TaxTMI 
TaxTMI 
2007 (1) TMI 217
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....al Wassan. It was reported that Sri Naresh Wassan had also expired on October 5, 2006. Thereafter Smt, Shraddha Wassan has been taken as legal heir on record. 3. The facts of the case are that the business and residential premises of Sri Satypal Wassan was searched in April, 1995. During the course of the search operations, various documents and books of account were seized. The impugned addition of Rs. 22,30,000 was based on a loose paper No. 7 of annexure A-T/1-4 which was seized from the residence of the late Sri Satyapal Wassan. The Assessing Officer required Sri Satyapal to explain the transactions. It was taken by the Assessing Officer that the documents in question reflected advancing of loans and therefore, he asked the assessee to explain these advances. The assessee denied to have advanced any amount to any person. Originally he disowned the paper seized from his residence. He also denied to have any concern with the document or the figures mentioned in that document. An affidavit to this effect was also filed. In that affidavit, Sri Satyapal Wassan averred that he did not know the persons whose names are appearing in that document. The Assessing Officer, however, t....
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....to place order for supply of 5 tons of iron. Shri Ravi Ghai stated that he wanted to place order for supply of 2 tons of iron. Sri G. A. Swamy wanted to place order for supply of 5 tons of iron. All the deponents have certified that they wanted to conduct business with Dharamveer Wassan and the figures noted in the affidavits prove the quantity of iron that they wanted to purchase from the late Dharamveer Wassan. Under such circumstances the entries in page No. 7 of the seized document stands explained. Therefore, the Assessing Officer was not justified in treating them as unexplained loans. The addition of Rs. 22,30,000 should be deleted. 9. Before me the appellant has submitted fresh evidence by way of affidavits from Smt. Nirmal Kanta the widow of the late Shri Dharam veer Wassan. He has also filed affidavits from the above persons who wanted to have business dealings with the late Shri Dharamveer Wassan. I am convinced with the argument of the appellant that these fresh evidences may be admitted in the interest of justice. In this regard, I rely on the judgment of the Supreme Court in Jute Corporation of India Ltd. v. CIT [1991] 187 ITR 688 wherein it has been held tha....
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.... Sri Satyapal Wassan, he deleted the impugned addition. 5. Against this, the learned Departmental Representative submitted that the learned Commissioner of Income-tax (Appeals) has wrongly admitted fresh evidence without giving any opportunity of being heard to the Assessing Officer, which is a violation of rule 46A. In fact, Sri Satyapal Wassan did not file any evidence at the time of assessment and therefore, the learned Commissioner of Income-tax (Appeals) was not justified in admitting additional evidence in the form of affidavits. Thus, the matter should be restored back to the file of Assessing Officer for examining the veracity of evidence. The learned Departmental Representative also submitted that the addition can be made under section 68 or under section 69 of the Income-tax Act, 1961. 6. Against this the learned Authorised Representative for the assessee submitted that the Assessing Officer had not recorded any statement either during the course of search on document No. 7 or during the course of assessment proceedings. Thus, without giving any opportunity to the assessee, the Assessing Officer had inferred something and made the addition. In fact, the assessee had....
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....esh S. Shah [1997] 59 TTJ 574 in I. T. A. No. 6580(Bom)/1990. There was a seized paper. Figures noted on the paper were taken as commission and added as undisclosed income of the assessee. There was no specific or direct evidence available which could have supported the finding of the Assessing Officer. The word " commission" or the word " rupees" was not mentioned on the loose paper. Further, there was no exact date of receipt shown on the document. Therefore, the same could not have been taxed in the assessment year in question. Accordingly that document was treated as dumb document. On the other hand, if they were advances as taken by the Assessing Officer, they ought to have been added in the wealth of the assessee which has not been done. There is no finding or material with the Assessing Officer so as to show that the document did not belong to Dharamvir Wassan. The learned Authorised Representative also submitted that the impugned loose paper does not constitute books of account and therefore, no addition under section 68 can be made on that basis. Further, there is no charge that there are receipts of money by the assessee. The addition has been made only on the ground that....
