TaxTMI 
TaxTMI 
TaxTMI 
2021 (11) TMI 96
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....ed by the assessee, the Assessing Officer made addition towards unexplained investment on the basis of loose sheets found during the course of search, which is as follows:- Assessment year Rs. 2008-09 - 25 lakhs 2009-10 - 25 lakhs 2010-11 - 3.20 crores 2011-12 - 3,28,50,000/-. 3. On appeal, CIT(A) confirmed the additions made by the AO. Against this, assessee is in appeal before us. First we will take up common ground raised in all these appeals. 4. The first common ground in all these appeals is with regard to framing of assessment without any incriminating material and issuance of notice u/s 153A without recording satisfaction. At the time of hearing, this ground is not pressed, hence the same is dismissed. ITA No.1375/Bang/2016 (Asst. Year 2008-09) 5. The ground in this appeal is with regard to making addition under section 69A of the Act, though there was no finding that the assessee was found to be the owner of the money, and by ignoring the case laws cited by the assessee. According to the assessee, the provisions of section 69A of the Act is not applicable but section 69 is applicable. Further, the AO not recorded any satisfaction as required under section 69A....
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....mar is a Telugu Distributor and he had approached for finance and I didn't finance. I have not dealt with him at all. 11.1 According to ld.AR, the amount mentioned @ Rs. 25 on 2/4. There was no figure of Rs. 25 lakh, for date 2nd April 2007. The ld.AO interpreted 25 as Rs. 25 lakhs and 2/4 as 2/4/2007, so as to bring it to tax in the finance year 2007-08 relevant to assessment year 2008-09, which he cannot do so without any supporting material to suggest that assessee advanced sum of rupees 25 lakhs to Shri Vijayakumar on 2/4/07. This is only on the basis of imagination and addition was made without any supporting document. 14. The ld.DR submitted that the assessee has not satisfactorily explained the reason for making entries in the loose sheet and actually it is out of the books of account. The assessee advanced money and the same was brought to tax. Further, it was submitted that the document was seized from the possession of the assessee and he did not deny the said document, hence the AO presumed that the amount shown in documents which has not reflected in the accounts made by assessee was his income by way of unexplained investment. He relied on the order of the CIT(A)....
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....the present case, the seized material did not contain the name of the assessee or signature of any person, they are merely unsubstantiated loose sheet as held by Tribunal in the case of ACIT Vs. Layers Exports Private Limited, 53 ITR (Trib) 416 (Mum), wherein, held that addition cannot be sustained merely on the basis of rough noting made in loose sheets, unless AO brings on records some independent and corroborative material to prove irrefutably that the said noting revealed unaccounted income or unaccounted investments or unaccounted expenditure of the assessee. The very purpose of search concluded under section 132 is to unearth the hidden income 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. For this purpose, we place reliance on the finding of the coordinate Bench in the case of Devraj Urs Educational Trust for Backward Classes in ITA No.500 to 506/Bang/2020 dated 16/8/2021 wherein held as under- "The contention of the ld. DR is that the department relied upon the statement of assessee's own employee, who need not cross-examine its own employee and there is no ....
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....ery 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 sheets of papers seized from premises of another person in course of search action on such other person. It is a fact that the said rough loose sheets of papers scribbled by some anonymous person and seized in course of search of another person cannot be termed as 'documents' having any evidentiary value within the meaning of section 132 or section 132A of the Act. Thus, the entire assessment u/s 153A of the Act in case of the assessee rests on shaky and incorrect foundation and thus deserves to be quashed. 17. The Tribunal in the case of Sri Y. Siddaiah Naidu, Tirupathi vs. Asst. Commissioner Of Income-Tax 2015 (2) TMI 403 - ITAT HYDERABAD held that it is very much clear that from such notings, it cannot be deduced whether they are receipt or payments nor it can be concluded whether they are in relation to any particular transaction as no names have been mentioned. In these circumstances, no addition can be made on the basis of such document. 19. ....
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.... Lal v. Ram Rakha the High Court, while negativing a contention that it having been proved that the books of account were regularly kept in the ordinary course of business and that, therefore, all entries therein should be considered to be relevant and to have been proved, said that the rule as laid down in Section 34 of the Act that entries in the books of account regularly kept in the course of business are relevant whenever they refer to a matter in which the Court has to enquire was subject to the salient proviso that such entries shall not alone be sufficient evidence to charge any person with liability. It is not, therefore, enough merely to prove that the books have been regularly kept in the course of business and the entries therein are correct. It is further incumbent upon the person relying upon those entries to prove that they were in accordance with facts. It is apparent from the aforesaid discussion that loose sheets of papers are wholly irrelevant as evidence being not admissible under Section 34 of Evidence Act so as to constitute evidence with respect to the transactions mentioned therein being of no evidentiary value. The entire prosecution based upon such entries....
