TaxTMI 
TaxTMI 
2011 (2) TMI 1416
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.... has not been honoured by the Department. 3. In the month of June, 2007, the Income-tax Inspector attached to the AO visited the residence of the assessee and collected the handwriting samples of eleven members of the family as per the requirement of the Government Examiner, which is on record. The AO has not mentioned anything about the report of the GEQD which is a crucial piece of evidence, as it goes to the very root of the matter in deciding the owner of the diary. 4. The assessee filed affidavits of the three persons viz., S/Shri Jai Prakash, Mohan Bhai and Mohan Gupta, whose names were mentioned by the AO in the assessment order. But the AO neither examined them nor gave reasons for not examining them. 5. This is the second time for the assessee to come before the Tribunal on the same issue, as the AO failed to carry out the directions of Tribunal, Hyderabad, in their order in IT(SS)A No. 151/Hyd/2005 dt. 28th Feb., 2006, to allow the assessee to examine or cross-examine certain persons, whose statements may be relevant for the purpose of determining the issue. 6. The addition of Rs. 2,55,50,000 made by the AO, purely on the basis of unidentified diary without bringing o....
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....ned jewellery (as admitted) Rs. 2,66,045 2. Unaccounted cash (as admitted) Rs. 2,38,700 3. Unexplained investment in shares In M/s Jivika Leasing & Finance Co. Ltd. (as against Rs. 2,25,000 admitted by the assessee ) Rs. 14,42,000 4. Unexplained moneylending Rs. 2,55,50,000 Total Rs. 2,94,96,745 5. Against this the assessee carried on the appeal to the CIT(A). The CIT(A) vide order dt. 2nd Sept., 2005 (issued on 28th Sept., 2005) confirmed the order of the AO. Against this the assessee came in appeal before this Tribunal. The Tribunal on first round vide its order dt. 28th Feb., 2006 set aside the issue to the file of AO with the following directions : "9. We have heard both the parties and perused the record. There is no doubt that presumption under s. 132(4A) applies to a document found during a search and seizure operation from the premises of the party. However, such presumption is a rebuttable presumption. If the assessee wants to rebut this presumption by examining or cross-examining certain persons, whose statements may be relevant for the purpose of determining the issue, we do not find any reason as to why an opportunity for the same should not be allowe....
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....garding the report of handwriting expert, the AO in categorical terms stated in his letter dt. 25th Oct., 2007 referred to above, that no enquiry was made by him, except what was referred to in the assessment order. No mention was made in the assessment order about any reference to the handwriting expert. No material is available on record to suggest that any matter was referred to the handwriting expert. In the absence of any material in that behalf, we may not be able to say anything about any reference to the handwriting expert. In the circumstances, in our opinion, there is no violation of principles of natural justice. No arguments were advanced by either side on merits. Therefore we are not inclined to go into the merits of the addition." 7. Against this, the assessee moved a miscellaneous application before this Tribunal, Misc. Appln. No. 173/Hyd/2008. The Tribunal dismissed the miscellaneous application filed by the assessee vide its order dt. 26th Dec., 2008 stating as follows : "5. Rival contentions were considered in the light of the material available on record. When the appeal was argued by the assessee, the only grievance is with regard to non-compliance of the dire....
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....e written submissions. Therefore, in the opinion of this Tribunal, there is no error in the order of this Tribunal. By saying no, it is not the correctness of the order of this Tribunal is being justified. There may be other views possible in the matter. It is open for the assessee to approach the appellate forum, in case it is aggrieved by the view taken by this Tribunal, but on that count, it cannot be said that the order of the Tribunal suffers from any mistake, much less a prima facie one, in terms of s. 254(2) of the Act. 7. In view of the above discussion, therefore the application of the assessee is devoid of merit. It is accordingly rejected." 7.1 Thereafter, the assessee not satisfied with the above order, filed one more miscellaneous application in Misc. Appln. No. 122/Hyd/2010. The Tribunal vide its order dt. 29th Oct., 2010 recalled the order of the Tribunal dt. 7th Nov., 2008 by holding as follows : "4. We have considered the rival submissions on either side and have also perused the material available on record. From the very beginning, the assessee claimed that the material found during the course of search operation does not relate to the assessee and it was not ....
