TaxTMI 
TaxTMI 
2011 (2) TMI 1416
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....pted in good spirit to avoid protracted litigation. But it 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 th....
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.... on 31st Jan., 2005 wherein he determined the income of the assessee as follows : 1. Unexplained 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 th....
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....y that opportunity of cross-examining the officers was not provided to the assessee, as per the directions of the Tribunal. Regarding 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 materia....
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....tten submissions cannot be considered to be an error, especially when the Revenue has no opportunity to meet the points raised in the 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 beg....
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....ference having been made to the handwriting expert was not brought to the notice of the Bench of this Tribunal, when the appeal of the assessee 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 ....
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....ain the recording of statement was resumed at 3.25 a.m. on 22nd Jan., 2003. The only issue arising for consideration in this appeal relates to an addition 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 as....
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.... books and dropped these books in the cellar to harass the assessee. The department should have sent the books to handwriting experts. The assessee strongly 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 A....
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....e diary cannot be attributed to the assessee. When the assessee was not in station, although in the warrant of search name of the assessee was mentioned, in his 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 othe....
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....missions made before the AO and CIT(A) before the Tribunal. Existence of evidence is must for moneylending business. No other incriminating material or documents 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. Jite....
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....EQD. On learning this fact from AO, the assessee on 16th Nov., 2007 wrote three letters to the AO requesting the AO to allow opportunity for cross-examination. This request of the 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 ....
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....ssee has been correctly and factually rebutting the presumption under s. 132(4A) right from the beginning. Thus, the assessee has rebutted the presumption with cogent and proper evidence. 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 s....
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....iscellaneous application vide order dt. 26th Dec., 2008. Thereafter the assessee filed an application under s. 154 of the IT Act, before the AO. The AO's order under s. 154 dt. 25th Feb., 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....
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....36 (Mumbai) 9. T.S. Kumarasamy vs. Asstt. CIT (1998) 65 ITD 188 (Mad) 10. Asstt. CIT vs. Om Prakash & Co. (2004) 87 TTJ (Mumbai) 183 11. Dr. R.M.L. Mehrotra vs. Asstt. CIT (1999) 64 TTJ (All) 259 : (1999) 68 ITD 288 (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 30-3-20....
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....-2002 Maheshji 0 5 lakhs -164.5 lakhs 4-2-2002 Kishorebai 0 15 lakhs -179.5 lakhs 10-2-2002 Shyambai 5 lakhs 0 -174.5 lakhs 2-3-2002 Mohanbai 2 lakhs 0 -172.5 lakhs 2-3-2002 Satish Rajuseth 0 10 lakhs -182.5 lakhs 3-3-2002 Gopalbai 0 5 lakhs -187.5 lakhs 10-3-2002 Shyambai 0 5 lakhs -192.5 lakhs 15-3-2002 Mohanbai 0 10 lakhs -202.5 30-3-2002 Ombai 2 lakhs 0 -200.5 25-4-2002 Ashok 0 5 lakhs -205.5 27-4-2002 Bhagwandas 0 7 lakhs -212.5 6-5-2002 Naresh 0 5 lakhs -217.5 8-5-2002 Mahesh 0 10 lakhs -227.5 23-5-2002 Pradeep Rajuseth 0 5 lakhs -232.5 15-6-2002 Ramesh 1 lakh 0 -231.5 16-6-2002 Shyam 0 8 lakhs -239.5 20-6-2002 Maheshji 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 ....
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.... operations are being conducted in the residential premises of P.C. Agarwal, because I was busy with the income-tax officials who were, carrying on search and seizure operations in my premises. As far as the papers containing Annex. A/PG/7 stated to have been seized from the premises of P.C. Agarwal, my reply is as under : The slips of papers serially numbered 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20 and 21 contained in the Annexure belong to me. Q.9 Can you explain how these papers found their way into the premises of P.C. Agarwal, your neighbour, and were identified by the Department and made as Annexure in the case of Sri P.C. Agarwal during the search ? Ans. Soon after the Income-tax officials entered our residential premises, my wife, Smt. Anshu Agarwal woke me up from sleep and I was in mental shock and in that hurry what were the papers available with me, I have thrown through my window into the premises of Shri P.C. Agarwal, who happened to be our relative 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 Depar....
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....on of the physical search of all the living rooms of the main members of the family, the other places which were locked were searched one by one in the presence of one of the family members. 1. Did you find any partition walls in the cellar or is it open without any hindrance ? Ans. To the best of my remembrance, there were no partition walls in the cellar. Only the pillars of the building were there. 2. Did you not find the polythene bag containing two note books when you first took the possession of the cellar ? Ans. At the time of locking the cellar door, it is not possible to ascertain whether any bag is available on the floor of the cellar as the location of the bag is not visible from the first level where we have locked the cellar entrance. Though we have locked the cellar entrance at 8.20 a.m., we have entered the cellar only at 3 p.m. 3. As stated above, by you that search officials called you to take physical search of the cellar, what did you find in cellar by physical 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 ....
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.... of India who had given report that on comparison of the questioned documents and specimen writings of the assessee and his family members the authorship of the questioned document does not tally with the seized material A/GAR/05. But this report of the handwriting experts is not binding on the Department. It is only circumstantial evidence. There is no necessity to the Department to prove the authorship of this document. The other plea of the assessee is that the documents are planted one and it cannot be relied for the purpose of assessment. Though the assessee refused that the documents do not belong to him, the burden is cast upon the assessee to prove conclusively that it does not belong to the assessee. There is no presumption in law that the AO is supposed to discharge tax liability (sic) by direct evidence only and thereupon the undisclosed income beyond doubt. The undisclosed income of the assessee is to be computed by the AO on the basis of available record. In many a time, it is very important to have 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 estima....
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....curity details, bank account receipts vouchers or any other corroborative evidence. Without any of these, the Department has taken a view that the assessee is carrying on the moneylending business. More so, there are so many names of the persons whose addresses are not at all traceable. The Department has not traced and examined any of them. There is no information from any party that they have taken loan from the assessee. There is no evidence as to whether they repaid the loans towards the principal amount and interest. The Department cannot draw inference on the basis of suspicion, conjecture and surmise. Suspicion, however strong cannot take place of material in support of the findings of the AO. The AO should act in a judicial manner, proceed with judicial spirit and should come to a judicial conclusion. The AO is required to act fairly as a reasonable person and not arbitrarily and capriciously. Assessment made should have adequate material and it should stand on its own legs. The AO without examining any 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 not....
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....nly with the undisclosed income and we have to consider only material and evidence detected as a result of search. It means that if an examination of the material already on record before search or if as a result of some external information or some other sources other than a search, it is found that some income had escaped assessment then it is open for the AO to resort to a regular assessment including reopening of a completed assessment if so advised. But he cannot drag these items into the block assessment proceedings envisaged under Chapter XIV-B of the IT Act. In our opinion evidence available with the AO as a result of search is to be used for the purpose of determining the undisclosed income of the block period. The evidence, if any, relied on by the AO for the purpose of determining the undisclosed income of the block assessment is to be put before the assessee for his comments before completing assessment. More so, if the AO wants to rely on the statement of any third party the same is required to be furnished to the assessee and if the assessee wants to cross-examine any of the parties whose statement was relied on by the AO the same is to be provided to the assessee. In....