Case Law Details
ACIT Vs Mihir Subodhbhai Shah (ITAT Ahmedabad)
Mere agreement to not to charge/pay interest on loan will not vitiate genuineness of such loan transaction
Admittedly, during the year the bank account of the assessee was credited by Rs. 8 Lakh which was treated as unexplained investment by the AO in the absence of necessary detail. The assessee during the appellate proceeding before the learned CIT-A submitted that same represent receipt of unsecured loan from Paresh N Patel and Paresh N Patel HUF. To this effect the assessee also furnished copy confirmation letter from the parties and copy of their PAN as well as ITR acknowledgment. The learned CIT(A) after considering the submission of the assessee and remand report from the AO, was pleased to delete the addition made by the AO. From the perusal of remand report and ground of appeal we note that the only issue of the revenue is that the transaction of credit of unsecured loan as discussed above was not genuine because the assessee has not paid interest on the loan. As such the assessee during the remand proceeding to establish the identity & creditworthiness of creditor and genuineness of transaction, furnished copy of pan, ITR and confirmation letter of the creditor. The AO in the remand did not find any infirmity in the primary evidence furnished by the assessee. The law is fairly settled in case of credit in the books of account the assessee is required to furnished primary document to establish identity & creditworthiness of creditor and genuineness of transaction, once the primary documentary evidence furnished, the onus shifts on the revenue to point infirmity in the document furnished by the assessee after conducting necessary inquiry. In the case on hand, the AO has not carried out any independent inquiry and not found any infirmity in the primary documents filed by the assessee but merely doubted the genuineness of transaction since interest was not paid on impugned loan. In our considered view, the prerogative to pay/charge interest on loan is between the parties who accepted/provided the loan and the same also depends upon various factors. Merely the parties agreed to not to charge/pay interest on loan will not vitiate the genuineness of such loan transaction unless and until the revenue brought some cogent material on record to prove that such transaction of loan is not genuine.
No assessment can be made in the hand of the assessee on basis of certain noting/jotting/rough estimates on the loose sheets/note pad/diary etc. unless and until same is corroborated with independent cogent material giving rise to undisclosed income
A non-speaking 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, must disregarded for the purposes of assessments to be framed pursuant to search and seizure action. From the search and seizure perspective, such non-speaking seized documents are to be referred to as “Dumb Documents”. Therefore, in our considered opinion any loose sheets/diary/note pad containing certain noting or jotting found but on perusal of the same it not discernible that whether any transaction taxable in nature materialized which has not been recorded in the regular books of account or not corroborating with some other cogent material shall not be used for making assessment despite being presumption provide under section 132(4A) and under section 292C of the Act.
In holding so, we draw support and guidance from the judgment of Hon’ble Supreme Court in case of CIT vs. Shoorji Vallabhdas & CO. reported in 46 ITR 144 wherein it was held as under:
“No doubt, the Income-tax Act takes into account two points of time at which the liability to tax is attracted, viz., the accrual of the income or its receipt; but the substance of the matter is the income. If income does not result at all, there cannot be a tax, even though in book-keeping, an entry is made about a “hypothetical income”, which does not materialise. ”
We also draw support and guidance from the order of the coordinate bench of Mumbai Tribunal in the case of Nagarjuna Construction Co. Ltd. vs. DCIT reported in 23 taxmann.com 239. The relevant finding of the bench is extracted as under:
The basis for addition is only note book/loose slips. These note book/loose slips are unsigned documents. The assessing officer has not established nexus between the note book/loose slips with actual accrual/ receipt of interest. The note book/loose slips seized marked A/NCCL-1/1 found during the course of search is a dumb document having no evidentiary value, no addition can be made in the absence of corroborative material. I f there is circumstantial evidence in the form of promissory notes, loan agreement and bank entries, the addition is to be made on that basis to the extent of material available. The assessee is not expected to explain the loose papers found as there is no evidence other than note book/loose slips regarding accrual of interest. In our opinion, no addition can be made on the basis of dumb documents/note book/loose slips in the absence of any other material to show that the assessee has carried on money lending business. Noting on the note book/diary/loose sheets are required to be supported/ corroborated by other evidence and are also include the statement of a person who admittedly is a party to the noting and statement from all the persons whose names there on the note book/loose slips and their statements to be recorded and then such statement undoubtedly should be confronted to the assessee and he has to be allowed to cross examine the parties.
The Hon’ble Supreme Court in case of Common Cause (A Registered Society) vs. Union of India (popularly known as Sahara-Birla Diary) reported in 77 taxmann.com 245 by following the earlier judgment of the Hon’ble SC in the case of C.B.I. v. V.C. Shukla [1998] 3 SCC 410 held as under:
It is apparent from the aforesaid discussion that loose sheets of papers are wholly irrelevant as evidence being not admissible under Section 34 so as to constitute evidence with respect to the transactions mentioned therein being of no evidentiary value. The entire prosecution based upon such entries which led to the investigation was quashed by this Court.
Thus, in view of the above discussion the answer to the question is that no assessment can be made in the hand of the assessee on basis of certain noting/jotting/rough estimates on the loose sheets/note pad/diary etc. unless and until same is corroborated with independent cogent material giving rise to undisclosed income.
Completed assessments cannot be disturbed in the absence of any incriminating material/ documents
Admittedly, there was search and seizure action and under section 132 of the Act dated 4th December 2014 (i.e. during the financial year 2014-15 corresponding to A.Y. 2015-16) which was carried out in the case of “Barter Group” and in consequence to the same, the proceedings under section 153A of the Act was initiated in case of respondent assessee for year under consideration. The assessment under section 153A r.w.s. section 143(3) of the Act for the year under consideration i.e. A.Y. 2011-12 was framed after making additions on account of credit entries appearing in the bank account as an unexplained investment. On appeal by the assessee, the learned CIT (A) deleted the addition made by the AO on technical ground by holding that there was no material of incriminating nature found during the search with reference to the year under consideration. Therefore, the year under consideration being unabated/completed assessment year, no addition should be made in the absence of incriminating material. The learned DR before us vehemently argued that there is no provision under section 153A of the Act which restricts the assessment or reassessment in case of search to the extent of incriminating material only.
In this regard, we find that it has been settled by various Hon’ble Courts including the Hon’ble Jurisdictional High Court that the completed assessments cannot be disturbed in the absence of any incriminating material/ documents whereas the assessment/ reassessment can be made with respect to abated assessment years. The word ‘assess’ in Section 153A/153C of the Act is relatable to abated proceedings (i.e. those pending on the date of search) and the word ‘reassess’ to the completed assessment proceedings. The Hon’ble Gujarat High Court in the case of Saumya Construction Pvt. Ltd. reported in 81 taxmann.com 292, has held that there cannot be any addition of regular items shown in the books of accounts until and unless there were certain materials of incriminating nature found during search. The word incriminating has not been defined under the Act, but it refers to materials/ documents/ information which were collected during the search proceedings and not produced in the original assessment proceeding. Simultaneously, these documents had bearing on the total income of the assessee. Now coming to the case, we note that addition was made based on the amount credited in the bank account of the assessee without referring to incriminating document found in this regard which would have made basis for the addition in the assessment. The learned CIT(A) has also given clear finding that the entries in the bank statement which were the basis for making addition, have already been reported in the return of income filed under section 139 of the Act. There was no other material referred to by the AO while making the addition of credit entries in the bank account.
At the time of hearing, the learned DR has not brought anything on record contrary to the finding of the learned CIT (A). Accordingly, we hold that there cannot be any addition of the regular items which were disclosed by the assessee in the regular books of accounts.
In view of the above, we hold that there cannot be any addition to the total income of the assessee of the regular items as made by the AO in the present case.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
The captioned appeals and cross appeals have been filed at the instance of the Assessee and the Revenue against the order of the Learned Commissioner of Income Tax(Appeals)-11, Ahmedabad dated 26/02/2021 arising in the matter of assessment order passed under s. 143 r.w.s. 153A(1)(b) & 143(3) of the Income Tax Act, 1961 (here-in-after referred to as “the Act”) relevant to the Assessment Years 2011-12 & 2013-14 to 2015-16.
First, we take up IT(SS)A No. 52/AHD/2021, an appeal by the Revenue for the A.Y. 2011-12
2. The Revenue has raised following grounds of appeal:
“1. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in holding that any addition during the assessment u/s 153A has to be confined to the incriminating material found during the course of search u/s 132(1) of the Act, even though there is no such stipulation in sec 153A of the Act.
2. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in not appreciating that sec. 153A requires a notice to be issued requiring the assessee to furnish his return of income in respect of each assessment year falling within six assessment years and to assess or to assess the total income of those six assessment years, and that the scheme of assessment or to assessment of the total income of a person searched will be brought to naught if no addition is allowed to be made for those six assessment years in the absence of any seized incriminating material.
3. On the facts and in the circumstances of the case and in low, the ld. CIT(A) has erred in not appreciating that while computation of undisclosed income of the block period u/s. 158BB was to be made on the basis of evidence found as a result of search or requisition of books of accounts, there is no such stipulation in sec 153A and sec 153BI specifically states that the provisions of Chapter-XIV-B, under which sec. 158BB falls, would not be applied where a search was initiated u/s 132 after 31/5/2003)
4. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in not appreciating that assessment in relation to certain issues not related to the search and seizure may arise in any of the said six assessment years after the search u/s. 132 as conducted in the case of the assessee, and that if the interpretation of the ld. CITIA) were to hold a will not be possible to assess such income in the 163A proceedings while no other parallel proceedings to assess such other income can be initiated. leading to no possibility of assessing such other income, which could not have been the intention o f the legislature. Further, the AO is duty bound to assess correct income of assessee as held by the Hon’ble Apex Court in the case of Mahalaxmi Sugar Mills, 160 ITR 920 (SC).
5. On the facts and circumstances of the case and in law the Ld. CIT(A) has erred in not appreciating the decisions of Hon’ble Delhi High court in the case of CIT Vs Anil Kumar Bhatia [211 Taxman 453, 352 ITR (493)] & Kerala High Court in the case of E.N. Gopakumar vs. Commissioner of Income tax (Central) [2016] 75 com 215(ker.) wherein Courts held that assessments in a search case can be concluded against interest of assessee including making additions even without any incriminating material, being available against assesses in search under section 132.
6. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting entire addition of Rs 1,78,35,069/ made on account of unexplained investment u/s 69 of Bin Income-tax Act
7. On the facts and in the circumstances of the case and in law, the Ld. CITIA) ought to have upheld the order of the A.O.
8. It is therefore prayed that the order of the Ld. CIT(A) be set aside and that of the AO be restored to the above extent. ”
3. The interconnected issue raised by the Revenue is that the learned CIT(A) erred in deleting the addition made by the AO of unexplained investment of Rs. 1,78,35,069/- by holding that no addition can be made in the proceeding under section 153A of the Act, in the absence of incriminating materials found during search.
4. The necessary facts are that there was a search and seizure action under section 132 of the Act carried out at the ‘Barter Group’ dated 04-12-2014 and a search warrant was also issued in the name of the present assessee. Accordingly, proceedings under section 153A of the Act were initiated in the case of the assessee for the A.Y. 2009-10 to 2014-15. Finally, the AO, for the year under consideration i.e. A.Y. 2011-12 finalized the assessment under section 143(3) r.w.s. 153A of the Act, wherein the AO treated the credit entries in the bank account of the assessee aggregating to Rs. 1,78,35,069/- as unexplained investment under section 69 and added to his total income.