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....see was heard. Therefore, in our opinion, there was a miscarriage of the justice due to non-consideration of the report of the handwriting expert. After considering the report of the handwriting expert, the authorities concerned may accept or reject the opinion of the handwriting expert in that report. Authorities under the IT Act are not bound by the opinion expressed by the handwriting expert. However, the authorities are bound to consider the same and record their findings/reasons for accepting or not accepting the same. Non-consideration of the report of the handwriting expert though it was available before the AO, would go to the root of the matter. 6. Furthermore, it is well-settled position of law that all judicial/quasi judicial/executive authorities have inherent power to recall an order passed by them, in case the order was found to have been obtained by suppression of any material fact/misrepresentation/fraud. In this case, even though the Department could have brought to the notice of the Bench of this Tribunal during the course of hearing of the appeal, about the report of the handwriting expert, it failed to do so. However, the report of handwriting expert came to li....
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....tion of Rs. 2,55,50,000 under the head unexplained investment in moneylending. In his statement, the search party put question about 2nd note books found together in one polythene bag numbered as A/GAR/2004, which contained 31 pages and the 2nd note book as A/GAR/2005, which had 21 written pages both were found in the cellar of the house. The AO made the addition solely on the basis of one unidentified note book, which suddenly sprang up from unknown place and found and seized in the cellar of house long after the commencement of the search when the assessee was not in city. Mr. Sunil Kumar Agarwal replied stating that the note book does not belong to them and he did not know in whose handwriting it was written and that the book was neither recovered in his presence nor in the presence of his family members and he did not know the contents of the book. No pronotes or receipts were found by the search party in any premises. The parties who were examined by the DDI also denied having indulged in any moneylending transactions with the assessee. Some hand loans were given by account payee cheques were recorded in the regular books of account. Simply because, the names of some persons v....
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....ngly believes that the person who had some idea of the assessee's business and assets could have written entries in these books on guesswork. 9.2 He submitted that it is clear from the facts that the entries made in the diary are imaginary, concocted and unrealistic transactions which do not at all relate to the assessee. The assessee affirmed that the diary does not belong to him. The so-called diary looks absolutely new, therefore it is of 2003 origin. The entries for earlier years contained therein are of fabrication and it does not belong to the assessee. The signatures of the witnesses are also not genuinely made because one witness viz., Rajender Kumar Gupta signed for himself and also impersonated his father Shri Amarnath by signing father's name. To cover-up this wrongful Act, the officer of the search party called the taxi driver at 3.30 a.m. and made him sign as a third witness. Another peculiar feature of the pocket note book is that the same name appears at different pages with different transactions. 9.3 According to learned Authorised Representative the diary A/GAR/2005 contains only incoherent entries which would not be written by any businessman. The diary....
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....is absence search was conducted. The presumption envisaged under s. 132(4A) applies only to accounts, other documents, money, jewellery or other valuable articles or things in the course of search are found. The presumption under s. 132(4A) is in respect of the persons in whose possession or control the books or the documents are found. The use of the words 'to such person' in the said section means the person in whose possession the books of accounts or document are found. Clause (ii) of s. 132(4A) provides that the contents of such books of accounts or documents are true. This presumption can be applied only against the person in whose possession the books of accounts or the documents are found. Therefore, had Mr. Gyan Kumar Agarwal present at the time of search and the above two diaries, along with any promissory notes or receipts, were found in his bedroom or almirah, the AO may presume that these diaries found in assessee's possession were correct. However, while utilizing these diaries in the case of any other person (the person present before search party other than Mr. Gyan Kumar Agarwal) there cannot be any presumption about the correctness of such diaries. The....
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....were found during the course of search. Therefore, the Tribunal by its order dt. 28th Feb., 2006 set aside the issue to the file of AO with a direction to provide opportunity to examine the persons whose statements are necessary to rebut the presumption under s. 132(4A) and thereafter, decide the issue afresh in accordance with law. Pursuant to the directions of the Tribunal, which is binding on the AO, the AO vide his letter dt. 22nd June, 2006, allowed an opportunity to present the case on 3rd July, 2006 for completion of set aside assessment. 9.7 He submitted that the assessee filed his reply on 28th June, 2006 before the AO, wherein he requested the AO to afford an opportunity : (a) To examine the search party officials; (b) To supply a copy of the enquiry made by the AO in respect of three persons mentioned in the assessment order viz. Rajkumar Marwah, Jaiprakash Agarwal and D. Mohan Gupta. (c) Enquiry made by the AO in regard to handwriting in the alleged note book; (d) To examine the persons viz. Jitender, Mr. Rajkumar, Mr. Jaiprakash and Mr. Mohan Gupta who filed their affidavits before the AO. 9.8 Therefore, it is binding on the AO to follow the directions given by t....
