TaxTMI 
TaxTMI 
TaxTMI 
2011 (7) TMI 1166
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....tion of addition by CIT(A). Hence, he is not interested in adjudication of these three appeals and is not pressing the same. As the learned counsel for the assessee, on instructions of assessee, has not pressed these three appeals due to no revenue implication, same are dismissed as not pressed. 3. Effective interconnected issues in IT(SS)A Nos. 4, 6 and 7/Kol/2011 for asst. yrs. 2006-07 to 2008-09 of assessee's appeal are against orders of CIT(A) confirming actions of AO as under : (i) Rejection of books of account, revised balance sheet and P&L a/c for asst. yrs. 2006-07, 2007-08 and 2008-09; (ii) Rejection of entries of seized documents marked as RM-1 to RM-4 by misinterpreting the provisions of s. 292C of the Act; (iii) Confirming additions to the extent of Rs. 6,90,00,000 and Rs. 90,00,000 in asst. yrs. 2006-07 and 2007-08 respectively on account of undisclosed investment in property at Sector-V, Salt Lake, Kolkata disregarding the fact that the source of investment is explained on the basis of entries made in RM-1 and RM-2, the seized documents, whereby the claim made by assessee regarding sale of paintings at Rs. 7.25 crores. For this, the assessee has raised follow....
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....h receipt added by AO at Rs. 19,07,35,000, on account of alleged undisclosed investment in shares of different companies. The assessee has raised following grounds : "2. On the facts and in the circumstances of the case, the learned CIT(A) erred in disregarding the noting recorded in the seized documents marked as RM-1 and RM-2 by misinterpreting the provisions of s. 292C of the IT Act, 1961 and thereby in rejecting the revised balance sheets and P&L a/cs for the earlier years filed during the course of the assessment proceedings. 3. On the facts and in the circumstances of the case, the learned CIT(A) erred in confirming the rejection of books of account of the assessee. 4. On the facts and in the circumstances of the case, the learned CIT(A) erred in rejecting the claim of the appellant about the exempted receipt of Rs. 19,07,35,000 declared on account of sales of diamond and gold duly recorded in the above-mentioned seized documents, and thereby in confirming the addition of Rs. 18,60,00,000 on account of alleged of undisclosed investment in shares of different companies." These being common and interconnected issues, we will deal with them by consolidating the same. 6. Bri....
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....ssee for his own use and therefore there was no reason or occasion to record transactions in a false manner. (21) The exercise book is a books of account and is being disbelieved without any cogent reasons, whereas noting made in loose sheets are being treated as correct in some case and incorrect in some cases. (22) RM-1 and RM-2 are one and the same and RM-2 is a bound exercise notebook and is therefore to be treated as books of account. (23) The said documents contain not just noting in respect of unaccounted transactions but also noting in respect of transactions duly disclosed in books of account of various concerns wherein the assessee is a director. Similarly a number of other noting pertaining to cash withdrawn from regular books of account of various companies, payment of cash duly recorded in regular books of account of said companies and other noting duly recorded in regular books of account, and all these noting are duly identifiable and verifiable with evidence and noting in regular books of account. Therefore, no doubt can be raised in respect of said recordings and it would be absurd to even contemplate that other noting duly recorded in the seized documents are n....
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....ordingly included in the return by the company, M/s. Fort Projects (P) Ltd. in asst. yr. 2008-09. As regards harassment, nothing is apparent from the statements or any other facts on record. Any question asked or show-cause issued in some matters cannot be said to be harassment. However, the claim that the records of on-money received pertains to the company and that it has nothing to do with the assessee is apparently reasonable." 7. The AO in view of documents RM-1 and RM-2 assessed the income of assessee by giving following finding : "It is apparent from the noting in RM-1, pp. 3 to 14, as discussed above, that such account has been prepared just before the search, also incorporating some actual transactions as per books belonging to the group purposely in order to give it a look of genuineness, keeping in view that for earlier period, as mentioned above, undisclosed purchases and sales as noted will be outside the purview of the provisions of the Act for any action for any assessment for those years involved, that paintings were not capital assets for the purpose of assessment of capital gains during the relevant period of sales since the relevant amendment in the Act is not ....
