Case Law Details

Case Name : Shri Bahadur Singh Sabharwal Vs. ACIT (ITAT Delhi)
Appeal Number : I.T.(SS). A. No. 223 /Del/2005
Date of Judgement/Order : 02/06/2010
Related Assessment Year : 1989- 99
Courts : All ITAT (4213) ITAT Delhi (925)

There is no such material referred to by the A.O. for making this addition and this addition was made by him on the basis of difference of alleged market price of the plot purchased by the assessee in January 1997 which was duly disclosed before the income tax department and no incriminating material is alleged to have been found in the course of search indicating that any extra payment in cash was made by the assessee on account of purchase of this plot. In the absence of any such material found in the course of search, no addition can be made in the course of block assessment on the basis of estimating of market price.

 IN THE INCOME TAX APPELLATE TRIBUNAL

(DELHI BENCH ‘I’ NEW DELHI)

I.T.(SS). A. No.223 /Del/2005

Block period from 1.4.89 to 31.3.99

Shri Bahadur Singh Sabharwal, 1 J/6, NIT, Faridabad.

Vs.

ACIT, Range-II, Faridabad.

(Appellant)

(Respondent)

 AND

I.T.(SS). A. No. 297/Del/2005

Block period from 1.4.89 to 31.3.99

ACIT, Range-II, Faridabad.

 

Vs.

Shri Bahadur Singh Sabharwal, 1 J/6, NIT, Faridabad.
(Appellant) (Respondent)

 Date of Judgement: 02.06 2010.

O R D E R

PER A.K. GARODIA, AM:

1. These are cross appeals filed by the assessee and revenue and these are directed against the order of Ld CIT(A), Faridabad dated 28.3.2005 for the block period from 1.4.1989 to 12.3.1999.

2. First, we take up the appeal of the assessee i.e. I.T.A. No.223/De/2005.

3. The grounds raised by the assessee read as under:-

1. That having regard to the facts and circumstances of the case, ld CIT(A) has erred in law and on facts in confirming an aggregate addition of Rs. 8,80,000/- on account of alleged unexplained investment in two cars without any basis, material or evidence, merely on the basis of suspicion, surmises and conjectures.

2. In any view of the matter and in any case, addition of Rs. 8,80,000/- made by the Ld Assessing Officer and confirmed by ld CIT(A) is bad in law and against the facts and circumstances of the case.

3. That having regard to the facts and circumstances of the case, Ld CIT(A) has erred in law and on facts in confirming the action of the Ld Assessing Officer in framing the impugned assessment without assumption valid jurisdiction and as such impugned assessment was liable to be declared null and void, more so when notice u/s 158BC was void.

4. That the appellant craves the leave to add, amend, modify delete any of the grounds of appeal before or at the time of hearing and all the above grounds are without prejudice to each other.

4. It was submitted by the ld AR of the assessee that ground No. 3 is not pressed and accordingly the same is dismissed as not pressed.

Ground No. 4 is general and in ground No. 1 & 2, the issue involved is common.

5. The facts in brief are that It is noted by the Assessing Officer on page No.7 of the assessment order that during the course of search, two cars bearing No. HR-5-D-0939 and UP-14-D-5428 (Ceilo) were found at the resident of the assessee. It is also noted by the Assessing Officer that the keys of these cars were found at the residence of Shri Inderjit Singh Sabharwal, the brother of the assessee. It is also noted by the Assessing Officer that Shri Inderjit Singh Sabharwal in his statement recorded in the course of search had admitted that these cars keys are of the assessee present before us. It is also noted by the Assessing Officer that Shri Inderjit Singh Sabharwal admitted that service jobs cards from Jain sons Automobiles, Mathura Road, Faridabad, document A-6, seized from the residence of Shri Bahadur Singh Sabrawal i.e. present assessee in the name of Shri Subash Chander relate to Ceilo car UP-14-D-5428. It is held by the Assessing Officer that since these cars were found at the residence of the present assessee i.e. Shri Bahadur Singh Sabharwal and service job cards and cars keys were found from the residence of Shri Inderjit Singh Sabharwal solidly prove that both these cars are benami cars of Shri Bahadur Singh. It is noted by the Assessing Officer that on these job cards, telephone of Shri Bahadur Singh Sabharwal i.e. 4175106 is written. The Assessing Officer further noted that the value of one car is Rs. 2.30 lakhs and value of Ceilo car is Rs. 5.50 lakhs. Total of both these figures comes to Rs. 7.80 laklhs but the Assessing Officer made addition of Rs. 8.80- lakhs on this account. Being aggrieved, the assessee carried the matter in appeal before Ld CIT(A). Before Ld CIT(A), it was submitted by the assessee that there is a mistake in the amount because as per break up of the value of these two cars total comes to Rs.7.80 lakhs but the Assessing Officer has made addition of Rs. 8.80 lakhs. On account of this contradiction in figures, Ld CIT(A) has directed the Assessing Officer to verify the facts and make correction if required. On merit, it was submitted before the Ld CIT(A) that the finding of the Assessing Officer that these two cars were found at the residence of the assessee is without any evidence. It was also submitted that in fact, there is no space in the house of the assessee where any car can be parked. It was also submitted that there is no mention of any car having been found at the residence of the assessee in the Panchnama. It was also pointed out before Ld CIT(A) that to the best of assessee’s knowledge, Shri Inderjit Singh Sabharwal brother of the assessee has not admitted that these cars belonged to the assessee. Ld CIT(A) has upheld the assessment order on this issue on the basis that a perusal of the statement of Shri Inderjit Singh Sabharwal clearly shows that these vehicles belonged to his brother Shri Bahadur Singh Sabharwal i.e. the present assessee. Now, the assessee is in further appeal before us.

6. It was submitted by Ld AR of the assessee that Panchnama is available on pages 5- 19 of the paper book and there is no mention in the Panchnama that any car was found or any car key was found in the course of search. Regarding the statement of Shri Inderjit Singh Sabharwal, it was submitted that the same is available on page No. 461 of the paper book in Departmental appeal in the case of Shri Inderjit Singh Sabharwal. Our attention was also drawn to the statement of the assessee recorded on 26.4.1998 which is available on pages 406-414 of the paper book in Departmental appeal in assessee’s own case and it is submitted that in this statement, no question was asked from the assessee with regard to these cars which are alleged to be owned by the assessee. It is also submitted that a questionnaire dated 22.3.2001 was issued by the Assessing Officer and copy of which is available on pages 20-24 of the paper book and in the said questionnaire, a query was raised by the Assessing Officer regarding that these two cars are alleged to be owned by the assessee. A reply was submitted by the assessee to the Assessing Officer vide letter dated 26.3.2001, copy of which is available on pages 28-31 of the paper book in which it was submitted that the keys of the cars were not found at the residence of the assessee. Regarding this allegation that the assessee is benami owner of these cars, which are registered in the name of one Shri Dinesh Kumar, it was submitted that this allegation is baseless and incorrect. Regarding Ceilo car, the Assessing Officer himself has mentioned that this Ceilo car belonged to Shri Subash Chander and assessee never owned any of these vehicles and enquiry may be made from Shri Subash Chander and Shri Dinesh Kumar. It was also submitted that the addition upheld by the Ld CIT(A) should be deleted. It was also submitted by ld counsel of the assessee that the issue may be restored back to the file of the Assessing Officer for a fresh decision.

