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2015 (10) TMI 2243 - ITAT PUNE

2015 (10) TMI 2243 - ITAT PUNE - TMI - Validity of reassessment proceedings - Addition u/s.69A - Held that:- There is no satisfaction of the AO that income has escaped assessment. Further, for the said ₹ 1 crore notice u/s.148 has been issued for A.Yrs. 2004-05 to 2006-07. Therefore, the AO is not sure for which assessment year the money has been deployed. Further, he is not saying that this is an income. Therefore, assumption of jurisdiction u/s.148 of the I.T. Act is not warranted. See C .....

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of the assessee. However, the Ld.CIT(A) while upholding the addition of ₹ 1 crore u/s.69A of the I.T. Act in principle, directed the AO to assess the same in A.Y. 2005-06 since the seized documents show that the amount has been paid to the assessee on 09-07-2004. We find an identical issue had come up before the Tribunal in the case of Shri Vinit Ranawat Vs. ACIT vide [2015 (6) TMI 608 - ITAT PUNE] wherein additions were made on the basis of seized documents found from the residence of Sh .....

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d that:- We find in the instant case the AO did not make any addition in the hands of the assessee in the impugned assessment year holding that he has already made the addition of ₹ 1 crore in A.Y. 2004-05. This was done by the AO despite the fact brought before him that the seized documents relates to A.Y. 2005-06 and not A.Y. 2004-05. Therefore, the AO in a clear application of mind and in a conscious manner made the addition in A.Y. 2004-05 and not in A.Y. 2005-06. Therefore, it cannot .....

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fore, the order of the CIT invoking jurisdiction u/s.263 cannot be sustained even on merit. - Decided in favour of assessee. - ITA No. 1016/PN/2014, ITA No. 916/PN/2014 - Dated:- 23-9-2015 - Shri R. K. Panda, AM And Shri Vikas Awasthy, JM For the Appellant : Shri V.L. Jain For the Respondent : Shri S.K. Rastogi & Shri Rajesh Damor ORDER Per R. K. Panda, AM ITA No.1016/PN/2014 filed by the assessee is directed against the order dated 20-03-2014 of the CIT(A)-III, Pune relating to Assessment Y .....

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al income of ₹ 9,61,055/-. Subsequently the assessments for the impugned A.Y. 2004-05 and A.Y.s 2005-06, 2006-07 and 2007-08 were reopened by the Assessing Officer on the basis of information received from ACIT Central Circle- 1(2), Pune according to which certain entries in assessee s name were found from documents seized during the search action by the Income Tax Department on Shri Sohanraj Mehta, C & F agent of RMD Gutkha group. The seized document included a summary of unaccounted .....

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as his income. 3. In response to the query raised by the AO the assessee made the following submission which have been reproduced by the AO in the assessment order and which read as under : 1. The seized document handed over to me compromises of two pages-one on the letter head of Al India Shwetambar Jain Conference Mahila Shakha Karnataka which contains a summary of some receipts and payments and the other is a summary of receipts broken into three periods. The copies of same are enclosed herew .....

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y amount has been paid to me. 6. The document reflects the name as Suvaas Mantri which is not my name and in no way confirms that it is me who is alleged to have been given the amount. 7. Lastly, the document reflects the name in the period 01-07-2004 to 31-07-2004 which falls in the previous year relevant to A.Y. 2005-06. It is therefore apparent that, in any event, the reopening for the years other than A.Y. 2005-06 is without jurisdiction. 8. There is no scope for conjectures and surmises. Th .....

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Share Brokers Vs. DcIT (109 TTJ 700) Delhi c. Bhajan Das & Bros Vs. ACIT (123 TTJ 865) Agra (TM) d. Ashwani Kumar Vs. ITO (42 TTJ 644) Delhi e. N.K. Malhan Vs. DCIT (91 TTJ 938 Delhi 10. I therefore strongly disown any such transaction Under the circumstances, there is no merit in your proposing to make an addition of Rs.One Crore in my hands much less when it is not even known whether it is in the nature of income. Should you choose to take a different view even after this submission, I re .....

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ted that Dhariwal Industries through their C&F agent of RMD Gutkha group of Karnataka Region Shri Sohanraj Mehta has carried out unaccounted sale of Gutkha for the period April 2003 to August 2006 worth ₹ 345.85 crores and has distributed a part of such unaccounted sale proceeds to his friends who are into real estate business. In the seized document, it is clearly mentioned that the assessee Shri Suhas Mantri has received cash worth ₹ 1 crore in July 2004 for which no repayment .....

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has been deployed to Shri Suhas Mantri. However, the AO failed to provide any reason for treating such deployment as income which is chargeable to tax and has escaped assessment. It was argued that there was no tangible material before the AO on the basis of which he could form a reason to believe that income chargeable to tax has escaped assessment. It was argued that powers for reopening of assessment cannot be exercised for mere verification of the claim. Relying on various decisions it was s .....

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transaction with the said third party nor he has been allowed an opportunity of cross examination. It was further submitted that the transaction which is relevant for A.Y. 2005-06 cannot be taxed in the impugned assessment year. It was argued that the seized document which forms the basis for the addition does not mention whom they belong to, whether the money has been paid and on what account. It was argued that the said document does not bear the signature of the assessee as acknowledgement of .....

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e had actually received the said amount or that the assessee has entered into any transaction with Dhariwal Industries Group. The AO has merely assumed the amount reflected to be the income of the assessee which is not correct in view of the clear notings and admission of its author explaining each and every noting recorded on the seized documents. 7. However, the Ld.CIT(A) was not convinced with the arguments advanced by the assessee regarding validity of the reassessment proceedings and upheld .....

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eceived information from ACIT, Central Circle-1(2), Pune regarding certain entries in asessee s name found in the documents seized during the search action by the income-tax department on Shri Sohanraj Mehta, C&F Agent of RMD Gutkha group, therefore, the AO had prima-facie reasons to believe that income had escaped assessment. Therefore, there is no infirmity or illegality in the reassessment proceedings initiated by the AO. 8. The CIT(A) was also not satisfied with the explanation given by .....

