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2018 (11) TMI 1747

..... o have acted as a middle man - HELD THAT:- Entire price of the car and the customs duty would have been borne by the assessee and on subsequent transfer being made, it would have been on payment by Sri. Arun Choksi to the assessee. Even in such a circumstance, there could not be a dis-allowance made under Section 40A(3) of the Act. The assessing officer having not attempted to view it in that perspective, we do not think that there need be a remand. However if as held by the Tribunal there could not be a dis-allowance under Section 40A(3) of the Act since the payment was not from the assessee to the registered owner of the vehicle; then there is no scope for allowing an expenditure, since that was not an amount received by the assessee from Arun Choksi and then passed on to Balan Pillai. The said amount was merely shown as an expenditure, by virtue of the payment made to Balan Pillai, without explaining the same. We, hence, find the ground of dis-allowance under Section 40A(3) to be improper but still find the dis-allowance to be apt for no explanation of the source of such funds. Unexplained cash credit u/s 68 - A.O. has, on facts, found that even though in the first instance, Sri .....

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..... on made by the Tribunal on that account. Unexplained cash found and seize - The assessee cannot merely contend that the cash belonged to Sri. Alex C. Joseph without any confirmation from him; especially when he declined to own up the same in his statement. The cash having been found from the assessee's premises, the assessee has a duty to reveal and substantiate the source, which was not done. In such circumstances, we do not think that the Tribunal was right in deleting the addition of income with respect to the cash recovered from the assessee's premises, which was not accounted by the assessee. We, hence set aside the deletion of the said addition by the Tribunal, restoring that made by the A.O. - IT Appeal No. 66 Of 2012 - 13-11-2018 - K. Vinod Chandran And Ashok Menon, JJ. Jose Joseph, Adv. for the Appellant. Anil D. Nair, Smt. Nivedita A. Kamath, J.R. Prem Navaz and R. Sreejith, Advs. for the Respondent. JUDGMENT Ashok Menon, The four appeals are filed for the assessment years (AY) 1992-93 and 1993-94, two by the assessee and two by the Revenue from the common order of the Tribunal. 2. For the year 1992-93, the assessee having not filed a return of income voluntarily, .....

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..... nditure amounting to ₹ 7,50,000/-claimed to have been paid in cash was not substantiated and hence, the same was disallowed under Section 40A(3) of the Act. 5. The assessee filed first appeal, in which the validity of the search carried out in the premises of the assessee on a warrant issued in the name of Alex C. Joseph, as also the additions were challenged. The assessee contended that there was an application in the preceding AY, i.e., 1991-92, under Form No.11A for registration of the partnership firm, which had not been declined till date. However, there was no evidence submitted to substantiate the said contention and there being no application in the current year, the claim of the assessee of the status of a partnership firm was declined. 6. On the unexplained cash credit of ₹ 1,48,450/-, a remand report was called for from the assessing officer. The addition based on the remand report was confirmed. The other additions of ₹ 35,000/-, ₹ 22,000/- and ₹ 7,16,255/- were also confirmed. The disallowance under Section 40A(3) of ₹ 7,50,000/- also stood confirmed. The assessee filed a further appeal before the Tribunal, in which all the grounds t .....

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..... re in perfect agreement with the finding of the appellate authority and the Tribunal. The Tribunal has found that it cannot go into the validity of the search proceedings and that, at best, the Tribunal can examine whether there was a warrant of authorisation for conduct of the search. It was rightly concluded that there was a warrant in the name of Sri. Alex C.Joseph, who was physically present at the premises of the firm when the search was conducted. It has also come out in evidence that despite, this person being not shown as a partner of the firm, he was actively involved in the affairs of the firm and continued to manage its affairs. Also the assessee was not registered as a partnership firm and it was assessed as an Association of Persons. That apart, materials were seized from the premises, which would substantiate the allegations made against the firm, so as to proceed against the firm under the provisions of the Act. We find the Tribunal having rightly relied on the judgment of the Hon'ble Supreme Court in Pooran Mal v. Director of Inspection [1974] 93 ITR 505. Even if the search is illegal, the Department could use the material seized against the person from whose cu .....