7. In reply, Ld DR of the revenue supported the orders of the authorities below.

8. We have heard the rival submissions and have gone through the material available on record. We find that the issue has been decided by the authorities below without making proper enquiry. In the statement of the assessee recorded by the Assessing Officer on 26.04.1999, no question was asked from the assessee regarding these two cars. In the statement of Shri Inderjit Singh Sabharwal recorded on the date of search i.e. on 12.03.1999, question No. 2 was asked with regard to keys of Jainsons Automobiles, regarding car HR51-D-0939 and invoice of M/s Vipul Motors Ltd. Found from his residence that who is the owner of these vehicles and in reply it was submitted by him that this is his brother’s vehicle and the question may be asked from Shri Bahadur Singh Sabharwal. In spite of this, no question was asked from the assessee in the course of his statement recorded on 26.4.1999. No enquiry was made from Shri Dinesh Kumar or from Shri Subash Chander. The assessee was also not given an opportunity to cross examine his brother Shri Inderjit Singh Sabharwal with regard to his statement as per which it was stated by him that the car belongs to the present assessee. Under these facts, we feel that this matter should go back to the file of the Assessing Officer for a fresh decision after making detailed enquiries and after recording statement of the assessee with regard to these two cars and after making enquiries from Shri Dinesh Kumar and Shri Subash Chander. If required, the assessee may be allowed to cross examine his brother Shri Inderjit Singh Sabharwal and after detailed enquiry, the Assessing Officer should decide this issue afresh and pass necessary order as per law after providing adequate opportunity of being heard to the assessee.

9. In the result, the appeal of the assessee stands partly allowed for statistical purposes.

10. Now, we take up revenue’s appeal in I.T.(SS).A. No.297/Del/2005.

11. Ground No. 1 of the appeal reads as under:-

“On the facts and circumstances of the case whether the CIT(A) was right in law in deleting the addition of Rs. 5,00,000/- on account of undisclosed investment in purchase of land from Smt. Sarla Devi.”

12. Brief facts of the case are that It is noted by the Assessing Officer on page No.2 that the assessee has purchased land from Smt. Sarla Devi for Rs. 5 lakhs. It is also noted that this was admitted by Smt. Sarla Devi in her statement, The Assessing Officer asked the assessee to explain the source of this investment. It is also noted by the Assessing Officer that as per assessee’s letter dated 07.03.2003, the assessee has denied the purchase of land from Smt. Sarla Devi. The Assessing Officer says that as per the evidence available on record, the assessee has invested a sum of Rs. 5 lakhs for purchase of land from Smt. Sarla Devi and since the source of this investment has not been explained, the same amount of Rs. 5 lakhs is added to the income of the assessee. It is further noted by the Assessing Officer in para No. 5.1. of the assessment order that as per agreement dated 1.1.1998 between Smt. Sarla Dvi wife of Shri Ram rich of village Palli, Shri Bahadur Singh i.e. the present assessee paid Rs. 5 lakhs for 4 Kanals and 3 Marlas land at Village Palli on 1.1.1998. Being aggrieved, the assessee carried the matter in appeal before Ld CIT(A). It was also submitted before Ld CIT(A) that the Assessing Officer has not brought on record any evidence to show that the assessee has made any investment by paying any amount to Smt. Sarla Devi. It is also submitted that in the course of search, no evidence was found which could suggest even remotely that the assessee has paid any sum of Rs. 5 lakhs to Smt. Sarla Devi. It is further submitted before ld CIT(A) that the Assessing Officer in his notice dated 7.2.2003 at page 10 thereof mentions about the receipt and ekrarnama placed at loose pages 88- 89 in the case of Shri ML Saini and further lease deeds at pages 82-83 was filed but copies of these pages have not been made available. Ld CIT(A) has deleted this addition on the basis that as per perusal of these documents, it is found that this is an agreement to sell between one Shri Vijay Kumar Arora and this document does not even contain the name of the assessee. It is further noted by the Ld CIT(A) that page 90 contain the name of one Shri Bahadur Singh Sabharwal with months scribbled of December, January & February amount of Rs. 21,000/- etc. It is held by him that it is indeed difficult to even comprehend how the Assessing Officer has given a finding that the assessee has made investment in land, transacted with Smt. Sarla Devi and made an undisclosed investment of Rs. 5 lakhs. It is held by him that the finding of the Assessing Officer is entirely misplaced and misconceived. Hence, the treatment of Rs. 5 lakhs as undisclosed income of the assessee is deleted. Now, the revenue is in appeal before us.

13. Ld. D.R. for the revenue supported the assessment order whereas it is submitted by the Ld. A.R. for the assessee that there was no agreement dated 01.01.1998 ever entered into by the assessee with Smt. Sarla Devi as alleged and nothing was found during the course of search and hence the addition was rightly deleted by the Ld. CIT(A). He supported the order of Ld. CIT(A). It was submitted that the documents found from one Mr. M L Saini are available at pages 310-314.

14. We have considered the rival submission and perused the material on record and have gone through the orders of authorities below. We find that the pages 310-311 of the Paper Book is an agreement dated 11th November 1998 between one Mr. Vijay Kumar Arora being the seller and there is no name mentioned in the agreement of the buyer. This agreement is with regard to sale of a land at Faridabad of 500 Sq. yards. The rates fixed as per this agreement is @ Rs. 2,200/- per sq. yard and it is also noted in the agreement that the buyer has paid Rs.1 lacs in advance and the balance amount of Rs.10 lacs will be paid up to 25.12.1998. In view of these facts, this agreement is nowhere related to the allegation of the A.O. in Para 5.1 of the assessment order that as per the agreement dated 01.01.1998 between Smt. Sarla Devi and the assessee, the assessee has paid Rs. 5 lacs for 4 canals and 3 marlas land at Village Pali. Letter dated 18.03.2005 written by the A.O. to Ld. CIT(A) is available a pages 399-401 of the Paper Book. In the same letter, it is stated by the A.O. with regard to this addition of Rs. 5 lacs on account of purchse of land from Smt. Salra Devi that this addition is based on pages 88- 90 and 82- 83 of the document No. 8 of Shri M L Saini which had been given to the assessee vide his office letter dated 28.01.2005. The said letter dated 28.01.2005 written by the A.O. to the assessee is also available at pages 293-328 of the Paper Book. In this letter dated 28.012005, the A.O. has mentioned pages 56, 82, 83 and 88-90 of A-8 of Shri M L Saini. These pages are the seized papers from Shri M L Saini available in the Paper Book but these papers are not containing any agreement of the assessee with Smt. Sarla Devi. Ld. D.R. also could not produce before us any such agreement, which is referred by the A.O. in para 5.1 of the assessment order. Under this factual position, we find no reason to interfere in the order of Ld. CIT(A) on this issue wherein he has deleted the addition of Rs. 5 lacs on the basis that the findings of A.O. is entirely misplaced and misconceived. We, therefore, confirm the order of the Ld. CIT(A) on this issue. Ground No. 1 of the revenue is rejected.

