TaxTMI 
TaxTMI 
2025 (3) TMI 1795
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....referred to as 'the Act') on 18.11.2017. A search and seizure action u/s 132 of the Act was carried out in the case of Shri Ashok B Jain and others (Dabba Trading) group on 04.11.2017 by the Investigation Wing, Pune. During the course of search at the residential premises of Shri Ashok B Jain, it was found that Ashok B Jain was engaged in Dabba trading business and made investment in Bhishis. It was also found that the assessee Shri Ganesh Bhutada is operating various Bhishis and also working as a sub-broker of Shri Ashok B Jain. During the course of search at the premises of Shri Ashok B Jain, various documents were seized which revealed unaccounted cash transactions with Shri Ganesh Bhutada in the nature of money lent by Shri Ganesh Bhutada and therefore, the office of the assessee Shri Ganesh Bhutada was covered under survey action u/s 133A of the Act. Since some documents pertaining to unaccounted cash transactions by Shri Ashok B Jain were related to the assessee, proceedings were initiated in the case of the assessee u/s 153C by recording satisfaction and notice u/s 153C of the Act was issued on 29.03.2021. The assessee in response to the same filed the return of income on 23....
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.... content and Shri Ashok B Jain offered explanation thereon in his statement u/s 132(4) of the Act which has been reproduced by the Assessing Officer in the body of the assessment order. Similarly, at page 59, there is one more noting of Shri Ganesh Bhutada which the Assessing Officer has reproduced. He noted that as per page 59, it is clear that Shri Ashok Jain duly has received cash loan of Rs. 3 Cr from Shri Ganesh Bhutada on 01-04-2016 and paid interest thereon on various dates @ 1% interest per month. Further from the above said seized page no.55, it is clear that Shri Ashok B Jain has taken Rs. 6 Cr in cash on 01-10-2017 from Shri Ganesh Bhutada. Further, he has paid interest in cash on various dates as mentioned above. The payment of interest @ 1% is also admitted by Shri Ashok B Jain in his statement recorded u/s 132(4) of the Act. On analysis of the interest given to Shri Ganesh Bhutada, it came to be known that the assessee has given Rs. 66,75,000/- as interest on Rs. 3 crore @ 1% per month in the F.Y. 2016-17 relevant to A.Y. 2017-18. The Assessing Officer further noted that during the course of assessment in the case of Shri Ashok B Jain for A.Y. 2017-18 the interest pai....
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....ngs and not criminal proceedings as held in the case of CIT v. Swarup Cold Storage and General Mills [1982] 136 ITR 435 (All.). Also, the jurisdiction Tribunal in the case of Arvind M Kariya vs. ACIT (2013) 153 TTJ 0422 (MUM) has held that income tax proceedings are civil proceedings and the degree of proof required is by preponderance of probabilities. The principle of preponderance of probability means that a fact is said to be proved when, after considering the matters before it the Court considers its existence so probable that a prudent man ought under the circumstances of the particular case, to act upon the supposition that it exists. 16.2 The Hon'ble Bombay High Court in the case of Smt. Rajrani Gupta vs DCIT [2012] 27 taxmann.com 235 (Bombay) after relying on the judgement of Hon'ble Supreme Court in the case of Sumati Dayal v. CIT [1995] 80 Taxman 89 (SC) has observed as under: 33 ...................In matters such as these all facts are within the knowledge of the appellant and therefore the department is not expected to prove its case with mathematical precision but a degree of probability of a prudent man taking into account the probable behav....
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.... the relevant aspects as laid down from time to time are - * the circumstances alleged must be established by such evidence, as in the case of other evidence; * the circumstances proved must be of a conclusive nature and not totally inconsistent with the circumstances or contradictory to other evidence; * although there should be no missing links in the case, yet it is not essential that every one of the links must appear on the surface of the evidence adduced, some of these links may have to be inferred from the proved facts; * in drawing those inferences or presumptions, the authorities must have regard to the common course of natural events, to human conduct and their relation to the facts of the particular case; * The circumstantial evidence can, with equal facility, be resorted to in proof of a fact in issue which arises in proceedings for the assessment of taxes both direct and indirect, circumstantial evidence can be made use of in order to prove or disprove a fact alleged or in issue. In fact, in whatever proceedings or context inferences are required to be drawn from the evidence or materials available or lacking, circumstantial....