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....assessee was turned down by the AO on the ground that the limitation was involved. The fact that the matter involved limitation could not be held against the assessee. It was the own lapse of the AO. The AO should have taken up the assessment well in time. Having not done so the AO was not correct in drawing adverse inference against the assessee and for making the impugned addition. Action of the AO violated the principles of natural justice. Upon hearing from the Addl. CIT, the AO should not have reinstated his earlier order on the very same material by ignoring the direction given by the Hon'ble Tribunal. He requested the Tribunal to give finding and adjudicate on this issue. But unfortunately GEQD report which should in fact become the basis of assessment has been totally ignored defeating the very purpose for which it was referred to for completion of set aside assessment. Fairness requires that the Revenue should have respected its own file note as has been held by Hon'ble Madras High Court in the case of CIT vs. Surana Metals & Steels (I) Ltd. (2008) 300 ITR 324(Mad). While passing the assessment order in the course of the second round of assessment proceedings the A....
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....ce. Therefore, the onus lies on the Department to prove that the note book belongs to the assessee and its contents are true and correct. This was the reason why the assessee had requested to examine the search officers. 10.3 He submitted that the assessee through a letter dt. 16th Nov., 2007 requested the AO to afford an opportunity to examine the three Panchas whose names and addresses were furnished in the Panchanama on 21st Jan., 2003 and reminder on 10th Dec., 2007. The Panchas were S/Shri Amarnath (father), Rajender Kumar Gupta (son), Syed Jaffar (driver of Qualis engaged by the search party). All the parties signed the alleged seized note book. All the three persons were never present when the search party found and picked up this alleged note book. How can the three Panchas become witnesses for finding and picking up the alleged book which leads to show that it was not at all proved the exact place from where the note book was found ? 10.4 He submitted that in the Panchanama and on the said note book Rajendra Kumar has not only signed but Mr. Rajendra Kumar Gupta has also signed as Amarnath impersonating his father's name who was not at all there at that time. The you....
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...., 2009 admitted that the matter was referred to the handwriting expert along with samples of handwriting taken from 11 Nos. of the family of assessee and the opinion was also received by the AO much before passing of the set aside assessment. In spite of these admitted facts that the AO failed to consider the same in assessment proceedings. 10.6 He submitted that the decision of the Tribunal should be read as a whole and it is not permissible to accept part of the directions and ignore the rest of the directions and placed reliance on the judgment in the case of Glass Lines Equipments Co. Ltd. vs. CIT (2001) 170 CTR (Guj) 470: (2002) 253 ITR 454(Guj). As the Department has referred the matter to the GEQD, ignoring the three requirements of the assessee, as was agreed to by both the parties, such a report is binding on both the parties. The Department cannot blow hot and cold. Actually the suggestion came from the Department to refer the matter to the GEQD to avoid protracted litigation and to resolve the issue. Therefore, either the Department should stick to the other three requirements of the assessee when the report of GEQD is not taken for consideration take the entire three r....
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....88 (All) 12. Brijlal Roopchand vs. ITO (1991) 40 TTJ (Ind) 668 13. Raj Pal Singh Ram Autar vs. ITO (1991) 39 TTJ (Del) 544 14. Ashwani Kumar vs. ITO (1991) 42 TTJ (Del) 644: (1991) 39 ITD 183(Del). 12. The learned Departmental Representative relied on the order of the lower authorities. 13. We have heard both the parties and perused the materials available on record. The main grievance of the assessee in this appeal is with regard to sustaining of addition at Rs. 2,55,50,000 which is on the basis of seized materials noted as A/GAR/5. According to the AO these documents contains detail of moneylending business of the assessee as follows : Analysis of entries in the diary Date Name Receipt Payment Day balance 12-1-2000 Rajuseth - 35 lakhs -35 lakhs 16-1-2000 Rajkumar 0 10 lakhs -45 lakhs 15-3-2000 Shyambai 0 5 lakhs -50 lakhs 25-3-2000 Rajuseth 4 lakhs 0 -46 lakhs 30-3-2000 Arvindbai 0 8 lakhs -54 lakhs 15-4-2000 Arvindbai 0 7 lakhs -61 lakhs 15-5-2000 Shyambhai 0 8 lakhs -69 lakhs 25-5-2000 Rajuseth - 5 lakhs -74 lakhs 24-6-2000 Rajkumar 5 lakhs 0 -69 lakhs 26-6-2000 Rajkumar 10 lakhs 0 -68 lakhs 25-7-2000 Rajkumar 0 4....
