TMI Blog2010 (3) TMI 939X X X X Extracts X X X X X X X X Extracts X X X X ..... ous decisions relied upon by the assessee in its synopsis, we uphold the order of the CIT(A) on this point. The Revenue's ground is rejected. Levy of surcharge - We, after hearing the parties, restore this issue to the file of the CIT(A) with a direction that the same may be reconsidered in the light of the decision of the hon'ble Supreme Court in the case of CIT v. Rajiv Bhatara[ 2009 (2) TMI 12 - SUPREME COURT] . In the result, the Revenue's appeal is partly allowed for statistical purposes. Addition on Seized material bearing identification mark KPS-55 - Assessing Officer had proposed to Initiate action for making assessment u/s 158BD in the case of seven parties - HELD THAT:- We are of the opinion that the Assessing Officer having taken a conscious decision as required under the provisions of section 158BD of the Act for initiating proceedings in the case of Baldev Singh and others on the basis of various documents seized the issue relating to interpretation of document under reference and consequential effect can be decided only after the decision in the case of Baldev Singh and since the Revenue has not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2001. The premises covered by the search on this date were as under: (a) Sarjug Dental College and Hospital at Lahersarai, Darbhanga a sponsored institution of Om Seva Trust. (b) Residential premises of Dr. Kamla Pd. Singh situated at Lahersarai, Darbhanga with the warrant being in the names of Dr. Kamla Pd. Singh, Promod Singh and Lalan Singh. 4. Later on search action under section 132 was also carried at the residential flat of Kamla Prasad Singh at A-1, Siddharth Apartment, Jagdeo Path, Patna on January 23, 2001 followed with the search operation on February 7, 2001 at the residential flat at Arjun Height, J-20-14, 3rd Floor, Krishna Nagar, New Delhi, which as per evidence on record was the head office of Om Seva Trust, which runs Sarjug Dental College and Hospital. The return of block period declaring nil undisclosed income was furnished on November 15, 2002 in response to notice under section 158BC dated August 22, 2002. During the course of assessment proceedings, the Assessing Officer first proceeded to deal with the contents of a document called by the Revenue as diary and identified as KPS-53, pages 87 to 98 and after allowing the assessee an opportunity to expl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has once again reiterated what was stated earlier emphasising (a) that the jottings made in the diary strictly and rigidly nowhere fall in the category of document as interpreted under section 132 unless shown that there is prima facie connection with the assessee's business activities or investments, notwithstanding that there is a presumption in law that the said jottings belongs to the assessee and it is in his handwriting and (b) that no addition could be made in respect of the diary unless corroborated and supported by other evidence. In view of the reasons specified vide notice dated January 3, 2003, it is held that the onus upon the assessee is not satisfactorily discharged and meticulous handwritten entries of transactions cannot be dismissed as mere jottings in a diary. The entire outstanding amount of Rs 85.22 lakhs is held as unexplained investment under section 69 relating to the financial year in which the search took place as no dates have been noted in the diary. 5. The next action of the Assessing Officer was to deal with page 163 of another document found and seized during the search and marked as KPS-55. When the assessee was called upon to explain the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ard to the same is enclosed herewith as annexure B-3. In this regard, this is necessary to mention here and to undertake and declare, on behalf of the said assessee as provided and informed hereto, that to the best of my knowledge and belief, the documents submitted as aforesaid are genuine and have not been altered and substituted to suit the convenience. (xi) This is again necessary to mention here, with regard to the said paper-identified as page 163 marked under KPS-55, that as per certain well settled precedence without prejudice to the submissions made in our earlier reply under paragraph 3(vi)(e) and submissions to be made subsequently thereto, that a reasonable nexus must prima facie exist between the entries, and the affairs of the assessee. Any adverse inference or presumption as to the concealment of income be drawn merely on the basis of the figures mentioned on a chit of paper, unless it is shown that there is a prima facie connection with the assessee's business activities or investment even though there is a presumption in law that the said chit of paper belongs to the assessee and it is in his handwriting. 