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.... reflect any paintings or any piece of diamond. It only reflects gold coins costing Rs. 1,950, jewellery costing Rs. 1,58,687 and silver utensils costing Rs. 7,020. The original opening capital balance as on 1st April, 2001 was only Rs. 34,88,739.29. No accounts or papers relating to any transactions of similar nature as noted in the seized documents concerned have been found although search and seizure operations were conducted in the residence of the assessee and survey was conducted in the office premises of the group companies. Sources of huge cash required for payments for alleged purchases have not been explained. No document or evidence has been furnished/produced in this respect. Nothing has been found in course of search or survey regarding any amount of such incomes earned at any time during the relevant period long back starting from 1993 which could have supported any probability of earning and having so much of cash as would have been required for the alleged purchases. It is apparent that the documents have been made up purposely to account for/explain subsequent outgoings in the years covered by s. 153A or during the year of search. In the facts and circumstances, I ....
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.... entry operator and as admitted by the assessee vide the statements recorded. As regards presumption under s. 292C of the Act regarding contents of seized documents etc. as true, the presumption is rebuttable, and in view of the facts and circumstances and reasons discussed in the earlier paras, the said presumption stand rebutted. In view of the above, the submissions of the assessee regarding RM-1 and RM-2 etc. are held not reasonable and hence rejected. Incidentally, a question may arise why a part relating to receipts is disbelieved and a part relating to payment regarding outgoing as per RM/and RM-2 is believed. As regards cash payments out of books to S.P. Bagla, the same is evidenced by GB-12, and it is apparent from the printouts vide RM-4, there was some dispute, even before the Court, and as such it would come to light any time. The cash payments for bogus share capital raising in group companies would have come to light also anytime since cash was deposited at one stage. The assessee has filed revised balance sheets, P&L a/cs along with the returns filed under s. 153A for the asst. yrs. 2002-03 to 2007-08, the assessment years relevant to the period of six years and ....
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....n was added as income from undisclosed sources. 4.3 Now the issue to be decided that whether as per provision of s. 292C introduced by the Finance Act, 2007 with retrospective effect from 1st Oct., 1975 the AO has to presume that whatever is recorded in the seized document is deemed to be true and the assessment has to be completed solely on the basis of the said document. Sec. 292C reads as under : '292C. Where any books of account, other documents, money, bullion, jewellery or other valuable article or thing are or is found in the possession or control of any person in the course of a search under s. 132 (or survey under s. 133A), it may, in any proceeding under this Act, be presumed- (i) that such books of account, other documents, money, bullion, jewellery or other valuable article or thing belong or belongs to such person; (ii) that the contents of such books of account and other documents are true; and (iii) that the signature and every other part of such books of account and other documents which purport to be in the handwriting of any particular person or which may reasonably be assumed to have been signed by, or to be in the handwriting of any particular perso....
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.... and supporting evidences relating to the transactions, the AO cannot proceed to prove or disprove it. Moreover in the case under consideration the AO has given enough circumstantial evidence to rebut the claim made by the assessee. Moreover the Hon'ble Tribunal, Kolkata in the case of Nirmal Fashions (P.) Ltd. v. Dy. CIT [2009] 123 TTJ (Kol.) 180/[2009] 23 DTR (Kol.)(Trib.) 386/[2008] 25 SOT 387has held that the provision of s. 292C is only a deeming provision. The presumption under s. 292C is rebuttable presumption and the document has to be considered considering the totality of the facts of the case. The deeming provision cannot be applied mechanically ignoring the facts of the case and the surrounding circumstances'. 4.6 Moreover as per the submission of the appellant that, presumption should be made that the assessee was carrying on the business of purchase and sale of gold and diamond outside the books on large scale which had resulted in the huge income, which was not recorded in the books of account since the year 1993-94. However, during the course of search of the assessee's premises, no stock of gold or diamond were found. The Revenue had searched the resid....
