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TMI Blog2022 (8) TMI 1245X X X X Extracts X X X X X X X X Extracts X X X X ..... No. Date of CIT(A) Order 30/Vns/2020 Pawini Infraventures Private Ltd., 2017- 18 Appeal No.06/DCIT/CC/Vns./CIT(A) -III/Lko/18-19 03.12.2019 31/Vns/2020 M/s Grace Infrazone Private Ltd. 2017- 18 Appeal No.5/DCIT/CC/Vns./CIT(A)- III/Lko/18-19 02.12.2019 32/Vns/2020 M/s Pawini Homes Private Ltd. 2017- 18 Appeal No.11/DCIT/CC/Vns./CIT(A) -III/Lko/18-19 03.12.2019 33/Vns/2020 M/s Pawini Buildzone Private Ltd. 2017- 18 Appeal No.13/DCIT/CC/Vns./CIT(A) -III/Lko/18-19 02.12.2019 34/Vns/2020 M/s Admire Infra Projects Private Ltd. 2017- 18 Appeal No.08/DCIT/CC/Vns./CIT(A) -III/Lko/18-19 03.12.2019 35/Vns/2020 M/s Admire Infraheights Private Ltd. 2017- 18 Appeal No.15/DCIT/CC/Vns./CIT(A) -III/Lko/18-19 03.12.2019 36/Vns/20 20 M/s Tulsiani Fitness and Healthcare Pvt. Ltd., 2017- 18 Appeal No.12/DCIT/CC/Vns./CIT(A) -III/Lko/18-19 02.12.2019 37/Vns/20 20 M/s Sunshine Infrazone (P) Ltd., 2017- 18 Appeal No.07/DCIT/CC/Vns./CIT(A) -III/Lko/18-19 02.12.2019 24/Vns/2020 M/s Avantika Infra Venture (P) Ltd., 2017- 18 Appeal No.09/DCIT/CC/Vns./CIT(A) -III/Lko/18-19 03.12.2019 The aforesaid appellate proceedings had arisen before ld. CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts in accordance with law, after hearing ld. CIT-DR and after perusing the material on record. We will first take up assessee's appeal in ITA No. 30/Vns/2020, for ay: 2017-18, filed by the assessee namely Pawini Infraventures Private Limited. ITA No.30/Vns/2020, AY 2017-18 3. The grounds of appeal raised by assessee in memo of appeal filed with Income Tax Appellate Tribunal, Varanasi Circuit Bench, Varanasi, in ITA no. 30/Vns/2020 for ay:2017-18, reads as under: "1. Because the Ld. Lower Authorities has erred on facts and under the law in assessing the income Rs.8,93,180/- instead of returned income of Rs.7,75,350/- by treating entire professional receipts as undisclosed income. 2. Because the addition are solely based on hypothetical situations, surmises, conjecture and personal presumptions as well as without proper verification/consideration of material and details available on record, hence the same is liable to be deleted. 3. Because the Ld. CIT (A) erred in taking a view that the appellant has not maintained any record which may enable the AO to compute his income without appreciating the fact that the books of account of the appellant, being private limited company, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Private Limited Company and has claimed to be engaged in construction and other ancillary and related activities and it claimed to have derived income under the head business and profession. The Assessing Officer observed during course of assessment proceedings that for all the assessment years from 2011-12 to 2016-17, the assessee had not offered income to the scale offered in ay: 2017-18. Since there was a sudden rise in income which was found to be disproportionate to income offered in earlier years as compared to impugned ay: 2017-18 which is the year of demonetization , the AO asked assessee to provide justification for the cash deposits made during demonetization period. The assessee was asked by AO to furnish following details: (i) Bills and vouchers for cash receipts. (ii) TDS deducted by payer (iii) Cash Book (iv) Sales Ledger (v) Bills of expenses incurred, if any (vi) Sales tax/Service tax details (vii) Name, PAN, address of persons from whom cash has been received against sales/service. (viii) Registration details in sales tax. The assessee submitted cash book, receipt ledger and vouchers in support of its claim, and the assessee had shown income from business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the Assessing Officer vide aforesaid show cause notice , claim of the assessee for consultancy income was not genuine , and the cash deposited and credited in the books of accounts was generated out of unexplained and unaccounted sources and the same was brought in the books of accounts by the assessee under the garb of consultancy income. Thus, the Assessing Officer asked assessee to justify deposit of cash of Rs.8,93,100/- credited in its books of account and why the same be not treated as unexplained cash credit and added as income of the assessee as unexplained income for the impugned assessment. The assessee submitted before AO that all the receipts vouchers in which full name of the person from whom receipt of consultancy income was received , was given. The assessee submitted before the AO that all the receipt vouchers against consultancy income were submitted wherein the name of person from whom