TMI Blog2017 (5) TMI 526X X X X Extracts X X X X X X X X Extracts X X X X ..... r herself by setting up and creation of chain on this account which is capital in nature only and not liable to tax being not a revenue receipt - Held that:- It is noted from the available records that the assessee had repaid the amount of ₹ 21.50 lacs as against the receipt of amount of ₹ 21.00 lacs from Smt. Saroj Joshi which includes the impugned amount of ₹ 16.00 lacs. In the books of account the assessee treated ₹ 16.00 lacs as receipt on account of goodwill and ₹ 5.00 lacs on account of contribution in capital account of firm. - taking into consideration all the facts and circumstances of the case, we find no reason to interfere with the order of the ld. CIT(A) that the amount of ₹ 16.00 lacs is not taxable receipt in the hands of assessee, accordingly , therefore, direct the AO to delete the addition made by him on account of goodwill. - Decided in favour of assessee. - ITA No. 606/JP/2016 - - - Dated:- 25-4-2017 - SHRI BHAGCHAND, AM and SHRI KUL BHARAT, JM For The Revenue : Smt. Pratima Kaushik, CIT - DR For The Assessee : Shri Vijay Goyal, CA and Shri Gulshan Agarwal, CA ORDER PER BHAGCHAND, AM The Revenue h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) has erred in sustaining the addition to ₹ 10,75,114/- as against ₹ 25,38,273/-made on account of undisclosed receipts from beauty parlors ignoring the contents of the seized material and statement of the assessee. 2.3 On the other hand, the ld. AR supported the order of the ld. CIT(A) and submitted the following written submission on the issue in question. 3.1.2 Submission of the assessee 1. The ld AO made the addition of ₹ 25,38,273/- which was reduced to ₹ 10,75,114/- by giving relief of ₹ 14,63,159/- by allowing the expenses recorded in the same seized documents. The findings of ld CIT(A) are at pg 15 of his order. The assessee relies on the findings of ld CIT(A). 2. While computing the income of the assessee on the basis of seized papers the ld. AO added the entire receipts of the parlor recorded on the seized papers over and above to recorded in regular books of accounts as income of the assessee presuming that the expenses relating to such receipts have been recorded in regular books of accounts of such parlor. Though the presumption taken by the ld. AO is based on the statements of the assessee but the seized documents ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ist the head to head comparison of expenses recorded on seized material and against which the expenses recorded in regular books of accounts. From the perusal of such chart the ld CIT(A) found that position of expenses as per seized paper viz a viz recorded in regular books of accounts was as under: - a) Mahaveer Nagar Parlor Month Expenses as per seized documents Expenses as per regular books of accounts April-08 1,77,609 48,836 May-08 2,12,726 59,141 June-08 2,17,518 65,284 July-08 1,95,700 61,289 Aug-08 2,01,337 66,041 Sept. 08 2,10,832 60,539 Oct 08 2,04,957 96,468 Nov 08 2,46,015 1,02,855 Dec 08 2,49,691 85,094 Total ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee is individual and during the year under consideration main source of income of assessee was from business of beauty parlors. The assessee filed her regular return u/s 139(1) of Income Tax Act on 28.09.2009 declaring total income ₹ 12,43,400/- . The department carried out search seizure operations on assessee on 11.11.2010 . The case of assessee was centralized at Central Circle-1, Jaipur. Notice u/s 153A was issued on 09.08.2011, which was served to assessee on 10.08.2011 . In pursuant to notice u/s 153A of Income Tax Act, the assessee filed her return on 24.10.2011 declaring the same income which she declared in original return i.e. income of ₹ 12,43,400/-. It is also noted that the assessment was completed by AO vide his order dated 30.03.2013 assessing the total income at ₹ 61,16,804/- as against returned income of ₹ 12,43,400/- It is further noted from the assessment records that the AO had made an addition of ₹ 25,38,273/- on account of alleged suppressed receipts of Mahaveer Nagar, Hanuman Nagar and Bani Park Parlor of the assessee which has been reduced by the ld. CIT(A) in first appeal by ₹ 14,63,159/- and sustained addition of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te in favour of Saroj Joshi directing the assessee to pay ₹ 21,50,000/- to Saroj Joshi (copy of award at PB page 55). The assessee has paid this amount by four cheques, copy of which is at PB pg 56-59. The outcome of this litigation proves beyond doubt that the amount was liability of the assessee not the income and the assessee made wrong entry in her account under bona fide belief that this amount is not repayable. The taxability of an amount depends on nature of the transaction and entries in the books of account cannot be decisive or conclusive in the matter. In this case, the arbitrator was appointed by the Hon'ble Rajasthan High Court and the assessee has repaid the amount in compliance of the Award passed by the Arbitrator. Considering the above fats and circumstances of the case, I am of the opinion that the amount of ₹ 16.00 lacs is not taxable receipt in the hands of assessee, accordingly , therefore, direct the AO to delete the addition of ₹ 16.00 lacs made by him on account of goodwill. 