TaxTMI 
TaxTMI 
TaxTMI 
2017 (5) TMI 471
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....195%, N.P. 28,71,656/- all are baseless, addition need to be deleted. 2. The brief facts of the case are that a survey was conducted u/s 133A at the business premises of Shri Naresh Kumar Agarwal and Smt. Kiran Agarwal and it was noticed that huge cash was deposited in the bank accounts of these two persons. These persons stated that transactions in their bank accounts actually pertain to various marble traders of the Kishangarh. Shri Naresh Kumar Agarwal stated that the sale consideration in respect of unaccounted sales made by the marbles traders is received through their bank accounts standing in name of Shri Naresh Kumar Agarwal and Smt. Kiran Agarwal and amount is withdrawn and returned to the actual marble traders. He stated that sale proceeds of M/s Heda Marbles, M/s Shobha Marbles and M/s Asharam Bapu Marbles have been deposited from various stations (places) in their bank accounts and after withdrawing the cash at Kishangarh, same is being passed on to Shri Sharad Heda, Manager of these concerns. The AO has reproduced the statement of Shri Naresh Agarwal recorded during survey on 18.01.2011 on Page No. 3 to 5 of the assessment order and then again recorded his statement ....
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....ffairs of Shri Heda Marbles Pvt. Ltd., M/s Shri Asharam Bapu Marbles and M/s Shobha Marbles. Summons u/s 131 were issued to Shri Sharad Heda on 11.03.2013. The AO noted that assessee Shri Sharad Heda, manager of the assessee is purposely killing time as case is time barring. On 22.03.2013, the statement of Shri Sharad Heda was recorded in front of Shri Naresh Agarwal and the Ld. A/R's Shri Dharmendra Maheshwari and Shri Ajay Somani which has been reproduced by the AO on Page 27 to 29 of the assessment order. Thereafter the statement of Shri Naresh Agarwal was recorded and reproduced at Page No. 29 to 30 of the assessment order. 3. From the statements so recorded, the AO concluded as under:- "From the statement of Shri Sharad Heda as reproduced above in answer to Question No. 16, he stated that he has made telephonic talk daily to Shri Naresh Agarwal in financial year 2009-10 and 2010-11. He further accepted that he meet Shri Naresh Agarwal daily in between 2-3 PM. Shri Sharad Heda accepted that in financial year 2009-10 and 2010- 11, he was making the sale bills of M/s Shobha Marbles, Shri Asharam Bapu Marble and M/s Heda Marbles Pvt. Ltd. In affidavit filed on 18.03.2013, he has....
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.... were doing the job. They have categorically accepted that they are doing job of facilitator because they are of no means. At the time of survey, statements are recorded which is being part of assessment order. The documents produced during assessment proceedings were not found at that time of assessment proceeding. The details from these documents is determined and supplied to assessee on 22.03.2013. These documents are perused to ld. A/R on 25.03.2013, the ld. A/R accepted that the documents produced are reliable." "During the course of statement Shri Naresh Agarwal has stated that the amount received through his bank was returned to Shri Sharad Heda. The amount was bringing in his account on instruction of Shri Sharad Heda and this amount pertains to M/s Heda Marbles (P) Ltd., M/s Shobha Marbles and M/s Shree Asha Ram Bapu Marble, Kishangarh. Their three concerns are of Heda Groups considering the facts of the case the amount is distributed equally in three concerns stated above. Thus Rs. 1,13,99,984/- (1/3rd of Rs. 3,41,99,953/-) are treated as undisclosed sales of the year under consideration of assessee. The declared GP rate is required to be applied on this sales amount rec....
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....r basis in the year under consideration. The record of the transactions in these bank accounts carried out by Shri Naresh Kumar Agarwal for the Heda group was also submitted by Shri Naresh Kumar Agarwal to the AO which was offered for examination and copy to the assessee. However assessee preferred to simply deny the transactions. From above, it is apparent that there was evidence in the form of record of transactions carried out on behalf of Heda Group through the bank account of Shri Naresh Kumar Agarwal, Smt. Kiran Agarwal and their proprietary concern Sarveshwar Traders. Shri Naresh Kumar Agarwal had specifically explained the modus operandi adopted by the assessee to receive the unaccounted sale proceeds through the bank account of above persons in the statement recorded by the AO during assessment and also during the survey proceedings. It has also been pointed out that they are persons of no means to carry out substantial transactions noted in the bank accounts. Shri Sharad Heda, manager of the assessee concern and a relative of the Heda family has purposely avoided the cross examination given to him by the AO. The assessee has not been able to give any bifurcation of the ....
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....ubmitted that during the course of survey, statements of Shri Naresh Kumar Agarwal who is properitor of M/s Sarveshwer Traders were recorded on 18/01/2011, where Shri Naresh Kumar Agarwal categorically stated:- (i) That he is proprietor of M/s Sarveshwer Traders and do the trading of marble. He further explained the nature of business and also stated that he regularly filed returns of income and also stated his PAN (While answering questions no 1 at APB 61). (ii) He further explained the address, nature and modus operandi of his business while answering question no 2 (APB-61). He also accepted that he maintains the books of accounts for his sales & purchases(APB 64 Q.No.11). (iii) He also explained that his wife is also a businesswoman and is assessed to Income Tax under PAN AGRPA6835C( ABP 62 answer of Q No 3). (iv) While answering question no 4, Shri Naresh Agarwal has categorically sated that he and his wife both enjoys cash credit limit with Punjab National Bank(APB 62). (v) While answering question no 8 ,it was further stated that he entered all the transactions in a diary but at present he does not know where the diary is, possibly it would have been destroyed. (vi) In ....
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....r nor a director or not an employee during the year under consideration. These statements were taken in presence of Naresh Kumar Agarwal. It is therefore clear that Sh. Shard Heda has denied receiving any cash/money from Shri Naresh Kumar Agarwal and it is also clear that Shri Shard Heda is neither a partner nor a director and even not an employee of the assessee company. Therefore Shared Heda clearly and loudly denied any transaction of receipt of money on behalf of Assessee Company from Sh. Naresh Kumar Agarwal. 6.4. It was further submitted that while answering question no 9 of statement dated 11/03/2013 Sh. Naresh Kumar Agarwal stated that the record of alleged transactions is not with him and he requires a time for atleast 4-5 days to produce the same. While answering question no 10 about the nature of evidence, it was stated by Shri Naresh Kumar Agarwal that said records were kept in copies i.e note books. We would like your honour's kind attention on the answer of question no 8 of statement dated 18/01/2011 where Shri Naresh Kumar Agarwal stated that the diary is not traceable and now that diary has been converted into copies/ note book in his statement dated 11/03/2013. 6....
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....rn M/s Shobha Marbles is @ 25.33% and in case of M/s Shree Asha Ram Bapu Marbles is @ 25.05%. The average of G.P. rate of these two concerns comes to 25.19%. This 25.19% G.P. rate is applied on undisclosed sales of Rs. 1,13,99,984/-. Thus the additional income which was alleged as not disclosed by assessee comes to Rs. 28,71,656/- which was added to the total income of the assessee company. 6.7. It was further submitted that the assumptions & presumptions taken by Ld A.O. while framing above assessment are as under:- (1) That Sh. Naresh kumar Agrawal and Smt. Kiran Agrawal are persons of limited means. (2) Their Concerns are bogus in which no kind of trading, manufacturing or other business activities were carried out. (3) The address given by these persons in banks and concerns are residential address. There are no separate premises from where their concerns were operating. (4) Assessee is indulged in making sales outside the books of account and sale considerations is received in cash through bank accounts of Shri Naresh kumar Agrawal & his wife. And the cash deposited in the above bank accounts of third parties belong to the assessee company. (5) That Sh. Shard Heda is Man....
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....ji ". We would like kind attention of Hon'ble members on the fact stated by third party Naresh Agrawal while answering question no 10 of statement dated 18/1/11 where the third party Sh. Naresh Agrawal has stated that 90% of 13 Crores belong to Hedaji. Now your honour kindly see the para 3 of page 55 of assessment order where the amount allegedly pertaining to Hedaji was found only Rs. 3,41,99,953/- which is only 26% of the total deposit of Rs. 13 Crore. Your honours Ld CIT (A) erred in not considering this important fact. (ii) whether the mere statements of a third party are sufficient evidence to treat any transaction of third party entered into the diary of third party as a transaction of assessee without proving the said transaction as sales of the assessee. No enquiry from the alleged buyers was made. Assessee company has never accepted the alleged transactions as their sales and has never accepted that the alleged amount was returned to the assessee company by the third party. (iii) Sharad Heda is not at all related with the assessee company. Neither he is a director nor an employee. He was never given any authority on behalf of assessee company to make any business dealing....
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....n. Talking on phone or meeting with Sh. Naresh Agrawal was his personal affairs as clearly stated by him. Therefore the assessee company can not be taxed simply on the basis of assumptions, presumptions, surmises & conjectures. Any taxation on the basis of statements of Sh. Sharad Heda/Manish Heda if leviable should be imposed in the hands of Sh. Sharad Heda/Sh. Manish Heda and not on the assessee company. (vi) Alleged diary/notebook/record of transaction was not produced in original before Ld A.O, only photo copy was produced. Copy of the same was not provided to the assessee company before passing the assessment order. Is photo copy of alleged diary/ note book is a reliable evidence. Can any assessment be framed on the basis of such evidence. (vii) The alleged modus operandi explained by Naresh Agrawal is the creation of his mind only. No evidence in regards to the allegation that the amount deposited in the bank account of Naresh Agrawal was of assessee company was brought on the record by the Ld A.O. No other corroborative evidence was brought on record either by the Naresh Agrawal or by the department. No Independent evidence was brought on the record. (viii) Naresh Agrawa....
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....ged diary/note book is not reliable and the statement cannot be relied upon. 6.10. The ld AR further submitted that the entire assessment order is based on the sole statements of Naresh Agrawal and there is no independent evidence against the assessee company. There is no receipt of money issued by the assessee Company. There is no confirmation of assessee company confirming the transaction made by Naresh Agrawal. There is no power of attorney in favour of Naresh Agrawal authorizing him to collect the money on behalf of assessee company. No enquiry from the alleged depositors was made. There is no statement of any of the depositors of money that the deposits have been made on behalf of the assessee company. No sales from outside the books of assessee was found. Assessee company has never accepted such transactions. Original records were not produced for verification by Sh. Naresh Agrawal. Only photo copies of alleged diary/note book was produced just 2 days before the date of the order. There is no handwriting of any of authorized representative of assessee company in any alleged record. Therefore making assessment simply on the basis of statement & photo copy of alleged diary/not....
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....ssessee company. Therefore also making the assessment against the assessee company is unlawful. 6.12. It was further submitted that the assessee company did not produce/manufacture or trade any goods during the year under consideration. There was no purchases or sales during the year. Therefore Ld A.O grossly erred in treating the undisclosed sales of the assessee company at Rs. 1,13,99,984/-. 6.13. It was further submitted that Sh. Naresh Agrawal in his statement dated 20/1/2011 has stated the name of Shri Sharad Heda/Shri Manish Heda only as a party while answering question no 3 & 4 of said statements. Therefore making assessment in the hands of assessee company is unlawful. 6.14. It was further submitted that Sh. Naresh Agrawal in his statement dated 11/3/2013 has again stated the name of Sh. Sharad Heda/Shri Manish Heda as a name of main trader and not of the assessee company. Therefore to assess the assessee company for the alleged undisclosed sales is unlawful. 6.15. It was further submitted that the Ld A.O at page 31 of assessment order has mentioned that Sh. Naresh Agrawal produced the photocopy of alleged notebook/diary/record on 22/3/2013 (late evening). Assessee was ....