5. The aggrieved assessee preferred an appeal before of the learned CIT(A).
5.1 The assessee before the learned CIT(A) submitted that during the search at his premises, there was no material of incriminating nature found regarding credit entries in bank account. The AO made addition based on bank entries which has already been incorporated and shown in the return of income. Further, such a bank statement was also not found during the search proceedings. Therefore, the year under consideration being unabated/completed assessment, no addition can be made in the proceedings under section 153A of the Act, in the absence of incriminating materials found during the search.
5.2 The learned CIT(A) agreed with the contention of the assessee and deleted the addition made by the AO by holding that in the proceedings under section 153A of the Act, the assessment in the case of unabated years can only be framed based on materials found during the search. The relevant finding of learned CIT(A) in this regard reads as under:
“7.3 It is apparent that the bank accounts were already shown in the return of income filed by the appellant and the same has not been commented upon with the findings of the search and seizure action carried out in the case of the appellant.
7.4 The issue related to addition u/s 153A in the cases in which the proceedings are not abated has been decided in favour of the assessee by the Jurisdictional High Court and Jurisdictional Tribunal as relied upon by the appellant. Legal position on the issue has been discussed comprehensively in the case of CIT vs. Kabul Chawla (2016) 380 ITR 573 (Del-HC) dated 28/08/2015.
7.5 It is a settled position of law at present that the completed assessments can be interfered with by the Assessing Officer while making assessment under section 153A only on the basis of some incriminating material unearthed during the course of search at the place of assessee, which was not produced or not already disclosed or made known in the course of the original assessment proceedings.
It is therefore submitted that the Assessing Officer has simply gone beyond the scope of the provisions of section 153A of the Act which comes into operation only after a search has been carried out u/s 132 of the Act and to assign power to the Income-tax authorities for a specific purpose only i.e. for unearthing concealed income.
7.6 The fact which may require appreciation at this stage is that even in the assessment order framed u/s. 153A, wherein addition made, there is no reference of any incriminating material. It is therefore submitted that on account of this special and very important factual matrix of this case, the provisions of section 153A are not applicable. To strengthen the aforesaid contention, it is submitted that it is very settled position of law as evident from various decisions of Tribunal as well as High Court that Assessing Officer has no jurisdiction to make additions in the order passed u/s 153A of the Act which are not pertaining to any undisclosed income or seized material when proceedings are closed and attained finality. In support of its contention the appellant strongly relied on the decision of Hon’ble Gujarat High Court in case of CIT Vs. Saumya Construction Pvt Ltd (Tax appeal No. 24 of 2016) dated 14th March 2016, the facts and findings of which are restated as under. ”
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“7.7 It is an undisputed fact that on the date of initiation of the search no assessment proceedings were pending in this assessment year. Therefore, the proceedings were not abated in the case as mentioned in the second proviso to section 153A(1) of the Act. It seems that the AO lost sight of the fact that he was not making an assessment under section 153A(1) of the Act read with its second proviso. As discussed hereinabove, there is no indication in the contents of the assessment order that the addition was made on the basis of any incriminating material found and seized in search.
7.8 In view of the aforesaid finding and respectfully following the judgments/decisions of Jurisdictional High Court, Jurisdictional Tribunal and other Courts, wherein it has been held that in absence of incriminating material / evidence, addition / disallowance cannot be sustained within the scope of section 153A of the Act. In my considered opinion, the action of the AO for making addition of deposit in the regular bank account which is already disclosed in the return of income filed u/s. 139(1) of the IT Act is not justified. Accordingly, the addition made in assessment completed u/s. 1353A is deleted. ”
5.3 Being aggrieved by the order of the learned CIT(A), the Revenue is in appeal before us.
6. The learned DR before us reiterated the findings contained in the assessment order and supported the order of the AO.
7. On the other hand, the learned AR before us vehemently relied on the order of the learned CIT-A.
8. We have heard the rival contentions of both the parties and perused the materials available on record. Admittedly, there was search and seizure action and under section 132 of the Act dated 4th December 2014 (i.e. during the financial year 2014-15 corresponding to A.Y. 2015-16) which was carried out in the case of “Barter Group” and in consequence to the same, the proceedings under section 153A of the Act was initiated in case of respondent assessee for year under consideration. The assessment under section 153A r.w.s. section 143(3) of the Act for the year under consideration i.e. A.Y. 2011-12 was framed after making additions on account of credit entries appearing in the bank account as an unexplained investment. On appeal by the assessee, the learned CIT (A) deleted the addition made by the AO on technical ground by holding that there was no material of incriminating nature found during the search with reference to the year under consideration. Therefore, the year under consideration being unabated/completed assessment year, no addition should be made in the absence of incriminating material. The learned DR before us vehemently argued that there is no provision under section 153A of the Act which restricts the assessment or reassessment in case of search to the extent of incriminating material only.
9. In this regard, we find that it has been settled by various Hon’ble Courts including the Hon’ble Jurisdictional High Court that the completed assessments cannot be disturbed in the absence of any incriminating material/ documents whereas the assessment/ reassessment can be made with respect to abated assessment years. The word ‘assess’ in Section 153A/153C of the Act is relatable to abated proceedings (i.e. those pending on the date of search) and the word ‘reassess’ to the completed assessment proceedings. The Hon’ble Gujarat High Court in the case of Saumya Construction Pvt. Ltd. reported in 81 taxmann.com 292, has held that there cannot be any addition of regular items shown in the books of accounts until and unless there were certain materials of incriminating nature found during search. The word incriminating has not been defined under the Act, but it refers to materials/ documents/ information which were collected during the search proceedings and not produced in the original assessment proceeding. Simultaneously, these documents had bearing on the total income of the assessee. Now coming to the case, we note that addition was made based on the amount credited in the bank account of the assessee without referring to incriminating document found in this regard which would have made basis for the addition in the assessment. The learned CIT(A) has also given clear finding that the entries in the bank statement which were the basis for making addition, have already been reported in the return of income filed under section 139 of the Act. There was no other material referred to by the AO while making the addition of credit entries in the bank account.
10. At the time of hearing, the learned DR has not brought anything on record contrary to the finding of the learned CIT (A). Accordingly, we hold that there cannot be any addition of the regular items which were disclosed by the assessee in the regular books of accounts. In holding so, we draw support and guidance from the judgment of Hon’ble Gujarat High Court in case of Saumya Construction (P.) Ltd (supra) wherein it was held as under:
Thus, while in view of the mandate of sub-section (1) of section 153A in every case where there is a search or requisition, the Assessing Officer is obliged to issue notice to such person to furnish returns of income for the six years preceding the assessment year relevant to the previous year in which the search is conducted or requisition is made, any addition or disallowance can be made only on the basis of material collected during the search or requisition. In case no incriminating material is found, the earlier assessment would have to be reiterated.
11. In view of the above, we hold that there cannot be any addition to the total income of the assessee of the regular items as made by the AO in the present case. Accordingly, we do not find any infirmity in the order of the learned CIT (A). Hence, we uphold the same. Thus, the grounds of appeal of the Revenue are hereby dismissed.
12. In the result, the appeal of the Revenue is hereby dismissed.
Coming to IT(SS)A No. 46/AHD/2021, an appeal by the assessee for the A.Y. 2013-14
13. The assessee has raised following grounds of appeal:
“1. The Ld. CIT(A)-11 erred in law and on facts in confirming addition of Rs. 11,82,147/- being alleged unaccounted receipts, ignoring detailed factual and lega l submission of the Appellant.
The assessee craves leave to add, amend, delete or alter one or more grounds of appeal. ”
14. The only issue raised by the assessee is that the learned CIT(A) erred in confirming the addition of Rs. 11,82,147/- being unaccounted receipt on account of noting/ jotting on loose paper/pocket diary etc.
15. At the outset, we note that identical addition of unaccounted receipts and payment based on noting/ jotting on loose papers/pocket diary were also made in AY 2014-15 and 2015-16 on which both the Revenue and the assessee were before us in separate appeals. As such, the facts of the issue of unaccounted receipts/ payment for the year under consideration viz a viz the succeeding years i.e. AY 2013-14 and AY 2014-15, 2015-16 are interconnected. Hence, for the sake of brevity, we combined the issue raised by the assessee and revenue regarding unaccounted receipt and payment in all these three assessment years.
15.1 The necessary facts are that the during the search and seizure action at the residence of the assessee, certain loose papers, pocket diaries etc. marked as Annexure A-1 to A-10 were discovered which were containing various noting relating to the land dealings situated at Memnagar, Hasdad, and Hasol besides other noting and jottings. The AO during the assessment proceeding required the assessee to explain the noting/ jotting on the loose papers/pocket diary in specified format which is as under:
| Annexure | Page No. | Contents | Period | Explanation | Where re ected |
16. The assessee vide letter dated 8-12-2016 explained the same in the specified format wherein he has shown receipts and payments of Rs. 4,61,89,000/- Rs. 4,89,97,800/- respectively. The assessee regarding other noting on the loose papers/ pocket diary which were not incorporated in the working sheet filed by him contended that the same are rough noting/ jotting/estimate. So, no credence can be given to them. However, the AO noticed that details w.r.t. land transaction situated at Memnagar, Hasdad, and Hasol with Alankar Infra were also found from the premises of Shri Ashot Vora as result of search. The seized documents contain clear names, amounts and in some cases clear dates also. Accordingly, the AO was of the view that transaction noted on seized documents/papers/diary etc. are not rough jotting or estimates. Thus, the AO based on seized document/paper/diary worked out the unaccounted receipts and payments at Rs. Rs. 11,58,54,994 and 21,20,96,524/- for all three years discussed above respectively and proposed to treat the same as explained money and unexplained expenses by issuing a show cause notice. The response of the assessee to the SCN are summarized as under:
i. There cannot be any inference drawn based on materials found either from his premises or from third party premises (Shri Ashit Vohra) as the same are mere rough jotting or estimates and not getting corroborated with independent materials.
ii. The entry wise explanation was furnished, and cash flow statement prepared on such entries should be accepted in Toto.
iii. There were funds received as advanced against land which has not been transferred due to dispute. Therefore, such receipts should be treated as liability and not in the nature of income.
iv. The office of the AO while working out the unaccounted receipts and payments treated the repetitive or continuous transaction of same party recorded on different pages separately. As such, the same should be considered as in consolidated form. Likewise, several papers only containing certain amounts without having any narration were not in a position of being explained. Therefore, such transactions should be excluded while drawing any adverse inference.
