TaxTMI 
TaxTMI 
2016 (10) TMI 991
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....ted receipts on the basis of certain loose papers in the form of chits found and seized during the course of search. 3. On the facts and in the circumstances of the case, the Ld C1T (A) has erred in deleting the addition of Rs. 2,88,600/- made by the Assessing officer on account of treating the agricultural income declared by the assessee as income received from undisclosed sources by applying the provisions of section 68 of IT. Act, 1961 without appreciating the fact that the assessee did not furnish the details/evidences in respect of genuineness of the claim of agricultural income. 4. On the facts and in the circumstances of the case, the Ld C1T(A) has erred in deleting the disallowance of interest of Rs. 15,55,670/- made by the Assessing officer under section 36(1)(iii) of I.T. Act, 1961on the ground that the interest bearing funds were diverted for non business purpose. 5. The appellant craves leave to add, amend any / all of the grounds of appeal before or during the course of the hearing of the appeal." 4. Ground Nos. 1 & 5 are general in nature so do not require any comment on our part. 5. Vide Ground No. 2, the grievance of the department relates to the dele....
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....ed on 20.01.2010. The AO pointed out that the documents seized by the Investigation Wing of Bangalore included loose papers containing signed chits having details of payments to various parties including the assessee on which instructions were issued either by Sh. Parkash Dhariwal or Sh. Rasik Lal Dhariwal, owners of RMD Gutkha Group to Sh. Sohanraj Mehta for handing over cash to the persons whose names had been specified in the chits or to the bearer of the chit. He also pointed out that the amounts mentioned in those chits were in codes and in the statement of Sh. Sohanraj Mehta recorded during the search on 09.10.2009, it had been categorically explained that the figures mentioned in Lakhs actually stood for Crores of rupees and the word "packet" stands for Lakh of rupees. The AO observed that the associate firms/concerns pertaining to those groups were supplier of Katha mainly to M/s RMD Group and the documents found/seized by the Investigation Wing, Bangalore during the search of Sh. Sohanraj Mehta mentioned name of person pertaining to Garg Group specifically as "Mukesh Bhai and Mukesh Bhai Delhi". The AO, therefore, was of the view that those documents/slip/chits pertained t....
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....ot have been a basis to be considered as his income. It was stated that those papers did not relate to the assessee at all. 8. However, the AO did not find merit in the submissions of the assessee for the following reasons: "i. Sh. Rasik Lal, the head of M/s RMD has categorically admitted in statement dated 20/01/2010 that the chits found with Sh. Sohan Raj Mehta during the course of search operation on him on 09.10.2009, have been signed by him. As such M/s RMD has admitted the contents of these chits. ii. Admission by Sh. Rasik Lal Dhariwal and Sh. Prakash Dhariwal regarding the genuineness of the chits as mentioned above, establishes that the transactions as evident from the chits with RMD have been made by the parties/persons mentioned therein. Therefore, the payments of amounts to the parties mentioned in these chits whether on account of sale of goods to RMD or otherwise is a proven fact, now. iii. The name of assessee is clearly mentioned on the chits as 'Mukesh Bhai/Mukesh Bhai Delhi'. iv. The assessee's family concerns are regular supplier of Katha for many years to RMD group and Sh. Sohan Raj Mehta is a C& F agents of M/s RMD group for Karnatka ....
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.... such chits had been found was a trustworthy person of the head persons of M/s RMD Group. Therefore, the admission made by Sh. Sohanraj Mehta in respect of chits/slips issued by the head persons of M/s RMD Group could not be washed away by saying that his statement admission was confirmed by Sh. Dhariwal (Head of M/s RMD Group). The AO pointed out that the family concern of the assessee, namely, M/s Yash Pal Narender Kumar was a regular supplier of RMD Group, therefore, the transaction in question was a trading transaction. He also pointed out that though on the documents in question, name of Sh. Mukesh Garg, the assessee was mentioned but the associated firm/family concern, namely, M/s Yash Pal Narender Kumar was the main supplier of Katha to RMD Group during the period to which those documents and chits pertained. The AO pointed out that the trading results shown by M/s Yash Pal Narnder Kumar for the assessment years 2004-05 to 2008-09 were as under: S. No. A.Y. Sales Gross Profit Stock Ratio of Stock GP Ratio Remar ks 1 2004-05 37193816 1842814 87360 0.23 4.95 2 2005-06 54126742 3667932 1888046 3.49 ....