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of ₹ 1 crore and such money could be deemed as his income u/s.69A if the same is not recorded on the books of account and there is no explanation about nature and source of acquisition of money. The name of the assessee is clearly mentioned although in the colloquial Marwadi language of the searched person and beside the name of the assessee, the place, i.e. Pune is mentioned. Further, the assessee is also one of the prominent persons of Pune. The date of handing over of the money is also .....

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a very detailed and minute notings of the transactions entered into by the Dhariwal group. 9. As regards the contention of assessee that no evidence has been found to show that the assessee has actually received such amount or that the assessee has entered into any transaction with Dhariwal group and that the addition has been made merely on assumptions is concerned, he noted that the Author of the document has clearly admitted and explained each and every noting recorded on the seized documents .....

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ough circumstantial evidences and preponderance of probabilities in this case namely, the ownership of the documents, the entire modus operandi regarding receipt in cash of the unaccounted sale proceeds which has been corroborated by the statement of the author of the seized documents which clearly points the fingers at the assessee. Distinguishing the various decisions cited before him the Ld.CIT(A) upheld the addition made by the AO u/s.69A of the I.T. Act. 10. However, since the documents sho .....

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A) has further erred in facts and in law in not providing a proper opportunity of hearing and thus violating the laws of natural justice. 3. The Ld.CIT(A) has erred in law and on facts in invoking the provisions of section 292C of the Income Tax Act, 1961 for a document not seized from the appellant s premises. 4. The Ld.CIT(A) has erred in law and on facts in confirming the addition of Rs. One crore u/s.69A of the Income Tax Act, 1961. 5. The Ld.CIT(A) has erred in law and on facts in issuing d .....

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the Bench to the reasons recorded. He submitted that there is no satisfaction of the AO that income has escaped assessment. Further, for the said ₹ 1 crore notice u/s.148 has been issued for A.Yrs. 2004-05 to 2006-07. Therefore, the AO is not sure for which assessment year the money has been deployed. Further, he is not saying that this is an income. Therefore, assumption of jurisdiction u/s.148 of the I.T. Act is not warranted. For the above proposition, the Ld. Counsel for the assessee .....

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irector of Income Tax (Investigation) to issue a notice u/s.148 and the third sentence again comprised a direction given by the Additional Commissioner of Income-tax to initiate proceedings u/s.148 in respect of cases pertaining to the relevant ward. The Assessing Officer referred to the information and the two directions as reasons on the basis of which he was proceeding to issue notice u/s.148. These could not be the reasons for proceeding u/s.147/148 of the Act. As the first part was only an .....

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bmitted that although the assessee had made various submissions during the course of assessment proceedings, however, the AO has not dealt with any of his objections. Neither the statement of Shri Sohanraj Mehta was provided to the assessee nor cross examination of the person was allowed. Referring to the decision of the Delhi Bench of the Tribunal in the case of Share Brokers Ltd. Vs. DCIT reported in 109 TTJ 700 he submitted that the Tribunal in the said decision has held that addition in bloc .....

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ound of appeal No.3 is concerned, the Ld. Counsel for the assessee drew the attention of the Bench to the provisions of section 292C and submitted that the CIT(A) has wrongly invoked the provisions of section 292C of the I.T. Act for a document not seized from the premises of the assessee. He submitted that it is only for the searched person that the said provision will be applicable and not to a third party like the assessee. 16. So far as ground of appeal No.4 is concerned, he submitted that h .....

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money, bullion, jewellery or other valuable article, or the explanation offered by him is not satisfactory according to the AO, such money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee for such financial year. However, in the instant case the assessee is not the owner. It is an entry in the books of another person. Therefore, the provisions of section 69A cannot be applied to the case of the assessee. 17. So far as the direction .....

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f third party with which the assessee had no business transactions and without any corroborative evidence was invalid. It has further been held that the presumption u/s.132(4A) is available only in respect of the person from whom the paper is seized. It could not be applied against a third party and hence no addition could be made on the basis of the evidence found with third party. It has been held that presumption u/s.132(4A) could be used only against the person from whose premises the docume .....

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CIT Vs. Ashok Kumar Vig 106 TTJ 422 5. Consolidated Doffee Ltd. Vs. ITO 155 ITR 729 6. Peico Electronics & Electricals & Electricals Ltd. Vs. DCIT & Others 210 ITR 991 18. The Ld. Departmental Representative on the other hand heavily relied on the order of the CIT(A). So far as the decision of the Tribunal in the case of Pradeep Amrutlal Runwal (Supra) is concerned he submitted that in the said decision there was no nexus between the assessee and Rasiklal M. Dhariwal. But here in the .....

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rise. There was specific information that some undisclosed transaction has taken place. The courts can always examine the existence of evidence. Adequacy of evidence is not required. However, since the addition was wrongly made in A.Y. 2004- 05 no injustice has been caused to the assessee. Therefore, the assessee should not have any grievance. He accordingly submitted that there is no infirmity in the order of the CIT(A). 20. We have considered the rival arguments made by both the sides, perused .....

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us explanations given by the assessee the AO made addition u/s.69A in the hands of the assessee. However, the Ld.CIT(A) while upholding the addition of ₹ 1 crore u/s.69A of the I.T. Act in principle, directed the AO to assess the same in A.Y. 2005-06 since the seized documents show that the amount has been paid to the assessee on 09-07-2004. We find an identical issue had come up before the Tribunal in the case of Shri Vinit Ranawat Vs. ACIT vide ITA Nos. 1005 and 1106/PN/2013 order dated .....

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onsidered the various decisions cited before us. We find in the instant case a search u/s.132 of the I.T. Act was conducted at the premises of Mr. Mittulal at Bangalore on 09-10-2009 wherein certain incriminating documents were found belonging to the Dhariwal group. Those documents were maintained by one Shri Sohan Raj Mehta, C&F agent of M/s. Dhariwal Industries Ltd. In his statement recorded u/s.132(4) Mr. Mehta had stated that he was effecting unaccounted sales of Gutkha of Dhariwal Indus .....

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Mehta in his statement recorded u/s.132(4) has stated that this amount was paid by Dhariwal Industries to Shri Vinit Ranawat through him, however, the statement appears to have been retracted as per the findings given by the Ahmedabad Bench of the Tribunal in the case of Mustafamiya H. Sheikh. 38. It is the case of the Assessing Officer that the assessee was associated with Dhariwal group for a long time and the assessee s name appearing in the seized document tally with the regular business ass .....

