Income Tax Appellate Tribunal - Amritsar
Guru Nanak Milk Products , Ferozepur ... vs Deputy Commissioner Of Income Tax ... on 28 June, 2024
IN THE INCOME TAX APPELLATE TRIBUNAL
AMRITSAR BENCH, AMRITSAR
BEFORE DR. MITHA LAL MEENA, ACCOUNTANT MEMBER
AND SH. UDAYAN DAS GUPTA, JUDICIAL MEMBER
I.T.A. No. 10/Asr/2024
Assessment Year: 2015-16
Dy. Commissioner of VS. Guru Nanak Milk Products
Income-tax, Village Mallanwala,
Central Circle-1, Jalandhar Ferozepur (Punjab)
[PAN: AABFG1005G]
(Appellant) (Respondent)
Appellant by: Sh. Amit Jain, CIT DR.
Respondent by: Sh. Ashray Sarna, CA
I.T.A. No. 320/Asr/2023
Assessment Year: 2015-16
Gur Nanak Milk Products VS. Dy. Commissioner of
Village Mallanwal, Income Tax,
Ferozepur Cantt (Punjab) Central Circle-1, Jalandhar
[ PAN: AABFG1005G]
(Appellant) (Respondent)
Appellant by: Sh. Ashray Sarna, CA
Respondent by: Sh. Amit Jain, CIT DR.
Date of Hearing : 16.05.2024
Date of Pronouncement : 28.06.2024
ORDER
Per Dr. Mitha Lal Meena, AM:
These cross appeals are filed by the revenue and assesse against the order of the Ld. Commissioner of Income Tax, Ludhiana [in short "the CIT(A)"] which is arising from the assessment order passed by 2 I.T.A. No. 10/Asr/2024 I.T.A. No. 320/Asr/2023 Assessment Year: 2015-16 & Ors.
the Dy. Commissioner of Income Tax, Central Circle-1, Jalandhar (hereinafter referred to as "the AO") in respect of the Assessment Year 2015-16.
2. The department has taken the following grounds of appeal in I.T.A. No. 10/Asr/2024:
1. Whether on facts and circumstances of the case and in law, the Id. CIT(A) was justified in considering the unregistered sale agreement dated 30.03.2015 as genuine even though it was not found/ seized/ produced/ disclosed during the search proceedings on 11.02.2016 but the unregistered sale agreement was submitted by the assessee during the assessment proceedings, and therefore, it was on afterthought?
2. Whether on facts and circumstances of the case and in law, the Id. CIT(A) was justified in deleting the addition of Rs. 32.80 Cr. made by AO on account of cash deposits made in bank account of the assessee on 30.03.2015 and claimed to out of sale of land on the basis of unregistered sale agreement dated 30.03.2015 submitted by the assessee during the assessment proceedings, and which was not seized/produced/ disclosed during the search proceedings on 11.02.2016 and therefore, it was on afterthought?
3. Whether on facts and circumstances of the case and in law, the Id. CIT(A) was justified in deleting the addition of Rs. 32.80 Cr. made by AO on account of cash deposits made in bank account of the assessee on 30.03.2015, as the assessee failed to prove the genuineness of transaction of sale of land with M/S Bhagwati Lacto Vegetarian Exports Ltd.?
4. Whether on facts and circumstances of the case and in law, the Ids CIT(A) was justified in deleting the addition of Rs. 32.80 Cr. made by AO as the assessee failed to prove the source of Rs. 32.80 Cr. and genuineness of transaction and ignoring the decision of Hon'ble ITAT, Ahmedabad in the case of Pavan Kumar M. Sanghvi vs. ITO, {120171 3 I.T.A. No. 10/Asr/2024 I.T.A. No. 320/Asr/2023 Assessment Year: 2015-16 & Ors.
81 taxmann.com 30} which has been upheld by Gujarat High Court {120181 90 taxmann.com 386(Gujarat)} and appeal of the assessee has been dismissed by Supreme Court {120181 97 taxmann.com 398(SC)} wherein it is held that it is duty of assessee to prove genuineness of transaction?
5. Whether on facts and circumstances of the case and in law, the Id. CIT(A) was justified in deleting the addition of Rs. 32.80 Cr. made by AO on account of cash deposits made in bank account of the assessee on 30.03.2015 as the assessee failed to prove the source of seed money by way of transfer of Rs. 744 Cr. from bank account of M/S Bhagwati Lacto Vegetarian Exports Ltd. from Andhra Bank to its account in State Bank of Patiala?
6. The appellant craves omit or substitute any of the before or at the time of hearing of the appeal.
3. The sole issue challenged by the revenue, in multiple grounds is regarding the source of disputed cash deposit Rs. 32.80 Cr. made by AO on account of cash deposits, in bank account of the assessee on 30.03.2015.
