TaxTMI 
TaxTMI 
2021 (11) TMI 308
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....is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by quashing the entire re-assessment proceedings, being illegal and without jurisdiction. 2. In the facts and circumstances of the case and in law, ld. CIT(A) has erred in confirming the action of the ld. AO in issuing notice u/s 148 of the Income Tax Act, 1961, without obtaining proper sanction u/s 151 of the Income Tax Act, 1961. Relief may please be granted by quashing the entire re-assessment proceedings, being illegal and without jurisdiction. 3. In the facts and circumstances of the case and in law, ld. AO has erred in reopening the assessment u/s 147 instead of section 153C of the Income Tax Act, 1961. The action of the ld. AO is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by quashing the reassessment proceedings being illegal and without jurisdiction." 3. In ITA No. 1298/JP/2019, the Revenue has taken the following grounds of appeal:- "1. Whether on the facts and in the circumstances of the case & in law, the Ld. CIT(A) has erred in deleting the addition of Rs. 25,00,00,000/- on account of cash loan in spite of the fac....
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....2 of the Act was carried out in the case of Ramesh Manihar Group which has been indulging in cash loan financing on a large scale. During the course of search, voluminous data comprising of excel sheets in 18 pen-drives were seized during the course of search action at the main office of the Ramesh Manihar Group at 303, Ratna Sagar, MSB Kaa Rasta, Johari Bazar, Jaipur which included details of cash loans financed by the Ramesh Manihar Group. It was found that the persons of the said group namely Sh. Ramesh Chand Maheshwari and Sh. Manmohan Krishan Bagla were engaged as finance brokers for arranging cash loans between various borrowers and lenders which were not reflected in the books of accounts and that the brokerage received for such unrecorded cash transactions was also not offered for taxation by the Group. It has also been found that the figures in the aforesaid data were suppressed by five zeroes. The Assessing Officer thereafter has listed down certain details of the transactions stating that the same relates to the assessee and from the perusal of the information, it is found that the assessee has paid cash loan of Rs. 25 crores out of his income from undisclosed sources in....
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.... the assessee that the Assessing Officer may point out specific portions of the statements of Sh. Ramesh Chand Maheshwari, on the basis of which he concluded the involvement of assessee in providing cash loans and for which the case of assessee was reopened. It was further submitted that where the Assessing Officer wishes to rely on the statement of Sh. Ramesh Chand Maheshwari, the assessee may be allowed an opportunity to cross examine him and in absence of such cross examination, such statements/documents cannot be used against the assessee in any manner whatsoever. 8. The reply so furnished by the assessee was examined by the Assessing Officer and as per the Assessing Officer, reply of the assessee is of routine nature having no evidence to contradict the information available with the Revenue and duly incorporated in the reasons for reopening of the case and the assessee has failed to substantiate the onus cast upon him about the impugned transactions of Rs. 25 crores where the assessee has provided cash loans through Ramesh Manihar Group to various parties. 9. The Assessing Officer thereafter stated that during the course of search as well as in post search proceedings, stat....
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....bsequent statement dated 08.11.2017 recorded u/s 131 of the Act and reproduced certain questions and replies so submitted by him. The Assessing Officer further stated that after search operations, Ramesh Manihar Group and its associates have filed their application before the the Income Tax Settlement Commission. In their application filed before the Settlement Commission, they have surrendered the income so earned as commission on account of these un-recorded or unaccounted transactions and due taxes has also been paid. The Assessing Officer basis the said application filed by the Ramesh Manihar Group stated that it can clearly be deduced that the assessee also made transactions regarding lending its unaccounted money through said group and advanced the same out of books to earn interest income which was also not recorded in the books of accounts. 11. Regarding assessee request to provide cross examination of these persons whose statements were recorded and relied upon, the Assessing Officer stated that the right of cross examination is not an absolute right and depends upon facts and circumstances of the each case and in the instant case, the assessee has been allowed ample oppo....
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....ng such addition, the ld. CIT(A) firstly referred to the statement of Sh. Ramesh Chand Maheshwari recorded during the course of search at his premises on 07.01.2016 and stated that though the Assessing Officer has produced certain questions and answers of the said statement in the assessment order, however, neither during the course of search by the Investigation wing nor during assessment proceedings by the Assessing Officer, any question was put to Sh. Maheshwari as to what 'PCK' stand for and against the name 'PCK', no address or telephone number is found to have been recorded. The ld CIT(A) stated that in what circumstances and on what basis or evidence the name 'PCK' is inferred as to the appellant herein is not forthcoming. The name of appellant is appearing only in the records maintained under the filename 'Ankoot' which was stated to be for the purpose of sending invitation card as per answer to question No. 31 of the above referred statement. The ld CIT(A) further stated that on perusal of extracted statement in the assessment order or in the entire statement of Sh. Ramesh Chandra Maheshwari, he do not find any answer which suggested the appellant herein is found to have a....
