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Rakesh Mahajan And Iftikhar Ahmed Versus DCIT, Central Circle – 3, New Delhi

2017 (11) TMI 910 - ITAT DELHI

Unexplained cash found during the course of search - whether the cash found from the residence of two directors is from the source of cash-in-hand of the company M/s.Nirala Developers Pvt. Ltd. in which these two person were directors? - Held that:- The payment of advance tax on 6.8.2011 is merely utilisation of cash for the payment of tax for the amount offered by the company during the course of the search. He has not rebutted that on date of search, whether this much amount of cash was availa .....

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company, in our opinion it does not tantamount to changing of stand, albeit the assessee has explained that whatever cash has been found, the same should be considered to be covered under the huge disclosure made by the company as ultimately the cash found belong to the company only. Nowhere the assessee had stated that the cash belongs to the assessee and then he has changed the stand that it is out of the cash book of the company. Consistently assessee has been stating that the cash found is f .....

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out of personal savings etc. from the source of income earned by the assessee, no adverse inference should be drawn. Thus, we direct the deletion of entire cash of ₹ 5,34,000/-. - Addition on account of alleged unexplained jewellery found during search - sridhan provisions applicability - Held that:- Looking to the assessee‘s family consisting of assessee himself, his wife, his mother, one major unmarried daughter, one minor daughter and one minor son and the status of the assessee bei .....

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be ignored. - It was for this prevalent norm and practice in the Indian families where jewelleries are gifted at time of marriage and birth of children and the married ladies receiving ‘stridhan’ from both side of the family, it is presumed that family having certain status will have some jewellery. That is why, CBDT vide it aforesaid instruction, has laid down a criteria of availability of jewellery with various category of family members. Here in this case total jewellery weighing of 1236 .....

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directed to be deleted. - Assessee appeal allowed. - ITA No.:- 1810/Del /2015 And ITA No. 7086/Del/2014 - Dated:- 15-11-2017 - SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER For The Assessee : Shri Rahul Khare, Advocate For The Department : Smt. Paramita Tripathy, CIT(DR) ORDER PER AMIT SHUKLA, J.M. The aforesaid appeals have been filed by the above mentioned assesses against separate impugned orders of even date, 7th October, 2014 in the cases of Shri Iftik .....

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ahajan being ITA No.,1810/DEL/2015 wherein the assessee has challenged two additions, viz., firstly, addition of ₹ 5,34,000/- made on account of unexplained cash found during the course of search;: and secondly, addition of ₹ 10,52,124/- made on account of alleged unexplained jewellery found during search. 2. The brief facts qua the issue involved are that a search and seizure operation u/s 132 (4) was carried out on 4.8.2011 at the business and residential premises of Nirala group w .....

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; 5 lacs in the name of imprest account of Shri Rakesh Mahajan as on 3.8.2011 and neither there is any entry of imprest in the name of any Director in the books of M/s. Nirala Developers Pvt. Ltd. He held that, since assessee is director in various group companies and looking after day to day activities of the company and during the search he could not explained that he had received imprest money from M/s. Nirala Developers Pvt. Ltd. and therefore, he treated the said cash amounting to ₹ 5 .....

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nd offered to tax out of which sum of ₹ 1,95,47,000/- was offered in the case of Nirala Developers Pvt. Ltd. for the assessment year 2012-13 and submitted that the same should be telescoped with any kind of addition made. It was further submitted that the cash found from the residence of assessee and another Director, Shri Iftikhar Ahmed was part of cash shown as cash-in-hand as on 3.8.2011 in the cash book of the company and also the relevant entries therein was pointed out. For the sake .....

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To F707 Sumit Vohra Receipt 235 182,350 03.08.2011 By(as per details) Imprest a/c Iftikhar Ahmed Imprest a/c Rakesh Mahajan Imprest a/c SKG Payment 42,50,000Dr 5,00,000 Dr 6,48,000 Dr 596 53,98,000 03.08.2011 To Imprest a/c Receipt 236 10,17,371 06.08.2011 By Advacne Tax A.Y. 12-13 Payment 612 12,61,221 11.08.2011 To Bank of Baroda 02/09 Contra 65 1,00,000 12.08.2011 By SiteOff.Imprest a/c-2 Payment 652 1,00,000 Thus it was submitted that the cash found from the residence of the assessee stands .....

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ondly, the assessee s contention that cash of ₹ 5,34,000/- was included in the disclosure of ₹ 1,95,47,000/- made in the case of Nirala Developers Pvt. Ltd. is not correct, because there is no linkage of such claim given by the assessee; * Thirdly, the entries of the cash book of Nirala Developers Pvt. Ltd., filed before the AO gives a different narration and do not match entries appearing in the cash book of the said company. It was filed during the course of assessment proceedings. .....

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d. shows payment of ₹ 53,98,000 towards advance tax for A.Y. 12-13 by voucher no. 611 on 06.08.2011. • Contrary to the appellant s claim, no imprest accounts of directors appear in the cash book of Nirala Developers P Ltd. (though there is an Imprest account for site office) • As per the document relied by the director, advance tax paid by Nirala Developers P Ltd. on 06.08.2011 as per voucher no. 612 was only ₹ 12,61,221 whereas Nirala Developers P Ltd has claimed as per it .....

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t document relied by the assessee is patently incorrect, fabricated and unreliable, therefore, same is reliable to be rejected and thus, assessee s explanation on the cash seized from his residence found is unexplained. 5. Before us, the Ld. Counsel drew our attention to the cash book of the Nirala Developers Pvt. Ltd. for the period of 1st of April, 2011 to 30th September 2011 and specifically drew our attention to the entries made from 3rd August to 6th August, 2011 and pointed out that on the .....

