TaxTMI 
TaxTMI 
2022 (2) TMI 318
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....as erred in deleting the addition of Rs. 25,00,000/- made by the Assessing Officer on account of unexplained unsecured loan." 2. On ground no.1, the facts as culled out from the records of Revenue Authorities are that during the course of search at office premises of the Signature Group at Chuna Bhatti Square, Pages 43-68 of LPS-72 ware seized. The AO during the course of assessment proceedings found that these papers are unsigned agreements/MoUs for purchase of lands at village Inayatpur and Kankariya by M/s Signature Colonisers from M/s Simara Realty and others. These papers shows payment of Rs. 90,00,000/- and Rs. 1,50,00,000/- by the assessee to M/s Simran Reality and others. Therefore, the AO vide questionnaire dated 12/01/2016 required the assessee to explain the impunged MOU/agreements. The assessee filed its reply and submitted that the impunged agreements were draft agreements which were not executed due to non-agreement between the parties on rates, time of payment etc. and draft agreement prepared only mentions the proposed advance payment and that any mention of such advance payment does not signify that payment was made and/or the agreement was executed. All the MOUs ....
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....ack by the assessee on account of cancellation of the said transaction. This submission is not relevant to the query raised as the query is raised in respect of cash payments made by the assessee to M/s Simran Reality and its partners as per the agreements. Once the assessee has agreed that the cheque payments mentioned in the agreement, which is also unsigned, are recorded in its books of accounts, it is a corroboratory evidence which proves beyond doubt that the cash payments mentioned in the agreements are also actually paid by the assessee, however the same are not recorded in the books of account of the assessee. (iv) Since the next payment of Rs. 1,00,00,000/- as per agreement seized at page no. 48 to 52 of LPS-72, is due on 30/11/2013 i.e. after 18/11/2012, the date of first payment of Rs. 50 Lacs and also before the dates of cheque payments i.e. 30/11/2013 and 02/12/2013, it is clear that the payment of Rs. 1,00,00,000/- has also been made by the assessee to M/s Simran Realty and its partners on 30/11/2013. This payment is also not recorded in the books of account of the assessee. (v) The agreement seized as per page no. 61 to 65 of LPS-72 shows the cash payment of Rs. ....
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....s of which are annexed herewith. 4. LPS 72 Page 48-52: is a second set of draft agreement which is not only unsigned but it also does not contain the name of the assessee or any of its related concerns in any capacity. It may also be mentioned that the assessee has never purchased the land mentioned in the said loose papers. 5. LPS 72 Page 53-54: is an unsigned and undated draft receipt which in absence of any signatures of the recipient is meaningless. 6. LPS 72 Page 55-58: is n draft agreement between Jawahar Kotwani & others with Signature Colonisers which has not been executed which is evident from the fact that they are unsigned. 7. LPS 72 Page 59-65: is an draft agreement for purchase of land comprised in loose papers earlier mentioned ( 3.424 acre in LPS 72 page 51, 0.59 & 0.18 acre in LPS 72Page 50) wherein the names of the sellers have been changed from the earlier draft. This fact categorically establishes that the papers under reference are draft agreements. In case your good self is not satisfied with the explanation of the assessee it is requested that summons may kindly be issued to the persons mentioned in the seized loose papers to get confirmation of the ....
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....ant case, the AO has presumed that since the other MOU were executed in AY 2014-15, the MOU under consideration is also executed in AY 2014-15. Cleary, addition has been made by AO on presumption and assumption basis. Ix M/s Simran Reality have made written submissions stating that they have received cheque payment of Rs. 60 lac only from the assessee. This submission is not acceptable since the agreement clearly shows receipt of cash amount. The appellant has contended that the agreements were never executed which are established by the fact that they are unsigned and is also confirmed by both the parties. The cheque issued as advance were issued prior to the preparation of Draft agreement and were subsequently refunded through banking channels as no consensus could be reached regarding the rates and other terms and conditions. The cheques were issued prior to the preparation of draft agreement and the advance amount has been returned by the beneficiary party. The agreement never materialized, therefore, the terms and condition mentioned therein cannot be used against the appellant in absence of any independent cogent evidence." 7. We find that the Ld. CIT(A) further noted th....
