Income Tax Appellate Tribunal - Amritsar
Surinder Pal Gandhi, Jalandhar vs Department Of Income Tax on 1 July, 2016
IN THE INCOME TAX APPELLATE TRIBUNAL
AMRITSAR BENCH; AMRITSAR
(CAMP AT JALANDHAR)
BEFORE SH. A.D.JAIN, JUDICIAL MEMBER AND
SH. T.S. KAPOOR, ACCOUNTANT MEMBER
I.T.A Nos.192 to194 & 370(Asr)/2013
Assessment Years: 2007-08 to 2010-11
Dy. CIT, Vs. Sh. Surinder Pal Gandhi,
Central Circle-II, B-2/357, Bhatt. Colony,
Jalandhar. Chandigarh Road,
Nawanshahar.
PAN:AFBPK5235K
(Appellant) (Respondent)
Cross Objection Nos.24 to 25 (Asr)/2013
Arising out of ITA No.193 & 194 (Asr)/2013
Assessment Years: 2008-09 to 2009-10
Sh. Surinder Pal Gandhi, Vs. Dy. CIT,
B-2/357, Bhatt. Colony, Central Circle-II,
Chandigarh Road, Jalandhar..
Nawanshahar.
PAN:AFBPK5235K
(Cross Objectors) (Respondent)
Appellant by: Sh. Bhawani Shankar (DR)
Respondent by: Sh. M.R.Bhagat &
Sh. Rajinder Kumar Chopra (CA)
Date of hearing: 29.06. 2016
Date of pronouncement: 01.07.2016
ORDER
PER T.S.KAPOOR (AM):
This is a bunch of four appeals filed by Revenue against the separate orders of learned CIT(A), Ludhiana, dated 11.01.2013 for Asst.
Years: 2007-08 to 2009-10 and dated 21.03.2013 for Asst. Year 2010-11.2 ITA Nos.192 to 194 & 370 (Asr)/2013
Asst. Years: 2007-08 to 2010-11
2. The assessee has also filed Cross Objections to appeal filed by Revenue in ITA 193 & 194(Asr)/2013 for Asst. Year: 2008-09 to 2009-10.
3. At the outset, the learned AR stated that he will not be pressing the Cross Objections, therefore, same may be dismissed as not pressed.
4. The learned DR had no objection to the withdrawal of cross objections, therefore, the Cross Objections filed by assessee are dismissed as withdrawn.
5. All these appeals contain common issues and these appeals were heard together, therefore, for the sake of convenience a common and consolidate order is being passed.
6. The brief facts of the cases are that a search u/s 132 of I.T. Act was conducted in the case of assessee on 18.02.2010 and cases of the assessee were reopened u/s 153A of the Act. The assessee during the assessment proceedings did not appear before the Assessing Officer, therefore, Assessing Officer completed the assessment u/s 144 of the Act on the basis of material available on record. The various additions made by Assessing Officer in these years are summarized as under:
Assessment Year: 2007-08
1. Income from General Store and Rs.3,58,166/-
Cement Store on the basis of provision of Sec.44AF
2. Income from Brick Kiln Rs.15,55,000/-
3. Unexplained credits in Bank Rs.27,31,559/-
Account No.1552508202
4. Unexplained Credits in Bank Rs.1,70,000/-
3 ITA Nos.192 to 194 & 370 (Asr)/2013 Asst. Years: 2007-08 to 2010-11 Account No.700243 (new A/c No.1552517987 5. Income from other sources Rs.958/- Assessment Year: 2008-09 1. Income from General Store and Rs.3,61,820/- Cement Store on the basis of provision of Sec.44AF 2. Income from Brick Kiln Rs.31,10,000/- 3. Unexplained credits in Bank Rs.4,45,000/- Account No.1552508202. 4. Unexplained credits in Bank Rs.1,85,000/- Account No.700243 (new A/c No.1552517987) 5. Income from other sources Rs.40,000/- Assessment Year: 2009-10 1. Income from General Store and Rs.3,75,000/- Cement Store on the basis of provision of Sec.44AF 2. Income from Brick Kiln Rs.31,10,000/- 3. Unexplained credits in Bank Rs.49,49,206/- Account No.1552508202 4. Unexplained credits in Bank Rs.3,80,127/- Account No.700243 (new A/C No.1552517987 Assessment Year: 2010-11 1. Income from General Store and Rs.3,75,000/- Cement Store on the basis of provision of Sec.44AF 2. Income from Brick Kiln Rs.31,10,000/- 3. Unexplained credits in Bank Rs.20,79,757/- Account No.1552508202 4. Unexplained credits in Bank Rs.3,80,127/- Account No.700243 (new A/c No.15525117987) 5. Unexplained jewellery Rs.2,22,340/- 6. Unexplained investment Rs.4,86,25,000/-
7. Aggrieved with the assessment orders, the assessee filed appeals before learned CIT(A) and submitted various submissions. During 4 ITA Nos.192 to 194 & 370 (Asr)/2013 Asst. Years: 2007-08 to 2010-11 appellate proceedings the assessee also filed additional evidences under Rule-46A. The CIT(A) sent the submissions along with additional evidences to Assessing Officer who objected to the admission of additional evidences. However, the learned CIT(A) accepted the additional evidences and also decided the issues partly in favour of assessee by holding as under:
In ITA No.192(Asr)/2013 for A.Y.2007-08 "6. Since the assessment order had been passed u/s 144, and the Assessing Officer had elaborated the reasons for doing so, the AR's claim of not getting reasonable opportunity to explain his case had to be examined in the given facts of the case. It is apparent that the Assessing Officer had issued number of notices in pursuance of the centralization order passed by the CIT dated 10/08/2010. However, the said order of centralization had been cancelled by the CIT on 28/10/2011 meaning thereby that the Assessing Officer did not have the jurisdiction for the intervening period. Therefore, various notices issued and their compliance/non compliance has no legal validity especially when the assessee had challenged the jurisdiction of the Assessing Officer on the basis of erroneous centralization order. The CIT finally passed the jurisdiction order centralizing the cases back to the Assessing Officer with effect from 14/11/2011. It is clear from the perusal of the records that very limited opportunity to explain the case had been provided to the assessee after 14.11.2011 i.e., the date from which the Assessing Officer was conferred valid jurisdiction to assess. It is also seen that most of the notices even prior to 14.11.2011 had been served by affixture and the assessee's claim that such notices were not received by him is also not invalid in the circumstances. It would be fair to conclude that a reasonable opportunity must be provided at this stage for various issues to be examined afresh. Therefore, the Assessing Officer was directed to call for the books of accounts so as to examine the issues pertaining to gross profit rate as well as share capital introduction and expenses debited to P&L Account.
