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2017 (4) TMI 963 - ITAT AHMEDABAD

2017 (4) TMI 963 - ITAT AHMEDABAD - TMI - Unexplained investment - Held that:- We wish to observe here that the CBDTís circular dated 10.03.2003 already advises the search authorities to collect evidence pointing out any undisclosed income rather than recording admissions of the searched assessees. Honíble jurisdictional high courtís judgment in Kailashben Manoharlal Choksi vs. CIT (2008 (9) TMI 525 - GUJARAT HIGH COURT) also adopts the same very view. We therefore do not find any reason to inte .....

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lready been assessed to tax qua the payments in question as per 40(a)(ia)(2nd proviso). We adopt the very course of action herein as well in absence of any distinction on facts being pointed out in the course of hearing. This identical substantive ground is accepted for statistical purposes. - IT(SS)A No.60 to 62/Ahd/2014 & ITA No.265/Ahd/2014, IT(SS)A No.63 to 65 & 100 to 102/Ahd/2014, CO Nos. 113 to 115/Ahd/2014, IT(SS)A No.66 to 68/Ahd/2014 & ITA No.266/Ahd/2014, IT(SS)A No.69 & 99/Ahd/2014, .....

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above former assessee. He has filed seven appeals IT(SS)A Nos. 60 to 65/Ahd/2014 & ITA No.265/Ahd/2014 in assessment years 2005-06 to 2011-12; respectively, against the CIT(A)-III, Ahmedabad s orders; all dated 28.11.2013 in case nos. CIT(A)-III/195 TO 201/DCIT.CC.2(2)/13-14. The Revenue on the other hand has preferred its cross appeals in assessment years 2008-09 to 2010-11 bearing IT(SS)A Nos. 100 to 102/Ahd/2014. This follows assessee s cross objections in said three appeals C.O. Nos. 113 .....

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nt year 2010-11 only as followed by the instant assessee s cross objection no.112/Ahd/2014. Relevant proceedings in all cases except in assessment year 2011-12 are u/s. 153A r.w.s. 143(3) of the Income Tax Act, 1961; in short the Act whereas the above assessment year involves proceedings u/s.143(3) of the Act. We have heard both the parties. Case file perused. 3. We now advert to rival pleadings. Learned Authorized Representative has filed before us a brief compilation chart of all the abovestat .....

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he above sums to the assessee in his salary account. The assessee s case was that the same were in the nature of salary advances. Both the lower authorities however did not agree to the said explanation. They accordingly invoked deemed dividend fiction enshrined in Section 2(22)(e) of the Act in order to make the additions in question. 4. Learned Authorized Representative appearing at assessee s behest submits that the very issue had arisen in IT(SS)A Nos. 426 to 428/Ahd/2013 decided on 06.10.20 .....

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the Act for the maximum debit balance at any point of time of particular assessment year in the ledger account in the name of assessee in the books of account of Trivedi Corporation Pvt. Ltd. We observe that there is no dispute to the fact that assessee is a director and getting salary from the company towards the services provided. This fact is evident from the ledger account of assessee in the books of account of Trivedi Corporation Pvt. Ltd. shown in the assessment order itself. The clear pi .....

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on. Allahabad High Court in the case of Shyama Charan Gupta vs. CIT 377 ITR 511 (All) wherein it has been held that advance payment of salary or commission to managing director is a trade advance ordinarily made in the course of business so that such advance is not covered under section 2(22)(e) of the Act. We find that the facts of the present case are quite similar to the facts adjudicated by Hon. Allahabad High Court in the case of Shyama Charan Gupta vs. CIT (supra) so much so that in the ca .....

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d u/s.2(22)(e) of the Act are in the nature of salary advances not to be treated as deemed dividends. We afforded sufficient opportunity to learned Departmental Representative who failed to draw any distinction on facts vis-à-vis the issue involved in the two sets of cases. We therefore reverse both the lower authorities action under challenge. The assessee s corresponding ground raised in the above captioned appeals are therefore accepted. His appeal IT(SS)A Nos. 60/Ahd/2014 thus succeed .....

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his C&F agents without deducting TDS thereupon resulting in the disallowance(s) in question made by the lower authorities after quoting Section 40(a)(ia) of the Act. Shri Dhiren Shah submits that the assessee had indeed not deducted TDS on the abovestated payments. He however submits that the C&F agents/payees in question have already been assessed to tax qua the assessee s payments. He then contends that Section 40(a)(ia) second proviso stipulates that no disallowance is to be made in .....

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ils to rebut all these legal developments. We therefore accept assessee s legal contention in principle. Learned Assessing Officer is directed to pass a fresh order as per law after carrying out necessary factual verification as to whether assessee s payees/C&F agents stand assessed qua the amounts in question or not. This substantive ground in above captioned appeal is accepted for statistical purposes. The assessee s appeals IT(SS)A Nos. 61 & 62/Ahd/2014 are partly accepted whereas IT( .....

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ndings making the abovestated addition of unexplained investment. The assessee s cross objection on the other hand strongly support the lower appellate findings under challenge deleting the said impugned addition. 8. We state the relevant facts at this stage. There is no dispute about the search in question being conducted on 21.04.2010. The said search revealed the assessee to have purchased lands at village Rohika, Taluka Bavla, Dist. Ahmedabad from total eight farmers. The departmental author .....

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abovestated addition of unexplained investment in the three assessment years before us. 9. The CIT(A) reverses Assessing Officer s action as follows: 8. Before taking a decision in this case, it will be worthwhile to go-through the relevant judicial decisions in this regard: (a) It was held by Hon'ble High Court of Bombay in the ease of CIT vs. C. J. Shah & Co. (246 ITR 671) that estimation of undisclosed profit made by AO for the entire block period on the basis of seized loose papers .....

