Case Law Details
Vishnu Kumar Garg Vs DCIT (ITAT Delhi)
We find the A.O. in the instant case made an addition of Rs.12 lakhs to the total income of the assessee under section 69A of the I.T. Act, 1961 on the basis of entries dated 07.07.2010 and 07.08.2010 found as per Page-14 of Annexure-A1. We find the Ld. CIT(A) deleted the addition of Rs.2 lakhs and sustained the addition of Rs.10 lakhs the reasoning of which has already been reproduced in the preceding paragraph. It is the submission of the Learned Counsel for the Assessee that since the cash available with the assessee in various proprietorship concerns and companies in which he is a Director is Rs.12,80,198/-which is more than the figure of Rs.12 lakhs, therefore, no addition should be made. Alternatively, it is the contention of the Learned Counsel for the Assessee that addition on account of bogus purchases, if any, made in the hands of the assessee and other related concerns should be set-off against this amount.
We find some force in the arguments of the assessee. We find the assessee before the AO had categorically stated that Mamaji & Mataji were staying with the assessee and he used to handover business cash to them for safe custody whenever he used to go out of station for either business purposes or personal work. The assessee has also given the availability of cash on 07.07.2010 (the date of entry in the seized document) in the books of accounts of various proprietorship concerns and companies in which the assessee is a director at Rs.12,80,198.91/- which is more than the amount of Rs.10.00 lakhs. Therefore, merely stating that the explanation is not acceptable is not justified. Since, the availabilities of cash of Rs.12.80 lakhs on 07.07.2010 in the books of accounts of various concerns of the assessee is not doubted, therefore, we are of the considered opinion that the Ld. CIT(A) is not justified in sustaining the addition of Rs.10,00,000/-. The order of the Ld. CIT(A) on this issue is, therefore, set-aside and the AO is directed to delete the addition. The ground raised by the assessee is accordingly allowed.
FULL TEXT OF THE ORDER OF ITAT DELHI
ITA.No.9147/Del./2019 to ITA.No.9152/Del./ 2019 filed by the assessee are directed against the common order dated 30.09.2019 of the Ld. CIT(A)-23, New Delhi relating to A.Ys. 2011-12 to 2016-17 respectively. The Revenue has filed ITA.No.9448/Del./2019 for the A.Y. 201314 and ITA.No.9449/Del./2019 for the A.Y. 2014-15 against the relief granted by the Ld. CIT(A)-23, New Delhi in the order dated 30.9.2019. Since, common issues are involved in all these appeals, therefore, these were heard together and are being disposed of by this common order.
ITA.No.9147/Del./2019 – A.Y. 2011-12 [Assessee] :
2. Facts of the case, in brief are that the assessee is an individual and derived income from salary, house property, income from business and income from other sources. He filed his return of income on 15.09.2011 declaring total income of Rs.61,93,010/-. A search under section 132 of the I.T. Act was conducted on 28.02.2017 at the residential premises of the assessee at House No. 128, Sector-16, Faridabad, Haryana from where certain papers/documents belonging to the assessee were found and seized. The jurisdiction of the assessee was transferred from Pr.ClT-5, Delhi to PCIT, Central Circle-4, Delhi vide order under section 127(1) dated 30.11.2017. In response to notice under section 153A of the I.T. Act, the assessee filed return of income declaring total income of Rs.61,93,010/-. The A.O. issued notice under section 143(2) and subsequently notice under section 142(1) along with questionnaire. In response to the same, the assessee appeared before the A.O. and filed the requisite details from time to time. The A.O. thereafter completed the assessment under section 153A of the I.T. Act determining the total income of the assessee at Rs.1,64,54,330/-.
3. In appeal, the Ld. CIT(A) granted part relief to the assessee. Aggrieved with such order of the Ld. CIT(A), the assessee is in appeal before the Tribunal by raising the following grounds of appeal :
1. Because the action for initiation, continuation and conclusion of assessment proceedings u/s 153A at an amount of Rs.1,64,54,331/- is being challenged on facts and law.
2. Because the action is being challenged on facts and law for making additions in assessment proceedings u/s 153A when there is no incriminating material/ document found during the course of search u/ s 132 of the Act for the impugned year.
3. Because the action is being challenged on facts and law for making an addition of Rs.10,00,000/- by invoking the provisions u/s. 69A, while the transaction is duly explained and accounted, recorded, disclosed and declared in books of account.
4. Because the action is being challenged on facts and law for making an addition of Rs.11,00,000/- by invoking the provisions u/s. 69A, however per assessee the same are rough notings.
5. Because the action is being challenged on facts and law for making an addition of Rs.14,00,000/- by invoking the provisions u/s. 69A, which is considering the explanation of assessee yet without assigning the reason to the basis of rejection of the explanation hence mechanically passing the assessment order.
6. Because the action is being challenged on facts and] law for making addition of Rs.11,25,000/- (@ 1.5%) given to Mishra ji which is unwarranted action by assuming the interest accrued of 1.5% which is a hypothetical income and against the principle of law (Godhara Electricity Co. Ltd., vs., CIT (1997) 225 ITR 746 (SC) further per assessee said loan of Rs.75,00,000/- is given to Abhay Salwan & not to Mishraji.
7. Because the action is being challenged on facts and law for making addition of Rs.11,25,000/-, wherein the evidence and the fact of the payee Abhay Salwan being a proclaimed offender and absconding is matter of Judicial Review before the Hon’ble Allahabad High Court, yet wrongly invoking the jurisdiction of presumption u/s. 132(4A). The prayer is to allow the claim/relief in accordance with the provision of section 58(2) r.w.s. 70, 71 of Income Tax Act, 1961.
8. Because the action is being challenged on facts and law for making an addition of Rs.40,00,000/- as unexplained money while treating the witness (assessee) u/s. 118 of Indian Evidence Act, 1872, as the assessee involved in the transaction resultingly an unreasonable finding without even calling and summoning the person involved namely RA Financial Services and Om Shanti Educational Society.
9. Because the action is being challenged on facts and law for making an addition of Rs.3,207/- by invoking the provisions u/s 69C by making presumption on presumption while law is settled that the presumption is supplied by Statute namely Income Tax Act, 1961, Schedule VII List 1 Entry 82 it is presumption of income and not presumption on presumption.
10. Alternatively and without prejudice to above, the action for not allowing telescoping of addition on account of u/s. 69A, u/s. 69C & commission expenses against addition on account of bogus purchases of group concerns is challenged on facts and law as both additions cannot be made simultaneously.
11. For any consequential relief and/or legal claim arising out of this appeal and for any addition, deletion, amendment and modification in the grounds of appeal before the disposal of the same in the interest of substantial justice to the assessee.”
3.1. The assessee has also raised the following additional ground:
i) Because the action is being challenged on facts & law for making additions in assessment proceedings u/s 153A wherein the seized documents Pg. 125 – 126 of Annexure A-5 relating to assessee were found from the premises of third parties i.e., LV Rustore Applications Pvt. Ltd., R R Carwell Pvt. Ltd., Blossom Landeal Pvt Ltd., & Elvi Bardahl India Pvt. Ltd., 17/6, Hanspal Industrial Complex, Mathura Road, Faridabad, therefore the additions on the basis of the said documents can only be made u/s 153C of the Act & not u/s 153A of the Act.
4. However, the Learned Counsel for the Assessee at the time of hearing did not press the additional ground, for which, the Ld. D.R. has no objection. Accordingly, the additional ground raised by the assessee is dismissed as not pressed.
5. Ground of appeal numbers.1 and 11 being general in nature are dismissed.
6. Learned Counsel for the Assessee did not press grounds of appeal numbers. 2 and 9, for which, the Ld. D.R. has no objection. Accordingly, the same are also dismissed as not pressed.
7. Grounds of appeal number. 3 relates to the order of the Ld. CIT(A) in confirming the addition of Rs.10 lakhs under section 69A of the I.T. Act, 1961.
8. Facts of the case, in brief, are that during the course of assessment proceedings, the A.O. noted that during the course of search operation at the residential premises of the assessee at House No. 128, Sector-16, Faridabad, Haryana, Page-14 of Annexure-A1 was seized wherein number of transactions were written. The A.O. asked the assessee to explain every transaction recorded on Page-14 of Annexure-A1 duly furnishing source of it and tallying with its regular books of account. The A.O. observed that there was an entry dated 07.07.10 against narration of ‘Mamaji ko 10,00,000/- diye, 1,00,000 ka Mataji ka hisab clear. One entry dated 07.08.2010, against narration of Mamaji ko diye Tagdi and Hath phool Gold ke layi Mamji ke of Rs.2,00,000/-.
8.1. It was explained by the assessee that Mamaji and Mataji were living with the assessee and assessee used to handover business cash to them for safe custody, whenever he used to go out of station for either business purpose or some personal purpose. So, Rs.10,00,000/- were given to Mamaji. Similarly an amount of Rs.1,00,000/- (i.e., 2 entries of Rs.50,000/- each were kept with Mamaji and Mataji) and the other entry relate to an amount of Rs.1,00,000/- received back by the assessee from Mataji. Therefore, the amount of Rs.1,00,000/- which assessee has given to them was received back. Alternatively, it was argued that if any addition on this account is to be made then assessee is entitled to telescoping against addition made on account of Bogus purchases which is treated as undisclosed income of assessee. It was further submitted that if telescoping of income is not allowed, it will amount to double addition.
8.2. However, the A.O. was not satisfied with the arguments advanced by the assessee and made addition of Rs.12 lakhs to the total income of the assessee.
8.3. In appeal, the Ld. CIT(A) deleted the addition of Rs.2 lakhs and sustained the addition of Rs.10 lakhs by observing as under :
“4.6. As far as amount of Rs.2,00,000/- given to ‘Mamaji’ on 07.08.2010 is concerned, it is clearly mentioned in the seized paper itself that it was given for purchasing gold jewellery. The AO has certainly not disputed cash in hand of Shri Vishnu Kumar Garg (Rs.1,75,446/-) and Smt. Lata Garg (Rs.1,63,557/-) as on 07.07.2010. It is noted that Shri Vishnu Kumar Garg has declared income of Rs.61,93,010/- for AY 2011-12 and Smt. Lata Garg has declared income of Rs.23,75,500/-. This shows that the appellant belong to a status family. Therefore, availability of cash of Rs.2,00,000/- in form of house hold cash,, in case of an Indian family of such status cannot be taken as abnormal. I am of a considered opinion that source of the cash of Rs.2,00,000/- given to ‘Mamaji’ on 07.08.2010 are explained. As far as ground of telescoping is concerned, I have noted that the AO, in the assessment orders for AYs 2013-14 and 2014-15, calculated cash availability on particular dates, by considering transactions which were outside books but were generating/consuming cash. Such availability of cash was considered and additions which were otherwise made out, were not made up to such extent. This action of the AO is based upon sound logic and is acceptable. The AR’s argument that the cash generated due to out of books transactions of bogus purchases is to be treated at par with other out of books cash generating/consuming transactions, is in line of the same logic and hence, cannot be brushed aside. Also, the argument of the AR that such case generation even in other cases [Smt. Lata Garg (wife of the appellant), and M/s. RR Carwell Pvt. Ltd. / M/s. L. V. Rustore Applications Pvt. Ltd. where the appellant is director] would be available in hands of the appellant because he is the person controlling affairs of these entities, cannot be brushed aside as he is the main decision maker of the group. However, one has to keep in mind the aspect that if any addition is made under any section which requires separate treatment, including special rates, provisions of such section would have over-riding effect. Secondly, requirement of consumption of cash in particular case, as per telescoping requirements in that case would get preference. Therefore, this ground (No.2) of appeal is partly allowed and as a consequence, the addition to the extent of Rs.2,00,000/- is deleted and balance addition to the extent of Rs.10,00,000/- is confirmed, subject to the above mentioned remarks.”
8.4. Aggrieved with such order of the Ld. CIT(A), the assessee is in appeal before the Tribunal.
8.5. The Learned Counsel for the Assessee reiterated the same arguments as made before the AO and Ld. CIT(A). He submitted that Mamaji and Mataji were living with the assessee and assessee used to handover business cash to them for safe custody, whenever he used to go out of station for either business purpose or some personal purpose. Referring to Page-267 of the PB, Learned Counsel for the Assessee drew the attention of the Bench to the details of cash in hand as on 07.07.2010 in various proprietorship firms and companies which are as under :
| Sr. No. | Particulars | Amount | PB Pg |
| 1. | Blossom Landeal Pvt. Ltd., | 8,001.00 | 268 |
| 2. | LV Rustore Applications Pvt. Ltd., FBD | 4,51,455.07 | 269 |
| 3. | LV Rustore Applications Pvt. Ltd., – DL | 17,392.25 | 270 |
| 4. | Vishnu Kumar Garg – Proprietorship Firm | 86,520.00 | 271 |
| 5. | Lata Garg – Proprietorship Firm | 3,77,827.00 | 272 |
| 6. | Vishnu Kumar Garg | 1,75,446.59 | 273 |
| 7. | Lata Garg | 1,63,557.00 | 274 |
| Total Cash Balance as on 07 Jul 2010 | 12,80,198.91 |
8.6. He accordingly submitted that since the amount of cash available as on 07.07.2010 is Rs.12,80,198/- which is more than the amount of Rs.10 lakhs kept with Mamaji and Mataji, the same should be deleted. In his alternative contention, he submitted that if any addition on this account has been made, then the assessee should be entitled to telescoping against the addition made on account of Bogus purchases in the hands of the assessee, Smt. Lata Garg, L V Rustore Applications Pvt. Ltd., and R R Carwell Pvt. Ltd., as undisclosed income of assessee. He submitted that unless telescoping is given, it will amount to double addition. Learned Counsel for the Assessee also relied on the decision of Hon’ble Delhi High Court in the case of CIT vs., Sonal Construction [2013] 359 ITR 532 (Del.) and the decision of Hon’ble Supreme Court in the case of Anantharan Veerasinghaiah & Co. vs., CIT [1980] 123 ITR 457 (SC).
9. The Ld. D.R. on the other hand relied on the order of the Ld. CIT(A) and submitted that assessee could not substantiate with evidence to the satisfaction of the A.O. or the Ld. CIT(A) regarding the amount paid to Mamaji and Mataji to the tune of Rs.12 lakhs. She submitted that the Ld. CIT(A) while deciding the issue has given elaborate reasoning while sustaining the addition. She accordingly submitted that the same should be upheld.
10. We have heard the rival arguments made by both the sides, perused the orders of the A.O. and the Ld. CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the A.O. in the instant case made an addition of Rs.12 lakhs to the total income of the assessee under section 69A of the I.T. Act, 1961 on the basis of entries dated 07.07.2010 and 07.08.2010 found as per Page-14 of Annexure-A1. We find the Ld. CIT(A) deleted the addition of Rs.2 lakhs and sustained the addition of Rs.10 lakhs the reasoning of which has already been reproduced in the preceding paragraph. It is the submission of the Learned Counsel for the Assessee that since the cash available with the assessee in various proprietorship concerns and companies in which he is a Director is Rs.12,80,198/-which is more than the figure of Rs.12 lakhs, therefore, no addition should be made. Alternatively, it is the contention of the Learned Counsel for the Assessee that addition on account of bogus purchases, if any, made in the hands of the assessee and other related concerns should be set-off against this amount.
10.1. We find some force in the arguments of the assessee. We find the assessee before the AO had categorically stated that Mamaji & Mataji were staying with the assessee and he used to handover business cash to them for safe custody whenever he used to go out of station for either business purposes or personal work. The assessee has also given the availability of cash on 07.07.2010 (the date of entry in the seized document) in the books of accounts of various proprietorship concerns and companies in which the assessee is a director at Rs.12,80,198.91/- which is more than the amount of Rs.10.00 lakhs. Therefore, merely stating that the explanation is not acceptable is not justified. Since, the availabilities of cash of Rs.12.80 lakhs on 07.07.2010 in the books of accounts of various concerns of the assessee is not doubted, therefore, we are of the considered opinion that the Ld. CIT(A) is not justified in sustaining the addition of Rs.10,00,000/-. The order of the Ld. CIT(A) on this issue is, therefore, set-aside and the AO is directed to delete the addition. The ground raised by the assessee is accordingly allowed.
11. Ground of appeal number.4 relates to the order of the Ld. CIT(A) in confirming the addition of Rs.11 lakhs.
12. After hearing both the sides we find the A.O. during the course of assessment proceedings asked the assessee to explain the following entries dated 26.04.2010 as mentioned in page-14 of Annexure-A1 found and seized from the premises of the assessee during the course of search.
