TaxTMI 
TaxTMI 
2007 (2) TMI 658
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....t the business and residential premises of Sri Satypal Wassan was searched in April, 1995. During the course of the search operations, various documents and books of accounts were seized. The impugned addition of Rs. 22,30,000 was based on a loose paper No. 7 of Annexure A-1/1-4 which was seized from the residence of Late Sri Satyapal Wassan. The AO required Sri Satyapal to explain the transactions. It was taken by the AO that the documents in question reflected advancing of loans and therefore, he asked the assessee to explain these advances. The assessee denied to have advanced any amount to any person. Originally he disowned the paper seized from his residence. He also denied to have any concern with the document or the figures mentioned in that document. An affidavit to this effect was also filed. In that affidavit, Sri Satyapal Wassan averred that he did not know the persons whose names are appearing in that document. The AO, however, took the view that once a document was seized from the residence of the assessee, then it would be in its knowledge and the explanation or affidavit furnished by him is only with the intention of escapement of tax liability. Since the assessee fa....
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....he quantity of iron that they wanted to purchase from late Dharamveer Wassan. Under such circumstances the entries in page No. 7 of the seized document stands explained. Therefore, the AO was not justified in treating them as unexplained loans. The addition of Rs. 22,30,000 should be deleted. 9. Before me the appellant has submitted fresh evidence by way of affidavits from Smt. Nirmal Kanta widow of late Shri Dharamveer Wassan. He has also filed affidavits from the above persons who wanted to have business dealings with late Shri Dharamveer Wassan. I am convinced with the argument of the appellant that these fresh evidences may be admitted in the interest of justice. In this regard, I rely on the judgment of the S.C. in Jute Corporation of India Ltd. v. CIT wherein it has been held that the powers of CIT (Appeals) are co-terminous with those of the AO and the entire assessment is open before the first appellate authority. Therefore, the first appellate authority can admit fresh evidence. The Cal. H.C. in Tara devi Goenka v. CIT had held that an appeal is continuation of assessment and first appellate authority is empowered to admit additional evidence at the time of hearin....
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.... under Section 69 of the Income-tax Act, 1961. 6. Against this the Ld. A.R. of the assessee submitted that the AO had not recorded any statement either during the course of search on the document No. 7 or during the course of assessment proceedings. Thus, without giving any opportunity to the assessee, the AO had inferred something and made the addition. In fact, the assessee had also given affidavit before the AO which was not considered by him. The figures recorded on the seized document are not the advances of money but they are, at best, quantity of orders for purchase or sale placed by different parties to Sri Dharmvir Wassan. The ld. A.R. further submitted that the document in question is incomplete inasmuch as it does not provide full names and addresses of persons, the date of alleged transactions or the monetary unit in which alleged figures are written. They did not show whether alleged figures are in Rupees, tons, Kilograms, Centimeters, Yards and Inches. They do not show whether it is a debit transaction or a credit transaction. The total of 22.30 does not show whether it is Rupees or something else. The document does not carry signature of any person. In absence of ....
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....that there are receipts of money by the assessee. The addition has been made only on the ground that they are unexplained advances made by the assessee. The Ld. A.R. also argued that presumption under Section 132(4A) cannot be imported for assessment purposes on account of latest decision of the Hon'ble Supreme Court in the case of P.R. Metrain v. CIT 287 ITR 209 (S.C.). The ld. A.R. also submitted that the AO has wrongly presumed that alleged advances were given in the assessment year 1989-90 whereas search was done in April, 1995. There is no date on the document which could indicate that the transaction took place in the previous year relevant to the assessment year 1989-90. At best one could consider the assessment year as 1995-96 as the document was recovered in April, 1995. 7. We have carefully considered the rival submissions and perused the material on record. In order to resolve the controversy as to whether any taxable income would arise from the alleged document, we may consider it relevant to record its English version: G.S. 5 Ravi 2 Kotli 2 Umiya 2 Swamy 5 Ganpath 1 1/2 Radhey Shyam 1/2 Shyamjibhai 1 Dari .30 Lamba 1/2 Bhu 1/2 Dev. Bros. 2 22.30 8. I....
