When Seized documents explains unexplained expenditure, no addition is warranted

ITAT KOLKATA BENCH ‘A’

Vivek Kumar Kathotia

versus

Deputy Commissioner of Income-tax

IT(SS)A Nos. 1 to 4, 6 & 7 (Kol.) of 2011
[ASSESSMENT YEARS 2003-04 TO 2008-09]

JULY  29, 2011

ORDER

Mahavir Singh, Judicial Member

IT(SS)A Nos. 1 to 3/Kol/2011 and IT(SS)A Nos. 4 and 6/Kol/2011 and IT(SS)A No. 7/Kol/2011 by assessee and IT(SS)A No. 10/Kol/2011 by Revenue are arising out of the orders of CIT(A), Central-1, Kolkata in Appeal Nos. 107 to 109, 110, 111 and 112/CCVI/CIT(A)-C-I/2009-10 vide dt. 26th Nov., 2010 and 29th Nov., 2010 and 30th Nov., 2010. Assessments were framed by Dy. CIT, CC-VI, Kolkata under s. 144/153A of the IT Act, 1961 (hereinafter referred to as “the Act”) for asst. yrs. 2003-04 to 2008-09 vide his orders dt. 31st Dec. 2009.

2. In respect to IT(SS)A Nos. 1, 2 and 3/Kol/2011 of assessee’s appeals for asst. yrs. 2003-04 to 2005-06, the learned counsel for the assessee stated that there is no revenue implication and Revenue is not in appeal against deletion of addition by CIT(A). Hence, he is not interested in adjudication of these three appeals and is not pressing the same. As the learned counsel for the assessee, on instructions of assessee, has not pressed these three appeals due to no revenue implication, same are dismissed as not pressed.

3. Effective interconnected issues in IT(SS)A Nos. 4, 6 and 7/Kol/2011 for asst. yrs. 2006-07 to 2008-09 of assessee’s appeal are against orders of CIT(A) confirming actions of AO as under :

(i)           Rejection of books of account, revised balance sheet and P&L a/c for asst. yrs. 2006-07, 2007-08 and 2008-09;

(ii)          Rejection of entries of seized documents marked as RM-1 to RM-4 by misinterpreting the provisions of s. 292C of the Act;

(iii)         Confirming additions to the extent of Rs. 6,90,00,000 and Rs. 90,00,000 in asst. yrs. 2006-07 and 2007-08 respectively on account of undisclosed investment in property at Sector-V, Salt Lake, Kolkata disregarding the fact that the source of investment is explained on the basis of entries made in RM-1 and RM-2, the seized documents, whereby the claim made by assessee regarding sale of paintings at Rs. 7.25 crores.

For this, the assessee has raised following grounds in IT(SS)A No. 4/Kol/2001 for asst. yr. 2006-07 :

“2. On the facts and in the circumstances of the case, the learned CIT(A) erred in disregarding the noting recorded in the seized documents marked as RM-1 and RM-2 by misinterpreting the provisions of s. 292C of the IT Act, 1961 and thereby in rejecting the claim of the appellant about sale of paintings at Rs. 7,25,00,000.

3. On the facts and in the circumstances of the case, the learned CIT(A) erred in confirming the rejection of books of account of the assessee.

4. On the facts and in the circumstances of the case, the learned CIT(A) erred in confirming the addition on account of the alleged unaccounted payment to Sr. Bagga to the extent of Rs. 6,00,90,000 for the purpose of so-called undisclosed investment as recorded in seized document marked as ‘RM/4’ without considering the source of the said investment as recorded in the revised balance sheet for financial year 2005-06 filed by the appellant during the course of the assessment proceedings.”

4. In IT(SS)A No. 6/Kol/2011 for asst. yr. 2007-08, assessee has raised following grounds :

“2. On the facts and in the circumstances of the case, the learned CIT(A) erred in disregarding the noting recorded in the seized documents marked as RM-1 and RM-2 by misinterpreting the provisions of s. 292C of the IT Act, 1961 and thereby in rejecting the revised balance sheets and P&L a/cs for the earlier years filed during the course of the assessment proceedings.

3. On the facts and in the circumstances of the case, the learned CIT(A) erred in confirming the rejection of books of account of the assessee.

4. On the facts and in the circumstances of the case, the learned CIT(A) erred in rejecting the claim of the appellant about the source of the current investment of Rs. 90,00,000 in property at Salt Lake from sales of diamonds, gold and paintings made during earlier years and duly recorded in the above-mentioned seized documents.

5. On the facts and in the circumstances of the case, the learned CIT(A) erred in not only confirming the addition of Rs. 75,10,000 made by the AO towards alleged undisclosed investment in property but also in enhancing the same to Rs. 90,00,000.”

5. In IT(SS)A No. 7/Kol/2011 for asst. yr. 2008-09 of assessee’s appeal, issue raised is regarding making fresh addition of Rs. 18.60 crores, as against undisclosed cash receipt added by AO at Rs. 19,07,35,000, on account of alleged undisclosed investment in shares of different companies. The assessee has raised following grounds :

“2. On the facts and in the circumstances of the case, the learned CIT(A) erred in disregarding the noting recorded in the seized documents marked as RM-1 and RM-2 by misinterpreting the provisions of s. 292C of the IT Act, 1961 and thereby in rejecting the revised balance sheets and P&L a/cs for the earlier years filed during the course of the assessment proceedings.

3. On the facts and in the circumstances of the case, the learned CIT(A) erred in confirming the rejection of books of account of the assessee.

4. On the facts and in the circumstances of the case, the learned CIT(A) erred in rejecting the claim of the appellant about the exempted receipt of Rs. 19,07,35,000 declared on account of sales of diamond and gold duly recorded in the above-mentioned seized documents, and thereby in confirming the addition of Rs. 18,60,00,000 on account of alleged of undisclosed investment in shares of different companies.”

These being common and interconnected issues, we will deal with them by consolidating the same.

6. Brief facts leading to the above issues are that search and seizure operations under s. 132 of the Act was carried out in Fort Group of cases on 28th Feb., 2008. The assessee, director in Fort Projects (P) Ltd. was also searched, who is a resident of Ballygunge Park, Kolkata-19. During the course of search on assessee group, cash, jewellery, silver utensils and various documents seized as RM-1 to RM-5 were found. As alleged by assessee, seized documents annexed as RM-5 was forcibly got manufactured by search party of IT Department and assessee was forced to write seized document RM-5 and make an exorbitant disclosure of Rs. 9.02 crores on the basis of the same in respect of on-money receipts. According to assessee, this disclosure was made to buy peace and to avoid unnecessary and protracted litigation in the matter. Subsequently, entire alleged on-money receipts of Rs. 9.02 crores was offered as undisclosed income in the return of income filed in response to notices under s. 153C of the Act for asst. yr. 2008-09 in the case of Fort Projects (P) Ltd. and paid taxes thereon. Simultaneously, survey action under s. 133A of the Act was also conducted in the office premises of group companies, from where books of account/documents were impounded. In consequent to search action, notice under s. 153A was issued on 1st Aug., 2009 and assessee filed his return under s. 153A on 28th Jan., 2009 declaring year-wise income (for the sake of clarity, we want to reproduce the income assessed by AO under s. 153A also) as under :

Subsequently, notices under ss. 143(2) and 142(1) along with questionnaire were issued. AO issued show-cause notice to the assessee dt. 22nd Dec, 2009 and assessee replied vide submissions dt. 28th Dec., 2009. Reply of the assessee is reproduced in the assessment order which is again reproduced from the assessment order for the sake of clarity of facts, as under :

“(20) The documents were maintained by the assessee for his own use and therefore there was no reason or occasion to record transactions in a false manner.

(21) The exercise book is a books of account and is being disbelieved without any cogent reasons, whereas noting made in loose sheets are being treated as correct in some case and incorrect in some cases.

(22) RM-1 and RM-2 are one and the same and RM-2 is a bound exercise notebook and is therefore to be treated as books of account.

(23) The said documents contain not just noting in respect of unaccounted transactions but also noting in respect of transactions duly disclosed in books of account of various concerns wherein the assessee is a director. Similarly a number of other noting pertaining to cash withdrawn from regular books of account of various companies, payment of cash duly recorded in regular books of account of said companies and other noting duly recorded in regular books of account, and all these noting are duly identifiable and verifiable with evidence and noting in regular books of account. Therefore, no doubt can be raised in respect of said recordings and it would be absurd to even contemplate that other noting duly recorded in the seized documents are not correct. The allegations levelled against are clearly a figment of imagination without any cogent basis.

