Case Law Details

Case Name : Indus Holidays & Tours India (P) Ltd. Vs DCIT (ITAT Indore)
Appeal Number : IT(SS)No.79 to 95,120 to 122, 134&135, 167 to 170/Ind/2017 & ITA No.269 to 271 & 313, 427/Ind/2017
Date of Judgement/Order : 28/03/2019
Related Assessment Year : 2007-08 to 2013-14
Courts : All ITAT (7621) ITAT Indore (69)

Indus Holidays & Tours India (P) Ltd. Vs ACIT (ITAT Indore)

Conclusion: AO was not justified in adding the entire suppressed receipts after rejection of books of accounts while making assessment u/s 153A as CIT(A) was fair enough to apply 2% of net profit rate on the alleged suppressed receipts by taking basis of net profit rate disclosed by the assessee for various assessment years which ranges from 0.5% to 2.05%.

Held: During the course of search u/s 132 conducted on assessee’s premises some loose papers and documents were seized . Assessee was unable to satisfy the lower authorities that these seized documents referred to by AO was a dumb document. AO made the addition for suppression of receipts @10% for all the assessment years. On appeal, CIT(A) after observing the net profit rates disclosed by assessee in the regular books of accounts applied the net profit rate @2% treating it to be as reasonable and computed the addition on account of suppressed receipts. Thus, the addition on account of suppressed receipts was worked as under applying a net profit rate of 2% on the enhanced turnover on account of suppressed receipts. It was held that incriminating material found during the course of search contains certain transactions relating to assessessee’s business which was not explained satisfactorily by assessee before lower authorities and also justified the action of AO of rejecting the books of accounts and estimating the suppressed receipts. Thus, CIT(A) was fair enough to apply 2% of net profit rate on the alleged suppressed receipts by taking basis of net profit rate disclosed by the assessee for various assessment years which ranges from 0.59% to 2.05%.

FULL TEXT OF THE ITAT JUDGEMENT

The above captioned bunch of appeals filed at the instances of the assessee’s pertaining to Assessment Year 2007-08 to 2013-14 and revenue’s appeal pertaining to Assessment Years 2011-12 to 2013-14 in the case of Indus Holiday & Tours India Pvt. Ltd are directed against the orders of Ld. Commissioner of Income Tax (Appeals)-3 (in short ‘Ld.CIT(A)’], Bhopal detailed as under;

Name of assessee Assessment
Year
Date of CIT

order

Date of A.O order Order
passed
u/s
M/s Indus Holidays & Tours India Pvt. Ltd 2007-08 to

2013-14

14.02.2017 23.03.2015 153A r.w.s.

143(3)

Smt. Neeta Bhadauria 2007-08 to

2013-14

15.02.2017 16.03.2015 -do-
Smt. Sunita Nigam 2007-08,

2009-10,

2010-11

21.03.2017 31.12.2014 -do-
M/s Purple  Vacations Pvt. Ltd 2010-11 06.03.2017 28.01.2015 -do-
Shri Ajay Bhadauria 2007-08 to

2013-14

15.12.2017 24.03.2015 -do-

2. As the issues raised in these appeals are common, therefore these were heard together and are being disposed off by this common order for sake of convenience and brevity.

3. First will take up the lead case i.e. M/s. Indus Holidays & Tours India Pvt. Ltd in which assessee has filed appeal for Assessment Years 2007-08 to 2013-14 and the revenue has filed Cross appeal for 2011-12 to 2012-13.

4. Briefly stated facts as culled out from the records are that the assessee is a private limited company engaged in the  business of tourist agent and contractors to facilitate travelling by air, road and sea. Since, the various concerns and individuals are inter connected and have business associations, they have been put together under one common name “Indus Group”. Return of income for respective Assessment Years were filed. Search u/s 132 of the Act were carried out on 30.11.2012 at various premises of the group. Notices u/s 153A was issued to the assessee’s to file return of income for the above assessment years and the same were filed u/s 139 of the Act. Thereafter, a consolidated assessment for Assessment Year 2007-08 to 2013-14 were passed u/s 153A/143(3) of the Act dated 23.03.2015, making substantial additions against which assessee preferred appeal before Ld. CIT(A) who partly confirmed the addition.

5. Aggrieved by the order of Ld. CIT(A) both the assessee and revenue are in appeal before the Tribunal. Some appeals of the revenue were dismissed for low tax effect and the assessee is in appeal for Assessment Year 2007-08 to 2013-14 and the revenue’s appeals for adjudication before us are for Assessment Year 2011-12 to 2013-14.

6. Assessee has raised following grounds of appeal;

I. M/s. Indus Holidays & Tours India Pvt. Ltd ITA(SS) No.79 to 84/Ind/2017 Assessment Year 2007-08 to 2013-14

1. That on the facts and in the circumstances of the case, the decision is contrary to law, without jurisdiction, materially irregular and unsustainable in law as well as on facts and that all the adverse findings recorded in making various additions in the order are incorrect and unlawful.

2. That on the facts and in the circumstances of the case, the law that the impugned assessment year, the return of income was filed in due course before search and such return was stood completed u/s 143(1)(a) and no proceedings for assessment/re-assessment were pending on the date of initiation of search and also in the search, no incriminating material was found suggesting the suppressed income in the nature of business receipts of Rs.137815 and, therefore, in absence of such incriminating material/concrete evidence, the assessment is bad in law hence be quashed and the addition of Rs.2756 as sustained by CIT(A) is unlawful and unjustified and, therefore, be deleted.

3. That on the facts and in the circumstances of the case and in law, the findings of the learned lower authorities with regard the completeness and correctness of the books of accounts maintained by the assessee in the regular course of business are wholly wrong, unlawful and injudicious, hence be quashed and it be held that the provisions of section 145 are not applicable. The income as shown in the account be kindly accepted and the addition of Rs.2756 as sustained by CIT(A) be kindly deleted.

4. That on the facts and in the circumstances of the case and in law, the findings of the learned lower authorities that there is suppression of receipts (turnover) in the relevant year was Rs.137815 are neither lawful nor justified hence be quashed. The addition of Rs.2756as sustained by CIT(A) be kindly deleted.

5. That on the facts and in the circumstances of the case and in law, the levy of interest u/s 234A, 234B & 234C are wholly unlawful and contrary to the provisions of the Act, hence be cancelled”

Assessment Year 2008-09

1. That on the facts and in the circumstances of the case, the decision is contrary to law, without jurisdiction, materially irregular and unsustainable in law as well as on facts and that all the adverse findings recorded in making various additions in the order are incorrect and unlawful.

2. That on the facts and in the circumstances of the case, the law that the impugned assessment year, the return of income was filed in due course before search and such return was stood completed u/s 143(1)(a) and no proceedings for assessment/re-assessment were pending on the date of initiation of search and also in the search, no incriminating material was found suggesting the suppressed income in the nature of business receipts of Rs.142324 and, therefore, is absence of such incriminating material/concrete evidence, the assessment is bad in law hence be quashed and the addition of Rs.2846 as sustained by CIT(A) is unlawful and unjustified and, therefore, be deleted.

3. That on the facts and in the circumstances of the case and in law, the findings of the learned lower authorities with regard the completeness and correctness of the books of accounts maintained by the assessee in the regular course of business are wholly wrong, unlawful and injudicious, hence be quashed and it be held that the provisions of section 145 are not applicable. The income as shown in the account be kindly accepted and the addition of Rs.2846 as sustained by CIT(A) be kindly deleted.

4. That on the facts and in the circumstances of the case and in law, the findings of the learned lower authorities that there is suppression of receipts (turnover) in the relevant year was Rs.142324 are neither lawful nor justified hence be quashed. The addition of Rs.2846 as sustained by CIT(A) be kindly deleted.

5. That on the facts and in the circumstances of the case and in law, the levy of interest u/s 234A, 234B & 234C are wholly unlawful and contrary to the provisions of the Act, hence be cancelled”

Assessment Year 2009-10

1.That on the facts and in the circumstances of the case, the decision is contrary to law, without jurisdiction, materially irregular and unsustainable in law as well as on facts and that all the adverse findings recorded in making various additions in the order are incorrect and unlawful.

2. That on the facts and in the circumstances of the case, the law that the impugned assessment year, the return of income was filed in due course before search and such return was stood completed u/s 143(1)(a) and no proceedings for assessment/re-assessment were pending on the date of initiation of search and also in the search, no incriminating material was found suggesting the suppressed income in the nature of business receipts of Rs.4916388 and, therefore, is absence of such incriminating material/concrete evidence, the assessment is bad in law hence be quashed and the addition of Rs.98327 as sustained by CIT(A) is unlawful and unjustified and, therefore, be deleted.

3. That on the facts and in the circumstances of the case and in law, the findings of the learned lower authorities with regard the completeness and correctness of the books of accounts maintained by the assessee in the regular course of business are wholly wrong, unlawful and injudicious, hence be quashed and it be held that the provisions of section 145 are not applicable. The income as shown in the account be kindly accepted and the addition of Rs.98327 as sustained by CIT(A) be kindly deleted.

4. That on the facts and in the circumstances of the case and in law, the findings of the learned lower authorities that there is suppression of receipts (turnover) in the relevant year was Rs.4916388 are neither lawful nor justified hence be quashed. The addition of Rs.98327 as sustained by CIT(A) be kindly deleted.

5. That on the facts and in the circumstances of the case and in law, the levy of interest u/s 234A, 234B & 234C are wholly unlawful and contrary to the provisions of the Act, hence be cancelled”

Assessment Year 2010-11

1. That on the facts and in the circumstances of the case, the decision is contrary to law, without jurisdiction, materially irregular and unsustainable in law as well as on facts and that all the adverse findings recorded in making various additions in the order are incorrect and unlawful.

2. That on the facts and in the circumstances of the case, the law that the impugned assessment year, the return of income was filed in due course before search and such return was stood completed u/s 143(1)(a) and no proceedings for assessment/re-assessment were pending on the date of initiation of search and also in the search, no incriminating material was found suggesting the suppressed income in the nature of business receipts of Rs.5146768 and, therefore, is absence of such incriminating material/concrete evidence, the assessment is bad in law hence be quashed and the addition of Rs.102935 as sustained by CIT(A) is unlawful and unjustified and, therefore, be deleted.

3. That on the facts and in the circumstances of the case and in law, the findings of the learned lower authorities with regard the completeness and correctness of the books of accounts maintained by the assessee in the regular course of business are wholly wrong, unlawful and injudicious, hence be quashed and it be held that the provisions of section 145 are not applicable. The income as shown in the account be kindly accepted and the addition of Rs.102935 as sustained by CIT(A) be kindly deleted.

4. That on the facts and in the circumstances of the case and in law, the findings of the learned lower authorities that there is suppression of receipts (turnover) in the relevant year was Rs.5146768 are neither lawful nor justified hence be quashed. The addition of Rs.102935 as sustained by CIT(A) be kindly deleted.

5. That on the facts and in the circumstances of the case and in law, the levy of interest u/s 234A, 234B & 234C are wholly unlawful and contrary to the provisions of the Act, hence be cancelled”

Assessment Year 2011-12

1. That on the facts and in the circumstances of the case, the decision is contrary to law, without jurisdiction, materially irregular and unsustainable in law as well as on facts and that all the adverse findings recorded in making various additions in the order are incorrect and unlawful.

