TaxTMI 
TaxTMI 
2018 (10) TMI 1857
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....ithout appreciating the facts of the case." (2) "On the facts and in the circumstances of the case and in law, the Ld CIT(A) erred in deleting the addition of Rs. 16,12,0751- made by the AO as unproved expenditure and sustaining only 20% of the said expenditure u/s 40A(2)(b) without appreciating that the assessee failed to prove the genuineness and true nature of the expenditure allegedly made as reimbursement and that the disallowance should have been sustained in toto even though the section u/s 40A(2)(b) was wrongly mentioned by mistake." (3) "On the facts and in the circumstances of the case and in law, the Ld. CIT (A) erred in deleting the addition of Rs. 2,66,362/- made on account of the party in versions of the account of the party as in the books of the assessee and as furnished by the assessee u/s 133(6), on the basis of the additional evidence produced by the assessee without remanding the issue to the AO." (4) "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in restricting the disallowance of bogus purchases of Rs. 7,09,387/-, without appreciating the facts of the case". (5) "On the facts and in the c....
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....ded. A statement on oath was recorded on 08-02-2013 wherein the assessee was specifically asked about these bogus purchases. In order to ascertain the genuineness of purchase transactions, notices u/s 133(6) were issued to the parties but same were returned with the remarks "Unclaimed". The AO asked the assessee to submit various details, i.e. details of purchases made from these patties, copies of bills raised by the parties, ledger accounts, documentary evidences such as transportation bills/delivery challans, stock register, details of payments made etc. In response, the assessee did not furnish any such bills/invoices allegedly issued by these panics. The A.O passed order u/s 143(3) dated 28.03.20 13 assessed the total income at Rs. 5,60,66,790/- after disallowing purchases of Rs. 1,02,83,056/- as bogus purchases, Rs. 4,82,289/- as service charges to sister concern, Rs. 16,12,0751- as reimbursement of expenses by M/s Pancharatna Plastics, Rs. 2,66,362/- as difference in purchases made from M/s Landscape Enterprises, Rs. 7,09,387/- from M/s Swastika Enterprises, Rs. 3,01 ,0581- towards interest paid on VAT, Rs. 65 lakhs from loose paper impounded during survey, Rs,3,77,000/- as ....
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....oss examination of these parties to the appellant. In a decision pronounced by Hon'ble ITAT, Mumbai on 1st October, 2013, in the case of Parmit Textiles vs. ITO (ITA Nos. 4012 to 4015 and 4020 to 4021/Mum/2012, the Hon'ble ITAT, Mumbai observed that there was no material on record to say that the purchases made by the assessee was bogus except the general statement recorded by the Department in the case of Shri Rakesh Kumar Gupta, which was later onretracted. The Hon'ble ITAT held that in absence of any adverse material brought on record, the addition made in the case of assessee will be based on presumptiononly and it cannot be sustained in the eyes of law. 6.4.3. In the case of Shri Rajeev G. Kalathil, ITAT Mumbai, 1TA Nos. 6727/MUM/2012, 06/MUM/2014, it is held as under: "We have heard the rival submissions and perused the material before us. We find that AO had made the addition as one of the suppliers was declared a hawala dealer by the VAT Department. We agree that it was a good starting point for making further investigation and take it to logical end. But, he left the job at initial point itself Suspicion of highest degree cannot take place of ....
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..... In such a situation, even assuming that the appellant would have purchased the goods by in the unaccounted cash, still it is undisputed that theSale proceeds of said goods have been duly accounted for in the books and offered to tax. Hence, the addition of entire purchase amount cannot be made in the present case. Rather, the cause ofjustice would be met by making addition of a reasonable percentage of such purchases in order to fulfill the gap of any revenue leakage in aforesaid circumstances. Following the Gujarat High Court in the cases of Commissioner of Income Tax-I Vs Simit P Sheth, 356 ITR 451 and M/s. Bholenath Poly Fab Pvt. Ltd. Vs AO, 355 ITR 290, in the present case, 1 confirm addition to the extent of 12.5% of the alleged purchases of Rs. 1,02,83,056/- from the impugned parties, i.e., Rs. 12,85,382/- The appellant gets balance relief of Rs. 89,97,674/- Therefore, this ground of appeal is partly allowed. After having gone through the facts of the present case and hearing the parties at length, we find that as per the facts of the present case, the major activity of the assessee is to develop, maintain and beutify gardens for Municipal Corporation of Greater Mu....
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....ses in order to fulfill the gap of any revenue leakage was applied. Thus, the additions were restricted @ 12.5% of the alleged purchases. No new facts or contrary judgments have been brought on record before us in order to controvert or rebut the findings so recorded by Ld. CIT(A). Therefore, there are no reasons for us to interfere into or deviate from the findings recorded by the Ld.CIT(A). Hence, we are of the considered view that the findings so recorded by the Ld. CIT (A) are judicious and are well reasoned. Resultantly, this ground raised by the revenue stands dismissed. Ground No. 2 7. This ground raised by the revenue is against challenging the order of Ld. CIT(A) in deleting the addition of Rs. 16,12,075/- made by the AO as unproved penalty and sustaining only 20% of the said expenditure u/s 40A(2)(b) of the Act. 8. We have heard counsels for both the parties at length and we have also perused the material placed on record, judgment cited by both the parties as well as the orders passed by revenue authorities. Before we decide the merits of the case, it is necessary to evaluate the orders passed by Ld. CIT(A). The Ld. CIT(A) has dealt with the above gr....
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....to specified person is disallowable. Taking all the factors into consideration including the disallowance of Rs. 4,82,289/- being amount paid to MIs. Pancharatna Plastics which is confirmed by me in paragraph no.7.4 of this appellate order; I hold that the cause of justice would be met by disallowing a reasonable percentage of this expenditure in order to fill in the gap of any revenue leakage in such circumstances. 1, therefore, confirm the addition to 20% of the alleged disallowance of Rs. 16,12,075/-, i.e. Rs. 3,22,4141-. The appellant gets the balance relief of Rs. 12,89,66 1 /-. This ground is partly allowed. After having gone through the aforementioned order and hearing the parties at length, we find that Ld. CIT(A) after correctly appreciating the facts of the present case had concluded that the assessee had made payments to M/s. Pancharatna Plastics. Even the auditors in their tax audit report had made an observation that the assessee had made payments to persons specified in section 40A(2)(b) of the Act, which prompted the AO to call for the information/details in relation to this expenditure. Although the assessee had furnished the details of expenditure, however the A....
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....10 of its order. The operative portion of the order of Ld. CIT(A) is contained in para no. 10.3 of its order and the same is reproduced below:- 10.3 I have considered the observation made by the AO for this disallowance. I have also considered the submissions made by the appellant. The appellant has on his part substantiated the details of purchases made by him from the said M/s. Landscape Developers and has also substantiated the payments made by cheques to the said M/s. Landscape Developers. The appellant has reconciled the figures of purchases and payments with this party and has arrived at negligible difference of Rs. 4,624/- as against the total purchase transaction of Rs. 43,25,579/-. I accept the contention of the appellant and delete the disallowance of Rs. 2,66,362/- made by the AO u/s 69. Therefore this ground of the appellant is allowed. After having gone through the aforementioned order and hearing the parties at length, we find that Ld. CIT(A) after correctly appreciating the facts of the present case had concluded that as per the facts, the assessee made purchases from M/s Landscape Enterprises and since, there was a discrepancy between the acc....
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....confirmation account copy of M/s. Swastik Enterprises could not be furnished before the AO at the time of assessment. I have considered the submissions made by the appellant before me. I have also verified the account copy and the confirmation copy. However, the fact cannot be denied that the notice issued under section 133(6) of the Act issued by the AO to M/s. Swastik Enterprises returned un-served. I therefore, following my observations in paragraph no. 6.4.5 of this appellate order, I confirm an addition to the extent of 12.5% of the alleged purchases of Rs. 7,71,180/- (as claimed by the appellant, and not Rs. 7,09,387/- as observed and disallowed by the AO). The addition to the extent of Rs. 96,398/- is confirmed and the appellant gets a relief of Rs. 6,12,989/- accordingly. Therefore, this ground of appeal is partly allowed. After having gone through the aforementioned order and hearing the parties at length, we find that Ld. CIT(A) after correctly appreciating the facts of the present case had concluded that initially the assessee failed to substantiate the transactions with the said M/s. Swastik Enterprises, however placed confirmation of M/s. Swastik Enterprises and als....
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....p, Apple. Mac Book belonging to the said Mr. Kevin Rajendra Shah was impounded from the possession of Mr. Kevin Rajendra Shah. The appellant's representative has argued that Mr. Kevin Rajendra Shah is in no way connected to the activities of the appellant and in-spite of his repeated requests the said laptop was impounded. A statement from Mr. Kevin Rajendra Shah was also recorded wherein he has admitted that the laptop belongs to him, configured by him and that he has no interest in any of the transactions being conducted by his elder brother Mr. Karan Rajendra Shah, the appellant herein. The appellant's representative strongly stressed to a point that the survey team exceeded the jurisdiction of conducting a survey at the residential premises of the appellant which is illegal and arbitrary and therefore all consequences and actions due to such illegal survey cannot be considered to fix the appellant for his lapses, if any. The appellant's representative also argued that the survey team has recorded a statement on oath from the appellant knowing pretty well that no such statement on oath can be recorded during survey as held by the Honorable Supreme Court in the ease o....
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....urt and referred to by the Honorable Bombay high Court in Sheratons Apparel Judgment as under : Further, the Supreme Court in the judgment delivered in the case of Ishwar Dass Jain v. SohanLal, AIR 2000 SC 426; 120001 I SCC 434 has observed as under (headnote) : "Under section 34 sanctity is attached in the law of evidence to books of account if the books are indeed 'account books', i.e., in original if they show, on their face, that they are kept in the 'regular course of business'. From the ratio of above judgment of Hon'ble Supreme Court as well as of the Hon'ble Bombay High Court, it is abundantly clear that mere mention of expenses in Mac-book found at the premises of the appellant's brother cannot be considered as books of account. Moreover, as against thousands of information/details are found in brother's Mae-book, mere mentioning of expenses in Mac-book of which not a single corresponding entry is appearing in the appellant's regular books of account cannot be considered for disallowance by the AO without any material or evidence on record. Further, from the ratio of above judgment of Hon'ble Supreme C....
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...., for maintain gardens. From the ratio of above judgment of Hon'ble Kerala High Court and that of Honorable Privy Council considered by the Kerala High Court which applies to appellant before me, the AO has disregarded appellant's own books of accounts which are regularly maintained and appellant is also regularly assessed to tax. it is also seen that the AO has just taken the printouts from the laptop Mac-book of one Mr. Kevin Rajendra Shah, the younger brother of the appellant who has nothing to do with the business activities of the appellant and has proceeded to make an add back to the appellant's returned income as Unexplained Expenditure U/s 69 of the Act. The income based on such guess work has no place in law and the same requires to be deleted. In view of the above, I delete the addition amounting to Rs. 3,39,65,7801- (Rs. 3,22,23,780+Rs. 13,65,00/- +Rs. 3,77,000/-). grounds no. 11th, 12th & 13th of the appeal are allowed accordingly. After having gone through the aforementioned order and hearing the parties at length, we find that Ld. CIT(A) after correctly appreciating the facts of the present case had concluded that during the survey at the resid....
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....overly relying upon the contention of the assessee regarding non-relevance of the incriminating documents with business of the assessee, and without subjecting his contention to proper examination." 17. The solitary ground raised by the revenue relates to challenging the order of Ld. CIT(A) in deleting the addition of Rs. 61,58,000/- made by the AO. 18. We have heard counsels for both the parties at length and we have also perused the material placed on record, judgment cited by both the parties as well as the orders passed by revenue authorities. Before we decide the merits of the case, it is necessary to evaluate the orders passed by Ld. CIT(A). The Ld. CIT(A) has dealt with the above grounds raised by the revenue in para no. 10 of its order. The operative portion of the order of Ld. CIT(A) is contained in para no. 10.6 to 10.8 of its order and the same is reproduced below:- 10.6 I have carefully considered the assessment order and the submission of the appellant. I find that the survey team has exceeded their jurisdiction by entering the residential premises of the appellant. The appellant stays in a joint family along with his parents and his younger bro....
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....ts on the basis of which an assumption of Income for Addition in appellant's hand can be made? b) Whether additions can be made on surmise, conjecture, assumption, presumption etc? In this regard, the Honorable Bombay High court in the case of Sheraton Apparels Vs. ACIT (2002) 256 ITR 20 has held in respect to addition made on the basis of mere mention of expenses: ......Now, turning to the facts of the cases in hand, private diaries may have been most regularly maintained, it may have been exhibiting record of the factual facts, contemporaneously made but they were never maintained for the purposes of the Income-tax Act to draw the source of income or for the computation of total income to offer income calculated there from for the purposes of taxation. Such books or diaries can hardly be designed or accepted as books of account for the purposes of Explanation 5 of section 271(1)(c) of the Act,..." What can be said to be actual and real books of accounts is considered by the Honorable Supreme Court and referred to by the Honorable Bombay high Court in Sheratons Apparel Judgment as under: Further, the Supreme Court in the judgment delivered i....
