Case Law Details
Deepak Kumar Samtani Vs DCIT (ITAT Jaipur)
In a recent ruling, the Income Tax Appellate Tribunal (ITAT) considered the validity of additions based solely on uncorroborated statements by an assessee. The Tribunal concluded that, without supportive evidence, such statements do not constitute a substantial basis for additions under the Income Tax Act. This decision highlights the importance of corroborative evidence in tax assessments, referencing a retracted statement and judicial precedents that emphasize the need for substantial material in tax disputes.
Background of the Case
The case involved multiple appeals, ITA Nos. 779 to 785/JP/2023, concerning assessment years from 2012-13 to 2018-19. The crux of the issue stemmed from an addition made by the Assessing Officer (AO) under Section 68 of the Income Tax Act, attributing certain unverified transactions as income for the assessee. This addition was based on a statement by the assessee, which was subsequently retracted. During the appeal, the ITAT had to assess the merits of this addition in the absence of corroborative evidence.
The assessee argued that the retracted statement, unsupported by documentation or records, should not be used as a primary basis for the addition. Citing a decision from the Rajasthan High Court in PCIT Vs. M/s Esspal International P. Ltd., the ITAT observed that additions cannot be made solely on the basis of a retracted statement without material evidence.
Tribunal’s Observations on Retraction of Statements
The ITAT noted that the retraction was not immediate and emphasized that a delayed retraction holds limited evidentiary value. Generally, a retraction should occur soon after the statement is recorded, with clear reasons provided for doing so. Although the delay weakened the case, the Tribunal nonetheless examined whether the retraction impacted the overall assessment.
Judicial Precedents Considered by the Tribunal
Referring to PCIT Vs. M/s Esspal International P. Ltd., the Tribunal reiterated that judicial precedents discourage additions based on retracted statements without evidence. The case of M/s Pullangode Rubber Produce Co. Ltd. v. State of Kerala, referenced by the Supreme Court, was also considered to affirm the necessity of corroborative evidence alongside admissions. The Tribunal underscored that an admission is not a conclusive basis for addition unless reinforced by supporting evidence.
Analysis of Supporting Documentation
The ITAT found that the AO’s assessment lacked credible evidence tying the transactions to the assessee. The AO had also failed to involve the assessee’s mother, who purportedly had a role in the transactions. According to the Tribunal, the absence of this involvement and the lack of corroborative documentation weakened the AO’s position.
The Commissioner of Income Tax (Appeals) [CIT(A)], upon review, found insufficient evidence to support the AO’s conclusion. The CIT(A) noted that the mother’s bank statements or transaction records were not provided, and no concrete financial documentation supported the claim that the share capital was a diversion of profits. Consequently, the CIT(A) dismissed the grounds raised by the AO.
ITAT’s Final Decision
After analyzing the material and legal precedents, the ITAT upheld the CIT(A)’s decision to reject the addition under Section 68, as the AO’s determination was based on an unverified and retracted statement. The ITAT highlighted that, although delayed, the retraction was accompanied by explanations, rendering the initial admission weak in evidentiary value.
The Tribunal also noted that the AO had not proven any cash transactions or other irregularities to establish the transactions as sham entries. Given these findings, the ITAT partially allowed the appeal for ITA Nos. 779 to 785/JP/2023, stating that in the absence of credible evidence or documentation, additions could not be sustained.
Implications of the Decision
This ruling underscores the importance of a robust evidentiary foundation in tax assessments, especially in cases relying on retracted statements. The decision reflects judicial caution in imposing tax liabilities solely on the basis of admissions or statements made under duress or without corroborative evidence.
Conclusion
The ITAT’s decision sets a noteworthy precedent in cases involving retracted statements and unverified admissions. By emphasizing the need for corroborative evidence, this ruling reinforces the standards for tax assessments and highlights procedural requirements for tax authorities when substantiating their claims.
FULL TEXT OF THE ORDER OF ITAT JAIPUR
These are the seven appeals filed by the assessee which are reacted against separate seven orders of the Id. Commissioner of Income Appeals) Jaipur-5, [ for short CIT(A)]. Orders are dat-ed 20.10.2023. The impugned assessments were challenged by the assessee before Id. CIT(A). Same were framed by the Assessing Officer u/s 153A r.w.s 143 (3)& 143(3) of the Income Tax Act, 1961 for short Act], on 30.12.2019& 31.12.2019.
2. Since the issues involved in these appeals are almost identical on facts and having com-mon grounds of appeals, all these matters were heard together with the consent of both the parties, and as such are being disposed off vide this common order.
3. First of all, we take up appeal -ITA No. 785/JP/2023 for assessment year 2018-19. In this ap-peal, the assessee has raised the following grounds:
1. The impugned assessment order dated 30.12.2019 u/s 143(3) of the Act is bad in law and on facts of the case. for want of jurisdiction and various other rea-sons and hence, the same kindly be
2. Rs. 4,00,00.000/- The Id. CIT(A), Jaipur-5 seriously erred in law as well as on the facts of the case in making addition of a huge amount of Rs.4 Cr. Ws 69A of the Act being cash found from Shri Banwari Lal Mishra of his Hawala Business on Protective basis. The addition so made and confined by the CIT(A), being totally contrary to the provisions of law and facts of the case. kindly be deleted in full
3. Rs. 27,00,000/- The Id. CIT(A), Jaipur-5 seriously erred in law as well as on the facts of the case in confirming the addition made by the AO on account of the hypothetical commission income of Rs. 27 Lakh estimated merely but wide based on the al-leged admission made by the appellant in the statement absolutely without any supporting evidence. The addition so made being contract the provisions of law & facts kindly be de-leted full.
4. The Id. AO further erred in law as well as on the facts of the case in confirming the imposition of tax, surcharge, cess etc. as per provision ofS. 11586E of the Act. The invoking of S.115BBE is contrary to the provisions of law, on facts and without ju-risdiction. The appellant totally denies its liability. The tax liability so created. kindly be delet-ed in full.
5. The Id. AO erred in law as well as on the facts of the case in charging interest u/s 234A. 2346 & 234C of the Act. The appellant totally denies it liability of charging of any such interest. The interest, so charged, being contrary to the provisions of law and facts, kindly be deleted in full.
6. The appellant prays your honour indulgences to add, amend or alter of or any of the grounds of the appeal on or before the date of hearing “
3.1 During pendency of appeal the assessee also raised prayer for admitting following addi-tional legal grounds.
“7. The impugned assessment order dated 30.12.2019 is a nul-lity being nonets and must be considered as never passed in as much as no DIN number has been generated as per the prescribed procedure. which is in violation of the binding instruc-tions of CBDT and hence. the impugned assessment order may kindly be held as non-est and may kindly be quashed.
8. The impugned assessment order passed Ws 153A r.w.s. 153B/143(3) dated 30.12.2019 is nullity and being without jurisdiction in as much as the said order has not been signed digitally as per the prescribed procedure. which is in violation of the binding instructions of CBDT and hence, the impugned assessment order may kindly be held as nonets and may kindly be quashed Hence, the impugned order is completely devoid of ju-risdiction not having being signed digitally as statutorily required.
9. The impugned assessment order passed Ws 153A r.w.s 153B/143(3) dated 30.12.2019 is nullity being without jurisdiction in as much as no prior ap-proval as mandate by S 153D was obtained or the approval obtained Ws 153D was not ob-tained from the specified authority. as prescribed in law or else the approval obtained u/s 1530 was accorded mechanically without any application of mind Hence. there is no approval as such, as contemplated by law hence the impugned assessment order may kindly be quashed.
4. Succinctly put, the facts as culled out from the records are thatas per Information/Appraisal Report, received from the Addl. Director of Income-tax (Inv.), Jaipur, A.T.S. Jaipur had seized cash of Rs.4.00,00,000/- on 28.03.2018 at Manohar Pura Toll Durgapura, Delhi-Jaipur Highway from Shri Banwari Lal Mishra (Dadhich) Sic) Shri Rameshwar Lal Dadhich, Resident of Harni Mahadev Road, Bhopalpura, Indira Colony, Bhilwara u/s 102 of CPC and then informed the In-vestigation Wing about the same on same date.
Accordingly, the competent authority issued Warrant of Authorization u/s 132A, which was executed on 29.03.2018 and the entire cash of Rs.4,00,00,000/- was seized on 29.03.2018. Statement of Shri Banwari Lal Mishra (Dadhich). Bhilwara, u/s 132(4) of the Income-tax Act dated 29.03.2018 was recorded by the ADIT (Inv.)-I, Jaipur.
On. perusal of Appraisal Report as well as Statement of Shri Banwari Lal Mishra (Dadhich), Bhilwara, it was revealed that Shri Fazle Raoof and Shri Deepak Samtani (assessee), Bhilwara were main persons of a Group and partners engaged in the business of Money Transfer i.e. “Hawala” Transactions.
Shri Banwari Lal Mishra (Dadhich) claimed himself to be an employee of Shri Fazle making delivery of cash from here and there. As per his statement, Shri Fazle Raoof used to pay him Rs. 10,000/- Per Month.
Consequent upon this information, search action was immediately
taken up by the Investigation Wing at the residential and business premises of Shri Deepak Kumar Samtani.
In the statement recorded on 29.03.2018 u/s 132(4), Shri Deepak Kumar Samtani is stated to have confessed factum of his partnership with Shri Fazle Raoof for the last 3 years for doing Hawala Business, and further that no books of accounts were ever maintained by them as re-gards said business.
The Pr. Commissioner of Income-tax, Ajmer, vide his order u/s 127
dated 12.12.2018, assigned the jurisdiction of this case from ITO, Ward-5. Bhilwara to DCIT, Central Circle, Ajmer.
4.1 During the year under consideration, the assessee was engaged in the business of Broker-age in the name and style of Mohan Broker Agency. but he did not include the income generat-ed by him from the Hawala transactions. He filed his original return of income on 29.03.2019, declaring total income of Rs.3,30,550/-. Notice u/s 143(2) of the was i 03.06.2019, which was duly served upon the assessee by S detailed questionnaire/ notice u/s 142(1) was also issued on the assessee requiring him to furnish the details/submission along with documentary evi-dences by 12.12.2019 on the source of cash of Rs.4,00,00,000/-, seized from the possession of Shri Banwari Lal Mishra (Dadhich) by ATS Team, Jaipur and source of Gold jewellery/Silver Or-naments worth Rs.21,36,864/- found during the course of search carried out at his residence premises & locker on 29.03.2018. The assessee was also asked to explain the source of cash of Rs. 1,29,200/- found during the course of search carried out at his residence premises on 29:03.2018, source of investment of Rs.75 lass to Rs.1 Crore in immovable property (resi-dence), details of immovable properties, if any sold during the year under consideration and capital gain if any, disclosed in ITR, explanation on Hawala transactions with Rs.3,58,85,810/-, found to have been used in Hawala business.
4.2 The assessee filed the details called for. The Id AO noted that the assessee neither ex-plained the source of cash of Rs. 4,00.00.000/- along with other details as required. Since the assessee failed to get verified the cash so recovered addition for an amount of Rs. 4 crore was made on protective basis in the hands of the assessee.
4.3 In the statement so recorded u/s. 132(4) of the Act, the assessee made admission that he was into Hawala Business for last 10 years, but for the last three years he was doing this busi-ness with Shri Fazle Raoof in undisclosed partnership. Therein, he also explained the detailed modus operandi adopted for this business and the magnitude of his income of commission from that activity. As per his own categorical admission in reply to query no. 10 to 16, he stat-ed to have income from this business which ranged between Rs. 15 to 20 thousand per day.
Based on the categorical statement Id. AO worked out the income of
hawala business at Rs. 27,00,0001- [ 15000 per day / 2 (as he is in partnership) = 7500 per day • 30 days 12 months = 27,00,000 ].
In reply, the assessee deciphered all the notings made on the seized
material found. The total of the transaction noted on the seized material came to Rs. 3,58.85.810/-.
Assessing Officer was of the view that if the version of the assessee was accepted as regards commission of Rs. 100 per one lac then his the income during short span between 02.02.2018 to 29.03.2018 came to Rs. 35,886/- and if that business was considered to be in partnership the profit for that period comes to the assessee for Rs. 17,943/-. Thus. Id. AO made an addition of Rs. 27,00,000/- as income of the assessee from business as undisclosed income of com-mission.
5. Aggrieved by the order of the Assessing Officer, assessee preferred appeal before the Id. CIT(A). Apropos to the grounds so raised the relevant finding of the Id. CIT(A) are reiterated here in below:
‘Decision
5.2.1 I have considered the facts of the case and written sub-mission of the appellant as against the observations/findings of the AO in the assessment or-der for the year under consideration.
The facts of the case are as under:-
a. The Anti Terrorist squad (ATS) Jaipur had seized cash of Rs. 4,00.00.000/-on 28.03.2018 at Manoharpura Toll Durgapura, Delhi-Jaipur Highway from Shri Banwari Lal Mishra (Dadhich) Ski Shri Rameshwar Lal Dadhich, Resident of Hami Mahadev Road, Bhopalpura, Indira Colonly, Bhilwara u/s 102 of CPC and informed to Investigation Wing on even date. Accordingly, the competent authority issued Warrant of Authorization u/s 132A, which was executed on 29.012018 and the entire cash of Rs.4.00,00,000/- was seized on 29.03.2018. The cash seized from Shri Banwari Lal Mishra (Dadhich) has been deposited in the P.D. Account of Pr. Commissioner of Income-tax (Central), Jaipur on 31.03.2018.
b. Statement of Shri Banwari Lal Mishra (Dadhich), Bhilwara, u/s 132(4) of the Income-tax Act dated 29.03.2018 was recorded by the ADIT Jaipur On perusal of Appraisal Report as well as Statement of Shri Banwari Lal Mishra (Dadhich), Bhilwara. it was revealed that Shri Fazle Raoof and Shri Deepak Samtani (assessee). Bhilwara are main Key Persons of this Group. Shri Fazle Raoof and Shri Deepak Samtani (Appellant) of Bhilwara are partners and engaged in the business of Money Transfer i.e. “Hawala” Transactions. Shri Banwari Lal Mishra (Dadhich) is an employee of Shri Fazle Raoof since last 5-6 months and working as Courier Boy for making delivery of cash from here and there. Shri Fazle Raoof paid Rs. 10.000/- Per Month to Shri Banwari Lal Mishra (Dadhich) for work of Courier Boy.
c. Consequent upon the deposing of names of both Shri Fazle Raoof and Shri Deepak Samtani by the intercepted person Shri Banwari Lal Dadhich, who stated to be an employee of Shri Fazle Raoof and carrying the said amount on the instruction of Shri Fazle Raoof, from New Delhi to Jaipur, search action was immediately taken up by the Investigation Wing at the residential and business premises of Shri Deepak Kumar Samtani, because Shri Dadhich had also deposed that both Shri Fazio Raoof and the assesses are part-ners in Hawala Business.
d. In the statement recorded on 29.03.2018 u/s 132(4), Shri Deepak Kumar Samtani (Appellant) had also confessed that he with Shri Fazle Raoof are in partnership for last 3 years doing Hawala Business and no books of ac-counts were ever maintained by them of this unaccounted business. Bunch of currency notes involving Hawala transactions with Rs.3.58,85,810/-, used in Hawala business and found & seized from his shop.
e. The ATS Team. Jaipur caught Shri Banwari Lal Mishra on 28.03.2018 and seized cash of Rs.4.00.00,000/- from hls possession and on being information received from Art Jaipur, search action Ws 132 was also carried out at Residential as well as business premises of Shri Fazle Raoof and Shri Deepak Samtani (Appellant) on 29.03.2018. The cash of Rs.4.00,00.000/- was seized by the Investigation Wing, Jaipur on 29.03.2018. Dur-ing the course of statement of Shri Banwari Lal Mishra recorded u/s 132(4) by the Investigation Wing. Jaipur, Shri Banwari Lal Mishra stated that he is an employee of Shri Fazle Raoof. Shri Fazle Raoof and Shri Deepak Samtani are the partners in the business of Money Transfer i.e. “Hawala Transaction”. Shn Banwari Lal Mishra (Dadhich) is just a courier boy for making deliv-ery of cash here and there for which Shri Raoof paid him Rs. 100001- Per Month. Therefore. the assessee was specifically asked to explain the source of such a huge- cash of Rs.4.00.00,000/-
f. Though, the assessee neither explained the source of cash of Rs.4,00,00,000/-. along with other details as required vide questionnaire referred to above, de-spite his categorical admission before the search team on 29.03.2018 which is evident from the relevant excerpts of his acceptance that he was actually involved In the Hawala Business in collaboration with Shri Fazle Raoof, he did not come forward to disclose his unaccounted 1 undisclosed business of this income in the return.
g. It is pertinent to mention here despite his categorical admis-sion before the search team on 29.03.2018. which is evident from the relevant excerpts, his joint venture in Hawala Business with Shri Fazle Raoof, he did not came forward to disclose his unaccounted/undisclosed income of Hawala business. Therefore. it Wass concluded that the assessee has failed to get verified unexplained cash of Rs.4,00.00.000/- from the regular books of accounts, thereby an addition of Rs.4.00.00,000/- on account of unexplained cash treating the same as Income from undisclosed sources is made Ws 69A of Rs.4,00,00,000/-, for A.Y. 2018-19 as the assessee failed to explain/disclose his share in cash.
h. Further during the course of search, seized Annexure Exhibit 11 from his business premises, currency notes of denomination Rs. 5/- Rs. 10/. and Rs 20/-and in reply to specific query in Question No. 31, he described in detail about the notings made upon each of the note with explanation regarding the code word ‘ok’ means ‘amount is deliv-ered and ‘kg’ means ‘Rs. 1 lac’. He further deciphered the find details of all the notings made upon each of the note.
i. The working given by him during the course of statement in-dicates the magnitude the of his earning from Hawala Business and endorses his own ac-ceptance in Query No. 10 of his statement that he earns normally Rs. 15,000 to Rs. 20000 day and this volume of Income earned by him also justifies. expenditure in construction of his house for which he has admitted to have incurred a sum of Rs. 75 lac to Rs. 1 crore.
j. The AO had mentioned in the first para of the order that vari-ous incriminating material/loose papers had been found and seized during search action, Fur-ther in the statement recorded Ws 132(4) especially in q no. 23, 31 etc. the appellant had ad-mitted that some currency notes with description written on it were seized which were used for Hawala business. Considering such facts and circumstances the argument of appellant is not correct that no incriminating material was found and seized during search. Thus all argu-ment and case law relied by the appellant relating to non existence of incriminating material is not valid.
5.2.2 During the course of search, the appellant had made statement Ws 132(4). Some of important translated parts of statement are as under
5.2.3 From the above facts narrated In his statement recorded along with currency notes. the appellant had categorically admitted in his statement recorded u/s 132(4) that he was doing Hawala business and earning 15-20 thousand Income on daily basis. It is clear that the disclosure was made voluntary and on these bases the AO had made addition in the assessment order. The appellant retracted his surrender without any basis, he had neither at the time of retraction nor during the assessment proceeding given any proof, cogent material or any satisfactory explanation about the currency notes with description found from his premises. Any claim of retraction cannot be entertained in the absence of any supporting evidence. The statement was not recorded under undue pressure as it is clear from the statement that it was not recorded under undue pressure and coercion.