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e C&F business of M/s. Dhariwal Industries Ltd. He had categorically stated that page 34 of A/M/08 and other related documents were written by him and most of the pages were in Marwadi language. The statement of Mr. Mehta clearly explains the entire unaccounted business chain and unaccounted business transactions of M/s. Dhariwal Industries Ltd. Mr. Sohan Raj Mehta, the author of the seized document in his statement u/s.132(4) has explained true impact of the contents of the seized documents .....

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or the assessee that from the very beginning the assessee was denying to have received any such amount from Mr. Sohan Raj Mehta. According to him, no addition can be made in the hands of the assessee on the basis of papers found in the premises of third party. Further, the assessee being a small taxpayer, some evidence should have been found from the residence of the assessee to show that in fact he has received such huge amount. It is also the case of the Ld. Counsel for the assessee that the D .....

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of the Ld. Counsel for the assessee. The assessee in the instant case is an individual and proprietor of M/s. S. Chains which is engaged in the business of job work in gold ornaments. M/s. S.D.D. Agencies is the C&F Agent of M/s. Dhariwal Industries Ltd. in the State of Maharashtra for their Gutkha and Pan Masala business. A search and seizure action on the premises of Mr. Mittulal at Bangalore was carried on 09-10-2009 wherein documents maintained by Mr. Sohan Raj Mehta, C&F Agent of M .....

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essee recorded during the course of search u/s.132(4) are as under (paper book page 41 and 42) : Q.33 A search action u/s.132 was carried out on 0-10-2009 in the case of Shri Mittulal by Investigation Wing of Bangalore. In course of the search action certain incriminating documents related to Shri Sohanraj Mehta were found in connection with C&F agency of RMD Group of Pan Masala and Gutkha products. Shri Sohanraj Mehta was also covered by the Investigation Wing of Bangalore and on being conf .....

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r books of accounts. A.33 I have gone through the documents shown to me and say that I have never received this amount from Shri Sohanraj Mehta. Hence, the said payments are not reflected in my books of account. Q.34 A search action u/s.132 was carried out on 26-1-2010 in the case of Dhariwal group. In the course of statement recorded u/s.132(4) Shri Prakash Dhariwal has explicitly stated that the above referred payments have been made by Shri Sohanraj Mehta at the instruction of my father Shri .....

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ooks. Q.35 The statement of Shri Sohanraj Mehta recorded u/s.132(4) on 09- 10-2009 has been confirmed by Shri Prakash Dhariwal in the statement recorded u/s.132(4) on 20-01-2010. Thus, both Shri Sohanraj Mehta and Shri Prakash R. Dhariwal have stated on oath that payments in cash of ₹ 21.22 cr has been made to you at the direction of Shri Rasiklal Dhariwal by Shri Sohanraj Mehta. As the statements have been given by them on oath, you are therefore once again requested to go through the abo .....

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er to substantiate that the assessee has in fact received any amount either from Mr. Sohan Raj Mehta or from Mr/ Rasiklal Manikchand Dhariwal/Mr. Prakash M. Dhariwal or M/s. Dhariwal Industries Ltd. No unaccounted asset, investment or loose paper evidencing such huge receipt has been found. Further, we find from the query raised during the course of search that the authorised officer has treated the same as short term advance given to the assessee. Therefore, we find some force in the submission .....

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ra, Bangalore. Our firm M/s Mehta Associates is a sole C & F agent of the Company for their product RMD Gutka since 1994-95. I have very long business and personal association with Mr. Raskilal Manikchand Dhariwal. He considers me as close confident. As per the requirement of the Distributors, I place order for dispatch of Stock either with Mr. Prashant Bafna or Mr. Jeevan Sancheti, who are incharge of the Factory at Bangalore. To send a dispatch with bill or without bill is decided as per t .....

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y remit consideration for the Guntka stock received by them. Periodically, I send these Collections to Mr. Rasiklal or his son Mr. Prashant as per their instructions. 42. Similarly, in his answer to Question Nos. 33 and 34 he has replied as under : Q.33 I am showing you exhibit marked as A/M/29, seized from the residence of Mr. Mitulal, No. 219, 68th, Cross, 5th Block, Rajaji Nagar, Bangalore. Please go through these loose sheets serially numbered 1-61 and state the contents written over these l .....

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they do not write any name on the slip, I have to handover the money mentioned in the slip to the bearer of the slips. Most of the times, I may not know the person but still I make payment to them as I have standing instructions from Mr.Raskilal Manikchand Dhariwal and his son Mr. Prakash to handover the money to the bearer of the slip. The money is paid out of the collections received from the distributors towards unaccounted sales. Q. 34 Do you obtain any receipt from the parties to whom you h .....

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lal Manikchand Dhariwal in his statement recorded u/s.132(4) on 21-01-2010 in reply to Question No. 9, 11 and 12 has answered as under (page 124 of paper book filed by Ld. DR) : Q9. Similarly, I am showing you page No.34 of Bundle No.A/M/29 seized on 9/10/2009. Kindly go through the contents and please explain. Ans. This is a signed chit in my handwriting dt.20/2/2007 wherein I have instructed Shri Vinit Ranawat to hand over an amount of ₹ 500000- 00 (Five Lakhs). Q11. Similarly, I am show .....

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to hand over an amount of ₹ 50000-00 (Fifty Thousand). 45. From the above, it is seen that at one place the Department is treating the amount as short term advance by Mr. Rasiklal Manikchand Dhariwal to the assessee (Question No.34 to assessee u/s.132(4) on 20- 01-2010). Similarly, Mr. Rasiklal Manikchand Dhariwal in his reply to Question Nos. 9, 11 and 12 recorded u/s.132(4) of the I.T. Act has stated that he has instructed Mr. Vinit Ranawat to hand over the various amounts. Therefore, it .....