4. Briefly the facts are that during the course of assessment proceeding, the AO was asked assessee to explain the source of cash deposit of Rs. 32.80 Crore in its bank account maintained with State Bank of Patiala (now SBI, Ferozepur). In response, the assessee submitted before the AO that assessee company was entered into an agreement of sale of property measuring 5 Acre, near village Ballo Majra, Tehsil-kharar for a consideration of Rs. 45.00 crore with M/S Bhagwati Lacto Vegetarian Exports P. Ltd. (hereinafter referred as M/S 4 I.T.A. No. 10/Asr/2024 I.T.A. No. 320/Asr/2023 Assessment Year: 2015-16 & Ors.
BLVE) and against the siad agreement assessee firm received Rs. 34.00 Crore in advance during the year under consideration and deposited the same in its bank account and also disclosed the same in the Audited Books of Accounts. However, the AO being not satisfied with the reply of the assessee, made the addition of Rs. 32.80 Cr. on account of cash deposits made in bank account of the assessee on 30.03.2015 to the return income of the assessee.
5. Being aggrieved with the assessment order, the assesse filed appeal before the learned CIT appeal who has granted relief to the assessee while adjudicating ground no. 3 by observing as under:
"5.3 Ground of Appeal No. 3: In this ground, the AR has contested the addition of Rs. 32,80,00,000/- on account of deposits represent sale proceed of the property after withdrawing cash from the same bank account on same day. The AR during the course of appellate proceedings has submitted that during the course of assessment proceeding, assessee firm was asked for the source of cash deposit of Rs. 32.80 Crore in its bank account maintained with State Bank of Patiala (now SBI, Ferozepur). As per AR, during the year under consideration assessee company was entered into an agreement of sale of property measuring 5 Acre, near Village Ballo Majra, Tehsil Kharar for a consideration of Rs. 45.00 crore with M/S Bhagwati Lacto Vegetarian Exports Pvt. Ltd. and against this agreement assessee firm received Rs. 34.00 Crore in advance and deposited the same in its bank account. The AR further stated that the information was called from bank regarding time of deposit and withdrawal and the bank furnished its submission, 5 I.T.A. No. 10/Asr/2024 I.T.A. No. 320/Asr/2023 Assessment Year: 2015-16 & Ors.
wherein it is represented that cash was deposit between 10.39.34 AM to 11.59.13 AM and withdrawal in the bank account of M/S BLVE was made on 30.03.2015 between 12.24.25pm to 13.49.45pm and as per the AR, the AO by relying upon this wrong facts framed assessment against assessee firm by making such a huge addition in the hands of assessee firm. Further, the AR furnished the information supplied by bank to the AO vide letter dated 13.10.2017 and 16.10.2017, wherein detail of cash deposit and withdrawal is provided, and extract of few transactions are given herein below:
Cash deposit Cash withdrawal Acct. No. Txn date JRNL NO Amt CHE UE NO Time 65041938456 03/30/15 1023705 9500000 613947 65041938456 03/30/15 1027768 9300000 613948 65041938456 03/30/15 1031071 9200000 613949 5.3.1 Further, during the course of the AR submitted from the tabular chart that, it is borne out that Bank cashier has counted the cash amointing to Rs. 2.40 Cr. Within 11 sec. only as on 10:39:34:72 amounting to Rs. 80,00,000/- and within 6 second i.e. 10:39:40:48 the cashier of bank counted the cash amounting to 6 I.T.A. No. 10/Asr/2024 I.T.A. No. 320/Asr/2023 Assessment Year: 2015-16 & Ors.
Rs. 85,00,000/-and deposited the same in the bank account and further in 5 seconds i.e. on 10:39:45:49 the cashier of bank counted the cash amounting to Rs. 75,00,000/- and deposited the same in the bank account of assessee firm. Further, as per AR, all the deposit and withdrawals are similar to the above tabulated transactions. Therefore, as per the AR, it is a surprising fact that how it is possible in a small branch a cashier can count a huge amount within 5 to 6 seconds and this is humanly or even electronically not possible.