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....en there is no finding that such entries are in fact pertaining to such third person only which should be emanating from the entries itself or from the person who has recorded such entry, no cognizance can be taken so as to fasten tax liability on such third person. 16. The ld. CIT(A) further referred to the observations of the Assessing Officer regarding application filed by the Ramesh Manihar Group before the Settlement Commission and stated that it is not understood as to how an income admitted by one person will bind other person in absence of any nexus between the person admitting and other person. Neither the Investigation wing during search proceedings nor Assessing Officer during the assessment proceedings have put any question as to what 'PCK' stand for nor is it discernible from the seized record any reference to the appellant herein against the entries stated to be of Rs. 25 crores. Further, referring to the decisions of Hon'ble Supreme Court in case of Kishinchand Chellaram reported in 125 ITR 713 and Andaman Timber Industries (dated 2 September, 2015 in Civil Appeal No. 4228 of 2006), the ld CIT(A) stated that it is a trite law when the statement of a person is to be ....
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....see who has advanced the money in cash through Ramesh Manihar Group and figures mentioned in the table were suppressed by 'five zeroes'. It was further submitted that the identity of the persons alleged to have received loans from the assessee was also not established and proceedings, if any, initiated against such persons for any contravention of the provisions of the Income Tax Act, 1961 were not disclosed. It was submitted that the Assessing Officer did not corroborate the information received from the DCIT, Central Circle-03, Jaipur and did not mitigate the risk of any lapse/disconnect in the information so provided. It was submitted that the Assessing Officer relied upon extracts of certain excel sheets, however, no steps were taken to mitigate any risk of the Electronic Records having been tempered in terms of section 65A, 65B of Evidence Act, 1872. It was submitted that even the screenshot of excel sheet provided to the assessee, relied upon by the Assessing Officer was taken on 22.10.2018, after recording the reasons for reopening the case. It was accordingly submitted that the AO reopened the case of the assessee on account of borrowed satisfaction and without any tangible....
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....o section 147 as well, reopening is bad in law. It was further submitted that as thorough scrutiny was done in the course of original assessment proceedings pursuant to search and materials seized during search, present proceedings are nothing but a clear case of change of opinion and in support, reliance was placed on the Hon'ble Supreme Court decision in case of CIT vs. Kelvinator of India Ltd. 320 ITR 561 (SC). 22. It was further submitted that the Assessing Officer vide letter dated 19.07.2018 has not supplied copy of reason actually recorded by Assessing Officer. From the extract of the reasons supplied, it is not possible to ascertain the date on which reasons were actually recorded. Further it is not clear whether compliance of first proviso to section 147 and other aspects of section 147 were recorded in the reasons actually recorded by Assessing Officer. It is also not clear whether the reasons actually recorded demonstrated independent application of mind by AO to the information received by him. Hence, great prejudice is caused to the assessee on account of non-receipt of actual recorded reasons and in support, reliance was placed on Co-ordinate Benches decision in case....
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....s 148 of the Act. 25. In support, reliance was placed by the ld PCIT/DR on the decision of Hon'ble Rajasthan High Court in case of Ankit Agrochem (P.) Ltd vs. Joint Commissioner of Income-tax, Range-1, Bikaner [2018] 89 taxmann.com 45 (Raj), the decisions of the Hon'ble Gujarat High Court in case of Peass Industrial Engineers (P.) Ltd. vs. Deputy Commissioner of Income-tax [2016] 72 taxmann.com 302 (Guj), HVK International (P) Ltd. vs. Deputy Commissioner of Income-tax, Central Circle-3 [2016] 72 taxmann.com 208 (Guj), and Ankit Financial Services Ltd. vs. Deputy Commissioner of Incometax, Circle 1(1)(2) [2017] 78 taxmann.com 58 (Guj), the decision of Hon'ble Mumbai High Court in case of Bright Star Syntex (P.) Ltd. vs. Income-tax Officer 9(2)(1) [2016] 71 taxmann.com 64 (Bom), the decision of the Hon'ble Delhi High Court in case of Principal Commissioner of Income-tax-7 vs. Paramount Communication (P.) Ltd [2017] 79 taxmann.com 409 (Del). 26. It was further submitted by ld PCIT/D/R that there is no doubt and it's a factual position as emanating from the assessment records that the reassessment proceedings were initiated based on the information/documentation received from DCIT, ....
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....34 (SC). 28. We have heard the rival contentions and purused the material available on record. Both the parties have relied upon a number of decisions rendered by the Hon'ble Supreme Court and by various Hon'ble High Courts regarding conditions precedent for assumption of jurisdiction by the Assessing officer u/s 147 of the Act. We have gone through these decisions as well as other authorities on the subject, and we find that in these decisions, the Courts have laid down certain cardinal tests which need to be fulfilled for assumption of jurisdiction u/s 147 and have reiterated the same from time to time considering the facts and circumstances of the particular case. These cardinal tests provide that before assuming jurisdiction u/s 147, the Assessing Officer must form a prima facie opinion on the basis of material/information in his possession that there is an escapement of income, the opinion formed may be subjective but the reasons recorded or the information available on record must show that the opinion is not a mere suspicion, the documents/material/information available on record must be tangible, specific and not vague and must be evident from reading of the reasons showin....