(24) The entries noted in the seized documents which is duly in form of books of account and wherein some entries are duly verifiable from regular books, bank statements and other evidence, cannot be disbelieved on the basis of assumptions and presumptions.

(25) It is clear from provisions of s. 292C that noting recorded in seized documents are to be treated as correct unless contrary is proved.

(26) The onus lies on the person in whose opinion the recordings in the seized documents are not correct but the onus is being tried to be shifted to the assessee, which is contrary to the provisions of s. 292C.

As regards RM/5, the records of on-money received pertain to Fort Project (P) Ltd. and the same has nothing to do with the assessee.

(27) The seized documents RM/5 was manufactured by the Department at the time of search. Sri Kathotia, the assessee, was forced to write the said documents by the search party and was asked to sign on the dotted line in the statement under s. 132(4) (some defects have been pointed out, claiming that there was no sale of the flats and that the areas differ in some cases). The assessee accepted to buy peace and not to enter into any dispute or litigation. Therefore, reliance on RM/5 is arbitrary and contrary to the true state of affairs.

(28) The Department has tried to harass the assessee from the date of search as would be evident from the facts stated and various statements recorded in course of search by continuously alleging that noting in RM/5 are correct. The said effort is being continued by the AO.

(29) In view of the submissions, no addition can be made in the hands of the assessee and recordings in RM-1 and RM-2 have to be treated as correct and no other interpretation can be alleged to the said noting without bringing any material on record to show that the recordings therein are not correct.

In respect of RM/5, the assessee’s contentions that the Department forced the assessee to write down the documents are not reasonable since there is no evidence. The issue has been raised for the first time now after about 22 months from the date of search. There is also nothing to show that the assessee was asked to sign on the dotted lines as alleged. As regards on-money, the receipts have been admitted and accordingly included in the return by the company, M/s. Fort Projects (P) Ltd. in asst. yr. 2008-09. As regards harassment, nothing is apparent from the statements or any other facts on record. Any question asked or show-cause issued in some matters cannot be said to be harassment. However, the claim that the records of on-money received pertains to the company and that it has nothing to do with the assessee is apparently reasonable.”

7. The AO in view of documents RM-1 and RM-2 assessed the income of assessee by giving following finding :

“It is apparent from the noting in RM-1, pp. 3 to 14, as discussed above, that such account has been prepared just before the search, also incorporating some actual transactions as per books belonging to the group purposely in order to give it a look of genuineness, keeping in view that for earlier period, as mentioned above, undisclosed purchases and sales as noted will be outside the purview of the provisions of the Act for any action for any assessment for those years involved, that paintings were not capital assets for the purpose of assessment of capital gains during the relevant period of sales since the relevant amendment in the Act is not retrospective, that provisions for presumption as to correctness of seized documents are there itself in the Act in the form of s. 132(4A) and also s. 292C introduced by the Finance Act, 2007 with retrospective effect from 1st Oct., 1975, and that by noting the payments out of such sales, the unaccounted for investments etc. in cash outside accounts made in later years, the sources will stand explained as such, and no tax will be required to be paid, except a small amount of tax on long-term capital gain as disclosed by the assessee. I have examined and seen the whole seized documents RM-1, pp. 3 to 14 and also RM-2. The transactions as aforesaid and noted/written in the documents since 15th April, 1993 onwards are in crores of rupees, all in cash, in those times long back. Heavy diamond pieces, famous paintings are noted/written as having been purchased for crores of rupees. The figures and transactions regarding alleged purchases in cash of gold, diamond and paintings as noted are quite fantastic and unimaginable in the circumstances of the case. It is also incredible that the assessee made such transactions. The chart at p. 4 of this order, which is a gist of RM-1, shows that all such purchases were upto financial year 2000-01 only, which period is beyond the purview of search and seizure assessments under s. 153A. Interestingly, no transaction is noted during the financial years 2001-02 to 2004-05, no purchase, except painting for personal use of Rs. 3.62 lakhs, is reflected during the period covered by s. 53A or the year of search, There is no opening cash balance as on the starting date i.e. 15th April, 1993. If the transactions as per RM-1 were true, there would have been gold of 2 kgs., diamond costing Rs. 25 lakhs and huge cash in crores of rupees remaining as on the date of search, but no such things or cash were found. The assessee has not furnished any details about the diamonds which would have remained I hand. Besides, it has not been established that the same materials allegedly purchased earlier long back were sold later in different years. The details available in original records before search does not reflect any such status of the assessee or any such practice/activities in paintings, gold and diamond. For example, the original balance sheet as on 31st March, 2002 filed along with the return under s. 139 for the asst. yr. 2002-03 does not reflect any paintings or any piece of diamond. It only reflects gold coins costing Rs. 1,950, jewellery costing Rs. 1,58,687 and silver utensils costing Rs. 7,020. The original opening capital balance as on 1st April, 2001 was only Rs. 34,88,739.29. No accounts or papers relating to any transactions of similar nature as noted in the seized documents concerned have been found although search and seizure operations were conducted in the residence of the assessee and survey was conducted in the office premises of the group companies. Sources of huge cash required for payments for alleged purchases have not been explained. No document or evidence has been furnished/produced in this respect. Nothing has been found in course of search or survey regarding any amount of such incomes earned at any time during the relevant period long back starting from 1993 which could have supported any probability of earning and having so much of cash as would have been required for the alleged purchases. It is apparent that the documents have been made up purposely to account for/explain subsequent outgoings in the years covered by s. 153A or during the year of search. In the facts and circumstances, I doubt the correctness and truthfulness of the relevant noting/writings in the aforesaid documents.

In view of the above, of the facts and circumstances and in absence of any paper/document/evidence, proof regarding the authenticity of the transactions in gold, diamond and paintings and in view of assessee’s failure, which is apparently wilful, to even state the details regarding the transactions which allegedly took place few days before the search, the AO is not bound to presume that whatever noted/written regarding those transactions are true and correct. Otherwise also, if such practices are done by any assessee by noting/writing similarly such transactions long back for any period for which no action is possible for assessment for collection of revenue and also by noting unaccounted investments etc. later on, the Revenue will not have anything to do to properly and correctly taxing such otherwise unexplained investments made actually out of undisclosed income, except to watch and allow. This would defeat the whole purposes of the Act and make it a farce.

It is seen from the handwritten RM-2 in ink that same ink pen has been used in different years. However, a reference has been made to the examiner of questioned documents and the report is awaited.

In view of the above and also in absence of production of any papers and documents supporting such transactions etc. it is held that the said transactions in respect of gold, diamond, paintings as noted in RM-1 p. 314 as also written in RM-2 as alleged/stated, are not genuine and that the statements of the assessee in these respects are not correct and are unreliable, that the assessee has not spoken the truth and did not comply with summons for personal appearance for recording his statements wilfully being afraid of coming out of truth/actual/true state fairs, and as such, it is accordingly held that the alleged amounts on account of sales of gold, diamond and paintings as per seized documents are, in reality incomes of the assessee from other undisclosed sources, but noted/written as sale considerations of gold, diamond and paintings, to wilfully evade taxes and to defraud the Revenue and also to explain out the unrecorded cash payments towards investments, viz. on-money payments for purchase of land as per seized documents and introduction of bogus share capital in different group companies through entry operator and as admitted by the assessee vide the statements recorded.

As regards presumption under s. 292C of the Act regarding contents of seized documents etc. as true, the presumption is rebuttable, and in view of the facts and circumstances and reasons discussed in the earlier paras, the said presumption stand rebutted.

In view of the above, the submissions of the assessee regarding RM-1 and RM-2 etc. are held not reasonable and hence rejected.

Incidentally, a question may arise why a part relating to receipts is disbelieved and a part relating to payment regarding outgoing as per RM/and RM-2 is believed. As regards cash payments out of books to S.P. Bagla, the same is evidenced by GB-12, and it is apparent from the printouts vide RM-4, there was some dispute, even before the Court, and as such it would come to light any time. The cash payments for bogus share capital raising in group companies would have come to light also anytime since cash was deposited at one stage.

The assessee has filed revised balance sheets, P&L a/cs along with the returns filed under s. 153A for the asst. yrs. 2002-03 to 2007-08, the assessment years relevant to the period of six years and also filed balance sheet and accounts for asst. yr. 2008-09 relevant to the year of search. It is apparent that the assessee has revised the balance sheets/prepared the balance sheet and accounts, considering and incorporating the transactions etc. as per RM-1 and RM-2 as real and correct. But in view of the treatment as discussed above, the revised balance sheets and accounts for the asst. yrs. 2002-03 to 2007-08 and also the transactions incorporated in accounts and balance sheets and accounts for asst. yr. 2008-09 on those basis, including all the relevant books of account, are rejected.

