partners as per regular books of account are not mentioned in the impounded note-book. Therefore, the person who has prepared the diary at the instance of Shri BhagwanjiAmrutia has not even considered the real transactions as per the books of account and jotted the figures as per this understanding, which proves that there is no legal sanctity of impounded diary. The above undisputed facts clearly reveals that the noting in the impounded diary is not complete and represent the actual transaction took place, but the same are notional / projected / estimated figures in order to inflate the valuation of assets in the books of account and to get higher finance from bank. It is also submitted that during the course of survey or post-survey investigation, no other corroborative or circumstantial evidences are found suggesting such huge cash receipt & payment by the assessee firm as mentioned in the impounded diary. Importantly, all the partners including Shri Bhagwanjibhai Amrutiya have furnished affidavits denying the noting made in the impounded diary with actual state ....
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....your good self are altogether on different facts, which cannot be made applicable in the case under consideration. The assessee submits that the statement recorded u/s. 133A of the Act has no evidentiary value as the statement recorded without any oath. Therefore, in absence of any circumstantial evidences, no addition can be made on the basis of statement recorded during the survey in the case of third party. In this regard, reliance is placed on the decision of Hon'ble Madras High Court in the case of CIT Vs. S. Khader Khan Son (2008) 300 ITR 157 (Mad.), which has also been upheld by Hon'ble Supreme Court in 254 CTR 228(SC) by dismissing the SLP of the revenue. Reliance also placed on the decision of Hon'ble Kerala High Court in the case of Paul Mathews & Sons vs. CIT (2003) 263 ITR 101 (Ker.), wherein, it is held that section 133A empowers the authority to record the statement of any person, which may be useful for, or relevant to any proceeding under the Act. This section only enables the authority to record any statement of any person, which may be useful, but does not authorise for taking any sworn statement. On the other hand, such power to exam....
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....s amount of investment not disclosed in the books of account. (ii) Addition of Rs. 6,77,34,130/-, on account of unexplained receipt of cash u/s. 69A of the Act. (iii) Addition of Rs. 54,04,130/- on account of bogus purchase u/s 37 of the Act. 12. Aggrieved by the order of the assessing officer, the assessee carried the matter in appeal before the ld.CIT(A), who has deleted the addition made by the assessing officer. About the addition of Rs. 6,77,34,130/-, the ld.CIT(A) observed that 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 of the Act, 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. 13. The ld.CIT(A) observed about the disallowance of Rs. 54,04,130/- made u/s. 37 of the Act on the basis of certain entries in the impounded note-book, that since the assessee has not claimed any deduction of alleged figure of purchases in the books of acco....
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.... alternative but to show higher valuation for the land, is afterthought and cooked story, therefore should not be believed. About the disallowance of Rs. 54,04,130/- made u/s. 37 of the Act on the basis of certain entries in the impounded note-book, is correct, hence, such addition should be confirmed in the hands of the assessee. 17.The ld.DR also stated that before the AO it was argued by the assessee that peak credit should be allowed to the assessee, however, the cash book of the assessee, which contained accounted and unaccounted transactions, therefore, peak credit should not be allowed. Besides, the affidavit filed by the partners should also to be rejected, as it is, after thought to mislead the revenue. The ld.DR further submitted that on-money paid by the assessee to purchase certain items and the cash receipts shown in the cash book also pertains to on-money and the assessee failed to explain the same. However, the assessee is entitled for telescopic benefit, and the same may be given to the assessee. 18. The ld.DR also pointed out that there was no need to provide opportunity of cross-examination because it is the matter between the partners that is, between old p....
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....re not confirmed in the hands of the assessee, then direction may be given by the Tribunal to reopen the case of partner to assess the income pertaining to the seized material, in the hands of the partner. 22. We have heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials brought on record. Though facts have been discussed in detail in the foregoing paragraphs, however in the succinct manner, the relevant facts and background are reiterated in order to appreciate the controversy and the issue for adjudication. We note that during the course of survey at the office premises of Shri Bhagwanjibhai Amrutiya, one notebook was impounded and inventoried as Annexure A-1. This notebook contained total credit at Rs.7,31,38,260 ( Rs. 6,77,34,130 + Rs.54,04,130). According to the assessing officer, the transactions contained in this notebook pertained to the assessee. For this he stated that, Shri Bhupendra Balubhai Patel ( one of the partners of the assessee- firm) in his statement record....
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....Bhupendra Patel had stated about the impugned Annexure A-1 that he is not aware about the transaction and that he needs to consult other partners, though he explained the contents as per his understanding. Thus, according to the assessee, the statement of Shri Bhupendra Patel is not binding to the firm and cannot be considered as authentic, having any evidentiary value. 24.The assessee also submitted before the learned CIT(A) that, during the post- search investigation, Shri Bhupendra Patel had, vide letter dated 08.05.2019 filed before Investigation Wing, clarified that the noting in the impounded notebook are not fully correct and not binding to anybody and that the replies given by him during the survey was one sided and without verification and was under pressure and tired state of mind. He also contended that the impugned noting were not made by him. This was further strengthened by similar affidavit filed during assessment proceeding, which was neither verified nor investigated by the assessing officer. All the above documents are forming part of the paper book and has been perused. The fact that the AO has not dealt with these affidavits, are also apparent from the assess....
