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2016 (9) TMI 1062
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....ade by the AO in the case of assessee Shri Pandoo P. Naig only and in the cases of other two assessees i.e. Shri Prakash B. Bandarkar & Pravin B. Bandarkar, additions were made on protective basis only considering them as acting on behalf of assessee Pandoo P. Naig, therefore, they are also covered under the same search action; hence, the facts and circumstances mentioned in ITA No.7089/Mum/2011 in case of assessee -Shri Pandoo Naig, be considered in deciding all the appeals. The Ld. DR has also pleaded no objection for the same. Hence, the facts, for the sake of convenience, have been taken from ITA No.7089/Mum/2011 in case of assessee -Shri Pandoo Naig. 4. The facts of the case as have been summed by the Assessing Officer (hereinafter referred to as the AO) in the assessment order dated 28.12.10 passed under section 143(3) of the Act are reproduced as under: 6. "Brief facts of the case: (i) Information of various high value transactions were received by the Investigation Wing of the Income Tax Department from FIUIND. These transactions were shown in the Saving Bank Account of Shri Prakash B. Bandarkar and Shri Pravin B. Bandarkar (both the brother) held in HD....
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....ng to the loose papers found during the survey action. However, the assessee Shri Pandoo P. Naig denied that those papers belonged to him. The AO, however, observed that the loose papers found during the survey action were suggestive of a number of transactions in shares. Share transactions happen to be the main activity/source of income of Shri Pandoo P. Naig. He therefore confronted Shri Pandoo P. Naig with the said papers as well as his statement made under section 131 during the survey action. However, the assessee Shri Pandoo P. Naig did not own up the documents. He, however, offered to tax the amount of Rs. 4 crores, offered/declared during the survey action, in the return of income. But, he neither during the course of post survey proceedings nor during the assessment proceedings furnished any working in relation to declared income of Rs. 4 crore for the assessment year under consideration, even though, the working of the same was specifically asked by the AO vide order sheet entry dated 01.09.2010. The assessee was then questioned on this issue by the AO and several enquiries were made. The assessee filed reply in respect to the various queries raised by the AO wherein he s....
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....After considering the statement of the assessee recorded under section 131 during the survey action and further during post survey proceedings and the reply given by the assessee to the various queries raised by him, the AO concluded that since the assessee was present at the office premises during the survey action and that the loose papers were found from the said premises, therefore, the premises was owned by the assessee and the loose papers belonged to him. He further observed that the assessee had owned up some of the papers but one (Annexure A1), which the assessee did not own up. He, therefore, relying upon the provisions of section 292C of the Income tax Act, held that there was a presumption that the said loose paper belonged to the assessee and the entries made therein represented the unaccounted income of the assessee. He, after going through the transactions recorded in the said loose papers observed that the profit arising out from the various transactions was done at Rs. 4,40,47,290/- and the total value of ownership was Rs. 35,01,51,584/-. He accordingly added the said amounts of profit and shares ownership into the income of the assessee as undisclosed profit and i....
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....sessee and hence as per the provisions of section 292C of the Income Tax Act, it had to be presumed that the said papers belonged to the assessee. Even the assessee had also offered the said amount in the return of income and since had not raised any objection in this respect during the assessment proceedings, hence, at the appellate stage before him, such a claim of the assessee that the surrender was under pressure was not acceptable. He, therefore, dismissed the above additional ground taken by the assessee. In respect to additions made by the AO on the basis of the loose paper, he observed that in view of the presumption laid under section 292C of the Act, the loose papers found during the survey action belonged to the assessee and the contents of the said papers were also presumed to be true and that the said transactions thus belonged to the assessee. He observed that the entries made in the relevant page No.36 were not reflected in the books of accounts of the assessee. He further observed that the entries given in the said loose paper were under three heads, firstly the amount of Rs. 4,40,47,290/- was under the head 'Profits', the second entry of the amount of Rs. 49710462/....