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....s quite clear that the Assessing Officer simply presumed that 22.30 stands Rs. 22.30 lakhs and therefore, these amounts were in rupees and further that they are advances given by the assessee. Thus, there are four presumptions made by the Assessing Officer in this case. 1. The transaction belonged to the financial year 1988-89 relevant to the assessment year 1989-90. 2. Figures mentioned in the document are advances made by the assessee. 3. The transaction belonged to the assessee. 4. The transactions are in a code of lakh and unit is the rupee. 10. After going through the order of the Assessing Officer, we do not find any material, so as to draw these presumptions or inferences. 11. The argument of the learned Departmental Representative that the learned Commissioner of Income-tax (Appeals) has admitted fresh evidence in the form of affidavits is not tenable because the Revenue has not raised any ground to this effect. On the other hand, the learned Authorised Representative has also claimed that this explanation was even before the Assessing Officer. It was only in support of that explanation that the assessee had filed affidavits before ....
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....ors and finally by recording the statements of concerned parties so as to fill up the gaps in confirming the inference arising from the documents for a proper charge of tax. Such correlation is necessary unless the document is capable of speaking giving full details so as to enable any intelligent person to find out the nature of transaction, the year of transaction, the ownership of the transaction and quantum thereof. Even in that situation, it is necessary to give opportunity to the assessee to offer his explanation and investigation be carried out to strengthen the direct inference arising from this document. 13. Let us now examine how all these transactions are necessary for the purposes of levying tax on the basis of a seized document. 14. Section 4 relates to charge of income-tax. It reads as under : "S. 4.(1) Where any Central Act enacts that income-tax shall be charged for any assessment year at any rate or rates, income-tax at that rate or those rates shall be charged for that year in accordance with, and subject to the provisions (including provisions for the levy of additional income-tax) of, this Act in respect of the total income of the previous year of....
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.... of income yielding nature as per income-tax law. Not all transactions yield taxable income. Firstly it is only the financial transactions which yield taxable income and secondly it is of revenue character. The capital transactions, unless specified in the Income-tax Act will not yield taxable income. It has to be shown either from the reading of the document or from accompanying investigation that the transaction recorded in a document is of revenue character or is otherwise taxable under Income-tax Act. As a quasi-judicial authority, the Assessing Officer has to satisfy himself on the basis of cogent material, either found in the search or on post-search enquiries that transaction recorded in the impugned document is real one and not imaginary (i.e. an estimate or something which is to take place in future) and it has actually taken place. It has to be shown that the transaction recorded in the impugned document is sale or purchase, advance or loan, of capital or of interest whether it is a statement of existing assets, disclosed or undisclosed what is the commodity involved who are the people involved in the transaction if it is advance, then whether the debtors concerned are ex....
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.... of any particular person or which may reasonably be assumed to have been signed by, or to be in the handwriting of, any particular person, are in that person' s handwriting, and in the case of a document stamped, executed or attested, that it was duly stamped and executed or attested by the person by whom it purports to have been so executed or attested." 19. Thus the Legislature has used the words " may presume". A presumption is an inference drawn from other known or proved facts. It is a rule of law under which courts are authorized to draw a particular inference from certain set of facts. This can be disproved by other evidence provided by other party. The words " may presume" leave it to the court to make or not to make the presumption according to the circumstances of the case. Such presumption is optional and the court is not bound to make it. Even if such presumption is made, it is only rebuttable one. A rebuttable presumption is, thus, clearly a rule of evidence which has the effect of shifting the burden of proof by leading the evidence. Initially the Assessing Officer would be justified to make such presumption, if drawn after judicial application of mind to the ....
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....s the assessment year. The document and/or follow up investigation must establish the period of transaction before charge of income-tax could be levied during the current assessment year. The document is silent on this aspect. It is only post-search investigation and correlation with other documents that could have filled up the gap. Since there is no material on record to indicate in certain terms the period of transaction, it is not possible to infer that the transactions belonged to this year. 22. The last component is the quantum of income. As stated above, the Assessing Officer has failed to properly decode the figures mentioned in the document as to whether they are in thousands or in ten thousands or in lakhs and what is the unit of these transactions. The document does not tell anything about this. It could have been done only by way of investigation. It has not been done. Therefore, one cannot infer merely from the face of the document as to what is the total of those transactions and whether they are in rupees or in kilograms or something else. In the absence of such proper decoding and clarification of number/quantity involved, no charge of income-tax can be levied....
