INCOME TAX APPEAL No.-58 of 2013 Appellant :- Commissioner Of Income Tax Kanpur Respondent :- M/S Kesarwani Sheetalaya Alld. Counsel for Appellant :- Krishna Agrawal,C.S.C.,Manu Ghildyal Counsel for Respondent :- Umesh Chandra Kesharwani,Suyash Agrawal Hon'ble Bharati Sapru,J. Hon'ble Rohit Ranjan Agarwal,J. 1. This appeal under Section 260-A of Income Tax Act, 1961 (hereinafter called as Act ) has been filed assailing order of Income Tax Appellate Tribunal, Allahabad (hereinafter called as ITAT ) dated 30.11.2012. 2. This appeal was admitted on 26.11.2013 on following question of law:- (1) Whether on ITAT erred in law as well as on facts in deleting addition of Rs.23,31,28,321/- made on account of investment in potatoes in disregard of all evidences on record, and fact that this belonged to one of partners Raj Kumar Kesarwani. (2) Whether ITAT has erred in law as well as in facts and circumstances of case in deleting addition of Rs.37,30,710/- made on account of difference of cash balance as reflected in balance sheet and cash as per seized documents on wrong appreciation of facts. (3) Whether ITAT was justified in substituting it own views which were based on interpretation of word either as used by both A.O. and C.I.T.(A) in coming to conclusion that case reflected was either bogus liability or unexplained cash. (4) Whether ITAT has erred in law as well as in facts and circumstances of case in directing A.O. to re-decide issue by considering books of [2] accounts produced by assessee, ignoring provision of Section 142A. 3. Thereafter two additional substantial questions of law were added which are as under:- 1. Whether ITAT is legally justified in reversing concurrent finding of fact of authorities below without appreciating material on record ? 2. Whether ITAT is legally justified in reversing concurrent findings of fact of authorities below in balance of fresh material placed before it ? 4. Respondent-assessee is partnership firm engaged in cold storage business having its Head Office at Sahson, Allahabad. dispute relates to assessment year 2008- 09. It appears that action under Section 132(1) of Act was taken in group cases of Kesarwani Zarda Bhandar, Allahabad and its partners on 27.8.2009. 5. Assessing Officer framed assessment under Section 153-A of Act on 28.12.2011 for assessment year in question. order of AO was challenged before Commissioner Income Tax (Appeals). major challenge by assessee was for two additions and dis-allowances of expenses. As far as challenge to addition by assessee was for Rs.37,30,710/- being lesser cash in hand as per seized paper as compared with books of account, in which assessee has shown more cash in hand. other major addition was of Rs.23,31,28,321/- on ground that assessee was engaged in business of potatoes. CIT(A) accepted addition so made by AO. 6. Being aggrieved assessee filed appeal before ITAT which was allowed to extent as far as addition of [3] amount of Rs.37,30,710/- and addition of Rs.23,31,28,321/- are concerned, while Tribunal remanded back matter to Assessing Authority as far addition of Rs.5,47,92/- on account of addition under heading building . 7. Sri Manu Ghildyal, learned Counsel appearing for Revenue submitted that ITAT was not correct in deleting addition of Rs.23,31,28,321/- made on account of investment in potatoes in disregard of all evidences on record, and further papers seized during search at residential premises of one of partners of assessee firm namely Raj Kumnar Kesarwani. He further submitted that actual cash with assessee firm was only Rs.27,39,932/- whereas in audited balance-sheet, amount was shown as Rs.64,70,642/- Thus difference of Rs.37,30,710/- was considered as unexplained income by Assessing Officer and same was added. Lastly, it was submitted that ITAT was not correct to reverse concurrent finding of fact recorded by Income Tax Authorities without appreciating material on record. 8. Per contra, Sri Ravi Kant, learned Senior Advocate assisted by Sri U.C. Kesarwani, learned Counsel for Assessee submitted that no papers were seized from residential premises of partners of firm and documents relied upon were seized from residence of Chartered Accountant, assessee being not author of document nor same having been signed by any of partners, nor Chartered Accountant examined at time of search or at assessment stage. It was further contended [4] that assessee had maintained proper books of account and AO had wrongly relied upon provisions of Section 68 of Act, which was not applicable in case, and subsequently in appeal, Commissioner of Income Tax (Appeals) held that provisions of Section 69A were applicable, which according to him, First Appellate Authority did not have power to change law to sustain addition. 9. He further submitted that assessee firm is not engaged in business of potatoes and assessee is running cold storage and business is of storing potatoes for which rent is realised from farmers who store agricultural produce in Cold storage. 10. assessee maintains complete record as far as storage of potatoes is done and assessee maintains storage (bhandaran) and delivery (nikasan) register and issues rent receipt for period for which potatoes are stored. 11. Sri Ravi Kant, learned Senior Counsel further placed on record U.P. Regulation of Cold Storage Act, 1976, which regulates functioning of Cold storage in State of Uttar Pradesh. 12. Section 2 (c) defines cold storage , means enclosed chamber insulated and mechanically cooled by refrigeration machinery to provide refrigerated condition to agriculture produce stored therein but does not include refrigerated cabinets and chilling plants. Further Section 2(d) defines word hirer means person who hires on payment [5] of prescribed charges spaces in cold storage for storing agricultural produce. Section 2(f) defines licensee means any person to whom licence is granted under this Act. Section 2(i) defines receipt means cold storage receipt including duplicate receipt issued by licensee under this Act. Section 5 of Act provides restrictions on carrying on business of cold storage. 