– 16,30,000 cash
– 75,000 Registree
– 6,05,000 bhaiyaa ne
-11,00,000/- Vishnu
12.1. The assessee vide his reply dated 26.12.2018 submitted as under :
“As regard entries to dt. 26.4.2010 amounting to Rs.17,05,000/- in pg. 14, it is submitted that the said entries are estimations and rough calculation for purchase of property which did not materialised. Papers pertaining to any such property were not found at the time of search, the same is verifiable from the statement of affairs and cash flow statement provided to your goodself. As regard Rs.14,00,000/- and 6,55,000/- are also rough notings/estimations, evident from the calculation mistakes might have done for the above proposed property. ”
12.2. However, the A.O. was not satisfied with the arguments advanced by the assessee. He noted that the amount of Rs.11 lakhs is clearly mentioned against the name of the assessee. The entry pertains to one 650 Gaz property for which 16,30,000/- was paid in cash and Rs.75,000/- in cash was also spent on registries. Out of total amount of Rs.17,05,000/-, Rs.6,05,000/- is given by bhaiya whereas remaining Rs.11,00,000/- is given by Vishnu i.e. the assessee. He therefore was of the opinion that the assessee is the owner of such amount of Rs.11,00,000/-. Since, the assessee could not explain the source of amount of Rs.11,00,000/- to his satisfaction nor could he show that these entries are recorded in his books of account, the A.O. made addition of Rs.11,00,000/- to the total income of the assessee u/s 69A of the I.T. Act, 1961.
12.3. In appeal, the Ld. CIT(A) upheld the action of the A.O. on the ground that there is a clear entry in the seized material to the effect that Shri Vishnu Kumar Garg paid Rs.11 lakhs. He, however, accepted the arguments of the Learned Counsel for the Assessee regarding the benefit of telescoping. The relevant observation of the Ld. CIT(A) at para 4.7 of his order reads as under:-
“4.7. The third addition is Rs.11,00,000/-. This addition has been made because there were following entries on page no.14 of Annexure-A1 seized from premise no.128, Sec. 16, Faridabad :-
– 16,30,000 cash
– 75,000 Registree
– 6,05,000 bhaiyaa ne
-11,00,000/- Vishnu
4.8 Before the AO, the appellant stated that the entries are rough workings s pertained to property relating Shri Mukut Bhaiya, elder brother of the appellant. The / did not accept this reply. The AO noted that Rs. 11,00,000/-were paid by the appella {Shri Vishnu Kumar Garg} and therefore, added this amount. This addition was dispute vide ground No. 3.
4.9 ‘ During the appellate proceedings, the appellant re-iterated the same stand as was taken before the AO. The appellant also raised alternative contention that the cash was available out of bogus purchases in the hands of Shri Vishnu Kumar Garg, Smt. Lata Garg, M/s. RR Carwell Pvt. Ltd. and M/s. L. V. Rustore Applications Pvt. Ltd. and this addition should be telescoped against the same.
4.10 In my considered opinion, there is a clear entry in the seized material to the effect that Shri Vishnu Kumar Garg paid Rs. 11,00,000/-. Therefore, there is no infirmity in the action of the AO in terms of making addition of Rs. 11,00,000/-. As far as alternative plea of telescoping is concerned, it has been dealt with in para 4.6(supra). The observations/remarks made therein are applicable to this addition, mutus mutandi.
4.11 In view of the above discussion, this ground (No. 3) of appeal is dismissed, subject to the above mentioned remarks/observations.
12.4. Aggrieved with such order of the Ld. CIT(A), the assessee is in appeal before the Tribunal.
12.5. The learned Counsel for the Assessee submitted that the entries found in the seized document are estimations and rough calculations for purchase of property which did not materialize. He submitted that papers pertaining to any such property were not found at the time of search. Referring to various decisions, he submitted that documents found during the course of search must be a speaking one and no addition can be made on the basis of dumb documents. Further in the absence of any corroborative evidence so as to support his inference, no addition can be made by the A.O. For the above proposition, Learned Counsel for the Assessee relied on the decision of the Co-ordinate Bench of the Tribunal in the case of CIT vs. Praveen Juneja vide ITA.No.57/Del./2011 order dated 14.07.2017 and the decision of Hon’ble Supreme Court in the case of CBI vs., V.C. Shukla reported in 1998 3 SCC 410. He also relied on the following decisions :
1. ACIT vs., Ashok Kumar Poddar [2008] 16 DTR 55 [Kol.-Tribu.],
2. ACIT vs., Satyapal Wassan [2007] 295 ITR (AT) 352 (Jab.-Tribu.].
3. S.P. Goyals DCIT [2002] 82 ITD 85 (TM) (Mum.Tribu).
4. CIT vs Shri Praveen Juneja 99 CCH 0115 (Del. ITAT)
12.6. He submitted that a perusal of the above decisions would show that even when entries in the books of account were held to be authentic and correct, then, independent evidence was required to prove that entries were in fact correct. He submitted that in the assessee’s case the impugned note were merely rough notings in some loose sheets and absolutely incomplete. Therefore, in the absence of any documentary evidence found during the course of search that assessee has in fact purchased the property, no addition should be made.
13. The Ld. D.R. on the other hand heavily relied on the order of the Ld. CIT(A) and submitted that Ld. CIT(A) has given justifiable reasons while sustaining the addition. Therefore, the same should be upheld.
14. We have considered the rival arguments made by both the sides, perused the orders of the A.O. and the Ld. CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us by both the sides. We find the A.O. on the basis of seized document Page-14 of Annexure-A1 made addition of Rs.11 lakhs since the amount of Rs.11 lakhs was appearing against the name of the assessee. We find the Ld. CIT(A) sustained the addition on the ground that there is a clear entry in the seized material to the effect that Shri Vishnu Kumar Garg paid Rs.11 lakhs. It is the submission of the Learned Counsel for the Assessee that the entries found in documents seized are rough calculations for purchase of same property which did not materialize and no such property was found to have been purchased by the assessee and, therefore, these are dumb documents and, therefore, in the absence of any corroborative evidence no addition should be made. It is the alternate contention of the assessee that benefit of telescoping should be given on account of additions made for bogus purchases etc.
14.1. We find the assessee had stated categorically before the AO that these are rough calculation for purchase of property which did not materialize. It is an admitted fact that no such document or papers pertaining to purchase of any property was found either during the course of search or post search enquiries. Apart from the noting in the seized papers, the revenue has no other evidence of purchase of any property by the assessee. No post search enquiry or investigation was conducted by the AO to find out if at all any property has been purchased.
14.2. The Hon’ble Supreme Court in the case of CBI vs V.C. Shukla (supra) has held that entries in the books of accounts shall not alone be sufficient evidence to charge any person with liability. Entries, even if relevant are corroborative evidence. Independent evidence as to the trustworthiness of those entries are necessary to fasten the liability.
14.3. The Kokata Bench of the Tribunal in the case of ACIT vs Ashok Kumar Poddar (2008) 16 DTR 055(Kol Trib.) has observed as under:-
“The AO has made the addition only on the presumption made u/s 132(4A) that the loose sheets belong to the assessee without verifying the handwriting and without making any enquiry or bringing any material on record to substantiate that the assessee had actually earned the income recorded in those loose sheets. It is a fact that there was no substantial seizure in the form of any investment in any movable or immovable property as reflected in the annexures to the Panchnamas. If the assessee had so much of undisclosed income, such income should have been reflected in some investment in one form or the other. But, no such investment or asset was found during the course of search and therefore the action of the AO in making the addition of the loose sheets without any matching assets found on search cannot be held to be justified. The action of the CIT(A) in deleting the addition was wholly justified. ”
14.4. The Jabalpur Bench of the Tribunal in the case of ACIT vs Satyapal Wasaan (2007) 295 ITR (AT) (Jab Trib.) has held that a document found during the course of a search must be a speaking one and without any second interpretation, must reflect all the details about the transaction of the assessee in the relevant assessment year. Any gap in various components as mentioned in section 4 of the I.T. Act must be filled up by the AO through investigation and correlation with other material found either during the course of the search or on investigation. Unless the document is clear and unambiguous, it is only a dumb document and no charge can be levied on the basis of a dumb document. We find the Tribunal at para 11 of the order has observed as under:-
“11. For the sake of argument if we accept the submission of the Ld. D.R. that the Ld. CIT (A) erred in accepting fresh evidence then what is left after ignoring those affidavits is the bare document No. 7 with the bare details as referred to above. The moot question now arises is whether any addition can be made on the basis of that document. We have already pointed out above that this document is bereft of necessary details about year of transaction, ownership of transaction, nature of transaction, necessary code for deciphering the figures. It may be possible that a document may not be complete in all respects as the businessman or tax evaders may chose to record minimum details on a document and keep the rest in their memory. It is the duty of the AO to carry out necessary investigations by correlating the impugned document with other documents seized, with regular books of accounts, with record kept by outside agencies, such as banks or financial institution or debtors/ creditors and finally by recording the statements of concerned parties so as to fill up the gaps in confirming the inference arising from the documents for a proper charge of tax. Such correlation is necessary unless the document is capable of speaking giving frill details so as to enable any intelligent person to find out the nature of transaction, the year of transaction , the ownership of the transaction and quantum thereof. Even in that situation, it is necessary to give opportunity to the assesses to offer his explanation and investigation be carried out to strengthen the direct inference arising from this document.”
14.5. The Mumbai Bench of the Tribunal in the case of S.P. Goyal vs DCIT (2002) 82 ITD 0085 (TM) (Mum.) while deleting the addition of Rs.60 lakhs on the basis of loose sheets of diary seized during the course of search has held that loose sheet of paper torn out of a diary could not be construed as books for the purpose of section 68,addition could not be made simply on the basis of certain notings on loose sheets of a diary without any corroborative evidence in the form of extra cash, jewellery or investment outside the books.
14.6. Since, in the instant case, no document/paper relating to the so called property was either found during the course of search or post search enquiry and no independent evidence was either found during the course of search or collected subsequent to the search, therefore, in the light of the above decisions, the assessee in our opinion cannot be fastened with the liability. We, therefore, set-aside the order of the ld. CIT(A) on this issue and direct the AO to delete the addition. Ground of appeal No.4 is accordingly allowed.
15. Ground of appeal number.5 relates to the order of the Ld. CIT(A) in confirming the addition of Rs.14 lakhs made by the A.O. under section 69A of the I.T. Act, 1961.
15.1. Facts of the case, in brief, are that during the course of assessment proceedings, the A.O. asked the assessee to explain the entries dated 26.04.2010 mentioned in Page-14 of Annexure-A1 seized from the premises of the assessee which are as under :
– 14,00,000
– 6,55,000
– 8,45,000 – Balance
– 5,00,000 – cash recd – 14/9/10
– 26/4/10 – 7,00,000/- mukut bhaiya (lan)
– 3,45,000 balance.
15.2. The assessee explained that the entry relating to dated 26.04.2010 pertains to property relating to Mukut Bhaiya who is the elder brother of the assessee. However, the A.O. was not satisfied with the arguments of the assessee and held that the assessee could not explain the source of Rs.14 lakhs. In absence of any satisfactory explanation given by the assessee, the A.O. made addition of the same to the total income of the assessee.
15.3. In appeal, the Ld. CIT(A) sustained the addition made by the A.O. He, however, accepted the alternate plea of the assessee for telescoping subject to his observation at para-4.6 of the order reproduced at para 8.3 of his order. The relevant observations of the Ld. CIT(A) at para 4.15 of his order reads as under :
“4.15. In my considered opinion, there is a clear entry in the seized material to the effect that on 14.09.2010, Rs.5,00,000/- cash was received. Also, the entry “650000” shows either an amount of Rs. 6,50,000/- were received or adjusted so that balance became Rs.8,45,000/- (instead of earlier balance of Rs. 14,00,000/-). Therefore, there is no infirmity in the action of the AO in terms of making addition of Rs.14,00,000/-. As far as alternative plea of telescoping is concerned, As far as alternative plea of telescoping is concerned, it has been dealt with in para 4.6 (supra). The observations/remarks made therein are applicable to this addition, mutus mutandi.
4.16. In view of the above discussion, this ground (No.4) of appeal is dismissed, subject to the above mentioned remarks/observations.”
16. Learned Counsel for the Assessee submitted that the said entries pertain to property mentioned in Ground number.3 as the same is on the same date i.e., 26.04.2010 and relate to Mukut Bhaiya, elder brother of the assessee. Further the entries are estimations and rough calculations for purchase of the property which did not materialize. He relied on the decisions already mentioned while arguing ground of appeal number.4.
17. The Ld. D.R. on the other hand heavily relied on the order of the Ld. CIT(A). She submitted that the amount of Rs.14 lakhs is clearly mentioned against the name of the assessee in the seized documents. The Ld. CIT(A) has given justifiable reasons while sustaining the addition. She accordingly submitted that the addition made by the A.O. and sustained by the Ld. CIT(A) should be upheld and the grounds raised by the assessee should be dismissed.
18. We have considered the rival arguments made by both the sides, perused the orders of the A.O. and the Ld. CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the A.O. in the instant case made addition of Rs.14 lakhs on the basis of entries found in the seized documents at page-14 of Annexure-A1 wherein an amount of Rs.14 lakhs was mentioned. We find the Ld. CIT(A) sustained the addition on the ground that assessee could not explain the source of Rs.14 lakhs nor proved that the entries are recorded in the books of account. It is the submission of the Learned Counsel for the Assessee that these are rough calculations and estimations for purchase of property which did not materialize and, therefore, no addition should be made in the absence of any corroborative evidence. It is his alternative contention that telescoping benefit should be granted to the assessee.
18.1. We do not find any merit in the arguments of the Learned Counsel for the Assessee that no property has been purchased and the entries are mere calculations and estimations. A perusal of the entries in the seized document, which has been reproduced at Para 15.1 of this order clearly mentions Rs.5,00,000/- cash received 14.09.2010. This, in our opinion, cannot be termed as rough calculation or estimation. However, a perusal of all the entries shows that out of Rs.14,00,000/- there is still a balance of Rs.3,45,000/- left. Therefore, addition, if any, has to be restricted to Rs.10,55,000/- only (i.e., Rs.14,00,000 – Rs.3,45,000). We, therefore, modify the order of the Ld. CIT(A) and direct the A.O. to restrict the addition to Rs.10,55,000/-.
18.2. So far as argument of Learned Counsel for the Assessee that telescoping benefit should be given is concerned, the same is acceptable in view of the decision of the Hon’ble Delhi High Court in the case of CIT vs. Sonal Construction reported in [2013] 359 ITR 532 (Del.) where the Hon’ble High court has accepted the theory of benefit of telescoping. We, therefore, direct the A.O. to allow the benefit of telescoping and deduct the addition of Rs.10,55,000/- from profits from bogus purchases etc. added in the hands of the assessee and his proprietorship concerns and in the case of the 02 companies namely LV Rustore Applications (P) Ltd., and RR Carwell Private Ltd., where he is a Director and is the controlling person. The A.O. shall do the necessary calculation and the ground raised by the assessee on this issue is accordingly partly allowed in terms indicated above.
19. In grounds of appeal number.6 and 7 the assessee has challenged the order of the Ld. CIT(A) in confirming the addition of Rs.11,25,000/- made by the A.O.
20. Facts of the case in brief are that during the course of search proceedings at premises 17/6, Hanspal Industrial Complex, Mathura Road, Faridabad, Pages 125 and 126 of Annexure-A6 were seized. It was found that assessee has given loan of Rs.50 lakhs in January, 2009 and Rs.25 lakhs in June, 2009 @ 1.5% interest. The A.O, therefore, asked the assessee to explain the source of the transaction and to explain as to why interest earned during the year on the above said loan should not be added back to the total income of the assessee.
20.1. The assessee filed reply which has been reproduced by the A.O. and which reads as under :
“Actually, assessee had given Rs.50 Lakh in cash in Jan 2009 & Rs.25 Lakh in June 2009 @ 1.5% p.m. to Abhay Salwan & group when the money was given as it was desired by Abhay Salwan as an interest bearing loan. The page 125 & 126 of the seized Annexure A-5 (Pg. 1-2) contain details of Loan. When Abhay Salwan did not make any payment of interest to assessee for period w.e.f 01.01.2009 to 11.10.2010, then assessee demanded from Abhay Salwan to recover the principal amount & interest amount. After that Abhay Salwan made repayment of Rs.25 Lakh on 11.10.2010 which has been adjusted against principal of Rs.75 Lakh. The same is mentioned on page 126 of the seized Annexure A-5. However, the interest for the above said period & balance Rs.50 Lakh (Principal) was still recoverable from Abhay Salwan, the same is mentioned on page 125 of the seized Annexure A-5. Similarly, Interest amounting Rs.6 Lakh on principal loan Rs.25 Lakh was still recoverable as mentioned on page 125 of the seized Annexure A-5.”
20.2. However, the A.O. was not satisfied with the explanation given by the assessee and held that the documents at Page Nos.125 and 126 of Annexure-A10 clearly mentions that assessee had received interest @ 1.5% during the year under consideration. The Assessee failed to prove that it had not received any interest during the year on the loan given in January 2009 of Rs.50 lakhs and June 2009 of Rs.25 lakhs @ 1.5% per month. The A.O, therefore, calculated the interest on Rs.75 lakhs at Rs.11,25,000/- and added the same to the total income of the assessee treating the same as income from other sources.