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....e taxation and is unlawful. 6.19. It was further submitted that the alleged diary/ record on which basis ld A.O. has made unjustified addition in the year under consideration, was not impounded by the investigation wing. Since the very beginning of the proceeding, till the morning of 23/03/2013, Naresh Agarwal was keep saying that he did not know where he had kept the diary and it might be possible that diary had been destroyed. And suddenly after more than 2 years, in the late evening of 23/03/2013, the said Naresh Agarwal has submitted the photocopy of that alleged records. 6.20. It was further submitted that no reason was submitted/ brought on the records by the Ld A.O. why the original diary was not produced. How the alleged diary which was not traceable from last 26 months, suddenly got traced when the assessment was getting time barred. No justification/ reasons have been provided by Ld A.O. regarding authenticity of that alleged diary. No other independent or corroborative evidences have been submitted / brought on the records by Ld A.O. to sustain his version. It is clear case of where third party has been be allowed to make evidence for himself by making diary as per hi....
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....of Shri Sharad U Mishra, Jaipur. Where Hon'ble Bench held that no addition can be made simply on the basis of statements only. 3. We also rely Hon'ble Bombay High Court in the case of Addl. CIT v. Lata Mangeshkar (1974) 97 ITR 696 (Bom) has held "that mere entries in the accounts regarding payment to the assessee was not sufficient as there was no guarantee that the entries were genuine in absence of any corroborative evidence. In that case, the income-tax authorities sought to assessee certain income as income from undisclosed sources received by the assessee on the basis of statement by 2 persons that they had paid money in black to the assessee and entries in books belonging to them regarding alleged payment to the assessee. The Tribunal examined the statement made by the 2 persons and found that the evidence tendered by them suffered from serious infirmities. It held that mere entries in the accounts regarding payments to the assessee was not sufficient as there was no guarantee that the entries were genuine. The Tribunal therefore held that there was no proof that the amount in question represented income from undisclosed sources belonging to the assessee. On further appe....
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....eived or deemed to be received by that person. At the same time, there are situations and circumstances where it is not possible for the Revenue to determine the person to whom the income rightfully belongs. In such cases, where there is some ambiguity or doubt in the mind of the Assessing officer, it is open for the Assessing officer to make assessment on two persons in respect of the same income. Such assessments are made to protect the interest of the Revenue so much so, unless such assessment is made, assessment proceedings against the party finally found to be liable may become barred by time. In this regard, useful guidance can be drawn from the decision of the Hon'ble Supreme Court in case of Lalji Haridas v. Income-tax officer [1961] 43 ITR 387 (SC) wherein it was held as under: "In cases where it appears to the income-tax authorities that certain income has been received during the relevant assessment year but it is not clear who has received that income and prima facie it appears that the income may have been received either by A or B or by both together, it would be open to the relevant income-tax authorities to determine the said question by taking appropriate proceedi....
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....to copies produced by Shri Naresh Agarwal in the evening of 22.03.2013 on perusal of which the AO found that Heda Group received Rs. 3,41,99,953 from the bank account of Shri Naresh Agarwal. In our view, these records of transaction of the bank accounts basis which the AO has determined the assessee's company tax liability is a critical piece of evidence which can support and corroborate the statements so recorded. It is equally important to know the contents of these documents and how the AO has established the necessary nexus with the assessee company. Unfortunately, the records and paperbook submitted before us is silent on this and in absence of the same, we are unable to take a view in the matter solely basis the statements so recorded. Further, the ld AR has raised various contentions (as noted above) in terms of inconsistency in the statements of Shri Naresh Agarwal, the absence of nexus with the assessee company, the locus standi of Shri Sharad Heda and how the same cannot be relied upon and held against the assessee. In our view, what is relevant is that the statements should be read as a whole and any inconsistencies should be examined. Further independent investigation b....
