TMI Blog2015 (11) TMI 402X X X X Extracts X X X X X X X X Extracts X X X X ..... s and circumstances, where it is not established that name PC Jain of Mumbai written in the said document was in fact the assessee before us and in the absence of any evidence having been found to establish that the assessee before us has received the said amounts from Shri Sohan Raj Mehta on account of M/s. DIL group, we find no merit in the aforesaid addition made in the hands of the assessee. In view thereof, we set-aside the order of CIT(A) and direct the Assessing Officer to delete the addition of ₹ 1.76 crores in assessment year 2004- 05. In view of our deleting the said addition in the hands of the assessee, there is no merit in estimating any gross profit on such undisclosed receipts. Accordingly, the main objections raised by the assessee are allowed and the ground of appeal raised on alternate base is dismissed. The grounds of appeal raised by the Revenue are also dismissed. - Decided in favour of assessee. - ITA Nos. 1325 to 1329/PN/2013, ITA Nos. 1350 to 1354/PN/2013 - - - Dated:- 16-9-2015 - Ms. Sushma Chowla, JM And Shri Pradip Kumar Kedia, AM For the Petitioner : Shri Naresh Jain and Jatin Kumar Jain For the Respondent : Shri Sashi Bhushan Prasa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lled as trader and in case of trading activity, the profit is very low just 2% of turnover. 2.4 That Ld. CIT(A) failed to appreciate that even section 44AD which talks about presumptive taxation only @ 8% of the gross receipts is considered as G.P. 2.5 That Ld. CIT(A) has grossly erred in talking gross profit rate instead of Net profit rate. 3. The appellant craves leaves to add, to alter or to delete any of the above grounds of appeal if necessary. 5. The Revenue in ITA No. 1350/PN/2013 has raised the following grounds of appeal :- 1) On the facts and in the circumstances of the case, the ld. CIT(A) has erred in taking the G.P. @ 35% of unaccounted cash received by assessee. 2) The order of the CIT(A) may be vacated and that of the Assessing Officer be restored. 3) The appellant craves leave to add, alter, amend and modify any of the above grounds of appeal. 6. Briefly, in the facts of the present case, search and seizure action under section 132 of the Act was conducted on Rasiklal M Dhariwal (RMD) group of cases on 20.01.2010. The assessee was also searched under section 132(1) of the Act. Consequent thereto, notice under section 153A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ost-search enquiries and enquiries during the assessment proceeding, it was established beyond doubt that the above mentioned documents seized from Bangalore were actual details of unaccounted sales of Gutka, which M/s. DIL had carried out through Shri Sohan Raj Mehta and who in turn, had maintained the details of those unaccounted sales, unaccounted sale proceeds generated in cash and the utilization of the said cash generated. He also admitted to have earned commission on this unaccounted sale of Gutka effected by him on behalf of M/s. DIL and has offered the said commission income to tax in the relevant years. The Assessing Officer thus, show caused the assessee that the documents found and seized at Bangalore were not dumb documents and were authentic accounts of cash generation and deployment of cash generated of unaccounted sale proceeds of ₹ 345.75 crores. In view thereof, the income arising out of unaccounted sale transaction of ₹ 345.75 crores was being taxed in the hands of M/s. DIL for respective years and the payment of ₹ 26.91 crores reflected as cash paid by M/s. DIL to the assessee for supply of unaccounted raw materials and the same proposed to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sactions. Reliance in this regard was placed on series of decisions with lead decision in Addl.C.I.T. Vs. Miss Lata Mangeshkar reported in 74 ITR 696 (Bom). In the end, without prejudice and without admitting the show cause notice, the assessee stated that in case suppressed sales are detected, the entire sales could not be taken as income and only reasonable net profit should be applied on suppressed sales. 7. The Assessing Officer rejected the submissions made by the assessee at the outset since evidence was seized during the course of search under section 132 of the Act, which as per the Assessing Officer was speaking evidence and proved beyond reasonable doubt, that the entire unaccounted business chain of it regarding unaccounted purchases, unaccounted manufacture, unaccounted packing, unaccounted printing, clandestine removal of goods, unaccounted sales and utilization of sale proceeds. The Assessing Officer also noted that on the basis of said evidence, an addition of ₹ 205.70 crores had been made in the case of M/s. DIL for assessment years 2004-05 to 2008-09. The relevant extract of the assessment order passed under section 143(3) r.w.s. 153A of the Act is reprodu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r words, it follows from well settled principles of law that normally, unless contrary is established, title always follows possession. Chuharmal Vs. CIT (1998) 172 ITR 250 (SC). Documentary evidence plays an important part in law. The Courts attach great value for documentary evidence. The Punjab Haryana High Court in the case of Paramjit Singh Vs ITO (2010) 323 ITR 588 (P H) pointed out that oral evidence is not conclusive as against documentary evidence under sections 91 and 92 of the Indian Evidence Act, 1872. 