Income Tax Appellate Tribunal - Ahmedabad
Tanshukhrai N. Gaur, Baroda vs Assessee on 1 February, 2008
IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD BENCH "D", AHMEDABAD
Before Shri Bhavnesh Saini (JM) and Shri D.C. Agarwal (AM)
I.T.A. No.1487/Ahd/2008 - AY 2001-02
I.T.A. No.3374/Ahd/2007 - AY 2000-01
I.T.A. No.3373/Ahd/2007 - AY 1997-98
Mr. Tansukhrai N Gaur vs ITO, Wd.2(1)
12, Adarsh Nagar Society Baroda
Near Chhani Jakat Naka
Vadodara - 390 002
PAN : AEBPG0408B
(Appellant) (Respondent)
Appellant by : Smt. Urvashi Shodhan
Respondent by : Shri SK Meena
ORDER
Bhavnesh Saini : All the above appeals by the same assessee are directed against different orders of ld.CIT(A)-II, Baroda dated 01-02-2008 for assessment year 2001-02, dated 18-05-2007 for assessment year 2000-01 and dated 18-05- 2007 for assessment year 1997-98.
2. We have heard the learned representatives of both the parties, perused the findings of authorities below and considered the material available on record.
3. The brief background of the case leading to filing of the present appeals is that a survey u/s 133A was carried out at the business premises of the assessee on 11-01-2002. During the course of survey and in pursuance of survey proceedings statement of Shri TN Gaur, the assessee, was recorded. The statement dated 23-01-2002 recorded u/s 131 is conclusive and statement of unaccounted income of the assessee has been recorded in the handwriting of the assessee himself. The portion of the statement pertained to assessment year 2000-01 has been dealt with in the order u/s 143(3). The statement pertaining to unaccounted income for the assessment year 2001-02 was 2 ITA 1487/Ahd/2008 ITA 3374/Ahd/2007 ITA 3373/Ahd/2007 considered on the basis of the statement of the assessee in which unaccounted income and expenses were explained as income under the head 'scrap sales - Rs.89,000', 'interest income - Rs.20,000', and 'cash shortage - Rs.12,05,300'. The expenses and outgoing funds were deposits - Rs.3 lakhs, household expenses - Rs.3 lakhs and deposits in bank account of Dhruv Sales Rs.7,94,300. The cash shortage was incurred out of cash generated outside books due to excess claim of expenses. Loans are given to various persons and this is also given out of cash generated outside books. The assessee explained that M/s Dhruv Sales Corporation (biscuit agency), a concern which was started by him two years before but assessee failed fully and settled the account by paying cash of Rs.7,94,300 as stated above from the income of Dhruv Transport Services outside books. Assessee therefore offered Rs. 12,05,300 as undisclosed / under estimated income for assessment year 2001-02. Apart from the above expenses, the following expenses were also disallowable, viz. overloading penalty, capital expenditure, construction of office building but debited to profit & loss account and also depreciation on the same (Rs.6,47,105). The total net estimated income for assessment year 2000-01 was explained as unexplained investment and expenses as per cash flow statement of Rs.12,05,300, overloading penalty of Rs.17,105 and capital expenditure, repairs to buildings Rs.6,30,000 (total Rs.18,52,405). The assessee offered this amount for tax and filed revised return. The assessee, however, later on filed an affidavit and submitted that statement was given under duress and disturbed state of mind and retracted from his earlier statement. During the assessment proceedings for assessment year 2001-02 assessee was show caused as to why addition should not be made on the above basis. The assessee stated on oath that his total estimated unaccounted income for assessment year 2001-02 was as under:-
1. Unexplained investment & expenses as per cash flow statement Rs. 12,05,300
2. Overloading penalty Rs. 17,105
3. Capital expenditure Rs. 6,30,000
3 ITA 1487/Ahd/2008 ITA 3374/Ahd/2007 ITA 3373/Ahd/2007 Total Rs. 18,52,405 It was explained that statement of cash flow explained by the assessee during the course of recording of his statement was not correct and true. It was submitted that deposit in bank account of Dhruv Sales of Rs.7,94,300 did not pertain to assessment year under consideration. Copy of the passbook of the bank was filed and on verification the claim of the assessee was found to be correct as the entries of cash deposit were found on 30-12-1998 - Rs.4 lakhs, Rs.1,95,000, and Rs.1,55,000; and on 31-12-1998 - Rs.44,320. However, as per the statement called for from the bank u/s 133(6) the entries were shown as under:
1. 24-12-1999 Cash Rs. 4,00,000
2. -do- -do- Rs. 1,95,000
3. 27-12-1999 -do- Rs. 1,55,000
4. 31-12-1999 -do- Rs. 44,320 Rs. 7,94,320 The assessing officer therefore noted that the above amount of Rs.7,94,320 pertained to the assessment year 2000-01 for which action would be taken accordingly. As regards deposit of Rs.3 lakhs shown as undisclosed deposit it was submitted that loan of Rs.3 lakhs was given to Shri Rajendrakumar Mohanlal Shah by account payee cheque dated 10-07-2000. Regarding household expenses assessee submitted that amount was withdrawn from bank accounts as well as from Dhruv Transport Services by the assessee, his wife and brother, who were filing the returns of income separately. On the income side of the cash offered assessee has shown scrap sales, interest income, cash shortage and it was explained that assessee filed revised return of income. It was, therefore, explained that all the deposits of Rs. 3 lakhs, Rs.7,94,320 and Rs.3 lakhs are explained. The cash flow statement of the assessee is recorded on page 4 of the assessment order for assessment year 2001-02. The assessing officer
4 ITA 1487/Ahd/2008 ITA 3374/Ahd/2007 ITA 3373/Ahd/2007 accordingly discussed the remaining additions on merit in each assessment year separately on which learned CIT(A) confirmed the additions. Therefore, all the additions on merit are considered separately in each assessment year hereinbelow.
ITA No.1487/Ahd/2008 (AY 2001-02)4. On ground No.1 assessee challenged the addition of Rs.5,96,575 u/s 68 as unexplained cash credit. During the course of assessment proceedings assessee was asked to explain the entries pertaining to kaccha cash book impounded as per Annexure A-5 subsequent to survey. This book contains financial transactions of Rs.62,15,724. It was submitted that kaccha cash book was mainly memorandum book and not having all the cash entries in it. The cash payments made to key persons of the business were made in it and on furnishing of the accounts, the expenses were entered in the main cash book and their workings were no more kept on record. It was also submitted that cash was withdrawn by the assessee for making lump sum payments for routine business expenses. In respect of Bhakti Finance amount of Rs.6,04,665 was found. The proprietor of Bhakti Finance denied of having any transaction with the assessee. The assessee could not explain the nature of transaction with Bhakti Finance and hence the maximum amount in this account was worked out at Rs.5,96,575 on 16-02-2001. Same was treated as unaccounted and added to the total income.
4.1 It was submitted before the ld.CIT(A) that entries relating to the transaction were found during the course of survey. This demonstrates the genuineness of the transactions. All amounts credited during the year to the account of the said party are returned in the same year and no net amount of surplus remains at the end of the year. It was therefore submitted that addition is unjustified. The ld.CIT(A), however, did not accept the contention of the assessee and rejected this ground of appeal of the assessee. The findings at paragraph 3.3 of the impugned order are reproduced below:
5 ITA 1487/Ahd/2008 ITA 3374/Ahd/2007 ITA 3373/Ahd/2007 "3.3 I have considered the submissions of the appellant and facts of the case. The amount credited in the name of Bhakti Finance was as per kaccha cash book found during the course of survey. The said party on verification denied having given any loan to the appellant. In the absence of confirmation from the party allegedly having given the loan, the credit appearing in he name of Bhakti Finance in kaccha cash book is unexplained. Appellant's explanation that cash book was found during the survey hence it should be believed is without any basis. The entries made in the cash book has to be verified and onus to explain the credit entries is on the appellant. The onus was not discharged and department on verification found that M/s. Bhakti Finance denied any such transaction with the appellant. In view of these facts, the credit appearing in the name of Bhakti Finance is established to be unexplained and hence addition made by the Assessing Officer u/s. 68 is confirmed."
