TMI Blog2022 (5) TMI 885X X X X Extracts X X X X X X X X Extracts X X X X ..... essment year 2011-12 based on which the proceedings u/s 153C of the Act were initiated against the assessee. Now the question arises the information pertaining to the assessment year 2011-12 can be used for the year under consideration being the financial year 2009-10 corresponding to assessment year 2010-11. In our considered view, such information cannot be used for forming believe that income in the year under consideration also escaped assessment unless and until fresh tangible material pertaining to the year under consideration brought on record. The information or material pertaining to different assessment year may give rise to suspicion but not the reason to believe. We are of the view that reason to believe formed by the AO for reopening the assessment is not valid as the same is not based on any tangible material which prima facie suggest income has escaped assessment rather the AO form believe merely based on suspicion, surmise and conjecture. Reason to be belief formed by the AO is not based on any fresh tangible material. Therefore we hereby quashed the proceeding under section 147 of the Act. Hence the ground of cross objection of the assessee is allowed. Un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... harged its onus imposed under section 68 of the Act. In view of the above, we do not find any infirmity in the order of Ld. CIT (A). Hence the ground of appeal of the revenue is hereby dismissed. - ITA No. 794/AHD/2019 With C.O.No.171/Ahd/2019 - - - Dated:- 27-4-2022 - SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND MS MADHUMITA ROY, JUDICIAL MEMBER Revenue by : Shri Vijaykumar Jaiswal, CIT, D.R And Shri S.S. Shukla, Sr. D.R Assessee by : Ms Nupur Shah, A.R ORDER PER WASEEM AHMED ACCOUNTANT MEMBER: The captioned appeal and CO have been filed at the instance of the Revenue and the assessee against the order of the Learned Commissioner of Income Tax (Appeals)-12, Ahmedabad, dated 08/02/2019 (in short Ld. CIT(A) ) arising in the matter of assessment order passed under s. 143(3) r.w.s. 147 of the Income Tax Act, 1961 (here-in-after referred to as the Act ). The assessee has filed the Cross Objection in the Revenue s appeal bearing ITA No. 794/Ahd/2019 for the Assessment Year 2010-2011. 2. First, we take up the CO filed by the assessee. The assessee in the CO has raised the following grounds: All the grounds in this Cross-Objections a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assed in the case of Sarthav Infrastructure PvtUd. In the case of Saral Management Consultancy (Prop. Mahendra Sutaria-HUF), the income disclosed in the return of income for A.Y. 2010-11 is an amount of Rs. 1,16,54,700/-. Further, in respect of Saral Management Consultancy (Prop. Mahendra Sutaria - HUF), there was a debit balance of Rs. 70,32,7107- as opening balance and further unsecured loan for an amount of Rs. 3,05,71,2907- has been received during the year under consideration and Rs. 2,69,82,0007-was also repaid during the year under consideration. During the year under consideration the Respondent firm has received an amount of Rs. 3,76,04,0007- out of which Rs. 70,32,3107- is against the loans and advances given by the Respondent firm and hence it can be concluded that the Respondent firm received Rs. 3,05,71,2907- as unsecured loan amount. In respect of unsecured loan of Rs. 5,00,0007- from Kalpesh Patel, on Page 99 of the assessment order of Sarthav Infrastructure Pvt.Ltd, the AO himself has stated the PAN Number of the said lender party. The Respondent firm has received unsecured loan of Rs. 5,00,0007- to meet the temporary shortage of fund on current account basis an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the purchase of lands by the different persons. The entries reflected in the excel sheet was duly correlated with the cash deposits in the bank accounts of different individuals/parties. In the bank account of the assessee, there was the deposit of cash amounting to ₹ 5 lacs in the assessment year 2011-12 i.e. subsequent AY which was not explained and therefore the same was treated as unexplained cash credit under section 68 of the Act in the hands of the assessee. 4.1 Based on the above, the AO analyzed the bank statements for the period beginning from 1 April 2008 to 31 March 2015 of different persons whose names were appearing in such excel sheet. As per the AO, all the names of the persons appearing on the excel sheet were of Sutaria Family/Group . As per the analysis, the AO found that there were deposits of cash in the bank accounts of Sutaria Family/ group/concerns during the period as discussed above aggregating to ₹47,17,00,273/- only during the F.Y. 2008-09 to 2014-15 . The breakup of the cash deposits in bank account of Sutaria Family/Group for the financial year 2008-09 to 2014-15 is recorded on pages 74 to 76 of the PB. 4.2 Out of such d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the basis of same material can be made. Hence, there was not any fresh tangible material available with AO for forming reason to believe that income of the assessee has escaped assessment. 