TaxTMI 
TaxTMI 
2022 (7) TMI 252
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....ct contract to Murudeshwar Power Corporation Ltd, which is a subsidiary of RNSIL, in 2008- 09. Therefore, the assessee is in an influential position and has direct connection with the RNSlL. Thus, there is a reason to believe that the assessee is one recipient of sundry payments from RNSIL to the tune of Rs. 1,00,00,000/-, Rs. 1,00,00,000, and Rs. 2,11,13,832/- for A.Yrs. 2009-10, 2010-11 and 2011-12 respectively. (3) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the additions made by the AO without appreciating the fact the diary jottings and the deleted data containing the details of all the transactions that was retrieved using the forensic tools during the course of search proceedings has not been disputed by VP(Finance) in RNSIL in his sworn statement u/s 132 (4) of the Act on the date of search. (4) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in not taking into account that the evidence mentioned above contains details of sundry payments that were made in cash were not made part of accounts. The evidence is substantial and is backed up by other corroboration and that they....
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....sons. In our opinion there is a good and sufficient reason for the short delay of two days in filing the appeal before this Tribunal. Accordingly the delay of two days in filing the appeal before this Tribunal is condoned and appeal is admitted for adjudication. 6. The facts of the case are that the assessee is an individual and the former Chief Minister of the State of Karnataka. The appellant derives income from Salary, House Property and Other Sources and for the year under appeal the assessee had filed his Return of income for AY 2009-10 on 31.07.2009 reporting a total income of Rs. 30,70,370/-, return of income for AY 2010-11 on 30.07.2010 reporting a total income of Rs. 26,53,320/- & Return of income for AY 2011-12 on 30.07.2011 reporting a total income of Rs. 57,74,420/-. No further proceedings for the assessment of income for the year under appeal were taken up after filing the aforesaid return of income. The assessee received notices under Section 148 of the Act dated 13.03.2015, from the A.O. calling upon the assessee to file his return of income for the years under appeal. In response to the aforesaid notices issued by the A.O., the assessee vide letter dated 02.04.20....
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....the pre- assessment notice, the assessee came to know of the A.O's intent to rely upon the seized materials and statements recorded from the employees of M/s. RNS Infrastructure Ltd., at the time of search. In response to the aforesaid pre-assessment notices, the assessee vide separate letter also dated 14.03.2016 and filed on 15.03.2016 sought for the copies of the seized materials and statements recorded that were referred to by the A.O. in the pre-assessment notices dated 08.03.2016. This is because after the assessment was re-opened on 13.03.2015 and case selected for scrutiny on 11.08.2015, the assessee was informed of the aforesaid issue only when he received the reasons recorded vide letter dated 24.02.2016 followed by the pre-assessment notice dated 08.03.2016. When the aforesaid issue was not put to the assessee at any stage before, there is no question of the assessee being served with the copies of the seized materials and statements recorded that were stated in the said notice much before. Thus, the assessee made a bonafide prayer for the copies of the aforesaid materials that were being relied upon by the A.O. in the pre-assessment notice dated 08.03.2016. This req....
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....litary addition of Rs.2,11,13,832/- in respect of the alleged payments made to the assessee by M/s.RNS Infrastructure Ltd., during the year under appeal. 7. Against the assessment order the assessee carried appeal before the learned CIT(A). The learned CIT(A) observed with regard to reopening of assessment that the AO recorded reasons to believe based on information received consequent to search and seizure carried in the case of M/s. RNS Infrastructure Pvt. Ltd.. It has been mentioned in the reasons recorded that the assessee has deleted data in the seized computer server, which have been retrieved by using forensic tools. The deleted data represents day-today transactions made in cash outside the regular books of account. As per the said information found in the course of search, the assessee is one of the recipients of the said payment and hence, there was a reason to believe that income chargeable to tax has escaped assessment. The assessee's objection on the said reasons is that the same do not bring out any belief that there is escapement of income. However, at the sage of recording the reasons the AO is not required to give any final conclusions and it is sufficient if th....
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.... Vice President, RNS Infrastructure Limited and Sri Naveen R. Shetty, Managing Director of RNS Infrastructure Limited, it is submitted that the cross-examination of the aforesaid two witnesses has shown that the seized materials relied upon by the department to suspect that there were cash payments made to the appellant is totally unreliable and unworthy of placing any credence. 3.1 In course of the cross-examination Sri Sunil Sahasrabudhi, Vice President, had submitted that he had given a statement u/s. 132(4) of the Act on 16/02/2012, which was obtained by force. In this regard, he has furnished copy of the letter dated 07/03/2012 addressed by him to the learned Deputy Director of Income-tax (Inv.). Unit-1(3) Bangalore in course of the search action in the case of RNS Infrastructure Limited. In the aforesaid letter Sri Sunil Sahasrabudhi has categorically mentioned that his initial statement recorded on 16/02/2012 was under force and he was threatened to give statement as per the wishes of the Departmental Officials and therefore, he has given certain statements and Signed certain statements under pressure without understanding the contents of the statements and document....
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....vered by the department from the computer systems of M/s. RNS Infrastructure Limited were not reliable. Infact, he has gone to the extent of stating that these documents may have been planted by vested interest to damage the business reputation of M/s. RNS Infrastructure Limited and other group entities. No statement has been made by Sri Naveen R. Shetty that the appellant was in receipt of any cash payments from M/s. RNS Infrastructure Limited and this aspect of the matter is not in dispute since no such statement has been pointed out or relied upon. 3.5 Even in course of the cross-examination, he has maintained the same stand and has clarified in answer to Q.No.3 that he had not made any statement about any cash payment made to the appellant. Even the re-examination of Sri Naveen R. Shetty by the learned A.0. has not thrown any light on the materials to support the allegation that there were cash payments made by M/s. RNS Infrastructure, Limited to the appellant. Thus, nothing turns much on the statement of Sri Naveen R. Shetty, which far from supporting the case of the department actually substantiates and drives home the stand taken by the appellant in his submissions ....
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....eous expenses. Q.05 It is noted that the wages have already been booked. Hence, please explain as to why they have to be book again under the head 'sundry' ? Ans. The sundry expenses are all cash expenses for which there are no vouchers. These are not entered in the ledger on account of the fact that there are no receipts for these expenses. These payments are made outside the books and are not part of regular books of account. Q.06 Do you mean to say that whatever expenditure is mentioned under the head 'sundry' is unaccounted cash expenditure without voucher and is outside the regular books of accounts? Ans. Yes Q.07 Does that mean the amount of approximately Rs.54 crores as per the documents shown to you and several others that are corresponding for different periods and appearing under the had 'sundry' are unaccounted cash payments made outside the books of accounts. Ans. Yes Q.08 What is the purpose for making such cash payments? Ans. These cash payments are made on the decision taken by the Management. I do not know the purpose for which these cash payments were made. As stated by ....
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....or [Bebbar], Chief Eng.[B.8.Patilj, lawer, Mumbay, lawyer, Delhi, S.E. [H.O], EE [Shinde], Thakare Bal, S.E.Gaikwad, S.E. [G. T.Gaikwadj, Irriganation Minister E.E. [Wadagavi], Ravi [PA-C.M], Sharad pawar, Ajit power. PA to Ajit Pawar, Paloke [5.E.], Irrigation Minister, new irrigation minister, suni! , tatkare, PA to min. A. Payments is not made to these persons, but is made on their behalf and the details are not known to me and amount mentioned is in rupees. Q.21 Why has this information been given to you over phone by the branch? A. To prepare income and expenditure account of the branch the above information is given. Q.22 Are all the details income and expenditure account of the branch informed to you over phone or these were the only payments that were informed over phone? A. Only these payments have been informed over the phone. Q.23 Why so ? A. Other information on monthly basis they used to submit to us. Q.24 Please be specific as to why only these payments were informed over phone or rather these were not included in the monthly details submitted? A. Other information is also submitted over ....
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....o imaged copies [A/RNSIL/21-22] have been found and seized from this premise during the course of search. Please certify that the Q.34 Do you have anything to say? A. Nothing" 9. Further the CIT(A) observed that there is nothing to show that Shri Shri Sunil D. Sahasrabhudhe any statement whether M/s. RNS Infrastructure Pvt. Ltd. had made any cash payment to the assessee in all the 3 years as per the seized material relied upon by the AO. He also recorded the cross examination of Shri Sunil D. Sahasrabhudhe as below: - Q1. Do you recollect a statement on oath recorded from you u/s.132(4) in course of search proceedings in the case of M/s. RNS Infrastructure Ltd., on 16.02.2012 ? Ans. Yes, I recollect having made the statement and the said statement was taken under force during midnight. Q2. Have you informed income tax department about this statement which you claim was token at midnight under force? Ans. Yes, on the date of search itself I have brought this to the notice of IT Officer who was recording the statement of the Managing Director that the statement was taken under force. In continuation to this on 07.03.2012, I hav....
