TaxTMI 
TaxTMI 
2010 (3) TMI 939
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....onducted prior to June 1, 2002 whereas section 113 of the Income-tax Act, 1961 does not explicitly says so. 3. For that any other ground may be raised during the course of hearing. 2. We have heard the parties. 3. The brief facts relating to the issue raised by the Revenue as per ground No. 1, which relates to addition of Rs. 85.22 lakhs having been made by the Assessing Officer on the basis of a small note book called by the Revenue as diary and identified as KPS-53, pages 87 to 98 are that action under section 132 of the Act was carried on at the assessee's place at Darbhanga on January 1, 2001. The premises covered by the search on this date were as under: (a) Sarjug Dental College and Hospital at Lahersarai, Darbhanga a sponsored institution of Om Seva Trust. (b) Residential premises of Dr. Kamla Pd. Singh situated at Lahersarai, Darbhanga with the warrant being in the names of Dr. Kamla Pd. Singh, Promod Singh and Lalan Singh. 4. Later on search action under section 132 was also carried at the residential flat of Kamla Prasad Singh at A-1, Siddharth Apartment, Jagdeo Path, Patna on January 23, 2001 followed with the search operation on F....
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.... It was replied that it is a well-settled precedence that the presumption claimed cannot be made available with regard to the jottings in a diary. The jottings in the diary when never represented either in the books of account or in any documents, as interpreted under section 132 of the said Act, the presumption under section 132(4A) cannot be availed of. Insisting that the matter could not be dismissed particularly in view of the clear identity of the persons named in the diary, the specific nature of entry detailing name, amount advanced, subsequent repayment/adjustment, balance outstanding, etc. for memory and record, the assessee has once again reiterated what was stated earlier emphasising (a) that the jottings made in the diary strictly and rigidly nowhere fall in the category of document as interpreted under section 132 unless shown that there is prima facie connection with the assessee's business activities or investments, notwithstanding that there is a presumption in law that the said jottings belongs to the assessee and it is in his handwriting and (b) that no addition could be made in respect of the diary unless corroborated and supported by other evidence. ....
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.... been made, in violation of the relevant provisions of the Income-tax Act, wherein the enquiries with regard to the real title of the alleged properties could have been made, which 'otherwise is leading to the unnecessary exercise of hunt-n-find on the part of the Department and its denial and negations on our part. (viii) That the option to verify the title of the alleged property not only from the concerned registration authority bill also from the said person, is always open and the same can be got verified accordingly. (ix) That the alleged investment in the said property is neither made nor was ever proposed to be made by the said assessee. (x) That an affidavit in regard to the same is enclosed herewith as annexure B-3. In this regard, this is necessary to mention here and to undertake and declare, on behalf of the said assessee as provided and informed hereto, that to the best of my knowledge and belief, the documents submitted as aforesaid are genuine and have not been altered and substituted to suit the convenience. (xi) This is again necessary to mention here, with regard to the said paper-identified as page 163 marked unde....
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....confronted to the assessee that it would lead to the assumptions that it is his benami investment considering that the papers were recovered from the college premises and can be linked to a paper found from his residential, which have evoked, the following response vide reply dated January 9, 2003: ... On the basis of the submissions above, a summons under section 131 was issued to Shri Baldev Singh for verification of the assertions made by the assessee that it is an independent investment of the former who is neither a relative nor a business partner, bindings that emerge necessitates that the matter of investment is considered independently under section 158BD. However, the genuineness of the receipt of Rs. 16,43,865 on August 25, 2000 (financial year 2000-01) appears to have been established with reference to a contemporary happening of Morton Confectionary, although the transaction with the latter may relate to Shri Baldev Singh. The amount is therefore added back in the hands of the assessee as unexplained for the relevant year. 7. The Assessing Officer levied surcharge also. 8. The assessee went in appeal before the Commissioner of Income-tax (Appeals) and ple....
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....assessee/appellant, with all honesty and genuineness, as an assessee/appellant with bona fide intention started filing his income-tax returns from the year 1989-90, properly disclosing all such income from all the concerned general sources as well as agricultural income. That the said assessee/appellant has been regularly, continuously and consistently, filing his income-tax return punctually and paying handsome amount of computed tax as per the prevalent tax laws and tax slabs although the main source of the said assessee/appellant's income initially forms part of the agricultural income derived from the ancestral land which gave the said assessee/appellant the strength to grow, develop, progress and prosper by leaps and bounds. As far as the investments are concerned, all the investments are properly shown/disclosed/specified in the balance-sheets, already submitted with the income-tax returns filed with the Department on part of the said assessee/appellant. All the copies of the returns filed with the Income-tax Department for the block period and/or copies of the assessment orders and/or intimation under section 143(1)(a) and income disclosed under VDIS have already been fu....