7. The Assessing Officer further commented that the books of accounts of the assessee for Asst. Years 2004-05 to 2010-11 were produced and were examined along with relevant balance sheet/other documents. The Assessing Officer with reference to the addition u/s 44AF submitted that the figures of purchases, sale and other expenses tallied 5 ITA Nos.192 to 194 & 370 (Asr)/2013 Asst. Years: 2007-08 to 2010-11 with the books of accounts examined. In the circumstances it become apparent that the provisions of section 44AF are not attracted in the case of the assessee as neither turnover is below the specify limit nor there is no maintenance of books of accounts. It is also a matter of fact that no discrepancy in the books of account has been pointed out nor anything has been found during the course of search operation to warrant any disallowance/addition. Therefore, the addition made by the Assessing Officer u/s 44AF is directed to be deleted.
8. The ground of appeal at Sr. No.4 pertains to an addition of Rs.1,70,000 which has been made by the Assessing Officer on the ground that as per statement of loan account No.700243 with Central Bank of India, Nawanshahar the assessee had made repayment of Rs.1,70,000/-
and no evidence regarding the source had been filed. The appellant with regard to this addition submitted during appellate proceedings that it had credit balance of Rs.9 lacs as on 1.4.2006 with M/s K.C. Social Welfare Trust and the repayment was done directly by the said trust by debiting my account on following dates:-
27.6.2006 Rs.70,000/-
12.09.2006 Rs.50,000/-
23.11.2006 Rs.50,000/-
The Assessing Officer during the course of remand proceeding has verified the submissions of the appellant and these have been found to be factually correct. Therefore, the addition is directed to be deleted.
9. The ground of appeal at Sr. No.5 pertains to an addition of Rs.15,55,000/- which has been made by the Assessing officer on account of alleged undisclosed income from brick kiln. The Assessing Officer in this regard has observed that the assessee during course of search stated that he had taken a brick kiln in the year 2007 on an annual lease of Rs.1,25,000/-. He further stated that another brick kiln had been taken on lease from one Shri Bhagat Singh of Rs.1,20,000/- during the year 2008 and the income from these business had not been disclosed in the return of income. The Assessing Officer also referred to page 1-5 of Annexure A-4 seized from the assessee's residence which contained the following description of stock with SBK Brick Kiln.
Date Stock of brick kiln
30.04.2009 3275800/-
30.05.2009 3985800/-
30.06.2009 3515400/-
30.06.2009 3871200/-
6 ITA Nos.192 to 194 & 370 (Asr)/2013
Asst. Years: 2007-08 to 2010-11
The said paper was explained as having been written for the purpose of obtaining bank credit limit. The Assessing Officer combined two statements of the assessee of running a brick klin and the above mentioned recording to hold that such business was kept out side the books of accounts. The Assessing Officer proceeded to work out production on the basis of monthly stock statement as reproduced above so as to work out the profit ofRs.15,55,000/-.
10. During the course of appellate proceedings, the AR of the appellant submitted his arguments on the issue as under:-
" This addition has been discussed in para 7 of the assessment order. The information on the on the basis of which addition had been made relate to financial year 2009-10, where as the relevant previous year is from 01.04.2006 to 31.03.2007. The statement are not signed by any one. The purpose for which the statements were prepared are not known. Those statements, could be even for purpose of bank. Even no evidence of sale of any good was found. The ld. Assessing Officer had referred to statement recorded at the time of search u/s 132 of the Act. Even in that statement the appellant mentioned that he had taken a brick kiln on lease in the year 2007, i.e. it can be interpreted safely that the assessee had not done any business in his individual capacity during the relevant previous year. More that brick klin was operated in partnership. A photo copy of the partnership deed is enclosed. It is clear that the appellant wanted to do business of brick kiln in partnership with other persons in subsequent year. As regard the second brick kiln that was taken on lease. It was a partnership concern. The application for renewal of license of brick kiln was rejected. In the order of rejection of brick kiln license, it is clearly mentioned that Surinder Pal Gandhi was one of the partners. In such circumstances the learned Assessing Officer gravely erred to hold that the assessee had done the business of brick kiln and estimated income ar Rs.15,55,000/-. The addition is without any basis. It is prayed that the addition may kindly be deleted. Photocopies of the documents providing that the appellant was only one of the partners. Even if, for the sake of argument it is presumed that brick kiln business was doe, income from that business could be assessed in the hands of firm or association of persons. The Assessing Officer of Central Circle-II, was not having jurisdiction to assess eth person who might have as per the presumption of the Assessing Officer, done business of brick kiln. It is again prayed that this addition may kindly be delete."
11. The submissions of the appellant were sent to the Assessing Officer and the Assessing Officer only reiterated the observation as contained in the assessment order.
12. I have considered the basis of addition made by the Assessing Officer and the arguments of the AR on the issue. It is quiet apparent that 7 ITA Nos.192 to 194 & 370 (Asr)/2013 Asst. Years: 2007-08 to 2010-11 the business of brick kiln had been carried out by the assessee as stated by him during the course of statement recorded at the time of search operation. Further there is evidence of the stock available at the end of month during the financial year 2009-10. However, the assessee during the course of appellant proceedings has brought on record evidence in the form of partnership deed executed in the months of January 2007 which clearly shows that the impugned business had been carried out by a partnership firm with the name and style M/s Surindra Brick Kiln and the sales tax return for various years had also been filed as a partnership firm only. The said evidence has not been created afresh which is evident from the nature of documents produced. The Assessing Officer during the course of appellate proceedings did not bring on record a contradictory evidence to show that the name of the appellant in this regard was factually incorrect. Therefore, the income emanating out of the business of brick kiln which very clearly had been carried out by the firm can not be assessed in the hands of the assessee as a proprietor. Even otherwise no evidence in the year under consideration has been brought on record even with respect to the business of the firm as the stock position found during the course of search is with respect to the Asstt. Year 2010-11 only. However, the Assessing Officer on careful perusal of the facts of the case may proceed to reopen specific years in respect of the firm so as to bring to tax any income that would have escaped assessment. The addition made in the hands of the assessee is therefore, directed to be deleted.