17. The AO after considering the submission of the assessee regarding duplicate entries and banking transactions re-worked the unaccounted receipts and payments which were bifurcated in AY 2013-14 to 2015-16 detailed as under:
| Sl. No. | A.Y. | Payment (Rs.) | Receipt (Rs.) |
| 1 | 2013-14 | 16,36,493 | 37,68,640 |
| 2 | 2014-15 | 1,33,22,253 | 47,95,000 |
| 3 | 2015-16 | 17,34,13,108 | 7,66,97,954 |
| Total | 18,83,71,854 | 8,52,61,594 | |
17.1 The AO accordingly made the addition of unaccounted receipt under section 69A of the Act. Likewise, the AO also made the addition of unaccounted payment after adjusting the unaccounted receipts under section 69C of the Act. Hence, the AO made addition of the net amount in all these three AYs detailed as under:
| 1. A.Y. 2013-14 | Rs. 37,68,640/- |
| 2. A.Y. 2014-15 | Rs. 1,33,22,253/- |
| 3. A.Y. 2015-16 | Rs. 17,34,13,108/- |
18. Aggrieved assessee carried the matter before the Ld. CIT-A.
18.1 The assessee before the learned CIT(A) made contentions applicable to all the years in dispute i.e. A.Y. 2013-14 to 2015-16 which are detailed as under:
(i) During the search operation, no assets, being money, bullion, jewelry etc. were found whereas the AO, based on loose paper containing unaccounted receipt/ payments worked out addition under section 69A of the Act. However, there is no correlation between the income determined and assets found. Hence, the provision of section 69A of the Act is not applicable.
(ii) During the assessment proceedings, the explanations were made for each loose papers and jottings and, if any receipts or payments were coming out of those loose papers/jottings, the same has been duly recorded in the cash flow statement as submitted during the assessment proceedings. Thus, the onus cast on him was duly discharged but the AO without making any independent enquiry and bringing out any contrary material on record disregarded his contentions merely based on surmise and conjecture.
(iii) The transactions in the loose papers at the most may be treated as his business turnover and the profit embedded in the same only can be brought to tax. As such, the entries in loose papers explained in the cash flow statement represent the turnover and the profit out of such turnover can only be brought to tax.
(iv) There were notings on loose papers without any narration or date but the same have been considered by the AO as receipts or payments at his own whims. Likewise, there were occasions where AO considered noting on a page but left out other noting on same pages without giving any basis. Similarly, the AO decoded some entries in multiple of 100 or 1000 or 100000 and some as it is. As such there was no uniformity in the basis given for doing so i.e. multiplying with Rs. 100, 1000 or 1,00,000 by the AO. As such, all these papers/diaries are dumb documents containing rough noting/ jotting or estimates.
18.2 The assessee also made specific contention about the noting/ jotting recorded on each page of loose papers/ diary used for making addition on account of receipts and payments in the different years in excel form giving detail in following format.
|
Sr.No. |
Ann | Page No. | Unaccounted Receipts per AO s | Unaccounted Receipts per AO as | Unaccounted Receipts per as Appellant | Unaccounted payment per as Appellant |
19. In the excel sheet, the assessee in some cases agreed with the amounts of receipts and payment worked out by the AO from such specific loose pages. Likewise, in some cases, the assessee calculated the amounts of receipts and payments other than the amount worked out by the AO from such specific loose pages. Similarly, in some cases the assessee did not agree with the amounts of receipts and payment worked out by the AO at all.
20. The learned CIT(A) after considering the finding of the AO, assessee’s contention regarding each page and statement recorded during the search proceeding worked out the amounts of receipts and payments coming out from seized documents. The basis adopted by the learned CIT(A) can be summarized as under:
1. In cases where there was no dispute between the AO and the assessee regarding the amounts of receipts or payments recorded on loose pages, the learned CIT-A has taken the same as it is.
2. In cases where the assessee worked the different amount than what has been worked out by the AO, the learned CIT(A) analyzed the specific page in the light of content on such pages and oral statement of the assessee if any recorded during the search proceeding, thereafter, he worked out the amount of receipt or payments as per his analysis.
3. In cases where the assessee was not agreed with the amounts worked out by the AO from specific pages at all, the learned CIT(A) analyzed the specific page in the light of content on such pages and oral statement of the assessee if any recorded during the search proceeding. Thereafter, the ld. CIT-A either accepted the version of assessee or AO or re-worked out other amount as per his understanding.
21. Thus, the learned CIT-A based on the above discussion worked out the amounts of receipts and payments pertaining to different assessment years and made the addition of difference between receipts and payments in the following manner:
| A. Year | Receipts (in Rs.) |
Payments (in Rs.) | Difference | Net receipt from PY |
Addition to total income |
| 2013-14 | 37,68,640 | 25,86,493 | 11,82,147 | – | 11,82,147 |
| 2014-15 | 55,89,000 | 1,04,58,253 | 48,69,253 | 11,82,147 | 36,87,106 |
| 2013-14 | 5,64,65,234 | 6,39,76,925 | 75,11,691 | – | 75,11,691 |
22. Being aggrieved by the order of the learned CIT(A) the assessee is in appeal in AY 2013-14 whereas both the assessee and the revenue are in appeal for AY 2014-15 and 2015-16.
23. The learned AR before us has filed a detailed chart running into various pages wherein each entry appearing in the loose paper was explained by submitting that the assessee being a social-political person was acting as mediator in various social disputes and therefore no adverse inference can be drawn based on such loose papers belonging to the other parties. It was also contended that the document found from the 3rd party premises i.e. Shri Ashit Vohra cannot be used for making any addition in the hands of the assessee.
24. On the other hand, the learned DR submitted that the onus is upon the assessee to counter the transactions recorded in the loose papers based on the materials recovered during the search from his premises.
24.1 Both the learned AR and the DR vehemently supported the order of the authorities below to the extent favourable to them.
25. We have heard the rival contentions of both the parties and perused the materials available on record. It is undisputed that during the search proceeding at the premises of the assessee, there were certain loose sheets/diary etc. found and impounded containing certain transactions alleged to be receipts and payments. The AO based on such noting & jotting recorded on the impugned sheets/diary etc. and after considering the argument of the assessee worked out the amounts of receipts and payments for each year being AY 2013-14 to 201516. The AO, accordingly, treated the receipts as unexplained money under section 69A of the Act and likewise treated net payments after adjusting the receipts as unexplained expenses under section 69C of the Act. On appeal by assessee, the learned CIT(A) re-worked out the receipt and payments recorded in the impugned sheets and added the difference amount as income of the assessee and thereby the learned CIT(A) provided the substantial relief to the assessee. Now both the assessee and Revenue are before us in separate appeal for separate assessment years. The issue before us can be summarized as under:
(i) Whether income can be assessed based on noting or jotting on the loose sheets /diary etc. found during search?
(ii) The materials found in the premises of the present assessee are dumb documents or not?
(iii) The quantum of transaction of receipt and payment on the impugned sheets?
25.1 With regard to the first question, we note that the provisions of section 132(4A) and section 292C of the Act provide that in the search proceedings any books of account, other document found from the possession and control of any person then it may be presumed that such books of account or document belong to such person and contents of such books of accounts and documents are true. However, we find that such a presumption under section 132(4A) or 292C of the Act is rebuttable. It is upon the assessee to rebut such presumption based on cogent material. In holding so, we find support and guidance from the judgment of Hon’ble Supreme court in case of P. R. Metrani vs. CIT reported in 287 ITR 209 where it was held as under:
A presumption is an inference of fact drawn from other known or proved facts. It is a rule of law under which courts are authorized to draw a particular inference from a particular fact. It is of three types, (i) “may presume”, (ii) “shall presume” and (iii) “conclusive proof”. “May presume” leaves it to the discretion of the Court to make the presumption according to the circumstances of the case. “Shall presume” leaves no option with the Court not to make the presumption. The Court is bound to take the fact as proved until evidence is given to disprove it. In this sense, such presumption is also rebuttable. “Conclusive proof” gives an artificial probative effect by the law to certain facts. No evidence is allowed to be produced with a view to combating that effect. In this sense, this is irrebuttable presumption. [Para 22]
The words in sub-section (4) are “may be presumed”. The presumption under sub-section (4A), therefore, is a rebuttable presumption. The finding recorded by the High Court in the impugned judgment that the presumption under sub-section (4A) is a irrebuttable presumption insofar as it relates to the passing of an order under sub-section (5) of section 132 and rebuttable presumption for the purpose of framing a regular assessment was not correct. There is nothing either in section 132 or any other provisions of the Act which could warrant such an inference or finding. [Para 23]
25.2 Moving ahead the provision of section 132(4A) and section 292C of the Act uses the phrase “any books of account, other documents”. Thus, the question arises whether any loose sheets or diary containing rough noting jotting or estimate can be brought under the net of tax liability as per the above presumption. The answer certainly stands in negative. In our considered view, during the search proceeding there might be volumes of loose sheets, notepad, diary etc. containing various type of noting jotting which can be found and impounded. But the same cannot be construed as the income of the assessee unless and until such documents are speaking one. A document/loose sheets/note pad can be said speaking one if such document itself or if reads in conjecture with some other corroborative document shall be able to give following information:
(i) Whether such document contains some transaction subjected to tax and consequently bears the tax liability.
(ii) If yes, taxability in whose hands?
(iii) The year of taxability of such income.
(iv) The rate and amount of tax
25.3 A non-speaking 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, must disregarded for the purposes of assessments to be framed pursuant to search and seizure action. From the search and seizure perspective, such non-speaking seized documents are to be referred to as “Dumb Documents”. Therefore, in our considered opinion any loose sheets/diary/note pad containing certain noting or jotting found but on perusal of the same it not discernible that whether any transaction taxable in nature materialized which has not been recorded in the regular books of account or not corroborating with some other cogent material shall not be used for making assessment despite being presumption provide under section 132(4A) and under section 292C of the Act. In holding so, we draw support and guidance from the judgment of Hon’ble Supreme Court in case of CIT vs. Shoorji Vallabhdas & CO. reported in 46 ITR 144 wherein it was held as under:
“No doubt, the Income-tax Act takes into account two points of time at which the liability to tax is attracted, viz., the accrual of the income or its receipt; but the substance of the matter is the income. If income does not result at all, there cannot be a tax, even though in book-keeping, an entry is made about a “hypothetical income”, which does not materialise. ”
25.4 We also draw support and guidance from the order of the coordinate bench of Mumbai Tribunal in the case of Nagarjuna Construction Co. Ltd. vs. DCIT reported in 23 taxmann.com 239. The relevant finding of the bench is extracted as under:
The basis for addition is only note book/loose slips. These note book/loose slips are unsigned documents. The assessing officer has not established nexus between the note book/loose slips with actual accrual/ receipt of interest. The note book/loose slips seized marked A/NCCL-1/1 found during the course of search is a dumb document having no evidentiaryvalue, no addition can be made in the absence of corroborative material. I f there is circumstantial evidence in the form of promissory notes, loan agreement and bank entries, the addition is to be made on that basis to the extent of material available. The assessee is not expected to explain the loosepapersfound as there is no evidence other than note book/loose slips regarding accrual of interest. In our opinion, no addition can be made on the basis of dumb documents/note book/loose slips in the absence of any other material to show that the assessee has carried on money lending business. Noting on the note book/diary/loosesheets are required to be supported/ corroborated by other evidence and are also include the statement of a person who admittedly is a party to the noting and statement from all the persons whose names there on the note book/loose slips and their statements to be recorded and then such statement undoubtedly should be confronted to the assessee and he has to be allowed to cross examine the parties.