2. That on the facts and in the circumstances of the case, the law that the impugned assessment year, the return of income was filed in due course before search and such return was stood completed u/s 143(1)(a) and no proceedings for assessment/re-assessment were pending on the date of initiation of search and also in the search, no incriminating material was found suggesting the suppressed income in the nature of business receipts of Rs.8211907 and, therefore, is absence of such incriminating material/concrete evidence, the assessment is bad in law hence be quashed and the addition of Rs.164238 as sustained by CIT(A) is unlawful and unjustified and, therefore, be deleted.

3. That on the facts and in the circumstances of the case and in law, the findings of the learned lower authorities with regard the completeness and correctness of the books of accounts maintained by the assessee in the regular course of business are wholly wrong, unlawful and injudicious, hence be quashed and it be held that the provisions of section 145 are not applicable. The income as shown in the account be kindly accepted and the addition of Rs.164238 as sustained by CIT(A) be kindly deleted.

4. That on the facts and in the circumstances of the case and in law, the findings of the learned lower authorities that there is suppression of receipts (turnover) in the relevant year was Rs.8211907 are neither lawful nor justified hence be quashed. The addition of Rs.164238 as sustained by CIT(A) be kindly deleted.

5. That on the facts and in the circumstances of the case and in law, the levy of interest u/s 234A, 234B & 234C are wholly unlawful and contrary to the provisions of the Act, hence be cancelled”

Assessment Year 2012-13

1.That on the facts and in the circumstances of the case, the decision is contrary to law, without jurisdiction, materially irregular and unsustainable in law as well as on facts and that all the adverse findings recorded in making various additions in the order are incorrect and unlawful.

2.That on the facts and in the circumstances of the case, the law that the impugned assessment year, the return of income was filed in due course before search and such return was stood completed u/s 143(1)(a) and no proceedings for assessment/re-assessment were pending on the date of initiation of search and also in the search, no incriminating material was found suggesting the suppressed income in the nature of business receipts of Rs.7361630 and, therefore, is absence of such incriminating material/concrete evidence, the assessment is bad in law hence be quashed and the addition of Rs.147232 as sustained by CIT(A) is unlawful and unjustified and, therefore, be deleted.

3. That on the facts and in the circumstances of the case and in law, the findings of the learned lower authorities with regard the completeness and correctness of the books of accounts maintained by the assessee in the regular course of business are wholly wrong, unlawful and injudicious, hence be quashed and it be held that the provisions of section 145 are not applicable. The income as shown in the account be kindly accepted and the addition of Rs.147232 as sustained by CIT(A) be kindly deleted.

4. That on the facts and in the circumstances of the case and in law, the findings of the learned lower authorities that there is suppression of receipts (turnover) in the relevant year was Rs.7361630 are neither lawful nor justified hence be quashed. The addition of Rs.147232 as sustained by CIT(A) be kindly deleted.

5. That on the facts and in the circumstances of the case and in law, the levy of interest u/s 234A, 234B & 234C are wholly unlawful and contrary to the provisions of the Act, hence be cancelled”

Assessment Year 2013-14

1.That on the facts and in the circumstances of the case, the decision is contrary to law, without jurisdiction, materially irregular and unsustainable in law as well as on facts and that all the adverse findings recorded in making various additions in the order are incorrect and unlawful.

2. That on the facts and in the circumstances of the case, the law that the impugned assessment year, the return of income was filed in due course before search and such return was stood completed u/s 143(1)(a) and no proceedings for assessment/re-assessment were pending on the date of initiation of search and also in the search, no incriminating material was found suggesting the suppressed income in the nature of business receipts of Rs.7605474 and, therefore, is absence of such incriminating material/concrete evidence, the assessment is bad in law hence be quashed and the addition of Rs.152109 as sustained by CIT(A) is unlawful and unjustified and, therefore, be deleted.

3. That on the facts and in the circumstances of the case and in law, the findings of the learned lower authorities with regard the completeness and correctness of the books of accounts maintained by the assessee in the regular course of business are wholly wrong, unlawful and injudicious, hence be quashed and it be held that the provisions of section 145 are not applicable. The income as shown in the account be kindly accepted and the addition of Rs.152019 as sustained by CIT(A) be kindly deleted.

4. That on the facts and in the circumstances of the case and in law, the findings of the learned lower authorities that there is suppression of receipts (turnover) in the relevant year was Rs.7605474 are neither lawful nor justified hence be quashed. The addition of Rs.152109 as sustained by CIT(A) be kindly deleted.

5. That on the facts and in the circumstances of the case and in law, the levy of interest u/s 234A, 234B & 234C are wholly unlawful and contrary to the provisions of the Act, hence be cancelled”

7. Revenue has raised following grounds of appeal.

II. ITA(SS) No.134 & 135/Ind/2017 & ITA No.313/Ind/2017 Assessment Year 2011-12

1. On the facts and circumstances of the case the Ld. CIT(Appeals) erred in deleting the addition made by the A.O of Rs.80,47,669/- on account of suppression of receipts without appreciating the facts and evidences brought into light by the A.O during assessment proceedings.

2. On facts and circumstances of the case the Ld. CIT(Appeals) erred in estimating Net profit @2% on suppressed receipts in absence of any evidence of expenditure against the suppressed receipts.

3. The appellant reserves his right to add, amend or alter the grounds of appeal on or before the date, the appeal is finally heard for disposal.

Assessment Year 2012-13

1. On the facts and circumstances of the case the Ld. CIT(Appeals) erred in deleting the addition made by the A.O. of Rs.72,14,398/- on account of suppression of receipts without appreciating the facts and evidences brought into light by the A.O during assessment proceedings.

2. On facts and circumstances of the case the Ld. CIT(Appeals) erred in estimating Net profit @2% on suppressed receipts in absence of any evidence of expenditure against the suppressed receipts.

3. The appellant reserves his right to add, amend or alter the grounds of appeal on or before the date, the appeal is finally heard for disposal.

Assessment Year 2013-14

1. On the facts and circumstances of the case the Ld. CIT(Appeals) erred in deleting the addition made by the A.O. of Rs.74,53,365/- on account of suppression of receipts without appreciating the facts and evidences brought into light by the A.O during assessment proceedings.

2. On facts and circumstances of the case the Ld. CIT(Appeals) erred in estimating Net profit @2% on suppressed receipts in absence of any evidence of expenditure against the suppressed receipts.

3. The appellant reserves his right to add, amend or alter the grounds of appeal on or before the date, the appeal is finally heard for disposal.

8. From perusal of the grounds raised by both the parties, we observe that the assessee has raised two common issues firstly challenging the addition for Assessment Year 2007-08 to 2011-12 taking a plea that no incriminating material was found during the course of search and the additions for Assessment Year 2007-08 to 2011-12 needs to be deleted as these assessment years comes under the category of completed assessments and secondly challenging the addition of net profit of suppressed receipts sustained by the Ld. CIT(A) pleading that the estimation of suppressed receipts is not correct as it is not based on any incriminating material.

9. As regards the revenue’s appeals the only issue is against the finding of Ld. CIT(A) deleting the part of the addition made by Ld. A.O for suppressed receipts and sustaining it only to the extent of net profit @2% of suppressed receipts.

10. We will first take up assessee’s first common issue that whether the additions made in the case of block assessments pursuant to search, for the non abated assessment years completed can be made without any basis of any incriminating material. Ld. Counsel for the assessee placing reliance on the judgment of Hon’ble High Court of Delhi in the case of CIT V/s Kabul Chawla 281 CTR 85 (Delhi) submitted that the seized documents referred to by the Ld. A.O comes under the category of dumb document as no details as to the nature of transactions and the purposes for the amounts were mentioned and therefore has no evidential value for the purpose of resorting to rejecting the books of accounts. He also submitted that the assessment u/s 153A of the Act cannot be made without any relevance or nexus with the seized material for the year which had attained finality i.e. completed assessment years and addition can be made only on the basis of seized incriminating material found during the course of search. Reliance also placed on the following decision;

a. Hon’ble Jurisdictional Bench of Indore ITAT – Kamal Kishore KotwaniIT(SS)A No. 186 to 190/IND/2016 dated 04.07.2018

b. Hon’ble Jurisdictional Bench of Indore ITAT – Kamta Prasad Dwivedi – IT(SS)A No. 182 to 185/IND/2016 dated 19.09.2018

c. Hon’ble Jurisdictional Bench of Indore ITAT – Anant Steel Private Limited 28 ITJ 47

d. Hon’ble Jurisdictional Bench of Indore ITAT – Kalani Brothers (Indore) Private Limited (2016) 27 ITJ 286

e. Hon’ble Jurisdictional Bench of Indore ITAT – Mukesh Sangla (HUF) (2016) 27 ITJ 172

f. Hon’ble Jurisdictional Bench of Indore ITAT – Chanderbhan Lalchandani IT(SS)A No. 121/IND/2015 to 126/IND/2015

g. Hon’ble High Court of Bombay – Continental Warehousing Corporatl (NhavaSheva) Limited – 374 ITR 645 dated 21.04.2015[ClPB 18-31] SLP dismissed

h. Hon’ble Delhi High Court – Kabul Chawla[2015] 61 taxguru.in 412 dated 28.08.2015[ClPB 32-38]

i. Hon’ble Delhi Bench of ITAT – Sanjay Aggrawal 169 TTJ 282/291 dated 16.06.2014

j. Hon’ble Kolkata Bench of ITAT – Budhiya Marketing Pvt Ltd 173 TTJ 649 Cal dated 10.07.2015

k. Hon’ble High Court of Bombay – Continental Warehousing 17 Corporation (NhavaSheva) Limited – 374 ITR 645 dated 21.04.2015[ClPB 18-31] SLP dismissed

m. Hon’ble Delhi Bench of ITAT – Sanjay Aggrawal 169 TTJ 282/291 dated 16.06.2014

n. Hon’ble Kolkata Bench of ITAT – Budhiya Marketing Pvt Ltd 173 TTJ 649 Cal dated 10.07.2015

11. Per contra Ld. Departmental Representative vehemently argued and supporting the orders of both the lower authorities and contended that the additions made were on the basis of seized material which were found during the course of search.

12. We have heard rival contentions and perused the records placed before us. The issue which needs our adjudication is whether the additions made by Ld. A.O for Assessment Year 2007-08 to 2011-12 were based on any incriminating material or not. If this question is answered in positive then the legal grounds raised by the assessee will not stand for.

13. From perusal of the records we observed that during the course of search conducted on 30.11.12 various documents, loose papers and books of accounts were seized and impounded. Reference to some loose papers at page 5 to 7 of LPS-3 i.e. seized records has been made by Ld. A.O in his assessment order. In these sheet of papers which are already scanned in the assessment order various details about gross profit, expenses, company contribution, outstanding, cluster of figures, details of amounts with dates were found. Ld. A.O called for the necessary reply from the assessee, which confined to the submission that all these documents are prepared by the employee and are mere rough jottings and therefore these seized loose papers are nothing but dumb document. Whereas Ld. A.O taking the basis of these loose seized materials came to the conclusion that the assessee has been unable to provide any proper explanation to various transactions mentioned in the seized records. These documents were related to the assessee as were found during the course of search. Taking the basis of these seized records Ld. A.O treated them as incriminating material and went ahead to make additions for suppressed receipts @10% of the gross receipts disclosed by the assessee in the regular books of accounts.

