Johri Lal Sodhani, Jaipur vs Assessee

Jh vkj-ih-rksykuh] U;kf;d lnL; ,oa Jh Vh-vkj-ehuk] ys[kk lnL; ds le{k BEFORE: SHRI R.P. TOLANI, JM & SHRI T.R. MEENA, AM

vk;dj vihy la-@ITA No. 186/JP/2014 fu/kZkj.k o"kZ@Assessment Year : 2010-11

Shri Johri Lal Sodhani, cuke The Commissioner of Income D-105, Siwar Area, Bapu Vs. Tax (Central), Jaipur. Nagar, Jaipur. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AGWPS 7021 B vihykFkhZ@Appellant izR;FkhZ@Respondent

fu/kZkfjrh dh vksj ls@ Assessee by : Shri P.C. Parwal (C.A.) jktLo dh vksj ls@ Revenue by : Smt. Rolee Agarwal (CIT).

lquokbZ dh rkjh[k@ Date of Hearing : 09/12/2014 ?kks"k.kk dh rkjh[k@ Date of Pronouncement : 16/01/2015

vkns'k@ ORDER

PER: T.R. MEENA, A.M.

This is an appeal filed by the assessee against the order dated

21/2/2014 passed by the learned CIT (Central), Jaipur for A.Y. 2010-11.

The effective grounds of appeal are as under:-

"1 Under the facts and circumstances of the case, the order passed by the learned CIT holding the order passed by the A.O. u/s 143(3) dated 29/12/2011 as erroneous and prejudicial to the interest of the revenue is illegal and bad in law and be quashed.

2 ITA 186/JP/2014_ Johari Lal Sodhani Vs. CIT

2 The learned Commissioner of Income Tax has erred on facts and in law in directing the A.O. for doing verifications before considering the alleged short surrender of cash of Rs. 76,76,080/- by making irrelevant objections ignoring that after making such verifications only, the A.O. has framed the assessment order U/s 143(3) by accepting the explanation of the assessee."

2. In this case, order U/s 143(3) of the Income Tax Act, 1961

(hereinafter referred as the Act) was completed by the learned

Assessing Officer on 29/12/2011 at Rs. 1,39,22,987/-. The Assessing

Officer observed that there was a search/seizure operation in this group

on 20/10/2009. During the course of search, cash/jewellery, stock in

trade, valuables, documents, books of account and/or loose papers

were found and/or seized from the premises of the members of the

Sodhani Sweets Group of which one such member happens to be the

assessee. The assessee filed return for A.Y. 2010-11 on 27/10/2010 at

total income of Rs. 1,09,99,050/-. The case was scrutinized U/s 143(3)

of the Act. During the course of search, the assessee in his statement

recorded on oath U/s 132(4) of the Act on 20/10/2009 admitted to an

undisclosed income, which was advanced by him as loan through his

relative and acquaintances. In reply to question No. 18, the assessee

stated that he had no account of the amounts of loans advanced to

persons which according to him was done purely on the basis of faith 3 ITA 186/JP/2014_ Johari Lal Sodhani Vs. CIT

and confidence of his close relatives as well as friends. This fact was

again admitted by the assessee in reply to question No. 19 in which he

additionally stated that he has discussed the matter of surrender with

his wife. The assessee filed detail of surrender vide letter dated

10/11/2009 under the various heads and reiterated the surrender made

by him in his above referred statement. The assessee surrendered an

amount of Rs. 34,60,400/- on account of loan advanced to people as

well as to cover up discrepancies found during the course of search.

While examining the return of income for the year under consideration,

it was noticed that the assessee had disclosed only an amount of Rs.