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....retation. 3.2.3 In Elite Developers v. Deputy CIT [2000] 73 1TD 379 (Nag), it was held that where the seized documents evidencing receipt of on money by the assessee were not speaking documents as they did not contain any narration or description about different figures noted thereon and the Department having failed to bring on record any material or evidence to corroborate allegation regarding receipt of on money, then the presumption on the basis of the documents could not be raised. 3.2.4 "A document seized from the assessee may not be complete in all respects as businessmen may choose to record minimum details on a document and keep the rest in their memory. It is the duty of the assessing Officer to carry out the necessary investigation by correlating the document with other documents seized, with regular books of account, with record kept by outside agencies, such as bank or financial institutions or debtors/ creditors and finally by recording the statements of concerned parties so as to fill up the gaps in confirming the inference arising from the documents for a proper charge of tax. Such correlation is necessary unless the document is capable of giving full details s....
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....3.3 to 3.3.5 of the impugned order which read as under: "3.3 Determination:- I have considered the rival arguments. The whole addition hinges on evidence gathered from third party document or statement. Now the issue is, can third party statement or entry in absence of any corroborative evidence despite using ultimate weapon of search, can result in justified addition. The legal provision relating to presumption u/s 132(4A) is applicable to the person from whose possession or control the incriminating material is found & seized. Based on the incriminating material found from third party search but not belonging to the appellant, this presumption will not be applicable unless corroborated by other evidence. Presumption available under section 132(4A) can be drawn against the person in whose case search is authorized and from whose possession or control books of account, diary or documents are found in the course of search. Presumptions regarding correctness of contents of books of account etc. cannot be raised against the third party. 3.3.1 Presumption under section 132(4A) is only against the person in whose possession the search material is found and not against any other....
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....l settled in law that the loose papers and documents cannot possibly be construed as books of account regularly kept in the course of business. Such evidence would, therefore, be outside the purview of Section 34 of the Evidence Act, 1972. Therefore, the revenue would not be justified in resting its case on the loose papers, diary and documents found from third party if such documents contained narrations of transactions with the assessee as decided by the Hon'ble Supreme Court in the case of Central Bureau of Investigation Vs. V.C. Shukla (1988) 8 SSC 410 and Chuharmal Vs. Commissioner of Income Tax (1988) 172 ITR 250 / 38 Taxman 190 (SC). Reliance was also placed on the following decisions rendered by various courts and Tribunals: a. Jai Kumar Jain Vs. Asstt. Commissioner of Income Tax (2007) 11 SOT (Jaipur) (URO). "Addition in the instant case was made on the basis of the papers found from 'A' (Third Party). In search these papers were not confronted to the assessee. From the assessment order it was not borne out whether 'A' (Third Party) had stated these papers as pertaining to the assessee. No presumption could be drawn against the assessee u/s 132(4A) in....
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....necessary to make arrangement for the cross examination of the witness by Shri Mukesh Garg, the appellant, in the interest of natural justice before taking a final view in the matter. However, from the assessment order it is found that such recourse was not taken by the A.O. despite being asked for vide appellant's request letter dated 26.12.2011. The Hon'ble Delhi High Court has held as under: i) In the case of CIT Vs. SMC Share Broker Ltd. 288 ITR 345, it was held that in absence of witness being made available for cross examination, his statement could not be relied upon to the detriment of the assessee. Tribunal was justified in setting aside block assessment. ii) In the case of CIT Vs. S M Aggarwal 293 ITR 43, it was held that statement made by the assessee's daughter, cannot be said to be relevant or admissible evidence against the assessee, since the assessee was not given any opportunity to cross examine her and even from the statement, no conclusion can be drawn that the entries made on the relevant page belongs to the assessee and represents his undisclosed income. After considering the submissions made, I am of the considered opinion that addition on the ba....
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....aterial found either during the course of search or on investigation thereafter. The reliance was placed on the following case laws: • Ashwani Kumar Vs ITO (1997) 39 ITD 183 (Del) • Neena Syal's (1999) 70 ITD 62 (Chdd.) • Elite Developers Vs DCIT (2000) 73 ITD 379 (Nag) • ACIT Vs Satyapal Wassan (2007) 295 ITR (AT) 352 (Jabalpur) • Addl. CIT Vs Miss Lata Mangeshkar (1974) 97 ITR 696 (Bom) • Saif Ali Khan Mansurali Vs ACIT (2012) 13 ITR (Trib) 204 (Mum) • D. S. Agencies and Associates & Usha Distributors Vs Addl. CIT (2015) 44 ITR (Trib) 46 (Mum) 15. The ld. CIT DR in his rejoinder submitted that the statement of Sh. Sohanraj Mehta was recorded inconsequence of the documents found during the course of search. Therefore, the documents found were not the dumb documents and that the absence of crossexamination was not sufficient to delete the addition made by the AO. 16. We have considered the submissions of both the parties and carefully gone through the material available on the record. In the present case, it is an admitted fact that the AO made the addition on the basis of statement of ....
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....n to interfere with the findings of the ld. CIT(A) who rightly deleted the addition made by the AO. In that view of the matter we do not see merit in this ground of the assessee's appeal. 17. The next issue vide Ground No. 3 relates to the deletion of addition of Rs. 2,88,600/- made by the AO by treating the agricultural income declared by the assessee as income received from undisclosed sources. 18. The facts related to this issue in brief are that during the year under consideration the assessee had shown agricultural income of Rs. 2,88,600/- and claimed the same as exempted. The AO asked the assessee to furnish the details as per the following proforma: 19. In response, the assessee furnished copy of documents/sale deed in respect of holding of land at various places and also furnished a certificate dated 20.08.2010 from Sh. Jagdish Prasad Sharma, Tehsilpatwari, which had certified that vegetables were grown in the agricultural land pertaining to the assessee. The assessee also furnished agreement on stamp paper of Rs. 5 dated 25.05.2003 with Sh. Dhirender Bhati son of Late Sh. Sardar Singh R/o Village Bisrak Distt. Gautam Budh Nagar, in respect of land given to him for....
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.... the scope of the term "agriculture" in the following terms: 'As we have noted above, the primary sense in which the term 'agriculture' is understood is agar- field and cultra- cultivation, i.e., the cultivation of the field, and if the term is understood only in that sense, agriculture would be restricted only to cultivation of the land in the strict sense of the term meaning thereby, tilling of the land, sowing of the seeds, planting and similar operations on the land. They would be the basic operations and would require the expenditure of human skill and labour upon the land itself." 21. The ld. CIT(A) after considering the submissions of the assessee deleted the addition by observing in para 3.6 of the impugned order as under: "3.6 I have considered the order of AO and the submissions made by the AR of the appellant. The appellant entered into an agreement for the cultivation of agricultural lands at Biharipur, Alipur, Khera Kherakera and Siraspur with Sh. Dhirender Bhati on 24.03.2005. The appellant submitted a certificate dated 20.08.2010 from tehsilpatwari that vegetables are grown on the appellant's agricultural lands for the past many years. The AO ....
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....ng the course of assessment proceedings noticed that the assessee had deducted an amount of Rs. 15,55,670/- from gross total income on account of interest paid to M/s RPG Credit & Capital Ltd. and M/s Yash Pal Narender Kumar, in which the family members of the assessee were having substantial interest. The AO also observed that the assessee had invested a large amount in the shares of various companies in which he and his family members were having substantial interest. He asked the assessee to furnish justification in respect of interest paid amounting to Rs. 15,55,670/-. He also asked the assessee to explain with evidence that loans taken on which interest was paid, were utilized for earning income which was forming part of taxable income. The assessee was also asked to show-cause as to why his claim in respect of interest paid on loans should not be disallowed and added to his income for the year under consideration. The AO observed that the assessee although furnished some details on 23.12.2011 but failed to substantiate his claim in respect of interest paid and no categorical explanation/reply had been submitted. According to him the assessee had parked the interest bearing fu....
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.... AO. 29. Now the department is in appeal. The ld. DR strongly supported the order of the AO. 30. In his rival submissions the ld. Counsel for the assessee reiterated the submissions made before the authorities below and further submitted that the interest free loans were provided to the family members to held them in their business and as the interest free advances to various concerns were owing to commercial and business expediency, therefore, the ld. CIT(A) rightly deleted the arbitrary disallowance made by the AO. The reliance was placed on the following case laws: • S.A. Builders Vs CIT (2007) 288 ITR 1 (SC) • DCIT Vs Monsanto Holdings P. Ltd. (2012) 13 ITR (Trib) 90 (Mum) 31. We have considered the submissions of both the parties and carefully gone through the material available on the record. In the present case, the ld. CIT(A) had given a categorical finding that the assessee advanced the money to those concerns in which he was either a director or a partner and there was business expediency, the said categorical finding of the ld. CIT(A) was not rebutted. We, therefore, do not see any valid ground to interfere with the findings of the ld. ....
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....iled to provide supporting evidence that the said share transactions were routed through the D-mat account of the assessee which is necessary to prove the genuineness of the transaction. He, therefore, held that the share transactions as claimed to have undertaken were not genuine and the income earned was from undisclosed sources which had been routed through short term capital gains for the purpose of giving tax at lower rate. 35. Being aggrieved the assessee carried the matter to the ld. CIT(A) and submitted as under: "3.7 That it was not the case of the Department that the assessee had not shown the investment in shares as investment in the balance sheets for relevant assessment year nor that the investment in shares and mutual fund was found to be false and untrue. The department had placed no material to show that the assessee's case did not fall within the tests laid down by the CBDT Circular No. 4 of 2007 (2007) 291 ITR (St.) 384. The share transactions were in the nature of investment and the profit received therefrom was assessable as short term capital gain as shown by the assessee." 36. The assessee also made a reference to Circular No. 4 of 2007 dated June 15,....
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.... account what was the reason for the same. This issue was although discussed by the AO but it had not been touched by the ld. CIT(A). We, therefore, in the absence of the clear facts available on the record, deem it appropriate to set aside this issue back to the file of the AO for fresh adjudication in accordance with law after providing due and reasonable opportunity of being heard to the assessee. 41. In ITA No. 3549/Del/2012 for the assessment year 2010- 11, the issues raised vide Ground Nos. 2, 3, & 4 are similar to the issues involved in ITA Nos. 3546 & 3547/Del/2012. Therefore, our findings given in the former part of this order in the appeals for the assessment years 2007-08 and 2008-09 on the identical issues shall apply mutatis mutandis for these issues raised by the assessee vide Ground Nos. 2, 3 & 4 for this assessment year i.e. 2010-11. 42. The another issue raised by the department vide Ground No. 5 relates to the deletion of addition of Rs. 4,40,100/- made by the AO in respect of cash found during the course of search from the premises of the assessee. 43. The facts related to this issue in brief are that during the course of search operation, cash of Rs. 4,....
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.... Therefore, the ld. CIT(A) rightly deleted the addition made by the AO. We do not see any infirmity in the impugned order on this issue. 49. In the result, the appeal of the department for the assessment years 2007-08 and 2010-11 are dismissed while the appeal for the assessment year 2008-09 is partly allowed for statistical purposes. (Order Pronounced in the Court on 26/08/2016) ============= Document 1 1 2 3 4 5 6 Name of Assessee Asstt. Year Land of Area (Hector & acre) Location of Land Holding Nature of Land (Irrigated or not) Name of Crops Quantitative of Crop Produced 8 Sale Price of Crops 9 Total Expenses Claimed 10 11 12 13 14 Rs Rs Bifurcation of Expenses Justification with (all expenses must be including labour expenses) (Labour expenses means no of days and per day per labour charge) Net Ag Income (Disclosed in Return of Income) % of net income to gross income Other Owners of the land With their share in that land What are the consideration paid for using their land (if not paid explain the reason) Remarks on reasonableness of the AG income d....