TaxTMI 
TaxTMI 
2026 (3) TMI 551
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....3A even though no valid search u/s 132 was initiated in assessee's case. 2.That the Ld. CIT(A) has erred in law and facts in confirming the addition of Rs. 98,45,100/- u/s 69 on the basis of noting on Neelgagan Dairy (Annexure A-3) by treating the noting in Dairy as unaccompanied advances by multiplying the figures by hundred and based on wrong calculations. 3.That the Ld. CIT(A) has erred in law and facts in confirming the addition of Rs. 98,45,100/- u/s 69 on the basis of noting on Neelgagan Diary ignoring the contents of noting. 4.That the Ld. CIT(A) has erred in law and facts in confirming the addition of Rs. 6,40,275/- on account of notional interest calculated on wrong calculations on unaccounted advances as per noting on Neelgagan Diary (Annexure A-3. 5. That the Ld. CIT(A) has erred in law and facts in confirming the addition of Rs. 72,00,000/- u/s 69 on account of unexplained investment in land plotting project near MDSD college on the basis of presumptions. 6.That the Ld. CIT(A) has erred in law and facts in confirming the addition of Rs. 1,56,51,832/- u/s 69 on account of unexplained investment in land plotting project near Gh....
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....dvances with different persons on different dates by the assessee in cash. The statement of the assessee was recorded u/s 132(4) wherein it was stated that the diary was having details of transactions pertaining to loans given and its repayment by assessee to various persons. Each written page, at the top, had rate of interest mentioned along with name of person and in many cases, their phone numbers. Upon perusal of these pages, it was noted by Ld. AO that the amount of transaction in the diary was not in English numerals but written / camouflaged in Landi language which is not commonly used and understood. 3.3 Post-search proceedings, statement of the assessee was recorded u/s 131 on 19-07-2017 wherein the assessee deciphered the numerals as written in the diary. It was also stated that the transaction in the diary relates to the year 2011 to 2015 but most of the transactions related to 2013-14. On examination of Page-6 of the diary, it was observed by Ld. AO that the same contained transaction of advances with Shri Asheem Goel, Nanyola wala. It was seen that the interest of Rs. 1 Lacs per month was shown to be paid by Shri Asheem Goel to the assessee. However, the transaction....
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....amounting to Rs. 1000.00 per month was recorded with pencil in which dot was not legible from which the department suspected that all the figures were deficient by two zeros and therefore, all the figures should be considered in Lacs. The same was not the case. Thus, the assessee controverted the conclusion of Ld. AO and stated that the hypothetical assumption regarding addition of two zeros after all the figures was totally baseless. The suspicion however strong could not take place of legal proof in the absence of any adverse material against the assessee. In subsequent reply dated 05-12-2018, the assessee furnished cash flow statement and quantified the unexplained investments at Rs. 2,89,281/- considering the circulation of money. 3.5 However, the contention that the advances pertained to Shri Sachin Aggarwal was rejected by Ld. AO considering the admission made by the assessee in recorded statement u/s 132(4). At few places in the diary, signatures were done by the assessee himself. Therefore, the plea that the advances were given by Shri Sachin Aggarwal was rejected. The assessee's plea on deficient zeros was also rejected since there were pencil entries at other places al....
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....investment of Rs. 72 Lacs and profit of Rs. 88.53 Lacs. These two items aggregated to Rs. 160.53 Lacs and the assessee's profit share therein to the extent of 22.5% was shown to be Rs. 36,11,925/-. This payment was shown to be cleared during the year. The Page No.6 reflected expenses incurred on the transaction. The Page No.7 contained summary of entire projects. 3.9 The Page Nos. 26 to 31 contained detail of Project-2 which was stated to be on Jain College Road. The Page No.26 was the rough sketch of the project. The Pages No.27 to 29 reflected sales of plots and shops and expenses incurred. The Page No.30 contained summary of the entire project transaction. The pending investment up-to 31-12-2015 was shown to be Rs. 6,04,960/- against the name of Lucky (Assessee). 3.10 The assessee, in statement u/s 132(4), stated that Page No.1-7 pertain to development of land at MDSD Road, Ambala City jointly with Mr. Amrit Lal, Bunty Singh, Mohan Lal and Mintu Ji whereas Pages 26-31 were another project at Ghale Road in partnership with Amrit Lal and Micky Ji. However, during post-search in statement u/s 131, the assessee retracted his statements and stated that the pages of the seized m....