25.5 The Hon’ble Supreme Court in case of Common Cause (A Registered Society) vs. Union of India (popularly known as Sahara-Birla Diary) reported in 77 taxmann.com 245 by following the earlier judgment of the Hon’ble SC in the case of C.B.I. v. V.C. Shukla [1998] 3 SCC 410 held as under:
20. It is apparent from the aforesaid discussion that loosesheets of papers are wholly irrelevant as evidence being not admissible under Section 34 so as to constitute evidence with respect to the transactions mentioned therein being of no evidentiaryvalue. The entire prosecution based upon such entries which led to the investigation was quashed by this Court.
25.6 Thus, in view of the above discussion the answer to the question is that no assessment can be made in the hand of the assessee on basis of certain noting/jotting/rough estimates on the loose sheets/note pad/diary etc. unless and until same is corroborated with independent cogent material giving rise to undisclosed income.
25.7 Now coming to the facts of the present case, we note that there were several documents in the form of loose papers/diary etc. found and impounded containing various financial transactions. Some of the pages contain dates whereas some are undated and unsigned, some pages contain clear names and narration such as receipts or payments whereas some pages contain only noting of some amount without being specific narration. The assessee contended that these are dumb document and cannot be relied upon whereas the AO held document were found from the premises of the assessee, therefore as per the presumption provided under section 132(4A) and section 292C of the Act the assessee was required to explain the transaction recorded in such documents, but assessee failed. If we see these facts alone in view of the above discussion, the seized material seems to be dumb document for purpose of making assessment in pursuant to search proceedings. However, we find that the assessee while recording his statement under section 132(4) of the Act admitted to some of the noting made in the seized document. There is no material on record suggesting that the assessee has retracted from the statement recorded under section 132(4) of the Act. The statement under section 132(4) of the Act is administered on oath and any statement given on oath carry evidentiary value in view of provision of section 181 and section 193 of Indian Penal Code. However, the provision of section 31 of the Indian Evidence Act, 1872 states that admissions are not conclusive proof of the matters, yet the admissions in the absence of rebuttal may conclude an issue. In the proceedings under the Income-tax Act also, the admissions bind the maker when the same are not rebutted or retracted. In holding so, we draw support and guidance from the judgment of Hon’ble Supreme court in case of Narayan Bhagwantrao Gosavi, Balajiwale v. Gopal Vinayak Gosavi AIR 1960 SC 100 wherein it was held as under:
“An admission is the best evidence that an opposite party can rely upon and, though not conclusive, yet could be decisive of the matter unless successfully withdrawn or proved erroneous.”
25.8. Likewise, the assessee during the assessment proceedings and during the appellate proceeding accepted to have receipts and payments as recorded on the certain loose paper/pages of diary etc. As such, there were some cases where there is no dispute between assessee regarding receipts or payments noted on a particular page.
25.9. Thus, if we see the facts of the noting made on seized document in the light of admission made by the assessee in the statement recorded under section 132(4) of the Act which has not been retracted and the submission made by the assessee before the Revenue authorities, such documents cannot be said to be dumb document.
25.10 Likewise, the learned CIT(A) analyzed every page of seized material in the light of finding of the AO, submission of the assessee and the oral statement of the assessee recorded under section 132(4) of the Act and the contents of pages. Accordingly, the learned CIT(A) held that pages of seized document are either dumb document or non-speaking one and worked out the amount of the receipts or payment from such pages. The finding and analysis of the learned CIT(A) nowhere been controverted either by the learned AR or the learned DR. Therefore, the finding of the learned CITA(A) cannot be brushed aside in absence of cogent contrary materials.
25.11 We find that the learned CIT(A) worked out the amount of unaccounted receipt or payment based on admission by the assessee either in the statement recorded during the search or in the submission made during assessment or appellate proceeding and based on analysis of seized document which has not been controverted. Therefore, we do not find any infirmity in the order of the learned CIT(A). Nevertheless, we find that the sum of Rs. 12,58,333 has been added twice i.e. in the AY 2014-15 and 2016-17 which is not desirable under the provisions of the Act. Thus, we delete the above addition from the AY 2014-15. Hence, the grounds of appeal of the assessee and Revenue for the AY 2013-14 and 2015-16 are dismissed whereas the ground of appeal of the assessee for the AY 2014-15 is partly allowed.
In the result, the appeal filed by the assessee is hereby dismissed.
Coming to IT(SS)A No. 53/AHD/2021, an appeal by the Revenue for the A.Y. 2014-15
26. The Revenue has raised following grounds of appeal:
“1. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in restricting the addition on account of unaccounted payments to Rs.67,58,253/-out of total addition of Rs.85,87,253/- despite the assessee had failed to produce corroborative evidences which proves the working of amount of receipt and payment on the basis of seized materials found from the assessee is not his unexplained payment.
2. On the facts and in the circumstances of the case and in law, the ld. CIT(A) is erred in holding that the entire unaccounted receipts or payments cannot be brought to tax and it is only the real income which is to be taxed, and accordingly restricting the net unaccounted payment to Rs.11,69,253/- (Rs.67,58,253 – 55,89,000), when no one to one correlation has been made by the assessee so as to grant him the benefit of telescoping.
3. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in deleting the addition on account of unexplained credit entries in Bank of Rs. 91,80,000/- despite the assessee could not establish the genuineness of transaction even during assessment proceedings or remand proceedings.
4. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) ought to have upheld the order of the A.O.
5. It is, therefore, prayed that the order of the Ld. CIT(A) be set aside and that o f the A.O. be restored to the above extent. ”
27. The first issue raised by the revenue in ground Nos. 1 and 2 is that the Ld. CIT-A erred in restricting the addition made by the AO to the tune of Rs. 36,87,106/- instead of confirming the entire addition of Rs. 1,33,82,263/-.
28. At the outset, we note that the issues raised by the Revenue in its grounds of appeal for the year under consideration i.e. AY 2014-15 has been dealt with assessee appeal in IT(SS)A No. 46/AHD/2021 for the assessment year 2013-14. The issue has been dealt with in detail vide paragraph no. 25 of this order where we have decided the issue against the Revenue. For detailed discussion, please refer to the paragraph of this order. Hence, the grounds of appeals filed by the Revenue are hereby dismissed.
29. The next issue raised by the revenue is that the Ld. CIT-A erred in deleting the addition of Rs. 91,80,000/- on account of unexplained credit entries in bank.
30. The necessary facts are that the AO during the assessment proceeding found that the assessee’s bank account maintained with Ahmedabad District Cooperative Bank Ltd was credited by Rs. 1,69,25,848/- throughout the year. The AO, in absence of satisfactory explanation regarding to the identity, genuineness and creditworthiness of the depositor treated the same as unexplained investment under section 69 of the Act and added the same to total income of the assessee.
31. The aggrieved assessee preferred an appeal before the learned CIT(A).
31.1 The assessee before the learned CIT(A) submitted that he does not maintain any books of account therefore details were not readily available as required by the AO regarding credit entries in the bank. Furthermore, the AO also the issued the notice in the fag-end of the assessment proceeding. Thus, the same was not submitted. The assessee before the learned CIT(A) requested for the admission of additional pieces of evidence as detailed below:
| Sr. No. | Name | PAN No. | Amount | Documentary evidence submitted |
| 1. | Paresh N Patel | ABMFS4283N | 59,00,000 | Confirmation letter, ADC Bank statement, ITR Acknowledgement |
| 2. | Shree Pushkar Construction Co | AKMPP4460B | 2,50,000 | Confirmation letter, ADC Bank statement, ITR Acknowledgement |
| 3. | Labdhi Finance | ALIPS4966M | 15,00,000 | Confirmation letter, BOI Bank statement, ITR Acknowledgement |
| 4 | Dharmesh Chandulal Patel | ARSPP9110B | 10,00,000 | Confirmation letter and bank statement |
| 5 | Sheetal Dharmesh Patel | ACLPP0073D | 5,00,000 | Confirmation letter and bank statement |
| 6 | Jalaram Finvest Ltd | AACM8004B | 77,45,000 | —- |
| 7 | SB Interest | NA | 848 | Interest credited in bank account |
| Total… | 1,69,25,848/ – | |||
31.2 The assessee regarding to one party namely Jalaram Finvest Ltd for the amount aggregating to Rs. 77,45,000/- credited during the year submitted that the said party was not co-operating. Therefore, no detail other than the PAN and copy of RTGS form obtained from bank can be submitted. The assessee requested to carry out an independent inquiry from said party if other details are required. Accordingly, the assessee contended that he discharged the onus cast upon him regarding identity, genuineness, and creditworthiness of the creditor.
31.3 The additional pieces of evidence furnished by the assessee were forwarded to the AO for remand report. The AO in the remand report submitted that the assessee furnished details about the credit of Rs. 91.5 lacs whereas the total amount credited in the bank is of Rs. 1,69,25,848/- only. Thus, the amount credited in the bank to the extent of Rs. 77,75,848/- remains unexplained therefore addition to this extent needs to be sustained.
31.4 With regard to the credit entry from Shri Paresh N Patel for Rs. 59 Lacs the AO submitted that the bank statement of party was not legible as the Xerox copy was faded, hence the same was not acceptable. Likewise, in the case of the party namely Shree Pushkar Construction Co., the confirmation letter was not dated, and the bank statement also pertains to different periods.
31.5 With regard to credit entry from Labdhi Finance for Rs. 15 Lacs, the AO submitted that same is proprietary concern of Shri Atul Hiralal Shah in whose case the transaction of loans or advances were not found to be genuine.
31.6 With regard to the credit entry of Rs. 10 lakhs from Shri Dharmesh Chandulal Patel, the AO submitted only confirmation and bank statement. There is no detail of ITR, hence the creditworthiness was not verified.
32. The learned CIT(A) after considering facts in totality deleted the addition made by the AO on account of credit entry in the bank except for the amount of Rs. 77.45 Lacs credited form Jalaram Finvest Ltd. The relevant finding of the learned CIT(A) reads as under:
“8.3 At the outset, It has been noticed that insufficient opportunity had been granted to the appellant before completing the assessment proceedings. As mentioned, except in the case of Jalaram Finvest Ltd., the appellant has provided PAN numbers in all cases, Confirmations of these parties & ITR acknowledgements besides bank statement copies. The appellant had also filed his bank statements wherein all these credits are reflected. It can be seen that all these sums have been received through proper banking channel which proved the genuineness of these credits. The appellant had also filed bank statements o f depositors except to Jalaram Finvest Ltd to prove source of the deposits taken by the appellant. Since the assessment order has been passed within 3-4 days of issuing show cause notice it was unreasonable to expect from the appellant to supply the documents not belonging to him. As per the legal precedence once the basic documents in respect o f identity, creditworthiness and genuineness are supplied by the assessee, the primary onus is discharged and now the onus shifts upon the AO to make further inquiries to gather the evidences upon the same. However, the AO has not pointed out any defect in the additional evidences before him in the remand proceedings.
8.4 Further it is noticed that no incriminating seized papers regarding these parties or these unsecured loans have been found during the course of search showing the bogus loans/deposit from the aforesaid parties. Since primary onus has been discharged by the assessee, the AO ought to have made independent inquiries & brought on record the outcome of the inquiries/evidences before making the addition in this regard. No such adverse evidences about the aforesaid deposits are on record. The appellant has supplied bank statements of the depositors and the same do not reflect any cash deposits before granting the advances to the appellant.