5,36,063/- out of Rs. 34,60,400/-. The learned Assessing Officer gave

reasonable opportunity of being heard on this issue, which was

responded by the assessee vide letter dated 27/12/2011, which is

reproduced as under:-

".......It is with reference to your order sheet query whereby it is required to explain why the assessee has not offered the amount of Rs. 34,60,400/- in the return, which was surrendered by him in his statement recorded U/s 132(4) as a part of the total surrender of Rs. 2 crores. In this connection we are to submit as under:-

1. In letter dated 24/11/2011 we have furnished a chart explaining the income offered by the

4 ITA 186/JP/2014_ Johari Lal Sodhani Vs. CIT

assessee/company in which he is director vis a vis the amount surrendered at Rs. 2 crore in statement u/s 132(4).

2. From that statement it can be noted that amount offered in the return is Rs. 1,10,40,000/- as against Rs. 2 crores stated in statement u/s 132(4). The difference is of Rs. 89,60,000/-. This difference is on two counts. One is on account of cash where instead of Rs. 98,39,600/- surrendered u/s 132(4), the amount offered in the return is Rs. 21,63,520/-. The difference is Rs. 76,76,080/-. This difference is mainly on account of the not recording of sales of few days before the date of search in the books of Sodhani Sweets Pvt. Ltd.. To this effect assessee has also clarified the position before the ADIT(Inv.) vide letter dated 15/12/2009. After including such sales made in regular course of business, the difference in the cash found and that as per the books of accounts has reduced to Rs. 21,63,520/-, which is offered in the return by the assessee. Thus the cash representing the sale is otherwise considered in the income.

3. It may be noted that in statement u/s 132(4) to make the total surrender at Rs. 2 crores, assessee offered Rs. 34,60,400/- as undisclosed advances 5 ITA 186/JP/2014_ Johari Lal Sodhani Vs. CIT

given through the relatives. Against this, assessee has offered Rs. 8.40 lacs as other income in Sodhani Sweets Pvt. Ltd. which was not surrendered in statements, Rs. 8,00,417/- (40,00,417 - 32,00,000) extra amount offered towards investment in construction of workshop and shop at Ajmer Road and Rs. 5,36,063/- to cover any other discrepancies. Thus, against Rs. 34,60,400/- assessee has offered an amount of Rs. 21,76,480/- (8,40,000 + 800,417 + 5,36,063) leaving a difference of Rs. 12,83,920/- (34,60,400 - 21,76,480).

4. In search no evidence is found that assessee has advanced any other amount other than those specifically mentioned in the statement through his relatives. The surrender was made to make the amount round about to Rs. 2 crores. This fact was specified in letter filed before the Addl.DIT/DDIT on 15/12/2009.

In view of above facts no separate addition for Rs. 34,60,400/- or for that matter of Rs. 12,83,520/- be made in the income of the assessee....."

The learned Assessing Officer considered the submissions of the

assessee carefully and held that the appellant reaffirmed the fact of

surrender of Rs. 34,60,000/- in his statement and also confirmed that

advance of loan to people more than one occasion including admitting 6 ITA 186/JP/2014_ Johari Lal Sodhani Vs. CIT

the same in his statement recorded on oath U/s 132(4) of the Act. He

further relied upon the decision in the case Hotel Kiran Vs. CIT 82 ITD

453 (Pune) and in the case of Prasanchand Surana Vs. ACIT 71 TTJ 466

and made addition of Rs. 29,23,937/- in the income of the assessee.

3. The learned CIT (Central) found the order of the Assessing

Officer erroneous and prejudicial to the interest of the revenue. The

learned CIT observed that during search, Rs. 2 crores was surrendered

by Shri Johari Lal Sodhani, however, only Rs. 1,02,00,000/- was

declared by him in his return of A.Y. 2010-11 as per letter dated

24/11/2011 of the AR filed during assessment proceedings. The details

given below clarify:

Surrender Declared in return * Cash found Rs. 98,39,600 Rs. 21,63,520 * Advances against Purchase of plots Rs. 30,00,000 Rs. 30,00,000 * Construction of workshop At Kartarpura Ind. Area Rs. 22,00,000 Rs. 29,62,461 * Construction of shop of Sodhani Sweets Ajmer Road Rs. 10,00,000 Rs. 10,37,956 * Investment in Jewellery Rs. 5,00,000 Rs. 5,00,000 * Advances to close relatives Rs. 34,60,400 Rs. 5,36,063 Rs. 2,00,00,000 Rs. 1,02,00,000

As against surrender of Rs. 2,00,00,000/- only Rs. 1,02,00,000 were declared in the return by the assessee. The computation filed with return is given below:

Income from salary Rs. 8,80,000 Income from house property at 7 ITA 186/JP/2014_ Johari Lal Sodhani Vs. CIT

Vasundhara colony Rs. 1,08,262 Income from other sources Interest from Bank Rs. 7,853 Interest from parties Rs. 4,32,600 Income offered for tax Rs. 1,02,00,000 Rs. 1,06,31,453

Less

Interest paid to parties Rs. 2,69,966 Brokerage for fund borrow Rs. 34,068 Bank charges Rs. 112 Rs. 3,04,146 Gross Total income Rs. 1,10,99,045 Less Chapter VI A deduction Rs. 1,00,000 Total income Rs. 1,09,99,045

The learned CIT again reiterated the facts of letter dated 24/11/2011

furnished during the course of assessment proceedings. It has been

held that out of surrender of Rs. 2 crores, surrendered to the extent of

Rs. 1,02,00,000/- had been offered in the return of the assessee in A.Y.

2010-11 and Rs. 8,40,000/- is claimed to have been offered in the

return of income to M/s Sodhani Sweets Pvt. Ltd. for A.Y. 2010-11 as

other income (from sale of scrap). Thus, surrendered to the extent of

Rs. 1,10,40,000/- is claimed to have been honoured. The learned CIT

has referred the contents of letter dated 27/12/2011 submitted during

the course of assessment proceedings on page Nos. 3 and 4 of her

order and also reproduced the finding given by the Assessing Officer in

assessment order. She held that the learned Assessing Officer only 8 ITA 186/JP/2014_ Johari Lal Sodhani Vs. CIT

made addition of Rs. 29,23,937/- as advance to relative surrendered

but not disclosed in the return. The learned Assessing Officer finalized

the assessment without giving any finding with respect to short

disclosure of cash to the extent of Rs. 76,76,080/-. The learned

Assessing Officer finalized the assessment without giving any comment

on the reply of the assessee, quoted in the assessment order, thus

leaving it vague whether Rs. 76,76,080 had been overlooked to be

added or had been omitted to be added back after proper application of

mind. Therefore, it has been held that the Assessing Officer's order

dated 29/12/2011 is erroneous and prejudicial to the interest of the

revenue because, surrender on account of the undisclosed cash to the

extent of Rs. 76,76,080/- was not disclosed in the return and was not

added to the income in the assessment order dated 29/12/2011 passed

U/s 143(3) for A.Y. 2010-11 without specifying the reasons, without

giving any finding. The learned CIT gave a show cause notice on the

above fact, which was replied by the learned AR on 08/1/2014, which

has been reproduced by the CIT on page Nos. 6-7 of her order, it has

been found that surrender was revised by the assessee through letter

addressed to the ADIT, cash sales, which were not posted on the date

of search in the cash books have since been posted in the cash book of 9 ITA 186/JP/2014_ Johari Lal Sodhani Vs. CIT