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....puted the correctness of the statements and wanted to cross-examine, the Adjudicating Authority did not grant this opportunity to the assessee. It would be pertinent to note that in the impugned order passed by the Adjudicating Authority he has specifically mentioned that such an opportunity was sought by the assessee. However, no such opportunity was granted and the aforesaid plea is not even dealt with by the Adjudicating Authority. (para 6) Appellant had contested the truthfulness of the statements of these two witnesses and wanted to discredit their testimony for which purpose it wanted to avail the opportunity of cross-examination. That apart, the Adjudicating Authority simply relied upon the price-list as maintained at the depot to determine the price for the purpose of levy of excise duty. Whether the goods were, in fact, sold to the said dealers/witnesses at the price which is mentioned in the price-list itself could be the subject matter of cross-examination. Therefore, it was not for the Adjudicating Authority to presuppose as to what could be the subject matter of the cross-examination and make the remarks as mentioned above. (para 7) If the testimony of these two wi....
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.... not indicated upon what material it held that Rs. 30,000 should be treated as secret profit or profits from undisclosed sources and the order passed by it was bad. The assessee had furnished a reasonable explanation for the possession of the high denomination notes of the face value of Rs. 61,000 and there was no justification for having accepted it in part and discarded it in relation to a sum of Rs. 30,000. The High Court ought to have held that there were no materials to justify the assessment of Rs. 30,000 from out of the sum of Rs. 61,000, for income-tax and excess profits tax and business profits tax purposes, representing the value of the high denomination notes which were encashed." 26. Further the Hon'ble Supreme Court in the case of CIT v. Odeon Builders (P.) Ltd., 418 ITR 315 (SC) headnote is as follows:- "Section 37(1) of the Income-tax Act, 1961 - Business expenditure - Allowability of (Bogus purchase) - Certain portion of purchases made by assessee was disallowed - Commissioner (Appeals) found that entire disallowance was based on third party information gathered by Investigation Wing of Department, which had not been independently subjected to further verificat....
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....ny stage and no court can decide on which occasion he was truthful. If Shri Sukla is neutralised as a witness what remains is the accounts, vouchers, challans, bank accounts, etc. But, we would observe here that which way lies the truth in Shri Sukla's depositions, could have been revealed only if he was subjected to a cross-examination by the assessee. As a matter of fact, the right to cross-examine a witness adverse to the assessee is an indispensable right and the opportunity of such cross-examination is one of the cornerstones of natural justice. Here Shri Sukla is the witness of the Department. Therefore, the Department cannot cut short the process of taking oral evidence by merely having the examination-in-chief. It is the necessary requirement of the process of taking evidence that the examination-in-chief is followed by cross-examination and re-examination, if necessary. 9. It is not just a question of form or a question of giving an adverse party its privilege but a necessity of the process of testing the truth of oral evidence of a witness. Without the truth being tested no oral evidence can be admissible evidence and could not form the basis of any inference agains....
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.... Sukla as a witness against the adverse party, the assessee, is relied upon as truthful, still remains the question of estimation of the profit. The assessee no doubt has given a comparative instance of gross profit rate but it is also necessary for the Department to come to a finding as to the norm of the gross profit on the basis of comparative cases. Therefore, it is the duty of the Assessing Officer to counter the comparative statement cited by the assessee before he can have the option to estimate the gross profit. Again, it is the comparative instance that alone can be the foundation of such estimate in case the accounts are really found to be unreliable and requiring to be rejected. Therefore, in the interest of justice for both the parties, the assessee and the Revenue, it is necessary for us to direct the Tribunal to remand the case to the Assessing Officer for reconsidering the whole matter in the light of the observations made by us in the foregoing and redo the assessment accordingly. All opportunities should be given to the assessee in order to lead any evidence that the assessee may feel necessary to rebut the case against him. As a result we decline to answer the que....