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....nd simply on guess work, presumption and suspicion, addition in this regard has been made. I agree with the contention of the appellant that the A.O. is not justified in making the addition simply on assumption and presumption basis. It would be pertinent to refer to the decision of Hon'ble Apex Court in the case of Umacharan Saha & Bros Co. v/s CIT 37 ITR 21 (SC) wherein it was held that suspicion, however, strong cannot take place of proof. It would be most pertinent to refer to the decision of Hon'ble Supreme court in the case of K P Varghese v/s ITO (1981) 131 ITR 597(SC)wherein it was held that assessee must be shown to have received more than what is disclosed by him as consideration. Burden of proof is on the department. Here the ratio of the above cited case is squarely applicable to the facts of this case, the AO is required to bring some tangible and positive material on record to prove that assessee has paid amount not recorded in books of accounts. Hon'ble Supreme Court in the case of Dhakeshwari Cotton Mills Ltd v/s CIT (1954) 26 ITR 775 (SC) has held that although strict rules of evidence Act do not apply to income tax proceedings, assessment cannot be made on the bas....
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....the proposed advance payment and any mention of such advance payment does not signify that payment was made and/or the agreement was executed. We find that the Ld. AO had referred various loose papers based on which the addition under consideration has been made. However, learned Counsel for the assessee submitted that all the papers were unsigned and ld. CIT(A) held allowed the assessee's appeals holding that the unsigned agreements never materialised and therefore, the terms and conditions therein cannot be used against the assessee sin absence any independent cogent evidence. We find that neither any of the persons has ever stated that such transaction actually took place. The entire addition has been made on sheer presumption and assumption. The A.O. failed to establish whether the transaction has actually materialised. M/s Simran Reality has stated that the MOU's are draft and did not materialise. The A.O. has failed to bring on record any cogent evidence or direct access of payment by the assessee. Thus, we are of the view that the "dumb document" cannot be used as an evidence to draw an adverse inference against the assessee. Our view is supported by the following judicial p....
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....absence of any other evidence found during the course of search or brought on record by the AO to show that the said expenditure was actually incurred by the assessee, the same cannot be added to the undisclosed income of the assessee by invoking the provisions of s. 69C-Assessee explained that the said entries represented estimates made by its employees in respect of proposed expenditure-There is no evidence on record to rebut/controvert the said explanation- Additions not sustainable CIT Vs. S M Agarwal (2007) 293 ITR 43 (Del) - Held that - "In this case the department seized documents "Annexure A-28 p. 15, - gives the details of certain handwritten monetary transactions which shows that the assessee had given a loan of Rs. 22.5 lacs on interest and earned interest income of Rs. 3.55 lacs on it. The Tribunal hold this document as dumb document. The relevant findings of the Tribunal as mentioned in the above order is as under:- "We have ourselves examined the contents of the document and are unable to draw any clear and positive conclusion on the basis of figures noted on it. The letters 'H.S.', 'T.2' and 'D-Shop' cannot be explained and no material has been collected to....
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....ate of any date or the year against the entries written therein. It does not show whether the assessee has made or received any payment. It also cannot be deciphered from the said documents that the entries therein pertain to the block period. The AO also did not bring on record any material to show that any investment has been made by the assessee in any chit fund company or otherwise. The document found and seized might raise strong suspicion, but it could not be held as conclusive evidence without bringing some corroborative material on record. The document contained only the rough calculations and was silent about any investment. On the basis of such a dumb document, it cannot be said that there were investments made in fact by the assessee. Heavy onus lay upon the Revenue to prove that the document gives rise to undisclosed investment by the assessee. This onus has not been discharged. Accordingly no addition of undisclosed income could be made on the basis of such a document. Such a view has also been entertained by the Hon'ble Allahabad High Court in CIT vs. Dayachand Jain Vaidya (1975) 98 ITR 280 (All). The addition so made, therefore, is directed to be deleted." Stanamsi....
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....a) as to the value of entries in the books of account, that such statement shall not alone be sufficient evidence to charge any person with liability, even if they are relevant and admissible, and that they are only corroborative evidence. It has been held even then independent evidence is necessary as to trustworthiness of those entries which is a requirement to fasten the liability. 18. This Court has further laid down in V.C. Shukla (Supra) that meaning of account book would be spiral note book/pad but not loose sheets. The following extract being relevant is quoted hereinbelow :- "14. In setting aside the order of the trial court, the High Court accepted the contention of the respondents that the documents were not admissible in evidence under Section 34 with the following words: "An account presupposes the existence of two persons such as a seller and a purchaser, creditor and debtor. Admittedly, the alleged diaries in the present case are not records of the entries arising out of a contract. They do not contain the debits and credits. They can at the most be described as a memorandum kept by a person for his own benefit which will enable him to look into the same whenev....