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.... respect of details and evidences submitted by the said Bandarkar brothers explaining the transactions of bank deposits in their bank account. After, considering the remand report, the Ld. CIT(A) observed that no transaction was carried out by the said brothers in the name of the assessee Shri Pandoo P. Naig; that it was established from the various evidences produced during the remand report that the said Bandarkar brothers were earning commission from sale and purchase of shares on behalf of the investors; that M/s. Hanuman Enterprises and M/s. Vivek Enterprises had transferred the shares to the D-mat account of the said Bandarkar brothers; that those shares were sold by the Bandarkar brothers and the receipts were deposited in their bank account; that the proceeds were received through cheques; that later on cheques were issued to the investors M/s. Hanuman Enterprises and M/s. Vivek Enterprises by Bandarkar brothers after charging their common on the transactions. The bank account and other details of M/s. Hanuman Enterprises and M/s. Vivek Enterprises were also submitted to the AO for confirmation of the transactions. After perusal of the various documents, it was confirmed th....
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....as stated that a perusal of the said document gives no inference that the same in any manner relates to the assessee Shri Pandoo P. Naig. He has further stated that neither there is any handwriting of the assessee Shri Pandoo P. Naig on the said document nor it bears signature of Shri Pandoo P. Naig or any of his employees. He has further stressed that all the computers etc. were thoroughly checked/examined by the tax authorities. That the data in the alleged document did not match at all with any of the data/ entries/soft copies of documents in the computers at the premises in question. Even neither any such transactions in any of these scripts nor any name of any person, as may be deciphered from the seized document, was found entered into any of the details/data in the computer systems of the assessee. He has further submitted that the assessee Shri Pandoo P. Naig had neither any concern nor relation with any of the persons mentioned in the said seized document and nor any of such persons named therein is known to the assessee. He has further submitted that now with the use of advanced technology, even the third stage deleted data on the hard disks of the computers can be retrie....
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....the reference of cheque payment etc. were the records which could have been verified by the Revenue Authorities and if the assessee would have got any concern, dealing or transactions with the said accounts or with the persons named in the said documents, the Revenue could have easily detected the same. However, despite making much investigations, the Revenue could not establish any link of the assessee with the said bank accounts or with the persons or the companies named in the seized documents. The Ld. A.R. has also invited our attention to question No.9 put to assessee- Shri Pandoo P. Naig during the said statement recorded on June, 6th, 2008 wherein the AO has repeatedly by using different wordings put the same queries to the assessee so as to extract some concern or relation of the assessee with the seized documents but could not succeed in this respect. Even when the assessee was asked to give the details/computation in relation to the additional income declared of Rs. 4 crore, the assessee had categorically replied that neither any of the transactions belonged to him nor he had any concern with the said transactions. The additional income was just offered because of the con....
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.... was not voluntary. He has invited our attention to page 33 of the paper book which is the copy of the letter dated July, 16th, 2011 addressed to CIT(A), Mumbai wherein, it has been explained that the assessee was time and again asked questions regarding the said dumb document and the assessee Shri Pandoo P. Naig always denied that the said document belonged to him. It has been further submitted that the additional income was got declared under coercion, threat and undue influence of the survey party. In order to get rid of the mental trauma and long interrogation, the assessee made the above stated declaration without realizing the meaning or consequences thereof. It has been further submitted that the statement made by Shri Pandoo P. Naig and the consequent tax paid was not voluntary but under threat and duress. That the assessee has been maintaining the proper accounts and the income earned from business, capital gains and other sources was duly declared on year to year basis in the respective returns of income. The Ld. A.R. has invited our attention to the fact that even in his accounts, the assessee made an entry on 31.03.08 i.e. at the end of the year, crediting his capital a....