9. The CIT(A) further referred to the objections of the assessee of not supplying the statement of Shri Sohan Raj Mehta recorded under section 132(4) of the Act, on the basis of which, the addition on account of undisclosed income was made nor grant of an opportunity to cross-examine the same being against the principles of natural justice and also the retraction by Shri Sohan Raj Mehta at a later date and held that where the findings and the statement had already been confronted to the assessee, and also the seized documents which form the basis for addition was also provided and appropriate opportunity was given to the assessee, it could not be said that the Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncluding the appellant. The fact that has been established is that the appellant is in receipt of unaccounted sale proceeds during the year for the supply of raw material in the form of edible perfume, attar etc. I find it difficult in the given facts and circumstances, to accept the arguments of the appellant that no addition on account of the unaccounted income earned on unaccounted sales of edible perfume could be made. Therefore, I hold that entries related to the appellant would lead to addition of undisclosed income in the hands of the appellant and the grounds of appeal no. 1 and 2 raised by the appellant are, therefore, liable to be dismissed for all the years under consideration. 10. The CIT(A) thereafter, adjudicated the issue raised by the assessee without prejudice that at best net profit could be added in the hands of the assessee. The CIT(A) was of the view that only net rate of profit can be applied in respect of goods sold outside the books of account and the taxing of the entire receipt by the Assessing Officer was not proper and correct. However, the CIT(A) was of the view that estimation of gross profit rate at a higher level is to be taxed in the hands of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd. The learned Authorized Representative for the assessee further referred to the letter filed at page 72 of the Paper Book, under which Shri Sohan Raj Mehta had retracted his earlier statement and had also stated that he was ready to come to Pune to take part in the proceedings. The learned Authorized Representative for the assessee further pointed out that similar issue of addition on account of such entries in the seized documents found from the possession of Shri Sohan Raj Mehta, arose before various Benches of Tribunal, wherein consistent view has been taken that no addition is warranted on the basis of such documents. The learned Authorized Representative for the assessee placed reliance on the following decisions:- 1. Shri Vinit Ranawat Vs. ACIT in ITA Nos.1105 and 1106/PN/2013, order dated 12.06.2015 2. Pradeep Amrutlal Runwal Vs. TRO in ITA No.334/PN/2013 , order 30.05.2014 3. DCIT Vs. M/s. Bhola Nath RAdha Krishna in ITA No.5149/Del/2012, order dated 05.04.2013. 4. ACIT Vs. M/s. Mohd. Ayub Mohd. Yaqub in ITA No.388/LKW/2013, order dated 10.12.2014 14. The learned Authorized Representative for the assessee further pointed out that in any case in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ially since Shri Sohan Raj Mehta has accepted the commission on such dealings. 16. The learned Authorized Representative for the assessee in rejoinder pointed out that the assessee has no dealings with M/s. DIL in individual capacity. The company Pragatiram Pvt. Ltd., in which the assessee was a director had transacted with M/s. DIL. With regard to the confirmation of Rasiklal and the Assessing Officer being the same, the learned Authorized Representative for the assessee pointed out that till date no statement of Rasiklal has been given to the assessee and in the absence of the same, it cannot be relied upon to make the aforesaid addition in the hands of the assessee. The learned Authorized Representative for the assessee further stressed that in DCIT Vs. M/s. Bhola Nath Radha Krishna (supra) the assessee was the supplier of supari and in the documents, there was receipt of ₹ 9 crores and even after considering those evidences, the addition was deleted. Further, in Shri Vinit Ranawat Vs. ACIT (supra), Pune Bench of Tribunal had considered the facts at length and had held that where the assessee s uncle and group companies were dealers of M/s. DIL, no addition was warrante ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by Shri Sohan Raj Mehta were found, no addition could be made in the hands of the assessee on account of any notings on such documents, without establishing that the person referred to in the said documents was the assessee and also in the absence of any cross-examination being allowed of Shri Sohan Raj Mehta. The assessee further pleaded that Shri Sohan Raj Mehta on a later date had