the company and have been accepted in the scrutiny assessment of the

company (Sodhani Sweets Pvt. Ltd) for A.Y. 2010-11. After considering

the assessee's reply, it has been held that the learned Assessing Officer

has not verified the cash sales made as per annexure-1 annexed with

the order U/s 263 of the Act. The cash book balance at Rs. 83,86,096/-

showing balance of company as on date of search, the assessee was

washing his hand off from honouring the disclosure made during search

on account of cash seized of Rs. 98,39,600/- as sales not accounted. No

proofs whatsoever have been filed at any stage for claiming the above

sales/receipts nor for any payments. Through reply dated 24/11/2011

certain lists have been furnished to the A.O. of the company in support

of sales and expenses. As sample copy of page 8 of the list in support

of sales, given with reply dated 24/11/2011 of the A.R. during

assessment proceedings has been enclosed as Anneuxre-3 alongwith

her order. This page shows bill number and during the course of search

at the time of recording statement, the assessee never stated that the

cash found at residence was recorded in the bill books. The surrender

was categorically that the sales were not recorded. Such bill books were

not found nor seized, and the claim of bill numbers is only an

afterthought. She again referred the Annexure-4 enclosed with her 10 ITA 186/JP/2014_ Johari Lal Sodhani Vs. CIT

order, shows the narration of cash purchase of ghee, packing material

and so on the so forth. This proves the point that proper proofs that

can inspire confidence were not furnished. She further held that such

sales acceptance by the A.O. of the company (M/s Sodhani Sweets P

Ltd) does not absolve the assessee from paying taxes on the amount

surrendered of cash of Rs. 98,39,600, as the same table is being relied

upon by the assessee for claiming liberation from payment of taxes. IN

the scrutiny assessment of the company even if Rs. 83,86,096 is

accepted as part of sales (of Rs. 10,90,46,258 as per P&L account),

then the point to take cognizance of is that the company has offered

only 6.43% of sales of Rs. 10,90,46,258 (as per P&L account of the

company) as net profit for taxation, which means only 6.43% of so

called sales declared of Rs. 53,18,872 + Rs. 8,40,000 has been offered

for taxation. That means only Rs. 3,96,015 (Rs. 61,58,872/6.43%) has

been offered for taxation in the return of the company. Here most

important point to mention is that during search in the statement

recorded u/s 132(4) on 20/10/2009 in response to question 16, the

assessee stated that cash in hand of the company (even if all sales and

expenses not posted in books are taken into account), then too cash in

hand of M/s Sodhani Sweets P Ltd. will come to Rs. 6,44,200 only. The 11 ITA 186/JP/2014_ Johari Lal Sodhani Vs. CIT

assessee confirmed in reply to question 17 that the amount of Rs.

98,39,600 is related to him and is not entered in regular books of

accounts of the company and surrendered this amount willingly for

taxation. The contention that cash balance as on 20/10/2009 in the

cash book of the company is Rs. 83,86,096/- is only an afterthought

and also an eyewash, which is in total negation of the acceptance in

statement U/s 132(4) by the assessee that even if all entries were

incorporated till 20/10/2010 (date of search) in the books of Sodhani

Sweets P Ltd., then too cash balance in the company's books would be

at Rs. 6,44,200 only. Moreover, cash balance in company's books

irrespective of the amount, does not obliterate the presence of huge

cash at residence which was accepted by the assessee as his own

income u/s 132(4).

It is seen that the A.O. has not verified the contention of the

assessee with respect to cash found at residence (as cash sales of

seven days prior to the date of search) vis a vis cash deposits made in

the bank accounts of the company and of Shri Johari Lal Sodhani.

The bank account of the company (M/s Sodhani Sweets P Ltd.)

maintained at the Urban Co-operative Bank Ltd., Bapu Nagar, Jaipur

shows following cash deposits:

12 ITA 186/JP/2014_ Johari Lal Sodhani Vs. CIT

Date Amount in Rs. 10/10/2009 4,00,000 12/10/2009 2,00,000 13/10/2009 2,00,000 15/10/2009 4,00,000 Search took place on 20/10/2009, therefore, the argument that cash

sales of seven days prior to the date of search were lying at residence is

not tenable.

