Income Tax Appellate Tribunal - Jaipur
Spc Infrastructures Pvt. Ltd., C-74, ... vs Dcit, Circle-4, Room No.212, Ncrb, ... on 15 November, 2019
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IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCH 'B', JAIPUR
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BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM
vk;dj vihy la-@ITA No. 325/JP/2019
fu/kZkj.k o"kZ@Assessment Years : 2010-11.
M/s. SPC Infrastructures P. Ltd., cuke The DCIT,
C-74, Amba Bari, Vs. Circle-4,
Jaipur. Jaipur.
LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No. AAFCS 8079 K
vihykFkhZ@Appellant izR;FkhZ@Respondent
fu/kZkfjrh dh vksj ls@Assessee by : Shri Mukesh Khandelwal (CA)
jktLo dh vksj ls@ Revenue by : Smt. Runi Pal (JCIT)
lquokbZ dh rkjh[k@ Date of Hearing : 14.11.2019.
?kks"k.kk dh rkjh[k@ Date of Pronouncement : 15/11.2019.
vkns'k@ ORDER
PER VIJAY PAL RAO, J.M.
This appeal by the assessee is directed against the order dated 29.01.2019 of ld. CIT (A) Ajmer for the assessment year 2010-11. The assessee has raised the following grounds of appeal :-
"1. That the ld. CIT (A) has erred in law and on facts in sustaining the order of the ld. AO as valid by ignoring the vital fact that the ld.AO had passed the order without meeting the objections of the appellant raised against proceedings u/s 148, through a speaking order as per the theory enunciated by the Hon'ble SC in the case of GKN Driveshaft India Ltd. (259 ITR 19).
2. Without prejudice to ground no. 1, the ld. CIT (A) has erred in law and on facts in sustaining the addition of Rs. 7.73,080/- made by the ld. AO on the basis of 5 loose papers impounded 2 ITA No. 325/JP/2019 M/s. SPC Infrastructures Pvt. Ltd., Jaipur.
during the course of survey proceedings undertaken against the appellant without properly appreciating the contents of such papers.
Ground No. 1 is regarding the validity of initiation under section
148.
2. At the time of hearing, the ld. A/R of the assessee has stated at bar that the assessee does not press ground no. 1 and the same may be dismissed as not pressed. The ld. D/R has raised no objection if the ground no.1 of the assessee's appeal is dismissed as not pressed. Accordingly, ground no. 1 of the assessee's appeal is dismissed being not pressed.
Ground No. 2 is regarding the additions made by the AO and sustained by the ld. CIT (A) on the basis of some loose papers found during the course of survey.
3. The assessee company filed its return of income on 5th September, 2010 declaring total income of Rs. 1,73,60,980/-. The return of income was processed under section 143(1) of the IT Act. Subsequently there was a survey on 3rd December, 2014 wherein various documents were impounded. The assessee is a company and engaged in the business of civil work and road contract. Based on the impounded documents relating to this year, the AO reopened the assessment by issuing notice under section 148 of the IT Act on 30th March, 2017. The reassessment was completed on 21st December, 2017 whereby the AO made addition of Rs. 1,28,638/- based on the entries in the impounded documents in the names of certain persons. Similarly, an addition of Rs. 70,000/- was made treating the same as undisclosed income as per page 35 of the impounded documents. The 3 ITA No. 325/JP/2019 M/s. SPC Infrastructures Pvt. Ltd., Jaipur.
third addition was made by the AO on account of the purchases made in cash as per the ledger account of the assessee in the books of M/s. Sarraf Pipe Industries for a sum of Rs. 5,74,442/-. Thus the AO made total addition of Rs. 7,73,080/-. The assessee challenged the action of the AO before the ld. CIT (A) and contended that the loose papers found during the survey are dumb documents and do not even reveal the nature of the entries whether it is the receipt or payment. Further, these entries even do not relate to any transaction and nature of transaction. As regards the ledger account in the books of M/s. Sarraf Pipe Industries, the assessee contended that the entries shown in the said ledger account were not relating to the assessee. The ld. CIT (A) did not accept this contention of the assessee and confirmed the addition made by the AO.
4. Before us, the ld. A/R of the assessee has submitted that the additions made by the AO of Rs. 1,28,638/- as well as Rs. 70,000/- are based on the loose papers but the entries in the loose papers do not constitute any income or undisclosed income of the assessee. Thus the ld. A/R of the assessee has submitted that even the addition of Rs. 70,000/- is based on the loose papers cannot be said to be an income of the assessee when the said account clearly shows an opening balance of Rs. 13,70,500/-, then the credit of Rs. 70,000/- dated 27.10.2009 cannot be treated as income of the assessee. Similarly, the addition of Rs. 1,28,638/- made by the AO based on the loose papers is also not justified as these entries do not represent any income or unaccounted income of the assessee. These are dumb documents neither giving any details of the transaction/nature of transaction nor signed by any person of the assessee company or somebody else. Thus some figures are written on the loose papers cannot be treated as disclosing any income of the assessee. The ld. 4 ITA No. 325/JP/2019
M/s. SPC Infrastructures Pvt. Ltd., Jaipur.