15. The ground No. 2 of the revenue reads as under:

“On the facts and circumstances of the case whether the CIT(A) was right in law in deleting the addition of Rs. 8,40,000/- on account of undisclosed income in purchase of Plot No. 3D/46, NIT, Faridabad.”

16. The brief facts of the case are that it is noted by the A.O. at page 5 of the assessment order that the assessee Shri Bahadur Singh had admitted in the statement recorded on 26.04.1999 that he along with his brother had purchased a plot in Faridabad in January 1997 measuring 300 sq. yards allegedly for Rs. 4 lacs and the same was declared by him in his income tax return for the Assessment Year 1997- 98. It is further noted by the A.O. that market rate of the land in most posh locality of Faridabad ranges from Rs. 7,000/- to Rs. 10,000/- per sq. yard and the A.O. had stated that the value of this plot purchased by the assessee in January 1997 has to be assessed @ Rs.7,000/- per sq. yard resulting in the total value of the land at Rs.21 lacs and the 40% share of the assessee comes to Rs.8.40 lacs. Thus the addition of this amount in the income of the assessee by the A.O. Being aggrieved, assessee carried the matter in appeal before the Ld. CIT(A) who have decided this issue at Para 4.3 to 4.4 of his order and this addition was deleted by him and now the revenue is in appeal before us.

17. The Ld. D.R. for the revenue supported the assessment order whereas the Ld. A.R. for the assessee supported the order of the Ld. CIT(A).

18. We have considered the rival submissions and perused the material on record and have gone through the orders of authorities below. We find that in Para 4 of the assessment order, the A.O. is referring to the prevailing market rates in Faridabad area in January 1997. In that Para, it is noted by the A.O. that the plot in 3F/14B of 300 sq. yards was sold for Rs. 9.03 lacs @ Rs. 3010/- per sq. yard. He further stated that block 3F is very much inferior then Block 3D and thereafter, he simply jumped to the conclusion that the market value of the plot purchased by the assessee along with his brother cannot be less than Rs. 7,000/- per sq. yard in January 1997. In the light of these facts, we find that there is no such material referred to by the A.O. for making this addition and this addition was made by him on the basis of difference of alleged market price of the plot purchased by the assessee in January 1997 which was duly disclosed before the income tax department and no incriminating material is alleged to have been found in the course of search indicating that any extra payment in cash was made by the assessee on account of purchase of this plot. In the absence of any such material found in the course of search, no addition can be made in the course of block assessment on the basis of estimating of market price. Hence we do not find any reason to interfere in the order of Ld. CIT(A) on this issue also. Ground No.2 of the revenue is rejected.

19. Ground No.3 of the revenue reads as under:

“On the facts and circumstances of the case whether the CIT(A) was right in law in deleting the addition of Rs. 30,90,000/- as undisclosed investment in purchase of land measuring 15 Kanal 4 Marlas in Village Pali.”

20. The brief facts of the case are that it is noted by the A.O. on page 5 & 6 of the assessment order that as per the statement of Shri Gauri Shanker, 2 acres of land was purchased in Village Pali at Sohna road @ Rs.16 lacs per acre totalling Rs. 32 lacs. The A.O. has stated that Shri Gauri Shanker has stated that in July/August 1997, he sold this land measuring 15 canals 4 marlas in Village Pali at Sohna Road to Bahadur Singh, Faridabad for Rs. 3000- 4000/-. I is further noted by the A.O. that a further inquiry made by the DDI from Shri Ramesh Chand and Sohan Lala of Village Pali from whom Gauri Shanker purchased that land, it is stated by them that they had sold 8 big has land to Gauri Shanker for Rs. 6.60 lacs in 1995- 96. Thereafter it is stated by the A.O. that it is clear that Gauri Shanker had paid Rs. 10 lacs for purchase of 15 canals and 9 marlas instead of Rs.2000- 3000/- as stated before him. Thereafter, the A.O. holds that obviously after 2 years, the rates of land in July 1997 when the assessee purchased the land were Rs.16 lacs per acre. Thereafter, the A.O. has stated that @ Rs. 16 lacs per acre, the value of the land purchased by the assessee to the extent of 15 canals 9 marlas comes to Rs.30,00,900/-. The A.O. made addition of the same. Being aggrieved, the assessee carried the matter before the Ld. CIT(A) who has deleted this addition as per para 5 of his order and now the revenue is in appeal before us.

21. The Ld. D.R. for the revenue supported the assessment order whereas the Ld. A.R. for the assessee supported the order of Ld. CIT(A). We find that his issue was decided by the Ld. CIT(A) as per Para 5.3 of his order which is reproduced below:

“5.3 The issue has been examined. Vide letter dated 18.03.2005 the A.O. has informed that the statement of various persons involved had been sent to the assessee on 14.03.2005. I have carefully gone though the assessment order, the written submissions and the various statements relied upon by the A.O. All the statement of various person making a very revealing reading and facts revealed from all the above statements is that the A.O. has heavily relied on imagination. Page 3 of the statement of Sh. Gauri Shankar recorded on 03.07.1999 clearly states that the land had been sold in July 1999 to Sh. Bahadur Singh Sabarwal for around Rs. 3,000/- to Rs. 4,000/- on lease and that this land was registered and had early been acquired for amount of Rs. 2,000/- to Rs. 3,000/- in 12995-96. The patta which is a registered document refers to the lease at Rs. 3,000/. A perusal of the statement of Sh. Sunil Kumar recorded on 23.07.1999 reversals that he had sold 8 big has of land to Sh. Vauri Shankar for a sum of Rs. 6,61,000/- and on page 4 he categorically denies any transaction with Sh. Bahadur Singh Sabarwal. A perusal of the statement of Sh. Ramesh Chand also does not refer to the transaction with Sh. Bahadru Singh Sabarwal but refers to the said having been sold to Sh. Gauri Shankar for a sum of Rs.30,00,000/- and this refers to some land measuring 3 canals. This is the summary of the statement which has been relied upon by the A.O. From the above facts and circumstances, it becomes apparent that there is no evidence, which has been found during the search and seizure proceedings to support the conclusion drawn by the A.O. What has been relied upon by the A.O. are statements of different persons, statements which have not even to be confronted to the appellant and statements which has as earlier been shown do not at all even remotely suggest the undisclosed investment of the appellant in property referred to by the A.O. and to the extent of Rs. 30,00,900/-. Under the circumstances the stand of the A.O. cannot be accepted and the treatment of Rs. 30,00,900/- as undisclosed income/investment is accordingly deleted.”

22. From the above Para of the order of Ld. CIT(A), we find that this land was taken on lease by the assessee and as per the registered document, this land was taken by him on lease @ Rs. 3,000/-. In the assessment order also, the A.O. has not referred to any material found in the course of search suggesting any outright purchase of land by the assessee at village Pali. A statement of Shri Gauri Shankar referred to by the A.O. supports the case of the assessee as per which it was stated by Shri Gauri Shankar that the land measuring 15 canals 4 marlas in Village Pali was given by him to the assessee for Rs.3,000-4,000/-. The A.O. has also referred to one more statement of Shri Gauri Shankar as per which the land was taken on lease by him at Rs. 2,000/- 3,000/-. Thereafter, the A.O. decided this issue on the basis of some further inquires made by DDI from Shri Ramesh Chander and Sohan Lal. In the absence of any seized material indicating any purchase of land by the assessee which is not disclosed before the department, the addition made by the A.O. in block assessment cannot be justified and hence we do not find any reason to interfere in the order of Ld. CIT(A) on this issue also. Hence, the ground No.3 of the revenue’s appeal is also rejected.