Another bank account of the company maintained at Punjab

National Bank, Tonk Road, Jaipur shows following cash deposits in

October. From the bank statement on record dates are not clear:

Rs. 4,00,000 Rs. 1,00,000 Rs. 1,00,000 Rs. 4,00,000 Rs. 7,50,000 NO effort has been made by the Assessing Officer to obtain clear dates

of October. The company has bank account in PNB, Johari Bazaar,

Jaipur and at Panch batti, Jaipur as well, which are not available on

record. Extracts of all bank accounts of Shri Johari Lal Sodhani are not

available on record. If the assessee has been regularly depositing cash

in the bank accounts then the availability of huge volume of cash at

residence is not fully explained.

The A.O. should have been seen the corresponding bank

accounts of the earlier assessment year A.Y. 2009-10 of the company

13 ITA 186/JP/2014_ Johari Lal Sodhani Vs. CIT

as well as all concerned at least of the period corresponding to the

festival of Diwali, to see the pattern of cash deposits.

As the assessee is regularly depositing in the bank accounts the

cash sales, so the availability of such huge volume of cash at the

residence of the assessee and also from the residence of the brother

who is not a Director in the private limited company which sells sweets,

is not explained. She further relied upon the decisions in the case of

Chuharmal V. CIT (1988) 172 ITR 250 (SC) and Surjeet Singh Chhabra

Vs. Union of India 1997 (89) ELT 646 (SC) and held that the order

passed by the learned Assessing Officer is erroneous and prejudicial to

the interest of the revenue.

4. Now the assessee is in appeal before us. The learned AR for the

assessee supported the order of the Assessing Officer and reiterated the

arguments submitted before the learned CIT. He further submitted that

from the facts stated, it can be noted that immediately after search,

assessee vide letter dated 01/12/2009 to DDIT (Inv.3) intimated the

position of cash as per books as on the date of search. Thereafter, in

course of assessment proceedings, assessee explained the position of

cash availability as per the books of accounts vide letter dated

24/11/2011 and 27/11/2011 according to which the cash availability as 14 ITA 186/JP/2014_ Johari Lal Sodhani Vs. CIT

per the books of accounts on the date of search worked out at Rs.

83,86,096/- after incorporating the cash sales and the cash payment

not recorded in the books. The cash receipt and the cash payment was

further supported by the detailed working of date wise cash sales and

cash payment. The Assessing Officer after examining the same has

accepted the cash positions as on the date of search at Rs. 83,86,097/-.

Therefore, the order passed by the Assessing Officer accepting the

above cash as per the books of accounts cannot be held to be

erroneous. Only because the Assessing Officer has not discussed this

issue in the assessment order, his order, which is made after detailed

inquiry cannot be held to be erroneous. To what extent, the Assessing

Officer should made investigation or discuss the issue in the assessment

order is a matter left to be wisdom of the Assessing Officer U/s 143(3).

Therefore, the order passed by the learned u/s 263 is not valid in law,

hence he prayed to quash the order of the learned CIT. He relied upon

the following case laws:-

(i) CIT Vs. Vodafone Essar South Ltd. (2013) 212 Taxman 184 (Del.)(HC).

(ii) Cit Vs. Ganpat Ram Bishnoi (2008) 296 ITR 292 (Raj.) (HC).

(iii) Cit Vs. New Delhi Television Ltd. (2013) 360 ITR 44/94 DTR 21 (Del.) (HC).

15 ITA 186/JP/2014_ Johari Lal Sodhani Vs. CIT

(iv) Cit Vs. Sunbeam Auto Ltd. (2011) 332 ITR 167 (Delhi) (HC).

(v) Mahish Kumar Vs. CIT (2012) 134 ITD 27/17 ITR (Trib.) 324 (Indore)(Trib).

(vi) CIT Vs. Gaberil India Ltd. 203 ITR 108, 113, 114 (Bom) (HC).

(vii) CIT Vs. Amit Corpn. (2012) 213 Taxman 19 (Guj) (HC). (Mag.)

(viii) Cit Vs. Leisure Wear Exports Ltd. (2011 341 ITR 166/202 taxman 130 (Magz) (delhi) (HC).