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....prosecution based upon such entries which led to the investigation was quashed by this Court. 9. Further, in numerous other case-laws, Hon'ble courts have consistently upheld the view that no addition could be made in the hands of the assessee on the basis of the dumb loose papers seized during search, in absence of any corroborative material to show unaccounted cash payment by the assessee. Some of the case-laws are as under:- M M Financiers (P) Ltd Vs. DCIT (2007) 107 TTJ (Chennai) 2000 Held that "no addition could be made in the hands of assessee on the basis of the dumb loose slips seized from his residence, in the absence of any corroborative material to show payment of any undisclosed consideration by the assessee towards purchase of land". Monga Metals (P) Ltd Vs. ACIT 67 TTJ 247 (All. Trib)- Holding that Revenue has to discharge its burden of proof that the figures appearing in the loose papers found from assessee's possession constitute undisclosed income. [In the present case, loose papers were not even seized from assessee's possession]. Pooja Bhatt Vs. ACIT (2000) 73 ITD 205 (Mum. Trib) Held that where document seized during search was merely a rough noting....
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.... The AO during the course of assessment proceedings required the assessee to explain the source, genuineness of loan and identity of the lender. The assessee was asked by AO to furnish confirmations, bank account statement and ITR of the creditors. The assessee before AO failed to furnish the desired documents. Therefore, the Assessing Officer made the addition under consideration. However, the assessee during appellate proceedings, furnished confirmation, bank account statement and copy of ITR of all the lenders. A copy of these additional evidences was also forwarded to the AO for comments. Before the ld. CIT(A), the assessee submitted that it had received advance against sale of land at Satgari of Rs. 25,00,000/- during the year through account payee cheques from Smt Harpreet Saluja. The advance amount was erroneously classified as "Unsecured Loan". The cheque was physically handed over to the assessee by Mrs. Saluja and accordingly credited to her account. The cheque was issued by Mr. Ish Arora. The assessee in support had filed copy of confirmation of Shri Ish Arora along with a copy of his ITR and bank statement containing relevant entries. The ld. CIT(A) decided the issue as....
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....rded in the regular books of accounts and has been received through the banking channel. The assessee could not submit the necessary details as the same were not available at the time of the assessment and the Assessing Officer made the addition on the ground that in absence of the bank statement and the income tax returns the genuineness and the credit worthiness of the parties are not established. However, we find that in the appellate proceedings, all details like the bank statements, income tax returns etc. were filed before the ld. CIT(A) with an application under rule 46A. The Ld. CIT(A) sent all the papers to the Ld. A.O. for his comment and the remand report. The ld. CIT(A) after considering the submissions and facts of the case deleted the additions on the ground that the assessee has furnished all details such as, the documents relating to the identity, credit worthiness of the lender and genuineness of the transaction. Thus, prima facie the liability of the assessee to prove the genuineness, identity and credit worthiness stands discharged. We also find that the necessary papers to establish genuineness of the transaction were filed and the assessee had proved beyond dou....
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....eting the addition of Rs. 3,00,00,000/- made by the Assessing Officer on account of admission of undisclosed income. " 15. Facts as culled out from the record are that facts as culled out from the orders of the Revenue Authorities are that the assessee is a partnership firm and filing the returns regularly. A search was conducted on the Signature Group on 29.1.2014 and search action was also taken against the assessee which commenced on 29.1.2014 and concluded on 31.1.2014. Statement u/s 132(4) of Ms. Rekhi Dwivedi, the In-charge of the accounts department was recorded on 30.1.2014 and 31.1.2014. Statements were also recorded of Mr. Deepak Hariramani (looking after Marketing) and Mr. Prabodh Mathur (the Architect of the project) on 30.1.2014. In the statements, questions were raised regarding various loose papers found and the books of account maintained by the assessee. Subsequently statement of Mr. Rajkumar Khilwani, one of the partners, was recorded on 02.02.2014 in which he surrendered the income of Rs. 1100 Lakh on account of cash receipt outside the books of account jointly in the case of the assessee and in case of the other relevant firms. However, the same was not offered....
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....s of both the parties and gone through the material available on the file. We find that in the course of the assessment proceedings all the information as required by the AO from time to time was furnished. The assessee is in the business of real estate, builders and developers. The assessee had maintained regular books of account in which all the expenses including the cost of construction were duly recorded. These books were presented before the AO during the course of assessment proceedings and were duly checked by him and no deficiency was found in the books of account or the records maintained and no incriminating evidence was found during the course of search or afterwards during post search enquiry or pre assessment enquiries to suggest that the assessee has incurred any unrecorded expense. Therefore, while filing the returns, the assessee retracted from the said surrender/the declaration made for additional income u/s 132(4) and filed the return on the basis of the accounts which are duly audited. We find that entire records found were seized and a panchnama was prepared on 31.01.2014 which was the last panchnama drawn in the case of the assessee and no further panchnama wa....