4.2 Learned counsel for the assessee submitted that small diary was kept for routine business expenses. The kaccha cash book mentioned finalization of payments to drivers, etc. It was primary cash book found and no entry was recorded in the final books of account. Learned counsel for the assessee also submitted that no addition u/s 68 could be made in respect of the kaccha book. On the other hand, the learned departmental representative relied upon the orders of authorities below.
4.3 We have considered rival submissions and do not find any justification to interfere with the order of the learned CIT(A). It is not in dispute that the entries relating to Bhakti Finance were found during the course of survey from the possession of the assessee. The above book contained financial transactions. Since the entries relating to Bhakti Finance were found in the document found during the course of survey, verification was made from the said party who denied of having given any loan to the assessee. Since no confirmation from the party was filed, the assessing officer has rightly treated the credits appearing in the name of Bhakti Finance in kaccha cash book as unexplained. The assessee contended before the learned CIT(A) that these are genuine transactions and all amounts credited during the year to the account of the said party are returned in the same year and since at the end of the year no amount was left therefore no 6 ITA 1487/Ahd/2008 ITA 3374/Ahd/2007 ITA 3373/Ahd/2007 addition could be made. It would prove that the assessee has now changed the stand taken before the learned CIT(A). The submissions of the assessee before the learned CIT(A) shows that the assessee admitted all the entries in respect of transactions conducted with Bhakti Finance because receipts and payments have not been disputed. However, now it is claimed that the addition cannot be made u/s 68 of the I.T. Act and that the kaccha cash book contained only small expenses paid to the driver, etc. However, in this case, on verification, the proprietor of Bhakti Finance denied of having any transaction with the assessee and the books of account of Bhakti Finance also did not contain any transaction with the assessee that were appearing in the kaccha cash book. Thus, the assessee has failed to explain the nature of transaction with M/s Bhakti Finance. Assessing officer, therefore, taken the peak of the same and correctly made the addition. Since the incriminating material was found during the course of survey and assessee did not dispute entries contained in the material found during the course of survey, the burden is upon the assessee to explain the entries appearing in the impounded document. However, the assessee did not discharge the onus of explaining the entries contained in the documents found during the course of survey. The background of the case is noted above which proves that during the course of survey several incriminating documents were found against the assessee in respect of other years also and assessee failed to explain any of them. Since the details contained in the kaccha cash book were not found recorded in the books of account of the assessee, it is a clear case of making bogus entries of the transactions between assessee and Bhakti Finance. It would show that assessee rotated his own money in the name of Bhakti Finance and on failure to explain the same addition was correctly made u/s 68 of the I.T. Act treating the same to be unexplained cash credits. It may also be noted here that kaccha cash book is also part of the books of account maintained by the assessee, therefore, entries found thereon would justify the actions of the authorities below in making and confirming the addition. We, therefore, do not find any merit in this ground of appeal of the assessee. Same is accordingly dismissed.
7 ITA 1487/Ahd/2008 ITA 3374/Ahd/2007 ITA 3373/Ahd/2007
5. On ground No.2 assessee challenged the addition of Rs.4 lakhs u/s 68 for unexplained cash credit. The assessing officer made the addition of Rs.7,34,000 on account of unexplained entries out of the cash book. The assessee on the basis of kaccha cash book furnished statement of cash withdrawn at Rs. 44,07,559. In this amount, Rs.23,83,150 was shown as salaries paid to drivers and conductors, Rs. 6,34,000 was shown as various expenses, purchases of land, etc. and balance of Rs.13,90,409 was claimed as for various expenses. The assessee could not furnish complete details in respect of Rs.13,90,409. In the absence of details and nature of business a lump sum disallowance of Rs.1 lakh was made out of the same amount by the assessing officer. The assessee also could not explain the source of Rs.6,34,000 incurred for personal expenses and investment and hence same was also disallowed. The assessing officer accordingly made addition of Rs.7,34,000 (Rs.6,34,000 + Rs. 1,00,000).
