TaxTMI 
TaxTMI 
2015 (6) TMI 608
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....by making the following additions : Expenses incurred in cash - Personal Expenses - Rs. 60,412/- Telephone Charges - Personal use - Rs. 12,438/- (The assessee has also filed the return of income for A.Y. 2007-08 disclosing income of Rs. 3,87,030/-. The said return was processed u/s.143(1) accepting the returned income). 3. An action u/s.132 of the I.T. Act was conducted in the RMD Gutkha group of cases on 20-01-2010 during which the assessee's premises was also searched. In response to notice u/s.153A dated 14-09-2010 the assessee filed his return of income on 20-10-2010 disclosing total income of Rs. 2,80,660/-. In response to notice u/s.143(2) and 142(1) the assessee appeared before the AO and filed the various details as called for from time to time. Since the addition made during the original assessment amounting to Rs. 72,850/- was not offered to tax by assessee while filing its return in response to notice u/s.153A the AO made the aforesaid addition. 4. During the course of assessment proceedings the AO noted that a search action at the residential premises of one Mittulal at Bangalore was conducted at 09-10-2009 during which a large number of incriminating docume....
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....riwal Industries Ltd. (DIL) through Shri Sohan Raj Mehta, However, from the inquiries and the details submitted by you in response to the questionnaire, it is seen that you are a C & F agent of M/s Dhariwal Industries Ltd.for Mumbai region over many years and you have transacted with M/s DIL during the said period of 2003 to 2008 as its C & F agent. Further, Shri Sohan Raj Mehta has accepted to have carried out unaccounted sale of Gutka on behalf of M/s DIL between the period 2003 to 2008 as depicted in the documents seized (29 bundles marked as Exhibit A/M/01 to A/M/29 seized vide Panchanama dated 09/10/2009) seized by Investigation Wing of Bangalore. As per detailed enquiry and evidences gathered by the Department during search, post search enquiries and during the assessment proceedings, it is established beyond reasonable doubt that the above mentioned documents seized from Bangalore are actual details of unaccounted sales of Gutka by M/s Dhariwal Industries Ltd. which it has earned out through Shri Sohan Raj Mehta and that, Shri Sohan Raj Mehta has maintained all the details of these unaccounted sales, unaccounted sale proceeds generated in cash and the utilization of the said....
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.... you furnish your say so that I can consider the same before finalizing the assessment in your case. Accordingly, this Setter may kindly treated as last and final opportunity / final show cause notice-in the matter involved. A formal notice u/s 142(1) of the I. T. Act is enclosed herewith". 6. The assessee in response to the above questionnaire flatly denied to have received any such amount from M/s. Dhariwal Industries Ltd. through Sohan Raj Mehta. The assessee submitted that he is the proprietor of M/s. S. Chains engaged in the business of undertaking labour job in gold ornaments upto A.Y. 2008-09. But for A.Yrs. 2009-10 and 2010-11 he has not carried out any business activity in his individual capacity. He is a partner in the firms Sanghvi Dhanrupji Devaji & & Co., carrying on the business of gold, jewellery, bullion and Shree Mumbadevi Safe Deposits Vaults carrying on business of safe deposit vaults. His uncle Mr. Kiran Mulchand Ranawat is a director of M/s. S.D.D. Agencies Pvt. Ltd. who is trading in shares and securities and packaging drinking water and is also an authorised commission agent of M/s. Dhariwal Industries Ltd. for their products. M/s. S.D.D. Agencies was also....
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.... Ltd. where addition of Rs. 40.88 crore has been made in A.Y. 2004-05. He observed that the irrefutable evidences in the form of seized documents found from the premises of Mr.Mittulal at Bangalore could not be negated by the assessee. 8. As regards the contention of the assessee that the seized documents were not seized from him and he has nothing to do with Shri Sohan Raj Mehta and the same cannot be treated as evidence against him being a third party evidence the AO noted that if such argument of the assessee is accepted, then the provisions of Evidence Act and Section 147, 158BD, 153C become redundant. He observed that although it is true that the strict rules of Evidence are inapplicable to the proceedings under the Income Tax Act 1961, however, that does not mean that the principles of Evidence Act are inapplicable to the proceedings under the Income Tax Act. Relying on the provisions of section 110 of Indian Evidence Act and the decision of Hon'ble Supreme Court in the case of Chuharmal Vs. reported in 172 ITR 230 (SC) the AO held that third party evidence has evidentiary value and therefore the same can be used if corroborated by other circumstantial evidence. Since in t....
