TMI Blog2024 (3) TMI 525X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee. Therefore, the law is well settled that credit found on the first day or carried forward from the preceding year cannot be added in this year. As decided in CIT v/s Parmeshwar Bohra [ 2007 (1) TMI 105 - RAJASTHAN HIGH COURT] Opening capital cannot be added as unexplained investment u/s 69 of the Act for the AY 1993-94 - clear finding recorded by the Tribunal that the impugned amount was credited in the books of account of the assessee in the earlier previous year and was shown as closing capital of that year carried forward amount of the previous year does not become an investment or cash credit of the relevant year. Thus we direct to delete the addition - Decided in favour of assessee. - Dr. S. Seethalakshmi, Jjudicial Member And Shri Rathod Kamlesh Jayantbhai, Accountant Member For the Appellant : Sh. Mahendra Gargieya (Adv.) For the Respondent : Ms. Nidhi Nair, Sr. DR ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM This appeal filed by assessee is arising out of the order of the Commissioner of Income Tax, Appeal, Udaipur-2 dated 26/03/2023 [here in after CIT(A) ] for assessment year 2010-11 which in turn arise from the order dated 13.03.2015 passed under section 143(3)/147 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l. 4. The Appellant prays your honour indulgences to add, amend or alter of or any of the grounds of the appeal on or before the date of hearing. 3. Succinctly, the fact as culled out from the records is that the assessee is an individual. A search conducted by the CBI at the office and residential premises of Shri Nitin Jain on 25.05.2010. During the course of search, the CBI seized cash amounting to Rs. 2.41 crore from the residential premises as well as bank lockers at Jaipur. The CBI lodged a written complaint against Sh. Nitin Jain and others for explaining the nature and source of acquisition of the money. Shri Nitin Jain, Shri Jitendra Singh Sanganeriya and Smt. Sushila Jain stated that they had received Rs. 97 Lakh from Shri Nitin Bolia as advance against Memorandum of Understanding dated 22.10.2009 executed among his mother Smt. Sushila Jain and Shri Nitin Bolia in respect of immovable property situated at AA-11, Anita Colony, Bajaj Nagar, Jaipur. On being asked by the CBI for the funds arranged by Shri Nitin Bolia he stated a sum of Rs. 58 lakh was arranged by him from the various persons. Thereafter, on the basis of information received and pursuant to CBI search conduct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the conclusion that the appellant was not having sufficient funds to explain the source of cash in hand. The AO has also noted that the appellant has taken loans also and the appellant has not disclosed bank accounts to the AO when specifically asked. The declared income of the appellant was not sufficient to prove that the appellant sourced the cash in hand from the declared sources of income. The appellant has also not made an attempt to show the source of the cash. Therefore, the conclusion drawn by the AO are found to be justified. The arguments raised by the appellant are not found to be acceptable. This ground of appeal is treated as dismissed. 5. As the assessee did not find any relief from the order of the ld. CIT(A) and feeling dissatisfied with the order of the ld. CIT(A) the assessee has preferred the present appeal on the grounds as raised by the assessee as reiterated here in above. To support the various grounds so raised by the assessee, the ld. AR appearing on behalf of the assessee has placed reliance on his written submission which is reiterated here in below; Brief General Facts: The assessee is an individual being regularly assessed. During the year under con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s as submitted herein below: 1. Reassessment invalid-without deciding the objections: At the outset it is submitted that the ld. AO failed to dispose of the objections raised by the assessee against the reassessment u/s 148. The assesse filed objection vide letter dated 03.02.2014 (PB 23-25) however, the same has not been disposed of by the ld. AO. The AO instead of following the law and procedure as provided in the decision of the Hon'ble Supreme Court in the case of GKN Driveshafts (India) Ltd. vs. ITO Ors. (2003) 259 ITR 19 (SC) and various other decisions by different Hon ble High courts passed the assessment order to the effect that on receipt of objection given by the assessee, to the notice u/s148, the AO is bound to dispose of the objections by passing a speaking order. The assessment completed by the AO without deciding the objections against the reasons for reopening is bad in law an illegality. Hence the impugned order dated 13.03.2015 is liable to be quashed. Also kindly refer pg.10 pr.5.4 of this WS. 2. Reason to believe and not reason to suspect: 2.1 It is submitted that even under the amended law the bedrock condition or words, which continue right since inceptio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t been followed by the AO in this case, he did not have any reasonable ground to have based an honest belief, nor that his belief was bonafide and in good faith, if the following facts, which were undisputedly available on record, on the date of recording of the reasons and submissions, are considered: 2.3.1. Undisputedly, the appellant did file the copies of the Balance Sheets for the preceding years and in particular for AY 2009-10 and 2010-11 as admitted by AO at pg.4 of the order. He himself recorded fact finding as regards availability of cash being Rs. 16,98,502/- as on 31.03.2015 at pg. 4 which was opening cash in hand and it is only thereafter, the advance of Rs. 10,00,000/- was given to Nitin Bolia shown as advance against purchase of property in the Balance Sheet. 