Income Tax Appellate Tribunal - Chandigarh
N.K. Sharma Enterprises (P) Ltd., ... vs Department Of Income Tax on 10 May, 2016
1
IN THE INCOME TAX APPELLATE TRIBUNAL
CHANDIGARH BENCHES, CHANDIGARH
BEFORE SHRI H.L.KARWA, HON'BLE VICE PRESIDENT &
MS. RANO JAIN, ACCOUNTANT MEMBER
ITA No. 1134/Chd/2012
Assessment Year: 2006-07
The AC IT, Vs. M/s N.K. Sharma Enterprises (P) Ltd.,
Central Circle, Zirakpur
Patiala
PAN No. AABCN3333K
(Appellant) (Respondent)
Appellant By : Sh. Manoj Mishra
Respondent By : Sh. Sudhir Sehgal
Date of hearing : 10.03.2016
Date of Pronouncement : 10.05.2016 .
ORDER
PER H.L.KARWA, VP This appeal filed by the Revenue is directed against the order of C IT(A)-I, Ludhiana dated 23.8.2012 relating to assessment year 2006-07.
2. Ground No. 1 of the appeal reads as under:-
1. That Ld. CIT(A) has erred both in law and on facts in deleting the addition made by the AO amounting to Rs.1700/-
on account of unexplained purchase of diamond pins, Rs.
1,34,000/- on account of unexplained purchase of jewellery and Rs.48,000/- on account of unexplained purchase of jewellery sets, as per specific findings given by the AO in the 2 assessment order that the expenses were not found recorded in the books of accounts.
3. Briefl y stated the facts of the case are that assessee relates to Shri N.K. Shamra Group of cases, Zirakpur. A search and seizure operation u/s 132 of the Income-tax Act, 1961 (in short 'the Act') Act was conducted on 16.10.2007. Notice u/s 153A of the was issued to the assessee on 6.6.2008. Subsequentl y, statutory notices were also issued to the assessee which were served upon the assessee. During the course of search at the residential premises of the directors of the assessee company, documents numbering 96 & 97 of Annexure A-1 dated 18.11.2005 containing details of purchases of jewellery set of Rs. 1,34,000/- (weight 158.880 gms) were siezed. The bill No. 3311 dated 18.11.2005 was issued by the Talwar Sons, jeweller SCT 14-015, Sector 22-D, Chandigarh in the name of M/s N.K. Enterprises (P) Ltd Village Lohgarh, Zirakpur. Similarl y docuementNo. 95 of Annexure A-1 dated 18.11.2005 containing details for purchases of five diamond rings of Rs. 1700/- was seized. The Bill No. 823 dated 18.11.2005 was issued by M/s Talwer Sons, jeweller in the name of M/s N.K. Sharma Enterprises (P) Ltd. During the course of search, at the residential premises of the directors, yet another document No. 99 of Annexure A-1 dated 19.11.2005 containing details of purchases of jewellery set of Rs. 48,000/- (weight 56.80 gms) was seized. The bill No. 3314 dated 19.11.2005 was issued by M/s Talwar Sons, Jewellers in the name of M/s N.K. Sharma Enterprises. The assessing officer issued a show cause notice to the assessee stating as to why Rs. 1,34,000/-, Rs. 1700/- and Rs. 48,000/- should not be added to the income treating the same as unexplained. The notice was properl y served on 4.9.2009 but the assessee did not file any repl y. In that view of the matter, the Assessing officer opined that assessee had purchased the above jewellery to make gift to someone and made payment from undisclosed sources; therefore, 3 the above said amount was treated as unexplained and was added to the total income of the assessee.