In view of the above discussions, the cash receipts as noted in RM/I are treated as income from undisclosed sources of the assessee and is being assessed in the relevant assessment years.”

Similar are findings in other years also i.e. asst. yrs. 2007-08 and 2008-09.

Assessee aggrieved as in the above ground, raised the first issue regarding addition of Rs. 6.09 crores and Rs. 90 lakhs for asst. yrs. 2006-07 and 2007-08 respectively on account of undisclosed investment in Salt Lake property and Rs. 18.60 crores on account of unexplained investment in shares for asst. yr. 2008-09 before CIT(A). The CIT(A) confirmed the addition by giving following finding in paras 4.1 to 4.8 of his appellate order :

“4.1 The AO has discussed in detail the reasons for rejecting the noting of RMJ1 found during the course of search on pp. 6 to 8 of the assessment order. It has been emphasized that investment in crores has been shown in the seized paper since 15th April, 1993 without having any opening cash balance, which is unimaginable taking into account the business and financial background of the assessee. It has been further pointed that neither any supporting document or evidence in support of the noting were found during the course of search nor the same was furnished during the assessment proceedings. It has also been specified that no stock of diamond or gold as per noting were found during the course of search. It has also been observed that the hand written RM-2 is a recently prepared accounts as same ink has been used for making entry for different years. Accordingly it has been held that the claim of the appellant that the receipts of Rs. 7,25,00,000 in question is from sale of paintings purchased during financial years 1993-94 to 1995-96 was rejected and the amount in question was added as income from undisclosed sources.

4.3 Now the issue to be decided that whether as per provision of s. 292C introduced by the Finance Act, 2007 with retrospective effect from 1st Oct., 1975 the AO has to presume that whatever is recorded in the seized document is deemed to be true and the assessment has to be completed solely on the basis of the said document. Sec. 292C reads as under :

‘292C. Where any books of account, other documents, money, bullion, jewellery or other valuable article or thing are or is found in the possession or control of any person in the course of a search under s. 132 (or survey under s. 133A), it may, in any proceeding under this Act, be presumed—

(i)           that such books of account, other documents, money, bullion, jewellery or other valuable article or thing belong or belongs to such person;

(ii)          that the contents of such books of account and other documents are true; and

(iii)         that the signature and every other part of such books of account and other documents which purport to be in the handwriting of any particular person or which may reasonably be assumed to have been signed by, or to be in the handwriting of any particular person, are in that person’s handwriting, and in the case of a document stamped, executed or attested, that it was duly stamped and executed or attested by the person by whom it purports to have been so executed or attested.’

4.4 From the plain reading of the section it is evident that in case of seizure of document in the course of search or survey proceeding certain presumption can be made regarding the ownership and content recorded thereof. The legal applicability of the term has been clarified by the Hon’ble Supreme Court of India in the case of P.R. Metrani v. CIT [2006] 206 CTR (SC) 290 ‘A presumption is an inference of fact drawn from other known or proved facts. It is a rule of law under which Courts are authorized to draw a particular inference from a particular fact. It is of three types, (i) ‘may presume’, (ii) ‘shall presume’ and (iii) ‘conclusive proof’. ‘May presume’ leaves it to the discretion of the Court to make the presumption according to the circumstances of the case. ‘Shall presume’ leaves no option with the Court not to make the presumption. The Court is bound to take the fact as proved until evidence is given to disprove it. In this sense, such presumption is also rebuttable. Conclusive proof gives an artificial probative effect by the law to certain facts. No evidence is allowed to be produced with a view to combating that effect. In this sense, this is irrebuttable presumption’.

4.5 In s. 292C of the IT Act the word used by the Legislature ‘may presume’. Hence it leaves it to the discretion of the Court to make or not to make the presumption according to the circumstances of the case. Hence section 292C is not for the benefit of the assessee. In other words the assessee cannot escape the legal responsibility to explain with documentary proof the expenditure or deduction claimed or investment shown in the return. In the case under consideration the assessee has claimed to have earned non-taxable capital gain. Hence onus is on the assessee to prove it to be true. The submission of the appellant that the onus is on the AO to prove that the noting in the RM-1 is not correct is illogical. The details and the basis of the transaction recorded in the seized document is the personal knowledge of the assessee. Hence, unless he provides the necessary details and supporting evidences relating to the transactions, the AO cannot proceed to prove or disprove it. Moreover in the case under consideration the AO has given enough circumstantial evidence to rebut the claim made by the assessee. Moreover the Hon’ble Tribunal, Kolkata in the case of Nirmal Fashions (P.) Ltd. v. Dy. CIT [2009] 123 TTJ (Kol.) 180/[2009] 23 DTR (Kol.)(Trib.) 386/[2008] 25 SOT 387 has held that the provision of s. 292C is only a deeming provision. The presumption under s. 292C is rebuttable presumption and the document has to be considered considering the totality of the facts of the case. The deeming provision cannot be applied mechanically ignoring the facts of the case and the surrounding circumstances’.

4.6 Moreover as per the submission of the appellant that, presumption should be made that the assessee was carrying on the business of purchase and sale of gold and diamond outside the books on large scale which had resulted in the huge income, which was not recorded in the books of account since the year 1993-94. However, during the course of search of the assessee’s premises, no stock of gold or diamond were found. The Revenue had searched the residential premises of the appellant. Not a single evidence of purchase or sale of diamond, gold or painting was found. The AO has pointed out several other inconsistencies in the claim of the appellant including the fact that the seized paper RM-2 is not a day-to-day accounts prepared by the appellant but have been recently written in one operation of writing, which was subsequently confirmed by the Dy. Government Examiner of Questioned Documents, Central Forensic Science Laboratory, Directorate of Forensic Science Ministry of Home Affairs Government of India vide opinion No DXC-1/2010, dt. 9th Sept., 2010. Therefore, the contention of the assessee that as per s. 292C the seized papers were to be considered as true without calling for any other supporting evidence is not justified and deserved to be rejected. Further, since no material were put forward by the appellant to explain the contents of the document and the transaction recorded thereof were also totally unexplained. Therefore, on the basis of noting and jottings, it could not be said that these are the noting of transactions related to purchase and sale of diamonds, gold and paintings carried out by the assessee during financial year 1993-94 to financial year 2007-08. Accordingly, it is held that the document in question is a dumb document.

4.7 Since it has been held that the document in question is a dumb document, hence no presumption can be made on the basis of noting and jottings made therein. Accordingly it is held that the AO has rightly rejected the revised balance sheet and P&L a/c prepared on the basis of seized document RM-1 and RM-2. Further, since, it is a settled legal position that the seized documents are required to be read as a whole i.e. accepted or rejected as a whole. Since the genuineness of the transaction recorded in RM-1 and RM-2 has been rejected, no further presumption can be made of the nature of receipt recorded in the said document. Accordingly no addition can be made only by taking into account the unaccounted receipts recorded in the said document.

4.8 However in p. 4 of the assessment order it has been mentioned by the AO that certain details of out unrecorded cash payment on account of acquisition of Salt Lake property was found and impounded during the course of survey in the business premises of the assessee (GB 12). Further the seized record RM-4 confirms that certain dispute regarding the said property is pending before the Civil Judge Court, Barasat. During the course search the appellant admitted that he has made unaccounted payment to S.R. Bagga and in the revised balance sheet for the financial year 2005-06 the same has been calculated at Rs. 6,00,90,000 and incorporated in the declared investment. The same was also confirmed from the order dt. 25th May, 2009 of the Civil Judge, Barasat in title suit No. 2007. Hence it is an undisputed fact that unaccounted payment of Rs. 6,00,90,000 has been made by the assessee during the year under consideration. The explanation offered by the appellant that the same is from the sale proceeds of paintings is found to be unsatisfactory as no details of the transaction or any other supporting evidence has been filed. Considering above out of total addition made by the AO of Rs. 7,25,00,000, addition of Rs. 6,00,90,000 on account of undisclosed investment is confirmed. Appellant will get necessary relief accordingly.”

