AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2019 (7) TMI 1497
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....has erred in :- 1. The Ld. CIT(A) has erred in deleting the addition made u/s 68 of Rs. 85, 31, 830/-, without appreciating the important fact that such addition was made on the basis of specific information of providing loan to the CHL Group which was revealed during search operation and opportunity of cross examination was also provided to the assessee. (vi) The appellant craves to leave, to add, or otherwise amend the above ground of appeal. 3. Briefly stated facts as culled out from the records are that the assessee is an individual. He derives income from interest on unsecured loans and brokerage and commission as finance broker. Return of income was filed on 30.7.10 u/s 139(1) of the Act declaring the same at Rs. 7, 35, 200/- which was processed u/s 143(1) of the Act. Search proceedings u/s 132 of the Act were conducted at the premises of CHL Hospital and its directors during F.Y. 2013-14. Investigation Wing seized a pen-drive from the residential premises of Accountant of CHL Hospital containing details of certain cash transactions including a noting relating to cash loan of Rs. 1.05 crores alleged to have been received from Mr. Mahesh Bansal (assessee) ....
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....ion of the AO. The entries found recorded in the pen-drive of the accountant of CHL Hospital, Indore was a guess work which cannot be made a basis to treat that the income of the assessee had escaped assessment specially when neither the appellant nor the accountant ever met and/or known to each other in last 20 years. The pen-drive belonged to Mr. Ashok Vaishnav, accountant of CHL Hospital hence the assessee was not supposed to explain entries relating to unsecured loan transaction in cash found recorded in said pen-drive of the accountant when he did not even know the directors of the Hospital. The AO independently recorded the statement of Mr. Ashok Vaishnav on 12.12.2017. (Page 9 to 12 of P.B) & thereafter statement of the assessee on 15.12.2017 (Page 13 & 14 of P.B). On cross examination, Shri Ashok Vaishnav categorically stated that he did not personally know the assessee and also agreed that assessee had never handed over the aforesaid sum of Rs.I05 lacs to him. On specific querry he stated that based on information from cashier of the Hospital, he had recorded the name of the assessee regarding receipt of money. (Page 15 to 17 of P.B). The AO did not make any enqui....
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....vedi Vs. ACIT (2018) 33 ITJ 565 (Inodre-Trib.) 7. Per contra Ld. Departmental Representative vehemently argued supporting the order of Ld. A.O submitting that the information was found during the course of search with the Accountant of CHL Group which is a sufficient material to make addition in the hands of the assessee. 8. We have heard rival contentions and perused the records placed before us. Revenue has challenged the finding of Ld. CIT(A) deleting the addition made u/s 68 of the Act at Rs. 85, 31, 830/-. This addition made by the Ld. A.O on the basis of the information contained in the pen drive seized from the premises of the Accountant of CHL group during the course of search conducted u/s 132 of the Act during the financial year 2013-14. In the seized pen drive there was a detail showing that the assessee Mr. Mahesh Bansal had given loan of Rs. 1, 05, 00, 000/- to CHL group and has also earned interest of Rs. 8, 31, 830/- during the financial year 2009-10. However there was no mention of the alleged loan in the balance sheet of the assessee nor interest income was shown of Rs. 8, 31, 830/-. It was contended by the assessee that he has no business connection with CHL....
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....untant of the third party and not even in the books of the third party. Such pen-drive cannot be considered to be appellant's account in the books of CHL Hospital hence he was not supposed to explain such entries. The AO did not collect any evidence from any source when the appellant denied the information received by the AO and did not make any independent enquiry from cashier of the Hospital or to any director of the company to verify aforesaid facts in relation to alleged receipt of money from the appellant. 4.2 The claim of the learned counsel for the appellant that the entries found recorded in the books of account of the third party or statement recorded under section 132(4) or 131 of the Act of a third party are binding upon so called third party only in his own case arid the same cannot be foisted upon the other parties in the absence of sufficient corroboratory material is found to be tenable. The appellant cannot be penalized for hand written entries in the diary maintained by 3rd party unless any evidence is found against him as held in following judgments: a) Addl. CIT Vs. Miss. Lata Mngeshkar (1974) 97 ITR 696 (Born.). b) Chiranji Lal Ste....
