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Prabhat Chandra S Jain Versus The Asst. Commissioner of Income Tax And Vica-Versa

2015 (11) TMI 402 - ITAT PUNE

Addition on account of third party evidence - additions on account of unaccounted sales - search and seizure action under section 132 - assessment u/s.153A - Gross profit ratio @ 35% of unaccounted sales - Held that:- The facts of the present case are identical to the facts before Pune Bench of Tribunal in Shri Vinit Ranawat Vs. ACIT (2015 (6) TMI 608 - ITAT PUNE) and where the assessee has denied to have received any payment from M/s. DIL through Shri Sohan Raj Mehta and in the absence of any i .....

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supplier of any items of raw material to M/s. DIL.

In the above said facts 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, .....

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n 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 Prasad, CIT and Rajesh Damor ORDER Per Sushma Chowla, JM : All the cross appeals filed by the assessee and the Revenue are against the consolidated order of CIT(A)-II, Pune, dated 28.03.2013 relating to assessment years 2004-05 to 2008-09 a .....

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djudicate the issue. 4. The assessee in ITA No. 1325/PN/2013 has raised the following grounds of appeal :- The below mentioned grounds are independent to each other: 1. Addition on account of third party evidence 1.1. That Ld. CIT (A) has erred in confirming the additions made by the Assessing Officer on account of unaccounted sales. 1.2. That Ld. CIT (A) has further erred in making additions on the basis of third party evidence. 1.3. The Ld. CIT (A) did not appreciate basic fact that there was .....

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udicial pronouncements cited by the appellant for deletion of the said additions. 2. Without Prejudice to 1 above taking gross profit ratio @ 35% of unaccounted sales 2.1. That Ld. CIT (A) erred in taking gross profit @ 35% of alleged Unaccounted Sale. 2.2. The Ld. CIT (A) also erred in taking GP of manufacturing companies and applying same to appellant who is just a trader. 2.3. That Ld. CIT (A) further erred in not accepting the alternative argument of the appellant that without prejudice, in .....

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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 .....

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noted that during the course of search action at the residential premises of Shri Mittulal at Bangalore on 09.10.2009, large number of incriminating documents were found and seized. These documents belonged to M/s. Dhariwal Industries Ltd. (DIL) and were maintained by Shri Sohan Raj Mehta, C&F agent of M/s. DIL, on behalf of M/s. DIL. When confronted on the said issue, Shri Sohan Raj Mehta categorically stated in his statement on oath under section 132(4) of the Act, that he was effecting un .....

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Officer noted that the assessee had received sum of ₹ 26,91,03,000/- from M/s. DIL through Shri Sohan Raj Mehta, as per the details tabulated at page 3 of the assessment order. Shri Sohan Raj Mehta in his statement recorded on oath under section 132(4) of the Act stated that M/s. DIL had paid the aforesaid amounts to the assessee through him, as per instructions received from Shri Rasiklal M Dhariwal / Shri Prakash R Dhariwal. The assessee was thus, show caused to explain as to why sum of .....

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depicted in the documents seized vide Panchanama dated 09.10.2009, seized by Investigation Wing of Bangalore and also because of post-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 ge .....

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5.75 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 taxed as unaccounted income generated on supply of the said raw materials. The year-wise break-up of the said ₹ 26.91 crores was proposed to be added i.e. ₹ .....

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ri Sohan Raj Mehta. He further stated that even in his statement recorded on the day of search, he denied to have received the said sum. The assessee also stated he had already clarified during the course of search that he had not entered into any business transaction with Mr. Sohan Raj Mehta ever in his life and further none of these transactions were reflected in his books of account. Referring to the contents of show cause notice, wherein it was alleged that Shri Sohan Raj Mehta effected unac .....

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then as per the assessee, the said statement was not reliable and in case they had given any confirmation, then the assessee wanted to understand from them about the basis of said confirmation. He stressed that without giving him an opportunity of cross-examination, Shri Sohan Raj Mehta and obtaining the confirmation from Rasiklal Dhariwal and Shri Prakash Dhariwal, no addition should be made, as there were no unaccounted sales nor any receipt of money from Shri Sohan Raj Mehta. Another plea rai .....

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ressed 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 m .....

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ssee. The Assessing Officer noted that in the case of M/s. DIL, entire unaccounted turnover was not brought to tax, instead gross profit of M/s. DIL was estimated and was taxed. The Assessing Officer further observed that since M/s. DIL s unaccounted expenses had been allowed as expenses by considering gross profit, it becomes imperative that the corresponding unaccounted income of recipient, in the form of raw material supply, etc. was also brought to tax as per law. The Assessing Officer furth .....

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The Assessing Officer admitted that strict rules of evidence were in-applicable to the proceedings under the Income-tax Act, however, that did not mean that the principles of Evidence Act were in-applicable to the proceedings under the Income-tax Act. Reliance in this regard was placed on the ratio laid down by the Hon ble Supreme Court in Chuharmal Vs. CIT reported in 172 ITR 250 (SC). The Assessing Officer also referred to the retraction by Shri Mallikarjuna of Shimoga and also by Shri S. Bala .....