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(75 ITD 19) that in the absence of any other evidence, AO is not empowered to estimate the suppression of sales for a larger period on the basis of the diary found in search showing suppression of sales for a particular period. (d) In the case of D. N. Kamani HUF (70 ITD 77) Hon'ble ITAT Patna Beneh held that documents regarding receipt of on-money by assessee having been found in respect of sale of flats to one party, addition could not be made in respect of all the parties to whom assessee .....

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ade on the basis of multiplication formula derived from suppression percentage of a few days. (g) In the case of Rajdeep Builders (52 SOT 62) Hon'ble ITAT Chandigarh Bench held that AO was not justified to make addition on the basis of statement of one of the purchaser who subsequently retracted his statement in cross-examination. (h) In the case of Jawaharbhai Atmaram Hathiwala [128 TTJ 36] addition on account of on money was made for purchase of flat. In this case, during the course of sea .....

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n the case of Bharat A Mehta [86 TTJ 369] by Hon'ble ITAT, B Bench. In this case addition u/s. 69 was made on account of on money paid on purchase of bungalow on the basis of admission made by builder during the search. However, no document was recovered during the search regarding on money paid by assessee. In such a case, the addition was directed to be deleted by Hon'ble ITAT. (j) In the case of CIT vs. D Kanta [205 Taxman 115(Kar)], addition was made u/s. 69B r.w.s. 147 on account of .....

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t justified and the same was directed to be deleted (k) In the case of Prarthana Construction Pvt. Ltd., it was held by Hon'ble jurisdictional High Court that revenue is not justified in resting its case on the loose papers and documents found from the residence of a third party, even if such documents contain narration of transactions with the assessee. It was also held that such loose papers cannot be construed as books of accounts regularly kept in the course of business and therefore suc .....

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sessee, which was deleted by Hon'ble ITAT. It was observed by Hon'ble ITAT that secondary evidence cannot be relied on as neither the witness nor the person who prepared the documents were produced. Therefore, sale consideration as shown in the documents is to be accepted. (m) In the case of Bansal High Carbons (P) Ltd. (223 CTR 179) nothing was found during the search which would suggest that the books maintained by the assessee were unrealiable. It was only subsequent to the search tha .....

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legal position, it is found that the entire addition in three years made by AO is based on statements of eight farmers. However, subsequently, during cross examination, all the farmers retracted from their statements. From the perusal of records it is found that only three farmers out of the seven had bank accounts, but even in the case of these three farmers no cash deposits were found in their bank accounts. 10. None of the farmers (land owners) identified the appellant as purchaser of the lan .....

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ed the cash component in the entire transaction on the basis of statements of these farmers, which resulted in estimation of total on money at ₹ 1,63,22,639. For this extrapolation the AO has presumed that cash was received in each and every transaction. From the perusal of records, it is found that in one case (survey No. 162/p) the seller is Manan Trivedi and the buyer is M/s. TCPL. It is absurd to presume that even Manan Trivedi (who is a family member of appellant) paid on money to M/s .....

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hat appellant paid on money in respect of purchase of these plots of land. Additions of ₹ 47,94,018 for A.Y. 2008- 09, ₹ 30,00,000 for A.Y.2009-10 and ₹ 87,00,000 for A.Y.2010-11 are not justified, in such a situation and the same are directed to be deleted. Ground No.l of the appeal is allowed for all the three years. 10. Heard both the parties reiterating their respective stands. Ms. Bhalla quotes hon ble Delhi high court s decision in Dayawanti vs. CIT (2017) 390 ITR 496 and .....

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rtains to procedural aspect of Section 131 jurisdiction vested with an authorized officer who can either summon the person concern or himself visit the said person for examination on oath. We revert back to the facts of instant case once again to observe that this latter case law also does not apply since there is no substantive evidence which renders this procedural aspect as mere academic. We wish to observe here that the CBDT s circular dated 10.03.2003 already advises the search authorities .....

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three appeals IT(SS)A Nos. 100 to 102/Ahd/2014 are declined. The assessee s cross objection C.O. No. 113 to 115/Ahd/2014 supportive of the CIT(A) above extracted findings are rendered academic. 11. We now proceed to deal with latter assessee s M/s. Trivedi Corporation Pvt. Ltd. s cases. It has filed IT(SS)A Nos. 66 to 69 & ITA No.266/Ahd/2014 in assessment years 2005-06, 2006-07, 2009-10 to 2011- 12 challenging Section 40(a)(ia) disallowances/addition of ₹ 64,653/-, ₹ 42,680/-, & .....

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so) (supra). We adopt the very course of action herein as well in absence of any distinction on facts being pointed out in the course of hearing. This identical substantive ground is accepted for statistical purposes. So is the outcome of assessee s appeals IT(SS)A Nos. 66, 67, 69 & ITA No.266/Ahd/2014. 12. We now deal with assessee s second substantive ground in its appeal IT(SS)A No. 68/Ahd/2014 challenging disallowance of unexplained expenditure of ₹ 4,01,435/-; made by the Assessin .....

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und in the cash book. The search authorities further came across various expenses not accounted in assessee s books totaling to ₹ 4,01,435/- in question. The assessee failed to offer any satisfactory reply. All this resulted in the impugned addition. The CIT(A) confirms the same in his lower appellate order. 14. We have given our thoughtful consideration to rival contentions. Learned counsel representing assessee again failed to indicate any evidence rebutting both the lower authorities co .....

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