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....und. Therefore, in absence of any incriminating material the additions made by the AO and sustained by the CIT(A) should be deleted. For the above proposition the assessee relied on the decision of the Special bench of the Tribunal in the case of All Cargo Global Logistics Ltd., Vs. DCIT vide ITA Nos. 5018 to 5022 and 5059/Mum/2010. Various other decisions were also relied upon for the above proposition. 12. So far as the merit of the case is concerned it was argued that the assessee has categorically stated that he has never received any such amounts and the assessee had no business connection with either M/s. Dhariwal Industries Ltd or Shri Sohan Raj Mehta. He neither knows Mr. Mittulal nor Mr. Sohan Raj Mehta. Therefore, the observation of the AO that the assessee was a co-conspirator with M/s. Dhariwal Industries Ltd. is baseless. The assessee further submitted that no incriminating documents/evidence was found supporting the cash receipt of Rs. 21 crores from Shri Sohan Raj Mehta. No unaccounted investment or asset was found during the search action against the assessee. It was argued that the seized documents have not been seized from his custody, does not belong to the as....
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....e. 15. So far as the merit of the case is concerned he also dismissed the same and upheld the addition made by the AO. While doing so, he observed that Shri Sohan Raj Mehta, C&F Agent of M/s. Dhariwal Industries Ltd. in his statement u/s.132(4) has explained the entire modus operandi of unaccounted generation of cash and also regarding its deployment which is corroborative and also corroborated by innumerable evidence contained in the seized documents. Further after decoding of the seized document by Shri Sohan Raj Mehta it has been explained that on the basis of the signed chits either by Shri Rasiklal M. Dhariwal/Shri Prakash M. Dhariwal, Shri Sohan Raj Mehta used to make payments to the parties whose names were mentioned on the chits. The AO has pointed out to the signed chit dated 14-08-2007 by Shri Prakash M. Dhariwal which appears on page 44 of the loose paper Bundle No.A/M/29 where the amount mentioned is Rs. 5 lakhs for which decoding has been explained by Shri Sohan Raj Mehta as Rs. 5 crores and the payments related to the said instructions on the chits have been made by way of number of instalments on different dates. The AO has also found and noted that the assessee h....
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....the said seized documents Shri Sohanraj Mehta, C&F agent of the Dhariwal Group at Bangalore has admitted to have written the said document in his own handwriting and also explained that most of the pages to have been written in 'Marwadi' language matching with the statement and the wordings on the seized document. It was also admitted that they represented purchase and sales of RMD Gutkha during financial years 2003-04 to February 2008. So far as the notings on page 34 is concerned, Shri Mehta had specifically stated that it was consolidated working of stock of RMD gutkha received from the company M/s Dhariwal Industries Ltd., whose factory was at Singsandra, Bangalore for the period April 2003 to August 2006. The C&F agent of the Dhariwal group, Shri Mehta also explained that the figures mentioned on the left side of the page 34 represented the stock of RMD Gutkha boxes received from the company and its value was also mentioned therein. It was further explained by Shri Mehta that the total of such stock received from the company as per the sheet worked out to Rs. 2,18,00,91,198/-. It was also stated during the 132(4) statement recorded on 10.10.2009 that the payments recei....
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....in the hands of the assessee is, therefore, based on a sound footing and moreover in such situation where the entire dealing itself is undisclosed, the books of account and other related documents are generally not maintained and corroborative evidences has to be seen within the materials found and seized and the inference drawn based on the statement recorded. The C & F agent Shri Sohanraj Mehta had a long association with the Dhariwals and because of such close association the entire C & F of RMD Gutka for Karnataka region was given to him. Moreover, the magnitude of the transaction which was handled by Shri Mehta and the amount of commission earned and also disclosed as income on such transaction clearly indicates that the statement given were not untrue and the same could be believed. The contention of the assessee that there being no evidence that the Dhariwal Group had paid to the assessee thus gets answered. The records of such undisclosed activity are maintained in the manner in which the document and loose papers have been found and seized in the present case and no regular books of accounts are maintained for such activity. The detailed statement given by Shri Mehta expla....
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....der of the CIT(A) the assessee is in appeal before us by taking the following grounds : "The ground or grounds of appeal are without prejudice to one another. 1.a) On the facts and in the circumstances of the case and in law, the Id. CIT(A) erred in not appreciating that the assessment order passed u/s. 143(3) r.w.s. 153A by the AO is without jurisdiction and bad in law as the jurisdiction u/s. 153A is vitiated. b) The Id. CIT(A) failed to appreciate that neither any incriminating document nor any unaccounted asset or investment was found in the course of the search carried out at the premises of the Appellant. 2. a) On the facts and in the circumstances of the case and in law, the Id. CIT(A) erred in confirming the addition of Rs. 1,00,00,000/- made by the AO to the income of the Appellant on account of undisclosed cash receipts on the basis certain notings on papers seized from the third party without allowing any opportunity to cross examine the third party inspite of specific request for the same. b) The Id. CIT(A) failed to appreciated that :- (i) the seized papers relied upon by the AO were found from the possession of the third party, (ii) the seized pap....
