TaxTMI 
TaxTMI 
2022 (5) TMI 944
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.... 2. The learned CIT(A)-18 erred in upholding an addition of Rs.2,49,00,000/- as income under the head other sources despite the fact that both the AO and CIT(A) have admitted that the said amounts were received by the appellant from the sale of agricultural land. 3. The learned CIT(A) erred in upholding the addition of Rs.2,49,00,000/- as income under the head other sources despite the fact that the materials found at the time of search and seized at the premises of both the purchaser and seller point out to the fact that the said amounts were paid only towards sale of agricultural land and that the same was exempt under section 2(14)(iii) of the income tax act in the hands of the appellant. 4. The learned CIT(A) ought to have seen that it was only at the instance of the purchaser, who bears the stamp duty and registration fee, that the agricultural land was registered at the guideline value and that that the appellant would not have been at any disadvantage even if the entire consideration was recorded in the sale deed since even in the eyes of the department the land was only an agricultural land and that the entire receipt is exempt under 2(14)(iii) of the inc....
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....that the addition should have been restricted to 10 bundles with endorsement paid. For these and other grounds that may be rendered at the time of hearing it is most humbly prayed that the Hon'ble Tribunal may be pleased to allow the appellants appeal and thus render justice. 3. The brief facts of the case are that the assessee Mr.A.Johnkumar, is a Proprietor of M/s.A.Johnkumar Cost Price Shop and M/s.Johnkumar Real Agency, and is engaged in the business of running a Departmental Store and real estate business respectively. A search and seizure operation was conducted u/s.132 of the Act, on 17.09.2016. During the course of search, a sum of Rs.1,70,65,190/- cash and some incriminating documents with regard to sale of land involving on money and also conduct of unregistered and unaccounted chits and moneylending business, was found. Another search operation was conducted in the assessee's premises on 17.11.2016, which also resulted in further seizure of unexplained cash to the tune of Rs.14,29,610/-. Further, certain incriminating material with regard to distribution of gift articles was also found and emanated during the course of search, which contains identity cards is....
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....filed in response to notice issued u/s.153A of the Act. Similarly, the AO further noticed that the assessee did not disclose additional income offered from chit and finance business. Therefore, taken into account various incriminating material found and sized during the course of search, coupled with statement recorded from the assessee and his associates, opined that the assessee did not declare true and correct income for the impugned assessment year and thus, completed the assessment u/s.143(3) r.w.s.153B(1)(b) of the Act, on 30.12.2018 and determine total income at Rs.23,41,68,640/- by making various additions including additions towards on money received from sale of land amounting to Rs.2.49 Crs. unexplained investment in chits and moneylending business u/s.69 of the Act, for Rs.3.20 Crs. unexplained cash found during the course of search u/s.69A of the Act, amounting to Rs.14,29,610/- and unexplained expenditure towards gifts to beneficiaries' u/s.69C of the Act, amounting to Rs.15 lakhs and unexplained expenditure incurred for election u/s.69C of the Act, amounting to Rs.17 Crs. 5. Being aggrieved by the assessment order, the assessee preferred an appeal before the Ld.CI....
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....dgment is in favour of the assessee, but went on to distinguish judgment merely for the reason that said judgment is not considered the decision of ITAT Chandigarh Benches in the case of ACIT Circle, Patiala v. Mohinder Singh, even though, facts stated in the said case are altogether different from the facts of the assessee's case. 6.1 The Ld.DR, on the other hand, supporting the order of the Ld.CIT(A), submitted that the assessee had categorically admitted receiving on money from sale of land and further, agreed to disclose additional income and thus, the AO as well as the Ld.CIT(A) rightly apprised the facts and has made addition and their orders should be upheld. 6.2 We have heard both the parties, perused the materials available on record and gone through orders of the authorities below. There is no dispute with regard to the fact that the assessee has received on money from sale of 12 acres of land near Nallur. In fact, the assessee had candidly admitted the fact that he had received on money from sale of property. This fact is further fortified by an incriminating material found during the course of search in the form of loose sheets, which strengthened the case of the ....
