TaxTMI 
TaxTMI 
2024 (2) TMI 334
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....03,770/- levied by the JCIT (Central), Indore, u/s 271D on account of violating the provisions of section 269SS of the Income-tax Act, 1961. 2) On the facts and in the circumstances of the case, the Ld. CIT(A) erred in holding that the penalty was imposed on the basis of dumb documents despite the fact that the data on the said documents was duly corroborated as per the findings in the penalty order. ITA No. 788/Ind/2019 for A.Y. 2010-11 in the matter of Penalty u/s 271E: 1) On the facts and in the circumstances of the case, the Ld. CIT(A) erred in deleting the penalty of Rs. 1,46,64,000/- levied by the JCIT (Central), Indore, u/s 271E on account of violating the provisions of section 269T of the Income-tax Act, 1961. 2) On the facts and in the circumstances of the case, the Ld. CIT(A) erred in holding that the penalty was imposed on the basis of dumb documents despite the fact that the data on the said documents was duly corroborated as per the findings in the penalty order. ITA No. 790/Ind/2019 for A.Y. 2009-10 in the matter of Penalty u/s 271E: 1) On the facts and in the circumstances of the case, the Ld. CIT(A) erred in dele....
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....f "PATH" and took Tally data from laptop in the name of XYZ 0809-2. The search-team also seized loose papers marked as LPS-1 to 8 from the premise of one Shri G.C. Patidar, an employee of "PATH". The statements of Shri G.C. Patidar were also recorded u/s 132(4) wherein he stated that unsecured loans were taken from various people which were out of books. During assessments of AY 2009-10 & 2010-11 with which were are concerned in these appeals, the assessing authority observed that the assessee has taken loans in cash from "PATH" and also made repayments in cash. Considering such act of assessee as a default committed in violation of section 269SS & 269T of the Act, the assessing authority referred matter to Joint Commissioner of Income-tax (Central), Indore ["JCIT"] for taking action 271D & 271E. Accordingly, the JCIT show-caused assessee in response to which the assessee made a detailed submission including denial of any cash loan having been taken/repaid. However, the JCIT rejected assessee's submission and imposed following penalties: AY Default committed by assessee Penalty section Penalty imposed 2009-10 Cash loan taken from "PATH" 271D 1,59,03,770/- ....
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....s of both sides and perused the orders of lower authorities. At first, we would like to extract the operative part of order passed by ITAT in IT(SS)A No. 32 & 33/Ind/2021 (supra) as under: "7. We have considered rival submissions as well as relevant material on record. The AO has made the addition on account of unexplained interest payment in respect of unaccounted cash loan on the basis of the loose paper seized from the premises of Shri G.C. Patidar an employee of the assessee as well as the tally account in the name of XYZ 0809-2 taken from laptop. The details of the seized document are reproduced by the AO in assessment order in para 7 & 8 as under: 7.1 The AO then proceeded to conclude that the transactions in the tally account of XYZ 0809-2 are corroborated by the transactions recorded in the loose paper seized from the premises of Shri G.C. Patidar and held that the transactions to the tune of Rs. 5,32,60,000/- are cash loan received by the assessee out of book for A.Y.2009-10 on which the AO has computed the interest expenses of Rs. 82,03,684/-. Similarly for A.Y.2010-11 the AO taken loan of Rs. 54,65,000/- and interest expenses of Rs. 58,55,122/-. The det....
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....onsidering the documents marked as LPS-1 and tally account found in the laptop would not lead to the conclusion that the assessee has paid interest on the alleged loan as there is nothing to reveal the payment of interest by the assessee. The entries as found in the account XYZ 0809-2 are regarding the credit and debit of the amounts which are all in round figures and do not represent any interest payment. Therefore, without going into the merits of the alleged transactions of cash loan taken by the assessee the documents relied upon by the AO itself do not reveal any payment of interest except the statement of Shri G.C. Patidar who has mentioned interest rate only and not the payment of interest during the year under consideration. We further note that the AO in para 13.3.5 rejected the contention of the assessee by considering the signature on the loose sheet on cutting and correction as signature of Shri Puneet Agrawal as under: "13.3.5 The contention of assessee is incorrect, important evidence seized from premise of Shri G.C Patidar is serial of 19 of page no.14 of LPS-1 seized from residence of Patidar it consist of signature of Shri Puneet Agrawal clearly meaning th....
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....ant and findings of the AO. Admittedly, the sole basis of such huge addition is one the tally data recovered from laptop of old employee and loose papers sheets seized vide LPS-1 to 8 from premises of Shri G C Patidar. During the course of search, statement of Shri GC Patidar was recorded on oath which has been retracted vide affidavit dated 28.12.2016. Since, the statement given during search has been retracted, therefore, the same cannot be relied upon. As a matter of fact the appellant before, AO as well as before me has stated that the entries in respect of laptop data which has been seized from the office of the company was used by one of its employee Mr. Nilesh Tawrech who was taking tally accounting training under Shri G.C. Patidar, who used to provide him hypothetical entries for learning purpose for that reason and for learning purpose name of the company was taken as 'XYZ'. The appellant has claimed not having any knowledge of company 'XYZ' which has also been stated by appellant during the course of assessment proceedings. The appellant after the search proceedings enquired from his staff member regarding the impugned printouts. Mr G.C. Patidar, who worke....
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....he documents have admitted that the said impunged printouts have been made by his ex- employee who is no more and had also explained the reason for preparing such documents. Shri G.C. Patidar has clearly stated that the tally accounts have been prepared for training purpose only and the data are picked from different sources which also includes random data of appellant. The AO failed to consider that neither the appellant nor his accountant has stated that any such firm actually exists and the transactions as mentioned in the seized printouts have been executed. The additions have been imposed on sheer presumption and assumption basis. Further, the AO did not even bother to carry out independent enquiries from the person whose names are mentioned on LPS-1 & LPS 8 which Was seized from the premises of G C Patidar. The trainee junior Nilesh Tawarech has untimely passed away. Therefore, it is impossible for the appellant to bring Shri Nilesh Tawarech in person for examination on oath. It is pertinent to mention that no incriminating material was found during search having sole direct nexus with any of the impuged cash loan transaction. Furthermore, neither the AO call any of the perso....
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....acing reliance on second table has reached to a inference that during financial year 2008, the Appellant - PATH has received a cash loan of Rs. 115 Lakhs in cash from Agroh (in short AIDPL) and in next financial year the appellant has accepted the cash loan of Rs. 3,66,25,000/- from M/s Agroh Infrastructure Developers Pvt. Ltd (In short AIDPL) and on other hand accepts the same to be cash- buyback of shares. The AO has also held that interest amounting to Rs. 14,83,394/- was charged by AIDPL. Whereas the said document only records some purported cash received and cash paid but nowhere the name of PATH is reflected. Even on second table at page 99, the name of PATH is not reflected therefore to attribute these transactions to PATH is fallacious. The said loose sheet was subject to varying interpretation in the year AY 2008-09 and is a non- speaking/ dumb document. The director of Agroh cannot give any satisfactory reply during the statement recorded at the time of search however during the course of their assessment admitted that they have given loan to PATH. The statement of the Director wherein they admitted giving loan to PATH has not been provided nor the opportunity to cross ex....
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....er has given loan to PATH by cheque, therefore the entries in the loose sheet / tally data can be assumed to be true. The proof of actual transaction taken place cannot be substituted from the presumption howsoever strong it may be it cannot take the place of an evidence. It is onus on the AO to prove that actual transaction of cash i.e. movement of cash actually taken place with the help of documentary evidence. The assessment order does not discuss any such attempt by the department to conclusively establish that the transaction whereby debtor creditor relationship has been created between the two parties. None of the parties from whom the loans are allegedly taken by Assessee Company in cash were examined for the truth of the happening of such transactions. If the alleged cash loans are taken by the assessee company is taken to be true on the fact of it, then there arises a corresponding liability of income tax on such undisclosed income in the hands of giver of the cash loan. In none of the cases, the reciprocity which is a fundamental necessity of existence of transaction was ever proved or attempted by the department. In two cases reopened by the Department of Mr. Anil Poddar....
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.... as 'book' within the meaning of s. 34 of Evidence Act. It has also been held therein by the Hon'ble Supreme Court that even correct and authentic entries 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 under s. 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 add....
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....that person, on such document by itself cannot prove the contents of the document. These are the findings of fact recorded by both the authorities i.e. CIT(A) and the Tribunal." "15. Similarly, in the present case, as already held above, the documents recovered during the course of search from the assessee 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 AO. This plot B-4, Govind Marg....
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.....): it is held that - (i) Additions can be made only when evidence is available as a result of search or a requisition of books of accounts or documents and other material. However additions cannot be made on the basis of inferences. (ii) No facts were available to AO after search and inference of AO did not fall within the scope of Section 158BB. (iii) Deletion 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 :- 6. With respect to the kind of materials which have been placed on record, this Co....
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....ch are within the knowledge of only the scribe of the said diaries as to what they stand for and whom they refer to." 19. With respect to evidentiary value of regular account book, this Court has laid down in V.C. Shukla, thus; "37. In Beni v. Bisan Dayal it was observed that entries in books of account are not by themselves sufficient to charge any person with liability, the reason being that a man cannot be allowed to make evidence for himself by what he chooses to write in his own books behind the back of the parties. There must be independent evidence of the transaction to which the entries relate and in absence of such evidence no 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 ....
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....Del.Trib) 786- Held that additions based on chit of paper, surmises, conjectures etc could not be sustained in the absence of any corroborative evidence supporting it. [Similarly in present case, neither either parties have admitted payment/receipt of 'on money' nor any corroborative evidence was seized to support the findings of the AO]. SK Gupta Vs. DCIT (1999) 63 TTJ (Del.Trib) 532 - Held that "that additions made on the basis of torn papers and loose sheets cannot be sustained as same do not indicate that any transaction ever took 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". (vii) In the latest decision of the Hon'ble M.P. High Court, Indore Bench in the case of the PCIT-1 v/s Shri PukhrajSoni (2019) 34 ITJ 489 (MP) has held as under; "On the basis of search re-assessment additions were made - Appeal allowed by CIT(A), which was confirmed by ITAT ITAT held that CIT(A) was justified in allowing the appeal as AO has done the addi....
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....eme Court in the case of Dhakeshwari Cotton Mills Ltd. v/s CIT (1954) 26 ITR 775 (SC) has held that although strict rules of evidence Act do not apply to income tax proceedings, still assessment cannot be made on the basis of imagination and guess work. It has been held in the case of UmacharanSaha& Bros co. v/s CIT 37 ITR 21 (SC) that suspicion, however strong cannot take place of evidence. Similar views have been expressed by Apex court in the case of Dhiraj Lal Girdharilal v / s CIT (1954) 26 ITR 736 (SC). 4.2.9 Despite the request of the Appellant, during the course of Assessment proceeding and also during the course of Penalty proceedings, the department despite having several weapons in its armory, like giving of summon, survey, search and seizure, re- assessment, revision etc could not establish as to whether the alleged person from whom it is alleged that the appellant has taken huge loan in cash are really existing person or imaginary person. Nothing has been brought on record to suggest any enquiry has been conducted about the alleged lenders. No statement were recorded of the so called lenders by issuing summon, if there be any belief or doubt as to taking of lo....
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....e actually transferred from one side to another, addition under section 69C were not sustainable. Hon'ble Supreme Court in the case of Pr. CIT Vs. Vinita Chaurasia [2018] 98 Taxman.com 468 (SC) arising out of Order of HC in CIT Vs. Vinita Chaurasia [2017] 82 Taxmann.com 153 dismissed the departmental SLP and affirm the very principle again that when a addition was made to the assessee income by invoking 153C on the basis of document seized in the course of search carried out in the case of L and later L retracted his statement that said document belong to Assessee and moreover there were various internal inconsistencies and contradictions in document in question, impugned addition was to be set aside. In the case of CIT Vs. World wide Township Project Ltd (2014) 106 DTR Del 139 it was held that - A plain reading of the aforesaid Section indicates that (the import of the above provision is limited) it applies to a transaction where a deposit or a loan is accepted by an assessee, otherwise than by an account payee cheque or an account payee draft. The ambit of the Section is clearly restricted to transaction involving acceptance of money and not intende....
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....tax, yet the ingredient of default has to be established by the Department. In the case of Ushakant N Patel vs CIT (2006) 6 ITJ 312 (Gujrat HC) it has been held that un-disclosed investment under Sec.69, the question was whether even if presumption under 132(4A) is established, yet prerequisite of sec. 69 has to be complied with. It was held that even if the presumption available u/s. 132(4A) can be raised against assessee, the ingredient by way of prerequisite condition of 69 of the Act has to be satisfied and cannot be presumed to have been established on the basis of 132(4A) of the Act. Section 69 opens with the word "where any financial year immediately preceding the Assessment year, the Assessee has made investment ..." Therefore it was incumbent upon the authority to establish that such investment had been made in a financial year immediately preceding the assessment year in question. In the case in hand, despite presumption, the ingredient of default i.e. actually taking or repaying loan or interest payment or giving loan to directors in cash is to be established by the Authority, with necessary enquires conducted in the case of alleged lenders by summoning them, recording t....
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....Rashid was summoned and his statement was recorded. A request was made by the assessee to cross- examine him. The same was not allowed. On a perusal of the assessment order it is perceivable that the Assessing Officer has heavily relied upon the statement of Mohd. Rashid. The Assessing Officer has expressed the opinion that there could not have been any transaction between M/s. Rashid and Co., as it was a small firm and not assessed to income-tax. 20. In the obtaining factual matrix the seminal question is whether the said statement of Mohd Rashid could have been utilised against the assessee without calling him for cross-examination. It is of immense significance that Mohd. Rashid has filed an affidavit in variance of his original statement. That apart, the Assessing Officer has ignored the affidavit and ascribed reasons how the transaction with the said Mohd. Rashid was not worth giving credence. The genuineness of bills produced by the assessee has not been accepted exclusively on the basis that the said Mohd. Rashid was a small businessman and was not assessed to income-tax. The aforesaid circumstances eloquently speak that the addition in the order of assessment has b....
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....ram reported in 125 ITR 713 at page 720 which is also followed in the judgments cited by the petitioner in the case of Deputy Commissioner of Income Tax vs. M/s. Roger Enterprises (P) Ltd., reported in 2012 SCC Online ITAT 11821 and in the case of Brij Bhushan Singal vs. Assistant Commissioner of Income Tax reported in 2018 SCC Online ITAT 2891, held as follows:- ''It is true that the proceedings under the Income Tax Act law are not governed by the strict rules of evidence and therefore, it may be said that even without calling the Manager of the bank in evidence to prove this letter, it could be taken into account as evidence. But before the Income Tax authorities could rely upon it, they were bound to produce it before the assessee so that the assessee could controvert the statements contained in it by asking for the opportunity to cross examine the Manager of the bank with reference to the statement made by him. ....'' 23.The counsel for the petitioners also placed the recent judgment of the Supreme Court in the case of ICDS Ltd., reported in 2020 10 SCC 529, wherein, the Apex Court has remanded back the matter on account of the assessee being d....
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....poses to use against the Assessee the result of any private inquiries made by him, he must communicate to the Assessee the substance of the information so proposed to be utilized to such an extent as to put the Assessee in possession of full particulars of the case he is expected to meet and that he should further give him an ample opportunity to meet it. The Income Tax Officer is not bound by any technical rules of the law of evidence. It is open to him to collect materials to facilitate assessment even by private enquiry. But if he desires to use the material so collected, the Assessee must be informed of the material and must be given an adequate opportunity to explain it and controvert the contents of it. (emphasis supplied) [See Dhakeshwari Cotton Mills Ltd. v. Commissioner of Income Tax, (1954) 26 ITR 775 (SC); C. Vasantial and Co. v. Commissioner of Income Tax, Bombay City, (1962) 45 ITR 206 (SC) and Kishinchand Chellaram v. Commissioner of Income Tax, Bombay City (1980) 125 ITR 713 (SC): (1980) 19 CTR 360: (1980) 4 Taxman 29]. In view of this legal position, in our considered view the orders of the CIT(A) and the Tribunal are in violation of principles of the natural justic....
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.... would not be in possession of the appellant themselves to explain as to why their ex-factory prices remain static. It was not for the Tribunal to have guess work as to for what purposes the appellant wanted to cross-examine those dealers and what extraction the appellant wanted from them. 7. As mentioned above, the appellant had contested the truthfulness of the statements of these two witnesses and wanted to discredit their testimony for which purpose it wanted to avail the opportunity of cross-examination. That apart, the Adjudicating Authority simply relied upon the price list as maintained at the depot to determine the price for the purpose of levy of excise duty. Whether the goods were, in fact, sold to the said dealers/witnesses at the price which is mentioned in the price list itself could be the subject matter of cross-examination. Therefore, it was not for the Adjudicating Authority to presuppose as to what could be the subject matter of the cross- examination and make the remarks as mentioned above. We may also point out that on an earlier occasion when the matter came before this Court in Civil Appeal No. 2216 of 2000, order dated 17.03.2005 was passed remittin....
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.... account of unaccounted/unexplained payment of interest on the alleged cash loans." 7. We find that both sides are ad idem to the point that the material on the basis of which the JCIT imposed penalties u/s 271D and 271E are same as in case of appeals of "PATH". We further note that in the appeals of "PATH", the first appellate authority as well as ITAT have concurrently disagreed and rejected the observations/inferences/ conclusions drawn by assessing authority. Since there is nothing new to be considered or analyed in present appeal, we adopt the same reasoning and same view as taken by ITAT in IT(SS)A No. 32 & 33/Ind/2021 (supra) and accordingly hold that the orders passed by CIT(A) in present appeals deleting the penalties are in order and do not require any interference from our side. 8. We would also like to emphasize one more point noted by Ld. CIT(A) on Page No. 81-82 of order which reads thus: "From the above, it is crystal clear that to bring into the effect of penalty provision us 271D or 271E, it has to be established with independent evidence and not merely corroborative evidence (i.e. book entries) that Assessee has actually committed the default contem....
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....s 271D or 271E which can be transmitted to the LR. Without prejudice, it is also submitted that as per Section 159(3), the LR shall be deemed assessee, however, his liability is restricted to the "tax" and it cannot be enlarged to the "penalty". The word "Tax" has been defined in Section 2(43) of the Income Tax Act which does not include a penalty. Even Section 271D or 271E makes that person who has taken or paid the loan in cash is made liable to Penalty and the word Person defined u/s 2(31) does not include the LR of the deceased assessee. The penalty for the wrong doing of the deceased cannot be shifted on the LR as he is not a person (who is liable for paying the penalty of the deceased) nor this penalty partakes character of a tax which can be shifted by operation of Section 159(4). This interpretation is based on combined and co-joint reading of Section 271D read with definition of Person and also Section 159 of the Act." Since we have already dismissed revenue's grounds on merit, this pleading by Ld. AR does not require any adjudication by us. Moreover, Ld. DR did not make any submission qua this pleading. Therefore, we are keeping it open at this stage. 11. Resultantl....
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....-11-2008 By 1Cash Receipt 111 14-3-2009 By 1Cash F 2 40,00,000.00 Receipt 184 15,00,000.00 25,00,000.00 145,00,000 00 Tc Closing Balance 1.20,00,000,00 1,45,00,000.00 1,45,00,000.00 1-4-2009 By Opening Balance 13-4-2009 By 1Cash 13-7-2009 To 1Cash 20-8-2009 To 1Cash 14-9-2009 To 1Cash 14-11-2009 To 1Cash 120,00,000.00 Receipt 10 20,00,000.00 Payment 76 20,00,000.00 Payment 02 25.00 000 00 Paymert 119 15,00 000.00 Puymant 15 15,00,000.00 To Closing Balance 75,00,000.00 1,40,00,000.00 65.00 000 00 1,40,00,000.00 1.40,00,000.00 8. An extract of the transaction recorded in the tally data is being reproduced as under: In Recovered Data Date Head Amount 02.04.08 RS Modi Receipt Paid 1000000 Recd Name of Party In regular books of Date Amount Nitin Barua AE 15000 Recd Nitin Barua 01.04.08 15000 NS Barua AE 110000 Recd 02.04.08 Puneet Agrawal MG 200000 Paid Nitin Agrawal 200000 Paid Finance Charges Satish Mewara 70000 Paid Mobile Recharge Finance Charges RS 461 Paid 120000 Paid ....