13. The ground of appeal at Sr. No.6 pertains to an addition of Rs.27,31,559/- which has been made by the Assessing Officer by treating the credits in bank account No.1552508202 of M/s K.C.Autors maintained with Central Bank of India, Nawanshahar or unexplained. The Assessing officer in this regard also observed that the assesee took dealership of TVS Motor Cycle in the name and Style M/s K.C. Autos but no income from this business had been reflected in the return of income. During the course of appellate proceeding the AT submitted that the said business of M/s M.C. Autos had been carried out in a partnership concern with the name and style M/s. K.C. Autos and return of income of said partnership firm had been filed from time to time. The appellant also submitted evidence of this claim in this regard. The Assessing Officer during the course of appellate proceedings verified the claim of the appellant and submitted that the partnership deed of M/s K.C. Autos was dated 18.8.2004 and the return of income for the same had also been filed and the assessee' PAN was AAHFK5844P. In view of the clear facts that the business of Auto dealership was in the name of the firm and said firm had filed its return of income, no addition could be made in the hands of the appellant. The same is directed to be deleted. The Assessing Officer may proceed to take 8 ITA Nos.192 to 194 & 370 (Asr)/2013 Asst. Years: 2007-08 to 2010-11 consequential action in the case of firm, if impugned transactions are unaccounted.
In ITA No.193(Asr)/2013 for A.Y: 2008-09
3. The ground of appeal at Sr. No.3 pertains to an addition of Rs.1m85,000 which has been made by the Assessing Officer on the ground that as per statement of loan account No.700243 with Central Bank of India, Nawanshahar the assesee had made repayment of Rs.1,85,000/-and no evidence regarding the source had been filed. The appellant with regard to this addition submitted during appellate proceedings that the appellant had also claimed deduction of Rs.1,00,000/- on account of repayment of house building advance u/s 80C of the Act. Even the appellant had received Rs.1,00,051.78/- from K.C. College of Engineering & IT from whom a sum of Rs.7,30,000/- was recoverable as on 01.04.2007. The appellant had also declared income of Rs.2,94,173/- from business and withdrawal from the business was Rs.1,08,000/-. The repayment of loan was claimed to be out of known sources of income. It is prayed that this addition may kindly be deleted.
4. I have considered the basis of addition made by the Assessing officer and the arguments of the AR on the issue. It is apparent that the repayment of loan has been made in cash over period of 12 months for which the assessee does not have any direct explanation. The assessee has only brought on record the fact of having withdrawn certain amounts for household withdrawals and the receipt of amounts from M/s K.C. Engineering College. The explanation of the assessee is this regard can not be said to be fully covered by the given facts even though certain amount of cash out of the withdrawals of Rs.2,94,173/- could be said to be available for repayment of loan. In the circumstances the addition made by the Assessing Officer is confirmed to the extent of Rs.1,00,000/-
5. The ground of appeal at Sr. No.4 pertain to an addition of Rs.31,10,000/- which has been made by the Assessing Officer on account of alleged undisclosed income from brick kiln. The Assessing Officer in this regard has observed that the assessee during course of search stated that he had taken a brick kiln in the year 2007 on an annual lease of Rs.1,25,000/- he further stated that another brick kiln had been taken on lease from one Shri Bhagat Singh of Rs.1,20,000/- during the year 2008 and the income from these business had not been disclosed in the return of income. The Assessing Officer also referred to page 1-5 of Annexure-A-4 seized from the assessee's residence which contained the following description of stock with SBK Brick Kiln.
9 ITA Nos.192 to 194 & 370 (Asr)/2013
Asst. Years: 2007-08 to 2010-11
Date Stock of brick kiln
30.04.2009 3275800/-
30.05.2009 3985800/-
30.06.2009 3515400/-
30.07.2009 3493900/-
30.08.2009 3871200/-
The said paper was explained has having been written for the purpose of obtaining bank credit limit. The Assessing Officer combined two statements of the assessee of running a brick kiln and the above mentioned recording to hold that such business was kept out side the books of accounts. The Assessing Officer proceeded to work out production on the basis of monthly stock statement as reproduced above so as to work out the profit of Rs.31,10,000/-.
10. During the course of appellate proceedings, the AR of the appellant submitted his arguments on the issue as under:-
" This addition has been discussed in para 7 of the assessment order. The information on the on the basis of which addition had been made relate to financial year 2009-10, where as the relevant previous year is from 01.04.2006 to 31.03.2008. The statement are not signed by any one. The purpose for which the statements were prepared are not known. Those statements, could be even for purpose of bank. Even no evidence of sale of any good was found. The ld. Assessing Officer had referred to statement recorded at the time of search u/s 132 of the Act. Even in that statement the appellant mentioned that he had taken a brick kiln on lease in the year 2007. The assessee had not done any business of brick kiln in his individual capacity during the relevant previous year. However, it appears that the appellant wanted to do business of brick kiln in partnership with some other persons in subsequent years. Even the application for renewal of license of brick kiln was rejected. In the order of rejection of brick kiln license, it is clearly circumstances the learned Assessing Officer gravely erred to hold that the assessee had done the business of brick kiln and estimated income at Rs.31,10,000/-. The addition is without any basis. It is prayed that the addition may kindly be deleted. Photocopies of the documents providing that the appellant was only one of the partners were with written submissions for the assessment year 2007-08. Even if, for the sake of argument it is presumed that brick kiln business was done, income from that business could be assessed in the hands of firm or association of persons. The Assessing Officer on Central Circle-II, was not having jurisdiction to assess the person who 10 ITA Nos.192 to 194 & 370 (Asr)/2013 Asst. Years: 2007-08 to 2010-11 might have as per the presumption of the Assessing officer, done business of brick kiln. It is again prayed that this addition may kindly be deleted."
7. The submissions of the appellant were sent to the Assessing Officer and the Assessing Officer only reiterated the observation as contained in the assessment order.