20.3. In appeal, the Ld. CIT(A) upheld the action of the A.O. on the ground that the plea of the assessee that interest was not received cannot be accepted in the absence of any supporting evidence.
20.4. Aggrieved with such order of the Ld. CIT(A), the assessee is in appeal before the Tribunal.
21. Learned Counsel for the Assessee referring to Pages 95 and 96 of the paper book submitted that the seized documents Pages 125 & 126 of Annexure A-5 contain details of Loan. He submitted that the A.O. presumed that the said documents contain details of loan amounting Rs.75 Lakh given to Shri Rattan Prakash Mishra in the year 2009 instead of Shri Abhay Salwan merely on the basis that the said document contains signature of Shri Rattan Prakash Mishra. He submitted that the A.O. overlooked that the seized document Page 125 contains signature of 4 persons (PB Page 95) namely the assessee, Abhay Salwan, Rattan Parkash Mishra and Dinesh Gupta wherein Rattan Parkash Mishra and Dinesh Gupta had signed as witnesses & assessee had signed as payer and Abhay Salwan had signed as payee. The hand writing expert report is at PB Pages 239-259 who confirmed that signature of Abhay Salwan on various documents and initial signature of Abhay Salwan on Page 126 of Annexure A5 are similar. Further, during assessment proceedings under section 153A, statement of Sh. Rattan Prakash Mishra was recorded on dt. 16.11.2018 (PB Pages 275-276) wherein no question regarding loan taken by him from assessee has been asked. This shows that AO with preconceived mind has considered that the said loan was given to Rattan Prakash Mishra. So, the presumption of loan to Rattan Prakash Mishra is wrong. He submitted that rule of presumption is that, once there is a doubtful fact, then, that may be inferred from certain other proven facts. While inferring the existence of a fact from another set of proved facts, the Court exercises the process of reasoning and reaches to a logical conclusion so as to arrive at the most probable position pursuant to Section 114 of the Indian Evidence Act, 1872. He submitted that in the present case the Department is settling the whole case on presumption on presumption and that too on circumstances which are a very weak recourse of one of the form of secondary evidence.
21.1. The Learned Counsel for the Assessee further submitted that the presumption of A.O. regarding interest received on loan amounting Rs.11,25,000/- is wrong because he overlooked the written pleadings of assessee dt. 30.11.2018 (PB Pages 68-78) and dt. 19.12.2018 (PB Pages 84-94) that assessee had given loan Rs. 50 Lakh in cash in Jan 2009 and Rs. 25 Lakh in June 2009 @ 1.5% p.m. to Abhay Salwan and group. When the money was given, it was desired by Abhay Salwan as an interest bearing loan. When Abhay Salwan did not make any payment of interest to assessee for period w.e.f 01.01.2009 to 11.10.2010, then the assessee demanded the money from Abhay Salwan to recover the principal amount & interest amount. After that Abhay Salwan made repayment of Rs.25 Lakh on dt. 11.10.2010 which has been adjusted against principal of Rs. 75 Lakh. The same is mentioned on pg.126 of the seized Annexure A-5 (supra). However, the interest for the above said period and balance Rs.50 Lakh (Principal) was still recoverable from Abhay Salwan and the same is mentioned on Page-125 of the seized Annexure A-5. Similarly, Interest amounting Rs.6 Lakh on principal loan Rs.25 Lakh was still recoverable as mentioned on Page-125 of the seized Annexure A-5. Thus, it is a proven fact that assessee has not received any interest on loan from Abhay Salwan during that year. AO overlooked the documents Pages 125 & 126 (supra) and submissions of assessee and merely on presumption added interest amount Rs.11,25,000/- during the year.
21.2. Learned Counsel for the Assessee submitted that Shri Rattan Prakash Mishra, in his proceedings under section 153C has denied to have any transaction with the assessee. He referred to the copy of assessment orders passed under section 153A/153C for the A.Ys. 2011-12 and 2012-13, copies of which, are placed at Pages 16-24 of second synopsis dated 03.08.2021 and drew the attention of the Bench to the submission before the A.O. He submitted that when both assessee and Shri Rattan Prakash Mishra are denying of any transaction and there is no other corroborative evidence or material before the A.O, the addition on account of interest received is not justified.
21.3. Referring to the decision of Hon’ble Delhi High Court in the case of CIT vs., Ved Prakash Choudhary reported in 305 ITR 245 he submitted that when both the parties are denying to have entered into the transaction, then no addition could be made, in absence of corroborative evidence as the presumption under section 132(4A) of the I.T. Act, 1961 is a rebuttal one.
21.4. The Learned Counsel for the Assessee submitted that the search party has not found any unrecorded assets or cash which can be said to have been received in the form of interest. So, interest on loan is not taxable so as to arrive at a real income and accrual basis cannot be a justifying factor and the commercial and business realties of the assessee, should be considered.
21.5. Learned Counsel for the Assessee submitted that the interest income has to be recognized in the books of accounts only to the extent of actual collection. Referring to the Accounting Standard 9 of ICAI, he submitted that according to these guidelines when uncertainties exist regarding the determination of the amount or its collectability, the revenue shall not be treated as accrued, hence shall not be recognized until collection is made. The recognition of revenue on accrual basis presupposes the satisfaction of two conditions – i.e., (i) The revenue is measurable and (ii) The revenue is collectable with certainty. In support of the above proposition, the Learned Counsel for the Assessee relied upon the following decisions:
1. Order of ITAT, Delhi Bench in the case of Red Fort Shahjahan Properties Pvt. Ltd., vide ITA.No.742/Del./2020 dated 20.08.2020 for the A.Y. 2016-17.
2. CIT vs., Goyal M.G. Gases (P) Ltd., 303 ITR 159 (Del.HC).
3. CIT vs., Godhra Electricity Co. 225 ITR 746 (SC).
4. Andhra Bank vs., CIT 225 ITR 447 (SC).
5. CIT vs., Excel Industries Ltd., & Others 358 ITR 295 (SC).
21.6. The Learned Counsel for the Assessee further submitted that Shri Abhay Salwan to whom loan was given on interest is a proclaimed offender and absconding and the matter is subjudice before Hon’ble Allahabad High Court in pursuant to order dt.20.07.2015 [PB Page-117 & Civil Misc. Writ Petition filed before Hon’ble Allahabad High Court is at PB Pages 198-238]. Resultantly, the ambit of re-convertibility of statutory levies are like a general lien of the state on all the belongings (moveable and immoveable assets) of the litigant whereby the assessee Vishnu Garg is an unsecured creditor. However an unsecured creditor with a unilaterally signed document bereft of bilateral and consensus-ad-idem is not an enforceable document in Law perse. Simultaneously and collaterally the state (statutory bodies for statutory levy) don’t have any document of whatsoever kind to recover the amounts from said Shri Abhay Salwan and in spite of that they are a secure creditor in accordance with the principle of law laid down in the case of Vijay Bank vs., CIT (2010) 323 ITR 166 (SC).
21.7. He further submitted that in the Court of Saurab Gusain, Civil Judge (Sr. Div), Faridabad in the case of Vijay Sachdeva (Plaintiff) vs., Abhay Salwan (Defendant), vide order dt. 22.09.2015 (PB Pages 112-197) in suit for specific performance of contract where the issue is that the defendant Abhay Salwan agreed to sell the property to the plaintiff for a total sale consideration of Rs.50 Lakhs vide sale agreement dt.31.12.2012. On same day defendant received a sum of Rs.45 Lakh as part payment and also handed over the original sale deed dt.05.11.2009 to the plaintiff. The last date for execution and registration of sale deed was fixed on or before 30.06.2013. A separate receipt was also executed by defendant in presence of witnesses. It has been further claimed that since defendant was in need of money, he requested the plaintiff to make balance sale consideration of Rs.5 Lakh, which was also paid by Plaintiff vide separate receipt. It was claimed that thereafter although plaintiff always remained ready and willing to perform the part of the contract, but, the defendant evaded on performing his part of contract and did not execute the sale deed in his favour. Hence this suit.
21.8. The defendant did not present before court and ex-parte order was passed on 22.09.2015. Thus, Abhay Salwan has not only defaulted to the assessee, but, was also a regular defaulter since past as mentioned in above case where he has received Rs.50 Lakh in December 2012. Even the plaintiff Vijay Sachdeva got decree in his favour from Civil Judge (Senior Division), Faridabad, still the said plaintiff could not recover his money and the same is open for verification. Further Judicial Magistrate, Faridabad in various cases held that Abhay Salwan is not traceable and is a proclaimed person [PB Pages 318-409 and at Page-327] wherein it is held as under :-
“Intimation to this regard be sent to SHO concerned & PO Staff. File after doing the needful be consigned to the record room with a red ink note on the index of the file that the accused Brij Bhushan Tyagi & Abhay Salzoan have been declared proclaimed persons in this case and proceeding against above named accused will be initiated as and when accused will be arrested and appeared before the court and till then file be not destroyed.”
21.9. He accordingly submitted that Shri Abhay Salwan is not traceable, is absconding, is a proclaimed person and has not repaid any of his debts/liabilities. The said fact is verifiable from Police stations, Banks and Various Courts of Faridabad that the said person is defaulter of many persons & not traceable since year 2014. He accordingly submitted that when Shri Abhay Salwan is a defaulter and not traceable to even Police, how it can be said that assessee has received interest from such person. So, it is only AO’s presumption that assessee has recovered such huge interest amount from Shri Abhay Salwan even though no document was found during search relating to recovery of interest and even overlooking the order of Hon’ble Allahabad High Court, Civil Court and Judicial Magistrate wherein Shri Abhay Salwan has been declared as a proclaimed person.
21.10. Alternatively and without prejudice to above, the Learned Counsel for the Assessee submitted that if any addition on this account is made, then, the assessee should be entitled to telescoping against addition made of Bogus purchases in the hand of assessee and two companies namely LV Rustore Applications Pvt. Ltd. and R R Carwell Pvt. Ltd. where he is the director and the controlling person as undisclosed income of assessee. He submitted that if telescoping of income is not given than there will be double addition in as much as both the undisclosed income and the investment made out of such income are both brought to tax which was contrary to the basic principles of assessment. Therefore, undisclosed income and the undisclosed investment are to be set off against each other, thus giving benefit of telescoping to the assessee. For the above proposition, the Learned Counsel for the Assessee relied upon the following Judgments :-
(i) CIT vs., Sonal Construction [2013] 359 ITR 532 (Del.)
(ii) Anantharan Veerasinghaiah & Co. vs., CIT [1980] 123 ITR 457 (SC)
22. The Ld. D.R. on the other hand, heavily relied on the orders of the A.O. and the Ld. CIT(A). She submitted that when the seized documents clearly mention the interest @ 1.5% per month, therefore, in the absence of any evidence on record to show that assessee has not received the interest, the order of the Ld. CIT(A) be upheld.
23. We have considered the rival arguments made by both the sides, perused the orders of the A.O. and the Ld. CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the A.O. in the instant case made addition of Rs.11,25,000/- being interest @ 1.5% on the loan of Rs.50 lakhs in January, 2009 and Rs.25 lakhs in June, 2009 given to Shri Abhay Salwan. The submission of the assessee that he has not received any interest on loan and only an amount of Rs.25 lakhs was received towards the principal amount was not accepted by the A.O. in the absence of any credible evidence to his satisfaction that assessee has not received any interest. According to the A.O. as per the provisions of Section 132 (4A) of the I.T. act, 1961 it is presumed that any content or document found during the course of search operation are true. It is also the observation of the A.O. that documents at Page Nos.125 and 126 of Annexure-A10 clearly mention that assessee had received interest @ 1.5% during the year under consideration and the assessee failed to prove that he had not received any interest during the year. It is the submission of the Learned Counsel for the Assessee that A.O. overlooked the seized documents at Page number.125 which contains signature of 04 persons namely the assessee, Abhay Salwan, Rattan Prakash Mishra and Dinesh Gupta, where Mr. Dinesh Gupta and Mr. Rattan Prakash Mishra have signed as witnesses, the assessee has signed as Payer and Abhay Salwan has signed as Payee. It is also his contention that a perusal of the seized documents at page no.125 of Annexure-A5 clearly shows that interest for the above said period and balance of Rs.50 lakhs was still recoverable from Abhay Salwan. Therefore, once the assessee has proved that he has not received any interest from Abhay Salwan during the year, no addition on account of such interest should be made.
23.1. We find some force in the above arguments of the Learned Counsel for the Assessee. A perusal of the seized document at Page Number-125 of Annexure-A5 clearly mentions the following :
“Principal Amount Rs.75,00,000
Paid 11.10.2010 Rs.25,00,000/-
Balance up to 31.12.2010 Rs.50,00,000/-
[Interest @ 1.5% p.m.]”
23.2. From the above it cannot be deciphered that assessee has received any interest on the amount of Rs.75 lakhs given to Shri Abhay Salwan. We find merit in the arguments of the Learned Counsel for the Assessee that the lower authorities have overlooked the submissions and added the interest merely on the basis of presumption and surmises. We find the Learned Counsel for the Assessee through various documents/Court order has established that Shri Abhay Salwan is absconding, is a proclaimed person and is a defaulter. Therefore, in absence of any evidence available with the Revenue, it cannot be said that the assessee has received the interest of Rs.11.25 lakhs from Shri Abhay Salwan during the year especially when the seized document does not categorically mention that the assessee has in fact received the interest.
23.3. We find the Coordinate Bench in the case of Red Fort Shahjahan Properties Pvt. Ltd., (supra) vide ITA.No.742/Del./2020 dated 20.08.2020 has held as under:
“16. In our considered opinion where the principle amount of loan/advance is doubtful of recovery interest thereon cannot be accrued and added to income even under the mercantile system of accounting. Our view is fortified from the decision of the Hon’ble Madras High Court in the case of CIT v. Motor Credit Co. P. Ltd.: 127 ITR 572.
17. xxx
18. xxx
19. Considering the facts in totality in the light of the judicial decision discussed hereinabove, we are of the considered view that on given set of facts there is no accrual of interest even though the assessee’s following the mercantile system of accounting and the charge of notional interest by the AO/ CIT (A) is bad on facts and deserves to be deleted. We direct accordingly.”
23.4. We find the Hon’ble Delhi High Court in the case of CIT vs Goyal M G Gases P Ltd. 303 ITR 159 has held that when the realization of even the principal amount of loan was in jeopardy, there could not be any accrual of income by way of interest, even as per the mercantile system of accounting.
23.5. We find the Hon’ble Supreme Court in the case of CIT vs. Godhra Electricity Co. (1997) 225 ITR 746 (SC) has held that if income does not result at all, there cannot be any tax and that if an income has not materialized, then merely an entry made about a hypothetical income by following book keeping methods, the liability to tax cannot be attracted.
23.6. We find the Hon’ble Supreme Court in the case of Andhra Bank vs., CIT (1997) 225 ITR 447 (SC) has held that there cannot be a tax if no income resulted, despite the entry in the book keeping. The case deals with s. 148. Assessee changed method of accounting from A.Y. 1960 onwards. But during A.Y. 1963-64, the A.O. objected the change and reopened assessments for A.Y. 1960 onwards. The Hon’ble Apex court held that this amounts to change of opinion and re-assessment is not valid.
23.7. We find the Hon’ble Supreme Court in the case of CIT vs. Excel Industries Ltd. & Ors. (2013) 358 ITR 295 (SC) has held that going by the Accounting Standard though the revenue is collectible by certainty, the assessee in the present case, in fact, had not received any interest and hence, interest in question remained only notional interest.
23.8. In view of the above discussion, we set aside the order of the Ld. CIT(A) on this issue and direct the AO to delete the addition. The grounds raised by the assessee are allowed.
24. In ground of appeal number.8, the assessee has challenged the order of the Ld. CIT(A) in confirming the addition of Rs.40 lakhs made by the A.O. as unexplained money.
25. Facts of the case, in brief, are that during the course of search proceedings at premises 17/6, Hanspal Industrial Complex, Mathura Road, Faridabad, Page Nos.67 to 71 of Annexure-A5 Hanspal Industrial Complex were seized. These pages are letters issued by R.A. Financial Services to Mr. Rattan Prakash Mishra, President Om Shanti Educational Society. As per this letter, Sh. Vishnu Garg has received Rs.40,00,000/- (Rs.18,00,000/- received on 19.10.2010 and Rs.22,00,000/- received on 30.10.2010) from R. A. Educational Trust. The A.O, therefore, asked the assessee to explain the said amount and his interest in Omshanti Educational Society and the reasons as to why the said amount was paid to assessee.
