TaxTMI 
TaxTMI 
2018 (1) TMI 725
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....y way of salary from M/s Aarti Infrastructure & Buildcon Limited, share of profit from partnership firm and from other sources, that is interest income. The assessee was asked explanation about the cash, jewellery and silver articles found out of which cash of Rs. 5,00,000/- was seized and entries appearing in the seized materials. The questionnaire covering the details of such entries along with notices u/s 142(1) were issued on 03.12.2012, 21.01.2013 and 11.03.2013 and the assesse furnished his explanation through written submissions filed on 14.12.2012, 27.02.2013, 18.03.2013, 25.03.2013 and 26.03.2013. The seized materials included, inter alia, a diary which was seized under, identification mark LPS 01/01, in respect of which the assessee was specifically asked for his explanation. The seized documents under identification mark LPS 01/01 is a diary by name "World Diary" and consists of 321 pages out of which 151 pages are written and were indexed with serial numbers 1 to 151. The diary prominently contains the name of the assessee, that is "CHHAGAN LAL MUNDRA" written in English & Hindi scripts and also his phone number and on the top of this page the noting "Vidhan Sabha Chuna....
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....ary the notings about the publicity materials relating to elections like flags, banners, badges, cut-outs, caps etc. are made but these have been specifically considered in the proper light and the assessee was never burdened to explain about these notings. The transactions on the relevant pages of the diary relate to transfer of funds and other pages of the diary are containing reliable information indicating tie nature of the impugned transactions. The diary describes transactions of amounts given to various persons including suppliers of election materials and the assessee was required only to explain the source but the assessee did not divulge the terms of expenses incurred by him. The diary was seized from the residence of the assessee is it was in the handwriting of the assessee. The provisions of section 132(4A) of I.T. Act, 1961 casts a presumption because of which the diary seized from the assessee shall be presumed to be belonging to the assessee. For failure on part of the assessee to do so, such expenditure is to be added by invoking provisions of section 69C of the Act. Hence, the AO added Rs. 8,06,14,288/- to the total income of the assessee as unaccounted expenditure....
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....gh tips of estimates of Chunav publicity materials and those were tentative quantities of flags, bindies, etc. publicity materials in the election noted in the diary as per discussions of budget / rough programmes trials, etc. as per tentative discussions of the karyakartas and were of the stage of rough notings, jottings, etc. as per their gossiping and chattering and had no live connection with any actual transaction or expenses incurred which the Karyakartas held in discussion in informal Chunav meetings and discussions. The diary contained rough jottings to be destroyed but omitted to be destroyed and has no evidentiary value. The AO has presumed "transactions" in the jottings and also presumed that even where 'Rs.' is not prefixed any numerical figure in the diary is amount rejecting the assessee's above submissions. The assessee has not given logical reasons or basis of material or evidence for holding the noting to contain any transaction of expenditure or that how the expenses were incurred and that too from assessee's source of income. There was no evidence of expenditure incurred by the assessee or that expenditure was incurred from assessee's sources and that....
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....ved/stores, Who took deliveries and where stored? Utilizations of the supplies, how made? Mode of payments? Whether paid once or in a number of times. No corroborative material or evidence was found in the search and in the enquiries made. The AO has held that the expenditure though do not relate or was found to have incurred by the assessee himself but there are definite indications that actual details of expenses incurred during the elections to State Legislature are recorded on page no.37,107,109,116, & 117, 119, 143, 147 and 148 which are having notings of figure of expenses against various names and so he is assessable on account of the provisions u/s 69C of the Income Tax Act, 1961. Merely on "indications" or "appear to be" the AO has tried to treat the rough jottings of meetings of political party workers, karyakartas, office bearers, leaders, etc. as actual transaction of the expenses BJP incurred in elections. The total of figures in page no.109 is 3.39 crores and total of gross estimate of the same as appearing in page no.116, 117, 119 is coming to Rs. 3.35 crores which are almost similar and repeated items prove that these were rough jottings. In totalling both figures a....
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.... (12A) has been inserted in section 2 to define "books of account" as including ledgers, day books, cash books, account books and other books whether kept in written form or as print-outs of data stored in a floppy disc, tape or any other form of electro-magnetic data storage device. 5.3 Another new clause (22AA) has been inserted in the section to define the expression "document" as including an electronic record as defined in clause (t) of section 2 of the Information Technology Act, 2000, as per which electronic record or data record or data generated, image or sound stored received or sent in an electronic form or micro film or computer generated micro fiche." 4.2 The assessee further submitted that the seized diary LPS 01/01 is neither books of account nor a document within the meaning of section 292C of the Act. The expression used is "may be presumed" and so there could be application of discretion (Metrani (P.R.) v. CIT (2006) 287 ITR 209 S.C.). 5. After considering the submissions, the CIT(A) deleted the addition so made by the Assessing Officer. 6. The DR relied on the order of Assessing Officer. 7. The AR of the assessee, on the other hand, submitted....
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....expenditure evident from the Chunav diary in question and not on the basis of the AO's above baseless observations that the assessee was an important organisational functionary for Bhartiya Janta Party, etc. The above facts do not justify observations that he had incurred any expenditure from his source within the meaning of section 69C. 4. It is stated in point no.5 that there are indications of expenses incurred during the elections to State Legislature because names of few persons, namely- Gandhi, Nagpur, Anilbhai, Delhi & Wilson, Ahmedabad, are found written who are dealing in supply of election materials and that on the pages numbers of 37, 107,109,116 and 117, 119, 143, 147 & 148 notings of figure of expenses against various names and also names/amounts and the names meant to be the sources are also given. The AO had further observed that the transactions on the relevant pages of the diary relate to transfer of funds and other pages of the diary are containing information indicating the nature of the impugned transactions, amounts given to various persons ,suppliers of election materials. When sources were found mentioned or that the entries wer....