23. Ground NO.4 of the revenue’s appeal reads as under:

“On the facts and circumstances of the case whether the CIT(A) was right in law in deleting the addition of Rs.15 lacs undisclosed investment in purchase of land from Smt. Sarla Devi & Shri Tek Chand.”

24. The brief facts of the case are that it is noted by the A.O. in Para 5.1 of the assessment order that as per the agreement dated 01.01.1998 between Smt. Sarla Devi of Village Pali and the assessee, the assessee has paid Rs. 5 lacs for 4 canals 3 marlas of land at Village Pali on 01.01.1998. This addition was separately made by the A.O., which is the subject matter of ground No.1 of the revenue’s appeal. In the same Para the A.O. further says that it is stated by Shir Tek Chand and Budh Ram brotherin- law of Mrs. Sarla Devi, in their statement that they have sold 10 acres of land on 13.07.1999 for Rs. 10 lacs to Shri Bahadur Singh Sabharwal on 26.08.1998. It is further noted in the assessment order that the share of Shri Budh Ram was given @ Rs. 4.20 lacs at the time of registry of the deed. Shri Tek Chand was given Rs. 5 lacs in many instalments over a period of one year. The A.O. made addition of Rs. 10 lacs on account of the land alleged to have been purchased of by the assessee from Shri Budh Ram and Shri Te Chand for Rs. 10 lacs. Being aggrieved, the assessee carried the matter in appeal before the Ld. CIT(A) who has deleted this addition by making various observations in as per Para 6.4 of his order and now the revenue is in appeal before us.

25. The Ld. D.R. for the revenue supported the assessment order whereas Ld. A.R. for the assessee supported the order of Ld. CIT(A).

26. We have considered the rival submissions, perused the material on record and have gone through the orders of authorities below. We find that the total addition of Rs. 15 lacs was made by the A.O. on account of alleged purchase of land by the assessee from Smt. Sarla Devi and Tek Chand and Budh Ram. The revenue has raised a separate ground i.e. ground No. 1 with regard to alleged purchased of land for Rs. 5 lacs from Smt. Sarla Devi hence ground No.4 should have been for deletion of the addition of Rs. 10 lacs only with regard to the alleged purchase of land by the assessee from Shir Tek Chand and Shri Budh Ram. This addition was deleted by the Lt. CIT(A) as per Para 6.4 of his order which is reproduced below:

“The issue has been carefully examined and I this regard reference is made to the statement of Sh. Tek Chand. In the statement recorded of Sh. Tek chand on 28.08.1999. It has been stated that he has received a sum ofrs.2,70,000/- on various dates after entering into an agreement of a sale of land to one Sh. Mulak Raj Bhatia and one Sh. Madan Lal Saini. In the statement he was categorically denied knowingly Sh. Bahadur Singh (page 5 of the statement). This statement is the sole document on which the A.O. has relied upon and from the facts as is apparent form record even this statement which has no reference with the alleged undisclosed investment made by Sh. Bahadur Singh Sabharwal was not even confronted. Moreover the reference to the bank accounts of Sh. Tek Chand is totally irrelevant as it no where indicates that the alleged unaccounted funds which had been applied by the appellant in the land had found its place in these accounts. It is also true that no such evidence had been found from the appellant during the search and seizure proceedings carried out in his case. In view of the above facts and circumstances of the case, the stand of ht A.O. cannot be accepted. The treatment of Rs. 15,00,000/- as undisclosed investment is accordingly deleted.”

27. From the above Para of the order of Ld. CIT(A), we find that as per the statement of Shri Tek Chand recoded on 28.08.1999, it is stated by him that he has sold land to one Shir Mulak Raj Bhatia and one Shir Madan Lal Saini. It is further noted by the Ld. CIT(A) that in another statement he was categorically asked as to whether he knew Shri Bahadur Singh Sabharwal and he categorically denied the name of Shri Bahadur Singh. The basis of addition is statement of Shri Tek Chand in which he has not stated the name of the assessee. Rather he has stated name of one Shri Mulak Raj and one Shri Madan Lal Saini and even after asking the specific question as to whether he knows Shri Bahadur Singh Sabharwal, he has denied. In the light of these facts, we feel that no interference is called for in the order of the CIT(A) on this issue because for making the addition also there is no reference by the A.O. to any material found in the course of search for making the addition. We, therefore, decide this issue also in favour of the assessee. Hence the ground No. 4 is also rejected.

28. Ground No. 5 of the appeal reads as under:

“On the facts and circumstances of the case whether the CIT(A) was right in law in deleting the addition of Rs.9.35 lacs in purchase of land at Village Pali in the name of Shri Mulak Raj Bhatia who was the benamidar of the assessee.”

29. The brief facts of the case are that as per Para 5.2 of the assessment order, the A.O. has made an addition of Rs.9.35 lacs on the basis of two registered deeds dated 11.03.1999 in favour of M L Saini and Mulak Raj Bhatia. It is alleged that Mulak Raj Bhatia is benami of Shri Bahadur Singh Sahbarwal and the value of the land purchased comes to Rs. 9.35 lacs as against Rs. 18.70 lacs being the value of the land purchased by Shri M. L. Saini. He made an addition of Rs. 9.35 lacs in the hands of the assessee on the allegation of land purchased in benami name, which has been deleted by Ld. CIT(A) as per para 7.3 of his order and now the revenue is in appeal before us.

30. The Ld. D.R. for the revenue supported the assessment order and the Ld. A.R. for the assessee supported the order of Ld. CIT(A).

31. We have considered the rival submissions. We find that this issue has been decided by the Ld. CIT(A) as per para 7.3 of his order which is reproduced below:

“In the assessment order the A.O. upon two registered deeds which were made available to the appellant on 28.01.2005. It is, therefore, important now to come to the two registries, which have been made available for perusal of the undersigned. Now these registries show that the transaction took place between one Sh. Tek Chand on one side and Sh. Madan Lal Saini and Sh. Mulak Raj Bhatia on the other side. There is no mention in these deeds of any transaction having taken place with the appellant Sh. Bahadur Singh Sabharwal. It is difficult to understand how the A.O. came to the conclusion that Sh. Bahadur Singh Sabharwal was the benamidar of Sh. Mulak Raj Bhatia. On perusal there is no evidence on record of any sort which can even remotely indicate that Sh. Bahadur Singh Sabharwal had anything to do with Sh. Mulak Raj Bhatia and that the funds invested if at all by Sh. Mulak Raj Bhatia to the tune of Rs. 9,35,000/- was actually the funds of Sh. Bahadur Singh Sabarwal and who had utilised the name of Sh. Mulak Raj Bhatia to make this benami investment. In view of the above facts and circumstances of the case the treatment of a sum of Rs. 9,35,000/- as undisclosed investment of the appellant cannot be sustained and is accordingly deleted.”