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....n each subsequent occasions, threatened with that huge addition and that penalties would be levied against him; that under this fear, coercion, threats and to get rid of the mental trauma and interrogation, the assessee was left with no choice but to offer the said income for tax. The assessee just declared the said Rs. 4 crores in his return of income as additional income as promised during the survey action but since the assessee was not having any such income from any source, hence no source of such income was explained in the return of income. The AO time and again asked for the working of the income but since there was no working and it was only declaration under threat, hence no working was filed with the AO. Even the AO has also not correlated the said additional income under any source of income but has given the credit of the same against the additions made on the basis of dumb document. The Ld. A.R. has further submitted that even in the case of Bandarkar brothers, such an additional income was got declared under threat and coercion on the basis of peak credits in their bank accounts. However, the Bandarkar brothers, before the CIT(A) and in the remand proceedings, explai....
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....copies of bank accounts ever operated by him or his wife in any foreign country during last six years. Similar type of summons were also issued to Smt. Anandhi Naig - mother of assessee pandoo. P. Naig and wife of Shri T.K. Prabhakar Naig. Thereafter, summons dated May 28, 2008 were issued to Shri T.K. Prabhakar Naig and Mrs. Anandhi Naig asking them to be present in the office of the DDIT Investigation along with various details including exhaustive note in relation to the businesses carried out by them, their partnership in any firm, list of bank accounts and the sources of their income during stay abroad etc. The Ld. A.R., therefore, has submitted that not only he, but also, his ailing father and mother were disturbed and he was compelled to offer and return the additional income without any incriminating material, asset, cash or source of investment found during the course of survey. 11. We have considered the rival contentions. The Ld. A.R. in this case has made two fold submissions. Firstly, that the incriminating document does not belong to Shri Pandoo P. Naig and that he has no concern, whatsoever, with the alleged loose papers found during the search action. Secondly, t....
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....sclosed investments and profits earned by the assessee. The AO has made additions of the total of figures mentioned under the headings 'profit', and 'ownership' but has not made any addition in relation to figures mentioned under the heading 'funding' as mentioned in the said document. There is no finding or observation made by the AO as to the name of persons mentioned in the said document against the transactions as to why those names should be ignored and the transactions be treated as relating to the assessee Pandoo P. Naig only. Even the AO has ignored the figures under the head 'funding.' A perusal of the impugned document gives impression that the transactions mentioned therein relate to many persons and that the same do not belong to any single person or that the same relate to some brokerage agent/firm which carried on transactions on behalf of other persons. Admittedly, no evidence of any holding, asset, valuable property or cash in the possession of the assessee had been found during search action or even during post survey investigations. The AO in the assessment order in para 8.4(1)(i) himself has given a finding that the share broking business carried on by the mother....
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....y 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." 13. A perusal of the above provisions shows that section 292C states that where any books of accounts, other documents .... etc. are found in possession or control of any person in the course of search action under section 132 or survey action under 133A; it may be presumed that such books of account, other documents etc. belong to such person and that the contents of such books of account and other documents are true. 14. We find that the wording of the section 292C which supposes the presumption to be taken is qualified with the words 'may be', hence, it may or may not be presumed that such documents belong to the person searched. Firstly, the section uses the word 'may presume' and not 'shall presume', hence the presumption....
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....h the said document or that any evidence found in his premises or possession is not suggestive of any link of him or any person or employee related to him with the alleged document/loose paper found during the search/survey action. The AO may also call upon or make enquiries whether such a relation of the assessee can be established with any of the transactions mentioned in such document; which course has, in fact, been adopted by the AO in this case but he could not find any evidence or of any relation of the assessee with such type of transactions of the assessee. The assessee is not supposed to prove the negative when under the circumstances, it seems impossible to do so. The assessee thus has discharged his burden of rebuttal of presumption in this case. Under such circumstances, the additions in this case solely on the basis of presumption under section 292C, which stands rebutted by the assessee as discussed above, cannot be held to be justified. The Hon'ble Allahabad High Court in the case of "CIT vs. Babu Mohanlal Arya Smarak Educational Trust" (2014) 42 taxman.com 255 (Allahabad) has observed that where in a case no evidence of actual receipt of own money/capitation was fo....
