TaxTMI 
TaxTMI 
2022 (3) TMI 342
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....hri Harresh N. Mehta and Late Shri Jitendra N. Mehta (Legal heir, Shri Rohan Mehta) along with the residential premises of the directors, associates, employees. During the course of such action, certain loose papers were found and seized on the basis of which additions were made and assessment orders passed dated 30.03.2014 u/s 143(3) r.w.s 153A of the Income Tax Act,1961 [the Act] in respect of the AYs 2007-08, 2008-09 & 2011-12 and u/s 143(3) for A.Y.2012-13. In the course of the assessment proceedings Shri Jitendra Mehta passed away on 14.04.2012, consequently the legal heir has been brought on record and assessments accordingly completed in the name of Shri Rohan J Mehta, legal heir of Late Jitendra Mehta. 3. At the core of the dispute is the admission of undisclosed income made by the late Shri Jitendra Mehta in the course of search action. In the assessment orders passed by the Assessing Officer, additions have been made in the context of the loose papers found and seized during the course of search and on the basis of statement recorded u/s 132(4) dated 26/27th July 2011. The said additions which are stated to be on the basis of seized material and statement u/s 132(4) of....
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.... AO to the extent confirmed by the Ld. CIT(A)." A.Y. 2012-13 1. On the facts and in the circumstances of the appellant's case and in law the Ld. CIT(A) erred in confirming AO's action of making an addition of Rs. 4,00,000/- on account of undisclosed income being negative peak. 2. On the facts and in the circumstances of the appellant's case and in law the Ld. CIT(A) erred in confirming AO's action of making an addition of Rs. 60,000/- on account of alleged undisclosed interest income. 3. The appellant craves leave to add to, alter, amend and /or delete all or any of the foregoing grounds of appeal. 4. The appellant prays before the Hon'ble Tribunal to delete the addition made by the AO to the extent confirmed by the Ld. CIT(A)." 5. Since the issues in question regarding undisclosed income / cash interest as raised for the various assessment years are interconnected and interlinked, they are taken up together for adjudication and disposal. 6. From the facts as observed from the record it is apparent that in the course of search Shri Jitendra Mehta has made disclosure of Rs..100 crores towards undisclosed income on behalf of ....
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....herein the assessee has made disclosure of Rs..100 crores for the group as a whole in support of the additions as made. 10. Flowing from the disclosure made in the statement u/s 132(4), in due course the assessee submitted a cash flow statement before the search party, reckoning the unaccounted receipts and payments in the cash flow. However, while filing the return of income in response to notice u/s 153A of the Act, some of these unaccounted receipts and payments were not considered by the assessee, thus resulting in additions to the income returned, as illustrated in the table below for the AYs 2007-08, 2008-09, 2011-12 & 2012-13 which are under consideration. AY Particulars Income Offered During Search Addition Made (E=C-D) Negative Peak (A) Undisclosed Income (B) Income Offered During Search as per cash flow statement (C ) Income Offered During Return u/s 153A (D) 2007-08 Negative Peak and Undisclosed Income 12,72,672 10,50,00,000 10,62,72,672 27,13,290 10,35,59,382 2008-09 2,29,29,097 9,80,43,198 1,20,29,72,295 26,82,715 11,82,89,580 2011-12 1,94,877 - 1,94,877 - 1,94,877 20....
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....0,000 Negative Peak Cash 12,72,672 10,62,72,672 2008-09 Unaccounted Income 9,80,43,198 Negative Peak Cash 2,29,29,097 12,09,72,295 2009-10 Negative Peak Cash 2,22,47,743 2,22,47,743 2010-11 Negative Peak Cash 9,84,095 9,84,095 2011-12 Negative Peak Cash 3,28,40,736 3,28,40,736 2012-13 Unaccounted Income 50,00,000 59,72,000 1,09,72,000 Total 29,66,34,233 29,66,34,233 It may be noted that the alleged receipts of Rs. 20,78,51,498/- noted on the seized page no. 1 of Annexure A-1 are duly covered in my disclosure of Rs. 29,66,34,233/-. The noting relating to Bhoslewadi/ CFO are not related and relevant in view of the disclosure made by me. The above disclosure is made voluntarily by me and I request that no penalty be levied or any other penal action be initiated against me. It may be noted that the above disclosure covers disclosures made by me in the course of statement recording under section 132 (4) of the Income Tax Act 1961 earlier on account of payments recorded on the various seized papers.............." 12. The ....