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....ain dispute regarding the said property is pending before the Civil Judge Court, Barasat. During the course search the appellant admitted that he has made unaccounted payment to S.R. Bagga and in the revised balance sheet for the financial year 2005-06 the same has been calculated at Rs. 6,00,90,000 and incorporated in the declared investment. The same was also confirmed from the order dt. 25th May, 2009 of the Civil Judge, Barasat in title suit No. 2007. Hence it is an undisputed fact that unaccounted payment of Rs. 6,00,90,000 has been made by the assessee during the year under consideration. The explanation offered by the appellant that the same is from the sale proceeds of paintings is found to be unsatisfactory as no details of the transaction or any other supporting evidence has been filed. Considering above out of total addition made by the AO of Rs. 7,25,00,000, addition of Rs. 6,00,90,000 on account of undisclosed investment is confirmed. Appellant will get necessary relief accordingly." 8. Exactly on similar facts CIT(A) also confirmed action of AO and also enhanced the addition from Rs. 75 lakhs to Rs. 90 lakhs by giving following findings in para 4.7 in asst. yr. 2007-....
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....ecorded in the said document. Accordingly no addition can be made only by taking into account the unaccounted receipts recorded in the said document. 4.8 However it is an undisputed fact that Rs. 18,60,00,000 has been invested by the appellant during the year under consideration on purchase of share capital of M/s Rajahat Housing (P) Ltd. (Rs. 8,80,000,00), M/s Rajahat Builders (P) Ltd. (Rs. 9,60,000,00 and M/s Fort Project (P) Ltd. (Rs. 20,000,00) and the same is duly reflected in the audited accounts of the respective Companies, M/s Rajahat Builders (P) Ltd., M/s Rajahat Housing (P) Ltd. and M/s. Fort Project (P) Ltd. The explanation offered by the appellant that the source of investment is from the sale proceed of diamonds and gold has found to be unsatisfactory as no details of the transaction or any other supporting evidence has been filed. Considering above out of total addition made by the AO of Rs. 19,07,35,000, addition of Rs. 18,60,000,00 on account of undisclosed investment in shares of different company is confirmed. Appellant will get relief of Rs. 47,35,000 accordingly." Aggrieved against the actions of the lower authorities, assessee is in appeals for all three yea....
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....ation that the difference between outgoing of Rs. 90 lakhs and cash availability of Rs. 75.10 lakhs is only at Rs. 14.90 lakhs, which should be treated as undisclosed investment for asst. yr. 2007-08. The assessee pointed out that actually there is no unexplained investment for asst. yr. 2007-08 as total amount paid to Sri S.P. Bagga during financial year 2005-06 relevant to asst. yr. 2006-07, in view of seized document RM-1, which adds upto Rs. 570.9 lakhs and not Rs. 620.90 lakhs taken by the AO. Learned counsel for the assessee referred to seized documents inventorised as RM-1, the copies of which are enclosed at assessee's paper book pp. 117 to 131. We have gone through seized document RM-1 and find that no other payment of Rs. 29 lakhs as indicated in the summary table of assessment order is mentioned. We further find that cash availability as per RM-1 at the start of financial year 2006-07 relevant to asst. yr. 2007-08 was Rs. 725 lakhs and Rs. 570.9 lakhs i.e. Rs. 725 lakhs. We find that outgoing of Rs. 90 lakhs for the said year was explained and in view of these facts, there was no unexplained investment for financial year 2006-07 relevant to asst. yr. 2007-08. We find....