5.3.2 The AR further submitted that his act of bank proves beyond any doubt that bank data operator/clerk put up the entries as per his convenience because both the bank account i.e. of assessee and of M/S BLVE were in the same branch and they neither make any withdrawal or counted the cash. Also, as per AR, the cashier/clerk of the bank put deposit entries first and then make withdrawal entries, which also put in seconds and it proved beyond any doubt that it is not possible for any human being to count the huge amount of cash in seconds or milli seconds. The AR also held that on the date 30.03.2015, when the impugned transaction was transacted, there was a heavy rush in bank due to closings and also due to last date of income tax returns, so number of challans were pending with the staff. Also, as per the AR, that the staff of bank put the entries in bank account of M/S GNMP and M/S BLVE as per his/her convenience because both accounts were maintained in the same branch. 5.3.3 Further, the AR stated that the AO admitted this fact that assessee entered into an agreement for sale of land and registration deed of said land to prove the ownership of assessee has already been filed on record and as per AR also, the AO stated that deal was still pending and final sale deed has not been executed which as per AR, proves that the agreement of sale of land and receipt of advance in cash is a made-up story since no prudent businessman will hand over the substantial amount of Rs, 34 Crore as advance without getting ownership title transferred in its name for years and there would and should have been some purpose for giving the money and in the present case money was given for purchase of property. Also, the AR furnished the copies of Affidavit of Seller, Purchaser and Witnesses. Also, as per the AR, this is not an essential condition that if both the parties of agreement have their account in same branch so, they must have to opt any other mode of transaction like bank transfer or cheque. 5.3.4 Also, the AR stated that assessment for the year under consideration has also been framed in the case of M/S Bhagwati Lacto 7 I.T.A. No. 10/Asr/2024 I.T.A. No. 320/Asr/2023 Assessment Year: 2015-16 & Ors.
Vegetarian Exports Pvt. (BLVE), wherein the same AO considered all the facts and no adverse inference drawn by him. Further, during the course of appellate proceedings, the AR stated that one Sh. Suraj Kumar an employee of the company who went to bank to do this transaction has confirmed the fact that both the transactions were carried out by him and it is also proved from the information supplied by the bank to the AO u/s 133(6) of the Act, wherein signature of Suraj Kumar is bear on deposits it and withdrawal and the same fact is also reflected in last para of page 7 of the assessment order. As per AR, M/S Bhagwati Lacto Vegetarian Exports Pvt. Ltd. was having sufficient funds to withdrawal in the bank account and after making withdrawal the same has been paid to assessee, Further, as per AR, this is not a case where cash was introduced from outside or some transaction or entry is made from outside but this is a case where cash deposits were made against the cash withdrawals in the same bank on the same date, which is supported by agreement.
5.3.5 Decision 5,3.5.1 I have considered the assessment order, the submissions of the appellant along with the documents filed by the AR and remand report submitted by the AO during remand proceedings. The undisputed fact in this case are that in the bank account of the assessee, there were large number of entries of cash deposits on 30.032015 and which as per AO are unaccounted money from undisclosed sources of the assessee. Thus, the basic question, which goes to the very root of the matter, ts that whether there was actual physical movement of cash i.e. withdrawal from one account and deposit into another account and secondly whether the deposits were prior to the withdrawals. To decide these aspects following important facts needs to be discussed:
(a) Both the bank accounts are in the same branch of bank. Therefore, as such there was no need to physically transfer the money.
(b) There was sufficient cash balance in the bank account of the entity from where the cash was withdrawn and deposited into appellant's bank account.
(c) Both the entities are part of same group, and such there is no introduction of any money/cash from outside.
(d) Statement of the branch manager was recorded by the AO. In this statement, the bank manager of the branch has also accepted this fact -
that there is no movement of cash. He has mentioned that although the 8 I.T.A. No. 10/Asr/2024 I.T.A. No. 320/Asr/2023 Assessment Year: 2015-16 & Ors.
#1me stamp as per the bank record is correct, but due to heavy rush in bank on 30th and 31 st March, there was no physical movement of cash. In the statement of Bank manager, he also clarified the fact that the entries were post as per the convenience of their staff as there were heavy rush in the bank being the closing date of Financial Year
(e) The Branch Manager also stated that the branch, where these transactions were happened, is a very small bank having only 7 employees.
(f) The statement of Sh. Suraj Kumar who was one of the company's employees, who went to carry out these transactions was also recorded by the AO during remand proceedings. He has confirmed the fact that the transactions were carried by him, and same information was provided by the bank to the AO u/s 133(6) of the Act, wherein signature of Suraj Kumar is bear on deposit and withdrawal. He also stated that there was no physical movement of cash.
(g) During appellate proceedings, the appellant has also argued that it is also a fact that the note counting machine can count approximately 1000 notes which means that if there is Rsv 1000/- note (which was the highest denomination at that time), then the machine could have been counted around Rs. 10,00,000/- (Rs. 1000 X 1000 notes) in one minute. In that way also, it is not possible that the note counting machine counted the amount of Rs. 70 to Rs. 80 lacs in one just only 5-10 second which is not possible for human and for the machine.
(h) Another very important aspect is that, as admitted by the Bank Manager in his statement on oath that the branch is very small having only 7 employees. As per prevalent banking system, each branch maintains certain minimum level of cash with it. Whenever there is requirement of large cash withdrawal, it must be intimated to the bank in advance, so that cash can be arranged. This availability of cash depends on the size of branch. Therefore, for such a small branch having only 7 employees, having availability of Rs. 32 crores cash is apparently very probable.
