TMI Blog2023 (2) TMI 345X X X X Extracts X X X X X X X X Extracts X X X X ..... counts but at the same time, as evident from the statement recorded during the course of survey as well, the assessee was maintaining receipts book/bills in respect of his gym activities. Where the entries corresponding to the entries in the receipts books are reflected in the cash book and are accepted by the Revenue, I see no justifiable reason to not accept the entries in the cash book corresponding to receipts surrendered during the course of survey. I therefore find that it is a case where the assessee has surrendered business receipts amounting to Rs 3,00,000/- during the course of survey and the said receipts have subsequently been offered as part of the total business receipts in the return of income so filed by the assessee u/s 44AD. In the result, the addition of Rs 3,00,000/- so made and upheld by the ld CIT(A) is hereby directed to be deleted. Unexplained advances - during the course of survey operations at the assessee s premises, a pocket book containing certain entries were found containing name of certain persons and the corresponding amount - assessee submitted that the entries reflected therein pertain to friendly loans given by him to certain persons out of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... RAM SINGH YADAV, AM: Both the above appeals have been filed by the respective assessees against the separate orders of the Ld. Commissioner of Income Tax, (Appeals)- 5, Ludhiana [hereinafter referred to as CIT(A) ] passed under section 250(6) of the Income Tax Act, 1961 (in short the Act ) each dated 27/05/2022 pertaining to A.Y. 2018-19. Both these appeals were heard and are being disposed off by this consolidated order. 2. In ITA No.569/Chd/2022, the assessee has raised the following grounds of appeal: 1. The CIT(A) as well as AO made the addition only on the basis of statement of appellant taken at the time of survey and completely ignored the evidences and detailed explanations given during assessment proceedings. As such the additions are liable to be deleted. 2. The CIT(A) and AO failed to appreciate the law that appellant was legally not required to maintain books of account as the tax returns of current as well as earlier years were filed under section 44AD. 3. The CIT(A) and AO wrongly presumed that production of cash book during assessment proceedings was an afterthought and rejected the books without finding any fault in the books. 4. The CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me. 4. Being aggrieved, the assessee carried the matter in appeal before the Ld. CIT(A) who has since sustained the addition. Hence, the assessee has come up in appeal before us. 5. The first issue relates to the addition of Rs. 3,00,000/- by the AO. During the course of assessment proceedings, the AO observed that the assessee voluntarily surrendered the receipt of Rs. 3,00,000/- vide letter dt. 23/10/2017. However while filing the return of income, the assessee has not declared any income under section 69A/115BBE of the Act and accordingly the assessee was asked to show cause as to why the amount of Rs. 3,00,000/- may not be considered as unexplained money and deemed income under section 69A r.w.s 115BBE of the Act. 5.1 In response, the assessee submitted that these are normal business receipts from gymnasium business and aerobic classes and these receipts of Rs. 3,00,000/- form part of the total receipt of Rs. 16,00,600/- declared by the assessee in his return of income filed under section 44AD of the Act. 5.2 The submissions so filed by the assessee were considered but not found acceptable to the AO. As per the AO, the assessee in his statement recorded in oath on 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts as was found and accepted at the time of survey u/s 133A at the premises of the assessee and during the statement the assessee accepted that he was not maintaining any books of accounts and only receipts books/bills have been maintained. It is a matter of record that at the time of survey, no books of accounts were found and the assessee also accepted this fact. It is also accepted by the AR that the books produced during the assessment proceedings before the AO were prepared only at the time of filing the return which means these were prepared after a gap of almost 7 and a half month between the end of the Financial Year on 31.03.2018 and the date of filing the return on 19.11.2018. The cashbook or other books prepared by the assessee after the end of accounting period have rightly been stated by the AO as an afterthought on the part of the assessee and such books cannot be relied upon because, these were not prepared on day to day basis and are emendable to manipulation at will of the assessee. It is cardinal principal of accounting that the cashbook has to be written on day to day basis and cash- in-hand has to be arrived on daily basis. Hence, the AO has rightly disregarded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be brought to tax as the show cause was issued under section 69A and the addition has been made under section 69 wherein both these sections are not applicable in case of business receipt of the assessee. It was further submitted that the assessee in its submission to the survey team clearly mentioned that the amount of Rs. 3,00,000/- are the charges received from various customers. It was submitted that the AO has accepted a part of statement of assessee which suits his purpose and ignored the rest of the same statement which is not suitable and the same cannot sustained in the light of settled judicial principles and reference was drawn to the Hon ble Gujarat High Court in case of Glass Lines Equipment Co. Ltd. Vs. CT 253 ITR 454. Further reference was drawn to the Hon ble Punjab Haryana High Court decision in the case of CIT Vs. Surinder Pal Anand 192 Taxman 264 for the preposition that once the exemption from maintaining books of account has been provided under the special provision and presumptive tax @ 8% has been made the basis for determining taxable income, the assessee was not under any obligation to explain individual entry of cash deposit in the bank unless such entry ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee was maintaining receipts book/bills in respect of his gym activities. Where the entries corresponding to the entries in the receipts books are reflected in the cash book and are accepted by the Revenue, I see no justifiable reason to not accept the entries in the cash book corresponding to receipts surrendered during the course of survey. I therefore find that it is a case where the assessee has surrendered business receipts amounting to Rs 3,00,000/- during the course of survey and the said receipts have subsequently been offered as part of the total business receipts in the return of income so filed by the assessee u/s 44AD. In the result, the addition of Rs 3,00,000/- so made and upheld by the ld CIT(A) is hereby directed to be deleted. 