TaxTMI 
TaxTMI 
TaxTMI 
2014 (10) TMI 938
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....o the asses see. The learned Commissioner of Income-tax (Appeals) before rejecting the explanation of the assessee must ought to consider that Shri Umesh Kajve is regularly assessed to tax before the search and has his own PAN, Sales Tax No. and Drug Licence No. and during the course of search no any document was found which could form the basis that Shri Umesh Kajve is only the name lender and income actually belongs to the assessee. 2. That on the facts and in the circumstances of the case, the learned Commissioner of Income-tax (Appeals) erred in giving relief of Rs. 13,849 out of the total addition of Rs. 1,08,76,560 and thereby confirming the addition of Rs. 1,08,62,711 in the hands of the appellant being undisclosed profit of Shri Umesh Kajve Prop. M/s. Chhattisgarh Pharmaceuticals. It is submitted that the method of determination of profit in the hands of Shri Umesh Kajve is highly unjustified, purely arbitrary and on very higher side and was determined without appreciating the fact that in a trading concern and particularly in Government supply business where the sale is undisputed, the profit should be at reasonable percentage. 3. That on the facts and in the circu....
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....nds of the assessee substantively without considering the explanation offered by the assessee that the aforesaid income is exclusively belongs to Shri Umesh Kajve and not to the assessee. The learned Commissioner of Income-tax (Appeals) before rejecting the explanation of the assessee must ought to consider that Shri Umesh Kajve is regularly assessed to tax before the search and has his own PAN, Sales Tax Number and Drug Licence No. and during the course of search no any document was found which could form the basis that Shri Umesh Kajve is only the name lender and income actually belongs to the assessee. 2. That on the facts and in the circumstances of the case, the learned Commissioner of Income-tax (Appeals) erred in giving relief of Rs. 1,05,684 out of the total addition of Rs. 2,49,07,842 and thereby confirming the addition of Rs. 2,48,02,158 in the hands of the appellant being undisclosed profit of Shri Umesh Kajve Prop. M/s. Chhattisgarh Pharmaceuticals. It is submitted that the method of determination of profit in the hands of Shri Umesh Kajve is highly unjustified, purely arbitrary and on very higher side and was determined without appreciating the fact that in a tra....
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.... Remedies in the hands of the assessee substantively without considering the explanation offered by the assessee that the aforesaid income is exclusively belongs to Shri Satyendra Sahu and not to the assessee. The learned Commissioner of Income-tax (Appeals) before rejecting the explanation of the assessee must ought to consider that Shri Satyendra Sahu is regularly assessed to tax before the search and has his own PAN, Sales Tax Number and Drug Licence No. and during the course of search no any document was found which could form the basis that Shri Satyendra Sahu is only the name lender and income actually belongs to the assessee. 4. That on the facts and in the circumstances of the case, the learned Commissioner of Income-tax (Appeals) erred in not giving relief and confirmed the addition of Rs. 17,28,61,528 in the hands of the appellant being undisclosed profit of Shri Satyendra Sahu Prop. M/s. Neptune Remedies. It is submitted that the method of determination of profit in the hands of Shri Satyendra Sahu is highly unjustified, purely arbitrary and on very higher side and was determined without appreciating the fact that in a trading concern and particularly in Government....
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....bstantively without considering the fact that the aforesaid advance was given for the purchase of property situated at Gram, Raslakhedi and the same was shown by the assessee in the regular return filed and also included in the balance-sheet of the assessee and taxes due thereon has already been paid. It is submitted that when the appellant himself has declared this amount in the return of income and paid the taxes due thereon and the rate of tax is same for the appellant as well as for the recipient, question of adding the same in the hands of the recipient father is unjustified, unwarranted and bad in law." While the Revenue in its appeals has taken the following grounds : IT(SS) No. 383/Indore/2012 : On the facts and in the circumstances of the case, the learned Commissioner of Income-tax (Appeals) has erred in : "Deleting the addition of Rs. 21,00,000 made by the Assessing Officer as cash payment to others by the assessee." IT(SS) No. 385/Indore/2012 : On the facts and in the circumstances of the case, the learned Commissioner of Income-tax (Appeals) has erred in : "Deleting the addition of Rs. 69,46,000 made by the Assessing Officer as cash payment to others by th....
