TaxTMI 
TaxTMI 
2026 (6) TMI 1273
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....ng the additions of Rs. 21,38,337/- u/s 69 for unexplained investment of Mr. Nirmal Bhai, considering the same to be assessee's investment, and for Rs. 42,97,350/- for profit received by assessee u/s 69A as unaccounted money of the assessee for alleged income generated through unaccounted off market MCX transactions, further an addition of Rs. 2,15,103/- has been made for alleged gross profit earned for stock found short during the search proceedings, considering the same as out of book sales. 3. The AO during the course of assessment proceedings, had relied on the loose papers stating it to be off market MCX speculation transactions, which was a trial balance of as identified of "PS". The assessee explained the said loose paper as a dumb document, putting forth his explanation, which was not considered appropriate by the AO and held that the said piece of paper related to the assessee and the investment made by some Nirmal Bhai of Rs. 21,38,337/- as assessee's investment u/s 69. 4. Further, the AO from the said piece of paper worked out a profit figure of Rs. 42,97,350/- and treated it as assessee's unexplained money u/s 69A. During the course of search proceedings, there wa....
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.... 1. "That the Ld. CIT(A)- 4, Kanpur has erred in law and on facts to complete the proceedings ex-parte without providing the proper opportunity to the appellant which is against the principle of natural justice. 2. That the Ld. AO has erred in law and on facts in completing the assessment u/s 143(3) rws 153A of the Act, without considering the explanations, documentations and submissions of the appellant. 3. That the Ld. CIT(A)-4, Kanpur has erred in law and on facts to uphold the impugned order passed by the Ld. AO after taking cognizance of a loose paper not belonging to the appellant without any cogent evidences in that regard. 4. That the Ld. CIT(A)-4, Kanpur has erred in law and on facts to uphold the impugned order passed by the Ld. AO after treating an amount of Rs. 21,38,337/- which belonged to some Nirmal Bhai as appellant's unexplained investment and treated it as appellant's income under section 69 of the Act. 5. That the Ld. CIT(A)-4, Kanpur has erred in law and on facts to uphold the impugned order passed by the Ld. AO after treating an amount of Rs. 42,97,350/- as unaccounted money of the appellant, taxing it under section 69A eve....
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.... the prop. Concern of M/s. S L Payals. It was argued that the AO has accepted the books of accounts. It is stated that during the course of the assessment proceedings a show cause notice was issued to the assessee for explaining as to why the amount shown in the impounded document be not treated as unexplained investment for off market dabba trading and profit arising out of it as unexplained money of the assessee. The assessee while submitting his submission dated 06-09-2021 which is part of the paper book, and also finds mention in the assessment order, had stated as under : "1. With regard to the impounded loose paper at A-1/LP-3/56, which your honour has alleged to be generation of unaccounted income through off market MCX speculation business wherein a trial balance of various parties having credit and debit balances is there. It is allegedly a trial balance of various parties involved in off market dabba trading was seized whereas there is no evidence that the said piece of paper is in regard to MCX speculation dabba trading as alleged by your honour in the show cause notice. It is simply a trial balance having code word "PS" having credit and debit balances of diffe....
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....njunction to some other corroborative evidence found during the course of search proceedings. However, your honour, in the above referred show cause notice, has not indicated as to what clinching corroborative evidence is in the possession of the department to saddle the assessee with the charge of tax, in respect of the same. It is the trite law that a nonspeaking document without any corroborative material, evidence on record and finding that such document has materialized into transactions giving rise to income of the assessee which had not been disclosed in regular books of account by such assessee, has to be disregarded for the purposes of assessments to be framed pursuant to search and seizure action. Evidently, from the search and seizure perspective also, such non speaking seized documents are referred to as "Dumb Documents". Having brought to your kind notice so, it is very humbly submitted that in view of the settled law, based on the predominant judicial view, it would be arbitrary on your honour's part to make addition to the income of the assessee based on the above referred dumb document, containing scribbling, rough/vague notings in the absence of a....
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....s or the statements of Shyam Vohra given to the police department, that this paper or entry relates to the assessee, has used the paper which has been scanned in the show cause notice against the assessee, without even giving any opportunity to cross examine the said piece of paper, as there is no corroborative evidence with the department that it relates to betting deal entered by the assessee Sushil Kumar Chauhan, it is unwarranted and uncalled for and the same cannot be taxed as income of the assessee under the provisions of the Income Tax Act." 9. The Ld. AR of the assessee submitted that in the alleged trial balance the name of the person against whom the figure of Rs. 21,38,337/- is appearing is of some Nirmal bhai and is a debit balance in the said trial balance. Thus the addition made by the AO for the said amount alleging it to be investment in some MCX trading even when it was not in the name of the assessee and was a debit balance of Nirmal Bhai and the addition made by the AO under section 69 as unexplained investment is bereft of any merit, as the said trial balance was undated and unsigned paper being a dumb document. Hence the presumption as provided under u/s 132....