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....o be destroyed but was omitted to be destroyed. In the proceedings taken place by the Department in search, post search and assessment proceedings no material or evidence or corroborating material or evidence of any expense actually incurred, much less spent by the Assessee, has been shown or found. No incriminating asset like Cash, Jewellery, Valuable, Movable, Immovable property or others was found. Likewise no unexplained expenditure on foreign travel, function or others was found. 7. By applying the test of human probabilities also it is more probable that on the occasion of election, firstly, it is the concerned political party that can be expected to make payments for election campaign and it is quite Customary also. Secondly, it is the candidate contesting election who can be expected to make payment for election campaign. It is confirmed by the A.O. that the assessee was not a candidate in the election. The Assessee was undisputedly not a candidate contesting in election. In the matter of Chunav expenses it is more probable that firstly, it is the concerned political party that can be expected to incur expenses for election campaign. Secondly, it ....
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....at too by the assessee for attracting section 69C. The Assessee relies upon the order of the Commissioner of Income Tax (Appeals). It is humbly prayed that the deletion of addition may be upheld. 8. We have heard rival submissions and perused the orders of lower authorities and materials available on record. A search and seizure operation u/s.132 of the Act was conducted in the case of the assessee on 23.06.2010. During the course of search, a diary marked LPS 01/01 was seized from the residence of the assessee. The AO observed that the total of various figures written in the diary comes to Rs. 8,06,14,288/-. According to the AO the said figure represents expenditure incurred at the time of election in the year 2008 and, therefore, he added the same to the income of the assessee of the assessment year 2009-2010 by invoking provisions of Section 69C of the Act. 9. On appeal, the CIT(A) deleted the addition by observing as under :- "6. I have carefully gone through the assessment order, contents of the seized diary and written submission of the appellant. It is an undisputed fact that the appellant was not contesting in the elections as a candidate. It is a....
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.... make payment for election campaigning. It is an undisputed fact that the appellant was not a candidate contesting election. Thus, the probability of appellant incurring or making payment for the expenses, if at all any incurred, in my considered view, is quite negligible. 8. In Para 5c. of the assessment order, the A.O has mentioned names such as Gandhi, Nagpur, Anilbhai, Delhi & Wilson, Ahmedabad and stated that all these persons are dealing in supply of election materials. However, the A.O has not brought on record the results of any enquiry conducted by the A.O from the said partie s. The conclusion drawn by the A.O has not been substantiated on the basis of corroborative evidences collected from the said parties. 9. On perusal of Para 5 of the assessment order, it is also seen that the A.O has stated that "On few of these pages dates against the name/amount and the names meant to be the source are also given". This assertion of the A.O, in my considered view, is self contradictory. I am of the considered opinion that the provisions of Section 69C cannot be invoked where the A.O himself is having knowledge about the source of any expenditure, as Section 69C co....
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.... found were explained fully and accepted in the assessment. Having gone through the contents of the seized document/diary, I am of the considered opinion that, it cannot be said with certainty as to whether the contents are representing the actual transactions or just the budgetary estimates. It is difficult to subscribe to the view of the A.O as the diary does not contain any concrete details as regards nature of notings, period, suppliers/parties involved, furthermore, the A.0 has not brought on record any evidence to rebut the appellant's claim that the notings were rough tips of estimates of Chunav publicity materials and those were tentative quantities of flags, bindies, etc. publicity materials in the election noted in the diary as per discussions of budget / rough programmes trials, etc. as per tentative discussions of the karyakartas. I am of the considered opinion that there is no corroborative evidence of expenditure incurred by the appellant, or that expenditure was paid from appellant's sources and that the above amount of addition u/s 69C was income of the appellant or that he had earned sum of Rs. 8,06,14,288/- and incurred expenses in Chunav, 2008 for BJP par....
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....come theory, i.e., income to be determined for taxation must invariably be proved to have been the correct quantum of income earned by the appellant during the relevant previous year and the one presumed to have been earned. The presumptions and hypothetical estimations and observations made by the A.O. for making the impugned estimated addition, were extraneous, irrelevant and opposed to the facts obtaining from the record. The fate of the appellant could not be decided by the A.O. on mere surmises or probabilities (Northern Bengal Jute Mills Trading Co. Ltd. v. CIT (1968) 70 ITR 407 (Cal). The mere existence of reasons for suspicion would not tantamount to evidence (Cal. HC in Narayan Chandra Baidya v. CIT (1951) 20 ITR 287 (Cal.). The AO was not entitled to make pure guess and make the impugned assessment without reference to any evidence or any material at all. There must be something more than bare suspicion to support the same. The rule of Law on this subject has been fairly and rightly stated by the Lahore HC in Seth Gurmukh Singh v. CIT (1944) 12 ITR 393 (Lah.) [Dhakeshwari Cotton Mills Ltd. v. CIT (1954) 26 ITR 775, 782 (SC)]. It was observed by the SC in Dy. Commissioner ....
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....ther, we find that the ld.DR could not controvert the finding of CIT(A) that no corroborative material was found during the course of search or even thereafter to show that the figure mentioned in the diary was actual financial transaction. 15. Undoubtedly, there are certain legal presumptions enumerated in Section 132(4A) of the Act, which provides as under :- (4A) Where any books of account, other documents, money, bullion, jewellery or other valuable article or thing are or is found in the possession or control of any person in the course of a search, it may be presumed- (i) that such books of account, other documents, money, bullion, jewellery or other valuable article or thing belong or belongs to such person; (ii) that the contents of such books of account and other documents are true; and (iii) that the signature and every 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, execute....