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....So far as the merit of the case is concerned, i.e. regarding addition of Rs. 1 crore for A.Y. 2006-07 and Rs. 20 crore for A.Y. 2007-08 he submitted that the addition made by the Assessing Officer and upheld by the CIT(A) is not at all justified. He submitted that the assessee is in jewellery business and has no business connection with M/s. Dhariwal group or Shri Sohan Raj Mehta, C&F Agent of M/s. Dhariwal Industries Ltd. The seized papers indicate payments to one Mr. Vinit and at a few papers the name Vinit Ranawat is mentioned. Referring to pages 143 to 147 of the paper book the Ld. Counsel for the assessee drew the attention of the Bench to the statement recorded u/s.132(4) of Sri Sohan Raj Mehta where he had stated that he effected the unaccounted sales of Dhariwal Industries and had made the payments noted on the loose papers as per the instructions of Shri Dhariwal. 22. Referring to the decision of the ITAT, Ahmedabad Bench in the case of Shri Mushtafamia Sheikh he submitted that Shri Sohan Raj Mehta had retracted from the statement. He submitted that although the assessee does not have such retraction statement, however, in view of the decision of the Ahmedabad Bench of ....
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....ngeshkar [97 ITR 696] b. Straptex (India) P. Ltd. v. DCIT [84 ITD 320 (Mum)] c. CBI v. V. C. Shukla [3 SCC 410 (SC)] d. Prarthana Construction P. Ltd. v. DCIT [118 Taxman 112 (Ahd.)] e. Unique Organizers & Developers P. Ltd. v. DCIT [118 Taxman 147 (Ahd.)] 25. Referring to the statement recorded u/s.132(4) on 20-01- 2010, a copy of which is placed at pages 34 to 44 the Ld. Counsel for the assessee drew the attention of the Bench to the Question No.33 and 34 and submitted that the assessee has categorically denied to have received any such amount from Shri Dhariwal or Shri Sohan Raj Mehta. Referring to Question No.34 he submitted that the authorized officer had termed the notings on the loose papers as "short term advances given to the assessee". Thus, if this sum is a short term advance the question of the same constituting income of the assessee does not arise. The Ld. Counsel for the assessee referred to the statement of Shri Sohan Raj Mehta wherein Mr. Mehta clarified that this was a short term advance. Hence, by no stretch of imagination the same can constitute income of the assessee. The Ld. Counsel for the assessee referred to the decision of the Hon'ble Bombay....
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....ds of the assessee is not justified. It can be considered only in the hands of M/s. S.D.D. Agencies. 29. Still in another alternate contention, the Ld. Counsel for the assessee submitted that there are many persons by such names such as that of the assessee in Mumbai and at other places. Hence it cannot be presumed that it is definitely the assessee who is the recipient of the money as noted in the seized paper. On this logic also, the addition is not justified in the hands of the assessee. 30. The Ld. Counsel for the assessee submitted that on the basis of notings on the seized papers found during the course of serach of Mr. Mehta additions have been made in the hands of such third parties by the Assessing Officers under identical facts. When the matter travelled up to the Tribunal, the Tribunal has deleted such addition. For the above proposition, the Ld. Counsel for the assessee relied on the following decisions : 1. Pradeep Amrutlal Runwal Vs. Tax Recovery Officer reported in149 ITD 548 2. Shri Mustafamiya H. Sheikh vide ITA No.2588/Ahd/2012 order dated 15-02-2013 3. Shri H.S. Chandramouli vide ITA No.1551/Bang/2012 order dated 30-08-2013 4. M/s. Mohd. Ayub Mo....