5.1 It was submitted before the ld.CIT(A) that during the year withdrawals of Rs.5,51,731 was made and about Rs.4 lakhs was available with the assessee which is claimed to have been taken from his father. It was also contended that the assessee had substantial cash balance in books of account but some entries were omitted by the accountant. The assessee contended that source was adequately explained. Without prejudice to above, the assessee also contended that addition on this ground and also on account of disbelieving of the transaction with Bhakti Finance and diesel and repair expenses are not justified simultaneously, as debits in these accounts would explain withdrawals for personal expenses. The ld.CIT(A) considering the explanation of the assessee restricted the addition to Rs.4 lakhs and deleted the addition of Rs.3,34,000. His findings at paragraph 6.3 of the impugned order are reproduced below:
"6.3 I have considered the submissions of the appellant and facts of the case. Assessing Officer added Rs.6,34,000/- on the ground that as per assessee had incurred various cash expenses starting from August 2000 onwards. Apart from these, appellant did not give complete details of other amount for various expenses and therefore a lump-sum disallowance of Rs.1 lac was made out of 8 ITA 1487/Ahd/2008 ITA 3374/Ahd/2007 ITA 3373/Ahd/2007 Rs.13,90,409/-. Thus, total disallowance of Rs.7,34,000/- was made consisting of Rs.6,34,000/- for personal expenses / unexplained investment and Rs.1 lac for lump-sum disallowance. Appellant submitted that the personal expenses / investments were made out of total withdrawals during the year which was more than Rs.5,50,000/- and apart from that he had about Rs.4 lacs available from his father during the year. Further, the cash credit in the name of Bhakti Finance was also disallowed. Considering all these facts, it cannot be said that appellant did not have source to fund any of the personal expense or investment. Considering his cash withdrawal and cash credits in the name of Bhakti Finance confirmed earlier, the addition out of Rs.6,34,000/- is considered as explained from his personal withdrawals and from other disallowances.
As regards ad-hoc addition of Rs.1 lac, since appellant could not give details of Rs.13,90,409/-, the same is confirmed in the absence of any details given at appellate stage also. Thus out of total addition of Rs.7,34,000/-, addition of Rs.4,00,000/- is confirmed and remaining Rs.3,34,000/- is deleted."
5.2 Learned counsel for the assessee reiterated the submissions made before the authorities below and also submitted that the additions made on other issues may be available to the assessee. Therefore, on telescoping, further addition may be deleted. On the other hand, the ld.DR relied upon the orders of authorities below.
5.3 On consideration of the rival submissions, we do not find any justification to interfere with the findings of the learned CIT(A). The assessee, on the basis of the kaccha cash book furnished the statement of cash withdrawals and also given the details of the expenditure. However, the assessee did not furnish any evidence to explain the personal expenses / unexplained investments and also could not prove that expenses were incurred for the purpose of business of the assessee. Whatever benefit assessee wanted, that set off of the same may be given, before learned CIT(A), the ld.CIT(A) has already been given to the assessee. The ld.CIT(A) considering telescoping benefit and all other attending circumstances, reduced the addition considerably. Therefore, in the absence of any further evidence on record, we do not find it to be a fit case for interference in 9 ITA 1487/Ahd/2008 ITA 3374/Ahd/2007 ITA 3373/Ahd/2007 the order of the ld.CIT(A). We confirm the findings of ld.CIT(A) and dismiss this ground of appeal of the assessee.
6. In the result, appeal of the assessee is dismissed.
ITA No.3374/Ahd/2007 (A.Y. 2000-01)7. Learned counsel for the assessee did not press ground No.1 of the appeal challenging the reopening of the assessment u/s 147 of the I.T. Act. This ground of appeal of the assessee is thus dismissed.