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....d 45 of the assessee's Paper Book, there is an affidavit of Smt. Nirmal Kanta Wassan wife of Shri Dharam Vir Wassan. This affidavit is dated 10.12.1997. According to this, document No. 7 belonged; to her late husband and they relate to transaction made by him. They are in fact the orders of iron and steel placed by various persons mentioned in the document. The assessment order of the AO also shows that affidavit of Sri Satyapal Wassan was available before him. Once an affidavit was filed before the AO, he was duty bound to look into it and find out who is the real owner of the transactions and income arising therefrom by carrying out necessary investigation. The fact that he chose to refrain himself from carrying out such enquiries clearly indicates that there was no merit in the presumptions raised by the AO that the document belonged to the assessee and transactions also belonged to him. The additions were apparently made for the sake of additions. 11. For the sake of argument if we accept the submission of the Ld. D.R. that the Ld. CIT (A) erred in accepting fresh evidence then what is left after ignoring those affidavits is the bare document No. 7 with the bare details ....
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.... reading of above section, we find following components which enter into the concept of taxation. The first is the taxable event which attracts the levy, the second is the person on whom the levy is imposed and who is obliged to pay the tax. The third is the assessment year in which charge of income-tax is levied. The fourth is the total income of the previous year and the fifth is the rate or rates at which tax is to be imposed. The rates are prescribed in the annual Finance Act. Therefore, this component has no value in determining total income on the basis of seized document. Our view in this regard is supported by the decision of Hon'ble Supreme Court in Govind Saran Ganga Saran v. CST (1985) 155 ITR 144(SC) wherein it was held that for the purpose of charging to tax, there should be four components to be satisfied. For the sake of convenience, we refer to the relevant head notes from that decision: The component which enter into the concept of a tax are well known. The first is the character of the imposition known by its nature which prescribes the taxable event attracting the levy, the second is a clear indication of the person on whom the levy is imposed and wh....
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....s. In the present case, the AO has simply presumed that the alleged figures are advances without there being any material on record to support such presumption. 16. About the second component the charging section clearly spells out that Income-tax will be levied on the total income of a person. The person must be the one as defined in Section 2(31). It must be clearly established who is that person whether he is the one from whose possession the document is recovered or someone else. Merely because a document is recovered from the body of a person, does not automatically lead to the inference that it belonged to him. It is only for certain purposes that presumption under Section 132 (4A) has been enacted and not for all purposes including the assessment. Further this presumption is not conclusive. It is rebuttable. If the assessee has by way of affidavit denied ownership of the document and further Smt. Nirmal Kanta, wife of Sri Dharamvir Wassan admitted that it belonged to her husband, it could not be inferred without rebutting those evidences (filed in the form of affidavits before the AO) that document and transactions recorded therein, in fact, belonged to Sri Satyapal Wassa....
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....ption in a given set of facts does not admit of any rigid rule. The evidence may be direct or circumstantial or both and a mere statement of the assessee may be enough in some cases. It does not raise a question of law. The assesses filed his affidavit and also the affidavit of Smt. Nirmala Kanta Wassan wife of Dharamveer Wassan to the effect that impugned document contained transaction belonging to Shri Dhaamvir Wassan. It could not be said that onus did not shift to the AO. In our considered view, the affidavits, even if regarded as self-serving do not lose their evidentiary value if there is no material contrary to the averments made in the affidavit. When sufficient other material is found in the search which corroborates that document belonged to the assessee, then denial of such ownership merely by affidavits will be meaningless and they do not carry any weight to rebut the presumption lying on the assessee. In the present case, nothing is shown by the AO that there was other material correlated with the impugned document clearly showing that it belonged to the assessee. Under these circumstances, the assessee has successfully shifted the onus on to the AO by filing the af....