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....reby submitted that it is a well-settled precedence that the presumption claimed cannot be made available with regard to the jottings in the diary. The jottings in the diary when never represented in the books of account or in any document, as interpreted under section 132 of the said Act, the presumption under section 132(4A) cannot be availed of by the Department unless any entry to the effect or for the support of the said has been specifically represented in the concerned books of account or in any concerned document. It is a well-settled statutory principle that no addition could be made on the basis of the jottings in the diary unless corroborated and supported by other evidence, the seizure of the same is merely the jottings in the diary and hence falls under the purview of the said well-settled statutory provision and precedence whereby the benefit of presumption laid down in section 132(4A) cannot be availed of. Hence the said nature of jottings made in the diary strictly and rigidly nowhere fall in the category of document as interpreted under section 132 of the said Act (i.e., Asst. CIT v. Karodilal Agrawal [1994] 50 TTJ (Jab) 393; S.P. Goyal v. Deputy CIT [2004] 269 ITR....
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....scribed upon any substance by means of letters, figures or marks or by more than one of those means, which is intended to be used or which may be used for the proposes of recording that matter'. In fact it is clear from the aforesaid definition that a rough chit of paper or jotting in a diary does not amount to a document and hence the presumption under section 132(4A) cannot be attracted. More important a nexus should be established between the document and the undisclosed income of the assessee. In furtherance of our above submissions, it is hereby submitted that the right of presumption contained in section 69 cannot be invoked for the purpose of section 132(4A). As per section 69, action could be taken only if anything represents the undisclosed income or property and not otherwise. The aforesaid submission stands substantiated as iota or judgments and rulings. That in the light of the aforesaid submissions, it is herein submitted that the order passed by the learned Assistant Commissioner of Income-tax, Central Circle, MZP against the said assessee/appellant is unsustainable, illegal and baseless and deserves to be set aside/overruled in favour of the assessee/appellant an....
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....o post-search investigations have ever been made, in violation to the relevant provisions of the Income-tax Act, wherein, the enquires with regard to the real title of the alleged properties could have been made which otherwise is leading to the unnecessary exercise of hunt-n-find on the part of the Department and its denial and negations on our part. The option, to verify the title of the alleged property not only from the concerned registration authority but also from the said person, is always open and the same can be verified accordingly. The alleged investment in the said property is neither made nor has ever been proposed to be made by the said assessee. That as per well-settled precedence, a reasonable nexus must prima facie exist between the entries and the affairs of the assessee. Any adverse inference or presumption as to the concealment of income be drawn merely on the basis of the documents seized, unless it is shown that there is a prima facie connection with the assessee's business activities or investments even though there is a presumption in law that the said documents belong to the assessee and it is in his handwriting. It is necessary to refer to the submissi....
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....isions of section 132(4A) of the Income-tax Act 1961. It was replied that it is a well-settled precedence that the presumption claimed cannot be made available with regard to the jottings in a diary. The jottings in the diary whenever represented either in the books of account or in any documents, as interpreted under section 132 of the said Act, the presumption under section 132(4A) cannot be availed of. Insisting that the matter could not be dismissed particularly in view of the clear identity of the persons named in the diary, the specific nature of entry detailing name, amount advanced, subsequent repayment/adjustment, balance outstanding, etc. for memory and record, the assessee has once again reiterated what was stated earlier emphasising (a) that the jottings made in the diary strictly and rigidly nowhere fall in the category of document as interpreted under section 132 unless shown that there is a prima facie connection with the assessee's business activities or investments, notwithstanding that there is a presumption in law that the said jottings belong to the assessee and it is in his handwriting and (b) that no addition could be made in respect of the diary unless co....