8. I have considered the basis of addition made by the Assessing Officer and the arguments of the AR on the issue. It is quiet apparent that the business of brick kiln had been carried out by the assessee as stated by him during the course of statement recorded at the time of search operation. Further there is evidence of the stock available at the end of month during the financial year 2009-10. However, the assessee during the course of appellant proceedings has brought on record evidence in the form of partnership deed executed in the months of January 2007 which clearly shows that the impugned business had been carried out by a partnership firm with the name and style M/s Surindra Brick Kiln and the sales tax return for various years had also been filed as a partnership firm only. The said evidence has not been credited afresh which is evident from the nature of documents produced. The Assessing Officer during the course of appellate proceedings did not bring on record a contradictory evidence to show that the name of the appellant in this regard was factually incorrect. Therefore, the income emanating out of the business of brick kiln which very clearly had been carried out by the firm can not be assessed in the hands of the assessee as a proprietor. Even otherwise no evidence in the year under consideration has been brought on record even with respect to the business of the firm as the stock position found during the course of search is with respect to the Asstt. Year 2010-11 only. However, the Assessing Officer on careful perusal of the facts of the case may proceed to reopen specific years in respect of the firm so as to bring to tax any income that would have escaped assessment. The addition made in the hands of the assessee is therefore, directed to be deleted.
9. The ground of appeal at Sr. No.5 pertains to an addition of Rs.4,45,000/- which has been made by the Assessing Officer by treating the credits in bank account No.1552508202 of M/s K.C.Autors maintained with Central Bank of India, Nawanshahar or unexplained. The Assessing officer in this regard also observed that the assesee took dealership of TVS Motor Cycle in the name and Style M/s K.C. Autos but no income from this business had been reflected in the return of income. During the course of appellate proceeding the AT submitted that the said business of M/s K.C. Autos had been carried out in a partnership concern with the name and style M/s. K.C. Autos and return of income of said partnership firm had been filed from time to time. The appellant also submitted evidence of this 11 ITA Nos.192 to 194 & 370 (Asr)/2013 Asst. Years: 2007-08 to 2010-11 claim in this regard. The Assessing Officer during the course of appellate proceedings verified the claim of the appellant and submitted that the partnership deed of M/s K.C. Autos was dated 18.8.2004 and the return of income for the same had also been filed and the assessee' PAN was AAHFK5844P. In view of the clear facts that the business of Auto dealership was in the name of the firm and said firm had filed its return of income, no addition could be made in the hands of the appellant. The same is directed to be deleted. The Assessing Officer may proceed to take consequential action in the case of firm, if impugned transactions are unaccounted.
In ITA No.194(Asr)/2013 for A.Y: 2009-10 "6. Since the assessment order had been passed u/s 144, and the Assessing Officer had elaborated the reasons for doing so, the AR's claim of not getting reasonable opportunity to explain his case had to be examined in the given facts of the case. It is apparent that the Assessing Officer had issued number of notices in pursuance of the centralization order passed by the CIT dated 10/08/2010. However, the said order of centralization had been cancelled by the CIT on 28/10/2011 meaning thereby that the Assessing Officer did not have the jurisdiction for the intervening period. Therefore, various notices issued and their compliance/non compliance has no legal validity especially when the assessee had challenged the jurisdiction of the Assessing Officer on the basis of erroneous centralization order. The CIT finally passed the jurisdiction order centralizing the cases back to the Assessing Officer with effect from 14/11/2012. It is clear from the perusal of the records that very limited opportunity to explain the case had been provided to the assessee after 14.11.2011 i.e., the date from which the Assessing Officer was conferred valid jurisdiction to assess. It is also seen that most of the notices even prior to 14.11.2011 had been served by affixture and the assessee's claim that such notices were not received by him is also not invalid in the circumstances. It would be fair to conclude that a reasonable opportunity must be provided at this stage for various issues to be examined afresh. Therefore, the Assessing Officer was directed to call for the books of accounts so as to examine the issues pertaining to gross profit rate as well as share capital introduction and expenses debited to P&L Account.
7 . The Assessing Officer further commented that the books of accounts of the assessee for Asst. Years 2004-05 to 2010-11 were produced and were examined along with relevant balance sheet/other documents. The Assessing Officer with reference to the addition u/s 44AF submitted that the figures of purchases, sale and other expenses tallied with the books of 12 ITA Nos.192 to 194 & 370 (Asr)/2013 Asst. Years: 2007-08 to 2010-11 accounts examined. In the circumstances it become apparent that the provisions of section 44AF are not attracted in the case of the assessee as neither turnover is below the specify limit nor there is no maintenance of books of accounts. It is also a matter of facts that no discrepancy in the books of account has been pointed out nor anything has been found during the course of search operation to warrant any disallowance/addition. Therefore, the addition made by the Assessing Officer u/s 44AF is directed to be deleted.
7 The ground of appeal at Sr. No.4 pertains to an addition of Rs.3,80,127 which has been made by the Assessing Officer on the ground that as per statement of loan account No.700243 with Central Bank of India, Nawanshahar the assessee had made repayment of Rs.3,80,127/- and no evidence regarding the source had been filed. The appellant with regard to this addition submitted during appellate proceedings that the learned Assessing Officer mentioned unexplained bank deposits at Rs.1,85,000/- but made addition of Rs.3,80,127/- as discussed in para 9 of the assessment order. The appellant had also claimed deduction of Rs.1,00,000/- on account of repayment of house building advance u/s 80C of the Act. The appellant had also declared income of Rs.2,55,152/- from business and withdrawal from the business was also made. The repayment of loan was claimed to be out of known source of income. It is prayed that this addition may kindly be deleted.