retracted his earlier statement and in view thereof, no reliance could be placed on the earlier statement recorded of Shri Sohan Raj Mehta. We find identical issue arose before the Tribunal and identical submissions were made by the learned Authorized Representative for the assessee and identical objections were raised by the learned Departmental Representative for the Revenue in Shri Vinit Ranawat Vs. ACIT (supra). The Tribunal after considering rival contentions and the seized documents and various legal propositions, held as under:- 37. We have considered the rival arguments made by both the sides, perused 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 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntents of the seized documents and has also acknowledged and substantiated the fact that the seized documents belong to M/s. Dhariwal Industries Ltd. and therefore his statement has immense evidentiary value. Based on the above and on the basis of various other observations in the assessment order the Assessing Officer made addition of ₹ 1 crore for A.Y. 2006 -07 and ₹ 20 crores for A.Y. 2007 -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 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 Department itself is treating this as short term advance during the course of search action. Similarly, the statement of Mr. Rasiklal M. Dhariwal is contrary to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts 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 Rasiklal Dhariwal as short term advance. I am showing you the relevant portion of the said statement. Please go through the same and state whether the payments in cash received from Sohanraj Mehta at the discretion of Shri R.M. Dhariwal are recorded in your books of account. A.34 I have gone through the statement shown to me of Shri Prakash Dhariwal recorded on 20-01-2010, however, 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 h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ately dispatched to our customers. We keep only the stock that comes with bill in our office. The stock that comes without bill is dispatched immediately to our customers. I have been involved in these transactions for longtime and I am responsible for all the 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. Ras iklal 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 loose sheets? Ans : I have gone through the exhibit marked A/M/29. I have placed my signature on page ho. 24 of this exhibit in confirmation of having seen it. This exhibit contains loose slips serially number 1-61. Slips marked as sl.no. 4 to 8, 49 to 50, 58 arid 59 contain the notings of Mr.Rask ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ating 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 instructe d Mr. Vinit Ranawat to hand over the various amounts. Therefore, it is not clear as to whether the Assessing Officer is correct or the Investigation Wing at the time of examining the assessee are correct or the answer of Mr. Rasiklal Manikchand Dhariwal is correct. 46. The Hon ble Bombay High Court in the case of Aziende Colori Nazionali Affini, Italy (Supra) has held that the agreement had to be considered as a whole and that the different clauses 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 pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence upon other independent evidence to fasten him with such liability, has been provided for in Section 34 by incorporating the words such statements shall not alone be sufficient 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 maintained by them under Section 4 of the Bankers' Book Evidence Act, 1891 and contended that certified copies became prima facie evidence of the existence of the original entries in the accounts and were admissible to prove the payment of loan given. The suit was decreed by the trial Court and the appeal preferred against it was dismissed by the High Court. In setting aside the decree this Court observed that in the face of the positive case made out by Chandradhar that he did not ever borrow any sum from the Bank, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ient 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 independent evidence of the transaction to which the entries relate and in absence of such evidence no relief can be given to the party who relies upon such entries to support his claim against another. In Hira Lal Vs. Ram Rakha [ A. I. R. 1953 Pepsu 113] the High Court, while negativing a contention that it having been proved that the books of account were regularly kept in the ordinary 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 merely to prove that the books have been regularly kept in the course of business and the entries therein are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h of the Tribunal in 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 January - March 2004 of the unaccounted transaction carried out by Shri Sohanraj Mehta C F of Karnataka Region of RMD Group. After analyzing the issue exhaustively as detailed in the assessment order as well as in the appellate order under dispute, a sum of ₹ 57.5 lakhs in cash as evidenced by the seized documents was treated as unaccounted receipt in the hands of the assessee and, accordingly, added to the income of the assessee for the period under consideration by the AO which has been 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 w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3.12.2009 filed with the Asst. Director of Income-tax (Investigation) Unit 2(1), Bangalore is negated which is incorrect and untrue. 