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....of Rs. 75.10 lakhs. We find that CIT(A) deleted the addition of Rs. 7.25 crores and Rs. 19.07 crores made by the AO on account of undisclosed cash receipts for asst. yrs. 2006-07 and 2008-09 but made addition of Rs. 6,90,00,000 for asst. yr. 2006-07 and Rs. 18.60 crores for asst. yr. 2008-09 on account of undisclosed investment in property at Salt Lake and unexplained investment in shares respectively. For asst. yr. 2007-08, CIT(A) enhanced addition to Rs. 90 lakhs as against addition made by the AO at Rs. 75.10 lakhs. The CIT(A) while adjudicating this interconnected issues held seized documents inventorised as RM-1 and RM-2 as dumb documents and rejected the same by invoking provisions of s. 292C of the Act stating that the words used by Legislature were 'may presume' and it is for the discretion of the Court to make or not to make the presumption according to circumstances of the case. The CIT(A) held that provisions of s. 292C of the Act was not for the benefit of the assessee and assessee could not escape legal responsibility to explain seized documents, particularly when there is no documentary evidences to prove explanation or deduction or investment as shown in the ....
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.... allegedly reflected in audited accounts of the company respectively. Hence, CIT(A) made addition of undisclosed investment of shares in different companies by the assessee. The CIT(A) further held that the explanation that shares were acquired out of sale proceeds of gold, diamonds and paintings is without any basis. Hence, he has not accepted the explanation of the assessee and upheld the additions by giving different reasoning and treating the unexplained investments. 11. We find that the AO has made additions for these three assessment years on the basis of pick and choose basis of entries of RM- 3 and RM-2 and by rejecting source explaining entries of investment. AO accepted the quantum of cash in RM-1 and RM-2 but rejected the nature explaining the source and also accepted entries belonging to unaccounted investments in property and shares reflected in RM-1 and RM-2. The AO made addition where sale proceeds of paintings, gold and diamonds as reflected in RM-1 and RM-2 exceeds unaccounted investments but made addition on account of unexplained cash received in these two assessment orders. Further, AO also made addition on account of unaccounted investment reflected in RM-1 an....
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....rovisions of s. 292C of the Act. "292C. (1) Where any books of account, other documents, money, bullion, jewellery or other valuable article or thing are or is found in the possession or control of any person in the course of a search under s. 132 or survey under s. 133A, it may, in any proceeding under this Act, be presumed- (i) that such books of account, other documents, money, bullion, jewellery or other valuable article or thing belong or belongs to such person; (ii) that the contents of such books of account and other documents are true; and (iii) that the signature and every other part of such books of account and other documents which purport to be in the handwriting of any particular person or which may reasonably be assumed to have been signed by, or to be in the handwriting of, any particular person, are in that person's handwriting, and in the case of a document stamped, executed or attested, that it was duly stamped and executed or attested by the person by whom it purports to have been so executed or attested. (2) Where any books of account, other documents or assets have been delivered to the requisitioning officer in accordance with the provisions of ....
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....plain away unrecorded cash payments towards investment. The CIT(A) also confirmed the action of AO but entirely on different ground by applying the provisions of s. 292C as well as decision of Hon'ble Apex Court in the case of P.R. Metrani (supra). First of all it is to be noted that the decision of Hon'ble Apex Court in the case of P.R. Metrani (supra) has discussed the issue of presumption under s. 132(4A) of the Act, and according to Hon'ble Apex Court this was a rebuttable presumption. The Hon'ble Apex Court in the case of P.R Metrani (supra) has discussed the facts as under :- "P.R. Metrani and Y.R. Metrani were two brothers and are the members of the joint Hindu family. P.R. Metrani (HUF) assessee was a partner in a firm called M/s R. N. Metrani & Sons. Y.R. Metrani was also a partner in this firm. P.R. Metrani as well as Y.R. Metrani have died during the pendency of these cases. A search of the residential premises Ranganatha Nilaya was conducted by the Income-tax, Central Excise and Customs Departments on 30th June, 1982 and 1st July, 1982, and as well as the business premises where the business of the firm was being conducted. The residential premises of ....