consultancy income was received , was duly mentioned . The assessee submitted that neither under the Income-tax Act nor under service tax laws , the assessee is required to keep record relating to PAN and address of such persons . The assessee submitted before the AO that the con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in proportion to increase in income , while so far as staff salary expenses of Rs. 90,000/- claimed by the assessee, the AO observed that apart from this year under consideration , the assesse has not claimed salary expenses in any of the earlier years. The AO concluded that the expenditure was claimed by the assessee merely to disguise the receipt of credit of money in the books of accounts , as genuine. The Assessing Officer also observed that the registration with service tax department is mandatory once services provided exceeds Rs. 9 lacs and deduction of service tax become mandatory once the turnover of services crosses Rs.10.00 lacs. The AO observed that the assessee has deliberately kept the turnover just below Rs.9.00 lacs in most of the cases, so that no registration is required. The AO observed that this argument gathers further strength from the fact that the same amount i.e. Rs.8.00lacs has been deposited in cash in respective bank accounts by multiple companies belonging to Tulsiani Group of Companies. The AO observed that in Pawaini Infrazone Private Limited and Tulsiani Fitness and Healthcare Limited, where even the turnover crossed Rs. 9 lacs, those entities also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of search, seizure and survey operations conducted by Revenue. It was also observed by the Assessing Officer that survey u/s. 133A of the Act was conducted by Revenue in the premises of Shri Uday Kushwaha, CA of the assessee, but no document supporting the claim of the consultancy services were found . Thus, the AO concluded that the vouchers are all made up post search and/or demonetization merely to prove creditworthiness to consultancy income ,which infact represents undisclosed cash credit. The AO also observed that the assessee did not deposit advance tax on these alleged consultancy income claimed to have been earned by the assessee, which also proves that it is only after search and demonetization that the assessee deposited the cash from unexplained and undisclosed sources and was coerced to submit tax with interest. The Assessing Officer also observed that search and seizure operation on Tulsiani Group was conducted by Revenue, on 16.11.2016 and nearly 30-35 companies were centralized to this office. Amongst these cases, a total of 11 companies, which had been showing very little or no business till the ay: 2016-17, were selected by the assessee group to deposit unaccount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 016 Receipts as per ledger 13.11.2016 to 31.3.2017 1. Pawini Infraventure Pvt. Ltd. 893100 813900 79200 2. Pawini Homes Pvt. Ltd. 891300 851200 40100 3. Grace Infrazone Pvt. Ltd. 859700 859700 0 4. Admire Infraprojects Pvt. Ltd. 882000 882000 0 5. Admire Infraheights Pvt. Ltd. 890700 852200 38500 6. Tulsiani Fitness and Healthcare Pvt. Ltd. 932400 892400 40000 7. Admire Realtors Pvt. Ltd. 829500 829500 0 8. Pawini Infrazone Pvt. Ltd. 978600 857700 120900 9. Avantika Infraventure Pvt. Ltd. (sale of soil) 807100 794600 12500 10. Pawini Buildzone Pvt. Ltd. 879800 859500 20300 11. Sunshine Infrazone Pvt. Ltd. 895300 895300 0 The Assessing Officer observed that evidently turnovers of all the companies are having similar pattern. None of the companies have reported turnover in any other assessment year to the extent shown in the demonetization year i.e. relevant ay: 2017-18. It cannot be mere coincidence that all the companies belonging to one Group follows exactly same pattern, i.e. had negligible turnover till the demonetization year and suddenly in the year demonetization occurred, the turnover inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7th December, 2018 passed by AO u/s 143(3) read with Section 153B of the 1961 Act. 5. Aggrieved by assessment order dated 27th December, 2018 passed by the AO u/s 143(3) read with Section 153B of the 1961 Act, the assessee filed first appeal before ld. CIT(A) , which stood dismissed by ld. CIT(A) vide appellate order dated 03rd December, 2019, by holding as under: "Ground No. 1 to 6 are relates to addition of Rs. 8,93,100/-, made by the AO. 7. In this case return of income was filed at total income of Rs. 7,75,350/- on receipts of 8,93,100/-. During the course of assessment proceedings the AO noted that the appellant had disclosed abnormal jump in income for the year under consideration. The appellant had deposited 