3.2 During the course of hearing, the ld. DR relied on the order of the AO and submitted that the ld. CIT(A) has erred in deleting the addition of ₹ 16.0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ointment of arbitrator suggested by assessee. e) Copy of notice dated 17.06.2011 given by Smt. Saroj Joshi for disapproval on name of arbitrator suggested by assessee. f) Copy of application dated 23.06.2011 filed before Additional district session Judge, Jaipur for appointment of arbitrator. g) Copy of order dated 27.09.2011 passed by Additional district session Judge, Jaipur. h) Copy of appeal filed before The High Court, Jaipur Bench. i) Copy of order of High court, Jaipur Bench, Jaipur dated 06.12.2012 wherein he appointed to Mr. Justice Bhanwroo Khan, former Judge of High court as arbitrator. j) Copy of entry recorded on order sheet by Mr. Justice Bhanwroo Khan (arbitrator) wherein he order to assessee to pay ₹ 21,50,000/- to Smt. Saroj Joshi. k) Copies of cheques of ₹ 21,50,000/- given to Smt. Saroj Joshi. Thus from the above documents this is clear that Smt. Saroj Joshi paid the amount of ₹ 16,00,000/- to assessee as loan and the assessee wrongly treated this amount as Goodwill. Now from the legal dispute settled between assessee and Smt. Saroj Joshi this has been proved that the amount was received as loan and the same has been rep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rcumstances provided u/r 46A of Income Tax rules and the additional evidence should be accepted in the interest of the justice. Further the facts of case law relied by the assessee in her application are identical and support the claim of the assessee. c) So far as submission of the ld. AO in para 1 that no partnership deed was produced along with application filed for admission of additional evidence. In this regard this is to submit that the copy of partnership deed was submitted to AO during the course of assessment proceedings and after that the receipt of Mahaveer Nagar parlor from January-2009 was treated by ld. AO as assessable in the hands of the firm. The copy of partnership deed is at PB Page105-108. In the partnership deed there is no reference of payment of ₹ 16,00,000/- to the assessee by Smt. Saroj Joshi. There was no written agreement/understanding between assessee and Smt. Saroj Joshi regarding receipt of sum of ₹ 16,00,000/- as Goodwill. Further if the assessee has credited something in wrong head the same cannot be taxed in the hands of the assessee. The real income can only taxed in the hands of the assessee. After settlement of legal dispute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ship firm and a sum of ₹ 16,00,000/- was credited in capital a/c of assessee treating the same received against goodwill. Thus from the legal notice it is clear that Smt. Saroj Joshri was only demanding her money along with interest whatever was paid by her to the assessee earlier, therefore there is no reason with ld. AO to suppose that the payment of ₹ 21,50,000/- was made to Smt. Saroj Joshi other than for the amount received from her earlier. ) As regard to finding of ld. AO in para 4 regarding justifying the taxability of ₹ 16,00,000/- in hands of the assessee as revenue receipt this is to submit that something can be taxed as revenue receipt when the same was received against sales of goods/services and the receipt is not refundable. In the instant case no goods/services were sold by the assessee to Smt. Saroj Joshi, therefore the same cannot be taxed as revenue income of the assessee. Further this amount cannot be treated as taxable capital receipt too because the same was refundable to the payer and later on the same was refunded back. g) As regard to finding of ld. AO in Para 5 regarding non treating the amount in question as loan; this is to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing not a revenue receipt. The AO did not accept the contention of the assessee. In first appeal the ld. CIT(A) has deleted the addition made by the AO. It is noted from the available records that the assessee had repaid the amount of ₹ 21.50 lacs as against the receipt of amount of ₹ 21.00 lacs from Smt. Saroj Joshi which includes the impugned amount of ₹ 16.00 lacs. In the books of account the assessee treated ₹ 16.00 lacs as receipt on account of goodwill and ₹ 5.00 lacs on account of contribution in capital account of firm. It is further noted that there was litigation between the assessee and Smt. Saroj Joshi for which Hon'ble High Court appointed an Arbitrator a Retired High Court Judge who decided the dispute in favour of Smt. Saroj Joshi by directing the assessee to pay ₹ 21.50 lacs to Saroj Joshi. She had paid the amounts by four cheques. The ld. CIT(A) has also observed in his order that the outcome of this litigation proves beyond doubt that the amount was liability of the assessee not the income and the assessee made wrong entry in her account under bona fide belief that this amount is not repayable. It is also notable that Hon& ..... X X X X Extracts X X X X X X X X Extracts X X X X
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