3. Toda y on 3.12.2011, Saturday I depose in the name of Almighty God that under wrong promises, mistaken beliefs, inadequate guidance and improper advise, I signed the letter dt. 10.8.2011 in the Income-tax Department, Bangalore which is absolutely wrong and not the correct version of what I wanted to 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 the assessee's contention that he should have been afforded an opportunity to cross-examine the third party [ Shri Shohanraj Mehta] since his statements on oath were coupled with inconsistency, he retracted his earlier statements and, thus, not abo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 fact belongs to the assessee. Though the AO has placed reliance upon the statements of MV and GC for the purpose of taxing the amount in the hands of the assessee, despite specific request being made by the assessee for cross- examining both the said persons, the AO has not permitted the assessee to cross-examine them. In the circumstances, no reliance could be placed upon the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .C. Sethi (2007) 295 ITR 351 (Raj), the Hon'ble Court had held thus: [PB - 174] 16. Thus, it is apparent that the conclusions arrived by the Tribunal are based upon the aforesaid findings of fact recorded by it upon appreciation of the evidence on record. On behalf of the 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 fact recorded by it upon appreciation of the evidence on record, which findings have not been dislodged by the revenue by pointing out any evidence to the contrary, therefore, does not warrant any interference. 7.9. Taking into account the submissions of the assessee, the stand of the AO, reasoning of the CIT (A) in sustaining the action of the AO and also in conformity with the rulings of the Hon'ble jur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade 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 and accordingly, we hereby direct the revenue to delete the same. Thus, ground No.1 raised by the assessee with respect to reopening of the assessment u/s 148 of the Act is dismissed and ground No.2 with respect to addition on account of undisclosed income is allowed in favour of the assessee. 50. We find the Bangalore Bench of the Tribunal in the case of DCIT Vs. H.S. Chandramouli (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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 3. An appeal was preferred before the ld. CIT(A) with the submission that no document indicating payment of ₹ 50 lakhs to the assessee- company 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 assesseecompany, 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 appeal before the Tribunal and reiterated its contentions. During the course of hearing, a specific query was raised from the ld. D.R. as to what evidence they have collected during the course of search or thereafter, on the basis of which the Assessing Officer has formed a belief that the income chargeable to tax has escaped assessment in the hands of the assessee. No satisfactory answer was furnished by the ld. D.R. We have also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsidered view, the A.O. had no material before him which could link the said payment to the appellant company. The reasons to believe in the case have been recorded on irrelevant material. On the basis of such material, no prudent man could have formed the belief that income had escaped asstt. in the hands of the appellant company. Accordingly, I hold th at the very assumption of jurisdiction by the A.O. under section 147 of the Act was illegal and, therefore, any asstt. framed pursuant to 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 arriving at that conclusion would vitiate the conclusion of facts.............................. In the result, the appeal is allowed. 5. Since we do not find any infirmity in the order of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 inquiry/ investigation was required to be carried out on the information passed by the ADIT(Inv.) - III, Kanpur but evidences are not collected or placed. Copies of the statements, on the basis of which additions has been made, were not provided nor was the opportunity of cross- examination given to the appellant. The assessing officer merely summarized the salient features of the report of the ADIT (Inv.) -III, Kanpur and thereafter summarily rejected the reply of the appellant as not satisfactory. 