6. The Assessing Officer, however, ignored the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugust 25, 2000 (financial year 2000-01) appears to have been established with reference to a contemporary happening of Morton Confectionary, although the transaction with the latter may relate to Shri Baldev Singh. The amount is therefore added back in the hands of the assessee as unexplained for the relevant year. 7. The Assessing Officer levied surcharge also. 8. The assessee went in appeal before the Commissioner of Income-tax (Appeals) and pleaded as under: That Dr. Kamla Prasad Singh, aged about 54 years, is a qualified M.B.B.S., M.D (Path.) Doctor. Dr. Kamla Prasad Singh is the head of the family consisting 52 persons, (which includes all the lineal descendants of the three brothers of the said assessee/appellant's father), in total and all the major male members are working independently, either in service or in business whether in partnership or proprietorship. Each and every major male member have separate income and contribute their share to the family, with respect to the proportion based on either the strength of their own lineal descendents or their income respectively and severally. At the inception of his professional carrier, in medical science the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r as the investments are concerned, all the investments are properly shown/disclosed/specified in the balance-sheets, already submitted with the income-tax returns filed with the Department on part of the said assessee/appellant. All the copies of the returns filed with the Income-tax Department for the block period and/or copies of the assessment orders and/or intimation under section 143(1)(a) and income disclosed under VDIS have already been furnished with the reply submitted earlier before the learned Assistant Commissioner of Income-tax, Central Circle, MZP and the same shall be taken into consideration while passing any order. That a notice under section 158BC of the Income-tax Act, 1961, was served to the said assessee/appellant by the concerned authorities. A detailed reply against the said notice was duly submitted by the said assessee/appellant before the said authority. Thereafter the learned Assistant Commissioner of Income-tax, Central Circle, MZP passed an order dated January 30, 2003 against the said assessee/appellant. It was held in the said order that (a) handwritten entries of transaction cannot be considered as jottings in a diary and since no dates have been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der the purview of the said well-settled statutory provision and precedence whereby the benefit of presumption laid down in section 132(4A) cannot be availed of. Hence the said nature of jottings made in the diary strictly and rigidly nowhere fall in the category of document as interpreted under section 132 of the said Act (i.e., Asst. CIT v. Karodilal Agrawal [1994] 50 TTJ (Jab) 393; S.P. Goyal v. Deputy CIT [2004] 269 ITR (AT) 59; [2002] 82 ITD 85 (Mum.) and Sheraton Apparels v. Asst. CIT [2002] 256 ITR 20 (Bom)). The said submission is made without prejudice to the submission, which can be raised subsequently in addition thereto whatsoever. Moreover as per well-settled precedence, a reasonable nexus must prima facie exist between the entries and the affairs of the assessee. Any adverse inference or presumption as to the concealment of the income be drawn merely on the basis of the document seized, unless it is shown that there is a prima facie connection with the assessee's business activities or investments even though there is a presumption in law that the said documents belong to the assessee and it is his handwriting. It is further submitted that presumption and assumpti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... property and not otherwise. The aforesaid submission stands substantiated as iota or judgments and rulings. That in the light of the aforesaid submissions, it is herein submitted that the order passed by the learned Assistant Commissioner of Income-tax, Central Circle, MZP against the said assessee/appellant is unsustainable, illegal and baseless and deserves to be set aside/overruled in favour of the assessee/appellant and against the learned Assistant Commissioner of Income-tax, Central Circle, MZP. That as far as a single page with jottings indicated as KPS-55 page 163 reflecting that a sum of Rs, 16,43,865 was allegedly delivered to the said assessee/appellant on August 25, 2000 is concerned, and on the basis of the said impugned notice the learned Assistant Commissioner of Income-tax, Central Circle, MZP had passed an order against the said assessee/appellant despite the specific rebuttal for the same that there exists no connection and nexus between the assessee/appellant and Shri Baldev Singh is concerned, it is herein submitted that the said rough chit of paper is wrongly and illegally accepted by the learned Assistant Commissioner of Income-tax, Central Circle, MZP