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.... that the total investment on the building was Rs. 6,45,809. A source to the extent of Rs. 1,21,627 was accepted. The balance was rounded off to Rs. 5,24,200. Half of this was added to the assessment of P.R. Metrani (HUF) and other half was added in the assessment of Y.R. Metrani. The appellant being aggrieved filed appeals before the CIT(A). The CIT(A) by separate order disposed of the appeals relating to the asst. yrs. 1981-82 and 1982-83. He examined the issue including certain credits, and, on 19th Sept., 1988 confirmed the additions barring the sum of Rs. 36,000 for the asst. yr. 1982-83. The orders of the assessing authority as well as the CIT(A) are based on the presumptions in terms of s. 132(4A) of the Act. It was held that the presumptions under s. 132(4A) were not confined to the orders passed under s. 132 only, but, were available for framing the regular assessments as well. The assessee being aggrieved filed a further appeal before the Income-tax Appellate Tribunal, Bangalore (for short 'the Tribunal'). The Tribunal relying upon the judgment of the Allahabad High Court in the case of Pushkar Narain Sarraf v. CIT [1990] 86 CTR (All.) 110/[1990] 183 ITR 388, on....
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.... a serious invasion into the privacy of a citizen, therefore, it has to be construed strictly. Sub-s. (4A) was inserted by the Taxation Laws (Amendment) Act, 1975, w.e.f. 1st Oct., 1975 to permit a presumption to be raised in the circumstances mentioned therein. Before the insertion of sub-s. (4A) the onus of proving that the books of account, other documents, money, bullion, jewellery etc., found in the possession or control of a person in the course of a search belonged to that person was on the IT Department. Sub-s. (4A) enables an assessing authority to raise a rebuttable presumption that such books of account, money, bullion, etc. belonged to such person; that the contents of such books of account and other documents are true, and, that the signatures and every other part of such books of account and other documents are signed by such person or are in the handwriting of that/particular person. Raising of such presumption has been enacted by the Legislature to enable the assessing authority to make a provisional adjudication within the time frame prescribed under s. 132. Otherwise it may not be possible to do so. The object of introduction of s. 132 is to prevent the evasion o....
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....ttable presumption for the purpose of framing a regular assessment is not correct. There is nothing either in s. 132 or any other provisions of the Act which could warrant such an inference or finding. The presumption under sub-s. (4A) would not be available for the purpose of framing a regular assessment. There is nothing either in s. 132 or any other provision of the Act to indicate that the presumption provided under s. 132 which is a self-contained code for search and seizure and retention of books, etc. can be raised for the purposes of framing of the regular assessment as well. Wherever the Legislature intended the presumption to continue, it has provided so. Reference may made to s. 278D of the Act which provides that where during the course of any search under s. 132, any money, bullion, jewellery or other valuable articles or things or any books of account etc. are tendered by the prosecution in evidence against the person concerned, then the provisions of sub-s. (4A) of s. 132 shall, so far as may be, apply in relation to such assets or books of account or other documents. This clearly spells out the intention of the Legislature that wherever the Legislature intended to ....
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.... of rebutting the presumption under s, 292C of the Act is on the party claiming otherwise, be it assessee or Revenue, in the present case before us, the seized documents RM-1 and RM-2 were found from the possession and control of the assessee. In present case, since seized documents RM-1 and RM-2 were found from possession and control of the assessee during the course of search in his case by legal fiction, a presumption under s. 292C had to be drawn that the said documents belonged to the assessee and the contents thereof were true unless disproved by cogent evidence. The onus to prove that what was apparent from these books was not real was on the party which claimed it to be so. The Department claimed that the contents of RM-1 and RM-2 found from the possession and control of the assessee in course of search were incorrect. Thus, the onus was on the Department, to bring on record some acceptable evidence to prove that what was stated in the seized documents did not depict the actual state of affairs. The AO and CIT(A) failed to discharge such onus by bringing on record some cogent evidence to disprove notings in the seized papers. On the contrary, CIT(A) and AO tried to shift on....