14. In these given circumstances it cannot be said that the addition for suppressed receipts made by Ld. A.O are not based on any incriminating material. Though the assessee is challenging it to be a dumb document but the addition made by the Ld. A.O have a direct nexus with the incriminating material found during the course of search. Various judgments referred and relied by the Ld. Counsel for the assessee can apply only in those cases where the additions for completed assessments post search are made without any basis of incriminating material found during the course of search.

15. However in the case of assessee the facts are different because the additions for Assessment Year 2007-08 to 2011-12 have been made by Ld. A.O on the basis of incriminating material found during the course of search and such incriminating material has no specific mention of the assessment year for which they relates except for few entries, therefore the Ld. A.O was within his powers to make the additions for the block of assessments for Assessment Years 2007-08 to 2013-14 taking the basis of incriminating material found during the course of search. Therefore this common Ground No.2 raised by the assessee for Assessment Year 2007-08 to 2011-12 needs to be dismissed. We accordingly order so.

16. Now we take up next common issue wherein the assessee is challenging the addition on the suppressed receipts whereas the revenue is challenging the deletion of part of the addition by Ld. CIT(A) for the suppressed receipts.

17. The Ld. Counsel for the assessee submitted that the seized documents referred to by the Ld. A.O are dumb documents. No discrepancy has been noted in the books of accounts and therefore rejection of books of accounts was not valid and therefore Ld. A.O erred in estimating the suppressed receipts. In support of his contention that there should be a strong and sufficient reason to indicate that the books of accounts are not correct. Reliance is placed by the assessee on the following decisions;

a. Hon’ble Jurisdictional High Court of Madhya Pradesh – Raj 24 DTR 191 dated 02.01.2008[CLPB 01]

b. Hon’ble Apex Court – Woodward Governors India Private Limited – 312 ITR 254 dated 08.04.2009[CLPB 02-09]

c. Hon’ble Apex Court – Dhakeswari Cotton Mills Limited – 26 ITR 775 dated 29.10.1954 [CLPB 10-13]

d. Hon’ble High Court of Calcutta – Dabros Industrial 21 Company Private Limited 108 ITR 424 dated 18.07.1975 [CLPB 14-15]

e. Hon’ble High Court of Kerala – St. Teresa’s Oil Mills dated 76 ITR 365 dated 06.11.1969 [CLPB 16-17]

f. Hon’ble High Court of Chhattisgarh – Roopchand Tharani – [2012] 20 taxguru.in204 dated 01.11.2011 [CLPB 77]

g. Hon’ble Jabalpur Bench of ITAT – Parasia Engineering Private Limited – [2017] 30 ITJ 462 dated 21.06.2017 [CLPB 78-79]

h. Hon’ble Jabalpur Bench of ITAT – Ashok Kumar Jain – [2012] 19 ITJ 233 dated 03.02.2012 [CLPB 80-83]

18. Per contra Ld. Departmental Representative vehemently argued and supported the order of Ld. A.O.

19. We have heard rival contentions and perused the records placed before us.

20. Some loose papers and documents were seized during the course of search u/s 132 of the Act on 30.11.12 conducted on the assessee’s premises. Ld. A.O referred to page 5 to 7 of LPS-3 which contained various transactions with dates and without dates.

Assessee was unable to satisfy the lower authorities that these seized documents referred to by the Ld. A.O is a dumb document. Ld. A.O made the addition for suppression of receipts @10% for all the assessment years calculated as follows;

A.Y. Gross Receipts Suppression of

Receipts @10%

2007-08 13,78,147.82/- 1,37,815/-
2008-09 14,23,243.92/- 1,42,324.3/-
2009-10 4,91,63,878/- 49,16,388/-
2010-11 5,14,67,677.21/- 51,46,768/-
2011-12 8,21,19,067.15/- 82,11,907/-
2012-13 7,36,16,303 73,61,630/-
2013-14 1,60,54,743/- 76,05,474/-
Total 3,35,22,579.3/-

21. When the matter came up before Ld. CIT(A), he applied the judgment of jurisdictional High Court in the case of CIT Vs Balchand Ajit Kumar reported in 263 ITR 610 (M.P) wherein it was held that total sale cannot be regarded as a profit of the assessee.

The net profit rate has to be adopted. Following above judgment, Ld. CIT(A) after observing the net profit rates disclosed by the assessee in the regular books of accounts applied the net profit rate @2% treating it to be as reasonable and computed the addition on account of suppressed receipts observing as follows;

Para 4. 1 During the course of appellate proceedings the details of net profit as shown by the appellant assessee in past 7 preceding years was filed which is in between 0.59 – 2.05%.

A.Y Gross receipts as per P&L a/c Net profit shown by assessee in P&L a/c % of profit as per assessee
2007-08 1378148 26129 1.90
2008-09 1423244 29246 2.05
2009-10 49163878 289851 0.59
2010-11 54167677 304582 0.59
2011-12 82119067 501995 0.61
2012-13 73616303 522572 0.71
2013-14 76054743 900645 1.18

The net profit of 2% should be reasonable keeping in view the net profit declared by the appellant assessee in the past years. In view of the above, the addition on account of suppressed receipts is worked as under applying a net profit rate of 2% on the enhanced turnover on account of suppressed receipts.

Assessment Year Addition by A.O. for Turnover Net Profit @2% of enhanced turnover
2007-08 Rs.1,37,815/- Rs.2,756/-
2008-09 Rs.1,42,324/- Rs.2,846/-
2009-10 Rs.49,16,388/- Rs.98,327/-
2010-11 Rs.51,46,388/- Rs.1,02,935/-
2011-12 Rs.82,11,907/- Rs.1,64,238/-
2012-13 Rs.73,61,630/- Rs.1,47,232/-
2013-14 Rs.76,05,474/- Rs.1,52,109/-

22. We further observe that incriminating material found during the course of search contains certain transactions relating to assessessee’s business. In our view they cannot be categorized as dumb document. These alleged seized material referred to by the Ld. A.O contains certain business transaction not explained satisfactorily by the assessee before the lower authorities and also before us which justify the action of the Ld. A.O of rejecting the books of accounts and estimating the suppressed receipts. Though Ld. A.O made the addition for suppressed receipts which in our view was not justified and Ld. CIT(A) was fair enough to apply 2% of net profit rate on the alleged suppressed receipts by taking basis of net profit rate disclosed by the assessee for various assessment years which ranges from 0.59% to 2.05%. In our considered view no interference is called for in the findings of Ld. CIT(A) sustaining the addition to the extent of 2% of the enhanced turnover. We confirm the same and dismiss the common Ground No. 3, 4 and 5 raised by the assessee for Assessment Years 2013-14 and also dismiss all the grounds raised by the revenue for 2011-12 to 2013-14.

23. Common Ground No.1 raised by the assessee is general in nature which needs no adjudication.

24. In the result all the appeals of the assessee for Assessment Year 2007-08 to 2013-14 and that of the Revenue for Assessment Year 2011-12 to 2013-14 stands dismissed.

25. Now we take up the appeals by the assessee in the case of Smt. Neeta Bhaduria for Assessment Year 2007-08 to 2013-14 wherein following grounds of appeals have been raised;

III. Smt. Neeta Bhadauria ITA(SS) No.85 to 89/Ind/2017 & ITA No.270/Ind/2017 Assessment Year 2007-08

1. That on the facts and in the circumstances of the case, the decision is contrary to law, without jurisdiction, materially irregular and unsustainable in law as well as on facts and that all the adverse findings recorded in making various additions in the order are incorrect and unlawful.

2. That on the facts and in the circumstances of the case, the law that the impugned assessment year, the return of income was filed in due course before search and such return was stood completed u/s 143(1)(a) and no proceedings for assessment/re-assessment were pending on the date of initiation of search and also in the search, no incriminating material was found suggesting the suppressed income in the nature of cash deposit in bank of Rs.32000 and, therefore, in absence of such incriminating material/concrete evidence, the assessment is bad in law and the addition made at Rs.32000 is unlawful and unjustified and, therefore, be deleted.

3. That on the facts and in the circumstances of the case and in law, and having regard to the explanation furnished, the findings of the learned lower authorities, that the cash deposits of the assessee of Rs.32000 in his bank account are unexplained deposits representing undisclosed income, are wholly unjustified, opposed to facts and unlawful and, therefore, the same be quashed and the addition sustained at Rs.32000 be kindly deleted.

4. That on the facts and in the circumstances of the case and in law, at any event, there is no justification in treating the entire cash deposits in the bank as the unexplained deposits, without giving the benefit of peak credit. The assessee submits that at any event only the peak amount may be added and the addition of Rs.32000 be kindly deleted.

5. That on the facts and in the circumstances of the case and in law, the levy of interest u/s 234A, 234B & 234C are wholly unlawful and contrary to the provisions of the Act, hence be cancelled”

Assessment Year 2008-09

1. That on the facts and in the circumstances of the case, the decision is contrary to law, without jurisdiction, materially irregular and unsustainable in law as well as on facts and that all the adverse findings recorded in making various additions in the order are incorrect and unlawful.

2. That on the facts and in the circumstances of the case, the law that the impugned assessment year, the return of income was filed in due course before search and such return was stood completed u/s 143(1)(a) and no proceedings for assessment/re-assessment were pending on the date of initiation of search and also in the search,  no incriminating material was found suggesting the suppressed income in the nature of cash deposit in the bank of Rs.17900 and, therefore, in absence of such incriminating material/concrete evidence, the assessment is bad in law and the addition made at Rs.17900 is unlawful and unjustified and, therefore, be deleted.

3. That on the facts and in the circumstances of the case and in law, and having regard to the explanation furnished, the findings of the learned lower authorities, that the cash deposits of the assessee of Rs.17900 in his bank account are unexplained deposits representing undisclosed income, are wholly unjustified, opposed to facts and unlawful and, therefore, the same be quashed and the addition sustained at Rs.17900 be kindly deleted.

4. That on the facts and in the circumstances of the case and in law, at any event, there is no justification in treating the entire cash deposits in the bank as the unexplained deposits, without giving the benefit of peak credit. The assessee submits that at any event only the peak amount may be added and the addition of Rs.17900 be kindly deleted.

5. That on the facts and in the circumstances of the case and in law, the levy of interest u/s 234A, 234B & 234C are wholly unlawful and contrary to the provisions of the Act, hence be cancelled”

Assessment Year 2009-10

1. That on the facts and in the circumstances of the case, the decision is contrary to law, without jurisdiction, materially irregular and unsustainable in law as well as on facts and that all the adverse findings recorded in making various additions in the order are incorrect and unlawful.

2. That on the facts and in the circumstances of the case, the law that the impugned assessment year, the return of income was filed in due course before search and such return was stood completed u/s 143(1)(a) and no proceedings for assessment/re-assessment were pending on the date of initiation of search and also in the search, no incriminating material was found suggesting the suppressed income in the nature of cash deposit in the bank of Rs.2000 and, therefore, in absence of such incriminating material/concrete evidence, the assessment is bad in law and the addition made at Rs.2000 is unlawful and unjustified and, therefore, be deleted.

3. That on the facts and in the circumstances of the case and in law, and having regard to the explanation furnished, the findings of the learned lower authorities, that the cash deposits of the assessee of Rs.2000 in his bank account are unexplained deposits representing undisclosed income, are wholly unjustified, opposed to facts and unlawful and, therefore, the same be quashed and the addition sustained at Rs.2000 be kindly deleted.