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....ssee. The Assessing Officer has not brought anything on record to prove that the transactions appearing in such dumb document has actually materialized. There is no corroborative material on record of Assessing Officer to link alleged transactions with assessee. The rough noting are not accompanied with any acceptable narration. The alleged transactions are not in any way linked to the financial statements, so much so that even transactions denoted as cheque payments are not reflected in books of assessee. There is no independent corroborative material on record of Assessing Officer to prove his hypothesis that said noting reveal either unaccounted income, or unaccounted investment or unaccounted expenditure of assessee. None of the properties as mentioned appear in the financials of the assessee. Placing reliance on the order of the jurisdictional Tribunal in the case of ACIT Vs Layer Exports Ltd [2017] 184TTJ 469, which as clarified by the Ld AR, has drawn support from the judgement of the Hon'ble Supreme Court in the case of Mohd.Yusuf & Anr Vs D.& Anr AIR 1968 Bom 112, it is contended by Ld AR that when seized material contains jottings of certain figures but same does not desc....
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....ported in [2007] 104 ITD 166 (MUM.) (TM) wherein on second appeal, the Judicial Member, inter alia, held that subsequent retraction was correction of the earlier statement which was disagreed to by the Accountant Member. On a reference, the Third Member agreed with view of the Judicial Member holding that a subsequent statement has to be seen as a clarification of an earlier statement especially when copies of earlier statement have not been provided resulting in handicap to assessee and when assessee's version has not been got clarified from the alleged recipients regarding schedule of payments, any on-money involved and actual payments made, for reasons best known to the Department and for said reasons addition is not sustainable on the basis of statement alone. According to Ld AR, a suspicion cannot be the basis of addition. In support of her contentions, the Ld AR has further cited the following judicial precedents to press home the issues flagged by her as mentioned above:- a) Karam Chand v. Asstt. CIT [2000] 73 ITD 434 (Chd.) b) Manoj Prabhakar v. Asstt. CIT [2004] 84 TTJ (Delhi) 625. c) Pullangode Rubber & Produce Co. Ltd. v. State of Kerala [1973]....
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....) while filing the return of income. It is the assertion of the assessee now, as per return of income filed that such transactions never materialized and that the jottings are mere simply rough noting of certain events that did not materialize, that such admission was made by late assessee only to purchase peace and facts being otherwise, there is no undisclosed income to be offered to tax. Of course the declarant u/s 132 (4) is no more. Moreover, from the statement recorded u/s 132 (4) it can be seen that there is no clinching admission on part of late Jitendra Mehta that such transactions as per the rough noting had taken place. It is apparent that it only in a manner of conditional declaration that such sums were admitted. Undoubtedly, the assessee has not explained the nature of transactions emanating from the seized material. It is indeed not clear as to which noting denotes purchase of property and which transaction constitutes sale of property. There is no mention as to whom the property is sold or from whom the property is purchased. There has been no attempt on part of Department to track down either seller/ buyer or even purported broker whose name has been mentioned in t....
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....ting the contents of a document. As per law, the power to presume is not conclusive in that presumption is a rebuttable presumption as laid down by Hon'ble Supreme Court in Pullangode Rubber Produce Co. Vs State of Kerala [1973] 91 ITR 18. It is to be kept in mind in the instant case that assessee who made the admission, albeit conditional admission, is no more. It is settled law that though admission could be an important piece of evidence, it is not conclusive as to truth of the matters stated therein. It is well settled that the provisions of Evidence Act are not strictly applicable to proceedings under the Income Tax Act; it is the broad principles of law of evidence that apply to proceedings under the Income Tax Act. Besides, in our considered view, in the peculiar facts of the instant case where the declarant is no more and the legal heir has renegaded from the declaration of the dead person by stating that as per his study of the documents/ books maintained as well as the seized material for the purpose of filing the return in his capacity as legal heir, such transactions had never materialized, and that such admission had been made only to purchase peace as well as avoid li....
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....ain any evidence regarding any receipts of money and also when the diary was not written by assessee or his employees, it cannot be substantiated assessee has earned any undisclosed income hence addition based on such dumb document. e) The ITAT, Mumbai in case of Amarjit Singh Bakshi (HUF) v. Asstt. CIT [2003] 86 ITD 13 (Delhi) (TM) held that any notings in loose sheet is no evidence by itself. An entry in the books of account maintained in the regular course of business is relevant for purposes of considering the nature and impact of a transaction, but notings on slips of paper or loose sheets of paper cannot fall in this category. Nothings on loose sheets of paper are required to be supported/corroborated by other evidence which may include the statement of a person, who admittedly is a party to the nothings. f) In the case of D.A. Patel v. Dy. CIT [2000] 72 ITD 340 (Mum.) it has been held that simply because a sheet of paper was found during the search at the premises of an assessee, he could not be saddled with a tax liability unless it could conceivably be related to the assessee in some reasonable manner. g) The Hon'ble Bombay High Court in case of ....