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....in selling of plots of these projects. In his statement he submitted that these 3 projects in which he has worked are as follows: - 1. At Ghale Road, Naresh Vihar, Ambala City 2. At Inderpuri, Backside of S.A. Jain High School, Ambala City 3. At Shalimar Colony, Backside Electricity Office at Ghale Road, Ambala City During field enquiries, Shri Bunty alias Shri Gurinder Pal Singh was traced and his statement was recorded u/s 131. He provided the map of one project situated at Naresh Vihar, Ambala City which matched with the map as found reflected on Page No.26 of the seized material. He also identified "Lucky" as the assessee. On the basis of the same, it was concluded by Ld. AO that this project had actual existence. Though the assessee vehemently opposed the conclusion of Ld. AO, the same stood rejected by Ld. AO. 3.12 Upon perusal of sale deeds as obtained from Sub- Registrar, Ambala City with respect to project-2 (Naresh Vihar), it was seen that the same was situated on ancestral property of Shri Shiv Charan s/o Shri Rajpal (popularly known as "bobby"). The land was transferred from Shri Shiv Charan to Shri Mewa Singh. In all the deeds, the purc....
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....made sales of the plots in two projects. Therefore, the investment was held to be undertaken in AY 2013-14. The investment in Project- 1 was for Rs. 72 Lacs which was added fully in assessee's hands whereas the investment in Project-2 was for Rs. 347.81 Lacs. Though the assessee's share in Project-2 was not mentioned in the seized document, the same was worked out to the extent of 45%. The working of Ld. AO resulted into addition of unexplained investment by the assessee in Project-2 for Rs. 156.51 Lacs. The aggregate addition thus made by Ld. AO as unaccounted investment was for Rs. 228.51 Lacs (Rs.72 Lacs + Rs. 156.51 Lacs). 3.14 Aggrieved as aforesaid, the assessee preferred further appeal against the assessment order before Ld. CIT(A). Appellate Proceedings 4.1 The assessee assailed the assessment on legal grounds as well as on merits by way of elaborate written submissions which have already been extracted in the impugned order. In these submissions, the assessee assailed the findings of Ld. AO qua advances as given by the assessee. It was contended that the suspicion however strong could not take place of proof as per the decision of Hon'ble Apex Court in the case of....
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....dvances were continuing till AY 2017-18. The assessee brought out many errors in the computation of addition. He also drew attention to cash flow statement from AYs 2012-13 to AY 2016-17 and pleaded for application of peak credit theory considering the facts of the case. The Ld. AO refused to accept the cash flow statement and instead added all the advances without giving credit of repayments and borrowings which resulted into double addition in the hands of the assessee. The fact of the case justifies application of peak credit theory in terms of various judicial decisions including the decision of Hon'ble Punjab & Haryana High Court in the case of Ved Prakash (ITA No.235 of 2015); the decision of Hon'ble Rajasthan High Court in the case of Apex Metchem Pvt. Ltd. (ITA No.77-78 of 2008); the decision of Chandigarh Tribunal in Surjit Kaur (ITA 1184/Chd/2011). In this background, the assessee pleaded for application of peak credit theory to these transactions. 4.4 On the issue of addition of unexplained investment in two projects, the assessee stated that the loose sheets were prepared by third-party property dealer which was brought to him as a proposal to make the investment. Ho....
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....sole basis of addition. The confession would need corroboration as per the decision in Pullangode Rubber Produce Co. Ltd. (91 ITR 18) holding that though admission is an important piece of evidence but it could not be said to be conclusive one and the maker thereof could show that it was incorrect. Further, a retracted statement would have no evidentiary value and the same could not be used in the assessment. Similar retraction was accepted by Hon'ble Delhi High Court in the case of Sunil Aggarwal (379 ITR 367). The Hon'ble Punjab & Haryana High Court in the case of Krishan Lal Shiv Chand Rai vs CIT (88 ITR 293) held that the party was entitled to show and prove that the admission made by him previously was not correct and true. 4.5 Similar arguments were advanced with respect to addition of unexplained investment in Project-2. It was pointed out that the said papers were brought in by a property dealer for investment but the same were not acted upon since the project was not found viable. The affidavit of property dealer Shri Rajiv was furnished confirming that he prepared the seized papers on behalf of owner of the land Shri Mewa Singh for soliciting investment from assessee f....