4. That on the facts and in the circumstances of the case and in law, at any event, there is no justification in treating the entire cash deposits in the bank as the unexplained deposits, without giving the benefit of peak credit. The assessee submits that at any event only the peak amount may be added and the addition of Rs.2000 be kindly deleted.

5. That on the facts and in the circumstances of the case and in law, the levy of interest u/s 234A, 234B & 234C are wholly unlawful and contrary to the provisions of the Act, hence be cancelled”

Assessment Year 2010-11

1. That on the facts and in the circumstances of the case, the decision is contrary to law, without jurisdiction, materially irregular and unsustainable in law as well as on facts and that all the adverse findings recorded in making various additions in the order are incorrect and unlawful.

2. That on the facts and in the circumstances of the case, the law that the impugned assessment year, the return of income was filed in due course before search and such return was stood completed u/s 143(1)(a) and no proceedings for assessment/re-assessment were pending on the date of initiation of search and also in the search, no incriminating material was found suggesting the suppressed income in the nature of cash deposit in the bank of Rs.3000 and, therefore, in absence of such incriminating material/concrete evidence, the assessment is bad in law and the addition made at Rs.3000 is unlawful and unjustified and, therefore, be deleted.

3. That on the facts and in the circumstances of the case and in law, and having regard to the explanation furnished, the findings of the learned lower authorities, that the cash deposits of the assessee of Rs.32000 in his bank account are unexplained deposits representing undisclosed income, are wholly unjustified, opposed to facts and unlawful and, therefore, the same be quashed and the addition sustained at Rs.3000 be kindly deleted.

4. That on the facts and in the circumstances of the case and in law, at any event, there is no justification in treating the entire cash deposits in the bank as the unexplained deposits, without giving the benefit of peak credit. The assessee submits that at any event only the peak amount may be added and the addition of Rs.3000 be kindly deleted.

5. That on the facts and in the circumstances of the case and in law, the levy of interest u/s 234A, 234B & 234C are wholly unlawful and contrary to the provisions of the Act, hence be cancelled”

Assessment Year 2012-13

1. That on the facts and in the circumstances of the case, the decision is contrary to law, without jurisdiction, materially irregular and unsustainable in law as well as on facts and that all the adverse findings recorded in making various additions in the order are incorrect and unlawful.

2. That on the facts and in the circumstances of the case and in law, and having regard to the explanation furnished, the findings of the learned authorities, that the cash deposit of the assessee of Rs.952712 in his bank account are unexplained deposits representing undisclosed income, are wholly justified, opposed to facts and unlawful and, therefore, the same be quashed and the addition sustained at Rs.9253712 be kindly deleted.

3. That on the facts and in the circumstances of the case and in law, no justification in treating the entire cash deposits in the bank as unexplained deposits, without giving the benefit of peak credit. The assessee submits that any event only the peak amount may be added and the addition of Rs.952712 be kindly deleted.

4. That on the facts and in the circumstances of the case and in law, the levy of interest u/s 234A, 234B & 234C are wholly unlawful and contrary to the provisions of the Act, hence be cancelled:

Assessment Year 2013-14

1.That on the facts and in the circumstances of the case, the decision is contrary to law, without jurisdiction, materially irregular and unsustainable in law as well as on facts and that all the adverse findings recorded in making various additions in the order are incorrect and unlawful.

2. That on the facts and in the circumstances of the case and in law, and having regard to the explanation furnished, the findings of the learned authorities, that the cash deposit of the assessee of Rs.3130750 in his bank account are unexplained deposits representing undisclosed income, are wholly justified, opposed to facts and  unlawful and, therefore, the same be quashed and the addition sustained at Rs.3130750 be kindly deleted.

3. That on the facts and in the circumstances of the case and in law, no justification in treating the entire cash deposits in the bank as unexplained deposits, without giving the benefit of peak credit. The assessee submits that any event only the peak amount may be added and the addition of Rs.3130750 be kindly deleted.

4. That on the facts and in the circumstances of the case and in law, the levy of interest u/s 234A, 234B & 234C are wholly unlawful and contrary to the provisions of the Act, hence be cancelled”

26. From perusal of above grounds we observe that following two common issues have been raised by the assessee;

(i) In absence of any incrimination material no addition was called for in the assessments completed u/s 153A r.w.s. 143(3) of the Act for the completed assessments before the date of search.

(ii) Challenging the addition u/s 68 of the Act for unexplained cash deposited in bank account.

27. Apropos first common issue Ld. Counsel for the assessee referred and relied upon the same set of judgments as were relied in the case of M/s. Indus Holidays & Tours India Pvt. Ltd is referred in para 10 above. It was argued that Income Tax Returns for Assessment Year 2007-08 to 2010-11 were regularly filed u/s 139(1) of the Act and the time limit for issuance of notice u/s 143(2) of the Act stood expired on 30.09.2010 for the return filed for Assessment Year 2010-11. Search took place on 30.11.2012. Additions made for unexplained cash deposit are not on the basis of any incriminating material.

28. Per contra Ld. Departmental Representative vehemently argued and supported the order of lower authorities.

29. We have heard rival contentions and perused the records placed before us.

30. The common issue raised by the assessee i.e Smt. Neeta Bhaduria is that no additions without any basis of any incriminating material should stand for as the assessment proceedings for Assessment Year 2010-11 and prior years were not pending as on the date of search and the same will be deemed to have been completed.

31. We observe that the search under the group case took place on 30.11.2012. Assessee has filed regular return of income for Assessment Years 2007-08 to 2010-11 on 31.7.2007, 31.07.2008, 30.07.2009 and 31.07.2010 respectively. The time limit for issuance of notice u/s 143(2) of the Act stands expired after 30.9.2010. The case of the assessee is that the last date for selecting the case for scrutiny for assessment year 2010-11 was 30.9.2010. All the returns are filed on earlier dates and the time limit for issue of notice u/s 143(2) of the Act for Assessment Year 2007-08 to 2010-11 has expired. Thus all the assessments for Assessment Year 2007-08 to 2010-11 are concluded and non abated assessments. Now the issue is whether for such concluded and non abated assessments for Assessment Year 2007-08 to 2010-11 whether the Ld. A.O can make any addition without having its nexus to the seized incriminating material. We find that the assessee relied and placed various decisions. Recently on 28.2.2019, I.T.A.T. Indore Bench in the case of Omprakash Gupta V/s ACIT 277 to 281/Ind/2018 and others order dated 28.2.2019 in which undersigned was a co-author, adjudicated similar issue and a detailed discussion was made about various judgments in favour of the assessee/Revenue and the Tribunal decided in favour of the assessee observing as follows;

“11. We have heard the rival submissions, perused the materials available on record and gone through the orders of the authorities below. The assessee is an individual filed returns of income for all the assessment years i.e. assessment years 2008-09 to 2012-13 and assessments are completed u/s 143(1) of the Act. Subsequently, a search action was conducted u/s 132 of the Act in the business group of the assessee and A.O. has asked the assessee to file returns of income for all the assessment years by issue of notice u/s 153A of the Act on 12.9.2014. In response to that, assessee has filed returns of income for A.Yrs. 2008-09 to 2013-14 on 7.11.2014. The case of the assessee is that the return for A.Y. 2012-13 was filed on 7.11.2012. As per section 143(2) of the Act, the last date on which notice for assessment would have been issued was 30.9.2013. All the other returns are filed on earliest date and the time limit for issue of notice u/s 143(2) of the Act in all those cases has expired. The search was initiated in the business premises of the assessee on 29.1.2014 and therefore the time limit for issue of notice u/s 143(2) of the Act is lapsed. All the assessment years from 2008-09 to 2012-13 are concluded and non abated assessments. The A.O. cannot reopen the assessments u/s 153A of the Act. In so far as the above submission is concerned from the assessment order and even from the Ld. CIT(A)’s order, there is nothing on the record which says that the additions made by the A.O. are based on any incriminating material. Even when the same was pointed out to Ld. D.R., she is not able to establish the fact that additions are based on any incriminating material, therefore we find that the additions made by the A.O. for all the years are not based on any incriminating material found during the course of search. It is only based on subsequent search by issue of notice u/s 153A of the Act calling for the various documents from the assessee additions are made. In so far as the arguments of the Ld. Counsel for the assessee in respect of concluded assessments cannot be reopened, we find that in all the assessment years from 2008-09 to 2012-13, there is no scope for the A.O to issue a notice u/s 143(2) of the Act for the reason that the time limit is already over before the date of search itself i.e. on 29.1.2014. Therefore, in our opinion, all the assessment years from 2008-09 to 2012-13 are concluded assessments and non abated assessments and any addition has to be made in respect of those assessment years, there must be an incriminating material. In the present case, there is no incriminating material and therefore, the additions made by the A.O. cannot survive.

12. This very issue has been considered by The Hon’ble Bombay High Court in the case of CIT Vs. Continental Warehousing Corporation (2015) 120 DTR (Bom) 89 and has observed that u/s 153A of the Act which enables carrying out a search or exercise of a power of requisition, assessment in furtherance thereof is contemplated. There is a mandatory issue of notice u/s 153(1A) of the Act and assess and reassess the total  income of 6 assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made. That the crucial word ‘search and requisition’ appear for the substantive provision on the provisos. That would throw the light on the issue of applicability of the provision. True it is that the assessment, which has to be made in pursuance of the notice is in relation to the 6 years. An order will have to be made in that record while making the order, the income or the return of income filed for all those assessment years is to be taken into account. A reference will have to be made to the income disclosed therein. However, the scope of enquiry there of not confined essentially revolves around the search or the requisition u/s 132A of the Act as the case may be. The proviso deals with the cases where the assessment or reassessment, if any relating to assessment years falling within the period of 6 assessment years refer to in sub section 1 of section 153A of the Act were pending. If they were pending on the date of initiation of search u/s 132 of the Act or making requisition u/s 132A of the Act as the case may be, they abate. It is only binding precedence that would abate and not where there are orders made on assessment or reassessment and which are in force on the date of initiation of the search or making the requisition.

13. In the case of Commissioner of Income Tax (Central)-3 Kabul Chawla (2015) 61 taxguru.in 412 (Del.), the Hon’ble Delhi High Court has considered the scope of section 132 of the Act and 153A(1) observed as under:

14. From the above decision, it is very clear that in respect of concluded assessments additions cannot be made without incriminating material.

15. The Hon’ble Delhi High Court in the case of PCIT Vs. Meeta Gutgutia 395 ITR 296 (Delhi) has held that it was only if during the course of the search u/s 132 of the Act incriminating material justifying the reopening of the assessment years for 6 previous years was found that invocation of section 153A of the Act qua each of the assessment year would justify.

16. In the case of Principal CIT Vs. Soumya Constructions 387 I TR 529 (Guj.) the Hon’ble Gujarat High Court has observed that the addition was based on statement of the third person and not based on any incriminating material found during the course of search, therefore the addition deleted by the Tribunal was upheld.

17. In the case of PCIT Vs. Lata Jain 384 ITR 543 (Del) (supra), the Hon’ble Delhi High Court has held that the Tribunal was right in holding that there had to be incriminating material recovered during the course of search qua the assessee in each year for the purpose of framing an assessment u/s 153A of the Act.

18. From the above all the decisions, it is very clear that the A.O. to make an addition u/s 153A of the Act and there must be incriminating material available to the A.O. during the course of the search. Unless there is an incriminating material, the concluded/non abated assessments cannot be disturbed again u/s 153A of the Act.

