AI Drafter 
TaxTMI 
TaxTMI 
2002 (4) TMI 952
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.... sales. On appeal, the order of the Assessing Officer was set aside by the CIT(A) vide his order dated 14-8-1996 with the following specific directions : (i)A finding of fact has to be given with reference to the total consignment value of Rs. 88,45,624 involved in 6 debit notes as to whether the same had been imported by Canon Steel Pvt. Ltd., and if so, how the same had been accounted for and disposed of. (ii)The claim of the assessee that he had sold goods worth Rs. 78.82 lakhs in small bits in cash and also needed to be properly authenticated. (iii)The assessee should be given opportunity of being heard in respect of seized page 37 of Annexure A-4. (iv)The assessee's claim that the jewellery said to have been purchased from undisclosed sources had disclosed in the wealth-tax return, needs verification and reconciliation. 3. In the reassessment proceedings, the Assessing Officer passed the order on 30-3-1999 wherein addition of Rs. 60 lakhs had been made under the head 'Income from other sources'. This addition was based on a document which was seized during the course of search conducted at the premises of the assessee in Delhi. Aggrieved ....
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....c i.e. 26-9-1992, on the expenses side also, the dates were specific i.e. 26-9-1992 to 25-10-1992. Thus according to him, it could not be said that it was planning. The Assessing Officer also rejected the explanation of the assessee that the unaccounted cash of Rs. 60 lakhs and other amounts pertaining to 13-10-1992 which was not readable due to punching hole had been channellised through the consignment account. 5. During the course of reassessment proceedings, the assessee filed the following explanation : "This paper is nothing except planning and planning is linked with marriage of my daughter, Monika, through matrimonial consultants/agents. Keeping in view the trend in the society, I found that there was good proposals of status families but subject to marriage expenses one crore or more therefore I was planning on the paper during September/October 92. Keeping in view the ideas of various matrimonial consultants/agents I started purchasing more jewellery as well as property for Monika during the year 1993. It will not be out of place to mention that the jewellery referred in the page was already in possession of my wife and myself and in HUF which I told ....
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....icer concluded that the assessee was in possession of Rs. 60 lakhs as on 26-9-1992 which remains unexplained. 7. The learned CIT(A) supported the findings of the Assessing Officer and has stated that Shri S.P. Goyal was in the possession of Rs. 60 lakhs and he had incurred an expenditure of Rs. 31,21,400 from 26-9-1992 to 25-10-1992. The learned CIT(A) has further stated that the assessee had not been able to prove that Rs. 60 lakhs were available with him as on 26-9-1992 and the same represented amounts withdrawn by him from disclosed sources of income. The learned CIT(A) has also stated that the assessee was also purchasing jewellery in the form of gold and diamond jewellery and silver articles from known sources of income in anticipation of his daughter's marriage. The learned CIT(A) referred to the decision of the Calcutta High Court in the case of Debi Burman v. CIT 1994 Tax LR 452, 456 wherein it has been held that the onus clearly lies on the assessee to prove that the entries ostensively showing receipt of on-money in cash are not real receipts. She has further stated that the contention of the assessee that the Department must prove the existence of cash and the fact th....
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....uced before the Assessing Officer. He also explained that the goods which were sent to the assessee by M/s. Canon Steels Pvt. Ltd. were kept and dealt through M/s. Shivganga Warehousing Corporation and the said file pertaining to such goods was a part of seized records. The learned counsel contended that the sales bills/memos and names of the buyers were produced before the Assessing Officer during the course of assessment proceedings. Thus, the goods received by the assessee were evident from the records of M/s. Shivganga Warehousing Corporation and the same were sold as per the books of the assessee. Thus according to the learned counsel, the assessee was expecting cash of Rs. 60 lakhs sometime back in the month of September 1992, but later on instead of cash, the assessee was sent goods for sales, mostly imported by M/s. Canon Steels Pvt. Ltd. The learned counsel also pointed out that no such jewellery or amount mentioned on the seized paper had been found during the course of search operation in the residence of the assessee. All the cash, jewellery, stock etc., found at the time of action under section 132 of the Act was fully explained and the same also tallied with the recor....
