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2015 (11) TMI 187 - ITAT PUNE

2015 (11) TMI 187 - ITAT PUNE - TMI - Addition u/s.69A - reopening of assessment - assessmet u/s 153A - search initiation - Held that:- As decided in Shri Vinit Ranawat Vs. ACIT [2015 (6) TMI 608 - ITAT PUNE] 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. In this case, the addition has been made on the basis of .....

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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 all authorities below it. Thus, the reliance placed by the Assessing Officer on the loose papers is not justified at all. Therefore, the question of making any addition is not justified in the absence of other corroborative evidence to that effect.

The assessee from the very beginning has denied to have receiv .....

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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

In the present case no corroborative evidence whatsoever was found or brought on record to show that the assessee has infact received the money. Neither the statement of Shri Sohanraj Mehta was given to the assessee nor the request of the assessee .....

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espectively. Since identical grounds have been taken by the assessee in both these appeals, therefore, these appeals were heard together and are being disposed by this common order. 3. First we take up ITA No.725/PN/2013 for A.Y. 2004-05. Facts of the case, in brief, are that the assessee is an individual and is engaged in the business of Real-estate broker. The assessee filed his return of income on 13-01-2005 declaring total income of ₹ 60,17,530/-. The assessment u/s.143(3) was complete .....

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ned the income at ₹ 65,21,100/-. Subsequently, the investigation wing Bangalore forwarded certain incriminating documents seized during the course of search u/s.132 in the case of Sri Sohanraj Mehta, C&F Agent of RMD Gutkha group Bangalore indicating that the assessee has received an amount of ₹ 2 crores from Shri Sohanraj Mehta. 5. Based on the incriminating documents the assessment for A.Y. 2004-05 was reopened by the AO after recording the following reasons: There was search a .....

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gust 2006. The left hand side of this paper has the details of sales & the right hand side of this paper has the details of payments made out of sale proceeds. As per this paper, an amount of ₹ 4.50 crores was paid to Shri Kantilal Lunkad. Page No.41 & 42 of Annexure A/M/8 gives similar details for some of the amounts in F.Y. 2003-04. According to which, there is a payment of ₹ 1 crores during the month of July 2003 & there is a payment of ₹ 1 crores during the mont .....

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of Annexure A/M/S (Rs. 2 crs + ₹ 2.50 crs, i.e. total ₹ 4.50 crs.) 2. The assessment for A.Y. 2004-05 has been completed u/s.143(3) r.w.s.153C of the I.T. Act. On 31-12-2008. The above mentioned receipt of ₹ 2 crores for F.Y. 2003-04 in not accounted for in the books of accounts of the assessee. I have, therefore, reason to believe that income of ₹ 2 crores has escaped assessment in this year on account of failure of the assessee to disclose fully and truly all material .....

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on 15-12-2011 which was disposed of by the AO by passing a speaking order on 23-12-2011. While disposing of the objections to such reopening, the AO had discussed the brief facts of the case, according to which during the course of search action u/s.132 of the I.T. Act on the business and residential premises of Shri Sohanraj Mehta C&F Agent of RMD Gutkha group, Pune, the paper identified as page 34 of annexure A/M/08 on the letter head of India Swetambar Sthanakwasi Jain Conference Mahila S .....

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ding to which there is payment of ₹ 1 crore during the month of July 2003 and there is a payment of ₹ 1 crore during the month of November 2003, thus the total payment to assessee during F.Y. 2003-04 is ₹ 2 crores. 7. Similarly page 45 of Annexure A/M/08 gives the details for some of the months for F.Y. 2004-05. According to this paper there is payment of ₹ 50 lakhs to the assessee in July 2004 and ₹ 2 crores in the month of August 2004 making a total of ₹ 2.5 .....

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urse of search action on Shri Sohanraj Mehta is not in the hand writing of the assessee and therefore the same cannot be used as evidence against the assessee for reopening the assessment. It was submitted that in the seized documents the name similar to the name of the assessee is appearing without the address or the name of the city except at one place the place of Pune has been written and therefore the presumption that Shri Sohanraj similarly of the name is not correct. 8. It was submitted t .....

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eeds of RMD Gutkha by Shri Sohanraj Mehta. Therefore, the addition of the said sum of ₹ 2.18 crores must have been offered in the hands of Shri Sohanraj Mehta or any assessee of the RMD group. Since the source is taxed, the payment out of the same cannot be taxed. It was further submitted that mere receipt of the money cannot be treated as income. The assessee also asked for the statement of Shri Sohanraj Mehta and asked for opportunity to cross examine Shri Sohanraj Mehta. 9. However, the .....