19. In so far as Kerala High Court decision in the case of E.N. Gopakumar (supra) the Hon’ble Kerala High Court has held that even without there being any incriminating material, the A.O. is empowered to make an addition u/s 153A of the Act. The same view has been expressed by the Hon’ble Karnataka High Court in the case of Canara Housing Development Company (supra).

20. In the above circumstances, whether the decision of the Hon’ble Supreme Court in the case of CIT Vs. Vegetable Products (supra) has to be applied or not. The Ld. D.R. has submitted that the decision held in CIT Vs. Vegetable Products (supra) cannot be applied in each and every case in the light of the decision of CCV Dilip Kumar (supra). In the present case, the assessee has filed all the returns before conducting the search and the time limit to issue notice u/s 143(2) of the Act already lapsed and a search is conducted and no incriminating material is found. The A.O. called for books of accounts and other relevant documents and assessment is completed u/s 153A r. w.s. 143(3) of the Act.

21. There are many decisions in favour of the assessee, which says that “once assessments are concluded without incriminating material, additions cannot be made by reopening u/s 153A of the Act. There are two decisions, one is of Hon’ble Kerala High Court in the case of E.N. Gopakumar (supra) and the second one is of Hon’ble Karnataka High Court in the case of Canara Housing Development Company Vs. DCIT Central Circle-1,Bangalore (supra) in favour of the revenue in which it was held that no incriminating material is necessary to reopen the assessments and to make an addition. In the present case, decisions of Hon’ble Delhi, Gujarat and Bombay High Courts are in favour of the assessee. The decisions of Hon’ble Kerala High Court and Karnataka High Court are against the assessee. We find that after examining the facts and circumstances of the case, the judgement of the Hon’ble Supreme Court in the case of Vegetable Products (supra) has to be followed. The Hon’ble Supreme Court in the above case has held that “if two reasonable constructions of a taxing provisions are possible, then that construction, which favours the assessee must be adopted.”

22. In the interest of justice, the decision of the Hon’ble Supreme Court in the case of Vegetable Products (supra) has to be followed. Therefore, we respectively following the decision of Hon’ble Delhi High Court in the case of Kabul Chawla (supra), Hon’ble Bombay High Court in the case of Continental Warehousing Corporation (supra) and also Hon’ble Gujarat High Court in the case of PCIT Vs. Meeta Gutgutia (supra), we hold that no addition can be made in respect of concluded assessments u/s 153A of the Act unless there is any incriminating material found during the course of search. We would like to make it clear that where the assessment is completed u/s 143(1) or 143(3) of the Act unless A.O. has a time to issue notice u/s 143(2) of the Act, A.O.cannot make an addition u/s 153A of the Act, unless there is an incriminating material found during the course of the search.

23. The coordinate bench of the Tribunal in the case of Sainath Colonisers Vs. ACIT (Central)-II Bhopal in IT(SS)A Nos.289 to 291/Ind/2017 dated 28.2.2019 has considered the similar issue and has held that if there is no incriminating material found during the course of search and the time limit for issue of notice u/s 143(2) of the Act expires, no addition can be made u/s 153A of the Act. For the sake of convenience relevant portion of the order is extracted hereunder:

“8. We observe that the assessee has filed regular return of income u/s 139 of the Act for Assessment Year 2008-09 to 2010-11on 30.9.08, 31.3.2010 and 12.10.2010 after claiming deduction u/s 80IB(10) at Rs.8,92,452/-, Rs.2,66,948/- and Rs.2,44,417/-respectively. The time limit for issuance of notices u/s 143(2) of the Act stood expired in relation to the assessment year 2008-09 to 2010-11 much before the date of conducting the search i.e.29.1.2014 and therefore these three assessment years falls under the category of unabated/non abated assessments. Now in the given facts Ld. Counsel for the assessee has relied few judgments and Ld. Departmental Representative has relied to few judgments in its favour. However, the Hon’ble Apex Court in the case of CIT V/s Vegetable Products Ltd 88 ITR 192 has “held that if two reasonable construction of a taxing provisions are possible, then that construction which favours the assessee must be adopted”. In the light of above judgment of Hon’ble Apex Court we have gone through the judgments referred and relied by both the parties and are inclined to follow the view taken by Hon’ble courts on the issue in question before us favouring the assessee.

9. The Hon’ble High Court of Gujarat in the case of PCIT Vs. Desai Construction (supra) confirmed the view taken by the Tribunal upholding the contention of the assessee that as no incriminating material was found during the course of search which could have enabled the Assessing Officer to re-examine its claim for deduction u/s 80IB which was part of the assessment prior to the search and such assessment unabated. Similarly Hon’ble High Court of Bombay in the case of Continental Warehousing Corporation and All Cargo Global Logistics Ltd (Supra) confirmed the view taken by the Special Bench of I.T.A.T. Mumbai Bench decided in favour of assessee dismissing the revenue’s appeal holding that there was noincriminating material found during the course of search, the Tribunal was right in holding the power conferred u/s 153A being not expected to be exercised routinely, should be exercised if the search revealed any incriminating material. If that was not found then in relation to the second phase of three years, there was no warrant for making an order within the meaning of this provision”.

10. Similar view was also taken by the Hon’ble High Court of Delhi in the case of Kabul Chawla (2015) 61 taxmann 412.

11. We therefore in the given facts and circumstances of the case and respectfully following the judgments referred and relied by the Ld. Counsel for the assessee are of the considered view that no addition/disallowance was called for Assessment Year 2008-09 to 2010-11 as no incriminating material was found during the course of search at the premises of the assessee as the time limit of issuance of notice u/s 143(2) of the Act stood expired much before the date of conducting search u/s 132 of the Act. Accordingly all the three appeals of the assessee are allowed.”

24. In so far as the arguments of the Ld. D.R. in respect of following the ratio of the Hon’ble Supreme Court in the case of Vegetable Products (supra), the Ld. D.R. by relying on the decision in the case of CCV Dilip Kumar (supra) has submitted that the ratio laid down in the case of Vegetable Products (supra) cannot be applied. We find that in the case of CCV Dilip Kumar (supra) has considered the exemption provisions and held that exemption provisions has to be considered strictly and in a case of ambiguity view which favours the revenue must be adopted. Therefore, the above decision relied by the Ld. D.R. has no application to the ratio laid down by the Hon’ble Supreme Court in the case of Vegetable Products (supra). Therefore, argument of the Ld. D.R. is rejected.

25. In view of the above, the order passed by Ld. CIT(A) is reversed and the appeals filed by the assessee are allowed.

26. In the result, the appeals filed by the assessee in ITA Nos.277 to 281/Ind/2017 are allowed.”

32. From perusal of the above decision of the Tribunal which has considered various judgments of Hon’ble High Courts as discussed above, came to a conclusion that while making the assessment u/s 153A r.w.s 143(3) of the Act subsequent to search proceedings u/s 132 of the Act, additions for concluded/non abated assessments cannot be made unless there is any incriminating material found during the course of search. Applying the same ratio in the identical facts before us, we are of the considered view that for Assessment Year 2007-08 to 2010-11 the Ld. A.O has no time to issue notices u/s 143(2) of the Act while the regular return of income was filed and in the assessment proceedings u/s 153A r.w.s. 143(3) of the Act the additions for unexplained cash deposit have no nexus with any incriminating material found during the course of search. Rather during the course of assessment proceedings carried out by the Ld. A.O u/s 153 r.w.s. 143(3) of the Act while going through the information called during the course of proceedings about the bank accounts this issue came in light.

Revenue has not controverted the fact that the additions for unexplained cash deposit made for Assessment Year 2007-08 to 2010-11 is not based on any incriminating material found during the course of search. Therefore we are inclined to follow the judicial pronouncements referred above and allow the assessee’s ground No.2 for Assessment Year 2007-08 to 2010-11 and direct the Ld. A.O to delete the addition for Rs.32,000/-, Rs.17,900/-, Rs.2,000/-and Rs.3,000/- for Assessment Year 2007-08 to 2010-11 respectively. In the result the appeals of the assessee for
Assessment Year 2007-08 to 2010-11 are allowed.

33. Apropos the second common issue for Assessment Year 2012-13 and 2013-14 wherein the assessee is challenging the findings of Ld. CIT(A) confirming the addition of Rs.9,52,712/- and Rs.31,30,750/- for unexplained cash deposited in bank account u/s 68 of the Act. Ld. Counsel for the assessee submitted that the basic requirement for making the provisions of Section 68 of the Act is maintenance of books of account. Bank statement/pass book is not an account maintained by the assessee. Reliance was placed on following judgments in support of the contention that if no books of accounts are maintained then no addition under the provision of Section 68 of the Act are called for;

a. Mansi Mahendra Pitkar (2016) 73 taxguru.in 68 (Mumbai) order dated 12.08.2016

b. Bhaichand N Gandhi (1982) 141 ITR 67 (Bom)

c. Rajshibhai Meramanbhai Oderdra – ITA No.1019 to 1023/Rjt/2010- Hon’ble Rajkot Bench of ITAT order dated 14.12.2012.

d. Madhu Raitani (2011) 45 SOT 231 – Hon’ble Gauhati Bench of ITAT TM – 07.10.2010.

e. Tej Borewells (2007) 291 ITR 232 – Hon’ble Madras High Court dated 02.04.2007 followed the decision of Hon’ble Apex Court in the case of Ananthram Veerasinghaiah & Co (1980) 123 ITR 457 dated 15.04.1981.

34. Without prejudice to the above submission challenging the applicability of provisions of Section 68 of the Act, Ld. Counsel for the assessee made an alternate submission referring to the cash flow statement placed in the paper book contending that Ld. A.O has not computed the amount of cash deposited and withdrawn from bank for the year under consideration. Ld. Counsel for the assessee submitted that there are certain incorrect observations by the Ld. A.O for Assessment Year 2012-13 for which as per assessee cash withdrawn is claimed at Rs.11,64,000/- but Ld. A.O has considered it at Rs.6,84,000/-. Similarly for Assessment Year 2013-14 assessee claimed to have deposited cash of Rs.29,85,750/- and Ld. A.O has adopted a figure of Rs.31,30,750/-Similarly for cash withdrawal for Assessment Year 2013-14 assessee has claimed to have withdrawn Rs. 7,85,000/- and Ld. A.O has adopted Rs.5,50,000/-. He also contended that the amount withdrawn is available for rotation and the assessee is also earning income from business of civil construction which is also deposited in bank account and is available for withdrawal.

35.One more alternate submission was submitted by the Ld. Counsel for the assessee that the peak credit theory may please be applied considering that no cash balance was available with the assessee as on 1.4.2006, and in case the peak credit theory is applied addition if any is to be made for the years under appeal as summarized below;

A.Y Peak credit Balance Incremental Balance if any, to be added
2007-08 34,500 34,500
2008-09 59,100 26,600
2009-10
2010-11 1,44,579 85,479
2011-12 1,37,940
2012-13 1,44,180
2013-14 1,01,366

36. Reliance was also placed on following judgments;

a. Hon’ble jurisdictional High Court of Madhya Pradesh in the case of Dharamdas Agrawal (1983) 144 ITR 143 – dated 30.08.1982.

b. Hon’ble Rajasthan High Court in the case of Sindh Medical Stores – 117 DTR 497 dated 12.11.2014.

c. Hon’ble jurisdictional High Court of Madhya Pradesh in the case of Agrawal Warehousing & Leasing Ltd (2002) 124 Taxman 440

d. Hon’ble jurisdictional High Court of Madhya Pradesh in the case of Govindram Sakseria Charity Trust (1987) 168 Taxman 384 – order pronounced on 05.02.1987.