5.2.4 Admission of a particular fact during the course of pro-ceedings is a strong evidence, which can be used against the person giving it. More so, when a person himself admits it to be true it may reasonable be presumed to be so, unless it is satis-factorily explained otherwise. Thus the effect of an admission is to shift the burden of proof to the person making the admission. The Supreme Court in the case of Basant Singh Janki Singh AIR 1967 SC 341 held that “An admission by a party in a plaint signed and verified by him in a prior suit is an admission within the meaning of section 17 of the Indian Evidence Act, 1872 and may be proved against him in other litigation. Section 17 of the Act makes no distinction between an admission made by a party In a pleading and other admission’
5.2.5 Considering the evidentiary value of an admission and the fact that an admission shifts the onus in terms of section 31 of the evidence Act, the Su-preme Court In Kishorllal Vs. Mst Chaotical AIR 1959 SC 304 held that
“………..the admission shifted the onus on to the respondent on the principle that what a party himself admits to be true may reasonably be presumed to be so and —unlit the presumption was rebutted the facts admitted must be taken to be estab-lished……
5:2.6 It is also relevant to point out that the statement which are recorded by administering oath are presumed to be carrying truth in view of section 181 and a section 193 of the Indian penal Code, which provide for imprisonment if false statement is given. When it is so no one would like to be punished knowingly and hence it is but logical to accept a sworn statement or the statement taken on oath as revealing the truth. In the Income tax proceedings, admission made during the course of survey / search proceedings binds its maker unless rebutted through clear and specific evidence to the contrary. Merely filing a re-traction letter denying thereby the earlier admission without the strength of corroborative fact shall construe this act as an afterthought guided by an intent to circumvent the proceedings. Unless the contrary is specifically demonstrated, the admission is to be considered as con-clusive evidence. This has been explained clearly in the following judgments of the Supreme Court:-
1. Pullangode Rubber Produce Co. ltd. vs. State of Kerala (1973) 91 ITR 18 (SC)
2. Narayan Bhagwant Ram Gosami vs. Gopal Vinjayke Gosave AIR 1960 SC 1000
3. Avadh Kishore Das vs. Ram Gopal AIR 1979 SC SC 861
5.2.7 In the survey or search proceedings the burden to prove that the admission given was Incorrect, lies on the maker and in case there is a failure of the maker to prove that earlier stated facts were wrong, his earlier statements are sufficient to conclude the matter. A retraction in order to be considered has to be proved beyond doubt. Bald retraction of earlier admission is not enough and even after retraction statements, such earlier statement/ admission are not automatically rendered as nullities. Merely because a statement is retracted, it cannot become as involuntary or unlawfully obtained for any retrac-tion to be successful in the eyes of law, the maker has to clearly show as to how earlier rec-orded statement does not state the true facts or that there was coercion, in document or threat. while recording his earlier statements. Judicial precedents In this regard unequivocally assert that in case of retraction assessee needs to prove by legally acceptable evidence that admission in statement given during survey or search was involuntary or was tended under coercion or duress. Moreover, there was no justifiable reason and material to consider his re-traction as genuine, In fact, the following reasons, which emerge from the proceedings do not justify the claim of retraction (1) The assessee had stated in the statement that he was giving the statement voluntarily without any undue influence, threat or coercion (2) The assessee did not produce any contemporaneous record or evidence, oral or documentary to substantiate the allegation (3) the statement given by him was coherent with specific reference to the dis-crepancies pointed out by the survey party (4) Before making statement the assessee was shown all the documents. (5) The assurance given by the assessee with regard the discrepan-cies indicated in the bills and other relevant matters were in his specific knowledge. From this it can be safely concluded that the assessee has failed to prove the incorrect or erroneous na-ture of facts admitted or stated in the statement at the opportunity from the state-ment/confirmation.
5.2.8 There is no evidence available on record leave aside any evidence to show that the said surrender if income was made on income of facts of under any threat etc. The Assessing Officer has stated that above surrender was made voluntarily by the assessee and voluntary deposition at the lime of search is binding unless proved otherwise with proper evidences, facts and figures, that the admission is presumed to be correct unless it is disproved with cogent reasons since every admission is evidence against the person by whom it is made. The onus heavily lies on the assessee to rebut and controvert the admission, and such onus is not discharged by the assessee in the present case. that therefore, cannot be allowed to be retracted from the surrender of income made by it voluntarily. This principle finds its echo in the following judicial pronouncements:-
i. Decision of the Montle ITAT, Vishkhapalnam Bench in the case of P. Govinda Satynarayana vs. DCIT, reported in 98 TTJ 908.
ii. Decision of Hon’ble Rajasthan High Court in the case of Ravindra D. Trivedi Vs. CIT, reported in 215 CTR 313.
iii. Decision of Hon’ble Delhi High Court in the case of Bhagi-rath Agganval s. CIT reported in 351 ITR 0143 (Delhi). iv. Decision of P&H High Court in the case of Bachittar Singh Vs. CIT & Anr. reported in 328 ITR 0400.
v. Decision of P&H High Court in the case of Navdeep Dhingra vs. CIT reported in 232 Taxman 0425 (P&H). vi. Decision of Hon’ble ITAT, Nagpur Third Member Bench in the case of Shree Mahalaxmi Rice Mill vs. ITO reported in 20 DTR 0298.
vii. ALIT vs. Hukum Chand Jain & Ors. reported in 337 ITR 0238 (Chaff HC). vill. Kishore Lal Shiv Chand Rai vs. CIT (1973) 88 ITR 293 (P&H).
5.2.9 It is relevant at this point to quote the Hon’ble Supreme Court in the case of CIT Vis Durga Prasad More (1971) 82 ITR 540 wherein the Hon’ble Court observed as under:- …Science has not yet invented any instrument to test the reliability of the evidence placed before a Court or Tribunal. Therefore, the Courts and Tribunals have to Judge the evidence before them by applying the test of human probabilities. Human minds may differ as to the reliability of a piece of evidence. But, in that sphere, the decision of the final fact-finding authority is made conclusive by law.” (p. 545)”
5.2.10 The Hon’ble Apex Court held very clearly that science has not yet invented any instrument to test the reliability of the evidence placed before a Court or Tribunal therefore, the Courts and Tribunals have to judge the evidence before them by applying, the test of human probabilities. The evidence adduced by the assessee e as-sessee and collected by the AO has to be examined not superficially but in depth and having regard to to the the test lest of human probabilities and normal course conduct. In the instant case. applying the test of human probabilities. it is not difficult to of human establish beyond doubt that sales (or which bills were Issued represented assessee’s undisclosed business in-come. The appellant has placed reliance on certain case•laws but it is seen that those deci-sions were rendered as per the facts and circumstances of those cases which are entirely different from that of the instant appellant. therefore, these cases are not applicable to the case of the appellant.
5.2.11 It is the consistent opinion of the judiciary that disclo-sure made voluntarily are binding unless otherwise proved conclusively later, therefore, I hold that the appellant was legally required to include the commission income. In view of my find-ings contained in pare pages. it is held that the AO had made addition of Rs 27,00.000/- cor-rectly. The ground raised by the appellant regarding this issue is dismissed’
6. As the assessee did not get any relief, before the Id. CIT(A), he is s before this tribunal chal-lenging the finding of Id. CIT(A) on various grounds on its merits as well as legality of the as-sessment framed.
To support the various grounds so raised by the assessee, Id. AR of the assessee, has filed the written submissions in .respect of the various grounds raised by the assessee and the same are reproduced herein below:
“1. The facts as noted by the AO are that as per Infor-mation/Appraisal Report. the A.T.S. Jaipur had seized cash of Rs.4,00,00.000/- on 28.03.2018 at Manoharpura Toll Durgapura, Delhi-Jaipur Highway from Shri Banwan Lal Mishra (Dadhich). During the statement of Shri Banwari Lai Mishra u/s 132(4) dated 29.03.2018, it was revealed that Shri Fazle Raoof and Shri Deepak Samtani (assessee), Bhilwara are partners and engaged in the business of Money Transfer I.e. “Hawala” Transactions. Shri Banwari Lal Mishra (Dad-hich) is an employee of Shri Fazle Raoof since last 5-6 months and working as Courier Boy for making delivery of cash from here and there. Shri Fazle Raoof paid Rs. 10,000/- Per Month to Shri Banwari Lal Mishra (Dadhich) for work of Courier Boy.
2. Consequently, a search and seizure action u/s 132 of I.T. Act, 1961, was carried out on dt. 29.03.2018 at the residential and business premises of assessee. During the course of search at assessee’s residence and business premises. the assessee admitted his indulgence in cash transfer business (Hawala) for last 10 years and for the last three years he is doing this business with Shri Fazle Raoof in undisclosed partnership, wherein the daily income from this business ranged between Rs.15 to 20.000 per day.
3. The assessee filed original ROI on 29.03.2019 declaring total incorrect 3,30,650 consequently, notice u/s 143(2) dt. 03.06.2019 and also dt. 07.12.2019 and also notice u/s 142(1) dt. 07.12.2019 along with detailed questionnaire/ were issued to the as-sessee requiring him to furnish details/submission along with documentary evidences by 12.12.2019, which were duly relied to by the assessee.
4. However, the Id. AO, feeling dissatisfied with the submis-sions, made addition on two grounds:
a) Addition of Rs. 4,00,00,0001- on account of Cash found from Shri Banwari Lal Mishra — on Protective Basis
b) Commission Income of Hawala Business of Rs. 27,00.0001- (i.e 50% of 15000’30 days ’12 months), thereby assessing the total income at Rs. 28,132A90/- on estimate basis.
5. In the first appeal, the Id. CIT(A) also confirmed both the ad-ditions vide its order dated 20.10.2023
Hence this appeal.
Submissions
GOA 1: Notices issued u/s 153A — without Jurisdic-tion/(Alternatively):
1.1 The Assessing Officer at several places repeated the fact that this appellant was doing hawala business in the partnership/joint ventures with Fazle Raoof, refer, (pg. 2.3 & 5 of the Assessment Order). Surprisingly however, addition of the entire amount of Rs. 4,00,000/- has been made in the case of the appellant alone. even though admittedly, the cash was found from the employee, Shri Banwari lal Mishra. Based on the very statement of Shri Banwari lal Mishra. addition in the hands of the appellant has been made and, in such statement, he has said that the appellant was doing hawala business in partner-ship with Fazle Raoof. then there is no reason why the entire amount, (if at all, to be added) shall have been added in the hands of the appellant.
1.2 Based on the above undisputed facts. issuance of notice u/s 153A in the appellant individual alone is without jurisdiction in as much as S. 2(31) defines ‘persons’ which also includes an AOP. BOI and a partnership firm. As stated above, there was a partnership between appellant and Fazle Raoof, CIT assumed to be correct and therefore, a notice Ws 153A could and should have been issued in the name of the firm or AOP, etc. but not to the appellant in its individual capacity.
1.3. Fact admitted by AO :
1.3.1 Interestingly, the AO himself has distributed the commis-sion income of Rs. 35,8061- between appellant and Fazle Raoof being Rs. 17,943/- each from hawala business at pg. 15 of the Assessment Order. which further cemented the contention that the proper person was a partnership firm not the assessee individual
1.3.2 Moreover, the AO himself has in the assessment order of Shri Fazle Raoof dated 30.122019 stated this fact at multiple places. The same are repro-duced hereinbelow for ready reference :
(Pg 6 of the assessment order)
‘Since. the assessee has not made any compliance at any stage but his partner in Hawala Business Shri Deepak Samtani has not only conceded that the assessee Slur Fazle Raoof aka Luffy is also indulged with him in the same business as such the income earned by both of them of this illicit business is shared equally by them. Since, Shri Deepak Samtani had not at any stage explained the source of cash of Rs. 4 crore, the same is also treated as unexplained in his hand also In this regard, it is worthwhile to men-tion that Shri Deepak Samtani has made categorical admission before the search team on 29.03.2018 which is evident from the relevant excerpts of his acceptance that he was actually involved in the Hawata Business in collaboration with Shri Fazio Raoof he did not come for-ward to disclose his unaccounted / undisclosed business income in the return. The relevant excerpts are being reproduced hereunder
x
(Pg 10 of the assessment order)
Therefore, it is concluded that the assessee has also failed to get verified unexplained cash of Rs.4,00,00,000/- from the regular books of accounts, thereby an addition of Rs. 4,00.00.0001- on protective basis on account of unexplained cash treating the same as Income from undisclosed sources is made u/s 69A of Rs. 4,00,00,0001–, for A.Y. 2018-19 as the assessee failed to explain/disclose his share in cash…..’
x x x x
(Pg 13 of the assessment order)
‘Further during the course of search in the business premises of Shri Deepak Samtani from where the Hawala Business is carried out by him along with his partner Shri Fazle Raoof (the assessee), seized Annexure Exhibit 11 which am curren-cy notes of denomination Rs 5/-. Rs. 10/. and Rs. 20/-and in reply fo specific query in Question No 31, he described in detail about the notings made upon each of the note with explanation regarding the code word ‘ok’ means ‘amount is delivered’ and ‘kg’ means ‘Rs. 1 lac’ ….”
2. Supporting Case Laws:
2.1 Kindly refer to ITO vs Ch. Atchaiah [1996) 84 Taxman 630 (S wherein it was held as under:
10. A comparison of the provisions of both enactments immediately bring out the difference between them. Section 3 of the 1922 Act provided that in respect of the total income of a firm or an AOP, the income-tax shall be charged either on the firm or the AOP or on the partners of the firm or on the members of the AOP individually. It is evident that this option was to be exercised by him keeping in view of the interest of revenue. Whichever course was more advantageous to revenue, he was entitled to follow it In such a situation, it was generally held that once the ITO opted for one course, the other course was barred to him. But no such option is provided to him under the present Act. Section 4 extract-ed hereinabove says that income-tax shall be charged on the total income ‘of every person’ and the expression ‘person’ is defined in clause (31) of section 2. The definition merely says that expression ‘person’ includes, infer aria. a firm and an AOP or a body of indi-viduals whether incorporated or not. There are no words in the present Act which empower the ITO or give him an option to fax either the AOP or its members individually or for that matter to lax the firm or its partners individually. Flit is the income of the AOP in law. ACP alone has to be taxed: the members of the AOP cannot be taxed indi-vidually in respect of the income of the AOP. Consideration of the interest of revenue has no place in this scheme. When section 4f11 of the present Act speaks of few of income-tax on the total income of every person, it necessarily means the person who is liable to pay income•fax in respect of that total income according to law. The tax has to be levied on that person, whether an individual, Hindu Undivided Family, Company, Firm, AOP/BOP, a local authority or an artificial juridical person. From this. it follows that if income of El is taxed in the hands of A, A may be legitimately aggrieved but that does not mean that B is exonerated of his liability on that account B cannot say, when he is sought to be taxed in respect of the total income which is lawfully taxable in his hands, that since the 170 has taxed very same income in the hands of A, he himself cannot be taxed with respect to the said total income. This is not only logical but is consistent with the provisions of the Act. In this connection, it may be pointed out that where the Parliament wanted to provide an option, a discretion to the 170, it has provided so expressly. Section 183 (which has since been omitted with effect from 1-4-1993 by the Finance Act, 1992) provided that in the case of an unregistered firm, it is open to the ITO to treat it, and make an assessment on it, as if it were a registered firm, if such a course was more beneficial to revenue – in the sense that such a course would fetch more tax to the public exchequer
2.2 In CIT vs Murlidhar Jhawar and Puma Ginning and Pressing Factory (1966) 60 ITR 95 (SC), the Hon’ble Apex Court held that :
It is common ground that the assessment made by the Income-tax Officer was not a ‘provisional assessment” within the meaning o! section 23B. It would be reasonable fo hold that the income of the three parties was assessed under section 23(3) of the Income-tax Act for the Income was earned in commercial transac-tions in different commodities. The Income-tax Officer In assessing the income of the joint venture could not have proceeded without scrutinizing the accounts and other relevant doc-umentary evidence and without determining the shares of the three parties to the joint venture. In determining the shares of the three parties, he had also to determine the con-tractual relation which gave rise to the right to a share in the profit. Again the order of the In-come-tax Officer clearly indicates that he was cognizant of the fact that the income of the joint venture was taxable collectively, but he thought that he could in law in the first instance make an assessment provisionally” of the three parties separately and then rectify the as-sessments later. In so holding the Income-tax Officer may have committed art error of law, but he does not appear to have laboured under an ignorance of facts. A survey of the contentions raised before the departmental authorities, the Tribunal and the High Court makes that infer-ence irresistible. The Income-tax Officer who made the assessment under challenge did not state that when the first assessment was made, the facts which had a bearing on the true rela-tionship between the three parties were not placed, and it was not even argued before the Ap-pellate Assistant Commissioner and the Tribunal that those facts were not placed before the Income-tax Officer. The Tribunal held, relying upon J. C. Thakkar v. Commissioner of Income-tax 119551 27 1TR 65$ and Joel Prasad Agarwal v. Income-tax Officer, 8-Ward, Mathu-ra (1959137 ITR 107 that once the option is exercised for assessing the individual pad-ner and including his share of profits in the firm in his assessment, it is not open to the de-partment to assess the same income as income of the unregistered firm.
Hence, the entire addition deserves to be deleted in full on this ground alone.
GOA 2: Addition of Rs. 4,00,00.000)- on account of Cash found from Shri Banwari Lal Mishra – on Protective Basis:
Facts: The AO dealt with the issue at Pg. 4 and his findings are reproduced herein below:
7. The ATS Team, Jaipur caught Shri Banwari La! Mishra on 28.03.2018 and seized cash of Rs.4,00,00.000/- from his possession and on being information received from ATS, Jaipur, search action u/s 132 was also carried out at Residential as well as business premises of Shri Fazie Raoof and Shit Deepak Samtani on 29.03.2018. The cash of Rs. 4,00,00,000/ was seized by the Investigation Wing, Jaipur on 29.03.2018. During the course of statement of Shd Banwad Lai Mishra recorded u/s 132(4) by the Investigation Wing, Jaipur, Shri Banwari La! Mishra stated that he is an employee of Shri Fazle Raoof. Shd Fazie Raoof and Shri Deepak Samtani are the partners in the business of Money Transfer i.e. “Hawala Transaction”. Shri Banwari Lal Mishra (Dadhich) is just a courier boy for making deliv-ery of cash here and there for which Shri Fazie Raoof paid him Rs. 10.000/- Per Month. There-fore, the assessee was specifically asked to explain the source of such a huge cash of Rs.4, 00,00,000/-.
Though, the assessee neither explained the source of cash of Rs.4 along with other details as required vide questionnaire referred to his categorical admission before the search team on 29.01201 from the relevant excerpts of his acceptance that he was act Haware Business in collaboration with Shri Fazie Raoof, he di to disclose his unaccounted / undisclosed business of this income in the return. The relevant excerpts are being reproduced here under
X X X X
It is pertinent to mention here despite his categorical admission before the search team on 2903.2018, which is evident from the relevant excerpts, this joint venture In Hawala Business with Shri Fazle Repot: he did not come forward to disclose his unaccounted/undisclosed income of Hawala business. The relevant ex-cerpts are being reproduced here under –
X
Therefore, it is concluded that the assessee has failed to get verified unexplained cash of Rs.4,00,00.000/- from the regular books of accounts, thereby an addition of Rs.4,00,00,000/- on protective basis on account of unexplained cash treating the same as Income from undisclosed sources is made u/s 69A of Rs.4,00,00,000/-, for AY. 2018- 19 as the assessee failed to explain/disclose his share in cash.’
In first appeal the Id. CIT(A) also confirmed the addition, holding as under:
‘5.2.11 It is the consistent opinion of the judiciary that disclosure made voluntarily am binding unless otherwise proved conclusively later, therefore. I hold that the appellant was legally required to include the cash seized and commission in-come in his ROt The appellant neither explained the source of cash of Rs.4,00,00,000/-, de-spite his categorical admission before the search team on 29.03.2018 which is evident from the relevant excerpts of his acceptance that he was actually involved in the Hawala Business in collaboration with Shri Fazle Raoof, he did not come forward to disclose his unaccounted / undisclosed business of this income in the return. Therefore, the AO is rightly concluded that the appellant has failed to get verified unexplained cash of Rs. 4,00,00,000/- from the regular books of accounts.
Submission:
1.1 At the outset, it is submitted that the AO made the addition of Rs. 4,00,0001- on protective basis in the hands of the appellant at pg.8 of the Assessment Order. However, he has not at all stated where substantive addition has been made or not. Un-less it is shown that substantive addition has been made elsewhere, no addition on protective basis could be made validly.
1.2 It is further submitted that a similar addition of Rs. 4 Cr. has been made in the case of Fazle Raoof on protective basis as evident from his assessment or-der .(ACP8‘11 — Pg 102 to 119). Very pertinently, this fact has been admitted even by the Id. CIT DR in his recent submission no. 116 dated 21.06.2024 (filed on 25.06.2024) along with a copy of the same very with the assessment order.