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..... ce he did not have an account at Thiruvalla. Thereafter, his statement was recorded by the AD(I), Ernakulam, in which he has withdrawn the statement in the affidavit and stated that the affidavit was actually prepared by Sri. Jose, the brother of Sri. Alex C.Joseph and he has just signed it, without understanding the contents of the affidavit. Subsequently, the statement given by the aforesaid George to the AD(I) was also withdrawn by him and he went back to his earlier version. The Tribunal has held that in view of the statements and the withdrawal of the affidavit, the version of George could not have been relied upon, unless he was subjected to cross-examination by the assessee and therefore, the addition was deleted by the Tribunal. 13. With respect to the dis-allowance under Section 40A(3) of the Act of ₹ 7,50,000/-, the same was not a payment made by the assessee. The payment was related to the transaction of sale of imported car by one Shri.Balan Pillai to one Sri. Arun Choksi. The assessee is said to have acted as a middle man. The customs duty was also paid for the imported car as reflected in the accounts of the assessee, on which there was an assumption made that t .....

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..... ive, we do not think that there need be a remand. However if as held by the Tribunal there could not be a dis-allowance under Section 40A(3) of the Act since the payment was not from the assessee to the registered owner of the vehicle; then there is no scope for allowing an expenditure, since that was not an amount received by the assessee from Arun Choksi and then passed on to Balan Pillai. The said amount was merely shown as an expenditure, by virtue of the payment made to Balan Pillai, without explaining the same. We, hence, find the ground of dis-allowance under Section 40A(3) to be improper but still find the dis-allowance to be apt for no explanation of the source of such funds. 15. The next question is with respect to the addition of the unexplained deposit of ₹ 22,000/- for the AY 1992-93 in the current account of the assessee with Union Bank of India, Thiruvalla Branch. There is no record of transaction made in the Cash Book seized from the assessee and despite the request of the A.O. to explain the nature and source of the deposit and the purpose of cash withdrawal on the same day of ₹ 21,750/-, there has been no explanation forthcoming. The A.O. has, on facts .....

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..... n the name of the assessee. Unexplained cash credits amounting to ₹ 35,000/- were also made addition under Section 68 of the Act. 18. In the first appeal, as in the other case, there was a remand report called for from the assessing officer. The additions of the business receipts and the cash credit and unexplained credit were confirmed in first appeal except an addition of ₹ 10,00,000/-, which was with respect to a transaction of sale of a car from one Sri. O.S. Shaduly to one Sri. L.K. Bagla, which was remanded to the assessing officer. The unexplained cash as also the cash credit and additions made thereon were also confirmed in first appeal. Before the Tribunal, the assessee raised the very same contentions, which were answered by the Tribunal as in the earlier year with respect to the unexplained cash credit and the validity of the search, which are the only questions raised in the appeal by the assessee for the year 1993-94. The question of validity of search, as upheld by the Tribunal, in the earlier years appeal, has found our acceptance. With respect to the unexplained cash credit as in the earlier year, the claim was chitty transaction, which, admittedly, the .....

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..... wherein two demand drafts of ₹ 9,00,000/- and ₹ 6,50,000/- were found to be credited to the accounts of Sri. Alex C. Joseph, out of which an amount of ₹ 9,00,000/- was reflected in the accounts of the assessee. The Tribunal's order is interfered with to the limited extent of making an addition of ₹ 9,00,000/- being the amounts reflected in the accounts of the assessee with respect to a transaction between Sri. Bagla and Sri. Alex C. Joseph. All the other business proceeds are seen to have been those found in the accounts of Alex C. Joseph. Only on information received of the same being that of the assessee itself the additions were proposed. There was nothing recovered in search to substantiate such information and confirm its veracity. We hence concur with the Tribunal except on the limited addition sustained herein above. 22. On the question of addition of ₹ 8,75,000/-, which was said to be received from the sale of a jeep belonging to Sri. M.K.A. George, there is an affidavit proffered of that person, in which he admitted the transaction. But, before the Additional Director (Investigation), he denied the same. Later, again a confirmation letter .....

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