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....ce u/s 148 of the Act. In the reasons so recorded, the Assessing Officer refers to the information received from the office of DCIT, Central Circle-03, Jaipur pursuant to search and seizure action carried out in case of Ramesh Manihar Group u/s 132 of the Act and the same read as under:- "2. Brief details of information collected/received by the A.O: Information has been received from the office of DCIT, Central Circle-3, Jaipur that search & seizure action u/s 132 of the IT Act, 1961 was carried out in the case of Ramesh Manihar Group on 07.01.2016. The group has been indulging in cash loan financing on a large scale. During the course of search, voluminous data comprising of excel sheets in the 18 pen-drives seized during the course of search action at the main office of the Ramesh Manihar Group at 303. Ratna Sagar, MSB Kaa Rasta, Johari Bazar, Jaipur, which consisted details of cash loans financed by the Ramesh Manihar Group was found. It was found that the persons of the Ramesh Manihar group, being Shri Ramesh Chand Maheshwari and Shri Manmohan Krishan Bagla were engaged as finance brokers for arranging cash loans between various borrowers and lenders which were not reflected....
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....hat the assessee has paid the loan amount of Rs. 25 crores out of his income from undisclosed sources and has failed to disclose fully and truly all material facts necessary for determination of income and therefore, he has reason to believe that income of Rs. 25 crores and interest received thereon has escaped assessment within the meaning of section 147 of the Act. 32. It is therefore manifest from the reasons so recorded by the Assessing Officer that he has basically relied upon the information received from the DCIT Central Circle -3, Jaipur and enquiries conducted by the Investigation wing. Further, given that the original assessment has been completed u/s 143(3) and more than four years have elapsed from the end of the impugned assessment and proviso to section 147 applies, with a view to satisfy the additional condition that there should be failure or omission on the part of the assessee in disclosing full and true material facts, he has considered the assessee's assessment records and thereafter, has concluded that there was no necessity to make further inquiries as the information available on record is self-sufficient. 33. The question that arises for consideration is w....
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....ransactions are related to the assessee and how the figures so depicted represent and add up to a figure of Rs. 25 crores in cash are again not discernable even from close reading of the said data. Therefore, in our considered view, the said data per se cannot constitute tangible material in possession of the Assessing officer unless the same is analysed and examined thoroughly and necessary linkage is established with the assessee. In this regard, useful reference can be drawn to the decision of the Hon'ble Supreme Court in case of ITO vs Lakhmani Mewal Das reported in 103 ITR 437 wherein the Hon'ble Supreme Court has laid down the following legal proposition (pg 448): " As stated earlier, the reasons for the formation of the belief must have a rational connection with or relevant bearing on the formation of the belief. Rational connection postulates that there must be a direct nexus or live link between the material coming to the notice of the Income-tax Officer and the formation of his belief that there has been escapement of the income of the assessee from assessment in the particular year because of his failure to disclose fully and truly all material facts. It is no doubt t....
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....e not in error in holding that the said material could not have led to the formation of the belief that the said material could not have led to the formation of the belief that the income of the assessee-respondent had escaped assessment because of his failure or omission to disclose fully and truly all material facts. We would, therefore, uphold the view of the majority and dismiss the appeal with costs." 35. In the reasons so recorded, the Assessing officer has further stated that detailed enquiries have been conducted by the Investigation Wing and it has been found that these transactions pertains to the assessee where the assessee has paid cash loans to various persons through Ramesh Manihar Group during the year under consideration. Here, the question is not about the reliance placed by the Assessing officer on the enquiry conducted by the Investigation Wing which the Assessing officer is well within his jurisdiction to place reliance upon but the question is how the Investigation wing has arrived at the finding that the data so found pertains to the assessee only and the transactions relates to cash loans provided by the assessee through Ramesh Manihar Group and whether the ....
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....Wing of the Revenue. This information is in the form of details of the amount of credit received, the payer, the payee, their respective banks, and the cheque number. This information by itself cannot be said to be tangible material. 20. Coming to the second part, this tells us what the AO did with the information so received. He says: "The information so received has been gone through." One would have expected him to point out what he found when he went through the information. In other words, what in such information led him to form the belief that income escaped assessment. But this is absent. He straightaway records the conclusion that "the abovesaid instruments are in the nature of accommodation entry which the Assessee had taken after paying unaccounted cash to the accommodation entry given (sic giver)". The AO adds that the said accommodation was "a known entry operator" the source being "the report of the Investigation Wing". 21. The third and last part contains the conclusion drawn by the AO that in view of these facts, "the alleged transaction is not the bonafide one. Therefore, I have reason to be believe that an income of Rs. 5,00,000 has escaped assessment in the A....
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.... it was not necessary for the AO to show that there was any failure to disclose fully or truly all material facts necessary for the assessment. 26. The first part of Section 147 (1) of the Act requires the AO to have "reasons to believe" that any income chargeable to tax has escaped assessment. It is thus formation of reason to believe that is subject matter of examination. The AO being a quasi judicial authority is expected to arrive at a subjective satisfaction independently on an objective criteria. While the report of the Investigation Wing might constitute the material on the basis of which he forms the reasons to believe the process of arriving at such satisfaction cannot be a mere repetition of the report of investigation. The recording of reasons to believe and not reasons to suspect is the pre- condition to the assumption of jurisdiction under Section 147 of the Act. The reasons to believe must demonstrate link between the tangible material and the formation of the belief or the reason to believe that income has escaped assessment." "36. In the present case, as already noticed, the reasons to believe contain not the reasons but the conclusions of the AO one after the o....