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....Shri Prakash Manikchand Dhariwal of M/s. Dhariwal Industries Ltd. Referring to page 19 of the paper book filed by him the Ld. Departmental Representative drew the attention of the Bench to the notings in the seized documents and submitted that the same contains the name of the assessee with an amount of Rs. 5 lakhs against his name. Referring to page 21 of the paper book he submitted that the name of the assessee appears at page 24 of Bundle No.A/M/29 which contains the name Vinit Ranawat. Referring to paper book page 123 he submitted that in his reply to Question No.3 recorded u/s.132(4) on 21-01- 2010 Shri Rasiklal Manikchand Dhariwal has taken the name of Vinit Ranawat, Mumbai who has been appointed as C&F Agent for the State of Maharashtra. Referring to the assessment order in the case of Dhariwal Industries, a copy of which are placed at pages 1 to 79 of his paper book the Ld. Departmental Representative submitted that a thorough discussion was made in the said assessment order containing the modus operandi and additions have been made in the case of Dhariwal Industries Ltd. 35. Referring to the copy of statement of Shri Sohan Raj Mehta recorded u/s.132(4) on 10-10-2009 cop....
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....hukla reported in 3 SCC 410 where it has been held that addition cannot be made in the hands of the assessee on the basis of entries in the books of account of third parties in absence of any corroborative evidence. 37. We have considered the rival arguments made by both the sides, perused the orders of the Assessing Officer and the CIT(A) and the Paper Book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find in the instant case a search u/s.132 of the I.T. Act was conducted at the premises of Mr. Mittulal at Bangalore on 09-10-2009 wherein certain incriminating documents were found belonging to the Dhariwal group. Those documents were maintained by one Shri Sohan Raj Mehta, C&F agent of M/s. Dhariwal Industries Ltd. In his statement recorded u/s.132(4) Mr. Mehta had stated that he was effecting unaccounted sales of Gutkha of Dhariwal Industries Ltd. and the sale proceeds were deployed as per the instructions of Shri Rasiklal M. Dhariwal and his son Shri Prakash M. Dhariwal. In some of the seized papers name of certain persons are appearing which contain the name either "Vinit" or "Vinit Ranawat". On the basis of those names an....
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....the basis of papers found in the premises of third party. Further, the assessee being a small taxpayer, some evidence should have been found from the residence of the assessee to show that in fact he has received such huge amount. It is also the case of the Ld. Counsel for the assessee that the Department itself is treating this as "short term advance" during the course of search action. Similarly, the statement of Mr. Rasiklal M. Dhariwal is contrary to the finding of the Department. It is also the submission of the Ld. Counsel for the assessee that different Benches of the Tribunal under identical facts and circumstances have deleted the addition made by the Assessing Officer on the basis of notings found from the premises of Mr. Sohan Raj Mehta. 40. We find some force in the submission of the Ld. Counsel for the assessee. The assessee in the instant case is an individual and proprietor of M/s. S. Chains which is engaged in the business of job work in gold ornaments. M/s. S.D.D. Agencies is the C&F Agent of M/s. Dhariwal Industries Ltd. in the State of Maharashtra for their Gutkha and Pan Masala business. A search and seizure action on the premises of Mr. Mittulal at Bangalore....
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....ement shown to me of Shri Prakash Dhariwal recorded on 20-01-2010, however, I have never recorded the amount mentioned from Shri Sohanraj Mehta hence the said payment are not recorded in my books. Q.35 The statement of Shri Sohanraj Mehta recorded u/s.132(4) on 09-10-2009 has been confirmed by Shri Prakash Dhariwal in the statement recorded u/s.132(4) on 20-01-2010. Thus, both Shri Sohanraj Mehta and Shri Prakash R. Dhariwal have stated on oath that payments in cash of Rs. 21.22 cr has been made to you at the direction of Shri Rasiklal Dhariwal by Shri Sohanraj Mehta. As the statements have been given by them on oath, you are therefore once again requested to go through the above referred documents/statement and state whether the said cash receipts are reflected and recorded in your regular books of accounts. A.35 As already stated earlier, I have never received any cash from Sohanraj Mehta at the instant of Shri Rasiklal Dhariwal or Prakash Dhariwal. Hence, no such cash is recorded in my regular books of accounts." 41. It is also pertinent to note here that the search party during the course of search at the premises of the assessee has not found any evidence whatsoever t....
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....lease go through these loose sheets serially numbered 1- 61 and state the contents written over these loose sheets? Ans : I have gone through the exhibit marked A/M/29. I have placed my signature on page ho. 24 of this exhibit in confirmation of having seen it. This exhibit contains loose slips serially number 1-61. Slips marked as sl.no. 4 to 8, 49 to 50, 58 arid 59 contain the notings of Mr.Raskilal Manikchand Dhariwal and his son Mr; Mr. Prakash. The notings on these slips contain their directions to me to handover the amount mentioned in the slip to the person who brings the slip. Sometimes, they do not write any name on the slip, I have to handover the money mentioned in the slip to the bearer of the slips. Most of the times, I may not know the person but still I make payment to them as I have standing instructions from Mr.Raskilal Manikchand Dhariwal and his son Mr. Prakash to handover the money to the bearer of the slip. The money is paid out of the collections received from the distributors towards unaccounted sales. Q.34 Do you obtain any receipt from the parties to whom you hand over Cash as per the instructions of Mr.Raskilal Manikchand Dhariwal and his son Mr. Pra....
