DCIT Vs. Smt. Manishaben N. Mashru (ITAT Rajkot)
Revenue challenges deletion of addition of Rs. 27.00 lakhs by the ld.CIT(A) on account of disallowance of fictitious liability.
During the assessment proceedings, on the basis of papers found in the survey proceedings, the AO formed an opinion that the assessee was having credit balance of Rs. 8,05,000/-with M/s. Divya Travels, and in the books of the assessee the assessee has shown liability of Rs. 18,95,000/-. The AO held the same to be fictitious liability and taxed accordingly. Assessee challenged this addition before the ld.CIT(A) who deleted the addition on the ground that rough papers found from the premises of wife of the assessee were mere notebooks and diaries and not books of accounts of the assessee. Besides, he observed that wife of the assessee has owned up the noting in the rough diary and taxed accordingly. The ld.CIT(A) has also observed that there is no documents or material evidence with the Revenue to link flow of unrecorded transactions with the assessee. Since there is no contrary material brought before us by the Revenue to convince us to take a different view, we do not find any merit in this ground of appeal. It is dismissed.
FULL TEXT OF THE ITAT ORDER IS AS FOLLOWS:-
This bunch of appeals contains eight appeals by the Revenue, five cross-objections by two assessees viz. Smt. Manishaben N. Mashru and Shri Nailesh M. Mashru and one appeal filed by the assessee viz. Smt.Manishaben N. Mashru. All these appeals are directed against separate orders of the ld.CIT(A)-I. Assessment years involved in these appeals are from A.Y 2003-04 to 2006-07.
2. Out of this bunch, in two appeals viz. ITA No.355 and 386/RJT/2011 Revenue impugned the orders of the ld.CIT(A)-I, Rajkot against cancellation of penalty imposed by the Assessing Officer under section 271(1)(c) of the Income Tax Act, 1961 for the Assessment Years 2004-05 and 2005-06. Since in all these appeals/cross-objections, issues and facts are intertwined to each other, we proceed to dispose of all by this common order for the sake of brevity and convenience.
3. Before adverting the specific grievance of the parties in particular assessment year, we would like to take note of certain basic common facts.
4. Assessee, Smt.Manisaben N. Mashru is an individual engaged in the business of domestic and international air-tickets booking, incentive tours, hotel reservations and visa formalities under the name and style “M/s. Divya Travels”. A survey under section 133A of the Income Tax Act, 1961 was carried out at the premises of the assessee on 18.2.2005. During the survey, certain loose papers, diaries, files etc. were found and impounded. Simultaneous survey action was also carried out at the premises of sister concern of the assessee i.e. “M/s.Divya Tourism Pvt.Ltd.” in which Shri Nailesh Masura, husband of the assessee is Managing Director, who also looks after day-to-day affairs of the proprietary concern of the assessee i.e. “M/s. Divya Travels”. Statement of Shri Nailesh Masura on oath was recorded under section 131(1A) of the Act in the case of survey of “M/s. Divya Travels”. After the survey, summons were issued to the assessee requiring to appear and furnish certain requisite details, which remained unattended. However, after filing a reply on 28.2.2005, the assessee again filed a reply on 22.3.2005 disclosing an amount of Rs. 32,20,478/- for the Asst. Year 2003-04 and agreed to pay tax on the same.
5. In the above background, the Assessing Officer issued notice under section 148 of the Act on 28.12.2007 which was served upon the assessee on 31.12.2007, requiring the assessee to file revised return. For which the assessee replied that the return filed vide receipt no. 011775 on 28.12.2007 be considered. Thereafter, the Assessing Officer issued notices on various dates requiring the assessee to clarify its stand on various issues and to explain the contents of the impounded material. These notices remained unanswered. Since the assessment was getting time barred, and to give another opportunity to the assessee to explain its position, a final notice under section 142(1) and 143(2) was also issued to the assessee, which also remained unattended. According to the Assessing Officer, whatever documents impounded during the survey, copies of which were furnished to the assessee, whenever asked for by the assessee. Despite that the assessee has not turned up for finalization of the assessment. Therefore, based on the material available with the department, the Assessing Officer proceeded to finalise the assessment of the assessee.
6. First we take appeals and cross-objection for the Asst. Years 2003-04 to 2005-06. In the case of Smt.Manishaben N. Mashru facts on all vital points are common except variation in the quantum. Therefore, for the facility of reference, we take up facts mainly from the Asst. Year 2003-04. It is pertinent to observe that during the course of survey certain loose papers and diaries were found. These were inventorised as Annexure A/2, A/3, A/4 and A/8. The ld.AO has compiled details of narrations made in these annexures. He also took into consideration credit entries in these pages and reproduced them on page nos.4 to 11 of the assessment orders. He confronted the assessee to show why these credit entries should not be added as unexplained cash credit of the assessee under section 68 of the Income Tax Act, 1961. According to the AO, the assessee failed to explain source of credit entries and also failed to reconcile entries with other material. Accordingly he treated alleged credit entries as unexplained cash credit of the assessee and made addition of Rs. 5,10,28,350/- in the Asst. Year 2003-04. Similar additions have been made in other two assessment years. On appeal, the ld.CIT(A) has deleted these additions.
7. The ld.counsel for the assessee during the course of hearing compiled details in tabular form and filed a synopsis exhibiting additions made by the AO; relief granted by the ld.CIT(A) and additions sustained by the ld.CIT(A). Common composition of ground no. 1 in the Revenue’s appeals for all these three years has been depicted as under:
8. This ground in all these three assessment years is inter-connected with ground no. 2 taken by the assessee in COs. filed in these assessment years. In other words, additions sustained by the ld.CIT(A) in the above table are being challenged by the assessee. Thus, we take all these grounds together.
9. With the assistance of the ld.representatives, we have gone through the record carefully. It is pertinent to observe that survey was conducted at the premises of the assessee on 18/19.02.2005. A notice under section 148 of the Act was issued on 28.12.2007 and AO has started investigation by issuance of notice under section 143(2) on 15.10.2008 i.e. this was first day of hearing fixed in these assessment years. The AO has passed assessment order on 18.12.2008. He observed that the assessee failed to submit requisite details explaining entries reflected in the seized papers. He also assumed that only cash credited are to be taken into consideration and these to be treated as unexplained cash credit. Before the ld.CIT(A) the assessee has filed details in the shape of additional evidence, and the ld.CIT(A) has called for remand report. As far as admission of additional evidences is concerned, Revenue has not impugned the order of the ld.CIT(A). The stand of the assessee has been reproduced by the ld.CIT(A) in para.4.1, which reads as under:
“4.1 Challenging the additions, the Id AR submitted as under:
“(a) The AO has invoked the provisions of section 68 of the Act in respect of credit entries appearing in rough note books impounded during the course of survey u/s 133A of the Act and made the following additions:
