TaxTMI 
TaxTMI 
2025 (10) TMI 906
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....e was filed on 30.09.2008 declaring total income of Rs. 1,38,26,350/-. A search and seizure operations was carried out at the business premises of M/s Bright Group of companies who was running one institute, namely M/s Bright Professional Pvt. Ltd. where the assessee was attached as one of the faculty members. As a result of search, the M/s Bright Group filed the petition before the Hon'ble Settlement Commission wherein it had claimed that payments were made in cash to various individuals including the assessee towards the professional charges for teaching assignment. As per the same a sum of Rs. 1,20,41,540/- for Assessment Year 2008-09 and of Rs. 2,20,660/- for Assessment Year 2009-10 was paid to the assessee in cash. The AO based on such information recorded the reasons and initiated the reassessment proceedings u/s 147 of the Act in the case of assessee and issue notice u/s 148 after obtaining approval from the competent authorities. In reply, the assessee filed return of income wherein the income as shown in the return field u/s 139(1) was declared. The reasons so recorded were supplied and they were objected, and the AO passed the order disposing the objections. Thereafter, t....
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....w the CIT(A) erred in holding that evidences filed along with Rule 46A application are an afterthought. 7.2 That on facts and in law the CIT(A) erred in not appreciating that evidences produced along with Rule 46A application were relevant to adjudication of issue in dispute 8. That on facts and in law the CIT(A) has erred in not passing a separate speaking order rejecting applications seeking admission of Additional Ground and Additional Evidences. 9. That on facts and in law the CIT(A) erred in upholding addition to total income of Rs1,20,41,540/- on account of alleged cash receipts. 9.1 That on facts and in law the CIT(A) has erred in upholding that appellant had received cash from M/s Bright Professional Private Limited as remuneration / share in revenue for coaching classes conducted there. 10. That on facts and in law the CIT(A) has erred in directing enhancement to total assessed total income by Rs. 5,00,000/-. 11. That on facts and in law the CIT(A) has erred in denying appellant opportunity to raise relevant interrogatories during the course of cross-examination of Mr. Sanjeev Kumar Gupta on 28th November 2017. ....
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....examination with representative of M/S Bright Professionals Pvt Ltd. The Ld. AO did not give an opportunity to correct or otherwise of the report to be tested, there is a clear violation of the principles of natural justice committed by him in relying upon the statement to the detriment of the assessee. Ground No. 9 The Ld. AO has erred in law and on facts in making an addition of Rs. 1,20,41,540/- being undisclosed income on the basis of material seized and found from the possession and control of a third party namely M/S Bright Professionals Pvt Ltd on the basis of irrelevant observation and findings based on decisions which are not applicable to the appellant's case. while ignoring the decisions cited by the appellant which were squarely applicable to the facts of the appellant's case in view of the facts and elaborate submissions filed coupled with legal position in support thereof. the impugned addition of Rs. 1,20,41,540/- requires to be deleted." 7. Grounds of appeal No.1 is general in nature. 8. Grounds of appeal No.2 to 2.1 are with respect to the initiation of provisions u/s 147 of the Act by issued of notice u/s 148 of the Act. Before us, ....
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.... Only material stated in point (a) above has been referred to in reasons recorded u/s 148(2). However, on a conjoint reading of both the above documents it is evident that name of 'A' is nowhere mentioned therein. There is no tangible material available with the AO which could justify assumption of jurisdiction u/s 148 of the Act. It is submitted that: (i) Annexures A-29 & A-30 are a summary of some rough cash books seized from premises of M/s Bright information depicted therein is too general. These annexures refer to someone "Kalraji". The summary prepared by search party in Annexures A-29 and A-30 are very much vague in as muchas there are no details like why cash is paid and to which "Kalraj". These annexures were seized from M/s Bright and are not even made by or handwritten by the 'A'. (ii) Specifically kind attention is invited to pages 18 to 23, Q12 to Q14 of PB-Mr Massod has in his staternent not named the 'A' but has named some other people as part of faculty in M/s Bright. Mr Massod also confirms that there are no cash receipts maintained by them (refer Q14). This is a statement recorded during search u/s 132(4) of the Act and is....
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....7, para 3.4 of CIT(A) order). 3. Reasons recorded cannot be supplemented and are to be read as such - 'A' acknowledges that in subsequent investigations conducted by the CIT(A) representatives of M/s Bright Group have further alleged that words "Kalra ji" mentioned in Annexures A-29 and A-30 refer to the 'A'. However, this further information was never available with AO while initiating action u/s 148. It is trite law now that revenue cannot supplement fresh reasons (for reopening assessment) in shape of counter affidavit or otherwise or by relying upon any further material not forming part of reasons recorded. Reasons recorded are to be read as it is. Material obtained post recording of reasons cannot be used to validate reopening. Refer: * NDTV reported in 424 ITR 607(SC) - copy enclosed at pages 377 to 400 of PB relevant at pages 398-399. * Abha Gupta reported in (2025) 173 taxmann.com 834(Del) - copy enclosed at pages 412 to 417 of PB relevant at page 416 of PB, para 11 4. ITSC order dated 30-05-2014 (copy enclosed at pages 115 to 132 of the PB) in case of M/s Bright Group and dated 30-05-2014 in case of Mr. Munish Bhadari are....
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....ctober 28, 2002, in the matter of MAL, as the said observations would not automatically bind on the appellant/writ petitioner/assessee. On receipt of such objections, the assessing authority is directed to consider the same and dispose of the matter on the merits, without being influenced by any of the observations made by the Settlement Commission in the proceedings dated October 28, 2002, in the case of MAL" 9. On the other hand, the Sr. DR supported the order of the lower authorities and submits that the Ld. CIT(A) has dealt the issue in detail in para 6.2 of the order wherein after considering all the aspects, the Ld. CIT(A) has held the reopening as valid. Thus relying upon such observations, he prayed for dismissal of the grounds taken by the assessee in this regard. 10. Heard both the parties and perused the materials available on record. In the instant case, there was some loose papers/documents were found and seized during the course of search titled as Annexure A29 and A-30. These annexures contained the details of cash payments made to various persons and it was explained that the said entries related to the payments in cash to the teaching faculties including the ....
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....and truly all the material facts necessary for his assessment for the relevant assessment year (AY 2008-09). Certainly, the AO had reasons to believe (and in no case there were reasons to suspect) This situation is aptly explained by Hon'ble Gauhati High Court while delivering the judgment in the case of Sh. Anant Kumar Saharia Vs. 533(Gauhati) Hon'ble court has held as follows (page 539): "The belief is that of the Assessing Officer and the reliability or credibility or for that matter the weight that was attached to the materials naturally, depends on the judgment of the Assessing Officer. This court in exercise of power under article 226 of the Constitution of India cannot go into the sufficiency or adequacy of the materials. After all the Assessing Officer alone is entrusted to administer the impugned Act and if there is prima facie material at the disposal of the Assessing Officer that the income chargeable to income-tax escaped assessment this court in exercise of power under article 226 of the Constitution of India should refrain from exercising the power. In the instant also, the case of the petitioner was fairly considered and thereafter the above decision....
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....n High Court has held that the AO initiated the reassessment proceedings u/s 147 even if the proceedings u/s 153C could be initiated. Therefore, in the light of above judgment, we hereby held that the action of the AO in reopening the assessment u/s 147 on the basis of the documents found from the possession of the 3rd person cannot be held as bad in law and, accordingly, the ground of appeal No.3 of the assessee is dismissed. 13. Ground No.4 to 9, 11 to 13 are with respect to the addition of Rs. 1,20,41,540/- made on account of alleged cash receipts as undisclosed income of the assessee. Ground No. 10 and 13 (v) are with respect to the enhancing of the income on account of alleged undisclosed receipts. Since, all these grounds are pertaining to the issue of alleged undisclosed cash/cheques receipts, therefore, they are taken together for consideration. 14. Before us, Ld. AR of the assessee submits that during the course of search documents found Annexure A-29 and A-30 do not contain the name of the assessee. In the preliminary statement recorded u/s 132(4) of the Director of the Bright Group Shri Rashid Masood nowhere stated the same of assessee as found noted in the said pa....
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....e. He further submits that in case of certain other persons also it was alleged that payments were also made to them in cash receipt for the teaching fees, however, in their cases the additions made were deleted by Ld. CIT(A). 17. Ld. AR further drew our attention to the order passed by Ld. CIT(A) for Assessment Year 2007-08 in the case of assessee himself, wherein the additions made on the basis of the same documents were deleted and no further appeal was preferred by the revenue. He thus, prayed that the additions made be deleted. Ld. AR also filed the detailed written submissions in this regard which reads as under: "GROUNDS 4 to 14-DISPUTED ADDITION OF RS 1,20,41,540 AND ENHANCEMENT OF TOTAL INCOME BY Rs. 5,00,000/- ON MERIST CIT(A) conclusions on merits of the matter are at pages 73 to 76, paras 4.1 to 4.4 6. There is no evidence to prove receipt of cash by the 'A' - Right from day one 'A' has denied receipt of any cash from M/s Bright Professionals. It is trite law now that without any corroborating evidence / material, any of the figures mentioned / appearing on an unsigned loose paper seized/collected by the department during the course ....
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....These evidences were relevant to demolish the false narrative being build by Mr. Gupta that 'A' was teaching to students in a large batch of 500 to 600 students in an auditorium (refer Q16 at page 41 of CIT(A) order) and hence was able to generate the amount of revenue in cash. In this regard (refer Q Nos 24 and 25) he was requested to furnish: (a) details of auditoriums rented (b) strength of each auditorium (c) evidence of payment of rent (d) student attendance register 6.1 However, CIT(A) restricted the 'A' from seeking a reply to the above questions. (refer comments of Shri Ashok Kumar Saroha, CIT(A) at pages 42 and 43 of CIT(A) order and page 45, para 3.13 of CIT(A) order). Here, it would be relevant to note the relevancy of these details which M/s Bright have colluded from the tax department in order to claim deduction for a bogus expenditure. Mr Masood has stated in his statement that "till 2008 coaching classes were given in small batches. In year 2008 onward the classes have been organized/conducted in batches of 300 students each.". It is not in dispute that 'A' stopped teaching in M/s Bright Professiona....
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....tely five months. (iii) Sample study material given by the appellant to the students as part of his coaching curriculum for classes held at the premises of M/s Bright were also filed. The study material states the address were coaching classes were being conducted as 1/53 Lalita Park, Laxmi Nagar and not any auditorium. (refer pages 345 and 348 of the PB) (iv) Appellant's schedule of daily affairs during the period under consideration (refer page 340 of PB) Above affidavits and Study Material were filed before CIT(A) as additional evidence u/s 46A. Application u/r 46A is enclosed at pages 301 to 349 of the PB. CIT(A) has conveniently gloated over these evidence and not even admitted / allowed request made u/r 46A. Reasons given for rejection of Rule 46A are very vague (refer pages 70 to 72 of CIT(A) order conclusions at page 72, para 3.26). CIT(A) has erred in not appreciating that these evidences were filed before CIT(A) only pursuant to his inquiry u/s 250(4) of the Act. He has erred in not even examining the relevancy of these evidences to the issue in despite (refer Text Hundred 351 ITR 57(Del) copy enclosed at pages 424 to 436 of PB-relevant at p....
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....pages 508 to 526 of PB relevant at page 524-525 and page 526 of PB. It is held by High Court that: "45. As pointed out in S.M. Aggarwal (supra) the said document can at best be termed as a 'dumb document which in the absence of independent corroboration could not possibly have been relied upon as a substantive piece of evidence to determine the actual rates at which the flats were sold. Further as pointed out in D.K. Gupta (supra) merely because there are notings of offers on slips of paper, it did not mean that those transactions actually took place. Likewise in Girish Chaudhary (supra), the Court termed a loose sheet containing some notings of figures as a 'dumb document' since there was no material to show as to on what basis the AO had reached a conclusion that the figure '48' occurring in one of them was to be read as Rs. 48 lakhs. 46. In the present case, there was again no material on the basis of which the AO could have applied a standard rate of Rs. 4,800 per sq. ft for all the floors of VT. It was also not open to the AO to draw an inference on the basis of the projection in the document, particularly when the Assessee offered a plaus....
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....es are therefore relevant to the case of 'A' is only a figment CIT(A)'s imagination. 9. Case made up by M/s Bright Group against human probability and reasonable imagination and therefore clearly bogus expenses claimed by M/s Bright Group before ITSC-A perusal of Cash Ledger filed by Mr Gupta before your CIT(A) shows that following few expenses for taking auditorium on rent has been incurred by M/s Bright Group: S. No. Date Particulars Amount 1 06.07.2006 Dr. Subhash (Auditorium Expense) 9,860 2 20.10.2006 Rajender Bhawan (Rent Auditorium) 30,000 3 10.10.2006 Raja Ram Mohan Roy (Auditorium) 5,500 4 16.11.2016 Rent Expenses 45,510 5 17.11.2016 Rent Expenses 37,400 6 29.11.2006 Raja Ram Mohan Roy (Auditorium) 13,610 7 06.12.2006 Institute of Engineers (Rent Auditorium) 30,000 8 10.12.2006 Navshakti School (Rent Auditorium) 3,600 9 16.12.2006 Navshakti School (Rent Auditorium) 3,600 10 26.12.2006 Navshakti School (Rent Auditorium) 21,600 11 24.01.2007 Institute Engineers (Rent Auditorium) 50,000 12 31.01.2007 Navs....
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.... of them have capacity to accommodate 500 to 600 people. Raja Ram Mohan Roy and Navshakti School Auditoriums have a capacity of 200 to 250 people, whereas Auditorium at Institute of Engineers has a capacity of around 170-200 people. As your goodself is aware during the year under consideration 'A' was also conducting classes for its own coaching center in Janakpuri i.e M/s Institute of Grooming Professionals. P&L account of 'A' is enclosed at page 2 of PB. We have also produced before your goodself daily time schedule of 'A' in FY 2007-08. During the year under consideration 'A' had incurred expense for Rent in Auditorium for Rs 9,33,976/-. The gross receipts of 'A' from his own coaching center in FY 07-08 is Rs 25,37,071/. The percentage expense is approx. 36.81%. These facts are not in dispute. It is therefore apparent that no auditoriums were booked by M/s Bright Group for classes conducted by the 'A' vis-a-vis services rendered by the 'A' classes were held only at Laxmi Nagar and the total strength of that premises was to hold maximum of 100 to 110 students. It is therefore clear that bogus expenses of at least Rs....
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....at pages 94 to 97 of PB and reproduced by CIT(A) at pages 34 to 37 of CIT(A) order) clearly shows that none of these professionals have admitted receipt of cash. As demonstrated above this is a fit case were in ITSC should be informed that bogus expense have been claimed by M/s Bright Group and therefore the settlement made is liable to be quashed u/s 2450(6) for being obtained by fraud or misrepresentation. 11. Without prejudice, enhancement bad in law - Enhancement of Rs 5,00,000/-made by Ld CIT(A) is premised upon Q. No. 7 recorded in statement of Mr Gupta dated 23rd October 2017. In this regard, it is submitted that during cross-examination on 28 November 2017 Mr. Gupta has conveyed following further facts: "(TS) (Q.27) Can you clarify why a sum of Rs. 5,00,000/- was received by you from Sh. Ashish Kalra vide cheque No.0264665 on 15th December, 2007? (SKG) Ans. It was a part of receipt which was later on reimbursed by the cash which is reflected in the seized record. (TS) (Q.28) Why a cheque of Rs. 5,00,000 bearing cheque No.947951 dated 06.06.2007 issued by M/s Bright Star Air Travels Pvt. Ltd.? On clarification being asked by Sh. A....
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....pect to the cash receipts as found noted in Annexure-A 29 and Annexure-A-30 found during the course of search from business premises of M/s Bright Professionals Pvt. Ltd. Assessee since beginning of the proceedings was denying the receipts of any such fee in cash. It was further submitted that the claim of the management of M/s Bright Professional Pvt. Ltd. that the classes were being taken by the assessee wherein more students had attended was not correct as assessee never took any class of such high number of students as per stated by the management who has failed to provide the details of the auditoriums where such classes were carried out. 20. It is seen that in the preliminary statement recorded u/s 132(4) at the time of search of Sh. Rashid Masood, Director of M/s Bright Professional Pvt. Ltd. and M/s Bright Star Air Travel Pvt. Ltd. on 25.11.2010, as available at PB page 14 to 20, he nowhere stated that the word "Kalra Ji" found noted in the Annexure A-29 and A-30 represents the cash payments made to the assessee. It is further seen that in the same statements Sh. Masood has accepted that there was no evidence of payment in cash to the faculty members. It is further seen ....
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....xpenditure out of the said undisclosed income. The said application was admitted by ITSC and order was passed u/s 245D. Consequently, revenue has initiated 153C/147 proceedings in the case of all these professionals, including the appellant, and assessed the payments made by BPL to these persons as their undisclosed professional income. The reason given by the revenue is that admission of undisclosed income by BPL/its directors and admission of the settlement case, as well as similar application by one of the professionals Sh. Munish Bhandari, established the fact that these professionals had received unaccounted cash payments as professional fees. The appellant is, however, denying that he received any cash payment during FYs 2005-06 & 2006-07. In fact, the appellant claims that though he had rendered professional service to BPL during this period, he took classes for about 200 students of BPL from April, 2006 to March, 2007 and received Rs. 2,40,000/- @ about Rs. 1200/- per student. During the same period he took classes of 200 students in his own institute by the name of IGP. Since each batch is taught 50 sessions of about 4 hours each on alternate days, the appellant in any cas....
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....rded unless corroborative evidence is found establishing such fact (CBI vs. V C Shukla & Ors. 3 SCC 410). 5.4 In view of the above, the addition made by the revenue, in the absence of any corroborative evidence, is without any legal basis and is deleted. Relief is allowed to the appellant on substantive basis." 22. It is relevant to state that order of ld. CIT(A) deleting the additions made in Assessment Year 2007-08 has been accepted by Revenue and no further appeal was preferred against the said order wherein the sole basis of addition is the same document. 23. It is further seen that in the case of the other faculty members, whose name were appearing as the recipient of cash against teaching in the said papers as claimed in the petition filed before the Settlement Commission were also deleted by Ld. CIT(A) in their respective cases which order have also been attained finality. Further in the case of one faculty member namely Sh. Vikash Kapoor in ITA No.5936 Del/2016, Co-ordinate Bench of ITAT Delhi (SMC) deleted the additions made. 24. With respect to the enhancement of the income, we find that the assessee has claimed that it was the amount of loan received fr....
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....f flats on the second and third floor of VT. 40. Turning to the case on hand, the document recovered from the file in the computer of Mr. Awasthi, forms the basis of the addition made by the AO, which was further reduced by the CIT (A). This was in the form of a computer print out of three sheets which were unsigned and undated. The first sheet was titled 'Cash- in-flow detail for the revenue', the next was titled 'Revenue details' and the third was titled 'Vatika Triangle, Guargaon. The notes to the documents are indicative of their being projections Noting (1) states that "it is presumed that the building will be completed and fully let out in the month of November 2002." Another note states "Further, the sale of the building will took place over a period of nine months." Admittedly, as on the date of the search the construction was still in progress. Flats up to the fourth floor had been sold. The view taken by the ITAT that mere fact that the print out states that the flats on second and third floor have been sold, does not necessarily mean that they were sold at the rates indicated therein is definitely a plausible view to take. 41. Consid....
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....asons, the question framed by the Court is answered in the negative, i.e., in favour of the Assessee and against the Revenue." 27. In the instant case, the documents were found in possession of the third party and none of the paper contained the name of the assessee. Solely for the reason that the company in whose possession those papers were found and seized, has claimed that they contained the entries of unrecorded payments to various faculty members in the petition filed before the settlement commission and no further corroborative evidence was brought on record to establish the link between the said entries and the assessee as recipient of such cash, no addition could be made in the hands of the assessee. Further the receipt of Rs. 5.00 lacs for which enhancement was made by ld. CIT(A) we find that the said sum of Rs. 5.00 lacs was returned by the assessee to the other company of the same group namely M/s Bright Star for which the necessary bank statements was also filed. Further no evidence was brought on record that the assessee has received this sum of Rs. 5.00 back in cash from the Bright group. 28. In view of these facts and discussion made herein above, and further ....