4. Aggrieved by the order of the Assessing officer, the assessee carried the matter in appeal before the C IT(A). Before the C IT(A), the assessee contended that the diamond pins were purchased by Shri Narinder Kumar Sharma, one of the directors of the assessee company on his personal account. It was also explained that Shri N.K.Sharma being at a good reputational post and being in the business of real estate for a long time, he is a known personalit y in the market Also, the name of the assessee company under consideration was on his name i.e M/s N.K. Enterprises, so sometimes the sellers mistakenl y issued the bills in the name of the assessee instead of Shri N.K. Sharma in his personal capacit y and vice versa. Accordingl y, it was contended that same is happened here to and the bills were found from the residential premises of the directors. It was also stated that the purchase of diamond pins is recorded in the personal cash book of Shri N.K.Sharma at page No.30. The C IT(A) forwarded the submissions of the assessee to the Assessing officer for his comments. After considering the remand report dated 9.8.2012 submitted by the Assessing officer, the C IT(A) held as under:-
"20. I have considered the basis of addition made by the AO and the of the AR on the issue. The Assessing Officer has rejected the explanation given by the appellant during appellate proceedings by making reference to the suspect nature of cash flow statement. I have already held in the case of the individual in this group of cases that the cash flow statement prepared by the appellant is based upon the bank deposits and withdrawals as well as various real estate transactions of purchases/sales/expenses and therefore could not be rejected on the ground that the same was an afterthought or created afresh. The said cash flow statement 4 is reflective of the events which are cross verifiable in terms of bank withdrawals/deposits an purchases/sales of immovable properties in the form of register deeds, The stance of the Assessing Officer that the same is not verifiable at this stage is hollow and devoid of any logic. , The purchase of jewellery which obviously should normally be in the hands of individual stands recorded in the personal cash book of Sh. N.K. Sharma and therefore no separate addition in the hands of company which has similar name could be made. The addition made is therefore directed to be deleted."
5. We have heard the rival submissions. From the above findings of the CIT(A), it is clear that jewellery in dispute was found recorded in the perosnal cash book of Shri N.K. Sharma and therefore, the Ld. C IT(A) has categoricall y held that no separate addition in the hands of the assessee company can be made. The Ld. C IT(A) observed that in the case of the individual in this group of cases, he had accepted cash flow statement prepared by the assessee was based upon the bank account deposits and withdrawals as well as various real estate transactions of purchases / sales. According to Ld. Counsel for the assessee, the cash flow statement clearl y revealed the events which were verifiable in terms of bank withdrawals /deposits. The Ld. CIT(A) concluded that the jewellery was found recorded in the personal cash book of Shri N.K. Sharma, and therefore, no separate addition can be made in the hands of the company. Considering the above facts, we do not see any infirmit y in the order of CIT(A) on this issue. We may also add here that there is nothing on record to to controvert the categorical findings given by the C IT(A) on this issue. Accordingl y, we uphold his order and reject ground No.1 of the appeal.
6. Ground Nos. 2 and 3 of the appeals read as under:-
2. That Ld. CIT(A) has erred both in law arid on facts in deleting the addition of Rs. 1,00,00,000/- made by the AO on 5 account of payment made to Sh. Jagdeep Singh from undisclosed sources as per specific finds given by the AO in the assessment order as under:
"Shri Yadwinder Sharma also enclosed with the affidavit the copy of cash book for 9-4-2005 showing cash in hand of Rs. 9295344/- to prove the availability of cash. If Sh. Yadwinder Sharma had given money through cheque then he would have enclose copy of the bank account showing bank balance and withdrawal during that period, therefore, the story of transaction by cheque cooked by the assessee is rejected and it is treated that Sh. Yadwinder Sharma paid Rs. 1 crore on behalf of the company in cash to Sh. Jagdeep Singh from undisclosed sources, therefore, added to the income. Copy of affidavit of Sh. Yadwinder Sharma enclosed as per Annexure 'A"'
3. That Ld. CIT(A) has erred both in law and on facts in deleting the additions by admitting the additional evidence at the appellate stage as per following reasons:
i. The AO objected to the admission of additional evidence at appellate stage u/s 46A of the Income Tax Rules.