13. Section 12 of Act provides for reasonable care of goods, while Section 13 is in regard to duty to exhibit capacity of cold storage. Section 19 is in regard to delivery of goods, where on demand made by hirer, every licensee shall deliver goods stored in cold storage provided hirer surrenders receipt and pays all charges due to licensee. Section 20 provides that licensee is entitled to retain possession of goods until receipt therefor is surrendered and necessary charges are duly paid. Further Section 37 of Act provides for penalty in case where any provision of Act, or any rule, order or direction is contravened, then on conviction punishment with imprisonment for term which may extend to two years or fine which may extend to Rs. 10,000/- or both shall be made. 14. Section 38 provides for offences by companies, in explanation to said section, company means any body corporate, and includes firm or other association of individuals, and director in relation to firm, means partner in firm. Section 39 further provides for cognizance of offence punishable under Act by Court not inferior [6] to that of Magistrate of first class, who shall try any such offence. 15. Sri Ravi Kant, learned Senior Counsel laid emphasis that cold storage cannot run without licence being granted by licensing authority and no agricultural produce in cold storage can be stored except in accordance with terms and conditions of licence. If, there is any contravention of any provision of Act, licensing authority can take punitive action as provided under Act. 16. In present case, no violation has been noticed or has been brought on record by Assessing Officer meaning thereby that assessee did not violate any of terms of provisions of U.P. Regulation of Cold Storage Act, 1976. He further submitted that addition is made merely on presumption and no material or evidence has been brought on record to prove that assessee is engaged in business of potatoes. As in cold storage potatoes can only be stored and it cannot be used for any other purposes. It was also submitted that case of assessee is only of bailee and transaction between assessee and constituents are bailment i.e. storage of potatoes and later on delivery. 17. We have heard learned Counsel for parties and perused material on record. 18. It is not in dispute that assessee is running of cold storage, after being granted licence as mandated under U.P. Regulation of Cold Storage Act, 1976. Under said Act, it is only storage of agricultural commodity for [7] which licence is granted and no other business can be carried out by licensee. Act and rules lay down procedure for storage of agricultural commodity and also maintenance of necessary records for regulating storage of such commodity. 19. In present case, learned Counsel for Revenue has mainly relied upon two deletion made by ITAT of addition so made by AO as confirmed by CIT (A). As to addition made of Rs.37,30,710/-, which is lesser cash in hand as compared with books of accounts in which assess has shown more cash in hand, Tribunal held that it is neither case under Section 68 of IT Act nor Section 69-A of Income Tax Act. Tribunal further went on to hold that it was not case where money is not recorded in books of account of assessee, and in present case cash in hand in books of account was found to be more than actual cash found during course of search. At most, authorities could have presumed that assessee has spent difference of amount in question somewhere as per cash in hand, as per books of account and lesser cash as per seized documents, but that would also not suffice to make addition under any of above propositions. 20. As far as other addition made of Rs.23,31,28,321/-, assessee had challenged same on ground that they are not engaged in business of potatoes and entries in seized register, gate pass and exit record were totally ignored by assessing authority as well as by first [8] appellate authority. Tribunal being last fact finding authority recorded categorical finding that assessee had submitted all documents as well as all entries of bhandaran and exit register (nikasan) tallied with stock, as such addition made by authorities were wrong. 21. argument raised by counsel for assessee as far as no violation of provisions of U.P. Regulation of Cold Storage Act is concerned, has force, as Assessing Officer has failed to bring on record any notice given by any of concerned licencing authority regarding violation of Act or any proceedings pending against assessee firm. 22. When this fact was confronted with counsel for Revenue, he failed to produced any document in regard to any violation made by assessee, Cold Storage of provisions of U.P. Regulation of Cold Storage Act. Once it is established that assessee did not violate any terms of provisions of U.P. Regulation of Cold Storage Act, 1976, then, finding recorded by by AO as well as first appellate authority that assessee was in business of potatoes and addition so made by Assessing Officer was merely on basis of presumption and assumption and without any material on record. 23. Tribunal has also recorded categorical finding that no evidence of purchase, sales or unaccounted stock belonging to assessee during course of search or survey was found or established, thus, there was no justification for authorities to make or confirm addition [9] of said amount. There is no doubt that business of running cold storage is governed by U.P. Act of 1976 and it is only after grant of licence by licencing authority that cold storage can run according to terms and conditions of licence. Any violation of terms of licence has penal consequences as provided under Section 37 and 38 of Act, for which Magistrate of Ist Class is empowered to take cognizance of any offence so made by licence holder. As, in case in hand, during search and survey in business premises of assessee, no such violation was found or recorded, nor any notice was given or action was taken against asssessee, as is evident from perusal of documents before us. Further, counsel for Revenue also could not point out to any such violation made by assessee of U.P. Act of 1976. 24. Once it is established that assessee had not violated terms of licence, so granted by licencing authority, merely on basis of presumption and assumption from any documents or papers seized during search and survey cannot be basis for addition of such amount. 25. Having considered facts and circumstances of case and going through records of case, we are of considered opinion that Revenue has failed to establish that order of Tribunal is manifestly illegal and suffers from error apparent on face of record. As Tribunal being last fact finding court has categorically recorded finding that authorities below had wrongly made [10] additions without any material on record on basis of mere presumption and assumption. 26. appeal is dismissed. question of law is, therefore, answered against Revenue and in favour of assessee. Order Date :- 20.8.2019 S. Singh Commissioner of Income-tax, Kanpur v. Kesarwani Sheetalaya