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....n each of the assessment year : A. Y. Regular profit of these two concerns Bogus purchase in Chhattisgarh Pharma Bogus purchase in Netam Industries Total 2004-05 41,600 1,00,00,000 8,21,111 1,08,62,711 2005-06 - - 1,16,01,194 1,16,01,194 2006-07 86,681 - 2,47,15,477 2,48,02,158 2007-08 1,82,163 - 1,20,62,000 1,22,44,163 2008-09 - - - 2,58,988 Total 1,00,00,000 4,91,99,782 5,97,69,214 The Assessing Officer made addition in respect of the income of Shri Umesh Kajve on estimated basis in the hands of the assessee as he noticed that during the course of the search at the office and factory premises of HIPL at A5, Kasturba Nagar, Bhopal and 96A, Mandideep Industrial Area documents pertaining to Netam Industries and Chhattisgarh Pharmaceuticals were found and seized as detailed at page 11 of the Commissioner of Income-tax (Appeals) order. The Assessing Officer further observed that the assessee when inquired in respect of presence of documents relating to these firms accepted in his statement that income of these concerns belonged to him and therefore he made addition substantively in the hands of the assessee. The Assessing Officer was of the ....
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....upplied antibiotic/antipyretic to M/s. KAPL. The Assessing Officer has observed that being proprietorship concern such ignorance was not possible for a real proprietor. Further, as per statement of Shri Umesh Kajve and detail shown by him in the returns of income it was found that he was drawing salary from M/s. Speed Automobiles. The Assessing Officer has observed that it was not understandable as to how a person who was a salaried employee was able to carry on business of such magnitude. Further, Shri Umesh Kajve was found to be unaware of name of the parties from whom purchases has been made or name of the employees working in M/s. Netam Industries. Shri Umesh Kajve as per statement of affairs filed during the assessment proceedings has no assets, no immovable properties which indicate that he was not the beneficial owner of M/s. Netam Industries and M/s. Chhattisgarh Pharmaceuticals. All these facts indicated that such concerns were de facto run by the asses see. The Assessing Officer has also referred to seized documents as per LPS-2/11 pages 73-80 which are documents pertaining to M/s. Netam Industries containing details of material supply to various CMO Offices and the perce....
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....e had been a search. No documents or any proof was found that the assessee derived any benefit or gain from Shri Umesh Kajve's business to establish determination of income of any other person in the hands of the assessee. The Department should prove the ownership and financial relation or financial interference of the assessee in the benami business. No such facts were brought on record. The Assessing Officer has misinterpreted the statement recorded in Hindi while translating it into English. The assessee has never stated that such business was carried out by him or profit earned from such business was surrendered by him. The assessee has simply stated that whatever income was earned on supply of the material to these concerns was covered by his declaration. The assessee also relied on the following case law : (i) ITO v. U. P. Tractors [1986] 19 ITD 199 (Jabalpur) ; (ii) Jodhpur Woollen Mills Ltd. v. Inspecting Assistant Commissioner of Income-tax [1997] 58 TTJ (Jaipur) 712; (iii) Murli Rolling Mills v. ITO [1988] 32 TTJ (Jaipur) 124; (iv) Madholal v. ITO [1991] 40 TTJ (Jaipur) 333; (v) ITO v. Chandra Kant N. Seth [2004] 89 TTJ (Kolkata) 417; and (vi) ITO v. Shyam Sunde....
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....rough M. P. Laghu Udyog for supply of drugs and medical instruments to the following two Government controlled companies-(a) Karnataka Antibiotic and Pharmaceuticals Ltd. (Government of India Enterprise) and (b) Rajasthan Drugs and Pharmaceuticals Ltd. (Government of India Enterprise). These companies made purchases from the open market. The concerns belonging to Shri Umesh Kajve and Shri Satyendra Sahu were amongst the persons who had to supply medicines/medical equipment on direction of the principal. They made purchases and supplied to the Government under instructions from the principal supplier on receipt of diversion letter from principals or otherwise directly to the principals. The payments were made by Madhya Pradesh Government directly to the principals who in turn made payment to Neptune Industries, Chhattisgarh Pharmaceuticals and Neptune Remedies. Sometimes the payments were also made directly to Neptune Industries, Chhattisgarh Pharmaceuticals and Neptune Remedies. In this regard, attention was drawn to the paper book. The additions were made relying on the statement of the assessee which was incorrectly translated and read by the Assessing Officer. This statement of ....
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....d Shri Satyendra Sahu (Neptune Remedies). It was vehemently contended that this was not correct translation from Hindi to English. For this, our attention was drawn towards the Hindi statement. Referring to the last sentence it was contended that this translation should read as "whatever I have taken from them as undisclosed income I have included in the statement I have made at my residence". Thus, it was stated that the translation made by the Assessing Officer with respect to the answer to question No. 24 gave a misleading impression as if these concerns belonged to the assessee while the assessee has stated that whatever benefit/income the assessee derived from the transactions with these concerns that was included in the declared income. These concerns had business transaction with HIPL in which the assessee was director. In reply to question No. 24 the assessee has clearly stated that Shri Umesh Kajve and Shri Satyendra Sahu are not benami and they have their own business. The assessee had made the submission to this respect before the Assessing Officer which was duly ignored by him. The said concerns do not belong to the assessee. They are separately assessed to Income-tax,....
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.... Mst. Bibi Hazra, AIR 1974 SC 171 ; and (f) Union of India v. Moksh Builders and Financiers Ltd., AIR 1977 SC 409. It was contended that there had been search and no evidence was found that the assessee has investment in the alleged benami concerns. Neither the Assessing Officer nor the Commissioner of Income-tax (Appeals) has brought any such evidence. Our attention was drawn towards the balance-sheet available in the paper book at pages 91, 96 and 106. There is no interlacing, intermingling, interdependence or interconnection in respect of finance between the assessee and the two persons/their concerns. Both the persons are being separately assessed. They have paid their taxes independently. Drawing our attention towards page 568 which contains the LPS II/13 it was contended that Department noted that the letter was written by Linco Scientific Instruments and Chemical Pvt. Ltd. dated April 8, 2006 for the payment by Netam Industries. Attention was drawn of Shri Ashok Nanda. Detailed address of Netam Industries was not given. The assessee was simply guiding the persons in carrying on their business. Bills were raised in favour of Linco Scientific Instruments and Chemical Pvt. L....
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..... This fact has also been accepted by Shri Umesh Kajve in his statement that he established the business with the support of Rajesh Jain. Bank account of Shri Umesh Kajve has been introduced by Rajesh Jain and address of Rajesh Jain is available therein. The Assessing Officer did not examine Rajesh Jain so that it could have been proved whether it is a bogus concern of Rajesh Jain. Rajesh Jain is a chartered accountant. The assessee has nothing to do with the bank account of Shri Umesh Kajve. He is operating his own account. Similarly, the assessee has nothing to do with the bank account of Shri Satyendra Sahu. Shri Satyendra Sahu was independently operating his bank account. Both these persons were having bank account with Mahanagar Nagrik Sahakari Bank Ltd. These accounts can be operated only by Shri Umesh Kajve and Shri Satyendra Sahu. The controlling documents were not found from the premises of HIPL in which the assessee is the managing director. The important controlling documents are as under : 1. Cheque-books and bank pass-books. 2. Letter head papers except of Neptune Industries-only 2. These are bank papers and hence insignificant. 3. Various registration certificat....
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....ses have been made by the respective concerns. No document was found to show that the purchases were made by the appellant on benami names. Kindly refer to 'facts' at the beginning of the synopsis. It given the year-wise figures of purchases made by S. Shri Umesh Kajve (NI & CP) and Satyendra Sahu (Neptune) that were held to be bogus by the Department and additions were made. The assessment year-wise total purchases, sales and purchases disallowed are as under : Netam Industries A.Y. Total purchase Purchase disallowed Total sales Remarks 2004-05 8,21,111 Golden Pharma 1,58,982 - Examples Netam Industries PB 446-477 579-586 CP 491-567 Rama Enterprises 1,25,852 Swastik Associates 3,47,836 Agrawal Trading Co. 1,88,441 8,21,111 2005-06 2,17,84,940 P. K. Traders, Kolkata 33,22,000 2,22,60,725 Examples Netam Industries PB 446-477 579-586 CP 491-567 Friends Mgt. and Consultant Private Ltd. 21,20,000 Misc. suppliers 61,59,194 ....
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....s". Supplies/sales are not made to any other person/concern. The payments have been received from the Government departments through bank transfers after making TDS of sales tax. This is apparent from the various papers seized by the Department paper-book-III contains some such examples. These are detailed below under sub-para (vii) "under the heading "Papers/Documents found." When there is sale, there is corresponding purchase. The Department has accepted the sales. The payments have been made by the Government. Such sales could not be made without corresponding purchases. Decision Where certain purchases are treated as bogus, because the assessee was unable to prove the purchases, it is not unusual for the authorities to disallow the entire payments as unproved purchases. The concerns have actually purchased the goods, but are unable to get proper vouchers, since the sellers for reasons of their own might have cooked up false vouchers to avoid their tax liability. The assessee could not have made the admitted sales without having made the purchases. It is not be correct to disallow the purchases. The assessee in one case was purchasing cloth and sold them after processing it ....
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....nbsp;Drug licence dated January 3, 2004. PB 169 District Trade and Industries Centre, Bhopal. Registration dated August 1, 2003. Chhattisgarh State (CP). PB 163 Vat registration with effect from May 23, 2003. PB 162 Central registration with effect from May 23, 2003. PB 164 Drug licence with effect from June 16, 2003. Income-tax return assessment year 2004-05/153C filed on March 31, 2009. Income returned Rs. 60,098. Assessed 1,09,22,808. All years under appeal before the honourable Appellate Tribunal IT(SS) Nos. 376 to 381/Ind/12 A.Y. Audited accounts/-accounts Netam Ind. Sales shown Chhattisgarh Pharma sales shown Total 2004-05 172-177 Bills enclosed PB 178-211 ledger A/cs from whom purchased 212-223 9,24,489 PB 173 1,12,58,124 PB 175 2005-06 136-249 2,22,60,725 Nil 2,22,60,725 List of purchases PB 250 Total purchases 2,17,84,940 Payment details are mentioned. All through banks. It is to be noted that total purchases from HIPL are Rs. 1,26,394. 2006-07 271-284....
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....ct). These are papers addressed to Neptune Industries, but in brackets. (Netam) is written. PB 436 There seems to be some confusion with the Health Department M. P. Therefore, sales tax by Netam was calculated in handwriting at the bottom of paper. CIT(A) Page 11 PB 441-477 LPS-2/9. It is a complete file. For example, the details are : PB 441 Letter from Netam inspection report to MPLUN. PB 442-445 Letter from MPLUN to Netam for submission of quality inspection. PB 446-453 Bills from Netam to CM HO and direct supply order from MPLUN. PB 454-457 Bills from Netam to Public Health and Family Welfare PHFW with certificate of purchase and goods received by them. PB 458-459 Public Health and Family Welfare (PHFW) receipts to Netam for goods received. PB 461-462 Letter from Netam to MPLUN confirming supply order received. PB 463 Annexure of Inspection Certificate signed by Assistant Manager MPLUN. PB 464 Delivery challan from Netam to PHFM. PB 465-466 Chief Medical Officer, Chattarpur letter with details of payment and copy of DD/SBI. PB 467 Commercial tax payment challan of Netam. PB 468-470 Direct supply order from MPLUN, bill by N. I. and acknowle....
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.... 48.00 10.37 11.09 69.46 On this basis, the learned Assessing Officer presumed and decoded that the amount is 69.46 lakhs without any basis which is not reasonable and it is absurd. Also it is against the provision of section 292C(1)(ii) of the Act which says that the contents of such document are true. At the bottom of the paper, the word "Crompton-2728" is written. This figure has been accepted as such by the learned Assessing Officer. If this is also decoded in lakhs (which is bad), it would be 27 crores 28 lakhs. Hence, the addition is beyond any reasoning and is absurd. The assessee denies ownership of the paper and the addition deserves to be deleted. LPS-IV/95. It mentions words as ENG, SDO and JE, showing that it is some construction project where such officials are engaged. The assessee denies these entries as belonging to him. The paper does not belong to him. The Department did not find any construction activity going on at the place or recently done. The addition may kindly be deleted. Dumb document. LPS-IV/96. The paper mentions designation of various officials and amounts again....
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....purchased. PB 117 PB 119 But he did not readily remember their names. On his orders, Lunco Company directly made supplies to Madhya Pradesh Government. He had purchases from HIPL also and it was related concern of Shri Nanda and hence some correspondence was do HIPL. Orders are received from MPLUN. He made purchases from Insilco, Bhoj Enterprises (PB 118). Hijco Surgicals (PB 118). There were four employees in his concern. Payments for purchases were made to brokers. Payments from Government were received through bank and balance to be received was Rs. 5 lakhs approx. Statement of Shri Satyendra Sahu : He was nervous at the time of recording of statements. Business of supply of medicines not shown by UK in his Income-tax returns : Commissioner of Income-tax (Appeals) page 18 writes that it was because Nanda was doing business and Umesh Kajve was unaware of such activity. This presumption is wrong. If the Department's stand is that various licences were managed by the assessee, it is not at all possible that the assessee would not have taken care to ensure that the said business was reflected in UK's Income-tax returns. Shri Kajve stated th....
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....oyed, this aspect has to be considered in UK or SS. There is no evidence that the assessee, directly or indirectly invested anything in these concerns. Inter-se relationship : The assessee and UK or SS are not related to each other. It is just the friendship that created the connection between them. CIT (A) Page 18 13th line from top Page 3 of this synopsis gives the translation of Shri Nanda's statement that UK was doing business independently and that Nanda used to help him in getting Government orders and supply and also used to supply from HIPL. Shri Nanda used to advice Mr. UK in his business. For Neptune Remedies, chart at page 24 of assessment order may kindly be seen. It shows business income right from assessment year 2002-03. Human probability : The theory of human probability and preponderance is not applicable to the facts of the case considering the initial capital, control over the business, destination of profit and intention of parties. The learned Assessing Officer or Commissioner of Income-tax (Appeals) were not justified in holding that the assessee is a right person where the total income should be assessed. T....