ii. The Ld. CIT(A) has deleted the addition without allowing the AO to examine the correctness and genuineness of the additional evidence admitted by the Ld. CIT(A) though
7. Ground No. 2 of the appeal relates to deletion of addition of Rs. 1 crore made by the Assessing officer on account of payment made to Shri Jagdeep Singh form undisclosed sources. Vide ground No.3 of the appeal the Revenue has also challenged the action of the CIT(A) in deleting the addition by admitting additional evidence at the appellate stage. We will dispose off both the grounds of appeal, together in succeeding paragraphs. 6
8. The facts relating to this issue are that the Assessing officer made the addition of Rs. 1 crore on account of alleged payment to one Shri Jagdeep Singh by Shri Yadwinder Sharma on behalf of the assessee company. The Assessing officer relied on the affidavit of Shri Yadwinder Sharma filed on 27.3.2009 in the Court of Additional Civil Judge (Senior Division) Dera Bassi in the case of Sh Jagdeep Singh S/o Sh. Narindaer Singh Vs. Sh. Jagdish Arora and others. The affidavit submitted by Shri Yadwinder Sharma reads as under:-
"I, Yadwinder Sharma, aged about 35 years s/o Sh. Vishwanath Sharma R/o village Lohgarh, N.A.C. Zirakpur, Tehsil Dera Bassi, Distt. S.A.S. Nagar (Mohali) do hereby solemnly affirm and declare as under :-
1. That I am permanent resident of village Lohgarh, N.A.C Zirakpur, tehsil Dera Bassi, Distt. .A.S, Nagar (MohaJi) and I am engaged in the business of real estate in the area of Zirakpur and its adjoining areas.
2. That I am full time director of M/s N.K Sharma enterprises Ltd. & other companies of N.K Group of companies.
3.. That Narinder Kumar Sharma (N.K Sharma) is my real brother who is also full time director of aforesaid N.K group of companies who are engaged in the business of construction of Government approved colonies and flats. It is pertinent to mention here that we have already developed many full fledged colonies and government approved apartments and flats in the area of Zirakpur and DeraBassi.
4. That I know the plaintiff personally who is very good friend of mine and that of my brother N.K Sharma.
5 That in the last week of April 2005, plaintiff and approached me to give him amount of Rs. 10000000/- as the same was required by the plaintiff for purchasing land at village Bhabat from Jagdish Arora and others.7
6. That keeping in view our long relations and friendship I had paid Rs. 10000000/- in the last week of April, 2005 to plaintiff to enable him to get the sale deed executed-and registered from Jagdish Arora & Others regarding land situated at village Bhabat.
7. That aforesaid money of Rs. 10000000/- had been returned by the plaintiff to me in the first week of May, 2005 by saying that the same will be required by him within next month and plaintiff will take the same from me when Jagdish Arora and others will be ready to execute and register the sale deed in die name of plaintiff.
8. That said money was taken back by me from plaintiff with the promise that I will give the same to plaintiff as and when the same will be required by him for getting the sale deed executed and registered in his favour, but later on I came to know that the person i.e., Jagdish Arora and others with whom the plaintiff had entered into two agreements to purchase the land, have refused to execute and register the sale deed in the name of plaintiff.
9 The detailed account statement and balance sheet of M/s N.K. Sharma Enterprises Ltd. where I am the Director, as on 31-3-2005 and 31-3-2006 are Ex.P-3 and P4.1 identify my signatures on Ex. P-3 and 4 and I also identify the signatures of my brother N.K Sharma the other director in the company on Ex. P-3 and P4 and Ex. P-3 and P4 are correct as per Ihe original filed before the income tax department Ex. P-5 is income tax return and Ex. P-6 is also income tax return filed on line by our aforesaid company which is also correct as per the original. Ex.P-7 is the entry of cash book for the month of April 2005 which is also correct as per the original .
On the basis of above affidavit of Shri Yadwinder Sharma, the Assessing officer took the view that no transaction by cheque was made between Sh. Jagdeep Singh and Yadwinder Sharma. He further observed that from paras 6 & 7 of the affidavit, it is clear that Rs. 1 crore was paid to Shri Jagdeep Singh in cash in 8 the last week of April 2005 and returned in cash in first week of May 2005. The Assessing officer further noted that Shri Yadwinder Sharma also enclosed with the affidavit a copy of cash book for 9.4.2005 showing cash in hand of Rs. 92,95,344/- to prove the availabilit y of cash. According to the Assessing officer, if Shri Yadwinder Sharma had given money through cheque then he would have enclosed copy of the bank account showing bank balance and withdrawals during that period and, therefore, the Assessing officer rejected the contention of the assessee regarding transaction by cheque. Consequentl y, the Assessing officer held that Shri Yadwindear Sharma paid Rs. 1 crore on behalf of the company in cash to Shri Jagdeep Singh from undisclosed sources, therefore, the Assessing officer added a sum of Rs. 1 crore to the total income of the assessee.
