Mukesh Gupta Vs ACIT (ITAT Mumbai)
ITAT Mumbai held that addition with regard to unexplained payment unsustainable in the hands of the employee as employee merely handled the cash on behalf of the employer.
Facts- During the course of the search, cash to the tune of ₹4,66,73,200/- was found. in the premises of the assessee, Shri Mukesh Gupta. When questioned about the source of the said cash, the assessee stated that the cash lying in his residence was given to him by Shri Premchand Ashok Kamble (Mr. PAK), and Mr. PAK is the Proprietor of M/s. Unique Finance. Further, it was stated by the assessee that Mr. PAK was involved in various business activities but the exact details of the business activity from which the cash had come from were not known to him.
AO treated the unexplained payments as income of the assessee and made additions thereof.
Conclusion- We observe that it is fact on record that assessee is only an employee of M/s. Unique Finance and having no established source of income, except that he has handled the cash on behalf of Mr. PAK and it is also fact on record by the investigating authority as well as assessing authority that assessee has handled all the cash on behalf of Mr. PAK and he is one of the trusted employee of Mr. PAK. Therefore, it clearly indicates that assessee has no means to make such undisclosed payments and any addition has to be made only in the hands of his employer or the Assessing Officer has to bring on record a cogent material in support of making the addition that assessee has direct relationship with above said parties. Considering the fact on record it can only be presumed that assessee has acted on the behest of Mr. PAK only, therefore these payments are also to be added in the hands of the employer not in the hands of the employee, who does not have any means.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
These appeals are filed by the assessee against common order of the Learned Commissioner of Income Tax (Appeals), Pune-11, [hereinafter in short “Ld. CIT(A)”] dated 23.02.2022 for the A.Ys.2005-06, 2006-07, 2007-08 and 2008-09, passed u/s. 250 of Income-tax Act, 1961 (in short “Act”).
2. Since the issues raised in all the appeals are identical, therefore, for the sake of convenience, these appeals are clubbed, heard and disposed off by this consolidated order. We are taking Appeal in No.883/MUM/2022 for Assessment Year 2005-06 as a lead case.
3. Brief facts of the case are, during the course of action by police authorities, it was found that assessee residing at 101, Shiv Darshan Apartment, Chandanwadi, Thane(W). was in the possession of huge cash. Based on the information provided by the police authorities, a search action u/s. 132 of the Act was conducted on 22.08.2007 at the residence of the assessee. During the course of search, cash to the tune of ₹.4,66,73,200/- was found. When questioned about the source of the said cash, assessee stated that the cash lying in his residence was given to him by Shri Premchand Ashok Kamble (Mr. PAK), and Mr. PAK is the Proprietor of M/s. Unique Finance. Further, it was stated by the assessee that Mr. PAK was involved in various business activities but the exact details of the business activity from which the cash had come from were not known to him. It was also stated that the details of transactions/receipts of M/s.Unique Finance were being maintained on computers (Tally Package). The assessee also provided the office details of M/s. Unique Finance. Further, it was stated that his nature of duties includes looking after the cash and bank transactions of M/s.Unique Finance under the instructions of Mr. PAK.
4. Consequent to the information provided by the assessee a survey was immediately initiated at the office of M/s. Unique Finance at the address declared by the assessee and later it was converted into search action u/s 132 of the Act. During the course of search Mr. PAK was not At the office premises cash to the tune of ₹.45,15,615/- was found. None of the employees present at the office could not satisfactorily explain about the cash and accordingly ₹.43,00,000/- was seized and several books of accounts and documents and loose papers were seized from the premises.
5. During the course of search at the residence of the assessee following details were extracted from the assessee that he has joined M/s.Unique Finance in April, 2004 as a Receptionist and was later promoted as an Executive in 2005. His salary ranged from ₹.4000/- per month to ₹.12,000/- per month which was the salary last drawn by him. It was also submitted that he had no other source of income. A Number of books of accounts/documents were seized from the premises. The assessee has shown the details of transactions/receipts of M/s. Unique finance maintained by him on computers in Tally Package and assessee has confirmed that these were regular books of accounts of M/s.Unique Finance and the entries regarding the cash found at his residence were not reflected in the books of accounts. The assessee could not give satisfactory explanation on the cash found to the tune of ₹.4.65 Crores.