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....w in treating the income derived by these concerns as belonging to the assessee. The Assessing Officer has correctly interpreted the statement given by the assessee. The assessee by offering income of Rs. 5.30 crores has stopped the Revenue from making a further investigation. On a query from the Bench whether these concerns were registered with the sales tax and also the drug licence, the learned Depart mental representative was fair enough to concede the position. 2.4 We heard the rival submissions and carefully considered the same along with the order of the tax authorities below. We noted that in this case there had been a search in the case of the assessee who is the director and chairman of HIPL which is engaged in pharmaceutical business. Certain documents were found as reproduced in the submission made by the assessee from the premises of the company in which the assessee is the managing director. It is an undisputed fact that these documents were not found from the premises of the assessee. We perused these documents and we noted that these documents relate to the various correspondences and the order as well as supply made by these concerns to the Government agencies by ....
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....e concerns were found on the basis of which the Assessing Officer took the view that these concerns are benami concerns of the asses see. If these letter heads and papers were found, in our opinion, the Revenue was bound atleast to conduct survey at the premises of these concerns so that the reality could be ascertained. It is not denied that these concerns have supplied goods to the Government concerns. Even the letter heads of Karnataka Antibiotic Pharmaceuticals which is also a Government concern was also found but that concern was not treated as bogus concern of the assessee. In our opinion, for holding the concerns to be benami of the assessee following proposition of law has to be fulfilled : (i) the burden to prove whether the concerns of Shri Umesh Kajve and Shri Satyendra Sahu are the benami concerns of the assessee lies with the Revenue and not with the assessee. (Krishnanand Agnihotri v. State of Madhya Pradesh, AIR 1977 SC 796) (ii) Revenue should prove that the assessee had made investment in these concerns and source of the capital in these concerns have arisen from the assessee. (iii) The assessee has control over the business. (iv) The assessee has derived b....
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..... It is an undisputed fact that these documents were not found from the premises of the assessee. The presumption, at the most, can be available in respect of the company in which the assessee is director. There had been search but no documents relating to the registration with the various authorities or licences obtained from various authorities in respect of these concerns were found from the custody or possession of the assessee. The assessee is also not authorised to operate the bank account of these concerns. Even the assessee has not introduced the bank account. No paper or document has been found that the assessee was having control over the business. There had been search but Revenue could not bring any evidence which proved that the assessee enjoyed the profit of these concerns. The assessee has duly accepted that he was assisting in the business of these concerns as these concerns were buying goods from the assessee also in a friendly gesture and therefore while replying to question No. 24 he categorically stated that whatever I received from these concerns I have included it in my undeclared income. Finding regarding benami nature is a finding of fact and it must be base....
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....s were benami for the following reasons : (i) B, the father-in-law of the assessee, could not be believed when he said that he had a sum of Rs. 1,00,000 in cash with him since he had discontinued his business in 1946. (ii) B had no source of income and at the relevant period he along with his wife was living with his son-in-law and both of them were dependent on the assessee. (iii) The assessee's wife was the only issue of her parents, and (iv) The assessee was not honest as he had admittedly purchased a house property benami, in the name of his wife. On a reference : Held, that the mere fact that the statement of B that he had cash amounting to Rs. 1,00,000 was not accepted by the Tribunal, would not lead to the inference that the properties in question were purchased benami by the assessee himself. The assessee's mother-in- law had stated that she had in her possession jewellery worth Rs. 15,000 and cash of Rs. 5,000. The Tribunal had not stated that this statement was not acceptable or was being rejected and, unless it were rejected, the Tribunal could not enter a finding that both the father-in-law and mother-in-law of the assessee were dependent on him. The fact that....
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....f traders, that the concern had got sales tax registration and was also registered under the Shops and Commercial Establishments Act, the business income from the concern could not taxed in the hands of the assessee merely on the ground that the proprietor the concern was the son of the assessee. Normally, in a reference, the court does not interfere in the finding of the Tribunal but the finding of the Tribunal as to whether the concern was independent or benami property of the assessee was perverse. In such circumstances the court should interfere. The income from business of the concern in question was not assessable in the hands the assessee." This decision, in our opinion, is squarely applicable to the facts of the assessee's case. Merely certain papers which does not empower the assessee to carry on the business were found at the premises of the concern in which the assessee is a director cannot authorise the Revenue to regard these concerns to be the benami concerns of the assessee. S/Shri Umesh Kajve and Satyendra Sahu are being assessed separately to Income-tax and the income of these concerns are duly shown by them. The investment made in the concern was not proved t....
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....he Income-tax Officer and the Tribunal, seems to be based on surmises, suspicions and conjectures. It is somewhat surprising that the Tribunal took from the representative of the Department a statement of gross profit rates of other cotton mills without showing that statement to the assessee and without giving him an opportunity to show that statement, had no relevancy whatsoever to the case of the mill in question. It is not known whether the mills which had disclosed these rates were situate in Bengal or elsewhere, and whether these mills were similarly situated and circumstanced. Not only did the Tribunal not show the information given by the representative of the Department to the appellant, but it refused even to look at the trunk load of books and papers which Mr. Banerjee produced before the Accountant Member in his chamber. No harm would have been done if after notice to the Department the trunk had been opened and some time devoted to see what it contained. The assessment in this case and in the connected appeal, we are told, was above the figure of Rs. 55 lakhs and it was meet and proper when dealing with a matter of this magnitude not to employ unnecessary haste and show....
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....he facts, set aside the order of the Appellate Tribunal in this case and remanded the matter for reconsideration in accordance with law, on the ground that the Appellate Tribunal had improperly rejected evidence gathered by the Income-tax Officer after the passing of the assessment order but pending an appeal from the assessment order to the Appellate Assist ant Commissioner.]" From the perusal of the said case, it is apparent that finding has to be based on the relevant consideration and the material. No addition can be sustained which is not based on the relevant material or evidence. 2.4.8 We have also gone through the decision in the case of CIT v. Daulat Ram Rawatmull [1973] 87 ITR 349 (SC). In this case it was held that apparent is real. The onus is on the person who claims that the apparent is not real. M/s. Netam Industries, M/s. Chhattisgarh Pharmaceuticals are the proprietary concern of Shri Umesh Kajve and M/s. Neptune Remedies is the proprietorship concern of Shri Satyendra Sahu. Each of them are being assessed separately. Copy of the assessment order and return filed were filed before us in the paper book. Both the concerns are registered under the Sales tax Act, sal....
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....held that the burden of proof was on the Department to show that the real owner was the assessee and the amount belonged to the assessee. Similar the proposition of law was also laid down by the Allahabad High Court in the case of CIT v. Daya Chand Jain Vaidya [1975] 98 ITR 280 (All) as relied on by the learned authorised representative. We have also gone through the decision in the case of CIT v. Daya Chand Jain Vaidya [1975] 98 ITR 280 (All). In this case we noted that the assessee, his wife, two major and two minor sons were the shareholders of a private company. The explanation given for the source of Rs. 40,500 paid for the allotment of additional shares to the wife and her two major sons was not accepted by the Income-tax Officer who treated the amount as income from undisclosed source of the assessee and assessed the same in the hands of the assessee. The Tribunal reversed the order on a reference honourable High Court held agreeing with the Tribunal that the revenue could succeed only in case they had brought on record material from which it could be concluded that the deposit made by the wife and two major sons were in fact made by the assessee. This decision also supports....
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....o evidence or material was found which may prove that the assessee had incurred the expenditure to that extent. It is a settled law that no addition can be made merely on the basis of surmises, assumption or presumption. Supposition, however strong it may be, it cannot take the place of actuality. It is a known fact that during the course of search the Revenue forces the assessee to confess undisclosed income even if the assessee had not earned such income or assessee had no source of earning income to that extent. This fact has been even admitted by the Central Board of Direct Taxes and therefore they have issued instructions to their officers that no attempt should be made to obtain confession forcefully. Relevant instructions of the board are reproduced as under : "Instruction F. No. 286/2/2003-IT (Inv.-II), dated March 10, 2003 Confession of additional income during the course of search and seizure and survey operation Instances have come to the notice of the Board where the assessees have claimed that they have been forced to confess the undisclosed income during the course of the search and seizure and survey operations. Such confessions, if not based on credible eviden....
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.... not prove that the assessee has made the investment, the assessee is managing or having the control over these firms, the income earned through these firms are passed over to the assessee. Our aforesaid view is supported by the decision of the honourable Supreme Court in Govind Saran Ganga Saran v. Commissioner of Sales Tax [1985] 155 ITR 144 (SC); 60 STC 1 (SC) wherein it was held for the purpose of charging to tax there should be four components to be satisfied. For the sake of convenience we reproduce the relevant headnote from the decision (head note) : "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 who is obliged to pay the tax, the third is the rate at which the tax is imposed and the fourth is the measure or value to which the rate will be applied for computing the tax liability. If those components are not clearly and definitely ascertainable, it is difficult to say that the levy exists in point of law. Any uncertainty or vague ness in the legislative s....