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.... the addition is the statement made by one of the partners. The Ld. A.O. did not make any addition for the documents found. Further, we find that the question asked and the answer given in the statement recorded were both vague and general in nature and were not with reference to any specific document or asset found during the course of search which would indicate the acceptance of the assessee of earning of any unrecorded income. Rather the assessee has made a categorical unambiguous statement that the assessee has not earned any unrecorded income as is evident from the statement of Mr. Rajkumar Khilwani recorded as under: Q-9: Do you take any payment from customers in cash other than the sale price mentioned in the registry and additional charges recovered. A-9: No. No additional payment is taken in cash in addition to above Thus, we are of the view that no addition can be made without finding any incriminating material merely on the basis of the declaration u/s 132(4). Our view is supported by the direct judgment of the this Indore Bench of Tribunal in the case of Shri Sudeep Maheshwari in ITA 524/IND/2013 pronounced on 13/02/2019 and in the case of M/s Ultimate Builders in....
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.... I have seen the loose papers of Raipur office and consulted the partners/ directors. For these loose papers and for receipt of unaccounted money for sale of some units I offer a sum of Rs. 11 crores as undisclosed income for F.Y.2013-14 in the following firms a. Signature Developers b. Signature Infrastructure c. Signature Builders d. Signature Builders and Colonisers 19. The additional income disclosed in various cases has been mentioned by the ld. A.O. at Pg.9 of the order which included the amount of Rs. 3,25,00,000/- in the case of the assessee. 20. It was submitted before the ld. A.O. that in absence of any incriminating paper, no addition can be made. However, the ld. A.O. has made the addition simply on the basis of the statement recorded during the course of the search. The ld. A.O. has narrated number of documents found during the course of the search at Pg. 14 & 15 of the order. None of these documents pertains to the assessee. In para 9 the ld. A.O. has merely relied on the statement recorded u/s 132(4). On pg.24 he has merely stated that several incriminating documents were confronted for which the assessee was unable to explain. On the sole ground of the d....
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....s High Courts specially the decision of the Hon. Jharkhand High Court in the case of Shri Ganesh Trading co. v/s. CIT (2013), 257 CTR 0159 and the decision of Hon. Gujrat High Court in the case of Kailashben Mangarlal Choksi v/s. CIT (2008) 14 DTR 257. Under these circumstances the additions sustained by the ld. CIT(A) are bad in law. In view of this, it is humbly prayed that the addition sustained by the Ld. CIT(A) deserves to be deleted. 24. Per contra Ld. Departmental Representative vehemently argued supporting the order of lower authorities and submitted that the statement given by various persons on behalf of the assessee company was the statement on oath given u/s 132(4) of the Act and there was no coercion or undue influence and no pressure by the revenue authorities for making such surrender. Further there was no retraction within the reasonable time and the action of the assessee was an after thought. Ld. CIT(A) has rightly confirmed the addition and same needs to be upheld. 25. We have heard rival contentions and perused the records placed before us and carefully gone through the decisions relied by Ld. Counsel for the assessee. Through Ground No.3 raised for Assessme....
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....orities were able to lay their hands, this addition totalling to Rs. 3.25 crores (Rs. 25,00,000/- + Rs. 3,00,00,000/-) is based only on the statement given u/s 132(4) of the Act. 28. Now the moot question remains that "whether the Ld. A.O was justified in making the addition purely on the basis of statement given u/s 132(4) of the Act without proving on record any corroborative evidence or incriminating material found during the course of search which could have direct nexus with the alleged addition of Rs. 3.25 crores". 29. We observe that similar issue came up before this Tribunal in another group concern M/s Ultimate Builders V/s ACIT ITA No.134/Ind/2019 order dated 09.08.2019. M/s Ultimate Builders was also subjected to search u/s 132 of the Act on 29.1.2014 being part of the same Signature group. From perusal of the impugned order of Ld. CIT(A) in the case of M/s Signature Builders observed at page 64 & 65, Ld. CIT(A) has given the brief details of the additional income admitted by the authorised person of M/s Signature group which is as follows; S.No Concern/F.Y 2012-13 2013-14 Total 1 Signature Infrastructure 50 300 350 2 Signature Builders 25 300 ....