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ector of the company. At the time of search only and also before the AO it was categorically stated and submitted that the cash found from the residence of these Directors were the cash belonging to the company and duly reflected in the cash book of the company. The observation and findings of the Ld. CIT (A) to point out that the entries do not match and there discrepancy is absolutely erroneous, because ₹ 53,98,000/- was on account of imprest account and not the advanced tax because the .....

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₹ 53,98,000/- is appearing on the date 6.8.2011 and shows the payment of advance tax. Thus such a cash cannot be said to be available as source of cash found at the premises of the assessee. 9. We have heard the rival submissions, perused the relevant findings given in the impugned order as well the material referred to before us. The main issue involved here is that, whether the cash amounting to ₹ 5,34,000/- found from the residence of two directors namely, Shri Rakesh Mahajan and .....

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t cash book of the company, the copy of which is appearing at page 16 of the paper book for the period 30th June 2011 to 7.9.2011, we find that there is a huge opening balance up till 3.8.2011 and as on that date the availability of cash in the cash book is ₹ 53,98,000/-. Out of this cash, advance tax has been paid towards the income offered during the course of search on 6.8.2011. The cash of ₹ 53,98,000/- as on 3.8.2011 has been stated to be lying with the three directors of the co .....

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t their being any contrary material to rebut such explanation, it can be safely inferred that the cash of the company was lying with the directors. Otherwise, the question would be arise that, if one day prior to the search the cash-in-hand of ₹ 53,98,000/- as recorded in cash book of the company is not found during the course of search then where has it gone. If the explanation was given that it debited to the interest account of the directors and the same amount has been found from the p .....

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ilable on the date of search or not. He is only going by the fact that an amount of ₹ 53,98,000/- has been shown against advance payment of tax on 6.8.2011. The payment of advance tax on 6.8.2011 is merely utilisation of cash for the payment of tax for the amount offered by the company during the course of the search. He has not rebutted that on date of search, whether this much amount of cash was available in the cash book or not; and whether at the time of search the cash recorded in the .....

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e has explained that whatever cash has been found, the same should be considered to be covered under the huge disclosure made by the company as ultimately the cash found belong to the company only. Nowhere the assessee had stated that the cash belongs to the assessee and then he has changed the stand that it is out of the cash book of the company. Consistently assessee has been stating that the cash found is from the company s account which is duly recorded in its book. Thus, we do not find any .....

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inference should be drawn. Thus, we direct the deletion of entire cash of ₹ 5,34,000/-. 10. As regard the second issue is concerned, i.e., addition on account of unexplained jewellery, the brief facts are that, during the course of search and seizure carried at the residential premises of the assessee and his locker, jewellery weighing 1182 grams was found, which was valued at ₹ 30,80,840/-. The details of which is appearing at page 2 of the assessment order. It was accepted by the a .....

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; 30,80,840/-, jewellery to the extent of ₹ 10,52,124/- can be treated to be unexplained and after giving benefit of other jewellery in view of the instruction No. 1916 issued by CBDT 11.05.1994. 11. Ld. CIT (A) too has confirmed the said addition and held that the shelter sought by the assessee on CBDT instruction No. 1916 dated 11.5.94, is only for the purpose of seizure of jewellery and not for explaining the source of acquisition. In support, he also relied upon the judgment of Hon ble .....

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er the CBDT instruction is to be presumed, then it comes to 1700 grams as against this, only 1236.24 grams have been found. Thus, such a jewellery cannot be treated as unexplained. 13 On the other hand, Ld. CIT DR strongly relied upon the order of the Ld. CIT(A) and submitted that the CBDT instruction are only for the purpose of seizure and not to explain the source. Nowhere the assessee before the AO or Ld. CIT(A) could explain the source of acquisition of jewellery and Ld. AO has already given .....

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- value (Rs.) Rakesh Mahajan (appellant) Residence Bank Locker 209.43 405.17 4,49,765 10,52,124 - 405.17 - 10,52,124 Renuka Mahajan (wife) Bank Locker 232.17 5,93,128 - Kaushalya Mahajan (mother) Bank Locker Residence 319.00 8,30,464 - Total 1236.24 30,80,840 405.17 10,52,124 Admittedly the assessee could not give any evidence in the form of purchase vouchers or bills for acquisition of jewellery. However, the assessee s contention has been that these jewelleries have been acquired over the peri .....

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On the contrary, we find that Hon ble Gujarat High Court in the case of CIT vs. Ratan Lal Vyapari Lal Jain, 339 ITR 351 (Guj.), while interpreting the same CBDT No.1916 (supra) the Hon ble High Court observed and held as under :- 10. Though it is true that the CBDT Circular No. 1916, dated 11th May, 1994 lays down guidelines for seizure of jewellery and ornaments in the course of search, the same takes into account the quantity of jewellery which would generally be held by family members of an .....

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vailing in a society cannot be ignored. Thus although the circular had been issued for the purpose of non-seizure of jewellery during the course of search, the basis for the same recognizes customs prevailing in Hindu society. In the circumstances, unless the Revenue shows anything to the contrary, it can safely be presumed that the source to the extent of the jewellery stated in the circular stands explained. Thus, the approach adopted by the Tribunal in considering the extent of jewellery spec .....

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owner and director of various companies then it has to be presumed that certain amount of jewellery would be available. If the availability of jewellery especially in the concept of Indian tradition and general practice in Hindu families whereby jewellery is gifted by the relatives and friends at the time of social functions, viz. marriages, birthdays, marriage anniversary and other festivals, such gifts in the form of jewellery are customary and such practice prevailing in our society cannot be .....

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