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....e assessee and income earned by these companies cannot be added in the income of the assessee. 2.4.15 We also noted that in respect of Netam Industries, the Assessing Officer has accepted the sales in each of the assessment years but treated the purchases made by the assessee bogus. The sales were duly accepted. All the sales are made by these concerns to the consignee and the payment against the supply were made by the Government or its concerned Department. These payment receipts are duly shown in the bank account of these concerns. No sale is being made to any third party. A person cannot make sales until and unless purchases are made. It is not the case of the Revenue that these concerns which are held by the Revenue to be the bogus concerns of the assessee were engaged in manufacturing of the medicines. These concerns were simply engaged in trading of the drug. The assessee could not have made sales without making the purchases. Under the Income-tax Act it is only the profit which can be treated to be the income of the assessee. The disallowance of purchases, in our opinion, will tantamount as if sales have been made without purchases being made. It may be a case that the ass....
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....income so earned by the assessee in respect of the service rendered to these companies. In case the Assessing Officer finds that the commission so earned does not exceed Rs. 1,21,80,000 no addition in this regard can be sustained as the assessee will get set-off of commission income against the surrender so made. In case the Assessing Officer finds that the commission so estimated in respect of these three concerns exceeds in all these years Rs. 1,21,80,000, the addition to that extent be sustained. 2.4.17 Thus, ground Nos. 1 and 2 in assessment years 2004-05 to 2006-07, ground Nos. 1 to 4 in assessment year 2007-08 and ground No. 4 in assessment year 2008-09 are partly allowed. 3. Since ground No. 3 in assessment years 2004-05 to 2006-07, ground No. 5 in assessment year 2007-08 and ground No. 6 in assessment year 2008- 09 relating to the initiation of penalty under section 271(1)(c) is premature as the cause of action will arise if the penalty is imposed by the Assessing Officer, therefore, it stands dismissed as such. 4. Ground No. 2 in assessment year 2008-09 relates to sustenance of addition of Rs. 40 lakhs on account of unexplained expenditure. The Assessing Officer on the ....
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....osed income. It is not a case where the assessee has retracted the statement. The documents found represent HIPL letter head and the documents relate to the assessee's company. Once the assessee has accepted that the figure of 20 represents Rs. 20 lakhs and the figures are in the handwriting of the assessee, we do not agree with the submission of the learned authorised representative that nowhere it is mentioned that this amount is numeric number or represents denomination of 10 or 1,000 or lakhs. It could have been some quantity of item returned during the course of packing or may be some quantity of some other items. Had it been so, the assessee could have explained the meaning of BLA, CM, HM, PS, Patel so that it could have been co-related with that particular item. There is no allegation on the part of the assessee that he was pressurised to admit it as sum of Rs. 20 lakhs. Similarly, on the left side of the paper, figures are written as 10-M, 2-CM, 2-HM, 2-PS, 2-Patel, 2-Delhi, the total of which also comes to 20 and total of both these 20 will come to 40. The assessee has not alleged that he was pressurised to surrender this amount. Three questions were asked relating to ....
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....pect of this figure can be made by the Assessing Officer. In these facts, we set aside the order of the Commissioner of Income-tax (Appeals) and delete the addition as, in our opinion, it is a dumb paper so far the assessee is concerned. Thus, this ground stands allowed. 6. Ground No. 5 in assessment year 2008-09 relates to sustenance of addition of Rs. 1,21,80,000. 6.1 The facts relating to this ground are that the assessee surrendered the said amount while submitting the return. The said amount was included in the sum of Rs. 1,38,00,000 surrendered by the assessee. The Assessing Officer noted that in the return filed by the assessee for the assessment year 2008-09 the assessee made surrender of Rs. 1.38 crore which included the sum of Rs. 1,21,80,000 stated to be cash given by the assessee to Gaurav Sharma s/o Dr. Yogiraj Sharma, then Director of Medical Health, Government of Madhya Pradesh as per the agreement of purchase of property. The Assessing Officer noted that the assessee was supplier of medicines to health directorate. Various documents pertaining to Dr. Yogiraj Sharma were found and seized from the premises of the assessee and the assessee was earlier director in Gaj....