37. Per contra Ld. Departmental Representative vehemently argued and supporting the detailed finding of fact by Ld. CIT(A).

38. We have heard rival contentions and perused the record placed before us and carefully gone through the judgments referred and relied by both the parties.

39. The common issue of addition for unexplained cash deposit at Rs.9,52,752/- and Rs.31,30,750/- has been taken up by the assessee challenging the order of Ld. CIT(A).

40. Ld. A.O during the course of assessment proceedings asked the assessee to file the copies of bank statement. On perusal of the same it was observed that cash has been deposited on various dates. The assessee was asked to explain the source of the cash. Various submissions were filed before the lower authorities about the cash withdrawn and deposited in bank accounts, inter bank withdrawal and cash deposited, amount of income received as Tour & Guide Travel, amount received from husband which is duly reconciled with the cash flow statement filed by the husband Shri Ajay Singh Bhaduria. In the given set of facts and in the light of judgment relied and referred by Ld. Counsel for the assessee, we are of the considered view that in such cases where there is a difference of opinion about the source of cash deposited and withdrawn, better option is to apply the peak credit theory by way of which the peak credit balance is taken as an unexplained cash amount which needs to be added to the income of the assessee. Various rounds of submission/documents have taken place before the lower authorities. Cash flow statements have been filed. Following working of peak credit is placed by the assessee which have been gone through by us;

A.Y Peak credit Balance Balance if any, to be added
2007-08 34,500 34,500
2008-09 59,100 26,600
2009-10
2010-11 1,44,579 85,479
2011-12 1,37,940
2012-13 1,44,180
2013-14 1,01,366

41. In similar set of facts in the case of Dharamdas Agrawal (1983) 144 ITR 143 – dated 30.08.1982 Hon’ble jurisdictional High Court following the judgment of Hon’ble Apex Court in the case of Ananthram Veersinghaiah & Co. (1980) 123 ITR 457 dated 15.4.1981 held that peak credit theory should be applied.

42. Now the above working of peak credit to Assessment Year 2011-12 the incremental peak cash amount is Rs.1,44,579/- (34,500 + 24,600+85,479). From Assessment Year 2011-12
onwards there is no incremental peak credit balance because of the telescoping of peak cash in the preceding years in the cash balance for Assessment Year 2012-13 and 2013-14.

43. We therefore are of the considered view that if an addition for peak cash credit of Rs.1,44,579/- is sustained for 2012-13 it will take care of the peak cash credit with the assessee and thus no addition of Rs.9,52,752/- and Rs. 31,30,750/- is called for. We accordingly order so and sustain the addition for Rs.1,44,579/- for unexplained cash for Assessment Year 2012-13 and delete the addition for Rs.31,30,750/- for Assessment Year 2013-14. In the result Ground No.3 for assessee’s appeal for Assessment Year 2012- 13 is partly allowed and that for Assessment Year 2013-14 is allowed.

44. Now we take up the appeal of the assessee namely Smt. Sunita Nigam for Assessment Year 2007-08, 2009-10 and Assessment Year 2010-11 raising following grounds;

IV. Smt. Sunita Nigam

ITA(SS) No.121 & 122/Ind/2017

Assessment Year 2007-08

1. That on the facts and in the circumstances of the case and in law, that in the impugned assessment year, the return of income was filed in due course before search and such return was stood completed u/s 143(1)(a) and no proceedings for assessment/re-assessment were pending on the date of initiation of search and also in the search, no incriminating material was found suggesting the suppressed income in the nature of cash deposit in the bank and the household expenses and, therefore, in absence of such incriminating material/concrete evidence, the assessment is bad in law and hence be cancelled and the additions made/sustained at Rs.60000 & Rs.26000 by learned lower authorities are unlawful and unjustified and, therefore, be deleted.

2. That on the facts and in the circumstances of the case and in law, and having regard to the explanation furnished/on record, the learned lower authorities are not justified in their findings that on the opening day of the previous year i.e. on 01.04.2006, the assessee did not have any cash-in-hand and that she was a pauper. The assessee submits that her explanation that she had estimated cash of Rs.200000 on the opening day of previous year i.e. 1.4.2006 be kindly accepted and it be held that additions made/sustained of Rs.60000 for the unexplained cash deposits in bank and Rs.26000 for the unexplained household expenses are neither justified nor lawful, hence the said additions be kindly deleted.

3. That on the facts and in the circumstances of the case and in law, the levy of interest u/s 234A, 234B & 234C are wholly unlawful and contrary to the provisions of the Act, hence be cancelled”

Assessment Year 2009-10

1. That on the facts and in the circumstances of the case and in law, that in the impugned assessment year, the return of income was filed in due course before search and such return was stood completed u/s 143(1)(a) and no proceedings for assessment/re-assessment were pending on the date of initiation of search and also in the search, no incriminating material was found suggesting the suppressed income in the nature of cash deposit in the bank and the household expenses and, therefore, in absence of such incriminating material/concrete evidence, the assessment is bad in law and hence be cancelled and the additions made/sustained at Rs.40000 & Rs.20000 by learned lower authorities are unlawful and unjustified and, therefore, be deleted.

2. That on the facts and in the circumstances of the case and in law, and having regard to the explanation furnished/on record, the learned lower authorities are not justified in their findings that on the opening day of the previous year i.e. on 01.04.2006, the assessee did not have any cash-in-hand and that she was a pauper. The assessee submits that her explanation that she had estimated cash of Rs.200000 on the opening day of previous year i.e. 1.4.2006 be kindly accepted and it be held that additions made/sustained of Rs.40000 for the unexplained cash deposits in bank and Rs.20000 for the unexplained household expenses are neither justified nor lawful, hence the said additions be kindly deleted.

3. That on the facts and in the circumstances of the case and in law, the levy of interest u/s 234A, 234B & 234C are wholly unlawful and contrary to the provisions of the Act, hence be cancelled”

Assessment Year 2010-11

1. That on the facts and in the circumstances of the case and in law, that in the impugned assessment year, the return of income was filed in due course before search and such return was stood completed u/s 143(1)(a) and no proceedings for assessment/re-assessment were pending on the date of initiation of search and also in the search, no incriminating material was found suggesting the suppressed income in the nature of cash deposit in the bank and the household expenses and, therefore, in absence of such incriminating material/concrete evidence, the assessment is bad in law and hence be cancelled and the additions made/sustained at Rs.60000 & Rs.26000 by learned lower authorities are unlawful and unjustified and, therefore, be deleted.

2. That on the facts and in the circumstances of the case and in law, and having regard to the explanation furnished/on record, the learned lower authorities are not justified in their findings that on the opening day of the previous year i.e. on 01.04.2006, the assessee did not have any cash-in-hand and that she was a pauper. The assessee submits that her explanation that she had estimated cash of Rs.200000 on the opening day of previous year i.e. 1.4.2006 be kindly accepted and it be held that additions made/sustained of Rs.60000 for the unexplained cash deposits in bank and Rs.26000 for the unexplained household expenses are neither justified nor lawful, hence the said additions be kindly deleted.

3. That on the facts and in the circumstances of the case and in law, the levy of interest u/s 234A, 234B & 234C are wholly unlawful and contrary to the provisions of the Act, hence be cancelled”

45. We will first take up the common issue for the three years raising Ground No.1 that no addition was called for in absence of any incriminating material for the completed assessments as on the date of search. We have dealt with this issue in the case of Smt. Neeta Bhaduria in the preceding paras. Both the parties have agreed to the fact that the issue remains the same. We therefore relying on the decision of the Co-ordinate Bench in the case of Omprakash Gupta ITA Nos 277 to 281/Ind/2017 order dated 28.2.2019(supra) held in favour of assessee after considering the judgment of Hon’ble High Court in the case of Kabul Chawla (2015) 61 Taxmannn 412 and another judgment of Bombay High Court in the case CIT V/s Continental Warehousing Corporation (2015) 120 DTR (Bom) 89, observe that in the case of Smt. Sunita Nigam regular return of income for Assessment Year 2007-08, 2009-10 and 2010-11  were filed on 27.7.2007, 28.7.2009 and 30.7.2010 respectively. Time limit for issuance of notice u/s 143(2) of the Act stood expired before the date of search and therefore the intimation u/s 143(1)(a) of the Act taken the shape of assessment order and such assessment year shall be deemed to be completed, concluded and non abated assessments and subsequent to search Ld. A.O while framing the assessment u/s 153A r.w.s. 143(3) of the Act addition for such assessment years 2007-08, 2009-10 and 2010-11 can be made only if any incriminating material is found during the course of search. However in the case of Smt. Sunita Nigam no such incriminating material was found. Addition was made only on the basis of bank statement called during the course of assessment proceedings and therefore in our considered view Ld. A.O’s action for making the addition for Assessment Year 2007-08, 2009-10 and 2010-11 for three assessment years was not justified and deserves to be deleted. We accordingly order so and allow the common issue raised by the assessee.

46. Ground No.2 raised on the merits of the case needs no adjudication as it becomes infructuous as we have already deleted all the addition for Assessment Year 2007-08, 2009-10 and 2010- 11 by allowing common Ground No.1 above. In the result all the three appeals of the assessee namely Smt. Sunita Nigam for Assessment Years 2007-08, 2009-10 and 2010-11 are allowed.

47. Now we take up the appeal in the case of M/s. Purple Vacations Pvt. Ltd for Assessment Year 2010-11 raising following grounds of appeal;

V. Purple Vacations Pvt. Ltd

ITA(SS) No.120/Ind/2017

Assessment Year 2010-11

1. That on the facts and in the circumstances of the case, the decision is contrary to law, without jurisdiction, materially irregular and unsustainable in law as well as on facts and that all the adverse findings recorded in making various additions in the order are incorrect and unlawful.

2. That on the facts and in the circumstances of the case, the impugned assessment year was non abated assessment year and no incriminating material was found in the search, as is evident from the assessment order itself, therefore, in absence of the incriminating materials, the addition made at Rs.210430 for the unexplained investment in the assessment made u/s 153A r.w.s. 143(3) is bad in law and without jurisdiction, hence the said addition be kindly deleted and the assessment be quashed.

3. That on the facts and in the circumstances of the case and in law, the addition of Rs.210430 for the alleged unexplained investment is unlawful and unjustified and, therefore, be deleted.

4. That on the facts and in the circumstances of the case and in law, the levy of interest u/s 234A, 234B & 234C are wholly unlawful and contrary to the provisions of the Act, hence be cancelled”

48. In this case also through first ground assessee has challenged the addition and submitted that they were not based on any incriminating material and we have gone through the case and considering the facts observe that the assessee is part of the group case wherein search was conducted on 30.11.2012. No incriminating material was found from the assessee’s premises during the course of search. However during the course of assessment u/s 153A r.w.s. 143(3) of the Act certain details were called for about the purchase of land made by the assessee during Assessment Year 2010-11 and addition of Rs.2,10,430/- was made the difference between the market value and the amount claimed by the assessee for purchase of land. The impugned addition of Rs.2,10,430/- is not based on any incriminating material found during the course of search. We therefore applying the same ratio of decision as adopted by us in the case of Smt. Neeta Bhadauria (ITA (SS) No.85 to 89/Ind/2017 & ITA No.270/Ind/2017) observe that return for 2010-11 was filed by the assessee on 6.10.2010. No notice u/s 143(2) of the Act was issued up to 30.9.2011. There were no pending assessments as on date of search and Assessment Year 2010-11 comes under the category of completed and non abated assessments. We therefore applying the same consistent approach are of the view that both the lower authorities erred in making the addition of Rs.2,10,430/- in the hands of the assessee. We delete the same by allowing the first ground of appeal raised by the assessee. Ground No. 2 & 3 relates to merits of the case becomes infructuous as we have already deleted the addition. Ground No.4 is general in nature which needs no adjudication. In the result appeals of the assessee for Assessment Year 2010-11 is allowed.

