TaxTMI 
TaxTMI 
2024 (9) TMI 1189
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....of all the facts and documents furnished by assessee during assessment proceedings. 1.1. That, Id.CIT(A) has further erred in confirming the reopening of completed assessment under section 147 of the Income Tax Act, when the proper course of action was to invoke the provisions of section 153C and complete assessment in accordance with provisions of that section. Appellant prays reopening the assessment under the facts and circumstances of the case and is not in accordance with law, thus consequent order deserves to be quashed. 2. On facts and circumstances of the matter the Id. CIT(A) has erred in confirming the addition of Rs. 1,76,342/-made by ld.AO on the basis of an excel sheet found with an employee of the Maverick group, by alleging the same as containing details of interest paid by the assessee out of undisclosed income, without appreciating the explanation/ documents filed by the assessee. The addition so confirmed deserves to be deleted. 3. On the facts and in the circumstances of the case and in law, Ld. CIT(A) has erred in confirming the action of Id. AO in completing assessment without providing assessee with opportunity to cross examine persons, report prepared b....
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....losed source of income for the year under consideration. The assessee vide his reply dated 14.12.2018 and requested for cross examination of the persons who has prepared the report of interest calculation. The assessee has given a general reply. The reply filed by the assessee has been considered and found untenable. 3.2 Ld. AO noted that the assessee has been allowed ample opportunity, but he failed to furnish any evidence contradicting the information available with the revenue. The assessee never produced himself during assessment proceedings to contradict the information available in the records of the revenue; he has failed to comply even though the show cause notices given to him in view of the principles of natural justice. Since the assessee has not controverted the information available the adjustment entries amount pertains to the assessee of Rs. 1,76,342/- is added to the total income of the assessee treating as interest paid from undisclosed source of income for the year under consideration. 4. Aggrieved from that order of ld. AO, assessee preferred an appeal before the ld. CIT(A). After perusing the submissions of the assessee, the ld. CIT(A) has dismissed the appea....
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.... a recital in a deed has to establish the truth of those recitals, otherwise it will be very easy to make self-serving statemerats in documents either executed or taken by a party and rely on those recitals. * If all that an assessee who wants to evade tax is to have some recitals made in a document either executed by him or executed in his favour then the door will be left wide open to evade tax. In view of the above, the submission made by the appellant cannot be accepted. The contention of the appellant that there is no connection with these parties is also incorrect as the bank part of the transactions is not in dispute ie. transactions have taken place between the parties. 5.5 Further, when all other figures are matching and accepted by the parties then the incriminating/unaccounted figures are also deemed to be correct until or unless proved otherwise by the assesses using evidences. The appellant in the present case has failed in this regard as also failed to satisfy that how the data of admitted bank transactions was with that person with precise details. The details are made party wise (like appellant). Prima-facie the same is not possible until or unless that person....
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.... [Hon'ble Supreme Court * CIT v. P. Mohankala [2007] 291 ITR 278 1 [Hon'ble Supreme Court) * Vivek N. Jajodia v. Income-tax Officer, 16(2)(2), Mumbai (2011) 10 ITRIT) 581 (Mumbai)/[2010] 123 ITD 136 (Mumbai)/[2010] 134 TTJ 806 (Mumbai)[23-01- 2009] * Durai Murugan Kathir Anand v. Additional Commissioner of Income-tax [2022) 136 taxmann.com 70 (Madras)/[2022) 443 ITR 423 (Madras)(25-02-2022) 5.7 In his reply, appellant has also relied upon the judgment in the case of other individuals in whose case similar addition was done but that was on protective basis and Hon'ble Tribunal has granted relief in those cases. The appellant has placed copy of combined order dated 26-09-2022 of Hon'ble ITAT in ITA Nos. 152, 161, 164, 165/JP 2020 and other ITAs and Cross Objections. One of the main grounds for the relief in the order is that the addition was done on protective basis and the substantive addition has not been done in any hand. This issue is discussed in better 40.3 of the order of the Hon'ble ITAT. In this on page 120 of the order it has been accepted by those assessee that the respective parties demanded further interest of 2.4%. The appellant has also admi....