8.5 At this juncture, it is important to decide as to the applicability of section 69 In the case of the appellant. Throughout the assessment proceedings, the AO has not raised any query regarding source of any investment. Since, AO has not found any investment as unexplained, in the books of accounts or otherwise, thus the question of invoking provisions of section 69 does not arise. The addition could have been made by the AO u/s 68 of the IT Act only but the same has been done u/s 69 of IT Act As has been held in the preceding paras that the identity, creditworthiness and genuineness has been duly proved by the appellant by furnishing the necessary details and documents in support. Therefore, the primary onus cast upon the appellant has been discharged except in the case o f Jalaram Finvest Ltd from whom the appellant has obtained the loan of Rs 77,45,000/-. Thus the addition to the extent of Rs 77,45,000/- in respect of Jalaram Finvet Ltd has not been established to be genuine and neither the creditworthiness is proved, hence the same is confirmed.
8.6 However, in respect of the other depositors the addition is legally found not sustainable and the same are deleted respectfully following the decisions/judgments of the Hon’ble Courts including the followings:
a) CIT v/s Apex Therm Packaging Pvt Ltd (2014) (42 com 473 (Guj))
b) Pratapbhai Virjibhai Patel v/s ITO (2014) (45 com 151 (Guj))
c) DCIT vs Rohini Builders 256 ITR 360 (Guj)
d) ITO vs Riddhi Siddhi Corporation ITA No 2248/Ahd/2012
e) CIT vs Ranchhod JivabhaiNakhava [2012] 21 com 159 (Guj)
f) BanwariLalvs ITO ITA No 1542/Del /2012 dated 15-01-2016
8.7 Hence, in view of the above discussion except unsecured loans from Jalaram Finvest amounting to Rs 77.45,000 & saving bank interest of Rs 848/ other additions aggregating to Rs 91 80,000 is deleted. However, the addition of Rs 77,45,848 is confirmed. ”
33. Being aggrieved by the order of the learned CIT(A), both the assessee and the Revenue are in appeal before us. The Revenue is against the relief/ deletion of addition made by the AO whereas the assessee is in appeal against the addition sustained by the learned CIT(A). The relevant ground of appeal of the assessee in IT(SS)A No. 47/Ahd/2021 reads as under:
“2. The Ld. CIT(A)-11 erred in law and on facts in confirming the addition o f Rs.77,45,000/- made u/s. 68 of the Act ignoring the fact that the Appellant is not required to maintain any books of account and therefore, question of any unexplained credit entry int eh same doesn’t arise. ”
34. Both the learned DR and the learned AR before us vehemently supported the order of the lower authorities to the extent favourable to them.
35. We have heard the rival contentions of both the parties and perused the materials available on record. The provision of section 68 of the Act fastens the liability on the assessee to make proper and reasonable explanation of nature and sources of sum credited in the books to the satisfaction AO. The assessee is liable to provide proof of the identity of the lenders, establish the genuineness of the transactions and creditworthiness of the parties. These liabilities on the assessee were imposed to justify the credit entries under section 68 of the Act by the Hon’ble Calcutta High Court in the case of CIT Vs. Precision finance (p) Ltd reported in 208 ITR 465 wherein it was held as under:
“It was for the assessee to prove the identity of the creditors, their creditworthiness and the genuineness of the transactions. On the facts of this case, the Tribunal did not take into account all these ingredients which had to be satisfied by the assessee. Mere furnishing of the particulars was not enough. The enquiry of the ITO revealed that either the assessee was not traceable or there was no such file and, accordingly, the first ingredient as to the identity of the creditors had not been established. If the identity of the creditors had not been established, consequently, the question of establishment of the genuineness of the transactions or the creditworthiness of the creditors did not and could not arise. The Tribunal did not apply its mind to the facts of this particular case and proceeded on the footing that since the transactions were through the bank account, it was to be presumed that the transactions were genuine. It was not for the ITO to find out by making investigation from the bank accounts unless the assessee proved the identity o f the creditors and their creditworthiness. Mere payment by account payee cheque was not sacrosanct nor could it make a non-genuine transaction genuine. ”
35.1 Now, 1st we proceed to understand the identity of the party. The identity of the party refers to the existence of such a party which can be proven based on the evidence. As such the identity of a party can be established by furnishing the name, address and PAN detail, bank details, passport, and other details of the Government agencies.
35.2 The next stage comes to verify the genuineness of the transaction. Genuineness of transaction refers what has been asserted is true and authentic. A genuine transaction must be proved to be genuine from all prospective and not merely on paper. The documentary evidences should not provide a mask to cover the actual transaction or designed in way to present the transaction as true but the same is not. The genuineness of transaction can be proved by submitting confirmation of the party along details of mode transaction but merely showing transaction carried out through banking channel is not sufficient. As such, the same (genuineness) should also be proved by circumstantial/ surrounding evidences as held by the Hon’ble supreme court in case of Durga Prasad More reported in 82 ITR 540 and in case of Smt. Sumati Dayal reported in 214 ITR 801.
35.3 The last stage comes to verify the creditworthiness of the parties. The term creditworthiness as per Black Law Dictionary refers as:
“creditworthy, adj. (1924) (Of a borrower) financially sound enough that a lender wil l extend credit in the belief default is unlikely; fiscally healthy-creditworthiness.
35.4 Similarly in The New Lexicon Webster’s Dictionary, the word “creditworthy” has been defined as under:-
“creditworthy, adj. of one who is a good risk as a borrower.”
35.5 It is the duty of the assessee to establish that the creditor party has capacity to advance such loan and has requisite fund in its books of account. The capacity to advance loan can be established by showing sufficient income, capital and reserve or other fund in the hands of creditor. It is required by the AO to find out the financial strength of the creditor to advance loan with judicious approach and in accordance with materials available on record but not in arbitrary and mechanical manner.
35.6. In the light of the above discussion, we proceed to adjudicate the issue in hand regarding each loan creditor separately.
35.7 Admittedly, during the year the bank account of the assessee was credited by Rs. 1,69,25,848/- which was treated as unexplained investment by the AO in the absence of necessary detail. At the outset we note, the above amount includes an amount of Rs. 848/- being bank interest which cannot be added to total income of the assessee under section 68 of the Act.
35.8 The next amounts aggregating to Rs. 59 Lacs and 2.5 Lacs were credited from Shri Naresh N Patel and Shree Pushkar Construction Co. respectively. The assessee during appellate proceeding claimed the same as loan credit and to establish identity, genuineness and credit worthiness furnished PAN, copy of confirmation letter, copy of bank statement of parties and copy of ITR acknowledgment. The AO in the remand report only objected to that bank statement either not visible or of another period. The AO did not feel it necessary to call for another copy of the bank statement. Therefore, in such facts and circumstances, we hold that assessee discharged primary onus cast upon him, hence we do not find any infirmity in the finding of the learned CIT(A) as he rightly deleted the addition made by the AO to this extent.
35.9 With regard to the credit aggregating to Rs. 15 Lacs from Labdhi Finance, we note that the assessee furnished PAN, copy of confirmation letter, copy of bank statement of party, and copy of ITR acknowledgment. The AO in the remand only objected that the sources of fund and advance made by the party namely Labdhi Finance held as bogus. In this respect, we are of the considered opinion that the assessee is only liable to explain the sources of credit in his books which he duly discharged. If any adverse action is taken in the case of creditor party, then the same will ipso facto prove that the credit in the books of the assessee is not genuine unless cogent material suggesting otherwise brought on record. Hence, we do not find any infirmity in the finding of learned CIT(A) as he rightly deleted the addition made by the AO to this extent.
35.10 Likewise, an amount of Rs. 10 Lacs credited from one Shri Dharmesh Chandulal Patel and the assessee in support furnished PAN, copy of confirmation letter, bank statement of party. The AO in remand only objected that assessee has not furnished copy of ITR. In our considered opinion, the AO was having PAN detail of the party, he should have obtained copy of ITR from ITD portal. But AO has not carried out any independent inquiry. Thus, in our considered opinion, the assessee discharged the onus cast upon him and the learned CIT(A) rightly deleted the addition made by the AO.
35.11 Coming to the credit of Rs. 77.75 Lacs from Jalaram Finvest Ltd, the assessee provided the identity, PAN detail of party, and furnished copy of RTGS form used for transferring the fund to the assessee bank by the said party. The assessee requested to make an independent inquiry as the party was not cooperating. The AO in the remand proceeding did not carry out any independent inquiry from the party under section 133(6) or 131(1) of the Act despite having power conferred under the statute. It is the primary onus upon the assessee to justify the test provided under section 68 of the Act i.e. identity, credit worthiness of the parties but the assessee instead of providing the same requested to the Revenue to conduct the enquiries. Thus, it appears that the assessee has failed to discharge the onus imposed upon it under section 68 of the Act. However, considering the submission of the assessee that the loan party is not providing the information, we interest of the justice and fair play deemed it fit to restore the issue to the file of the AO for fresh adjudication after conducting necessary enquiries from the loan party. Hence, the ground of appeal of the assessee is allowed for statistical purposes. Thus, in view of the above detailed discussion, the grounds of appeal of the Revenue are hereby dismissed whereas the ground of appeal of the assessee is allowed for statistical purposes.
35.12 In the result, the appeal of the Revenue is hereby dismissed.
Coming to IT(SS)A No. 47/AHD/2021, an appeal by the Assessee for the A.Y. 2014-15
36. The assessee has raised following grounds of appeal:
“1. The Ld. CIT(A)-11 erred in law and on facts in confirming addition o f Rs.36,87,106/- being alleged unaccounted payments, ignoring detailed factual and lega l submission of the Appellant.
2. The Ld. CIT(A)-11 erred in law and on facts in confirming the addition o f Rs.77,45,000/- made u/s. 68 of the Act ignoring the fact that the Appellant is not required to maintain any books of account and therefore, question of any unexplained credit entry in the same doesn’t arise.
3. The assessee craves leave to add, amend, delete or alter one or more grounds o f appeal. ”
37. The first issue raised by the assessee is that the Ld. CIT-A erred in sustaining the addition for Rs. 36,87,106/- made by the AO on account of unaccounted payment based on loose paper.
38. At the outset, we note that the issue raised by the assessee in his grounds of appeal for the year under consideration i.e. AY 2014-15 has been dealt with assessee’s appeal in IT(SS)A No. 46/AHD/2021 for the assessment year 2013-14. The issue has been dealt with in detail vide paragraph no. 25 of this order where we have decided the issue partly in favour of the assessee. For the detailed discussion, please refer to the above-mentioned paragraph of this order. Hence, the ground of appeal filed by the assessee is hereby partly allowed.
39. The next issue raised by the assessee is that the Ld. CIT-A erred in sustaining the addition for Rs. 77,45,000/- made by the AO by treating the credit in bank as unexplained.
40. At the outset, we note that the issues raised by the assessee in his grounds of appeal has been dealt along with Revenue appeal in IT(SS)A No. 53/AHD/2021. The issue has been dealt with in detail vide paragraph no. 35 of this order where we have remitted the issue to the file of the AO for fresh adjudication. For detailed discussion, please refer to the above-mentioned paragraph of this order. Hence, the ground of appeal filed by the assessee is hereby allowed for the statistical purposes.