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....ons through Ramesh Manihar Group and since the same has not been reflected in the loans and advances account in his balance sheet and no cash book has been produced in the original assessment proceedings, there is a failure on part of the assessee to disclose fully and truly all material facts necessary for determination of income. In our view, in order to establish failure on part of the assessee to reflect the transactions in his books of accounts, firstly, it has to be prima facie established by the Revenue that the transactions infact pertains to the assessee and he has carried out these transactions of cash loans through Ramesh Maniar Group and he has reasons to believe that income has escaped assessment. Therefore, where the Revenue has not been able to establish, even prima facie, basis any tangible material that the transactions pertains to the assessee or the necessary nexus has been established with the assessee and formation of belief that income in the hands of the assessee has escaped assessment has no sound basis and foundation, as we have noted above, escapement of income cannot be linked merely on account of failure on part of the assessee to reflect truly and fully....
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....icer is satisfied that,- (a) any money, bullion, jewellery or other valuable article or thing, seized or requisitioned, belongs to; or (b) any books of account or documents, seized or requisitioned, pertains or pertain to, or any information contained therein, relates to, a person other than the person referred to in section 153A, then the books of account or documents or assets, seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against each such other person and issue notice and assess or reassess the income of the other person in accordance with the provisions of section 153A, if, that Assessing Officer is satisfied that the books of account or documents or assets seized or requisitioned have a bearing on the determination of the total income of such other person for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made and for the relevant assessment year or years referred to in sub-section (1) of section 153A" 39. On perusal of the aforesaid provisions, it is noted that firstly, th....
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....not constitute as tangible material, as we have noted earlier, and unless and until the said data and information is properly analysed and examined and necessary linkage and nexus established with the assessee, the same cannot form the basis for initiating action u/s 147 in hands of the assessee. It cannot be a case that since action could not be taken under section 153C, the Assessing officer is free to initiate action u/s 147 of the Act as the Courts have held from time to time that reopening of assessment proceedings is a potent power which cannot be casually and mechanically invoked and lightly exercised by the Assessing officer and the invocation of such powers is based on satisfaction of certain cardinal tests and principles as we have discussed above and which have not been fulfilled in the instant case. 41. In light of above discussions and following the decisions referred supra, we are of the considered view that in the peculiar facts and circumstances of the present case, the assumption of jurisdiction and initiation of the proceedings under Section 147 of the Act to reopen the assessment proceedings does not satisfy the requirement of law and is hereby set-aside. 42. I....
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....on of Ramesh Manihar revealed that these are related to Shri Prakash Chand Kothari (PCK). 45. It was further submitted by the ld PCIT/D/R that Sh. Ramesh Chand Maheshwari in his statement dated 07.01.2016 recorded on oath u/s 132(4) of the Act and his subsequent statement dated 08.11.2017 recorded u/s 131 of the Act has admitted that he was involved in cash loan financing transactions on a large scale. It was further submitted that Ramesh Manihar Group have filed their application before the Income Tax Settlement Commission and have surrendered the income so earned as commission on account of these unrecorded or unaccounted transactions and due taxes has also been paid. It was submitted that basis the said application filed and admission by the Ramesh Manihar Group, the Assessing officer has rightly stated that the assessee also made transactions regarding lending its unaccounted money through said group and advanced the same out of books of accounts to earn interest income which was also not recorded in the books of accounts. It was accordingly submitted that the excel sheet notings extracted from the Jagat. XIs from the PEN drive in possession of Sh. Ramesh Chand Maheshwari thus....
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....eciating the entirety of facts and circumstances of the case and considering various authorities on the subject including the decisions of the Hon'ble Supreme Court, the ld CIT(A) has passed a detailed, speaking and a well-reasoned order. The ld A/R accordingly supported the findings and the order of the ld CIT(A). 50. The ld A/R further submitted that the Assessing officer, on the basis of extracts of excel sheets and statements recorded during the course of search has failed to point out any basis of allegation of involvement of the assessee in providing cash loans. It was submitted that even identities of the persons alleged to have received cash loans from the assessee through Ramesh Manihar group was not established and thus, the second leg of the alleged transaction could not be proved. It was submitted that extensive search was conducted on 06.05.2010 on KGK Group of which assessee is a part and no unaccounted income, cash or hundis etc. were found. It was submitted that Ramesh Manihar nowhere in his statements stated the name of the assessee and even no opportunity of cross-examining Ramesh Manihar was provided to the assessee. 51. It was further submitted that various di....
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....nsactions were undertaken by him. 31 * Excel sheets were prepared and maintained by the receptionist for the purpose of sending invitation cards. * Such information had no link with the regular business carried out by RM. 54. It was submitted that in the extracts of the statement recorded u/s 131, as set out in the AO order at Pages 11 and 12, Ramesh Manihar has not specified the name of the assessee or any transaction done through him in cash. Even copy of such statements recorded, u/s 131 on 08.11.2017 was not provided to the assessee during the course of assessment proceedings. 55. It was further submitted that the ld. AO wrongly relied on the extracts of the excel sheet maintained by Ramesh Manihar Group and seized during search on 07.01.2016 for the reason that ld. AO did not comply with the provisions of section 65A and 65B of the Evidence Act, 1872 and no satisfaction recorded by AO that the output of the pen-drives/ computer records were analyzed on "as is" basis by the Department and there was no risk of being tempered by anyone. In support, reliance was placed on the decision of Hon'ble Supreme Court in the case of Anvar P.V. v. P.K. Basheer [2014] SSC Online SC 7....