as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... airs of the assessee. Any adverse inference or presumption as to the concealment of income be drawn merely on the basis of the documents seized, unless it is shown that there is a prima facie connection with the assessee's business activities or investments even though there is a presumption in law that the said documents belong to the assessee and it is in his handwriting. It is necessary to refer to the submissions made and contentions raised in paragraph 5 above in relation to the submissions made in paragraph 6 above. It is also necessary to submit here that the learned Assistant Commissioner of Income-tax, Central Circle, MZP has observed in its order dated January 30, 2003 'Findings that emerge necessitates that the matter of investment is considered independently under section 158BD'. In fact when separate proceedings are felt necessary to be initiated against Mr. Baldev Singh, who is having no concern with the said assessee/appellant the transaction of the said assessee/appellant assumely cannot be related to Mr. Baldev Singh and henceforth cannot in any way be added back in the hands of the assessee. That the charge of surcharge, interest and initiation of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rictly and rigidly nowhere fall in the category of document as interpreted under section 132 unless shown that there is a prima facie connection with the assessee's business activities or investments, notwithstanding that there is a presumption in law that the said jottings belong to the assessee and it is in his handwriting and (b) that no addition could be made in respect of the diary unless corroborated and supported by other evidence. In view of the reasons specified vide notice dated January 3, 2003, it is held that the onus upon the assessee is not satisfactorily discharged and meticulous handwritten entries of transactions cannot be dismissed as mere jottings in a diary. The entire outstanding amount of Rs. 85.22 lakhs is held as unexplained investment under section 69 relating to the financial year in which the search took place as no dates have been noted in the diary. (b) Unexplained-Receipt of Rs. 16,43,865 on August 25, 2000 Among voluminous material/documents/accounts found and seized from the different premises during the search operations, a single page with jottings, identified as, KPS-55, page 163, reflecting that a sum of Rs. 16,43,865 was delivered t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... possession of the said assessee only because of the fact that the said documents were just kept to analyse and form an opinion thereon. (v) That the said document identified as page 27 marked under BD-15, indicates the total sum, paid by the said person (Shri Baldev Singh) as an advance against the agreement to purchase the alleged property. (vi) That the seizure of the said documents, from the possession of the said assessee can never be interpreted/presumed as the investment made by the said assessee. (vii) That, due to the fact, no post-search investigations have ever been made, in violation of the relevant provisions of the Income-tax Act, wherein the enquires with regard to the real title of the alleged properties could have been made, which otherwise is leading to the unnecessary exercise of hunt-n-find on the part of the Department and its denial and negations on our part. (viii) That the option, to verify the title of the alleged property not only from the concerned registration authority but also from the said person is always open and the same can be got verified accordingly. (ix) That the alleged investment in the said property in neither made nor was eve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r approval of the Additional Commissioner of Income-tax, Central Range 2, Patna. 10. It was in the above facts that the learned Commissioner of Income-tax (Appeals) deleted the addition of Rs. 85.22 lakhs after allowing the Assessing Officer an opportunity to put up his case. The findings of the Commissioner of Income-tax (Appeals) as. well as the Assessing Officer's stand as contained at pages 10 to 15 of the order of the Commissioner of Income-tax (Appeals) are as under: My decision on each one of the above grounds of appeal along with reasons for the same are given ground by ground as follows: 1. Addition of Rs. 85.22 lakhs on the basis of jottings in the diary. After a careful perusal of the facts and circumstances, I find that this addition, has been based by the Assessing Officer on a seized diary bearing identification as pages 87 to 98 of KPS-53. The diary is a mini pocket note book. The Assistant Commissioner of Income-tax was requested to furnish photocopies of the diary as well as the statement and copy of the KPS-53 vide this office letter dated December 10, 2003. But the Assessing Officer did not furnish any photocopies of this diary. Instead the Additiona ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reply should reach me on or before February 24, 2004. You may also attend personally on the above said date, i.e., February 24, 2004. In response to this query the Assessing Officer has sent in the following reply: I acknowledge receipt of both the letters referred above. Your communication dated December 10, 2003, was responded by the Additional Commissioner of Income-tax, Central Range-1, Patna, within whose jurisdiction the office of Central Circle, Muzaffarpur functions. A copy of the said reply by the Additional Commissioner of Income-tax dated January 5, 2004 is enclosed for your ready reference. Further, a query has been called by you, through your communication dated February 10, 2004, enquiring the basis relied upon treating the loans recorded in the small diary as relating to the block period in spite of the fact that no dates were mentioned against any of the entries recorded in the said diary. In this connection, my submissions are (1) the assessment involved in the instant case is related to the block period ending with the date of search encompassing a substantial length of time, as distinguished from an assessment comprising of a period of twelve months. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Income-tax Appellate Tribunal in the case of Asst. CIT v. Karodilal Agrawal [1994] 50 TTJ (Jab) 393 wherein it has been held that the presumption under section 132(4A) cannot be availed of in the course of assessment under section 143(3). Then there is the Gujarat High Court judgment in the case of CIT v. Bai Vina [1965] 58 ITR 100 wherein it has been observed that legal fictions are created only for definite purposes and they are limited to the purposes for which they are created and should not be extended beyond their legitimate field. Presuming without admitting that the presumption under section 132(4A) arises in respect of this note book which has been made the basis of the addition. I find there is no evidence whatsoever regarding the time-period to which the diary belonged or pertains or the period to which the entries in the diary pertained as all the entries or jottings in it are undated. The veracity of the said note book and its evidential value is doubtful not only because it is not clear by whom the entries in the note book were written but also because there are no dates in respect of these entries. There are no signatures on the diary. There are no witnesses. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hese circumstances, it is possible that the entries in this diary if the diary is presumed to be belonging to the appellant pertains to lending of money which he might have received back from the borrowers mentioned in the diary and reinvested in the Dental College by way of donation to the trust or/and might have invested in guest-house and his residential place at Patna and Delhi and investment in Onkeshwar Trading in a company at Muzaffarpur which carries on a C F agency business for Panama cigarette, in view of the above facts and circumstances, the addition made by the Assessing Officer to the extent of Rs. 85.22 lakhs is deleted. 11. It was in view of the above facts and circumstances of the case that the learned Departmental representative relying on the copies of the relevant documents placed at pages 11 to 22 of the paper book, photocopies of which are made as annexures to this order, submitted that the assessee had disowned the ownership of these documents, but the entry at page 18, which reads as * * * 1 goes to show that it was for the purchase of land as per the agreement. When he was asked to explain as to which agreement and between whom, the learned Departmenta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lag raha hai. (I am surprised to see the diary. The amount noted in the diary has never been seen by me in my whole life. It is like a dream). (d) The learned Assessing Officer considered the entire amount of Rs. 85.22 lakhs as unexplained investment under section 69 and added to the period of block period. (e) The learned Commissioner of Income-tax (Appeals) dropped the proceedings on the finding that- (1) the Assessing Officer did not prove that the handwriting is that of the appellant. (Commissioner of Income-tax order, page 11, 8th line from bottom) (2) The Assessing Officer did not bring on record any evidence to establish that the entries in the diary were in the handwriting of the appellant. (Commissioner of Income-tax order, page 11, 5th line from bottom) (3) The Assessing Officer has also not questioned the appellant as to the particular place or person or pocket from where the diary, was exactly found. (Commissioner of Income-tax order, page 11, 4th line from bottom) (4) The Assessing Officer has also not brought on record any evidence as nature of transaction and association of the persons mentioned in the diary. (Commissioner of Income-tax order, page ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es are undisclosed advances without there being any material on record to support such presumption. A. 1 The learned Assessing Officer while considering it as unexplained investment under section 69 could not establish that the assessee has charged any interest. A. 2 There is no material to show that the Assessing Officer has taxed these advances as wealth of the 'A'. A. 3 There is no material to show that the 'A' has taken any action to recover the money from the alleged debtors. B. Second component: The person must be one as defined in section 2(31). It must be clearly established who is that person. Merely because a document is recovered from the body of a person, does not automatically lead to the inference that it belonged to him. The learned Assessing Officer has simply presumed that the seized papers belongs to 'A'. B. 1 Panchnama - It is only panchnama in respect of warrant to search at residential premises of the assessee from where so called diary was recovered. (No specific place or location was mentioned in panchnama) B. 2 There is no material to establish that the diary was found from the possession of the assessee. B. 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er is under an obligation to corroborate the entries with the assessee. Since, the section is not mandatory, the onus has been discharged by denying the contents and ownership. It is now for the Revenue to prove that the assessee is not disclosing true facts and that he has not discharged his onus. B. 10 No connection of noting with the dealings of the assessee. CIT v. Vinod Kamra 10 TTJ (Jd) 15, Chander Mohan Mehta v. Asst. CIT [1999] 71 ITD 245 (Pune). B. 11 In one case papers were signed but no link was established with the assessee's dealing, it could not be taxed. D.A. Patel v. Deputy CIT [2000] 72 ITD 340 (Mum). B. 12 Entries in the diary not clearly revealing that the assessee has earned income and it being a dumb document, no addition could be made on the basis of noting in the diary Asst. CIT v. Ashok Kumar Vig [2007] 106 TTJ (Ranchi) 424. B. 13 No addition could be made on the basis of dumb loose slips seized from the residence in the absence of any corroborative material to show payment of any undisclosed consideration by the assessee towards purchase of land. M.M. Financiers (P.) Ltd. v. Deputy CIT [2007] 107 TTJ (Chennai) 200. B. 14 The Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... different figures noted thereon and the Department having failed to bring on record any material or evidence to corroborate allegation regarding receipt of on-money, then the presumption on the basis of the documents could not be raised. Elite Developers v. Deputy CIT [2000] 73 ITD 379 (Nagpur), Kishanchand Sobhrajmal v. Asst. CIT [1992] 41 ITD 97 (Jaipur) and Agrawal Motors v. Asst. CIT [1999] 68 ITD 407 (Jab). 2. Asst. CIT v. Satyapal Wassan [2007] 295 ITR (AT) 352 (Jabalpur). This case is applicable to our case. The document was bereft of necessary details about the year of transaction, ownership, nature of transaction, necessary code for deciphering the figures. The Assessing Officer presumed that the transaction belonged to the financial year 1988-89 relevant to the assessment year 1989-90, that the figures mentioned in the document were advances made by the assessee, that the transactions belonged to the assessee, and that the transactions were in a code of lakhs and that the unit was the rupee. The Assessing Officer did not carry out any enquiry either during the course of search or during the course of assessment proceedings to find out the nature of transactions and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... necessitates that the matter of investment is considered independently under section 158BD. (Assessing Officer order : Last page : Third paragraph from bottom) (e) The learned Assessing Officer added the above amount to the income of the assessee. (f) The learned Commissioner of Income-tax (Appeals) confirmed the addition. The assessee being aggrieved by the confirmation of addition has preferred the second appeal. Arguments 1. The learned Assessing Officer reproduced the submissions of the appellant under 11 sub-heads and then gave a finding that 'Findings that emerge necessitates that the matter of investigation is considered independently under section 158BD'. (The Assessing Officer order- submissions on pages 6 and 7-findings page 7, paragraph 2, line 4) 2. The seized paper contains amount appearing in the name of Pappuji and Shanker Singh. Some of the amounts are through pay order or cheque or demand draft. Certain amounts mention words cash, gas, rickshaw, etc. The learned Assessing Officer did not establish that the assessee has any connection with these nothings. The learned Assessing Officer was satisfied that this amount was to be added in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arly, it is also settled law that any document found and seized during the course of search has to be interpreted literally and nothing can be added or subtracted. 