In the result, the appeal filed by the assessee is partly allowed for statistical purposes.
Coming to ITA No. 86/AHD/2021, an appeal by the Revenue for the A.Y. 2015-16
41. The revenue has raised following grounds of appeal:
“1. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in deleting the addition on account of unexplained cash of Rs.70,00,000/- without considering the provisions of section 132(4A) as the incriminating materials based on which the addition was made was seized from the premises of the assessee and the assessee has filed to explain the same satisfactorily.
2. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in restricting the addition on account of unaccounted receipts at Rs.5,64,65,243/-out of total addition of Rs.7,66,97,954/- and restricting the total unaccounted payments to Rs.6,39,76,925/- out of total addition of Rs.9,57,15,154/- despite the assessee had failed to produce corroborative evidences which proves the working of amount of receipt and payment on the basis of seized materials found from the assessee is not his unaccounted receipt and unexplained payment.
3. On the facts and in the circumstances of the case and in law, the ld. CIT(A) is right in holding that the entire unaccounted receipts or payments cannot be brought to tax and it is only the real income which is to be taxed, and accordingly restricting the net unaccounted payment of Rs.75,11,691 (Rs.6,39,76,925 – Rs.5,64,65,234), when no one to one correlation has been made by the assessee so as to grant him the benefit o f telescoping.
4. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in deleting the addition on account of unexplained credit entries in Bank o f Rs.8,00,000/- despite the assessee could not establish the genuineness of transaction even during assessment proceedings or remand proceedings.
5. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) ought to have upheld the order of the A.O.
6. It is, therefore, prayed that the order of the Ld. CIT(A) be set aside and that o f the A.O. be restored to the above extent. ”
42. The 1st issue raised by the revenue is that the Ld. CIT-A erred in deleting the addition made by the AO for Rs. 70,00,000/- representing unexplained cash based on the seized material found on the premises of the assessee without considering provisions of section 132(4A) of the Act.
43. The necessary facts as emerging from the order of the authorities below are that the assessee in the present case is an individual and deriving his income under the head business and profession as share of profit from the partnership firm, income from other sources in the form of interest. The assessee was also engaged in the activity of state broker/property consultant. The assessee was also engaged in political and social activities. Accordingly, the assessee used to act as mediator to resolve the issues of various parties relating to social and business activities.
44. There was a search and seizure operation under section 132 of the Act dated 4th December 2014 at the group known as Barter Group which was engaged in providing the accommodation entries. The assessee was also made subject to the search operation under section 132 of the Act along with the search at Barter Group.
45. As a result of search at the premises of the assessee, there were found various loose papers and the documents which were impounded and inventoried as annexure No. 1 to 10 as mentioned on page 39 of the Ld. CIT-A order.
46. Likewise, Shri Ashit Haribhai Vora being the director of the company
namely M/s Neminath Trades Private Ltd, a company belonging to the barter group was also subject to the search and seizure operation and accordingly various documents and loose papers were found and impounded from his premises. Among other documents, one diary marked as Annexure A-4, containing various financial transactions related to the sale of land by M/s Neminath Traders Pvt Ltd was also recovered. This diary contains the information in relation to the sale of the land by M/s Neminath Traders Pvt Ltd. The diary contained information about the receipts and payments over a period of time which were not recorded in the books of accounts of either party i.e. assessee and Neminath Traders Pvt Ltd. The AO segregated the amount recorded in the diary marked as annexure A-4 for the year under consideration and belonging to the assessee. It was found that the assessee has made a cash payment of Rs. 70,00,000/- to Shri Ashit Haribhai Vora. Accordingly, the AO sought explanation with respect to the transactions relating to the assessee, recorded in the diary marked as annexure A-4 by issuing a show cause notice dated 24-10-2016.
47. The assessee in response to such show cause notice submitted that the diary was found from the premises of the 3rd party and the nature of such transaction can only be explained by the person who maintained it i.e. Shri Ashit Haribhai Vora. Such transactions were not recorded in the handwriting of the assessee and therefore the same cannot be used against him (the assessee).
48. The assessee with respect to the seized document bearing page No. 7 of annexure-A1 submitted that it was not discernible from such seized document whether it relates to the payment made by the assessee on the stipulated dates. As such, the impugned transactions were pertaining to the barter group.
49. Likewise, the assessee also contended that he has not purchased any piece of land either in his name or in the name of his family members. As such the entire transaction relating to the land was carried out between M/s Neminath Traders Pvt Ltd and 3rd Thus, in such a situation, the question of making any payment to Shri Ashit Haribhai Vora does not arise.
50. It was also submitted by the assessee that he, being a social worker, was involved in resolving the disputes of various parties between the barter group and the 3rd parties being the buyers of the land. Therefore, based on the document found on his premises, bearing page No. 70 of annexure-A1 no adverse inference can be drawn against him.
51. However, the AO rejected the contention of the assessee by observing as under:
“Above explanation of the assessee is not acceptable as section 132(4A) clearly provides that:
132(4A): Where any books of account, other documents, money, bullion, jewellery or other valuable article or thing are or is found in possession or control of any person in the course of search, in the course of a search, it may be presumed-
(i) That such books of account, other documents, money bullion, jewellery or other valuable article or thing belong or belongs to such person;
(ii) That the contents of such books of account and other documents are true; and
(iii) that the signature and every other part of such books of account and other documents which purport to be in the handwriting of any particular person or which may reasonably be assumed to have been signed by, or to be in the handwriting of, and in the case of a document stamped, executed or attested, that it was duly stamped and executed or attested by the person by whom it purports to have been so executed or attested.
Thus the onus was on the assessee to prove that transaction relating to Jamanagar land was not related to him and was related to other person as the same transaction which were found and seized from the residence of Shri Ashit Haribhai Vora inventorized as Annexure-A-7 at page 9 recorded at page 70 of Annexure-A-1 found and seized from your residence. Hence the transaction recorded in unaccounted Cash Book found and seized from the residence of Ashit Haribhai Vora was related to assessee. Hence investment made to the tune of Rs.70,00,000/- during Financial Year2014-15 to purchase land in Jamnagar is treated as unexplained and added to the income of the assessee. Penalty proceeding is separately initiated u/s 274 r.w.s. 271AAB of the Act. ”
52. Aggrieved assessee carried the matter before the Ld. CIT-A and made submission as detailed under:
There was a loose sheet numbered as page no.70 of Annexure A-1 found from the residence of the appellant. The said sheet contained account of Jamnagar land totaling to Rs.2446.86. It may be noted that the said paper was not written by the appealnt as is clearly evident from the handwritings. During the course of the assessment proceedings Ld.Assessing Officer had put-forth the figures as jotted down on Pages No.9 & 10 o f Annexure A/7 found and seized from the residence of Shri Ashitbhai H. Vora. On comparative study of both these papers, it was noticed that the paper found from appellant’s residence contained jottings totaling to Rs.2446.86 whereas the papers found from the residence of Shri Ashit H. Vora and as shown during the course of the assessment proceedings, contained the total of Rs.2446.86 in the first coloumn, and thereafter under appellant’s name there is jotting as under in the second column.
“Mihirbha i
50 26.06.14
15 27.06.14
5 Cheque Neminath ”
Thereafter, in the third column the total of first column of 2446.86 has been carried forward and thereafter the same has been enhanced to Rs.2517.86
Thus, in nutshell, the paper found from appellant’s residence did not contain any entries, as are mentioned in the second and the third column of the pages found from the residence of Shri Ashit H. Vora. The Jottings showin total of Rs.2446.86 pertains to the third party whose plots were being proposed to be sold through appellant. Secondly, to the best of your appellant’s knowledge, the figure of 2446.86 has been admitted and disclosed by Shri Ashit Vora or Raju Barter Group (R.B. Group) and therefore, the paper found from appellant’s residence containing the same total of 2446.86 is fully covered by the disclosure as transaction of and belonging to R.B Group. As regards the third party evidence, it is important to place on record that it does not belong to appellant or pertain to appellant. There are no jottings made by appellant. The total of the first column has been carried forward to third column and amount has been enhanced to 2517.86. Enhancing entries does not match with the entries below appellant’s name and therefore, as a natural corollary arc not. carried forward in column No.3. In nutshell, it is appellant’s respectful submission that, there is apparent contradiction between jottings found from his residence and jottings found from possession of the third party. The paper found from the possession of the third party cannot be attributed to appellant and cannot be considered as material available on appellant’s record. Your appellant have simply acted as a mediator of the plots and there were no further transaction as surprisingly jotted down by the third party for the reasons best known to him. It may also he noted that the “‘5 cheque Neminath” is written in the column under appellant’s name but no such cheque has been issued by appellant to any entity called Neminath which can be verified from appellant’s bank statements. Further, why the appellant would make any payment for a third party transaction?
It may also be noted that the L.d. Assessing officer in the assessment order slated that as per the provision of section 1322(4A), the onus was on your appellant to prove that the transaction related to Jamnagar Land was not related to him. In this regard, your appellant would like to bring to your notice the decision of Allahabad High Court in the case o f Pushkar Isarain Saraf Vs CIT reported at 183 ITR 388. where in Hon’blc high court has held that presumption arising out of sub-s. (4A) of b. 132 of the Act is available for the Revenue for the limited purpose of search and seizure and the proceedings under s,
132(5) and 132(11). Such presumptions are available for the limited purpose of estimating the undisclosed income and the estimated tax liability for the purpo.se of deciding whether the seized assets should be seized or retained. The presumption cannot have the effect o f excluding or overriding the provisions of s. 69 of the IT Act during the course of regular assessment proceedings.
In light of the above, the addition of Rs.70,00,000/- made by the L.d. Assessing Officer
deserves, to be deleted.
Date 06/02/2018
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
“1.3 The Appellant, at the outset, submits that the reference to section 132(4A) made by the AO in support of his conclusion is totally misconceived. Further the observations made by the AO that certain jottings found in the seized paper No.A-1/70 from the residence of the Appellant matches with the description contained in the papers / diary seized from the premises of Shri Ashit Vora is absolutely wrong and evident from the above documents themselves. The papers seized from the residence of Shri Ashit Vora referred to by the AO in the assessment order are for the period from 25/6/2014 to 28/6/2014 on which dates or even thereabout, no matching transactions are there in the paper seized from the residence of the appellant. The paper seized from the residence o f the appellant is apparently rough jottings not even in the hand writing of the appellant and the total of which is mentioned at 2446/86 and has not correlation with the narration appearing in the diary seized from the residence of Shri Ashit Vora as wrongly observed by the AO. The Appellant does admit his role of a mediator to resolve dispute between the company and Sghri Nileshbhai Toliya. There is nothing either in the seized material or any oral evidence of any party much less that of Ashit Vora that I have any pecuniary interest in the said deal apart from being a mere mediator. Since the AO has grossly failed in his judicial duty to bring on record some corroborative material at least through obtaining some confirmation or examining Shri Ashit Vora that the said entries represented sale proceeds of some land sold to the appellant, the whole basis of making such addition is patently wrong. The Ld. AO could have at least verified from the sub registrar whether the appellant had purchased any plot from Shri Ashit Vora or the company represented by him before reaching conclusion that the said amount of Rs.70,00,000/- was in the nature of investment made by the appellant.