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.... against certain names were written. They were decoded to make the total to Rs. 53,69,260. The assessee submitted before the Tribunal that (i) the impugned seized papers are dumb documents and no addition can be made on their basis in the absence of corroborative materials. No circumstantial evidence in the form of unaccounted cash, jewellery or investment outside the books was found in the search, (ii) the assessee from the very inception denied having any nexus with the seized papers, (iii) the impugned papers did not constitute books of account, (iv) the said papers are unsigned and therefore, not sufficient to fasten the liability on the assessee, (v) the Assessing Officer did not carry out any enquiry by summoning the persons named in the seized papers although the assessee has furnished their addresses, (vi)some of the documents did not specify the year. The Revenue did not discharge the onus lying on them to prove that the documents pertained to the block period. On this basis, the Tribunal held that no addition could be made on the basis of the seized papers as material available with the Assessing Officer is grossly inadequate. 26. In Kay Cee Electricals v. Deputy CIT [....
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....ITD 183 (Delhi) was referred to in which it was held that where documents found at the time of the search did not indicate whether figures referred to in the paper reflect quantities of money or to quantities of goods, the same are only dumb documents and therefore, no addition could be made on the basis of such documents. It was held in Neena Syal' s case [1999] 70 ITD 62 (Chand) that where a document found during the course of search is open to more than one possibility of interpretation and does not prove conclusively that any premium was given by the assessee or received by the seller then no addition in respect of premium could be paid on purchase of plot. From this decision it is clear that the document must unmistakably reflect the transaction without having any second interpretation. 30. In Elite Developers v. Deputy CIT [2000] 73 ITD 379 (Nag), it was held that where the seized documents evidencing receipt of on-money by the assessee were not speaking documents as they did not contain any narration or description about different figures noted thereon and the Department having failed to bring on record any material or evidence to corroborate allegation regarding rece....
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....d spiral pads are books within the meaning of section 34 of the Evidence Act. In the same case, it was also held that loose sheets of papers contained in files are not the books. In this regard, it would be relevant to refer to the decision of the hon' ble Bombay Court in Sheraton Apparels v. Asst. CIT [2002] 256 ITR 20. The concept of the word " books" in the context of section 271(1)(c) Explanation 5 was considered but it is equally relevant for the purposes of section 68 where the word " books" is used. It would be relevant to refer to the part of the headnote from that decision defining " books" and " books of account" . "If ' books of account' is considered in isolation, then it may mean books in which merchants, traders and businessmen generally keep their accounts and which are maintained for recording ; (a) all receipts and expenses with matters relating thereto ; (b) all sales and pur chases ; and (c) the assets and liabilities. They are the documents and ledgers which must be prepared and kept by the business entity including the profit and loss account and the balance-sheet. In traditional terms, ' books' means a correction of sheets of paper....
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....printed, but appropriately to a printed composition bound in a volume. In view of the above, the piece of paper impounded at the time of search cannot be construed to be a book. The definition of the book as given in the Stroud' s Judicial Dictionary and relied upon by the learned departmental representative, deals with its meaning in the context of the Copyright Act, 1842. There the book is defined as every volume, part or division of a volume, pamphlet, sheet of letter press, sheet of music, map, chart or plan separately published. This definition is not relevant for our purpose. For the purpose of explaining the meaning in the context of the Income-tax Act, in our opinion, the term ' book' is to be construed as it is understood in the common par lance. No special meaning can be assigned to that term. We are, therefore, of the opinion that the case of the assessee cannot be put within the ken of section 68 of the Act." 35. Since the facts of the present case are similar to the case of Kantilal and Bros. v. Asst. CIT [1995] 52 ITD 412 (Pune), we are of the view that no addition under section 68 of the Act can be made on the basis of loose sheet being docume....