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....logical corroboration with another paper, page 163 marked as KPS-55 is concerned, it is submitted as under: (i) That the said person (namely Mr. Baldev Singh) is neither a relative nor any business partner of the said assessee, in any way, whatsoever and howsoever. (ii) That the said person has no connection with the said assessee except that of a person living in the same village from which the said assessee belongs to. (iii) That the said person in the capacity of an independent purchaser of the alleged property, once contacted the said assessee, just to have certain opinion from the said assessee in his capacity of a renowned business personality, about the purchase of the alleged property. (iv) That the alleged papers, identified and marked as BD-15 running into several pages, were found in the possession of the said assessee only because of the fact that the said documents were just kept to analyse and form an opinion thereon. (v) That the said document identified as page 27 marked under BD-15, indicates the total sum, paid by the said person (Shri Baldev Singh) as an advance against the agreement to purchase the alleged property. ....
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....rge necessitates that the matter of investment is considered independently under section 158BD. However, the genuineness of the receipt of Rs. 16,43,865 on August 25, 2000 (financial year 2000-01) appears to have been established with reference to a contemporary happening of Morton Confectionary, although the transaction with the latter may relate to Shri Baldev Singh. The amount is therefore added back in the hands of the assessee as unexplained for the relevant year. On the basis of narration above, total undisclosed income for the block period under assessment is determined at Rs. 1,01,65,870 only which is assessed accordingly under section 158BC read with section 143(3) of the Income-tax Act, 1961. The penalty proceedings under section 158BFA(2) have been initiated separately. Charge interest as per the provisions of law. Issue notice of demand. This order issued with the prior approval of the Additional Commissioner of Income-tax, Central Range 2, Patna. 10. It was in the above facts that the learned Commissioner of Income-tax (Appeals) deleted the addition of Rs. 85.22 lakhs after allowing the Assessing Officer an opportunity to put up his case. The findi....
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.... to which period the note book or the entries in the note book 'belong to'. The Assessing Officer was therefore given an opportunity on this point vide letter dated February 10, 2004 which is reproduced as under: Please refer to this office letter vide F. No. 587/A-U02-03/2043 dated December 10, 2003 on the above subject. It is seen that no compliance has been made with the above referred letter. You are once again given an opportunity to comply with the requirement of the above mentioned letter and also to furnish to this office a copy of the statement of the appellant recorded on oath in course of search as well as in the course of assessment proceedings. You are also given an opportunity to show the basis or the evidence on the basis of which KPS-53, pages 87 to 98 being small pocket diary was related to be necessarily falling within the block period particularly when no date on any of the entries in this diary were there on these pages of the diary. Your reply should reach me on or before February 24, 2004. You may also attend personally on the above said date, i.e., February 24, 2004. In response to this query the Assessing Officer has sent in the fol....
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....hether the entries in the diary were in the handwriting of the appellant. The Assessing Officer did not bring on record any evidence to establish that the entries in the diary were in the handwriting of the appellant. The Assessing Officer has also not questioned the appellant as to the particular place or person or pocket from where the diary was exactly found. The Assessing Officer has also not brought on record any evidence as to the nature of transaction and association of the persons mentioned in the diary. In the absence of any information on this crucial aspect, this diary and entries therein, there is no basis to draw the presumption that the appellant was necessarily the owner of the note book. The provision of section 132(4A) cannot be availed of for the purposes of making a block assessment. For this purpose reference is invited to the judgment of the Bangalore Bench of the Income-tax Appellate Tribunal in the case of Addl. ITO v. T. Mudduveerappa Sons [1993] 45 ITD 12 and to the Jodhpur Bench of the Income-tax Appellate Tribunal in the case of Asst. CIT v. Karodilal Agrawal [1994] 50 TTJ (Jab) 393 wherein it has been held that the presumption under section 132(4A) canno....
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.... instant case, section 158BA being a charging section to assess the undisclosed income, the burden is on the Assessing Officer to prove the undisclosed income of the assessee by bringing corroborating relevant and supporting material on record. In this case, the Assessing Officer has not proved that the amounts mentioned in the note book represented such undisclosed income of the appellant which falls within the block period. Reliance is also placed on Chander Mohan Mehta v. Asst. CIT [1999] 71 ITD 245 wherein it has been held that in the absence of statement on the entries in the note book or loose paper the amounts mentioned in the note book cannot be treated as undisclosed income straightaway. It is also relevant here to mention that the appellant has claimed to be owning vast agricultural lands and has claimed that earlier he had been running a pathological laboratory, and then serving in Darbhanga Medical College and from 1977, he was practising for some years as a medical practitioner also. Under these circumstances, it is possible that the entries in this diary if the diary is presumed to be belonging to the appellant pertains to lending of money which he might have received....