6. The second issue relates to the addition of Rs. 4,50,000/- on account of unexplained advances. The relevant facts and the findings of the Ld. CIT(A) reads as under: The facts of the case, basis of addition made by the AO and the arguments of the AR during the appellate proceedings have been considered. The AR argued that the AO simply ignored all the submissions of appellant by stating that it is an afterthought and AO had not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out any threat and coercion. It is also argued by the AR that the advances were out of cash in hand available with the assessee as per books prepared later on, however as already discussed these books are not reliable and rightly considered by the AO as an afterthought because at the time of survey, no such books were being maintained by the assessee and the entries in the diary were not recorded in the books as accepted by the assessee also. Here it is relevant to observe that the addition has been made by the AO on the basis of entries which were accepted by the assessee during the survey as unexplained. Had these entries been explained entries, the assessee could have stated so at the time of survey and could have mentioned the source and given the documentary evidence also at the time of survey. Nothing of this sort was done and rather the assessee voluntarily surrendered the amounts over and above the normal income for the year under consideration. Under the facts circumstances of the case and in view of the facts unearthed during the survey and also mentioned by the AO in the assessment order, the addition of Rs. 4,50,000/- made by the AO duly supported by the statement and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2,80,000/-. The statement made during the course of survey is relevant and at the same time, where the assessee is able to demonstrate that the transactions actually pertain to previous year and there are infact repayments rather than fresh loan transactions during the year, it is essential that the said submissions be considered and examined which has not happened in the instant case. The factum of repayment through cheques could easily be verified from the bank statements. Basis material available on record, I find that the assessee has reasonably demonstrated that there are no fresh loan transactions during the year and considering the same, the addition of Rs 4,50,000/- so sustained by the ld CIT(A) is hereby directed to be deleted. 7. In the result, the appeal of the assessee is allowed. 8. Now, coming to appeal in ITA No. 570/Chd/2022n wherein the assessee has raised the following grounds of appeal: 1. That CIT(A) has not given any finding on the ground no. 2 raised before him That the AO in assessment order doubted the identity of persons to whom advances were made and at the same time treated Rs. 8,05,000/- advanced to those doubtful persons as income of the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see stating that during the course of survey at the business premises, a notebook was impounded and the statement of the assessee was recorded under section 131 on 23/10/2017 wherein you have stated that loan and advances amounting to Rs. 8,05,000/- have been given to certain persons mainly artists connected with the business activities and given that you have failed to furnish any documentary evidence and inability to establish the source of money used to make such advances, you have voluntarily surrendered the said amount vide letter dt. 23/10/2017. However on perusal of the return of income, it is noticed that you have not declared any such income under section 69 read with section 115BBE of the Act. 9.1 In response to the show-cause, the assessee submitted that these were normal business advances given during the course of day to day business as already explained to the survey team. It was submitted that the assessee was not required to maintain books of account being covered under section 44AD of the Act that is why the assessee could not explain these entries to the survey team at the time of survey. However while filing the return of income, the assessee got the books of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct. 10. Being aggrieved, the assessee carried the matter in appeal before the Ld.CIT(A), who has sustained the findings of the AO and the relevant findings of the Ld. CIT(A) read as under: The facts of the case, basis of addition made by the AO and the arguments of the AR during the course of appellate proceedings have been considered. The AR has submitted that the appellant is in the small business of providing DJ sets on rent and arranging artists for functions and regularly filing returns under the provisions of Sec 44AD. The AR further submitted that after survey, the appellant prepared the account books from the receipt and expenses available which clearly reflected that sufficient cash was available with the appellant and the AO without rejecting the books of the appellant, denied to accept the replies of appellant based on such books of accounts, without whispering anything on record. The AR also argued that no man will surrender any income as undisclosed for the running financial year in which survey is being conducted specially when the time limit for filing of return of income is still not over and there was no legal requirement to maintain books of accounts as pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the books of the assessee on 28.05.2021, assigning the reason that in the statement, the assessee stated that he is not maintaining books of accounts except receipt books/bills. It is a matter of record that at the time of survey, no books of accounts were found and the assessee also accepted this fact at the time of survey. It is also accepted by the AR that the books presented during the assessment proceedings before the AO were