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....e ground that his statement dated 16.02.2012 was taken by force. Thereafter, the DDIT (Inv.) has neither done any cross examination of Shri Sunil D. Sahasrabhudhe, nor carried out any investigation to establish and corroborate the said statement. Going by the version of DDIT, the Investigating Office should have examined the source of generation of huge cash needed for such cash payment outside the books to establish and link the cash payment. By not doing any such linkage without there being any other corroborative evidence, leaving the facts as it is in the face of retraction by the witness, proves the contrary. Further, Sh. Sahasrabhudhe has also admitted in course of his cross-examination that he was not shown at all the relevant seized material, based on which the addition has been made by the A.O. in the case of the assessee. He has also stated that he has not made any statement to the effect that assessee was paid any amounts in cash, in course of the search proceedings conducted by come-tax Department. The Witness Sri Sunil Sahasrabhudhe has also been reexamined by the A.O. after cross-examination by the assessee and nothing has been elicited from him, which brings out any ....
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.... Ans. As of now, I do not recall any business transactions. As I have stated earlier, I am seeing these documents for the first time. Q9. Was Mr. Prashant Shetty working for M/s. RNS Infrastructure Ltd. in relevant AY ? Ans. As there are more than 700 employees in our organization, I do not recall any employee named Mr. Prashant Shetty. Q10. Who was the chairman of M/s. RNS Infrastructure Ltd. in the relevant A. Y. ? Ans. Dr. R.N. Shetty was the chairman of M/s. RNS Infrastructure Ltd. in the relevant A. Y. Q11. Do you have anything else to say? Ans. No." 11. From the above re-examination of Sri Sunil Sahasrabhudhe in course of the remand proceedings, it is seen that the seized materials relied upon by the A.O. were not shown to Sunil Sahasrabhudhe at the time of search and that he has taken a stand that the said seized materials is not: part of the books of account of M/s. RNS Infrastructure Limited. He has maintained the same stand about his statement being taken by force and nothing has been elicited from him to substantiate the case of the Department that the appellant was paid cash as per the seized materials. At this ....
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....taken a categorical stand that the data retrieved from the computer server of M/s. RNS Infrastructure Limited was a fabricated data and does not relate to the accounts of Mis. RNS Infrastructure Limited. Sri Naveen R.Shetty has also confirmed that the statement of Sri Sunil Sahasrabhudhe, dated 16.02.2012 was taken by force and he had been informed of the same at the time of search itself. He has also stated that Sri Sunil D.Sahasrabhude was called by the Income-tax Officials, who was recording the statement of Sri Naveen R.Shetty at the time of search and he had confirmed the same to him. Thereafter, the recoding of the statement of Sri Naveen R.Shetty was stopped. Sri Naveen R.Shetty has also categorically stated that no cash payments were made to the appellant in Limited. This is the consistent stand taken by him before the department. 13. Sri Naveen R.Shetty was also re-examined by the A.O. and the following statement of Sri Naveen R.Shetty on re-examination is recorded: "Re-examination by the Assistant Commissioner of Income Tax Q1 What expenses were being booked under the head "Sundryexpenses" in the books of accounts of M/s. RNS Infrastructure Ltd., in t....
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....h the concerns. Q11. Do you occupy a position of responsibility in M/s. Murudeshwar Ceramics Ltd. ? Ans. I am a director of the company M/s. Murudeshwar Ceramics Ltd. Q12. Are you aware of the business transactions of M/s. RNS Infrastructure Ltd., with the following concerns - Cstystalline Rocks, Sangam Granites and Harishranam and Granite City, in the relevant A. Y.? Ans. As of now, I do not recollect any of these names. Q13. Are you aware of any expenses that had been made out of the books of M/s. RNS Infrastructure Ltd., in case of Upper Bhadra Project, for the relevant A. Y.s ? Ans. No such expenses have been made in case of Upper Bhadra Project or any other projects. Q14. Are you aware of any 'sundry-expenses' being made in case of Upper Bhadra Project or related work? Ans. We do not have any head "Sundry-expenses' in the books of accounts of M/s. RNS Infrastructure Ltd., for this project or any other project. Q15. Do you have anything else to say ?. Ans. No." 14. From a combined reading of the statements recorded of the aforesaid two witnesses both in course of their original ....
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.... The Dy DIT (Inv), who conducted search in the case of M/s. RNS Infrastructure Pvt. Ltd. has not brought out any corroborative evidence to support the alleged cash payouts. The Dy DIT has not carried out any hot pursuit investigation even after the filing of the retraction letter by Shri Sahasrabhudhe even well before the conclusion of the search proceedings in the case of M/s. RNS Infrastructure Pvt. Ltd. The managing Director Sri RN Shetty, had denied consistently any such payout, from the inception of the search proceedings." 15.1. Again the Revenue is in appeal before us. 16. We have heard the rival submissions. Similar issue came for consideration in the case of Shri D.S. Suresh in ITA No. 462 & 463/Bang/ 2020 for assessment years 2009-10 and 2011-12. The Tribunal vide order dated 22.02.2021 held as under: - 13. We have heard the rival contentions, perused and carefully considered the material on record. In the present case, the addition is based on the diary jottings found during the course of search action in the case of RNSIL on 16.02.2012. We have carefully gone through the diary jottings recorded earlier part of this order. It contains the entry No.5 - MLA ....
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....he present case, the assessee is having grievance for not furnishing the seized material to the assessee and there was no question of providing an opportunity of cross examining of the parties whose statements are relied on by the Assessing Officer while completing the assessment. In these circumstances, we are not in a position to uphold the addition sustained by the CIT(Appeals). The circumstances surrounding the case are not strong enough to justify the rejection of the assessee's plea of asking the copies of the seized material and providing an opportunity of cross examination of the parties concerned. In view of the above, we set aside the order of the lower authorities and allow the ground taken by the assessee in their appeals for both the assessment years under consideration. 14. In the result, the appeals of the assessee are partly allowed." 17. Further in the case of Shri D.V. Sadananda Gowda in ITA No. 895/Bang/2019 the issue is considered by the Tribunal in order dated 30.03.2021 wherein it is held as under: - "7. I have heard rival submissions and perused the material on record. Admittedly, the addition of Rs.5 lakh has been made in the case of the....
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....e is not tenable. In that statement, what he had deposed is the fact that the expenditure under the head "sundry" is unaccounted and as no question on the break up details of sundry expenditure was asked, the possibility of the name of the appellant appearing in any of the answers does not arise. (emphasis supplied) PADMAMEENAKSHI Joint.Commissioner of Income-tax Range-1(3), Bengaluru." 7.1 From the aforesaid facts, it is very clear that there is no nexus between any payment made by RNSIL to that of the assessee. There is no mentioned anywhere that the assessee was the recipient of the payment, the alleged quantum of payment, the date, the month or the year of the alleged payment. There were two sets of reasons for reopening the assessment, one with Rs.15 lakh and another with Rs.5 lakh. In the impugned assessment order, the A.O. at page 2 had stated that there is reason to believe that the amount of Rs.1 crore chargeable to tax for assessment year 2009-2010 have escaped assessment, while the impugned order relates to the assessment year 2011-2012. All these facts point to a situation that the addition has been made merely on surmises, conjectures and without any ....
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.... supported by any corroborative material or evidence to show that the information made by lower authorities is correct. Further unsigned document in the form of diary jottings cannot be relied upon for making or sustaining the addition. In the present case, more so, the Managing Director of RNSIL made a categoric statement in his letter that no payments were made to the assessee in the F.Y. 2008-09 to F.Y. 2010-11. Further even if the Assessing Officer wants to rely on the diary jottings to make an assessment or relying on the statement of any third party, the same is required to be furnished to the assessee and if the assessee wants to cross examine any of the parties whose statements were relied on by the Assessing Officer, the same is to be provided to the assessee In the present case, the assessee is having grievance for not furnishing the seized material to the assessee and there was no question of providing an opportunity of cross examining of the parties whose statements are relied on by the Assessing Officer while completing the assessment. In these circumstances, we are not in a position to uphold the addition sustained by the CIT(Appeals). The circumstances surrounding th....