(i) The AR has also explained the nature of transaction with the documentary evidences and the affidavits of the concerned persons, which has not been doubted by the AO as well.
9
I.T.A. No. 10/Asr/2024 I.T.A. No. 320/Asr/2023 Assessment Year: 2015-16 & Ors.
5.3.5.2 Therefore, from the above said facts and document or record, the AR has built up his case for the source of cash deposits. On the other hand, the AO the made the addition on the basic of time stamp of the transaction in the bank. This the timing certificate issued by the bank which has been rebutted by the bank manager himself during remand proceedings. Therefore, as such the addition made by the AO falls under the category of assumptions. In this regard, the reliance is being placed on following judgments:
The Hon'ble Supreme Court of India in the case of Omar Salay Mohamed Sait vs. Commissioner of Income-tax reported at [1959] 37 ITR 151 held as under:-
"Section 254 of the Income-tax Act, 1961 - Appellate Tribunal - Order of Assessment year 1948-49 - Whether Tribunal should not base its findings on suspicions, conjectures, or surmises nor should it act on evidence at all or on proper rejection of material and relevant evidence or partly on evidence and suspicions, conjectures or surmises and if it does anything of that sort, its finding even though on questions of fact, will be liable to be set aside by - Held, yes"
The Hon'ble Supreme Court in the case of Dhakeshwari Cotton Mills . CIT reported at 26 ITR 151 775 held as under:
"When making an assessment u/s 143(3), the AO is not entitled to make a pure guess without any evidence or material at all, Reliance is also placed on the following judgments:
International Forest co, vs. CIT [1975] 101 ITR 721 (J&K), Mohammad Hayet vs. CIT 5 ITC 159 Gunda Subbayya vs. CIT 7 ITR 21 28 (Mad.) (FB) Radhaylal vs. CIT 4 ITC 454 Binjraj vs. CIT 5 ITC 303 10 I.T.A. No. 10/Asr/2024 I.T.A. No. 320/Asr/2023 Assessment Year: 2015-16 & Ors.
Dhunichand vs. CIT 2 ITC 188 Mrs. Hirabai D. Desai & sons vs. CIT [1936] 4 ITR 95 (Bom.) A. S. Sivan Pillai vs. CIT [1958) 34 ITR 328 (Mad.) Commissioner of Agricultural Income Tax v s. M J Cherian [1979) 117 ITR 371 (Ker.) Messrs. Laichand Bhagat Ambical Ram vs. CIT [19591 37 ITR 288 (SC)/1959 AIR 295, 1960 SCR (1) 301.
5.3.5.3 In view of above discussion and stated legal position, I agree with submission of the appellant. it is therefore held that the cash deposited in the appellant's bank account CIA no. 55012501653 with then SBOP, Ferozepur was from. the bank account 65041938456 of M/S Bhagwati Lacto Vegetarian Exports P. Ltd. Therefore, the source of cash deposit in its bank account is explained/disclosed. Under the facts & circumstances of the case, the addition made by the AO is therefore deleted.
Accordingly, this ground of appeal is allowed. 5.4 Ground of Appeal No. 4: In this ground, the AR has contested the addition of*Rs. 13,25,119/- on account of income earned from unaccounted sales amounting to Rs. 32,80,00,000/-. "
6. The Ld. CIT(DR) for the revenue supported the assessment order. He submitted that the Id. CIT(A) was not justified in considering the unregistered sale agreement dated 30.03.2015 as genuine even though it was not found/seized/produced/disclosed during the search proceedings on 11.02.2016 but the unregistered sale agreement was submitted by the assessee during the assessment proceedings, and therefore, it was on afterthought; that the Id. CIT(A) was not justified in law and on facts in deleting the addition of Rs. 32.80 Cr. made by AO 11 I.T.A. No. 10/Asr/2024 I.T.A. No. 320/Asr/2023 Assessment Year: 2015-16 & Ors.