8. On grounds No.2 & 3, the assessee challenged the addition of Rs.7,94,320 u/s 68 as unexplained cash credits. The assessee filed copy of the bank account before assessing officer to show that there are deposits in his bank account in a sum of Rs.7,94,320 being cash deposits on 30-12-1998 and 31-12- 1998. However, the bank statement from the bank was called for which showed that cash were deposited on four occasions i.e. on 24-12-1999, 27-12-1999 and 31-12-1999 in a sum of Rs.4 lakhs; Rs.1,95,000; Rs.1,55,000; and Rs.44,320 totalling Rs.7,94,320. It was, therefore, clear that the above amount pertained to assessment year 2000-01. This fact is also not disputed by learned counsel for the assessee during the course of arguments. The assessee took the plea before the ld.CIT(A) that assessee was having wholesale business of sale and purchase of biscuits and confectionery since 1996 and the amount of cash deposited pertained to that business. The contention was not accepted by the assessing officer on the ground that assessee failed to furnish any evidence by way of purchase bills, sale bills, names and addresses of the parties. It was also explained that since there was a loss in the business, it was not shown in the return of income filed. It was also explained that since no profit was made, no profit & loss account and balance-sheet was submitted along with the return of income for assessment year 2000-01 and since the turnover was below Rs.40 lakhs accounts were not audited. It was also explained that amounts were deposited out of the sale proceeds of biscuits and confectionery of Dhruv Sales 10 ITA 1487/Ahd/2008 ITA 3374/Ahd/2007 ITA 3373/Ahd/2007 Corporation. However, the contention of the assessee was not accepted because the source of the deposit is not proved through any evidence on record. The ld.CIT(A) accordingly rejected the contention of the assessee. His findings at paragraphs 3.5 to 3.5.3 are as follows:
"3.5 I have considered the submissions of the ld.counsel and facts of the case. As per the last question appearing at Page No.9 of appellant's statement recorded on 11th January 2002 some pay- in-slips pertaining to M/s Dhruv Sales Corporation were found during the course of survey showing cash deposits totaling Rs.7,94,320/-. When these pay-in-slips were confronted to the appellant, eh replied, as per Answer on Pagte 10 of the aforesaid statement, that eh had taken an agency of Champion Biscuits, Bombay, in the year 1999 which was closed within 4 - 6 months. It is further stated in the same answer that he had taken a CC limit from Chhani Nagrik Sahakari Bank Ltd. and the pay-in-slips under the consideration were repayment of loan earlier taken from the aforesaid bank and the entries are reflected in the cash-book of M/s Dhruv Transport. Since the statement was recorded on the very day of survey, therefore, it was spontaneous and hence carries evidentiary value. Subseuently, a statement in appellant's own handwriting was recorded on 23rd January 2002 wherein he made disclosure of unaccounted income in respect of A.Ys 2000-01, 2001-2002 and 2002-2003. It is clearly stated in the aforesaid statement that the amounts of unaccounted incomes had been calculated after referring to the books of accounts and documents and on the basis of cash flow statement prepared by the appellant himself. As per the aforesaid statement, a disclosure of Rs.18,52,405/- was made in respect of A.Y. 2001-2002 which included cash shortage of Rs.12,05,300/- which, in turn, included the amount under consideration viz. Rs.7,94,300/- deposited in the bank account of M/s Dhruv Sales Corporation. It was during the assessment proceedings for A.Y. 2001-2002, it was brought to the notice of the Assessing Officer that the aforesaid deposits in the bank, in fact, pertained to A.Y. 2000-2001 and not A.Y. 2001-2002. The same fact was also verified and found to be correct from the statement of the bank account which was called by way of issue of notice u/s 133(6).
5.1 The plea now taken by the appellant that the source of cash deposits of Rs.7,94,320/-, as stated earlier, is the wholesale business of sale and purchase of biscuits and confectioneries which he stated to have been doing since 1996 is in contradiction to his statement recorded on the day of survey viz. 11th January 2002
11 ITA 1487/Ahd/2008 ITA 3374/Ahd/2007 ITA 3373/Ahd/2007 as referred to above. Moreover, the finding of the Assessing Officer that the purchase / sale bills, names and addresses of the parties with whom the appe3llant had claimed to have transacted were not produced during assessment proceedings is not rebutted. Merely because a sales tax number is obtained or a credit limit was sanctioned from the bank in the name of M/s Dhruv Sales Corporation does not explain the source of the deposits of cash in the aforesaid bank account. Moreover, as per statement recorded on 11th January 2002 M/s Dhruv Sales Corporation is claimed to have been started in 1999 for 4 - 6 months. As per statement recorded on 23rd January 2002 the same concern was claimed to have been started two years before recording the statement on 23rd January 2002 which means that it was started in January 2000. Now the stand taken before the Assessing Officer is that the same concern was started in the year 1996.