8. Exactly on similar facts CIT(A) also confirmed action of AO and also enhanced the addition from Rs. 75 lakhs to Rs. 90 lakhs by giving following findings in para 4.7 in asst. yr. 2007-08 :

“4.7 However in p. 4 of the assessment order it has been mentioned by the AO that certain details of out unrecorded cash payment on account of acquisition of Salt Lake property was found and impounded during the course of survey in the business premises of the assessee (GB 12). Further the seized record RM-4 confirms that certain dispute regarding the said property is pending before the Civil Judge Court, Barasat. During the course search the appellant admitted that he has made unaccounted payment to Sr. Bagga and in the revised balance sheet for the financial year 2006-07 the same has been calculated at Rs. 90,00000 and incorporated in the declared investment. The same was also confirmed from the order dt. 25th May, 2009 of the Civil Judge, Barasat in title suit No. 2007. Hence it is an undisputed fact that unaccounted payment of Rs. 90,00,000 has been made by the assessee during the year under consideration. Considering above the assessee was show cause that why not the addition on account of undisclosed investment should be enhanced to Rs. 90,00,000. In response, it was submitted by the appellant that the source of the investment has been duly recorded in the seized document RM-1 and RM-2 and the same has been duly incorporated in the revised return filed under s. 153A of the Act. The explanation offered by the appellant that the same is from the sale proceeds of paintings gold and diamonds has been found to be unsatisfactory as held in the appellate order for the asst. yr. 2006-07. Accordingly the addition of Rs. 75,00,000 on account of undisclosed investment is enhanced to Rs. 90,00,000. The AO will revise the order accordingly.”

9. Similarly, CIT(A) also confirmed the action of AO in asst. yr. 2008-09 by giving following finding in paras 4.7 and 4.8 :

“4.7 Since it has been held that the document in question is a dumb document, hence no presumption can be made on the basis of noting and jottings made therein. Accordingly it is held that the AO has rightly rejected the revised balance sheet and P&L a/c prepared on the basis of seized document RM-1 and RM-2. Further, since, it is a settled legal position that the seized documents are required to be read as a whole i.e. accepted or rejected as a whole. Since the genuineness of the transaction recorded in RM-1 and RM-2 has been rejected, no further presumption can be made of the nature of receipt recorded in the said document. Accordingly no addition can be made only by taking into account the unaccounted receipts recorded in the said document.

4.8 However it is an undisputed fact that Rs. 18,60,00,000 has been invested by the appellant during the year under consideration on purchase of share capital of M/s Rajahat Housing (P) Ltd. (Rs. 8,80,000,00), M/s Rajahat Builders (P) Ltd. (Rs. 9,60,000,00 and M/s Fort Project (P) Ltd. (Rs. 20,000,00) and the same is duly reflected in the audited accounts of the respective Companies, M/s Rajahat Builders (P) Ltd., M/s Rajahat Housing (P) Ltd. and M/s. Fort Project (P) Ltd. The explanation offered by the appellant that the source of investment is from the sale proceed of diamonds and gold has found to be unsatisfactory as no details of the transaction or any other supporting evidence has been filed. Considering above out of total addition made by the AO of Rs. 19,07,35,000, addition of Rs. 18,60,000,00 on account of undisclosed investment in shares of different company is confirmed. Appellant will get relief of Rs. 47,35,000 accordingly.”

Aggrieved against the actions of the lower authorities, assessee is in appeals for all three years before us on these issues.

10. We have heard rival contentions and gone through facts and circumstances of the case. We find that (during the course of search at the residential premises of the assessee on 28th Feb., 2008 Revenue found documents which were inventorised as RM-1 and RM-2 and seized, these contain details of unaccounted receipts of paintings, gold, diamonds, share applications etc. apart from other entries. The assessee in its paper book at pp. 117 to 150 has enclosed copies of seized documents inventorised as RM-1 and RM-2. We find that AO has summarized additions of three years in assessment orders and relevant summary is being reproduced as it is :

Assessee before us pointed out that AO has committed certain mistakes in summarizing transactions of pp. 3 to 14 of RM-1 and the counsel pointed out mistakes. According to assessee, AO inadvertently made addition of Rs. 75.10 lakhs on account of unexplained investment for the asst. yr. 2007-08 as against his own observation that the difference between outgoing of Rs. 90 lakhs and cash availability of Rs. 75.10 lakhs is only at Rs. 14.90 lakhs, which should be treated as undisclosed investment for asst. yr. 2007-08. The assessee pointed out that actually there is no unexplained investment for asst. yr. 2007-08 as total amount paid to Sri S.P. Bagga during financial year 2005-06 relevant to asst. yr. 2006-07, in view of seized document RM-1, which adds upto Rs. 570.9 lakhs and not Rs. 620.90 lakhs taken by the AO. Learned counsel for the assessee referred to seized documents inventorised as RM-1, the copies of which are enclosed at assessee’s paper book pp. 117 to 131. We have gone through seized document RM-1 and find that no other payment of Rs. 29 lakhs as indicated in the summary table of assessment order is mentioned. We further find that cash availability as per RM-1 at the start of financial year 2006-07 relevant to asst. yr. 2007-08 was Rs. 725 lakhs and Rs. 570.9 lakhs i.e. Rs. 725 lakhs. We find that outgoing of Rs. 90 lakhs for the said year was explained and in view of these facts, there was no unexplained investment for financial year 2006-07 relevant to asst. yr. 2007-08. We find that the AO has noted that since most of purchases are noted in the seized documents RM-1 and RM-2 beyond the period covered under s. 153A of the Act i.e. prior to financial year 2001-02 (during the period financial year 1993-94 to 2000-01) and same did not fall within the purview of s. 153A of the Act but sales made falls within the time period covered under s. 153A of the Act. The AO observed that the assessee failed to furnish the details or names of persons from whom or to whom purchases/sales of gold, diamonds and paintings were made and further assessee could not give any evidence of supporting documents in respect of sales made. The AO tried to negate the claim of cash generated on sales utilization out of books cash payments for investment in lands, share application-money etc. which have been reflected by the assessee in his revised balance sheet filed along with returns of income in response to notice under s. 153A of the Act. It means that the allegation of AO that assessee was involved in real estate business where on-money receipt was rampant and receipts were nothing but on-money receipts noted in the guise of sale consideration of gold and diamonds to defraud Revenue and to explain away receipt as cash payments towards investments. But we find that the AO accepted as it is other entries pertaining to undisclosed investments made in property etc. and entries disclosed in the regular books and account of assessee maintained in regular course. The AO has only disregarded specific noting made in RM-1 and RM-2 recording purchases and sales of diamonds, gold and paintings. Hence, the AO made addition of Rs. 7.25 crores and Rs. 19.07 crores for asst. yr. 2006-07 and asst. yr. 2008-09 respectively on account of undisclosed cash receipts appearing as sale proceeds of gold, diamonds and paintings in RM-1 and RM-2 by disregarding long-term capital gains disclosed by the assessee on sale of diamond and gold to the tune of Rs. 7.70 crores in his return of income for asst. yr. 2008-09, in view of noting made in RM-1 and RM-2 in response to notice under s. 153A of the Act. We further find that the AO for asst. yr. 2007-08 has noted that assessee had outgoings of Rs. 90 lakhs (but AO has assessed in assessment order by noting as Rs. 90 crores wrongly) but cash availability was to the extent of 725 crores and Rs. 640.90 lakhs and thus, thereby the difference of Rs. 75.10 lakhs. We find that CIT(A) deleted the addition of Rs. 7.25 crores and Rs. 19.07 crores made by the AO on account of undisclosed cash receipts for asst. yrs. 2006-07 and 2008-09 but made addition of Rs. 6,90,00,000 for asst. yr. 2006-07 and Rs. 18.60 crores for asst. yr. 2008-09 on account of undisclosed investment in property at Salt Lake and unexplained investment in shares respectively. For asst. yr. 2007-08, CIT(A) enhanced addition to Rs. 90 lakhs as against addition made by the AO at Rs. 75.10 lakhs. The CIT(A) while adjudicating this interconnected issues held seized documents inventorised as RM-1 and RM-2 as dumb documents and rejected the same by invoking provisions of s. 292C of the Act stating that the words used by Legislature were ‘may presume’ and it is for the discretion of the Court to make or not to make the presumption according to circumstances of the case. The CIT(A) held that provisions of s. 292C of the Act was not for the benefit of the assessee and assessee could not escape legal responsibility to explain seized documents, particularly when there is no documentary evidences to prove explanation or deduction or investment as shown in the return of income filed in response to s. 153A of the Act. The CIT(A) noted that during the course of search no stock of gold, diamonds or paintings was found although assessee was claiming to have been carrying on the business of purchase and sale of this items outside the books of account i.e. unaccounted purchase and sales. According to the CIT(A) RM-2 was not a day to day account prepared by the assessee but written in one operation of writing and he rejected the contention of assessee that the seized papers were to be considered as true without calling for any other supporting evidence. According to CIT(A), since assessee had not furnished evidence to prove the contents of RM-1 and RM-2 as true, the same were held as dumb documents and, therefore, the revised balance sheets and P&L a/c prepared by assessee on the basis of RM-1 and RM-2 were held to be rightly rejected by AO. The CIT(A) held that seized documents were required to be read as a whole and has to be accepted or rejected as a whole. According to CIT(A) since genuineness of transactions recorded in RM-1 and RM-2 has not been proved, no further presumption could be made on the nature of receipt or expenditure recorded in RM-1 and RM-2. The CIT(A) also noted that certain own recorded cash payments for acquisition of Salt Lake property was found and impounded from the business premises of the assessee during the course of survey under s. 133A of the Act and inventorised the same document as GB-12. It is also proved, CIT(A) noted that the seized document RM-1 contains certain disputes regarding Salt Lake property before Civil Judge Court, Barasat. Even from the revised balance sheet filed by assessee for asst. yrs. 2006-07 and 2007-08, payment made to Shri S.P. Bagga has been calculated by the assessee at Rs. 6.009 crores and Rs. 90 lakhs respectively and declared as investment. Hence, CIT(A) held that unaccounted payment of Rs. 6.009 crores and Rs. 90 lakhs had been made by the assessee for acquisition of Salt Lake property for asst. yrs. 2006-07 and 2007-08 and added the same as undisclosed investment. For asst. yr. 2008-09, the CIT(A) held that assessee has invested a sum of Rs. 18.60 crores i.e. for purchase of shares of Rajahat Housing (P) Ltd. amounting to Rs. 8.80 crores, Rajahat Builder (P) Ltd. amounting to Rs. 0.6 crore and Fort Project (P) Ltd. amounting to Rs. 20 lakhs and the same were allegedly reflected in audited accounts of the company respectively. Hence, CIT(A) made addition of undisclosed investment of shares in different companies by the assessee. The CIT(A) further held that the explanation that shares were acquired out of sale proceeds of gold, diamonds and paintings is without any basis. Hence, he has not accepted the explanation of the assessee and upheld the additions by giving different reasoning and treating the unexplained investments.