25.1. The reply of the assessee vide letter dated 30.11.2018 has been reproduced by the A.O. which reads as under :
“As regard Pg. No. 67 & 71 of Annexure 5(Pg. 155-159) seized from 17/6, Hanspal Industrial Complex, Mathura Road, Faridabad, letters issued by R A Financial Services to Rattan Prakash Mishra, President Om Shanti Educational Society. As per these letters, assessee received cash of Rs.40,00,000/- on behalf of Om Shanti Educational Society from R.A. Financial Services. In this regard, it is submitted that assessee has received cash on behalf of Om Shanti Educational Society (as authorised person) which is specifically mentioned in Letter at Pg. 155. Moreover, the impugned agreement mentioned in this letter was between RA financial services and Om Shanti Education Society & assessee was not related to either with Om Shanti Education Society or R.A. Financial services. His role was only that of a witness to the transactions and he had not received any amount from any of the involved parties. It is further stated that he has neither any interest in Om Shanti Education Society nor do have any shareholding or investment in the said society.”
25.2. However, the A.O. was not satisfied with the arguments advanced by the assessee and made addition of Rs.40 lakhs on the ground that assessee did not furnish any evidence in respect of its claim that this money was actually further given to Omshanti Educational Society. According to him, merely submitting that the amount was received on behalf of the Society without furnishing any evidence of giving it further to the Society cannot be accepted. He accordingly made addition of Rs.40 lakhs to the total income of the assessee under section 69A of the I.T. Act, 1961.
25.3. In appeal, the Ld. CIT(A) upheld the action of the A.O. by observing as under :
“5.4. It is not in dispute that the cash was received by the appellant. It is onus of the appellant to prove that the cash was received as an agent of someone else (M/s. Omshanti Educational Society). The appellant failed to discharge this onus before the A.O. as well as before the undersigned. I find no infirmity in action of the A.O. in making this addition. Therefore, this ground (No.6) is dismissed.”
25.4. Aggrieved with such order of the Ld. CIT(A) the assessee is in appeal before the Tribunal.
26. Learned Counsel for the Assessee strongly challenged the order of the Ld. CIT(A) in confirming the addition of Rs.40 lakhs made by the A.O. He submitted that the documents Page Nos. 67 to 71 of Annexure 5 (PB-1 Pages 79-83) seized from 17/6, Hanspal Industrial Complex, Mathura Road, Faridabad, are letters issued by RA Financial Services to Rattan Prakash Mishra, President Om Shanti Educational Society. As per these letters assessee received cash of Rs.40,00,000/- (40 Lakh) on behalf of Om Shanti Educational Society from R.A. Financial Services as Authorized Person which is specifically mentioned in Letter at PB Pages 81-82. Moreover, the impugned agreement mentioned in this letter was between RA financial services and Om Shanti Educational Society and assessee was not related to either with Om Shanti Educational Society or R. A. Financial Services. He submitted that assessee’s role was only that of a witness to the transactions and he had not received any amount from any of the involved parties. During assessment proceedings under section 153A, statement of Sh. Rattan Prakash Mishra was recorded on dt. 16.11.2018 (PB Pg. 275-276) wherein specific question (Q-13) was asked relating to above said letter and money received by assessee amounting Rs.40 Lakh from R A Educational Trust on behalf of Om Shanti Education Trust and in reply after looking the letter (supra), he has recalled about Ms. Ashima Salwan he had stated as under :-
“Presently I can’t recall about such information and I am unable to access books of accounts of Om Shanti Education Society now. After looking these pages I recall that Ms. AshimaSal wan is the wife of Sh. AbhaySalwan who is the controlling authority ofRA Financial services & RA Education Trust.”
26.1. Thus from above submissions, letter and statement of Rattan Prakash Mishra, it is clear that the said sum of Rs.40 Lakh belongs to Om Shanti Educational Society. The A.O. without making any further enquiry from Om Shanti Educational Society or Sh. Rattan Prakash Mishra merely on surmises and conjectures made the addition of Rs.40 lakh in the hands of the assessee.
26.2. The Learned Counsel for the Assessee in his alternate contention submitted that if any addition on this account is to be made, then assessee is entitled to telescoping against addition made on account of bogus purchases in the hands of assessee, L V Rustore Applications Pvt. Ltd. & R R Carwell Pvt. Ltd. as undisclosed income of assessee. He submitted that if telescoping of income is not given, then there will be double addition in as much as both the undisclosed income and the investment made out of such income are both brought to tax which is contrary to the basic principles of assessment. Therefore, undisclosed income and the undisclosed investment are to be set-off against each other, thus, giving benefit of telescoping to the assessee. In support of this contention, the Learned Counsel for the Assessee relied upon the following decisions :
(1) CIT vs Sonal Construction (2013) 359 ITR 0532 (Del) (supra).
(2) AnantharanVeerasinghaiah & Co. Vs CIT (1980) 123 ITR 0457 (SC) (supra).
27. The Ld. D.R. on the other hand heavily relied on the order of the A.O. She submitted that assessee could not substantiate with evidence that it had received money on behalf of Omshanti Educational Society from R.A. Financial Services and handed over the same to Omshanti Educational Society. She submitted that it is highly improbable that R.A. Financial Services instead of giving the money directly to Omshanti Educational Society has given the money to the assessee to handover the same to Omshanti Educational Society. She accordingly submitted that the order of the Ld. CIT(A) should be upheld and the ground raised by the assessee on this issue should be dismissed.
28. We have considered the rival arguments made by both the sides, perused the orders of the A.O. and the Ld. CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the A.O. in the instant case made addition of Rs.40 lakhs on the basis of the seized documents Page Nos.67 to 71 of Annexure-A5 on the ground that as per the letter issued by R.A. Financial Services to Mr. Rattan Prakash Mishra, President Omshanti Educational Society, Mr. Vishnu Garg has received Rs.40 lakhs from R.A. Educational Trust on various dates i.e., Rs.18 lakhs on 19.10.2010 and Rs.22 lakhs on 30.10.2010. The submission of the assessee that he has received the cash of Rs.40 lakhs on behalf of Omshanti Educational Society from R.A. Financial Services and were subsequently passed-on to Omshanti Educational Society was rejected by the A.O. on the ground that the assessee failed to furnish any evidence that this money was actually further given to Omshanti Educational Society. It is the submission of the Learned Counsel for the Assessee that there is an agreement between R.A. Financial Services and Omshanti Educational Society and assessee was not related to either of them and his role was that of a witness to the transaction. It is also his submission that during the course of assessment proceedings under sections 153A/153C of the I.T. Act, 1961, the statement of Shri Rattan Prakash Mishra was recorded on 16.11.2018 wherein specific query was asked to him. The A.O. without any further enquiry from Omshanti Educational Society or Shri Rattan Prakash Mishra made the addition which is nothing but surmises and conjectures.
28.1. We find some force in the above arguments of the Learned Counsel for the Assessee. A perusal of the seized documents clearly and categorically show that the amount of Rs.40 lakhs was paid by R.A. Financial Services to Shri Rattan Prakash Mishra, President of Omshanti Educational Society through Shri Vishnu Garg. We find from PDF Page-81 (PB Pages 172 and 173) that R.A. Financial Services vide letter dated 17.08.2011 addressed to Shri Rattan Prakash Mishra, President Omshanti Educational Society has written as under :
“R.A. FINANCIAL SERVICES
SOLUTION TO FINANCIAL MATTERS
F-13, 2nd Floor, Sector-10, Faridabad Ph.9971797798
Email : abhaysalwan@gmail.com
17th August, 2011
To
Mr. Rattan Prakash Mishra,
President, Om Shanti Educational Society,
H.No.1365, Sector-17,
Faridabad.
Sub: Re-Reply to your Letter Dated 09.08.2011 in context with my Letter Dated 5.08.2011.
Dear Mr. Mishra,
1. This has reference to the letter dated 9th August 2011 regarding the re reminders and reminder letters for the MOU agreement dated 6th Sep 2010 between RPS Education Foundation, Om Shanti Educational Society and R.A. Financial Services. At the outset, it is stated that each and every allegation of breach and or non performance of-any of the terms and conditions of MOU dated 06.09.2010 are wrong, false and have been totally concocted.
2. It is not disputed that as per the Clause 11 of MOU dated 06.09.2010, R.A. Financial Services was liable to pay 1,73,32,674/- (Rupees; One Crore Seventy Three Lacs Thirty Two Thousand Six Hundred and Seventy Four only) to party of the first and second part which stands already paid, The details of which are as under :
“A sum of Rs.1,35,00,000 (Rs.One Crore Thirty Five Lacs only) has been paid till 16.10.2010 as admitted by you in your letter under reply. The balance amount of Rs.40,00,000 (Rs.Fourty Lacs only) has been paid by R.A. Financial Services through its authorized signatory Mr. Abhay Salwan to Mr. Vishnu Garg, s/o. Sh. B.D. Garg, member Omshanti Educational Society as per your instructions and to your knowledge because you have to pay the aforesaid amount to Mr. Vishnu Garg. The details of payment are given below :
19.10.2010 – A sum of Rs.18,00,000 (Rs.Eighteen Lacs only) was paid.
30.10.2010 – A sum of Rs.22,00,000 (Rs.Twenty Two Lacs only) was paid.
3. That as per the clause 9 of MOU and the payment terms of the said agreement, the balance payment having already been paid to you on 30.10.2010 by R.A. Financial Services the land of RPS Education. Foundation has been transferred to Omshanti Educational Society vide Sale Deed No.149 dated 06.04.2011. It is further stated that after having received the amount of Rs.1,35,00,000 (Rs. One Crore Thirty. Five lacs only) the undersigned and five of his associates were inducted as members of the Governing body of Omshanti Educational Society which fact is to your knowledge. The undersigned and five of his associates were inducted as members with all powers to deal with, the properties and management of Omshanti Educational Society. It is further to bring to your notice that the undersigned was .appointed as the Treasurer of the society and Ms. Aashima Salwan as the Vice President of the society. The aforesaid members were inducted on 12.10.2010. The intimation of the induction of the said members was duly communicated to the District Registrar, Firms and Societies, Faridabad vide letter dated 18.10.2010 addressed to him by your goodself.
4. It is further’ brought to your kind notice that a resolution was passed on in the name of Shyam College of Education which was run by Omshanti Educational Society inter alia authorising the undersigned to operate the account of Shyam College of Education run by Omshanti Educational Society in Syndicate Bank, Chawla Colony, Ballabgarh.
5. It is therefore preposterously wrong to allege that any amount is outstanding towards the undersigned or R.A. Financial Services. You have no right to allege or say that the MOU dated 06.09.2010 has in any way been violated by the undersigned thereby giving you any scope to treat the MOU as cancelled or rescinded. In these premises each and every allegation and statement of facts contained in the letter under reply is totally false and the symbol of falsity stated therein is to your knowledge.
6. It is highly incongruent on your part to suppress the factum of receipt of the amount of Rs.40,00,000 (Rs. Forty Lacs only) which has, been paid by the undersigned on behalf of R.A. Financial Services to your authorised arid nominated person.
7. Under the circumstances you are hereby inform to withdraw your letter dated and refrain from shuttle cocking such type of obnoxious communications in future. Needless to add that you have no right to either resile from the terms and conditions of the MOU dated 06.09.2010 or treat it as cancelled on your fabricated grounds.
For R.A. Financial Services
Sd/-
Authorised Signatory
cc. Mr. Vishnu Garg, H.No.128, Sector-16, Faridabd. Mr. Dinesh Gupta, H.No.326, Sector-10, Faridabad.”
28.2. Similarly, R.A. Financial Services vide letter dated 29.08.2011 addressed to Shri Rattan Prakash Mishra, President Omshanti Educational Society has written as under [PB Pages 170-171 and PDF Pages 79-80] :
“R.A. FINANCIAL SERVICES
SOLUTION TO FINANCIAL MATTERS
F-13, 2nd Floor, Sector-10, Faridabad Ph.9971797798
Email : abhaysalwan@gmail.com
29th August, 2011
To
Mr. Rattan Prakash Mishra,
President, Om Shanti Educational Society,
H.No.1365, Sector-17,
Faridabad.
Dear Mr. Mishra,
Please refer to your communication dated 23,08.2011. After going through the contents and without adverting to para-wise and point-wise reply, I wish to Inform you as under :
At the outset, it is highly surprising and painful to say that despite having received- the entire amount in terms of the MOU dated 06.09.2010, you still have the audacity to deny the receipt of payment, although it is in your active and full knowledge. To steer clear the misgivings, it is once again brought to-your notice in order to straighten the records that admittedly a sum of Rs.1,35,00,000 has been received by you. The remaining amount of Rs.40,00,000 stands paid to you by the, undersigned and the payment has been received by you through Mr. Vishnu Garg, your authorised person.. The details of payment have been given in the last letter dated 17.08.2011. You can cross check and co ordinate with your own representative..
Your bid to cancel the MOU is obviously mischievous and malafide attempt. It is beyond anybody’s comprehension as to how and under what circumstances you can wriggle out of the aforementioned MOU when its terms and conditions have been, adhered to by the undersigned in its entirety.
Regarding your assertion that attempts are being made to allegedly occupy or possess the land and building at Panhera Khurd, Ballabgarh by the undersigned and about the alleged trespass, it is yet another cock and bull story on your part. You are unnecessary trying to put curtain on your admitted stand. It is again emphasized that the land and building at the said site is in possession of R.A. Educational Trust which is in in lawful possession under a valid arrangement. Any attempt, to dislodge the working of R.A. Educational Tryst would on the other hand be an act of trespass and or interference in the legal and peaceful possession of the said R.A. Educational Trust. Rest of the contentions in your reply are nothing but old rhymes enchanted earlier in your communication under reply which have since been appropriately dealt with and replied.
It is needless to emphasize that R.A. Educational Trust is running Savitri Polytechnic For Women in the premises which is too well known to you and such activity is going on since January 2011, Coincidently the said institution was inaugurated by your goodself and the members of your family. It is therefore too late in the day for you to resile from the factual matrix.
For R.A. Financial Services
Sd/-
Authorised Signatory
cc. Mr. Vishnu Garg, H.No.128, Sector-16, Faridabd. Mr. Dinesh Gupta, H.No.326, Sector-10, Faridabad.”
28.3. Since these letters were found and seized during the course of search and the letters clearly and categorically mention that an amount of Rs.40 lakhs was given by R.A. Financial Services to Shri Rattan Prakash Mishra, President Omshanti Educational Society and the assessee was only an intermediary, therefore, adding the same to the income of the assessee, in our opinion, is not justified. Accordingly, the order of the Ld. CIT(A) on this issue is set aside and the ground of appeal number 8 raised by the assessee is allowed.
29. Grounds of appeal number.10 relates to telescoping which has already been adjudicated while deciding the ground No.5 at para 18.2 of this order and, therefore, no separate adjudication is required.
30. In the result, ITA.No.9147/Del./2019 of the Assessee is partly allowed.
ITA.No.9148/Del./2019 – A.Y. 2012-13 :
31. The grounds raised by the Assessee are as under:
1. “Because the action for initiation, continuation and conclusion of assessment proceedings u/s 153A at an amount of Rs.79,47,790/- is being challenged on facts and law.
2. Because the action is being challenged on facts and law for making additions in assessment proceedings u/s 153A when there is no incriminating material/document found during the course of search u/ s 132 of the Act for the impugned year.
3. Because the action is being challenged on facts and law for making an addition of Rs.4,50,000/- (@ 1.5% of Rs.50,00,000/- given to Mishra ji) which is unwarranted action by assuming the interest accrued of 1.5% which is a hypothetical income and against the principle of law (Godhara Electricity Co. Ltd., vs., CIT (1997) 225 ITR 746 (SC) whereas per assessee said loan of Rs.50,00,000/- is given to Abhay Sal wan & not to Mishraji.
4. Because the action is being challenged on facts and law for making an addition of Rs.4,50,000/- (@ 3% of Rs.50,00,000/- given to Abhay Salwan) which is unwarranted action by assuming the interest accrued @ 3% which is a hypothetical income and against the principle of law (Godhara Electricity Co. Ltd., vs., CIT (1997) 225 ITR 746 (SC).
5. Because the action is being challenged on facts and law for making an addition of Rs.9,00,000/-, wherein the evidence and the fact of the payee Abhay Salwan being a proclaimed offender and absconding is matter of Judicial Review before the Hon’ble Allahabad High Court, yet wrongly invoking the jurisdiction of presumption u/s. 132(4A). Alternatively and without prejudice to above, the prayer is to allow the claim/relief in accordance with the provision of section 58(2) r.w.s. 70, 71 of Income Tax Act, 1961.
6. For any consequential relief and/or legal claim arising out of this appeal and for any addition, deletion, amendment and modification in the grounds of appeal before the disposal of the same in the interest of substantial justice to the assessee.”
31.1. The assessee has also raised the following additional ground :
ii) Because the action is being challenged on facts & law for making additions in assessment proceedings u/s 153A wherein the seized documents Pg. 125 – 126 of Annexure A-5 relating to assessee were found from the premises of third parties i.e., LV Rustore Appliations Pvt. Ltd., R.R Carwell Pvt. Ltd., Blossom Landeal Pvt Ltd., & Elvi Bardahl India Pvt. Ltd., 17/6, Hanspal Industrial Complex, Mathura Road, Faridabad, therefore the additions on the basis of the said documents can only be made u/s 153C of the Act & not u/s 153A of the Act.