on account of cash deposits made in bank account of the assessee on 30.03.2015 and claimed to be out of sale of land on the basis of unregistered sale agreement dated 30.03.2015 submitted by the assessee during the assessment proceedings, and which was not seized/produced/disclosed during the search proceedings on 11.02.2016 and therefore, it was on afterthought; that the addition of Rs. 32.80 Cr. made by AO on account of cash deposits made in bank account of the assessee on 30.03.2015, as the assessee failed to prove the genuineness of transaction of sale of land with M/S Bhagwati Lacto Vegetarian Exports Ltd; that the assessee failed to prove the source of Rs. 32.80 Cr. and genuineness of transaction and ignoring the decision of Hon'ble ITAT, Ahmedabad in the case of Pavan Kumar M. Sanghvi vs. ITO, {120171 81 taxmann.com 30} which has been upheld by Gujarat High Court {120181 90 taxmann.com 386(Gujarat)} and appeal of the assessee has been dismissed by Supreme Court {120181 97 taxmann.com 398(SC)} wherein it is held that it is duty of assessee to prove genuineness of transaction and that the Id. CIT(A) was justified in deleting the addition of Rs. 32.80 Cr. made by AO on account of cash deposits made in bank account of the assessee on 30.03.2015 as the assessee failed to prove the source of seed money by way of transfer of 12 I.T.A. No. 10/Asr/2024 I.T.A. No. 320/Asr/2023 Assessment Year: 2015-16 & Ors.
Rs. 744 Cr. from bank account of M/S Bhagwati Lacto Vegetarian Exports Ltd. from Andhra Bank to its account in State Bank of Patiala?
7. Per contra, the defendant, ld. Counsel for the assessee that during the course of assessment proceeding, assessee has explained the source of cash deposit of Rs. 32.80 Crore in its bank account maintained with State Bank of Patiala (now SBI, Ferozpur) as the said was out of sale consideration duly supported with an agreement of sale of property measuring 5 Acre, near village ballo majra, tehsil kharar for a consideration of Rs. 45.00 crore with M/S Bhagwati Lacto Vegetarian Exports P. Ltd. (hereinafter referred as M/S BLVE) and against the said agreement assessee has received Rs. 34.00 Crore in advance and deposited the same in its bank account and duly disclosed the same in the Audited Books of Accounts while filing the return of income. He argued that the addition made by the Ld. Assessing Officer was based on presumption without examining the bank statement relevant, with reference to volume of cash and time given of few minutes used for the said disputed cash deposit. He argued that it is humanly not possible in a small branch for a cashier to count a huge amount of cash of 32.80 Crs. within 5 to 6 seconds and which is even electronically not possible. This act of bank prove beyond any doubt that bank data operator/clerk put up 13 I.T.A. No. 10/Asr/2024 I.T.A. No. 320/Asr/2023 Assessment Year: 2015-16 & Ors.
the entries as per his convenience because both the bank account i.e. of assessee and of M/s BLVE were in the same branch and they neither make any withdrawal or counted the cash. The cashier/clerk of the bank put deposit entries first and then make withdrawal entries, which also put in seconds and it proved beyond any doubt that it is not possible for any human being to count the huge amount of cash in seconds or mili seconds.
7.1 The Ld. AR filed a copy of bank certificate (APB, Pgs. 4) wherein it has confirmed the facts that the impugned transaction was transacted on 30.03.2015, a day of heavy rush in bank due to closings and last date of income tax returns, so number of challans were pending with the staff to put the entries in bank account of M/S GNMP and M/s BLVE as per its convenience because both accounts were maintained in the same branch and that the cash was deposited in the bank account no.55012501653 of M/S GNMP after making withdrawal in M/S BLVE bank account 110.65041938456.
7.2 Further, the Ld.AR drawn attention to the fact that the aforesaid transaction Rs.34,00,00,000/- was duly disclosed in the Audited books of Accounts as per Balance Sheet (APB, Pgs. 2-14) that established the fact that it is a genuine transaction disclosed in books of accounts much 14 I.T.A. No. 10/Asr/2024 I.T.A. No. 320/Asr/2023 Assessment Year: 2015-16 & Ors.
before the search u/s 132 of the Act and therefore, it can not be said to be a made up story.
7.3 The Ld. AR brought to our notice the facts that assessment has also been framed in the case of M/S Bhagwati Lacto Vegetarian Exports Pvt. Ltd. (BLVE), for the year under consideration wherein the same Ld. AO considered all the identical facts and evidences where no adverse inference are drawn by him. The Ld. AO accepted the same agreement of sale of land and no addition was made in the hands of company APB, Pgs. 41-43).
7.4 The AO during the course of remand proceedings, issued summons u/s 131(1) of the Income Tax Act, 1961, to the persons, who were parties to the agreement dated 30.03.2015 for sale of land between M/S Guru Nanak Milk Products and M/S Bhagwati Lacto Vegetarian Exports Pvt.Ltd and also to the persons who filed affidavits in order to verify the genuineness of the claim made by the assessee during appellate proceedings and the AO could not controvert the evidence filed by the assessee on record. From the statement of Sh. Gurmeet Singh, it is evident that the cash deposited in the bank account of the assessee firm by the employee of M/S Bhagwati Lacto Vegetarian Exports Pvt. Ltd. was on account of sale of land situated at Village Ballo Majra by the 15 I.T.A. No. 10/Asr/2024 I.T.A. No. 320/Asr/2023 Assessment Year: 2015-16 & Ors.
assessee company to M/S Bhagwati Lacto Vegetarian Exports. b. That no physical cash was involved in the transaction since it was not possible to count huge cash in such time as mentioned in the letter. In the remand proceeding, the bank manager stated that no cash was involved, for the reason that the bank accounts of both the firm/company were in the same bank branch, so there was no need of actual movement of cash, since the funds were to be actually transferred from one bank account to another within the same branch, without the actual involvement of cash. Thus, it is concluded from the statement of Sh. Sudhanshu Kumar, i.e. Branch Manager, that the certificate given by bank with respect to timing of cash deposit and cash withdrawal is totally incorrect as it is not possible to count huge cash in such time frame.