11. We find that the AO has made additions for these three assessment years on the basis of pick and choose basis of entries of RM- 3 and RM-2 and by rejecting source explaining entries of investment. AO accepted the quantum of cash in RM-1 and RM-2 but rejected the nature explaining the source and also accepted entries belonging to unaccounted investments in property and shares reflected in RM-1 and RM-2. The AO made addition where sale proceeds of paintings, gold and diamonds as reflected in RM-1 and RM-2 exceeds unaccounted investments but made addition on account of unexplained cash received in these two assessment orders. Further, AO also made addition on account of unaccounted investment reflected in RM-1 and RM-2, where exceeded inflow of cash by treating the same as deficit and unexplained investments. But CIT(A) rejected the seized documents RM-1 and RM-2 in toto and also rejected the revised accounts prepared on the basis of entries in RM-1 and RM-2. The CIT(A) since rejected RM-1 and RM-2, inflow, outflow of cash, shown therein was also rejected. He made fresh addition on account of unexplained investment in property made on the basis of entries in GB-12 found from the business premises of the assessee and on account of investment made in shares of different companies as narrated above even from the audited balance sheet of such companies. Here, we want to mention one important aspect that the AO made additions which were deleted by the CIT(A), apart from challenging the deletion of Rs. 35 lakhs, balance additions are not subject-matter of challenge by Revenue before us.

12. We find that Revenue during the course of search on the residential premises of assessee on 28th Feb., 2008, under s. 132 of the Act, found and inventorised documents as RM-1 and RM-2. Whether these documents are to be treated as true or not is now to be decided first. We find that CIT(A) as well as AO has invoked provision of s. 292C of the Act for not accepting these documents RM-1 and RM-2. The main contention of the Revenue authorities is that under s. 292C of the Act the words used by Legislature were ‘may presume’ and hence it was at the discretion of the Court to make or not to make presumption according to the facts and circumstances of the case. The Revenue authorities in support has relied on the judgment of Hon’ble Apex Court in the case of P.R. Metrani v. CIT [2006] 287 ITR 209. He thus concluded that s. 292C of the Act was not for the benefit of the assessee and he could not escape the legal responsibility to explain with documents and without any evidence for the claim of expenditure or deduction or investment shown in the return of income filed under s. 153A of the Act. According to CIT(A), onus was on the assessee to prove that what was stated in seized document is true and in the present case since the assessee failed to produce evidence in support of transactions pertaining to sale of gold, diamonds and paintings recorded in seized documents inventorised as RM-1 and RM-2 and hence, rejected by CIT(A). First, all we have to go through the provisions of s. 292C of the Act.

“292C. (1) Where any books of account, other documents, money, bullion, jewellery or other valuable article or thing are or is found in the possession or control of any person in the course of a search under s. 132 or survey under s. 133A, it may, in any proceeding under this Act, be presumed—

(i)           that such books of account, other documents, money, bullion, jewellery or other valuable article or thing belong or belongs to such person;

(ii)          that the contents of such books of account and other documents are true; and

(iii)         that the signature and every other part of such books of account and other documents which purport to be in the handwriting of any particular person or which may reasonably be assumed to have been signed by, or to be in the handwriting of, any particular person, are in that person’s handwriting, and in the case of a document stamped, executed or attested, that it was duly stamped and executed or attested by the person by whom it purports to have been so executed or attested.

               (2) Where any books of account, other documents or assets have been delivered to the requisitioning officer in accordance with the provisions of s. 132A then, the provisions of sub-s. (1) shall apply as if such books of account, other documents or assets which had been taken into custody from the person referred to in cl. (a) or cl. (b) or cl. (c), as the case may be, of sub-s. (1) of s. 132A, had been found in the possession or control of that person in the course of a search under s. 132.”

13. We find that in the instant case search and seizure operation under s. 132(1) of the Act was conducted in the Fort Group of cases, including assessee on 28th Feb., 2008 and from the residential premises of the assessee i.e. Ballygunge Park, Kolkata-19, cash, jewellery, silver utensils and various documents marked as annexure RM-1 to RM-5 was found and seized. On the basis of these seized documents marked as RM-1 to RM-5, assessee was asked to make disclosure of Rs. 9.02 crores in respect to on-money receipts of Fort Projects (P) Ltd., a private limited company in which assessee is one of the directors. We find that the assessee’s statement during the course of search in respect of notings in various seized documents recorded were accepted under s. 132(4) of the Act. In the course of statement recorded under s. 132(4) of the Act on 14th March, 2008, assessee made disclosure of Rs. 7.70 crores on the basis of noting in RM-1 on account of capital gain arising on sale of diamonds and gold in asst. yr. 2008-09. We have perused copies of statement of assessee recorded during the course of search, which are enclosed in assessee’s paper book at pp. 82 to 111. The main issue in the present appeals revolves around notings made in seized documents marked RM-1 and RM-2 which are computer printout in respect of assessee’s unaccounted investment in gold, diamonds and paintings etc. upto 23rd Feb., 2008. RM-1 is a note book in handwriting of assessee’s recording entries upto 20th Feb., 2008 and all these entries are completely reflected in RM-1, if we compare these two. We find that AO disbelieved part of notings in seized documents and made addition in respect of notings in document RM-1 and RM-2 of sale of gold, diamonds and paintings by stating that actually it is income of the assessee from undisclosed sources. The AO noted that assessee was in real estate business where on-money receipts were rampant and these receipts were nothing but on-money noted as sale consideration of gold and diamonds and to explain away unrecorded cash payments towards investment. The CIT(A) also confirmed the action of AO but entirely on different ground by applying the provisions of s. 292C as well as decision of Hon’ble Apex Court in the case of P.R. Metrani (supra). First of all it is to be noted that the decision of Hon’ble Apex Court in the case of P.R. Metrani (supra) has discussed the issue of presumption under s. 132(4A) of the Act, and according to Hon’ble Apex Court this was a rebuttable presumption. The Hon’ble Apex Court in the case of P.R Metrani (supra) has discussed the facts as under :—

“P.R. Metrani and Y.R. Metrani were two brothers and are the members of the joint Hindu family. P.R. Metrani (HUF) assessee was a partner in a firm called M/s R. N. Metrani & Sons. Y.R. Metrani was also a partner in this firm. P.R. Metrani as well as Y.R. Metrani have died during the pendency of these cases.