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....chnical rules of the law of evidence. It is open to him to collect material to facilitate assessment even by private enquiry. But, if he desires to use the material so collected, the assessee must be informed about the material and given adequate opportunity to explain it. The right of cross examination is not an absolute right. (Nath International Sales vs. UOI, AIR 1992 (Del) 295). The Hon'ble Supreme court has also held that the right of hearing does not necessarily include right of cross examination. The right of cross examination must depend upon the circumstances of each case and also on the statute concerned (State of J&K vs. Bakshi Gulam Mohammad AIR 1967 SC 122). The question which may largely depends on the facts and circumstances of the case (Shyam lal Biri Merchant vs. UOI (1993) 68 ELT 548, 551 (All). The Hon'ble Rajasthan High Court in the case of Rameshwar lal Mali vs. CIT 256 ITR 536 (Raj.) has held that "there is no provision for permitting the cross examination of the persons whose statements were recorded during survey." Further, in the present case the evidence seized documents in the pen drive. Hence the judgements referred by the appellant on the iss....
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....ipur. According to ld. AO, such purchase contained some entries pertaining to the individuals/ concerns of Maverick group as also some other persons, and had an amount of Rs. 1,76,342/- against the name of assessee. On the basis of this information reasons were recorded u/s 147 and a notice was issued to the assessee u/s 148 of the Act. The copy of reasons recorded is available at (APB 1-4). The assessee had filed objections against the reasons(APB 5-6) so recorded which were rejected by ld.AO in a summary manner and the assessment was completed u/s 143(3) r.w.s.147 of the Act, by adding the said sum of Rs. 1,76,342/- by alleging that the assessee had paid interest in cash out of undisclosed source of income. Aggrieved of the aforesaid addition, the assessee has filed the appeal before the ld. CIT(A) who arbitrarily dismissed the appeal of the assessee without considering the submission of assessee. Therefore the present appeal is filed before the hon'ble bench. Ground Of Appeal No.1 to 1.1: In these grounds the assessee has challenged the action of ld. CIT(A) in confirming the re-opening of an assessment already completed u/s 153A r.w.s.143(3), merely on the basis of some en....
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....xamined and the interest paid was accepted as such. There was no material with ld.AO, except information about entry in pen-drive found with one of the employee of Maverick group, who is not even connected to the assessee. It is submitted that the Ld. AO ought to have considered the issue objectively and not on the so called information received from some other official, therefore, the action of the ld. AO in reopening the completed assessment without independent application of mind deserves to be held bad in law. The Hon'ble Gujarat High Court in the case of Seth Brothers Vs. CIT reported in 169 CTR 519 has laid down following principles for the re-opening of the assessment u/s 148 of the Income Tax Act, 1961: (Reproduced in 28 TW 57,79) "11 (a) There must be material for belief (b) Circumstances must exist and cannot be deemed to exist for arriving at an opinion. (c) Reason to believe must be honest and not based on suspicion, gossip, rumour or conjuncture. (d) Reasons referred must disclose the process of reasoning by which he holds 'reasons to believe' and change of opinion does not confer jurisdiction to reassess. (e) There must be nexus between material and belief. ....
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....ecord including the written submission filed by the ld. AR of the assessee. From the perusal of the figures of the Profit & Loss Account, the amount of Trailer Rent of Rs. 3,60,000/- was shown as in independent item of expense. Further this amount was also shown in the Tax Audit Report as payments to specified persons u/s 40A(2)(b). Thus, it could not be presumed that the AO had not verified the expense about its allowability or otherwise as stated by the ld. CIT(A). The AO is not supposed to make all that as part of the assessment order. He is supposed to make the enquiries to be part of assessment order where he is not satisfied and where he holds different views. The decision of the ITAT, Jaipur Bench in the case of Arvind BhartiyaVidhyalayaSamti vs. ITO 32 Tax World 155 (2004) relied on by the assessee is squarely fit to the present case wherein the Hon'ble bench held as such. The copies of documents submitted in the form of Paper Book further reveals that the case was reopened solely on the basis of the major audit para. This indicates that there was no application of mind by the AO as provided in section 147 of the Act. The ld. AR of the assessee relied on various case la....
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....ade available along with return of income. Commissioner of Income Tax Vs. Eicher Limited, (2007) 294 ITR 310 (Del) The High Court has taken a view that since the facts and materials were before the Assessing Officer at the time of framing of the original assessment, and later a different view was taken by him or his successor on the same facts, it clearly amounted to a change of opinion, which would not form the basis for permitting the Assessing Officer or his successor to reopen the assessment of the assessee. The Hon'ble High Court further observed that if the entire material had been placed by the assessee before the Assessing Officer at the time when the original assessment was made and the Assessing Officer applied his mind to that material and accepted the view canvassed by the assessee, then merely because he did not express this in the assessment order, that by itself would not give him a ground to conclude that income had escaped assessment and, therefore, the assessment needed to be reopened. The assessee had no control over the way an assessment order is drafted. 314 ITR 275 Cartini India Ltd. Vs. Addl. CIT (Bom.) S. 143(3) - Reassessment - Notice - Validity - D....
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....o provide cross examination of the aforesaid person. Thus the assessment proceedings completed without adhering to the strict rules of natural justice embedded in an authority of quasi-judicial nature is prima facie bad in law and deserve to be quashed. Ld. CIT(A) dismissed the contention of assessee that ld. AO passed the order without disposing the objections raised by assessee for reopening the assessment vide letter dated 28.11.2018 by simply stating that proceedings were getting time barred concluded the proceedings by passing vide order 28.12.2018. In this regard it is submitted that actions of ld. AO is against the settled position of law in the case of the GKN Driveshafts (India) Ltd. vs. DCIT MANU/SC/1053/2002 : (2003) 259 ITR 19 (SC) wherein the Hon'ble Apex Court has held that "when a notice u/s. 148 of the Act is issued and the assessee has filed its return of income and sought the reasons for issuance of notice u/s. 148 of the Act, the AO is bound to furnish the copy of reasons within the reasonable time and assessee on receipt of the reasons is entitled to file objections to issuance of notice. The Hon'ble Apex Court held that the AO is bound to dispose of....
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....the date of objection raised by assessee) could not be sole basis for rectify the error of ld. AO, despite of the facts there are plethora judgement in the favour of assessee. It is also a matter of fact that no search has been conducted in the case of assessee and the entries in the pen-drive are not found and seized from the possession of the assessee thus the presumption available u/s 132(4) cannot be applied against the assessee, as has been done blindly by the ld. AO. It is further submitted that, the said entries found during search operation of Maverick Group, had entries pertaining to the assessee. Therefore provisions of sec 153C of the Act applied directly to the facts of the assessee. And the ld.AO was statutorily required to issue notice u/s 153C of the Act. Provisions of Sec 153C are reproduced herein for the sake of convenience as under: 153C. (1) 57[Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, where the Assessing Officer is satisfied that,- (a) any money, bullion, jewellery or other valuable article or thing, seized or requisitioned, belongs to; or (b) any books of account or documents,....
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....sub-section (2) of section 143 has been served and limitation of serving the notice under sub-section (2) of section 143 has expired, or (c) assessment or reassessment, if any, has been made, before the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person, such Assessing Officer shall issue the notice and assess or reassess total income of such other person of such assessment year in the manner provided in section 153A. It is submitted that Finance Act 2014 has amended section 153C with effect from 01.10.2014 whereby if any books of account or documents, seized or requisitioned, pertains or pertain to, or any information contained therein, relates to person other the person who has been searched, the action under section 153C is to be taken in the case of such other person only after satisfaction is recorded by assessing officer having jurisdiction over searched party. It is thus submitted that in the present case, the fact that ld. AO has not invoked the provisions of section 153C itself, shows that no satisfaction was recorded by the Assessing officer having jurisdiction ove....
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.... during the search carried out of the Manihar Group and the statements recorded during proceedings. From the information received the AO noticed that the loan advanced and interest earned thereon were unaccounted. In other words the basis for initiation of Section 148 proceedings is the material seized relating to or belonging to the petitioner, during the search conducted of Manihar Group. 24. In the case where search or requisition is made, the AO under Section 153A mandatorily is required to issue notices to the assessee for filing of income tax return for the relevant preceding years. The AO assumes jurisdiction to assess/reassess 'total income' by passing separate order for each assessment. 25. In cases of the person other than on whom search was conducted but material belonging or relating such person was seized or requisition, the AO has to proceed under Section 153C. The two pre-requisites are that the AO dealing with the assessee on whom search was conducted or requisition made, being satisfied that seized material belongs or relates to other assessee shall hand over it to AO having jurisdiction of such assessee. Thereafter, the satisfaction of AO receiving the seized ....
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.... whom search is conducted or requisition made does not render Section 148 otiose. Section 148 shall continue to apply to the regular proceedings and also in cases where no incriminating material is seized during the search or requisition. 31. ..................... ......................... ........................ 40. In view of above discussion the notices issued under Section 148 and the impugned orders are quashed. However, the respondents shall be at liberty to proceed against the petitioners in accordance with law." The hon'ble ITAT Jaipur bench in the identical case in ITA No. 425/JP/2017 in the case of Sh. Navrattan Kothari Vs. ACIT, Jaipur vide order dt. 13.12.2017 has held as under: "....Therefore, in conjoint reading of provisions of section 153A, 153C and 147/148 of the Act as well as a consistent view taken by this Tribunal in a series of decision cited (supra) we hold that the assessment or reassessment of income of the person other than search persons based on seized material can be only be made u/s 153C r.w.s. 153A and the provisions of section 147/148 of the Act are not applicable in such cases. No contrary decision has been brought to our notice. Accord....
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....losing the same in the return of income. In reply to this vide letter dated 21.03.2018 (APB 10-11) it was explained that interest was not paid to them rather, it was paid by them. Further the confirmation for the same had already been submitted before ld.AO during proceedings u/s 153A of the Act. Thereafter, ld. AO had changed his stand of treating the entries as interest paid instead of earlier observation as interest received and alleged that the amount appearing under the column 'Adjustment' is the amount of interest paid by assessee out of his undisclosed sources and not recorded in the books of accounts. During the assessment proceedings in the case of the Maverick group, it was observed that excel sheet was received from some finance broker who had been working for many persons apart from Maverick Group. Same was received by employee of the group namely Kailash Khandelwal with the understanding that he would refer the details as belonging to various individuals / companies of the group out of total list and do the needful. This explanation of assessee was partly accepted by Ld. AO at this juncture. Since there is no incriminating document relating to assessee, additions s....
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....ged the initial burden of explaining the entries in the pen-drive found in possession of an employee of the assessee, so far as it pertained to the assessee. Also, it is a settled law that mere writing any transaction in one's own record including on computer without the knowledge or supporting, signatures, handwriting etc. of other person and the writing of such transactions behind his / her (other person's) back cannot make the other person liable for the transactions and also the consequential effect cannot be given against the other person and simultaneously it cannot bind / make liable to the other person from the entry / transaction (s). Reliance is also placed on judgement of Apex Court in the case of V.C. Shukla & and Others, AIR (1998) Supreme Court 1406. Thus, the addition so made merely on suspicion without any corroborative evidence on record deserves to be deleted and the assessee prays accordingly. Ground of Appeal no. 2 to 3: In these ground of appeal assessee has collectively challenged the action of ld. CIT(A) in confirming the addition of Rs. 1,76,342/- made by ld. AO by treating the entry found noted in excel sheet of a pen drive, found in possession of a....
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....O the non-provision of cross examination was held as a technical-breach for the reason that the papers which were made basis for addition were found at the premises of the assessee and it was the assessee's employee whose statement was relied upon. It was under these circumstances that Hon'ble High court had held that, ld.AO was not bound be the technical rules of evidences. Thus, in the present case the impugned assessment order has been passed in violation of the principles of natural justice and therefore, is prima-facie bad in law. Not allowing the cross examination of the witness of the department to the assessee is thus gross violation of the principle of natural justice and for this reliance is placed on the decision of Hon'ble Supreme court in the case of Andaman Timber Products vs. CCE reported in 127 DTR 241 / 281 CTR 241 wherein it has been held as under: Assessment - Natural justice - Denial of opportunity to cross-examine witnesses - Denial of opportunity to the assessee to cross-examine the witnesses whose statements were made the sole basis of the assessment is a serious flaw rendering the order a nullity in as much as it amounted to violation of principles of natu....
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....it was categorically stated that they were not made by assessee. This fact is further evident from the fact that the assessee has deducted due tax on the amount of interest actually paid by him and the same is appearing as such in the excel sheet. The entries appearing in the 'adjustment' column was the additional interest asked by the lender, which was never paid by the assessee, as is evident from the fact that no TDS was deducted there on. Further no incriminating document was found during the course of search corroborating the allegation of the ld. AO nor was anything brought on record during the post search assessment proceedings by the ld.AO to substantiate the allegation that the assessee had paid anything more than what was recorded in the books of the assessee. Moreover the assessee had filed copies of confirmation from the concerned parties along with the PAN and complete address, duly confirming the amount borrowed with the amount of Interest paid and Tax deducted by the assessee which stood accepted without raising any doubts. Thus the assessee has discharged the initial burden of explaining the entries in the pen-drive found in possession of an employee of the assessee....