There apart, he also confirmed that the in the case of Banwari Lal Mishra, the Id. CIT(A) had also confirmed the said addition in his hands.
1.3.1(1) It is further submitted that undisputedly. the AO has made addition of Rs. 4 Crore on substantive basis in the hands of Shri Banwari Lal Mishra as evident from his assessment order dated 30.12.2019 u/s 143(3) (ACPB II 97-101), the conclud-ing para from the which is as under:
“Also since, the assessee has intentionally and willfully evaded to make compliance to various statutory notices issued to him, therefore, the under-signed records his satisfaction for initiation of penalty u/s 271 (1) (b) of the Income-tax Act. Further, no conclusive evidence regarding disowning of such huge cash of Rs. 4,00,00.000/- could be adduced by him at any stage, from the beginning when he was intercepted by A. T.S., Jaipur and statement recorded u/s 132(4) by the Investigation Wing, Jaipur. to the assessment proceedings undertaken by the undersigned u/s 143(3) for A Y 2018-19, the said unexplained cash found of Rs. 4.00 Crore is treated as his undisclosed money u/s 69A of the I. T Act, and accordingly, the same is added to his total income on substantive basis for A Y 2018.19 as income from other sources. The undersigned also records his satisfaction that the assessee has faulted under the provisions of Sec. 27IAAB(IA) of the I. T Act. 1961 ‘
1.3.1(11) Very pertinently, this fact has been admitted even by the Id. CIT – DR in his recent submission no. 116 dated 21.06.2024 (filed on dated 25.06.2024) along with a copy of the same very with the assessment order. Thereapart. he also admitted that the Id. CIT(A) has also upheld the impugned addition in the hands of Banwari Lal.
The settled legal position is that once a substantive addition has already been made in the case of a third person, then no addition is legally permissible in the hands of the assessee, more particularly, at the stage of the first appeal when the Id. CIT(A) was supposed to record a categorical finding as to why he is going to confirm the addition on a protective basis even though substantive addition has been made elsewhere. However, there is no whisper at all on this legal aspect. The Id. CIT (A) without applying its mind on this crucial aspect, has simply confirmed the addition, without bothering to see in other cases.
1.3.2 Supporting Case Law:
1.3.3 The Hon’ble Delhi – ITAT in the case of DCIT vs. VKS Prop-erties Pvt. Ltd. New Delhi noted that:
‘The commission income earned on providing accommo-dation entries Though the assessee company have already been assessed by the AO in the hands of and Jain and Naresh Jain which has been confirmed by the Learn respective appeals. Therefore, Learned CIT(A) in their respective appeals Therefore, Learner CIT(A) has rightly held that, no Further addition can be made in the hands of the assessee company and therefore. directed to delete the protective addition of Rs. 12,63,56536 made by the AO.’
1.3.4 Reliance is also placed on a very recent decision in the case of Mewar Hospital (P) Ltd. Vs. ACIT (2024) 227 ITJ 145 (Jodhpur) (DC 93-124) held as un-der:
‘16.4 We have heard the rival contentions and perused the material available on record. The Bench noted that the addition under dispute is made on account of cash seized at the residence of the assessee for an amount of Rs. 24,91,000 out of that addition to the extent of Rs. 15,00,000 was made in the case of the assesses on protective basis, considering the fact that Shri Manish Chhaganlal has claimed that it re-lates to the outsourcing of medical shop al Mendsair Centre (MP). Even though based on the explanation the same has been considered in the case of Shri Manish Chhaparwal as unex-plained. To protect the interest of the Revenue. the same is also added on protective basis in the case of the assessee. As it is transpired that the Revenue has already added the said amount on substantive basis in the case of Shri Manish Chhaparwal. Even in the proceeding before the learned CIT(A) the said addition is confirmed in the hands of Shri Manish Chhap-arwal. We also note that during the course of search proceeding in the statement recorded of Shri Manish Chhaparwal has already submitted that the cash to the extent of Rs. 15,17,080 as appearing the books of the following entity:
—-xxx•–•—xxx–•xxx—-xxx–xxx
The learned CIT(A) has sustained the addition in the case of Shri Manish Chhaparwal and since Shri Manish Chhaparwal has challenged the decision of the learned CIT(A) before the Tribunal we do not see any reason to sustain the protective addition in the case of the assessee at this stage. The Revenue has challenged the action of the lower authorities in case of the essessee which is the protective addition the concept of protective and substantive addition is not in the provisions of the IT Act but generally the Revenue when the alternative claim is being made the addition is made on protective and substantial basis so as to make the alive the issue. Here we note that till the second stage of dispute of the addition has been sustained by the Revenue in the case of Shri Manish Chhaparwal to the extent of Rs. 15,00,000 and before us the Revenue did not bring an-ything contrary to the findings of the learned C1T(A) in the case of Shri Manish Chhaparwal so as to support the reasons as to why the said protective addition in the case of the assessee should sustain. Once it is already considered at the two level at the AO and the learned CIT(A) that related to amounting pertains to Shri Manish Chhaparwal in absence of the Revenue not demonstrating before us in support we confirm the reasoned finding of the learned CIT(A) and we see no reason to sustain the addition. Considering these observations, the ground
2.1 On Merits: Alternatively, on merits, it Is submitted that the stand of the AO is evidently highly contradictory in as much, the relevant extract from the statement of the assessee, employee Banwari Lal Mishra and Fazle Raoof brings out an un-disputed fact that the appellant was engaged in Hawala Business (whether individually or in partnership) for which he is charging commission from its customers/clients, at a certain rate in terms of percentage of the cash transferred from one place to another place. Interestingly, the AO himself has even estimated the commission Income, over and above what the as-sessee declared, clearly implies that the AO has accepted the fact being assessee engaged in Hawala Business getting commission on account of transferring others fund as per their directions. Thus, as necessary corollary and by necessary implications, it is admit-ted by the AO that the fund belongs to others, and not to the appellant. Needless, to clarify that in the Hawala Business funds are given by the customer at one place which are to be de-livered to be at other place In consideration of the commission• which fact has been elaborated by the assessee in the statement Ws 132(4) (extract at AO’s pg 5-7). Surpris-ingly, the AO made out the case that Rs. 4 Cr. was the assessee’s own undisclosed Income. If It really so, then there was no question of charging any commission on the transfer of the same. But the AO having assessed the commission income cannot blow hot and cold in the same break.
2.2.1 Source fully explained: A careful reading of the statement of the appellant, Shri Fazle Raoof and Shri Banwari Lal Mishra shall reveal that the seized amount of Rs. 4 Cr. belonged to altogether different/ customer, on whose behalf money was taken to be delivered to Jaipur, Ahmedabad and Bhilwara. The same is evident from 0/A No. 11 and 17 of the statement recorded of the assessee on dated 23.03.2018, the same are repro-duced hereunder:
- Question & Answer No. 11
- Question & Answer 17
2.2.2 The details and information w.r.t the source of money is also stated in the statement of Fazle Raoof In his assessment order dated 30.12.2019 (ACPB II – Pg
2.3 A bare perusal of the above statement of the appellant, makes it crystal clear that the fund belongs to others, and not to the appellant. In this regard, the approach of the AO is highly contradictory, in as much as having admitted that the appel-lant was engaged in hawala business and even commission income was estimated, an una-voidable implication flowing therefrom was that the appellant was dealing in cash movement of its customers. Therefore, the cash so found shall always belong to the customer and cannot belong to the assessee itself.
3. Supporting Case Jaws :
3.1. In the case of ACIT vs. Narendra Gupta (in ITA No.795/Ind/2018 vide order dated 01.12.2022, the Honble ITAT held as under:
‘5…..Out of 79 persons, 36 confirmed to have done trans-actions of Rs. 7,04,89,360A, remaining 43 persons who had done rest of the transactions of Rs. 8,25,03,772/- did not turn up or denied to have done transactions. Ld. AO also observed that the assesses had been receiving a commission of Rs. 100A to Rs. 2004 per lac for effect-ing those hawala transactions. Thus, the Ld. AO made addition in two tranches, viz. (0 Unex-plained transactions of Rs. 8,25,03772/- i.e. the transactions where the persons had not turned up / denied to have made transactions. Ld AO made a full addition of As 8,25,03,772/- (ii) Explained transactions of Rs. 7,04,89.360A i.e. the transactions where the persons had appeared and admitted to have made transactions, Ld. AC) made an addition of Rs. 16,91,744A by applying a commission-rate of Rs. 200/- per lac on 7,04,89,360/- which results in estimated commission-income of Rs. 1,40,9784 for 1 month and extrapolat-ing the same for 12 months arrived at Rs. 16.91,744A. Accordingly, the additions of Rs. 8,25,03,772/- and Rs. 16.91,744/- were made rejecting all submissions made by assessee dur-ing assessment-proceeding.
8 ………. We observe that the 14. CIT(A) has given a care-ful thought to the facts of case and validly held that the assesses must have earned only commission of Rs 36,71,832/- on all transactions of Rs. 15,29,93,132/-. Having said so, Ld. CIT(A) was justified in applying a commission-rate of Rs. 200/- per lac on 8,25,03,772/-which results in estimated commission-income of Rs. 1,65,007/- for 1 month and extrapolating the same for 12 months arriving at commission of Rs. 19,80,088A for the whole year. Finally, Ld. CIT(A) has rightly ordered the Ld. AO to assess commis-sion-income of Rs. 19,80,0881- and thereby granted a relief of Rs. 8,05,23,6761- (Rs. 8,25,03,764A minus Rs. 19,80,0880 to the assesses. We do not find any infir-mity in the action of Ld. CIT(A) and the same is hereby upheld. Therefore, Revenue’s Ground No. 1 is devoid of merit”
Hence. the impugned addition deserves to be deleted in full.
GOA 3: Impugned addition of Rs. Rs 27.00.0001- on account of hypothetical ‘ commission income:
Facts: The AO dealt with the issue at Pg.4 and his findings are reproduced herein below:
‘8.During the course of search at assessee’s residence and business premises, in his statement recorded U/s 132(4) he had made another categorical admission about his indulgence in cash transfer business (Hawala) for last 10 years and for the last three year he is doing this business with Shri Pante Raoof in undis-closed partnership, later he explained in detail the entire modus operandi of his hawala busi-ness in which he admitted the magnitude of his commission income earned per day on ac-count of transfer of cash from one city to another city of country such as Jaipur, Ajmer, Delhi, Mumbai, Chandigarh Ludhiana and Bangalore etc As per his statement they do not record any commission details and after executing the transfer of money, they use to destroy their rec-ords of Hawala trade. According to him and as per his own categorical admission in reply to query No. 10 & 16, his daily Income from this business ranged between Rs.15 to 20 thou-sand per day. The relevant portion of his above statement is reproduced as under.
X X X X
9. On the basis of his categorical admission made as above in his statement the magnitude of his Hawaii, Business is calculated as under 50% Commission Income 17500X30 days X 12 months) of Hawala Business car-ried out in Collaboration with Fazle Raoof Rs.27 00,000A
Further during the course of search, seized Annexure Ex-hibit 11 from his business premises, currency notes of denomination Rs. 54, Rs. 1W- and Rs. 20/-and in reply to specific query in Question No. 31, he described in detail about the notings made upon each of the note with explanation regarding the code word ‘ok’ means ‘amount is delivered’ and ‘kg’ means ‘Rs. 1 lac’. He further deciphered the find de-tails of all the notings made upon each of the note. The relevant portion of his reply as referred above and his working is reproduced as under.
X X X X
The above working given by him reflects that an overall transition of Hawala Money between different parties during a period of 02.03.2018 to 29.03.2018 were made and The gross amount of cash movement is Rs. 3,58,85,810A and if assessee’s own acceptance of having earned commission Income of Rs. 100 per lac then dur-ing the short span of a month, he has earned commission income of Rs, 35,886/ on this amount along with his partner Shn Fazle Raoof and his share in the pitiful is obviously of Rs. 17,943/in this Hawala Business during the month of March 2018. This also indicates the mag-nitude of his earning from Hawala Business and endorses his own acceptance in reply to Que-ry No. 10. of his statement that he earns normally Rs. 15,000 to Rs. 20,000 per day and this volume of income earned by him also justifies his undisclosed expenditure in construction of his house for which he has admitted to have incurred a sum of Rs. 75 lees. to Rs. 1 crate. How-ever, no separate addition on the basis of seized currency notes is made as an ad-dition of Rs. 27 teas. fo his income is being made on account of undisclosed Ha-wala Business as per the working done above.”
In first appeal the Id. CIT(A) also confirmed the addition, holding as under:
5212 …………………….. Further in view of my findings con-tained in pare pages, it is held that the AO had made an ,addition of Rs 27,00,000/- correctly as commission income from Hawala business. The grounds from I fo 3 raised by the appellant regarding these issues are dismissed. `(P9 9)
Submission:
1.1 Sole Statement, not a good basis for Addition: At the outset, we may submit that no addition can be made merely and solely on the basis of a statement of a party. The Id. AO heavily relied upon the statement of the appellant recorded u/s132(4) on dated 29.03.2018 (ACPB – I Pg 1-21) by the search learn.
In this regard, the statement of the assessee recorded u/s 132(4) (which Is 21 pages), although suffered from various deficiencies which have been enu-merated below. Yet specifically all the pages of the said statement from Pg. No. 1 to 20 are dated 29.03.2018. however, only the last page i.e the 21st page of the said statement is dated 30.03.2018. This cena my creates doubt as to when this statement was recorded. The state-ment doesn’t even mention at what time such statements were concluded on 29th March and thereafter, what time were they resumed on the 30th March. The only plausible reason, for mentioning the time at which the said statement were concluded on 29th March, is that the statement was recorded on the entire day on 29th March, which continued all the way till the early morning of 30th March, thereby making the time duration of the statement more than 24 hours.
Further, the credibility of such statements is highly doubtful and not binding for various reasons. as enumerated below in this written submission.
1.2 No addition permissible solely based on statements: Perti-nently, the impugned additions have been made solely based on the statement of the as-sessee without any corroborative evidence, and that too ignoring the retraction. It is settled that an admission cannot be made the sole basis of assessment since it is a matter of com-mon knowledge that during the course of search, the Revenue Authorities normally do exert unwanted pressure and influence over the appellants to get something surrendered to make their survey a success. To expect the appellant to furnish infallible evidence of concrete na-ture in such a situation is totally beyond comprehension.
In this regard, it is submitted that the assessee during the as-sessment proceedings, in reply of notice u/s 143(2) dated 08.12.2019 (APB’ Pg 12714) at S.No.7 stated that during this year the assesses has not earned any commission on transfer of money, which is evident from the documents seized by you dur-ing search. If your honor has any documents, please oblige by providing the same to the as-sesses. Yet nothing has been provided till date. However, the AO simply ignored the same. This clearly proves that the AO blindly followed the said statements recorded. Ignoring all other facts and circumstances of the case, even the submissions of the assessee.
Supporting Case laws:
1.2.1 This is something against common sense and human probabilities. Pertinently, the Kelkar Committee has also taken note of this prevailing attitude of the search parties and consequently remarked very adversely.
1.2.2 The CBDT vide Circular No. 286/2/2003 dt. 10.03.2003 and the Budget Speech, 2003 by the Finance Minister please be referred. which is reproduced herein below :
“Instances have come to the notice of the Board where assessee have claimed that they have been forced fo confess the undisclosed in-come during the course of the search & seizure and survey operations. Such confessions, if not based upon credible evidence, am later retracted by the concerned assessee while filing returns of income. in these circumstance, on confessions during the course of search & seizure and survey operations do not serve any useful purpose. It is, therefore advised that there should be focus and concentration on collection of evidence of income which leads to information on what has not been disclosed or is not likely to be disclosed before the Income Tax Departments, Similarly, while recording statement during the course of search & sei-zures arid survey operations no attempt should be made to obtain confession as to the undis-closed income. My action on the contrary shall be viewed adversely.
Further, in respect of pending assessment proceedings also, assessing officers should rely upon the evidences/materials gathered during the course of search/survey operations or thereafter while framing the relevant assessment.”
1.2.3. The said instruction was relied upon In the cases of R. K. Synthetics 30 TW 228 (Jd) and ITO vs. Suresh Chandra Kootwal (2004) 32 TW 23 (Jp). CIT vls Shn Ramdas Motor Transport 238 ITR 177(AP).
1.2.4 The existence of tension and surcharged atmosphere has been recognized even by the courts. Kindly refer Jagdish Narayan Ratan Kumar 22 TW 209 (JP). Such statements, therefore are bound to give a distorted picture and are not fully reliable as such.
1.2.5 On this aspect it will be quite relevant to refer to decision of Hon’ble Gujarat High Court Kailashben Manharlal Chokshi vs. CIT (2008) 14 DTR 257/ (2010) 328 ITR 411 (Guj.) wherein, it was held as under:
“22. It is also to be seen as to whether an addition made is merely based on the statement recorded by the AO under s. 132(4) of the Act and whether any cognizance may be taken of the retracted statement. So far as case on hand is concerned, the glaring fact required to be noted is that the statement of the assessee was recorded under s. 132(4) of the Act at midnight. In normal circumstances, it is too much to give any credit to the statement recorded at such odd hours. The person may not be in a position to make any correct or conscious disclosure in a statement if such statement is recorded at such odd hours. Moreover, this statement was retracted after two months.
26. In view of what has been stated hereinabove we are of the view that this explanation seems to be more convincing, has not been considered by the authorities below and additions were made and/or confirmed merely on the basis of state-ment recorded under s. 132(4) of the Act. Despite the fact that the said statement was later on retracted no evidence has been led by the Revenue authority. We are, therefore, of the view that merely on the basis of admission the assessee could not have been subjected to such additions unless and until, some corroborative evidence is found in support of such admis-sion. We are also of the view that the statement recorded at such odd hours cannot be con-sidered to be a voluntary statement, if it is subsequently retracted and necessary evidence is led contrary to such admission. Hence there is no reason not (sic) to disbelieve the retraction made by the AO (sic-assessee) and explanation duly supported by the evidence. We are, there-fore, of the view that the Tribunal was not justified in making addition of Rs. 6 lees on the basis of statement recorded by the AO under s. 132(4) of the Act The Tribunal has committed an er-ror in ignoring the retraction made by the assessee.’
2. Admission retracted/ Not acted upon – Retraction not object by AO- Hence addition Invalid:
2.1 The AO ignored the settled legal position that a person mak-ing a statement is legally entitled to retract from what it had stated earlier. It has been held that an admission, though best evidence against such a person, if shown to be out of ambigui-ty. under tension or was against the facts or misconception of law, can be validly retracted. The very statement of the appellant so heavily relied upon by the AO, was otherwise not a good and reliable evidence, the moment it stood retracted. A letter dated 11.05.2018 (ACPB II – 94-96) was written to the DDIT (Inv.) – I, Jaipur on dated 14.05.2018 wherein, the complete fact and detailed reason behind such retraction, elaborating the circumstances wherein, legally speak-ing, he wrongly made admissions under pressure and confusion, were explained. The relevant extract from the letter, are worth noting and therefore, the same is reproduced herein below in verbatim:
“1. My statement was recorded on oath Ws 132 on 29.03.18 by the income department.
2. I wish to state that my statements recorded were not in accordance with the facts, because I was in under threat, undue pressure and duress.
3. Further before the stated my statement I was locked myself in washroom by 7-8 hours due to threat of Police and same fact has been stated in my statement. Hence, I was not in position to state the facts in such stressful, tense situation end I was not with able to state my statement with mental piece.
4. In this connection, I wish to state that, some of the statements recorded stated here below were not in accordance with the actual facts which is evident from the explanation like I stated that had to two tarn Hari-om Agency and Mohan Broker Agnecy. at Bazar no. 2. BMAvara”, while actual fact is Hari-om Agnecy is under the ownership of Smt. Yshoda Devi not in my ownership.
5. I am owner of Ws Mohan Broker Agnecy, at Bazar no 2, Bhilwara, doing agency business of cattle feed items since year 2001 and my father was farmer and doing farming
6. A search has been conducted at my premises in rela-tion to the matter of Cash Seized from Banwari lel at Jaipur. I wish to state that, I am not con-nected, and I don’t have any concern and relationship in the matter of seizer of Cash form Shri Banwari Lal at Jaipur on 29.03. 2018
7. That I once again reiterated my statements U/s 132 of Income tax Act. 1961 recorded on 29.03.2018. as that was recorded under threat, undue pres-sure, duress under mental pressure, hence my confession was therefore not legal “
2.2 Facts of filling of Retraction : fully established: In the entire orders of the authorities below, there is no denial of the fact of filling this retraction letter. Apart from sending such retraction by post on 04.04.2018, the appellant once again physically filed the same on 14.05.2018 The retraction letter is by way of an affidavit, duly signed & duly notarized. The above paper placed in (ACPB II Pg 9496) are the certified copies obtained from the AO [ACIT (Central) Ajmer]. Further this fact of filling of retraction letter is duty men-tioned in the penalty order dated 27.03.2019 (ACPB II 91-93). Undisputedly, in addition, the appellant after making the alleged admission, did not act upon it and on the contrary while filling ROI in response u/s 153A on dated 07.04.2017 (APB Pg 2-4) declared the same total in-come as declared in ROI u/s 139, not adhering to his confession and thus, duly retracted from the admission so made. Admittedly, there is no mode prescribed for retraction and even non-inclusion of the income in ROI with or without suitable note also amounts to a valid retraction. However, the Id. AO ignored the retraction letters in the sense that he did not consider the same judiciously.
2.3. Legal Principles:
2.3.1 It is trite law that an admission, though best evidence against such person, if shown to be out of ambiguity. under tension or was against the facts or misconception of law, can be validly retracted. It has been held by the Hon’ble Supreme Court in Pullangode Rubber Produce Co. Ltd. vs. State of Kerala & Others 91 ITR 18 (SC):
“Such admission is an extremely important piece of evi-dence, but it cannot be said that it is conclusive It is open to the assessee who made the ad-mission to show that it is incorrect, and the assessee should be given a proper opportunity to show that the books of accounts do not disclose the correct state of feta”.
2.3.2The Hon’ble Apex Court in Nagubai Amnia! vls B. Sharma Rao AIR 1956 (SC)593: held as under
An admission is not conclusive as to be truth of the mat-ters stated therein. It is only a piece of evidence, the weight to be attached to which must de-pend on the circumstances under which it is made. It can be shown to be erroneous or un-true”
2.3.3 In Rajesh Jain v/s DCIT (2006) 100 TTJ 929 (Del), held that computation of undisclosed income solely on the basis of confessional statement of the as-sessee was not justified, inter alia, where the conduct of affairs by the Revenue Authorities showed that good amount of psychological pressure was built on the assessee to make the said statement and all material found during search was duty explained by assessee on which no adverse comments was made by the AO. This decision contains various references and relevant extracts quoted from various case laws.
2.3.4 In Ashok Kumar Sons vs. DCIT (2001) 72 TTJ 323 (Jd). and Control Touch Electronics (Pune) (P) Ltd. VS. Asstt. CIT (2001) 72 TTJ (Pune) 65 at para 9 it was held as under
“……. At this stage, it is mentioned that it is a settled legal position that there cannot be any estoppel against the statute. If any income is not taxable by virtue of any provision of the Act, then it cannot be taxed merely because it was offered by the assessee in ins return. Therefore, the contention of the learned Departmental Representative in this regard is hereby rejected. Accordingly, the order of the AO is set aside on this issue and is hereby deleted from the assessment of undisclosed income…. “
2.3.5 Kasal Paper & Pulp Ltd. VS. Assn. CIT (2000) 69 TTJ (Pune) 924 at pg. 465 para 8 ‘There cannot be estoppel against the legal principles and therefore, if the income does not accrue to the assessee. the same cannot be taxed merely on the ground that it was offered for taxation. The assessee can always retract if the amount offered cannot be taxed under the law…..
2.3.6 The Hon’ble Supreme Court in Vinod Solanki v/s Union of India (2009) 233 ELT 157 (SC) makes it abundantly clear that the issue of summons and obtain-ing statements from the persons summoned, cannot and should not be the only baths, to make out a case by the Revenue against the assessee. The Hon’ble ‘Supreme Court took into account the fact that the burden of the revenue can be dispensed with and the onus cannot be shifted by it to the assessee by obtaining a confessional statement. After elaborate judicial analysis of the legal position, the Hon’ble Supreme Court allowed the ap-peal of the assessee and vacated the orders of all the lower authorities.
2.3.7 Also refer Heirs and LRs of Late Laxman Bhai S. Patel v/s CIT (2009) 222 CTR 138 (Guj). Further kindly refer Polat Marmo Agglomerates Ltd vs. Union of India (1994) 73 ELT 536 (Raj.) wherein it was held that the admission made in ignorance of the correct position of law and facts are not binding upon a party. Similarly, in the case of Ambalal vs. Union of India (1983)13 ELT 1321 (SC) it was held that confessional statements recorded under threat, coercion, inducement or promise are not valid but the person concerned should lake care to retract such confessions without delay. Retraction would then be weighed in the light of other evidence available
3. No addition legally possible in absence of incriminating ma-terial found:
3.1 The law is very well settled that in case of assessment of a search case Ws 153A or u/s 153C, any addition or disallowance can be made only and only if some Incriminating material has been found during the course of search (or even if not), where the related assessment stands completed/unabated (in other words, were not pending on the date of on date of search i.e. 29.03.2018.
3.2 In the instant case. undisputedly, the assessments for AY 2012-13 to AY 201617 were already completed and were not pending on the day of the search (i.e. on 29.03.2018) (falling in AY 2019-20). In case of intima-tion u/s 143(1) of the Act, the time limit to issue notice Ws 143(2) of the Act had already ex-pired in those cases on the date of search and hence such assessment even though made u/s 143(1) of the also stand completed as attained finality. For better appreciation, kindly refer the following chart:
| AY. | ROI Filed u/s 139 on Stet |
Total Income Declared in ROI u/s 139 |
Assessment Completed | Tine lmit for
issuance of |
|
| Under Section |
On Dated | ||||
| 12-13 | 29.07.2012 | 1.79,160/- | 143(1) | 08.12.2012 | 30.09.2013 |
| 13-14 | 21.07.2013 | 1.54•7101- | 143(1) | 04.01.2014 | 30.09.2014 |
| 14-15 | 09.08.2014 | 2.21,4301- | 143(1) | 25.11.2014 | 30.09.2015 |
| 15-16 | 24.09.2015 | 2.54.980/- | 143(1) | 24.10 2015 | 30.09.2016 |
| 16-17 | 28.07.2016 | 3.48.340/. | 143(1) | 08.09 2016 | 30.09.2017 |
| 17-18 | 01.12.2017 | 3.58.8704. | 143(1) | 07 05 2018 | 30.09.2018 |
| ‘18.19 | 29.03.2019 | 3.30.65W- | 143(1) | 19.04.2019 | 26012019 |
3.3. It is well settled that any variation, by way of addition of any income, in the returned income of any assessment year, (which were not pending on the date of Search), could be made u/s 153A or u/s 153C of the Act, only and only based on the in-criminating material found during search u/s 132/132A of the Act in accordance with the stat-utory procedure but not otherwise. However, in the instant case there is no undisclosed in-come at all based on/emanating from the incriminating material. Undisputedly, no incriminat-ing material as such was found during search. In all these subjected years, there is no refer-ence to any seized material at all showing suppressed commission income and no assess-ment remaining pending (or completed/unabated) no addition/ disallowance at all could be made.
3.3.1. There are umpteen number of cases including the case of CIT vs. Kabul Chawla (2015) 281 CTR (Del) 45/ (2016) 380 ITR 573 (Del), wherein the Hon’ble Delhi High Card after detailed analysis. has summarized legal position, and the relevant ex-tracts therefrom are extracted herein below:
“(v) In absence of any incriminating material, the com-pleted assessment can be reiterated, and the abated assessment or reassessment can be made. The word ‘assess’ in s. 153A is relatable to abated proceedings (i.a those pending on the date of search) and the word ‘reassess’ to completed assessment proceedings.
(vi) Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under s. 153A merges into one. Only one assessment shall be made separately for each assessment year on the basis of the findings of the search and any other material existing or brought on the record of the AO.
(vii) Completed assessments can be interfered with by the AO while making the assessment under s. 153A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or properly discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment’s
3.3.2. Moreover, reliance is also placed upon the decision of Hon’ble Rajasthan High Cowl In the case of Jai Steel (India) vs. Asstt. CIT (2013) 259 CTR (Raj) 281/ 88 DTR (Raj) 1, wherein it was has held that:
“18. To consider the rival submissions made at the Bar in the context of the present case and the substantial question of law framed, the scope of ‘assessment and reassessment of total income’ under S. 153A(1)(b) and the first and second proviso have to be considered. Further, for answering the above issues, guidance will have to be sought from S. 132(1) of the Act as S. 1534 of the Act cannot be read in isolation, inasmuch as, the same is triggered only on accoubt:of,any, search/requisition under S.s 132 or 132A of the Act. If any books of accouter other doc-uments relevant to the assessment had not been produced in the course’ of original assess-ment and, found in the course of search, such books of account or other documents have to be taken into consideration whisky assert or reassessing the total income under the provisions of S. 153A of the Act. Even in a case where undisclosed income or undisclosed property has been found as a consequence of the search, the same would also be taken into consideration. The requirement of assessment or reassessment under the said S. has to be read in the context of S.s 132 or 132A of the Act, inasmuch as, in case nothing incriminating is found on account of such search or requisition, then the question of reassessment of the con-cluded assessments does not arise, which would require more reiteration and it is only in the context of the abated assessment under second proviso which is required to be as-sessed.
—XXX—–XXX——XXX—-XXX — xxx
20. The necessary corollary of the above second proviso Is that the assessment or reassessment proceedings, which have already been ‘completed’ and assessment orders have been passed determining the assessee’s total income and, such orders are subsisting at the time when the search or the requisition is made, there is no ques-tion of any abatement since no proceedings are pending. In such cases, where the assess-ments already stand completed, the AO can reopen the assessments or reassessments al-ready made without following the provisions of S.s 147, 148 and 151 of the Act and determine the total income of the assessee.”
3.3.3. The law on this aspect is no more Res Integra in as much as very recently the Hon’ble Apex Court in the case of POT vs. Abhisar Builders (2023) 332 CTR (SC) 385 has held as under:
“13. For the reasons stated hereinabove, we are in complete agreement with the view taken by the Delhi High Court in the case of Kabul Chawla (swat and the Sulam: Hick Court in the case of Saumya Construction (saws) end the decisions of the other High Courts taking the view that no addition can be made In respect of the com-pleted assessments in absence of any incriminating material.
14. In view of the above and for the reasons stated above, It is concluded as under
(i) that in case of search under S. 132 or requisi-tion under S. 132A, the AO assumes the jurisdiction for block assessment under S. 153A.
(ii) all pending assessments/reassessments shall stand abated;
(iii) in case any incriminating material is found/unearthed, even, in case of unabated/completed assessments, the AO would assume the jurisdiction to assess or reassess the ‘total income’ taking into consideration the incrimi-nating material unearthed during the search and the other material available with the AO in-cluding the income declared in the returns; and
(iv) in case no incriminating material is unearthed during the search, the AO cannot or reassess taking into consideration the other material in respect of completed , assessments/unabated assessments. Meaning thereby, in respect of completed/unabated assessments, no addition can be made by the AO in ab-sence of any incriminating material found during the course of search under S. 132 or requisition under S. 132A of the Act, 1961. However, the complet-ed/unabated assessments cart be re-opened by the AO in exercise of powers un-der S s 147/146 of the Act, subject to fulfilment of the conditions as envisaged/mentioned un-der S.s 147/148 of the Act and those powers are saved.’
3.3.4. Other similar case laws are:
(a) Principal CIT vs. Meeta Gutgutia (2017) 295 CTR (Del) 466: (2017) 152 DTR (Del) 153 • (2017) 395 ITR 526 (Del)
(b) Principal CIT vs. Saumya Construction (P) Ltd. (2016) 144 DTR (Guj) 41 : (2017) 297 CTR (Guj) 387 : (2016) 387 ITR 529 (Gut)
(c) Jami Nirmala vs. Principal CIT (2021) 323 CTR (OM 317: (2021) 207 DTR (Ori) 65 : (2021) 437 ITR 573 (Ori)
(d) PCIT-Central, Jaipur Vs Smt. Daksha Jain(2019) D.B. Income Tax Appeal No. 125/2017(Rajasthan)
3.3.5. All these decisions have been approved by the Hon’ble Apex Court in the case of Abhisar Builders (supra).
3.3.6. Taking note of the aforesaid decision in Abhisar builders (supra), the CBOT has come out with binding instruction No. 01/2023 on dt. 23.08.2023 whereby certain directions have been given to the AO (JO) with regard to the manner in which the completed /unabated assessment have to be made in pare 7.2 read with para 8.
3.4 Statement of assessee not an incriminating material: In this case, the AO solely and merely relied upon the statement which already stands retracted and otherwise is not a case of incriminating material. In case of PCIT vs Best Infrastructure Pvt. Ltd. 397 ITR 82 (Del). it has been held that statement recorded u/s 132(N) In the Itself does not constitute incriminating material. The relevant finding of the Hon’ble court reads:
*38. Fifthly, statements recorded under Section 132 (4) of the Act of the Act do not by themselves constitute incriminating material as has been ex-plained by this Cowl In Harjeev Aggarwal (supra),
4. Wild estimation made on ad-hoc basis-no incriminating evi-dence found but favorable Evidence ignored:
4.1 The AO worked out the commission income alleging that in the statement the assessee admitted having earned commission © Rs. 15.000 to 20.000/- per day vide answer to question 10 & 16 (ACPB I 1-21). At Pg. 11 of the Impugned assessment order, considering 50% of the said commission, he connected Rs. 7,500/- per day for 30 days and for 12 months and worked out However, such commission income of Rs. 27,00,000/- per m per day would mean movement of cash of Rs. 75 lakhs per humanly impos-sible for a person In as much as it involves collection of cash as also delivery of the cash on one single day, not only to this magnitude but of a larger sum to manage the ha-wala business.
4.2 Interestingly and notably, on the other hand, the search team during the search found loose record which reflected the overall working of the Assessee for the entire month of March. 2018. (reproduced at Pg 14 of the impugned assessment order) and discussed by the AO at pg. 14 & 15 of the assessment order, wherein he himself ad-mitted the cash movement of Rs. 3.58,85.810/- in a month and as per AO’s own calculation the Commission income earned jointly by the assessee and Shri Fazle Raoof was Rs. 35,806/-. half of which came to merely Rs. 17,943/-belonging to the appellant.
Glaringly, this figure of Rs. 17,943/- was for a month as against Rs. 15,000/- to 20.000/- estimated for a day. Therefore, there appears a clear mistake in re-cording of the statement or in understanding of the question while replying by the assessee. Such a bonafide mistake cannot be capitalized, more particularly, when there is direct evi-dence found during the same search itself. Hence, the AO had got no basis for considering per day income of Rs. 7,500!- (i.e. 50% of 15.000) merely on the basis of the statement of the As-sessee.
4.3 Kindly refer ACTT vs. F Tharani (in ITA No. 113/Ind/2021 vide order dated 30.10.2023) (DC 139-156), wherein the Hon’ble ITAT held as under:
“5.1. It is pertinent to note that there was search and sei-zure action u/s 132 of the Act on 3rd April 2014 in case of MIs. Kalyon Grain Merchant and these assessments were completed by the AO post search and seizure in the case of the part-nership firm. As it is clear from the assessment order on this issue the AO has made ad hoc addition by estimating the commission income with increase of 20% of the income already declared by the assessee. The sole basis of the AO for increasing the commis-sion income is the past unaccounted cash found during the search as well as in the raid of Po-lice authorities in the year 1998 and 2008 respectively Therefore, the AO suspected the unac-counted transactions of earning commission income by the assessee (or these years also. Addition made by the AO is purely on the basis of the suspicion without any material or evi-dence to reflect any unaccounted commission income of the assessee for these years. On appeal the CIT(A) has deleted the addition in pare no 4.4 of page 92 as under
X X X X
5.2. As if is manifest from the assessment order that the AO has not referred to any incriminating material disclosing any undisclosed income of com-mission for these assessment year either found during the search and seizure action or even during the assessment proceedings. Therefore, the AO has not brought any material on record fo show higher commission income earned by the assessee. The commission income duly recorded in the books of account and declared in the return of income cannot be disturbed in absence of any material. Accordingly we do not find any error or illegality in the impugned order of the CIT(A) qua this issue.
4.4 Suspicion cannot be the reason for additions: Thus, the im-pugned additions have been made merely on suspicion. It is trite that no addition can be made merely on suspicion. It is well settled that suspicion howsoever strong, cannot take place of reality, as held in Dhakeshwari Cotton Mills v/s CIT (1954) 26 ITR 775 (SC).
GOA 4: Invocation of S.1158BE is without jurisdiction:
1.1 At the outset, a bare perusal of the impugned assessment order will show that there is no mention, at all, of invoking the provision of Section 115BBE. Even no-show cause notice was served upon the assessee before invoking the said provision and therefore, the levy of special tax under that provision deserves to be struck down for want of opportunity and because of gross violation of principle of natural justice. But otherwise also on merits, there is absolutely no case made out by AO to invoke sec 115BBE since there is no income at all chargeable Ws 68/69/69k
1,2. Thus the Id. AO invoked S.1158BE probably for the reason that the total addition of Rs. 4.27 Cr. [wherein (I) Rs. 27 Lakhs on account of com-mission Income earned and (ii) Rs. 4 Cr. on account of cash seized u/s 69A of the Act.
1.3 There is absolutely no case made out by AO to invoke sec.115B8E. Admittedly, the additions so made which are under challenge, are not the income from other sources but by AO’s own admission, these are the cases of business Income only. Once It is so, S.115BBE cannot be Invoked. The AO even didn’t conform the appellant on this aspect.
2. Legal Position w.r.t S.115BBE:
2.1 In the instant case, the entire impugned addition of Rs. 4.27 Cr. though not at all admitted but once made, could not have been assessed as income under the head Income from Other Sources. Even the AO did not very specifically assess such In-come as Income from Other Sources. Once the AO himself did not dispute that it was a case of business income (AO Pg-15), he could not have invoked S. 115BBE. Further it is the case of the AO that the entire commission income has been earned by the assessee in partnership with Shri Fazle Raoof, thus being business receipts. Hence, the income, if any, arising could be assessed only as a business income but not as Income from Other Sources (these sub-missions are without prejudice to our basic contention that the entire addition itself was bad in law and without jurisdiction and for various reasons).
2.2. AO can’t change head of income:
2.2.1 It is submitted that 5.11588E specifically refers to the In-come which are of the nature as referred in S. 68, 69, 69A of the Act being the income fromdther sources Therefore. subjected income has essentially to be classified Ws 44 of the. Act as income from other sources and that is possible only when the income is not capable of being classified under any other head being income from Salary, property, capital gain, busi-ness or profession.
2.2.2 A combined reading of S. 14 with S. 56 of the Act makes is evidently clear that for the assessment of an income it must have to be classified under four heads of income as enumerated Ws 14 and if it doesn’t fall under any specific head of income as per item A to E of S. 14, such income has to be assessed under the residuary head of in-come i.e. item F of S. 14. Therefore, income added u/s 68 or 69 etc. has to be given a specific head in terms of S. 14.
Therefore, income added u/s 68 or 69 etc. has to be given a specific head in terms of S. 14, 4.3 The Hon’ble Supreme Court in case of Karanpura Develop-ment Co Ltd vs. CIT 09621 44 ITR 362 (SC) held that these heads are in a sense exclusive to one another and income which falls within one head cannot be brought to tax under another head. Further, the Hon’ble Supreme Court in case of Natinikant Ambalal Mody v CIT [1966} 61 ITR 428, has held that whether an income falls under one head or another is to be decided according to the common notions of practical man because the Act does not provide any guidance In the matter. Of course, lot of judicial precedents are available to a tax-payer to arrive at a conclusion about determination of appropriate head of income.
3. Binding judicial guideline: The Hon’ble Rajasthan High Court as also Tribunals whose decision are binding upon the assessing officer as a juridical prece-dence have also been consistently holding so. Kindly refer:
3.1 The Hon’ble Rajasthan High Court in case of CIT vs Bajar-gan Traders in ITA No. 258/2017 dated 12.09.2017 has held that when the assessee is dealing in sale of food grains, rice and oil seeds and the excess stock which is found during survey Is stock of rice then, it can be said that investment in procurement of such stock of rice is clear-ly identifiable and related to the regular business stock of the assessee. Therefore, the invest-ment in the excess stock is to be brought to tax under head ‘business income’ and not under the head Income from other sources. It was held as under:
“2.10. We have heard the rival contentions and perused the material available on record. During the course of survey, the assessee has surrendered an amount of Rs. 70,04,814/- towards investment in stock of rice which had not been recorded in the books of accounts. Subsequently, in the books of accounts, the assessee has incorporated this transaction by debiting the purchase account and crediting the income from undisclosed sources. In the annual accounts, the purchases of Rs. 70,04,814/were finally reflected as part of total purchases amounting to Rs. 33,47,19,658/- in the profit and loss ac-count and the same also found included as part of the closing stock amount to Rs. 1,94,42,569/- In the profilffoss account since the said stock of rice was not sold out. In addi-tion to the purchase and the closing stock, the amount of RS. 70,04,814/also found credited in the profit and loss account as income from undisclosed sources. The net effect of this double entry accounting treatment is that firstly the unrecorded stock of rice has been brought on the books and now forms part of the recorded stock which can be subsequently sold out and the profit/loss therefrom would be subject to tax as any other normal business trans-action. Secondly, the unrecorded investment which has gone in purchase of such unrecorded stock of rice has been recorded in the books of accounts and offered to tax by crediting the said amount in the profit and loss account. Had this investment been made out of known source, there was no necessity for assessee to credit the profit loss account and offer the same to tax. Accordingly, we do not see any infirmity in assessee’s bringing such transaction in its books of accounts and the accounting treatment thereof so as to regularize its books of accounts. In fact, the same provides a credible base for Revenue to bring to tax subsequent protiVloss on sate of such stock of rice in future.
2.11. Having said that, the next issue that arises for con-sideration is whether the amount surrendered by way of investment in the unrecorded stock of rice has to be brought to tax under the head “business income” or ‘income from other sources”. In the present case, the assessee is dealing in sale of foodgrains, rice and oil seeds, and the excess stock which has been found during the course of survey is stock of rice. There-fore, the investment in procurement of such stock of rice is clearly identifiable and related to the regular business stock of the assesses The decision of the Co-ordinate Bench in case of Shri Ramnarayan Bide (supra) supports the case of the assessee in this regard. Therefore, the investment in the excess stock has to be brought to tax under the head ‘business Income and not under the head income from other sources.
In the result, ground No. 1 of the assessee is allowed “
3.2 The Hon’bie ITAT Jaipur, Jaipur in its decision in the case of Shri Ram Narayan Bida in ITA No. 482fJPf2015 dated 30.09.2016 has held that unrecord-ed/excess investment or expenditure surrendered during the course of the survey has to be assessed as business income only and not under the head income from other sources. The Hon’ble ITAT Jaipur followed the case of Choksi Hiralal Mengel vs. DCIT 131 TTJ 1 (Ahd).
3.3 The Honsble Ahmedabad Tribunal in case of Chokshi Hira-lal Maganlal vs DCIT (ITA No. 3281/Ahd/2009 AY 200405 dated 05.08.2011) held that for invok-ing deeming provisions u/s 69, 69A, 698 & 69C of the Act there should be clearly identifi-able investment or asset of expenditure (i.e. In our understanding not connected with business so as to make convenient to invoke aforesaid sections). In case the source of investment or asset or expenditure is clearly identifiable and has no independent existence of its own where a case arises to claim that it cannot be separated from business then first ‘what is to be taxed is the undisclosed business receipt. Only on failure of such exercise, it would be regarded as taxable u/s 69 on the premises that such excess investment or asset or expenditure is unex-plained and unidentified, satisfying the mandate of the law.
In view of the facts & circumstances, judicial guidelines and the sietolory provisions, the Impugned addition could not be subjected to S. 1151388. of the Act. Thus, considering all the facts the entire addition deserves to be deleted.
GOA 5: Interest charged Ws 234A, 23413 & 234C: is con-sequential and kindly be decided accordingly.
Addl. GOA 7: No DIN mentioned – Hence impugned orders is non-est invalid:
Facts: The relevant facts are that the impugned assessment order has been passed on dated 30.12.2019 without mentioning the DIN, ignoring the specific requirement made by binding Circular No. 19/2019 dated 14.08.2019.
Submissions:
1.1. It is submitted that in order to prevent instances where certain notices, orders, summons, letters and other correspondences which have been issued manually do not have proper audit trail of their communication despite various e-governance initiatives and computerization and to maintain proper audit trail of all the communications. the Central Board of Direct Taxes (CBDT’ in short) vide its Binding Circular No.19/2019 dated 14.08.2019 (DC-1.2) has made it obligatory on the part of the authorities below to essentially mention of Document Identification Number (‘DIN* for short) and has directed that no com-munication shall be issued by any Income-Tax Authority relating to assessment, appeals. or-ders, statutory or otherwise, exemptions, enquiry, investigation, verification of information. penalty, prosecution, rectification, approval, etc. to the Assessee or any other person. on or after the 01.10.2019 unless a computer generated DIN has been allotted and is duly quoted in the body of such communication. Para 3 of the said Circular provides for certain exceptional circumstances when the communication can be issued manually but must mention such fact and the date of obtaining of the written approval of the Chief Commissioner/Director General of Income-tax for issue of said manual communication in the prescribed format, failing which, para 4 of the said circular states that such communication shall be treated as ‘non-est’ / ‘in-valid’ and shall be deemed to have never been issued.
1.2 Moreover, the Directorate of Income-tax (System) vide In-structions dated 25.10.2019lays down the procedure for generation of DIN for documents pre-pared outside ITBA system and uploaded manually, wherein it is stated that when a document is prepared outside ITBA system and uploaded manually. a DIN is required to be generated pri-or to uploading the document in ITBA. The instructions make it imperative that the DIN so gen-erated has to be quoted in the physical copy. The reasoning behind the said instruction is that the generation of DIN is a condition precedent for making an assessment manually or other-wise on the ITBA and therefore the order should have DIN bearing on its face. The assessment can be said to be ‘made’ only when the DIN is quoted on the order before it is signed. If without first generating the DIN and before it is quoted on the order, the order is signed. the order is non-est.
2. Supporting case laws Order invalid where no DIN Is men-tioned:
2.1 Recently the Hon’ble Bombay High Court In the case of PCIT (EXEMPTION) vs. Tata Medical Centre Trust (2023) 334 CTR (Cal) 942 (DC 3-4), wherein the issue under consideration was whether the Tribunal was justified in quashing the order passed under s. 263 of the said Act on the ground of not mentioning any DIN. The Hon’ble court held as under:
“6 The Revenue filed miscellaneous application seeking for rectification of the said order. Once again the Tribunal has undertaken a factual exercise and in fact. raised a specific query to the Revenue to point out how a DIN intimation letter along with the manual order as explained by the CIT(Exemption) in his reply fulfils the categor-ical requirement mandated by the CBOT circular, more particularly, in para 2 of the said circu-lar, that the body of the communication, the order under s. 263 of the Act, must contain the fact and that the communication issued referred to the DIN without justifying as to how the non-compliance of the CBDT Circular dt. 14th Aug., 2019, which was noted by the Tribunal when it passed the main order. The Tribunal notes that this specific query was unable to be answered by the Revenue and therefore the learned Tribunal came to the conclusion that the order passed under a 263 does not satisfy the requirement mandated by the CBDT circu-lar
7. Thus, we find no substantial question of law arises for consideration in this appeal. Accordingly, the appeal is dismissed
2.2 Kindly refer Hexaware Technologies Limited vs ACIT & Ors. (VW no.1778/2023) (DC 5-47), wherein the notice u/s 148 was issued without DIN. The Hon’ble Court vide its order dated 04.05.2024 held as under:
’31 As regards issue no. 3, in the notice dated 27th August 2022 impugned in the petition, admittedly there is no DIN mentioned. It is petitioner’s case that the notice is invalid and bad in law in view of the Circular No.19 of 2019 dated 14th Au-gust 2019 issued by CBDT A separate intimation letter also dated 27th August 2022 was issued and the said letter reads as under:
XXX,–XXX*—XXX–XXX—-XXX
We agree with petitioner that this fetter cannot validate the notice issued under Section 148 of the Act on 27th August 2022. The reason is firstly; the intimation letter refers to a DIN with respect to some notice under Section 148 of the Act dat-ed 26th August 2022. The impugned notice issued to petitioner is dated 27th August 2022 and not 26th August 2022 for which the DIN is generated. Secondly, the procedure prescribed in Circular No.19 of 2019 dated 14th August 2019 for non-mention of DIN in. case letter/notice/order has not been complied with by respondent no.1. It is settled that if DIN is not mentioned in the letter/notice/order, the reason for not mentioning the DIN and the ap-proval from specified authority for issuing such letter/notice/ order without DIN has to be ob-tained and mentioned in such letter/notice/order In the present case, in the impugned notice dated- 27th August 2022, no such reference is there. Therefore, as held in Ashok Commercial Enterprises (Supra) and Tata Medical Center Trust (Supra), the impugned netice is clearly inva-lid and bad in law. It will be useful to reproduce paragraph’ 1p of Ashok Commercial Enterprises (Supra):
XXX — -XXX —XXX —XXX
Therefore, the impugned notice dated 27th August 2022 issued under Section 148 of the Act is invalid and bad in law as the same has been issued without a DIN “
2.3 In the case of Ashok Commercial Enterprises v. ACIT [2023) 154 taxmann.com 144 (Bombay), a satisfaction note also has been held as a communication requiring DIN to be mentioned thereon. II was held that:
“(d) The said Circular also applies to the satisfaction note dated 13th July 2021 issued by respondent no. 1, The satisfaction note will fall within the scope of paragraph 2 of the Circular as a communication of the specified type is-sued to any person. In the case of the satisfaction note no regularization dated 13th October 2021 has been issued’.
2.4 Recently in the case of Practo Technologies Pvt. Ltd. Vs DCIT (in IT (TP)A No.154/Bang(2022, the Hon’ble Tribunal – Bangalore Bench, in the context of the directions issued u/s 144C (5), when noticed that no DIN was mentioned therein, held as under:
21. Respectfully following the above order of the Tribunal, since the DIN was not mentioned in DRP order dated 30.122021 which was mandatory as per CBOT Circular No.19 (supra) & in view of the facts noted above in regard to communications done with the assesses, we hold that the DRP directions dated 30.12.2021 is invalid in the eyes of law and shall be deemed to have never been issued as per Para 4 of the CBOT circular as the order is not conformity with Para 2 and Para 3. Accordingly, the DRP order dated 30.12.2021 is held to be null and void ab initio and quashed. Thus, the ad-ditional grounds No. 24 & 25 raised by the assesses on the legal issue are al-lowed.”
While holding so, the Hon’ble ITAT has firstly admitted the additional ground of Appeal in Para 5 and thereafter, followed the decision in the case of intra-do EC India Private Ltd. v. DCIT IT(TP1A No.239/Bang/2021.
2.5 Various other decisions are in the case of Bangalore Nara-yan Das vs. ITO (International Taxation) (2023) 226 TTJ (Bang) 66. Ankit Jain v. DCIT (2023) 155 taxmann.com 321 (Delhi – Trib.) and Deepak Kumar vs DCIT (2024) 159 taxmann.com 358 (Delhi – Trib.)
3. Supporting Case Laws – CBDT Instructions are binding:
3.1 The CBOT circular and instructions have been held to be binding on the Income-Tax Authorities for which a useful reference can be made to the cases of ay v. Hero Cycles (P.) LW. (1997) 94 Taxman 271/228 ITR 463 (SC). wherein. it was held that circulars bind the ITO but will not bind the Court or even the Assessee. In the case of UCO Bank v. Cif (1999) 104 Taxman 547(237 ITR 889 (SC), Hon’ble Supreme Court while dealing with the legal status of such circu-lars, observed thus (page 896):
‘Such instructions may be by way of relaxation of any of the provisions of the sections specified there or otherwise. The Board thus has power, inter alia, to tone down the rigour of the law and ensure a fair enforcement of its provisions, by issuing circulars in exercise of its statutory powers under section 119 of the In-come-tax Act, which are binding on the authorities in the administration of the Act. Under sec-tion 119(2)(a), however, the circulars as contemplated therein cannot be adverse to the assessee. Thus, the authority which wields the power for its own advantage under the Act is given the right to forgo the advantage when required to wield it in a manner it considers just by relaxing the rigour of the law or in other permissible manners as laid down in section 119. The power is given for the purpose of just, proper and efficient management of the work of assessment and in public interest. It is a beneficial power given to the Board for proper admin-istration of fiscal law so that undue hardship may not be caused to the assesses and the fiscal laws may be correctly applied. Hard cases which can be properly categorized as belonging to a class, can thus be given the benefit of relaxation of law by issuing circulars binding on the taxing authorities.”
3.2 Strong reliance is also placed in the decision of His Late Highness Maharana Shri Bhagwat Singhji of Mewar vs. ITAT & Oct (1996) 133 CTR (Raj) 97: (1997) 223 ITR 192 (Raj).
3.3 Also, the Horible Rajasthan High Court in Sudesh Teneja vs. ITO (2022) 324 CTR (Raj) 577 : (2022) 210 DTR (Raj) 105: (2022) 442 ITR 289 (Raj)held that (a) taxing statute must be interpreted strictly. Equity has no place in taxation. Nor while interpret-ing taxing statute intendment would have any place. (b) There is nothing unjust in the tax payer escaping if the letter of the law fails to catch him on account of the legislature’s failure to ex-press itself clearly. (c) It is axiomatic that taxation statute has to be interpreted strictly be-cause the State cannot at their whims and fancies burden the citizens without authority of law. (d) In the matter of interpretation of charging section of a taxation statute, strict Rule of interpretation is mandatory and if there are two views possible in the matter of interpretation of a charging section. the one favorable to the assessee need to be applied.
4. In the Instant case. since the impugned assessment order has been passed in the absence of DIN as aforesaid, hence the impugned assessment order may kindly be held as non-est / invalid and quashed.
Addl. GOA 8: Impugned assessment order not digitally signed :
Facts: In the instant case, the impugned assessment order has been passed by not signing the impugned assessment order, and rather simply manually sigh-ing. the same. in utter disregard of the binding procedure laid down In the Act and the. Instruction thereon, which are binding upon the Income Tax Officeip includ-ing the Respondent — AO, as mentioned aforesaid.
Submission:
1. In this regard, kindly refer Section 282A of the Act which has been enacted for proper signing and authentication of notices and other documents. For ready reference, Section 282A is reproduced herein below (relevant extract only):
‘Section 282A. Authentication of notices and other doc-uments.
{1) Where this Act requires a notice or other document to be issued by any income-tax authority, such notice or other document shall be signed and issued in paper form or communicated in electronic form by that authority in ac-cordance with such procedure as may be pre-scribed.
2.1 In reference to the above provision, the CBOT issued In-struction No. 6 dt. 03.10.2017 (DC 48-56), wherein it explains the entire process of passing assessment order. As per the said CBDT Instruction, Tam 7.Summary of the steps for As-sessment order generation’ — Point x it specifically states that ‘the As-sessment order, demand notice and computation sheet should be digitally signed by the AO. A copy of each (including challans in case of demand) would be sent by email to tax-payer and also posted to taxpayer’s e-filing account.” Moreover, the said instructions also explain the procedure to digitally sign the assessment order.
2.2 Further, the CBDT again in its Instruction No.1/18 dated 12.02.2018 (DC 5758) issued fresh instructions explaining procedural aspects while conduct-ing assessment proceedings. In pars 4.2 of the said instructions, it has again been stated that all Department orders/notices/communications issued to the assessee through ‘e-proceedings’ are to be digitally signed by the Assessing Officer.
3. Thus, a joint reading of Section 282A (1) along with Instruc-tion No. 6 dt. 03.10.2017 and Instruction No.1/18 dated 12.02.2018 makes it obligatory upon the Assessing Officers that where any notice or other document Is required to be issued under the provisions of the Act, the same shall be signed and issued by the competent authority in accordance with the procedure prescribed.
4. Supporting Case Laws : Assessment order by digitally Signed :
4.1 Prakash Krishnavtar Bhardwaj v. ITO [2023] 150 tax-mann.com 60 (Bombay) (DC 59-71). wherein It held that :
Applying the ratio of the judgment of the Calcutta High Court in B.K. Gooyee and Aparna Agency (P.) Ltd. (supra) to the facts of the present case, the signature of the Assessing Officer admittedly not having been affixed on the notice issued u/s.148 of the Act, the notice itself would be invalid and consequently, the Assening Officer could not assume jurisdiction to proceed in the matter in terms of section 148 of the Act. The Madhya Pradesh High Cowl in Umashankar Mishra (supra) has dealt with a similar fact situa-tion where the first substantial question of law dealt with in that case had consid-ered the effect of whether an unsigned notice can be considered as an irregularity or clerical mistake. The Madhya Pradesh High Court after making reference to the conclusions drawn in 8.K.Gooyee (supra) by the Calcutta High Court. has taken the view, that a notice without a signature affixed on it is an invalid notice and is effectively no notice in the eyes of law
20. The Madhya Pradesh High Court in Uma Shankar (su-pra) has further dealt with the second substantial question of law as to whether the Tribunal was right in holding that the absence of a signature on the notice constitutes a mistake or omission within the meaning of section 2928 of the Act and while addressing itself to that question, has concluded that in the absence of a signature on the notice. the same would not constitute a mistake or omission and would not be curable under the provisions ofsection 2928 of the Act
21. We are, therefore, of the considered opinion that in the present case, the notice u/s.148 dated 2-4-2022 having no signature affixed on if, digitally or manually, the same is invalid and would not vest the Assessing Officer with any further ju-risdiction to proceed to reassess the income of the petitioner. Consequently, the notice dated 2-4-2022 u/s.148 of the Act issued to the petitioner being invalid and sought to be issued after three years from the end of the relevant assessment year 2015-16 with which we are con-cerned in this petition, any steps taken by the respondents in furtherance of notice dated 21-3-2022 issued under clause (b) of section 148A of the Act and order dated 2-4-2022 issued under clause (d) of section 148A of the Act, would be without jurisdiction, and therefore, arbitrary and contrary to Article 14 of the Constitution of India. Consequently, we quash and set aside the notice dated 2-4-2022 issued by the respondents u/s 148 of the Act, order dated 2-4-2022 under clause (b) of section 148A of the Act and notice dated 21-3-2022 issued under clause (b) of section 148A of the Act.
5. Supporting Case Laws : Meaning of Proper Signing :
5.1 Kindly refer Umashankar Mishra v. CIT (1982) 11 Taxman 75 (MP) (DC 72-73). wherein it was held as under :
The first question for consideration is whether the Tribu-nal was right in holding that the notice issued to the assessee under section 271(1)(a) of the Act was a valid notice. Now, the Tribunal has found that that notice was not signed by the ITO. Section 282 of the Act provides that a notice under the Act may be served on the person named therein as if it were a summons issued by a court under the Code of Civil Procedure, 1908 Sub-rule (3) of rule 1 of 0. 5, CPC, provides that every summons shall be signed by the judge or such officer, as he appoints. In view of this provision, it must be held that the notice to show cause why penalty should not be levied issued by the ITO should have been signed by the ITO and the omission to do so invalidated the notice In B.K. Gooyee v. CIT (19661621TR 109(Cal), the question for consideration was whether the absence of the sig-nature o/ the ITO on the notice under section 34 of the Indian Income-tax Act, 1922, Was a mere irregularity or a clerical mistake. Dealing with this question, Delta 4. Observed as follows (p 119).