8. We have heard both the sides, perused the material on record, impugned order, assessment order, written submission and case law cited. Admittedly, the disputed transaction of cash deposit of Rs.34,00,00,000/- was duly disclosed in the Audited books of Accounts as per Balance Sheet (APB, Pgs. 2-14) from the sale of land which clearly established the fact that it is a genuine transaction disclosed in 16 I.T.A. No. 10/Asr/2024 I.T.A. No. 320/Asr/2023 Assessment Year: 2015-16 & Ors.
books of accounts much before the search u/s 132 of the Act. The Ld. AO or the Ld. CIT(DR) has failed to controvert the contention of the defendant assessee despite the department was granted opportunity by way of remand report during the appellate proceedings before the CIT(A) and in the present proceedings by the Tribunal.
9. From the record, it is evident that Sh. Gurmeet Singh, in his statement has categorically admitted and explained that the disputed cash was deposited in the bank account of the assessee by the employee of M/S Bhagwati Lacto Vegetarian Exports Pvt. Ltd. on account of sale of land situated at Village Ballo Majra by the assessee company to M/S Bhagwati Lacto Vegetarian Exports and that there was no physical cash transaction since it was not possible to count huge cash in such short time as mentioned in the letter. In the remand proceeding, further the bank manager stated that no cash was transaction was involved, for the reason that the bank accounts of both the firm/company were in the same bank branch, so there was no need of actual movement of cash, since the funds were to be actually transferred from one bank account to another within the same branch, without the actual involvement of cash. Thus, it can be logically concluded from the statement of Sh. Sudhanshu 17 I.T.A. No. 10/Asr/2024 I.T.A. No. 320/Asr/2023 Assessment Year: 2015-16 & Ors.
Kumar, i.e. Branch Manager, that the certificate given by bank with respect to timing of cash deposit and cash withdrawal is factually incorrect as it is not possible to count huge cash in such time of few minutes.
10. In the present case, the AO has made addition purely on presumption and guess basis. It is settled principle of law that while making an assessment u/s 143(3), the AO is not entitled to make a pure guess without any evidence or material at all on record. In view of that matter, we find no infirmity or perversity in the decision of the ld. CIT(A) in deleting the addition of Rs. 32.80 Cr.
11. Accordingly, we find no merit and substance in the ground of the department and therefore, the order of the CIT(A) is upheld on the issue of deleting the addition of Rs. 31.80 Cr.
12. The appellant assessee has raised the following grounds of appeal in I.T.A. No. 320/Asr/2023:
1. That the order passed by the Hon'ble CIT (A) dated 18.10.2023 is against the law and facts of the ease.
2. That having regard to the facts and circumstances of the case, Hon'ble CIT(A) has erred in law and on facts in confirming the action of Ld. AO in assuming jurisdiction and framing the impugned assessment order u/s 153C/143(3) of the Act which is bad in law and against the facts and circumstances of the case and is not sustainable on various legal and factual grounds.18
I.T.A. No. 10/Asr/2024 I.T.A. No. 320/Asr/2023 Assessment Year: 2015-16 & Ors.
3. That having regard to the facts and circumstances of the case, Hon'ble CIT(A) has erred in law and on facts in confirming the action of Ld. Assessing Officer in making an addition of Rs. 60.20,750/- on account of disallowance of interest paid on CC account, without considering the facts of the case and without observing the principles of natural justice.
4. That having regard to the facts and circumstances of the case, Hon'ble CIT(A) has erred in law and on facts in confirming the action of Ld. Assessing Officer in making an addition of Rs. 1,76,57,729/- without considering the facts of the case and without observing the principles of natural justice.
5. That having regard to the facts and circumstances of the case, Hon'ble CIT(A) has erred in law and on facts in eonlirtning the action of Ld. Assessing Officer in making an addition of Rs. 13,25,1 19/- on account of income earned from unaccounted sales, without considering the facts of the case and without observing the principles of natural justice.
6. That the appellant craves the leave to add, modify, amend or delete any of the grounds of appeal at the time of hearing and all the above grounds are without prejudice to each other.