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....vail of the opportunity to cross-examine a person at the appropriate stage in the proceeding, the said party would be precluded from raising such issue at a later stage of the proceeding. Therefore, the belated claim of the assessee at the appellate stage that it was denied the opportunity of cross-examining witnesses in the assessment proceeding is wholly untenable in law. 35. Plea of violation of natural justice taken at the appellate stage appears to be belated and clearly an afterthought. It appears that no prejudice had been suffered by the appellant assessee in the manner the proceeding was conducted by the Assessing Officer and the assessee was not aggrieved at that stage. Only when the assessment order went against it, the assessee conveniently raised such belated plea of denial of opportunity of fair hearing and breach of principles of natural justice (Emphasis supplied) 19. The issue of cross-examination was further examined by Hon'ble High Court of Calcutta in the case of PCIT vs Swati Bajaj 446 ITR 56 (Calcutta) wherein after examining the legal position on this issue, the Hon'ble High Court of Calcutta has held as under. 58. ....
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....he right of cross examination and the right must depend upon the circumstances of each case and must also depend on the statute under which the allegations are being enquired into. 61. Having noted the above legal position, it goes without saying there is no vested right for the assessee to cross examine the persons who have not deposed anything against the assessee. The investigation report proceeds on a different perspective commencing from a different point and this has led to the enquiry being conducted by the assessing officer calling upon the assessee to prove the genuineness of the claim of LTCG. (Emphasis supplied) Thus, by following the above judgements, the contention of the appellant regarding cross-examination, stands rejected. 20. Even otherwise, the legal position of providing cross examination in income tax proceedings is as under 20.1 It is a well settled law that the strict provisions of the Indian Evidence Act do not apply to income-tax proceedings and the Income Tax authorities are not bound by the technical rules of evidence. It has been held at various judicial forums that what is important for income tax proceedings....
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....witness-box." (emphasis supplied) Further, in para 105, following has been observed - "105 In our opinion right to cross-examine the witness who made adverse report, is not an invariable attribute of the requirement of the dictum, 'audi alteram partem. The principles of natural justice do not require formal cross-examination Formal cross-examination is a part of procedural justice It is governed by the rules of evidence and is the creation of Court It is part of legal and statutory justice and not a part of natural justice, therefore, it cannot be laid down as a general proposition of law that the revenue cannot rely on any evidence which has not been subjected to cross-examination. However, id a witness has given directly incriminating statement and the addition in the assessment is based solely or mainly on the basis of such statement, in that eventuality it is incumbent on the Assessing Officer to allow cross-examination. Adverse evidence and material, relied upon in the order to reach the finality, should be disclosed to the assessee. But this rule is not applicable where the material or evidence used is of Collateral Nature." ....
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....rded by the Tribunal that there was no relationship between the donors and the assessee and there was no natural love and affection. The Tribunal had followed the judgment of the jurisdictional High Court in Shri Tirath Ram Gupta v CIT [2008] 304 ITR 145/[2009] 177 Taxman 294 (Pun). & Har.), laying down that in the absence of natural love and affection, the gift could not be accepted as genuine. The question whether denial of opportunity of cross-examination results in violation of natural justice depends upon facts of each case. The object of cross-examination is to test the veracity of the version given in examination in chief. In the instant case, even if cross-examination was allowed and the donors who had disowned the making of gifts, were confronted and shown to be factually wrong, the same would have made no difference, as there was no natural love and affection and, in its absence, the gifts were not genuine. 20.6 Similarly, when it is not feasible to give the opportunity of cross examination due to lapse of time or a large number of beneficiaries being part of a racket, their claim for cross-examination of a witness, may not be necessary. In the case of M/s. Meghn....
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.... 2017-18, he had received cash loan of Rs. 3,00,00,000/- from Shri Ganesh Bhutada and paid an interest to Shri Ganesh Bhutada amounting to Rs. 66,75,000/-. The said admission was made by Shri Jain on the basis of diary seized in his case. This has been accepted by Hon'ble Tribunal meaning thereby, the Hon'ble Tribunal has held that the appellant has given a cash loan of Rs. 3,00,00,000/- to Shri Ashok Jain during the year under consideration. 25. The above discussion suggests that while deciding the appeal in the case of Shri Ashok B Jain for AY 2017-18, I have held that Shri Ashok Jain had received cash loan of Rs. 3,00,00,000/- from Shri Ganesh Bhutada (the appellant) and Shri Jain paid interest of Rs. 66,75,000/- to the appellant on cash loans. This factual finding has also been upheld by the Hon'ble Tribunal. Therefore, following the decisions in the case of Shri Ashok B Jain for AY 2017-18, the additions of Rs. 3,00,00,000/- u/s 69 of the Act for cash loan given by the appellant to Shri Ashok Jain as well as the addition of Rs. 66,75,000/- towards the interest received from Shri Ashok Jain on such cash loans, are upheld. The grounds no.2 to 6 raised by the....