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....to take into consideration local knowledge and repute in regard to the asses.see's. circumstances, and his owr knowledge of previous returns by and assessments of the assessee, and all other matters which he thinks will assist him in arriving at a fair and proper estimate; and though there must necessarily be guess-work in the matter, it must be honest guess-work. The Judgement of Privy Council quoted by the Honorable Kerala High Court in St_ Theresa's case throws much needed light on the assessment on best of judgment and this applies to appellant before me. The AO has disregarded appellant's own books of accounts which are regularly maintained and appellant is also regularly assessed to tax. It is also seen that the AO has just taken the print-outs from the laptop Mac-book of one Mr. Kevin Rajendra Shah, the younger brother of the appellant who has nothing to do with the business activities of the appellant and has proceeded to make an addition to the appellant's returned income as Unexplained Expenditure u/s 69 of the Act. The income based on such guess work has no place in law and the same requires to be deleted. In view of the above I delete the additi....
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....03.2018 which relates to condonation of delay in filing appeal before ITAT. Ld. AR submitted that the present appeal could not be filed within time because of the reasons mentioned in detailed affidavit and thus there was a delay of 907 days in filing the present appeal. It was submitted that AO aggrieved by the order of Ld. CIT(A) had preferred an appeal before ITAT and the assessee while preparing written submission had realized that Ld. CIT(A) had erred in confirming addition of Rs. 65 lakhs which inadvertently went unnoticed due to multiple additions and deletions. It was further submitted that the present appeal had been filed during the pendency of the appeal filed by the AO wherein the order of the same CIT(A) had already been challenged, thus no prejudice would be caused to the revenue in case the delay is condoned, whereas a great prejudice would be caused to the assessee in case delay is not condoned. 21. On the other hand, Ld. DR requested for dismissal of the said application. 22. We have heard the counsels for both the parties on the application for seeking condonation of delay and while taking into consideration the contents of application filed by the assessee,....
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....f the contents of this page. Since the assesse has failed to do so, the amount of Rs. 65,00,000/- is treated as unexplained expenditure of the assessee u/s 69C of the Act, 1961. The same is added to the total income. It may be stated here that since there is no date mentioned on this document as to which financial year it relates, for taxation purpose, the same is taken as unexplained expenditure u/s 69C of the A. Y. 2010-11 i.e. the year under assessment." It was submitted that the AO had made additions on a loose paper without corroborating the same. This loose paper according to the assessee is not in the handwriting of the assessee and does not bear any signature. In this respect, on a specific question by the Survey Officer (question no. 69), the assessee had categorically denied having incurred any such expenditure and this being a dumb document, no data recorded therein has been corroborated by the assessing officer. The Ld. AR also stressed that the AO had made the above additions based on assumptions and presumptions. The AO justified in his order that "It may be stated here that since there is no date mentioned on this document as to which financial year it relat....
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.... 2986, 1927, 1907, 1928, 1929 & 1930/Mum/2011, 1842/Mum/2013 and 3378/Mum/2016 in para no. 33 to 38, which are reproduced below:- 33. In entirety of the matter, we are of the view that an addition in assessments carried out pursuant to search action u/s 132 of the Act has to be related to cogent and positive materials found during search which prove conclusively that the assessee has either earned an income or made an investment which has not been recorded in his regular books of account or that his case is covered under any of the deeming provisions contained in sections 68, 69, 69A to 69D of the Act. However, additions cannot be sustained merely on the basis of rough noting made on few loose sheets of papers unless the AO brings on record some independent and corroborative materials to prove irrefutably that the said noting reveal either unaccounted income or unaccounted investment or unaccounted expenditure of the assessee. As discussed above, in the instant case, assessments for the impugned years have been completed u/s 153A of the Act which relates to assessment in case of search or requisition. The prerequisite condition for application of Sec. 153A of the Act is a ....
