TMI Blog2006 (9) TMI 240X X X X Extracts X X X X X X X X Extracts X X X X ..... ly, we uphold the order of the learned CIT(A) and dismiss the ground of appeal of the Revenue. Addition on protective basis when the substantive addition has been made in the hands of Smt. Kanchan Khullar - HELD THAT:- We are of the considered view that the protective assessment does not survive as the basis of determination of undisclosed income i.e. seized documents were found from the business premises of Ms. Kanchan Khullar and, therefore, any undisclosed income computed therefrom can be assessed in her hands alone. The AO did not transfer the proceedings in respect of these seized documents in the hands of the assessee respondent u/s 158BD of the Act. Further, the assessee respondent did not include any undisclosed income computed from the seized documents under reference in his block return in Form 2B. Therefore, the protective assessment of this income cannot be sustained in the hands of the assessee respondent. Accordingly, the decision of the learned CIT(A) in this regard is upheld and the Revenue's ground of appeal is dismissed. Before parting with this ground, we would like to make it clear that our observation in respect of this ground would not prejudice th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... NAYAR, A.M. For the Appellant : Arun Kumar For the Respondent : Vinay Kumar Jalan ORDER- M.V. NAYAR, A.M : 1. This appeal is by the Revenue against the order of the learned CIT(A), Ranchi dt. 8th Oct., 2004 for the block assessment period 1996-97 to 2001-02 and 1st April, 2001 to 6th Feb., 2002. 2. The grounds taken by the Revenue are as under : 1. For that the learned CIT(A), Ranchi has erred in deleting additions of Rs. 67,01,380 and Rs. 77,02,747 made on account of notings in the seized documents PKC-60 found and seized during the search in the case of the assessee showing outstanding debts regarding amounts receivable from the various parties. The learned CIT(A) has not appreciated that in view of the provisions of sub-s. 4A of s. 132 and cl. (b) of s. 158B the onus is on the assessee to disprove the contents of the documents seized from assessee's possession. 2. For that the learned CIT(A), Ranchi has erred in allowing relief of Rs. 1,06,90,852 in respect of outstanding debtors found recorded in the seized documents PKS-1 to 126 in respect of Maa Durga Service Station, a proprietorship concern of Smt. Kanchan Khullar without adjudicating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the search in the case of the assessee showing outstanding debts regarding amounts receivable from the various parties. The learned CIT(A) has not appreciated that in view of the provisions of sub-s. 4A of s. 132 and cl. (b) of s. 158B the onus is on the assessee to disprove the contents of the documents seized from assessee's possession. 5. In this case the AO has made this addition on the basis of the seized documents marked as PKC-60, which is a small Neel Gagan Diary, and observed that there are details of datewise supplies of petroleum products to different parties and datewise payment received by M/s Bhartiya Oil Company. During the course of assessment proceedings, the assessee was required to explain the nature of transactions contained in this diary and to clarify to whom such transactions relate. In reply, the assessee stated that the seized document is merely a diary and worksheets on which no reliance can be placed because no trial balance and P L a/c can be prepared from the contents of the aforesaid diary. On verification, the entries in the diary reveal that it is a party ledger book in the form of diary which contains the accounts of different parties to wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - 3,24,000 Khosla Steel Industries 9.75 49,27,747 - - 49,27,747 Total 77,02,747 6. The AO, however, rejected the explanation of the assessee on the basis that the same are not specific, as the entries contained in the seized diary are not reflected in the seized books of account and return of income. Accordingly, the entire balance of Rs. 67,01,380 and Rs. 77,02,747 are considered to be the undisclosed sundry debtors of Bhartiya Oil Company and were added back to the total income of Ashok Kumar Vig for the asst. yrs. 2001-2002 and 2002-03 respectively. When the matter went before the learned CIT(A), the learned CIT(A) after considering the facts and submissions of the assessee deleted the additions holding as under: The fourth ground of appeal is that the AO was not right in making addition of Rs. 67,01,380 and Rs. 77,02,747 for the asst. yr. 2001-02 and 2002-03, respectively relying on the seized diary, which cannot be the books of account of the assessee. 