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....e decisions are relevant to the facts of the present case. The assessee has submitted rebuttal on each decision relied upon by the AO. The AO also strengthened his case by taking recourse to Section 292C of the Act which presumes that, documents found during the course of survey is presumed as belonging to such person. However, this finding is shallow because, there was no survey at the premises of the assessee- firm and the documents were not impounded from the possession of the assessee. A plain reading of the provisions of section 292C of the Act reveals that where any books of accounts, other documents etc. are found in possession or control of any person in the course of search action under section 132 or survey action under 133A; it may be presumed that such books of account, other documents etc, belong to such person and that the contents of such books of account and other documents are true. This power has already been exercised by the AO when he made the entire addition in the hands of Shri Bhagwanjibhai Amrutiya, while finalizing his assessment. On the other hand, in the case of the assessee, from the very beginning, all the partners have denied link or relation with the ....
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....unted cash receipts noted in the said diary was of the firm, when it had not even started commercial production. Thus, there was no source of income of the assessee, as it was the first year of its inception and the factory was being established. Therefore, when the noting in the impounded diary contains specific reference of amount received from partners and other persons, the said receipts cannot be treated as unexplained income in the hands of the assessee- firm. Based on these facts, the learned CIT (A) deleted the addition of Rs. 6,77,34,130. 27. Next ground of the Revenue pertains to the addition of Rs.54,04,130/-. The common facts of the case have been narrated above therefore, we do not repeat the same. Learned DR for the revenue, relied on the findings of the assessing officer, whereas, learned Counsel for the assessee, relied on the findings of the learned CIT(A). About the disallowance of Rs. 54,04,130/-, made u/s 37 of the Act, on the basis of certain entries in the impounded note-book, it was observed by ld.CIT(A) that since the assessee has not claimed any deduction of alleged figure of purchases in the books of account / ITR and hence, there is no question of disa....
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....n question was purchased on 21.04.2018 and thereafter, an application was made to convert the same to non-agricultural land. The said conversion was made on 19.06.2018. Thereafter, on 06.07.2018, the assessee obtained permission to start construction of factory shed. On 27.11.2018, the construction of factory shed was completed. In the meantime, Shri Bhagwanjibhai P Amrutiya pursued the bank loan matter with Syndicate Bank. Since there was need for higher financial assistance, he had no alternative but to show higher valuation for the land. It is for this purpose that the agreement to sale of the land was made with higher valuation. The fact that no cash has been paid on purchase of land, can be proved from last para of the agreement, wherein, it is mentioned that the balance sum of Rs. 98,89,125/- is payable on or before 06.11.2018. However, the registered conveyance deed of the land was executed on 26.04.2018. No prudent person will take risk of transferring title and handing over possession of property without receiving substantial portion of consideration. Therefore, in this case, a small farmer having meagre income is not expected to have transferred the title deeds and posses....
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....t 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 Bhagwanjibhai Amrutiya reflects the cash payment of Rs. 50,00,000/-, made on 06.04.2018, as per the agreement to sale, which is funded from the fund brought in by the partners of the appellant firm including Shri Bhagwanjibhai Amrutiya. Therefore, it is clear that, even if cash has exchanged hands, it is between the partners of the appellant- firm including Shri Bhagwanjibhai Amrutiya and the seller, and necessary recourse has already been taken by the AO, by making the additio....
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....he basis of cogent material and relevant evidence on record. 6. On the facts and in the circumstances of the case and in law, learned Commissioner (Appeals) erred in deleting the addition of Rs.3,42,000/- made on account of undisclosed investment u/s 69A of the I.T. Act. 7. On the facts and in the circumstances of the case and in law, learned Commissioner (Appeals) fails to appreciate the fact that the AO has made addition on account of investment made in Gold was not explained by the assessee during the course of assessment. 8. The assessee prays that the order of the learned Commissioner (Appeals) on the above ground be set aside and the addition made in the Assessment order may kindly be restored." 34. The relevant facts have already been narrated by us, above, as we have noted that the issue involved in these two appeals of the Revenue are interconnected and mix, as in the hands of one assessee, the substantive addition was made by the Department, and in the hands of other assessee, the protective addition was made by the Department, therefore, we do not repeat the facts again for the sake of brevity. However, brief facts of the assessee's case....