A search of the residential premises Ranganatha Nilaya was conducted by the Income-tax, Central Excise and Customs Departments on 30th June, 1982 and 1st July, 1982, and as well as the business premises where the business of the firm was being conducted. The residential premises of J.J. Bakale, nephew of P.R. Metrani were also searched. The search brought to surface unaccounted money, gold biscuits, gold jewellery, silver etc. besides some important documents. For the purpose of assessment for the asst. yrs. 1981-82 and 1982-83 three documents were found to be relevant by the AO and they were marked as PRM-1, PRM-7 and PRM-13 at the time of search and seizure, which were seized from the residential premises namely, ‘Ranganatha Nilaya’. The statement of J.J. Bakale was recorded at the time of search. P.R. Metrani was away to Rajasthan on a business tour. He was examined after his return to Hubli on 13th July, 1982. He denied the possession of PRM-1, PRM-13 and PRM-14. He also defied that these papers contain any writing made by him. The assessing authority made a summary adjudication order under s. 132(5) of the IT Act, 1961 (for short ‘the Act’). He made certain additions and retained the assets seized.

Notice under s. 139(2) dt. 17th Sept., 1982 for the asst. yr. 1982-83 was served on the assessee on 21st Sept., 1982. The appellant declared a total income of Rs. 46,200 and a net agricultural income of Rs. 6,000. Notices under ss. 143(2) and 142(1) were issued on several dates. The appellant appeared before the authorities on several dates and assessment came to be completed. The following additions were made in respect of the asst. yr. 1982-83 :

The assessment for the year 1981-82 was completed after making an addition of Rs. 19,93,117.

The assessing authority made an assessment for the construction of a commercial complex in Durgadabailu, the investment for which was declared at Rs. 5,55,000 for the entire building. Half of the building belonged to P.R. Metrani and other half to Y.R. Metrani. The Department had sent the Valuation Officer for enquiry regarding the cost of building and it was fixed by the DVO at Rs. 5,83,000. The assessing authority however did not accept the valuation made by the Valuation Officer and held that the total investment on the building was Rs. 6,45,809. A source to the extent of Rs. 1,21,627 was accepted. The balance was rounded off to Rs. 5,24,200. Half of this was added to the assessment of P.R. Metrani (HUF) and other half was added in the assessment of Y.R. Metrani.

The appellant being aggrieved filed appeals before the CIT(A). The CIT(A) by separate order disposed of the appeals relating to the asst. yrs. 1981-82 and 1982-83. He examined the issue including certain credits, and, on 19th Sept., 1988 confirmed the additions barring the sum of Rs. 36,000 for the asst. yr. 1982-83. The orders of the assessing authority as well as the CIT(A) are based on the presumptions in terms of s. 132(4A) of the Act. It was held that the presumptions under s. 132(4A) were not confined to the orders passed under s. 132 only, but, were available for framing the regular assessments as well.

The assessee being aggrieved filed a further appeal before the Income-tax Appellate Tribunal, Bangalore (for short ‘the Tribunal’). The Tribunal relying upon the judgment of the Allahabad High Court in the case of Pushkar Narain Sarraf v. CIT [1990] 86 CTR (All.) 110/[1990] 183 ITR 388, on the scope of s. 132(4A) held that the presumptions under s. 132(4A) are confine to the framing of the order under s. 132(5) only and are not available for framing the regular assessment. The Tribunal accepted the appeals, set aside the orders passed by the CIT(A) as well as the assessing authority except to the extent of addition of Rs. 2,62,100. At the instance of the Revenue, the Tribunal referred the following two questions for both the asst. yrs. 1981-82 and 1982-83 for the opinion of the High Court :

(1) Whether the Tribunal was correct in law in holding that the presumption under sub-s. (4A) of s. 132 of the IT Act, 1961, is only for the limited purpose of passing an order under sub-s. (5) of the said section?

(2) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the documents seized from the residential premises of the assessee HUF were not of the said HUF and the entries therein did not pertain to it, particularly when the Tribunal itself has accepted that the entries in the said documents culminating in addition of Rs. 2,62,100 in the assessment for the asst. yr. 1982-83 pertained to the assessee-HUF and upheld the said addition ?’

At the instance of the assessee, the Tribunal referred the following two questions for the opinion of the High Court (p. 249) :

39(1) Whether on the facts the Tribunal was justified in holding that the applicant HUF was liable to be taxed in respect of Rs. 2,62,100 being alleged unexplained investment in the property invoking the provisions of s. 69 of the Act?

(2) On the facts whether the Tribunal was justified in holding that the part of the entries in the seized documents could be attributed to the applicant HUF when the applicant had denied the knowledge or ownership of the document ?

The High Court answered all the four questions in favour of the Revenue and against the assessee. On question No. 1 regarding presumption under sub-s. (4A) of s. 132 of the Act, it has been held that the same is not limited to the passing of an order under sub-s. (5) of s. 132 only; the same presumption can be raised for framing the regular assessment as well. The Bench has recorded its dissent with the view taken by the Allahabad High Court in Pushkar Narain Sarraf (supra).”

14. Hon’ble Apex Court has finally concluded as under :

“Search and seizure under s. 132 is a serious invasion into the privacy of a citizen, therefore, it has to be construed strictly. Sub-s. (4A) was inserted by the Taxation Laws (Amendment) Act, 1975, w.e.f. 1st Oct., 1975 to permit a presumption to be raised in the circumstances mentioned therein. Before the insertion of sub-s. (4A) the onus of proving that the books of account, other documents, money, bullion, jewellery – etc., found in the possession or control of a person in the course of a search belonged to that person was on the IT Department. Sub-s. (4A) enables an assessing authority to raise a rebuttable presumption that such books of account, money, bullion, etc. belonged to such person; that the contents of such books of account and other documents are true, and, that the signatures and every other part of such books of account and other documents are signed by such person or are in the handwriting of that/particular person.

Raising of such presumption has been enacted by the Legislature to enable the assessing authority to make a provisional adjudication within the time frame prescribed under s. 132. Otherwise it may not be possible to do so. The object of introduction of s. 132 is to prevent the evasion of tax, i.e., to unearth hidden or undisclosed income or property and bring it to assessment. It is not merely an information of undisclosed income but also to seize money, bullion, etc., representing the undisclosed income and to retain them for the purposes of realization of taxes, penalties etc. Search and seizure is a serious invasion into the privacy of the person. Sec. 132 which is a complete code by itself provides that the money, bullion or the books of account etc. should not be retained unnecessarily and that the provisional assessment made under s. 132 for the purpose of retention of the books is passed within a specified time in accordance with law. It provides that the books of account, money and bullion which are not required are not retained unnecessarily thereby causing harassment to the person concerned. In order to see that the assessment order is framed within the time frame provided under s. 132, the Legislature provided for a rebuttable presumption to be raised against the person from whose possession and control the books of account, money, bullion, etc. are seized so that the order can be passed within the time frame provided under s. 132.

A presumption is an inference of fact drawn from other known or proved facts. It is a rule of law under which Courts are authorized to draw a particular inference from a particular fact. It is of three types, (i) ‘may presume’, (ii) ‘shall presume’ and (iii) ‘conclusive proof’. ‘May presume’ leaves it to the discretion of the Court to make the presumption according to the circumstances of the case. ‘Shall presume’ leaves no option with the Court not to make the presumption. The Court is bound to take the fact as proved until evidence is given to disprove it. In this sense such presumption is also rebuttable. Conclusive proof gives an artificial probative effect by the law to certain facts. No evidence is allowed to be produced with a view to combating that effect. In this sense, this is an irrebuttable presumption.

The words in sub-s. (4A) are ‘may be presumed’. The presumption under sub-s. (4A), therefore, is a rebuttable presumption. The finding recorded by the High Court in the impugned judgment that the presumption under sub-s. (4A) is an irrebuttable presumption insofar as it relates to the passing of an order under sub-s. (5) of s. 132 and a rebuttable presumption for the purpose of framing a regular assessment is not correct. There is nothing either in s. 132 or any other provisions of the Act which could warrant such an inference or finding.

The presumption under sub-s. (4A) would not be available for the purpose of framing a regular assessment. There is nothing either in s. 132 or any other provision of the Act to indicate that the presumption provided under s. 132 which is a self-contained code for search and seizure and retention of books, etc. can be raised for the purposes of framing of the regular assessment as well. Wherever the Legislature intended the presumption to continue, it has provided so. Reference may made to s. 278D of the Act which provides that where during the course of any search under s. 132, any money, bullion, jewellery or other valuable articles or things or any books of account etc. are tendered by the prosecution in evidence against the person concerned, then the provisions of sub-s. (4A) of s. 132 shall, so far as may be, apply in relation to such assets or books of account or other documents. This clearly spells out the intention of the Legislature that wherever the Legislature intended to continue the presumption under sub-s. (4A) of s. 132, it has provided so. It has not been provided that the presumption available under s. 132(4A) would be available for framing the regular assessment under s. 143 as well.