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....g to him, the assessee did not file any information in response to this letter. He contended that the explanation filed by the assessee regarding the goods imported by M/s. Canon Steels Pvt. Ltd., was false. He further pointed out that the explanation filed by the assessee regarding the marriage of his daughter at the time of reassessment proceedings was contradictory to his explanation filed during the course of original assessment proceedings. According to him, there was no mention of the marriage of his daughter in the explanation filed regarding the seized paper during the course of the original assessment but the explanation filed during the course of reassessment proceedings pertain to the marriage of his daughter. Therefore, he contended that the explanation filed during the course of reassessment proceedings was contradictory to the explanation filed during the course of original assessment. The learned DR reiterated the findings of the Assessing Officer that the planning for expenses cannot be retrospective. Hence according to him, the explanation filed by the assessee is without any substance and does not prove that the assessee was actually planning for the marriage of h....
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....lled for only during the course of regular assessment proceedings. The assessee filed explanation that the paper was nothing except planning and that planning was linked with the marriage of his daughter, Monika. He stated that during September/October 1992, he was planning on this paper keeping in view the ideas of various matrimonial consultants/agents. He also explained that he started purchasing more jewellery as well as property for Monika during the year 1993. He explained that the jewellery referred in the page was already in possession of his wife, himself and the HUF. Thus the assessee filed the explanation regarding the seized paper. The Department rejected the explanation given by the assessee and made the addition on the presumption that the assessee was having undisclosed cash of Rs. 60 lakhs on 26-9-1992. 10. The basis of addition is a seized paper on which cash of Rs. 60 lakhs and other jewellery items have been mentioned. There appears to be some substance in the explanation of the assessee. The assessee was planning to arrange the funds for the marriage of his daughter. He wanted to withdraw Rs. 60 lakhs from firms/companies for his personal use and he was plann....
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.... which had been mentioned in the seized paper. The jewellery found during the course of search was fully explained and the same also tallied with the records of the Department. Therefore, notings on the seized paper do not indicate the actual transactions. The paper in question does not indicate that any transaction had ever been taken place or the cash was available with the assessee because it does not contain any informa- tion as to what was the nature of the transactions. The Department did not bring any evidence on record to corroborate to the allegation that the assessee had entered into any transaction or the assessee was actually in possession of Rs. 60 lakhs. The Department also could not lay its hand on any evidence regarding the investment of Rs. 60 lakhs in any assets or in sales of any property or goods for Rs. 60 lakhs out of the books. The Department also did not brought on records any corroborative evidence to show that the assessee was actually possessing Rs. 60 lakhs cash on 26- 9-1992. The Department could neither found this cash during the course of search proceedings nor any evidence supporting the contention that the assessee was actually in possession of the ....
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.... the learned CIT(A) can come to the conclusion that the entries made in the paper was not a planning for the marriage of the daughter of the assessee. Allahabad High Court in the case of Pushkar Narain Sarraf (supra) relied upon by the learned counsel for the assessee has laid down that "Section 132(4A) does not override the provisions of section 68. The presumption arising under sub-section 4A of section 132 of the IT Act, 1961 applies only in relation to the provisional adjudication which is contemplated under sub-section 5 of section 132. Section 132(5) provides for estimation of undisclosed income or the calculation of the amount of tax on the income so estimated and the determination of the amount of interest payable or the amount of penalty imposable in a summary manner. For this limited purpose, the Legislature has provided under section 132(4A) that the books of account, other documents, money, bullion, jewellery or other valuable articles seized from the possession of the assessee shall be presumed to belong to the assessee if they are found in the possession or control of the assessee in the course of the search. A similar presumption may also be made as to the correctnes....
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....brought on record some independent evidence as to the trustworthiness of the entries necessary to fasten liability on the assessee. Keeping in view the facts and circumstances of this case and the various cases mentioned above, we are of the considered opinion that the addition made of Rs. 60 lakhs by the Assessing Officer and confirmed by the CIT(A) is not justified. The addition made is, therefore, deleted and the order of the learned CIT(A) is reversed. 12. In the result, the appeal is allowed. Per Shri M.A. Bakshi, Vice-President - On going through the order proposed by my learned brother, I am unable to persuade myself to agree to the proposed view. It is a search and seizure case. In the original assessment, the Assessing Officer had made addition of Rs. 78,82,775 on account of consignment sales. An addition of Rs. 60 lakhs was also found to be warranted on the basis of the entries made in a diary. However, since the addition of Rs. 78,82,775 on account of the alleged consignment sales was more than the amount of Rs. 60 lakhs on account of the entries in the diary, the Assessing Officer made only one addition of Rs. 78,82,775. The assessee had filed an appeal with th....