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nkad 4. M/s. D.P. Dhariwal 5. Shri Prakash R. Dhariwal 6. Shri Rasiklal M. Dhariwal 10. Further assessee Shri Kantilal Lunkad was a wellknown dealer and developer in Pune city and very close associate of Rasiklal M. Dhariwal. Both Dhariwal and Lunkad have business and personal relationship. He observed that Mr.Dhariwal and the assessee are Swetambar Jains and are very active in the association of Jains who are the founder members of the JITO (Jain International Trade Organisation). Therefore, th .....

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ed in such documents. Therefore, he held that the person mentioned as kantilal Lunkad, Pune, Kantilal Lunkadji, Lunkadji, Pune are one and the same. 11. As regards the contention of the assessee that the documents in question are neither in the handwriting of the assessee nor acknowledgement was signed by the assessee, the AO observed that if a document contains details of transactions relating to the assessee along with date and amount, the burden of proof lies on the assessee. The assessee, th .....

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e income of the RMD group the AO held that the same cannot be commented upon as they are not assessed under him. So far as the contention of the assessee that mere receipt of money cannot be treated as income, the AO observed that every money received by the assesse during the year has to be disclosed to the income-tax department along with source of receipt whether it is taxable or not. Since the assessee has not disclosed to the department that he has received the above sum of money in the res .....

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r the A.Y. 2004-05. He further observed that Shri Sohanraj Mehta in his statement recorded u/s.132 on 09-10-2009 in response to question No.23 had confirmed the payments made of the abovementioned amount to different persons mentioned in the seized documents. The AO, therefore, made addition of ₹ 2 crores to the total income of the assessee u/s.69A as unexplained money. Similar addition of ₹ 2.50 crores made in A.Y. 2005-06. 13. Before CIT(A) the assessee challenged the validity of t .....

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urse of search action conducted on Shri Sohanraj Mehta. In case of search action if documents relating to the person other than the searched person are found the same are handed over to the AO having jurisdiction over such other person and the assessment of income of such other person must be completed u/s.153C. However, instead of doing that the AO has initiated proceedings u/s.148. Therefore, the AO has not correctly followed the procedure as per law. Further, the assessments have been reopene .....

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s were noted against the name of the assessee. Apart from this no evidence was found to show that the assessee had actually received the said amount or that the assessee had entered into any transaction with the Dhariwal group. It was contended that there was no business relation with Dhariwal group and therefore in absence of any documentary evidence to show the same it would not be presumed that the amounts reflected in the loose papers were the income of the assessee from the Dhariwal group. .....

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f Shri Sohanraj Mehta. The assessee further submitted that even if it is assumed that Shri Sohanraj Mehta has given the amount under consideration to the assessee the same cannot become income in the hands of the assessee. The ownership of such amount is not proved by the AO. The burden lies on the department to show that any amount which it seeks to tax is the income in the hands of the assessee. Relying on various decisions, it was argued that addition u/s.69A can be made only if the condition .....

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e same holding that the AO has validly issued notice u/s.148 beyond 4 years on the basis of information in his possession. The AO had sufficient material from which he could form the belief that the income had escaped assessment and the belief of the AO was held in good faith. Further, the AO had recorded reasons showing due application of mind before taking recourse to reassessment proceedings. Further, the assesse s case had already been assessed twice, i.e. once u/s.143(3) and thereafter u/s. .....

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money to the persons whose names are appearing on the said documents. The name of the assessee also appears on the said document. It gives very detailed and minute notings of the transactions entered into by the Dhariwal group through its business line of M/s. Dhariwal Industries Ltd. Further Shri Sohanraj Mehta in his statement recorded u/s.132(4) has admitted to have paid unaccounted money to various persons named in the seized documents. The assessee and the Dhariwal group are known and repu .....

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ection with the business was also written and also admitted that the money so received had been sent to his Seth from time to time and the money was handed over to the persons as per the directions of Shri Rasiklal M. Dhariwal and his Son Shri Prakash Dhariwal whom he referred to as Seth . According to the Ld.CIT(A) the contents found on the seized documents and papers where the assessee s name appear raised a presumption of legality of documents found and that would mean that they cannot be ign .....

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e assessee has actually received the said amount or that the assessee has entered into any transaction with the Dhariwal group and that the AO has assumed the amounts reflected in the year as the income of the assessee is concerned the Ld.CIT(A) held that in view of the clear notings and admission of its author explaining each and every noting recorded on the seized document and explaining the modus operandi of the business and the manner in which the amounts were given to the persons including .....

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of income is taken up on the basis of documents seized in the search action under section 132 of the Income Tax Act 1961 on Mr Sohanraj Mehta, Bangalore. Seized documents have been handed over to the AO of the appellant. Therefore, the assessment of income ought to have been completed under section 153C of the I. T. Act. On the facts and in the circumstances of the case and in law the CIT(A) erred confirming the order passed by the Learned AO under section 143(3) read with section 147 of the I. .....

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sment by the learned AO under section 147 of the I. T. Act beyond the expiry of 4 years of assessment year under consideration. The order passed under section 143(3) read with section 147 is without the jurisdiction, illegal and is bad in law and is void ab-initio. The appellant hereby prays that the assessment order may please be quashed. 3) On the facts and in the circumstances of the case the honourable CIT(A) erred In confirming the addition of ₹ 2,00,00,000/- made by the learned AO wi .....

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mstances of the case the honourable CIT(A) erred in confirming addition of ₹ 2,00,00,000/- made by the learned AO under section 69A of the Income Tax Act as "unexplained money" without appreciating the fact that the appellant is not found to be owner of money, bullion, jewellery, etc.. The appellant hereby prays that the addition may please be deleted. 6. On the facts and in the circumstances of the case the honourable CIT(A) erred in assuming the ownership of the amount under co .....

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g the validity of the reassessment proceedings for which the Ld. Departmental Representative has no objection. Accordingly, the above 2 grounds are dismissed as not pressed . 20. So far as ground of appeal No.3 to 6 are concerned they relate to the addition of ₹ 2 crores u/s.69A of the I.T. Act. The Ld. Counsel for the assessee at the outset submitted that addition has been made on the basis of documents found during the course of search in the premises of Shri Sohanraj Mehta, C&F Agen .....

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l case in the case of Shri Vinit Ranawat Vs. ACIT vide ITA No. 1105 and 1106/PN/2013 order dated 12-06-2015. In the said case also additions were made based on the seized documents found during the course of search from the residential and business premises of Shri Sohanraj Mehta, C&F Agent of RMD Gutkha group. The CIT(A) deleted the addition and on further appeal by the revenue the Tribunal dismissed the appeal filed by the Revenue relying on decisions of various benches of the Tribunal whe .....

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sessee for the impugned assessment year and therefore the assessee cannot say that he has not received the money. The assessee has not proved beyond doubt that the entry so recorded is false or untrue. Since the assessee is closely associated with the Dhariwal group and the seized paper contains the payment of ₹ 2 crores to the asessee and since the author of the document has admitted to have made payments to various persons mentioned in the seized document at the instruction of his Seth, .....

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assessee be allowed. 23. We have considered the rival arguments made by both the sides, perused the orders of the AO and CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find during the course of search in the residential cum business premises of Shri Sohanraj Mehta, C&F Agent of RMD Gutkha group at Bangalore certain documents were seized viz., page 34, 41, 42 and 45 which recorded the summary of the unaccounted sal .....

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the assessee. We find the Ld.CIT(A) upheld the addition made by the AO. 24. It is the submission of the Ld. Counsel for the assessee that the addition was based solely on the notings made on the seized documents found from the premises of Shri Sohanraj Mehta. No corroborative evidence whatsoever was found or brought on record to show that the assessee has infact received the money. Neither the statement of Shri Sohanraj Mehta was given to the assessee nor the request of the assessee to cross ex .....

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rused the orders of the Assessing Officer and the CIT(A) and the Paper Book filed on behalf of the assessee. We have also considered 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 .....

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crore for A.Y. 2006-07 and ₹ 20 crores for A.Y. 2007-08 as received by the assessee Shri Vinit Ranawat. Although Mr. 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 .....

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ed that the seized books of account, loose sheets and other documents, i.e. A/M/01 and A/M/29 were actually belonging to the 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 .....

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08 as undisclosed income of the assessee which has been upheld by the CIT(A). 39. It is the submission of the Ld. Counsel for 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 assesse .....

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ng Officer on the basis of notings found from the premises of Mr. Sohan Raj Mehta. 40. We find some force in the submission 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 .....

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ch had completely denied to have received any such amount from Mr. Sohan Raj Mehta. Relevant Question and answer of the assessee 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 Pa .....