9. I have considered the basis of addition made by the Assessing officer and the arguments of the AR on the issue. It is apparent that the repayment of loan has been made in cash over period of 12 months for which the assessee does not have any direct explanation. The assessee has only brought on record the fact of having withdrawn certain amounts for household withdrawals and the receipt of amounts from M/s K.C. Engineering College. The explanation of the assessee in this regard can not be said to be fully covered by the given facts even though certain amount of cash out of the withdrawals of Rs.2,55,152/- could be said to be available for repayment of loan. In the circumstances the addition made by the Assessing Officer is confirmed to the extent of Rs.1,00,000/-
10. The ground of appeal at Sr. No.5 pertains to an addition of Rs.31,10,000/- which has been made by the Assessing officer on account of alleged undisclosed income from brick kiln. The Assessing Officer in this regard has observed that the assessee during course of search stated that he had taken a brick kiln in the year 2007 on an annual lease of Rs.1,25,000/-. He further stated that another brick kiln had been taken on lease from one Shri Bhagat Singh of Rs.1,20,000/- during the year 2008 13 ITA Nos.192 to 194 & 370 (Asr)/2013 Asst. Years: 2007-08 to 2010-11 and the income from these business had not been disclosed in the return of income. The Assessing Officer also referred to page 1-5 of Annexure A-4 seized from the assessee's residence which contained the following description of stock with SBK Brick Kiln.
Date Stock of brick kiln
30.04.2009 3275800/-
30.05.2009 3985800/-
30.06.2009 3515400/-
30.08.2009 3871200/-
The said paper was explained has having been written for the purpose of obtaining bank credit limit. The Assessing Officer combined two statements of the assessee of running a brick klin and the above mentioned recording to hold that such business was kept out side the books of accounts. The Assessing Officer proceeded to work out production on the basis of monthly stock statement as reproduced above so as to work out the profit ofRs.31,10,000/-.
11. During the course of appellate proceedings, the AR of the appellant submitted his arguments on the issue as under:-
" This addition has been discussed in para 7 of the assessment order. The information on the on the basis of which addition had been made relate to financial year 2009-10, where as the relevant previous year is from 01.04.2006 to 31.03.2007. The statement are not signed by any one. The purpose for which the statements were prepared are not known. Those statements, could be even for purpose of bank. Even no evidence of sale of any good was found. The ld. Assessing Officer had referred to statement recorded at the time of search u/s 132 of the Act. Even in that statement the appellant mentioned that he had taken a brick kiln on lease in the year 2007, that it can be interpreted safely that the assessee had not done any business in his individual capacity during the relevant previous year. It is a well known fact that in such circumstances brick kiln cannot be operated without partnership because the person to whom licnese of brick kiln has been issued is required to be one of the persons for that business. If partnership deed is not written, the assessment is required to be made in the status of association of person for that business. If partnership deed is not written, the assessment is required to be made in the status of association of person. However, it appears that the appellant wanted to do business of brick kiln in partnership with some other persons in 14 ITA Nos.192 to 194 & 370 (Asr)/2013 Asst. Years: 2007-08 to 2010-11 subsequent years. Even the application for renewal of license of brick kiln was rejected. In the order of rejection of brick kiln license, it is clearly mentioned that Surinder Pal Gandhi was one of the partners. In such circumstances the learned Assessing Officer gravely erred to hold that the assesee had done the business of brick kiln and estimated income at Rs.31,10,000/- The addition is without any basis. It is prayed that the addition may kindly be deleted. Photocopies of the documents providing that the appellant was only one of the partners. Even if, for the sake of argument it is presumed that brick kiln business was doe, income from that business could be assessed in the hands of firm or association of persons. The Assessing Officer of Central Circle-II, was not having jurisdiction to assess eth person who might have as per the presumption of the Assessing Officer, done business of brick kiln. It is again prayed that this addition may kindly be delete."
12. The submissions of the appellant were sent to the Assessing Officer and the Assessing Officer only reiterated the observation as contained in the assessment order.
13. I have considered the basis of addition made by the Assessing Officer and the arguments of the AR on the issue. It is quiet apparent that the business of brick kiln had been carried out by the assessee as stated by him during the course of statement recorded at the time of search operation. Further there is evidence of the stock available at the end of month during the financial year 2009-10. However, the assessee during the course of appellant proceedings has brought on record evidence in the form of partnership deed executed in the months of January 2007 which clearly shows that the impugned business had been carried out by a partnership firm with the name and style M/s Surindra Brick Kiln and the sales tax return for various years had also been filed as a partnership firm only. The said evidence has not been credited afresh which is evident from the nature of documents produced. The Assessing Officer during the course of appellate proceedings did not bring on record a contradictory evidence to show that the name of the appellant in this regard was factually incorrect. Therefore, the income emanating out of the business of brick kiln which very clearly had been carried out by the firm can not be assessed in the hands of the assessee as a proprietor. Even otherwise no evidence in the year under consideration has been brought on record even with respect to the business of the firm as the stock position found during the course of search is with respect to the Asstt. Year 2010-11 only. However, the Assessing Officer on careful perusal of the facts of the case may proceed to reopen specific years in respect of the firm so as to bring to tax any income that would have escaped assessment. The 15 ITA Nos.192 to 194 & 370 (Asr)/2013 Asst. Years: 2007-08 to 2010-11 addition made in the hands of the assessee is therefore, directed to be deleted.
14. The ground of appeal at Sr. No.6 pertains to an addition of Rs.49,49,206/- which has been made by the Assessing Officer by treating the credits in bank account No.1552508202 of M/s K.C.Autors maintained with Central Bank of India, Nawanshahar or unexplained. The Assessing officer in this regard also observed that the assesee took dealership of TVS Motor Cycle in the name and Style M/s K.C. Autos but no income from this business had been reflected in the return of income. During the course of appellate proceeding the AT submitted that the said business of M/s K.C. Autos had been carried out in a partnership concern with the name and style M/s. K.C. Autos and return of income of said partnership firm had been filed from time to time. The appellant also submitted evidence of this claim in this regard. The Assessing Officer during the course of appellate proceedings verified the claim of the appellant and submitted that the partnership deed of M/s K.C. Autos was dated 18.8.2004 and the return of income for the same had also been filed and the assessee' PAN was AAHFK5844P. In view of the clear facts that the business of Auto dealership was in the name of the firm and said firm had filed its return of income, no addition could be made in the hands of the appellant. The same is directed to be deleted. The Assessing Officer may proceed to take consequential action in the case of firm, if impugned transactions are unaccounted.
8. In ITA No.370(Asr)/2013 for A.Y:2010-11 The learned CIT(A) in respect of income from General Store and Cement Store, in respect of income from Brick Kilns and for Unexplained credits in Bank Account No.1552508202, allowed relief to the assessee in this year also by recording similar findings.