7. It is seen from the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1988) 32 TTJ (Pat)(TM) 483 : (1988) 25 ITD 599 (Pat)(TM) and argued that the AO was justified in doing so in view of provisions of s. 132(4A) of the Act. Learned Departmental Representative further contended that the learned CIT(A) was not justified in holding that the AO had failed to verify these transactions from books of account of those persons, whose names appear in the said diary, to find out whether any debt was incurred by them to the assessee. It was for the assessee to prove that these transactions did not take place or the income earned therefrom was already declared. He further relied on the decision of the Tribunal in the case of Kollipara Subba Rao vs. ITO (1990) 32 ITD 668 (Hyd). 9. Shri Vinay Kumar Jalan, learned Authorised Representative appearing for the assessee relied heavily on the order of the learned CIT(A) and submitted that the assessee had explained before the AO the circumstances under which this diary used to be maintained by his employee. Even in the course of his examination under s. 131 of the Act by the AO, the assessee repeated his contention. The assessee had clearly explained to the AO that all transactions entered into were duly recorded in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on the decision of Tribunal in the case of Kasat Paper Pulp Ltd. vs. Asstt. CIT (2000) 69 TTJ (Pune) 924 : (2000) 74 ITD 455 (Pune). 10. We have considered the rival submissions of the parties and have also perused the orders of the authorities below along with the paper book filed by the learned Authorised Representative. We find that the AO has made the additions of Rs. 67,01,380 and Rs. 77,02,747 for the asst. yrs. 2001-02 and 2002-03 on the basis of a diary marked 'PKC-60', seized from the office of the assessee in the premises of M/s Maa Durga Service Station, a propriety concern of the assessee's sister-in-law. We further find that the assessee has explained the AO that the diary belonged to his employee, who was working in the office located in the said service station and the record of transactions in the said diary was in the nature of worksheets only where the transactions were completed and subsequently were taken to the books of account. The AO has also confirmed that cheques were received and were found recorded in the books of account of the assessee or that of sister-concern, as was the case. We have perused the document at p. 4 of PKC-60. where t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disputed. However, there is no presumption about the earning of income. The assessment is made under Chapter XIV-B of the Act. The AO cannot make addition on the basis of incomplete entries. The onus rests on the Revenue to establish that the assessee was in receipt of money then, the onus would automatically be shifted to the assessee to prove that the money has been disclosed in the account or the same is not liable to tax. In the present case in hand, the AO has not been able to demonstrate with adequate evidence that the assessee received the amounts in two years as alleged. These entries as recorded in 'PKC-60 do not clearly reveal that the assessee has earned income. The assessment of undisclosed income is under Chapter XIV-B of the Act and there is no scope of assumption or presumption while making assessment under this chapter. They are dumb documents on which reliance cannot be placed, unless they are corroborated with other evidences. The ratio of the decision in the case of Rama Traders vs. ITO on which the Revenue placed reliance is not applicable to the facts of this case. Also the fact of the case of Kollipara Subba Rao is distinguishable and thus not applicable. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered in the seized book marked as PBS-5, which contains the sale details of A' shift. Similarly, the seized book marked as PBS-10 contains the details of sales made from 1st Feb., 2002 to 5th Feb., 2002 for 'B' shift. Over and above, the entries of PBS-12, PBS-5, PBS-10, there are many entries of parties in the seized books marked as PBS-35 to whom sales have been made and payments have been received. 14. The assessee was specifically asked to explain the referred books of account and differences of sundry debtors during the course of assessment proceedings. The queries made and the replies of learned Authorised Representative have been noted in the order sheets dt. 13th Feb., 2004 and 16th Feb., 2004. In the written reply, the learned Authorised Representative the assessee Sri Vinay K. Jalan has stated that reliance cannot be placed on the seized books referred above as they are nothing but just the work book in the due course of business operation in consolidated form which cannot reveal any disclosed income. The learned Authorised Representative has also submitted that the above seized books and documents are neither complete nor contain complete