AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2022 (2) TMI 1378
X X X X Extracts X X X X
X X X X Extracts X X X X
....-12 was not supported by any seized material. For AY 2012-13, the additions were merely based on loose dumb document which did not belong to the assessee. The Ld. CIT-DR supported the findings given by lower authorities and submitted that the additions were based on seized material found during the course of search action. Having heard rival submissions and after considering the material on record including the orders of lower authorities, our adjudication would be as under. 3.1 The assessee firm was constituted on 25.02.2010 and is stated to be engaged in money lending business and allied businesses. The firm had six partners but the day-to-day affairs of the business were looked after by Shri T. Kannan, husband of one of the partners. Consequent to recovery of cash of Rs.122.43 Lacs by Madurai Police on 30.08.2011 from employees of the assessee, the assessee firm was subjected to search proceedings on 01.09.2011 wherein certain books of account and other papers were found and seized besides seizure of cash of Rs.8.78 Lacs. Consequently, notice u/s 153A was issued to the assessee on 08.06.2013 in response to which the assessee offered income of Rs.100.28 Lacs for AY 2011-12 in th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....income at Rs.0.89 Lacs. As noted in preceding paragraphs, a rough day book written up-to 31.01.2011 for the money lending business was seized. The assessee did not maintain any books of accounts for money lending business after January, 2011. It was held by Ld. AO that the intention of the assessee was never to disclose the transaction of money lending as well as money transfer business. Therefore, the business was being done in a secret manner on computer system with use of codes / cryptic short name. It also transpired that the assessee had done business in the name of other group concerns viz. M/s Ponmahal Auto Finance and M/s Srimahal Finance also which had either common partners or the family members as partners. Accordingly, Shri T. Kannan, who was managing day-to-day affairs of the business, was asked the furnish the amount of loan outstanding in these three firms as on 31.08.2011. However, he expressed inability to disclose the exact amount. In the Balance Sheet for 31.03.2011 as well as for 31.03.2012, the assessee had not shown any loan outstanding. The Ld. AO opined that the amount of loan outstanding on the date of search was to be ascertained from loose sheet no.12 of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hereas the computerized printout sheet no. 12 in Annexure PAF/DAM/LS/S, SI.No.1 shows the loan outstanding as Rs. 6,20,54,000 which is an unimaginable figure for a small money lending firm like us. j. We don't know from where the single sheet of paper had been brought into our firm and we totally disown it. In other words, the assessee disowned this sheet of paper and submitted that it did not belong to the firm. 4.3 However, Ld. AO rejected the same on the ground that the assessee did not raise any such contention while replying to various questions put before him during search proceedings. The Ld. AO opined that the assessee had done the business clandestinely without any intent to declare the transactions to the department. The books were titled in fictitious name to mislead the authorities in believing that the records do not belong to the firm. In fact, other loose sheets bundles as seized did not bear the name of the firm but still it was accepted by the assessee that the bundles belonged to the firm. Further, it was not possible to go through every paper at the initial stage since there were numerous print outs of money transfer business and Annexure-12 may have rema....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the employees of the assessee. The cash of Rs.46.60 Lacs was seized by the Police from the business premises of the assessee. The cash of Rs.8.89 Lacs was seized during search operations. It was submitted that the money was sourced out of capital of firm. However, in the absence of any satisfactory evidences, the submissions were rejected and the amounts were added as unexplained cash u/s 69A. Appellate Proceedings 5.1 During appellate proceedings, the assessee relied on the decision of Hon'ble Supreme Court in the case of CBI V/s V.C.Shukla (1998 3 SCC 410) wherein it was held that file containing loose sheet of papers are not 'books' and hence entries made therein are not admissible u/s 34 of the Evidence Act. The Hyderabad Tribunal in the case of DCIT V/s Shri K. Babu Rao (ITA No.329/Hyd/2012 24/01/2014) held that other than loose papers, AO had not brought on record any corroborative material or evidence to show that inference made by hm was correct. Guess work is not possible in case of search proceedings and it is not permissible to assess the undisclosed income in the absence of any evidence. The unsubstantiated loose sheets cannot be considered as conclusive evidence to ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hich is solely based on entries stated to be contained in one seized document i.e., loose sheet No.12 of Annexure PAF/DAM/LS/S, Sl. No.1. It has been alleged by Ld. AO that the said document contained the list of persons against whom loans were outstanding as on 31.07.2011. In other words, it is the allegation of Ld. AO that the assessee had advanced loans to all these persons and earned interest for the month of July, 2011. The copy of this document is on record. The same was seized during search proceedings. However, after going through the statement of Shri T. Kannan, it could be seen that this document was never confronted to him by the search team. The perusal of this document, as placed on record, would show that it is a two-sheet paper and does not bear any date, title, description or any inscription which would show that it was, in any way, connected with the assessee firm. It is an unsigned document. There is no other evidence on record that the assessee was doing money lending business after 31.01.2011. In fact, no such interest income has been offered to tax by the assessee during this year and no such interest income has finally been assessed by Ld. AO for any part of t....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... AO was obligated to establish that the notings revealed either unaccounted income or unaccounted investment or unaccounted expenditure of the assessee. Additions could not be made simply on the basis of loose unsigned and undated computer sheets. These sheets were to be considered in the nature of 'dumb document' having no evidentiary value and could not be taken as the sole basis for determination of undisclosed income of the assessee. No fact-based finding has been rendered by Ld. AO that such transactions gave rise to the income in the hands of the assessee. 7. Proceeding further, it is trite law that in case of search proceedings, the additions are to be based solely on the basis of incriminating material found during the course of search operations. Guess work or estimation or extrapolation of income is not permissible unless there are strong evidences to suggest otherwise. The additions are to be based solely on tangible material and not on the basis of estimations or extrapolation theory. 8. The aforementioned legal position is duly supported by the judgment of Hon'ble Supreme Court in case of CBI v. V.C. Shukla (1998 3 SCC 410) wherein it was held that any presumpti....