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....r of the property denied having paid on money, but the documents found during the course of search indicate receipt of on money. Therefore, we are of the considered view that explanation of the assessee is that on money received from sale of property partakes the nature of capital receipt which is exempt u/s.2(14)(iii) of the Act, cannot be accepted. Hence, we are inclined to uphold the findings recorded by the AO as well as the Ld.CIT(A) and sustain the additions made towards on money received from sale of property. 7. The next issue that came up for our consideration from Ground Nos.6 & 7 of the assessee's appeal is additions towards unaccounted income from unregistered chit and finance business. The Ld.AR for the assessee submitted that the Ld.CIT(A) erred in sustaining the addition without appreciating the fact that except statement obtained from the assessee, no other evidence was brought on record to substantiate the findings of the AO that the assessee had earned unaccounted income from chit and finance business. The Ld.AR further submitted that the assessee had made substantial disclosure in his return of income towards income from finance business and thus, the Ld.CIT(A....
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....Rs.93,10,180/- out of total addition made by the AO at Rs.3.2 Crs. The balance amount of Rs.2,26,89,820/- remains unexplained. Even before us, the assessee neither explained the loose sheet found during the course of search, which contain chit and finance business transactions nor reconcile total loans and advances outstanding as on date, even though, he himself quantified outstanding loans and advances at Rs.3.14 Crs. Therefore, we are of the considered view that there is no error in the reasons given by the Ld.CIT(A) to sustain additions made by the AO towards undisclosed income from chit and finance business amounting to Rs.2,26,89,820/-. Hence, we are inclined to uphold the findings of the Ld.CIT(A) and reject the ground taken by the assessee. 8. The next issue that came up for our consideration from Ground No.8 of the assessee's appeal is additions towards unexplained expenditure u/s.69C of the Act, on account of gifts to beneficiaries amounting to Rs.15 lakhs. The Ld.AR for the assessee submitted that the Ld.CIT(A) erred in sustaining addition of Rs.15 lakhs as unexplained expenditure without appreciating the fact that the assessee had made substantial disclosure from chit....
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....ards expenditure claimed to have incurred for election. The facts with regard to impugned dispute are that the assessee was elected from Nellithope Constituency of Pondicherry Union Territory in the General Election held on 15.05.2016. Subsequently, the assessee had resigned from his membership and bye-election was announced for Nellithope Constituency for voting on 19.11.2016. The assessee did not contest for election. Mr.Narayana Swamy had contested for Nellithope Assembly Constituency and the assessee was overseen the election process. When the election process was going on, which is two days prior to voting, a search and seizure operation was conducted on 17.11.2016 in the premises of the assessee. During the course of search, unexplained cash of Rs.14,29,610/- was seized. Besides, 194 bundles of photo identity cards of general public issued by M/s.Johnkumar Trust, was found and seized. On each of the bundle cover, the amount in 'Rs.' being written (Rs.4,000/-). However, only in bundle Nos.184-194, apart from rupees being written the word "Paid" is also written. Vide Sworn statement dated 24.04.2017 from Mr.K.Vengadesan, Accounts Manager of Mr.A.Johnkumar Group concerns, was re....
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....dditions. The Ld.AR further referring to various dates and events submitted that the search was conducted on 17.11.2016, which is two days prior to the bye-election for Nellithope Constituency. The election was conducted under the supervision of Election Commission of India, which deploys various observers for election. Neither the Election Commission of India found any irregularities in election process, nor the Police has found any complaint of distribution of cash for votes. The AO himself has taken the job of Investigation Officer and made a false allegation of distribution of cash for votes without any evidence to justify his claim. The sole basis for the AO to arrive at such conclusion is photo identity cards of general public issued by M/s.Johnkumar Trust. Those photo identity cards never indicate distribution of cash for votes and further, the assessee never admitted to have distributed cash for votes. It is also an admitted fact that the employees of the assessee have also denied to have distributed cash for votes. The AO only on suspicion and surmises basis arrived at a huge amount of cash distribution for votes and made addition u/s.69C of the Act, without any iota of ev....
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.... Except photo identity cards issued by M/s.Johnkumar Trust, found in the premises of the assessee and WhatsApp message sent from assessee's mobile phone, no other evidence was with the AO to draw a conclusion that the assessee had distributed cash to voters amounting to rs.17 Crs. First of all, WhatsApp messages cannot be considered as a conclusive evidence to draw an adverse inference against the assessee, unless those WhatsApp messages are supported by corroborative evidences to indicate that those messages and contents represents undisclosed income of the assessee. Further, what is written in WhatsApp message is not readable in terms of any income or expenditure. We have gone through those WhatsApp messages, which is available in the assessment order and we find that nothing could be made out from those messages. In some messages, it was written inward on various dates and some tonnes. In some messages, it was written in outward in tonnes. From those messages, the AO given his own meaning and inferred with tonne means lakhs, inward means cash received for distribution and outward means cash distributed. The AO had also in his own meaning for some other contents recorded in Whats....
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....Commission of India deploys various agencies for monitoring election process. In this case, neither any of the agencies deployed for monitoring election process, was filed a case against the assessee for doing any malpractices in election, nor the Election Commission of India, had taken any action as pointed out by the Counsel for the assessee. The Election Commission of India has not initiated any enquiry and further, accepted election expenditure statement filed by the assessee. As regards, WhatsApp messages, the assessee had offered an explanation before the AO and contended that those messages are exchanged between the assessee and the other counterpart about the business carried on by them. The AO rejected explanation offered by the assessee on the ground that the assessee could not substantiate its claim. In our considered view, the AO is grossly erred in denying the explanation offered by the assessee, because whether or not any explanation offered by the assessee on the messages, but the fact remains that the AO could bring some positive evidence to link the WhatsApp messages to allege that the contents of WhatsApp messages depicts the undisclosed income or expenses of the ....
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.... is corroboration by corresponding entry in regular accounts of both the parties to the transaction. Loose sheets of papers are "not book' and hence entries therein not admissible u/s.34 of Evidence Act. 4. The Hon'ble CIT(A) erred in confirming the addition of Rs.2,26,89,820/-and Rs.17,00,00,000/- not appreciating that the writing on the loose papers found and seized during the course of search action as invalid and cannot be treated as document under Evidence Act, relevant and admissible in evidence as held in Raj Homes SV Group Vs. DCIT circle ITAT "B' Bench Mumbai, dt.7.3.2019, holding that the additions based upon selective scribbling in rough note is de-hors any corroborative finding is not justified. Moreover, in this scribbling in the note is examined on the touch tone on the common law maxim of approbate and reprobate, the addition is further not justified. Relying on the decision of the Hon'ble Apex Court in the case of CIT Vs. P.V.Kalayanasundaram 2007 (294) ITR 49 SC. 5. The Hon'ble CIT(A), erred in confirming the addition, made by the Learned Assessing Officer, while the Show Cause Notice dated 11.12.2018 referred to only one issue....
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....opies of those documents are furnished the other party cannot be expected to give an effective reply which forms part of the principles of natural justice. As held in (a) Siemens Ltd., Vs. State of Maharashtra, MANU/SC/8259/2008, (b) Sahi Ram Vs. Avtar Singh Manu/SC/0378/1999 (c) Government of A.P. Vs. A. Venkata Raidu MANU/SC/8591/2006 (d) Kumaon Mandal Vikas Nigam Ltd., Vs. Girja Shankar Pan] Manu/SC/0639/2000 8. The Hon'ble CIT (A) erred in appreciating that there is lack of cross examination and violation of principles of natural justice as held in Rima Maheswari, New Delhi Vs. ITO - 01.03.2019. 9. The Hon'ble CIT(A) erred in appreciating that, addition is merely based on suspicion and non-furnishing of opportunity to cross examine. Without recording statement from the author of the information and the ultimate beneficiary namely Mr.Somasundaram and his father the candidate of Nellithope Constituency and who became the Chief Minister of Puducherry namely Mr.Narayanasamy, and affording any opportunity for cross examine them is violative of the Principles of Natural Justice. The above view further gathers reinforcement....
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....rt has held in Ramji Dayawala & Sons(P) Ltd. Vs. Invert Import AIR 1981 SC 2085: It was held by Supreme Court rat the "mere proof of handwriting of a document not tantamount to a proof of all the contents or the facts stated in the documents, if the truth of the stated in a document is in issue, mere proof of the handwriting and execution of the document would not furnish evidence of the truth of the fact or contents of the document. The truth or otherwise of the fact or contents so stated would have to be proved by admissible evidence i.e., by the evidence of those persons who can vouchsafe for the truth of the fact in issue." 11. The Hon'ble Apex court held in Mohd. Yusuf (Sir) Vs. D FAIR 1968 Bom 1121, "the contents contained in document is hearsay evidence unless the writer is examined before the court. The Hon'ble Court, thereof held that the attempt to prove the contents of the document by proving the signatures of the handwriting of the author thereof is to set at nought, the well-recognized rule that hearsay evidence cannot be admitted. If we consider the said piece of paper seized during the search in light of definition of the word "Document" as given in ....