32. From the above Para of the order of Ld. CIT(A), we find that it is noted by the CIT(A) that these 2 registered deeds were examined by him and as per these deeds, transaction took place between one Shri Tek Chand on one side and Shri M L Saini and M. R. Bhatia on the other side and there is no mention in these deeds of any transaction having been taken place with the assessee, Shri Bahadur Singh Sabharwal. It is further observed by the Ld. CIT(A) that there is no basis for the A.O. to conclude that the assessee was benamidar of Shri M R Bhatia. In the assessment order, we do not find any basis of this allegation by the A.O. that Shri M R Bhatia is Benamidar of the assessee. Considering these facts, we find no reason to interfere in the order of Ld. CIT(A) on this issue also. The ground No.5 of the revenue’s appeal is also rejected.

33. The ground no. 6 of the revenue appeal reads as under:

“On the facts and circumstances of the case whether the CIT(A) was right in law in deleting the addition of Rs. 6,61,267/- made on account of income from money lending.”

34. The brief facts of the case are that it is noted by the A.O. on page 6 & 7 of the assessment order that as per document A-9, pocket diary seized form the residence of Shri Bahadur Singh Sabharwal during search, various transactions of money lending of Shri Bahadur Singh are available. The A.O. further stated that this proves that surplus money left with the assessee is lent on interest by him @ 2%. It is further noted by the A.O. that as per document A-9, the total interest has been worked out as per Annexure 3 and total intrest as per these transactions by the assessee comes to Rs. 6,61,261/- and he made the addition of the same amount. Being aggrieved, the assessee carried the matter in appeal before the Ld. CIT(A) who also deleted the addition by making various observations in Para 8.3 of his order. Now, the revenue is in appeal before us.

35. The Ld. D.R. for the revenue supported the assessment order whereas the Ld. A.R. for the assessee supported the order of Ld. CIT(A).

36. We have considered the rival submissions. We reproduce Para 8.3 of the order of Ld. CIT(A) as under:

“Pocket diary A-9 has been perused and this diary refer to names of various persons against whom certain amounts have been written. What the A.O. has done in the annexure incorporating these entries is that he has added two zeros to all the transactions and there after computed the undisclosed investment and out of this undisclosed investment computed the total undisclosed interest earned at the rate of 2% and held that the assessee had earned an undisclosed interest income of Rs. 6,61,261/-. How and why the A.O. had added two more zeros to all the figures is impossible to understand. There are only two possibilities-either there is some other corroborative evidence, no evidence is mentioned in the order or indicated by the A.O., which clearly shows that the amounts mentioned in this diary were actually not what has been mentioned and the actual amounts are different than what ahs been mentioned in the diary. The other possibility could be that this document has been confronted to the appellant and the appellant in his statement has indicted or admitted that the entries in these documents are not the actual entries and that two more zeros are to be added to these entries. Unfortunately, both the possibilities do not exist in this case. In fact, whatever records have been made available do not contain any such statement, which shows that this diary has been confronted at all to the appellant or that the appellant in any other oral evidence has indicated to the alleged manipulation. Moreover, there is no other documentary evidence which has been brought to my attention which can corroborate the conclusion drawn by the A.O. Under the circumstances the stand of the A.O. cannot be sustained and the addition is accordingly deleted.”

37. In the above Para of the order of Ld. CIT(A), we find that specific finding has been given by the CIT(A) that in the figures noted in the seized documents the A.O. had added two zeros to the amounts of all the transaction and thereafter computed the amount of undisclosed investment, and on such undisclosed investment he computed interest @ 2% which as per him comes to Rs. 6,61,261/-. It is observed by the Ld. CIT(A) that how and why the A.O. has added two zeros to all the figures is impossible to understand. It is further observed by the Ld. CIT(A) that the A.O. has not referred to any other corroborative evidence for adding these two zeros to all the amounts. We also find that no basis is indicated by the A.O. in the assessment order for adding two zeros to the various figures noted in the seized documents. Considering these facts and circumstances, we find no reason to interfere in the order of Ld. CIT(A) on this issue also. The ground No. 6 of the revenue’s appeal is also rejected.

38. The ground No. 7 of the revenue’s appeal reads as under:

“On the facts and circumstances of the case whether the CIT(A) was right in law in deleting the addition of Rs.5 lacs in plot no.64, Neelam Bata Road, Faridabad.”

39. The brief facts of the case are that it is noted by the A.O. at page 7 of the assessment order that the assessee is also doing real estate business in the name of Sabharwal Estate Agency, Neelam Bata Road, Faridabad. The A.O. further says that this estate agency is having plot 64, Neelam Bata Road, where survey u/s 133A was conducted. It is further observed by the A.O. that as per the assessee, this plot belongs to his Maternal grand Mother and its market value is Rs.5 lacs. After making these observations, the A.O. came to the conclusion that this also represents undisclosed income of the assessee in the benami name of his maternal grand mother. On this basis, he made addition of Rs.5 lacs. The assessee carried the matter in appeal before CIT(A) who has deleted the addition as per para 9.3 of his order and now the revenue is in appeal before us.

40. The Ld. D.R. for the revenue supported the assessment order whereas the Ld. A.R. for the assessee supported ht order of Ld. CIT(A).

41. We have considered the rival submissions. The relevant Para of the order of Ld. CIT(A) i.e. Para 9.3 is reproduced below:

“The A.O. has now sent for perusal the survey report and what the survey report reveals is that there is a property situated at 64, Neelam Bzaa Chowk and that it allegedly belongs to the maternal grand mother. From this survey report how the A.O. has come to the conclusion that this property belongs to the assessee or how this property which belongs to the assessee has a market value of Rs. 5,00,000/- is difficult rather impossible the comprehend. It may be true that the assessee may be in the Real Estate business but thee is no evidence to suggest that this property situated at 64, Neelam Baa Chowk belongs to him or it is his benami investment in the name of his maternal grand mother or that the market value of this property is Rs. 5,00,000/-. The stand of the A.O. cannot be upheld and the treatment of Rs. 5,00,000/- as undisclosed income is deleted.”

42. From the above Para of the order of Ld. CIT(A), we find that a clear finding has been given by the Ld. CIT(A) that there is no evidence to suggest that his property has situated at 64, Neelam Bata Road belongs to the assessee and it is his benami investment in the name of his maternal grandmother.

43. We have also gone through the assessment order and we do not find any basis of this allegation that this property is belonging to the assessee and is a benami investment in the name of his maternal grandmother. Since, no adverse material is found in the course of search regarding this alleged benami investment in the name of maternal grandmother of the assessee we do not find any reason to interfere in the order of Ld. CIT(A) on this issue. Hence, the ground No.7 of the revenue’s appeal is also rejected.

44. The ground No.8 of the revenue’s appeal is as under:

“On the facts and circumstances of the case whether the CIT(A) was right in law in deleting the addition of Rs. 18,973/-, Rs. 3,181/-, Rs. 2,56,666/-, Rs. 1,41,750/- & Rs. 4,600/- as undisclosed income from real estate business.”