31.2. However, the Learned Counsel for the Assessee did not press the additional ground, for which, the Ld. D.R. has no objection. Accordingly, the additional ground is dismissed as not pressed.
32. Grounds of appeal number.1 and 6 being general in nature, are dismissed.
33. Learned Counsel for the Assessee did not press grounds of appeal number.2, for which, the Ld. D.R. has no objection. Accordingly, grounds of appeal number.2 is dismissed as not pressed.
34. Grounds of appeal numbers.3 to 5 relate to interest of Rs.9,00,000/- [Rs.4,50,000/- + Rs.4,50,000/-] from Shri Abhay Salwan and Shri Rattan Prakash Mishra.
1. After hearing both the sides, we find the above grounds are identical to the grounds of appeal numbers.6 and 7 in ITA.No.9147/Del./2019. We have already decided the issue and the grounds raised by the assessee have been allowed wherein the addition of interest made by the AO and upheld by the Ld. CIT(A) has been deleted. Following similar reasoning the above grounds by the assessee are allowed.
ITA No.9149/Del./2019(Assessee’s appeal) A.Y. 2013-14
33. The grounds raised by the assessee are as under :
1. Because the action for initiation, continuation and conclusion of assessment proceedings u/s 153A at an amount of Rs.3,70,94,992/- is being challenged on facts and law.
2. Because the action is being challenged on facts and law for making additions in assessment proceedings u/s 153A when there is no incriminating material/document found during the course of search u/ s 132 of the Act for the impugned year.
3. Because the action is being challenged on facts and law for invoking the jurisdiction u/s. 69A r.w.s. 115BBE as unexplained money for Rs.2,39,25,000/- while assuming the presumption for addition bereft of material facts containing material particulars in the case proceedings.
4. Alternatively & without prejudice to above, the action for not giving benefit of Rs.50,00,000/- (receipts dt. 01.01.2012 seized during search) received back from Abhay Salwan & R. A. Financial Services in peak cash balance. Similarly, A.O. has not given benefit of Rs.50,00,000/- (receipts dt.15.12.2011 seized during search relating to L V Rustore Applications P. Ltd., wherein assessee is Share Holder & Director) received back from Abhay Salwan & R A Financial Services along with interest in peak cash balance.
5. Because the action is being challenged on facts law for charging interest of Rs.41,86,000/- (Period 12.11.2012 to 31.03.2013) as income from other sources which is disputed since hypothetical income cannot be put to charge and alternatively without prejudice, the prayer is to allow the claim/relief in accordance with the provision of section 58(2) r.w.s. 70,71 of Income Tax Act 1961.
6. Because the action is being challenged on facts and law for making the addition of Rs.13,50,000/- on the invoking of provision u/s 132(4A) (presumption) which is being disputed since treated as income from other sources since hypothetical income cannot be put to charge and alternatively without prejudice, the prayer is to allow the claim/relief in accordance with the provision of section 58(2) r.w.s. 70,71 of Income Tax Act 1961.
7. Because the action is being challenged on facts and law for making disallowance of interest for Rs.3,04,832/- which is a deduction allowable while computing chargeable income u/s 22 to 24.
8. For any consequential relief and/or legal claim arising out of this appeal and for any addition, deletion, amendment and modification in the grounds of appeal before the disposal of the same in the interest of substantial justice to the assessee.”
37. The assessee has also raised the following additional ground :
“(i) Because the action is being challenged on facts & law for making additions in assessment proceedings u/s 153A wherein the seized documents Pg. 38 – 39 of Annexure A-10 & Pg.36-37 of Annexure A-10 relating to assessee were found from the premises of third parties i.e., LV Rustore Applications Pvt. Ltd., RR Carwell Pvt. Ltd., Blossom Landeal Pvt Ltd., & Elvi Bardahl India Pvt. Ltd., 17/6, Hanspal Industrial Complex, Mathura Road, Faridabad, therefore the additions on the basis of the said documents can only be made u/s 153C of the Act & not u/s 153A of the Act.”
38. Learned Counsel for the Assessee did not press the additional ground, for which, the Ld. D.R. has no objection. Accordingly, the additional ground by the assessee is dismissed.
39. Grounds of appeal numbers.1 and 8 being general in nature, are dismissed.
40. Learned Counsel for the Assessee did not press ground of appeal number.2, for which, the Ld. D.R. has no objection. Accordingly, the same is dismissed as not pressed.
41. In ground of appeal number.3 the assessee has challenged the addition of Rs.2,39,25,000/- made by the A.O. and sustained by the Ld. CIT(A).
42. Facts of the case, in brief, are that during the search operation at premises 17/6, Hanspal Industrial Complex, Mathura Road, Faridabad, Page numbers.35 and 36 of Annexure A-10 was seized. It is an MOU entered into by the Assessee and Gyaneshwar Education Trust on 12.11.2012. According to this MOU assessee had given a cash loan of Rs.3.5 crores to Gyaneshwar Education Trust @ 2.6% interest per month for one year till 11.11.2013. This MOU is duly signed by Shri Abhay Salwan on behalf of the Trust and was found in the custody of the assessee. The A.O, therefore, asked the assessee to explain the source of Rs.3.5 crores and explain as to why the same should not be added as unexplained income.
43. The assessee filed the following reply :
“As regard Pg. No. 36 & 37 of the Annexure A-10 (Pg. 98-100 of submission for AY 2011-12) seized from premises 17/6, Hanspal Industrial Complex, Mathura Road, Faridabad, it is submitted that in MOU, Abhay Salwan has not signed at First Party place but made initial only as proposal of signing MOU(supra) & sent the same to the assessee for execution however assessee rejected said MOU & declined to sign the said MOU and however the document was kept as a matter of abundant caution to determine the acceptance of acknowledged debt by Mr Abhay Salwan. Moreover, the same is not having any seal of Gyaneshwar Education Trust nor the document is notarized hence the same is not enforceable in accordance with the procedure of law…”
44. However, the A.O. was not satisfied with the explanation given by the assessee on the reasoning that during assessment proceedings in case of the assessee for AY 2012-13, it was concluded that the basic premise of the assessee that Rs.75,00,000/- was given to Shri Abhay Salwan in Year 2009 was false because such amount of Rs.75,00,000/- was found to have been given to Shri Rattan Prakash Mishra in Year 2009. The AO also reasoned that the version of the assessee that the assessee, in order to protect the principal amount of Rs.50,00,000/- (out of Rs.75,00,000/-, Rs.25,00,000/- was returned to the assessee in September 2011) and interest thereon, decided to create the MOU with Shri Abhay Salwan for Rs.3.5 Cr on 12.11.2012, did not appeal to human logic on several accounts. The AO reasoned that even if it is considered that Rs.50,00,000/- and interest @ 1.5% per month thereon was pending to be received from September 2010, the said amount would not be more than Rs.71,47,514/- in September 2012. Then why a person i.e. Shri Abhay Salwan on behalf of M/s. Gyaneshwar Educational Trust would sign an agreement which clearly mentioned that M/s. Gyaneshwar Educational Trust had received a cash loan of Rs.3.5 Cr which carried interest @ 2.6% per month for one year (i.e. till 11.11.2013). The AO calculated available cash balance as per the table mentioned in para 5.8 of the assessment order to the tune of Rs.1,10,75,000/- as on 12.11.2012. Since, the MOU acknowledged receipt of cash loan of Rs. 3.5 Cr, therefore, the AO treated Rs.2,39,25,000/- being the difference between Rs.3.5 Cr and Rs.1,10,75,000/-, as unexplained and made addition of equivalent amount u/s 69A.
45. In appeal, the Ld. CIT(A) upheld the action of the A.O. by observing as under :
22.6. During the present appellate proceedings, that AR repeated the stand taken before the AO. Additionally, the AR argued that calculation of availability of cash as on 12.11.2012 was not correct because benefit of Rs.1,00,00,000/- which was extended by way of four receipts of Rs.25,00,000/-each {first evidencing payment of cash loan Rs.25,00,000/- by Shri Vishnu Kumar Garg to Shri Abhay Salwan, second evidencing payment of cash loan of Rs.25,00,000/- by M/s. L.V. Rustore Applications Pvt. Ltd. to Shri Abhay Salwan, third evidencing payment of cash loan of Rs.25.00,000/- by Shri Vishnu Kumar Garg to M/s. RA Financial Services (signed by Shri Abhay Salwan) and fourth evidencing payment of cash loan of Rs.25,00,000/- by M/s. L V. Rustore Applications Pvt. Ltd. to M/s. RA Financial Services (signed by Shri Abhay Salwan) } and cash generated out of bogus purchases in case of appellant, Smt. Lata Garg (W/o the appellant), M/s. L.V. Rustore Applications Pvt. Ltd. and M/s. R R Carwell Pvt. Ltd. has not been allowed.
22.7. As far as plea that this agreement was not enforceable by the law is concerned, the same cannot be accepted. The provisions u/s 132(4A)/292C are very clear. The presumption is that content of any seized material are to be taken as true. The MOU clearly stated that the appellant had given a total amount of Rs.3,50,00,000/- as a loan in cash for a period of one year i.e. from 12th November, 2012 to 11th November, 2013. It is an evidence. Of course, it is a rebuttable evidence. However, the appellant produced no evidence to rebut the same. Therefore, this plea is rejected. The AO has rejected the theory of earlier loan of Rs.75,00,000/- ( Rs.50,00,000/- in Jan, 2009 and Rs.25,00,000/- in June, 2009 and re-payment of Rs.25,00,000/- on 11.10.2010) to Shri Abhay Salwan because the seized papers clearly showed that it was given to Shri Rattan Prakash Mishra. During the present appellate proceedings, the AR could not show that any material was submitted before the AO to rebut this finding. Therefore, this theory is also rejected.
22.8. As far as benefit of Rs.1,00,00,000/- which was extended by way of four receipts of Rs.25,00,000/-each is concerned, the two receipts out of captioned four receipts have stated that the amounts mentioned therein were advanced on 15.12.2011 for a period of one year. Rest of the two receipts stated that the amount mentioned therein were advanced on 01.01.2012 for a period of one year. Although, the AR claimed that it was the same amount along with the due interest (because the interest was never paid) which was shown as received under the MOU under consideration, however, the appellant produced no material evidence in support of this claim. As such, these (four) receipts evidence that the loan was extended for one year with effect from 01.01.2012. Therefore, in absence of any evidence showing contrary, it will be presumed that these loans would be returned on 15.12.2012/01.01.2013. Therefore, it is difficult to accept this plea. As far as the other plea (telescoping against the generation of cash out of bogus purchases) is concerned, it has been dealt with in para 4.6 (supra). The observations/remarks made therein are applicable to this addition, mutus mutandi.
22.9. In view of the above discussion, this ground (No. 3) of appeal is dismissed, subject to the above mentioned remarks/observations.”
46. Aggrieved with such order of the Ld. CIT(A), the assessee is in appeal before the Tribunal.
47. The ld. Counsel for the assessee strongly challenged the order of the Ld. CIT(A) in sustaining the addition of Rs.2,39,25,000/- made by the AO on the basis of seized documents at page no.36 & 37 of the Annexure A10. He submitted that the First MOU dated 12.11.2012 has only the signature of Abhay Salwan, which was neither stamped nor notarized. Therefore, it has no evidentiary value. Further Shri Abhay Salwan is a fraud has already been brought on record by producing court orders while arguing for AY 2011-12. There is no corroborative evidence that the amount of Rs.3.5 crores is given by the assessee to Abhay Salwan. He submitted that a perusal of the MOU and other details given by the assessee to the AO at the time of assessment proceedings conclusively prove the amount of Rs.3.50 Crores consists of the principal, interest and interest on interest be recovered from Abhay Salwan. He accordingly submitted that the addition made by the AO and sustained by the Ld. CIT(A) should be deleted.
47.1. He submitted that in the MOU, Abhay Salwan has not signed at First Party place but made initial only as proposal of signing MOU and sent the same to the assessee for execution. However, the assessee rejected the said MOU and declined to sign the said MOU. However the document was kept as a matter of abundant caution to determine the acceptance of debt acknowledged by Mr Abhay Salwan. He submitted that the MOU is not having any seal of Gyaneshwar Education Trust nor the document is notarized hence the same is not enforceable in accordance with the procedure of law.
47.2. He submitted that the two MOUs dated 12.11.2012 and 28.09.2013 are not supported by any book entries which could reveal that actual cash has been paid. He submitted that the above MOUs are only made up documents to protect the assessee’s interest on account of assuring the amount to be received from Mr. Abhay Salwan. The ld. Counsel for the assessee submitted that the assessee does not have any source to pay such huge amount of Rs.5 Crores to Mr. Abhay Salwan as per the second MOU. Referring to various pages of the paper book, he submitted that in fact the principal loan given to Mr. Abhay Salwan in 2009-10, the interest on it and interest on interest all together comes to Rs.5 Crores which can be verified from the details given before the AO and the AO has not found the same to be incorrect or untrue. Referring to various decisions, he submitted that when assessee is denying the making of any payment, then the burden is on the Revenue to bring cogent evidence to establish the same.
47.3. Ld. Counsel for the assessee referring to the contents of the MOUs, submitted that as per the MOU, money was received by Mr. Abhay Salwan for construction of his ongoing project. However, no effort has been made by the AO to find out as to whether any construction activity has taken place so as to verify the authenticity of the cash payment and charge the assessee. He submitted that since the main person Mr. Abhay Salwan is absconding, the AO should have examined the witnesses to such MOUs and the notary who are available to find out the truth.
47.4. Ld. Counsel for the assessee referring to various court orders submitted that Mr. Abhay Salwan, his wife Ashima Salwan, his partner Brij Bhusan Tyagi, Mr. Himanshu Tyagi and Suman Tyagi wife of Mr. Brij Bhushan Tyagi, who are parties to the second MOUs are declared as proclaimed offenders. However, the AO has not examined Mr. Sanjay Gupta, one of the witness of the MOU or the notary in whose register, such documents/MOUs were entered to find out the truth.
47.5. Ld. counsel for the assessee submitted that during the course of search, receipts in the name of O.P. Gulati and his wife Renu Gulati were also found, which is related to these MOUs. Although the AO has summoned O.P. Gulati and recorded his statement, however, no question was asked to him on these MOUs which shows that no proper examination was done by the AO. He submitted that since the AO has failed in his duty, the addition made by him and sustained by the Ld. CIT(A) should be deleted.
47.6. The ld. counsel for the assessee further submitted that addition has been made by the AO under section 69A of the I.T. Act. Referring to the provisions of section 69A, he submitted that these MOUs do not come under the category of money, bullion, jewellery or other valuable articles. Further, the date of payment is also not mentioned in the MOUs and therefore to which financial year it relates is not ascertainable which is mandatory requirement of provisions of section 69A of the I.T. Act, 1961. He submitted that addition, if any, could have been made only u/s 69 of the Act.
47.7. Ld. counsel for the assessee submitted that the first MOU dated 12.11.2012 does not have the signature of the assessee or any witness and not even notarized. The Second MOU dated 28.09.2013 has not been acted upon.
The so-called property to be mortgaged by Mr. Abhay Salwan as mentioned in the MOU was already mortgaged to the bank and property documents were never handed over to the assessee, then it is against human probability that the assessee would have given such huge money especially when he is denying the same from the beginning.
47.8. Alternatively & without prejudice to the above, he submitted that the AO has not given the benefit in calculation of peak cash credit relating to loan given by L V Rustore Applications P Ltd. to Abhay Salwan amounting Rs. 50 Lakh in AY 2012-13 received back from him during the year and interest on loan given to Abhay Salwan for which separate addition of Rs. 5,25,000/- in AY 2012-13 & Rs. 11,25,000/- in AY 2013-14 has been made. The peak cash credit after giving benefit of amount of L V Rustore Applications Pvt. Ltd. & interest amount be reduced by Rs. 66,50,000/-.
47.9. He accordingly submitted that the addition sustained by the ld. CIT(A) should be deleted.
48. The Ld. DR on the other hand, heavily relied on the orders of the AO and the Ld. CIT(A). She submitted that the addition was made by the AO on the basis of seized documents page no.36 & 37 of the Annexure A-10. The assessee could nothing explain with satisfactory explanation as to how and why the MOUs were found from the place of the assessee. Whatever argument the ld. Counsel for the assessee has made are nothing but concocted story and does not have any evidentiary value. She submitted that the argument of the assessee nowhere matches with the figures mentioned in the MOU. Therefore, the order of the Ld. CIT(A) being in accordance with law should be upheld.