15. If facts of the assessee's case before us are evaluated in the light of the aforesaid settled principles of law, it will be revealed that the documents found and seized and relied upon for making the addition under appeal by the Revenue have neither date nor the name of the assessee and therefore, it cannot be assumed or presumed as to when and by whom the nothings were recorded. It is also not known as to in what connection the nothings even if considered as giving and taking of money were made; meaning thereby that these documents being dumb documents, no addition can be made on the basis of assuming or presuming the nothings in those documents relating to any other transaction nor recorded in the documents. In a nutshell, any infirmity in the order of the Commissioner of Income-tax (Appeals) on this point (sic) and therefore, following the law laid down in various decisions relied upon by the assessee in its synopsis, we uphold the order of the Commissioner of Income-tax (Appeals) on this point. The Revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... received in English and 'paya' in Hindi when the signatures are in English and Hindi respectively. The dates appear at so many places on this document and the amounts received are referable to the date. For example, the appellant has indicated that Rs. 12,79,155 had been received by him upto June 16, 2000, and this is a signed entry along with date in the handwriting of the appellant. Similarly, after further receipt of amount the appellant has stated that he received Rs. 14,93,865 cumulatively upto August 5, 2000. This is also a signed entry. Similarly, the appellant has again written that he had received Rs. 16,43,865 cumulatively upto September 25, 2000. This is also a signed and dated entry. The paper therefore shows that the appellant had received funds back by way of cash, pay order, cheque, D.O., and by way of account rendered by Sri Pappuji and Sri Shankar Singh. It is seen that Lallan is the brother of the appellant and therefore his name is not suffixed by 'Jee' and the paper shows that the amount received has been written as 'self or 'Liya'. The appellant is therefore not justified in saying that the paper is about working out a project cost ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... room as if he was Lallan Singh, c/o. Vinay Kumar Singh, chartered accountant, Darbhanga. A copy of this slip was kept in record after being signed by me overleaf but was untraceable for purposes of enclosure to this order. The word Lallan appears on page 163 (on which this addition is based) of KPS-55 and the word 'Lallan' appeared on the entry slip in the appellant's handwriting and these two words are exactly in the same handwriting. This also shows that the seized page 163 of KPS-55 is in the appellant's handwriting and his signature in Hindi as 'Kamla', where the letter 'L' also appears in Hindi shows, it to be in appellant's handwriting. Thirdly, the appellant's authorised representative Shri Vinay Singh was told to produce the appellant for examination on January 5, 2004 (vide order sheet entry dated December 10, 2003) but he failed to produce the appellant on January 5, 2004. Thus the appellant avoided being present in his own name. Therefore, an adverse inference that the appellant shunned giving his handwriting sample in respect of the KPS-55 is drawn against the appellant. Fourthly, the copy of the appeal memo (enclosed herewith) b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 158BD in his case, the addition in the assessee's case should not have been made or confirmed by the Commissioner of Income-tax (Appeals) unless and until the decision in the argument, the learned authorised representative submitted that if the addition on the basis of nothings in this document is confirmed in the hands of Baldev Singh, then there will be no reason for making any addition in the assessee's case. According to him, the assessee will, therefore, be under an obligation to explain the contents of this document only if the same is not considered in the hands of Baldev Singh and since the Assessing Officer recorded a finding for taking action in the hands of Baldev Singh, it will be fair enough and in the interest of justice that the issue relating to this addition may be restored back to the Assessing Officer for fresh decision after the assessment in the case of Baldev Singh. 23. The learned Departmental representative, on the other hand, supported the orders of the Revenue authorities for the reasons stated therein. Reliance was placed at page 8, which is a copy of the relevant document placed in the Revenue's paper book wherein the date of August ..... X X X X Extracts X X X X X X X X Extracts X X X X
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