This is also evident from the fact that whereas the Legislature under s. 132(4) has provided that the books of account, money, bullion, jewellery and other valuable articles or things and any statement made by such person during examination may thereafter be used as evidence in any other proceedings under the Act it has not provided so under sub-s. (4A) of s. 132. It does not provide that the presumption under s. 132(4A) would be available while framing the regular assessment or for that matter under any other proceeding under the Act except under s. 278D.

Sec. 132 being a complete code in itself cannot intrude into any other provision of the Act. Similarly, other provisions of the Act cannot interfere with the scheme or the working of s. 132 or its provisions.

The presumption under s. 132(4A) is available only in regard to the proceedings for search and seizure and for the purpose of retaining the assets under s. 132(5) and their application under s. 132B. It is not available for any other proceeding except where it is provided that the presumption under s. 132(4A) would be available.”

15. We find that the term ‘used’ in the provision of s. 292C of the Act “may be presumed” is discussed, but in the context of s. 132(4A) of the Act, by Hon’ble Apex Court in the case of P.R. Metrani (supra) and said term implies that the presumption is rebuttable. The term ‘rebut’ means to disprove. In other words, [unless contrary is proved, what is stated in the seized documents has to be presumed to be true and thus, the provisions of s. 292C of the Act does not confer discretionary power on the Department to presume or not to presume the correctness of seized documents as held by CIT(A). We find that CIT(A) observed that s. 292C of the Act is not for the benefit of the assessee but it is for benefit of Department. We are of the view that the provision will equally apply to both assessee as well as Department and s. 292C of the Act only creates a legal fiction, whereby in case of search and seizure, contents of seized material are presumed to be true unless rebutted by the party claiming contrary. Now, we are of the view that onus of rebutting the presumption under s, 292C of the Act is on the party claiming otherwise, be it assessee or Revenue, in the present case before us, the seized documents RM-1 and RM-2 were found from the possession and control of the assessee. In present case, since seized documents RM-1 and RM-2 were found from possession and control of the assessee during the course of search in his case by legal fiction, a presumption under s. 292C had to be drawn that the said documents belonged to the assessee and the contents thereof were true unless disproved by cogent evidence. The onus to prove that what was apparent from these books was not real was on the party which claimed it to be so. The Department claimed that the contents of RM-1 and RM-2 found from the possession and control of the assessee in course of search were incorrect. Thus, the onus was on the Department, to bring on record some acceptable evidence to prove that what was stated in the seized documents did not depict the actual state of affairs. The AO and CIT(A) failed to discharge such onus by bringing on record some cogent evidence to disprove notings in the seized papers. On the contrary, CIT(A) and AO tried to shift onus of proving entries in seized books/papers on the assessee in contradiction to provisions of s. 292C of the Act. We are of the view that seized documents RM-1 and RM-2 clearly depicting the purchase and sale of gold, diamonds and paintings and investment of the sale proceeds in property and shares had to be accepted as such unless some evidence or material was brought on record by the Revenue to show that what was stated in the seized documents was not correct. CIT(A)’s opinion that onus was on the assessee to prove that what was stated in the seized documents was true. Such an interpretation would render the deeming provisions of s. 292C otiose and presumption as to the correctness of seized documents is automatic under s. 292C of the Act unless the contrary is proved and as such, the assessee was not legally required to substantiate the seized documents with supporting evidence. Where the statute provides a deeming provision, what is prescribed is to be deemed without seeking corroborative evidence. We find from a bare perusal of RM-1 and RM-2, which would reveal that seized documents have been maintained in considerable details such as exact caratage of diamonds, the weight of gold and the rates of purchases and sales, the dates of purchase and sales have been mentioned. Further, in respect of paintings, minute details such as the exact size of the paintings and the names of the artists have also been mentioned in the seized documents. Thus, these are speaking documents and not dumb documents. A dumb document is a document which does not speak for itself and not a self-explanatory and detailed document like present one. Further, on going through these documents it is revealed that these documents also record several regular transactions of the assessee which stand duly disclosed in regular books of account. The assessee has cited few examples in his written submissions of transactions of disclosed/regular nature found recorded in RM-1 as under :

Similarly several other notings pertaining to withdrawal of cash from the regular bank accounts of various companies, payment of cash on account of various properties acquired by various companies duly recorded in the books of those companies etc. were also recorded in RM-1 and RM-2. All these entries were verified from regular books of account and found to be correct and accepted as such by the Department. This also fortifies the fact that RM-1 and RM-2 contained genuine entries of the appellant and were not dumb documents.

16. We further find that Revenue did not make any effort to controvert the correctness of the noting in the seized documents. Revenue, both authorities below, did not doubt the rates at which gold, diamonds and paintings were purchased and sold by the assessee and were not proved to be unfeasible or impracticable. Lower authorities failed to prove a single instance where sale proceeds of diamonds, gold or paintings actually represented ‘on-money’ or some other form of undisclosed receipt and in the absence of cogent evidence express noting in the seized documents could not be arbitrarily disregarded and no additions could be made solely on the basis of surmises and conjectures. Even seized documents could not be outrightly rejected as dumb documents without disproving the same. It is also a fact that seized papers were findings of search operations carried out by the Department and not papers submitted by the assessee suo motu in course of normal assessment which required substantiation. These papers were part of Department’s evidence unearthed as a result of search carried out by the Department, and thus, the same were to be taken at face value unless contrary is proved. The said papers were not meant for production before the Department but for personal information of the assessee and as such, could not have been untrue or fabricated. Therefore, it was highly illogical on the part of the Department to assume that the said papers had been purposely prepared by the assessee to defraud the Department. As regards CIT(A)’s contention that no stock of gold, diamonds or paintings were found in course of search at the residential premises we are of the view that most of the gold, diamonds and paintings were sold prior to search action and as such considerable stock of aforesaid items were not remaining at the time of search. Even during the course of search the assessee in reply to question No. 8 of his statement recorded on oath under s. 132(4) on 14th March, 2008, pp. 101 to 102 of assessee’s paper book referred by learned counsel, wherein he stated that the gold after purchase was kept at various locations and this explains the reason why the remaining 2 kgs. of gold was not found in course of search at the residential premises of the assessee. Even during the course of search, in regards paintings, assessee admitted vide question No. 15 on the date of search that the same were on display at his residence and the same question No. 15, pp. 104-105 of assessee’s paper book, is reproduced as under :

“Ans. 15. I am fond of paintings and have been collecting them for my personal purpose to display in my residence from year 1993. I got bored of having the same paintings in the house for so long and therefore decided to sell the old ones and purchased new ones to display in the residence which were also on display in the residence on the date of search.”

In view of these facts, we are of the opinion that RM-1 and RM-2 was a day to day account prepared by assessee and discovered as a result of search and the contents therein had to be presumed to be true under s. 292C unless proved otherwise. The CIT(A) rejected the claim of the assessee that this is not an authenticated document but relied on documents marked GB/12 impounded in course of survey in the premises of M/s Fort Projects (P) Ltd. and the said seized documents contained certain details of unrecorded cash payment on account of acquisition of Salt Lake property. Since RM-1 and RM-2 explaining the source of acquisition of such property and accounts prepared on the basis of the same were rejected by CIT(A), we are of the considered opinion that notings in GB-12 only substantiate/confirm the entries pertaining to investment in property at Salt Lake noted in RM-1 and RM-2. Thus, GB-12 only fortifies the correctness of RM-1 and RM-2 and CIT(A) failed to explain the logic behind relying on one set of seized documents marked GB-12 containing details of unaccounted investment in property and rejecting the other set of seized documents marked RM-1 and RM-2 containing both the details of investment in property as well as explaining the source thereof. CIT(A) failed to appreciate that since RM-1 and RM-2 were found from the possession and control of the appellant in course of search conducted in the assessee’s own case, presumption under s. 292C could more aptly be drawn in respect of RM-1 and RM-2 rather than documents impounded in course of survey in group case, i.e. GB-12.

17. In view of above facts, it is clear that the documents seized during the course of search from the possession of assessee are true till it is proved otherwise by cogent evidence. The onus to prove that the apparent is not the real is on the party who claims it to be so. Here, in the present case, Department claimed that documents inventorised RM-1 to RM-4 are dumb documents and for this Revenue has no basis whatsoever. To give a finding that the documents are dumb and such a finding can be reviewed on the ground that there is no evidence to support it or it is perverse. Further, when a conclusion has been reached on an appreciation of a number of facts, whether that is sound or not must be determined, not by considering the weight to be attached to each single fact in isolation, but by assessing the cumulative effect of all the facts in their setting as a whole. When a Court of facts acts on material partly relevant and partly irrelevant, it is impossible to say to what extent the mind of the Court was affected by the irrelevant material used by it in arriving at its finding. Such a finding is vitiated because of use of inadmissible material and hence decision in such situation is based on conjectures, surmises and suspicion. Hence, we consider documents found from the possession of the assessee during the course of search was real and declaration made by assessee on the basis of entry recorded in these documents of long-term capital gain on account of sale of gold and diamond and also receipts on account of sale of paintings are true and there is no basis not to accept the same. Accordingly, we delete the addition made by CIT(A) of Rs. 6.009 crores and Rs. 90 lakhs for asst. yrs. 2006-07 and 2007-08. This interconnected issue of the assessee’s appeals is allowed.

