9911796707
TMI Blog2010 (3) TMI 939X X X X Extracts X X X X X X X X Extracts X X X X ..... e Income-tax Act, 1961 does not explicitly says so. 3. For that any other ground may be raised during the course of hearing. 2. We have heard the parties. 3. The brief facts relating to the issue raised by the Revenue as per ground No. 1, which relates to addition of Rs. 85.22 lakhs having been made by the Assessing Officer on the basis of a small note book called by the Revenue as diary and identified as KPS-53, pages 87 to 98 are that action under section 132 of the Act was carried on at the assessee's place at Darbhanga on January 1, 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, Krishn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... available with regard to the jottings in a diary. The jottings in the diary when never represented either in the books of account or in any documents, as interpreted under section 132 of the said Act, the presumption under section 132(4A) cannot be availed of. Insisting that the matter could not be dismissed particularly in view of the clear identity of the persons named in the diary, the specific nature of entry detailing name, amount advanced, subsequent repayment/adjustment, balance outstanding, etc. for memory and record, the assessee 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 bill 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 is neither made nor was ever proposed to be made by the said assessee. (x) That an affidavit in regard 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sidential, which have evoked, the following response vide reply dated January 9, 2003: ... On the basis of the submissions above, a summons under section 131 was issued to Shri Baldev Singh for verification of the assertions made by the assessee that it is an independent investment of the former who is neither a relative nor a business partner, bindings that emerge necessitates that the matter of investment is considered independently under section 158BD. However, the genuineness of the receipt of Rs. 16,43,865 on August 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 descendan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sources as well as agricultural income. That the said assessee/appellant has been regularly, continuously and consistently, filing his income-tax return punctually and paying handsome amount of computed tax as per the prevalent tax laws and tax slabs although the main source of the said assessee/appellant's income initially forms part of the agricultural income derived from the ancestral land which gave the said assessee/appellant the strength to grow, develop, progress and prosper by leaps and bounds. As far 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er section 132 of the said Act, the presumption under section 132(4A) cannot be availed of by the Department unless any entry to the effect or for the support of the said has been specifically represented in the concerned books of account or in any concerned document. It is a well-settled statutory principle that no addition could be made on the basis of the jottings in the diary unless corroborated and supported by other evidence, the seizure of the same is merely the jottings in the diary and hence falls under 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 prece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh chit of paper or jotting in a diary does not amount to a document and hence the presumption under section 132(4A) cannot be attracted. More important a nexus should be established between the document and the undisclosed income of the assessee. In furtherance of our above submissions, it is hereby submitted that the right of presumption contained in section 69 cannot be invoked for the purpose of section 132(4A). As per section 69, action could be taken only if anything represents the undisclosed income or 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of hunt-n-find on the part of the Department and its denial and negations on our part. 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 verified accordingly. The alleged investment in the said property is neither made nor has ever been proposed to be made by the said assessee. That 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 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ocuments, as interpreted under section 132 of the said Act, the presumption under section 132(4A) cannot be availed of. Insisting that the matter could not be dismissed particularly in view of the clear identity of the persons named in the diary, the specific nature of entry detailing name, amount advanced, subsequent repayment/adjustment, balance outstanding, etc. for memory and record, the assessee 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 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the said assessee except that of a person living in the same village from which the said assessee belongs to. (iii) That the said person in the capacity of an independent purchaser of the alleged property, once contacted the said assessee, just to have certain opinion from the said assessee in his capacity of a renowned business personality, about the purchase of the alleged property. (iv) That the alleged papers, identified and marked as BD-15 running into several pages, were found in the 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 r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the hands of the assessee as unexplained for the relevant year. On the basis of narration above, total undisclosed income for the block period under assessment is determined at Rs. 1,01,65,870 only which is assessed accordingly under section 158BC read with section 143(3) of the Income-tax Act, 1961. The penalty proceedings under section 158BFA(2) have been initiated separately. Charge interest as per the provisions of law. Issue notice of demand. This order issued with the prior 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er and also to furnish to this office a copy of the statement of the appellant recorded on oath in course of search as well as in the course of assessment proceedings. You are also given an opportunity to show the basis or the evidence on the basis of which KPS-53, pages 87 to 98 being small pocket diary was related to be necessarily falling within the block period particularly when no date on any of the entries in this diary were there on these pages of the diary. Your 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n on this crucial aspect, this diary and entries therein, there is no basis to draw the presumption that the appellant was necessarily the owner of the note book. The provision of section 132(4A) cannot be availed of for the purposes of making a block assessment. For this purpose reference is invited to the judgment of the Bangalore Bench of the Income-tax Appellate Tribunal in the case of Addl. ITO v. T. Mudduveerappa Sons [1993] 45 ITD 12 and to the Jodhpur Bench 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 eviden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of statement on the entries in the note book or loose paper the amounts mentioned in the note book cannot be treated as undisclosed income straightaway. It is also relevant here to mention that the appellant has claimed to be owning vast agricultural lands and has claimed that earlier he had been running a pathological laboratory, and then serving in Darbhanga Medical College and from 1977, he was practising for some years as a medical practitioner also. Under these 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paper book were confronted to the assessee, who in his statement on oath recorded on March 23, 2001 vide reply to question No. 4 stated that the handwriting in the said paper book was quite similar to his handwriting. However, he did not admit that the handwriting is his own. (c) He also stated that Mujhe is diary ko dekhkar achambha ho raha hai jitna paisa isme ankit hai utna paisa toh mai apne jeewan mein bhi nahi dekha hoon. Yoh bilkul swapan jaisa 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-t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earch enquiries that the transaction in the seized document is a real one and it has actually taken place. Various aspects-whether sale/purchase, advance/loan, capital/revenue, existing disclosed/undisclosed assets, who are the people involved in the transaction, whether they are existing, their identity, evidence of income, therefrom, steps for recovery thereof. The learned Assessing Officer has simply presumed that the alleged figures 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 belon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd 'may' has been used in sub-sections (2), (3), (4), (4A), (9), (10) of section 132 whereas the word 'shall' has been used in rest of the sub-sections of section 132. It indicates clear intention of the Legislature about any section being mandatory or being suggestive. Since section 132(4A) contains 'may', it is suggestive and not mandatory. For making it mandatory, the learned Assessing Officer 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 mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red to in the paper reflect quantities of money or quantities of goods, the same are only dumb documents and therefore no addition could be made on the basis of such documents. Neena Syal (Smt.) v. Asst. CIT [1999] 70 ITD 62 (Chandigarh). D. 2 Where the seized documents evidencing receipt of on-money by the assessee were not speaking documents as they did not contain any narration or description about 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 assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The sheet contains several jottings such as pay order, cash, Morton DD, etc. (c) The learned Assessing Officer, on the basis of an agreement with Sri Baldev Singh regarding property of Morton Confectionery (contained in BD 15 : page 27), correlated and issued a summons under section 131 to Sri Baldev Singh. (d) The Assessing Officer after being satisfied, found that the findings that emerge 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 seiz ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... well settled that undisclosed income for the purpose of block assessment has to be computed solely on the basis of seized material and any enquiry made by the Assessing Officer thereafter relatable to such material; meaning thereby neither any enquiry report nor any document procured either before or after the search can be considered while computing the undisclosed income. Similarly, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch party. On this paper the handwriting is of the appellant. A copy of the seized paper is enclosed with this order. From this it is clear that the signatures of the appellant once in English as on June 16, 2000 and again in Hindi as on August 5, 2000 and still again in Hindi as on September 25, 2000 are made. On the above signature the appellant has written 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 ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cknowledged as 'received' by the appellant on the loose paper have undoubtedly everything to do with him. Another proof of the handwriting on KPS-55, (page 163) being the handwriting of the appellant's that on one of the dates of hearing before me he appeared posing as Lallan Singh, i.e, his brother and had given a permission chit to enter my 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 s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hands of the assessee as unexplained for the relevant year. 22. At the time of hearing, the learned authorised representative at the outset, submitted that since the Assessing Officer had specifically accepted the assessee's submissions that the transactions in this document may relate to Shri Baldev Singh and had decided to take action under section 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 f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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