TaxTMI 
TaxTMI 
2022 (2) TMI 318
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..... On the facts and in circumstances of the case, ld. CIT(A) has 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 pa....
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.... the agreements are unsigned and are not finalized and the amounts paid by cheques as mentioned in the agreements are received back 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 recorde....
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....he parties agreed to cancel the proposed deal. 3. Accordingly the advance payment made of Rs. 60 lacs was received back by the assessee during July-Oct 2014 the details 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. ....
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.... at any place in the agreement was executed by the appellant without any material to justify such presumption. Any addition can be made in a specific assessment year when the same has been actually taken into place in the same assessment year. In the instant 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 am....
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....ecause there was not even an iota of evidence to establish that investment was not recorded in the books of account. Onus of proof is on the department to prove that appellant made some unaccounted investment. It is undisputed fact that the AO has failed to discharge his onus and 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 assesse....
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....s LPS 72 page 43-68. During the course of assessment proceedings, the assessee had submitted that these were draft agreements which were not executed due to non agreement between the parties on rates, time of payment etc. It was also submitted that any draft agreement prepared mentions 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 materialis....
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....ith positive evidence. Here in the present case nothing has been corroborated or proved that assessee was dealing in money lending business." Mohan Foods Ltd Vs. DCIT (2010) 123 ITD 590 (Del) - Held that -- although the contents of the relevant seized documents show that the amounts mentioned therein relate to some expenditure, in the 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. ....
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....ies on a piece of paper which is claimed to have been found at the time of search, can be made, treating the figures as investment for purchase of plot No. B-4, Govind Marg, Jaipur in the hands of Dr. Tomar, Dr. Mrs. Tomar and B.S. Tomar HUF." N K Malhan Vs. DCIT (2004) 91 TTJ (Del) 938 - Held that - "We have perused the aforesaid explanation and the seized document placed at assessee's paper book-I pp. 48 and 50. The document does not state 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 ....
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....leted but same is relevant for the purpose of decision of this case also. This Court has considered the entries in Jain Hawala diaries, note books and file containing loose sheets of papers not in the form of "Books of Accounts" and has held that such entries in loose papers/sheets are irrelevant and not admissible under Section 34 of the Evidence Act, and that only where the entries are in the books of accounts regularly kept, depending on the nature of occupation, that those are admissible 17. It has further been laid down in V.C. Shukla (Supra) 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....
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....ufficient 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." 20. It is apparent from the aforesaid discussion that loose sheets of papers are wholly irrelevant as evidence being not admissible under Section 34 so as to constitute evidence with respect to the transactions mentioned therein being of no evidentiary value. The entire 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 d....
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....es not appear as is evident of page nos. 32 & 39 of the paper book. There is no iota of any evidence that the assessee has made the payment in cash in execution of these agreements. Under these circumstances, we do not find any reason to interfere with the findings of the ld. CIT(A) on this issue. Therefore, we confirm the same. Accordingly, ground no.1 raised in the departmental appeal is dismissed. 11. So far as ground no.2 with regard to challenging the addition of Rs. 25 lacs made on account of unexplained unsecured loan is concerned, the facts as culled out from the record are that the AO during assessment proceedings found that assessee has taken unsecured loans of Rs. 25,00,000/- in AY 2014-15. 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....
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.... of land. Thus, keeping in view the documentary evidences filed by the appellant, the addition made by the AO amounting to Rs. 25,00,000/- in AY 2014-15 is Deleted. Therefore, the appeal on this ground is Allowed." 12. Now, the Revenue is in appeal before this Tribunal. Before us, the ld. CIT-DR relied upon the order of the Assessing Officer whereas the learned Counsel for the assessee relied upon the order of the ld. CIT(A). 13. We have considered the rival submissions of both the parties and gone through the material available on the file. We find that during the previous year, the assessee had received unsecured loans from Smt. Harpreet Saluja. It was submitted before the ld. A.O. that the above loan is duly recorded 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 li....
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....or u/s 131 -Addition cannot be made. 14. On consideration of above facts in the light of the judicial pronouncements (supra), we are of the view that since the assessee had established the genuineness of the transaction from all the sides, the ld. CIT(A) was right in deleting the addition. Therefore, we confirm the order of the ld. CIT(A) on this issue. Accordingly, ground no.2 raised in the appeal of the Revenue is also dismissed. Thus, departmental appeal i.e ITA No.218/Ind/2020 is dismissed. M/s. Signature Builders & Colonisers, Bhopal-A.Y.2014-15 In ITA No.219/Ind/2020 for the assessment year 2014-15, the Revenue has raised the following grounds of appeal: "1. On the facts and in circumstances of the case, ld. CIT(A) has erred in deleting 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 comm....