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.... than one of those means, intended to be used or which may be used for the purpose of recording that matter. The word "document" has also been similarly defined in the General Clauses Act. The meaning of the word "describe ................ According to the Hon'ble Supreme Court in the case of Ramji Dayawala & Sons (P) Ltd. vs. Invert Import AIR 1981 SC 2085, mere proof of the handwriting of a document would not tantamount to a proof of all the contents or facts stated in the documents, if the truth of the facts stated in a document is in issue, mere proof of the handwriting and execution of the document would not furnish evidence of the truth of the fact or contents of the document. The truth or otherwise of the fact or contents so stated would have to be proved by admissible evidence i.e., by the evidence of those persons who can vouchsafe for the truth of the facts in Issue. 6.5 Further, the Hon'ble Supreme Court in the case of Mohd. Yusuf& Anr. Vs. D. & Anr. AIR 1968 Bom. 112 has observed that the evidence of the contents contained in document is hearsay evidence unless the writer thereof is examined before the Court. The Hon'ble Court, therefore, held that ....
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.... as per the provisions of section 132 (4A)(ii), when any document is seized pursuant to search it may be presumed that the contents of such documents are true. We have examined a copy of MOU filed before us in this appeal and we find that the same, is not signed either by the assessee or by any person for and on behalf of Naihati Jute Mills. No names whatsoever are also mentioned in the said MOU on the basis of which the Assessing Officer has made the addition of Rs. 4,93, 900. We entirely agree with the assessee's counsel that under section 132(4A) there is no presumption that if an unsigned paper or document is found during the course of search it has to be presumed that it is signed. We find in section 132(4A)(ii) that if there is signature on any document or account books recovered during the course of search then it has to be presumed that the signature and every other part of such account books 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. Needless to say that in law no document or paper ....
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....of the books of account or document are true the document must be a speaking one. In this case the slip, said to have been recovered by the revenue, does not contain any narration in respect of the various figures noted therein. The slip does not indicate whether the figures referred to quantities of money or to quantities of goods and whether one side, and if so, which side represents receipts and which side represents outgoings. This is, thus a dumb document and as the orders of the authorities below would show they have merely added the total of the right side of the slip without supplying the figures any language to indicate their meaning. In the case of such a dumb document, the provisions of Section 132(4A) do not permit any one to presume that the total of the figures of right side of the slip represents the assessee's income. The presumption at the most is attracted to the fig ures and a further presumption that they represent the income of the assessee Is not permissible under Section 132(4A). When a dumb document, like the present slip, is recovered and the revenue wants to make use of it, it is the duty of the revenue to collect necessary evidence which may provide a....
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....on record some independent and corroborative material to prove irrefutably that the said noting reveal either 'unaccounted income or unaccounted investment or unaccounted expenditure' of the assessee. The prerequisite condition for application of Sec. 153A of the Act is a search conducted under section 132 of the Act or any requisition made under section 132A of the Act to unearth 'hidden income or property'. Thus, the very purpose/ essence of search conduced u/s 132 of the Act is to unearth hidden income or property or get hold of books of account or documents which has not been or will not be otherwise produced by the assessee in regular course on issue of summons or notice. In the assessee's case, as stated above, the purported search action did not lead to discovery of any unaccounted money, bullion, jewellery or other valuable article or thing. Further, no books of account revealing any undisclosed transactions of the assessee were found during the course of search. The entire assessment order revolves around scribbling in loose sheet of paper seized from the premises. In the course of search action, said rough loose sheet of paper was seized which cannot be termed as '....
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....zed during search in light of the definition of the word "document" as given in the Indian Evidence Act and General Clauses Act and the truthfulness of the contents thereof in light of the aforesaid decisions of the Hon'ble Supreme Court we find that the said paper contains jottings of certain figures but the same does not describe or express the substance of any transaction and even if the said paper has been seized from the possession of the assessee the contents thereof are not capable of describing the transactions the way the AO has deciphered them without support of corroborative evidence of the parties attributed to the alleged transaction. The said paper, therefore, does not come within the compass of the definition of the word "document" to be used as any evidence. The paper seized, therefore, has no evidentiary value and accordingly the same cannot form the basis for assessing the undisclosed Income." In light of the aforesaid judgment, we are of the view that the impugned loose sheet of paper cannot come within the ambit of definition of the word "document" to be used as evidence and the same cannot form the basis for assessing the undisclosed income o....