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....0 5 lakhs -244.5 23-7-2002 Bhagawandas 1 lakh 0 -248.5 20-8-2002 Rajuseth 0 6 lakhs -249.5 23-8-2002 Abhisekh 0 5 lakhs 254.5 25-8-2002 Mohanbai 2 lakhs 0 252.5 20-9-2002 Bhagawandas 5 lakhs 0 247.5 25-10-2002 Gopalbai 2 lakhs 0 245.5 9-11-2002 Rajuseth 0 5 lakhs 250.5 15-12-2002 Abhisekh 0 5 lakhs 255.5 15-10-2002 Shyam 2 lakhs 0 253.5 14. We have also carefully gone through these documents and also the seized materials on the basis of which the addition was made. These seized materials were found at 2 p.m. on 21st Jan., 2003 in the corner of the cellar of the assessee's house. The assessee submitted before the lower authorities that it does not belong to him. The search was commenced at 8.30 a.m. on 21st Jan., 2003 and the note book/loose slips marked A/GAR/5 were found out only at 2 p.m. on 21st Jan., 2003. When it was confronted to the assessee's brother Mr. Sunil Agarwal while recording the statement on oath from him at 3.25 p.m. on 21st Jan., 2003, he submitted that the documents do not belong to them at all. He also stated that he cannot identify the handwriting. He also stated that the seized material was not r....
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....elative and neighbour. As I mentioned, the papers stated above belong to me and reflect certain business transactions or other matters pertaining to myself and my family members". 15. From the above, the Department drew inference that the documents were thrown from assessee's premises into the premises of Mr. Prem Chand Gupta. It is also fact that on the basis of information gathered from these seized materials, the assessment was framed. There was also information which revealed the bank account indicating the name of the assessee and it was also found that Shri D.V. Agarwal admitted transaction through bank credit cards seized from the premises of Shri Prem Chand Gupta as his undisclosed income. From the act and conduct of the assessee and their family members, the Revenue authority drew conclusion that they intend to conceal vital evidence which threw light on their undisclosed income to the Department. As such, they relied on the seized material marked as A/GAR/5 to determine the undisclosed moneylending business and income which was reflected in the seized document marked as A/GAR/5. Since Shri G.K. Agarwal is the head of the family, looking after the business and family ....
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....sical search ? Please name the documents found. Ans. In the cellar, besides the polythene bag referred above, some household articles were there. No other books/documents were found. 4. How many Panchas attended your search operation ? Ans. I do not remember." 16. The assessee has also cross examined the authorized officer Mr. Mohan Kumar and the contents of cross-examination read as follows : "Q. 6 The witness Mr. Syed Jaffer appeared to be driver of vehicle engaged by your search team. How can a driver be present at the material time ? Was he aware of the search proceedings conducted by your team ? Ans. I do not recollect the vocation of Mr. Syed Jaffer. As far as I know there is no legal bar in having a driver as a witness. This witness was present throughout the course of the search. He was aware of the search being conducted by the Income-tax Department consisting of myself and my team in the above premises. Q. 7 It appeared that Mr. Syed Jaffer was a driver of a private taxi car and he was all through sitting in the car outside the gate of the premises. How can he be expected to witness the search proceedings and finding of two note books numbered A/GAR/4 and A/GAR/5 ?....
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....ave direct evidence or conclusive evidence to prove to determine the undisclosed income. When the assessee gives an evasive reply to the AO, he has no choice but to take estimation of the income. The only thing is it should be reasonable on the basis of material available on record. It should not be based on conjectures and surmises. As of now material considered by the AO for making the addition is only the seized material marked as A/GAR/05 which is a note book containing the details of day-to-day ledger accounts of various persons to whom the money was advanced. In view of this, we have to consider the seized material A/GAR/05 to see whether it is enough to make addition. In our opinion, this document is only note book/loose slips. We have to look into the statement recorded under s. 132(4) or 132(4A) of the IT Act. The seized material A/GAR/05 found during the course of search and the statement recorded is some piece of evidence to make an addition. The AO has to establish the link between the seized material A/GAR/05 and other books of accounts of the assessee. It cannot be considered alone as conclusive evidence. The words 'may be presumed' appearing in s. 132(4A) giv....
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....ny party, who has taken the loan from the assessee, cannot come to the conclusion that the assessee lends money. The basis for addition is only note book/loose slips. These note book/loose slips are unsigned documents. The AO has not established nexus between the note book/loose slips and business of the assessee. There is no narration regarding the address of the parties, the exact amount of loan, period of advance, rate of interest and instalments due. Also there is no evidence for repayment of money towards the loan. There is no valid seized material to come to the conclusion that the assessee has actually made an advance of that amount i.e. Rs. 2,55,50,000. The note book/loose slips marked A/GAR/05 found during the course of search is a dumb document having no evidentiary value, no addition can be made in the absence of corroborative material. If there is circumstantial evidence in the form of promissory notes, loan agreement and address of the parties or bank entries, the addition is to be made on that basis to the extent of material available. The assessee is not expected to explain the loose papers found as there is no evidence other than note book/loose slips carrying on mo....