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te whether the said cash of ₹ 21.22 cr received from Shri Sohanraj Mehta on account of RMD group are reflected in your 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 exp .....

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owever, I have never recorded the amount mentioned from Shri Sohanraj Mehta hence the said payment are not recorded in my books. 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 Soha .....

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here that the search party during the course of search at the premises of the assessee has not found any evidence whatsoever 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 authorise .....

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Please state how these transactions are unaccounted? Ans: M/s Dhariwal Industries Ltd has a manufacturing unit in Singsandra, 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. Jeev .....

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despatches and also for the collections from our customers; Normally, we extend credit of 7-10 days to our customers. They 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 .....

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contain their directions to me to handover the amount mentioned in the slip to the person who brings the slip. Sometimes, 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 collection .....

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Mr. Sohan Raj Mehta was not granted on the ground that the same will not serve any purpose. 44. We further find Mr. Rasiklal 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 .....

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contents and please explain. Ans. This is a signed chit in my handwriting wherein I have instructed Shri Vinit Ranawat 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 .....

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uses in the agreement could not be considered separately. Therefore, when the Department itself is treating the same at 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 .....

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s there was no guarantee that the entries were genuine in absence of any corroborative evidence. In that case, the income-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 .....

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idence. This was finding of fact by the Tribunal and no question of law arose and no reference would lie from the decision 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 det .....

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cient to charge any person with liability. The probative value of the liability created by an entry in books of account 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 maintaine .....

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m from the Bank, the Bank had to prove that fact of such payment and could not rely on mere entries in the books of account 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 th .....

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rse of business are relevant, but such a statement will not alone e be sufficient to charge any person with liability. That 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 entires represent real and honest transactions and that the moneys were paid in accordance with tho .....

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however strongly those accounts may be supported by the probabilities, and however strong may be the evidence as to the 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 .....

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ary course of business and that, therefore, all entries therein should be considered to be relevant and to have been prove, 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 merel .....

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her by some independent evidence that the entries represent honest and real transactions and that monies were paid in accordance 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 o .....

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Mr. Altaf Ahmed in this regard. Suffice it to say that the statements of the four witnesses, who have admitted receipts 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 anot .....

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n the case of Shri Mustafamiya H. Sheikh (Supra) has observed as under: 7. On a perusal of the seized materials received 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 Ja .....

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een subsequently sustained by the learned CIT (A) for the detailed reasons recorded in his appellate order which is under 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 pay .....

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ge 99 of PB AR]. To a question No.14 Exhibit A/M/8/dated 9.10.2009 which contained a bunch of loose sheets serially numbered 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 .....

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g that the receipt of such amount was merely a collection for on behalf of the company and such amount cannot par take the 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 st .....

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o convey to the Income-tax Department at that point of time. 4. With my this letter specifically addressed to you, I once 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 .....

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................................. Comments of the AO: (ii) Opportunity of cross examination of Shri Sohanraj Mehta: '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.... .....

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party from distant Bangalore and afford the facility of cross examination during a short period of just 12 working days, 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. T .....

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d party on the basis of whose statement the impugned addition sought to be added to his income, has been denied on flimsy 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 th .....

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statements of the said persons as the assessee had no opportunity to cross-examine them. The statements made by the aforesaid 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 actuall .....

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record, it cannot be stated that the impugned order of the Tribunal suffers from any legal infirmity............" (ii) 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 can .....

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nd as such, the order of the Tribunal being based upon findings of fact recorded by it, does not give rise to any question 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 .....

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revenue nothing is pointed out to show that the findings recorded by the Tribunal are in any manner perverse, nor is it 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 fa .....

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(A) was not justified in sustaining the addition of ₹ 57.5 lakhs made by the AO in the hands of the assessee for the 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 categorical .....

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mited and concluded the assessment for the AY 2004-05 u/s 153A r.w.s. 143 (3) of the Act, dated 29.12.2011 by the ACIT, 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......&qu .....

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on a statement of a third party, without bringing any credible documentary evidence to the contrary on record to nail the 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 th .....

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ouli (Supra) had also an occasion to decide an identical issue and deleted the addition by observing as under : 13. We have 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 .....

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ng received any payment from Sohanraj Mehta. Even in the proceedings before the AO, when the assessee was examined, he had 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 S .....

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nraj Mehta, C&F of RMD Gutkha group in Bangalore, statement of account was seized in which there was an entry of ₹ 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 .....

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ssesseecompany was found during the course of search. Only dumb documents were found in which there was a debit entry of ₹ 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 sectio .....