addresses of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e daily cash report maintained in PBS-48 is torn after three or four days after the inspection of Mr. Ashok Vig.......... 17. The opening balance which is the closing balances as at 31st March, 2001 of other parties have not been disclosed in the balance sheet as at 31st March, 2001 filed along with return' of income. During the course of assessment proceedings, the learned Authorised Representative of the assessee was specifically questioned about the fact, which is contained in the written note sheet of the assessment folder wherein he has stated that PBS-2 is the consolidated account of the concerns of Kanchan Khullar and Ashok Vig. The parties' balances which have been disclosed in the return of Maa Durga Service Station pertain to Maa Durga Service Station and the other parties balances which have not been accounted for in the balance sheet of Maa Durga Service Station relate to the concerns of Sri Ashok Kumar Vig........... 18. Thus, it is clear that the differences in the balances of the parties are the undisclosed income of M/s Maa Durga Service Station. The debit balances pertaining to the undisclosed business as on the close of the financial year were found ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs to Smt. Kanchan Khullar and nothing has been brought on record to prove that the concern belong to the appellant, except a letter, the protective addition made by the AO is not sustainable and rightly added substantively in the hands of Smt. Kanchan Khullar in order under s. 158BC of the IT Act. Thus, the addition, made on protective basis in the hands of the appellant is deleted. 22. learned Departmental Representative while assailing the order of the learned CIT(A) supported the order of the AO and submitted that the AO has made the addition of Rs. 1,06,90,852 on the basis of documents seized from M/s Maa Durga Service Station, a proprietary business of Ms. Kanchan Khullar on substantive basis in her hand. However, the AO also made protective addition of this amount in the hand of the respondent assessee for the reason that both these persons in their written submission dt. 23rd April, 2002 to the DDIT (Inv.), Jamshedpur stated that undisclosed income in respect of M/s Maa Durga Service Station belonged to the respondent assessee. He further contended that the very same learned CIT(A) deleted the substantive addition of the like amount in the case of Ms. Kanchan Khullar as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d asset could be located as a result of the search The reason for protectively assessing the same undisclosed income in the respondent's hand is his written submission to the DDIT (Inv.), Jamshedpur that any undisclosed income of the service station should be assessed in his hands. We are of the considered view that the protective assessment does not survive as the basis of determination of undisclosed income i.e. seized documents were found from the business premises of Ms. Kanchan Khullar and, therefore, any undisclosed income computed therefrom can be assessed in her hands alone. The AO did not transfer the proceedings in respect of these seized documents in the hands of the assessee respondent under s. 158BD of the Act. Further, the assessee respondent did not include any undisclosed income computed from the seized documents under reference in his block return in Form 2B. Therefore, the protective assessment of this income cannot be sustained in the hands of the assessee respondent. Accordingly, the decision of the learned CIT(A) in this regard is upheld and the Revenue's ground of appeal is dismissed. Before parting with this ground, we would like to make it clear that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ;s contention as well as gone through the assessment order. It is seen from the details of investment mentioned in the order that the deposits were made Sunita, Renu and Sonia. The AO relied on the seized document marked PKC-32, pp. 87-98. The AO has himself mentioned the persons in whose name the deposits stand. No fixed deposits were found in course of search and seizure operation. No corroborative evidence was brought as a result of search to hold that the deposits were made by the appellant. To make any addition as undisclosed investment, the onus is on the Revenue to prove that the investment had been made by the appellant and it was the appellant alone and none else who was the owner of such investments without proving the same, the AO added the deposits, which were in the name of some other persons. Thus, the addition of Rs. 2,70,000 is deleted. 29. The learned Departmental Representative for the Department relied on the order of the AO, whereas the learned Authorised Representative for the assessee supported the order of learned CIT(A). 