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one place as short term advance, therefore, the question of treating the same as income of the assessee does not arise. It is also an admitted fact that the papers were found with Mr. Sohan Raj Mehta at Bangalore. Therefore u/s.132(4A) they can be presumed to be true, genuine and correct only in the case of the searched person, i.e. Mr. Sohan Raj Mehta who has admitted that the papers belong to him. Therefore, we find force in the submission of the Ld. Counsel for the assessee that on the basis .....

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me-tax authorities sought to assessee certain income as income from undisclosed sources received by the assessee on the basis of statement by 2 persons that they had paid money in black to the assessee and entries in books belonging to them regarding alleged payment to the assessee. The Tribunal examined the statement made by the 2 persons and found that the evidence tendered by them suffered from serious infirmities. It held that mere entries in the accounts regarding payments to the assessee w .....

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ion of the Tribunal. Accordingly, the appeal filed by the Revenue was dismissed. 48. The Hon ble Supreme Court in the case of CBI Vs. Shri V. C. Shukla reported in 3 SCC 410 has observed as under : The rationale behind admissibility of parties' books of account as evidence is that the regularity of habit, the difficulty of falsification and the fair certainty of ultimate detection give them in a sufficient degree a probability of trustworthiness (wigmore on evidence $ 1546). Since, however, .....

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came up for consideration in Chandradhar vs. Gauhati Bank [1967 (1) S.C.R. 898]. That case arose out of a suit filed by Gauhati Bank against Chandradhar (the appellant therein ) for recovery of a loan of ₹ 40,000/-. IN defence he contended, inter alia, that no loan was taken. To substantiate their claim the Bank solely relied upon certified copy of the accounts maintained by them under Section 4 of the Bankers' Book Evidence Act, 1891 and contended that certified copies became prima f .....

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unt even if they were regularily kept in the corse of business in view of the clear language of Section 34 of the Act. This Court further observed that where the entries were not admitted it was the duty of the Bank, if it relied on such entries to charge any person with liability, to produce evidence in support of the entries to show that the money was advanced as indicated therein and thereafter the entries would be of use as corroborative evidence. The same question came up for consideration .....

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hat merely means that the plaintiff cannot obtain a decree by merely proving the existence of certain entries in his books of account even though those books are shown to be kept in the regular course of business. he will have to show further by some independent evidence that the entries represent real and honest transactions and that the moneys were paid in accordance with those entries. The legislature however does not require any particular form or kind of evidence in addition to entries in b .....

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honesty of those who kept them, such consideration could not alone with reference to s.34, Evidence Act, be the basis of a decree."(emphasis supplied) In Beni Vs. Bisan Dayal [ A. I. R 1925 Nagpur 445] it was observed tat entries in book s of account are not by themselves sufficient to charge any person with liability, the reason being that a man cannot be allowed to make evidence for himself by what he chooses to write in his own books behind the back of the parties. There must be independ .....

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e, said that the rule as laid down in Section 34 of the Act that entries in the books of account regularly kept in the course of business re relevant whenever they refer to a matter in which the court has to enquire was subject to the salient proviso that such entries shall not alone be sufficient evidence to charge any person with liability. It is not, therefore, enough merely to prove that the books have been regularly kept in the course of business and the entries therein are correct. It is f .....

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ordance with those entries. A conspectus of the above decisions makes it evident that even correct and authentic entries in books of account cannot without independent evidence of their trustworthiness, fix a liability upon a person. Keeping in view the above principles, even if we proceed on the assumption that the entries made in MR 71/91 are correct and the entries in the other books and loose sheets which we have already found to be not admissible in evidence under Section 34) are admissible .....

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of the payments as shown against them in MR 71/91, can at best be proof of reliability of the entries so far they are concerned and not others. In other words, the statements of the above witnesses cannot be independent evidence under Section 34 as against the above two respondents. So far as Shri Advani is concerned Section 34 would not come in aid of the prosecution for another reason also. According to the prosecution case itself his name finds place only in one of the loose sheets (sheet No. .....

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from the Investigation wing, Pune, the AO had noticed that Page 34 was a summary of the cash payment made by Shri Sohanraj Mehta for the period from April 2003 - August 2006 as per the direction of RMD Group. As per this version, an amount of ₹ 57.50 lakhs pertained to Shri Sheikh Mustafmiya Hussainmiya of Ahmedabad and page 47 was the monthly summary for the month of January - March 2004 of the unaccounted transaction carried out by Shri Sohanraj Mehta C & F of Karnataka Region of RMD .....

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scrutiny. 7.1. Admittedly, the whole proceedings were initiated on the strength of a statement of a third party (Shri Sohanraj Mehta). The purported seizure of slips, loose sheets etc. at the premises of a third party contained only the names, but, not other details such as their identity, addresses, contact numbers etc. On a perusal of the statement, it is clear that the payments made were to the persons whose names were appearing on the right side of the papers (sheets) which were paid to tho .....

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red from 01 to 58 to explain the contents, Shri Sohanraj Mehta answered thus - "Page 34 records receipt of Gutkha consignment from Dhariwal Industries Ltd., during April 2003 to Jan. 2006 totalling to ₹ 218,00,91,198/- (which is recorded on the left hand side of the page). On the right hand side of the page, parties to whom cash payments were made have been recorded, on instructions from Dhariwal Industries Ltd., The instructions were in the form of slips of paper and they contain the .....

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e character of income in the hands of those persons. 7.3. Moreover, according to the assessee, the searched person being a third party had retracted all the statements recorded during the search proceedings in the following words: "1. I referred my aforesaid statement recorded by Deputy Commissioner of Income-tax, Central Circle 2(2), Bangalore on 10.8.2011. 2. In this statement dated 10.8.2011 sense conveys that my detailed letter dt.23.12.2009 filed with the Asst. Director of Income-tax ( .....

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again state that all my statements recorded during the search proceedings on 10.9.2009 and my statement dated 10.8.2011 recorded at Bangalore before Deputy Commissioner of Income-tax, Central Circle 2(2), Bangalore is retracted un- conditionally by me, it being improper."[Refer: Pages 225 - 27 of the assessee's submission dt.12.12.2012]. 7.4. Thus, there is force in the assessee's contention that he should have been afforded an opportunity to cross-examine the third party [ Shri Sh .....

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The assessee was provided with the copy of the statement of Shri Sohanraj Mehta recorded by the ADIT (Inv), Pune, along with documents on which his statement was recorded. Due to paucity of time the cross examination could not be granted." 7.6. The CIT (A) had also turned down the assessee's request for crossexamination on the ground that - "(On page 53) 2.25................It has also been indicated, as borne out on records, that the appellant had asked for cross examination of th .....

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the appellant makes request for cross examination. There is no denying the fact that cross examination is an inalienable right of an agreed party but it is also true that there has to be a justifiable time frame in which such right can be exercised. It is as settled principle of law that rights and duties under a statute go hand in hand and cannot be exercised in isolation. The appellant truly had the right to cross examination but at the same time had the duty to ask for it within a reasonable .....

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grounds. 7.8. At this point of time, we shall analyze the judicial pronouncements on a similar issue, as under (PB -184): (i) the Hon'ble jurisdictional High Court in the case of DCIT v. Mahendra Ambalal Patel reported in (2010) 40 DTR (Guj) 243 had held as under: "From the findings recorded by the Tribunal it is apparent that though it is the case of Revenue that the land has been sold by the assessee to GC through MV, there is no material on record to indicate that the said land in f .....

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said persons would have no evidentiary value and as such, would not be admissible in evidence. Further, though the said MV has stated that he has paid ₹ 60 lakhs to the assessee on behalf of one GC, the said amount has not been taxed in the hands of GC. Moreover, no evidence has been adduced to indicate that any transaction in relation to the land in question has actually taken place. The Tribunal has rightly found that the basis for making the addition in the case of the assessee is merel .....

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i) During the course of hearing of a reference application of the Revenue in the case of DCIT (Asst) v. Prarthana Construction Pvt. Ltd [Tax Appeal No.79 of 2000 dated 25.3.2001] before the Hon'ble jurisdictional High Court, the learned Counsel for the assessee submitted that the documents in question have been found from the premises of a third party. The loose papers cannot be stated to be books of account in the light of the decision of the Supreme Court in the case of CBI v. V.C. Shukla .....

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n of law. It was, further, submitted on behalf of the assessee that the entire case of the revenue was based upon documents recovered during the course of search from the premises of third parties and the statements of the third parties and that the assessee was not granted an opportunity to cross examine the third parties and as such their statements have no evidentiary value. After due consideration of rival submissions and also taking into account the reliance placed by the assessee's cou .....

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the case of the revenue that the Tribunal has taken into consideration any irrelevant material or that any relevant material has been ignored. The conclusion arrived at by the Tribunal on the basis of the findings of fact recorded by it cannot in any manner be said to be unreasonable. In the aforesaid premises, the impugned order of the Tribunal being based upon findings of fact recorded by it upon appreciation of the evidence on record, which findings have not been dislodged by the revenue by p .....

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e following reasons: (i) that the learned AO had solely depended upon the information received from the Investigation Wing of Pune; (ii) that the AO had failed to substantiate the same with any credible documentary evidence to the effect that the assessee had indeed received the alleged cash payment of ₹ 57.5 lakhs from Shri Sohanraj Mehta as the assessee had categorically pleaded before the AO that he was making purchases through Ambika Distributors who were the C & F Agents for Gujar .....

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C.C. 1(1), Pune [Courtesy: P 231 - 238 of PB AR]; (iv) that once the alleged sum of ₹ 57.5 lakhs was subjected to tax in the hands of Dhariwal Industries Limited, the same cannot be subjected to suffer further tax. This view has been fairly conceded by the CIT (A) "(On page 54) 2.27.......The appellant is right to the extent that no income can be taxed twice......" (v) that the AO had candidly admitted that during the course of assessment proceeding itself the assessee had sought .....

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he assessee; & (vii) No reliance can be placed on the statements of a third person whose premises were subjected to a search since he had retracted his own statement made earlier on oath and precisely the assessee has been denied to cross-examine him to bring out the truth. 7.9.1 For the above said reasons, we hereby hold that the addition made for ₹ 57,50,000/- by the learned AO on account of undisclosed income, which was further sustained by the learned CIT(A) requires to be deleted .....

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ave considered the submissions of the learned DR. It is seen that the document in question was seized from the possession of one Mr. Sohanraj Mehta. The seized document makes a reference to the name of the assessee and a figure of ₹ 22.75 lakhs appears against his name. As to whether this document evidences payment of ₹ 22.75 lakhs to the assessee is a moot question. There is no basis set out in the order of the AO for coming to the conclusion that the seized document evidences recei .....

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ad taken the same stand. The details called for in the scrutiny assessment did not call for any specific details on the seized document or receipt of cash based on the seized document. 14. In the light of these circumstances, the CIT(Appeals) was justified in coming to the conclusion that no evidence has been brought on record to prove that the assessee received the sum of ₹ 22.75 lakhs from Sohanraj Mehta. The addition made by the AO was therefore rightly deleted by the CIT(A). We do not .....

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377; 50 lakhs in the name of Malik Kannauj. This entry was interpreted by the Revenue as this amount was given to Shri. Abdul Malik, MD of the assessee-company. On the basis of seized documents, the Assessing Officer has formed a belief in the assessee's case that the income chargeable to tax has escaped assessment, as this amount was not shown by the assessee in its books of account. Accordingly a notice under section 148 of the Income-tax Act, 1961 (hereinafter called in short "the Ac .....

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₹ 50 lakhks in the name of Malik Kannauj. Even in the statement of Shri. Sohanraj Gupta, there was no mention of the Director of the assessee-company, Shri. Abdul Malik. Therefore, the ld. CIT(A) came to the conclusion that in the absence of any evidence involving the assessee to the alleged receipt of ₹ 50 lakhs, reopening in the hands of the assessee under section 147 of the Act is not proper and he accordingly annulled the assessment. 4. Aggrieved the Revenue has preferred an app .....

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ebit entry of ₹ 50 lakhs in the name of Mlik Kannauj, but this entry does not indicate that the amount of ₹ 50 lakhs was given to the Managing Director of the assessee. There may be hundred of Malik in Kannauj but on the basis of this dumb document, the reopening of assessment in the hands of the assessee is not permissible. Moreover, the searched party has also examined Shri. Sohanraj Gupta and the statement is also placed on record and at nowhere Shri. Sohanraj Gupta has deposed ab .....

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nterpreted as Shri Abdul Malik, MD of the appellant company. In the statement given by Shri Sohanraj Gupta, there is no mention of any Malik. Further, in his statement under oath before the ADIT(lnv), Kanpur, Shri Abdul Malik, the M.D. of the appellant company had denied such transaction. In these circumstances, I fail to understand as to how, the A.O. formed the belief that the entry in the name of "Malik Kannauj" (as appearing in the seized document) referred to Shri 'Malik, M.D. .....

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rd), to same could not have been the basis for the A.O. to initiate the reassessment proceedings in the case of the appellant company. It is a trite law that the "reasons to believe" for reopening the case should be that of the A.O. alone and could not be formed at the dictates of others or on suspicion, conjectures or surmises. 5.1.7 In the instant case, in my considered view, the A.O. had no material before him which could link the said payment to the appellant company. The "rea .....

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I am fortified by the decisions of the Hon'ble Apex Court in fie case of CIT vs Daulat Ram Rawat Mull (87 ITR 349) wherein, it was held: 'there should, in our opinion, be some direct nexus between the conclusion of fact arrived at by the authority concerned and the primary facts upon which the conclusion is based. The use of extraneous and irrelevant material in arriving at that conclusion would vitiate the conclusion of facts.............................." In the result, the appea .....

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additions of ₹ 1,13,40,000/- made on account of alleged undisclosed income. I have carefully considered the rival submissions and perused the material on record. I have also gone through the order of the A.O. It was contended by the learned AR before me that mere jottings and notings should not be the basis for making any addition in the returned income, more particularly when A.O has not allowed the opportunity of Cross Examination of Mr. Shobhan Raj Mehta. The material provided/gathered .....

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egorically denied having any financial or business transaction with Shri. Shobhan Raj Mehta. A request was also made to provide complete statements on the basis of which addition was being contemplated by the assessing officer. However, the assessing officer did not provide the copies of those statements. During the course of assessment proceedings, the assessing officer did not throw any light on any inquiry/ investigation carried out by him that could justify the additions made by him. That as .....

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nship with M/s. Dhariwal Industries, Pune and not with the Shobhan Raj Mehta. Therefore, it is clear that the addition made by the Assessing Officer purely based on guess work without any evidence, therefore this addition deserves to be deleted. 7.1 From the facts enumerated above, it is clear that the assessing officer failed to establish any case against the appellant. Further inquiry/ investigation was required to be carried out on the information passed by the ADIT(Inv.)- III, Kanpur but evi .....

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wed to be cross-examined nor a copy of his statement was given despite several requests. The AO's contention to the effect that the contents of the statement were made known to the assessee, is not a compliance of mandatory requirement to provide the assessee incriminating material to defend its own case and therefore it can categorically be held that: (i) Statement of Shri Shobhan Raj Mehta was not given to the assessee. (ii) Beyond the belief of presumption on the information supplied by t .....

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From the above Para from the order of CIT(A), we find that a categorical finding has been given by him that statement of Shri Shobhan Raj Mehta was not given to the assessee and beyond the belief of presumption on the information supplied by the ADIT(Inv.)-III, Kanpur, further evidences are not found to corroborate the additions. He has also given a finding that Cross-examination of Shri Shobhan Raj Mehta was not allowed and the assessee firm had strongly denied having any financial and busines .....

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oned in the seized paper is the assessee. Without establishing this aspect that the name mentioned in the seized paper is that of the assessee, no addition can be made in the hands of the present assessee on the basis of such seized paper. Considering these facts, we do not find any reason to interfere in the order of CIT(A). 53. We find the Delhi Bench of the Tribunal in the case of M/s. Bhola Nath Radha Krishan (Supra) while deleting an identical issue has observed as under : 7. After consider .....

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ken place at the assessee's business premises as well as at the business premises of RMD Group. No evidence of any unrecorded sale by the assessee or unrecorded purchase by RMD Group was found. Thus, when, despite search at the premises of seller and buyer, no evidence of any unrecorded sale or purchase is found, in our opinion, merely because in the chits found at the premises of some third party with whom the assessee has no business dealing, it cannot be presumed that the assessee is maki .....

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n that the statement of Shri Sohan Raj Mehta cannot be relied upon because he is frequently retracting his statement. Moreover, a statement of a third party cannot be used against the assessee unless the assessee is allowed an opportunity to crossexamine him. Now, we find that during the assessment proceedings, the assessee specifically requested for allowing opportunity to cross-examine Shri Sohan Raj Mehta also and requested the Assessing Officer to supply the copy of retraction of his stateme .....

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Copy of receipts obtained from the assessee by Sh. Sohanraj Mehta on payment to the assessee, if any. The assessee has been provided statement of Sh.Sohan Raj Mehta. However, it is further submitted that the assessee should be given the opportunity to cross examine the genuineness of the statements of Sh. Sohan Raj Mehta and should be given reasonable opportunity to verify the claims made by him. In the case of Kishan Chand Chelaram (125 ITR) it has been held by the Hon'ble Supreme Court of .....

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. Sohan Raj Mehta's statement regarding decoding of figures is also not applicable on the assessee since this has no bearing or nexus of connection with the assessee firm or its business transaction. No addition or adverse decisions can be taken on the basis of surmises and/or conjectures. There has to be specific mention of M/s Bhola Nath Radha Kishan, 6377, Naya Bans, Kahri Baoli, New Delhi in order to link any payment to it from Mr. Sohan Raj Mehta or anybody else..........." (emphas .....

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ts, we entirely agree with the learned CIT(A) that the statement of Shri Sohan Raj Mehta cannot be used against the assessee and, similarly, the chits found from the third party, with which the assessee has no dealing, cannot be used against the assessee in the absence of any corroborative evidence. That merely because some excess stock was found in the survey for which separate addition has already been made, it cannot be further presumed that the assessee made sales outside the books, speciall .....