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....7. Being aggrieved, the Revenue and the respective assessee are in appeals. Ld. CIT-DR relied upon the orders of the Assessing Officer whereas learned Counsel for the assessees submitted that 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, the assessee was justified in retracting from the declaration made for additional income u/s 132(4). The ld. CIT(A) relied on various case laws and after considering the submissions of the assessee deleted the addition. Thus, learned Counsel for the assessee submitted that the ld. CIT(A) was right in deleting the addition. 18. We have considered the rival submissions 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 w....
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.... 9.8.2019 and Sudeep Maheshwari in ITA No.524/Ind/2013 dated 13.2.2019. The Ld. CIT(A) observed that the addition was made merely on the basis of the statement recorded without specific reference to any incriminating material found during the course of the search suggesting any earning of unaccounted income. Thus, we are of the view that no addition was warranted as the surrender was not made with reference to any loose paper seized during the course of search and was accordingly not in accordance with the provisions of section 132(4) as the Ld. AO failed to bring on record any specific instance of the assessee having earned any undisclosed income or having made any unexplained investment which could justify the addition under reference. The sole basis for making 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 ....
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....the case of the assessee the search commenced on 29.01.2014 at 08.45 A.M and was concluded at 08.00 AM on 02.02.2014. The proceedings continued for 4 days (96 hours) without any break. The statement of Mr. Raj Kumar Khilwani commenced on 01/02/2014 and was concluded on 02/02/2014. During the course of the statement, the assessee declared the additional income of Rs. 25,00,000/- for the A.Y. 2013-14 and Rs. 3 crores for the A.Y. 2014-15 (Pg.222-240 of PB at page 239). In the statement Q.27 was asked as "during the course of search at Bhopal and Raipur many loose papers have been found for which no satisfactory answer and explanations have been given. In relation to these papers, an opportunity is given for explanation after consulting the other partners/ directors. The assessee gave a reply as 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 ....
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....s statement that the assessee has not earned any unrecorded income. Reference in this regards may be made to the statement of Mr. Rajkumar Khilwani recorded on 01-02/02.2014 Q-9: Do you take any payment from customers in cash other than the sale price mentioned in the registree and additional charges recovered. A-9: No. No additional payment is taken in cash in addition to above 23. It is further submitted that no addition can be made without finding any incriminating material merely on the basis of the declaration. In this connection the attention is drawn to the direct judgment of the Hon'ble Indore Tribunal in the case of Shri Sudip Maheshwari in ITA 524/IND/2013 pronounced on 13/02/2019 and in the case of M/s Ultimate Builders in ITA 134/2019 pronounced on 09/08/2019. The Hon'ble Tribunal has relied on the various judgments of the various 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)....
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..... The Ld. A.O has failed to prove on record any specific instance with support of incriminating material found during the course of search which could show that the assessee has earned the alleged undisclosed income. It is not in dispute that various other additions have been made by the Ld. A.O for the undisclosed investment u/s 69B, undisclosed investment in projects of land and unexplained unsecured loan as well as unexplained cash u/s 69A of the Act. However specifically with regard to the addition of Rs. 25,00,000/- and Rs. 3,00,00,000/- made for the Assessment Years 2013-14 and 2014-15 the same is purely based on the statement given on oath u/s 132(4) of the Act by the authorised representative on behalf of the assessee which was collectively surrendered as additional income on behalf of various group concerns. But without the support of any incriminating material on which the revenue authorities 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 ....
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....irm. 10. At the cost of repetition we would like to recite and recapitulate the facts once more. The assessee is a partnership firm engaged in real estate business. It is the part of Signature Group. Search action was initiated in the Signature Group and its associates on 29.1.2014. The assessee's association with the Signature group is on account of the common partners in various concerns. Assessee is separately assessed to tax. Search u/s 132(4) of the Act was initiated in the case of the assessee on 29.1.2014 and was concluded on 31.1.2014. This fact is proved on the basis of "panchanama" prepared by the officer of the search team which is placed at page 62-64. No surrender was made in the statements taken by the search team during the course of search from 29.1.2014 to 31.1.2014. There is no mention of any incriminating material referred by the Ld. A.O on the basis of which additions have been made. 11. The search action in the case of Signature Group continued ever after 31.1.2014. On 02.02.2014, Mr. Vipin Chouhan 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 app....