prepared only at the time of filing the return which means these were prepared after a gap of almost 7 and a half month between the end of the financial year on 31.03.2018 and the date of filing the return on 19.11.2018. The cashbook or other books prepared by the assessee after the end of accounting period have rightly been stated by the AO as an afterthought on the part of the assessee and such books cannot be relied upon because these are not prepared on day to day basis and are emendable to manipulation at will of the assessee. It is cardinal principle of accounting that the cashbook has to be written on day to day basis and cash-in-hand has to be arrived on daily basis. Hence, the AO has rightly disregarded such books. It is a matter of fact on rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 44AD and in such cases, no addition can be made on account of creditors and debtors separately. It is however, mentioned that the addition has been made on the basis of documents found during the course of survey which were not part of the receipts of the assessee and neither accounted for anywhere as no books were being maintained and it is only an afterthought by the assessee to claim that these are advances duly recorded in the books of accounts and given out of business income, because no such explanation/books or any evidence was provided at the time of survey. Under the facts circumstances of the case and in view of the facts unearthed during the survey and also mentioned by the AO in the assessment order, the addition of Rs. 8,05,OOO/- made by the AO supported by the statement and surrender letter given by the assessee, is found sustainable and hence confirmed. 11. Against the said findings of the Ld. CIT(A) the asessee is in appeal before us. During the course of hearing, the Ld. AR submitted that the appellant is in a small business of providing DJ sets on rent and arranging artists for functions and regularly filing returns under the provisions of Sec 44AD. A survey ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sibility of any changes/alterations/modifications to the bank deposits and bank withdrawals. c) Not even a single rupee has been raised as loan by assessee in cash upto the date of survey. d) There was opening cash of Rs 1,79,768/- as per the earlier year's Income tax return and the same is taken as Opening Balance on 01-04-2017 in the cash book. 11.3 It was submitted that there was no scope of any adjustment, as alleged by ld CIT(Appeal) and AO, to the actual date wise cash position of the assessee. The CIT(Appeal) and AO have simply stated that cash book is an afterthought and completely ignored the cash book/cash flow submitted by assessee without even verifying the same and without finding any fault in the cash book of the assessee. 11.4 It was submitted that the order of ld CIT(Appeal) is completely silent on the issue that the details of all the persons and the nature of relationship of assessee with those persons to whom such advances of Rs 8,05,000/- were made were duly submitted. The assessee in its detailed reply dated 22.02.2021, in response to question no 12 raised by AO provided the complete details of advances. However neither AO nor CIT(Appeal) ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... NIL 1,11,500/- 1,11,500/- adjusted against his salary NIL NIL NIL Raj Vehicles Advance 1,75,500/- 58,500/- 2,34,000/- Cheque Received NIL NIL NIL Rakesh Kumar Business Advance NIL 1,96,000/- 18,500/- adjusted against Stage rent to him 1,77,500/- NIL NIL Sanjeev Bhardwaj Business Advance NIL 52,000/- 28,000/- adjusted against magic and comedy shows done by him 24,000/- NIL NIL Sukhwant Singh Business Advance NIL 76,000/- 38,000/- adjusted against LED rent to him 38,000/- NIL NIL Suneeta Chauhan Business Advance NIL 86,200/- 15,000/- adjusted against dance work done by her 71 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vances amounting to Rs 8,05,000/- were not for the purpose of business and were not out of the business receipts of the assessee and the AO simply rejected the Cash Book, Balance Sheet, GST Service Tax Returns and other submissions in summarily manner without any speaking order stating that 'it is an afterthought'. It is well settled position of law that the AO is expected to appreciate the reasonable explanation offered to him, the evidences produced before him about the nature and source of investment and he cannot make the additions merely on surmises, conjectures as well as without any supporting evidence. The onus was on the department/AO to prove that the detailed /explanations given by assessee are wrong, once the assessee discharged its liability by providing the names of persons, nature of advances, Cash Book; GST Returns, Service Tax Returns, Balance Sheet of current year to substantiate its claim that advances of Rs 8,05,000/- were out of business receipts. However the AO without bringing any evidence on record simply ignored the submissions; and evidences of assessee and made the additions. 11.8 It was submitted that it is a well settled law that once the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has relied on the order of the lower authorities. 13. Heard the rival contentions and purused the material available on record. Admittedly, the assessee is engaged in the business of providing DJ services and during the course of survey operations at the assessee s premises on 4/10/2017, a ledger namely Bajaj Entertainers containing certain entries was found. In his statement recorded u/s 131, the assessee was asked to explain the said entries and in response, the assessee submitted that the entries reflected therein pertain to loans and advances given to certain persons mainly artists connected with his business activities out of his undisclosed income and to buy piece of mind and avoid litigation, he surrendered the amount of Rs 8,05,000/- for the purposes of taxation. During the course of assessment proceedings where the assessee was again confronted with the same and a show-cause was issued seeking explanation on the individual loan/advances transaction, it was submitted by the assessee that these were normal business advances. It is noted that the name of these persons to whom the advances were given was stated by the AO in the show-cause notice and thereafter, in respons ..... X X X X Extracts X X X X X X X X Extracts X X X X
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