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....ility of evidence by way of electronic record. The non-obstante language of Section 65B(1) makes it clear that when it comes to information contained in an electronic record, admissibility and proof thereof must follow the drill of Section 65B, which is a special provision in this behalf. Requirement under Section 65B(4) is not necessary if the original computer/laptop etc in which the data/information, relied upon, itself is produced and conditions under Sections 65B(2) and 65B(4) must be satisfied cumulatively. 59. It was further submitted that in case of K. Natwar Singh (ITA No. 3258,3290,4168/Del/2013) and Jagat Singh (ITA No. 3036, 3037, 3038 and 3039/Del/2015), having similar factual matrix, wherein pen-drives were seized from one Shri Chetan Gupta allegedly containing details of approx. 148 people, whose money and wealth, allegedly, was administered by the said Shri Chetan Gupta, additions were made in the case of persons, based on entries in such pen-drives/ computer records, however, such additions were deleted by the appellate authorities. Further, reliance was placed on the decision in case of DCIT vs Mahabir Prasad Gupta (ITA No. 713 & 714/DEL/2011 dated 23.11.2012) wh....
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....in the Pen-Drive alleged to be his, there were deposits received by him from the assessee. It was submitted that without examining the persons, who allegedly received loans, and without obtaining due confirmations from them, even the factum of investment is not proved. What would be the case of the Department, if the so-called alleged loan takers refuse to ever having received loan from the assessee? Without agreeing, if the loans given is not proved, what is the point in tracing and taxing the person who allegedly has given the loan. It was submitted that the present case is similar to a situation, wherein, an allegation is made on the assessee to have made investment in land, without even identifying specific piece of land, which has been allegedly purchased by the assessee. This situation can very well arise, wherein search is conducted by the Department, as in the present case, on some broker, dealing in land transactions. It was submitted that Hon'ble Gujarat High Court in the case of Ushakant Patel (2006) 282 ITR 553 (Guj) has held that the burden of proof that the investment in the asset not recorded in the books of account is on the revenue. 62. It was submitted that unsub....
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....t being earned by the assessee. 66. It was accordingly submitted that the ld CIT(A) has rightly accepted the contentions of the assessee and deleted the additions holding that Ramesh Manihar was never confronted by the ld. AO or the Investigation Wing as to what "PCK" stands for, against the name "PCK', no address or telephone number is found to have been recorded, no evidence or basis to suggest "PCK" was no one else but the assessee, no evidence to suggest that assessee had advanced loans in cash through Ramesh Manihar, evidences as relied upon by ld. AO do not relate to the assessee, in the statements recorded of Ramesh Manihar, there is no reference to "PCK" being considered as "Prakash Chand Kothari", during the assessment proceedings, ld. AO could not point out any specific portion of the statement of Ramesh Manihar which could suggest involvement of the assessee in providing cash loans, in case of uncorroborated entries kept by third party, no tax liability can be fastened on the assessee and no case could thus be made out to prove that the entries found during the search on Ramesh Manihar Group relate to the assessee. The ld A/R accordingly supported the order and findings....
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....mined by the Assessing Officer and as per the Assessing Officer, reply of the assessee is of routine nature having no evidence to contradict the information available with the Revenue and duly incorporated in the reasons for reopening of the case and the assessee has failed to substantiate the onus cast upon him about the impugned transactions of Rs. 25 crores. During the course of hearing, there is reiteration on part of the ld PCIT/D/R that initial onus lies on the assessee which he has failed to satisfy and reliance has been placed on the findings of the Assessing officer in this regard. 70. The ld A/R in his submissions has however stated that the addition has been made by the Assessing officer by way of undisclosed investment in form of cash loans invoking the provisions of Section 69 and therefore, the burden lies on the Assessing officer to prove that the investment by way of cash loans has infact taken place and the amount so invested belongs to the assessee and the burden is on the Revenue to first prove the said allegations by leading positive evidence. In this regard, our reference was drawn to the provisions of Section 69 of the Act which reads as under: "Where in th....
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....nts so maintained by the assessee is not sufficient enough to discharge the initial burden cast on the Assessing officer. 72. In order to determine whether the onus cast on the Assessing officer has been satisfied or not and basis of his findings, we refer to the information and other material/documentation available with the Assessing officer prior to initiation of the reassessment proceedings as well as analysis/examination thereof during the course of reassessment proceedings and besides, other information/documentation relied upon by the Assessing officer during the course of reassessment proceedings to arrive at his findings and which forms the basis of subject addition of undisclosed investment in the impugned order. These include information received from DCIT Central Circle-3 Jaipur prior to recording of reasons and issuance of notice u/s 148, copy of extracts of excel sheets/data found in 18 pen drives during the course of search u/s 132 from the premises of Shri Ramesh Manihar and relevant to the assessee, copy of statement of Shri Ramesh Chand Maheshwari alias Shri Ramesh Manihar recorded during the course of search u/s 132(4) dated 7.01.2016, copy of statement of Shri ....