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....tion and/or in the search. The speaking from the document should be loud, clear and unambiguous in respect of all the four components as described above. If it is not so, then document is only a dumb document. No charge can be levied on the basis of a dumb document. 20. We also notice that the AO could not establish that the assessee has charged any interest, if at all the impugned; figures were advances. There is no material to show that the AO has taxed these advances as wealth of the assessee. There is also no material to show that the assessee has taken any action to recover the money from the alleged debtors. It is not believable that the assessee or his legal heir would forget their money lying with the debtors. By one way or other, he or his legal heir would try to recover the money. The department has not done anything to find out that after the search in April, 1995. We are also unable to satisfy ourselves as to why the alleged transactions are considered in the assessment year 1989-90 when there is no date mentioned on the document. Once search took place in April, 1995, then undated paper could be presumed to be belonging to that period and hence the year of taxabilit....
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....made. It means that recording of receipt of on money in respect of one flat can result into addition in respect of that flat only and on that basis no further addition could be made in respect of other flats sold by the assessee as the document did not reflect receipt of such on money in respect of others. To that extent, the document was treated as dumb document. 24. In Steel Home v. ACIT (1999) 69 ITD 240 (Del.), the I.T.A.T. held that where the entries recorded on a document found in the course of the search could not be related to the assessee, then any mentioning of low withdrawals or purchase of plots or the mentioning of stock or the figures of stock could not be added as the assessee's income as they could not be related to the assessee. It shows that it is very important for the AO to find out that the entries and related transactions belonged to the assessee. In our case, where affidavit is filed that entries related to Dharamveer Wassan and not to the assessee, it was incumbent on the AO to carry out necessary enquiries and relate the transactions with Sri Satyapal Wassan. Since such exercise has not been done, the document could not be considered in the assessmen....
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....ection 69 for the undisclosed advances given by the assessee the question of treating them as cash credits is only an afterthought. The department is not sure as to whether alleged entries are payments or receipts. If the department itself is vacillating and two interpretations are possible, then this fact itself justifies the stand of the assessee that no addition can be made. Notwithstanding above, in our considered view, document No. 7 is only a piece of paper and cannot be called to be a "book" within the meaning of Section 68. In ordinary sense a book signifies a collection of sheets of paper bound together in a manner which cannot be disturbed or altered except by tearing them apart. This binding is of a kind which is not Intended to be movable in the sense of being undone and put together again. As per Section 34 of Indian Evidence Act, book means a collection of sheets of paper bound together with the intention that such binding shall be permanent. Unbound papers collectively kept in one volume, in whatever quantity, though filled up with one continuous account, are not a book of account within the meaning of Section 34 of Indian Evidence Act. In C.B.I. v. V.C. Shukla (1998....
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.... deeming provision which applies when the assessee's explanation about cash credit found in his book is rejected. To invoke this section, it is sine qua non, that the sum must be credited in the books of the assessee maintained for a previous year. It may be charged to income-tax as the income of the income of the assessee of that previous year; if. (i) the assessee who offers no explanation about the nature and source of such sum, or (ii) the explanation offered by him is, in the opinion of the AO not satisfactory. 23. In that context, it would be necessary here to explain the meaning of the term 'book'. The word 'book' is not defined under the Income-tax Act. We, therefore, take the meaning of the word 'book' as is understood in the common parlance. As per Chambers 20th Century Dictionary (1983) edition), 'book' is defined as under: "Book" means A collection of sheets of paper etc. bound together or made into a roll either printed, written on, or blank. As per Bouvier's Law Dictionary (Eight Edition), Book is a general name given to every literary composition which is printed, but approp....