“In the present case, there was more than a mere irregu-larity or a clerical mistake, for, in my view a notice without the signature lacks an essential and/or an inteoral and /or an inseparable vital part or requirement of a notice under sec-tion 34. a notice the terms of which are a condition precedent to the assumption of jurisdic-tion by the Income-tax Officer. It is notice with a body but without a soul Hence, it is an invalid notice and consequently, equivalent to no notice.”
We respectfully agree with the aforesaid observations. The Tribunal distinguished the decision in (1966) 62 lTR 109 on the ground that the provisions of section 2928 of the Act were introduced after that decision. But, that provision, in our opin-ion, is intended to ensure that an inconsequential technicality does not defeat justice. But, the signing of a notice under section 271(1)(a) of the Act is not merely an inconsequential techni-cality. It is a requirement of the provisions of 0. 5, rule 1(3) of the CPC, which are applicable by virtue of section 282 of the Act Under the circumstances, the provisions of sec-tion 2928 of the Act would not be attracted in the instant case and the Tribunal, in our opinion, was not right in holding that the notice issued under section 271(1)(a) of the Act was a valid notice in the eye of law.
In view of our answer to the first question, our answer to the second question is that the Tribunal was not right in holding that the absence of the signa-ture on the notice simply constituted a mistake or omission within the meaning of section 2928 of the Act.
In view of the fact that no valid notice was served on the assesses before levying penalty, our answer to the third question is that, on the facts and in the circumstances of the case, the penally levied under section 271(1)(a) of the Act was not valid. Thus, our answers to all the three questions referred to This court are in the negative and in favour of the assesses.
5.2 The Horible High Court of Calcutta in CIT vs Aparna Agency (P.) Ltd. (2004) 189 CTR 355 (DC 74-78), while placing reliance upon the Judgment in B.K. Gooyee’s case (Supra). held as under
‘6 A close scrutiny of B.K. Gooyee’s case (supra) could show that the question for consideration was regarding the irregularity in the issuing of a no-tice under section 34 of the Indian Income-tax Act, 1922. The notice did not contain the signa-ture of the income-tax Officer who issued it. II was held that service of a valid notice is a con-dition precedent to the assumption of jurisdiction by the Income-tax Officer to take further proceedings and that all proceedings taken in pursuance of a notice which does not contain the signature of the Income-tax Officer are invalid. if was further held that such irregularity cannot be waived and the question of its validity can be taken at any stage of the proceedings. Their Lordships of the Madhya Pradesh High Court have taken notice of the provisions con-tained In section 2928 which provision was incorporated subsequent to the judgment in B.K. Gooyee’s case (supra) and have specifically dealt with this question in the light of the provi-sions in section 2928. We are in respectful agreement with the view of their Lordships in Umashankar Mishra’s case (supra) based on which the Tribunal in the case on hand reversed the order of the Commissioner of Income-tax (Appeals). –
6. Thus, the impugned assessment order dated 31.03.2022 hav-ing been passed without digitally signing or even manually signing the same in com-plete and gross violation of the law, and hence is without jurisdiction and hence completely null & void-ab-initio.
Addl. GOA 9: Prior approval u/s S.153D — granted mechanical-ly (only for A.Y. 2012-13 to 2017-18):
Submission
1. As per the mandatory provisions of 5.153D of the Act, the AO, who is below the rank of the Jt. Commissioner of Income Tax, has to mandatohly obtain prior approval by sending him the Draft Assessment Order from the Jt Commissioner of In-come Tax before finally passing of any assessment order u/s 153A r.w. S.143(3) in a search case. Accordingly, the Respondent AO in this case also duly sought approval of the Addl. Commissioner of Income Tax. Central Range. Udaipur u/s 153D of the Act. The requisite ap-proval was communicated by the Addl. CIT vide his letter no. Addl./CR/UPR/2019-20/1567 dated 30.12.2019 as stated on the last page of the impugned assessment order :
“11 The assessment order has been passed after getting necessary approval u/s 1530 of the I. T. Act, 1961 from the Add/ Commissioner of Income-lax.
Central-Range, Udaipur vide his letter No. CR/UPR/2019-20/_____ dated_
2.1 In this regard, a bare perusal of the approval (ACPB II 90-93) clearly shows that there is absolutely no application of mind much less independent applica-tion of mind as contemplated under law. Rather, the same appears to have been granted me-chanically, in absence of a single word even to show that the competent authority has really considered the proposal, put forth before him, for getting his approval. The Id. Addl. CIT has simply stated that approval is granted, followed by a table which is nothing but a simply show-ing basic details of the case. He is completely silent as to what made him to grant approval In other words. even the bare minimum requirement of the approving authority having to indi-cate what the thought process involved was is missing in the aforementioned approval order. While elaborate reasons need not be given. there has to be some indication that the approving authority has examined the draft orders and finds that it meets the requirement of the law. The mere repeating of the words of the statute, or mere “rubber stamping” of the letter seeking sanction by using similar words like ‘see’ or ‘approved’ will not satisfy the requirement of the law.
2.2 Moreover, it is contented that the provisions contained in S. 153D as enacted by the parliament cannot be treated as an empty formality. The certain pur-pose. It is apparent that the purpose behind the enactment provision has certain purpose. It is apparent that the purpose behind the enactment of their approve provision in the statute by the parliament are two folds. Firstly the approval of the senior authority will ensure that the assessee is not prejudiced by the under or irrelevant addition or assessment. Secondly, the approval by senior authority will also ensure that proper enquiry or investigation are carried out by the assessing authority. Thus, the above provision provides for mental application of a senior officer of the Department. which in turn, provides safeguard to both i.e., Revenue as well as the assesses. Therefore, this important provision laid down by the legislature cannot be treated as a mere empty formality. Thus. the legislative intent behind getting prior approval u/s 153D is that the work done by the junior officer is properly check & analyzed and thereafter, approved by a superior officer before the AO finally pass the assessment order.
2.3 The contention that the Id. Addl. CIT has granted approval u/s 153D of the Act mechanically, and without application of mind gets further support from the fact that he has also approved. the initial assessment order u/s 143(3) of the search year i.e A.Y. 2018-19.
3. Supporting Case Laws:
3.1 In the case of ACIT vs. Serajuddin & Co. (2023) 333 CTR (Ori) 228 (DC 79-88) It was held that:
“The requirement of prior approval under a 153D is com-parable with a similar requirement under s. 1586G. The only difference being that the latter provision occurs in Chapter XIV-8 relating to “special procedure for assessment of search cases” whereas s. 1530 is part of Chapter XIV. A plain reading of s. 153D itself makes it abun-dantly clear that the legislative intent was to be obtaining of “prior approval” by the AO when he is below the rank of a A CIT, before he passes an assessment order or reassessment order under a 153A(1)(b) or 1538(2)(b). That such an approval of a superior officer cannot be a me-chanical exercise has been emphasized in several decisions. It is therefore not conect on the part of the Revenue to contend that the approval itself is not justiciable. Where the approval is granted mechanically, it would vitiate the assessment order itself—Sahara India (firm) vs. CIT (2008) 216 CTR (SC) 303: (2008) 7 DTR (SC) 27 : (2008) 14 SCC 151 and Rajesh Kumar vs. Dy. CIT (2006) 206 CTR (SC) 175: (2007) 2 SCC 181 applied.
There is not even a token mention of the draft orders hav-ing been perused by the Addl. CIT. The letter simply grants en approval. In other words, even the bare minimum requirement of the approving authority having to indicate what the thought process involved was is missing in the aforementioned approval order. While elaborate rea-sons need not be given, there has to be some indication that the approving authority has ex-amined the draft orders and finds that it meets the requirement of the law. The mere repeating of the words of the statute, or mere “rubber stamping” of the letter seeking sanction by using similar words like ‘see’ or ‘approved’ will not satisfy the requirement of the law. This is where the Technical Manual of Office Procedure of CBOT becomes important Although, it was in the context of s. 1588G, it would equally apply to s. 153D. It is an admitted position that the assessment orders am totally silent about the ,40 having written to the Addl. Cif seeking his approval or of the Addl. CIT having granted such approval. Interestingly, the assessment orders were passed on 30th Dec.. 2010 without mentioning the above fact These two orders were therefore not in compliance with the requirement spelt out in pare 9 of the Manual of Official Procedure.
For all of the aforementioned reasons, the Court finds that the Tribunal has correctly set out the legal position while holding that the requirement of prior approval of the superior officer before an order of assessment or reassessment is passed pursuant to a search operation is a mandatory requirement of s. 1530 and that such approval is not meant to be given mechanically. The Court also concurs with the finding of the Tribunal that in the present cases such approval was granted mechanically without application of mind by the Addl. CIT resulting in vitiating the assessment orders themselves
The initial assessment order as also the impugned as-sessment order without jurisdiction is void-ab-initio being a nullity and hence the same de-serves to be quashed and set aside.’
Pertinently, the Dept. assailed this order of the Honble High Court before the Honble Supreme court in ACIT vs Serajuddin & Co. (SLP (Civil) Diary No(s). 44989/2023) (DC-89) wherein the Horibte court after hearing the Dept. dismissed the said petition
3.2 Kindly refer Veena Singh vs. ACIT (2024) 38 NYPTTJ 519 (Del)
‘Search and seizure—Assessment under s. 1534—Approval under s. 153D vis-a-vis non-application of mind—A common and consolidated ap-proval has been granted for asst yrs 2011-12 to 2017-18–There is no year-wise reasoning in the said approval granted under s. 1530—After receiving the letter seeking approval under s. 153D, the Addl. CIT granted the approval on the very same date re., on 21st Jan., 2018 and the impugned assessment order has also been passed on 21st Dec., 2018—Impugned approval was apparently issued in a mechanical and hurried manner without mentioning the reasons and the same has been issued without application of mind—Such approval is genic and list-less and accorded in a blanket manner without any reference to any issue in respect of any of the five assessment years—Apparently, the approval has been granted on a dotted line with-out availability of reasonable time—Whole sequence of action apparently appears to be illu-sory to merely meet the requirement of law as an empty formality—Approval granted under s. 153D should necessarily reflect due application of mind, and if the same is subjected to judi-cial scrutiny, it should stand for itself and should be self-defending—In the instant case ap-provigiauthohlyzfirt not mention anything in the approval memo towards his/her of denying. satisfaction so as to exhibit hisMer due application of mind-fin reading of the
letter of approval granted by the Addl. CIT clearly depicts that tha;Addl. CIT has routinely given approval to the AO to pass the order only on the basis of letter of , : 11 the AO without any application of mind—Thus. the sanctioning authority has in effect abdicated its statutory functions and delightfully relegated its statutory duty to the subordinate AO. whose action the Addl. CIT was supposed to super-vise—Said approach of the Addl. CIT has rendered the approval to be a mere formality and cannot be sustained in the eyes of law—Approval so granted under the shelter of s. 1530 does not pass the test of legitimacy—Consequently, the impugned assessment orders are non est and nullity and hence, the same are quashed”
3.3 Other Supporting case laws: On this aspect. a useful refer-ence can be made to the following case laws.
- PCIT V. Sapna Gupta (2023)147 com 288(AII.)
- PCIT V Shiv Kumar Nayyar (2024) 163 com 9 (Del.)
4.1 Further, the said approval (ACPB II 89) states that the ap-proval was sought by the AO vide his letter dated 29.12.2019. Pertinently, 29°‘ of December was a Sunday, being a non-working day and thus. the letter approval could not have been posted before the 30°‘ of December, more particularly since the courier ser-vices are not working on Sundays. Importantly, the said letter of AO could not have been sent through email since the AO, who is posted in Ajmer, was required and had couriered humong-ous and voluminous records (a) 18^ files (i.e 6 years each of Deepak Samtani – the assessee, Kavita Samtani – assessee’s wife and Shri Fazle Raoof), (b) 3 statements record-ed Ws 132(4) i.e of Shri Banwari Lal Mishra. Deepak Samtani – the assessee and Mahesh Kri-plani, (c) Appraisal report of 18 files and (d) Seized records in all 3 cases (e) Written Submis-sion of all 18 files. to the Id. Addl. CIT, who is posted in Udaipur.
4.2 Secondly, even assuming for a moment that the said AO’s letter dated 29.12.2019 was posted to the Id. Addl. CIT on 29°‘ De-cember itself, the same would have been received by the Id. Addl. CIT on 3011‘ of December only. Cynically, the Id. Addl. CIT. who would have reached the office around 10:30 am in the morning, on the very same day i.e 30°‘ December went through atleast (a) 18°‘ files (i.e 6 years each of Deepak Samtani – the assessee. Kavita Samtani -assessee’s wife and Shri Fazle Raoof), (b) 3 statements recorded Ws 132(4) i.e of Shri Banwari Lal Mishra, Deepak Samtani – the assessee and Mahesh Kriplani. (c) Appraisal report of 18 files and (d) Seized records in all 3 cases (e) Written Submission of all 18 files. Thereafter, he prepared his approval report and couriered the same along with all these files. which was re-ceived by the AO on 3o December 2019 before 6 pm. Thereafter. AO approved the draft as-sessment orders of 18 files, signed them and couriered them, which again reached from Udai-pur to Ajmer, in a single day. Moreover, this is when the Addl. CIT might have granted approval and worked on other cases also.
4.3 It is surely not humanely possible, rather impossible since assuming that the courier company almost instant supplied the record from Udaipur to Ajmer. which itself takes 6 hours by road. then a person i.e the Addl. CIT went through more than 500 pages (approx.) within 2.5 hours and prepared his approval report (considering it reached the office at 10:30).
4.4 Kindly refer the judgment of Mantle High Court of Madhya Pradesh in the case of CIT vs S. Goyanka Lime & Chemicals Ltd. [2015] 56 taxmann.com 390 (MP) (DC 90-91), wherein the Hon’ble Court held as under:
7. We have considered the rival contentions and we find that while according sanction, the Joint Commissioner. Income Tax has only recorded so “Yes. I am satisfied”. In the case of Arjun Singh (supra), the same question has been considered by a Coordinate Bench of this Court and the following principles am laid down:—
‘The Commissioner acted, of course, mechanically in or-der to discharge his statutory obligation properly in the matter of recording sanc-tion as he merely wrote on the format “Yes. 1 am satisfied” which indicates as if he was to sign only on the dotted line. Even otherwise also, the exercise is shown to have been performed in less than 24 hours of time which also goes to indicate that the Commissioner did not apply his mind at all while granting sanction. The satisfaction has to be with objectivity on objective material.’
8. If the case in hand is analysed on (he basis of the aforesaid principle, the mechanical way of recording satisfaction by (he Joint Commissioner, which accords sanction for issuing notice under section 148. is clearly unsustainable and we find that on such consideration both the appellate authorities have interfered into the matter. In doing so, no error has been committed warranting reconsideration.”
Pertinently. the Dept. assailed the said judgment of Hon’ble High Court of Madhya Pradesh before the Hon’ble Supreme Court in CIT vs S. Goyanka Lime & Chemical Ltd. [2015)64 taxmann.com 313 (SC) ISLP (C) NO.11916 OF 20151(DC-92). wherein the Division Bench of Hon’ble Supreme Court dismissed the said SLP. up-holding the judgment of Hon’ble High Court.’
7. To support the contention so raised in the written submission reliance was placed on the following evidence / records / decisions:
Part II
| S.NO | PAR11CULARS | PAGE NO. |
| 1. | Copy of Approval issued by ki Addl. CIT dated 30.12.2019 | 89 |
| 2. | Copy of assessment order of Deepak Samtani u/s 272A(1)(c) dated 27.012019 | 90-93 |
| 3. | Copy of Retraction Petition of the assessee dated 11.05.2018 | 9496 |
| 4. | Copy of Assessment order In the ease of Shri Banwari lal Mishra dated 26.12.2019 for A.Y. 201949 | 97-101 |
| Copy of Assessment older in the case of Shri Fazio Raoof dated 30.12.2019 fee AY. 2018-19. | 102-119 |
Paper book for the year under consideration:
| S.NO | PARTICULARS | PAGE No. |
| 1. | Copy of Return of Income Ws 139(1) on dated 29.03.2019 | 1-3 |
| 2. | Copy of Balance Sheet & PS& for A.Y. 2018-19 | 44 |
| 3. | Copy of Notice Ws 143(2) dated 03.06.2019 | 6 |
| 4. | Copy of Notice Ws 142(1) dated 07.12.2019 | 7-11 |
| 5. | Copy of Written Submissions Ned before the AO dated 08.12.2019 | 12.14 |
| 6. | Copy of Written Submissions Ned before the Id CIT(A) dated 05.08.2023 | 15.29 |
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8. The Id. AR of the assessee in addition to the above written submission and paper book so filed also argued on the additional grounds. To support the additional grounds raised. Ld. AR of the assessee relied upon the written submissions, and also referred to extracts from judicial decisions on the arguments raised in the written submission.
So far as the merits of the case sustaining the protective addition is concerned. Id. AR of the assessee submitted that in the case of Shri Banwari Lal Mishra, he has claimed the credit of money so seized, and therefore, the protective addition in the hands of the assessee cannot be sustained.
As regards the addition of Rs. 27,00,000/-.his contention is that the AO cannot extrapolate the incriminating document as per his own will and wishes; that the assessee has already retract-ed the statement on the basis of which addition was made in the case of the assessee. There-fore, he has urged that no addition can be made. based on the statement made by the as-sessee.
9. Per contra, the Id. DR relied upon the orders of Assessing Officer and Id CIT(A) and repeated the contentions already recorded in the orders of the lower authorities, and same are. not be-ing repeated.
10. We have heard rival contentions and perused the material placed on record. It may be mentioned here that Full text of the decisions referred to on behalf of the appellant have not been provided.
11. As regards ground No. 2 raised by the assessee, in relation to addition of Rs. 4,00,00,0001- made in the hands of the assessee u/s 69A of the Act on protective basis, the money was seized from Sh. Banwari Lal Mishra.
We take judicial notice of the fact, and it is not disputed by any of the parties before us, that as regards the case of Shri Banwari Lal Mishra, the same addition was made on substantive ba-sis, as search and seizure operations were carried out by the Investigation Wing after cash worth Rs. 4 Cr. was recovered from Sh. Banwari Lal.
In the course of arguments, it was brought to our notice by Id. DR by way of report requisi-tioned from the Assessing Officer that Sh. Banwari Lal therein has filed an application before the competent authority for release of cash seized, but. at the same time, by filing the appeal Shn Banwari Lal was denying the addition so made on substantive basis.
We confronted Id. AR appearing on behalf of Shri Banwari Lal with the said report of the As-sessing Officer, whereupon he submitted an application withdrawing the appeal filed by Shri Banwari Lal. Thus, the appeal filed by Shri Banwari Lal stands dismissed as having been with-drawn.
In the given situation, when addition of Rs. 4 Cr. has been made in the case of Shri Banwari Lal, on substantive basis, and he has ultimately upon withdrawn appeal, that addition has be-come final in the case of Shri Banwari Lai. Considering this aspect of the matter, we do not find any reason to sustain the addition of Rs. 4 Cr. made u/s 69A of the Act, against present ap-pellant-assessee on protective basis. Accordingly, ground No. 2 raised by the assessee is al-lowed.
12. So far as regards the ground No. 3 is concerned, same pertains to the estimation of com-mission income of Rs. 27 lacs, based on the statement recorded by the revenue. The As-sessing Officer made addition considering that statement estimated income from commis-sion on the basis of following calculation;
50% Commission Income
(7500X30 days X 12 months) of
Hawala Business carried out in
Collaboration with Fazel Raoof Rs. 27,00.0007-
The authorities below took into consideration not only statement of Shri Deepak Kumar Sam-tani, the assessee but also Exhibit-11 discovered by the search team from the premises of as-sessee wherein the details of date, the amount of money transferred based on the Hawala business along with the remarks column found mention in Annexure-11
From these details it is established that the assessee is engaged in Hawala business activi-ties. The material seized from assesseepertained to the period from 02.03.2018 to 29.03.2018. The authorities took into consideration the statement of the assessee to have earned income of Rs. 15,000/- to 20,000/- per day from this business. So considering the share of the assessee, the Assessing Officer added 50% income at Rs. 27,00,000/(7500X30 days X 12 months) to the income of the assessee.