30. We have considered the submissions and facts of the case. We have also perused the orders of authorities below along with the pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as made was available with the AO. However, since the quantum of undisclosed investment is of meager amount, the addition of Rs. 11,000 is deleted. 33. Before us, the learned Departmental Representative strongly relied on the order of the AO whereas the learned Authorised Representative for the assessee relied heavily on the order of the learned CIT(A). 34. We have heard the submissions of the rival parties and perused the materials available on record. We find that the AO while making the addition has failed to confirm the actual payment made by the assessee with the person to whom the payment was made. The assessee has also not denied regarding the documents so referred and has duly explained. We, therefore, do not find any reason to interfere with the order of the learned CIT(A). Accordingly, the same is upheld. 35. The last ground of appeal taken by the Revenue is against deletion of Rs. 41,00,000 made under various heads of expenditure in respect of inflation of expenditure to suppress income. 36. The facts relating to the issue are that the AO while making the addition on verification of the seized book marked as PKC-41 which is the general ledger of Ashoka Petro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l expenditure has been Worked out at Rs. 3,11,682. However, in the P L a/c, expenses of Rs. 5,11,682 has been claimed inflating a round figure of expenditure of Rs. 2,00,000. 40. Rent, tax, insurance expenses: Page 22 of the seized book PKC containing this account reveals that total. expenditure comes to Rs. 2,71,401 on which expenditure transferred from bank ledger for Rs. 20,81,410 has been added and thus grand total has been worked out at Rs. 23,52,811. However, in the P L a/c, a sum of Rs. 25,52,811 has been claimed inflating a round figure expenditure of Rs. 2,00,000. 41. Staff salary: Page 42 of the seized book PKC-41 contains this account wherein grand total has been written in pencil for Rs. 5,41,420. However, in the P L a/c, expenditure of Rs. 6,41,420 has been claimed inflating the expenses by Rs. 1,00,000. 42. During the course of assessment proceedings, the learned Authorised Representative of the assessee was pointed out to this fact and was specifically required to explain the nature of difference. In reply he has stated that it is a partial account, which cannot be relied upon. The assessee has filed his P L a/c duly audited and PKC-41 is not the final accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iled his P L a/c duly audited whereas PKC-41 is not the final account. It has also been stated before the AO that hire charges paid for the tanker directly from the control of the appellant not taken into account into this ledger and hence, it was stated that partial account cannot be relied upon. S repair and maintenance, Tyre tubes and flaps, fooding expenses, rent, taxes and insurances, staff salary, etc. which have been paid at the operation of business has not been accounted for in this ledger. The appellant also submitted that the reason for non-accounting in this ledger was because the payments were made directly by the appellant which is substantiated by the fact that some figured amount was disbursed by him from his house which was not incorporated in this ledger and these amounts were incorporated in final accounts which were prepared after that. From the assessment order, it appears that the A.O. has not controverted the contention of the appellant by bringing any corroborative evidence. The AO should have examined each and every expense. He could have verified the expenses, particularly the difference in expenses claimed in P L a/c and as per seized document under the h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Oriental 2,00,000 Rent, tax and -do- Insurance Insurance - 507724 dt. 18-01-2001 Aftab Alam 60,000 Salary a/c -do- 507727 dt. 27-01-2001 Jhangir Hussain 40,000 Salary a/c -do- Total 41,00,000 47. It is further contended that the expenditure of Rs. 41,00,000 identified by the AO as inflated expenses in the return of income, as not recorded. in the seized documents, is factually incorrect. The counterfoils of the cheque books from where these payments were made are also under seizure vide Annex. 'A'. He therefore pleaded that the ground of appeal in this regard deserved to be dismissed. 48. We have considered the rival submissions of the parties and perused the materials available on record including the paper book filed by the learned Counsel for the assessee. We find that the AO while completing the assessment has not considered the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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