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....self is treating the same at one place as short term advance, therefore, the question of treating the same as income of the assessee does not arise. It is also an admitted fact that the papers were found with Mr. Sohan Raj Mehta at Bangalore. Therefore u/s.132(4A) they can be presumed to be true, genuine and correct only in the case of the searched person, i.e. Mr. Sohan Raj Mehta who has admitted that the papers belong to him. Therefore, we find force in the submission of the Ld. Counsel for the assessee that on the basis of the papers found with some third party addition cannot be made in the hands of the assessee particularly when there is no business connection between the assessee and that party. 47. The Hon'ble Bombay High Court in the case of Addl.CIT Vs. Lata Mangeshkar reported in 97 ITR 696 has held that mere entries in the accounts regarding payment to the assessee was not sufficient as there was no guarantee that the entries were genuine in absence of any corroborative evidence. In that case, the incometax authorities sought to assessee certain income as income from undisclosed sources received by the assessee on the basis of statement by 2 persons that they had paid....
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.... accounts and were admissible to prove the payment of loan given. The suit was decreed by the trial Court and the appeal preferred against it was dismissed by the High Court. In setting aside the decree this Court observed that in the face of the positive case made out by Chandradhar that he did not ever borrow any sum from the Bank, the Bank had to prove that fact of such payment and could not rely on mere entries in the books of account even if they were regularily kept in the corse of business in view of the clear language of Section 34 of the Act. This Court further observed that where the entries were not admitted it was the duty of the Bank, if it relied on such entries to charge any person with liability, to produce evidence in support of the entries to show that the money was advanced as indicated therein and thereafter the entries would be of use as corroborative evidence. The same question came up for consideration before different High Court on a number of occasions but to eschew prolixity we would confine our attention to some of the judgements on which Mr. Sibal relied. In Yesuvadiyan Vs. Subba Naicker [A. I. R. 1919 Madras 132] one of the learned judges constitutin....
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....fer to a matter in which the court has to enquire was subject to the salient proviso that such entries shall not alone be sufficient evidence to charge any person with liability. It is not, therefore, enough merely to prove that the books have been regularly kept in the course of business and the entries therein are correct. It is further incumbent upon the person relying upon those entries to prove that the were in accordance with facts. The evidentiary value of entries relevant under Section 34 was also considered in Hiralal Mahabir Pershad (supra ) I.D. Dua, ]. (as he then was) speaking for the Court observed that such entries though relevant were only corroborative evidence and it is to be shown further by some independent evidence that the entries represent honest and real transactions and that monies were paid in accordance with those entries. A conspectus of the above decisions makes it evident that even correct and authentic entries in books of account cannot without independent evidence of their trustworthiness, fix a liability upon a person. Keeping in view the above principles, even if we proceed on the assumption that the entries made in MR 71/91 are correct and t....
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....sessee and, accordingly, added to the income of the assessee for the period under consideration by the AO which has been subsequently sustained by the learned CIT (A) for the detailed reasons recorded in his appellate order which is under scrutiny. 7.1. Admittedly, the whole proceedings were initiated on the strength of a statement of a third party (Shri Sohanraj Mehta). The purported seizure of slips, loose sheets etc. at the premises of a third party contained only the names, but, not other details such as their identity, addresses, contact numbers etc. On a perusal of the statement, it is clear that the payments made were to the persons whose names were appearing on the right side of the papers (sheets) which were paid to those persons on the instructions of PRD & RD. Moreover, against the names of Mustufa & Taufik, it was specifically written as (PRD) expenditure in respect of PRD was given by Shri Sohanraj Mehta as per the telephonic and written instruction of Prakash Rasikal Dhasriwal and Rasiklal Manikchand Dhariwal as per the Statement of Sri Sohanraj Mehta dated 21.10.2009 [Refer: Page 99 of PB AR]. To a question No.14 Exhibit A/M/8/dated 9.10.2009 which contained a bun....
