TMI Blog2022 (8) TMI 1274X X X X Extracts X X X X X X X X Extracts X X X X ..... sed cash/money/income by depositing cash in bank during demonetization period, to avoid old demonetized bank notes held by it from becoming valueless as legal character of old bank notes of denomination of Rs. 500 and Rs. 1000 were withdrawn, owing to demonetization announced on 08th November, 2016. We have observed 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). CIT(A) rightly relied upon decision of Hon ble Supreme Court in the case of Sumati Dyal [ 1995 (3) TMI 3 - SUPREME COURT] and Durga Prasad More [ 1971 (8) TMI 17 - SUPREME COURT] 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 acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or 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.8,29,500/- instead of returned income of Rs.6,14,440/- 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, has been kept and audited by the Independent Chartered Accountant as per the provision of Companies Act. 4. Because the Ld. CIT (A) erred in affirming the addition done by the Ld. AO u/s 68 of the Act in the case of the appellant without appreciating that provisions of Section 68 are not applicable in the facts and circumstances of the case since the appellant has already accounted for the income and paid the tax thereon. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 and consultancy.. It was also observed by AO that the assessee has deposited cash of Rs.8.00 lacs on 13.11.2016 in its bank account with Federal Bank and the assesseewas asked by AO to explain the sources of cash deposits in the bank account, which the assessee explained that the cash deposits of Rs. 8,00,000/- on 13.11.2016 was made out of income received fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssing Officer asked assesseeto justify deposit of cash of Rs.8,29,500/- 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 assesseesubmitted 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 assesseesubmitted before the AO that the consultancy services relating to real estate business was rendered in the earlier years also and for this year also similar consultancy income was received. The assessee also submitted before AO that list of all expenses were duly submitted along with audited financial statements. The assessee submitted before AO that major expenses to the tune of Rs. 1,20,000/- were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 assesseehas 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 PawainiInfrazone Private Limited and Tulsiani Fitness and Healthcare Limited, where even the turnover crossed Rs. 9 lacs, those entities also did not get themselves registered under service tax laws, to avoid further scrutiny by other department. The AO also observed that it could not be coincidence that all these companies have similar turnover for ay:2017-18. The Assessing Officer also observed that under Section 44AA of the 1961 Actr.w.r. 6F of the Income Tax Rules,1962, the assessee is required to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prove creditworthiness to consultancy income, whichinfact 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 unaccounted cash accumulated with the group. These companies were primarily showing their income from business and consultancy. The AO observed that it was only in the ay:2017-18, which happens to be year of demonetization that all these companies registered manifold growth in their turnover. The AO observed that surprisingly but not coincidently, all the companies deposited on amount of Rs.8.00 lacsin cash in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 Admire Realtors Pvt. Ltd. 0 34000 48500 31000 33800 32200 829500 60000 800000 13.11.2016 8 PawiniInfr azone Pvt. Ltd. 0 0 26000 36400 11500 0 978600 17000 800000 13.11. 2016 9 AvantikaInfra ventures Pvt. Ltd. (sale of soil) Nil Nil Nil Nil Nil Nil 807100 Return not filed 800000 13.11. 2016 10 PawiniBuil dzone Pvt. Ltd. 0 0 25000 34300 24400 23350 879800 27800 800000 13.11. 2016 11 Sunshine Infrazone Pvt. Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 increased to several times. The AO observed that that turnover has again decreased in ay: 2018-19 i.e. the year after demonetization. It is therefore clear that, the assessee has tried to use the entire arrangement as a coloring device, just to evade taxation and action against the companies. The AO observed that theassessee has certainly failed to provide satisfactory explanation of money so credited in the bank account. The Assessing Officer also observed that during the course of assessment, theassessee was time and again given opportunity to provide details of persons from whom such Consultancy receipt was credited. But, in response the assessee has only provided Name of such persons without any address, contact details or any other detail by which identity and as a natural corollary to it, Creditworthiness of such persons may be ascertained. The AO observed that the assessee has failed to satisfy the mandate of