8,00,000/- on 13/11/2016 in the bank account, during demonetization period. On being confronted to substantiate source of deposit and receipts, it was submitted that the total receipts were part of professional income of the relevant financial year, which were deposited by appellant. The appellant also submitted copies of bills raised for professional receipts. It was claimed that the appellant provided consultancy to several persons and the fee received in cash was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osed by the appellant in the year under consideration are abnormally high in comparison to the overall trend of amount of receipts disclosed by the appellant. It is a fact that no document was found during the search and seizure operation conducted at the premises of the appellant with regard to the professional receipts and the appellant has submitted the copies of the bills during the assessment proceedings only 13. The receipts issued by the appellant are all issued prior to the date of deposit of cash i.e. 13/11/2016 . It is practically improbable that a company having a robust business up to a certain date ceases to have any business after that particular date. The bills issued by the appellant does not provide any information with regards to identity of the person to whom the same is being issued except for the name of the person. Thus the genuineness of the receipt issued by the appellant is very much doubtful. The appellant has contended that it was not bound by any law to maintain any record in this regard, but it is against all human probability that none of the receipts issued by the appellant contains any details what so ever except the name regarding the person to wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs Pvt. Ltd. 829500 8 Pawini Infrazone Pvt. Ltd. 857700 9 Avantika Infraventures Pvt Ltd. (Sale of soil) 794600 10 Pawini Buildzone Pvt Ltd, 859500 11 Sunshine Infrazone Pvt. Ltd. 895300 A peculiar fact that emerges from the perusal of the above reveals that all these companies have two common directors i.e. Mr. Naresh Tulsiani and Mr. Mahesh Tulsiani. The appellant has claimed that these directors are well qualified to provide technical consultancy. If the contention of the appellant is taken at its face value than these two persons have provided consultancy of approx Rs. 94 Laks in the period 01/04/2016 to 13/11/2016. All the fees has been received in the denomination of Rs. 12-16000/-. Thus the average size of consultancy provided by the directors is Rs. 14,000/-. Accordingly to achieve the said turnover the directors needed to provide approx 680 consultations during the said period even when they were engaged in other companies also. Looking at this it can be safely assumed that the consultancy practice of the these two directors was quite handsome but due to inexplicable reasons this vanished in the post demonitization period. It is against the human pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tained in the light of surrounding circumstances. It needs to be emphasized that standard of proof beyond reasonable doubt has no applicability in determination of matters under taxing statutes, in the present case, it is clear that apparent is not the real as evidence from the investigation report. 16. In view of the above mentioned facts, the material brought on record by the AO, and the decision of CIT vs Durga Prasad More (1971) 82 ITR 540, and the case of Sumati Dayal vs. CIT (supra) 214 ITR 801 (SC), the test of human probabilities needs to be applied and true nature of the transaction has to be ascertained in light of the surrounding circumstances. Considering the facts and circumstances of the case, I find that the appellant has not maintained any record which may enable the AO to compute his income and the source of receipts have remained unsubstantiated. In view thereof addition of Rs. 8,93,100/- made by the AO u/s 68 of the I. T. Act are hereby upheld. 17. The appellant has also contended that the provisions of section 115BBE are not applicable in its case. In order to adjudicate the same, a visit to the provision of the section 115BBE is necessary. The section 115BB ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e (b), at the rate of sixty per cent; and (ii) the amount of income-tax with which the assessee would have been chargeable had his total Income been reduced by the amount of income referred to in clause (i) The purpose and object of the latest amendment was explained in the statements of objects and reasons "Concerns have been raised that some of the existing provisions of the Income tax Act, 1961 could possibly be used for concealing block money. It is, therefore, Important