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....ngible and cogent material/evidence in possession of the Assessing officer unless the same is analysed and examined thoroughly and necessary linkage is established with the assessee. 74. Now, let's look at as to how the Assessing officer has examined and analysed the said data further during the course of reassessment proceedings. The Assessing officer has referred to and compared the aforesaid data with data found in other pen drives as well as statements of Ramesh Chand Maheshwari recorded u/s 132(4) during the course of search and post search proceedings u/s 131 of the Act given that the said data has been found in pen drives from the premises of Ramesh Manihar Group during the course of search. Apparently, the aforesaid data was found in pen drive "Jagat.xlsx" where name of lenders and borrowers were admittedly stated in code name or abbreviated form and it has been claimed by the Revenue that "PCK" stands for the assessee, Shri Prakash Chand Kothari. The said data was then compared with data in other pen drives namely "from and two group.xlsx", "copy of New Dir.xls", data in Ankoot file where name of Prakash Chand Kothari, KGK Jewellers, address and phone number has been stat....
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....s of contents of such data/information found in the pen drives can be drawn against the person in whose case the search has been authorized and from whose possession or control such pen drives have been found during the course of search. Therefore, in the instant case, the presumption lies against Ramesh Manihar Group, and not against the assessee. In such a case, the burden lies on the Assessing officer by leading corroborative evidence that the data/information so found in the pen drives relates to the cash loan transactions belongs to the assessee and the same have actually been undertaken by the assessee through Ramesh Manihar Group and the contents therein are found as correct and authentic and stand duly corroborated by independent evidences. 76. The assessee has also challenged the reliance on such extracts and print outs of the excel sheets stating that the AO has not complied with the provisions of section 65A and 65B of the Evidence Act, 1872 and no satisfaction has been recorded by the AO that the output of the pen drives/computer records were analysed on "as is" basis by the Department and there was no risk of the data being tempered by anyone and which has been relied....
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....RTGS has been undertaken on commission basis and in reply to question no. 15, he has stated that cash loan financing is done jointly with Manmohan Bagla in their private capacity and his companies/firms have no relationship with such cash loan transactions. In reply to question no. 16, he has further stated that whatever amount was given as cash loans was his's and Manmohan Bangla's own money which was given on interest and which on receipt, is further given on interest to various parties. Thereafter, in subsequent questions, he has explained since how long these cash loan transactions have been undertaken by them and how the accounts are maintained which has been stated by him to be maintained on computer, pen drives and slips which remains in his possession. Further, questions no. 30 and 31 were asked specifically about the pen drives and the data so found in the pen drives and we deem it appropriate to reproduce the same as under: 79. As noted above, in reply to Q. No. 30 & 31, he stated that all these transactions found in the pen drives are of similar nature and pertains to cash loan transactions. Further, regarding names in code word and names as found in various pen drives/....
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....orded under Section 132(4) of the Act. 80. Now, coming to the another statement of Shri Ramesh Chand Maheshwari recorded under Section 131 on 8.11.2017 which has been relied upon by the Assessing officer and we refer to response of Shri Ramesh Chand Maheshwari in response to various questions. We find that in this statement recorded u/s 131 on 8.11.2017, after a gap of almost 21 months from the earlier statement which was recorded u/s 132(4) on 27.01.2016, when Shri Ramesh Chand Maheshwari was confronted with his earlier response to question no. 15 in statement recorded u/s 132(4), there has been a change in his stand where he stated that cash loan financing is undertaken in their personal capacity where they acted as a mediator/facilitator. This is unlike his earlier statement where he had stated in response to question no. 15 that cash loan financing is done jointly with Manmohan Bagla in their personal capacity and in reply to question no. 16, he has stated that whatever amount was given as cash loans was his and Manmohan Bangla's own money which is given on interest and which on receipt, is again given on interest. We therefore find that there has been a change in stand of Shr....
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....ce placed by the Revenue on the latter statement recorded u/s 131, it is imperative that the assessee be allowed an opportunity to seek a copy of the said statement and file his objections and secondly and equally important, an opportunity to cross examine Shri Ramesh Chand Maheshwari which has been recognized time and time by the Courts as an important facet through which the principle of natural justice can be implemented and is duly supported by various authorities quoted at the Bar. In absence of such an opportunity, no reliance can be placed on such statement more so where in his statement, Shri Ramesh Chand Maheshwari did not categorically referred the name of the assessee or that the assessee provided cash loans through his Group to different persons. Therefore, the finding of the AO that data so found in the pen drives relates to cash loan financing by the assessee through Ramesh Chand Maheshwari stand corroborated by the statement of Shri Ramesh Chand Maheshwari recorded under Section 131 of the Act cannot be accepted. 83. Further, the ld AR has stated at the Bar that even before the settlement Commission, Shri Ramesh Chand Maheshwari has not given any names and identity ....
