TMI Blog2013 (11) TMI 368X X X X Extracts X X X X X X X X Extracts X X X X ..... Mr. Jayant Vithaldas or even Mr. Dilip Sardesai. Ld. CIT(A) erred in confirming the addition made by the AO to the income of the Appellant on account of unaccounted hundies /bills of exchange on protective basis on the basis of certain materials seized from the residence of Shri Jayant Vithaldas, Pune, who was an ex-executive of the Appellant company and he further grossly erred in changing the protective addition into substantive addition without allowing any opportunity of hearing to the Appellant before increasing the tax liability by changing the protective addition into substantive addition – Decided in favor of Assessee. - ITAs No.: 3850 to 3852/Mum/2011, ITA No. : 3853/Mum/2011, ITA No. : 3846/Mum/2011 - - - Dated:- 9-10-2013 - SHRI P.M. JAGTAP AND SHRI VIVEK VARMA, JJ. For the Appellant : S/Shri K. Shivaram Parag Savla For the Respondent : Shri O.P. Singh ORDER PER VIVEK VARMA, JM: The captioned appeals in ITAs No. 3850, 3851, 3852 and 3853/Mum/2011 for various years pertain to common grounds. ITA No. 3846/Mum/2011 is an appeal filed by the department against the order of the CIT(A), deleting the penalty. This appeal is adjudicated separately. In v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 132 of the IT Act was undertaken on the residential premises of Vissanji group on 02.10.1993. This search included one Mr. Jayant Vithaldas, from whose possession promissory notes (hundies) were found. These hundies were executed by Mr. Dilip Sardesai, along with certain cheques and drafts. On these hundies, the name of the payer had been left blank. 3. Consequent to search, substantive addition on the aggregate sum of the hundies was made on Mr. Jayant Vithaldas, as these were found from his premises and possession. However, the protective addition was made on the assessee, which came up before the coordinate Bench in ITA no. 4029/Mum/1996, wherein it was observed, We have considered the rival submissions. It is a case where substantive addition was made in the hands of Shri Jayant Vithaldas and protective assessment .was made in the hands of the assessee. Both the parties before us could not explain the position with regard to substantive assessment made in the hands of Shri Jagant Vithalcias. In our view, it may not the appropriate to delete the addition made on protective basis in the hands of the assessee without ascertaining the position of substantive ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exchange with the assessee and, therefore decide the matter accordingly as per law . 8. The AO in the consequential appeal effect order, reversed the protective assessment to substantive assessment as the substantive addition in the hands of Mr. Jayant Vithaldas was deleted by the coordinate Bench of the ITAT, thereby proceeded to make the addition. 9. The initial grievance of the assessee was that the AO did not given any opportunity to the assessee to explain its case. The CIT(A), exercising the co-terminous powers, allowed the assessee to explain its case. The CIT(A), after examining the seized material and the submissions of the assessee, held, 15. I have perused the facts of the case. The denial in the course of the search by Jayant Vithaldas to the effect that the promissory notes had no relationship with the appellant company does not carry any weight. Such a statement coming from him would have clinching evidential value only in a situation when he would have categorically come out clean on the promissory notes which he did not. This contention in the course of the search was that it was Mr. Dilip Sardesai, ironically the author of the promissory notes, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... two. This fact cannot be denied. Jayant Vithaldas is closer related to the persons at the helm of affairs of appellant. This fact also cannot be denied. In such a situation there being no present relationship of business between the two is of no consequence. 19. The last argument that in the course of search no incriminating evidence of undisclosed income against the appellant has been identified in the search proceedings does not per se suggests that addition to income of appellant cannot be made on the basis of incriminating documents in the form of promissory notes found in the course of the search from a person closely associated with the appellant. 20. Therefore, to my mind none of the objections taken up have any serious implication against the addition to income in the present facts of the case. On the contrary all circumstantial evidences lead directly to one conclusion that looking to the huge quantum of money associated with the promissory notes, the only source of financing of the promissory notes was the main income earning source of the group, in the instant case the appellant corporate entity. This is in the background fact of the case that the person from whose h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellant company. 8. The issue has been decided by the Hon ble ITAT in the case of Shri Jayant Vithaldas on merits. The Order has been confirmed by the Hon ble High Court. The Tribunal has deleted the addition on the ground that the documents were dumb documents and held that no money was received under the said hundies. The High court has confirmed this order and while doing so has considered the FERA order. 9. Neither IT Dept. nor FERA Authorities have ever asked a single question to assessee regarding these papers as they never found any connection between these papers and the assessee. 10. The CIT(A) vide its order dated 30.3.1998 has deleted the protective addition made by the AO while passing an order under section 143(3) r.w.s.147. 11. The 1TAT has vide its order dated 31.1.2008 allowed the appeal in favour of Shri Jayant Vithaldas on merit of the case. 12. The CIT(A) has deleted the penalty for A.Y. 1985-86. 13. The High Court vide its order dated 8.8.2011 in case of Shri Jayant Vithaldas accepted the findings of the ITAT and dismissed the appeal of the IT Dept. 14. The FERA Appellate Tribunal have accepte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I wanted to raise certain finances to my firm M/s. R.S. International for which these hundies were signed and given to Shri Jayant Vithaldas. Shri Jayant Vithaldas could not raise the required Finances and I verbally told him to tear these hundies. In fact because of non-raising of these finances my firm could not enter into any contract. I was taken by surprise when I came to know during the search that these hundies were still lying with Shri Jayant Vithaldas. 22. The Supreme court in case of Umacharan Shaw Bros. vs. CIT (1959) 37 ITR 271 (SC) has settled that suspicion however strong cannot take the place of proof. Similar view has been taken in case of K.P. Vargheese vs. CIT 131 ITR 597 (SC). 23. The affidavit of third party presumed to be correct unless proved otherwise. Mehta Parikh and co v. CIT ( 1956) 30 ITR i8i (SC). 24. The documents have no evidentiary value and the Tribunal has given categorical finding the documents have not been acted upon hence there cannot be addition in the assessment of assessee. 25. The Assessee has proved that the documents seized from third party has no where connected with the assessee hence addition confirmed by the Commissioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ventually concluded that it is the assessee, who is the lender. This conclusion, in our opinion is merely based on conjecture. The close relation of Mr. Jayant Vithaldas with the assessee company, on which the entire edifice has been built does not bear any foundation. The revenue authorities have failed to establish the connection of the assessee and Mr. Jayant Vithaldas or even Mr. Dilip Sardesai. 16. This cannot lead the revenue authorities anywhere. Not one piece of evidence has been placed on record in any proceedings in the so called connected persons, Mr. Jayant Vithaldas and Mr. Dilip Sardesai which could lead to even the faintest conclusion that it was the assessee, whose funds had been utilized for execution of hundies. It is also worthwhile to mention that the revenue authorities have not stated anywhere under which section the addition is sought to be made. 17. We are thus, inclined to agree with the submissions made by the AR and reproduced in the synopsis that the addition of Rs. 1,09,51,150/- merits to be deleted. 18. We, therefore, set aside the order of the CIT(A) on this issue and direct the AO to delete the addition of Rs. 1,09,51,150/- made by him on acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or there is any evidence on record which suggest that the Appellant might have advanced any money on hundies/bills of exchange; (ii) the AO has not followed the directions given by the ITAT, Mumbai correctly and thereby he failed to bring on record any material to link the unexplained hundies/bills of exchange with the Appellant as directed by the ITAT; and (iii) the ITAT vide order dated 5-5-2009 in ITA No. 6125/Mum/2007 for the A.Y. 1985-86 allowed the ground of appeal raised by the Revenue to keep the issue of protective addition alive and no specific findings are given by the ITAT, Mumbai so as the protective addition can be assessed as substantive addition. b) In reaching to the conclusion and confirming such addition on substantive basis in place of protective basis made by the AO, the ld. CIT(A) omitted to consider relevant factors, considerations, principles and evidences while he was overwhelmed, influenced and prejudiced by irrelevant considerations and factors. 3. The ld. CIT(A) erred in holding that the charge of interest under section 215 and 220(2) of the Income Tax Act, 1961 is consequential. The Appellant denies its liability for such inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed by the assessee against the order of the CIT(A) 2, Mumbai, dated 11.02.2011 for AY 1987-88, wherein, the assessee has raised the following grounds: The ground or grounds of appeal are without prejudice to one another. 1. On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in confirming the addition of 4,50,000/- made by the AO to the income of the Appellant on account of unaccounted hundies/bills of exchange on protective basis on the basis of certain materials seized from the residence of Shri Jayant Vithaldas, Pune, who was an ex-executive of the Appellant company and he further grossly erred in changing the protective addition into substantive addition without allowing any opportunity of hearing to the Appellant before increasing the tax liability by changing the protective addition into substantive addition. 2a) On the facts and in the circumstances of the case and in law, the id. CIT(A) failed to appreciate that:- (i) neither the seized materials belonged to the Appellant nor there is any evidence on record which suggest that the Appellant might have advanced any money on hundies/bills of exchange; ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng our decision taken in ITA 3850 ITA 3851 (supra), Ground no. 1 of the impugned appeal stands allowed. 40. Ground no. 2: Since we have allowed ground no. 1 by directing the AO to delete the addition of Rs. 4,50,000/-, on facts, ground no. 2 becomes academic and needs no adjudication. 41. Ground no. 3, being consequential in nature, it is mere academic exercise to adjudicate this ground, therefore, the same is dismissed as academic. 42. Ground no. 4 relates to penalty proceedings under section 271(1)(c), which is premature in nature, and does not call for any interference from either parties, as such, we reject this ground. 43. In the result, appeal is treated as partly allowed. ITA No. 3853/Mum/2011 for AY 1994-95, Assessee s appeal: 44. The appeal is filed by the assessee against the order of the CIT(A) 2, Mumbai, dated 11.02.2011 for AY 1994-95, wherein, the assessee has raised the following grounds: The ground or grounds of appeal are without prejudice to one another. 1. On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in confirming the addition of Rs. 1,02,00,000/- made by the AO to the income of the Appellant on account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relevant decisive paras being 17, 18 19, as far as gist outcome of the issue involved as lead appeal is concerned, which we deem it proper to reproduce the same here for the sake of clarity brevity: 17. We are thus, inclined to agree with the submissions made by the AR and reproduced in the synopsis that the addition of Rs. 1,09,51,150/- merits to be deleted. 18. We, therefore, set aside the order of the CIT(A) on this issue and direct the AO to delete the addition of Rs. 1,09,51,150/- made by him on account of amounts mentioned on hundies. 19. Ground no. 1 is, therefore, allowed. 47. Respectfully following our decision taken in ITAs 3850, 3851 3852 (supra), Ground no. 1 of the impugned appeal stands allowed. 48. Ground no. 2: Since we have allowed ground no. 1 by directing the AO to delete the addition of Rs. 1,02,00,000/-, on facts, ground no. 2 becomes academic and needs no adjudication. 49. Ground no. 3 relates to penalty proceedings under section 271(1)(c), which is premature in nature, and does not call for any interference from either parties, as such, we reject this ground. 51. In the result, appeal is treated as partly a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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