TaxTMI 
TaxTMI 
2000 (12) TMI 227
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....scale. During the search operation at the residence of Shri Mahendra Jain (Sogani) loose papers and summary sheets as per Annexure-8 to Exhibit 1 to 46 dt. 7th Oct., 1997, were seized when the search was concluded. Shri Mahendra Jain partner stated that the loose papers related to the firm M/s. Manak Chand Kanhaiya Lal and M/s. Sogani Jewellers, Johari Bazar where he is a partner. Both these firms are doing business from the common premises having common stocks, etc. The assessee could not segregate the loose papers firm-wise. The AO gave finding that these loose papers belong to the appellant who are the main firm. From these loose papers and summary sheet, the AO found a peak credit from financial years 1991-92 to 1996-97 of Rs. 88,33,491 which pertains to financial year 1992-93. Out of that, for the financial year 1991-92 Rs. 65,56,735 was introduced in that year itself. Balance Rs. 22,74,756 pertains to financial year 1992-93. He further found that this peak credit includes Rs. 15,44,509 was reduced from the peak credit of Rs. 88,33,491 and the balance of Rs. 72,88,982 was considered as unexplained investment under s. 69 as under: For financial year 1991-92 ....
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....le as undisclosed income of the appellant. No entry of purchase and sales were found entered in the record except that all the entries related to the loans raised through the brokers. A reference was drawn on paper book pp 100 to 101 where entries as regards receipt of loan raised through brokers, entries as regards repayment of loan and the entries as regards payment of interest through brokers, etc. have been given as few instances only. The assessee received loans from these brokers. The alphabets represent the names of brokers and these were decodified by the said assessee Shri Mahendra Kumar in his statement recorded under s 132(4) of the Act. The entries so stated are as under: (a) Entries as regard receipt of the loan through brokers: 1. A-2/4pg28 Through "S" Sumer Mal 50. 2. A-2/1pg49 Through "SG" Rambabu Khandelwal 100. 3. A-2/1pg48 Through "SG" Kaushal Agarwal 200. 4. A-2/1pg45 Through "S" Ratan Kumar Jain 50. 5. A-2/1pg41 &n....
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....Bansal. Reference was also drawn at paper book pp 97 and 98 where the abbreviations have been indicated against the names and addresses of the brokers and such details have been placed at paper book pp 97 and 98 as under: Short Name Name Address recorded in loose paper. D Dilip Kumar Partaniyo Ka Temple, Partaniya Ka Rasta, Johari Bazar, Jaipur. SG  ....
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....n Prasad Gattani Gangori Bazar, Jaipur. The assessee claims to have approached these brokers but he could not obtain the addresses of the depositors and confirmations against the deposits made by them through the brokers due to their genuine fear of harassment, etc. However, it has been placed on record that a search was carried on one of the brokers S/Shri Padam Chand Jain, Rakesh Jain and Tara Chand Jain and others. The abbreviations of their names has been recorded in the loose papers found and seized from the assessee-firm as 'PR'. In his statement recorded at paper book p 159 Shri Padam Chand Jain has admitted that he is working as finance broker and has admitted about the appellant. No denial has been made by him for getting loans advanced to the appellant firm. The copy of assessment order of said broker has also been placed at paper book pp 165 to 197 and in this assessment order at paper book p 170 it is clearly indicated that Shri Mahendra Kumar's account is on p 223-K-1/5 (lender's ledger). Against this account on p 101, annexure A-18 (regular party ledger of Shri Mahendra Kumar has also been recorded). The AO has included brokerage as income o....
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....lding that s. 69 lays the onus not on the Department but on the appellant for proving the claim made of borrowings or loans through she herself has accepted that assets and expenditure to the extent of this peak credit had not been found during the course of search. It has also been argued by learned authorised representative that no addition has been made under s. 68 neither s. 68 has been invoked nor any books have been found. The loose papers are not books but are documents. The Department has found stocks as short and no investment has been found. For making addition receipts, if any, should be in the nature of income and the burden is on the Department to prove that the assessee is in a capacity to earn. Reliance has been placed on the decision reported in the case of Parimisetti Seetharamamma vs. CIT (1965) 56 ITR 532 (SC), in the case of Roshan Di Hatti vs. CIT 1977 CTR (SC) 200 : (1977) 107 ITR 938 (SC), in the case of CIT vs. Daulat Ram Rawatmull 1972 CTR (SC) 411 : (1973) 87 ITR 349 (SC), and in the case of CIT vs. S.M.S. Investment Corpn. Ltd. (1994) 207 ITR 364 (Raj). This burden has also not been discharged for making the substantive addition. Besides this, the assesse....
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....source thereof. Since onus was on the assessee and the same having not been discharged by him, the action of the authorities below needs to be upheld. It has also been contended that once the assessee claims that he has taken the money, the onus is on him to prove the nature and source thereof. The assessee has failed to produce any of these brokers from whom such credits have been received nor any evidence thereto has been filed. It is unaccounted money of the assessee which has rightly been taxed by the AO as peak amount and the burden was on the assessee. The assessee was carrying secret business and the income thereof was assessable under s. 69. The reliance has been placed on the various decisions as under: (i) A. Govindarajulu Mudaliar vs. CIT. (1958) 34 ITR 807 (SC); (ii) Lakhmichand Baijnath vs. CIT (1959) 35 ITR 1 (SC); (iii) Kale Khan Mohammad Hanif vs. CIT (1963) 50 ITR 1 (SC); (iv) Jamnaprasad Kanhaiyalal vs. CIT (1981) 123 CTR (SC) 146 : (1981) 130 ITR 244 (SC); (v) S. Kumaraswami Reddiar vs. CIT (1960) 40 ITR 590 (SC); (vi) (sic) (1961) 43 ITR 72 (SC); (vii) CIT vs. Orissa Corporation (P) Ltd. (1986) 52 CTR (SC) 138 : (1986) 159 ITR 78 (SC); (v....