9. On appeal, the C IT(A) deleted the addition, observing as under:-
"29. I have considered the basis of addition made by the AO and the arguments of the AR on the issue as well as the comments of the Assessing Officer in the remand report and of the appellant in the rejoinder. The issue whether any amount had been paid on behalf of the company to Sh. Jagdeep Singh has to be seen in the context of civil dispute between Sh. Jagdeep Singh and Sh. Jagdish Arora wherein Sh. Jagdish Arora had filed a suit before the additional civil judge, Dera Bassi to seek forfeiture of the amount he had received from Sh. Jagdeep Singh to the tune of Rs. 50 lacs in respect of a deal they had entered into to purchase land worth Rs. 3,75,00,000/-. Sh. Jagdeep Singh in his attempt to satisfy the civil court as to his capability of having sufficient resources to honour his part of the commitment in the deal to purchase the impugned real estate sought the help of his family friend Sh. Yadwinder Sharma who agreed and actually did file an affidavit wherein the availability of amount of Rs. 1 crore was agreed to be available for Sh. Jagdeep Singh. It is in this context that the copy of cash book of the appellant company as on 19/4/2005 had been filed as enclosure 9 of the affidavit by Sh. Yadwinder Sharma before the civil court. It meant that on the given date the company had sufficient cash balance as per the cash book to honour the cheque issued in favour of Sh. Jagdeep Singh to the tune of Rs. 1 crore. If the assessee had already paid cash to Sh. Jagdeep Singh as concluded by the Assessing Officer, then they would not have been any need to provide the copy of the cash book to the civil court and in that case the copy of the cash book would have incorporated the entry of withdrawal of Rs. 1 crore cash. The perusal of the affidavit of Sh. Yadwinder Sharma in its entirety makes it amply clear that it meant to support the case of Sh. Jagdeep Singh and no actual either in cash or in cheque had been made at all. Further it is pertinent to appreciate that the Assessing Officer during the course of assessment proceedings had recorded the statement of Sh. Jagdeep Singh with reference to this issue wherein Sh. Jagdeep Singh clearly stated that no amount was actually borrowed from the appellate company as the entire deal for the purchase of land when into civil dispute before the court. The specific question and answer on the issue as recorded by the Assessing Officer u/s 131 is reproduced as under:-
Q.6. A complaint has been received against you from Sh. Jagdish Arora in which he has stated that you have received a sum of Rs. 1 crore cash in month of April, 2005 from Sh. Yadwinder Sharma, which was returned by you in the month of May, 2005, what do you want to say in this regard?
Ans. Yes I had received a cheque of Rs. 1 crore from Mr. Yadwinder Sharma bearing cheque No. 133950 drawn on HDFC Bank, Zirakpur dated 25/4/2005 from M/s N.K. Sharma Enterprises (P) Ltd. Actually Sh. N.K. Sharma is my very close friend and we have the family relations with each other. The cheque as received by me was returned within 10 days to Sh. Yadwinder Sharma due to some dispute, registration of plot could not executed.
The perusal of proceedings conducted by the Assessing Officer in terms of enquiries done from Sh. Jagdish Singh make it clear that no consequential action was taken in the case of Sh. Jagdeep Singh as the alleged receipt and repayment of loan of Rs. 1 crore had not 10 actually taken place. This further lends credence to the claim of the appellant that no amount either in cash or in cheque had been paid to Sh. Jagdeep Singh. In the circumstances, the addition made by the Assessing Officer is directed to be deleted."
