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2018 (11) TMI 1747

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..... 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. M.K.A. George accepted the fact that he handed over the Demand Draft for ₹ 22,000/- to the assessee. But later he stated that the affidavit pertaining to such acceptance was actually prepared and brought to him by Sri. Jose, brother of Sri. Alex C.Joseph, and that he had simply signed it and the contents of that affidavit were denied when he was examined by the AD(I). Consequently, the affidavit was rejected and addition of ₹ 22,000/- was made. Sri. M.K.A. George had later filed a letter before the A.O. stating that he did not give any statement to the AD(I) voluntarily and that he had handed over the draft and the same was encashed through the bank account of the assessee. The Tribunal has held that without any cross-examination by the assessee in this regard, the statement before the AD(I) cannot be a basis for making such an addition. We agree with that. We ans .....

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..... 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, a notice under Section 148 of the Income Tax Act (for short, "the Act") was issued, pursuant to which, after some delay, the assessee filed a return showing an adjusted total income of ₹ 17,140/-. Similarly, for the year 1993-94, pursuant to a notice issued under Section 142(1) of the Act, the assessee filed a return disclosing an income of ₹ 770/-. On 17.08.1992, a search was conducted under Section 132 of the Act in the business premises of the assessee at Thiruvalla. At the time of search, Sri. Alex C. Joseph, the ex-managing partner of the firm, in whose name the authorization was issued, was present in the premises. He was the brother of the present partners. His statement on oath was recorded and certain books of accounts and other documents were seized in addition to unaccounted cash of ₹ 2,89,500/- and an imported Benz Car. 3. The as .....

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..... 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 taken before the first appellate authority were reiterated. The Tribunal found the status of the assessee to be an Association of Persons being an unregistered firm as held by the assessing officer. The addition of ₹ 1,48,450/- under Section 68 of the Act was confirmed. On the unexplained credit of ₹ 7,16,255/-, the Tribunal remanded the issue for fresh consideration to the assessing officer. The addition of ₹ 35,000/- was confirmed, but that of ₹ 22,000/- was deleted. The deletion was on account of the deponent, Sri. M.K.A. Gerge, having not been allowed to be cross-examined. The dis-allowance under Section 40A(3) of the Act was also set aside. 7. The questions of law arising in the appeal of the assessee for the year 1992-93, as available in the memorandum of appeal, are as follows; "(i) In the facts and circumstances of the case, ought not .....

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..... 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 custody it was seized. On both counts, we find absolutely no reason to interfere with the findings of the Tribunal with regard to the legality of the search. 10. As regards the additions made under Section 68 of the Act also, the claim of the assessee that the amounts were received as chitty installments is not credible, especially since the assessee in the subject year had not been carrying on chitty business. Further, the identity of persons, who had paid the amounts, were not revealed. The issue has been considered by the Assessing Officer (A.O.), appellate authority and the Tribunal and there is no cause shown for interference by us. The appeal filed by the assessee as I.T.A.No. 212 of 2012 for 1992-93 is, therefore, rejected and the questions of law are answered in favour of the Revenue. 11. As regards the appeals filed by the Department, the challenge is regarding d .....

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..... essee. 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 the clearance of the vehicle from the customs authorities had been made by the assessee and hence, the registration of the car should also be in the name of the assessee. However, the registration of the car was made in the name of one Sri. Balan Pillai and the copy of the Registration Certificate was available in the files. The Tribunal then found that since the vehicle was registered in the name of Sri. Balan Pillai and the transfer of the vehicle was also effected in the name of one Sri. Arun Choksi, there was no reason to find the payment of ₹ 7,50,000/- as having been made by the assessee. If at all a dis-allowance had to be made under Section 40A(3) of the Act, then necessarily, the same should have been in the name of Sri. Arun Choksi, was the finding. 14. Admittedly, the car was imported to India on transfer of residence (T.R) of a Non-Resident Indian (NRI) .....

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..... ruvalla 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, found that even though in the first instance, Sri. M.K.A. George accepted the fact that he handed over the Demand Draft for ₹ 22,000/- to the assessee. But later he stated that the affidavit pertaining to such acceptance was actually prepared and brought to him by Sri. Jose, brother of Sri. Alex C.Joseph, and that he had simply signed it and the contents of that affidavit were denied when he was examined by the AD(I). Consequently, the affidavit was rejected and addition of ₹ 22,000/- was made. Sri. M.K.A. George had later filed a letter before the A.O. stating that he did not give any statement to the AD(I) voluntarily and that he had handed over the draft and the same was encashed through the bank account of the assessee. The Tribunal has held that without any cross-examination by the assessee in this regard, the statement before the AD(I) cannot be a ba .....

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..... 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 assessee had not been carrying on in the subject years. Hence, both the questions raised are to be answered against the assessee and in favour of the Revenue. ITA No. 214 of 2012 is, hence, rejected. 19. The Revenue's appeal for 1993-94 raises the following questions: "1. Whether, on the facts and in the circumstances of the case, the Tribunal is right in law and fact in deleting the additions of - (i) ₹ 28,70,000/- on account of import and sale of car; (ii) ₹ 30,43,887/- on account of unaccounted business receipts; (iii) Business receipts of ₹ 8,75,000/- on account unverifiable and unconfirmed credit on sale of jeep; (iv) ₹ 2,89,500/- on account of unexplained cash found and seized during search? 3. Are not the findings of the Tribunal highlighted and challenged in the grounds raised or as grounds raised perverse and against law, logic .....

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..... n 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 was submitted. What assumes significance is the fact that there was no cross-examination permitted of the person when he appeared before the AD(I). Hence, we cannot interfere with the deletion made by the Tribunal on that account. 23. The further contention is with respect to unexplained cash found and seized of ₹ 2,89,500/-. The Tribunal found that there was no enquiry carried out to find the actual owners of the cash. Sri. Alex C. Joseph, who was found to have been managing the affairs of the firm, also was present at the time of search and seizure. The specific contention taken up by Sri. Alex C. Joseph was that the cash was withdrawn from the account of the assessee firm. However, the accounts of the assessee firm do not show such a withdrawal having been effected. Whatever withdrawal was effected, it could not have led to the presence of the cash with the spe .....

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