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....herefore, the revenue and assessee both are in appeal before us. 36. About the addition of Rs.1,48,89,125/-, the learned DR for the revenue and learned Counsel for the assessee made the same arguments, as we have noted above. The finding of the AO is contained in para 4 of the assessment order wherein he has held that, on the basis of one agreement to sale ("Satakhat") found and impounded during the course of survey at the office premises of the assessee, it was noted that the Firm M/s. Expert Particle Board had purchased land at Survey No 111 situated at Village RavaparNadi. The total purchase consideration as per the impugned agreement to sale is at Rs. 1,55,89,125/- out of which Rs. 7,00,000/- is paid by DD dated 21.4.2018; cash of Rs 50,00,000 was paid on 6.4.2018; cash of Rs 67,89,125/- was paid on 6.11.2018 and balance sum of Rs. 31,00,000/- was payable. The AO further relied upon the statement recorded from Shri Bhupendra Patel during the survey who admitted the transaction as per the impounded agreement to sale. 37. Before the learned CIT(A), the assessee submitted that no corroborative evidences were found evidencing actual payment of cash as per the impounded agreem....
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....ation. Hence, terms & conditions of impugned agreement to sale signed by the assessee is against the normal human probabilities, which raise doubt on the events as mentioned in such document, has really occurred. 38. The ld.CIT(A) also relied on the decision of the Hon. Gujarat High Court in the case of PCIT Surat Vs Nageshwar Enterprise (2020) 122 Taxmann.com 41 Gujarat dated 3.2.2020 having similar fact. In the case so relied, during the course of search at the premises of the assessee- firm by the DRI, the partner of the assessee firm had confessed of under valuation of imported goods from China and Japan, which was paid in cash. The ld. CIT(A) had deleted the addition on human probability by holding that, it was unbelievable that seller who was sitting in Japan / China had delivered goods to a purchaser in India without receiving full payment. On further appeal, the ITAT had also observed that no evidence or finding in this respect was brought on record either by the DRI or the assessing officer, to suggest that under invoicing was done while importing goods. Similar analogy was cited for assessee's case. According to the assessee, it is unbelievable that a marginal farm....
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....stence from 02.04.2018 and the deal for purchase of land as per the impounded agreement is stated to have entered into on 18.03.2018. Further, it is the first year of the incorporation of firm, which has not even started any commercial activities. Therefore, the firm could not have any source of income for purchase of land except the funds contributed by partners and in that case, even if cash has exchanged hands for purchase of land, it is between the partners and the 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 tiles 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 earned by him has not been offered to tax. Further, the assessee 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 ....
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.... diary contains the details of accounted as well as unaccounted transactions related to the firm; in the statement recorded from the assessee u/s. 131(1A), he has stated that wherever, the name of bank is mentioned in the narration of transaction, they are all bank transactions and accounted in the books of accounts of the firm and the remaining transactions are cash transactions; In post-search investigation, Expert Particle Board and other partners of said 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 u/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 pre....
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....na Developers ITA No. 1177 and 1231/Ahd/2011, wherein, the addition made in the similar facts and circumstances was deleted by CIT(A) and ITAT. The assessee, alternatively argued before the learned CIT(A) that he has earned unaccounted commission income from Coral Group and also had access of unaccounted income / fund of the partnership- firm M/s. Kishan Minerals. This fact was deposed by the assessee in his statement recorded u/s 132(4) 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 is 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....
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....r. No. Name of Person Amount (Rs.) 1 Bhupatbhai Amrutiya (Appellant) 97,40,000 2 Bhupendrabhai Patel 1,15,14,000 3 Sureshbhai Soriya 73,00,000 4 Jitubhai Jetpariya 1,08,00,000 5 Harshadbhai Gami 59,00,000 6 Jayantibhai Amrutiya 5,00,000 7 Daksh Amrutiya 10,00,000 8 Laljibhai Sherashiya 20,00,000 9 Ranchhodbhai Bela 20,00,000 10 Randeepbhai 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....
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....counted cash deposits as discussed above is to be treated as the unaccounted fund infused by the assessee in the firm. So far as credits in the impounded diary in the name of other partners and persons as noted above, the same cannot be treated as the assessee's unaccounted investment or income and same may be considered in the respective hands by the AO. 45. As regard the disallowance of Rs. 54,04,130/- made u/s 37 of the Act on the basis of certain entries in the impounded note-book, it was noted that the assessee has not claimed any deduction of alleged figure of purchases in his books of account / ITR and hence, there is no question of disallowance of purchases. Hence, this disallowance was deleted by CIT(A). 46. We have gone through the above findings of the learned CIT (A) and noticed that conclusion reached by the learned CIT(A) is correct. In the wake of above delineation, we see no error in the conclusion drawn by the CIT(A) in this regard. We thus decline to interfere with the conclusion so drawn by the CIT(A) whose order is under challenge by the revenue. Similarly, the ground No.1 raised by the assessee, in Cross Objection No. 05/RJT/2022, is also dismissed. ....