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....n the assessee's contention that he should have been afforded an opportunity to cross-examine the third party [ Shri Shohanraj Mehta] since his statements on oath were coupled with inconsistency, he retracted his earlier statements and, thus, not above the board. 7.5. Moreover, the assessee's plea for permission to cross examine Shri Sohanraj Mehta at the assessment stage was not conceded by the AO on the ground that - "[On page 9 CIT (A)] 2.8........................................................................... Comments of the AO: (ii) Opportunity of cross examination of Shri Sohanraj Mehta: 'The assessee was provided with the copy of the statement of Shri Sohanraj Mehta recorded by the ADIT (Inv), Pune, along with documents on which his statement was recorded. Due to paucity of time the cross examination could not be granted." 7.6. The CIT (A) had also turned down the assessee's request for cross-examination on the ground that - "(On page 53) 2.25................It has also been indicated, as borne out on records, that the appellant had asked for cross examination of the party for the first time only on 14.12.2011. The appellant was also fully ....
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....atements made by the aforesaid persons would have no evidentiary value and as such, would not be admissible in evidence. Further, though the said MV has stated that he has paid Rs. 60 lakhs to the assessee on behalf of one GC, the said amount has not been taxed in the hands of GC. Moreover, no evidence has been adduced to indicate that any transaction in relation to the land in question has actually taken place. The Tribunal has rightly found that the basis for making the addition in the case of the assessee is merely a bald statement of MV, which is not corroborated with any documentary evidence found at the time of search, either in the case of S or MV or the assessee. No plea to the effect that the impugned order of the Tribunal suffers from any perversity has been raised. The Tribunal having based its conclusion on findings of fact recorded by it after appreciation of the evidence on record, it cannot be stated that the impugned order of the Tribunal suffers from any legal infirmity............" (ii) During the course of hearing of a reference application of the Revenue in the case of DCIT (Asst) v. Prarthana Construction Pvt. Ltd [Tax Appeal No.79 of 2000 dated 25.3.2001] b....
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....erence." 7.9. Taking into account the submissions of the assessee, the stand of the AO, reasoning of the CIT (A) in sustaining the action of the AO and also in conformity with the rulings of the Hon'ble jurisdictional High Court (supra), we are of the considered view that that learned CIT (A) was not justified in sustaining the addition of Rs. 57.5 lakhs made by the AO in the hands of the assessee for the following reasons: (i) that the learned AO had solely depended upon the information received from the Investigation Wing of Pune; (ii) that the AO had failed to substantiate the same with any credible documentary evidence to the effect that the assessee had indeed received the alleged cash payment of Rs. 57.5 lakhs from Shri Sohanraj Mehta as the assessee had categorically pleaded before the AO that he was making purchases through Ambika Distributors who were the C & F Agents for Gujarat Region; (iii) that the total unaccounted sales effected by Shri Sohanraj Mehta C & F of RMD Gutkha on behalf of Dhariwal Industries Limited for the period of April 2003 to Feb 2008 was Rs. 345.72 crores (approx). The unaccounted income for the AY 2004-05 was arrived at Rs. 40,88,32....
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....f the assessee and a figure of Rs. 22.75 lakhs appears against his name. As to whether this document evidences payment of Rs. 22.75 lakhs to the assessee is a moot question. There is no basis set out in the order of the AO for coming to the conclusion that the seized document evidences receipt of money by the assessee from Sohanraj Mehta. The presumption u/s. 292C of the Act is only with reference to the person searched and it cannot be extended to the assessee. There is no corroborative evidence or statement of Sohanraj Mehta relied upon by the AO, to the effect that a sum of Rs. 22.75 lakhs was paid to the assessee. The assessee has categorically denied having received any payment from Sohanraj Mehta. Even in the proceedings before the AO, when the assessee was examined, he had taken the same stand. The details called for in the scrutiny assessment did not call for any specific details on the seized document or receipt of cash based on the seized document. 14. In the light of these circumstances, the CIT(Appeals) was justified in coming to the conclusion that no evidence has been brought on record to prove that the assessee received the sum of Rs. 22.75 lakhs from Sohanraj Meh....
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....in the hands of the assessee. No satisfactory answer was furnished by the ld. D.R. We have also carefully perused the seized documents and we find that there is a debit entry of Rs. 50 lakhs in the name of Mlik Kannauj, but this entry does not indicate that the amount of Rs. 50 lakhs was given to the Managing Director of the assessee. There may be hundred of Malik in Kannauj but on the basis of this dumb document, the reopening of assessment in the hands of the assessee is not permissible. Moreover, the searched party has also examined Shri. Sohanraj Gupta and the statement is also placed on record and at nowhere Shri. Sohanraj Gupta has deposed about payment of Rs. 50 lakhs to the assessee. In the absence of any relevant material, the reopening of assessment in the hands of the assessee is not proper. The ld. CIT(A) has given valid reasons while holding that the reopening is bad. The relevant observations of the ld. CIT(A) are extracted hereunder:- "5.1.6 From all the aforesaid correspondence, it is obvious that there is no clue as to how the identity of "MALIK Kannauj" as appearing in the seized document (supra) was interpreted as Shri Abdul Malik, MD of the appellant company.....