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....ing to withdrawal of cash from the regular bank accounts of various companies, payment of cash on account of various properties acquired by various companies duly recorded in the books of those companies etc. were also recorded in RM-1 and RM-2. All these entries were verified from regular books of account and found to be correct and accepted as such by the Department. This also fortifies the fact that RM-1 and RM-2 contained genuine entries of the appellant and were not dumb documents. 16. We further find that Revenue did not make any effort to controvert the correctness of the noting in the seized documents. Revenue, both authorities below, did not doubt the rates at which gold, diamonds and paintings were purchased and sold by the assessee and were not proved to be unfeasible or impracticable. Lower authorities failed to prove a single instance where sale proceeds of diamonds, gold or paintings actually represented 'on-money' or some other form of undisclosed receipt and in the absence of cogent evidence express noting in the seized documents could not be arbitrarily disregarded and no additions could be made solely on the basis of surmises and conjectures. Even seized ....
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....resumed to be true under s. 292C unless proved otherwise. The CIT(A) rejected the claim of the assessee that this is not an authenticated document but relied on documents marked GB/12 impounded in course of survey in the premises of M/s Fort Projects (P) Ltd. and the said seized documents contained certain details of unrecorded cash payment on account of acquisition of Salt Lake property. Since RM-1 and RM-2 explaining the source of acquisition of such property and accounts prepared on the basis of the same were rejected by CIT(A), we are of the considered opinion that notings in GB-12 only substantiate/confirm the entries pertaining to investment in property at Salt Lake noted in RM-1 and RM-2. Thus, GB-12 only fortifies the correctness of RM-1 and RM-2 and CIT(A) failed to explain the logic behind relying on one set of seized documents marked GB-12 containing details of unaccounted investment in property and rejecting the other set of seized documents marked RM-1 and RM-2 containing both the details of investment in property as well as explaining the source thereof. CIT(A) failed to appreciate that since RM-1 and RM-2 were found from the possession and control of the appellant in....
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....s of Fort Projects (P) Ltd. as held by CIT(A), which is clearly proved by seized documents RM-1 and RM-2 and the table reproduced by the AO in his assessment orders of these years. After going through facts, we find that this mistake has cropped up due to mistaken notion of the CIT(A). As regards investment of Rs. 18.40 crores the same has been extracted by lower authorities from RM-1 and RM-2. Apart from RM-1 and RM-2, CIT(A) could not have arrived at the factum of investment in shares by assessee from any other source. The CIT(A) accepted the factum of investment in shares from RM-1 and RM-2 for making addition on one hand and rejecting the same as dumb documents on the other hand. Since we have already held that seized documents RM-1 and RM-2 are correct financial statements prepared after incorporation the entries from the seized documents are also true explaining the investment in shares. Accordingly, on the same reasoning, we delete the addition of unexplained investment in shares amounting to Rs. 18.60 crores for asst. yr. 2008-09. This issue of assessee's appeal is also allowed. 19. The next issue in IT(SS)A No. 4/Kol/2011 raised by assessee by way of additional ground....
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.... and RM-2 are dumb documents and accordingly, cash receipt on the basis of noting in RM-1 could not be taken as explanation for the alleged undisclosed cash found during the course of search. Aggrieved, now assessee is in appeal before us. Before us learned counsel for the assessee stated that cash was generated from undisclosed transactions noted in RM-1 and RM-2. The assessee filed returns of income under s. 153A, revised balance sheets and P&L a/c for these years after incorporating all the entries of disclosed and undisclosed nature noted in the seized documents. The undisclosed income in the form of long-term capital gains arising from the undisclosed transactions was also duly offered for taxation by the assessee in his return of income for asst. yr. 2008-09 and due taxes were paid thereon. After incorporating all the entries in seized documents marked RM-1 and RM-2, the assessee had surplus cash balance of Rs. 6,28,53,906 on the date of search i.e. 28th Feb., 2008 and Rs. 6,08,43,906 on 31st March, 2008. In support of the above, assessee enclosed cash account which is at p. 164 of the assessee's paper book. 24. We have heard rival submissions and gone through facts and ....