4.4 However the AO, disposed off the objection of the assessee by observing as under: It is noticed that assessing officer had reopened the case after duly recording reasons. On verification of the reasons recorded, it is clearly evident that the assessing officer had duly applied his mind, made belief on the base of the fact available on record. It is also noticed that during assessment proceeding u/s 153A of the Act in case of Sarthav Infrastructure Pvt Ltd, Gross Profit derived from unaccounted receipt has been added to its income. Further, if any, addition has already made in the hands of other assessee related to escaped income, then the same can be verified in detail and considered during assessment proceeding. Also it is already discussed in the reason recorded that assessee was holding two bank accounts with CUB bank and assessee kept silence on the correlation of the cash deposit in the account no. CA 124684. This indicated that the source of the cash deposit are unexplained ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation as per provision of the I T Act principal of Natural Justice and assessment will be competed in the judicious manner. Assessee will also provided all the material relied upon by this office to complete reassessment proceeding. Further, assessee is also requested to cooperate in the re-assessment proceeding and submit his explanation/submission within time allowed by assessing officer so that assessing officer has enough time to consider his submission for the completion of re-assessment proceeding in judicious manner. 5. It is also to be noticed that as per section 147 of the !.T. Act, the Assessing Officer is expected to form only a prima facie opinion or belief regarding the applicability of the provision in question at the time of recording of reasons for reopening the assessment, and it is not necessary for Assessing Officer to conclusively establish that his belief or opinion is correct even on the merits. In view of the above discussion regarding objections of the assessee and fact of the case, the assessee's all the objections are hereby rejected and disposed off discussing the same in the preceding paras. 4.5 The assessee carried the matter to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 91. Accordingly, the case was reopened and the proceedings for re-assessment were commenced. The reasons for reopening u/s. 146 were duly provided to the assessee, opportunity under natural justice was given to it and the procedure as per judicial pronouncements was followed as mentioned in initial paras of this order Subsequently assessee was asked regarding source of the same vide show-cause notice dated 17.11.2017, Assessee submitted its reply vide submission dated 05.12.20T7 and 12.12-2017. The submission and contentions of the assessee were duly considered. However the same are not found to the AO. 4.3. The appellant contended that the entire reassessment notice was issued based upon documents found during the course of search at the premises of a third party and A.O. was of the view that appellant has obtained accommodation entry against transactions carried with Barter group and hence the AO ought to have issued notice u/s.l53C of the Act and not the notice u/s.148 of the Act. Provision of section 147 of the Act provides for reopening of the assessment subject to certain conditions which have been fulfilled in this case. The section does not bar reopening of assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the AO if, there was any document found during the search proceedings at the premises of the 3rd party pertaining/belonging to the assessee. As such, there was no document found in the search proceedings pertaining/belonging to the assessee for the year under consideration. Therefore, the AO did not initiate the proceedings under section 153C of the Act. Thus, the AO has rightly initiated the proceedings under section 147 of the Act after forming the reasons to believe that income of the assessee has escaped assessment. The learned DR vehemently supported the order of the authorities below. 7. We have gone to the rival submissions made by both the sides and the order of the authorities below as well as the judgment relied upon by the respective parties. As per the assessee there was no tangible material available with the AO leading to form the reasons to believe that income of the assessee has escaped assessment. As such, the AO has initiated the proceedings under section 147 of the Act merely on the excel sheet found and seized in search proceeding at the premises of third party which was not containing any information pertaining to the year under consideration. There ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r upon receiving the information has analysed and found that such information containing detail of cash deposit in the bank account during A.Y. 2011-12. Thereafter the AO perused the bank statement of the assessee for the year under consideration where cash deposits was also made. The AO on the basis of the same reached to the conclusion that income to the extent of cash deposit escaped for assessment. 7.4 The 1st question that arises for our adjudication whether cash deposits represent the income of the assessee and gives rise to the AO to believe that income has escaped assessment within the meaning of the provisions of section 147 of the Act. In our considered view, the mere deposit of cash itself does not represent income unless and until some tangible material available on record evidencing that such deposits is the income of the assessee. Therefore, mere information of cash deposit does not give any rise to form believe that the income of the assessee has been escaped assessment. In this regard we draw support and guidance from order of Delhi tribunal in case of Bir Bahadur Singh Sijwali vs. ITO reported in 53 taxmann.com 366, the relevant finding of the coordinate benc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e financial year 2009-10 corresponding to assessment year 2010-11. In our considered view, such information cannot be used for forming believe that income in the year under consideration also escaped assessment unless and until fresh tangible material pertaining to the year under consideration brought on record. The information or material pertaining to different