TaxTMI 
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2023 (4) TMI 208
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....r: IT(SS)A No. 185/Ind/2020 - Revenue's appeal for AY 2008-09: "(1) On the fact and in the circumstances of the case, the Ld. CIT(A) erred in deleting the addition of Rs. 1,89,52,017/-made by the AO on account of unexplained investment. (2) On the fact and in the circumstances of the case, the Ld. CIT(A) erred in granting the benefit of exemption under section 11 of the Income-tax Act, 1961 to the assessee." IT(SS)A No. 186/Ind/2020 - Revenue's appeal for AY 2009-10: "(1) On the fact and in the circumstances of the case, the Ld. CIT(A) erred in deleting the addition of Rs. 98,52,368/- made by the AO on account of unexplained investment. (2) On the fact and in the circumstances of the case, the Ld. CIT(A) erred in deleting the addition of Rs. 82,50,000/- made by the AO on account of unexplained investment. (3) On the fact and in the circumstances of the case, the Ld. CIT(A) erred in deleting the addition of Rs. 19,01,500/- made by the AO on account of unexplained investment. (4) On the fact and in the circumstances of the case, the Ld. CIT(A) erred in deleting the addition of Rs. 2,00,00,000/- made by the AO on account of unexplained expenditure. (5) On the fact an....
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....d for AY 2013-14 was made u/s 143(3) vide a consolidated assessment-order dated 27.03.2015 wherein certain additions/disallowances were made. Being aggrieved, the assessee went in first-appeal and succeeded. Now, aggrieved by the order of first-appellate authority, the revenue/assessee have filed these appeals/cross-objections assailing the orders of Ld. CIT(A) for AY 2008-09 and 2009-10. 7. We would proceed year-wise. Since some of the grounds raised by revenue in appeals and by assessee in cross-objections are identical/interrelated, we would take up those inter-related grounds together for the sake of convenience and smooth adjudication. A.Y. 2008-09: Ground No. 1 of Revenue's appeal and Ground No. 2 to 5 of Assessee's C.O.: 8. These grounds relate to the addition of Rs. 1,89,52,017/- made by the AO on account of unexplained investment. 9. Facts apropos to these grounds are such that during assessment-proceeding, the Ld. AO observed that the assessee has made investments in construction of certain colleges. In order to ascertain the exact quantum of investment, the Ld. AO made a reference to Departmental Valuation Officer (DVO) vide letter dated 24.09.2014 u/s 142A whereu....
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....egard, the Ld. AR straightaway carried us to direct decision of Hon'ble Supreme Court in Sargam Cinema Vs. CIT (2010) 328 ITR 513 (SC), wherein it was categorically held thus: "3. In the present case, we find that the Tribunal decided the matter rightly in favour of the Assessee in as much as the Tribunal came to the conclusion that the assessing authority could not have referred the matter to the Departmental Valuation Officer (DVO) without the books of account being rejected. In the present case, a categorical finding is recorded by the Tribunal that the books were never rejected. This aspect has not been considered by the High Court. In the circumstances, reliance placed on the report of the DVO was misconceived. 4. For the above reasons, the impugned judgment of the High Court is set aside and the order passed by the Tribunal stands restored to the file. Accordingly, the Assessee succeeds." Ld. AR also relied upon Goodluck Automobile Pvt. Ltd. 359 ITR 306 (Guj) where it was held that the rejection of books of accounts should precede reference to DVO and, therefore, report of DVO cannot form the foundation for rejection of books of accounts. The Gujarat High Court held that....
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....ars in separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of the six AYs "in which both the disclosed and the undisclosed income would be brought to tax". iv. Although Section 153 A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment "can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material." v. In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153 A is relatable to abated proceedings (i.e. those pending on the date of search) and the word 'reassess' to completed assessment proceedings. vi. In so far as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only o....
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....d to be incomplete or unreliable and also have not been rejected by the Ld. A.O and secondly Valuation was done of the incomplete project which has been valued not on the basis of local price but on the basis of Delhi rates which are universally accepted on higher side. Therefore since no defects were pointed out in the books of accounts regularly maintained by the assessee and are duly audited and no incriminating material was found in the search to show that unaccounted investment in the building project has been made, addition made purely on the basis of Departmental Valuation Report, we find no reason to interfere in the finding of Ld. CIT(A) who was rightly deleted the addition for the alleged undisclosed investment u/s 69B of the Act made by the Ld. A.O at Rs.2,73,48,559/-, Rs.5,32,58,155/- and Rs.4,38,32,956/- for Assessment Years 2012-13, 2013-14 and 2014-15 respectively. We accordingly confirm the finding of Ld. CIT(A) on this issue and dismiss Revenue's common Ground No.1 raised for Assessment Years 2012-13, 2013-14 and 2014-15 in ITA No.174 to 176/Ind/2018." [Emphasis supplied] 15. With these submissions, Ld. AR argued that the addition made by Ld. AO is not sustainabl....
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..... AO made reference to DVO on 24.09.2014 and the DVO submitted report on 04.03.2015. Thus, the event of making reference to DVO had taken place before 01.10.2014 and that too without rejecting books of account. In such a situation, we suffice it to say that the Ld. AO was not justified to make a reference in the light of decision of Hon'ble Supreme Court in Sargam Cinema (supra) and the provision of sub-section (2) of section 142A. 17. Regarding second contention raised by Ld. AR challenging the addition made in an abated year without having incriminating-material in his possession, we observe that the Hon'ble jurisdictional High Court in Gahoi Dal & Oil Mills (supra) has clearly held that in absence of incriminating material, addition cannot be made in an assessment of unabated year u/s 153A. Ld. DR is not able to demonstrate any decision of Hon'ble Supreme Court holding against the decision of Hon'ble jurisdictional High Court. At this stage, we would also like to mention that in their later decision in the case of Pr. CIT and ors. Vs. MeetaGutgutia, Prop. Ferns 'N' Patels and Ors. (2017) 395 ITR 526 (Delhi), the Hon'ble Delhi High Court reiterated with approval their observatio....
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....mption u/s 11 of the Act. In view of the above discussion and remand report of the AO, the AO is directed to allow appropriate exemption u/s 11 of the Act as per prevailing provisions of the Act. Therefore, appeal on this ground is Allowed." 21. Before us, Ld. DR argued that the assessee was not entitled to exemption u/s 11 as there are additions made by department which shows that the activities of assessee were not genuine. With such short submission, the Ld. DR prayed to uphold the denial of exemption u/s 11 to assessee. 22. Per contra, the Ld. AR submitted that nowhere in the assessment order, the Ld. AO has made any comment on denial of exemption u/s 11 to the assessee. However, since the Ld. AO had computed the total income of assessee without giving the benefit of exemption u/s 11, the assessee agitated this issue before the Ld. CIT(A) during first-appeal and therefore only the Ld. CIT(A) had occasion to consider this issue. Ld. AR further submitted that neither there is any illegality in the working of society nor any kind of infringement of provisions of section 11 or 13 noted by Ld. AO. As a matter of fact, Ld. AR also submitted that the assessee has fulfilled all condi....
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....reement of land executed between Smt. Neetu Sahibani and assessee. This agreement showed the actual consideration of land at Rs. 60,24,000/- as against the consideration of Rs. 75,00,000/- declared in final registry. When the Ld. AO confronted the assessee on this difference, the assessee submitted that the actual consideration paid by assesseeas per registry is Rs. 75,00,000/- which is more than the consideration of Rs. 60,24,000/- revealed by agreement and hence there is nothing adverse against assessee. After such reply, the Ld. AO moved to a different direction and observed that impugned land had been purchased/registered for Rs. 75,00,000/- which was below the "prevailing market price" of land in that area and hence the assessee must have paid on-money @ 110%. The Ld. AO estimated "prevailing market price" at Rs. 1,57,50,000/- and accordingly made an addition of Rs. 82,50,000/- [Rs. 1,57,50,000 (-) 75,00,000] u/s 69B. 29. During first-appeal, the Ld. CIT(A) observed that the addition has been made on pure presumption and conjecture without bringing any material, loose-paper or any evidence whatsoever to establish that the assessee had actually paid the consideration over and ....
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....n-money. The Ld. AO estimated "prevailing market price" at Rs. 22,01,500/- and accordingly made an addition of Rs. 19,01,500/- (Rs. 22,01,500 (-) Rs. 3,00,000] u/s 69B. 34. During first-appeal, the Ld. CIT(A) observed that the addition has been made on pure presumption and conjecture without bringing any material, loose-paper or any evidence whatsoever to establish that the assessee had actually paid the consideration over and above the declared consideration of Rs. 3,00,000/-. Ld. CIT(A) further held that there is no basis even to estimate the "prevailing market price" at Rs. 22,01,500/- and this was a mere guess-work done by Ld. AO. Based on these findings, the Ld. CIT(A) deleted the entire addition of Rs. 19,01,500/-. 35. Before us, Ld. DR dutifully defended the assessment-order. Per contra, the Ld. AR placed a heavy reliance on the order of Ld. CIT(A). 36. We have considered rival submissions of both sides and perused the material held on record. After a careful consideration, we observe that the position of this ground is broadly similar to the ground No. 2 decided in preceding paragraph but there is a substantial difference. In ground No. 2, the actual consideration shown ....