3.5.2 In the statement recorded on 11th January 2002, it was deposed by the appellant that the source of cash deposited in the aforesaid bank account could be found in the cash book of M/s Dhruv Transport. In the statement recorded on 23rd January 2002, it was reaffirmed that the cash was paid out of the unaccounted income of M/s Dhruv Transport Services. Now in the present proceedings, the appellant has changed the stand and the source is claimed to be wholesale business in the name of M/s Dhruv Sales Corporation claimed to be setup in 1996.
3.5.3 In view of the discussions given above and clear-cut admission by the appellant himself, I do not find any infirmity in bringing to tax the amount of cash totaling Rs.7,94,320/- deposited in the bank account maintained in the name of M/s Dhruv Sales Corporation during the assessment year under consideration. The addition made by the Assessing Officer, is therefore confirmed."
8.1 Learned counsel for the assessee reiterated the submissions made before the authorities below. On the other hand, the ld.departmental representative relied upon the orders of authorities below.
8.2 We have considered the rival submissions and material on record and also considered reply filed by assessee placed at pages 55 & 56 of the paper book on this issue and do not find any infirmity in the order of the ld.CIT(A) in confirming the addition. It is not in dispute that the amount of Rs.7,94,320 was deposited in the bank account of the assessee in the assessment year under 12 ITA 1487/Ahd/2008 ITA 3374/Ahd/2007 ITA 3373/Ahd/2007 appeal. The same were cash deposits. This fact is also confirmed by the bank in their statement. The ld.counsel for the assessee also did not dispute that the cash amounts were deposited in bank account of the assessee in the assessment year under appeals. The assessee has, however, tried to explain that the above deposits in the bank account were made out of the sale proceeds of biscuit and confectionery business and on realization of the debts by Dhruv Sales Corporation. The assessee filed copy of the bank passbook, purchases and sales in support of the contention. However, it is a fact that the said business was never disclosed to the revenue department prior to the survey. The assessee admitted that since there was no profit in the business of biscuits and confectionery, it was not shown in the return of income filed for the assessment year under appeal. The authenticity of the business conducted by Dhruv Sales Corporation thus could not be established beyond doubt before the authorities below. Since the entire business of biscuits and confectionery remained undisclosed to the revenue department, the transactions recorded therein cannot be believed and the authorities below have rightly rejected the same contention of the assessee. It may also be noted here that specific dates have been given for depositing cash in the bank account of the assessee. Therefore, assessee shall have to prove through specific evidence that cash was available to the assessee for making the deposit in the bank account. In the absence of any evidence and the source and availability of the cash with the assessee and its nexus with the deposits in the bank account of the assessee, the contention of the assessee remained oral explanation which has been rightly rejected by the authorities below. In the absence of any evidence of source and availability of the cash with the assessee and that too, when Dhruv Sales Corporation was running in losses, the explanation of the assessee was rightly rejected by the authorities below. In the absence of any reasonable and cogent evidence on record, we do not find it to be a fit case for interference. We accordingly do not find any infirmity in the order of the ld.CIT(A) in confirming the addition. Merely because protective assessment is made in assessment year 1997-98 we do not find any justification to give any benefit to the assessee 13 ITA 1487/Ahd/2008 ITA 3374/Ahd/2007 ITA 3373/Ahd/2007 particularly when assessee has not produced any evidence in support of the contention. We, therefore, do not find any merit in both the grounds of the assessee. Both are accordingly dismissed.