assessment year may give rise to suspicion but not the reason to believe. In this regard we find support and guidance from the judgment of Hon ble Supreme court in case of ITO vs. Lakhmani Mewal Das reposted in 103 ITR 437, where the Hon ble court held as under: the reasons for the formation of the belief must have rational connection with or relevant bearing on the formation of the belief. Rational connection postulates that there must be a direct nexus or live link between the material coming to the notice of the ITO and the formation of this belief that there has been escapement of the income of the assessee from assessment in the particular year because of his failure to disclose fully and truly all material facts. It is no doubt true that the Court cannot go into sufficiency or adequacy of the material and sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n any fresh tangible material. Therefore we hereby quashed the proceeding under section 147 of the Act. Hence the ground of cross objection of the assessee is allowed. 7.9 In the result, the cross objection of the assessee is allowed. Coming to ITA No. 794/Ahd/2019 an appeal by Revenue on merit 9. The Revenue has raised following grounds of appeal: 1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs.98,31,461/- on account of unexplained cash credits u/s.68 of the Act. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in law and on facts in holding that the source of cash deposit was out of cash withdrawal from the bank without examining the explanation regarding repeated cash withdrawal, cash deposits and immediate transfer of funds, which show that the transaction were layered and the explanation was not credible 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs.3,81,00,000/- on account of unexplained credits u/s.68 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... time but despite that the assessee was withdrawing cash and depositing the same in the bank account in the denomination of ₹ 5 Lacs. The AO also perused the cash book of the assessee and found that there was no other transaction in the cash book except withdrawal from the bank and deposit the same in the bank. As per the AO, the transactions of withdrawing cash and depositing the same in the bank account was very unusual and without any rationality. Furthermore, the assessee also failed to justify the modus operandi adopted by it for withdrawing and depositing the cash in the bank account. Thus, in the absence of any justification, the AO was of the view that the transactions reflecting in the cash book are not genuine. Further, the assessee s contention with regard to evidentiary value of the excel sheet found from seized from third party and pertaining to different period and demand of cross examination is also devoid of merit for the reason that addition is purposed on the basis of huge cash deposit which was made during the year. As per the AO, it was the onus upon the assessee to explain the transactions of cash deposits and withdrawals based on the documentary evidence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. cash book vis-a-vis bank statement and hence it cannot be said that the appellant firm had unexplained cash deposit and hence the addition made by the AO is found incorrect and is based on merely on surmises and conjectures. The cash book itself clearly reflects that the appellant firm had sufficient cash in hand to deposit the same in the bank. The appellant firm has discharged its onus by submitting cash book which clearly reflects all the cash deposits and withdrawals as all entries of withdrawals and deposits in the bank both stand recorded in the cash book and the availability of funds with the appellant firm is sufficient to meet the outflow of money deposited in the bank account. The appellant firm relied upon the judgment in the case of Dhakeshwari Cotton Mills Ltd, vs. CIT. 26 ITR 775 (SO. Considering all the aforesaid facts, I am in agreement with the contention of the appellant firm that the cash deposit in aggregate of Rs 98.31.461/- is out of the cash withdrawn from bank account which is duly explained by the appellant firm. The appellant firm also in support of the contention that mere cash deposits made in the bank account of the appellant firm do not render the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year : 19.1 On a plain reading of the above provisions, it is revealed that, the following conditions should be fulfilled for attracting the provisions of section 68 of the Act. i. There should be a credit entry in the books of accounts. ii. No explanation was offered by the assessee with respect to such credit entry or iii. The explanation offered by the assessee was not satisfactory to the AO. 19.2 Admittedly, there was credit entry in the books of accounts of the assessee, reflecting the deposits of cash in the bank account. The explanation was offered by the assessee to the AO that the cash was deposited out of the cash withdrawal from the earlier year as well as in the year under consideration. However, the explanation offered by the assessee was not found satisfactory by the AO. As such, the AO was of the view that there was sufficient cash balance available with the assessee throughout the year and therefore there was no reason for the assessee to withdraw the cash in the denomination of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ewhere else either towards the capital or revenue expenses/ personal expenses. At this juncture we also find pertinent to refer the order of this Tribunal in case of Sudhirbhai Pravinkant Thaker vs. ITO reported in 88 taxmann.com 382, where in similar facts and circumstances it was held as under: 4. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below as well as the judgements relied upon by the ld. counsel for the assessee. There is no dispute with regard to the fact that the assessee had deposited the cash of Rs.11,27,800/- starting from 07/06/2007 to 31/02/2008. The cash withdrawn from the bank was of Rs.4,20,000/- on 01/07/2006, Rs.4,90,000/- on 06/07/2006, Rs.83,000/- on 26/06/2007, Rs.51,000/- on 20/11/2007, Rs.1,28,000/- on 14/12/2007 and Rs.2,00,000/- on 07/01/2008. However, the cash was deposited on 07/06/2007 of Rs.2 lacs, on 08/06/2007 of Rs.2 lacs, on 11/06/2007 of Rs.1,50,000/-, on 12/06/2007 of Rs.2 lacs, on 13/06/2007 of Rs.2,25,000/-. The total deposits till 13/06/2007 was of Rs.9,75,000/- and the amount withdrawn till 06/07/2006 was of Rs.9,10,000/- (Rs.4,20,000 + 4,90,000). Rest o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee had withdrawn amount of Rs.9,10,000/- before the deposits made on various dates during the FY 2007-08. Therefore, the orders of the authorities below are set aside and the AO is directed to delete the addition. Thus, ground raised in the assessee's appeal is allowed. 19.6 In view of the above, there cannot be any addition to the total income of the assessee on account of cash deposited in the bank unless the AO demonstrate that the amount in question has been used by the assessee for any other purpose. Thus in our considered view the addition is made by the AO on inferences and presumptions which is bad in law. Accordingly, we do not find any infirmity in the order of the learned CIT(A). Thus we direct the AO to delete the addition made by him. Hence the ground of appeal of the Revenue is hereby dismissed. 20. The next issue raised by the Revenue is that the learned CIT(A) erred in in deleting the addition made by the AO for Rs. 3,81,00,000/- on account of unexplained cash credit under section 68 of the Act. 21. The assessee in the year under consideration has shown the loan from certain parties as detailed under: Sr.No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d details such as PAN, Address, confirmation, contra confirmation and bank statement which were sufficient enough to prove the identity, credit worthiness of the parties and genuineness of the transactions as held by Hon ble Gujarat High court in case of Rohini Builder reported in 256 ITR 360. But the AO failed to make proper consideration of the submission while making addition merely on basis of surmises and conjecture. 24. It was also submitted that addition of Rs. 3.76 crores on account loan from Saral Management Consultancy was unjustified. As the loan amount of Rs. 3.76 crores includes opening balance of Rs. 70,32,710/- and fresh receipt stands at Rs. 3,05,71,290.00 only. Out of such receipt, an amount of Rs. 2,69,82,000/- was repaid during the year. All the details of the above loan party was available with the AO as loan party also come under the jurisdiction of same AO. The AO was also having the details of Kalpesh Patel in case of assessment proceeding of Sarthav Infrastructure Pvt. Ltd. Further loan from Kalpes Patel was repaid within 2 days. All the transaction of receipt of loan and their repayment has been made through banking channel. Accordingly, the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all the transactions have been made through proper banking channel. So, the addition of Rs.3,76,00,000/- made by the A.O with respect to the unsecured loan of Saral Management and Consultancy is unjustified and the said j addition is deleted. The AO in para 8.2 at page no.20 of the assessment order has observed that j it is to conclude that identity of Kalpesh Patel were not proved. The said observation of the AO is found not correct and unjustified as in case of Kalpesh Patel, on page no.99 of the assessment order of SIPL, the AO himself has stated the PAN No. of (he said lender party as ATSPP0295I. The appellant firm has received unsecured loan of Rs.5.00,000/- to meet the temporary shortage of fund on current account basis and the amount of Rs.5,00,000/- has been repaid back with a period of 2 days and hence the appellant firm has not paid interest on such amount. In this regard, the appellant firm has placed on record the copy of contra confirmation alongwith the bank statement of Kalpesh Patel. The appellant firm has also placed on record the ledger account of Kalpesh Patel from the books of the appellant firm. Hence the addition of Rs.5,00,000/- made by the AO with re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions were through the bank account, it was to be presumed that the transactions were genuine. It was not for the ITO to find out by making investigation from the bank accounts unless the assessee proved the identity of the creditors and their creditworthiness. Mere payment by account payee cheque was not sacrosanct nor could it make a non-genuine transaction genuine. 29.1 The assessee has discharged its onus by furnishing the necessary details such as a copy of PAN, ledger copy, confirmation and bank details in support of identity of the parties, genuineness of transaction and creditworthiness of the parties. Admittedly the AO has accepted the identity of the parties except of Kalpesh Patel but the genuineness of transaction and credit worthiness of the parties were not accepted. However the learned CIT(A) held that the assessee has discharged the primary onus cast under section 68 of the Act and deleted the addition made by the AO. In this backdrop we proceeds to adjudicate the issue on hand. 29.2 Coming to first condition cast under section 68 of the Act i.e. proof of identity. The AO has held that the identity of the Kalpesh Patel was not proven by the assessee. Ho ..... X X X X Extracts X X X X X X X X Extracts X X X X
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