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....l against deletion of Rs. 85.22 lakhs. 'A' filed appeal against confirmation of Rs. 16,43,865. 1. Additions of Rs. 85,22 lakhs. Facts in brief: (a) During the course of search, a small paper book (named as diary by the learned Assessing Officer) measuring 4 cms x 5 cms, containing certain noting as regards to names and amount in short figures (totalling Rs. 85.22 lakhs) were recovered from the residential premises of the assessee. There was neither date nor signature of the assessee on any page of the said paper book. (b) The contents of the said paper book were confronted to the assessee, who in his statement on oath recorded on March 23, 2001 vide reply to question No. 4 stated that the handwriting in the said paper book was quite similar to his handwriting. However, he did not admit that the handwriting is his own. (c) He also stated that Mujhe is diary ko dekhkar achambha ho raha hai jitna paisa isme ankit hai utna paisa toh mai apne jeewan mein bhi nahi dekha hoon. Yoh bilkul swapan jaisa lag raha hai. (I am surprised to see the diary. The amount noted in the diary has never been seen by me in my whole life. It is like a dre....
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....imposed and who is obliged to pay the tax, third, the assessment year in which charge of income-tax is levied, fourth, the total income of the previous year and fifth, the rate or rates at which tax is to be imposed. The rates are prescribed in the annual Finance Act and therefore, this component has no value determining the total income on the basis of a seized document (Govind Saran Ganga Saran v. CST [1985] 155 ITR 144 (SC). Therefore the first four components only are relevant for taxing an item. A. First component: Nature of transaction which is the source of generating income. The Assessing Officer has to satisfy himself on the basis of cogent material found in search or on post-search enquiries that the transaction in the seized document is a real one and it has actually taken place. Various aspects-whether sale/purchase, advance/loan, capital/revenue, existing disclosed/undisclosed assets, who are the people involved in the transaction, whether they are existing, their identity, evidence of income, therefrom, steps for recovery thereof. The learned Assessing Officer has simply presumed that the alleged figures are undisclosed advances wit....
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.... [1993] 45 ITD 12 (Bang); P.R. Metrani v. CIT [2006] 287 ITR 209 (SC). B.9 Even if the provision of section 132(4A) is applicable, the presumption is not mandatory, it is suggestive. When both 'may' and 'shall' are used in the Legislature, then it is clear indication that 'shall' is mandatory and 'may' is not. (B.K. Khanna v. Union of India [1985] 156 ITR 796 (Delhi)). The literal rule of interpretation says that primarily it is the plain and ordinary meaning of the words used in the enactment that has to be taken and further that all the words used by the Legislature have to be given their due meaning and effect and no surplusages in the language employed is to be imputed to it. (Punjab State Civil Supplies Corporation Ltd. v. CIT [1993] 200 ITR 536 (P&H) [FB]). There word 'may' has been used in sub-sections (2), (3), (4), (4A), (9), (10) of section 132 whereas the word 'shall' has been used in rest of the sub-sections of section 132. It indicates clear intention of the Legislature about any section being mandatory or being suggestive. Since section 132(4A) contains 'may', it is suggestive ....
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....estigation and correlation with the other documents that could have filled up the gap. C. 1 There is no date and therefore it is not a diary. Amar Natvarlal Shah v. Asst. CIT [1997] 60 ITD 560 (Ahd), Devilal Gherilal Shah v. Dy. CIT [1995] 127 CTR (Ahd) 135. C. 2 The Revenue did not discharge the onus lying on them to prove that documents pertained to the block period. Bansal Strips (P.) Ltd. v. Asst. CIT [2006] 99 ITD 177 (Delhi). D. 2 Fourth component: The fourth component is the quantum of income. Most of entries in the diary could not speak the quantum of the amount whether hundred, thousand, lakh or otherwise The unit of the transaction- whether rupees, kilograms or something else. The learned Assessing Officer has simply presumed that all figures either written say as 0.30 or 3.00 are 'rupees in lakh'. D. 1 Where documents found at the time of search did not indicate whether figures referred to in the paper reflect quantities of money or quantities of goods, the same are only dumb documents and therefore no addition could be made on the basis of such documents. Neena Syal (Smt.) v. Asst. CIT [1999] 70 ITD 62 (Chandigarh). ....