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....of the pen drive falls short of material facts and remain uncorroborated and mere admission of the amounts recorded in the pen drive as the additional income by Sh. Niranjan Hiranandani in his application before the Settlement Commission falling short of any such material which would inextricably evidence payment of "on money" by the assessee would not lead to drawing of adverse inference as regards the investment made by the assessee for purchase of the property under consideration and additions made by lower authorities were deleted and the relevant findings of the Coordinate Bench read as under: "14. We shall now take up the case of the assessee on merits and deliberate on the validity of the addition of Rs. 2.23 crore made by the A.O on the ground that the assessee had made a payment of "on money" for purchase of flats from M/s Lakeview developers. We have perused the facts of the case and the material available on record on the basis of which the addition of Rs. 2.23 crore had been made in the hands of the assessee. We have further deliberated on the material placed on record and the contentions of the ld. A.R to drive home his contention that no payment of any "on money" wa....
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....short of any such material which would inextricably evidence payment of "on money" by the assessee would not lead to drawing of adverse inferences as regards the investment made by the assessee for purchase of the property under consideration. We rather hold a strong conviction that the very fact that the consideration paid by the assessee for purchase of the property under consideration when pitted against the 'market value' fixed by the stamp valuation authority is found to be substantially high, further fortifies the veracity of the claim of the assessee that his investment made towards purchase of the property under consideration was well in order. We are of the considered view that though the material acted upon by the department for drawing of adverse inferences as regards payment of "on money" by the assessee formed a strong basis for doubting the investment made by the assessee for purchase of the property under consideration, but the same falling short of clinching material which would have irrefutably evidenced the said fact, thus, does not inspire much of confidence as regards the way they have been construed by the lower authorities for drawing of adverse infere....
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....mation from the recipients of the loan, the AO has not been able to establish even the identity of the persons alleged to have received loans from the assessee. There is shifting stand of Shri Ramesh Chand Maheshwari in his two statements recorded u/s 132(4) and u/s 131 of the Act. We find that in his latter statement recorded u/s 131, he has stated that cash loan financing is undertaken in their personal capacity where they acted as a mediator/facilitator. This is unlike his earlier statement u/s 132(4) where he had stated that cash loan financing is done jointly with Manmohan Bagla in their personal capacity and whatever amount was given as cash loans was his and Manmohan Bangla's own money which is given on interest and which on receipt, is again given on interest. We therefore find that there has been a change in stand of Shri Ramesh Chand Maheshwari where even in respect of cash loan financing, he has stated that he acts as a mediator and facilitator between the lenders and borrowers and thus earns commission income instead of interest income on amount advanced in their personal capacity as stated earlier. Even no question was even put to Shri Ramesh Chand Maheshwari as to wha....
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....re are no other corroborative evidence brought on record to prove the fact that the payment mentioned in the seized material was actually received by the assessee and relevant findings read as under: "8. We have heard rival contentions and perused the material available on record. Undisputedly, on the basis of a print out taken from the computer back-up of Ms. Sandhya Ramchandra, it was concluded by the Assessing Officer that the assessee has received an amount of Rs. 2,50,000 in cash for appearing as a host at an ICC event in Sidney. It is very much clear that apart from this document, there was no other evidence before the Assessing Officer to indicate that the assessee has received cash amount in question. It is a fact that in course of search as well as post search proceedings, the assessee was confronted with seized material and the assessee categorically stated to have neither appeared as a host in the said event nor received any cash from Matrix. In fact, an Affidavit was also filed on behalf of Matrix categorically stating that no such cash payment of Rs. 2,50,000 was made to the assessee. Thus, from the aforesaid facts, it is to be seen that the addition was made on the ....
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....of Rs. 10,06,43,054 comprises of two additions, one of Rs. 7,32,98,821 and the other of Rs. 2,73,44,233. The facts relating to both the additions are different and therefore both these additions need to be adjudicated at length. We observe that the addition of Rs. 7,32,98,821 has been made by the assessing officer on the basis of the screenshot of journal entry dt. 4-9-2007 taken from the tally data in the pen drive and the printout of the details of land which has been reproduced by the assessing officer on page Nos. 2 and 3 of the assessment order as table 1. Other than these two materials, there is no other basis for making addition, which is undisputed fact as per record also accepted by the learned Commissioner Departmental Representative. The assessing officer has made addition invoking section 69. As held inCIT v. Naresh Khattar (HUF) (supra) and CIT v. Dinesh Jain HUF (supra), the initial burden is on the Revenue to establish that there is any investment, which has not been recorded in books and in respect which the assessee is not able to give satisfactory explanation to the assessing officer. As rightly contended by learned Authorised Representative of the assessee, neith....
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....n in the partnership firm. Since, these journal entries have been relied upon by the assessing officer. Thus, it has remained undisputed that the lands were not purchased by the assessee but by the two persons as named in the journal entry. When the lands were not purchased by the assessee firm, any question of payment of "on money" does not arise in the case of assessee firm. As rightly contended by learned Authorised Representative of the assessee, that all the lands, except one, described in the assessment order on page Nos. 2 and 3, were purchased prior to formation of the assessee firm. We observe that in para 3 of the assessment order, the assessing officer has himself mentioned that the assessee firm was formed on 4-9-2007. As evident from different entries of land given in table 1 in the assessment order, the date of purchase in all the cases, except in one case, falls prior to 4-9-2007. In other words, the seized material itself shows that the lands were purchased prior to formation of the assessee firm, in this background also, we fail to see how any case can be made out of payment of "on money" by the assessee. There is yet another convincing reason that in all the three....