1.4 The Appellant further submits that it is well settled law that firstly the contents o f materials seized from the possession of a third party cannot be a basis for making any addition and secondly, there has to be some corroborative material in support o f entries in the material seized from the possession of an assessee to hold that the same reflects any undisclosed income. It is very clear from the jottings on the paper No. A-1/70 seized from the residence of the Appellant that there are abstract jottings only with some dates and it has not relationship with any paper seized from a third party as wrongly held by the AO. The Appellant submits that in the event of search of business or residence o f any person, it is not uncommon that various papers containing several jottings of different natures are expected to be found / seized. Merely because of such jottings, there cannot be any inference much less a conclusion that the same reflects any undisclosed income being either specific receipts or specific payments and further they are of revenue nature only. In essence, what the law requires is corroborative material i.e. independent evidence in support of entries in the seized papers which can only lead to determination of undisclosed income. ”
53. The assessee in support of his contentions discussed above has also referred to various judicial pronouncements which are duly extracted on pages 34 to 38 of the appellant order.
54. The Ld. CIT-A after considering the submission of the assessee called for the remand report from the AO who submitted that all the transactions recorded in the diary are matching with the document found from the premises of the assessee except the payment of Rs. 70,00,000/- which represents the brokerage payment to the assessee. Similar brokerage was also recorded in the impugned diary paid to other brokers namely Nileshbhai Jamnagar, Nitinbhai Jamnagar which was also added in their respective hands and the same addition was confirmed by the Ld. CIT-A (11) in the hands of Shri Nileshbhai by order dated 1st November 2019. Thus, the AO in the remand report vehemently contended that the amount of Rs. 70,00,000/- in relation to the land transaction deal was not received by Shri Ashit Haribhai Vora. It is because such income was the brokerage of the assessee.
55. The assessee in rejoinder to the remand report submitted as under:
“2. Further, at Para 5.1 of the remand report, the AO has tried to correlate the document seized from the residence of Shri Asit Vora and the Appellant as per the table While doing so, the AO interpreted the seized papers and misrepresented as per his convenience and multiplied the figures / abstract jottings by 100 or 1000 or 100000 as per his own free will and without there being any corroborative material or any statement or admission of either the Appellant or a third party in support of such multiplication. The paper seized from the residence of the appellant is apparently rough jottings not even in the hand writing of the appellant and the total of which is mentioned at 2446/86 and has no correlation with the narration appearing in the diary seized from the residence of Shri Asit Vora as wrongly observed by the AO.
3. Assuming though not admitting the contents of the diary seized from the premises of Shri Asit Vora are true, the alleged Rs 70,00,000/- in the name of Mihirba are reflecting on the left side of the account meaning thereby Shri Asit Vora has received the said amount. While passing the impugned order the AO at Page 5 of the said order observed that “Thus, as per the entries recorded therein it has been found that out of above cash receipt, receipt of Rs 70,00,000 is found to be received from assessee during FY 201415….”. Whereas in the remand report dated 26.02.2020, the AO at Page 5, alleged that the said Rs.70,00,000/- is the undisclosed brokerage income of the Appellant and the brokerage payment made to Nileshbhai Jamnagar Nitinbhai Jamnagar and Mihirbhai were not received by Shri Asit Vora, Sir, had it been the brokerage payment made to Mihirbhai by Shri Asit Vora then the same would be reflecting at the debit side and not the credit side of the seized document. Hence, the observations of the AD as per assessment order and remand report are contradictory On one hand, the AO alleged that Ra 70 lacs is the unexplained investment of the Appellant in Jamnagar land and on the other hand he alleged that it is the brokerage income of the Appellant without there being any supporting evidence worth the name.
Sir, the Appellant clearly established that the observation of the AO that the both papers matches is absolutely wrong n our earlier submission. Further, the AO had not offered any comments on the affidavit of Shri Asit Vora clearly denying any financial involvement of the Appellant in the said land deal. The Appellant submits that the entire conclusion arrived at by the AO is vague and based on his own whims and conjectures without even remote connection with the ground realities. Unfortunately, the AO has grossly misdirected himself, is not deliberately chosen to shake his hands off, from his duty as AO to make any investigation of his own. ”
56. The Ld. CIT-A after considering the submission of the assessee and the remand report of the AO deleted the addition made by the AO by observing as under:
“ DECISION
14. The grounds of appeal No. 1 to 1.5 are relating to addition of Rs.70,00,000/-treating the same as payment made for purchase of land.
14.1 I have carefully considered the facts of the case, the assessment order and the submissions made by the appellant during the course of appellate proceedings. The relevant discussion has been made by the AD at Para 5 of the assessment order A search u/s 132 was carried out on Barter Group including one Shri Asit Vora and certain documents were found from his residence which inter alia showed receipts totalling to Rs 70,000=00 in the name of one Mihirbhai noted in seized diary. The AO multiplied the said figure by 100 and treated the same undisclosed investment of Rs 70,00,000/- of the appellant in Jamnagar land. The AO further contended that during the course of search at the residence of the appellant, certain jottings found in the seized paper No A-1/70 matches with the description contained in the papers / diary seized from the premises o f Shri Ashit Vora. The AO then invoked the provisions of Section 132(4A) and held that the onus was on the appellant to prove that transaction relating to Jamanagar land was not related to him and the alleged transaction of Rs 70 lacs recorded in unaccounted Cash Book found and seized from the residence of Ashil Haribhai Vora was treated as unexplained investment of the appellant.
14.2 During the course of the appeal proceedings, the appellant submitted that the documents which have been relied upon for making additions were not found & seized from the appellant’s premises nor in the handwriting of the appellant. He further argued that he had never made any investment in the Jamnagar land and the same can be verified from the land records. Moreover, he contended that in so far as the jottings contained at Page A-1/70 are concerned, they are not in his handwriting and furthermore, there has to be some corroborative material in support of entries in the material seized from the possession of an assessee lo hold that the same reflects any undisclosed income being either specific receipts or specific payments and further they are of revenue nature only. He also relied upon plethora of judicial pronouncements in support of his contention. The appellant also submitted that he acted as a mediator to solve business disputes between the seller i.e. Neminath Traders Pvt Ltd wherein Shri Ashit Vora is one of the directors and some buyers and he has not been sold any part of the land in question.
14.3 The appellant also filed the affidavit of Shin Ashit Vora to this effect and requested to admit the same as additional evidence. The said document was remanded back to the AO for his comments on the additional evidences filed by the appellant following the principles of natural justice. In the remand report the AO requested not to accept the additional evidences filed by the appellant and a Page 5, he changed his stand and contended that the sale Rs 70,00.000/ is the undisclosed brokerage income of the appellant and the brokerage payment made to Nileshbhal Jamnagar, Nitinbhai Jamnagar and Mihither were not received by Amit Vora. The AO submitted his remand report dated 26.02.2020 to his office and the same was forwarded to the appellant for his comments.
14.4 The appellant filed his rejoinder to remand report and requested for admission o f additional evidences and highlighted that as per the contents of the diary seized from the premises of Shri Asit Vora, the alleged Rs 70,00,000/- in the name of Mihirlibal are reflecting on the left side of the account, meaning thereby Shri Asit Vora has received the said amount. Had it been the brokerage pop made to Mihirbhai by Shri Asit Vora as alleged by the AO in his remand region then the same would be reflecting at the debit side and not on the credit side of the seized document. Hence, the observations of the AO as per assessment order and remand report are contradictory in the assessment order the same have been treated as appellant’s undisclosed investment but subsequently in the remand proceedings the same have been held to be brokerage income of the appellant. So there was change in stand of the AO on similar facts but without any basis.
14.5 In so far as the admission of additional evidence is concerned & is an undisputed fact that the notice u/s 142(1) was issued on 16.12.2016, the appellant filed his reply on 23.12.2016 and the impugned order was passed on 20.12.2016. This clearly implies that only 7 days time was made available to the appellant to compile the voluminous details Furthermore the case is clearly covered by the provisions of Rule 46A and in order to impart justice, I admit the affidavit of Shri Ashit Vora as evidence. As per his affidavit the appellant only acted as mediator to solve business disputes and ho has not been sold any part of the land in question. Neither the maker of the affidavit namely in Asit Vora was examined by the AO in the assessment proceedings nor the averments made in the affidavit have been rebutted by the AO. Therefore, the affidavit stands in favour of the appellant as it has been legal sanctity. The AO also failed to offer any comments on the affidavit filed by Shri Ashit Vora. The AO has also not brought anything on record to prove that the appellant has sold any portion of Jamnagar Land On the contrary, he changed his stand in the remand report and alleged that the figure of Rs 70 lacs represents brokerage income of the appellant.
14.6 However, I agree with the appellant that had it been the brokerage income of the appellant the same would have reflected on the right side of the seized diary and not on the left side. There is nothing on record that could even remotely suggest that either the appellant had made any investment in said land or received any brokerage in the said land deal. Therefore, I hold that the action of the AO in treating the sum of Rs 70 lacs as unexplained investment of the Appellant or the undisclosed brokerage income of the Appellant is incorrect and hence, the same is deleted.
14.7 The reason of addition is mainly based upon the documents found at the premises of Shri Asit H Vora during the course of search at his residence but the cognizance of the same could have been made in the case of appellant by invoking provisions of section 153C of IT Act. But no such procedure for initiating the proceedings u/s 153C of the IT Act in the case of appellant has been completed by the AO. Thus on this legal aspect the addition on this account is not tenable in the case of appellant.
14.8 This view has been subscribed and followed from the Recent decision of Hon’ble ITAT, Ahmedabad Bench in the case of Rajesh Sundardas Vaswani, and Others in a bunch of 107 appeals rendered on 12/11/2020. ”
57. Being aggrieved by the order of the Ld. CIT-A, the Revenue is in appeal before us.
58. The Ld. DR before us reiterated the findings contained in the assessment order and supported the view of the AO.
59. On the other hand, the Ld. AR before us filed a paper book running from pages 1 to 165 and reiterated the findings contained in the order of the learned CIT-A and vehemently supported the view taken by the learned CIT-A.
60. Both the Ld. DR and the AR before us vehemently supported the order of the authorities below as favourable to them.
61. We have heard the rival contentions of both the parties and perused the materials available on record. From the foregoing paragraph, we note that the AO in the assessment order has made the addition of Rs. 70,00,000/- in the hands of the assessee on the reasoning that the assessee failed to explain the source of money paid to the Shri Ashit Haribhai Vora. As per the AO, there was a diary recovered during search operation from the premises of Shri Ashit Haribhai Vora showing the receipt of money from the assessee for Rs. 70,00,000/-. As such in the diary bearing number annexure-A4 was containing the financial transactions in the form of receipt and payment which were duly matching with the seized document recovered from the premises of the assessee except the receipt recorded in the diary against the name of the assessee amounting to Rs. 70,00,000/-. In other words, the other transactions recorded in the seized document recovered from the premises of the assessee were matching with the diary recovered from the premises of the Shri Ashit Haribhai Vora except the payment by the assessee of Rs. 70,00,000/- to Shri Ashit Haribhai Vora. Thus, the addition was made by the AO in the assessment framed under section 143(3) read with section 153A of the Act dated 30-12-2016. However, the AO in the remand proceedings before the Ld. CIT-A has changed his stand and submitted in the remand report that the amount of Rs. 70,00,000/- represents the commission earned by the assessee on the sale of land carried out by him. As such the assessee has earned the commission income of Rs. 70,00,000/- on the sale of land belonging to M/s Neminath Traders Pvt Ltd as evident from the diary found from the premises of the director namely Shri Ashit Haribhai Vora.