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er : 5. After going through the rival submissions and material on record, we find that the issue before us is regarding the addition of ₹ 5,10,00,000/-. As stated earlier, during the search proceedings in the case of Dhariwal Group, some loose papers were seized wherein certain amounts were written against the name of 'Pradeep Runwal'. Hence, the case of the assessee was reopened u/s 148 of the Income Tax Act. It was explained to the learned Assessing Officer that the assessee had .....

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wal Group through their staff. Hence, the assessee must have received the amount noted on the seized papers. The Assessing Officer has proceeded to make the addition of ₹ 5.10 crs. by stating that as per section 114 of the Indian Evidence Act, it is an accepted rule of evidence that if a person possessing an evidence does not produce it, the inference is that such evidence if produced is detrimental to him. Accordingly, the Assessing Officer held that the said receipts were the income of t .....

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TR 807(SC], Himmatram Laxminarain vs. CIT [(1986)161 ITR 7(P&H)], CIT vs. Ganapathi Mudaliar [(1964)53 ITR 623(SC)] and CIT vs. Lacchman Dass Oswal [(1980)126 ITR 446(P&H)]. 5.3 According to us, the additions made by the Assessing Officer were not justified in the facts and circumstances vis-à-vis of the assessee. As discussed earlier, during the course of search in the case of Dhariwal Group, the only documents found on the basis of which the addition u/s 69A has been made in the .....

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y documentary evidence to suggest the same, it could not be presumed that the amounts reflected in the loose papers were the income of the assessee received from Dhariwal Group. It has been the consistent stand of the assessee that there may be many persons of the name Pradeep Runwal in Pune and there was no specific evidence to suggest that the said notings pertained to the assessee. Hence, it was not justified as to how, in the absence of any other corroborative details, the Assessing Officer .....

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ce of any transaction between the assessee and Dhariwal Group and in the absence of any corroborative evidence to suggest that the assessee had actually received the said amount, no addition could be made merely on the basis of noting in loose papers found during the search proceedings in the case of Dhariwal Group against the name of the assessee. 5.4 The presumption u/s 132(4A) is available only in respect of the person from whom the paper is seized. It could not be applied against a third par .....

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it. In the case of ACIT Vs. Lata Mangeshkar (Miss) (1974) 97 ITR 696 (Bom), the addition was made in the hands of the assessee on the basis of the entries in the books of third persons. Hon'ble Bombay High Court held that such addition could not be made only on the basis of the notings in the books of third persons. The facts of the present case are covered by the decision of Lata Mangeshkar (supra). It is a settled legal position that the decision of jurisdictional High Court is binding on .....

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ficer has referred the aforesaid section which states that the court may presume that the evidence which could be and is not produced would, if produced be unfavourable to the person who withholds it. It is pertinent to mention this rule applies to the cases wherein it is evident or an established fact that a particular evidence or document was in possession of the assessee. For example, an owner of a land may well be expected to be in possession of a 7/12 extract of the said land in order to ch .....

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t is misplaced. 5.7 As stated above, it has been consistent stand of the assessee that the assessee has had no business relations whatsoever with the Dhariwal Group. Further, apart from the noting on paper with the name 'Pradeep Runwal, there is no corroborative evidence in this regard against the assessee. In such circumstances, where the assessee has not entered into any transaction with the Dhariwal Group, one certainly could not expect the assessee to be in possession of any evidence to .....

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s a presumption that the documents produced before the court as record of evidence are genuine. In this regard, the stand of the assessee is that in the case of assessee, document produced was merely in the form of a rough noting wherein certain amounts were written against the name 'Pradeep Runwal'. As discussed earlier, there may be many people of that name in Pune and in the absence of any other corroborative evidence to that effect. In such a situation, it cannot be inferred that it .....

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ng Officer are differentiable on facts and hence, the same are not applicable to the case of the assessee. In all the cases relied by the Assessing Officer, the fact that the assessee had actually earned income or received amounts by way of cash credits, unexplained investment etc. was not under dispute. The issue related to whether the receipts were received from genuine lenders or whether the investments or receipts were a part of the disclosed sources of income of the assessee. We find that i .....

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ssee appears on the seized papers and seized documents give a detailed and minute noting of the transactions of Dhariwal Group. He has stated that Shri Sohanraj Mehta has admitted that the documents were written by him and most of the papers were written in marwadi language. The CIT(A) referred to the fact that Shri Mehta had admitted that the papers belonged to Dhariwal Group. In para 4.3, the CIT(A) states that when the author of the paper has accepted the notings made by him, in that event, t .....

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irstly, he has relied upon the decision of ITAT Third Member in the case of Khopade Kisanrao Manikrao [74 ITD 25]. In this regard, the stand of assessee is that the decision in the case before Third Member was not applicable to the facts of the present case. In the said case, the assessee was searched and documents were found indicating on money received on sale of plots. On the basis of the documents found, the Assessing Officer estimated the income from on money which was held to be valid. In .....

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It was held that the document was found with the assessee and therefore, the A.O. was justified in making the addition. Even in this case, the issue of no addition can be made on the basis of documents found with third party was not raised. The CIT(A) has further referred to the decision of ITAT, Mumbai in the case of P. R. Patel Vs. DCIT [(2001) 78 ITD 51 (Mum)] for the proposition that seized papers cannot be called dumb paper because they indicate date, amount and calculation. There is no dis .....

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D 18 (PUNE)(TM)], In this case, the assessee was a builder and had sold flat to one Mr. Tanna. There was search on Mr. Tanna wherein a document was found indicating flat purchased from the assessee firm and the amount of cheque and cash paid. The amount of cheque paid was tallying with the books and therefore, it was held that cash was paid as noted on the paper. Mr. Tanna had also accepted the fact that cash was paid to the assessee. In these facts, ITAT held that since there was transaction be .....

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st that the payment was made to the assessee. Accordingly, considering the factual position, the decision in the case of Dhunjibhoy Stud and Agricultural Farm is not applicable in the case of assessee. 5.13 The CIT(A) has relied on the decision in the case of Vasantibai N. Shah Vs. CIT [(1995) 213 ITR 805 (Bom)]. In this case, the issue was regarding validity of reassessment proceedings. The assessee had made a false disclosure. Subsequently, the case was reopened. Hon'ble High Court held th .....