9. As regards the addition of Rs.3,80,127 as unexplained credits in Bank Account No.700243, the learned CIT(A) confirmed the addition to the extent of Rs. 1 lac by holding similar findings as in earlier years reproduced above in earlier part of this order.
16 ITA Nos.192 to 194 & 370 (Asr)/2013Asst. Years: 2007-08 to 2010-11
10. As regards the addition of Rs.2,22,340/- as unexplained jwellery the learned CIT(A) allowed relief to the assessee by holding as under:
"17 I have considered the basis of addition made by the Assessing Officer and the arguments of the AR on the issues as well as the report of Assessing officer in the remand proceedings. It is a matter of fact that the jwellery found during the search operation belonged to three ladies in the house and none of them is wealth tax assessee. It is also a matter of fact that no statement has been recorded during the course of search operation on the issue of accountability of impugned jewellery and same has not been seized on the basis of CBDT circular referred to by the appellant. It is clear that the circular referred to by the appellant is meant for the procedure to be adopted by the Authorized Officers during the course of search operation in order to minimize the inconvenience associated with seizure of jewellery especially when the same is within certain limits as prescribed therein. However, the same is not applictble to the Assessing Officer for the purpose of assessment. The Assessing officer has given allowance of Rs.1,50,000/- being istridhan which to my kind could not be appropriate and reasonable especially when there are tow ladies and three males living jointly and no other jewellery has been found from the residence/lockers. It is also a fact that no evidence of purchase of jwellery during the year or earlier years has been found and the amount of jwellery recovered is well within the normal jewellery owned by ladies belonging to reasonably affluent families. Further the jwellery in question is not too high in value so as to warrant the conclusion that the same is unaccounted to the extent held by the Assessing Officer. Therefore, addition made by the Assessing Officer in this regard is directed to be deleted. "
11. Coming to last addition of Rs.4,86,25,000/- , which the Assessing Officer had made on account of unexplained investments in land, the learned CIT(A) deleted the same by holding as under:
"19. During the course of appellate proceeding, the AR of the appellant submitted his arguments on the issue as under:
"The addition of Rs.4,86,25,000/- is discussed in para 11 of the assessment order. The paper on the basis of which addition has been made was seized from hotel K.C. Residency, Chandigarh. The 17 ITA Nos.192 to 194 & 370 (Asr)/2013 Asst. Years: 2007-08 to 2010-11 document which is deaf and dumb was not found at the place which is in possession of the assessee. Even the document was not in control of the appellate. In such circumstances the presumption u/s 132 (4A) of the Act is not applicable. Even that document was not confronted to the assessee in the course of assessment proceedings. With great difficulty the assessee could get a copy of that paper and declare that none of the properties mentioned in that document ever belonged/owned by the appellant. The appellant has also filed an affidavit to this effect. Even the market value of those properties has been calculated at Rs.1,91,00,000/- and again at the lower half of that document at Rs.1,29,00,000/-. Even on that basis of Rs.4,86,25,000/- is not sustainable. The appellant is not in a position to state the purpose for which that paper was prepared or was used for any purpose by any person. It is prayed that this addition may kindly be deleted."
20. The submissions of the appellant were sent to the Assessing Officer for his comments and he reiterated the observations of the AO in the assessment order. I have considered the basis of the addition made by the AO and the arguments of the AR on the issue and the comments of the AO in the remand report. First of all, it needs to be appreciated that the document relied upon by the AO and had been found from the premises of M/s. K.C. Residency, a hotel in which the assessee does not have any share and which is owned by Sh. Prem Gandhi and the primary onus of explaining the same should have been on him only. The said paper is in the form of a print out and therefore, not written by the assessee himself and the AO has neither during the assessment proceedings nor during the appellate proceedings examined the issue as to why the same had been prepared. However, since the impugned paper records the name of the assessee as the one to whom the detailed properties belong, it was correct to call the assessee's explanation on the same as well. The assessee on his part as explained that apart from owning one house as recorded in the impugned paper, he does not own or had ever owned any other property. In the face of this clear cut denial, the AO is expected to bring on record any evidence in the form of revenue records to show that assessee had been owner of the impugned properties. Here again, the issue is that the properties have been mentioned in a manner that the same can not be located with given information. If the assessee was the real owner of the properties in question, the evidence of same in the form of title papers should have been found during the course of search operation which is not the case. There is only one property out of entire list which is identifiable, i.e., the residential house in which 18 ITA Nos.192 to 194 & 370 (Asr)/2013 Asst. Years: 2007-08 to 2010-11 the assessee was found to be living at the time of search. The said house has also been recorded at a value aof Rs.15,00,000/- which clearly shows that the paper records only perceived valuation and not the investment done by the assessee. The list of properties is therefore, at best a valuation and therefore, cannot be treated as investment. In the circumstances, the AO was directed to call for a report from the office of the Tehsildar/Patwari of relevant revenue district to bring on record the evidence of the assessee actually owning immovable property as recorded in the seized document. The AO vide his report dated 06.03.2013 submitted the information as obtained from the office of the Tehsildar as under:
"In this connection, it is submitted that as per your letter No.1277 dated 29.02.2013, the information from the Tehsildar office, Nawanshahar, was called for u/s 133(6) of the I.T. Act, 1961 vide this office letter no.1814 dated 10.01.2013. Reply in response to your letter was also submitted before your goodself by this office letter No.2011 dated 7/11.02.2013. The bulk information from the Tehsildar Office, Nawanshahar has been received in this office today, i.e., 05.03.2013. The information received in this case is as follows:-
Sr. Name of Khewat Description Jamabandi/Hadb Address of No. the No./Khaton of the ast no. the property assessee i no. property Khasra no.