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....(d) Except the information found in the pen drive no other incriminating material was found during the course of search or any other source which could prove that the assessee has ever entered into any business transaction of financing to the CHL group. 10. Before moving further to adjudicate the facts before us, let us go through some judicial pronouncements dealing such type of issues. (i) In the case of K. P. Varghese Vs. ITO, (1981) 131 ITR 597 (S.C.)(supra), Hon'ble High court held that "Mere seizure of note books of documents at the personal residence of an employee would not conclude the issue against the employer company that the on money has been received by the employer company. The onus of proving the charging of on money lies on the Revenue". (ii) In the case of Addl. CIT Vs. Miss. Lata Mangeshkar (1974) 97 ITR 696 (Bom.)(supra), Hon'ble High Court held that the conclusion was reached by the Tribunal on a proper appreciation of evidence and observed as under:- "The evidence on which the income tax authorities relied were statements by two persons that they had paid money in "black" to the assessee and entries in books belonging to them rega....
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....see was Rs. 13 crores was not perverse". 11. Similar issue was also came up before the co-ordinate bench in the case of ITO v/s Pukhraj Soni vide ITA No.585/Ind/2015 order dated 21.09.2016 wherein also documents relating to transactions of Shri Pukhraj Soni with Shri Nilesh Ajmera were found at the residence premises of M/s. Phoenix Devcons Private Limited in the form of loose papers. The Tribunal set aside the finding of Ld. A.O holding that the inference of the A.O that the assessee has advanced the money is merely based on suspicion, surmises and conjectures and there was no material to support the connection. Relevant extract of the finding of the Tribunal is reproduced below; "8. We have considered the facts and materials available on record. On consideration of above facts and circumstances, we find that no search was carried out in the premises of Shri Pukhraj Soni and no loose paper / hundi / documents / promissory note/ cash book or cash flow statement were found or seized, which could prove the movement of cash to &fro between Shri Pukhraj Soni & Shri Nilesh Ajmera with respect to interest and loans. We find that the AO failed to bring on record any corroborat....
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....ITJ 197 (SC) (supra) held as follows; "6. The Tribunal has considered the aforesaid judgment while dismissing the appeal of the Revenue. The Apex Court in the case of Common Cause (A Registered Society) versus Union of India reported in (2017) 77 taxmann.com 245 (Hon'ble Supreme Court) 22, 24 and 27 has held as under:- "22. In case of Sahara, in addition we have the adjudication by the Income Tax Settlement Commission. The order has been placed on record along with I.A.No.4. The Settlement Commission has observed that the scrutiny of entries on loose papers, computer prints, hard disk, pen drives etc. have revealed that the transactions noted on documents were not genuine and have no evidentiary value and that details in these loose papers, computer print outs, hard disk and pen drive etc. do not comply with the requirement of the Indian Evidence Act and are not admissible evidence. It further observed that the department has no evidence to prove that entries in these loose papers and electronic data were kept regularly during the course of business of the concerned business house and the fact that these entries were fabricated, non-genuine was proved. It held....
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....eizure which are on loose papers are being made the basis to add income of this respondent. 9. Resultantly, in light of the Supreme Court judgments, referred above, no case for interference is made out with the order passed by the Tribunal. Moreover no substantial question of law arises in the present appeal, the appeal is dismissed" 13. The judgment of Hon'ble jurisdictional High Court mentioned above settles the issue that the additions cannot be made merely based on the basis of random sheets, loose papers, computer prints, hard disk and pen drive etc found from the third party without there being any nexus with other incriminating material establishing the live link of the assessee with the alleged transaction. In the instant case also the addition has been made only on the basis of pen drive seized from the third person i.e. Accountant of BHL group. Revenue authorities have failed to establish any connection either business or personal of the assessee with the Accountant or with the Directors of CHL group. No efforts were made by the revenue authorities to summon the Directors of CHL group. Assessee has denied to have entered into the alleged transaction through an....