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....in the grounds without application of mind merely referring to contention of the Assessing Officer and ignoring totally the contention of the appellant before the CIT(A) mechanically in violation of principle of natural justice being arbitrary, illegal and bad-in-law be quashed/set-aside. 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in dismissing the appeal of the appellant thereby confirming the addition of Rs. 3,00,00,000/- on account of amount lent by the appellant to Shri Ashok Bhavarlal Jain in cash u/s. 69 r.w.s. 115BBE of the IT Act, 1961 on the basis of merely the statement given by Shri Jain without any supporting documentary evidences in proof that such loan had at all been given by the appellant, when no such cash loans had been given by the appellant to Shri Jain from appellant's undisclosed income in violation of the principles laid down by the Hon'ble Supreme Court in the case of Principal Commissioner of Income Tax, Central -3 Vs. Abhisar Buildwell P. Limited in Civil Appeal No. 6580 of 2021, Order dated 24/04/2023. The addition therefore so made by the Ld. Assessing Officer duly confirmed in the appellate ord....
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....f the appellant thereby confirming the addition of Rs. 66.75,000/- on account of interest income earned by the appellant from the alleged cash loans given to Shri Ashok Bhavarlal Jain as income from other sources when no such cash loans had been given by the appellant and there were no cash transactions at all which could yield interest of Rs. 66,75,000/- ignoring and without appreciating the facts that no such corroborative incriminating documents were found in the premises of the appellant and there was no specific mention also in the documents seized from the residence of the searched person Shri Ashok B. Jain which had revealed the amount of interest as mentioned above to have been paid by Shri Jain to the appellant and such addition was the result of only the statement of the third person Shri Jain and his action and had nothing to do with the appellant himself in violation of the principles laid down by the Hon'ble Supreme Court in the case of Principal Commissioner of income tax, Central -3 Vs. Abhisar Buildwell P. Limited in Civil Appeal No. 6580 of 2021, Order dated 24/04/2023. The addition therefore so made by the Ld. Assessing Officer duly confirmed in the appellate ....
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....cts and further the detailed submissions made before him and also before the Ld. Assessing Officer during the assessment proceedings and virtually had passed the appellate order thereby only mentioning the contentions of the Assessing Officer in a mechanical manner without giving any cogent reasons in violation of the principle laid down by the Hon'ble Supreme Court in the case of Siemens Engg. Vs. UOI, AIR 1976 SC 1785 wherein it was held that the rule requiring reasons to be given in support of an order is like the principle of audi alteram partem, a basic principle of natural justice, which must inform every quasi-judicial process and must be observed in the proper spirit and mere pretence of compliance with it would not satisfy the requirement of law and further the Apex Court's decision in the case of CIT Vs. Walchand and Co. Pvt. Ltd (1967) 65 ITR 381 (SC) wherein it was held that the practice of recording a decision without reasons in support cannot, but be deprecated. The appellate order therefore so passed confirming two additions as raised in the grounds without application of mind merely referring to contention of the Assessing Officer and ignoring totally the co....
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....cer duly confirmed in the appellate order passed by the Ld. CIT(A) being arbitrary, illegal and bad-in-law be deleted. 5. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in dismissing the appeal of the appellant thereby confirming the addition of Rs. 36,00,000/- on account of interest income earned by the appellant from the alleged cash loans given to Shri Ashok Bhavarlal Jain as income from other sources when no such cash loans had been given by the appellant and there were no cash transactions at all which could yield interest of Rs. 36,00,000/- merely on the basis of the statement given by the third party Shri Jain and in his case such amount had been added in the assessment made for AY 2018-19 as his undisclosed income. The addition therefore so made by the Ld. Assessing Officer duly confirmed in the appellate order passed by the Ld. CIT(A) being arbitrary, illegal and bad-in-law be deleted. 6. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in dismissing the appeal of the appellant thereby confirming the addition of Rs. 36,00,000/- on account of interest income earned by the appellant from ....
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....ng was found regarding the alleged cash loan given to Shri Ashok B. Jain. Referring to the statement recorded u/s 131 of the Act during the course of survey u/s 133A of the Act on 04.11.2017 in case of the assessee, copy of which is placed at pages 272 to 282 of the paper book, the Ld. Counsel for the assessee drew the attention of the Bench to question Nos.18 to 21 and the reply of the assessee which are as under: "Q. 18) Please state whether you are doing business in MCX / dabba trading. Ans: Earlier before two years I had done the business in MCX trading on commission basis only. However, due to losses in this business I have stopped doing this business since 2015. I would like to state that I have never done any dabba trading business. Q. 19) Please state whether any records are maintained by you for the above mentioned MCX business. Ans: No. I have not maintained any record for this business activity. Q. 20) Do you know Shri. Ashok Jain of Dehu Road. Please state whether you had made any business transactions with him. Ans: Yes I know Shri. Ashok Jain of Dehu Road. Earlier before two years I have done MCX trading business o....