8.3 In the result, appeal of the assessee is dismissed.
ITA No.3373/Ahd/2007 (AY 1997-98)9. On ground No.1 assessee challenged the reopening of the assessment u/s 147 of the I.T. Act and on ground No.2 assessee challenged addition of Rs.4.25 lakhs. Since both the grounds are connected, both are decided together. As noted above survey was conducted in the premises of the assessee and assessee had admitted unaccounted income which includes unexplained cash deposit in the bank account. Therefore, considering explanation of the assessee and material on record it was found on the basis of assessee's own submission that amount of Rs.4.25 lakhs was sought to be taxed in the assessment year under appeal on protective basis. The assessee's case was accordingly reopened u/s 147 of the I.T. Act It was observed during the assessment proceedings for assessment year 2001-02 that assessee claimed to have introduced initial capital of Rs.4.25 lakhs in Dhruv Sales in assessment year 1997-98. The assessing officer, therefore, noted that there is a reason to believe that income to the extent of Rs.4.25 lakhs had escaped assessment within the meaning of section 147 of the I.T Act and notice u/s 148 dated 23-04-2004 was served upon the assessee on 24-03-2004. The assessee explained that the return filed originally may be treated as return filed in response to notice u/s 148 of the I.T. Act. The assessing officer noted that the assessee could not explain the source of the capital despite giving several opportunities. Same was treated as unexplained cash credit on protective basis because substantive addition is made in assessment year 2000-01. The ld.CIT(A) considering facts of the case and finding that income escaped assessment in a sum of Rs.4.25 lakhs, confirmed the reopening of the assessment. As regards the protective assessment it was contended before the ld.CIT(A) that protective assessment 14 ITA 1487/Ahd/2008 ITA 3374/Ahd/2007 ITA 3373/Ahd/2007 needs to be cancelled as soon as the substantive addition is confirmed in assessment year 2000-01 and therefore, protective assessment may be cancelled. The ld.CIT(A), however, considering the submissions of the assessee noted that findings given by the assessing officer from paragraphs 5.4 to 5.9 of the assessment order have not been rebutted by the assessee. It was also explained that since substantive addition is made of Rs.7,94,320 in assessment year 2000-01 as per explanation of the assessee with regard to unexplained bank deposits, protective addition may be deleted. The ld.CIT(A), however, noted that introduction of capital of Rs.4.25 lakhs was made in the month of December, 1996 as per the books of account of Dhruv Sales Corporation and the source of the same being agricultural income of father of the assessee is not supported by any evidence. Therefore, assessee failed to explain the source and as such the amount is required to be taxed on substantive basis in the assessment year under appeal. The ld.CIT(A) also noted that no nexus is established between the sum of Rs.4.25 lakhs and addition of Rs.7,94,320 for which addition is made in subsequent assessment year 2000-01. Therefore, assessing officer was directed to make addition of Rs.4.25 lakhs on substantive basis. Appeal of the assessee was accordingly dismissed.
9.1 Learned counsel for the assessee reiterated the submissions made before authorities below and submitted that reopening is made in the case of assessee after six years from the end of the relevant assessment year. Learned counsel for the assessee relied upon the submissions made before authorities below and submitted that assessee explained the source of the capital introduction because the assessee was doing the business even prior to starting of the business in the name of Dhruv Sales Corporation. Learned counsel for the assessee also submitted that since substantive assessment is made of unexplained bank deposits in earlier year, benefit of telescoping may be given to the assessee. On the other hand, ld.DR relied upon the orders of authorities below and submitted that the reopening is made prior to six years from the end of the relevant assessment year, therefore, contention of the assessee is liable to be rejected.
15 ITA 1487/Ahd/2008 ITA 3374/Ahd/2007 ITA 3373/Ahd/2007 Ld.DR, on merits, relied upon the orders of authorities below and also submitted that here is no nexus between addition made in the subsequent year on account of unexplained bank deposits with the addition made in the assessment year under appeal. Therefore, ldCIT(A) rightly converted the protective assessment into substantive assessment.