49. Now we take up appeals related to Shri Ajay Singh Bhaduria for Assessment Year 2008-09 to 2013-14 raising following grounds of appeal;

VI. Shri Ajay Bhadauria

ITA(SS) No.90 to 95/Ind/2017 & ITA No.271/Ind/2017 Assessment Year 2007-08

1. That on the facts and in the circumstances of the case, the decision is contrary to law, without jurisdiction, materially irregular and unsustainable in law as well as on facts and that all the adverse findings recorded in making various additions in the order are incorrect and unlawful.

2. That on the facts and in the circumstances of the case, the law that the impugned assessment year, the return of income was filed in due course before search and such return was stood completed u/s 143(1)(a) and no proceedings for assessment/re-assessment were pending on the date of initiation of search and also in the search, no incriminating material was found suggesting the suppressed income in the nature of cash deposit in bank of Rs.231241 and, therefore, in absence of such incriminating material/concrete evidence, the assessment is bad in law and the addition made at Rs.231241 is unlawful and unjustified and, therefore, be deleted.

3. That on the facts and in the circumstances of the case and in law, and having regard to the explanation furnished, the findings of the learned lower authorities, that the cash deposits of the assessee of Rs.231241 in his bank account are unexplained deposits representing undisclosed income, are wholly unjustified, opposed to facts and unlawful and, therefore, the same be quashed and the addition sustained at Rs.231241 be kindly deleted.

4. That on the facts and in the circumstances of the case and in law, at any event, there is no justification in treating the entire cash deposits in the bank as the unexplained deposits, without giving the benefit of peak credit. The assessee submits that at any event only the peak amount may be added and the addition of Rs.231241 be kindly deleted.

5. That on the facts and in the circumstances of the case and in law, the levy of interest u/s 234A, 234B & 234C are wholly unlawful and contrary to the provisions of the Act, hence be cancelled”

Assessment Year 2008-09

1 That on the facts and in the circumstances of the case, the decision is
contrary to law, without jurisdiction, materially irregular and unsustainable in law as well as on facts and that all the adverse findings recorded in making various additions in the order are incorrect and unlawful.

2. That on the facts and in the circumstances of the case, the law that the impugned assessment year, the return of income was filed in due course before search and such return was stood completed u/s 143(1)(a) and no proceedings for assessment/re-assessment were pending on the date of initiation of search and also in the search, no incriminating material was found suggesting the suppressed income in the nature of cash deposit in the bank of Rs.755500 and, therefore, in absence of such incriminating material/concrete evidence, the assessment is bad in law and the addition made at Rs.755500 is unlawful and unjustified and, therefore, be deleted.

3. That on the facts and in the circumstances of the case and in law, and having regard to the explanation furnished, the findings of the learned lower authorities, that the cash deposits of the assessee of Rs.755500 in his bank account are unexplained deposits representing undisclosed income, are wholly unjustified, opposed to facts and unlawful and, therefore, the same be quashed and the addition sustained at Rs.755500 be kindly deleted.

4. That on the facts and in the circumstances of the case and in law, at any event, there is no justification in treating the entire cash deposits in the bank as the unexplained deposits, without giving the benefit of peak credit. The assessee submits that at any event only the peak amount may be added and the addition of Rs.755500 be kindly deleted.

5. That on the facts and in the circumstances of the case and in law, the levy of interest u/s 234A, 234B & 234C are wholly unlawful and contrary to the provisions of the Act, hence be cancelled”

Assessment Year 2009-10

1. That on the facts and in the circumstances of the case, the decision is contrary to law, without jurisdiction, materially irregular and unsustainable in law as well as on facts and that all the adverse findings recorded in making various additions in the order are incorrect and unlawful.

2. That on the facts and in the circumstances of the case, the law that the impugned assessment year, the return of income was filed in due course before search and such return was stood completed u/s 143(1)(a) and no proceedings for assessment/re-assessment were pending on the date of initiation of search and also in the search, no incriminating material was found suggesting the suppressed income in the nature of cash deposit in the bank of Rs.608150 and, therefore, in absence of such incriminating material/concrete evidence, the assessment is bad in law and the addition made at Rs.2000 is unlawful and unjustified and, therefore, be deleted.

3. That on the facts and in the circumstances of the case and in law, and having regard to the explanation furnished, the findings of the learned lower authorities, that the cash deposits of the assessee of Rs. 608150 in his bank account are unexplained deposits representing undisclosed income, are wholly unjustified, opposed to facts and unlawful and, therefore, the same be quashed and the addition sustained at Rs. 608150 be kindly deleted.

4. That on the facts and in the circumstances of the case and in law, at any event, there is no justification in treating the entire cash deposits in the bank as the unexplained deposits, without giving the benefit of peak credit. The assessee submits that at any event only the peak amount may be added and the addition of Rs. 608150 be kindly deleted.

5. That on the facts and in the circumstances of the case and in law, the levy of interest u/s 234A, 234B & 234C are wholly unlawful and contrary to the provisions of the Act, hence be cancelled”

Assessment Year 2010-11

1. That on the facts and in the circumstances of the case, the decision is contrary to law, without jurisdiction, materially irregular and unsustainable in law as well as on facts and that all the adverse findings recorded in making various additions in the order are incorrect and unlawful.

2. That on the facts and in the circumstances of the case, the law that the impugned assessment year, the return of income was filed in due course before search and such return was stood completed u/s 143(1)(a) and no proceedings for assessment/re-assessment were pending on the date of initiation of search and also in the search, no incriminating material was found suggesting the suppressed income in the nature of cash deposit in the bank of Rs.1331500 and, therefore, in absence of such incriminating material/concrete evidence, the assessment is bad in law and the addition made at Rs.1331500 is unlawful and unjustified and, therefore, be deleted.

3. That on the facts and in the circumstances of the case and in law, and having regard to the explanation furnished, the findings of the learned lower authorities, that the cash deposits of the assessee of Rs. 1331500 in his bank account are unexplained deposits representing undisclosed income, are wholly unjustified, opposed to facts and unlawful and, therefore, the same be quashed and the addition sustained at Rs. 1331500 be kindly deleted.

4. That on the facts and in the circumstances of the case and in law, at any event, there is no justification in treating the entire cash deposits in the bank as the unexplained deposits, without giving the benefit of peak credit. The assessee submits that at any event only the peak amount may be added and the addition of Rs.1331500 be kindly deleted.

5. That on the facts and in the circumstances of the case and in law, the levy of interest u/s 234A, 234B & 234C are wholly unlawful and contrary to the provisions of the Act, hence be cancelled”

Assessment Year 2011-12

1. That on the facts and in the circumstances of the case, the decision is contrary to law, without jurisdiction, materially irregular and unsustainable in law as well as on facts and that all the adverse findings recorded in making various additions in the order are incorrect and unlawful.

2. That on the facts and in the circumstances of the case and in law, and having regard to the explanation furnished, the findings of the learned authorities, that the cash deposit of the assessee of Rs.373160 in his bank account are unexplained deposits representing undisclosed income, are wholly justified, opposed to facts and unlawful and, therefore, the same be quashed and the addition sustained at Rs. 373160 be kindly deleted.

3. That on the facts and in the circumstances of the case and in law, and having regard to the explanation furnished, the findings of the learned lower authorities, that the cash deposits of the assessee of Rs. 373160 in his bank account are unexplained deposits representing undisclosed income, are wholly unjustified, opposed to facts and unlawful and, therefore, the same be quashed and the addition sustained at Rs. 373160 be kindly deleted.

4.That on the facts and in the circumstances of the case and in law, at any event, there is no justification in treating the entire cash deposits in the bank as the unexplained deposits, without giving the benefit of peak credit. The assessee submits that at any event only the peak amount may be added and the addition of Rs. 373160 be kindly deleted.

5. That on the facts and in the circumstances of the case and in law, the levy of interest u/s 234A, 234B & 234C are wholly unlawful and contrary to the provisions of the Act, hence be cancelled”

Assessment Year 2012-13

1. That on the facts and in the circumstances of the case, the decision is contrary to law, without jurisdiction, materially irregular and unsustainable in law as well as on facts and that all the adverse findings recorded in making various additions in the order are incorrect and unlawful.

2. That on the facts and in the circumstances of the case and in law, and having regard to the explanation furnished, the findings of the learned authorities, that the cash deposit of the assessee of Rs.285410 in his bank account are unexplained deposits representing undisclosed income, are wholly justified, opposed to facts and unlawful and,
therefore, the same be quashed and the addition sustained at Rs. 285410 be kindly deleted.

3. That on the facts and in the circumstances of the case and in law, at any event, there is no justification in treating the entire cash deposits in the bank as the unexplained deposits, without giving the benefit of peak credit. The assessee submits that at any event only the peak amount may be added and the addition of Rs. 285410.

4. That on the facts and in the circumstances of the case and in law, the levy of interest u/s 234A, 234B & 234C are wholly unlawful and contrary to the provisions of the Act, hence be cancelled”

Assessment Year 2013-14

1. That on the facts and in the circumstances of the case, the decision is contrary to law, without jurisdiction, materially irregular and unsustainable in law as well as on facts and that all the adverse findings recorded in making various additions in the order are incorrect and unlawful.

2. That on the facts and in the circumstances of the case and in law, and having regard to the explanation furnished, the findings of the learned authorities, that the cash deposit of the assessee of Rs.111000 in his bank account are unexplained deposits representing undisclosed income, are wholly justified, opposed to facts and unlawful and,
therefore, the same be quashed and the addition sustained at Rs. 111000 be kindly deleted.

3. That on the facts and in the circumstances of the case and in law, no justification in treating the entire cash deposits in the bank as unexplained deposits, without giving the benefit of peak credit. The assessee submits that any event only the peak amount may be added and the addition of Rs. 111000 be kindly deleted.

4. That on the facts and in the circumstances of the case and in law, the learned lower authorities had drawn wrong and unlawful inferences on the notings and jottings in the seized paper referred to in the order (Page 54 LPS-2). The assessee’s contention is that he is not the owner of the paper and he is also not the author of the paper & the notings and jottings do not convey in any manner his undisclosed income. Hence the addition made at Rs.733000 is unlawful &injudicious, hence the same be kindly deleted.

5. That on the facts and in the circumstances of the case and in law, the levy of interest u/s 234A, 234B & 234C are wholly unlawful and contrary to the provisions of the Act, hence be cancelled”

50. We will first take up the appeal for Assessment Year 2007-08 to Assessment Year 2011-12. In these years also two common issues have been raised. In Ground No.1 & 2, challenging the addition for Assessment Year 2007-08 to 2011-12 taking a plea that no incriminating material was found during the course of search and the additions for Assessment Year 2007-08 to 2011-12 cannot stand for as these assessment years comes under the category of completed and non abated assessments and secondly challenging various addition referred in Ground No.3 & 4 relates to addition for unexplained cash deposit and un accounted receipts with an alternate plea for applying the peak credit theory.