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....vganga Warehousing Corporation. Though the Assessing Officer has not made any addition in respect of the consignment sales, yet, the addition of Rs. 60 lakhs which is the subject matter of dispute in this appeal is connected with the claim of the assessee relating to the consignment sales. It is, therefore, necessary to consider this aspect of the matter. Moreover, my learned brother has referred to the findings of the Assessing Officer and gave his approval to the said findings I, not being satisfied, record my dissent and hold that the Assessing Officer has not proceeded to make the fresh assessment order in the spirit of the directions of the CIT (Appeals). I am, therefore, unable to subscribe to the view of my learned brother in regard to the manner of assessment made by the Assessing Officer. 3. Now, coming to the addition of Rs. 60 lakhs which is the subject matter of dispute in this appeal, it is to be noted that the addition has been made on the basis of the entries found in the diary belonging to the assessee seized during the course of search. The CIT (Appeals) has confirmed the addition of Rs. 60 lakhs. My learned brother has proposed to delete the addition on the bas....
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....arly attracted in respect of the entries made in the diary. Applying the provisions of section 68, the burden is upon the assessee to explain the entries in the diary to the satisfaction of the Assessing Officer. The Assessing Officer has not been satisfied with the explanation given by the assessee. The CIT (Appeals) has also not been convinced with the explanation of the assessee relating to the entries in the diary. In these circumstances, the addition of Rs. 60 lakhs made by the Assessing Officer is justified in the light of the provisions of section 68 of the I.T. Act. 4. Reference may also be made to the decision of the Hon'ble Supreme Court in the case of Chuharmal v. CIT [1988] 172 ITR 250 2 where Their Lordships have held that when a person is found in possession of anything, the onus of proving that he was not its owner was on that person. The finding recorded by my learned brother that the Department has been unable to establish by any evidence that the assessee had received a sum of Rs. 60 lakhs is not based on sound principle of law as the Department is not required to establish the same by any evidence. As already pointed out, the decision of the Hon'ble Supreme Co....
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.... the entries made in the diary found during the course of search ?" THIRD MEMBER ORDER Per Shri V. Dongzathang, President - The following point of difference was referred to me under section 255(4) of the Income-tax Act, 1961 : "Whether, on the facts and in the circumstances of the case, the Assessing Officer was justified in making the addition of Rs. 60 lakhs on the basis of the entries made in the diary found during the course of search ?" 2. The assessee is an individual. Its previous year is the year ending on 31-3-1993. The return of income was filed declaring total income of Rs. 34,270. The Assessing Officer however, completed the assessment on a total income of Rs. 79,17,040. The Assessing Officer in this case made an addition of Rs. 78,82,775 on account of unexplained credits claimed to be pertaining to consignment sales. The assessee claimed to have sold the goods of M/s. Canon Steel Pvt. Ltd. where he is a Director on consignment basis. These goods have been shown as given by M/s. Canon Steel Pvt. Ltd. to the assessee by way of 6 debit notes which have been claimed to be sold by the assessee on cash basis to various person at Bhivandi, Thane and Bomb....
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.... of 15th November, 1992. That shows that it was written on 15-11-1992. The entries pertain to dates and period prior to the date of writing on 15-11-1992. Therefore, the same cannot be quoted as planning and planning cannot be made with retrospective effect but for the future. According to him the date of receipt of the amount and the expenses were of definite dates and, therefore, the same cannot be said to be of planning. He, therefore, held that the sum of Rs. 60 lacs and other amount pertaining to entries of 13-10-1992 which was not legible due to punching hole have been intended to be channellised through the consignment account which stands rejected. He, therefore, rejected the explanation. However, keeping in view the fact that the addition of Rs. 78,82,775 has been already made in case of the assessee no separate addition was made on this point. 4. Aggrieved by the said order, the assessee took up the matter in appeal before the CIT (Appeals). The learned CIT(Appeals) set aside the order of the Assessing Officer with the following specific directions : "(i)A finding of fact has to be given with reference to the total consignment value of Rs. 88,45,624 involved i....