45. On page 7 of the assessment order, the A.O. has made following observations and thereafter, made addition of Rs. 18,973/-, Rs. 3,181/-, Rs. 2,56,666/-, Rs. 1,41,750/- and Rs. 4,600/-. Relevant portion of assessment order at page 7 is reproduced here as under:

“Sarurpur land 2286 sq. yard @ 415 per sq. yard 9,48,690/- Commission @ 2% (50%) share of Bahadur Singh 18,973/- 1605 sq. yeards plot for Rs. 318114/0 (50%) 3,180/- Property purchased form Sh. Raghbir Rattan, Balbir, Dudeja, Malik alongwith Saini and sold for 39,03,600/- docuemtn A-2 page 12 of Saini 27,33,600/- total profit in this deal was 11,70,000/- 4 lacs paid for vacation and net profit come to Rs.7,70,000/- 1/3rd of Sh. Bahadur Singh 2,56,666/- Page 6 of document No.A-2 of M L Saini, Bahadur Singh entered in to a deal with Sh. Saini on 20.01.97 and purchased and sold many plots. Sh. Bahadur Singh was to receive Rs. 4,03,289/-. This amount include a profit of Rs. 1,77,500/- + 1,06,000/- half share of Bahadur Singh in this property comes to Rs. 1,41,750/- 1,41,750/- Plot at Pali Road page 7 document A-2, Commission admitted by Saini 9200 ½ share of Bahadur Singh Sabharwal. 4,600/-“

46. Being aggrieved, the assessee carried the mater in appeal before Ld. CIT(A). He deleted this addition also by making observation in para 10.3 of his order and now the revenue is in appeal before us.

47. Ld. D.R. of the revenue supported the assessment order whereas the Ld. A.R. for the assessee supported the order of Ld. CIT(A).

48. We have considered the rival submissions. The relevant Para of the order of Ld. CIT(A) is reproduced here as under:

“The issue raised in appeal have been carefully examined. It has been correctly brought on record by the Ld. counsel that these documents have not been recovered form the possession of the assessee. It is also an undisputed fact that the A.O. did not even consider it fit to examine the assessee in the context of these documents so as to come to any conclusion regarding the relationship of the assessee with Sh. M L Saini, if at all, and as noted in the documents. From the records it is also apparent that the A.O. did not even consider fit to examine the assessee regarding the statement of a third party which allegedly brought the assessee into an alleged transactions. These papers recovered form Sh. M L Saini are reflecting real Estate transactions of various lands and at few places refers to the scribbling as BSS or BS or B S Sabarwal. How the A.O. could come to a conclusion that the appellant has derived undisclosed sources from the various transactions based on the documents allegedly found in the case of Sh. M L Saini is difficult to understand. Law does not permit the use of such evidence to fasten undisclosed income in the hands of an assessee without such evidence being corroborated through other evidence which has been found form the appellant and or which is indicated by any oral evidence of the appellant. As has been indicated above, the A.O. did not at any stage , even fulfil the basic requirement of laws of evidence and such dependence on isolated third party evidence is not acceptable in the eyes of law. The A.O. does not have any right to determine any income undisclosed or otherwise, on the basis of such evidences. Under the circumstances, the treatment of Rs. 128,973/-, Rs. 3,181/-, Rs. 2,56,666/-, Rs. 1,41,756/- & Rs. 4,600/- as undisclosed income is deleted.”

49. In the above Para the Ld. CIT(A)’s order, a clear finding is given by him that these papers on the basis of which these additions are made by the A.O. were not found or recovered from the possession of the assessee but these were found in the possession of Shri M L Saini. It is also observed by him that the A.O. did not even consider it fit to examine the assessee regarding the statement of a 3rd party. We have also reproduced the relevant portion of the assessment order from page 7 of the assessment order and there also, we find no basis is indicated by the A.O. for making these additions. In the absence of any valid basis for making the allegation about these undisclosed income, we do not find any reason to interfere in the order of Ld. CIT(A) on this issue. This ground of revenue is also rejected.

50. The ground No.9 of revenue’s appeal reads as under:

“On the facts and circumstances of the case whether the CIT(A) was right in law in deleting the addition of Rs. 98,000/- on account of unexplained purchase of household goods.”

51. The brief facts of the case are that it is noted by the A.O. at page 8 of the assessment order that in the course of search, various house hold items like TV, Washing Machine, Air conditioner, Music System, Moped etc. were found. The A.O. had estimated the value of these 8 items at Rs. 1.10 lacs. It is further noted by the A.O. that as per the return of income for the Assessment Year 1997- 98, TV is disclosed in the balance sheet of the assessee. After excluding the value of the TV of Rs. 12,000/-, the A.O. made addition of Rs. 98,000/- being the balance amount of the remaining 7 items. Being aggrieved, the assessee carried the mater in appeal before CIT(A) who has decided this issue in favour of the assessee as per Para 12.3 of his order and now the revenue is in appeal before us.

52. The Ld. D.R. for the revenue supported the assessment order whereas the Ld. A.R. for the assessee supported the order of Ld. CIT(A).

53. We have considered the rival submissions. We find that a clear finding is given by the Ld. CIT(A) that the assessee lives with his four brothers and parents under the same roof. It is further observed by the Ld. CIT(A) that house hold gods to the extent of Rs. 30,000/- have been declared by the spouse of the assessee in her return of income which have been filed prior to the date of search. It is held by him that there is nothing to suggest that investment in such small household goods were out of unaccounted funds. Out of the total assets found at Rs.1.10 lacs, the A.O. himself found explanation to the extent of Rs. 12,000/-. Ld. CIT(A) has found that the house hold goods of Rs. 30,000/- were declared by the spouse of the assessee. For the balance amount of Rs. 68,000/-, it cannot be held that the same was out of undisclosed income of the assessee particularly when the assessee is living with four brothers and parents under the same roof. Considering all these facts, we do not find any reason to interfere in the order of Ld. CIT(A) on this issue also. This ground No.9 of the revenue’s appeal is also rejected.

54. Ground no.10 of the revenue’s appeal reads as under:

“On the facts and circumstances of the case whether the CIT(A) was right in law in deleting the addition of Rs.43,27,400/- as income from Lucky Car draw scheme.”

55. The brief facts of the case are that in the assessment order, the A.O. has referred to lucky car draw scheme and in this regard he has dealt with the issue in the assessment order at pages 3 & 4. On page 4 of the assessment order, the A.O. referred to a statement of one Shri Gulshan Bagga recorded on 02.07.1999 wherein he has stated that Shri B S Sabharwal and Shri Harjeet Singh were doing chit business through M/s. Sabharwal International. Thereafter, the A.O. has given in detail how Shri Gulshan Bagga has dealt with the transaction, which he had through his proprietary concern M/s. Amit Sales Agency vis-à-vis M/s. Sabharwal International. A.O. has referred to a statement of one Shri Satish Chander who was stated to be a member of the lucky car draw scheme through M/s. Sabharwal International. Thereafter, the A.O. stated that lucky car draw scheme was similar to the one run by his brother Shri Inderjedeet Singh. Thereafter, the A.O. says that lucky car draw scheme was started in March 1997 and was run with his brother Shri Harjeet Singh through a firm M/s. Sabharwal International. Thereafter, the A.O. referred to two diaries seized from the residence of the assessee and has referred to two annexure of the assessment order i.e. AnnesureA-2 and A-1 to show that the assessee had surplus money of Rs.167.20 lacs on which interest income undisclosed came to Rs. 43,27,400/- which was treated by him as undisclosed income of the assessee. Being aggrieved, the assessee carried the matter in appeal before the Ld. CIT(A) who has deleted this addition also and now the revenue is in appeal before us.