1. Surinder 1734/2018 2908/2057 2007-08/126 Bhagat Pal Singh Nagar, Gandhi Nawanshah ar
2. -do- 2568/2983 106 -do- -do-
3. -do- 2569/2984 107 -do- -do-
4. -do- 153/172 5814/53. -do- -do-54 5816/55
5820/57, 5822/25 78
5. -do- 8/12/3 2007-08/162 Vill. Saloh, Tehsil Nawanshah ar
6. -do- 291/270/3 2007-08 -do-
237. -do- 387/351, -do- -do-
4558. -do- 560/527 62/5/2 -do- 135 Barnala 683 Kalan, 19 ITA Nos.192 to 194 & 370 (Asr)/2013 Asst. Years: 2007-08 to 2010-11 Nawanshah r
9. -do- 547/515 62/11 -do-135 -do-
67010. -do- 546/514 62/10 -do-135 -do-
66911. -do- 519/488 59/4/2 -do-135 -do-
64012. -do- 518/487 59/3 -do-135 -do-
63913. -do- 175/175.1 1/7/2 2006-07/127 Durgapur, 71 219 Nawanshar 13 -do- 54/51 21/225/2/ -do-127 -do-
A 86 214 -do- 205/6687 -do- -do-
part
21. The report of the Assessing Officer went given to the AR for his comments which were received as under:
"In inviting reference to the discussion we had, it is to inform you that the available land as per letter dated 06.03.2013 of the DCIT of Income Tax Central Circle II is as under:-
Sr. No. as per letter referred to above. Area of land remaining
1. Bhagat Singh Nagar, (NII) 1/3 of 1 sarsai ie.
Nawanshar. 0.375 sq ft. 2. -do- 0.36 marlas 3. -do- 0.69 marlas 4. -do- 2.25.sarsai i.e. 2.38 marlas 5. V. Saloh (NIL) ¼ of sarsai 6. V. Saloh (NIL) 0.5 sq ft. 7. V. Saloh 0.5 sq. ft. 8. Barnala Kalan 3 marla 9. Barnala Kalan 0.15 sq ft. 10. Barnala Kalan 4.56 marlas 11. Barnala Kalan 1.175 marla 12. Barnala Kalan 25 sq ft 13. Durgapur, Nawanshahr 5 sq ft 13.A Durgapur, Nawanshahr 9 sq ft. 14. Durgapur, Nawanshahr 17 sq ft.
It is again brought to your kind notice that the areas left are not available to the assessee. The valuation is because of the time of purchase of land as per jamabandi was mentioned in the deed and the land at the time of sale actually available at the spot was mentioned in the sale.20 ITA Nos.192 to 194 & 370 (Asr)/2013
Asst. Years: 2007-08 to 2010-11
22. The AR further submitted the following on the issue:
" In continuation to our letter dated 12.03.2013. It is again submitted that addition of Rs.4,86,25,000/- is based on deaf and dumb paper to which provisions of section 132(4A) of the Act are not applicable. Another attempt to locate the records of the aproperties mentioned in letter dated 06.03.13 of the Assessing Officer was made. Properties mentioned at serial no.2 and 3 were purchased on 22.10.1999by Surinder Pal, Subash Chander, Prel Pal sons of Khushhal Chand and at present the balance land remains at 0.36 and 0.69 marlas. This variation may be because of the fact that at the time of purchase the area as mentioned in the jambandi was considered and at the time of sale area actually available was mentioned in the sale deed. A photocopy of the purchase deed is attached. Land measuring 21 kanals 2 marlas mentioned at s. no.4 of letter under reference was purchased by Surinder Pal, Prem pal, Ashwani Kumar and Subash Chander sons of Khushhal Chand on 20.07.1993. As photocopy of the purchase deed is enclosed. At present the balance land out of that remains is only 2 marlas and 2.5 sarsaies. This difference could also be due to difference in measurement at the time of purchase and sale. The land mentioned at serial no.5 measuring 45 Kanal 19 marlas was purchased on 10.02.1998 by Suriner Pal, Subahs Chander, Ashwani Kumar sons of Khushal chand and at present there is no land. Land mentioned at serial no.8,9,10 were purchased on 22.09.1999 by Surinder Pal, Subash Chander, Ashwani Kumar sons of Khushhal Chand and the balance land remains only a few marlas which may be due to variation in measurement. Land mentioned at serial no.13 was purchased on 25.01.1999 by Suriner Pal, Ashwani Kumar sons of Khushhal Chand and 25.01.2000. the information in respect of serial no.6,7,12 and 14 is incomplete and the assessee is not in position to comment on those items. Similar is the position regarding land mentioned at serial No.1. The assessee again declared that no investment in purchasing any land was mad during the previous year relevant to the assessment year 2010-11.
It is again prayed that this addition of Rs.4,86,25,000/- may kindly be deleted."
23. I have considered the facts of the case in the light of the report of the Assessing Officer based upon the revenue records and the factual clarification given by the appellant as detailed above. It is quite clear that the lands owned by the appellant along with his other brothers are very insignificant in terms of area so as to be of any value. Further, there is no evidence even to hold that the said insignificant valuable immovable properties/plots were purchased in the year under consideration. In fact, the evidence is quite to the contrary as the said assets have been 21 ITA Nos.192 to 194 & 370 (Asr)/2013 Asst. Years: 2007-08 to 2010-11 purchased in the year 1986 and 1989 as evidenced by the copies of the registration deeds. The entire exercise in this regard has clearly pointed out that the records on the said papers do not have relationship with the assets actually owned by the assessee or investment made by the into them. In fact, the list contains unidentifiable properties which have been valued with no relationship with regard to the actual investment. The seized paper therefore can not be taken to be the basis for making addition of Rs.4,86,25,000/- being assessee's unexplained investment into the purchased of said properties. The evidence on record is more than sufficient to hold that the said list is actually an estimation/valuation only. In the circumstances, the addition made is directed to be deleted."
12. Aggrieved the order the Revenue is in appeal before us.
13. The learned DR, argued that Assessing Officer had given sufficient opportunities to the assessee but he did not cooperate with the assessment proceedings, therefore, Assessing Officer was bound to complete assessment on the basis of material on record. He further submitted that learned CIT(A) has wrongly admitted additional evidences and, therefore, he had wrongly allowed relief to the assessee.
14. As regards merits of the additions deleted by learned CIT(A), learned DR heavily placed his reliance on the order of Assessing Officer.
15. The learned AR, on the other hand, regarding objection of Revenue for admission of additional evidences submitted that the learned CIT(A) has passed a detailed order for admissions of evidences and similarly he has passed a detailed order in respect of additions and he relied upon the order of learned CIT(A).