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....e possession of any person during a search belong to such person and 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 a presumption has been eracted by the Legislature to enable the assessing authority to make a provisional adjudication within the time frame prescribed under Section 132. Otherwise it may not be possible to do so. The object of introduction of Section 132 is to prevent the evasion of tax, i.e., to unearth hidden or undisclosed income or property and bring it to assessment It is not merely for obtaining information of undisclosed income but also to seize money, bullion e etc representing the undisclosed income and to retain them for the purposes of realization of taxes, penalties etc. Search and seizure is a serious invasion into the privacy of the person. The words in Sub-section (4A) are "may be presumed". The presumption under Sub-section (4A), therefore, is a rebuttable presumption. The presumption under Sub-section (4A) would not be available for t....
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....s of the case, and in law the learned Commissioner of Income-tax (Appeals)-II has properly adjudicated issues raised in ground No. 4 regarding charging of interest Under Section 234A and 234B in reassessment proceeding Under Section 148. The main grievance of the assessee is that the Ld. CIT (A) has confirmed the re-opening of the assessment under Section 148 and also an addition of Section 20,000 on the basis of a seized loose paper No. 9 of Annexure A1/14. 33. The AO had issued a notice under Section 148 on 21.2.1997 in response to which the assessee had filed return of income on 22.4.1997 for assessment year 1989-90 on a total income of Rs. 1,67,020. As mentioned in Revenue's appeal, there was a search and seizure operation at the business premises of the assessee. Several documents were found. One was document No. 7 in Annexure A1/14 on the basis of which an addition of Rs. 22,3 0,000 was made. This was deleted by the Ld. CIT (A) against which the Revenue: is in appeal, which has been decided as above in I.T.A. No. 290 (Jab.)/1999. In the present appeal filed by the assessee, the challenge is to the reopening of the assessment under Section 148. The issue was discusse....
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....h addition is made in the wealth of the assessee, then these figures could not be treated as income of the assessee and, therefore, no addition could be made on that basis. Thus, he submitted that re-opening of the assessment was bad and therefore, assessment so framed is also bad. 36. Against this the ld. D.R. submitted that the AO had , in fact, recorded the reasons before reopening the assessment. He referred to pages 131 and 132 of the assessee's Paper book wherein the AO had recorded the reasons. Regarding argument of the ld. A.R. that there should be a live-link between information and forming of opinion, the ld. D.R. submitted that seized documents were found wherein transactions amounting to Rs. 330937 and of Rs. 22,3 0,000 were recorded. It was enough of the reasons for the AO to form a belief that income of the assessee has escaped assessment. It is not necessary for the AO to come to the final conclusion that income has actually escaped assessment. The belief is only, prima facie, and therefore no inference can be drawn as to the final outcome of the assessment proceedings. 37. We have considered the rival submissions and perused the material n record. The reas....
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....r sufficiency of material cannot be questioned for the purposes of re-opening of the assessment. It is true that belief should not be arbitrary or irrational but where it is based on relevant material and reasons, then re-opening is justified. The Court cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the AO in coming to the belief though Court can examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief. Support is derived from the decision of Hon'ble Supreme Court in the case of Ganga Saran and Sons P. Ltd v. ITO and Raymond Woollen Mills Ltd. v. ITO (1999) 152 CTR (SC) 418: (1999) 236 ITR 34(SC). In the present case, we find that there is a direct nexus of the material available with the AO with the formation of the belief. Once it is done, in our considered view the reopening is justified. As a result, we reject the contention of the ld. A.R. in this regard. We uphold the order of ld. CIT (A) wherein he has confirmed the re-opening of the assessment. This ground of the assessee is, therefore, rejected. 39. The next ground is about addition of Rs. 20,000 a....