13. In ground no. 3, the appellant assessee has challenged that the Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. Assessing Officer in making an addition of Rs. 60.20,750/- on account of disallowance of interest paid on CC account, without considering the facts of the case and without observing the principles of natural justice. 13.1 Having heard both the sides and perusal of record, we find that Ld AO disallowed the interest expense claimed by assessee by observing that major part of funds remained invested in the immovable 19 I.T.A. No. 10/Asr/2024 I.T.A. No. 320/Asr/2023 Assessment Year: 2015-16 & Ors.
properties (as investment but disclosed under the head debtors) and share of other companies and not in the productive assets related to assessee's business. Therefore, even if claim of any additional expense in proceedings u/s 153C of the Act had been allowable, and unclaimed interest on CC limit was required to capitalized as cost of acquisition of immovable properties or shares. Keeping in view of these facts, the assessee claims not found in order and hence, rejected claim of interest expenses was restricted to the original claim of Rs. 23,94,258/- and fresh additional claim of Rs 60,20, 750/- was disallowed. The CIT(A) confirmed the finding of the AO.
13.2 The Ld. AR submitted that in assessee's own case for the Assessment Year 2016-17, similar addition was made bythe AO and later confirmed by the CIT(A) but this issue was decided in favour of assessee by the Hon'ble ITAT Amritsar in ITA no.132/Asr/2022 vide order dtd. 09.11.2023 in which it was held as under:
"We heard the revenue's submission, peruse the orders of venue authorities and consider the documents available in the record.
Related to ground no., the assessee already placed that the activities of the assessee are more requirement of lands for 20 I.T.A. No. 10/Asr/2024 I.T.A. No. 320/Asr/2023 Assessment Year: 2015-16 & Ors.
maintaining the livestock, chilling of milk, distribution. All are related to business, Further, the opening and closing balance of cash credit limit does not reveal that there is no use funds of the assessee. The Id AR relied on the order of Hon'ble Apex Court in the case of Vardhman Polytex Ltd. v. Commissioner of Income-
tax[2012] 25 taxmann.com 281 (SC), the relevant paragraphs are reproduced as below:-
"The question which arises for determination in these civil appeals filed y the assessee is as follows:
Whether interest paid in respect of borrowings for acquisition of capital assets not put to use in the concerned financial year can be permitted allowable deduction under section 36(1)(iii) of the Income-tax Act, 1961?
This question has been answered in favour of the assessee.
In the case of CIT v. Core Health care Ltd [2008] 298112194/167 206 (SC). Consequently, the civil appeals filed by the assessee are allowed with no order as to costs. "21
I.T.A. No. 10/Asr/2024 I.T.A. No. 320/Asr/2023 Assessment Year: 2015-16 & Ors.
We respectfully relied on the order of Vardhmgn Polytex Ltd. (supra). The disallowance of50% interest has no basis. The funds used purely business purposes. The Id DR was not able to submit any contrary judgment against the assessee. So, the appeal or related this issue is setting aside. We quash the addition amount to Rs. , the ground no. 4 is allowed "
13.3 In the present case, the funds remained invested in the immovable properties and share of other companies i.e. in the business of the assessee meaning thereby that the discloser of the said funds as investment under the head debtors will not debar the appellant from the claim of interest expenses on the same as the investment was in the productive assets related to assessee's business. Following the Coordinate Bench (Supra), decision in the assessee's own case on similar facts, the addition made by the AO is liable to be deleted.
13.4 Accordingly, we hold that the decision of the CIT(A) on the issue of claim of interest is infirm and perverse to the facts on record and the as such, the addition of Rs 60,20, 750/- is deleted. The ground 3 of the assessee is allowed.22
I.T.A. No. 10/Asr/2024 I.T.A. No. 320/Asr/2023 Assessment Year: 2015-16 & Ors.
14. In ground no.4, the appellant challenged that the Hon'ble CIT(A) has erred in law and on facts in confirming an addition of Rs.
1,76,57,729/- based on the presumption without considering the facts of the case.
14.1 The Ld. CIT(A) has observed that the annexure A-I containing details of loan and interest, and the AO has computed the amount pertaining to the Assessment Year 2016-17 with balance amount of Rs.4,76,57,729/- pertain to assessment year under consideration i.e 2015-16. At the same time, however, the AO has not made a separate addition on this issue, as he has already made addition on account of unexplained cash deposit. The Ld. CIT further observed that the AO held that part of this cash was generated on account of the unaccounted profit arising out of trading receipts based on this document. The Ld. CIT(A) has considered the submission of the appellant, that these amounts also represent unaccounted business turnover, is acceptable but not agreed by stating that the AO has clearly mentioned in the assessment order about the nature of these entries that these are loan entries by the partner of appellant firm from whose possession, this annexure was seized. Accordingly, he finds no force in the argument of the appellant that these are also entries of unaccounted sale, as in annexure A-2 23 I.T.A. No. 10/Asr/2024 I.T.A. No. 320/Asr/2023 Assessment Year: 2015-16 & Ors.
