ACIT Vs Shyamsunder R. Agrawal (ITAT Ahmedabad)
ITAT Ahmedabad held that addition towards unexplained expenditure unsustainable as impugned amount has already been surrendered by the firm and accepted by the Settlement Commission.
Facts- The assessee, is partner in a partnership firm. Search operation u/s. 132 of the Act was conducted at the residential premises of the assessee, and simultaneous survey operation u/s. 133A of the Act was carried out at the business premise of M/s. Laxmi Construction on 21.10.2016. The partnership firm had filed a petition before the Settlement Commission and offered income on account of noting in this diary for settlement. The ld. Pr. CIT, Ahmedabad in his report under Rule 9 had stated that proceedings under section 153A are on-going in the case of partner Shri Shyamsundar R. Agrawal, and impact of the seized material found during the course of search shall be taken into consideration at the time of finalization. The assessee had objected to the same, and thereafter the order was passed by the Settlement Commission accepting the income returned by the assessee on account of unaccounted expenditure to the tune of Rs.1,66,98,800/- pertaining to the noting in the diary found during the search at the assessee’s premises.
During assessment proceedings, the assessee had not disclosed any income on account of noting in the impugned diary on the ground that this stood disclosed and accepted in the settlement petition of the partnership firm. But the AO did not agree with the same for the reason that Pr. CIT in his report under Rule 9 had categorically stated that the impact of diary would be considered during the course of assessment of the assessee, and also for the reason that the assessee had admitted to the transactions pertaining to his unaccounted income and expenditure. Accordingly, he made an addition of Rs.2,54,73,420/-.
CIT(A) deleted the said addition. Being aggrieved, revenue has preferred the present appeal.
Conclusion- CIT(A) has found that all income relating to entries noted in the diary stood disclosed by the partnership to and accepted by the settlement commission. This fact is not disputed before us. In the light of the same we agree with the ld.CIT(A) that the objection of the ld. Pr. CIT to the ITSC being overruled by acceptance of income by ITSC, the said objection was irrelevant to merit any consideration while framing assessment in the hands of the assessee.
In the light of the above where the assessee had stated the notings in the diary as relating to his business and which stood disclosed by its partnership firm to the settlement commission, who in turn accepted the same also, we find no reason to interfere in the order of the Ld.CIT(A) deleting the addition made in the hands of the assessee finding the said income to be doubly assessed to taxed.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
This appeal has been filed by the Revenue against order passed by the ld.Commissioner of Income Tax(Appeals)-12, Ahmedabad [hereinafter referred to as “Ld.CIT(A)”] under section 250(6) of the Income Tax Act, 1961 (“the Act” for short) dated 20.5.2019pertaining to the Asst.Year 2017-18.
2. At the outset, it was stated that solitary grievance of the Revenue relates to the deletion of addition made by the AO on account of unexplained expenditure under section 69C of Rs.2,54,73,420/-. The said addition, it was pointed out, emanated from noting in a diary found during search conducted on the assessee’s premises, which diary marked as Annexure A/1 and which allegedly contained details of receipts and payments. The assessee, it was stated, is partner in a partnership firm, M/s. Laxmi Constructions. Search operation under section 132 of the Act was conducted at the residential premises of the assessee, and simultaneous survey operation under section 133A of the Act was carried out at the business premise of M/s. Laxmi Construction on 21.10.2016. The partnership firm had filed a petition before the Settlement Commission and offered income on account of noting in this diary for settlement. The ld. Pr. CIT, Ahmedabad in his report under Rule 9 had stated that proceedings under section 153A are on-going in the case of partner Shri Shyamsundar R. Agrawal, and impact of the seized material found during the course of search shall be taken into consideration at the time of finalization. The assessee had objected to the same, and thereafter the order was passed by the Settlement Commission accepting the income returned by the assessee on account of unaccounted expenditure to the tune of Rs.1,66,98,800/- pertaining to the noting in the diary found during the search at the assessee’s premises.
3. During assessment proceedings, the assessee had not disclosed any income on account of noting in the impugned diary on the ground that this stood disclosed and accepted in the settlement petition of the partnership firm. But the AO did not agree with the same for the reason that the ld. Pr. CIT in his report under Rule 9 had categorically stated that the impact of diary would be considered during the course of assessment of the assessee, and also for the reason that the assessee had admitted to the transactions pertaining to his unaccounted income and expenditure. Accordingly, he made an addition of Rs.2,54,73,420/-.
4. The contents of the diary were explained to us in a summarized form as under:
i) Total amount of all transactions (Payments, Receipts, repetitive entries etc.) : Rs.3,91,33,420/-
ii) Amount Revised as per Order Sheet dated 04/12/2018 (after eliminating duplicate entries : Rs.2,54,73,420/-
iii) Total Amount of payments of Seized Diary (as per ITSC Application : Rs.1,66,98,800/-
iv) Total Amount of Receipts of Seized Diary (as per ITSC Application : Rs.1,45,23,900/-
v) Other Amounts (such as sub-totals, c/f balances, amount not considered by AO, rough notings etc. : Rs.12,50,720/-
5. Referring to the above, it was explained that total of notings of transactions in the diary amounted to Rs.3,91,33,420/-, which after eliminating duplicate entries the total impact came to Rs.2,54,73,420/- which included payment of Rs.1,66,98,800/- and receipt of Rs.1,45,23,900/-. The partnership firm had surrendered the higher of the payments and receipts, being Rs.1.66 crores, to the Settlement Commission, while the AO had made addition to the income of the assessee of the total entries found in the diary amounting to Rs.2,54,73,720/-. The entire facts relating to the case, as stated above, are reproduced at para 3 to 3.4 of the order as under:
“3. The appellant is an Individual, who derives income from business as Partner in the firm, M/s Laxmi Constructions, which is assessed to tax as such (the Firm has total three partners – the appellant and his two sons – all three partners sharing P&L equally). In addition, the assessee had also minor income from other sources such interest income. There was a search operation u/s 132 of the Income Tax Act at the residential premises of the assessee on 21/10/2016. Simultaneously, survey operation u/s 133A of the Act was carried out at the business premises of the M/ Laxmi Constructions, in which appellant is a partner. During the course of search at the residential premises, among other things, cash of Rs.14,88,310/- was found out of which Rs.13,50,000/- was seized. Further, jewellery worth Rs.63,75,335/- was found out of which jewellery worth Rs.11,41,810/-was seized. Further, a diary marked as Annexure A-l (containing pages 1 to 28) was also seized during the search. The notings in the said diary was related to receipts and payment mainly pertaining to the Partnership Firm, M/s. Laxmi Constructions and this fact was admitted by the appellant in the statement recorded u/s 132(4) of the Act. The said partnership firm subsequently filed a petition before the Hon’ble Settlement Commission, Mumbai for settling the case of the Firm for the assessment years from A.Y. 2011-12 to A.Y. 2017-18. In the said petition, the Firm had owned up the diary seized from the residential premises of the appellant being the Annexure A-l containing the pages from 1-28 and also disclosed income on well accepted basis of accounting and taxation with respect to the entries in the said diary as well as cash and other valuables found from the residential premises of the Appellant.
3.1 As per the appellant, the summary analysis of seized diary Annexure Al (Pages 1 to 28) is explained as under:
