TaxTMI 
TaxTMI 
2024 (8) TMI 1536
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....ing that the assessee has taken cash loan of Rs. 6,20,00,000/- from various parties through Mr. Sachin Nahar, which is not reflected in the return of income and therefore has escaped assessment, reopened the assessment by recording the following reasons: "Reasons recorded for reopening AY 2017-18 reads as follows: "1. Brief Facts of the case: In original return of income for AY 2017-18 was filed by the assessee on 02.02.2018 by declaring Total Income of Rs. 18,16,300/-. The Income was revised on 15.02.2018 by declaring Total Income of Rs. 22,77,170/-. The Income was further revised on 22.07.2018 by declaring Total income of Rs. 31,47,670/-. This case was not subjected to Scrutiny assessment u/s. 143(3) of the Act. 2. Brief details of information collected/received by AO : In this case information in respect of Shri NARENDRA SAMPATLAL BAFNA, being Cash loan of Rs. 6,20,00,000/- was received from DCIT Central Circle 1(1) Pune through the Insight Portal. The Information was passed on by the DCIT Central Circle 1(1) Pune on the basis of the details emerged during the statement recorded u/s. 132(4) of Shri Sachin Nahar during the course of Search and Post Sear....
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.... the Act on 17.11.2017 & 27.11.2017. During the assessment proceeding, once again Shri Sachin Nahar was asked to submit the above said details. On the basis of details provided by Shri Sachin Nahar, particularly name, PAN, mobile No. and other details, efforts have been made to identify various Depositors and Borrowers. In this regards, the details of the following Borrower who has borrowed amount mentioned in table below in CASH. Sl. No. Name PAN Amount Deposited in CASH (Rs.) 1 Narendra Sampatlal Bafna AAVPB7561N 6,20,00,000/- The above transaction took place in cash. In the case of borrowers, since they have borrowed funds in cash, it is violation of provisions of section 269SS & 269T of the Act and the interest amount paid by them in cash is their unaccounted income. Shri NARENDRA SAMPATLAL BAFNA (PAN: AAVPB7561N), has taken cash loan of Rs. 6,20,00,000/- from various parties through Shri Sachin Nahar during the FY 2016-17 relevant to AY 2017-18. During the course of the Search action u/s. 132(4) of the IT Act, statement u/s. 132(4) of the IT Act, 1961 of Shri Sachin Nahar was recorded wherein Shri Sachin Nahar has admitted these facts and submi....
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.... 142(1) of the Act which were duly served on the assessee. The Assessing Officer also supplied the reasons recorded for reopening of the assessment as requested by the assessee. 4. During the course of assessment proceedings the Assessing Officer asked the assessee to explain as to why the amount of Rs. 6,20,00,000/- received by the assessee as cash loan from various parties through Shri Sachin Nahar should not be added u/s 69A of the Act and brought to tax by invoking the provisions of section 115BBE of the Act. The assessee replied that the provisions of section 69A of the Act are not applicable in the case of the assessee since as per the reasons for reopening, the assessee has received cash loan from various parties through Shri Sachin Nahar i.e. if the money is borrowed, it cannot be considered as the assessee's own money. Further, the assessee also denied the allegation of the Revenue that he has taken any cash loan from Shri Sachin Nahar during the year. The assessee submitted that he does not know Shri Sachin Nahar at all. Apart from the above, the assessee also contended that the proceedings in the case of the assessee should have been initiated and completed u/s 153C o....
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....is of submissions filed by the assessee and material available before him. He held that the assessment should have been made u/s 153C and not u/s 147 of the Act. Further addition also cannot be made u/s 69A of the Act especially when Shri Sachin Nahar has stated that the assessee had taken loan and there is no other corroborative evidence. He also observed that neither copy of the statement was provided to the assessee nor produced or made available during the appellate proceedings and neither any reply was sent in the matter. The relevant observations of the CIT(A) / NFAC deleting the addition as well as cancelling the re-assessment proceedings read as under: "Ground Nos. 2 to 5 relate to challenging the validity of reopening of assessment proceedings carried out under section 147 of the Income Tax Act, 1961 and the addition made of Rs. 6,20,00,000 under section 69A of the Income Tax Act on account of unexplained cash loans availed from various parties through Sh. Sachin M. Nahar. All these grounds of appeal are taken up together for adjudication. An analysis of letter No. Pn/DCIT. Cen. Cir.1(1)/Sharing of Info./2020-21 dated 05.03.202 of ACIT, Central Circle 1(1....
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....s Ltd- vs- ACOIT- which inter alia, directed the revenue to adhere to certain guidelines to be followed for reassessment proceedings, (a) While communicating the reasons for re-opening the assessment, a copy of the standard form/request sent by the Assessing Officer for obtaining approval of the Superior Officer should itself be provided to the assessee. This would contain comment or endorsement of the Superior Officer with his name, designation and date. The Assessing Officer shall not merely state the reasons in the letter addressed to the assessee. (b) If the reasons make reference to any other document or a letter or a report, such document or letter or report should be enclosed to the reasons. Such a portion as it does not bear reference to the assessee concerned could be redacted. (c) The order disposing of the objections should deal with each objection and give proper reasons for the conclusion. (d) A personal hearing shall be given and minimum seven working days advance notice of such personal hearing shall be granted. (e) if the Assessing Officer is going to rely on any judgment/order of any Tribunal or Court reference/....
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....de u/s 153C only, but not under section 147 of the Act." From Para 10, 11 and 12 of the assessment order, it is clear that the reassessment proceedings have been initiated on the basis of the statement of Sh. Sachin M Nahar and based on material in seized documents. There is no Para 13 in the assessment order which has been referred in the Assessment Order and again in Paragraph 20 of the assessment order. Further, there is no dispute as to nature of transaction in question and it has been stated to be loan taken by the appellant (LIABILITY) and the same can by no stretch of imagination be treated as income in the absence of any other corroborative evidences and hence no addition u/s 69A can be made in such a case. In Para 11 also there is mention of seized materials as Bundles No. 1 to 28 but neither the copy of same were provided to the Assessee nor produced / made available during the appellate proceedings and neither any reply was sent in the matter. In view of the above, Ground No. 4 of the appeal is allowed. Neither during the assessment proceedings nor during the appellant proceedings nor in the assessment order, there is disclosure of the evidence....
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.... the Act and the proceedings u/s 147 as illegal and void ab initio by ignoring the fact that no material pertaining to or belonging to the assessee was found in the search on third party and therefore the AO has correctly initiated proceedings u/s 147 of the Act as there was no jurisdiction available to Assessing Officer to assess the income of the assessee under section 153C. 2. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs. 6,20,00,000/- u/s 69A by holding that no addition can be made u/s 69A being the nature of transaction is loan taken and ignoring the fact that the assessee has denied such transaction during assessment proceedings without supporting evidence and the AO has therefore rightly taxed the said transaction u/s 69A. 3. Whether on facts and circumstances of the case and in law, the Ld. CIT(A) erred in ignoring the fact that mere mentioning a wrong section by the AO is not fatal as held by the Hon'ble ITAT(SMC)"C" Bench, Bangalore in the case of Shri Arif Vs ACIT in ITA No. 976/Bang/2022 . 4. Whether on the facts and circumstances of the case, the Ld. CIT(A) is legally j....
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.... when no material pertaining to or belonging to the assessee was found in the search at the premises of Shri Nahar, the reopening of the assessment was valid which was based on certain information. The Assessing Officer after having reason to believe that the income has escaped assessment, has reopened the assessment by following due process of law. Therefore, the order of the CIT(A) / NFAC quashing the re-assessment proceedings is not correct. So far as the merit of the case is concerned, he submitted that although the CIT(A) / NFAC has called for the remand report from the Assessing Officer, however, without waiting for the report of the Assessing Officer, he has passed the order. Therefore, he has no objection if the matter is restored to the file of the CIT(A) / NFAC for adjudication of the matter afresh after obtaining the remand report. 11. The Ld. Counsel for the assessee on the other hand heavily relied on the order of the CIT(A) / NFAC. Referring to para 22 of page 8 of the assessment order, the Ld. Counsel for the assessee submitted that the Assessing Officer without disclosing the basic documents and without providing the opportunity to cross-examine Shri Sachin Nahar....
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....t. Referring to the CBDT Instruction No. F.No.286/98/2013-14 (Inv-11) dt 18.12.2014, he submitted that the Board has clearly directed the Field Officers that no addition should be made in absence of any credible evidence since additions made on the basis of statements recorded during the survey or search proceedings are retracted subsequently. Referring to the following decisions, he submitted that under identical circumstances the Co-ordinate Benches of the Tribunal have deleted such additions which were made merely on the basis of third party statements and not based on any credible evidence. i) M/s. Dhananjay Marketing Pvt. Ltd. vs. DCIT vide IT(SS)A No. 65/PUN/2017 for the assessment year 2014-15, order dated 19.05.2021 ii) Prabhat Chandra S Jain vs. ACIT vide ITA Nos.1325 to 1329/PN/2013 for AYs. 2004-05 to 2008-09, order dated 16.09.2015 iii) Atul Tantia vs. DCIT vide ITA No. 492/Kol/2021 for A.Y. 2018-19, order dated 28.03.2023 15. The Ld. DR in his rejoinder drew the attention of the Bench to the provisions of section 250(4) of the Act and submitted that as per the said provisions, the CIT(A) may, before disposing of any appeal, make such furth....
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....of the Act of Shri Sachin Nahar and during search and post search enquiries by the Investigation wing and also during the course of enquiries conducted during search proceedings by the Central Circle - 1(1), Pune that the assessee has received cash loan of Rs. 6,20,00,000/- through Shri Sachin Nahar. Further, the various documents, note books, note pads and loose sheets found during the course of search contained the business details of Shri Sachin Nahar. The provisions of section 153C of the Act read as under: "153C. (1) 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, seized or requisitioned, pertains or pertain to, or any information contained therein, relates to, a person other than the person referred to in section 153A, then, the books of account or documents or assets, seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and th....
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....cash loans from other parties through him, since he was a broker between these two parties, Shri Sachin Nahar has received commission for this transaction. The details of the parties who have taken cash loans have been obtained from Shri Sachin Nahar. There is also a mention of these persons in the seized documents (copy enclosed). 2. The case of NARENDRA BAFNA (PAN: AAVPB7561N), who has taken cash loan from various parties through Shri Sachin Nahar, pertains to your charge. The copy of statement recorded u/s. 132(4) of the IT Act, 1961 on 04.08.2017 of Shri Sachin Nahar as well as related documents regarding cash loan taken by the party along with the related pages of Shri Sachin Nahar's submission containing name of the above mentioned person and the Assessment Years in which the transactions were made are enclosed herewith for reference and necessary action at your end." 20. We find the Assessing Officer at para 2 of the reasons recorded has mentioned as under: "During search at his residence, various notebooks, notepad and loose papers were found and seized as Bundle No 1 to 28. In his statement recorded u/s. 132(4) of the Act at his residence on 02.08.....
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....u/s 132(4) of Shri Sachin Nahar to fasten liability on the assessee. 24. It has been held in various decisions that the presumption u/s 132(4A) of the Act is available only in respect of a person from whom the paper is seized. It cannot be applied against the third party and hence no addition could be made on the basis of the evidence found with the third party. The presumption u/s 132(4A) of the Act could be used only against the person from whose premises the documents are found and not against the person whose name is appearing in the seized papers. We find an identical issue had come up before the Pune Bench of the Tribunal in the case of Pradeep Amrutlal Ranwal vs. TRO (supra). The Tribunal in the said decision deleted the addition by observing as under: "5.3 According to us, the additions made by the Assessing Officer were not justified in the facts and circumstances vis-à-vis of the assessee. As discussed earlier, during the course of search in the case of Dhariwal Group, the only documents found on the basis of which the addition u/s 69A has been made in the case of the assessee are in the form of two loose papers wherein amounts of Rs. 4.80 Crores and Rs....
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.... it. In the case of ACIT Vs. Lata Mangeshkar (Miss) (1974) 97 ITR 696 (Bom), the addition was made in the hands of the assessee on the basis of the entries in the books of third persons. Hon'ble Bombay High Court held that such addition could not be made only on the basis of the notings in the books of third persons. The facts of the present case are covered by the decision of Lata Mangeshkar (supra). It is a settled legal position that the decision of jurisdictional High Court is binding on all authorities below it. Thus, the reliance placed by the Assessing Officer on the loose papers is not justified at all. Therefore, the question of making any addition is not justified in the absence of other corroborative evidence to that effect. 5.6 Without prejudice to the above, the learned Authorized Representative submitted that the Assessing Officer was not justified in making the additions by relying on the provisions of section 114 of the Indian Evidence Act. The concerned Assessing Officer has referred the aforesaid section which states that the court may presume that the evidence which could be and is not produced would, if produced be unfavourable to the person who wit....
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.....10 crores as stated above, the CIT(A) relied on the following decisions of Sumati Dayal vs. CIT [(1995) 214 ITR 801(SC)], CIT vs. Durga Prasad More [(1969)72 ITR 807(SC], Himmatram Laxminarain vs. CIT [(1986)161 ITR 7(P&H)], CIT vs. Ganapathi Mudaliar [(1964)53 ITR 623(SC)] and CIT vs. Lacchman Dass Oswal [(1980)126 ITR 446(P&H)]. In this regard, the stand of the assessee has been that the case laws relied by the Assessing Officer are differentiable on facts and hence, the same are not applicable to the case of the assessee. In all the cases relied by the Assessing Officer, the fact that the assessee had actually earned income or received amounts by way of cash credits, unexplained investment etc. was not under dispute. The issue related to whether the receipts were received from genuine lenders or whether the investments or receipts were a part of the disclosed sources of income of the assessee. We find that in the present case, the issue in question itself is whether rough noting on loose paper found in the course of search at the premises of third person could be assumed the income from the assessee as in the cases relied by the Assessing Officer. This fact has not been establi....
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....dition can be made on the basis of documents found with third party was not raised. The CIT(A) has further referred to the decision of ITAT, Mumbai in the case of P. R. Patel Vs. DCIT [(2001) 78 ITD 51 (Mum)] for the proposition that seized papers cannot be called dumb paper because they indicate date, amount and calculation. There is no dispute with the above proposition. The papers are found pertaining to Dhariwal Group as admitted by Shri Mehta and therefore, these documents may be relevant for deciding the issue in the case of Dhariwal Group. However, in the absence of any corroborative evidence, the addition could not be made in the hands of the assessee on the basis of the said papers. 5.12 The CIT(A) has further relied upon ITAT Third Member decision in the case of Dhunjibhoy Stud and Agricultural Farm Vs. DCIT [(2002) 82 ITD 18 (PUNE)(TM)], In this case, the assessee was a builder and had sold flat to one Mr. Tanna. There was search on Mr. Tanna wherein a document was found indicating flat purchased from the assessee firm and the amount of cheque and cash paid. The amount of cheque paid was tallying with the books and therefore, it was held that cash was paid as no....
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....id Shri Kolhe was examined, cross examined and reexamined and no evidence was gathered from him to establish that the contents of the seized documents were correct and true. Thus, in the absence of any corroborative evidence in the present case, the said seized document has to be treated as a dumb document as rightly observed by the CIT(A). The A.O. dismissed the retraction of the statement dated 29.03.2003 by filing an affidavit as an after thought and self serving. The A.O. concluded that the facts mentioned in the seized documents clearly indicated that the statement given on 29.03.2003 was true and correct. The A.O. has not brought on record any material or corroborative evidences to come to these conclusions. The reasons given by the A.O. in this regard are without any basis and support. The affidavit filed by Shri Kolhe remained uncontroverted and which is against the settled legal position on the issue that the contents of the affidavit be rejected by confronting the same to the deponent which is missing in this case. Nothing was shown by the A. O. that there was any other material co related to the seized documents. The A.O. was not justified in rejecting the contents of th....
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....irected to be deleted. It is pertinent to mention here that this case is being decided in its facts and circumstances; it cannot be applied to other cases as such. 7. In the result, appeal filed by the assessee is allowed." 25. We find the Pune Bench of the Tribunal in the case of M/s. Dhananjay Marketing Pvt. Ltd. vs. DCIT vide IT(SS)A No. 65/PUN/2017 for the assessment year 2014-15, order dated 19.05.2021 has observed as under: "35. Further, we notice that both Assessing Officer as well as CIT(A) misdirected themselves by applying presumption u/s 132(4A) of the Act. The provision of section 132(4A) incorporates the rule of evidence relating to material found during course of search. On plain reading of said provision, it is evident that it has application in the case of searched person, in whose hands the material was found and seized. The presumption envisaged under said provision cannot be extended to assessment of third party. The CBDT also recognized the principle that no addition can be made on mere statement made u/s 132(4) without bringing any corroborative evidence. The CBDT Circular reads as under :- "Admissions of undisclosed income under c....