In his statement. under section 132(4) of the Act. andin reply to question Nos. 23 & 31, the assessee admitted that the notings on the seized documents related to the Hawala busi-ness.
In view of above incriminating material on record, cash movement was found to be of Rs. 3.58,85,810/-. Commission on this amount from Hawala Business comes to Rs. 35,886/-. Considering the statement that the share of the assessee in this business is only 50% and the commission income for the year under consideration comes to Rs. 2,15,316/- (35886 X 50% and the commission income for the year under consideration comes to Rs. 2,15,316/-(35886x 50%x 12).Based on these observations, we restrict the addition of Rs. 2,15,3161-in the hands of the assessee. In terms of these observations ground No. 3 raised by the assessee is partly allowed.
13. In view of the above discussion, ground Nos. 4 & 5 raised by the assessee, for levy of tax at special rate and charging of interest Ws 234A/8/ &C being consequential in nature the same are not required to be adjudicated.
14. Ground No. 6 raised by the assessee is general in nature and does not require adjudica-tion.
Additional Grounds
15. First additional ground raised on behalf of the assessee-appellant is that the impugned assessment order is a nullity as no DIN Number was generated as regards the assessment or-der, as prescribed by CBDT in its instructions issued to the Income Tax Authorities, which they are required to follow, but were not followed, and as such, impugned assessment order de-serves to be set aside.
16. In support of this contention, Id. AR has referred to in the written submissions to the follow-ing decisions:-
- Smrutishuda Nayak vs. 1101(2021) 323 CTR 617 (On.)
- CIT vs. Kabul Chawla (2015) 281 CTR (Del)45
- CIT vs. Chelan Das Lachman Das (2012) 254 CTR (Del) 392
- Hau /steek (India) vs. Asstt. CIT (2013) 259 CTR (Raj.) 281.
- Chintels India Ltd. vs. DY. CIT (2017) 297 CTR (Del) 574
- Bharati Vidyapeeth Medical Foundation vs. ACTT, ITA No. 959-967/PN/10 dated 28.04.2021.
- CIT vs. Kabul Chawla (2015) (2016) 380 ITR 573 (Del)
- Jai Steel (India) vs. Asstt. CIT (2013) 259 CTR (raj) 281.
- PCIT Abhisar Builders (2023) 332 CTR (SC) 385.
17. On the other hand, Ld. DR for the Revenue has submitted that the matter as regards im-pact of non mentioning of DIN number, as per instructions issued by CBDT is pending adjudi-cation before the Hon’ble Supreme Court, and as such, there is no merit in the contention on behalf of the assessee-appellant.
18. The said instructions were issued vide Circular No. 19/2019 dated 14.08.2019.
19. As regards the decisions cited, it may also be mentioned that -Ld. AR has not provided full text of any of the above said decisions., Only certain portions of some of the decisions have been extracted in the written submissions.
As regards, three decisions mentioned in para 2.5 of the written submissions, what to say of providing of Full text thereof, even no portion or relevant paragraph thereof has been repro-duced or extracted in the written submissions.
20. Admittedly, the point in issue is sub judice before Hon’ble Supreme Court of India after a decision by Hon’ble Delhi High Court in the case of CIT vs. Brandix mauritious holding limited, ITA No. 163/2023, decided on 20.03.2023.
21. Record reveals that while challenging the impugned assessment order before Learned CIT(A), no such ground/objection on behalf of the assessee-appellant was raised.
Even though this is a legal ground and can be raised before the Appellate Tribunal, it was for the assessee-appellant to prove to the satisfaction of this Tribunal if any prejudice has been caused to the assessee-appellant due to non mentioning of DIN number.
Instructions issued by Central Board of Direct Taxes are meant for compliance by the Income Tax Authorities. When the instructions were issued that such communications without DIN number shall be treated as ‘non-est, and shall be deemed to have never been issued, same can safely be said to have been issued to ensure, and lay emphasis on, their compliance by the Income tax authorities, without fail.
It is not the allegation of the appellant that no assessment proceedings were conducted by the Assessing Officer or that the impugned assessment order is a made up or forged and fabricat-ed document.
In absence of any such plea or material to suggest that any prejudice was caused to the as-sessee-appellant, we do not find any merit in the contention raised on behalf of the assessee-appellant that because of non mentioning of DIN number. in the impugned assessment order, the same deserves to be set aside.
Impugned assessment order not digitally signed-its impact
22. Another additional ground raised by Ld. AR for the appellant is that the impugned assess-ment order has been manually signed, and since same has not been digitally signed as re-quired u/s 282 A of the Act and as per Instruction No. 6 dated 03.10.2017 issued by CBDT, the impugned assessment order deserves to be set aside.
23. In support of this contention Ld. AR of the assessee appellant relied on following deci-sions:-
- Aravah Trading Co. Vs. ITO 8 DTR 199 (Raj.)
- Labhchand Bohra vs. ITO (2008) 8 DTR 44 (Raj.)
- Kanhaialal Jangid vs. ACIT (2008) 8 DTR 38 (Raj.)
- CIT vs. Jai Kumar Bakliwal (2014) 101 DTR 377 (Raj.)
- CIT vs. Shree Barkha Synthetics 182 CTR 175 (Raj.)
- CIT vs. Orissa Credit Corp. Ltd. 159 ITR 78 (SC).
- Sarogi Credit Corp. Vs. CIT 103 ITR 344 (Patna.
- ACIT vs. India Tyre House 72 TTJ 316 (Gau)
- CIT vs. HeeraIa Chaganlal 257 ITR 281 (Raj).
- CIT vs. Ajay Kumar Sharma 259 ITR 240 (Raj.).
- Jhalani Timbers vs. CIT (1997) 223 ITR 11 (Gau)
24. On the other hand, Ld. DR for the Revenue has submitted that no such ground was raised in the appeal before Learned CIT(A), and that the impugned assessment order, even if manually signed by the Assessing Officer, cannot be discarded from being taken into consideration.
25. It may be mentioned here that full text of the abovesaid decisions cited by Ld. AR of the appellant has not been provided. Only portions from the said decisions have been incorpo-rated in the written submissions.
26. Copy of the assessment order made part of the appeal filed by the assessee-appellant is a photocopy of the copy supplied to the assessee. It purports to bear signatures of DCIT, Central Circle, Ajmer-Assessing Officer. The original assessment order is stated to be forming part of the original record pertaining to assessment proceedings. Exact copy of the said original order has not been made available. In absence thereof, it is difficult to say if this is a case of any vio-lation of the provisions of section 282A of the Act.
In the written submissions reference has been made to instruction NO.6 dt. 3.10.2017, requir-ing the Income tax authorities to digitally sign the assessment order, demand notice and com-putation sheet etc.
Instruction No.1/18 dated 12.2.2018 issued by Central Board of Direct Taxes has also been re-lied on in the written submissions to submit that all departmental or-ders/notices/communications issued to the through ‘e-proceedings’ are to be digitally signed by the Ass As already noticed above, instructions issued by Central Board of Direct Taxes are meant for compliance by the Income Tax Authorities. Same can safely be said to have been issued to ensure compliance and lay emphasis on their compliance by the Income tax author-ities, without fail.
It is not the allegation of the appellant that no assessment proceedings were conducted by the Assessing Officer or that the impugned assessment order is a made up or forged and fabricat-ed document.
Ld. AR for the appellant has not been able to satisfy if any prejudice was caused to the as-sessee-appellant for want of digital signatures on the impugned assessment order. According-ly, we do not find any merit in the contention raised on behalf of the appellant
Prior approval u/s 153D of the Act, whether the same was granted mechanically?
27. Ld. AR for the appellant has contended that the impugned assessment order is nullity, be-ing without jurisdiction. in as-much-as no prior approval, as mandated by section 153D of the Act, was obtained.
At the same time, it has been contended that no approval u/s 153D of the Act was obtained from the specified authorities.
Furthermore, it has even been contended that if the said approval was obtained, same was accorded mechanically without application of mind.
Accordingly, Ld. AR for the appellant has urged that the impugned assessment order deserves to be set aside.
28. On the other hand, Ld. DR for the Department has referred to the approval dated 31.12.2019 accorded by Additional Commissioner of Income Tax, Central Range, Udaipur and contended that the same having been accorded in accordance with law, there is no merit in the contention raised by Id. AR for the appellant.
29. Significant to note that after having raised abovesaid inconsistent grounds as regards the approval, in the common paper book-II dated 29.08.2024 presented on behalf of the assessee-appellant on 17.09.2024, the very first document made available at page No. 23 (as assigned by the Ld. AR for the appellant), is the copy of approval u/s 1530 of the Act, accorded by Addi-tional Commissioner of Income Tax, Central Range. Udaipur, vide its letter dated 31.12.2019.
The impugned assessment order is dated 30 12.2019
It is available from the abovesaid letter dated 31.12.2019 that on receipt of letter dated 30.12.2019 from the office of DCIT, Central Circle, forwarding therewith draft assessment or-ders, mentioned therein, for approval u/s 153D of the Act, Additional Commissioner of Income Tax went through the contents of draft assessment orders and accorded approval u/s 153D of the Act.
30. In view of the said document submitted by the appellant , there is no merit in the conten-tion raised on behalf of the assessee-appellant.
31. No other argument has been advanced before this Appellate Tribunal.
- Based on these observations, appeal of the assessee in ITA No. 785/JP/2023 is part-ly allowed.
ITA No. 784/JP/2023 for A.Y 2017-18
32. In this appeal, assessee has raised the following grounds;
1. The impugned order dated 30.12.2019 u/s 153A r.w.s 153B/143(3) of the Act is bad in law and on facts of the case, for want of jurisdiction and vari-ous other reasons and hence, the same kindly be deleted.
2. 27.00.000/- The Id. CIT(A). Jaipur-5 seriously erred in law as well as on the facts of the case in confirming the addition made by the AO on account of the hypothetical Commission income of Rs. 27 Lakh estimated merely but widely based on the alleged admission made by the appellant in the statement but absolutely without any support-ing evidence. The addition so made being contrary to the provisions of law & facts kindly be deleted full.
3. 25,00,000/- The Id. CIT(A). Jaipur-5 seriously erred in law as well as on the facts of the case in confirming the addition made by the AO being undisclosed expenditure made in construction of house and added u/s 69C. The addition so made being contrary to the provisions of law & facts kindly be deleted full.
4. The Id. AO further erred in law as well as on the facts of the case in confirming the imposition of tax, surcharge. cess etc. as per provision of S. 115BBE of the Act. The invoking of 5.1158BE is contrary to the provisions of law, on facts and without jurisdiction. The appellant totally denies its liability. The tax liability so created, kindly be deleted in full.
5. The Id. AO erred in law as well as on the facts of the case in charging interest u/s 234A, 2348 & 234C of the Act. The appellant totally denies It liability of charging of any such interest. The interest, so charged, being contrary to the provisions of law and facts, kindly be deleted in full.
6. The appellant prays your honour indulgences to add. amend or alter of or any of the grounds of the appeal on or before the date of hearing.”
32.1 The following additional grounds of appeal are raised, as under:
“7. The impugned assessment order is a nullity being non-est and must be considered as never passed in as much as no DIN number has been generated as per the prescribed procedure, which is in violation of the binding instructions of CBOT and hence, the impugned assessment order may kindly be held as non-est and may kindly be quashed.
8. The impugned assessment order passed u/s 153A r.w.s. 1538/143(3) is nullity and being without jurisdiction in as much as the said order has not been signed digitally as per the prescribed procedure, which is in violation of the bind-ing instructions of CBDT and hence, the impugned assessment order may kindly be held as non-est and may kindly be quashed. Hence, the impugned order is completely devoid of Juris-diction not having being signed digitally as statutorily required.
9. The impugned assessment order passed Ws 153A r.w.s. 153B/143(3) is nullity being without jurisdiction in as much as no prior approval as mandate by $.1530 was obtained or the approval obtained Ws 153D was not obtained from the specified authority, as prescribed in law or else the approval obtained–Ws 1530 was ac-corded mechanically without any application of mind. Hence, there is no approval as such, as contemplated by law hence, the impugned assessment order may kindly be quashed.
10. The impugned assessment order is nullity being nonets and must be considered as never passed in as much as there is no date mentioned on the im-pugned order before the same hence, the impugned assessment order may kindly be held as non- est and may kindly be quashed.’
33. As regards ground Nos. 1, 2, 4, 5, 6 & additional grounds are being similar to the grounds raised by the assessee in ITA No. 785/JP/2023. While disposing of said appeal, all these grounds have been dealt with. Said findings shall apply mutatis mutandis in this appeal ITA No. 784/JP/2023 for Assessment Year 2017-18.
34. The only ground left in this appeal is ground No. 3 raised by the assessee being the amount of addition made by AO as undisclosed expenditure made in construction of house, on the ba-sis of which additionas made u/s 69C of the Act for an amount of Rs. 25,00,000/-.
34.1 The assessee, in his statement recorded u/s 132(4) of the Act. Vide question No. 21, the assessee admitted that he had incurred an expenditure between 75,00,000/- to Rs. 1,00,00,000/- during the period from 2014 to 2017 in construction on basement, ground, 1u floor and rd floor and including interior bath fittings and electron-ics/electrical fittings in the residential building situated at 29. Sindhu Nagar, Bhilwara, He also admitted to have met the expenditure out of his income from Hawala Business for the last 5-6 years. He assured the search team that he would provide the documentary evidence in this regard in next two days post search.
Considering his categorical admission and justifying the source of the same. it was held that assessee had incurred unexplained expenditure of Rs. 1 crore in the construction and furnish-ing of his residential building from undisclosed income sources in a span of 4 assessment years viz. A Y 2014-15 to 2017-18 and accordingly addition of Rs. 25 lac for each of the above assessment year was made u/s 69C of the IT Act.
34.2 The matter was carried to Id. CIT(A),. Relevant portion of his finds reads as under:-
‘62.1 I have considered the facts of the case and written sub-mission of the appellant as against the observations/ findings of the AO in the assessment or-der for the year under consideration„
6.2.2 The search and seizure action Ws 132 of the Act was car-ried oul on 29.03.2018. The AO had mentioned in the first pars of the order that various incrim-inating material/loose papers had been found and seized during search action. Further in the statement recorded u/s 132(4) especially in q no. 21 in which the appellant had admitted that he had incurred an expenditure of Rs 75 lakh to 1 crore between a period of 2014 to 2017 in construction of residential building situated al 29. Sindhu Nagar, Bhilwara which was: constructed on basement, ground. 1st floor and 2nd floor including bath fittings electronics and electrical fitting. He admitted that he had met the expenditure out of his money transfer income (Hawala Business). Although the appellant had committed to produce documentary evidence to explain the source of such expenditure recorded in books in next two days of post search but as per AO nothing was produced as he was not having and accord-ingly the AO made addition of Rs 25 lakh in each year from AY 2014.15 to 2017-18.
6.2.3 The appellant agitated that the section 69C is not correct-ly applied by the AO. The argument of the appellant is not acceptable. The AO had made addi-tion by narrating that theappellant had incurred expenditure on construction of house which are supported bydocumentary evidences and the same are not recorded in baths. Considering this situation thesection 69C comes in picture. For ready reference the provision Of section 69 C is as under:
69C. Unexplained expenditure, etc. Where in any financial year an assessee has incurred anyexpenditure and he offers no explanation about the source of such expenditure or part thereof, or the explanation, if any, offered by him is not, in the opinion of the Assessing Officer, satisfactory. the amount covered by such expenditure or part thereof, as the case may be, may be deemed to be the income of the assessee for such financial year.
5.2.4 In the present case, it is seen that the appellant had in-curred construction expenditure and as per his statement u/s132(4) the source of same is not explained with documentary evidences. Considering the above facts and circumstances the AO had correctly applied this section.
6.2.5 Further the appellant had argued that this house is in name of his mother Smt. Yashodevi who is separate assessee and she had made renovation expenditure from AY 2016-17 to 2018- 19. The argument is also not tenable. The appellant was living in the same house. The house was in name of his mother but as he had admitted in the statement that he had made expenditure for construction of the house. It is very normal in our culture that the house is used to be in name of our parents but further construction or renova-tion expenditure are incurred by the next generation.
6.2.6 Further the appellant had not furnished supporting evi-dences neither during search operation nor during post search nor during assessment pro-ceedings that his mother had made payment for construction and renovation of this house. Now al the appellate stage the appellant is stating that his mother had made expenditure and he had submitted the balance sheet in support of it. The same is not acceptable as the balance sheet of his mother was prepared after thought.
6.2.7 As it can be seen that the ROI of his mother Smt Yasho-devi is very low.
| AY | Taxable income filed in ROI |
| 5015-16 | 2,78,010 |
| 2016-17 | 4.60.540 |
| 2017.18 | 4,81.810 |
From such meagre source of income it is unreliable fact that she had expended Rs I crore on the house.
6.2.8 Further all such content of balance sheet of his mother was not submitted on the IT portal at the time of filing ROI as this case was not an auditable case. So the appellant got ample lime to reconstruct a false balance sheet. Further to in-crease the value of house in asset side of hismother’s balance sheet, the appellant had in-creased the value of unsecured loan. The appellant had not Submitted bank statement to prove that such unsecured loan was received through cheque and the payment for renovation/ constructions expenses were made through bank. The genuineness of such unsecured loan parties have not been verified in absence of their confirmation/PAN/Balance sheet/R01 etc.
6.2.9 Further during the course of search, the appellant had made statement u/s 132(4) that the proprietary concern of appellant’s mother Ws Hari Om Traders was dealing in cattle feed like Chub 8 Chhilka on commission basis and there is no stock of such item was found Further lie also stated that they work on commis-sion basis, therefore showing sales and purchase in the trading account is dobtful. The appel-lant had not furnished bank statement showing such sale receipt or purchase payment in sup-port of trading account and other transaction as shown in balance sheet of his mother Further the appellant had also not furnished any supporting bills or payment slip for construction of house where his mother had made payment through bank neither he produced bank state-ment of his mother to prove that the payment was made from the bank account of his mother. All such argument Is seems to be after thought and the same is not reliable:
6.2.10 The appellant had admitted in the statement u/s 13 ex-penditure up to Rs 1 crore on construction/ renovation of years starting from 2014 to 2017. In the earlier para of this law has been relied by the undersigned where it was stated that admis-sion of a particular fact during the course of proceedings is strong evidence, which can be used against the person giving it. More so, when a person himself admits it to be true it may reasonable be presumed to be so. unless it is satisfactorily explained other-wise. Thus the effect of an admission is to shift the burden of proof to the person making the admission. The appellant had admitted in his statement recorded u/s 132(4) about the ex-penditure on construction/ renovation of house up to Rs 1 crore for which he failed to submit the documentary evidences for source of such expenditure. Therefore, the addition made by the AO of Rs 25.00.000/- u/s 69C is hereby upheld. The ground raised by the appellant regard-ing this issue Is dismissed.
34.3 Since this grounds of appeal was not considered by Id. CIT(A), the assessee has chal-lenged the finding of Id. CIT(A) before us. Sustaining the addition of Rs. 25,00,000/- in the hands of the assessee. Ld. AR of the assessee in support of the grounds submitted following written submissions.
“1. The relevant facts are that the assessee in his statement recorded urs 132(4) admitted, in reply to Query No. 21, of having incurred expenditure be-tween Rs. 75 lacs to Rs. 1 crore, between a period of 2014 to 2017, in construction of the resi-dential building (situated at 29, Sindhu Nagar, Bhilwara) which is constructed on basement ground 1st floor and 2nd floor and including interior bath fittings and electronics/ electrical fittings. He also admitted that he had met the expenditure out of his money transfer income (Hawala Business) of the last 5-6 years and the same are recorded in his books of ac-counts.