6. It was also observed during search/survey operation that various incriminating documents and cash of ₹.4.65 Crores was seized from the residential premises of the assessee, a trusted employee of Mr. PAK and cash of ₹.43 lacs was also seized from the office premises of M/s Unique Finance a proprietary concern of Mr. PAK and there was no cash book maintained to ascertain the cash balance as on the date of search and there was no satisfactory explanation for the cash found.
7. Since the entries in the diaries and documents were stated to be related to the business of Mr. PAK and the contents of the diaries and materials seized from the various premises need to be co-related with the business activities of each of the associated concerns involved in the search and complexity. Therefore, a special audit u/s. 142(2A) of the Act was proposed in order to arrive at the correct book results and the profit of the assessee.
8. After obtaining the proper approval an order u/s. 142(2A) of the Act was passed requiring the assessee to get its books of accounts and documents audited by M/s Agrawal & Chajjed, Chartered Accountants appointed for this purpose.
9. Consequent to the search action notice u/s. 153A(a) of the Act, was issued on 10.03.2008 to the assessee (who was lodged at Central jail, Thane) requiring the assessee to file the return of income within 30 days of service of the notice. Subsequent to the issue of notice, notice u/s. 142(1) of the Act was issued and served on the assessee.
10. In response assessee filed the return of income on 31.03.2009 declaring total income of ₹.90,160/- along with the computation of total income and balance sheet as at 31.03.2005. Thereafter notice u/s. 143(2) of the Act were issued and served on the assessee.
11. Subsequent to serving of various notices, as observed by the Assessing Officer that assessee failed to comply with the notices, the assessment is finalized on the basis of the material available on record, material seized during the course of Search & Seizure action and the Special Audit Report u/s. 142(2A) dated 30.04.2010.
12. The Assessing Officer observed from the return of income filed u/s.153A of the Act that assessee has declared income from salary at ₹.1,20,000/- and has claimed standard deduction u/s 16(1) at ₹.30,000/, thereby offering taxable salary at ₹.90,000/-. Assessing Officer observed from the audit report that assessee has received salary of ₹.48,000/- for the year under consideration based on the verification of the bank statement and data given by M/s Unique Finance. In the absence of any supporting evidence to confirm the receipt of above said salary the difference of ₹.72,000/- (₹.1,20,000 – ₹.48,000) is treated as income from unexplained sources and also disallowed the corresponding standard deductions claimed by the assessee to the extent of ₹. 19,200/-.
13. Further, as per the balance sheet / capital account furnished by the assessee, assessee has shown drawings amounting to ₹.40,945/- for the Assessing Officer observed that taking into consideration the place of stay in the city of Thane and the living conditions therein, the drawings appear to be on the lower side and hence an amount of ₹.12,000/- is added as income.
14. Assessing Officer observed from the seized materials found during the search in the residence of the assessee which is a diary written and maintained by him and as per Annexure “N” of the audit report, the assessee made payment of ₹.3,04,000/- to Shri Sanjay Chavan and ₹.11,00,000/- to Abhay Sir’s wife on 07.01.2005. The Assessing Officer issued show cause notice and asked the assessee to explain these entries.
15. Since no reply was furnished the Assessing Officer observed from the search proceedings that assessee had stated that the transactions in the diary are related to Mr. PAK and he had written the same in the diary on his instructions of Mr. PAK. Accordingly, the above addition of ₹.14,04,000/- relating to these entries was made in the hands of Mr. PAK and in the interest of revenue the same amount was added in the hands of the assessee on protective basis.
16. Further, Assessing Officer observed from Annexure D of the Special Audit report that during the current assessment year i.e., A.Y. 2005-06, the assessee has made cash payments of ₹.31,50,400/- to three persons as per the details below: –