61.1 However, the Ld. CIT-A was pleased to delete the addition made by the AO on the reasons given hereunder:
a- That the AO has nothing to say anything about the affidavit of Shri Ashitbhai Vora and does not bring anything on record from which it can be proved that the assessee has sold the land at Jamnagar.
b- That the AO has changed his stand in his remand report where he contended that the sum of Rs. 70,00,000/- is the brokerage income of the assessee.
c- That if the sum of Rs. 70,00,000/- must be income of the assessee then it would have been recorded on the righthand side of seized diary rather than recorded on left hand side.
61.2 Admittedly different documents were recovered from the premises of the assessee as well as from the premises of Shri Ashit Haribhai vora director of M/s Neminath Trades Pvt Ltd. These documents were containing lot of financial transactions which were matching with the documents recovered from both the parties namely assessee and Shri Ashit Haribhai Vora barring few transactions which were aggregating to Rs. 70,00,000/-. The AO has not made any addition of whatsoever of the transactions which were matching with the seized documents recovered from the premises of the assessee and Shri Ashit Haribhai Vora except the transactions which were not matching. These unmatched transactions represented the sum of Rs. 70,00,000/-. Thus, the dispute before us revolves to the tune of Rs. 70,00,000/- only. Undeniably, the AO has taken contradictory stand in the assessment order and the remand report. The AO in the assessment order has assumed the sum of Rs. 70,00,000/- representing the payment made by the assessee whereas in the remand report it was contended that the sum of Rs. 70,00,000/- represents the commission income in the hands of the assessee. First of all, we note that the transactions recorded in the seized document itself does not represent any income per se until and unless these are corroborated by the other materials or information and these documents read in aggregation of other documents/information. But, in the case on hand we find that the AO has not brought any iota of corroborative material before making any addition in the hands of the assessee for Rs. 70,00,000/-. Thus, in the absence of any corroborative material, the information contained in the seized document cannot be treated as incriminating material suggesting any income in the hands of the assessee. As such these documents are dumped documents and based on the same no addition can be sustained. Nevertheless, the director namely Shri Ashit Haribhai Vora has categorically denied by furnishing the affidavit to have made any payment of commission to the assessee. The contents of the affidavit were not controverted by the AO during the remand proceedings. On this count as well, the addition made by the AO is not sustainable.
61.3 Moving further, the Ld. CIT-A in his order has also observed that the due process of the provisions of section 153C was not adopted by the AO in the given set of facts and therefore for that reason as well the Ld. CIT-A was pleased to delete the addition made by the AO. The finding of the Ld. CIT-A was based on the order of this tribunal in the case of Rajesh Sundardas Vaswani and others in IT(SS)A 95/AHD/2019 vide paras Nos. 29 to 38 order dated 12-11-2020. At the time of hearing, the Ld. DR has not brought anything on record contrary to the finding of the Ld. CIT-A which has been reproduced somewhere in the preceding paragraph. Therefore, we do not find any reason to interfere in the finding of the Ld. CIT-A. Hence the ground of appeal of the revenue is hereby dismissed.
62. The next issue raised by the revenue in ground No. 2 and 3 is that the Ld. CIT-A erred in restricting the addition made by the AO to the tune of Rs. 75,11,691 being the difference of receipts and payments against the total addition made by the AO for Rs. 7,66,97,954/- and Rs. 9,57,15,154/- respectively.
63. At the outset, we note that the issues raised by the Revenue in its grounds of appeal for the year under consideration i.e. AY 2015-16 has been dealt with assessee appeal in IT(SS)A No. 46/AHD/2021 for the assessment year 2013-14. The issue has been dealt with in detail vide paragraph no. 25 of this order where we have decided the issue against the Revenue. For detailed discussion, please refer to the paragraph of this order. Hence, the ground of appeal filed by the Revenue is hereby dismissed.
64. The next issue raised by the revenue is that the Ld. CIT-A erred in deleting the addition of Rs. 8,00,000/- on account of unexplained credit entries in bank.
65. The necessary facts are that the AO during the assessment proceeding found that the assessee bank account maintained with Ahmedabad District Cooperative Bank Ltd was credited by Rs. 3 Lacs and Rs. 5 Lacs on 5th March 2014. The AO, in absence of satisfactory explanation regarding the identity, genuineness and creditworthiness of the depositor treated the same as unexplained investment under section 69 of the Act and added the same to total income of the assessee.
66. On appeal by the assessee the learned CIT(A) deleted the addition made by the AO by observing as under:
“16.1 I have perused the assessment order, submission made by the appellant before the AO before this office. I have also gone through the legal decisions furnished by the appellant in this regard. At the outset, it is clear that insufficient opportunity was granted to the appellant before completing the proceedings. The appellant has availed unsecured loans from Paresh N Patel & Paresh N Patel HUF during the year under consideration. The appellant has provided PAN numbers, Confirmations of these parties & ITR acknowledgements. The appellant has provided his bank statement in this regard to prove that all the loans have been received through proper banking channel only. Since the assessment order has been passed within 3-4 days of issuing notice it is unreasonable to expect assessee to supply the documents not belonging to him. I held that once the basic documents are being supplied by the assessee the primary onus had shifted upon the AO to gather further evidences. The AO has not pointed out any defect in the papers filed before him. Further, there were no incriminating seized papers regarding these parties or these unsecured loans. Hence, it can be held that except insufficiency of documents, there is no evidence available on record based upon which addition can be made. Since primary onus has been discharged by the assessee, the AO ought to have made independent inquiries & brought on record evidences before proceeding further with the addition. No such inquires have been made by the AO. Moreover, the appellant has supplied bank statements of Paresh N Patel &b Paresh N Patel HUF. These bank statements do not reflect any cash deposits prior to grant of the loans to the appellant.
At this juncture, it is also important to decide as to applicability of section in the case of the appellant. Throughout the assessment proceedings, the AO has not raised any query regarding source of any investment. Since AO has not found any investment as unexplained thus the question of invoking provisions of section 60 does not arise. It further rely on following judicial precedents
a) CIT vs. Apex Therm Packaging Pvt Ltd (2014) (42 taxman com 473 (Guj))
b) PratapbhaiVirjibhai Patel v/s ITO (2014) (45 Taxman com 151 (Guj))
c) DCIT vs. Rohini Builders 256 ITR 360 (Guj)
d)ITO vs. Riddhi Siddhi Corporation. ITA No. 2248/Ahd/2012
e) CIT vs. RanchhodJivabhiaNakhava (2012) 21 com 159 (Guj.)
f) BanwariLal vs. ITO ITA No. 1542/Del/2012 dated 15-01-2016
Hence, from overall discussion, the addition of Rs. 8,00,000/- in this regard is deleted as the three ingredients as per requirement of section 68 are duly fulfilled. The appellant has submitted confirmations, bank statement copy of the depositors, ITR copies and PAN o f depositors. Thus the primary onus cast upon the appellant is discharged as identity, creditworthiness and genuineness of the depositors is proved. ”
67. Being aggrieved by the order of the learned CIT(A) the Revenue is in appeal before us.
68. The Ld. DR before us reiterated the findings contained in the assessment order and supported the view of the AO.
69. On the other hand, the Ld. AR before us reiterated the findings contained in the order of the learned CIT-A and vehemently supported the view taken by the learned CIT-A.
70. We have heard the rival contention of both the parties and perused the materials available on record. Admittedly, during the year the bank account of the assessee was credited by Rs. 8 Lakh which was treated as unexplained investment by the AO in the absence of necessary detail. The assessee during the appellate proceeding before the learned CIT-A submitted that same represent receipt of unsecured loan from Paresh N Patel and Paresh N Patel HUF. To this effect the assessee also furnished copy confirmation letter from the parties and copy of their PAN as well as ITR acknowledgment. The learned CIT(A) after considering the submission of the assessee and remand report from the AO, was pleased to delete the addition made by the AO. From the perusal of remand report and ground of appeal we note that the only issue of the revenue is that the transaction of credit of unsecured loan as discussed above was not genuine because the assessee has not paid interest on the loan. As such the assessee during the remand proceeding to establish the identity & creditworthiness of creditor and genuineness of transaction, furnished copy of pan, ITR and confirmation letter of the creditor. The AO in the remand did not find any infirmity in the primary evidence furnished by the assessee. The law is fairly settled in case of credit in the books of account the assessee is required to furnished primary document to establish identity & creditworthiness of creditor and genuineness of transaction, once the primary documentary evidence furnished, the onus shifts on the revenue to point infirmity in the document furnished by the assessee after conducting necessary inquiry. In the case on hand, the AO has not carried out any independent inquiry and not found any infirmity in the primary documents filed by the assessee but merely doubted the genuineness of transaction since interest was not paid on impugned loan. In our considered view, the prerogative to pay/charge interest on loan is between the parties who accepted/provided the loan and the same also depends upon various factors. Merely the parties agreed to not to charge/pay interest on loan will not vitiate the genuineness of such loan transaction unless and until the revenue brought some cogent material on record to prove that such transaction of loan is not genuine.
70.1 Thus, in view of the above discussion we do not find any infirmity in the finding of the learned CIT(A), accordingly, the same is hereby confirmed. Hence, the ground of appeal of the Revenue is hereby dismissed.
70.2 In the result, the appeal of the Revenue is hereby dismissed.
Coming to ITA No. 61/AHD/2021, an appeal by the assessee for the A.Y. 2015-16
71. The only issue raised by the assessee is that the learned CIT(A) erred in confirming/ sustaining the addition of Rs. 75,11,691/- on alleged unaccounted receipts and payments.
72. At the outset, we note that the issues raised by the assessee in his grounds of appeal for the year under consideration i.e. AY 2015-16 has been dealt with the appeal of the assessee in IT(SS)A No. 46/AHD/2021 for the assessment year 2013-14. The issue has been dealt with in detail vide paragraph no. 25 of this order where we have decided the issue against the assessee. For detailed discussion, please refer to the above-mentioned paragraph of this order. Hence, the ground of appeal filed by the assessee is hereby dismissed.
72.1 In the result, the appeal of the assessee is hereby dismissed.
74. In the combined results, the appeal of the assessee bearing IT(SS)A Nos.46 & 61/Ahd/20121 for A.Y. 2013-14 & 2015-16 and appeals of the Revenue bearing IT(SS) A Nos.52 & 53/Ahd/2021 for A.Ys. 2011-12 & 2014-15 & ITA No.86/Ahd/2021 for A.Y. 2015-16 are dismissed whereas the appeal of the assessee bearing IT(SS) A No.47/Ahd/2021 for A.Y. 2014-15 is partly allowed for statistical purposes.
Order pronounced in the Court on 19/4/2023 at Ahmedabad.