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....rties was subsequently withdrawn and handed over to the marble traders to whom the said money belong. The assessee submitted that for the activity of facilitating the receipt of cash in her bank accounts and, subsequent withdrawal and handing over the cash to the marble traders, she used to get the commission from the said marble traders. Here it is relevant to note that the entire transactions in various bank accounts in terms of monitoring the cash deposits as well as subsequent withdrawal and handing over the cash has been carried out by the assessee herself with the assistance of her husband to whom she has authorised and not by the marble traders. Here it is also relevant to note that the AO has also stated in his order about the said market practice in the business of marble trading where there is large scale under invoicing and under billing of sales. The ld. AO has stated that "generally, for obtaining sale consideration of actual transaction from the buyers located outside the hometown or throughout India, the traders obtain part amount through cheques and for balance amount, they have been using their confidants (facility providers). The confidents are having multiple ban....
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....accounts maintained by the assessee, the onus to prove that cash belongs to the assessee or to someone else lies on whom- on the assessee or on the Revenue. In this regard, we refer to the decision of Hon'ble Supreme Court in case of Chuharmal vs CIT (1988) 172 ITR 0250 wherein the Hon'ble Supreme Court has laid down the following proposition in law: "The High Court in its order noted that the raiding party by virtue of the search entered into the bedroom of the assessee on 12th May, 1973, and seized the watches. A panchnama was prepared. The Department found that the assessee was the owner. Sec. 110 of the Evidence Act is material in this respect and the High Court relied on the same which stipulates that when the question is whether any person is owner of any-thing of which he is shown to be in possession, the onus of proving that he is not the owner is on the person who affirms that he is not the owner. In other words, it follows from the well-settled principle of law that normally, unless the contrary is established, title always follows possession. In the facts of this case, indubitably, possession of the wristwatches was found with the petitioner. The petitioner did not add....
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....t arises for consideration is whether in the instant case, the assessee has discharged her onus in terms of explaining the nature and source of deposits and withdrawals in various bank accounts throughout the year. The assessee has stated in her statement recorded during the course of survey that she has given the particulars of the depositors and the beneficiaries to the investigation wing. Admittedly, the assessee was therefore having knowledge and access to the information/data in terms of various depositers and the beneficiaries. The assessee could have submitted the said information/data to the AO during the course of assessment proceedings. There is nothing on record to suggest that the assessee was not having access to the said information or was prevented by sufficient cause from sharing these information with the AO. It is not the plea of the assessee all these documents were seized during the course of survey and she was not having access to all these documents which were admittedly maintained by her while transacting through her bank accounts. In our view it is for the assessee in whose bank accounts the money has been found deposited to explain the nature and source of ....
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....he opportunity to prove such unexplained investments. The observations of the Tribunal makes it clear that the Tribunal itself was in doubt about the correctness of its own conclusion when it observed that some of the cash credits were not genuine. Thus, the finding recorded by the Tribunal that some of the cash credits were not genuine vitiates the order passed by it. The burden to be discharged by the assessee has not been discharged and the order of the CIT(A) could have been confirmed only if the Tribunal was satisfied that all the investments were satisfactorily explained. The Tribunal itself was not in a position to feel satisfied with regard to the explanation submitted and observed that some of the investments were not genuine. It was not justified on the part of the Tribunal in such a case to uphold the order of the CIT(A). While explaining the various credits and investments, it may be possible that the assessee may be successful in explaining some of them, but that does not by itself mean that the entire investments have to be considered as explained. Even lapse of time or inability of the assessee would not make the unexplained investment an explained one. It is each an....
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.... explanation of the assessee or not and then take a final view in the matter. 2.10 Having said that, we are also intrigued by the inaction on the part of the Revenue and in particular the AO whereby he has failed to consider the details of the depositors and beneficiaries as claimed to be submitted by the assessee during the course of survey. Ideally, the AO should have confronted the assessee with the details found during the survey and sought an explanation regarding various deposits and withdrawals in respect of various bank accounts maintained by the assessee, the details in respect of which has been obtained by the AO by issuing notices calling for the information from the various banks. It seems to us that the reason for inaction on the part of the AO is account of AO not having necessary records of survey maintained by the Investigation Wing. There thus seems to be a clear lack of co-ordination between the Investigation wing and the Assessing Officer handling the assessment. We do not see a justifiable reason especially where the case of the assessee alongwith other similar assesses were centralized before a single assessing authority, why the survey records cannot be shar....