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....ner of Income-tax (Appeals) the asses see contended that the assessee entered into an agreement with Gaurav Sharma, s/o Dr. Yogiraj Sharma for the purpose of a property at Gram Raslakhedi for a total consideration of Rs. 1,77,50,000. The sum of Rs. 1,21,80,000 was paid as advance which was shown by the assessee in the balance-sheet along with the return of income ending on March 31, 2008. The assessee also enclosed copy of the acknowledgment of the return, computation of total income and balance-sheet for the assessment year 2008-09 as well as copy of the agreement dated August 30, 2007. He submitted before the Commissioner of Income-tax (Appeals) that during the course of the search cash amounting to Rs. 1,13,26,338 was found in the premises of Dr. Yogiraj Sharma and his son Gaurav Sharma. Gaurav Sharma during the course of the search accepted that the cash belonged to him and it was earned out of the business of property. Dr. Yogiraj Sharma in his statement stated at the time that whatever cash was found belonged to his son, Gaurav Sharma and his business. Gaurav Sharma is regularly assessed to Income-tax and filed return for the assessment year 2008-09. The assessee has surrende....
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....ed Government accommodation. There is no evidence being brought on record that the said money belonged to Dr. Yogiraj Sharma. It is also a fact that the impugned property for the purchase of which the agreement had been entered into between Gaurav Sharma and the assessee belonged to Gaurav Sharma. It is not a case that Gaurav Sharma did not own the property which he disposed of. Once the assessee has accepted that he has entered into an agreement with Gaurav Sharma, the agreement is duly signed by Gaurav Sharma as well as by the assessee, the assessee has also filed return showing the said money as his income, the said income, in our opinion, cannot be assessed protectively in the hands of the assessee merely on the basis that the agreement was not found during the course of search. The assessee had already during the course of search accepted that he had earned undisclosed income from transactions with Chhattisgarh Pharmaceuticals, Netam Industries and Neptune Remedies. We have also sustained addition in this regard in preceding paragraph. The Revenue even accepted that the assessee derived income from these concerns even treated these concerns to be benami to which we did not agr....
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....xes on the income until and unless the income belongs to him. It is a settled law that suspicion, howsoever strong it may be, it cannot take the place of actuality. In our opinion, apparent is real. Once the assessee has surrendered the sum of Rs. 1,21,80,000, the onus lies on the Revenue to prove that this money does not belong to the assessee and assessee is the benami of Gaurav Sharma. We do not find that the onus as lies on the Department has been discharged by the Department except relying on the probabilities. We, therefore, set aside the order of the Commissioner of Income-tax (Appeals) on this issue and direct the Assessing Officer to admit the sum of Rs. 1,21,80,000 substantively as the income of the assessee. Thus, this ground stands allowed to that extent. Revenue's appeal (assessment year 2006-07) 7. The only issue involved in this appeal relates to the deletion of the addition of Rs. 21 lakhs added by the Assessing Officer as cash payment to others by the assessee. 7.1 The brief facts of this ground are that the Assessing Officer noted that as per LPS 4, page 96 details amounting to Rs. 21 lakhs are mentioned. He was of the view that details represents payment m....
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....t's case is that prima facie this document did not pertain to the appellant or the appellant-company and that the transactions recorded on this document is rough projection for certain posts. It is stated that no such post are existing in the appellant-company. On careful consideration of facts, it appears that though the document is dated but it contained some projections of salary of specific post which are not existing as on date in the case of assessee or in the case of corporate entity of the assessee. Prima facie there is no indication that such payments have been made. Moreover, in the absence of any specific evidence of payment, it cannot be presumed that the appellant may have paid such amount against such posts which are not existing. It may be mentioned that though it is correct that the onus is on the assessee to satisfactorily explain transactions recorded on such documents but even in search case also each and every document found and seized may not necessarily contain transactions of incriminating nature and cannot said to be of unexplained income. The document by itself or by way of any corroborative evidence should indicate that either it represented income or ....
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....the basis of LPS 4, page 94 which contains entries of 69.46 as under : 48.00 10.37 11.09 69.46 Before the Commissioner of Income-tax (Appeals) the assessee contended that this document indicates that it is simply some calculation and not payment for any gratification, etc., on the top of this paper it is written "From the desk of VP(C)" which shows that this document does not belong to the assessee. The assessee does not have any post like PC, VP (P&A) etc., in HIPL in which the assessee is the director. No such post like PC or VP is there. It was also pointed out that on the bottom of the page it is written "discussion of VP-P and A for Insurance" and Crompton 2728. It was contended that all these designations denote that the document does not belong to the assessee or does not contain transaction relating to the assessee. Three amounts have been made as 69.46 and nowhere on this document the date or name, etc., are mentioned. It is not clear whether the figures are in 100s, 1000s or lakhs. The same are not related with any payment. The Commissioner of Income-tax (Appeals) after appreciating the document deleted the addition of Rs. 69.46 lakhs by observing as under : "14.4 ....