9.2 We have considered the rival submissions and material available on record. The assessing officer specifically noted at paragraphs 5.4 to 5.9 of the assessment order that assessee brought cash of Rs.4.25 lakhs in his capital account on various dates in the month of December, 1996. The assessee, however, could not explain the source of the same despite giving several opportunities by the assessing officer. Assessing officer, therefore, treated the same amount to be unexplained cash credit and made the protective assessment because of the substantive addition made in assessment year 2000-01. The ld.CIT(A) therefore, correctly noted that the findings of the assessing officer in the assessment order have not been rebutted by the assessee through any evidence before him. Same is the position before the Tribunal also because the learned counsel for the assessee except making oral submissions to explain introduction of the capital by the assessee, has not furnished any documentary evidence or material on record. Learned CIT(A) also noted that the assessee before him explained the source of introduction of capital being out of agricultural income of father of the assessee but same is also not supported by any evidence. This finding of fact recorded by the authorities below would clearly prove that assessee has failed to explain the introduction of the capital through any evidence or material on record. Since introduction of the amount in the books of the assessee remained unexplained through out, it was rightly treated as unexplained cash credit of Rs.4.25 lakhs in the capital account of the assessee. The assessing officer made protective assessment because substantive assessment is made for the assessment year 2000-01. The ld.CIT(A), however, on proper appreciation of facts and material on record rightly noted that in the assessment year 2000-01 substantive addition is made of Rs.7,94,320 on 16 ITA 1487/Ahd/2008 ITA 3374/Ahd/2007 ITA 3373/Ahd/2007 account of unexplained cash deposit in the bank account. Therefore, the said addition made in assessment year 2000-01 has no nexus with addition of Rs.4.25 lakhs in the assessment year under appeal. Moreover, addition of Rs.7,94,320 is made in the subsequent year. Therefore, no benefit either on telescoping or in the name of protective / substantive could be given to the assessee. Since this issue is not explained at all through any evidence or material on record, ld.CIT(A) was justified in making the addition on substantive basis in the assessment year under appeal.
9.3 We may also note here that the assessing officer made protective assessment in the assessment year under appeal and ld.CIT(A) converted the addition into substantive addition, the assessee has not raised any ground of appeal to challenge the above findings of the ldCIT(A) in any of the grounds of appeal. In the absence of any ground of appeal challenging the addition converted into substantive addition by the ld.CIT(A), the finding recorded by the ld.CIT(A) could not be disturbed. We therefore, do not find any justification to interfere with the finding of the ld.CIT(A) in confirming the substantive addition of Rs.4.25 lakhs.
9.4 As regards reopening of the assessment, the assessing officer specifically noted that notice u/s 148 dated 23-03-2004 was served on 24-03-2004. Since the amount of escaped income is more than Rs.1 lakh, the reopening of the assessment would have been initiated by issue of notice u/s 148 of the I.T. Act within six years from the end of the relevant assessment year. Therefore, in this case, the reopening is made within six assessment years from the end of the relevant assessment year. Contention of the learned counsel for the assessee in this regard is therefore rejected. Learned counsel for the assessee also argued that the assessing officer failed to record reasons for reopening of the assessment. However, the assessing officer has specifically noted in the assessment order that the reason to believe that income escaped in a sum of Rs.4.25 lakhs in the assessment order under appeal was recorded because of 17 ITA 1487/Ahd/2008 ITA 3374/Ahd/2007 ITA 3373/Ahd/2007 the facts found during the course of assessment proceedings for assessment year 2001-02. The above facts would show that assessing officer has reason to believe that income escaped assessment was more than Rs.1 lakh in the assessment year under appeal. The assessing officer, therefore, was well within his rights in invoking the jurisdiction u/s 147 / 148 of the I.T. Act. No material is produced before us to contradict the observation of the assessing officer in this regard. The contention of the assessee is therefore rejected that reopening is bad in law.
9.5 Considering the totality of the circumstances noted above we do not find it to be a fit case for interference. The assessing officer has rightly exercised his jurisdiction u/s 147 of the I.T. Act and addition is correctly made on substantive basis. Thus, all the grounds of appeal of the assessee are accordingly rejected.
9.6 In the result, appeal of the assessee is dismissed.
10. In view of the above findings, all the appeals of the assessee are dismissed.
Order pronounced on this 07th day of October, 2010.
Sd/- sd/-
(D.C. Agarwal) (Bhavnesh Saini)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Ahmedabad, Dt : 07th October, 2010
pk/-
copy to:
1. the appellant
2. the respondent
3. the CIT-I, Baroda
4. the CIT(A)-II, Baroda
5. the DR, "D" Bench
(True copy) By order
Asstt.Registrar, ITAT, Ahmedabad Bench