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....this trial balance there is no evidence that the appellant has indulged in MCX trading. We would like to state that the Ld. AO has made addition of Rs. 21,38,337/- u/s 69 as unexplained investment even when the said amount as depicted in the alleged trial balance was in the name of Nirmal Bhai and was a debit balance. Since this amount was not related to the appellant and it was a debit balance (meaning thereby that it is a liability for the concerned person) then how it can be treated as unexplained investment of the appellant is not understood. Further the Ld. AO has made addition for alleged profit received by the appellant of an amount in of Rs. 42,97,350/- as unaccounted money of the assessee u/s 69A of the Act. In this regard we would humbly submit the provisions of section 69A for honours kind perusal as follows : Unexplained money, etc. "69A. Where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanatio....
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....f S L Payals. We have perused the impounded paper which has been annexed at Paper Book page 32 which is a group summary of sundry debtors in the name of some "PS" wherein if we look at the group summary the amount of Rs. 21,38,337/- has been mentioned as a debit balance in the name of some "Nirmal Bhai" which the AO has made addition for as unexplained investment of the assessee. This amount shown has been added by the AO as undisclosed investment u/s 69 of the Act, however in the impounded paper of group summary it is a debit balance, meaning thereby that in the books of the assessee it would be a credit balance. Hence by no yardstick it can ever be said to be undisclosed investment of the assessee, as the investment has always to be debit in the books of the assessee. Further, the said amount is not standing in the name of the assessee and it is in the name of some "Nirmal Bhai" which is not the assessee in question. Thus we have no hesitation in deleting the said unjustified addition of Rs. 21,38,337/- made by the AO when the said impugned paper was undated and unsigned and can be termed as a dumb document, being a group summary of sundry debtors in the unknown name in the books....
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....A) and 292C was there on the assessee to state that the said document or the amounts did not relate to him. However, since the assessee in his submissions before the AO stated that this piece of paper did not belong to him nor the AO has been able to brought on record that the said figure of Rs. 42,97,350/- was the profit earned by the assessee and from which kind of activity it was earned, the said amount cannot be added u/s 69A as unexplained money, as no such money, bullion etc. was found from the possession of the assessee so as to invoke the said provisions. Thus, the addition made by the AO for unexplained money / profit of Rs. 42,97,350/- is hereby deleted and the assessee gets the relief for the same. 9. With respect to grounds 7 & 8 raised by the assessee before us for addition of Rs. 2,15,103/-, being the income of the assessee as gross profit earned by him on sales of stock which was found short in physical verification at the business premises during the course of search proceedings. In this regard the AO has made the said addition as stock of Rs. 2,44,43,592/- was found short during the search proceedings and AO has made the addition for the gross profit @ 0.88% on ....
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....ld have been earned as it was presumed that the shortage of stock was because of out of books sales, as that was the only reason why there could have been shortage of stock at the business premise of the assessee. 11. Considered the rival submissions and material placed before us and observed that the whole issue in these grounds are with respect to the addition made by the AO with respect to the shortage of stock found during the course of search proceedings for an amount of Rs. 2,44,43,592/-. The AO in the assessment order has stated as follows: "Since the stock of Rs. 2,44,43,592/- was found short during the course of the search proceedings at the assessee's business premises, hence, this stock is presumed to be out of book sales by the assessee on which the gross profit percentage of 0.88% as shown by the assessee in his audited books of accounts is applied, which comes to Rs. 2,15,103/. This income is being added to the income of the assessee as gross profit earned by him on sales of stock which was found less in physical verification at his business premises." 12. From the above findings of the AO it is seen that he has made the addition on the basis of presump....
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....he mobile phone of Mr. Shyam Bohra the bookie, wherein a narration as "Sushila*5" is mentioned which the AO has considered that it pertains to Sushil Kumar Chauhan the assessee and * 5 indicates Rs. 5,00,000 and has come to a conclusion that it is unaccounted income through betting activities of the assessee for which addition u/s 69A has been made in the assessment order. 14. The Ld. AR of the assessee during the course of hearing before us has submitted that the WhatsApp message found from the mobile phone of Mr. Shyam Bohra wherein a narration as "Sushila*5" is mentioned does not relate to the assessee as the assessee had requested for cross examination of Shyam Bohra from the department as the evidence adduced in the assessment proceedings did not germinate from the search proceedings at the assessee premises by was in regard to some police report which the AO got which was never confronted in totality with the assessee and nowhere any correlation with Shyam Bohra and the assessee has been established or the involvement of the assessee in betting activities was found during the course of search proceedings, then at the back of the assessee such kind of addition should not ha....
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....ction 69A of the Act. Further, it is strongly denied by the appellant before the Ld. AO and in the entire proceedings that he had no connection with Mr. Shyam Vohra, hence the images procured from Agra police have no evidentiary value and the same cannot be used in assessment proceedings to tax the appellant." 15. The learned CIT DR relied upon the assessment order and has stated that since in the narration there was a name of Sushila and the AO has codified the letter 5 as Rs. 5,00,000/- hence the addition made by the AO needs to be sustained. 16. Considered the rival submissions and material placed before us and observed that no separate addition has been made in the computational part for this amount of Rs. 5,00,000/- but in the body of the order addition of Rs. 5,00,000/- for unaccounted betting income has been made by the AO as unexplained money u/s 69A of the Act. For the purpose of adjudication of these grounds it is seen that impugned addition of Rs. 5,00,000/- has been made on the basis of a police report whereby the mobile phone of Mr Shyam Bohra was seized wherein in the WhatsApp chat there was this narration for which the AO has made addition as unexplain....