49. We have considered the rival arguments made by both the sides, perused the orders of the Assessing Officer and the Ld. CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the AO in the instant case made addition of Rs.2,39,25,000/-on the basis of documents at page 36 and 37 of the Annexure A-10 seized from the premise at 17/6, Hanspal Industrial Complex, Mathura Road, Faridabad. According to the AO, the seized document is an MOU entered into between the assessee and Gyaneshwar Education Trust on 12.11.2012, according to which the assessee had given cash loan of Rs.3.50 Crores to Gyaneshwar Educational Trust @ 2.6% interest per month for one year till 11.11.2013. This MOU is duly signed by Shri Abhay Salwan on behalf of the Trust and was found in the custody of the assessee. We find the reply of the assessee that Mr. Abhay Salwan has not signed at First Party place but made initial only as proposal of MOU was rejected by the AO and for which the AO has given his reasoning at pra 5.4 to 5.10 onwards in his order. However, the AO while making the addition of Rs.2,39,25,000/-, has given benefit of peak credit of Rs.1,10,75,000/- and made the addition of balance Rs.2,39,25,000/-. We find the ld. CIT(A) upheld the same, the reasoning of which have already been reproduced in the preceding paragraph. It is the submission of the ld. Counsel for the assessee that since Mr. Abhay Salwan defaulted in making the payment, he came with a new proposal in the month of November, 2012 to secure the assessee’s loan and voluntarily furnished an undertaking in the form of MOU with Gyaneshwar Education Trust for consolidated amount of Rs.3.5 Crores which was outstanding with interest upto 12.11.2012. It is the submission of the ld. Counsel for the assessee that in the MOU dated 12.11.2012, there is only one initial of Mr. Abhay Salwan, which is not stamped or notarized. Further, it does not contain the signature of the assessee or any witness. It is his submission that Mr. Abhay Salwan is fraud and was only buying time to pay the principle as well as interest. It is the submission of the ld. Counsel for the assessee that there is no corroborative evidence regarding the amount of Rs.3.5 Crores given by the assessee to Mr. Abhay Salwan and that the AO has not examined the available persons to the MOU such as the witness Mr. Sanjay Gupta or the notary since the other persons in the MOU are declared as proclaimed persons. It is also his submission that although the AO summoned and recorded statement of Mr. O.P. Gulati, he has not asked any question to Mr. Gulati on the issue of the MOU although receipts in the name of Mr. Gulati were found and related to the same MOU.
49.1. We find some force in the argument the ld. counsel for the assessee that proper justice has not been done while making such huge addition without examining the various persons to the MOU to find out the truth. We find a somewhat identical issue had come up before the Hon’ble Delhi High Court in the case of CIT Mr. Ved Prakash Choudhary, reported in 305 ITR 245 (Del.) and relied by the Ld. counsel for the assessee, where the Hon’ble High Court dismissed the appeal filed by the Revenue by observing as under:-
2. Briefly the facts of the case are that a search was conducted at the residence of the Appellant on 10th February, 2000. During the course of search, two Memorandums of Understanding (MOU) dated 1st March, 1999 were recovered. These MOUs were entered into between the Assessee, Ravi Talwar and Madhu Talwar. In terms of the MOUs, the Assessee had paid Rs.25 lakhs each to Ravi Talwar and Madhu Talwar towards part consideration for the purchase of agricultural land valued at Rs.123.30 lakhs. The balance amount was to be paid on or before 30th April, 1999, failing which the amount of Rs.25 lakhs each would be forfeited.
3. On the basis of the MOUs, the Assessing Officer issued a questionnaire to Ravi Talwar and Madhu Talwar regarding receipt of the amount of Rs.25 lakhs each but while they both admitted having signed the MOUs, they denied having received any amount. The Assessing Officer concluded that the denials by the Assessee of having made payments and of Ravi Talwar and Madhu Talwar of having received the amounts was only to escape payment of tax liabilities. Accordingly, an amount of Rs.50 lakhs was added in the hands of the Assessee under Section 69 of the Income Tax Act, 1961 (for short the Act) as unexplained expenditure.
4. The view taken by the Assessing Officer was not accepted by the Commissioner of Income Tax (Appeals) and also by the Tribunal. Both concurrently were of the view that there was not enough evidence to add the amount in the hands of the Assessee.
5. The Commissioner was of the view that all the parties had denied the transaction and in fact the property in question was eventually sold by Ravi Talwar and Madhu Talwar to M/s. Delhi Tent and Decorators Pvt. Ltd. whose Director gave a statement on 4th February, 2002 to the effect that he had purchased the agricultural land in question from Ravi Talwar and Madhu Talwar. It was also held that in view of the denial of receipt of any money by Ravi Talwar and Madhu Talwar, there ought to have been some independent corroboration of the payment but there was no such material forthcoming.
6. In so far as the Tribunal is concerned, it was of the view that under the provisions of Section 132(4A) of the Act, there was a presumption about the correctness of the contents of the MOUs but relying upon the decision of the Karnataka High Court in Commissioner of Income Tax vs. P.R. Metrani (HUF), [2001] 251 ITR 244, it was held that the presumption was rebuttable. It was further held that the Assessee had been able to successfully rebut the presumption.
7. Learned counsel for the Revenue reiterated the view expressed by the Assessing Officer. Unfortunately, we are not in agreement with that view.
8. The facts of the case make it very clear that there were two MOUs entered into by the Assessee with Ravi Talwar and Madhu Talwar in respect of the purchase of agricultural land. The two MOUs did record that “the purchase consideration shall be Rs.123.30 lacs. The purchaser having paid to the vendor the sum of Rs.25,00,000 part of the said purchase consideration as a deposit and shall pay the residual of said purchase consideration to the vendor on or before 30th April, 1999 when the purchase will be completed.”
9. Notwithstanding this, the Assessee as well as Ravi Talwar and Madhu Talwar denied the money transaction. In addition thereto, the case set up was that the agricultural land had, in fact, been sold to M/s. Delhi Tent and Decorators Pvt. Ltd. by Ravi Talwar and Madhu Talwar. This was confirmed by Shri N.K. Mittal, one of the Directors of M/s. Delhi Tent and Decorators Pvt. Ltd. Quite clearly, the MOUs did not fructify.
10. Section 132(4A) of the Act uses the expression “it may be presumed”. It is not obligatory on the assessing authority to make a presumption. Even if a presumption is required to be made, then, as held in Commissioner of Income Tax v. S.M.S. Investment Corporation P. Ltd., [1994] 207 ITR 364, the presumption is a rebuttable one and relates to a question of fact. While coming to this conclusion, the Rajasthan High Court relied upon an earlier decision rendered by it in Commissioner of Income Tax v. S.M.S. Investment Corporation, [1988] 173 ITR 393.
11. Even in Income Tax Officer, B-Ward, Ernakulam v. T. Abdul Majeed, [1988] 169 ITR 440, it has been held as follows: –
“It is true that section 132(4A) of the Act enables the court to presume the truth of the contents of such books. However, it is a presumption which can be rebutted. Moreover, the presumption envisaged therein is only a factual presumption. It is in the discretion of the court, depending upon other factors, to decide whether the presumption must be drawn. The expression used in the sub-section is “may be presumed” as is used in section 114 of the Evidence Act, 1872. It is not a mandate that whenever the books of account are seized, the court shall necessarily draw the presumption, irrespective of any other factors which may dissuade the court from doing so.”
12. In so far as the present case is concerned, the Assessee had stated that in fact there was no transfer of money between him and Ravi Talwar and Madhu Talwar. On the other hand, Ravi Talwar and Madhu Talwar had denied receipt of any money from the Assessee. In the fact of these denials, there ought to have been corroborative evidence to show that there was in fact such a transfer of money. Both the Commissioner as well as the Tribunal have come to the conclusion that there was no such material on record.
13. The Assessing Officer relied on certain other transactions entered into by the Assessee with Ravi Talwar and Madhu Talwar for drawing a presumption in respect of the transfer of money, but the Tribunal rightly held that those were independent transactions and had nothing to do with the MOUs, which were the subject matter of discussion. Even if there was something wrong with some other transactions entered into, that would not give rise to an adverse inference in so far as the subject MOUs are concerned.
14. In our opinion, no substantial question of law arises.
15. Dismissed.”
49.2. We find the SLP filed by the Revenue was dismissed by Hon’ble Supreme Court vide order dated 09.01.2009 as reported in (2010) 3 taxmann.com 785 (SC)
50. In the instant case, we find it is peculiar case where the assessee is denying to have made any payment as per the MOU and the second party in the MOU is absconding and is a proclaimed person. However, it is also a fact that the MOUs were found from the premises of the assessee and therefore the onus is on the assessee to prove that the assessee has not paid the amount as mentioned in the first and second MOU and that these MOUs are only for securing the payments made earlier with interest and interest on interest.
50.1. In our opinion, the matter requires a revisit to the file of the AO to examine certain things to find out the truth before making any addition.
i. The AO shall summon and record the statement of Mr. Sanjay Gupta who is a witness to the MOU and the notary in whose register the same has been entered to find out the facts and veracity of the MOU.
ii. The AO shall also summon and record the statement of Mr. O.P. Gulati in whose name receipts were found and which are related the MOU.
iii. In case the above persons do not respond to the summons issued by the AO, the onus shall be on the assessee to produce them before the AO. If the assessee fails to produce them and they do not respond to the summons then the AO may take adverse view.
50.2 The AO shall decide the issue in the light of our above observation and in accordance with law after giving due opportunity of being heard to the assessee. He shall also keep in mind the decision of the Hon’ble Delhi High Court (cited supra), while deciding the issue. We hold and direct accordingly. The ground of appeal no.3 by the assessee is accordingly allowed for statistical purposes.
51. Ground of appeal no.4 relates to the non-granting of credit of Rs.50 lakhs received from Mr. Abhay Salwan and R.A. Financial Services while computing the peak cash balance.
51.1. After hearing both the sides, we find it is the contention of the ld. Counsel for the assessee that benefit of Rs.50 lakhs as per receipt dated 01.01.2012 seized during the search and received back from Mr. Abhay Salwan and R.A. Financial Services should be given for computing the peak cash balance, Similarly, it is also his submission that the Assessing Officer has not given the benefit of Rs.50 lakhs as per seized documents dated 15.12.2011 seized during the course of search relating to L.V. Rustor Application Pvt. Ltd. where the assessee is shareholder and director and amount being received back from Mr. Abhay Salwan and R.A. Financial Services along with interest should be considered for computing the peak cash balance. Considering the totality of the facts of the case and in the interest of justice, we deem it proper to restore this issue to the file of the AO with a direction to decide the issue afresh after giving due opportunity of being heard to the assessee. We hold and direct accordingly. Ground of appeal No.4 by the assessee is accordingly allowed for statistical purposes.
52. Ground no.5 relates to the addition of Rs.41,86,000/- made by the Assessing Officer and sustained by the Ld. CIT(A).
53. After hearing both the sides, we find the Assessing Officer made the addition of Rs.41,86,000/- being interest @ 2.6% of cash loan of Rs.3.5 Crores given by Gyaneshwar Education Trust for the period 12.11.2012 to 11.11.2013 on the basis of MOU seized at the time of search. We find the Ld. CIT(A) sustained the addition by observing as under:-
22.9 Vide ground No. 4, the appellant has contested the addition of Rs. 41,86,000/-. This addition has been made because the AO has calculated the interest on the above stated cash loan of Rs. 3,50,00,000/- to M/s. Gyaneshwar Educational Trust.
22.10 Before the AO, as well as during the present appellate proceedings, the appellant contested that no interest was ever received. Other contentions extended are same as raised in support of ground No. 3, adjudicated above.
22.11 The provisions u/s 132(4A)/292C are very clear. The presumption is that content of any seized material are to be taken as true. The MOU clearly stated that the appellant had given a total amount of Rs. 3,50,00,000/- as a loan in cash for a period of one year i.e. from 12th November, 2012 to 11th November, 2013 and bears an interest @2.6 % per months. It is an evidence. Of course, it is a rebuttable evidence. However, the appellant produced no evidence to rebut the same. Therefore, this plea is rejected.
22.12 In view of the above discussion, this ground (No. 4) of appeal is dismissed.”
53.1. Since, the issue relating to the addition on the basis of the MOU as per ground of appeal No.3 has been restored to the file of the AO for fresh adjudication, therefore, this ground is also restored to the file of the for fresh adjudication by the AO. Needless to say, the AO shall give due opportunity of being heard to the assessee and decide the issue as per fact and law. We hold and direct accordingly. This ground of the assessee is accordingly allowed for statistical purposes.
54. Ground no.6 relates to the addition of Rs.13,50,000/- made by the AO and sustained by the Ld. CIT(A) again on account of interest received from Mr. Abhay Salwan on the loan granted of Rs.25 lakhs and Rs.25 lakhs each.
55. After hearing both the sides, we find the above ground is identical to the ground of appeal no.6 and 7 in ITA No.9147/Del/2019 for AY 2011-12. We have already decided the issue and ground raised by the assessee has been allowed. Following similar reasonings, this ground raised by the assessee is allowed.
56. Ground No.7 by the assessee relates to the order of the Ld. CIT(A) in confirming the addition of Rs.3,04,832/-made by the AO being interest paid on housing loan.
57. After hearing the both the sides, we find the AO on the perusal of the computation of income found that the assessee has shown interest payment on housing loan amounting to Rs.12,05,686/- . On being questioned by the AO, it was submitted by the assessee that he has obtained housing loan of Rs.2,00,75,720/- on which interest has been paid. However, the AO noted that the assessee has utilized only Rs.1,50,00,000/- out of the above amount of Rs.2,00,75,720/- for the purchase of the house property and the remaining funds were diverted for other purpose. In absence of any satisfactory explanation given by the assessee, the AO made addition of Rs.3,04,832/-, which has been upheld by the Ld. CIT(A). We do not find any infirmity in the order of the Ld. CIT(A) on this issue in absence of any satisfactory explanation even before us. Accordingly, the order of the ld. CIT(A) on this issue is upheld and the ground raised by the assessee is dismissed.
58. Ground No.8 being general in nature is dismissed.
ITA No.9448/Del/2019 (Revenue’s Appeal) for AY 2013-14.
59. The Revenue has raised the following grounds of appeal :
1. The order of Ld. CIT (A) is not correct in law and facts.
2. Whether the facts and circumstances of the case, the Ld. CIT (A) has erred in allowing telescoping effect of Rs.2,39,25,000/- on account of bogus purchases made in the hand of other entity of Group to the assessee’s case.
3. Whether the facts and circumstances of the case, the Ld. CIT (A) has erred in allowing the benefit of cash generated due to the additions of bogus purchases in the hands of other entity of Group to the assessee’s case.
4. Whether the facts and circumstances of the case, the Ld. CIT (A) has erred in allowing the cash generated due to out of books transactions of bogus purchases is to be treated at par with other out of books cash generating transactions in assessee’s case.
5. Whether the Ld. CIT (A) has erred in appreciating the facts that additions on account of bogus purchases made in the cases of other entity whereas, the addition on account of un-explained money u/s. 69A of the Act, made in the assessee’s hand.
6. The appellant craves for leave to add, amend any/all the ground of appeal before or during the course of hearing of the appeal.”
60. The Revenue in various grounds of appeal has challenged the order of the Ld. CIT(A) in allowing the telescoping benefit out of the income from bogus purchases and the profit from other entities.
61. After hearing both the side, we do not find any infirmity in the order of the Ld. CIT(A) on this issue. So far as the benefit of telescoping is concerned, we have already allowed the benefit of telescoping by relying on the decision of the Hon’ble Delhi High Court in the case of CIT vs., Sonal Construction [2013] 359 ITR 532 (Del.). Therefore, the grounds raised by the Revenue on this issue are dismissed.
62. So far as the order of the ld. CIT(A) in granting telescoping benefit from additions made in various other companies are concerned, the same in our opinion is justified. Admittedly, the assessee Mr. Vishnu Kumar Garg is the director and controlling person of the two other companies namely R.R.Carwell (P) Ltd. and L.V. Rustore Applications Pvt. Ltd. . Therefore, there is no infirmity in the order of the Ld. CIT(A) on this issue since the profit was generated on account of bogus purchases, etc in the hands of the two companies are appropriated by Mr. Vishnu Kumar Garg only. Therefore, the grounds raised by the Revenue on this issue being devoid of any merit are dismissed.
ITA No.9150/Del/2019 (Assessee’s Appeal) for AY 2014-15.
63. The grounds raised by the assessee are as under:-
1. Because the action is under challenge on facts and law for arriving at the chargeable income of Rs.6,03,53,210/- which is dehors material facts containing material particular to the case controversy during the course of case proceeding and contrary to the judgement S. Sankappa vs. ITO ((1968) 2SCR 674).
2. Because the action is being challenged on facts and law for making additions in assessment proceedings u/s 153A when there is no incriminating material/ document found during the course of search u/s 132 of the Act for the impugned year.
3. Because the action is being challenge on facts and law for invoking the jurisdiction u/s 69A r.w.s. 115BBE as unexplained money for Rs 3,59,64,000/-while assuming the presumption for addition bereft of material facts containing material particulars in the case proceedings.
4. Alternatively & without prejudice to above, the action for not giving benefit of Rs.3,50,00,000/- (as per MOU dt. 12.11.2012 seized during search) received back from Gyaneshwar trust in peak cash balance.