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.... available on record of found during the course of search which may prove wrong the contention of the assessee that the said paper does not belong to him and the assessee offers a plausible explanation regarding the recovery of such a document in his premises, then under the circumstances the additions in the absence of any corroborative evidence cannot be held to be justified. The Lucknow bench of the Tribunal in the case of "Satnam Singh Chhabra vs. DCIT" (2002) 74 TTJ 976 (Lucknow) has held that the uncorroborated loose papers found during search action cannot be taken as a sole basis for the determination of undisclosed income. The circumstantial evidences in the case in hand, such as there being no soft copy/data available in the computer systems of the assessee in relation to the alleged document or correlating any transaction as mentioned in the said document; no recovery of any valuable asset, bullion money or jewellery or any other evidence of any investment at the premises of the assessee; no discovery of any incriminating evidence despite thorough investigations of the books of account, bank accounts and other evidences during the survey action, post survey action and du....
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....rothers on protective basis, which amount in fact was added in the hands of the assessee by the AO on substantive basis. Now the fact which strikes one's attention as to when the transaction in Bandarkar brothers account was through banking channel and there was no scope for addition of Rs. 33978291/- and Rs. 36710971/- respectively as their undisclosed income then what prevented them to explain the transaction of deposit during survey action or post survey action . The facts itself, speak that the Bandarkar brothers might have offered this additional income under pressure from the Revenue Authorities but subsequently they reconciled each transaction and proved genuineness of each of the deposits and the additions were deleted in their case. Under such circumstances the offer/surrender made by them proved to be not volunteer but under mistaken belief or pressure. Considering the above facts, we have to see what sanctity can be attached to the surrender of income made by the assessee during the survey action. It is to be noted that during the survey action, no evidence of any such share transactions, investment, undisclosed income etc. was found except the loose paper which the asse....
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....e AO would have accepted his returned income as per the disclosure, the assessee would have got no chance or opportunity to claim that the disclosure made by him was under force, coercion or duress. He would have been left with no alternative than to console himself with the taxes paid in consequence of such declaration made. Under such circumstances, it will be wrong to assume that the assessee would have taken such a risk only to get an opportunity to contend that the statement made by him was wrong or false or the same was under pressure, threat or coercion. Had the AO not made huge additions on the basis of the loose paper sheet trading of the figures mentioned therein as undisclosed income/profit of the assessee there might have no chance to claim the deletion of the additional income assessed by the AO on the basis of declaration made during the survey action. Once the assessee was forced into the litigation, then only he gathered courage to fight for his rights and to show that neither the alleged loose paper belongs to him nor he had any undisclosed income or profits and further that even the declaration taken from him during his statement was under threat and pressure. ....
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....hi High Court in the case of "CIT vs. Harjeev Agarwal" in ITA No.8/2004 vide order dated 10.03.16 has observed that a statement made under section 132(4) of the Act on a stand-alone basis, without reference to any other material discovered during search and seizure operation, would not empower the AO to make a block assessment merely because any admission was made by the assessee during search operation. In the case of "Commissioner of Income Tax vs. Sunil Agarwal" (2015) 64 taxman.com 107 (Delhi-HC), the assessee therein, during the course of search, made a categorical admission under section 134 that the cash amount seized belonged to him and it represented undisclosed income not recorded in the books of accounts. The assessee did not immediately retract from the above admission but only during the assessment proceedings at a belated stage. In his retraction, the assessee stated that the surrender was made under a mistaken belief and without looking into books of account and without understanding law and that he had been compelled and perturbed by events of search and that the pressure of search was built so much that he had to make the surrender without having actual possession ....