2.3.2 Further, simply, because ROI was filed on 24.12.2010 whereas inquiries were going on in May 2010, will not undone the cash availability supported by the Balance Sheets. 2.3.3 Mere fact of giving advance to someone does not ipso facto becomes an income much less escaped income. 2.3.4 There is no reference given of any provision of law, in the reasons to believe, which authorized the AO to consider the amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the conditions are satisfied does not exist or is not material or relevant to the belief required by the section. The Court can always examine this aspect though the declaration or sufficiency of the reasons for the belief cannot be investigated by the Court. The judicial guideline provided above fully applies on the facts of present case. 2.5.3 Lastly, it may be clarified that the assessee is not asking for/alleging insufficiency of the reasons. What has been contended is that no reason at all existed and the courts have held at times and again that they can certainly examine whether relevant and bonafide reason of belief, existed or not. 3. Escapement of Income without Jurisdiction: 3.1. The pertinent aspect to be considered is that the law u/s 147 provides addition of the escaped income than only new income can be added due to use of the word also u/s 147. Whereas in the impugned reasons (PB 1-2), the AO has alleged the escaped income of Rs. 8,01,815/- (Rs.10,00,000/- less Rs. 1,98,185/- declared), only being the advance given to Sh. Nitin Bolia however, while making the assessment, this figure/addition do not at all find place anywhere in as much as there appears no specific ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able to tax, which, according to his 'reason to believe', had escaped assessment for any assessment year, did not escape assessment, then, the mere fact that the AO entertained a reason to believe, albeit even a genuine reason to believe, would not continue to vest him with the jurisdiction, to subject to tax, any other income, chargeable to tax which the AO may find to have escaped assessment, and which may come to his notice subsequently, in the course of proceedings under s. 147. 3.3.2. CIT vs Jet Airways (I) Ltd. (2011) 331 ITR 236 (Mum) (DPB 16-26), wherein it was held as under: Reassessment Scope Income in respect of which notice issued not found to be escaped income Once the AO accepts that the income in respect of which he entertained reason to believe to have escaped assessment, was not in fact escaped income; he has no jurisdiction to reassess other items of income In such a situation, Expln. 3 to s.147 does not come to the reserve of AO 3.3. This followed by Hon ble Delhi High Court in the case of Ranbaxy Laboratories Ltd. v/s CIT (2011) 336 ITR 136 (Del HC) wherein, it was held that the AO had jurisdiction to reassess income other than the income in respect of w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mine the concerned persons, recorded their statements or obtained the evidences with a view to form an honest belief as regards the existence of some income, in the hands of the assessee, which escaped assessment. Notably, even the CBI enquiry discussed by AO in the reasons recorded, does not suggest that the present assessee denied giving the subjected amount to Shri Nitin Bolia or that he was found having no sufficient source thereof. The AO could not have just jumped to take action u/s 147 r/w 148, merely on the direction of the higher authority or on the advice of third party, unless he could have justified his action in the light of judicial guidelines summarized above, by forming his own independent opinion based on reasonable grounds. Until then not only such information was merely hearsay (rumor) and he did not form even any prima facie belief of his own but he merely acted at behest of a higher authority. 4.2.2 The AO however, while dealing with, has merely repeated the crux of the enquiry made by the CBI and rather again confirmed that his formation of belief was based only on the CBI Information as was given by the higher authorities to him with a direction to take suita ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a number of paper and dummy companies in lieu of cash and that the assessee-company has also obtained accommodation entries in the form of share capital/premium/loan for an amount of Rs. 25,00,000 with the help of the aforesaid accommodation entry providers Based on perusal of the report of the Director of IT, Investigation Wing, the AO has formed not merely a prima facie belief but has reached a conclusion that the assessee has routed back its undisclosed income in the form of share capital However, it is not stated in the reasons that the undisclosed income reached the investor company PEL Ltd. and thereafter, the latter has invested the amount so received in the assessees company by way of share capital Satisfaction of the AO should be discernable from the reasons so recorded only and nothing can be added or supplemented to the reasons Particular of the transaction doesn t give any prima facie impression that these are transactions where the assessee s own money has been routed back in form of share capital Thus, the conclusion of the AO that the amount received by the assessee-company by way of share capital/premium is undisclosed income without establishing the nexus cannot b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Valid 5.1. The ROI Filed on 24.12.2010 is also a valid return u/s 139 (4) hence, no adverse inference can be drawn from this fact. 5.2. The AO made certain allegations based on the CBI report at pg.3 of the Assessment Order however, it is a fact that no copy of the CBI report was supplied to the assessee in absence of which, no allegation averse to the assessee can be made even the relevant portion from the CBI report was not reproduced in the reasons. 