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....ransaction the way Assessing Officer has deciphered them especially without corroborative evidence of parties attributed to the transaction, and when there is no material to show nexus between the assessee herein and the alleged transactions, no addition to the income can be justifiably made. In other words, it is held that no addition can be made when there is nothing to establish that such payments as alleged have been received or expended. No enquiry in this direction is seen made by the Assessing Officer. We accordingly hold that the impugned addition of on-money payment and receipts made in assessee's case is on the basis of a mere dumb document and not corroborated by any other evidence and thus, not sustainable. The additions made on the basis of uncorroborated noting and scribbling on loose sheets is accordingly unsustainable and is therefore directed to be deleted. On the basis of the above considered findings, the addition made in respect of each year is dealt accordingly in the ensuing paragraphs. A.Y: 2007-08 Ground No.1 19. In A.Y. 2007-08, the Assessing Officer has made addition of Rs..10,35,59,382/- in respect of negative peak and unaccounted receipts on sal....
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....132(4) made such disclosure on account of negative peak and undisclosed income. However, while filing its return of income u/s 153A, the said amount was not offered for taxation. Hence, Assessing Officer made this addition on account of negative peak and undisclosed income. In view of our findings given in paragraphs 16 to 18, the said addition is directed to be deleted. Accordingly, ground no. 1 of AY 2011-12 is allowed. Ground No. 2 25. The second ground of appeal raised by the assessee pertains to the addition of Rs. 17,20,35,681/- made by the Assessing Officer on account of alleged cash interest. Shri Samir Shah, finance broker of Rohan Group was also searched along with the Rohan group. It appears that Samir Shah arranges finance for the Rohan Group. During the course of search at residential premises of Shri Samir Shah, loose page no. 206 of Annexure A-1 was found wherein, the names of various parties were mentioned against the amounts which is related to alleged interest payment in cash to various lenders. The Assessing Officer considered the amounts mentioned in seized page as cash interest paid by Rohan Group and thus, he made addition of Rs. 17,20,35,681/- by relyin....
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....f Samir Shah recorded on 21.07.2011 u/s 132(4) of the Income Tax Act, 1961. The relevant extract is reproduced as under: - "Q.38 During the course of search at your residence at Shiv-Tapi Apartment various loose papers and documents handwritten and computer print outs have been found and seized. Kindly explain the contents of the same and the manner in which these records are maintained with reference to your business. Ans. I have not been able to complete graduation; do not know how to use the computer. Therefore, initially I used to maintain, the record of such loans in hand written pages. However, considering the volume of work I could not properly maintain such records and lots of errors and discrepancies erupted in such records. I was not able to maintain proper / accurate / complete records and therefore mainly used to rely on the records maintain by respective parties. Further considering the volume I requested my daughters to help me in maintaining these noting in the computer Since I did not understand how computer works, there are numerous noting which are incomplete, in parts and without any reference. A lot of trial and error was carried by me with the....
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....put a claim to the clients all these calculations were made which are found and seized from my residence. Most of these calculations were for the quarter beginning April 2010." 29. In view of the above statement given by Shri Samir Shah, the Ld AR of the assessee argued that in response to question no. 38, the person who has actually carried out the noting in the seized paper has himself admitted that various papers found from his residential premises are those generated during the course of trial-and-error exercise and it cannot be correlated with any of the actual transactions that may have been carried out. Further, in response to Q.39, he has admitted that various lenders were demanding higher rate of interest and as a broker, he prepared these proposed workings to present before his clients. Samir Shah has himself admitted that these are merely tentative workings. The AR of assessee has also pointed out that that Assessing Officer has completely ignored this part of the statement given by Samir Shah. Further, it is the submission of the AR that during the course of search, the assessee was also confronted with the statement of Samir Shah and assessee has also denied of any ....
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....saction emanating from the said document. In the present case, Samir Shah has himself admitted that the amounts appearing in the said seized material are merely rough workings of interest prepared by him in order to present before his clients. Further, it has been brought to our notice that the Assessing Officer of Samir Shah, in his remand report, has also admitted the amounts mentioned in the seized page as rough workings. It is also observed that none of the lenders have admitted that any cash interest has been received by them. All these documents/statements support the contention of the assessee that the entries mentioned on the seized pages are merely tentative workings of additional interest and there is nothing on record to hold that such workings had materialized and cash payment of interest was actually made. Under the circumstances we are unable to sustain the addition as made. We accordingly direct that the addition of Rs. 17,20,35,681/- made by the Assessing Officer in respect of alleged cash payment of interest be deleted. Ground no. 2 raised by the assessee is allowed. Ground no. 3 33. Ground no. 3 raised by the assessee against the Assessing Officer 's action ....