Section 68 of the 1961 Act, to establish identity, cre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial year, which were deposited by appellant. The appellant also submitted copies of bills raisedfor professional receipts. It was claimed that the appellant provided consultancy to several persons and the fee received in cash was deposited in the bank account after deduction of expenses. The AO rejected the contention of the appellant and held that the total receipts of the appellant were from undisclosed sources and taxed them u/s 68 of the Act and applied provisions of section 1158BE of the Act. 8. During the course of appellate proceedings it was once again submitted that the receipts disclosed by the appellant was professional receipts, which was duly recorded in the books of account, subject to audit and properly vouched. It was further submitted that the appellant had regularly disclosed Income from professional receipts in the preceding year also and the same were accepted as such by the AO, hence it was unwarranted that the same were not accepted for the year under consideration. 9. I have examined the assessment order of the AO and the submission made by the appellant. The only issue which needs examination pertains to the treatment of receipts disclosed by the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lant 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 whom it was issued. The appellant has not submitted any details regarding the consultancy provided by it to its customers, only a vague description has been offered by that it has provided consultancy services regarding structural designing and planning etc. relating to construction of small houses. Even if the contention of the appellant is accepted for the sake of argument, then too details regarding its customer can be generated from the scope of consultancy provided by it. A person who wishes to have consultancy regarding the structural design and construction of house needs to provide details regarding dimensions of the area of the land, location, budget and the basic requirements it seeks to have in the dwelling unit. Thus the details regarding the customer can be obtained very easily by the appellant. Furthermore the type of consultancy provided by the appellant requires that the customer needs to meet the professional more ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eshTulsiani 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 approxRs. 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 probability that a professional consultant to have extraordinary clientele during a certain period, but the same just vanishes without trace, after a certain period. The appellant is engaged in consultation In real estate sector and this extra ordinary turnover has been achieved even when the whole sector was going through crisis. 15. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oned facts, the material brought on record by the AO, and the decision of CIT vsDurga Prasad More (1971) 82 ITR 540, and the case of SumatiDayal 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 115BBE is as under Section 11588E was originally introduced by Finance Act 2012 w.e.f. 01.04.2013. Section 115BBE as enacted then is reproduced as under: 1158BE. Tax on income referred to in section 68 or section 69 or section 69A or section 69B or section 69C or section 69D.-(1) Where the total income of an assessee includes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bjects 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) withoutmaking 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 prove the nature and source to the satisfaction of the A.O. This section is also applicable to the assessee who are not required to maintainbooks of accounts but is found to have made unexplained investment, unexplainedexpenditure or he is found to be in possession of money, bulli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay:2017-18. It was submitted that assessee did not produce books 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 lacsduring the demonetization period, on 13.11.2016 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 thatassessee is required to maintain books of account. It was submitted by ld. CIT-DR that ld. CIT(A) dismissed the appeal filed by the assessee. Our attention was drawn by ld. CIT-DR to the appellate order passed by ld. CIT(A). It was submitted by ld. CIT-DR that cash of Rs.8.00lacs was deposited by the assessee in its bank account on 13th November 2016, which was the period of demonetization. It was submitted by ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sold soil which is again a bogus claim as no evidence whatsoever was made available substantiating sale of soil. Thus, the ld. CITDR submitted that all the cash deposits in bank accounts happened between 13.11.2016 to 16.11.2016 for all these eleven entities, and the cash receipts were offered to tax as business income, but the same were unaccounted and undisclosed cash which these elevenassessee s deposited in bank during demonetization period. The ld. CIT-DR submitted that appeals of nine companies-assessee s out of eleven assessee s, were heard by tribunal on 23.08.2022 (Appeals in ITA no. 24/Vns/2020 and 30-37/Vns/2020, all for ay: 2017-18, and the facts are similar in all these appeals. 