18. Since seized documents RM-1 and RM-2 are accepted as true, consequently the assessee has also explained the investment made in purchase of Salt Lake property and also explained the investment in shares explaining source thereof from sale proceeds of diamonds and gold. The assessee has explained that it did not make any investment of Rs. 20 lakhs in the purchase of shares of Fort Projects (P) Ltd. as held by CIT(A), which is clearly proved by seized documents RM-1 and RM-2 and the table reproduced by the AO in his assessment orders of these years. After going through facts, we find that this mistake has cropped up due to mistaken notion of the CIT(A). As regards investment of Rs. 18.40 crores the same has been extracted by lower authorities from RM-1 and RM-2. Apart from RM-1 and RM-2, CIT(A) could not have arrived at the factum of investment in shares by assessee from any other source. The CIT(A) accepted the factum of investment in shares from RM-1 and RM-2 for making addition on one hand and rejecting the same as dumb documents on the other hand. Since we have already held that seized documents RM-1 and RM-2 are correct financial statements prepared after incorporation the entries from the seized documents are also true explaining the investment in shares. Accordingly, on the same reasoning, we delete the addition of unexplained investment in shares amounting to Rs. 18.60 crores for asst. yr. 2008-09. This issue of assessee’s appeal is also allowed.

19. The next issue in IT(SS)A No. 4/Kol/2011 raised by assessee by way of additional ground is as regards the disallowance of interest paid to M/s. Floor & Walls. For this, the assessee has raised the following additional grounds :

“1.          That the learned CIT(A) omitted to consider the additional ground filed by the appellant in regard to disallowance of interest of Rs. 2,93,366 paid to M/s Floor & Walls by the appellant for asst. yr. 2006-07.

2.            That the AO erred in disallowing interest on capital of Rs. 2,93,366 paid to M/s Floors & Walls alleging that the same was in the nature of interest on loan and remained unsubstantiated despite the fact that the genuineness of the same was proved from the facts and evidence on record.”

20. At the outset, the learned CIT-Departmental Representative fairly agreed that this can be admitted and adjudicated upon as the facts are available in the records of the Department. Hence, we admit this issue and adjudicate the same.

21. We have heard rival submissions and gone through facts and circumstances of the case. We find that this addition was also not challenged in the original grounds of appeal before the first appellate authority but was challenged by additional ground but CIT(A) inadvertently omitted to consider this additional ground of appeal. As this ground has not been adjudicated by CIT(A), we set aside this issue to the file of CIT(A) to adjudicate the same on merits. Accordingly, this issue of the assessee’s appeal is allowed for statistical purposes.

22. The next issue in IT(SS)A No. 7/Kol/2011 is as regards to the order of CIT(A) confirming the action of AO making addition of cash found during search as unexplained. For this, assessee has raised following ground No. 5 :

“On the facts and in the circumstances of the case, the learned CIT(A) erred in rejecting the claim of the appellant about the source of the cash found during the search at Rs. 50,61,250 and in confirming the addition as made by the AO in that regard.”

23. The brief facts leading to the above issue are that during course of search at the assessee’s residential premises, cash of Rs. 50,61,250 was found out of which cash of Rs. 50,00,000 was seized. The AO added Rs. 50,61,250 on account of unexplained cash on the ground that the assessee had admitted the same to be out of books in statement recorded under s. 132(4). Aggrieved, assessee preferred appeal before CIT(A) and CIT(A) confirmed the action of AO by holding that RM-1 and RM-2 are dumb documents and accordingly, cash receipt on the basis of noting in RM-1 could not be taken as explanation for the alleged undisclosed cash found during the course of search. Aggrieved, now assessee is in appeal before us. Before us learned counsel for the assessee stated that cash was generated from undisclosed transactions noted in RM-1 and RM-2. The assessee filed returns of income under s. 153A, revised balance sheets and P&L a/c for these years after incorporating all the entries of disclosed and undisclosed nature noted in the seized documents. The undisclosed income in the form of long-term capital gains arising from the undisclosed transactions was also duly offered for taxation by the assessee in his return of income for asst. yr. 2008-09 and due taxes were paid thereon. After incorporating all the entries in seized documents marked RM-1 and RM-2, the assessee had surplus cash balance of Rs. 6,28,53,906 on the date of search i.e. 28th Feb., 2008 and Rs. 6,08,43,906 on 31st March, 2008. In support of the above, assessee enclosed cash account which is at p. 164 of the assessee’s paper book.

24. We have heard rival submissions and gone through facts and circumstances of the case. We find that the entire cash of Rs. 50,61,250 found in course of search on 28th Feb., 2008 stood adequately explained, since total undisclosed income arising from the seized documents were already offered for taxation by assessee and cash found in course of search stood explained from the entries recorded in seized documents, no separate addition can be made in respect to cash found. We have already accepted the seized document RM-1 and RM-2 as genuine documents explaining away the entries, the cash explained by assessee cannot be treated unexplained. Accordingly, this issue of assessee’s appeal is allowed.

25. The next issue in Revenue’s appeal in IT(SS)A No. 10/Kol/2011 is against the order of CIT(A) deleting the addition of undisclosed income made by AO on account of expenditure incurred by assessee on furniture, fixture, flooring etc. in respect of flat No. 501, 20 Lee Road, Kolkata. For this, Revenue has raised following two grounds :

“1.          That, on the facts and circumstances of the case, learned CIT(A) has erred in both law and facts in deleting the addition of Rs. 35,00,000 on account of undisclosed income without appreciating fact that the assessee incurred expenditure of Rs. 35 lakhs for furniture, fixtures, flooring etc. in respect of Flat No. 501, at 20 Lee Road, Kolkata.

2.            That, in doing so, learned CIT(A) overlooked the facts the expenditure referred above were duly recorded in the same seized documents marked as RM-1 and RM-2.”

26. The brief facts leading to above issue are that assessee incurred undisclosed expenditure for furniture, fixture, flooring etc. incurred in respect of Flat No. 501, at 20 Lee Road, Kolkata for asst. yr. 2008-09. The said expenditure was found recorded in RM-1 and RM-2. The expenditure of Rs. 35 lakhs was incurred by the assessee in connection with purchase of furniture of director’s flat at 20 Lee Road on behalf of M/s Fort Projects (P) Ltd. It is pertinent to note that no such addition of Rs. 35 lakhs on account of undisclosed expenditure was made by AO in very first place and this will be clear from perusal of assessment order for asst. yr. 2008-09, which would make clear that AO made an addition of Rs. 19.07 crores for the said year on account of alleged undisclosed cash receipts arising on sale of gold and diamonds and not on account of any unexplained expenditure on furniture, fixtures etc. But CIT(A) after rejecting notings in RM-1 and RM-2 in toto apart from other additions, this unexplained expenditure was also added. Since only seized material evidencing payment of expenses of Rs. 35 lakhs by assessee were RM-1 and RM-2 and all the entries in RM-1 and RM-2 were duly incorporated in the accounts of the assessee for relevant years and the resultant undisclosed income was offered for taxation in returns filed under s. 153A, expenses of Rs. 35 lakhs was similarly incorporated in the books of account of the assessee for asst. yr. 2008-09 and his income as per return was computed after taking into account the said expenses. In support of the aforesaid, assessee has filed copies of relevant ledger accounts showing payment of expenses in the books of assessee on behalf of M/s Fort Projects (P) Ltd. and in the books of M/s Fort Project (P) Ltd. for asst. yr. 2008-09. The relevant copies are enclosed at pp. 1-7 of assessee’s paper book. Since we have already accepted seized material RM-1 and RM-2 as true, automatically the expenditure recorded in these documents is explained and the assessee has also made disclosure to cover up the same. Accordingly, this addition is not warranted and hence, deleted.

27. In the result, appeals of the assessee in IT(SS)A Nos. 1, 2 and 3/Kol/2011 are dismissed, appeals of assessee in IT(SS)A Nos. 4, 6 and 7/Kol/2011 are allowed. Revenue’s appeal in IT(SS)A No. 10 is dismissed.