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.... hence AO should not have made the addition of Rs. 20,000. 12. I find that the appellant cannot claim bad debt if he does not conform to the conditions prescribed Under Section 36(1). There is no apparent explanation given in respect of credit entries in the name of Ambika Enterprises. In my opinion such credit entry is not explained. The AO was justified in adding Rs.20,000. The addition is confirmed. 42. We have heard the parties and considered the material on record. Before us, the Ld. A.R. submitted that document No. 9 is also a dumb document and no inference can be drawn therefrom. We have examined document No. 9. It shows entry of Rs. 20,000 in the name of Ambika Enterprises on 10.10.1988 relevant to the assessment year in question. There is a heading which shows Doobat Khata at the top of the paper. On the other hand, the ld. D.R. relied on the orders of the authorities below. 43. The ld. A.R. raised the same arguments as he has raised in respect of document No. 7 in revenue's appeal. We find that the AO had not recorded any statement of any person or carried out any investigation so as to show that the sum of Rs. 5,30,000 as mentioned on this Paper, which....
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....he learned Commissioner of Income Tax (Appeals) II has properly adjudicated issues raised in ground No. 1 regarding charging of interest Under Section 234A and 234B in reassessment proceeding. 46. In this case, the addition has been made on the basis of entry on document No. 9 of Annexure A1/14. The Ld. CIT (A) had confirmed the addition. However, we have held in assessee's appeal in I.T.A. No. 291 (Jab.)/199 that document No. 9 is non-speaking. It is a dumb document in the sense that it does not reflect whether the assessee has advanced the money or received the money. The AO has not correlated that the document belonged to the assessee. The presumption under Section 132(4A) could not be invoked for the purpose of regular assessment. As a result, the addition made in the assessment year 1989-90 on the basis of document No. 9 was deleted. 47. After hearing the parties, following our decision for the assessment year 1989-90, we hold that the addition of Rs. 90,000 on the basis of loose document No. 9, which is a dumb document, could not be made for the same reasons. As a result this addition is deleted. 48. The next ground is about interest under Section 234A and 234B. ....
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....I has properly adjudicated issues raised in ground No. 1 regarding levy and interest Under Section 234 A and 234B in reassessment proceeding. 2. Whether on the facts and in the circumstances of the case, the learned CIT (Appeals)-II was justified in maintaining addition of Rs. 21,600 as notional interest income an imaginary income. 54. We have heard the parties. We have held in appeal for the assessment years 1989-90 and 1990-91 that interest under Section 234A and 234B is mandatory and is consequential on the basis of assessed income. This ground of appeal of the assessee is dismissed. 55. The second ground raised by the assessee relates to confirming the notional interest of Rs. 21,600 on basis of additions sustained by the Ld. CIT (A) on the basis of seized document No. 9. We have held in appeal of the assessee in assessment year 1990-91 that no addition could be made on the basis of loose paper No. 9. Therefore, there is no scope of presuming interest income in respect of such advances. As a result, addition sustained by the Ld. CIT (A) is deleted. This ground of the assessee is therefore, allowed. As result, the appeal is allowed in part. I.T.A. No. 305 (Jab.....
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....uch advances. As a result, addition sustained by the Ld. CIT (A) is deleted. This ground of the assessee is, therefore, adowed. 60. The assessee has also raised following additional grounds: (A) Considering the fact that the notice issued under Section 143(2) of the Income Tax Act was contrary to the provisions of law, the impugned notice Under Section 143(2) of the Act is bad in law rendering all subsequent action, including the assessment completed on 30/03/1999 Under Section 143(3) of the Act, bad in law and illegal. AND (B) Considering the feet that mere is no direction to charge interest in the assessment order passed on 30/03/1999, hence in view of Supreme Court decision in Ranchi Club Ltd. Case (supra), the learned Assessing Officer erred in charging interest under Sections 234B and 234C of the Act. As held in the appeal for the assessment year 1990-91, the additional grounds become academic in view of the deletion of the addition and hence the additional grounds, after admitting, are dismissed. As a result, the appeal is allowed in part. I.T.A. No. 30 (Jab.)/1999-A.Y. 1992-93 (Revenue's appeal) 61. In this appeal, the Revenue has r....