(ix) Pradeep Bandhu Vs. CIT (2013) 81 DTR 289 (Jd) (Trib.)

The learned AR further explained the short surrender of cash of Rs.

76,76,080 before the learned CIT in tabulation form. The learned AR

argued that during the search proceeding/assessment proceedings even

before the learned CIT, the appellant had explained the lower disclosure

with evidence. The Assessing Officer after due verification and inquiry

had accepted the cash available of Rs. 83,86,097/- in case of Sodhani

Sweets P. Ltd. and accordingly the unexplained cash of Rs. 21,63,520/-

offered by the assessee in the return of tax. Therefore, the order of the

Assessing Officer is not erroneous and direction given to the Assessing

Officer for doing verification keeping in mind that surrender was made

by assessee while assessment of company is being completed as

escaped goat for escaping tax, is illegal and bad in law. Hence order

passed by the learned CIT U/s 263 be quashed.

16 ITA 186/JP/2014_ Johari Lal Sodhani Vs. CIT

5. At the outset, the Sr. D.R. vehemently supported the order of the

learned CIT(Central), Jaipur and argued that the statement recorded

U/s 132(4) during the course of search proceedings is binding. The

appellant has not pin pointed during the course of recording of

statement at the time of search that certain cash bill book had been left

to be recorded and also not found and seized during the course of

search. Therefore, she requested to confirm the order of the learned

CIT.

6. We have heard the rival contentions of both the parties and

perused the material on record. The Assessing Officer gave the

reasonable opportunity of being heard on short disclosure of income in

the return on account of cash, which has been replied by the assessee

and considered by the Assessing Officer with detailed evidences. It is

true that he has not given detail findings in his order but does not

mean, has not considered the assessee's reply on this count. The

appellant also explained this difference before the DDIT at the time of

search, which has been again reiterated before the Assessing Officer at

the time of assessment and also during the course of 263 proceedings.

The statement recorded U/s 132(4) of the Act is an evidence under the

Income tax proceedings but is rebuttable. The appellant had calculated 17 ITA 186/JP/2014_ Johari Lal Sodhani Vs. CIT

the difference of cash on the basis of cash sales bill book which had not

been considered during the search proceedings. The learned CIT DR

had not found any defect in the computation made by the appellant

regarding cash sales and receipts not posted up to 20/10/2009,

payment remained/posted up to 20/10/2009. Mainly cash sales at

Lalkothi branch, cash sales as per machine at Lalkohti shop, mainly cash

sales at Ajmer Road branch, cash sales as machine at Ajmer Road shop,

sales worked out from seized material, cash sales as per bill book No.

3101 to 3200, recovery from debtors, payment for expenses and

payment for purchases, therefore, we do not find Assessing Officer's

order erroneous and prejudicial to the interest of the revenue.

Accordingly, the order of the learned CIT passed U/s 263 of the Act is

set aside.

7. In the result, the assessee's appeal is allowed.

Order pronounced in the open court on 16/01/2015.

Sd/- Sd/- ¼vkj-ih-rksykuh½ ¼Vh-vkj-ehuk½ (R.P.Tolani) (T.R. Meena) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member

Tk;iqj@Jaipur fnukad@Dated:- 16th January, 2015

*Ranjan 18 ITA 186/JP/2014_ Johari Lal Sodhani Vs. CIT

vkns'k dh izfrfyfi vxzsf'kr@Copy of the order forwarded to:

1. vihykFkhZ@The Appellant- Shri Johri Lal Sodhani, Jaipur

2. izR;FkhZ@ The Respondent- The CIT (Central), Jaipur..

3. vk;dj vk;qDr@ CIT, Jaipur

4. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur

5. xkMZ QkbZy@ Guard File (ITA No. 186/JP/2014)

vkns'kkuqlkj@ By order,

lgk;d iathdkj@Asst. Registrar