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....ouhan who is the partner of the assessee firm gave a statement before the search team wherein he made surrender of Rs. 2,25,00,000/- on behalf of the appellant firm and agreed to offer it to tax. In the very same statement he also made surrender on behalf of another firm M/s. Virasha Infrastructure in the capacity of a partner. In the very same statement he also made surrender on behalf of other companies of Signature Group. Ld. A.O during the course of assessment proceedings observed that the assessee has not offered surrendered income of Rs. 2,25,00,000/- for tax and confronted the assessee. During the assessment proceedings u/s 143(3) of the Act, assessee made the retraction by submitting that no such undisclosed income was earned and therefore no such income was required to be offered to tax. However, Ld. A.O giving reference to the statement of Mr. Vipin Chouhan, partner of Ultimate Builders and also giving reference to the seized documents found during the search at Signature Group made addition for undisclosed income. When the matter came up before Ld. CIT(A) addition was confirmed. However the basis of addition was accepted to have been made only on the basis of the stateme....
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....the search or seizure, examine on oath any person who is fond to be in possession or control of any books of account, documents, money, bullion, jewellery to other valuable article or thing and any statement made by such person during such examination may thereafter be used in evidence in any proceeding under the Indian Income- tax Act, 1922 (11 of 1922 ), or under this Act. 1 Explanation.- For the removal of doubts, it is hereby declared that the examination of any person under this sub- section may be not merely in respect of any books of account, other documents or assets found as a result of the search, but also in respect of all matters relevant for the purposes of any investigation connected with any proceeding under the Indian Income- tax Act, 1922 (11 of 1922 ), or under this Act." 16. The above sub Section 4 of Section 132 of the Act starts with reference to "authorised officer", which means that the Officer who is authorised to conduct search on the assessee. In the instant case it is stated before us that the authorised officer of the assessee and that of the other concerns of Signature Group are different. 17. After the word the authorised officer it reads "during....
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.... Ld. A.O has referred to various seized documents but none of them is directly related to the assessee. These seized documents are of the Signature Group and Ld. A.O has only mentioned the details of the seized document without uttering a word about their nexus with the business transaction carried out by the assessee or by pointing out assessee's connection with the seized document in name or otherwise. Thus it can be safely concluded that the addition made by the Ld. A.O was not on the basis on the incriminating material found during the course of search but only on the basis of statement of Mr. Vipin Chouhan given on 02.02.2014. 22. Recently the Co-ordinate Bench in the case of ACIT(1) VS. Sudeep Maheshwari (supra) in which the undersigned was also a co-author while adjudicating the issue that "whether addition can be made merely on the basis of statement given during the course of search without correlating the statement with incriminating material", we have decided the issue observing as follows:- "6. It is the case of the assessee that during the course of search & seizure, no incriminating material or undisclosed income or investments were found. It is stated that the as....
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....2008) 14 DTR 257 (Guj.), held that merely on the basis of admission, the assessee could not have been subject to additions, unless and until some corroborative evidence is found in support of such admission. 24. Hon'ble Jharkhand High Court Shree Ganesh Trading Co. V/s Commissioner of Income-tax, Tax Case No.8 of 1999 order dated 03.01.2013 held as under; "4. We considered the submissions of the learned counsel for the parties and perused the reasons given in the impugned orders as well as reasons given in the case of Kailashben Manharlal Chokshi (supra). 5. It appears from the statement of facts that there was a search in the business premises of the petitioner's firm as well as in the residential premises of its partner, Shri Sheo Kumar Kejriwal, on 24th September, 1987. During the course of search, the statement of Shri Sheo Kumar Kejriwal had been recorded under section 132(4) of the Income Tax Act and in the statement, he stated that he was partner in the Ganesh Trading Company, i.e. the present assessee-firm in his individual status and that he surrendered Rs. 20 lacs for the assessment year 1988-89 as income, on which tax would be paid. He further stated that other....
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....Officer did not proceed further to enquire into the undisclosed income as admitted by the assessee in his statement under section 134(2) in fact situation where during the course of search, there was no recovery of assets or cash by the Department. This fact also has not been taken care of and considered by any of the authorities that in a case where there was search operation, no assets or cash was recovered from the assessee, in that situation what had prompted the assessee to make declaration of undisclosed income of Rs. 20 lacs. Mere reading of statement of assessee is not the assessment of evidentiary value of the evidence when such statement is self-incriminating. Therefore, we are of the considered opinion that in the present case, a wrong inference had been drawn by the authorities below in holding that there was undisclosed income to the tune of Rs. 20 lacs. 7. In view of the above reasons, without answering the question about retrospective operation of the proviso to section 134(4), we are holding that the authorities below have committed error of law in drawing inference from the materials placed on record, i.e. admission of the assessee coupled with its retraction by ....