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....1/15 was found with certain transactions in purchase of hardware worth Rs. 1,31,736. A loose paper No. 25 was also found, according to which, the assessee had purchased hardware worth Rs. 17,884. The assessee was required to explain the transactions. It was explained by the assessee that transactions recorded in loose paper No. 12 amounting to Rs. 1,31,736 were quotations with rates and value for hardware materials and not actual purchases thereof. It was also submitted to the AO that no date is mentioned in this paper and it was not possible to correlate these entries. On the other hand, the AO observed that the submission of the assessee is incorrect as a date is mentioned on the paper, which is 27.6.1992. The AO rejected the contention of the assessee that these are quotations and not actual purchases by saying that the assessee is a big contractor and he would not have obtained quotation for one door closer or 500 screws. The AO observed that these were the purchases made for the use in the assessee's own house. In the loose paper under consideration not only the number of items and their rates are given but total value was also given. Under the circumstances, the AO did no....
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.... and therefore, we are of the considered view that lower authorities were justified in treating this amount as expenditure/investment and as no explanation was forthcoming, it was rightly treated as unexplained investment. It was for the assessee to submit cogent material so as to show that inference drawn by the AO was incorrect. It was for him to bring evidence from the concerned party that it is not a purchase but only a quotation. Since no such material was produced by the assessee, the onus shifted back to the assessee, remained undischarged. As a result, we confirm this addition. This ground of the assessee, therefore, fails. 69. The assessee has raised following additional grounds: (A) Considering the fact that the notice issued under Section 143(2) of the Income Tax Act was contrary to the provisions of law, the impugned notice Under Section 143(2) of the Act is bad in law rendering all subsequent action, including the assessment completed on 30/03/1999 Under Section 143(3) of the Act, bad in law and illegal. AND (B) Considering the feet that mere is no direction to charge interest in the assessment order passed on 30/03/1999, hence in view of ....
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....s a party), to the effect that time limit as envisaged in proviso to Section 143(2) will not apply in relation to the assessment completed consequent upon the notice issued under Section 148 of the Act. 12. Since all the provisions of the Act "so far as may be, apply" as envisaged under Section 148(1) which is the phrase used in relation to assessment under Chapter XIV-B in Section 158BC(c) and "so far as may be, apply" has been interpreted not only by various Benches but also the Special Bench of the Tribunal to mean "to the extent necessary and practical", therefore, in our considered opinion, provision of Section 143(2) in its entirety cannot be made applicable to the assessment/reassessment under Section 147 which relates to the income escaped assessments and the same can be to the extent and for the purpose of opportunity only as same is necessary and practical for scheme of provisions relating to escapement of income. Therefore, the plea of the assessee in this regard is found to be not tenable, which is rejected. 72. After the amendment by Finance Act, 2006, the view was explicitly made clear that time limit for issuance of notice under Section 143(2) will not ap....
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....IT(A) that revenue has failed to prove that the assessee has actually given advances. Accordingly, there is no case for charging any notional interest on such advances. This ground of appeal of the assessee is, therefore, allowed. 77. Grounds No. 2 and 3 relate to the addition of Rs. 7,750 and of Rs. 16,800 on account of unexplained investment and disallowances of interest payment to L.I.C. The ld. CIT (A) has confirmed the additions on the ground that the assessee has failed to produce any evidence in support of his claim that these investments are explained. Before us also, no evidence was produced. Therefore, we decline to interfere in the order of ld. CIT (A). These ground of appeal is therefore, dismissed. 78. Ground No. 4 is about interest under Section 234B and 234C. We have held in assessment year 1990-91 that the charging of interest is mandatory and consequential. We, therefore, dismiss this ground of appeal. As a result, the appeal filed by the assessee is partly allowed. I.T.A. No. 201 (Jab.)/2002-A.Y. 1995-96 (Revenue's appeal) 79. In this case, the Revenue has raised the following grounds: On the facts and in the circumstances of the case, the....