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 st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the arguments of both the sides and the facts of the case, we do not find any infirmity in the above order of learned 7 ITA-5149/Del/2012 CIT(A). The addition has been made on the basis of certain chits found from Shri Sohan Raj Mehta and his statement. Admittedly, the assessee has no dealing with Shri Sohan Raj Mehta. The assessee is supplying goods (Supari) to RMD Group who 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 of some third party with whom the assessee has no business dealing, it cannot be presumed that the assessee is making sales outside books. Moreover, as per chits found from Shri Sohan Raj Mehta, the payment made to the assessee is only `9 lakhs and not `9 crores. The department has also relied upon the statement of Shr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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........... (emphasis by underlining supplied by us) 8. The Assessing Officer has dealt with this letter but he has not given any reason for not allowing the assessee an opportunity to cross-examine Shri Sohan Raj Mehta. Similarly, he has neither supplied the copy of retraction of his statement nor dealt with the retraction in the 9 ITA-5149/Del/2012 assessment order. It is only in the remand report 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ption as to the documents produced as record of evidence are genuine. Hence, he has held that the documents seized from Dhariwal Group could be relied upon for making addition in the hands of the assessee. The Assessing Officer has placed 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- -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 case of the assessee are in the form of two loose papers wherein amounts of ₹ 4.80 Crores and ₹ 30 lacs were noted against the name Mr. Pradeep Runwal . Apart from this, no evidence has been found to suggest that the assessee had actually received the said amount or that the assessee had entered into any transaction with Dhariwal Group. Ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de 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 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. 5.6 Without prejudice to the above, the learned Authorized Representative submitted that the Assessing Officer was not justified in making 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 example, an owner of a land may well be expected to be in possessio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TR 623(SC)] and CIT vs. Lacchman Dass Oswal [(1980)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 or whether the investments or receipts were a part of the disclosed sources of income of the assessee. We find that in the present case, the issue in question itself is whether rough noting on loose paper found in the course of search at the premises of third person could be assumed the income from the assessee as in the cases relied by the Assessing Officer. This fact has not been established in the case of assessee, therefore, the case laws relied by the Assessing Officer are clearly distinguishable 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paper because they indicate date, amount and calculation. There is no dispute with the above proposition. The papers are found pertaining to Dhariwal Group as admitted by Shri Mehta and therefore, these documents may be relevant for deciding the issue in the case of Dhariwal Group. However, in the absence of any corroborative evidence, the addition could not be made in the hands of the assessee on the basis of the said papers. 5.12 The CIT(A) has further 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 accepted the fact that cash was paid to the assessee. In these facts, ITAT held that since there was transaction between assessee and Shri Tanna and also the fact that the amounts paid by cheque tallied, the addition was rightly made. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 regard are without any basis and support. The affidavit filed by Shri Kolhe remained uncontroverted and which is against the settled legal position on the issue that the contents of the affidavit be rejected by confronting the same to the deponent which is missing in this case. Nothing was shown by the A.O. that there was any other material co related to the seized documents. The A.O. 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 thir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see from the very beginning has denied to have received any such payment from M/s. Dhariwal group through Mr. Sohan Raj Mehta and since no incriminating material was found from the residence of the assessee during the course of search and since the assessee is not dealing 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 to delete the addition of ₹ 1 crore for A.Y. 2006 -07 and ₹ 20 crores for A.Y. 2007 - 08. Grounds raised by the assessee on this issue are accordingly allowed. 56. Since the assessee succeeds on merit, therefore, the ground relating to validity of assessment u/s.143(3) r.w.s. 153A become academic in nature and therefore the same is not being adjudicated. 57. In the result, both the appeals filed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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