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....t an amount in the future, one does not write expenses from 26-9-1992 to 25-10-1992. One could not give the details of jewellery in terms of specific weight and in odd numbers. The learned CIT (Appeals), therefore, held that the only conclusion which can be drawn is that as on 26-9-1992 the assessee was in possession of Rs. 60 lakhs and he had incurred an expenditure of Rs. 31,21,400 from 26-9-1992 to 25-10-1992 as recorded in the paper. It is also held by the learned CIT(A) that the Department was not required to prove the existence of cash particularly when the entries in the diary were admittedly in his own handwriting which is sufficient evidence to prove that the entries and the amounts mentioned therein belong to him. He accordingly upheld the addition made by the Assessing Officer. 7. In the appeal before the Tribunal, both the parties reiterated the same arguments placed before the CIT (Appeals). After re-evaluating the evidences in the light of the arguments before it, the Accountant Member was of the view that the addition was made merely on suspicion without substance. According to him, the assessee was not confronted with the said entries at the time of the search. W....
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.... the books of account shall not alone be sufficient evidence to charge any person with liability. Entries found if relevant are only corroborative evidence. Reference was also made to the decision of the Ahmedabad Bench of the Tribunal in the case of Prarthana Construction (P.) Ltd. (supra) wherein it was held that it is a settled proposition as held by various judicial authorities that rigours of the rules of evidence contained in the Evidence Act were not applicable to income-tax proceedings. Having regard to the above ratio, he held that the revenue would not be justified in resting its case on the loose papers and documents found from the residence of the third party even if such documents contained narration of transactions with the assessee. The Department could not being on record any independent evidence to prove that the assessee was having cash of Rs. 60 lakhs available on 26-9-1992. He, therefore, held that the addition of Rs. 60 lakhs made by the Assessing Officer and confirmed by the CIT (Appeals) is not justified. 9. On the other hand, the learned Vice-President, who is the Judicial Member could not agree to the above view primarily because the Assessing Officer, a....
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....refore, held that the addition of Rs. 60 lakhs made by the Assessing Officer is justified in the light of the provisions of section 68 of the Act. The Judicial Member, further cited the decision of the Hon'ble Supreme Court in the case of Chuharmal (supra) for the proposition that when a person is found in possession of anything the onus of proving that he was not its owner was on that person. Having regard to the above facts, he held that no corroborative evidence would be necessary in view of the specific provisions of section 68 of the Act as the entries made in the diary found during the course of the search is sufficient to make an addition to the said amount. 11. On this difference of opinion, the above point of difference was referred to me for my decision. 12. At the time of hearing before me Shri J.L. Girdhar, learned Commissioner (D.R.) appeared for the revenue and Shri Prakash Jotwani, learned counsel appeared for the assessee. They were heard at length. On careful consideration of the rival submissions in the light of the dissenting orders and the evidences on record, I am of the view that the findings given by the learned Accountant Member is reasonable on the fa....
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....ntended to be movable in the sense of being undone and put together again. A collection of papers in a portfolio, or clip, or strung together on a piece of twine which is intended to be untied at will, would not, in ordinary English, be called a book....I think the term 'book' in section 34 aforesaid may properly be taken to signify, ordinarily, a collection of sheets of paper bound together with the intention that such binding shall be permanent and the papers used collectively in one volume. It is easier however to say what is not a book for the purposes of section 34, and I have no hesitation in holding that unbound sheets of paper, in whatever quantity, though filled up with one continuous account, are not a book of account within the purview of section 34.' We must observe that the aforesaid approach is in accord with good reasoning and we are in full agreement with it. Applying the above tests it must be held that the two spiral notebooks (MR 68/91 and MR 71/91) and the two spiral pads (MR 69/91 and MR 70/91) are 'books' within the meaning of section 34, but not the loose sheets of papers contained in the two files (MRs 71/91 and 73/91)." If the loose paper seized....
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.... find any evidence to show that the assessee invested in any movable or immovable property. On the basis of these findings, he held that the addition was on mere suspicion without any corroborative evidence. This finding is in order. 15. Lastly, the Hon'ble Vice-President (Judicial Member) also cited the decision of the Hon'ble Supreme Court in the case of Chuharmal (supra) for the proposition that when a person is found in possession of anything, the onus of proving that he was not its owner was on that person. The above ratio will not have application to the facts of the present case. In the case of Chuharmal (supra ), the possession was in regard to valuable articles in the form of wrist watches of foreign make. The ownership of such valuable articles have to be definitely proved and if the person in whose possession the said valuable article was found claimed that the same did not belong to him, the onus of proving that he was not its owner was on that person. In the present case here it is a mere loose sheet in which the assessee confirmed that the entry was in his own handwriting. The loose paper in itself has got no intrinsic value. It does not represent negotiable instru....