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.... material cannot be a valid basis for sustaining such ad-hoc addition. The co-ordinate Jaipur Bench of the Tribunal (supra) further observed that the issue of existence of pressure, threat, coercion during search proceedings is to be judged by reference to the existing facts and circumstances, human conduct and preponderance of possibilities. During the search proceedings, record relating thereto being in exclusive custody of the searching officers, it is their wish and will which prevails during the fateful period. That it is almost impossible for the assessee to adduce demonstrative evidence of exerting such pressure. The co-ordinate bench of the Tribunal (supra) while holding so, apart from relying upon various decisions of the higher courts has also relied upon the decision of the Tribunal in the case of "Dy CIT vs. Pramukh Builders" (2008) 112 ITD 179 (Ahd.) wherein it has been held that even in the absence of proof of coercion or pressure, the statement by itself cannot be taken as conclusive. Therefore, merely in the absence of proof of pressure, threat, coercion or inducement the statement cannot be held as conclusive and additions cannot be made by solely relying on a stat....
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....nts should not be made and that corroborative evidences should be collected or obtained before making such additions. The circular of the CBDT is binding on the revenue officials. In the facts and circumstances of this case, when seen in the light of above case laws and CBDT circular, additions in this case cannot be said to be justifiably made. 19. Now coming to the point, whether, the claim put by the assessee Shri Pandoo P. Naig by way of additional ground before the Ld. CIT(A) regarding the deletion of addition of Rs. 4 crore offered during the survey action and thereby offered in the return of income can be allowed at this stage? The Ld. Counsel for the assessee in this respect has placed reliance on the decision of the Hon'ble Supreme Court in the case of "National Thermal Power Co. Ltd." vs. CIT" 229 ITR 383. The facts before the Hon'ble Supreme Court were that the assessee in that case offered the interest amount for taxation and the assessment was completed on that basis. Before the Ld. CIT(A), the assessee though had taken a number of grounds of appeal, however, the inclusion of the said amount of interest was not challenged. The inclusion of the said amount of inte....
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.... Appellate Assistant Commissioner or before the Appellate Tribunal, the appellate authority can consider the proceedings before it and the material on record before it for the purpose of determining the correct tax liability of the assessee. The appellate authorities, of course, cannot travel beyond the proceedings and examine new source of income, for that purpose other separate remedies are provided to the department under the Income Tax Act. The Hon'ble full bench of the Bombay High Court observed that apart from the above, there was nothing in section 254 or section 251 which would indicate that the appellate authorities are confined to considering only the objections raised before them or allowed to be raised before them either by the assessee or by the department, as the case may be. They can consider the entire proceedings to determine the tax liability of the assessee. The Hon'ble Bombay High Court in the case of "CIT vs. Pruthvi Brokers and Shareholders Pvt. Ltd." (2012) 349 ITR 336 (Bom.) has observed that the assessee is entitled to raise not merely additional legal submissions before the appellate authorities, but is also entitled to raise additional clams before the....
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....uch a claim is not barred. The Hon'ble High Court has further observed that the decision of the Hon'ble Supreme Court in the case of 'Goetze (India) Limited v. CIT' (2006) 157 Taxman 1, relating to the restriction of making the claim through a revised return was limited to the powers of the Assessing Authority and the said judgment does not impinge on the power or negate the powers of the appellate authorities to entertain such claim by way of additional ground. Even otherwise, the Ld. CIT(A) ought to have considered the claim of the assessee in exercise of his appellate jurisdiction under section 250 of the Act. Moreover, if the assessee is, otherwise, entitled to a claim of deduction but due to his ignorance or for some other reason could not claim the same in the return of income, but has raised his claim before the appellate authority, the appellate authority should have looked into the same. The assessee cannot be burdened with the taxes which he otherwise is not liable to pay under the law. Even a duty has also been cast upon the Income Tax Authorities to charge the legitimate tax from the tax payers. They are not there to punish the tax payers for their bonafide mistakes. In....