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....es, and its contents were not corroborated by any material and could not relied upon and made the basis of addition. Reliance can be also placed on the judgment of the Panaji Bench of ITAT in case of Abhay Kumar Bharamgouda Patil V ACIT [2018] 96 taxmann.com 377 (Panaji -Trib.) wherein the judgement of the Apex Court was relied upon. 15. Unless and until the contents of a document and its character and nature per se falls u/s.68, 69, 69B & 69C, the mere deemed presumption u/s.!32(4A) r/w.sec.292C shall be of no help for the department to make addition. 16. K.P.Vargheese Vs. ITO - 1981 (24) CTR held that the fictional receipt cannot be deemed to be a receipt in the absence of any cogent material receipt. 17. Commissioner of Income Tax (Central-II) Vs. D.K.Gupta [2008] 174 TAXMAN 476 (DELHI): Dumb Document without any corroborating evidence or documents have materialized into transactions cannot be deemed to be held income of the assesse. 18. Ashwani Kumar Vs. ITO - 1999 (39) ITD 183 Delhi - ITAT-08.08.1999 In the case of dumb documents, the revenue should collect necessary evidence to prove that the figures represent incomes earned by the....
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....e to prove conclusively that the seized documents contained details of secreted profits which were chargeable to tax. No doubt, the seized papers contained statement in figures of what appeared to be the financial results of certain unnamed transactions but there was nothing either in law or in logic to warrant the conclusion that the figures denoted secreted profits which were chargeable to tax. The details of distribution contained in the seized papers did not by themselves present a preponderance of probabilities so as to support department's case that what was distributed was taxable income. 26. In Dy. CIT v. Krorilal Aggarwal [1994] 50 TTJ (Jab.) 3935 diary seized during search contained certain jottings. The Tribunal held that the jottings in diary neither represented books of account nor any document and, therefore, presumption under section 132(4A) was not available and the addition made on the basis of the said jottings was deleted. 27. In the case of M.V. Mathew v. ITO [1993] 46 TTJ 353 (Coch.) unaccounted sum found noted in a diary and the assessee claimed that the same represented deposits from certain parties. The parties denied having deposited t....
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....l High Court in Commissioner of Income Tax Vs. S.Khader Khan Son- SC-2012 (25) taxmann.com 413 laid down the principles, Sec.l33A does not empower any ITO to examine any person on : = ". So statement recorded U/S.133A, has no evidentiary value and any remission made during such statement cannot be made basis of addition. Decision of Madras High Court CIT Vs. S.Khader Khan Son - 2008 (300) ITR 157 Madras affirmed). In para 6, the circular of the Central Board of Direct "exes, dt.10.03.2003 is not complied with. 31. The Hon'ble High Court of Judicature at Madras in M/s.M.Narayanan & Bros Vs. Assistant Commissioner of Income Tax MHC, DB, dt, 13.07.2011 (Para 11) followed CTO Vs. Khadher Khan (supra), Paul Mathews and Sons Vs. Commissioner of Income Tax 2003 (263) ITR 101 clearly held the admission of the Assesse. 32. The Hon'ble ITAT Cochin had rightly held the sale of agricultural land in Income Tax officer Vs. Shri. P.V. Abraham, dt.06.02.2019 and Income Tax Officer Vs. Abraham Varghese Charuvil 26.04.2017 rely upon ITO Vs. Dr.Koshi George 2009 (317) ITR, AT 116 Kochin - Para 16. 33. The Hon'ble Supreme Court in P.R.Metrani Vs. Commissioner of ....
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....Senniappan 2006 (284) ITR 220 -DB- 17.06.2006. 9.7 In this view of the matter and by respectfully following various case laws relied upon by the assessee, we are of the considered view that the AO is erred in making additions towards unexplained expenditure u/s.69C of the Act, towards alleged distribution of cash for votes. The Ld.CIT(A) without appreciating the fact simply sustained additions made by the AO and hence, we reverse the findings of the Ld.CIT(A) and direct the AO to delete the additions made towards unexplained expenditure u/s.69C of the Act, amounting to Rs.17 Crs. towards alleged distribution of cash for votes. 10. In the result, the appeal filed by the assessee in ITA No.3028/Chny/2019 is partly allowed. ITA No.3092/Chny/2019: 11. The Revenue has raised the following grounds of appeal: 1. The order of the learned Commissioner of Income Tax (Appeals) is erroneous on facts of the case and in law. 2. The Id. CIT(A) erred in directing the Assessing Officer to delete the protective addition of Rs.17,00,00,000/- made on account of unexplained expenditure u/s.69C of the Act. 3. It is submitted that the protective addition of Rs.17,00....