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....d." 5. Since we do not find any infirmity in the order of the ld. CIT(A), we confirm his order." 52. Similarly the Lucknow Bench of the Tribunal in the case of DCIT Vs. Pawan Kumar Agarwal (Supra) has held as under : "5. We have considered the rival submissions. We find that the issue in dispute was decided by learned CIT(A) as per para 7 & 7.1 of his order, which is reproduced below for the sake of ready reference:- "7. That vide grounds No. 3 to 7, assessee has challenged the additions of Rs. 1,13,40,000/- made on account of alleged undisclosed income. I have carefully considered the rival submissions and perused the material on record. I have also gone through the order of the A.O. It was contended by the learned AR before me that mere jottings and notings should not be the basis for making any addition in the returned income, more particularly when A.O has not allowed the opportunity of Cross Examination of Mr. Shobhan Raj Mehta. The material provided/gathered by the department has also been produced before me. In this paper, it is seen that name of assessee is appearing. It was vehemently argued before me that how the department comes into conclusion that name Pawa....
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....ion to the effect that the contents of the statement were made known to the assessee, is not a compliance of mandatory requirement to provide the assessee incriminating material to defend its own case and therefore it can categorically be held that: (i) Statement of Shri Shobhan Raj Mehta was not given to the assessee. (ii) Beyond the belief of presumption on the information supplied by the ADIT(Inv.)-III, Kanpur, further evidences are not found to corroborate the additions. (iii) Cross-examination of Shri Shobhan Raj Mehta was not allowed. (iv) The assessee firm had strongly denied having any financial and business transactions with Mr. Shobhan Raj Mehta. In view of these factual exigencies, it is held that the addition made by the AO, without any corroborative evidence, was unjustified and accordingly deleted. Accordingly, ground No. 3 to 7 raised by appellant are allowed." 5.1 From the above Para from the order of CIT(A), we find that a categorical finding has been given by him that statement of Shri Shobhan Raj Mehta was not given to the assessee and beyond the belief of presumption on the information supplied by the ADIT(Inv.)- III, Kanpur, further evidences ....
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....upon the statement of Shri Sohan Raj Mehta. It was pointed out by the learned counsel that Shri Sohan Raj Mehta retracted his statement. However, as per Revenue, Shri Sohan Raj Mehta has retracted his retraction affirming the original statement. On these facts, the learned CIT(A) has come to the conclusion that the statement of Shri Sohan Raj Mehta cannot be relied upon because he is frequently retracting his statement. Moreover, a statement of a third party cannot be used against the assessee unless the assessee is allowed an opportunity to cross-examine him. Now, we find that during the assessment proceedings, the assessee specifically requested for allowing opportunity to cross-examine Shri Sohan Raj Mehta also and requested the Assessing Officer to supply the copy of retraction of his statement. The Assessing Officer has reproduced the assessee's letter, paragraph No.11 of which, reads as under:- "11. The assessee had requested your good self to provide the following documents: (a) Copy of the Sworn Statement of Sh. Sohanraj Mehta. (b) Copy of written statements or Affidavits obtained from Sh. Mehta wherein he has mentioned that Rs. 9 crore was payable to the asses....
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....rative evidence. That merely because some excess stock was found in the survey for which separate addition has already been made, it cannot be further presumed that the assessee made sales outside the books, specially when the survey was followed by the search and neither during the course of survey nor during the course of search, any evidence of sale outside the books was found. In view of the totality of above facts, we do not find any justification to interfere with the order of learned CIT(A). The same is sustained." 54. We find the Pune Bench of the Tribunal in the case of Pradeep Amrutlal Runwal reported in 149 ITR 548 while deleting addition under identical facts and circumstances has observed as under : "5. After going through the rival submissions and material on record, we find that the issue before us is regarding the addition of 5,10,00,000/-. As stated earlier, during the search proceedings in the case of Dhariwal Group, some loose papers were seized wherein certain amounts were written against the name of 'Pradeep Runwal'. Hence, the case of the assessee was reopened u/s 148 of the Income Tax Act. It was explained to the learned Assessing Officer ....