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#8377; 1750/- per cent while the Assessing Officer on the basis of evidences held that actually the lands were sold at ₹ 4,000/- per cent. Hon'ble High Court held that the additions made were correct. The said decision is not applicable to the facts of the present case. The CIT(A) has further relied upon the decision in the case of Chuharmal Vs. CIT [(1988) 172 ITR 250 (SC)] for the proposition that documentary evidence plays an important part. There is no dispute to the said propositi .....

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ment has to be treated as a dumb document as rightly observed by the CIT(A). The A.O. dismissed the retraction of the statement dated 29.03.2003 by filing an affidavit as an after thought and self serving. The A.O. concluded that the facts mentioned in the seized documents clearly indicated that the statement given on 29.03.2003 was true and correct. The A.O. has not brought on record any material or corroborative evidences to come to these conclusions. The reasons given by the A.O. in this rega .....

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umptions u/s 132(4A) of the Act on the ground that this section was very clear that the contents of book of account and other documents may be presumed to be true and presumption can be drawn even on the third person who was not searched u/s 132 of the Act. The A.O. further rejected the submissions given by the assessee in his paper book dated 28.12.2007 reiterating the same stand. The A.O. has drawn inferences and presupposes relying on surmises and conjectures. The ITAT Mumbai Bench in their d .....

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ly the presumption is in respect of the person from whom they were found. The use of the word "to such person" in the said Section means the person from whom the books of account or documents were found. Clause (ii) of Section 132 (4A) provides that the contents of such books of account or documents are true. This presumption can be applied only against the person from whose possession the books of account or the document were found. Therefore, the A.O. was not justified in applying th .....

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. In the absence of clinching evidence against the third person as stated above, no action could be taken against him. In such a situation, the Assessing Officer was not justified to make addition in question in assessee's case. In view of above, we are of the view that the addition made by the Assessing Officer is not justified and the same is directed to be deleted. It is pertinent to mention here that this case is being decided in its facts and circumstances; it cannot be applied to other .....

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and in view of our reasonings given earlier, we are of the considered opinion no addition in the hands of the assessee can be made. Since it is held that the assessee has not received any amount, therefore, the question of taxing the same u/s.56(2)(vi) as held by CIT(A) does not arise. In this view of the matter, we set aside the order of the CIT(A) and direct the Assessing Officer to delete the addition of ₹ 1 crore for A.Y. 2006-07 and ₹ 20 crores for A.Y. 2007-08. Grounds raised b .....

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e hold that addition u/s.69A is not warranted in the hands of the assessee either for A.Y. 2004-05 or for A.Y. 2005-06. In view of the above, we set aside the order of the CIT(A). 22. Since the assessee succeeds on merit the other grounds raised by the assessee being academic in nature are not being adjudicated. ITA No.916/PN/2014 (A.Y.2005-06) : 23. Grounds raised by the assessee are as under : 1. The Ld.CIT(A) erred on facts and in law in assuming the jurisdiction u/s.263 of the Income Tax Act .....

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rse of search in the case of Shri Sohanraj Mehta, C&F agent of RMD Gutkha Group which indicated deployment of ₹ 1 crores to Shri Sohanraj Mehta out of the unaccounted sale proceeds. The AO completed the assessment u/s.143(3) r.w.s. 147 on 17-12-2011 by observing as under : 3. The assessee s case was re-opened for A.Y. 2004-05, 2005-06, 2006-07 & 2007-08 on the basis of a seized document during the course of search action conducted by Investigation Wing of Bangalore in the case of S .....

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d that an amount of ₹ 1 crore had been deployed to the vendor Suvaas Mantri on 09-07-2004. However, assessment order dated 17-12-2011 for A.Y. 2005-06 witnesses no addition of an amount of ₹ 1 crore for the reason that the said amount had already been added to the total income of the assessee for A.Y. 2004-05. The AO has accepted the returned income for A.Y. 2005-06. Since the AO has failed to make any enquiry and made addition during the year despite the fact that the seized materia .....

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d for during the assessment proceedings were provided vide submission dated 23-11-2011. It was brought to the notice of the AO that the deployment of funds relates to the period 01-07-2004 to 31-07-2004 which falls in the previous year relevant to A.Y. 2005-06 and therefore the reopening for the other years is without jurisdiction. 26. The AO has in his wisdom after due consideration of the material produced before him brought the amount to tax in A.Y. 2004- 05 vide order passed on 17-12-2011, i .....

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not prejudicial to the interest of the revenue since the amount has already been brought to tax in the preceding assessment year. 27. However, the Ld.CIT was not satisfied with the explanation given by the assessee. He observed that the relevant date for deploying funds as per the seized paper was 09-07-2004 and therefore addition cannot be made in the A.Y. 2004-05 and has to be made in A.Y. 2005- 06. Further, the assessee has filed an appeal before the CIT(A) for A.Y. 2004-05 contending that t .....

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nterest of the revenue. He accordingly set aside the order of the AO and directed him to pass fresh order after reconsidering all aspects. 28. Aggrieved with such order of the CIT the assessee is in appeal before us. 29. The Ld. Counsel for the assessee strongly challenged the order of the CIT. He submitted that the observation of the CIT that no enquiry has been made by the AO is factually incorrect since the AO has applied his mind and taxed the amount of ₹ 1 crore u/s.69A in A.Y. 2004-0 .....

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be prejudice to the interest of the revenue since it has already been brought to tax in the preceding assessment year and therefore there cannot be any loss to the revenue. Referring to the decision of the Hon ble Bombay High Court in the case of Grasim Industries Ltd. Vs. CIT reported in 321 ITR 92 he submitted that the Hon ble High Court in the said decision held that when the AO takes a possible view while passing an order of assessment, the CIT cannot invoke jurisdiction u/s.263. Therefore, .....

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ted that the AO while passing the assessment order has not given any reason at all as to why he is making the addition in A.Y. 2004-05 instead of A.Y. 2005-06. Therefore, the order is erroneous as well as prejudicial to the interest of the revenue. The AO in the instant case has omitted to make proper application of mind. Even the CIT(A) has also held that the income pertains to A.Y. 2005-06. Therefore, the order of the CIT invoking jurisdiction u/s.263 is justified. 31. We have considered the r .....

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