without controverting the contention of the appellant with supporting corroborative documentary evidence on record. 14.2 The Ld. AR submitted that CIT(A) has erred in law and on facts in confirming an addition of Rs. 1,76,57,729/- without appreciating the facts of the case that the total receipts as per A-2 amounts Rs.6,45,07,729/-, out of which part receipt pertain to the AY 2016-17 and remaining amount of Rs. 4,76,57,729/- pertain to Assessment Year under consideration. The Ld. CIT(A) had allowed the benefit ofRs.3,00,00,000/- (being amount surrendered during search declared in the Audited balance sheet) and confirmed the addition of Rs.1 76,56,729/- (Rs. 4,76,57,729- Rs.3,00,00,000) without considering the facts of the case regarding sale receipt although he has confirmed the profit percentage on the same sale receipts. Meaning thereby that the Ld. CIT(A) has accepted the facts of sale receipt amounting to Rs. 4,76,57,729/- computed as per Annexure A-2.
14.3 It is noted that the observation of the Ld. CIT(A) regarding the alleged entries in the names of a number of persons, indicating the amounts mostly received in cash on interest, with interest rate mentioned in each account and details of periodical payment of interest are 24 I.T.A. No. 10/Asr/2024 I.T.A. No. 320/Asr/2023 Assessment Year: 2015-16 & Ors.
examined by the AO and accepted as covered with the cash deposit in the bank account of the appellant assessee and that the AO has appropriately charged gross profit rate on unaccounted sales receipts of Rs.3,45,98,421/-. In view of that matter, the Ld. CIT(A) decision is held to be based on presumption that no profit rate can be applied on these trading receipts/entries amounting toRs.3,45,98,421/-and therefore, confirming the addition of Rs.1,76,57,729/- out of Rs.3,45,98,421/- is not justified. The Ld. CIT(A) ought to have controverted the contention of the appellant regarding trading receipts by bringing corroborative documentary evidence on record to disprove its claim in respect of sale receipts as per annexure A-1 and A-2.
14.4 From the record, it is evident that the Ld. CIT has allowed benefit of voluntary disclosure of Rs.3,00,00,000/- made by the assessee during search proceedings but he has ignored to consider the amount of sale receipts found as per Annexure A- 2, to the extent of Rs.3,45,98,421/- although on the same sale receipts, addition of gross profit has already been confirmed by the Ld. CIT(A) appeal (Pg. number 55 of the impugned order). The observation of the ld. CIT(A) is self-contradictory as firstly, he has confirmed the Profit percentage on the trade/sale receipts Rs.3,45,98,421 and secondly, he is disputing the same receipts 25 I.T.A. No. 10/Asr/2024 I.T.A. No. 320/Asr/2023 Assessment Year: 2015-16 & Ors.
as unexplained loan and interest entire which is illogically concluded against the principles of accounting and against the interest of justice. Thus, in our view, the funds available were explained by the appellant in the manner that Rs.3,00,00,000/- was discloser made at the time of the search and Rs.3,45,98,421 being sale receipts as per annexure A- 2, duly declared in the audited balance sheet where specific percentage profit has been applied and accepted by the AO and the Ld. CIT(A) as well.
14.5 In view of that matter, we are of the considered view that the finding of the Ld. CIT(A) in confirming separate addition of Rs.1,76,56,729/-is infirm and perverse to the facts on record as the entire sale receipts Rs.3,45,98,421/-as per A-2 stands explained. Thus, the ground 4 of the appeal is allowed.
14.6 In the above view, we hold that the decision of the Ld. CIT(A) in confirming the addition of Rs. 1,76,00,000/- in perverse to the facts on record and as such, same is deleted. Thus, the ground 4 of the assesse is allowed.
15. Since the assessee gets relief in quantum, and hence legal issues are rendered academic. Thus, do not require adjudication. 26
I.T.A. No. 10/Asr/2024 I.T.A. No. 320/Asr/2023 Assessment Year: 2015-16 & Ors.
16. In the result, the revenue appeal in I.T.A. No. 10/Asr/2024 is dismissed and the assessee appeal in I.T.A. No. 320/Asr/2023 is allowed.
Order pronounced in the open court on 28 /06/2024 Sd/- Sd/-
(Udayan Das Gupta) (Dr. Mitha Lal Meena)
Judicial Member Accountant Member
Copy of the order forwarded to :
(1) The Appellant
(2) The Respondent
(3) The CIT
(4) The DR, I.T.A.T.
True Copy
By Order