51. Apropos the first common issue as to whether the addition can be made in absence of any incriminating material for the completed/non abated assessments, we find that the same set of facts were there before us in the case of Smt. Neeta Bhaduria (ITA (SS) No.85 to 89/Ind/2017 & ITA No.270/Ind/2017) wherein we have referred and relied on the Tribunal decision in the case Omprakash Gupta V/s ACIT 277 to 281/Ind/2018 in which judgment of Hon’ble High Court in the case of Kabul Chawla (2015) 61 Taxmann 412 was followed to allow the assessee’s appeal. In the light of above decisions and our discussions in the preceding paras we have examined the facts of Shri Ajay Singh Bhaduria and find that except for 2010-11 for the remaining four assessment years i.e. 2007-08, 2008-09, 2009-10 & 2011-12 the alleged additions are only for the unexplained cash deposit in the bank accounts regularly disclosed by the assessee in its return of income. No incriminating material is there. Regular returns of income for Assessment Years 2007-08, 2008-09, 2009-10 & 2011-12 were filed on/before the due dates u/s 139(1) of the Act as mentioned in the assessment order. There is no evidence on record to show that notice u/s 143(2) of the Act were issued for these four assessment years nor any assessment proceedings was pending on the date of search. Therefore applying the same consistent approach we are of the considered opinion that no addition was called for during assessment years 2007-08, 2008-09, 2009-10 & 2011-12 because the alleged addition was not based on any seized incriminating material. Therefore, the addition of Rs.2,31,241/-, Rs.7,55,500/-, Rs.6,08,150/- and Rs.3,73,160/- for assessment years 2007-08, 2008-09, 2009-10 & 2011-12 respectively deserves to be deleted.

52. As regards Assessment Year 2010-11 is concerned there were two additions namely Rs.13,31,500/- for unexplained cash deposit and addition of Rs.9,27,500/- for unaccounted receipts. As far as the addition for un explained cash deposit of Rs.13,31,500/- is concerned this addition is not based on any incriminating material and as the time limit for issuance of notice u/s 143(2) of the Act for assessment year 2010-11 stood expired and assessment proceedings for Assessment Year 2010-11 was not pending as on the date of search 30.11.2012, thus assessment for Assessment Year 2010-11 stood completed and therefore in view of our above decision for Assessment Year 2007-08, 2008-09, 2009-10 & 2011-12, the addition of Rs.13,31,500/- also deserves to be deleted as it is not based on any incriminating material.

53. However with regard to the addition for unaccounted receipt of Rs.9,27,500/- is concerned, after going through the written submissions filed by the assessee as well as perusal of record we find that page Nos 43 to 45 of LPS-3 was seized during the course of search on 30.11.12 and on one of the page of the seized papers various amounts were mentioned against the date and month but no year mentioned and in another page though the date has been mentioned there are various amounts reflected. Assessee was asked to explain all these seized documents which was found at the premises of the assessee. Assessee could not explain the same and claimed the alleged seized papers as dumb document which contains some rough jottings. Ld. A.O came to a conclusion that the seized loose papers shows the cash receipts of Rs.9,25,500/-during financial year 2009-10. Ld. CIT(A) also confirmed the addition accepting the observation made by the Ld. A.O. Before us also the same arguments have been made by the assessee that seized document are dumb document. However from perusal of the seized sheets i.e. LPS 43 to 45 in our view these pages do not come under the category of dumb document. Various financial transactions have been written which has the mention of dates at some pages & mention of Shri Ajay Bhaduria. It is quite possible that some employee of the assessee or the group company has written these figures but these documents were found at the assessee’s premises and has the reference of assessee but he failed to explain the transactions in these seized documents even when the burden lies heavily on the shoulders of the assessee, which in the instant case seems not to have been properly fulfilled. As the reply/submission made by the assessee/Ld. Counsel for the assessee in our view are unsatisfactory and vague, we find no reason to make any interference in the findings of Ld. CIT(A) confirming the addition for unaccounted cash receipt of Rs.9,25,500/-. Ground No. 5 & 6 of the assessee’s appeal for Assessment Year 2010-11 is dismissed.

54. Now we have to deal with the appeals by the assesse Shri Ajay Bhaduria for Assessment Year 2012-13 & 2013-14. In these two appeals first common issue relates to unexplained cash deposit in bank at Rs.2,85,410/- and Rs.1,11,000/- respectively. Similar issue came up before us in the case of assessee’s wife namely Smt. Neeta Bhaduria wherein in the similar given facts and circumstances we have decided to apply peak credit theory following the judgment of Hon’ble jurisdiction High Court of Madhya Pradesh in the case of Dharamdas Agrawal (1983) 144 ITR 143 (MP). Cash flow statements have been filed before the lower authorities and before us giving details of amount received from various sources and the cash amount applied. On the basis of these cash flow statements working of following peak credit have been filed by the assessee.

A.Y Peak Credit Balance Incremental Balance
2007-08 317018 317018
2008-09 356301 39283
2009-10 399484 43183
2010-11 365562 0
2011-12 390526 0
2012-13 288503 0
2013-14 360103 0

55. In preparing peak cash credit theory assessee has taken opening cash balance of Rs.4,00,000/- on 1.4.2006 for which no explanation or documentary evidences have been filed before the lower authority. However looking to the fact that the assessee is regularly filing its income tax returns in the past and for Assessment Year 2007-08 also income of Rs.6,01,077/- has been disclosed. Therefore looking to the age of the assessee and a fair possibility of accumulating cash for last so many years the claim of opening cash balance of Rs. 4,00,000/- is allowed. The incremental cash balance is totaling to Rs.3,99,184/- (3,17,018/- + 39,283 + 43,183/-) as duly accepted by the assesee. As against this incremental cash balance of Rs. 3,99,184/- the addition challenged before us is of Rs.3,96,410/- . It is well established rule that the addition to be confirmed cannot exceed the addition challenged before the Tribunal. Accumulated incremental peak cash credit as accepted by the assessee is Rs.3,99,184/- whereas the addition challenged before us is Rs.3,96,410/-. We are thus inclined to hold that out of the incremental peak cash credit accepted by the assessee we confirm the addition for unexplained cash for Assessment Year 2012-13 at Rs.2,85,410/- and Rs.1,11,000/- for Assessment Year 2013-14 and accordingly dismiss this common ground of assessee Shri Ajay Singh Bhaduria for Assessment Year 2012-13 and 2013-14.

56. Now we are left with Ground No.4 for Assessment Year 2013-14 through which assessee has challenged the finding of Ld. CIT(A) confirming the addition of unaccounted investment/expenditure of Rs.7,33,000/- made on the basis of seized paper bearing page No.54 of LPS-2.

57. Counsel for the assessee reiterating the same submission as made before the lower authorities submitted that the assessee is not the owner of the paper and nor the author of the paper. Details mentioned on the loose sheet are rough notings and jottings and do not convey in any manner about the assessee’s undisclosed income. This piece of paper is also not signed.

58. Per contra Departmental Representative vehemently argued and supported the orders of lower authorities and also referred to the Agra project of IBD Group which is related to the assessee and also brought to our notice that in the seized paper Page No.54 of LPS-2 below the word Agra, various amounts have been mentioned along with the dates which connotes that this seized paper have a direct connection with the assessee vis-à-vis Agra Project.

59. We have heard rival contentions and perused the records placed before us. The assessee is challenging the addition of un accounted investment/expenditure of Rs.7,33,000/-. This addition was made by the Ld. A.O on the basis of seized paper Page-54 of LPS-2 seized during the course of search conducted on 30.11.2012 at IBD group. Assessee is one of the Director of IBD group of company. Ld. Counsel for the assessee reiterated the same submission before the lower authorities and before us that this sheet of paper merely contains the rough calculations and estimates and rough jottings and has got no connection with the assessee and therefore this document is to be treated as dumb document.

60. In the reply filed by the assessee on 22.1.2015 before the Ld. A.O it was accepted by the assessee that he is enaged into the business of real estate, purchase and sale of land and building and tour and travels. During the course of business number of meetings, discussions, calculations, bargaining etc have to be made. It is also not disputed by the assessee that the assessee is one of the Director in IBD group company which runs various real estate projects and a project in Agra is being undertaken by IBD Group. As the documents were found at the residence of the assessee primarily the onus is on the assessee to explain the document. In the seized paper against the dates amounts have been mentioned and on the top Agra word is mentioned, against one of the figures IBD word is mentioned and total of various figures is coming to Rs.7,33,000/- which has been marked at the end by the phrase “to Agra in our record”.

61. In our considered view and in the given facts and circumstances of the case, assessee cannot go away without explaining the contents of such seized material which has some bearing/connection with the business projects run by the group concern. Ld. A.O has also not made proper enquiry about IBD project of Agra so as to correlate the seized material showing the entry of Rs.7,33,000/- with the details if any of IBD group. In our view this issue of addition of Rs.7,33,000/- needs to be set aside to the file of Ld. A.O for afresh adjudication so as to decide accordingly as per the provisions of law after calling necessary information from the assessee about the Agra project and IBD group and any other details as necessary to examine the facts after providing reasonable opportunity to the assessee to file its submission in this regard. In the result Ground No.4 of the assessee i.e. Shri Ajay Singh Bhaduria for Assessment Year 2013-14 is allowed for statistical purposes.

62. In the result the appeal of the assessee for Assessment Year 2013-14 is partly allowed for statistical purposes.

63. In the result the appeals of different assessee’s are disposed off as under;

S.No. Name of Appellant Appeal No Assessment Year Result
1 M/s. Indus  Holidays &  Tours India  Pvt. Ltd  (Assessee’s Appeal) ITA (SS) No.79 to 84/Ind/2017 &
ITA  No.269/ Ind/2017
2007-08 to 2013-14 Dismissed
2 M/s. Indus  Holidays & Tours India  Pvt. Ltd (Revenue’s Appeal) ITA (SS) No.134 & 135/Ind/2017 &
ITA No.313/ Ind/ 2017
2011-12 to 2013-14 Dismissed
3 Smt. Neeta  Bhadauria ITA (SS) No.85 to 88/Ind/2017 ITA(SS)  No.89/Ind/2017 ITA  No.270/Ind/2017 2007-08 to 2010-11  2012-13  2013-14 Allowed

Partly Allowed Allowed

4 Smt. Sunita  Nigam ITA (SS) No. 121 & 122/Ind/2017 2007-08, 2009-10 &  2011-12 Allowed
5 M/s. Purple  Vacations Pvt. Ltd ITA (SS) No. 120/ Ind/2017 2010-11 Allowed
6 Shri Ajay  Singh

Bhadauria

ITA (SS) No.90, 92, 94 & 95/Ind/2017  ITA(SS)No.93/Ind/2017 ITA(SS)No.95/Ind/ 2017 ITA No.271/Ind/ 2017 2007-08, 2008-09, 2009-10 & 2011-12 2010-11 Allowed Partly
2012-13  2013-14 Allowed  Dismissed  Partly allowed for statistical purposes

The order pronounced in the open Court on 28.03.2019.

Download Judgment/Order

More Under Income Tax

Leave a Comment

Your email address will not be published. Required fields are marked *

Search Posts by Date

January 2021
M T W T F S S
 123
45678910
11121314151617
18192021222324
25262728293031