16. We have heard the rival parties and have gone through the material placed on record. We find that the primary objection of Revenue is the grievance of admitting the additional evidences by the learned 22 ITA Nos.192 to 194 & 370 (Asr)/2013 Asst. Years: 2007-08 to 2010-11 CIT(A), specifically in view of the fact that Assessing Officer had provided sufficient opportunities to the assessee. It is a fact that Assessing Officer had issued a number of notices but the cases of the assesee were centralized by CIT on dated 10.08.2010, however, the said order of centralization had been cancelled by the CIT on 28.10.2011 meaning thereby that the Assessing Officer did not have the jurisdiction for the intervening period and therefore, various notices issued and their compliance/non compliance had no legal authority specially as the assessee had challenged jurisdiction of Assessing Officer on the basis of erroneous centralization order. We further find that CIT(A) finally passed the jurisdiction order centralizing the cases back to the Assessing officer w.e.f, 14.11.2011 and the order of assessments were passed on 26.12.2011, for assessment year 2007-08, 2008-09 and 2009-10 for 2010-11 was passed on 28.11.2011. These findings has been recorded by learned CIT(A) while admitting the additional evidences. From the above findings recorded by learned CIT(A) we find that he has rightly held that assessee was provided insufficient opportunity and, therefore, he has rightly admitted the additional evidences. Further more we find that the additional evidences were at the root of additions which were necessary for consideration and learned CIT(A) had forwarded such additional evidences to Assessing Officer for his remand report and had also considered the remand report while allowing relief to the assessee. In 23 ITA Nos.192 to 194 & 370 (Asr)/2013 Asst. Years: 2007-08 to 2010-11 view of the above, we hold that learned CIT(A) had rightly accepted the additional evidences.
17. As regards the deletion of additions on merits, we find that as regards additions u/s 44AF, the learned CIT(A) has held that the turn over of the assessee was exceeding prescribed turn over for declaration of profits u/s 44AF and moreover the he has held that the books of accounts of assessee were produced and Assessing Officer had verified figures of purchases and sales and other expenses and which tallied with the books of accounts and therefore, he has rightly deleted the addition made u/s 44AF of the Act.
18. As regards income from Brick Kiln the learned CIT(A) has recorded a finding of fact that the business of Brick Kiln was not done by assessee and rather it was being done by a partnership firm which was a separate legal entity. He has further held that Mr. Surinder Pal Gandhi was one of the partners in such firm and the name of firm was M/s. Surinder Brick Kiln. He has further held that sales tax returns for various years has also been filed as partnership firm only. Therefore, in view of all these facts and circumstances the addition in the cases of the assessee was not warranted as M/s. Surinder Brick Kiln was a separate legal entity.
19. Coming to the additions made in the Bank Account No.1552508202 we find that this account related to the partnership firm 24 ITA Nos.192 to 194 & 370 (Asr)/2013 Asst. Years: 2007-08 to 2010-11 with the name and style of M/s K.C. Autos and return of this firm had been filed from time to time. The learned CIT(A) has further noted that M/s K.C. Autos was a partnership firm having PAN No.AAHFK5844P and therefore, the learned CIT(A) has rightly deleted this addition as the bank account on the basis of which the addition was made never belonged to the assessee and rather it belonged to a different assessee and which was a partnership firm.
20. As regards unexplained deposits in Account No. 700243, we find that learned CIT(A) had confirmed part addition. The learned CIT(A) has further held that though a part of the depsoits in the bank was explainable from the cash received from M/s. K.C. Engineering College but the full amount of deposits was not explainable, therefore, he had rightly confirmed the addition of Rs.1 lac in all these years.
21. As regards the addition on account of unexplained investments we find that Assessing Officer had made this addition on the basis of seized documents listed at page 107 Annexure-2 wherein the list of land of Sh.
Surinder Pal Gandhi was placed. The assets were listed at Rs.1,91,00,000/- and from another list Assessing officer observed that assessee had assets of Rs.1,29,00,000/-. The Assessing Officer further on the basis of seized documents observed that there was another list at page 56 which contained the assets of assessee to the tune of 25 ITA Nos.192 to 194 & 370 (Asr)/2013 Asst. Years: 2007-08 to 2010-11 Rs.1,90,25,000/-. The Assessing Officer, therefore, made an addition of Rs.4,86,25,000/- after allowing the benefit of Rs.24,00,000 for a property which was listed twice in the list. The learned CIT(A) has made a finding of the fact that said asset has been purchased in the years 1986-1989 on the basis of copies of registration deeds. The learned CIT(A) has further made a finding of fact that the list of properties contains unidentified properties which have been valued with no relationship with regard to the actual investment. The learned CIT(A) had also directed the Assessing Officer to obtain a report from the office of Tehsildar / Patwari of Revenue bring on record the actual dates of purchases of properties.
The Assessing Officer vide his report dated 6.3.2013 submitted the information as obtained from the Office of Tehsildar. The bulk information received from Tehsildar has been reproduced by the learned CIT(A) at page 16 to 17 of his order. The said report of Tehsildar sent to Assessing Officer was confronted to the assessee. In the reply to the said vide letter dated 12.03.2013, the assessee explained the dates of purchases of various properties which the learned CIT(A) has reproduced at page 18 of his order. From the above reply of assessee it was observed by learned CIT(A) that no investment was made in the year under consideration, therefore, he has rightly deleted the additions as the investment in properties never belonged to the year under consideration.
In view of the above detailed and exhaustive findings of learned CIT(A) in 26 ITA Nos.192 to 194 & 370 (Asr)/2013 Asst. Years: 2007-08 to 2010-11 respect of every addition we do not intend to interfere in the above said order, therefore, all the appeals filed by Revenue are dismissed.
22. In nutshell, the appeals filed by Revenue as well as Cross Objections filed by assessee are dismissed.
Order pronounced in the open Court on 1st July, 2016.
Sd/- Sd/-
(A.D. JAIN) (T. S. KAPOOR)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated: 01.07.2016.
/PK/ Ps.
Copy of the order forwarded to:
(1) The Assessee:
(2) The
(3) The CIT(A),
(4) The CIT,
(5) The SR DR, I.T.A.T.,
True copy
By order