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....elied upon is afforded; 2) some of the statements have been recorded under section 131 by the by the Revenue which cannot be relied upon without confronting to the same to the concerned parties subsequent to completion of search; 3) the seized material are in the form of various loose sheets, scribbling and jottings having no signature or authorization from the assessee's side. These are unsubstantiated documents and there is nothing to suggest any undisclosed assets of assessee found during the course of search. More so, search action not resulted in recovery of any undisclosed assets in the form of landed property, building, investments, money, bullion, jewellery or any kind of movable or immovable assets. 32. Accordingly, the addition made by the AO u/s 69A of the Act is deleted. ITA No.1376/Bang/2016 (asst. year 2009-10) 33. In this asst. year, the addition is made @ Rs. 25 lakhs on the basis of loose sheet u/s 69A of the Act wherein, the entry as follows in seized material A/BHB/11 25 Anand 25 in the seized material A/BHB/11 34. The ld.AR submitted that as per the loose sheet A/BHP/11, item 13 shows Anand Prasanna Theater and also date is not recorded in the loose sh....
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.... the addition made by AO of Rs. 15 lakhs is purely based on the assumption that amount of Rs. 10 lakhs was recorded in the books of account of the assessee and assumed that the balance has been paid by cash, which is also not stated by Shri Krishna Kumar. According to the AR there was no mention of date as such attributing this amount to the assessment year under consideration is not proper. Further, he submitted that as per typed statement in Sl.No.3, the AO considered Aptha Rakshaka @ Rs. 15 lakhs relating to the assessment year 2010-11 and Sl.No 17 Aptha Rakshaka (24) totaling Rs. 39, when both are added. But the loose sheet mentions only Rs. 25 lahks and Shri Krishna Kumar also mentioned as Rs. 25 lakhs paid to Basha vide letter dated 13/04/2011. But the AO added Rs. 15 lakhs only on assumption of assessee has received by cash. Hence, this addition to be deleted. Bhadra : 25 lakhs 40. The ld.AR submitted that there has no mention of this amount in the loose sheet. The AO observed that the assessee has given 45 lakhs to Shri N Kumar, the producer of the movie. In the ledger account filed during the course of search, it was observed that an amount of Rs. 20 lakhs was shown. Thu....
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....he person, hence, the same is to be deleted. Shanta Enterprises- Rs. 25 Lakhs 45. As per loose the amount mentioned by AO is item No.17-20 dated 04/01/2020. The AO has not produced any proof of the assessee having received the amount and also AO not sought any explanation from the assessee. The AO has made the addition on surmise and assumption. The argument of the AR that there is no foolproof evidence in this regard. Hence, the addition to be deleted. 46. We have heard both the parties and perused the materials on record. As discussed in earlier assessment year 2008-09 in ITA No.1375/Bang/016, the addition is deleted on similar line. 47. Now coming to the unexplained expenditure of Rs. 24.10 lakhs, the AO made addition on the basis of loose sheet marked as page-5 of seized material A/BE/6 shows as follows:- 48. According to AO, there was unexplained expenditure of Rs. 24.10 lakhs and same was brought to tax. 49. As discussed earlier, the addition is based on unsubstantiated loose sheets and on that basis addition cannot be made. Accordingly, the addition is deleted. Additional ground : ITA No.1377/Band/16 "The appellant having admitted u/s132(4) a sum of Rs. 3.03 crore a....
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....lakhs 54. As per loose sheet in entry No.4, Shankar Reddy Adduri - 10/1/1/ = 95.00. On the basis of this entry, the AO made addition of Rs. 60 lakhs. The AO also placed reliance on unsigned letter from KS Shankar to Bahara films seeking financial assistance of Rs. 25 lakhs of Kannada picture Adduri, which is made at page No.23. As per the ledger extract furnished by the assessee, the AO stated that the assessee has made the payment of Rs. 28 lakhs only by cheque and the assessee also mentioned in the ledger extract that he has advanced only Rs. 3.50 crores to the producer of Adduri, a sum much more than the amount mentioned in the seized document. As mentioned in assessment order page No.27, the AO linked the letter of CMR Production, wherein they have directed to pay 30 Lakhs directly to the assessee vide letter dated 22/03/2011. The AO overlooking the ledger extracts and without having any proof of cash transaction between Shankar Reddy and the assessee, made addition of Rs. 16 lakhs and same has to be deleted. Mass : Rs. 45 lakhs 55. As per item No.2 A.Ganesh Mass - 12/01/2011 - 65=00 as mentioned in the seized material. Vide letter dated 11/01/2011 written by A.Ganesh to the....