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....decision of Hon'ble Punjab & Haryana Court in the case of CIT vs. Ram Singh & Ors. (351 ITR 391) holding that no valid search u/s 132 took place on assessee in the absence of his name on the warrant. Similar were the decisions of Hon'ble Orissa High Court in the case of Siksha vs CIT (336 ITR 112); the decision of Hon'ble Rajasthan High Court in the case of CIT vs. Umlesh Goel (387 ITR 575) and various other decisions as enumerated in the impugned order. 4.7 In yet another legal ground, the assessee assailed jurisdiction on the ground that the same was based on invalid approval u/s 153D by Addl. CIT. The draft assessment order dated 30-12-2018 was forwarded to Addl. CIT which was approved on the same day. Therefore, the approval was mechanical and without application of mind. The entire case was dependent on seized material, enquiry folder which was never placed before Addl. CIT. Therefore, the assessment was alleged to be bad-in-law. 4.8 The Ld. CIT(A) noted the factual matrix in para 4 to 6.6 of the impugned order. In para 6.7, the Ld. CIT(A) concurred with the conclusion of Ld. AO that the assessee's claim that figures were recorded in thousands and not in Lacs, lack evide....
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....ould lead to a conclusion that the said transactions were carried out by the assessee and not by Shri Sachin Aggarwal who was merely a partner in M/s C.M. Jewellers. The assessee was engaged in money financing business. Further, the retraction has to be within a reasonable time. Finally, the addition of advances u/s 69 as well as addition of consequential interest was upheld. However, protective addition as made in the hands of Shri Sachin Aggarwal was deleted. 4.9 The additions of unexplained investment which was based on loose sheets marked as Annexure A-1 was also confirmed by applying the provisions of Sec.292C. The impugned transactions were found contained in documents as seized from the assessee's own premises bearing specific details of payment received on sale of plots. Therefore, the additions of unexplained investments were also confirmed. 4.10 The legal ground qua mechanical approval u/s 153D was dismissed in the background of the fact that in central charges, all search and seizure assessments would be regularly supervised and monitored by the Range Heads. The AO and Range Head follow the instructions / guidelines of the Board for completion of assessment and the....
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....round that the assessee owned up the transactions in recorded statement u/s 132(4). Further, at few places in the dairy, the signatures of the assessee were found. Therefore, the presumption of Sec.292C that the contents of the diary were true and the document belonged to the assessee, was raised against the assessee to make impugned addition in the hands of the assessee. We concur with these findings of lower authorities. Considering the facts that the assessee was engaged in money lending business and the diary was found from the residence of the assessee, the conclusion of lower authorities, in this regard, could not be faulted with. The dairy as well as contents thereof has righty been considered to be belonging to the assessee. We order so. 7. Proceedings further, considering one figure of interest as found noted as Rs. 100000/- on Page No.6 (kept on Page No.27 of the paper-book) containing details of loan advanced by assessee to Shri Asheem Goel and payment of interest by that person to the assessee, Ld. AO has concluded that all the other figures, on all the pages, were deficient by two zeros. The interest of Rs. 1 Lacs would work out only if two zeros were added to the l....
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....fficer had reached the conclusion that the figure '48' was to be read as Rs. 48 lakhs. Similar analogy has been laid down in the decision of Ved Prakash Chaudhary (305 ITR 245). The Hon'ble Apex Court in the case of Mehta Parikh & Co. (30 ITR 181) rejected additions without there being any adverse evidence and where the addition was made on suspicion without countering affidavit / statement on record. The jurisdictional High Court in the case of Ravi Kumar (294 ITR 78) rejected additions which were made without corroborating evidences. Similar is the decision in Atam Valves Pvt. Ltd. (332 ITR 468). The Chandigarh Tribunal in the case of Harvinder Pal Singla (ITA 456-458/Chd/2014) has rejected similar assumption as made by Ld. AO. The other decisions as cited by the assessee during first appeal reinforces the said proposition and reject arbitrary assumption of facts by Ld. AO. 9. Finally, considering the facts and circumstances of the case, we would hold that the impugned addition of unexplained investment and consequential estimation of interest income could not be sustained in law. Considering the contents of the diary, sufficient surrender has already been made by the assessee....
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....are of the considered opinion that the decision of Hon'ble Apex Court in the case of CBI vs. V.C. Shukla (3 AIR 410) supports the case of the assessee. In this decision, it was held by Hon'ble Apex Court that every transaction as recorded in the regular books needs to be independently corroborated and proved when some liability is to be fastened in respect of such transactions. The legal principle as laid down by Hon'ble Supreme Court was that independent corroborative evidence is required in respect of entries in regular books of accounts. Similarly, Hon'ble Supreme Court in Common Cause Vs. Union of India (2017) 77 Taxmann.com 245 (SC) stressed the need for exercising caution and for bringing on record relevant, reliable and cogent evidence to corroborate the entries found noted in the seized material. The court, thus, concluded that loose sheets / papers are not admissible as evidence. Further, even if same are held to be admissible, additions could be made only if the entries were corroborated by any evidence. The corroboration of entries is completely missing in the present case. Therefore, the documents as found are to be considered as dumb documents only, which, on stand....