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....ating material gathered during the course of search". 13. So the contention of the Ld. Counsel for the assessee can be summarised that the addition cannot be made merely on the basis of statement which too was taken after conclusion of the search and no correlation has been made with the incriminating material found during the course of search. 14. On the other hand Departmental Representative gave reference to various judgements referred above. She mainly placed emphasis on the judgment of Hon'ble High Court of Madras in the case of Kishore Kumar V/s DCIT (supra) holding that "when there was a clear admission of undisclosed income in the statement sworn in u/s 132(4) of the Act there is no necessity to scrutinise the documents". 15. Now so far as the first contention of the assessee that the statement relied on by the revenue authorities cannot be construed as a statement given u/s 132(4) of the Act, we will like to first reproduce the provisions of Section 132(4) of the Act; "(4) The authorised officer may, during the course of the search or seizure, examine on oath any person who is fond to be in possession or control of any books of account, ....
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....rns and not specifically for the assessee M/s. Ultimate Builders. Reference was also given to other business concerns namely M/s. Virasha Infrastructure, Signature Infrastructure, Signature Builders and Signature Builders and Colonisers. Certainly the search in the case of concerns other than the Ultimate Builders did not conclude on 02.02.2014 but at that point of time on 02.02.2014 the search in the case of Ultimate Builders stood concluded two days before on 31.1.2014. 20. We therefore are of the considered view that the alleged statement given by Mr. Vipin Chouhan on 02.02.2014 may be construed as the Section 132(4) of the Act for all the other concerns named above except for the assessee i.e. M/s. Ultimate Builders. Therefore the statement referred to by the Ld. A.O on the basis of which the addition have been made in the hands of the assessee in our view cannot be construed as the statement u/s 132(4) of the Act. 21. Coming to the issue of addition made by the Ld. A.O on the basis of the statement but no reference been given to the incriminating material, we find that in the assessment order Ld. A.O has referred to various seized documents but none of them i....
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....idences, the admission is merely a hollow statement. We have given our thoughtful consideration to the rival contentions of the parties. It is undisputed fact that the statement recorded u/s 132(4) of the Act has a better evidentiary value but it is also a settled position of law that the addition cannot be sustained merely on the basis of the statement. There has to be some material corroborating the contents of the statement. In the case in hand, revenue could not point out as what was the material before the A.O., which supported the contents of the statement. In the absence of such material, coupled with the fact that it is recorded by the Ld. CIT(A) that the assessee himself had surrendered a sum of Rs. 69,59,000/- and Rs. 75,00,000/- in A.Y. 2008-09 and 2009-10 respectively. The A.O. failed to co-relate the disclosures made in the statement with the incriminating material gathered during the search. Therefore, no inference is called for in the finding of the Ld. CIT(A) and is hereby affirmed. Ground raised by the revenue is dismissed." 23. Hon'ble Gujarat High Court in the case of Kailashben Mangarlal Chokshi vs. CIT - (2008) 14 DTR 257 (Guj.), held that merely on th....
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....are of the considered opinion that statement recorded under section 132(4) of the Income Tax Act, 1961 is evidence but its reliability depends upon the facts of the case and particularly surrounding circumstances. Drawing inference from the facts is a question of law. Here in this case, all the authorities below have merely reached to the conclusion of one conclusion merely on the basis of assumption resulting into fastening of the liability upon the assessee. The statement on oath of the assessee is a piece of evidence as per section 132(4) of the Income Tax Act and when there is incriminating admission against himself, then it is required to be examined with due care and caution. In the judgment of Kailashben Manharlal Chokshi (supra), the Division Bench of Gujarat High Court has considered the issue in the facts of that case and found the explanation given by the assessee to be more convincing and that was not considered by the authorities below. Here in this case also, no specific reason has been given for rejection of the assessee's contention by which the assessee has retracted from his admission. None of the authorities gave any reason as to why Assessing Officer did not pro....
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....by the Authorised Officer. Secondly as regards to other business concerns referred by Mr. Vipin Chouhan in his statement given on 02.02.2014 and in case of such business concern wherein search action u/s 132 of the Act was continuing the said statement dated 02.02.2014 will be considered as the statement u/s 132(4) of the Act. Thirdly, no reference has been given by the Revenue Authorities to any incriminating material found during the course of search at the business premises of the assessee, which could be correlated to the alleged surrendered income earned by the assessee from undisclosed sources. 27. We therefore are of the considered view that the finding of Ld. CIT(A) needs to be set aside and the addition of Rs. 2,25,00,000/- deserves to be deleted since it has been made on the basis of a statement not given u/s 132(4) of the Act and without referring to any incriminating material found during the course of search. Addition for undisclosed income of Rs. 2,25,00,000/- is deleted. Accordingly Ground No.1 raised in the appeal by the assessee is allowed." 31. From perusal of the above finding of this Tribunal in the case of M/s Ultimate Builders (supra), we fin....