Thus, the AO made addition on account of undisclosed ex-penditure made in construction of house of Rs. 25.00.000/- u/s 69C
2. In the first appeal, the Id. CIT(A) confirmed the addition vide its order dated 20.10.2023.
‘6.2.10 The appellant had admitted in the statement u/s 132(4) for making expenditure up to Rs I crore on construction/ renovation of this house in four years starting from 2014 to 2017. In the earlier pars of tins order, venous case law has been relied by the undersigned where it was stated that admission of a particular fact during the course of proceedings is strong evidence, which can be used against the person giving it More so. when a person himself admits it to be true it may reasonable be presumed to be so, unless it is satisfactorily explained otherwise. Thus the effect of an admission is to shift the burden of proof to the person making the admission The appellant had admitted in his statement recorded u/s 132(4) about the expenditure on construction/ renovation of house up to Rs 1 crore for which he failed to submit the documentary evidences for source of such ex-penditure. Therefore, the addition made by the AO of Rs 25,00.000t u/s 69C is hereby upheld. The ground raised by the appellant regarding this issue is dismissed.’
Submission:
1. No incriminating material found: Al the outset. the sole reli-ance is only on the so-called admission statement of the appellant however. absolutely with-out referring to any material found during the course of search. The impugned additions have been made solely and entirely on the basis of admission by the assessment in the statements recorded u/s 132(4) on dated 29.012018 (ACPB – I . Pg 1-21). which pertinently were retracted vide letter dated 11.12.2018 (ACPB II 94-96). Undisputedly. the said retraction has not been objected by AO. either during the assessment proceedings or during the 1st appellate pro-ceedings before the Id. CIT(A). In this regard, reliance is placed upon the Written Submission – GOA 3 : filed in ITA No.785/JPIR/2023 (for A.Y. 2018-19). wherein the followings arguments are taken :
1.1 Sole Statement. not a good basis for Addition
1.2 No addition permissible solely based on statements along with supporting case laws
1.3 Admission retracted/ Not acted upon – Retraction not ob-ject by AO- Hence addition invalid:
1.4 Facts of filling of Retraction: fully established along with supporting case laws.
1.5. No addition legally possible in absence of incriminating material found
1.6 Statement of assessee not an incriminating material:
Thus, in these undisputed facts, no addition could have been made and the controversy has already been settled at best in the case of PCIT vs. Abhisar Builders by the Hon’ble Supreme Court. Further even assuming. again shelter of the statement of the appellant has been taken, it will not help the revenue for the reasons staled above and also that such statement is not incriminating material as held in case of PCIT vs Best Infrastructure Pvt. Ltd. 397 ITR 82 (0e1)1 jt.has been held that statement recorded u/s 132(iv) in the itself does-slot dratitute incriminating material. The rel-evant finding of the Hon’ble court reads:
“38. Fifthly. statements recorded under Section 132 (4) of the Act of the Act do not by themselves constitute incriminating material as has been ex-plained by this Court in Haifeev Aggenval (supra).”
1.7 Interestingly, though question as regard source was raised in the statement recorded of the appellant (refer Q & A 21), to which the assessee duly replied that the same are recorded in his books of accounts. He also assured the search team that he would provide the documentary evidence in this regard in next two days post search. Importantly, in Notice Ws 142 dated 07.12.2019 (APB 7-8 for AY 2017-18) at para 2(vi) the AO asked for details of immovable and movable property. The Assessee, in response, very catego-rially staled that no movable and immovable property was owned by the appellant (APB 12-14). Moreover, during the assessment proceedings. the assessee Informed the AO that the res-idential house was owned and belonged to his mother Smt. Yashoda Devi, who is separate a PAN holder and separate assessee, who has been regularly filling ROI. She has already been showing the said property in her balance sheet filed along with ROI for the respective years starting since A.Y. 2015-16 Ws 139. She even claimed income of Self Occupied Property w.r.t the subject property and deduction u/s 24 of Rs. 2.00.000/- in AY 2017-18 and 2018-19.
Hence, no addition u/s 69C could be made
2. No admission made/admission otherwise not a good basis: It is apparent from the impugned orders of the subordinate authorities below that while making the impugned additions, they have taken support from question-and-answer No. 21 of the statement of the assessee (ACPB – Pg 11), as if it was undisclosed income of the assessee without any source and have justified the linking and confirmation of the addition u/s 69C of the Act. However, these statements are not at all reliable in as much as firstly they were retracted vide letter dated 11.12.2018 (ACPB II 9496). within a short span of less than two months only, addressed to the DDIT (Inv.)-I, Jaipur, through duly sworn affidavit. (Kindly also refer Para 2.2 above of this WS). Secondly, it was only a vague idea and mere estimation out of a recollection, he could state the amount to be between Rs. 75 lakh to Rs 1 Cr. under the tensed and surcharged atmosphere of search (on this aspect also kindly refer Para 1.2.4 above of this WS). Lastly, the said property belongs to the mother, and thus, the appellant had no authority to make any authoritative comment or ad-mission in relation to the house construction. For all these reasons, the blind reliance based upon the retracted statements by the authorities below is completely unjustified and has to be ignored altogether, when pertinently it is a well settled law that retracted statements are no statement at all.
3. Subjected Property belongs to mother – Undisputed / Settled fact :
3.1. It is an undisputed fact on record of the department that said the residential house was owned and belonged to his mother Smt. Yashoda Devi, who is separate a PAN holder and separate assessee, who has been regularly filling ROI. (I) She has already been showing the said property in her balance sheet filed along with ROI for the re-spective years starting since A.Y. 2015-16 Ws 139. (II) She even claimed income of Self Occu-pied Property w.r.t the subject property and deduction Ws 24 of Rs. 2,00,000/- in AY 2017-18 & 2018-19 (III) She took a Secured loan from Dena Bank of Rs. 44,00,0001- and (IV) de-duction of House Loan of Rs. 52.124/- and 1,50,000/- in AY 2017-18 & 2018-19 (Refer Chart w rt House Construction)
3.2 In this regard. the actual investment made by Sml. Yashoda Devi was upto Rs. 65.00.000/- on the construction / renovation of the house. It was not a case of construction of a house from the beginning but it was mainly a renovation part only. Im-portantly, Smt. Yashoda Devi has shown the subjected property in her balance sheet which was accepted by the Dept. and thus. there was no reason for making any guesses. Unwarrant-ed and undue reliance is placed upon the statement of the appellant. The Dept. itself has not got the subjected property valued. Further, the incurrence of the cost of 75 lacs to 1 crore in the subjected residential properly, is wrongly alleged by the CIT(A). The said allegation is a mere suspicion of Id. CIT(A), which cannot lake the place of reality. Refer Dhakeshwari Cotton Mills v/s CIT (1954) 26 ITR 775 (SC).
3.3 The income so declared by Smt. Yashoda Devi has been assessed. It is not the case that assessment of the lady has been reopened. No finding that the appellant was the Benamidar of his mother. Thus, the department by his own admission, hav-ing accepted and assessed the very fact that Smt. Yashoda Devi was the legal owner, there was no basis al all to presume that some expenditure on account of house construction/ reno-vation must have been incurred by the appellant only.
4. Dealing with CIT(A) s Objections :
4.1 Firstly. the Id. CIT(A) has stated at Para 6.2.2 of his order that despite commitment of the appellant in the statement w.r.t the expenditure In house property. he did not produce anything in support. In this regard, it is apposite to keep in mind that the residential house was owned by his mother Smt. Yashoda Devi. who has shown the subjected property in her balance sheet, which was accepted by the Dept. Thus, expecting the assessee to produce supporting documents was completely wrong and arbitrary on the part of the Id. CIT(A).
4.2 Secondly. the Id. CIT(A) has objected at Para 6.2.6 of his order that the appellant has not furnished supporting evidences neither dur-ing search operation nor during post search nor during the assessment proceedings that his mother had made payment for construction and renovation of this house.
This Isan Incorrect fact as much as (0 during the search pro-ceedings the search team was not ready and willing to listen to the assessee, and rather was only focused upon getting admission in the statement recorded Ws 132(4) by writing their ver-sion. This contention gets further support from the fact that the assessee duly retracted his statement. (ii) Further, during the assessmenygrcceeding itself, the appellant, at the very first instance itself. made the following. written submission submitted before AO dat-ed 08.12.2019 Para 3 (APB 12-14) :
” 3. Smt. Kavita Samtami wile is a separate assessee having PAN – 080PS4032R and filing return of income regularly. As regards assessee’s infor-mation of moveable and immoveable property is concerned in this respect we submit that except business property like Computer and furniture and fixture no other moveable or im-moveable properly is in the name of the assessee and the same has already been reflected in his balance sheet already submitted.
As the assessee is not having any immoveable property therefore no investment in renovation of house property during the year 2014 to 2017 does not arise.’
4.2 Thirdly, the Id. CIT(Ays objection that it is very normal & in the culture that house are in the name of parent, but expenditure is borne by the next generation. This contention, on the face itself, is mere surmise and conjecture absolutely without any corroboration. The Id. CIT(A) conveniently Ignored that It was a search case u/s 153A, wherein the Dept. certainly needed incriminating material to support the addition, more particularly when the assessment for AY 2017-18 had already been completed and was not pending/abated on the date of search.
4.3 Fourthly, the Id. CIT(A) in pare 6.2.6 to 62.10 has made certain allegations that no evidence supporting construction, bank statement were furnished and looking into her income could not have incurred Rs. 1 Clare Suffice to say that such allegations are mere suspicion and mere guess work, ignoring the vital fact that the Department has already accepted and assessed the fact of owing the subjected prop-erty in the name and case of Snit. Yashoda Devi i.e she is the legal factual (de-facto and de-jure) owner of the property and hence. such allegations are irrelevant. The assessment in her case attends finality therefore binding upon the department.
34.4 Ld. AR of the assessee has relied upon the written submission and submitted that the house is duly reflected in the name of mother of the assessee and the expenditure incurred has also been recorded in the regular books of his mother. He has also submitted that the ad-dition was made merely based on the statement, which was subsequently retracted by the assessee.
34.5 On this aspect. Id. DR relied upon the findings recorded in the orders of lower authorities. Ld. DR further submitted that during search, the assessee was confronted with the incriminat-ing material, and that even if the house is in the name of his mother. the assessee having dis-closed that he had incurred unaccounted expenditure of house from Hawala business in-come, the addition deserves to be sustained.
34.6 We have heard the rival contentions and perused the material placed on record. As re-gards this addition, we may observe that same is based on the sole statement given by the as-sessee, and there is no supporting or corroborative or supporting evidence found during the search proceeding so as to support the admission so made by the assessee u/s 132(4) of the Act. The statement so relied upon by the revenue has already-been retracted by the assessee.
Retraction of a statement is to be justified by resorting thereto soon after recording of such a statement with reasons for retraction thereof. Herein, retraction came to be made after suffi-cient period had elapsed. Retraction after expiry of sufficient period is generally of no avail to its maker. At this stage, reference may be made to decision by our Hon’ble Rajasthan High Court in the case of PCIT Vs. M/s. Esspal International P. Ltd. DB, ITA no. 25/2024 dated 03/09/2024 stating that the merely based on the retracted statement no addi-tion can be made. The relevant finding of binding judicial precedent is reproduced herein be-low:
6. In the background of the aforementioned facts. Mr. K.K. Bis-sa. the learned standing counsel submits that the findings recorded by the Tribunal are ex-facie erroneous and contrary to the materials on record. The learned counsel for the appellant submits that on examination of the soft data seized and impounded in course of the search proceeding, it was detected that Shirish Chandrakant Shah had provided one-time entry of Rs.3,00.00,0001- to the assessee-company through a broker named liken Shah and such transaction was not genuine.
7. After having considered the materials on record. we are of the opinion that the Tribunal has rendered the findings on the basis of the materials on record. The Tribunal held as under:
“……………………………………………………………………………………………………………………………………………………………
12. From the record, it is evident that the appellant has fur-nished each and every document required for proving the identity. creditworthiness of the share applicants and genuineness of the transactions whereas the AO or the DR has not been able to brought on record any evidence to show that cash was paid by the appellant company to Shri Shirish Chandrakant Shah or any other person for obtaining accommodation entries from Ws Ganesh Spinners Ltd., Ws Emplis Projects Ltd., M/s Speciality papers Ltd., M/s Dhanus Technologies Ltd. And Mrs Sanguine Media Ltd. in the form of share application money of Rs. 3,00.00.000/- either in the assessment proceeding or remand furnished before the CIT(A) or before us. On similar facts. the Ld. CIT (A) has rightly relied on the decision delivered by the ITAT Jodhpur vide its order dated 08.02.2018 in the case of M/s PSM Realmart Pvt. Ltd. (ITA No.321 /Jodh/2017) on and the Coordinate bench of ITAT Delhi in the case of CV T v. Nesbit Fincop P Ltd (ITA No.151De1./2010) where the addition made u/s 68 has been deleted. The Id. CIT(A) further relied upon the decision of Jurisdictional ITAT in the case of PSL Realmart and decision of Supreme Court in the case of Andman Tauber Industries (Civil Appeal No.4228 order dated 02.09.0215 while deleting the addition of Rs.3.00.00,000/- made by the AO u/s 68 is hereeby deleted.
14. That the Ld. CIT(A) on a very detailed examination was sat-isfied about identity. creditworthiness and genuineness of the investor companies and held that the assessee had discharged the primary onus to prove their identity. creditworthiness, and genuineness. We, therefore, concur with the finding of the Ld. CIT(A) that the AO has made an addition under section 68 of the Act without any basis. In our view. the CIT(A) has analyzed the transaction with each share holder and assigned reasons as to why share capital have to be treated as genuine and has rightly deleted the addition. There is no reason to interfere in this finding of fact particularly since nothing has been shown by the department to conclude that the finding of fact was perverse in any manner whatsoever. In view of that matter, we hold that the impugned order it did not suffer from any legal infirmity or perversity to the facts on record.”
8. In “Rank.* Bhargava and Mr. v. Mobrnder Nath and Ant’ AIR 1991 SC 1233. the Hon’ble Supreme Court held that if a question of law has been settled by the highest Court of the country that question, however important and difficult it may have been regarded in the past and however large may be its effect on any of the parties, would not be regarded as substantial question of law. The expression ‘substantial question of law’ has been explained by the Hontle Supreme Court in “Sir Chunilal V. Mehta and sons Ltd. v. Century Spinning and Manufacturing Co. Ltd: AIR 1962 SC 1314 wherein the Hon’ble Supreme Court held that the proper test for determining whether a question of law raised in the case is substantial would be to find out whether it directly and substantially affects the rights of the parties and if so whether it is either an open question or is not free from difficulty or calls for discussion of alternative views.
9. Applying the aforesaid test, we find that the question sought to be raised in this Income Tax Appeal is not even a question of law. The ground taken by the appellant that the findings recorded by the Tribunal are contrary to records seems to have been raised just for the sake of creating a ground; nothing has been shown to this Courl on this point. The findings recorded by the appellate Authority and the Tribunal are in consonance with the law of evidence and the Income Tax Act, in particular. On a glance at materials on record, we find that the Assessing Officer assessed MIs Esspal International Pvt. Ltd. under section 143(3) of the Income Tax Act, 1961 only on the basis of the statement given by Shirish Chandrakant Shah: though he has recorded that the assessment order is being passed after considering the “totality of the facts and circumstances the case”.
10. The Assessing Officer held as under:
“…………………………………………………………………………………………………………………………….
5. Thus, it is clear from above discussion that Ws. Esspal Inter-national Pvt. Ltd Has received accommodation entries of Rs. 3.00 crores from Sh Chan-drakant Shah.
6 In view of the above, It is crystal clear that the transaction concerns owned or operated by Shirish Chandrakant Shah are there are only paper transaction took place instead of are not genuine and there are only paper transaction took place instead of actual transaction Although the transactions are completed through banking channel after getting commission in case. Therefore, share application money of Rs 3.00,00.000/-shown by the assessee is treated as diversion of profits to evade the tax liabilities. Therefore, the amount of Rs. 3,00,00,00W- is added to the total income of the assessee. Penalty proceedings ufs.271(1) (c) are initiated for concealing income by furnishing inaccurate particulars of in-come.
Addition: Rs. 3.00.00.000)-
7. Shirish Chandrakan Shah in his statement has admitted that “rate of commission varying between 2.5% to 5% on the total benefits provided to the benefi-ciaries in form of LTCG. STCG, Sharge Application Money or unsecured loans. Therefore, on the basis of admission by Shirish Chandrakant Shah, commission of 01)2.50% for bogus accom-modation entries of Rs. 3.00.00.0001-which amounts to Rs. 7,50,000/- is added to the total income of the assessee being undisclosed income. Penalty proceedings ids.271(1)(c) are ini-tialed for concealing income by furnishing inaccurate particulars of income.
Addition: Rs. 7.50.000/-
8. Subject to the above remarks and after considering the total-ity of the fact and circumstances of the case, the submissions of the assessee and the mate-rial available on the record the total income of the assessee is computed as under :-
| Total income as per order ufs.143(3) dated 2403.2014 | 6756612 |
| Add: (1) On account of Bogus share application money as discussed in Para-6 as above | 3,00.00,000 |
| (2) On account of bogus share application money as discussed in para-7 as above | 750000 |
| Total Income f | 37506612 |
| Rounded off of Income uls.288A | 3,75.08,810/- |
Assessed u/s.143(3) of the Income Tax Act. 1961 at total in-come of Rs 3.57,56,610)-. Demand Notice, Challan & other forms are also hereby issued as per ITNS-150 which is forming part of this assessment order. Penalty Notice uis.271(1)(c) of the Income Tax Act, 1961 is being issued separately for concealing income by furnishing inac-curate particulars of income.”
11. Now it is a matter of record that Shirish Chandrakant Shah had retracted his statements given before the Assessing Officer. Even otherwise, an admission by the assessee cannot be said to be a conclusive piece of evidence. The admission of the as-sessee in absence of any corroborative evidence to strengthen the case of the Revenue can-not be made the basis for any addition. Therefore, the substantial questions of law framed by the appellant pertained to an open issue which stands concluded by the decision of the Hon’ble Supreme Court; one such decision was rendered in “M/s Pullangode Rubber Produce Co. Ltd. v. State of Kerala And Another” (1973) 19lTR18.
12. Therefore, we hold that no substantial question of law aris-es between the parties and while so, the present Income Tax Appeal is not maintainable
13. For the foregoing reasons, D.B. Income Tax Appeal No.25/2024 is dismissed.”
But in the given facts and circumstances. Assessing Officer should have joined mother of the assessee by issuing her notice. But, no step step appears to have been taken.
Learned CIT(A) observed in the impugned order that from the material produced during appel-late proceedings it transpired that mother of the assessee had not much income during the last 3 years, and that the assessee had come up with said appeal of incurring of expenditure by her mother.
Learned CIT(A) further observed that the appellant had neither furnished any supporting bills or payment slip for construction of house where his mother had made payment through bank nor he produced bank statement of his mother to prove that the payment was made from the bank account of his mother. With these observations, learned CIT(A) rejected the grounds raised by the assessee.
It is true that the assessee came up with said plea for the first time in the appeal before Learned CIT(A) and it was for the assessee, to explain as to why said plea that her mother had incurred expenditure on renovation of the house was not raised by him earlier.
But, in the given situation, even learned CIT(A) could associate mother of the assessee for the purposes of adjudication of the issue. There is nothing to suggest that any step was taken to join her in the proceedings. Even the option to remit the matter to the Assessing Officer on this point was not directed.
Fact remains that the observations and findings recorded by Assessing Officer are based on sole statement of the assessee i.e. without any cogent and convincing material. In this situa-tion, said addition could not be sustained.
In the result, appeal of the assessee in ITA No. 784/JP/2023 is partly allowed.
35. Facts giving rise to the issues in ITA Nos. 779 to 783/JP/2023 are similar to the facts and issues in ITA No. 784& 785/JP/2023/. We are not repeating the facts and grounds raised. In the given situation, the decision in ITA No. 784& 785/JP/2023 for the Assessment Year 2018-19 2017-18 shall applyjnutatis mandis to ITAs Nos. 779 to 783/JP/2023 which pertain to the Assessment Year 2012-13 to 2016.17 In terms of these observations, these appeals of the assessee are also partly allowed.
Order pronounced in the open court on 28/10/2024.
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