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y answer was furnished by the ld. D.R. We have also carefully perused the seized documents and we find that there is a debit 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 exa .....

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t there is no clue as to how the identity of "MALIK Kannauj" as appearing in the seized document (supra) was interpreted 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 th .....

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seized document) to one "Malik Kannauj" related to the Appellant company (without any supporting in this regard), 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 consid .....

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o such illegality cannot be sustained. Thus, the whole asstt. framed u/s 147 is hereby annulled, While taking this view, 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 arrivi .....

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hich is reproduced below for the sake of ready reference:- 7. That vide grounds No. 3 to 7, assessee has challenged the 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 .....

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e submissions of the appellant are considered. On examination of the assessment record it is seen that the appellant categorically denied having any financial or business transaction with Sh.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 t .....

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and this was found verified from the assessee's books of A/c. It is clear that the assessee has business relationship 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 i .....

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. Learned counsel for the assessee, on the other hand, contends that neither the said Shri Shobhan Raj Mehta was allowed 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 Sho .....

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idence, was unjustified and accordingly deleted. Accordingly, ground No. 3 to 7 raised by appellant are allowed. 5.1 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 .....

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s not having any direct transaction, it cannot be said that the said Pawan Kumar Agarwal, of whom the name was mentioned 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 .....

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are manufacturing Gutkha. Shri Sohan Raj Mehta is C&F agent for Karnataka region of RMD Group. The search had taken 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 .....

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racted his retraction affirming the original statement. On these facts, the learned CIT(A) has come to the conclusion 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 cross-examine him. Now, we find that during the assessment proceedings, the assessee specifically requested for allowing opportunity to cross- .....

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the assessee. (c) Copy of subsequent retraction of the statements made at the time of search operation, if any. (d) 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 cla .....

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r in the said statement. The assessee cannot be held liable for any act of the omission or commission done by him. Mr. 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 .....

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he has mentioned that Shri Sohan Raj Mehta has retracted his retraction also. Considering the totality of above facts, 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 ad .....

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l Runwal reported in 149 ITR 548 while deleting addition under identical facts and circumstances has observed as under : 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 .....

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ot disown the existence of such documents. The Assessing Officer observed that the money has been passed on by Dhariwal 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 .....

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ed reliance on the decisions of Sumati Dayal vs. CIT [(1995) 214 ITR 801(SC)], CIT vs. Durga Prasad More [(1969)72 ITR 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 .....

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on record to suggest that the assessee has previous business relations with the Dhariwal Group. In the absence of any 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 assess .....

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an that the addition could be made in the hands of the assessee. Since no evidence was found relating to the existence 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) i .....

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he presumption u/s. 132(4A) could not be used against the assessee since no incriminating documents were found with 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 L .....

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ing the additions by relying on the provisions of section 114 of the Indian Evidence Act. The concerned Assessing Officer 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 ex .....

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Assessing Officer to establish the same. The reliance placed on the provisions of section 114 of Indian Evidence Act 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 tran .....

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making the addition by relying on the provisions of section 80 of the Indian Evidence Act which states that there is 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 .....

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0)126 ITR 446(P&H)]. In this regard, the stand of the assessee has been that the case laws relied by the Assessing 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 o .....

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hable on facts and hence, not applicable to the case of the assessee. 5.10 According to CIT(A), the name of the assessee 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 .....

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Assessing Officer, has been held by CIT(A). He has referred to various decisions in support of the addition made. Firstly, 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 ba .....

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In the said case, the assessee was searched and documents were found indicating on money received by the assessee. 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 propositio .....

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r relied upon ITAT Third Member decision in the case of Dhunjibhoy Stud and Agricultural Farm Vs. DCIT [(2002) 82 ITD 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 .....

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ssee had received any amount. The Assessing Officer and CIT(A) have also not brought on record any evidence to suggest 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 procee .....

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was engaged in real estate business and it had sold certain plots. The assessee stated that the plots were sold at ₹ 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 (S .....

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were correct and true. Thus, in the absence of any corroborative evidence in the present case, the said seized document 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 rec .....

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was not justified in rejecting the contents of the affidavit as mentioned above. The A.O. further relied on the presumptions 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. .....

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y person in the course of the search, it is to be presumed that they belong to " such person". Thus, clearly 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 wh .....

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A) is available only against the person from whose possession the document is found and not against the third person. 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 per .....

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ng with M/s. Dhariwal group in his individual capacity, therefore, respectfully following the decisions cited above 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 .....

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