A/R has further contended that the addition of Rs. 5,74,442/- is made on the basis of the ledger account in the books of M/s. Sarraf Pipe Industries, however, the assessee has not made these purchases as recorded in the said ledger account. It may be a case of post purchases made by the sub contractor of the assessee who has executed the work at the site and M/s. Sarraf Pipe Industries has made these entries in the ledger account of the assessee instead of sub contractor. Thus the ld. A/R has submitted that the additions made by the AO and sustained by the ld. CIT (A) are not sustainable. In support of his contention, he has relied upon the decision of the Coordinate Bench of this Tribunal dated 05.09.2016 in case of M/s. SPC Infrastructure Pvt. Ltd. vs. ACIT in ITA Nos. 138 & 328/JP/2016. The said decision was challenged by the Revenue before the Hon'ble Jurisdictional High Court, however, the Hon'ble High Court has dismissed the appeal of the revenue and upheld the decision of the Tribunal. Thus the ld. A/R has contended that the additions made by the AO are not justified and the same may be deleted.
5. On the other hand, the ld. D/R has submitted that all these documents were found in the possession of the assessee and, therefore, the onus was on the assessee to explain the entries recorded in these documents. Further, the ledger account of the assessee in the books of M/s. Sarraf Pipe Industries was also found and impounded from the possession of the assessee and, therefore, it was the assessee to explain the true and correct facts about the entries in the ledger account. When the assessee has failed to explain the entries in the impounded material, the AO was justified to make the addition. While framing the assessment, the AO relied upon various precedents as cited at page 3 of the assessment order. Thus the ld. D/R has relied upon the orders of the authorities below and submitted 5 ITA No. 325/JP/2019 M/s. SPC Infrastructures Pvt. Ltd., Jaipur.
that when the assessee has failed to explain the entries in the impounded material, then the said entries revealing certain amounts on different dates are in the nature of unaccounted income of the assessee.
6. We have considered the rival submissions as well as the relevant material on record. As regards the addition of Rs. 70,000/- made by the AO based on the impounded material placed at page 3 of the paper book, we find that the AO has picked up only one entry of cash received by the assessee for the year under consideration of Rs. 70,000/- ignoring all other entries recorded in the said document. For ready reference, we reproduce the entries in the said document at page 3 as under :-
Sr. Date Particulars Debit Credit Remarks No. 1. 31.05.2005 Old balance 1317500.00 2. 08.09.2005 FDR Interest Rs. 5 lac 13000.00 3. 08.09.2005 Cash rec. 513000.00 4. 13.10.2006 Cash Rec. 100000.00 5. 12.09.2007 Cash Rec. 100000.00 6. 22.01.2009 Cash Rec. 100000.00 7. 27.10.2009 Cash Rec. 70000.00 8. 1330500.00 883000.00 447500.00 Deu.
Thus it is clear that there is a debit balance as on 31st May, 2005 of Rs. 13,17,500/- and the other entries including the entries dated 27.10.2009 are representing the cash received against the said debit balance in the account of Shashi Sahay. This entry is nothing but recovery of debits from the said party and would not constitute income of the assessee for the year under consideration. If there is any income not offered by the assessee on account of that entry, then the initial balance is required to be considered and verified whether it was a revenue receipt and unaccounted entry. Therefore, the said recovery of debit as per the said account cannot be 6 ITA No. 325/JP/2019 M/s. SPC Infrastructures Pvt. Ltd., Jaipur.
treated as income of the assessee. Accordingly, we delete the addition of Rs. 70,000/- made by the AO based on the said entry. Even otherwise, making the addition by the AO without considering the other entries in the said account is not justified.
6.1. As regards the addition of Rs. 1,28,638/- is concerned, the said addition was made by the AO based on the entries in the loose papers at page 4 are as under :-
All these entries are only certain amounts recorded on different dates but there is no description or particulars of the entries whether these are the amount due or amount paid or amount received by the assessee on these dates. At the time of survey, the department ought to have recorded the statement of the assessee and seek the explanation regarding the nature of these entries. In the absence of any 7 ITA No. 325/JP/2019 M/s. SPC Infrastructures Pvt. Ltd., Jaipur.