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.... in the books of a stranger assessee's name appeared and the entry narrated that there were certain sales effected by the assessee, it would be unwise to tax the assessee on such a flimsy material i.e. the books of a third party. 17. Referring to the decision of the Hyderabad Bench of the Tribunal in the case of Smt. K.V. Lakshmi Savitri Devi vs. ACIT (2011) 148 TTJ 517 (Hyderabad - Trib.), he submitted that the Tribunal in the said decision has held that handwritten loose document found during search at third party was not enough to make addition under section 69 in assessee's hands on account of on money payment for purchase of property. 18. Referring to the decision of the Amritsar Bench of the Tribunal in the case of Smt. Harmohinder Kaur vs. DCIT (2021) 187 ITD 289 (Amritsar - Trib.), he submitted that the Tribunal in the said decision has held that without corroborative evidence to prove authenticity of diary seized during search, Assessing Officer could not make additions in assessee's income on basis of notings in diary of third party by making presumptions as per section 292C. 19. Referring to the decision of the Ahmedabad Bench of the Tribunal in the case....
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....rore as unexplained investment u/s 69 r.w.s. 115BBE of the Act being the cash loan given by the assessee to Shri Ashok Jain. Further, he also made the addition of Rs. 66,75,000/- being the interest income earned by the assessee on such cash loan. We find in appeal, the Ld. CIT(A) confirmed the addition made by the Assessing Officer, the reasons of which have already been reproduced in the preceding paragraphs. It is the submission of the Ld. Counsel for the assessee that since nothing was found from the premises of the assessee on account of cash loan during the course of survey u/s 133A of the Act on 04.11.2017 i.e. the date of search at the premises of Shri Ashok B. Jain and since seized documents were found from the premises of Shri Ashok Jain which were in his own handwriting and do not bear the signature of the assessee and there was no cross-examination by the assessee of Shri Ashok Jain, therefore, the addition cannot be made in the hands of the assessee on account of the entries made by Shri Ashok Jain in his diary without any corroborative evidence to prove the authenticity of the diary. It is his submission that Shri Ashok Jain for his own convenience has made certain not....
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....escoping of addition made in the earlier assessment years and current year, against which the department is not in appeal before the Tribunal. However, the benefit of loans borrowed, the availability of funds on bidding the bishes (chits) was ignored by the CIT(A), though this is very much evident from the entries found in the diaries. 17. As evident from the above cash flow statement, no cash deficit was found in any of the previous year relevant to the assessment year under consideration. Therefore, no addition is called for on account of unclaimed investments, which forms the basis for making additions in the assessment. Therefore, we direct the AO to delete all the additions made by the AO." 25. From the above it is seen that Shri Ashok Jain in his cash flow statement while explaining his investments has stated to have received the cash loan of Rs. 3 crores during the assessment year 2017-18. Similarly, he has stated to have received the cash loan of Rs. 9 crores during assessment year 2018-19, out of which he has repaid an amount of Rs. 2 crores and there is net receipt of Rs. 7 crores. Although it is the submission of the Ld. Counsel for the assessee that in light....
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.... by the Assessing Officer and sustained by the Ld. CIT(A) in our opinion should be deleted. With these observations, we deem it proper to restore the issue to the file of the Assessing Officer with a direction to verify the records of Shri Ashok B Jain for assessment years 2017-18 and 2018-19. In case penalty proceedings are initiated for violation of the provisions of section 269SS and 269T of the Act, then the addition in the hands of Shri Ganesh Bhivraj Bhutada will be sustained. In case no such penalty proceedings have been initiated and penalty levied on account of violation of provisions of section 269SS and 269T of the Act by accepting cash loan and making repayment of such cash loan in the hands of Shri Ashok B. Jain, then no addition can be made in the hands of Shri Ganesh Bhivraj Bhutada. We hold and direct accordingly. The grounds raised by the assessee are accordingly allowed for statistical purposes. ITA No.1132/PUN/2024 (A.Y. 2018-19) 26. After hearing both the sides, we find the grounds raised in ITA No.1132/PUN/2024 are identical to the grounds raised in ITA No.1131/PUN/2024. We have already decided the issue and restored the same to the file of the Assessing ....