10. We have heard the Ld. Representatives of both the parties at length and have also perused the materials available on record. It is observed that during the appellate proceedings before the C IT(A), the assessee submitted copy of the statement made by Shri Jagdeep Singh in response to the summons issued to him by the Assessing officer u/s 131 of the Act. In this regard the assessee contended that it was prevented by sufficient cause from producing the copy of statemtent of Shri Jagdeep Singh due to paucit y of time since the assessment proceedings were taken up in November 2009 and the records were not traceable and accordingl y, the assessee requested the C IT(A) to admit the statement of Shri Jagdeep Singh recorded u/s 131 of the Act as an additional evidence under Rule 46 of the I.T. Rules, 1962. The Ld. C IT(A) forwarded the assessee's submissions and the statement of Shri Jagdeep Singh to the concerned Assessing officer for his comments. In compliance to the directions of the CIT(A), the Assessing officer submitted a remand report stating that the additional evidence may not be admitted. He further stated that the assessee has failed to explain the source of sum of Rs. 1 crore. Accordingl y, the Assessing officer asked the CIT(A) to uphold the addition of Rs. One crore. In our opinion, ground No.3 of the Revenue's appeal is without any merit and deserves to be rejected. There was no violation of Rule 46A of the I.T Rules, by the C IT(A). According to Ld. C IT(A), the assessee was prevented by sufficient cause from producing the statement of Shri Jagdeep Singh, recorded u/s 131 of the Act before the Assessing officer. At the same time, the C IT(A) has afforded an opportunit y of being heard to the Assessing officer. The submissions together with the additional evidence submitted by the assessee were sent to the Assessing officer 11 by CIT(A) for comments and after receiving the comments of the Assessing officer, the C ITa has adjudicated the issue in accordance with law. Accordingl y, ground No.3 of the appeal is rejected.
11. As regards ground No.2 of the appeal, the Ld. C IT(A) has correctl y observed that the issue whether any amount was paid on behalf of the company to Shri Jagdeep Singh has to be considered in the context of the pending civil litigation between Shri Jagdeep Singh and Shri Jagdish Arora. It is apparent from the records that Shri Jagadish Arora had filed a suit before the Additional Civil Judge, Derabassi to seek forfeiture of the amount which he had received from Shri Jagdeep Singh to the tune of Rs. 50 lakhs in respect of a deal they had entered into for purchase of land worth Rs. 3.75 crores. The contention of the assessee was that Shri Jagdeep Singh in his attempt to satisfy the Court regarding his capabilit y of having sufficient resources to honour his part of the commitment in the deal to purchase the propert y sought the help of his famil y friend Shri Yadwinder Sharma, one of the directors of the assessee company, who agreed and submitted an affidavit, wherein the availabilit y of an amount of Rs. 1 crore was shown for his friend Shri Jagdeep Singh. It is clear from the above narrated facts that Shri Yadwinder Sharma filed the affidavit before the Civil Court, Derabassi to support the case of Shri Jagdeep Singh. We full y agree with this observation of the C IT(A) that in fact no actual payment either in cash or in cheuqe had been made at all. In this regard, the statement of Shri Jagdeep Singh was recorded by the Assessing officer is relevant; wherein Shri Jagdeep Singh had categoricall y stated that no amount was actuall y borrowed from the assessee company as the entire deal for the purchase of land went into civil dispute before the Court. From the answer to Q.No.6 of the statement of Shri Jagdeep Singh, it is clear that no amount either in cash or cheque has been paid to Shri Jagdeep Singh. In fact, the cheque No. 133950 drawn on HDFC 12 bank, Zirakpur dated 25.4.2005 from assessee company was returned within 10 days to Shri Yadwinder Sharma. Thus, in view of the above discussion, we are of the view that the Ld. C IT(A) was fully justified in deleting the addition. We dismiss ground Nos. 2 & 3 of the appeal.
12. No other point was raised or argued before us.
13. In the result, the appeal is dismissed.
Order pronounced in the Open Court on 10.05.2016
Sd/- Sd/-
(RANO JAIN) (H.L.KARWA)
ACCOUNTANT MEMBER VICE PRESIDENT
Dated : 10 t h May, 2016
Rkk
Copy to:
1. The Appellant
2. The Respondent
3. The CIT
4. The CIT(A)
5. The DR