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.... be not justified, relying upon the decision of Hon'ble Supreme Court in the case of Smt. P.K. Noorjahan (supra). If we apply the ratio of aforesaid two decisions to the facts of the present case, we find that when the source of income/revenue for the assessee was missing in the sense that the business had not even started during all the three years and since during search, nothing was found to establish that the assessee had any undisclosed income from any other source, the discretion vested in the assessing officer should have been exercised in favour of the assessee and the addition should not have been made. We also observe that the assessing officer has not made any enquiry whatsoever from different vendors of the lands and not even from the two persons named in the journal entry, who, as per the journal entry, introduced their lands as capital contribution in the partnership firm. In absence of any enquiry whatsoever, no addition could have been made only on the basis of inference. It is a settled position of law that for making addition under section 69, there has to be some material establishing actual investment and therefore it is not justified to invoke the section merel....
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.... is also worth noting that there is no finding of fact recorded by the assessing officer about any unaccounted assets or unaccounted expenses or excess cash found during search. Considering all the facts, it comes out that apart from the printout in the form of chart, there is no other evidence in support of the addition made by assessing officer and the chart, by itself, does not constitute any material/evidence to establish unaccounted payment. As held by us earlier, for invoking section 69, the initial burden is on the Revenue to establish that any unaccounted investment was made by the assessee. This mandatory requirement of law is missing in the present case and so the addition is not justified. 8.2.1 It is seen that the details of the lands are contained in the printout obtained from the pen drive. When complete details were available with the assessing officer, the assessing officer could have conducted independent enquiry from the vendors, which also does not appear to have been done. On the contrary, the assessee submitted affidavit of two vendors before the assessing officer and the assessing officer did not even cross-examine them to verify the facts. In absence of any....
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.... in case of Mahabir Prasad Gupta (supra), the matter came up before the Coordinate Delhi Benches of the Tribunal. In this case, during the course of search at the premises of Brij Mohan Gupta, a diary containing entries in coded language was found and basis the said entries, the Assessing officer has held that the assessee has advanced loan of certain sum through Shri Brij Mohan Gupta and addition was made under section 69 as undisclosed investment. The Coordinate Bench held that the Revenue could not establish that name of the person recorded in the diary as 'MPG' meant Mahabir Prasad Gupta only i.e. assessee and following its earlier decision in case of Atul Gupta having similar fact patten, deleted the addition and relevant findings of the Coordinate Bench read as under: "7. We have heard the rival contentions and gone through the record carefully. We find that similar issue was considered by the ITAT in a number of cases. The findings recoded in the case of Atul Gupta read as under: "16. We have duly considered the rival contentions and gone through the record carefully. The issue for our adjudication is whether the narration found in the diary of Shri Brij Mohan Gu....
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....iary of Shri Brij Mohan Gupta where names of persons were recorded in coded words e.f. 'HD' means Hamamm Dass, R.K. means Ram Kumar. The revenue could not establish that 'MPG' means Mahabir Prasad Gupta only i.e. 'assessee'. The revenue has not placed on record statements of Shri Brij Mohan Gupta or Ram Avtar Singal or Rajiv Gupta before us. Therefore, in our opinion, the issue in dispute is squarely covered in favour of the assessee by the orders of the ITAT passed in the case of other persons i.e. Ashok Prasad Gupta, Atul Gupta, Dev Dutt Prasad etc. 9. On due consideration of all these material, we do not find any merit in this appeal. It is dismissed." 89. In light of aforesaid discussions and following the decisions cited supra, we are of the considered view that in the peculiar facts and circumstances of the case present case, there is no basis for making the addition in the hands of the assessee of Rs. 25,00,00,000/- made on account of cash loans and consequent interest charged thereon amounting to Rs. 90,58,625/- and for the reasons cited supra, we affirm the findings of the ld CIT(A) deleting the said additions. We make it clear that our findings ....
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....d assessed income was determined at Rs. 27,01,45,250/-. It was submitted that there was no discussion in the assessment order as well as no addition was made by the Assessing Officer while passing the order u/s 147 read with section 143(3) in respect of Long Term Capital Gain amounting to Rs. 50,05,578/- and only addition was in relation to alleged cash loans and alleged interest income of Rs. 25,90,58,625/-. It was submitted that in the Income Tax Computation Form attached with the assessment order, the Assessing Officer had inadvertently included a figure of Rs. 50,05,578/- towards Long Term Capital Gains and which was also brought to tax in the hands of the assessee. It was further submitted that assessee took specific ground of appeal before the ld. CIT(A) and the said ground of appeal was initially not adjudicated upon by the ld CIT(A). Subsequently, the Revenue moved an application u/s 154 before the ld. CIT(A) and the ld. CIT(A) has passed the impugned rectification order u/s 154 wherein the ground of appeal has been dismissed. It was submitted that against the said findings and order of the ld. CIT(A), the assessee has filed the present appeal before the Tribunal and given ....