description or particulars of transaction in the impounded documents, it cannot be treated as income of the assessee. Further, when the document itself does not reveal any income then the AO cannot make the addition on assumption of the said entry as income of the assessee. The Coordinate Bench of this Tribunal in case of SPC Infrastructures Pvt. Ltd. (supra) while considering an identical issue has held in para 5.3 as under :-
5.3. We have heard rival contentions and perused the material available on record.
As per Annexure-20 impounded during the course of survey, statement of account of Shri Ghanshyam Parihar was impounded which is placed at page 52 of the paper book. As per this paper, there are three different entries for Rs. 30 lacs, Rs. 15 lacs and Rs. 35 lacs totaling Rs. 80 lacs. In this working also, interest is given at different rates i.e. on Rs. 30 lacs @ 1% Rs. 30,000/-, on Rs. 15 lacs @ 2% Rs. 30,000/- and on Rs. 35 lacs @ 2.25% Rs. 79,000/-. In this paper there are other notings also related to some other persons of Rs. 2,00,000/-, Rs. 50,000/-, Rs. 15,000/- and Rs.65,000/-. This piece of paper shows only working and source of interest at different rates. There is no signature by the borrower or the lender. There is no other document corroborating these entries. Admittedly, the authorities below have raised the entire addition on the basis of this piece of paper. This is neither acknowledgement of fact nor a document nor an agreement enforceable under the law. This only reflects the working of the interest at different amounts. The authorities below have discarded the explanation and have not accepted the affidavit of the borrower on the ground that the borrower is not produced by the assessee. The AO has not issued any summon to Shri Ghanshyam Parihar. It is now well settled that merely on the basis of a piece of paper impounded during the course of survey, it is not a sufficient evidence to make the addition. The revenue has to bring on record corroborative evidence. We draw support from the decision of Hon'ble Delhi High Court rendered in the case of CIT vs. Kulwant Rai, 291 ITR 36 (Del.). Respectfully following the judgment of the Hon'ble Delhi High Court, supra, we set aside the order of ld. CIT (A) and delete the additions on account of alleged undisclosed investment and alleged interest thereon. The ground of the assessee is allowed."
8ITA No. 325/JP/2019
M/s. SPC Infrastructures Pvt. Ltd., Jaipur.
The said decision of the Tribunal was challenged by the revenue before the Hon'ble Jurisdictional High Court and the appeal of the revenue was dismissed vide judgment dated 20th February, 2018 in DBIT Appeal No. 69 of 2017 upholding the decision of the Tribunal. Accordingly in view of the facts and circumstances of the case, when the impounded documents do not reveal any nature of the entries or unaccounted income, then in the absence of any corroborative evidence to show that these entries are representing the unaccounted income of the assessee, the addition made by the AO is uncalled for. Accordingly the same is deleted. 6.2. As regards the addition of Rs. 5,74,442/- based on the ledger account of the assessee in the books of M/s. Sarraf Pipe Industries, we find that the said document was found from the possession of the assessee and it is a proper ledger account maintained by M/s. Sarraf Pipe Industries. The assessee has not disputed the said ledger account found in the possession of the assessee and the business relation with M/s. Sarraf Pipe Industries. However, the assessee has disputed that the entries in the said ledger account are not relating the assessee's purchases but it may be the purchases made by the sub contractor of the assessee who has executed the work at site. However, in the absence of any such explanation and supporting material produced by the assessee, this contention of the assessee cannot be accepted. We further note that there are 3-4 entries of purchases made against the payment through cheques. Therefore, those entries in the ledger account can make the picture clear who has actually made the purchases and from whose bank account these payments were made. Therefore, we find that the addition made by the AO based on the ledger account requires proper verification 9 ITA No. 325/JP/2019 M/s. SPC Infrastructures Pvt. Ltd., Jaipur.
and examination of facts whether these purchases were made by the assessee or somebody else but recorded in the name of the assessee. Thus this issue is set aside to the record of the AO for proper verification and examination of these facts relating to the purchase entries recorded in the said ledger account. The assessee is also directed to produce all the relevant details and record in support of the contention that these purchases were not made by the assessee. Needless to say that the assessee be given an appropriate opportunity of hearing before passing the fresh order.
7. In the result, appeal of the assessee is partly allowed.
Order pronounced in the open court on 15/11/2019.
Sd/- Sd/-
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(Vikram Singh Yadav) (VIJAY PAL RAO)
ys[kk lnL;@Accountant Member U;kf;d lnL;@Judicial Member
Tk;iqj@Jaipur
fnukad@Dated:- 15/11/2019.
das/
vkns'k dh izfrfyfi vxzfs 'kr@Copy of the order forwarded to:
1. vihykFkhZ@The Appellant-M/s. SPC Infrastructures P. Ltd., Jaipur.
2. izR;FkhZ@ The Respondent-The DCIT Circle-4, Jaipur.
3. vk;dj vk;qDr@ CIT
4. vk;dj vk;qDr@ CIT(A)
5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur
6. xkMZ QkbZy@ Guard File {ITA No. 325/JP/2019} vkns'kkuqlkj@ By order, lgk;d iathdkj@Asst. Registrar 10 ITA No. 325/JP/2019 M/s. SPC Infrastructures Pvt. Ltd., Jaipur.