56. The Ld. D.R. for the revenue supported the assessment order and the Ld. A.R. for the assessee supported the order of Ld. CIT(A).

57. We have considered the rival submissions. We find that in Para 13.4 of his order, a clear finding is given by the Ld. CIT(A) that the A.O. has relied upon two statements of Shri S Chander and Shri Gulshan Bagga but in both these statements, no reference has been made to the assessee. It is further stated by the Ld. CIT(A) that the A.O. has again referred to the documents seized from one Shri M L Saini and it is also stated by him that as per the perusal of these documents, it is found that these documents do not refer to the alleged lottery being carried out allegedly by the assessee except at one place where it is written (B S Sabharwal- Lottery March 10th, 97 – Apr 97). Regarding this noting also it was argued by the Ld. A.R. before CIT(A) that this noting in a document found at the 3rd person’s residence can never be utilized for determining the undisclosed income of the assessee in as much as this document was never confronted and the assessee has neither admitted to any transaction as recorded in this document. It is also observed by the Ld. CIT(A) that as per the assessee, there is no document that have been made available with the A.O. which was found in the course of search which can corroborate the evidence found from the residence of the 3rd person namely Shri M L Saini. It is also observed by the Ld. CIT(A) that as per assessee, even the statement of Shri M L Saini was never confronted to the assessee. The A.O. had relied upon the diary alleged to be seized form the residence of the assessee and drawn a conclusion that lottery business was run and total surplus money to the tune of Rs.167.20 lacs was invested on which interest income of Rs. 43.27 lacs was earned. A clear finding was given by the Ld. CIT(A) that these two diaries A-4 & A-5 have been carefully perused and the entries therein do not indicate that some sort of lottery business was carried out in the form of lucky car draw scheme. It is observed by the Ld. CIT(A) that these documents indicate a few names scribbled against which petty amounts of money have been mentioned. The Ld. A.R. for the assessee before Ld. CIT(A) has also challenged the stand of the A.O. that these documents were recovered from the residence of Shri Inder Singh Sabharwal and Shri Bahadur Singh Sabharwal, the assessee. It was argued by the assessee before the Ld. CIT(A) that these documents were found from the Chaiwala Shri Yashpal, who was having his shop outside the residence of the assessee and both in the statement and the affidavit of Mr. Yashpal these facts have been confirmed. It was also argued by the Ld. A.R. before the Ld. CIT(A) that even two panchas who were witness to the search categorically denied that these documents were found from the residence of Shri Inderjeet Singh and brother of the assessee. On the basis of these observations by the Ld. CIT(A) that these facts clearly point out that the A.O. has erred in holding that the assessee was running lucky car draw scheme he has deleted this addition. The final finding of the Ld. CIT(A) is available at para 13.3 – 13.8 which is reproduced below:

“13.3 I have carefully examined the entire issue and have gone through the written submissions, the assessment order and the report of the A.O. The various points, which need to be considered are as under:

13.4 The statement of Sh. Satish Chander has been carefully perused. A perusal of the statement shows that no where does Sh. Satish Chander mentions the name of the appellant. What he does mention is that the lottery was being run by M/s. Sabarwal International and one Sh. Harjeet Singh used to run this lottery. A perusal of the statement of Sh. Gulshan Bagga, which has again been relied upon by the A.O., reveals that this statement does not at all refer to the appellant. It has been stated by Sh. Gulshan Baga that one Sh. Harjeet Singh ran a lottery scheme and he thereafter gave the various details of the method by which this transaction was carried out. Before any conclusion can be drawn it must be categorically brought out on record that the statement of Sh. Satish Chander and Sh. Gulshan Bagga, relied upon by the A.O., does not make any reference to the appellant- Sh. Bahadur Singh Sabarwal. At best the statement makes a reference to one Sh. Harjeet Singh. It may also be at this point categorically stated that the statement of Sh. Gulshan Baga and Sh. Satish Chander have been used against the appellant without confronting the same to the appellant and without giving an opportunity to the appellant to explain and nor were Sh. Gulshan Bagga and Sh. Satish Chander cross examined by the appellant. It has been argued by the Ld. counsel, and correctly so, that the A.O. could not under law rely on such unsubstantiated uncorroborated statements. The A.O. has again referred to the documents seized form one Sh. M L Saini. Once again a perusal of these documents do not refer to the alleged lottery business carried out allegedly by the appellant except at one place where it is written (B.S. Sabarwal – lottery March 10th 97 to April 97). In this regard the Ld. counsel has argued that this noting in a document found a the third persons’ residence can never be utilised for determining the undisclosed income of the appellant in as much as this document was never confronted and appellant has never ever admitted to any transactions as recorded in the document. It has been argued that there is no document or evidence available with the A.O. which was found during the search which can corroborate the evidence found form the residence of a third person namely Sh. M L Saini. The Ld. counsel has further argued that even the statement of Sh. M L Saini was never confronted to the appellant and so the A.O. committed an error in using this piece of third parts statement of against the appellant to determine that he lottery scheme was being run which resulted in huge undisclosed income. The A.O. has relied on the two diaries seized form the residence of Sh. Bahadur Singh Sabarwal to draw the conclusion that lottery business was run and that total surplus money to the tune of Rs. 1,67,20,000/- and that the undisclosed interest income on this income would be to the tune of Rs. 43,27,400/-. The document A-4 and A-5 have been carefully perused and the entries therein do not at all indicate that some sort of lottery business was carried out in the form of Lucky Car Draw Scheme. These documents indicate a few names scribbled and against which petty amounts of money have been unmentioned. It has been argued by the Ld. counsel it is impossible to arrive at a conclusion based on such entries that the appellant was carrying on lottery business and that huge amounts of undisclosed income was being generated. The Ld. counsel in his written submissions has also challenged the stand of the A.O. that these documents were recovered form the residence of Sh. Inderjeet Singh Sabarwal and Sh. Bahadur Singh Sabarwal, the appellant. It has been vehemently argued that Sh. Inderjeet Singh, the brother of Sh. Bahadur Singh Sabarwal has refused to sign these documents and in his statement itself recorded on the date of search and had denied that these documents had been found from his residence. The Ld. Counsel has also vehemently argued that these documents wee found from the Chaiwala, Sh. Yashpal, who was having his shop outside the residence of the appellant and that both in the statement and the affidavit of Mr. Yashpal these facts have been confirmed. It has also vehemently been argued by the Ld. Counsel that even the two panchas who wee witnessed to the search categorically denied that these documents were found from the residence of Sh. Inderjeet Sing hand his brother, the appellant Sh. Bahadur Singh Sabarwal.