5. Because the action is being challenged on facts law for charging interest of Rs.91,50,000/- (Period 28.09.2013 to 31.03.2014) as income from other sources which is disputed since hypothetical income cannot be put to charge and alternatively without prejudice, the prayer is to allow the claim/relief in accordance with the provision of section 58(2) r.w.s. 70,71 of Income Tax Act 1961.
6. Because the action is being challenged on facts and law for making the addition of Rs.67,03,666/- on the invoking of provision u/s 132(4A) (presumption) which is being disputed since treated as income from other sources since hypothetical income cannot be put to charge and alternatively without prejudice, the prayer is to allow the claim/relief in accordance with the provision of section 58(2) r.w.s. 70, 71 of Income Tax Act 1961.
7. Because the action is being challenged on facts and law for making disallowance of interest for Rs.5,47,261/- which is a deduction allowable while computing chargeable income u/s 22 to 24.
8. For any consequential relief and/or legal claim arising out of this appeal and for any addition, deletion, amendment and modification in the grounds of appeal before the disposal of the same in the interest of substantial justice to the assessee.”
64. The assessee has also raised the following additional ground :
(i) Because the action is being challenged on facts & law for making additions in assessment proceedings u/s 153A wherein the seized documents Pg. 36-37 of Annexure A-10 & Pg.13-14 of Annexure A-10 relating to assessee were found from the premises of third parties i.e., LV Rustore Applications Pvt. Ltd., RR Carwell Pvt. Ltd., Blossom Landeal Pvt Ltd., & Elvi Bardahl India Pvt. Ltd., 17/6, Hanspal Industrial Complex, Mathura Road, Faridabad, therefore the additions on the basis of the said documents can only be made u/s 153C of the Act & not u/s 153A of the Act.
65. However, the ld. Counsel for the assessee did not press the additional ground of appeal for which the Ld. DR has no objection. Accordingly, the additional ground filed by the assessee is dismissed as not pressed.
66. Ground No.1 and 2 were not pressed by the ld. counsel for the assessee for which the Ld. DR has no objection. Accordingly, the grounds of appeal no. 1 and 2 are dismissed as not pressed.
67 Grounds of appeal no.3 and 4 relate to the order of the Ld. CIT(A) in confirming the addition of Rs.3,59,64,000/-.
68. Facts of the case in brief are that the AO noted that during the search operation at premise 17/6, Hanspal Industrial Complex, Mathura Road, Faridabad , page No. 13 & 14 Of Annexure- A10 was seized. It is an MOU entered into by the assessee and Gyaneshwar Educational Trust on 28.09.2013. According to this MOU, the assessee had given a cash loan of Rs 5 Cr in cash to Gyaneshwar Educational Trust on 28.09.2013 @ 3% interest per month for three years from 28.09.2013 to 28.09.2016. This MOU is duly signed by the assessee and Sh Abhay Salwan on behalf of Gyaneshwar Educational Trust and was found in the custody of the assessee. During assessment proceedings, the assessee was asked to explain the source of Rs 5 Cr and to show cause as to why the amount Rs 5 Cr not to be treated as unaccounted money and be added back to total income of the assessee during the year under consideration.
69. The assessee in his reply dated 30.11.2018 submitted that Pg. No. 13 & 14 of the Annexure A-10 were seized from premises 17/6, Hanspal Industrial Complex, Mathura Road. Faridabad. It is an MOU dt. 28.09.2013 executed between Gyaneshwar Educational Trust & assessee. It was submitted that during the year Abhay Salwan has not made any payment of whatsoever kind relatable to principal, interest & interest on interest. However it is most relevant to state that Abhay Salwan again offered to furnish an undertaking in the form of another MOU with Gayneshwar Education Trust for Rs. 5 Crs acknowledged outstanding debt upto 15.09.2013 towards earlier given loan and interest amount & interest on interest for the period w.e.f 15.12.2011/01.01.2012 to 15.09.2013. However, Abhay Salwan was unable to either repay the principal or the interest amount. The said MOU was duly signed & notarized but assessee had not received any amount as interest till date.
70. However, the AO was not satisfied with the arguments advanced by the assessee. He noted that during assessment proceedings of the assessee for AY 2012-13, it was concluded that the basic premise of the assessee that Rs 75,00,000/- was given to Abhay Salwan in Year 2009 is false because such amount of Rs 75,00,000/- was found to be given to Sh Ratan Prakash Mishra in Year 2009. Submission of the assessee that he, in order to protect the principle amount of Rs.50,00,000/- (Out of Rs 75,00,000/-, Rs 25,00,000/- was returned to the assessee in Sep 2011) and interest thereon , entered into the MOU with Abhay Salwan for Rs. 5Cr. on 28.09.2013 defies human wisdom on several accounts. According to the AO, even if it is considered that Rs.50.00,000/- and interest @1.5% per month thereon is pending to be received from Sep 2010, the said amount would not be more than Rs.85,45,697/- in September 2013. Then why a person i.e. Abhay Salwan on behalf of Gyaneshwar educational trust would sign on an agreement which clearly mentioned that Gyaneshwar educational trust is receiving Rs 5 Cr in cash on 28.09.2013@ 3% interest for three year till 28.09.2016.
71. The AO further observed that MOU of Rs 5 Cr was entered into by the assessee and Gyaneshawar Educational Trust on 28.09.2013 whereas MOU of Rs 3.5 Cr was entered into by the assessee and Gyaneshawar Educational Trust on 12.11.2012 for one year. Therefore, the MOU of Rs 5 Cr was entered before completion of the MOU of Rs 3.5 Cr. Therefore, Both MOUs are independent and not related to each other. The AO therefore concluded that the assessee had given a cash loan of Rs 5 Cr to Gyaneshwar Educational trust @ 3% interest per month on 28.09.2013 for three year till 28.09.2016.
72. From the various seized material found during course of search, the AO noted that the following transactions pertain to the assessee and were occurred in cash. In order to find peak cash balance on a given date, the AO recorded these transactions in chronological order with narration as shown below:
| AY 2011-12 | |||
| Date | Amount Received | Amount Paid | Narration |
| 30.09.2010 | 2,25,000 | Interest received on unsecured cash loan of Rs 25 lakh given to Mishraji in Year 2009 for period from 01.04.2010 to 30.09.2010 | |
| 30.09.2010 | 3,75,000 | interest income for prior period on loan of Rs 25 lakh given to Mishraji in Year 2009 for period from 01.04.2010 to 30.09.2010 | |
| 19.10.2010 | 18,00,000 | Received on behalf of Om Shanti education society from RA financial services | |
| 30.10.2010 | 22,00,000 | Received on behalf of Om Shanti education society from RA financial services | |
| 11.11.2010 | 25,00,000 | Received back principle amount of Rs 25,00,000 given to Mishra in 2009 | |
| 31.03.2011 | 9,00,000 | Interest income on cash loan of Rs 50 lakh given to Mishraji in 2009 for period from 01.04.2010 to 31.03.2011 | |
| 31.03.2011 | 11,25,000 | Prior period interest on Rs 50 lakh cash loan given to Mishra in 2009 | |
| 91,25,000 | Cash in hand on 31.03.2012 | ||
| AY 2012-
13 |
|||
| 30.09.2011 | 50,00,000 | Received back principle amount of Rs 50,00,000 given to Mishra in 2009 | |
| 30.09.2011 | 4,50,000 | Interest on 50 lakh given to mishra in 2009 for period from 01.04.2011 to 30.09.2011 | |
| 1,45,75,000 | Total cash in hand at 01.01.2012 | ||
| 01.01.2012 | 50,00,000 | Cash loan given to Abhay Salwan & RA Financial Services | |
| 95,75,000 | Remained cash in hand as on 02.01.2012 | ||
| 31.3.2012 | 4,50,000 | Interest income from cash loan of Rs25,00,000/-given to Abhay Salwan & cash loan of Rs25,00,000/-.given to RA Financial Services for period from 01.01.2012 to 31.03.2012 | |
| 1,00,25,000 | Total cash in hand on 31.03.2013 | ||
| AY 201314 | |||
| 11.11.2012 | 10,50,000 | Interest income from cash loan of Rs25,00,000/-given to Abhay Salwan & cash loan of Rs25,00,000/- given to RA Financial Services for period from 01.04.2010 to 31.10.2012 | |
| 1,10,75,000 | Total cash in hand on 12.11.2012 | ||
| 12.11.2012 | 3,50,00,000 | Cash loan given to Gyaneshwar Trust | |
| 31.12.2012 | 3,00,000 | Interest income from cash loan of Rs25,00,000/-given to Abhay Salwan & cash loan of Rs25,00,000/- given to RA Financial Services for period from 1.1 1.2012 to 31.12.2012 | |
| 01.01.2013 | 50,00,000 | Received back principle amount of Rs25,00,000/-given to Abhay Salwan and Rs.25,00,000/-given to RA Financial Services | |
| 31.3.2013 | 41,86,000 | Interest income from cash loan of 3.5 Cr given to Gyaneshwar Trust on 12.11.2012 for period from 12.11.2012 to 31.03.2013 |
|
| 94,86,000 | Cash in hand as on 31.03.2014 | ||
| AY 2014-15 | |||
| 31.8.2013 | 45,50,000 | Interest income from cash loan of 3.5 Cr given to Gyaneshwar Trust on 12.11.2012 for period from 01.04.2013 to 31.08.2013 |
|
| 1,40,36,000 | Total cash in hand as on 28.09.2013 |
73. He observed that on 28.09.2013, the assessee had a peak cash balance of Rs. 1,40,36,000/-. The assessee had given a cash loan of Rs 5 Cr to Gyaneshwar Educational Trust on 28.09.2013. Out of total cash of Rs 5 Cr given to the Gyaneshwar Educational Trust, Rs. 1,40,36,000/- is adjusted against total cash in hand on 28.09.2013. For the remaining amount of Rs.3,59,64,000/-out of Rs 5 Cr, the source remained unexplained. The assessee has not recorded these transactions in his books of account/statement of affairs. The assessee is found to be owner of Rs.3,59,64,000/- but he did not furnish any explanation regarding the source of the money. Therefore, he treated the amount of Rs.3,59,64,000/- as unexplained money of the assessee u/s 69A of IT Act.
74. In appeal, the Ld. CIT(A) confirmed the addition made by the AO by observing as under:-
29.7. During the present appellate proceedings, that AR repeated the stand taken before the AO. Additionally, the AR argued that calculation of availability of cash as on 28.09.2013 is not correct because benefit of Rs. 3.5 Cr received as per earlier (draft) MOU have already been added. The AR also said that the benefit of cash generated due to additions of bogus purchases in the hands of appellant, his wife (Smt. Lata Garg) and his companies namely, M/s. RR Carwell Pvt. Ltd. and M/s. L. V. Rustore Applications Pvt. Ltd. should be allowed, while calculating cash availability.
29.8. It was argument of the AR that MOU dated 28.09.2013 was made after rescinding the MOU dated 12.11.2012 or in other words only additional amount of Rs.1.5 Cr was given which was in form of accrued interest. The AR submitted calculation by using a calculation of interest @ 3% per month, compounded every month which was nearing (but not exactly tally) the figure of Rs. 5 Cr. The AR also argued that the property mentioned in both the MOUs is same and he also produced a copy of auction notice published on 18 May, 2018 in ‘Jan Satta’ newspaper (got published by Central bank of India) in respect of a part the same property showing its reserved price Rs. 1.43 Cr for 5.063 acre. The AR pointed out that the total area of this property was 3.883 hectares. The AR argued that by this rate the total value of the property is less than 2.5 Cr and no prudent was likely to give an additional loan of Rs. 5 Cr during the pendency of earlier loan of Rs. 3.5 Cr.
29.9 Although, the AR claimed that the amount of Rs. 3.5 Cr became the amount of Rs. 5 Cr by including the due interest (because the interest was never paid). However, the appellant used rate of interest @ 3% per month and used compounding every month. However, the rate of interest as per seized MOU dated 12.11.20121 was only 2.6 % per month and the agreement was supposed to be in force upto 11.11.2013. The appellant produced no material evidence in support of this claim that the (earlier) MOU dated 12.11.2012 was rescinded.
Therefore, in absence of any evidence showing contrary, it will be presumed that the loan of Rs. 3.5 Cr would be returned’ on 11.11.2013. Therefore, it is difficult to accept this plea. As far as the other plea (generation of cash out of bogus purchases) is concerned, it has been dealt with in para 4.6(supra). The observations/remarks made therein are applicable to this addition, mutus mutandi.”
75. Aggrieved with such order of the Ld. CIT(A), the assessee is in appeal before the Tribunal.
76. After hearing both sides, we find this ground is identical to ground of appeal no.3 in ITA No.9149/Del/2019 for AY 2013-14. We have already decided the issue and restored the issue to the file of the AO for fresh adjudication. This issue was also discussed in the said ground. Following similar reasonings, we restore this issue to the file of the AO for fresh adjudication. The AO shall decide the issue as per fact and law after giving due opportunity of being heard to the assessee in the light of our direction given therein. We hold and direct accordingly. This ground by the assessee is accordingly allowed for statistical purposes.
77. In ground no.4, the assessee made alternate contention regarding giving benefit of Rs.3.56 lakhs which was received back from M/s Gyaneshwar Educational Trust as per MOU dated 12.11.2012.
77.1. Since, we have already restored ground of appeal no.3, this ground is also restored to the file of the AO for fresh adjudication. The ground raised by the assessee is accordingly allowed for statistical purposes.
78. In ground No. 5, the assessee has challenged the order of the Ld. CIT(A) in confirming the addition of interest of Rs.91,50,000/- made by the AO.
79. After hearing both the sides, we find the AO on the basis of MOU that the assessee has received interest @ 3% per month on the cash loan of Rs.5 Crores given to Gynaeshwar Educational Trust on 28.09.2013 made addition of Rs.91,50,000/- being interest. We find the Ld. CIT(A) upheld the action of the AO. It is the submission of the ld. Counsel for the assessee that Mr. Abhay Salwan is not traceable, is absconding, is a proclaimed person and offender. Therefore, no interest can be taxed on notional basis. For the above proposition, he relied on the argument while arguing for the interest on loan from Mr. Abhay Salwan for AY 2012-13.
80. The Ld. DR on the other hand heavily relied on the order of the AO and the Ld. CIT(A).
81. After hearing both the sides, we find the issue of MOU has been restored to the file of the AO for fresh adjudication. We therefore, restore this issue to the file of the AO for adjudication of this issue in accordance with law and after giving due opportunity of being heard to the assessee. While doing so, the AO shall also keep in mind our findings in ground of appeal No.6 and 7 in ITA No.9147/Del/2019 for AY 2011-12. The ground raised by the assessee on this issue is accordingly allowed for statistical purpose.
82. In ground No.6, the assessee has challenged the order of the ld. CIT(A) in sustaining the addition of Rs.67,03,666/- again on interest income.
83. After hearing both the sides, we find the AO on the basis of MOU entered into by the assessee with M/s Gyaneshwar Educational Trust on 12.11.2012, according to which the assessee had given a sum of Rs.3.5 Crores to Gyaneshwar Education Trust on 12.11.2012 as loan on interest @ 2.6% per month for one year made addition of Rs.6,70,3666/- on account of interest received, which has been upheld by the Ld. CIT(A).
84. We find the above issue is identical to the ground of appeal No.5 decided in the preceding paragraph. Following the similar reasoning, we restore this issue to the file of the AO for fresh adjudication in the light of our directions given therein. The ground raised by the assessee is accordingly allowed for statistical purposes.
85. In grounds of appeal no.7, the assessee has challenged the order of the Ld. CIT(A) in sustaining the addition of Rs.5,47,261/- on account of disallowance of housing loan interest.
86. After hearing both the sides, we find this ground is identical to ground of appeal no.7 in ITA No.9149/Del/2019 for AY 2013-14. We have already decided this issue and dismissed the ground. Following the similar reasoning, the ground raised by the assessee is dismissed.
ITA No.9449/Del/2019 (Revenue’s Appeal) for AY 2014-15
87. The ground raised the Revenue are as under:-
1. The order of Ld. CIT (A) is not correct in law and facts.
2. Whether the facts and circumstances of the case, the Ld. CIT (A) has erred in allowing telescoping effect of Rs.1,8186,816/- on account of bogus purchases made in the hand of other entity of Group to the assessee’s case.
3. Whether the facts and circumstances of the case, the Ld. CIT (A) has erred in allowing the benefit of cash generated due to the additions of bogus purchases in the hands of other entity of Group to the assessee’s case.
4. Whether the facts and circumstances of the case, the Ld. CIT (A) has erred in allowing the cash generated due to out of books transactions of bogus purchases is to be treated at par with other out of books cash generating transactions in assessee’s case.
5. Whether the Ld. CIT (A) has erred in appreciating the facts that additions on account of bogus purchases made in the cases of other entity whereas, the addition on account of un-explained money u/s. 69A of the Act, made in the assessee’s hand.