5.3. There is no omission or failure on the part of the assessee as alleged with respect to the alleged escaped income of Rs. 10,00,000/-in as much as the same was sourced out of the opening cash in hand of Rs. 16,98,502/-and same was shown in the Balance Sheet filed with the ROI for the A.Y. 2009- 10. No other manner has been shown by the AO to support his contention. 5.4. Further the ld. CIT(A) was wrong in stating incorrect facts (in pr. 4.2 pg.7 of the Appellate order) that there was absence of clear facts as regard the filling of the legal objections and no disposal thereof by the AO, in as much as, the appellant vide letter dt. 03.02.2014 (PB 23-25) has clearly raised legal objections against the very initiation of the procee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT vs Rajeev Sharma (2010) 232 CTR 303 / 336 ITR 678 (All) (DPB 27-39). It was held that: Reassessment Validity of reassessment Failure to issue notice under s. 143(2) after filing return Provision contained in s. 143(2) is mandatory in nature and it shall be obligatory for the AO to apply mind to the contents of the return filed in response to notice under s. 148 and record reasons and thereafter, issue notice under s. 143(2) before proceeding to decide the controversy with regard to escaped assessment Notice issued earlier de hors return in response to notice under s. 148 is inconsequential Tribunal rightly held reassessment invalid GOA-2 Addition of Rs. 16,98,502/- of opening cash as undisclosed income: Facts: During the year under consideration the assessee was asked to furnish necessary details, evidence, books and bills and vouchers. In response thereto the assessee filed Balance Sheet for A.Y. 2010-11, showing advance against purchase of property at Jaipur of Rs. 10,00,000/- (PB 5) and also filed Balance Sheets for earlier years i.e. A.Y. 2008-09 and 2009-10. After examining the same the AO concluded that the assessee has invested the entire savings earned in the NDMPL Share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated to have been disturbed by taking action u/s 147 or u/s 263 of the Act. Thus, the closing balance of cash in hand for AY 2009-10 stood established. 1.2 Balance Sheet of the current year and the preceding years accepted by the Department: The repeated contention of the assessee that the very source of the availability of the cash in hand of Rs. 16,98,502/- was the Balance Sheet which explains everything. Notably the AO himself has taken note of the Balance Sheet, Capital Account and P L Account of A.Y. 2009- 10 and A.Y. 2010-11 at Pg. 4 to 6 and also discussed the investments, debtors, creditors, loan taken etc. but was not willing to accept the opening cash in hand. He even admitted the closing balance of cash in hand of Rs. 7,42,864/- in this year (PB 5). He even admitted the availability of closing cash in hand of Rs. 16,98,502/- in A.Y. 2009-10. It is beyond one`s comprehension that when each and every entry of the Balance Sheet for the preceding year i.e. A.Y. 2009-10 and current year i.e. A.Y. 2010-11 have been accepted (and no dispute raised w.r.t. the correctness of these figures and the facts), there is no reason as to why the AO should not accepted the closing cash in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear in the books of account maintained by the assessee. Therefore, the law is well settled that credit found on the first day or carried forward from the preceding year cannot be added in this year. Kindly refer The Hon ble Jodhpur Bench of ITAT in Parmeshwar Bohra v/s ITO 27 TW 55(JD). Page 61 para 22 has held that --- Therefore, we hold that the opening capital cannot be added as unexplained investment u/s 69 of the Act for the AY 1993-94. This decision was affirmed in CIT v/s Parmeshwar Bohra (2007) 301 ITR 404 (Raj.) (DPB 50-52) holding that clear finding recorded by the Tribunal that the impugned amount was credited in the books of account of the assessee in the earlier previous year and was shown as closing capital of that year carried forward amount of the previous year does not become an investment or cash credit of the relevant year. This decision squarely applies on fact of the present case also, hence on this plea alone the entire addition has to be deleted here itself. 3.1 Utilization of income earned not established by the AO/CIT (A): The main reason of the not considering the availability of the cash in hand was the suspicion of the AO that such amount might have been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the preceding year/s also, the assessee declared the income of Rs. 1,47,932/- (Remuneration of Rs. 1,20,000/- from M/s Nutan Deco Mark P. Ltd. and Rs. 1,88,150/- from job work income, Interest Rs. 3,592/- less House Property Income (-) Rs. 73,749/-, and deduction under Chapter-VI of Rs. 90,061/-) and Rs. 19,500/- from Agriculture Income. Very pertinently, these facts are evidenced from the copies of the ROI filed and not only accepted but even assessed by the department. The respective assessments upto A.Y. 2009-10 stands completed and the same have not been disturbed by taking action u/s 147 or u/s 263 of the Act. 5.2 Even in the later years the assessee continued filing ROI and declaring the income similarly and was also assessed by the department. Kindly refer the copies of the ROIs filed for AY 2007-08 to 2012-13 (PB 6-22). The mere fact that the ROIs were processed u/s 143(1), cannot, in any way, reduce the evidentiary value thereof. 