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 (Inv.), Lucknow, and search, seizure and survey operations u/s. 132 133A of the 1961 Act were carried out by Investigation Wing on the business and residential premises of M/s Tulsiani Construction and Developers Pvt. Ltd., its sister concerns, residential premises of Directors and Proprietors of the gro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ₹ 500 and ₹ 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 denomination notes have been misused by terrorists and for hoarding black money. India remains a cash based economy hence the circulation of Fake Indian Currency Notes continues to be a menace. In order to contain the rising incidence of fake notes and black money, the scheme to withdraw legal tende ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tities were not given. The similar pattern of earning alleged consultancy services wherein major receipts were allegedly 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 lacseach 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 eleven entities have common Directors namely Mr. NareshTulsiani and Mr. Mahesh Tulsiani. All these eleven entities showed meager income for all the years upto ay: 2016-17 and then there is spurt of cash income in ay: 2017-18 which is explained to be alleged consultancy income, an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Admire Infraheights Pvt. Ltd. 0 30000 92000 34500 36900 32600 890700 34500 800000 16.11. 2016 6 Tulsiani Fitness and Healthcare P. Ltd. 0 33000 42000 40500 36500 34650 932400 34100 800000 13.11. 2016 7 Admire Realtors Pvt. Ltd. 0 34000 48500 31000 33800 32200 829500 60000 800000 13.11. 2016 8 PawiniInfr azone Pvt. Ltd. 0 0 26000 36400 11500 0 978600 17000 800000 13.11. 2016 9 AvantikaInfr aventures Pvt. Ltd. (sale of soil) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10. PawiniBuildzone Pvt. Ltd. 879800 859500 20300 11. Sunshine Infrazone Pvt. Ltd. 895300 895300 0 Since, there was huge deposit of cash in bank account to the tune of Rs. 8,00,000/- on 13.11.2016 by assesseeand that too during demonstration period, the assessee was asked to explain the sources of these cash deposits. The assessee only provided name of the persons who gave cash in small denomination towards alleged consultancy services rendered by assessee, while no address, PAN etc. of the person to whom consultancy services were rendered was provided by assessee to both the authorities below, and even before us no such details are provided. The assessee also did not provided the scope of alleged consultancy services rendered by it to various persons in small small denomination. Similar pattern was followed in all the eleven companies which belong to this Tulsianigroup, and no details were furnished except the name of person and amount received. The assessee on its part is contending that it is not un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 year only small small consultancy services were claimed to be rendered and that too majorily from 01.04.2016 to 13.11.2016, wherein the amount of alleged consultancy services rendered were to the tune of Rs. 8,29,500/- until 13.11.2016, and while consultancy services rendered were from 14.11.2016 to 31.03.2017, were to the tune of Nil. Again in the subsequent assessment year, the assessee has shown meager income of Rs. 60,000/- in the return of income filed with the revenue. The assessee has deposited Rs. 8,00,000/- in its bank account on 13.11.2016 in one tranche, which is the period of demonetization and in our considered view was done to avoid getting its unaccounted and undisclosed money in the form of cash becoming valueless/worthless as the old bank notes ceased to be legal tender, with the demonetization announced on 08t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee 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 1961 Act. So, far as expenses claimed by the assessee are concerned, we are of the considered view that the assessee could not show that it was engaged in any business or profession whatsoever, and in our considered view, the assessee is not entitled for claim of deduction of expenses claimed by it. We donot find any merit in the appeal filed by the assessee in ITA No. 27/Vns/2020 for ay: 2017-18, which now stand dismissed.This disposes of ground no. 1 to 7 raised by the assessee, while ground number 8 is general in nature which does not require separate adjudication, and hence consequently all the eight grounds raised by the aassessee stand dismissed. We order accordingly. 8. In the result appeal of the assessee in ITA no. 27/Vns/2020 for ay: 2017-18 stand dismissed. We order accordingly. Or ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