6. The appellant craves for leave to add, amend any/all the ground of appeal before or during the course of hearing of the appeal.”
88. After hearing both the sides, we find the above grounds are identical to the ground raised by the Revenue in ITA No.9448/Del/2019 for AY 2013-14. We have already decided this issue and the grounds raised by the Revenue have been dismissed. Following, the similar reasoning, the ground raised by the Revenue are dismissed.
ITA.No.9151/Del./2019 – A.Y. 2015-16 :
89. The grounds raised by the assessee are as under :
1. Because the action is under challenge on facts and law for arriving at the chargeable income of Rs.1,95,05,533/- which is dehors material facts containing material particular to the case controversy during the course of case proceeding and contrary to the Judgment S. Sankappa vs. ITO ((1968) 2 SCR 674).
2. Because the action is being challenged on facts and law for making additions in assessment proceedings u/s 153A when there is no incriminating material/document found during the course of search u/s 132 of the Act for the impugned year.
3. Because the action is being challenged on facts law for charging interest of Rs.90,00,000/- (Period 01.04.2014 to 30.09.2014) as income from other sources which is disputed since hypothetical income cannot be put to charge and against the principle of law (Godhara Electricity Co. Ltd v CIT (1997) 225 ITR 746(SC)).
4. Because the action is being challenged on facts and law for making an addition of Rs.90,00,000/-, wherein the evidence and the fact is that the payee Abhay Sal wan being a proclaimed offender and absconding is matter of Judicial Review before the Hon’ble Allahabad High Court, yet wrongly invoking the jurisdiction of presumption u/s 132(4A) and alternatively without prejudice, the prayer is to allow the claim/relief in accordance with the provision of section 58(2) r.w.s. 70, 71 of Income Tax Act 1961.
5. Because the action is being challenged on facts and law for making disallowance of interest for Rs.5,06,563/- which is a deduction allowable while computing chargeable income u/s 22 to 24.
6. Because the action for addition amounting Rs.30,00,000/- is being challenged on facts and law as assessee failed to prove identity, genuineness and credit worthiness of unsecured loan whereas per assessee the said amount received is repayment of loan given to Abhay Sal wan by assessee substantiated through document seized in search.
7. For any consequential relief and/or legal claim arising out of this appeal and for any addition, deletion, amendment and modification in the grounds of appeal before the disposal of the same in the interest of substantial justice to the assessee.”
90. The assessee has also raised the following additional ground :
i) Because the action is being challenged on facts & law for making additions in assessment proceedings u/s 153A wherein the seized documents Pg. 13-14 of Annexure A-10 & Pg.46 of Annexure A-10 relating to assessee were found from the premises of third parties i.e., LV Rustore Appliations Pvt. Ltd., RR Carwell Pvt. Ltd., Blossom Landeal Pvt Ltd., & Elvi Bardahl India Pvt. Ltd., 17/6, Hanspal Industrial Complex, Mathura Road, Faridabad, therefore the additions on the basis of the said documents can only be made u/s 153C of the Act & not u/s 153A of the Act.
91. However, the ld. Counsel for the assessee did not press the additional ground for which the ld. DR has no objection. The additional ground raised by the assessee is accordingly dismissed.
92. The ld. Counsel for the assessee did not press grounds no.1 and 2 for which the ld. DR has not objection, accordingly, the grounds no.1 and 2 are dismissed.
93. In ground no.3 and 4, the assessee has challenged the order of the Ld. CIT(A) in confirming the addition of Rs.90 lakhs being interest @ 3% on the amount of cash loan to Mr. Gyaneshwar Educational Trust.
94. After hearing both the sides, we find the above grounds are identical to grounds of appeal No. 5 to 6 in ITA No.9150/Del/2019. We have already decided the issue and the grounds raised by the assessee have been restored to the file of the AO for fresh adjudication. Following similar reasoning, these grounds by the assessee are allowed for statistical purpose.
95. In ground no.5, the assessee has challenged the order of the Ld. CIT(A) in confirming the addition of Rs.5,06,563/- being interest on borrowed capital.
96. After hearing both the sides, we find that above ground is identical to ground of appeal no. 7 in ITA No.9149/Del/2019. We have already decided this issue and the ground raised by the assessee has been dismissed. Following similar reasoning, this ground by the assessee is dismissed.
97. In ground no.6, the assessee has challenged the order of Ld. CIT(A) in confirming the addition of Rs.30,00,00/- made by the AO being unsecured loan from M/s Giantmaker Developers Pvt. Ltd. and M/s NBS Engineers India Pvt. Ltd.
98. The facts of the case, in brief, are that the AO during the course of assessment proceedings observed from the details of unsecured loan that the assessee has shown unsecured loan of Rs 10,00,000/- received on 09.04.2014 and Rs. 15,00,000/- on 11.04.2014 from M/s Giantmaker Developers P Ltd and Rs. 5,00,000/- received on 05.05.2014 from NBS Engineers India P Ltd during the year under consideration. The assessee was asked to provide ITR, Bank statement of the party and Confirmation of the party who provided unsecured loan during the year in order to prove identity, credit worthiness and genuineness of the transaction. But the assessee failed to provide any of the above mentioned documents. Further, page no 46 of Annexure A-10 seized from the premise of the asessee contains above mentioned loan amount from Giant maker developers P Ltd and NBS Engineers P Ltd. Vide questionnaire dated 15.10.2018, the assessee was asked to explain these entries. Thereafter, the assessee was asked to show cause as to why the amount Rs. 25,00,000/- received from M/s Giant maker Developers Pvt. Ltd and Rs. 5,00,000/- received from M/s NBS Engineers P Ltd not to be considered bogus/unaccounted and added back to total income of the assessee. The assessee did not file any satisfactory reply. The AO noted that the assessee could not provide any document in support of his claim of unsecured loan received during the year. Secondly, the assessee is contradicting himself when he is mentioning that Rs 25,00,000/- received from Giantmaker Developers Pvt Ltd and Rs 5,00,000/- received from M/s NBS Engineers India Pvt Ltd is actually a payment made by Abhay Salwan against the loan given by the assessee in earlier years. He noted that as per submission made by the assessee, this payment of Rs 30,00,000/- should have been shown as bad debt recovered or loan recovered in the hand of the assessee and not as unsecured loan in hand of the assessee. Moreover, the assessee has shown this received payment as a liability in his statement of affairs. That liability still exists in the statement of affairs as on 31.03.2017. That clearly shows that the assessee was trying to hide the actual nature of receipt and colouring it with character of liability in his statement of affairs. In view of the above the AO held that the assessee failed to prove identity, genuineness and credit worthiness of the unsecured loan but also tried to hide the actual nature of the payment by showing it as a liability. Therefore, he considered the said amount of Rs.25,00,000/-received from M/s Giantmaker Developers Pvt. Ltd. and Rs.5,00,000/- received from M/s NBS Engineers P Ltd as unexplained money of the assessee. He accordingly made addition of Rs 30,00,000/- to the total income of the assessee.
99. In appeal, the ld. CIT(A) confirmed the action of the AO by observing as under:-
“39.3. Before AO, the appellant failed to discharge initial onus of providing identity and creditworthiness of the lender and genuineness of the transaction. The appellant stated that these are repayments of the loan taken by Shri Abhay Salwan. The appellant that these are companies of Shri Abhay Salwan and the addition has already been made in the hands of appellant when this amount was extended as a loan, in cash. In other words, It was claim of the appellant that the cash of Rs. 50,00,000/- { Rs. 25,00,000/- each paid to Shri Abhay Salwan/ M/s. R A Financial } has already been taxed(added) and the same money has come back. The AO did not accept this plea and added the amount.
39.4. Before undersigned, the AR argued that the fact of this money being received from Shri Abhay Salwan was evident from the entries reflecting re-payments under consideration which are written in juxtaposition of an entry reflecting receipt of Rs. 10 Lakhs on 07.05.2014 from Shri Abhay Salwan. The AR informed that this re-payment of Rs. TO Lakhs received from Shri Abhay Salwan was received in group company M/s. Blossom Landeal Pvt. Ltd. and has been taxed in AY 2015-16.
39.5 It is noted that these additions have been made u/s 68. It is not the case of appellant that he was able to discharge initial onus of proving identity and creditworthiness of the lender and genuineness of the transaction. It is also noted that the amount of Rs. 50 Lakhs was not added in the AY 2012-13 (because due to telescoping, the source of two cash loans of Rs. 25 each were extended on 01 January, 2012 to Shri Abhay Salwan and M/s. RA Financial Services, were treated as explained, as discussed in para 15.2, above ). Moreover, the AO has already given credit for receipt of this amount after one year i.e. on 01.01.2013 as per the chart of cash availability in para 5.8 of the AY 2014-15.
39.6. Therefore, this ground (No. 5) of appeal is dismissed.”
100. Aggrieved with such order of the Ld. CIT(A), the assessee is in appeal before the Tribunal.
101. The ld. Counsel for the assessee submitted that the seized document at page no.46 Annexure A-10 from the premises at 17/6, Hanspal Industrial Complex, Mathura Road, Faridabad, shows certain hand written entries of receipt of amount from Mr. Abhay Salwan in his group companies. The ld. Counsel for the assessee drew the attention of the Bench to the following details:-
| S. No. | Date | Amount (Rs.) | Mode of Payment | Name of Party from whom Received | Books of Acoounts in which received |
| 1. | 09.04.2014 | 10,00,000 | RTGS | Giantmaker Developers P. Ltd. | Vishnu Kumar Garg (ROC Form 32 & Annual returns showing that Abhay Salwan is director & shareholder in said company (Submitted at submission dt. 23.07.2019 of Vishnu Kumar Garg AY 2011-12 Pg. 451 – 468) |
| 2. | 11.04.2014 | 15,00,000 | RTGS | Giantmaker Developers Pvt Ltd. | Vishnu Kumar Garg |
| 3. | 05.05.2014 | 5,00,000 | RTGS | NBS Engineers India Pvt Ltd. | Vishnu Kumar Garg (ROC Form 32 for appointment on dt. 13.04.2013 & resignation on dt. 01.07.2014 from directorship in said company (Submitted at submission dt. 23.07.2019 of Vishnu Kumar Garg AY 2011-12 Pg. 469 -478) |
| 4. | 28.04.2014/ 06.05.2014 | 10,00,000 | RTGS | SBN Construction | Blossom Landeal Pvt Ltd. & Blossom has given cheque dt. 06.05.2014 to Vishnu Kumar Garg |
| 5. | 05.05.2014 | 10,00,000 | RTGS | NBS Engineers India P Ltd. | L V Rustore Applications Pvt Ltd. |
| 6. | 14.09.2012 | 10,00,000 | Cheque | Giantmaker Developers Pvt Ltd. | L V Rustore Applications Pvt Ltd. |
| 7. | 23.11.2012 | 15,00,000 | Cheque | Giantmaker Developers Pvt Ltd. | L V Rustore Applications Pvt Ltd. |
| Total | 75,00,000 |
102. He submitted that the assessee has received back Rs. 75 Lakh from Abhay Salwan, Rs. 25 Lakh in A.Y. 201314 & Rs. 50 Lakh in A.Y. 2015-16. When assessee received back the principal amount Rs. 50 Lakh & Rs. 25 Lakh as interest, then assessee decided not to file any FIR against Abhay Salwan to buy peace of mind. Most importantly, if assessee had given such huge amount of Rs 8.5 Cr. as loan to Abhay Salwan, then assessee must have filed the FIR as filed by other persons and (or) initiated court proceedings under the Specific Relief Act,1963. However, till date no such proceeding has been initiated, thus, the onus to explain & put the details of transaction to the knowledge of the deptt. stands discharged by the assessee & even further to state that rule of presumption is that once there is a doubtful fact then that may be inferred from certain other proved facts. While inferring the existence of a fact from another set of proved facts , the Court exercises the process of reasoning and reaches to a logical conclusion so as to the most probable position pursuant to Section 114 of the Indian Evidence Act, 1872. He submitted that in the present case the Deptt. is settling the whole case on presumption which is not correct. He accordingly submitted that the order of the Ld. CIT(A) be set-aside and the ground raised by the assessee be allowed.
103. The Ld. DR, on the other hand, heavily relied on the order of the Ld. CIT(A).
104. We have heard the rival arguments made by both the sides, perused the orders of the A.O. and the Ld. CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the AO in the instant case made addition of Rs.30,00,000/- to the total income of the assessee being unsecured loans of Rs.25 lakhs from M/s Giant Maker Developers Pvt. Ltd. aned Rs.5 lakhs from NBS Engineers India Pvt. Ltd. obtained by the assessee on the ground that the assessee has failed to prove the identity, genuineness and creditworthiness of the loan creditors and also tried to hide actual nature of the payment by showing its liability.
105. We find the ld. CIT(A) upheld the action of the AO, the reasons of which have already been reproduced in the preceding paragraph. It is the submission of the Ld. counsel for the assessee that the amount of Rs.30,00,000/-received by the assessee are in fact the recovery of principal amount earlier given to Mr. Abhay Salwan and the addition made by the AO and sustained by Ld. CIT(A) are on presumption basis. It is the settled position of law that for allowing any cash credit as genuine, the onus is always on the assessee to substantiate with evidence to the satisfaction of the AO regarding the identity and creditworthiness of the loan creditor and genuineness of the transactions. However, the assessee in the instant case has not discharged the onus. The submission of the ld. counsel for the assessee that these are in fact recovery of principal amount also needs to be established by the assessee. Considering the totality of facts of the case and in the interest of justice, we deem it proper to restore this issue to the file of the AO with a direction to give one more opportunity to the assessee to substantiate his case and decide the issue as per fact and law. We hold and direct accordingly. The ground raised by the assessee is accordingly allowed for statistical purposes.
106. Ground No.7 being general in nature is dismissed.
ITA.No.9152/Del./2019 – A.Y. 2016-17 :
107. The grounds raised by the assessee are as under :
1. Because the action is being challenged on facts and law for making disallowance of interest for Rs.2,39,785/- which is a deduction allowable while computing chargeable income u/s 22 to 24.
2. Because the action is being challenged on facts and law for making addition of Rs.10,000 based on seized paper whereas per assessee the said entry is rough noting given to driver for business purposes.
3. For any consequential relief and/or legal claim arising out of this appeal and for any addition, deletion, amendment and modification in the grounds of appeal before the disposal of the same in the interest of substantial justice to the assessee.
108. The additional grounds raised by the assessee are as under:-
i) Because the action is being challenged on facts & law for making additions in assessment proceedings u/s 153A wherein the seized documents Pg. 13-14 of Annexure A-10 & Pg.46 of Annexure A-10 relating to assessee were found from the premises of third parties i.e., LV Rustore Appliations Pvt. Ltd., RR Carwell Pvt. Ltd., Blossom Landeal Pvt Ltd., & Elvi Bardahl India Pvt. Ltd., 17/6, Hanspal Industrial Complex, Mathura Road, Faridabad, therefore the additions on the basis of the said documents can only be made u/s 153C of the Act & not u/s 153A of the Act.
109. However, the ld. Counsel for the assessee did not press the additional ground for which the ld. DR has no objection. Accordingly, the additional ground raised by the assessee is dismissed.
110. In ground no. 1, the assessee has challenged the order of the Ld. CIT(A) in confirming the addition of Rs.2,39,785/- made by the AO being interest on borrowed capital for house property.
111. After hearing both the sides, we find the above ground is identical to the ground of appeal no. 7 in ITA No.9149/Del/2019. We have already decided this issue and the ground raised by the assessee on this issue has been dismissed. Following similar reasoning, this ground of the assessee is dismissed.
112. In ground no.2, the assessee has challenged the addition of Rs.1 lakhs made by the AO as unexplained money.
113. After hearing both the sides, we find the AO during the course of assessment proceedings noted that during the course of search at premises H. No.128, Sec 16, Faridabad, page 11 of Annexure A-1 was seized. It contains entry dated 14.04.2015 of Rs.1,00,000/- against narration of Yadav bhai le gaye, 65000 unke, 35000/- mere. In absence of any satisfactory explanation given by the assessee, the AO made addition of Rs.1 lakhs u/s 69A of the Act.
114. In appeal, the ld. CIT(A) sustained the addition by holding that it is clear entry of handing over cash of Rs.1 lakh to Yadav Bhai and no specific explanation was given by the assessee either before the AO or before him. Since, the ld. Counsel for the assessee could not explain before us also regarding the nature and source of the entry of Rs.1 lakh, therefore, we uphold the addition made by the AO and sustained by Ld. CIT(A). However, the alternate contention of the ld. Counsel for the assessee that the benefit of telescoping be given is accepted. The AO is directed to give the benefit of telescoping as held by us in the preceding years. The ground raised by the assessee is accordingly partly allowed for statistical purposes.
115. Ground No.3 being general in nature is dismissed.
116. In the result, both the appeals filed by the Revenue are dismissed and all the appeals filed by the assessee are partly allowed for statistical purposes.
Order pronounced in the open Court on11.02.2022.