6. Supporting Case Laws: 6.1 Kindly refer CIT v/s P.V. Bhoopathy (2006) 205 CTR 495 (Mad) held Appeal (High Court) Substantial question of law Income from undisclosed sources AO did not accept various sources of income explained by the assessee a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the time of search Thus, addition cannot be sustained 6.4 Kindly refer SMT. Rekha Shekhawat vs. PCIT (2022) 99 ITR (Trib) 69 (JP) Revision Erroneous and prejudicial order Lack of proper enquiry vis-a-vis assessment of additional income as business income During the course of survey under s. 133A assessee's husband admitted unrecorded income in the case of his wife i.e., assessee which was stated to be advances made for property in the course of her real estate business Unrecorded trade advances and cash in hand were brought in the books of accounts and formed part of business assets and thereafter used in day-to-day business activities Questions which were raised and the answers given during the survey show that the additional income declared on account of advances and the cash found emanated from and related to the real estate business only Even the Principal CIT has admitted in the impugned order that this income pertains to recovery of cash amounts of advances made by the assessee to the other persons for purchase of land/plots Undisputedly the assessee is engaged in the real estate business and there is no undisclosed or unknown source of income and the source of addition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n hand during the financial years 2015-16 and 2016-17 to determine the linkage thereof with the transactions undertaken and reflected during the year under consideration In the asst. yr. 2008-09 assessee surrendered an amount of Rs. 1,96,37,930 to tax which includes an amount of Rs. 1,59,00,000 in respect of unexplained advances/investment in the name of assessee and his family members Assessee reflected the said amount under the head Sundry advances and investments in his regular books of accounts for the financial year 2007-08 relevant to asst. yr. 2008-09 Said advances were thereafter regularly reflected in terms of outstanding balances net of recoveries from time to time in the financial statements and balance sheets for the subsequent financial years which were also placed on record and examined by the AO Tax returns for all earlier assessment years including that of the subsequent asst. yr. 2017-18 have been filed by the assessee and accepted by the Revenue which is again a clear affirmation on the part of the Revenue that the financial statements represent true and fair view of assessee's affairs In such a scenario, it cannot be said that the AO could entertain any appre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submission and supported case laws prayed that the assessment order is bad in law. The assessee has filed the return of income and therefore, the assessee has already explained the source of cash and therefore, even on merits the addition is not sustainable. The ld. AR of the assessee relying on the decision of the jurisdictional high court judgment submitted that once the revenue accepted the opening balance which is supported with earlier year no addition can be made. 8. The ld DR is heard who has relied on the findings of the lower authorities has raised similar contentions that has been recorded in the order of the ld. AO and that of the ld. CIT(A). 9. We have heard the rival contentions and perused the material placed on record and have also gone through the various judicial precedent cited to drive home to the respective contentions raised by both the parties. The bench noted that in this case there were two type of grounds one challenging the legality of the assessment and other on the merits of the case. On merits of the case the addition the bench noted that the ld. AO has repeatedly recorded findings that the assessee did not filed any ROI for A.Y. 2008-09 (AO Pg 4) and a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . A.Y. 2009-10 and current year i.e. A.Y. 2010-11 have been accepted (and no dispute raised w.r.t. the correctness of these figures and the facts), there is no reason as to why the ld. AO not accepted the closing cash in hand as having been available with the assessee in A.Y. 2009-10. Also consequently therefore, again when he has admitted rather not disputed any of the entries of the Balance Sheet for the current year, the opening cash in hand of the subjected amount of Rs. 16,98,502/- should have been accepted as available balance with the assessee. Thus, once the assessee based on the all the evidence which are not under dispute submit that the same is out of the opening cash in hand no addition can be made in the year under consideration. The ld. AO assumed opening cash balance as `Nil` on the suspicion that whatever the assessee had earned in the preceding years stood utilized towards expenses or in making the investments and also alleged that the assessee failed to prove the existence of cash in hand and accordingly he considered Rs. 16,98,502/- as undisclosed income of the current year. Thus, what the ld. AO added was the opening balance of cash in hand in this year which is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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