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....o suggest that the assessee has previous business relations with the Dhariwal Group. In the absence of any documentary evidence to suggest the same, it could not be presumed that the amounts reflected in the loose papers were the income of the assessee received from Dhariwal Group. It has been the consistent stand of the assessee that there may be many persons of the name Pradeep Runwal in Pune and there was no specific evidence to suggest that the said notings pertained to the assessee. Hence, it was not justified as to how, in the absence of any other corroborative details, the Assessing Officer has assumed that the amounts reflected the income of the assessee himself, while the assessee has no business dealings of his with Dhariwal Group. The Assessing Officer has not brought on record any evidence to suggest that Dhariwal Group has admitted that the amounts were paid to the assessee. Hence, simply because the name of the assessee is noted on the seized papers does not mean that the addition could be made in the hands of the assessee. Since no evidence was found relating to the existence of any transaction between the assessee and Dhariwal Group and in the absence of any corrobo....
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....in order to check whether the said land was used for agricultural purposes. In the present case, the provisions relied by the Assessing Officer are not applicable, the assessee is not withholding any documents. The case of department is that the amount mentioned on the seized paper found with the Dhariwal Group indicates that the assessee has received the amount, therefore, the burden was on the Assessing Officer to establish the same. The reliance placed on the provisions of section 114 of Indian Evidence Act is misplaced. 5.7 As stated above, it has been consistent stand of the assessee that the assessee has had no business relations whatsoever with the Dhariwal Group. Further, apart from the noting on paper with the name 'Pradeep Runwal, there is no corroborative evidence in this regard against the assessee. In such circumstances, where the assessee has not entered into any transaction with the Dhariwal Group, one certainly could not expect the assessee to be in possession of any evidence to suggest that it has not entered into any such transaction except for his books of account which have already been verified by the concerned Assessing Officer. Hence, the Assessing Off....
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....ting of the transactions of Dhariwal Group. He has stated that Shri Sohanraj Mehta has admitted that the documents were written by him and most of the papers were written in marwadi language. The CIT(A) referred to the fact that Shri Mehta had admitted that the papers belonged to Dhariwal Group. In para 4.3, the CIT(A) states that when the author of the paper has accepted the notings made by him, in that event, the document is having great evidentiary value and could not be rejected. As regards, the objection of the assessee that no evidence was found to indicate that the assessee had received the amount, the CIT(A) referred to the fact of acceptance of the paper by Shri Mehta and considering the fact that the modus operandi was clarified by Shri Mehta, the addition was rightly made by the Assessing Officer, has been held by CIT(A). He has referred to various decisions in support of the addition made. Firstly, he has relied upon the decision of ITAT Third Member in the case of Khopade Kisanrao Manikrao [74 ITD 25]. In this regard, the stand of assessee is that the decision in the case before Third Member was not applicable to the facts of the present case. In the said case, the ass....
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....ot applicable to the facts of the present case. Firstly, there is no transaction between the assessee and Dhariwal Group. Secondly, there is no corroborative evidence found which could suggest that the assessee had received any amount. The Assessing Officer and CIT(A) have also not brought on record any evidence to suggest that the payment was made to the assessee. Accordingly, considering the factual position, the decision in the case of Dhunjibhoy Stud and Agricultural Farm is not applicable in the case of assessee. 5.13 The CIT(A) has relied on the decision in the case of Vasantibai N. Shah Vs. CIT [(1995) 213 ITR 805 (Bom)]. In this case, the issue was regarding validity of reassessment proceedings. The assessee had made a false disclosure. Subsequently, the case was reopened. Hon'ble High Court held that the reopening was valid since the assessee herself had made a false disclosure. Thus, the facts are totally different from the present case and hence, the ratio of Vasantibai N. Shah (supra) is not applicable to the assessee's case. The CIT(A) further relied on the decision in the case of Green Valley Builder v. CIT [(2008) 296 ITR 225 (Ker)]. In the said case, the ....
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....d the submissions given by the assessee in his paper book dated 28.12.2007 reiterating the same stand. The A.O. has drawn inferences and presupposes relying on surmises and conjectures. The ITAT Mumbai Bench in their decision in the case of Straptex (India) Pvt. Ltd. [84 ITD 320 (Mum), clearly held that the presumption u/s 132(4A) is applicable only against the person from whom possession the books of accounts or other documentary were found and not against any other person. It is held that as per Section 132(4A) where any books of account or document is found in the possession and control of any person in the course of the search, it is to be presumed that they belong to " such person". Thus, clearly the presumption is in respect of the person from whom they were found. The use of the word "to such person" in the said Section means the person from whom the books of account or documents were found. Clause (ii) of Section 132 (4A) provides that the contents of such books of account or documents are true. This presumption can be applied only against the person from whose possession the books of account or the document were found. Therefore, the A.O. was not justified in applying the ....