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....ut the same is not acceptable:- A. The assessee has not submitted any material evidence to substantiate his claim. B. As per the sheet it is evident that the assessee has made cash expenditure of Rs. 5,80,00,000/- in AY. AY. 2009-10, 2010-11 and 2011-12. The above cash expenditure has not been entered in the books of accounts of assessee. ] C. This above handwritten note book has been found and seized from the premise of the assessee. Therefore, in view of provisions of section 132(4A) of the Income tax Act, 1961, it is presumed that the transactions recorded in this loose paper pertain to the assessee and the content of these transactions is true. 12.4 Therefore, in view of above facts and circumstances of the case, it is established and held that the above excel sheet records the cash expenditure Rs. 5,80,00,000/- in AY. A. Y. 2009-10, 2010-11 and 2011- 12. These cash expenditure are not recorded in the books of accounts of the assessee. 12.5 In the light of above observations, I am to hold that the source of such expenditure of Rs. 5,80,00,000/- in AY. A.Y. 2009-10, 2010-11 and 2011-12 does not stand explained by the assessee and therefore, deserves to be added as undi....
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....ver, as per AO no year wise/date wise entries were mentioned in the excels sheet, hence it was presumed by the that the pertains to AYS 2009-10 to 2011-12. Therefore, it cannot be said that the impunged expenses represents actual expenditure for AYS 2009-10 to 2011-12. Therefore, the AO has erred in totality in making addition on sheer assumption and guess work. Further, the AO during assessment proceedings has verified books of accounts of the appellant and no adverse comment was pointed out. On plain reading of the contents of the excel sheet it was observed that the AO has made addition on the basis of entry in the name of Shri Sanjay Pandey of 580.00 lakhs as mentioned in bold fonts on page no 34 of the assessment order. However, the addition made by the AO is in three different years and is not in synchronization with contents of the impunged excel sheet. The findings of the AO are based on guess work laced with figment of imagination. No details of beneficiaries, date of payment, details of payment either in cash/cheque/kind, details of payer are completely missing. Most importantly, no independent corroborative evidence was found in possession of appellant having direct nexu....
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....ies in books of account cannot, without Independent evidence of their trustworthiness, fix a liability upon a person. The Hon'ble Supreme Court also observed that even assuming that the entries in loose sheets are admissible unders. 9 of the Evidence Act to support an inference about correctness of the entries still those entries would not be sufficient without supportive independent evidence. Rakesh Goyal Vs. ACIT (2004) 87 TTJ (Del) 151- The findings of Hon'ble Tribunal was as under- "20.1 After perusing the findings of the CIT(A) and the submissions of both the parties, we do not find any infirmity in these findings. Firstly the finding of the CIT(A) has not been controverted by the learned Departmental Representative by filing any positive evidence. The copies of the pages found from the possession of the assessee are placed in the paper book and after going through these papers, we find that these are simply deaf and dumb documents and they cannot be considered for making any addition. This is a settled principle of law that any document or entry recorded in those documents should be corroborated with positive evidence. Here in the present case nothing has been ....
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....overed during the course of search from the assssee are dumb documents and there are concurrent findings of CIT(A) and the Tribunal to this effect. Since the conclusions are essentially factual no substantial question of law arises for consideration". Jayantilal Patel Vs. ACIT &Ors (1998) 233 ITR 588 (Raj) - Held that- "During search at the residence of Dr. Tomar, the Department official found a slip containing some figures. This piece of paper claimed to have been recovered at the time of search contains figures under two columns. In one column, the total of these figures comes to Rs. 17.25,000 from 31st May, 1989, to 8th Dec., 1989, and in the other column, the total of these figures comes to Rs. 22.12.500. An addition of Rs. 22.12.500 on the basis of figures on a small piece of paper in respect of purchase of Plot No. B-4, Govind Marg, Jaipur was made by the AQ. This plot B-4, Govind Marg, Jaipur, has been purchased jointly by Dr. Tomar, Dr. Mrs. Tomar and B.S. Tomar, HUF Held that no addition on account of entries 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, ....
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....tion of additions made by Tribunal of assumed undeclared payments made for purchase of property was on basis of facts. Ashwani Kumar V. ITO (1991) 39 ITD 183 (Del) and Daya Chand V. CIT (2001) 250 ITR 327 (Del) and S.P. Goel V. DCIT (2002) 82 ITD 85 (Mum.) Nine out of 19 slips found were without any name or amount and therefore were dumb documents and no adverse inference could be drawn. Common Cause (A Registered Society) Vs. Union of India - 30 ITJ 197 (SC). In this case, the Hon'ble Court held that without any independent evidence or corroborative material, no addition is permissible on the basis of loose paper jottings & notings. The relevant paras of the order are as under :- 16. With respect to the kind of materials which have been placed on record, this Court in V.C. Shukla's case (supra) has dealt with the matter though at the stage of discharge when investigation had been completed 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....
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....e for himself by what he chooses to write in his books behind the back of the parties. There must be independent evidence the transaction to which the entries relate and in absence of such en relief can be given to the party who relies upon such entries to support his claim against another In Hira Lal v Ram Rakha the High Court, while negativing a contention that it having been proved that the books of account were regularly kept in the ordinary course of business and that, therefore, all entries therein should be considered to be relevant and to have been proved, said that the rule as laid down in Section 34 of the Act that entries in the books of account regularly kept in the course of business are relevant whenever they refer to a matter in which the Court has to enquire was subject to the salient proviso that the entries shall not alone be sufficient 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 f....
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....place and does not contain any information in relation to the nature and party to the transaction in question." (vi) Jagdamba Rice Mills Vs. ACIT (2000) 67 TTJ (Chd) 838 Held that "No addition can be made on dump documents". It is settled legal position that onus of proof is on the person who makes any allegation and not on the person who has to defend. As per legal maxim "affairmanti non negantiincumbit probation" means burden of proof lies upon him who affirms and not upon him who denies. Similarly as per doctrine of common law "incumbit probation qui digit non qui negat" i.e. burden lies upon one who alleges and not upon one who deny the existence of the fact. Further, it is most important to mention that nowhere in the said impunged excel sheet it has been mentioned that the alleged expenditure was done in AYS 2009-10 to 2011-12. The AO has failed to discharge his onus of proof especially when addition has been made under "deeming fiction". In view of this lacune on the part of AO, impunged addition is legally not sustainable. As held in the case of CIT v/s KP Varghese 131 ITR 574 (SC) by Hon'ble Apex Court in absence of evidence that actually assessee paid more am....
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....Sanjay Pande was provided to the appellant. Hon'ble Supreme Court in the case of Andaman Timber Industries Vs. Commissioner of Central Excise Kolkata in Civil Appeal No.248 of 2006 has held that in absence of cross-examination of parties, the assessment proceedings to be quashed. Further, the Hon'ble Gujarat High Court in the case of Praful Chunilal Patel Vs. M.J. Makwana [236 ITR 832 (Guj)) and JCIT &Ors. Vs. George Willimson (Assam) Ltd. [258 ITR 126 (Guj)] has held that statement of third party cannot be relied upon without having any corroborative evidence. Similarly, Hon'ble Supreme Court in the case of Kishanchand Chellaram V/s. CIT 125 ITR 713 (SC) has held that adverse inference cannot be drawn against the assessee from the statement of third parties. Similarly, Ld. AR of the assessee has relied upon the decision of Hon'ble High Court in the case of CIT V/s. Indrajit Singh Suri (2013) 33 Taxmann 281 (Guj.) that where additions were made on the basis of statements of persons who were not allowed to be cross examined by the appellant, additions were not sustainable. It is a serious flaw on principles of natural justice which renders the order a nullity. 4.5.....
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.... It was further requested to kindly let us know the source and the manner in which the aforesaid file has been extracted to enable to submit new response to the same. The same submission was reiterated in further two letters which are reproduced in the assessment order at page 19 and 20. Without any details, the Ld. AO made the addition on the assumption that the payment is made in three year. The CIT(A) has deleted these additions from page 63 to 74 of the order and held that the impugned excel sheet or rather say it as a dumb document should be speaking one, having direct nexus with the assessee. Secondly, the excel sheet are undated, unsealed and unsigned. Thirdly, no independent incriminating material was found suggesting alleged expenditure by the assessee. Relying on number of cases which are quoted from page 65 to 72, the Ld. CIT(A) deleted the addition. Arguments It is humbly submitted that the said excel sheet has not been found in the hard disc of the assessee as alleged by the Ld. AO. In spite of our repeated request, the source of this excel sheet has not been provided by the Ld. AO. As seen from the excel sheet the name of Sanjay Pandey is mentioned (pg. 34 of ass....
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....9;panchnama made u/s 133A only two hard discs have been seized from the office the assessee -one relating to the Accounts section and the other relating to the fees counter. There is no mention of any file by the name of CFO MIS etc as claimed in the referred questionnaire in the said computer discs. As such it is most humbly requested to please provide the assessee the information w.r.t the panchnamal seizure memo which mentions the relatable hard disk other storage material from where this file has allegedly been extracted from You are therefore, requested to kindly let us know the source and the manner in which the aforesaid file has been extracted to enable us to submit due response to the same. Once you let us know the seized/ impounded source from which the aforesaid documents were extracted and provide us the copy of the Panchnama in which the aforesaid extraction from the seized/ impounded evidence was recorded/ evidenced, we will ascertain if this document was prepared by any person looking after the affairs of the society and on what basis the document, if true, was prepared and will file appropriate reply. We also wish to add here that no document whatsoever was seiz....