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....ion of the material. But in this case the Department has failed to prove that the entries belong to the assessee and not to the persons whose names have been recorded in the documents. No secret business has been found. No unaccounted sales or purchase has been found. The assessee has discharged its onus. It was, therefore, prayed that the addition could not be made under s. 69 and deserves to be deleted. 8. Rival submissions have been heard in the light of precedents relied upon by the parties and with reference to the paper book filed by both the parties. The main plank of the argument of the assessee is that the amount of Rs. 50,31,735 for financial year 1991-92 and Rs. 22,57,247 for financial year 1992-93 totalling to Rs. 72.88 lacs included as undisclosed income of the block period from 1st April, 1987 to 28th Sept., 1997, are loans and borrowings but not the investment assessable under s. 69 of the Act. 9. During the course of search loose papers found from the residential premises of Shri Mahendra Kumar Jain and inventorised as Annexure A-2, exhibits 1 to 46 have been claimed to be belonging to the assessee's two firms namely, M/s. Manakchand Kanahiya Lal and M/s. Soga....
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....red under various abbreviations like S, PR, K. Under each alphabet the assessee has mentioned the amount, name and date. When asked during the course of hearing one such entry under the abbreviation as it was contended by the assessee that the alphabet 'S' stands for the name of a broker and similarly another abbreviation of 'PR' stands for the name of another broker. When asked the abbreviation "PR", it was explained to be code of Padam Chand Jain and Tara Chand Jain, Pano Ka Dariba, Kawasji Ka Rasta, Ramganj Bazar, Jaipur. Names of all such brokers with their abbreviations in alphabet finds place at pp 97 and 98. The assessee has explained the transactions written below the abbreviation 'PR' with details of loans received with name of broker, amount, name of person from whom such loans were taken by the broker for the assessee with date thereof is also found to have been mentioned. Like this several transactions have been recorded and summary sheet prepared by the assessee in the loose papers for his claim of taking loans through various brokers. Paper book p 122 of Annexure A-2/4 of p 28 of the seized annexure when examined found to reveal various entries. Against the entry of c....
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....n the Department itself has not treated any income or investment through the loose papers found in the premises of Shri Mahendra Kumar Jain in his hands but that of the appellant. The transaction done by Shri Padam Chand Jain are thus done by Shri Mahendra Kumar Jain for the firm by accepting his statement that the loose papers found and seized belong to the appellant. The AO has also not examined all other brokers whose names and addresses were duly provided by the assessee nor made available for cross-examination. It is not the case of the Department that all such brokers are not traceable. The Inspector deputed by the AO did meet all these persons, who made certain enquiries and recorded their statements. It is not understandable as to why the AO did not enforce their attendance by taking appropriate action as available under the law and why proper statements were also not recorded and any contention that was being made by such persons for denying the transaction in cash with the appellant was not confronted to dislodge the explanation rendered by the assessee by making them available for cross-examination more particularly when the Department has invaded the rights of the appel....
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....t page 6 reveal that the fact of the creditors has not been denied by her. The AO herself accepted as deposits and that is why peak credit was taken and no investment or expenditure or asset was found. No material has been brought by the AO with respect to the investment made by the assessee before coming to the conclusion that the amount of Rs. 72.88 lacs are the investment. What is the nature of investment and how she treats such transaction as investment, when made, to whom given or where invested has also not been brought on record by the AO. The whole exercise appears to have been undertaken by her under a great suspicion. The persons whose names have been found on record under the alphabets and codes in the loose papers from whom the brokers took loan for the appellant have not been verified by the AO. No enquiries have been made from the brokers in this respect and, therefore, holding a view that the peak credit so worked out are the investment is nothing but a fallacy. It is settled law that suspicion howsoever strong cannot take the place of proof. This has been held by the Supreme Court in the case of Uma Charan Shaw vs. CIT (1959) 37 ITR 271 (SC). Keeping in view the var....
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....We also do not find any other evidence to show that the assessee has made any investment. The addition has been on account of peak which is on account of credits/deposits received by the appellant. The AO has not been judicious in applying provisions of s. 69 for bringing the amount to tax. We, therefore, hold that the amount of deposits are loans taken by the appellant. There could not have been added as unexplained income under s. 69 of the Act for deeming undisclosed income for the block period of the assessee under the provisions of Chapter XIV-B of the IT Act. The said addition of Rs. 72,88,982 is, therefore, directed to be deleted. 14. In the next ground the assessee is aggrieved with the addition of Rs. 1,38,217 on account of stock of silver and silver utensils, etc. found short at the time of search. The inventory taken at the time of search reveal that there was stock of Rs. 19.28 lacs as against the estimated stock of Rs. 31,84,519. The assessee's explanation that stock weighing 67.196 kg found from the premises of the partners belong to the firm was not acceptable to the AO for the reasons that there was no stock register nor any details were found which could reveal ....