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.... to belie the contents of the affidavit and hold that the document and transactions recorded therein, in fact, belonged to the assessee. The Assessing Officer had drawn inferences, made presumptions, relied on surmises and thus made unsustainable additions. (ii) That document No. 7 was only a piece of paper and could not be called a 'book' within the meaning of section 68. No addition under section 68 of the Act could be made on the basis of the loose sheet being document No. 7 found during the search. 1. Additions of Rs. 16,43,865 Facts in brief: (a) During the course of search, a single page with jottings identified as KPS-55, page 163 was recovered from the premises of the assessee containing different groups of figures having independent totals. At the bottom of the sheet final total of Rs. 16,43,865 having initials dated September 25, 2000 is appearing. Copy of the sheet is appearing on page 8 of the paper book submitted by the Department. (b) The sheet contains several jottings such as pay order, cash, Morton DD, etc. (c) The learned Assessing Officer, on the basis of an agreement with Sri Baldev Singh regarding pr....
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....mount may relate to Baldeo Singh. (The word 'may' has been used by the learned Assessing Officer in the assessment order). Therefore the amount added to the income of the assessee is just on presumption and is liable to be deleted. (The Assessing Officer order page 7 paragraph 2, third line from end of paragraph). Submitted accordingly, (Sd.) Ca. Nishant Maitin, AR. 13. Before proceeding further, we would like to record that during the course of hearing of these appeals, the Bench has specifically asked the learned Departmental representative as to whether he was taking shelter behind the provisions of section 292C of the Act, but the learned Departmental representative was fair enough to state that he was not interested in relying on the provisions of section 292C of the Act. 14. Having considered the rival submissions, the provisions relating to assessment for the block period under Chapter XIV-B of the Act and the assessee's case including the documents under reference, which have been made annexure to this order also, we are of the opinion that it is now well settled that undisclosed income for the purpose of block assessment has to be comput....
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....terial bearing identification mark KPS-55, page 163. 2. For that the addition sustained is wrong, illegal and unjustified on the facts and in the circumstances of the appellant's case. 3. For that the learned Commissioner of Income-tax (Appeals) has failed to appreciate that addition on the basis of rough jotting is not permissible. 4. For that the learned Commissioner of Income-tax (Appeals) has failed to appreciate the entries in loose sheet does not in any way suggest/indicate/income/asset/as deemed under section 158B(b). 5. For that the order confirming addition of Rs. 16,43,865 is bad in law and fact of the case and is fit to be modified. 6. For that other grounds, if any, shall be urged at the time of hearing of the appeal. 20. The issue raised by the assessee relates to the addition of Rs. 16,43,865 on the basis of document marked as KPS-55, page 163, which has been confirmed by the Commissioner of Income-tax (Appeals) by observing as under: Rs. 16,43,865 on the basis of KPS-55, page 163 This paper which is a single loose paper bears the identification No. 163 of KPS-55 given by the search party. On this p....
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....n about the paper. In fact, this paper shows that the appellant was receiving back the monies. The appellant has failed to discharge the burden as to why his signature appears on the paper and why he has written received on the paper and why he has given a dated total account of sums of money received. It is possible, I could have drawn more conclusion about this paper if the Assessing Officer had shown me the original paper; even then from the photocopy of the paper produced by the appellant in the course of hearing, the basis for the conclusion that the handwriting and the signature of the applicant and the amount received with reference to specified dates are in the appellant's handwriting can be shown by a comparison of the photocopy of the power of attorney given by the appellant to the authorised representative, Shri Vinay Kumar Singh which is enclosed with this order and where the word 'Singh' appearing in the appellant's signature on the power of attorney is exactly the same as appearing in the appellant's signature in English on the impugned loose paper having identified No KPS-55. This is abundant proof of the fact that the signed amounts acknowledged ....
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....es of the Income-tax Act. They fall within the definition of the undisclosed income as defined under section 158B(b). The addition of Rs. 16,43,865 is confirmed. 21. The assessee's case before the authorities below had been that the transactions in this document relates to business carried on by Shri Baldev Singh and this fact was not only noted but acted upon by the Assessing Officer while completing the assessee's assessment wherein the Assessing Officer at page 7 has observed as under: On the basis of the submissions above, a summons under section 131 was issued to Shri Baldev Singh for verification of the assertions made by the assessee that it is an independent investment of the former who is neither a relative nor a business partner. Findings that emerge necessitates that the matter of investment is considered independently under section 158BD. However, the genuineness of the receipt of Rs. 16,43,865 on August 25, 2000 (financial year 2000-01) appears to have been established with the reference to a contemporary happening of Morton Confectionary, although the transaction with the latter may relate to Shri Baldev Singh. The amount is therefore added back in....