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....same is also confirmed by the AO in the report presented before us. 16. It is not disputed the findings of the ld. AO that there is no addition on substantive basis. Thus, the protective addition cannot be survived as AR of the assessee explicitly proved that whatever interest that they have paid in the group cases is duly recorded in the books of accounts and wherever applicable TDS is also deducted. As an additional interest as allegedly demanded by the parties is not paid by the assessee, even those parties are not questioned on that 2.4% found recorded in the Excel-Sheet and same were also not taxed on substantive basis. There cannot be any protective addition without making the substantive addition and Revenue did not controvert the argument of the AR of the assessee and has also not supported by any judicial decision so as to confirm the order of the lower authorities. Thus, the interest which is actually paid is duly recorded in the books of accounts and there is no other material which is found even the person under whom possession the PAN Drive is found his statement is not recorded. This action itself shows that department find this evidence as dump documents and is not....
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....-8 4. Copy of notice u/s 133(6) of the I.T. Act, 1961 dated 16.03.2018 9-10 5. Copy of reply filed before ACIT, Central Circle-1, dated 21.03.2018 in response to notice u/s 133(6) 11-12 9. Copy of Written Submission filed before Ld. CIT (A)-4, Jaipur. 13-25 10. Copy of Judgment Hon'ble ITAT Jaipur dated 13.12.2017 in the case of Shri Navrattan Kothari v/s The ACIT in ITA No. 425/JP/2017 26-69 7. The ld. AR of the assessee in addition to the written submission also argued that the similar issue addition made in the case of the alleged PEN drive found and the interest recorded thereon has been deleted in the case of M/s. Marverick Share Brokers P. Ltd., Jaipur Vs. DCIT, Jaipur on protective basis in ITA no. 40 & 41/JP/2020. Thereafter the same was also directed to be deleted in the case of Shri Ramesh Kumar Mantri and others in ITA no. 164 & 165/JP/2020. Based on that set of fact and considering the consistent view of the Tribunal that decision taken should be applied in the case of the assessee on merits and on the legal ground he relied upon the decision of our Hon'ble Rajasthan High Court in the case of Shyam Sunder Khandelwal in DB writ petition no. 18363/2019. 8. P....
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....Therefore, the present appeal. Ground no. 2 raised by the challenges the addition made by ld. AO and confirmed by ld. CIT(A) for an amount of Rs. 1,76,342/-. The said addition was made based on an excel sheet found with an employee of the Maverick group, by alleging the same as containing details of interest paid by the assessee out of undisclosed income, without appreciating the explanation/documents filed by the assessee. In this regard it is submitted that an addition of amount Rs. 1,76,342/- was made by relying upon the material stated to have been found noted in the pen drive seized from the possession of an employee of Maverick Group, Jaipur wherein contained an excel sheet. The said excel sheet contained three columns titled as 'adjustment' containing entries of amount Rs. 35,15,548/- out of which in entry of Rs. 1,76,342/- is in the name of the assessee with interest @2.4% mentioned in the last column. During assessment proceedings in the case of assessee himself, initial notice u/s 133(6) was issued (APB 9) wherein the said amount of interest appearing as 'adjustment interest' was alleged to be interest received and was asked to furnish the manner of disclosing the same....
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....he declared income in question really belongs to some other assessee. The Id. DR honestly conceded that till this date no proceedings in respect of the disputed income have been made against any other assessee and the same is also confirmed by the AO in the report presented before us. 16. It is not disputed the findings of the Id. AO that there is no addition on substantive basis. Thus, the protective addition cannot be survived as AR of the assessee explicitly proved that whatever interest that they have paid in the group cases is duly recorded in the books of accounts and wherever applicable TDS is also deducted. As an additional interest as allegedly demanded by the parties is not paid by the assessee, even those parties are not questioned on that 2.4% found recorded in the Excel-Sheet and same were also not taxed on substantive basis. There cannot be any protective addition without making the substantive addition and Revenue did not controvert the argument of the AR of the assessee and has also not supported by any judicial decision so as to confirm the order of the lower authorities. Thus, the interest which is actually paid is duly recorded in the books of accounts and ther....