that the Government amends the Act to plug these loopholes as early as possible so as to prevent misuse of the provisions. The Toxation Laws (Second Amendment) Bill, 2016, proposes to make some changes in the Act to ensure that defaulting assessees are subjected to tax at a higher rate and stringent penalty provision." Section 11588E imposes tax at a flat rate of 60% (w.e.f.... A/Y 17-18) without making any deduction in respect of any expenditure or allowance as may be admissible to an assessed under any provision of the Act. A perusal of the afore said provisions show that this Section is applicable where assessee's income is recorded in books but has not been offered to tax and theassesses fails to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 23.8.2022, the Bench decided not to grant any further adjournment and proceeded to adjudicate this appeal on merits in accordance with law, after hearing ld. CIT-DR. The ld. CIT-DR opened argument before the Division Bench and submitted that this appeal pertains to ay:2017-18. It was submitted that assessee did not producebooks of accounts either before the Assessing Officer as well as before the ld. CIT(A). It was submitted that cash was deposited by assessee in its bank account to the tune of Rs. 8 lacs during the demonetization period , between 13.11.2016 to 16.11.2016 by these nine assessees and complete details have been brought out by Assessing Officer in its order. It was submitted by ld. CIT-DR that assessee has claimed that under the provision of Sections 44AA read with Rule 6F, the assessee is not required to maintain books of account, but ld. CIT-DR that the assessee is required to maintainbooks of accounts not only under the provisions of the 1961 Act but also under the Companies Act as the assessee is a Private Limited Company .Thus, the ld. CIT-DR submitted that assessee is required to maintain books of account. It was submitted by ld. CITDR that ld. CIT(A) dismissed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ligible for the year under consideration , and even for subsequent assessment year, the assessee has shown negligible consultancy income. It was submitted that the assessee was searched on 16.11.2016. The ld. CIT-DR submitted that only nine cases are fixed out of the aforesaid eleven case, for hearing before the Bench today. It was submitted that in all nine cases which are fixed before DB today, similar pattern was followed and similar receipts from consultancy services were shown , except in the case of ITA No. 24/VNS/2020 for ay: 2017-18 where the assessee has claimed to have sold soil which is again a bogus claim as no evidence whatsoever was made available substantiating sale of soil. Thus, the ld. CIT-DR submitted that all the cash deposits in bank accounts happened between 13.11.2016 to 16.11.2016, and the cash receipts were offered to tax as business income , but the same were unaccounted and undisclosed cash which these eleven assessee's deposited in bank during demonetization period. 7. We have heard ld. CIT-DR and perused the material available on record. The brief facts of the case are that there was a warrant of authorization issued by ld. Pr. Director of Income tax ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... through these small small denomination of alleged consultancy income aggregating to Rs. 8,13,900/- claimed to have been received by the assessee, and deposited cash of Rs. 8,00,000/- in one tranche its bank account on 13.11.2016. Incidentally, when this cash of Rs. 8,00,000/- was deposited in bank in one tranche on13.11.2016, the demonetization of bank notes of denomination Rs. 1000 and Rs. 500 was announced ,on 08.11.2016 .The effect of demonetization of existing bank notes of denomination of Rs. 1,000 and Rs. 500 which were in circulation until 08th November, 2016 , were that they were withdrawn from circulation and cease to be legal tender, post announcement of demonetization . As per FAQ issued by RBI , the reasons for demonetization and scheme , were given as under: "1. Why was the Scheme of Withdrawal of Legal Tender Character of the old Bank Notes in the denominations of Rs. 500 and Rs. 1000 introduced? The incidence of fake Indian currency notes in higher denomination has increased. For ordinary persons, the fake notes look similar to genuine notes, even though no security feature has been copied. The fake notes are used for antinational and illegal activities. High d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of person to whom alleged consultancy services were claimed to be rendered by these assessee's had been given, while no details of the address , PAN of these persons to whom consultancy was rendered were given . Even the scope of consultancy services rendered by these eleven entities were not given. The similar pattern of earning alleged consultancy services wherein major receipts were alleged received upto 13.11.2016 is visible, that as much as more than Rs. 8 lacs were received from these alleged consultancy services (only one entity namely Avantika Infraventures Pvt. Ltd. Claimed to received alleged amount from sale of soil) by each of these eleven entities until 13.11.2016. The cash of around Rs. 8 lacs each was allowed to be accumulated until 13.11.2016 by all these 11 entities. None of the entities deposited accumulated cash in their bank account , until 13.11.2016 to 16.11.2016, when each of the entity deposited cash of Rs. 8,00,000/- each in their respective bank accounts, which happens to be period of demonetization. Thereafter, similar pattern is also visible in all these 11 entities, that they received meager consultancy income from 14.11.2016 to 31.03.2017. All these ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 24400 23350 879800 27800 800000 13.11.2016 11 Sunshine Infrazone Pvt. Ltd. 0 0 27500 33300 25400 24160 895300 27900 800000 13.11. 2016 Chart of 11 group companies under consideration and comparison of similar pattern of receipts before and after demonetization month i.e. November, 2016 S.No. Name of the company Total receipts as shown by assessee during ay: 2017-18 Receipts as per ledger upto 13.11.2016 Receipts as per ledger 13.11.2016 to 31.3.2017 1. Pawini Infraventure Pvt. Ltd. 893100 813900 79200 2. Pawini Homes Pvt. Ltd. 891300 851200 40100 3. Grace Infrazone Pvt. Ltd. 859700 859700 0 4. Admire Infraprojects Pvt. Ltd. 882000 882000 0 5. Admire Infraheights Pvt. Ltd. 890700 852200 38500 6. Tulsiani Fitness and Healthcare Pvt. Ltd. 932400 892400 40000 7. Admire Realtors Pvt. Ltd. 829500 829500 0 8. Pawini Infrazone Pvt. Ltd. 978600 857700 120900 9. Avantika Infraventure Pvt. Ltd. (sale of soil) 807100 794600 12500 10. Pawini Buildzone Pvt. Ltd. 879800 859500 20300 11. Sunshine Infrazone Pvt. Ltd. 895300 895300 0 Since , there was huge deposit of cash ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng consultancy services. Even survey u/s133A was conducted by Revenue on CA of the assessee, but no evidence /material as to rendering of such consultancy services was found/impounded during the course of survey. The assessee is obligated to maintain and keep proper books of accounts not only under the 1961 Act but also under the Companies Act, as the assessee is private limited company. The primary onus is on the assessee to prove that the transactions recorded in its books of accounts towards consultancy receipts are genuine and apparent is real and not a smoke screen to evade taxes, which inter-alia requires proving whether consultancy services were infact rendered and to whom the services were rendered, and thus these alleged consultancy services were genuinely rendered and not used as shield to convert unaccounted and undisclosed cash , more so when demonetization of bank notes was announced just five days back . The assessee has only furnished the name of persons to whom alleged consultancy services were rendered , but no address, PAN or even the scope of services rendered were furnished. The assessee was consistently showing meager income in the earlier years , and in this y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bserved that both the authorities have passed well reasoned ,detailed and speaking order, and we are not inclined to interfere with the orders passed by authorities below, and we confirm the appellate order passed by ld. CIT(A). We also hold that learned CIT(A) rightly relied upon decision of Hon'ble Supreme Court in the case of Sumati Dyal(Supra) and Durga Prasad More(Supra) , as the claim of consultancy income set up by the assessee is a coloring device adopted by the assessee to convert its unaccounted and undisclosed money which was going to become valueless due to bank notes of Rs. 1000 and Rs. 500 ceased to be legal tender , due to demonetization announced on 08th November, 2016 . The authorities below have rightly invoked provisions of Section 68 and made additions to the income of the assessee as the amount stood credited in books of accounts of the assessee , and the assessee failed to satisfy the mandate of Section 68, as identity and creditworthiness of the payer is not proved nor genuineness of the transaction of alleged consultancy income was proved. Once Section 68 is invoked, then AO has rightly applied tax-rate provided within provisions of Section 115BBE of the 196 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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