13.5 The issues as disclosed above clearly points out to the fact that the A.O. has erred in holding that the appellant was running the Lucky Car Draw Scheme. None of the statements relied upon indicate the name of the appellant. None of the statements relied upon have been confronted. Nowhere has the appellant indicated that he was running a Lucky Car Draw scheme. The A.O. has not pointed out to any document or evidence seized from the appellant which can corroborate the evidence relied upon regarding the documents found from the premises of one Sh. M L Saini. And coming to the diaries which have been relied upon it cannot at all be understood and comprehended how the A.O. has been able to decipher these diaries to come to a conclusion that undisclosed interest income had been earned from these Lucky Car Draw Scheme. Moreover, any reliance on this evidence appears to be grossly unjustified – Sh. Inderjeet Singh the brother of the appellant had in his statement recorded during the search itself objected to these documents. Q.No.21: I am showing you A-4 and A-5 A. : I will not sign on these diaries as these are not mine documents. This statement was recorded during the search and seizure proceedings and has significant evidentiary value and this statement gets further cemented with the affidavit of Sh. Harish Ratra and Sh. Inderpal Singh (PB83-84 case of Sh. Inderjeet Singh Sabarwal). In fact the statement of Sh. Inderjeet Singh the Panch recorded on 29.03.2001 further confirms the stand of the appellant. The extract o the statement is as under:

“Sh. Inderjeet Singh Sabarwal, I J /6 in the capacity of “Panch” during the search two documents now seen as A-4 and A-5 were not found from the premises of Sh. Inderjit Sabharwal but these were brought from outside and the same was objected by Sh. Inderjeet Singh Sabharwal and his brother Sh. Bahadur Singh Sabharwal and they did not signed the diary in protest. However same were signed by me on all the papers including those diaries on request of search team and I w3asnot known the implication of the same. I know to Shri Inderjit Singh Sabharwal form last 15 years. He is having shop of electronics goods and he was canceller of our area and is a social worker. He use to collect donation from different persons for social and religious purposes. As per my knowledge Sh. Inderjit Singh Sabharwal or Sh. Bahadur Singh Sabharwal was not running any chit business or car draw lottery scheme.”

13.6 The A.O. in fact also examined Sh. Yash Pal whose statement is on PB167-168 (File of Sh. Inderjeet Singh Sabarwal) wherein his affidavit was examined in the presence of the authorised representative and in which Sh. Yashpal stated on oath that he is a owner of a Kabari shop and that these diaries do not have any relationship; to Sh. Inderjeet Singh Sabarwal or to the appellant Sh. Bahadur Singh Sabarwal. The A.O. has argued that the diaries were found from the premises and that Sh. Inderjeet Singh and his brother Sh. Bahadur Singh Sabarwal has concocted the entire story and that the statement of Sh. N K Malhotra clearly pointed out to the Chit and lottery business and that his retraction is not acceptable in law.

13.7 These arguments of the A.O. lack credence. What is important to note here is that –

a) Sh. Inderjeet Singh, in his statement recorded during the search and seizure proceedings itself denied that the documents pertained to him;

b) That the Panchas themselves who were witnesses to the search and seizure proceedings substantiated the statement of Shj. Inderjeet Singh.

c) That the A.O. himself recorded the statements of the Panchas in which it could not be brought out by the A.O. that the affidavits sworn by them was factually incorrect.

13.8 Keeping in view the above facts and circumstances of the case the stand of the A.O. cannot be accepted and the treatment of Rs. 43,27,400/- as the undisclosed interest income is deleted.”

58. From the above paragraphs of the order of Ld. CIT(A), we find that the finding of Ld. CIT(A) is based on these facts that Shri Inderjeet Singh, brother of the assessee has denied in the course of search proceedings itself that these documents do not pertain to him. It is also noted by the Ld. CIT(A) that the Panchas themselves who were the witnesses, substantiated the statement of Shri Inderjeet Singh and it is stated by them that these docuemtns were not found from the premises of Shri Inderjeet Singh Sabharwal. In addition to this, we also find that addition was made by the A.O. on the basis of the statement of Mr. Satish Kumar and Mr. Gulshan Bagga but in these statements, these persons have not mentioned the name of the assessee. The documents seized form Shri M L Saini also do not refer to the name of the assessee. Further allegation of the A.O. that there was surplus funds with the assessee on which assessee was earning interest is not supported by any adverse material found in the course of the search and it is a mere guess work of the A.O. under these facts and circumstances, we do not find any reason to interfere in the order of Ld. CIT(A) on this issue also. This ground of the revenue is also rejected.

59. The ground No.11 of the revenue’s appeal reads as under:

“On the facts and circumstances of the case whether the CIT(A) was right in law in deleting the addition of Rs. 20,41,050/- on account of undisclosed commission income form chits business.”

60. The brief facts of the case are that by alleging that the assessee is carrying on lucky car draw scheme, the A.O. has made addition on account of alleged interest income on surplus funds alleged to be lying with the assessee which was the subject matter of ground No.10 above. In addition to this, he has made addition of Rs. 20,41,050/- on account of allegation that the assessee has earned 3% commission on the total amount of instalments of chits. Being aggrieved the assessee carried the matter in appeal before the Ld. CIT(A) who has deleted this addition also on the basis of his observation in Para 14.3 of his order and now the revenue is in appeal before us.

61. The Ld. D.R. for the revenue supported the assessment order whereas the Ld. A.R. for the assessee supported the order of the Ld. CIT(A).

62. We have considered the rival submissions. The relevant Para of the order of Ld. CIT(A) i.e. Para 14.3 is reproduced below:

“The A.O. has referred to document A-10 page 17 to arrive at his conclusion that the appellant had earned an undisclosed income of Rs. 20,41,050/-. The relevant papers are on PB252 and 222. A careful perusal of the documents does not at all indicate what has been concluded by the A.O. Pages 222 (page 17 of document A-10) refers to some calculation in the name of Shri Ashok Tent or Sh. Harjeet Singh or Sh. Lalid Garg etc. against which the total amounts referred to are as petty as Rs. 400/-, Rs. 1,000/-, Rs. 3,000/-. Similarly page 95 document A-10 (Paper Book-252) refers to some transactions amounting to Rs. 24,76,980/- or to Sh. Harish – Rs. 1,500/-. It is absolutely incomprehensible how the A.O. has relying on these documents come to a conclusion about the monthly instalments, the number of person involved and the number of months to determine an undisclosed commission income at the rate of 3% amounting to Rs. 20,41,050/-. The documents do not in any context referred to the above calculation and conclusion of the A.O. To clarify further, there is no other evidence which has been relied upon nor has any evidence even been confronted for the A.O. to arrive at any conclusion least the conclusion arrived at by the A.O. Under the circumstances the treatment of undisclosed income amounting to Rs. 20,41,050/- stands deleted.”

63. In the above Para, the Ld. CIT(A), has given a clear finding that regarding the noting of the calculation on page 222 & 252 containing page 17 of the document A-10, the noting are regarding petty amounts of Rs. 400/-, Rs. 1,000/-, Rs. 3,000/-. It is also noticed by the Ld. CIT(A) that it is absolutely incomprehensible that how the A.O. relying on these documents come to the conclusion about the monthly instalments and number of persons involved and number of months to determine undisclosed commission income @ 3% amounting to Rs. 20.41 lacs. The Ld. D.R. could not point out any specific mistake in the order of Ld. CIT(A) on this issue and considering the facts & circumstances, we do not find any reason to interfere in the order of Ld. CIT(A) on this issue also. The ground No. 11 of the revenue’s appeal is also rejected.

64. In the result, appeal of the assessee stands allowed for statistical purpose whereas the appeal of the revenue is dismissed.

65. This decision was pronounced in the open court on 02.06 2010.

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