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3.15 held as under:- 3.16 Section 110 of the Evidence Act is material in this respect which stipulates that when the question is whether any person is owner of anything of which he is shown to be in possession, the onus of proving that he is not the owner, is on the person who affirms that he is not the owner. In other 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). D .....

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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 no .....

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DIL and the seized document and the entire modus operandi of out of books sales of M/s. DIL has been explained by Shri Sohanraj Mehta, which also gets corroborated by the seized documents. These documents and the accounting records are not dumb document rather are true statement of actual state of affairs among various parties including the appellant. Therefore, it cannot be said that no additions are called for on the loose papers found at the residence of Mithulal Jain at Bangalore. I, therefo .....

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spread over several assessment years it could not have been expected that the assessee would keep details of each and every transaction connected with the activity. Obviously these could find place in a manner which were discovered by the Investigation Wing during the search action. The efforts of the Assessing Officer in linking up these transactions with the evidences of M/s. DIL with the appellant and others, on this basis needs to be appreciated. Any document has to be necessarily read, as a .....

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ceipt 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 .....

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A) was of the view that estimation of gross profit rate at a higher level is to be taxed in the hands of the assessee. Consequently, GP rate of 35% on unaccounted sales was directed to be applied to work out the income in the hands of the assessee. 11. The assessee is in appeal against the order of CIT(A) and has raised two issues. The first issue is with regard to the addition made on account of third party evidence and second issue raised without prejudice is the application of GP rate @ 35% o .....

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ge 4 of the assessment order, wherein there is no mention of any incriminating evidence found from the assessee. The learned Authorized Representative for the assessee further pointed out that the documents relied upon by the Assessing Officer to make the addition in the hands of the assessee were the documents found during the course of search on Shri Sohan Raj Mehta. Our attention was drawn to the said documents placed at pages 73 to 83 of the Paper Book and it was pointed out that the entries .....

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this regard. The learned Authorized Representative for the assessee further submitted that even during the course of search, a query was raised with regard to the documents seized from the possession of Shri Sohan Raj Mehta and the assessee had replied that the documents do not belong to him. Further, no opportunity of cross-examination was provided to the assessee to cross-examine Shri Sohan Raj Mehta. Reference was made to the observations of Assessing Officer at pages 6 and 7 in this regard. .....

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arious 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. .....

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CC 410 and Vinod Solanki Vs. UoI & Anr (SC-Civil Appeal No.7407 of 2008). The learned Authorized Representative for the assessee further relied on the ratio laid down by the Hon ble Bombay High Court in Addl.C.I.T. Vs. Miss Lata Mangeshkar (supra) and also Straptex (India) (P.) Ltd. Vs. DCIT (2003) 84 ITD 320 (Mumbai). Without prejudice to the above said issue, the learned Authorized Representative for the assessee pointed out that it had raised the grounds of appeal against the application .....

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for the Revenue referred to the order of CIT(A), especially paras 3.2 and 3.3 at pages 14 and 15, wherein there is finding of CIT(A) that the assessee was a regular supplier of raw materials and since the assessee was connected to M/s. DIL, there was preponderance of probabilities. The learned Departmental Representative for the Revenue further pointed out that case laws relied upon by the learned Authorized Representative for the assessee were not relevant, as in the above said decision, the as .....

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siklal Dhariwal, the addition in the hands of the assessee is justified, especially 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, .....

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nsidering 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 warranted in the hands of the assessee. 17. We have heard the rival contentions and perused the record. Search and seizure action under section 132 of the Act was carried out in the RMD group cases on 20.01.2010 and the assessee s pr .....

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intained by one Shri Sohan Raj Mehta, who was the C&F agent of M/s. DIL. When confronted, Shri Sohan Raj Mehta in his statement recorded under section 132(4) of the Act admitted that he was effecting unaccounted sales of Gutka on behalf of M/s. DIL and sale proceeds were deployed as per the directions of Rasiklal Dhariwal and / or Prakash Dhariwal. As per the seized documents, name of PC Jain of Mumbai was there on various pages and the Assessing Officer tabulated the details from Bundle A/M .....

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s supplying raw material to M/s. DIL, his association having been established whether M/s. DIL and where M/s. DIL was engaged in sale of Gutka outside books, the entries on the said seized documents were relating to the assessee and since the same were not recorded in the books of account, addition to that extent merited in the hands of the assessee. 19. We find objection of the assessee was that in the absence of any documents having been found from the possession of assessee during the course .....

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her 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 con .....

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ting documents were found belonging to the Dhariwal group. Those documents were maintained by one Shri Sohan Raj Mehta, C&F agent of M/s. Dhariwal Industries Ltd. In his statement recorded u/s.132(4) Mr. Mehta had stated that he was effecting unaccounted sales of Gutkha of Dhariwal Industries Ltd. and the sale proceeds were deployed as per the instructions of Shri Rasiklal M. Dhariwal and his son Shri Prakash M. Dhariwal. In some of the seized papers name of certain persons are appearing whi .....

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dings given by the Ahmedabad Bench of the Tribunal in the case of Mustafamiya H. Sheikh. 38. It is the case of the Assessing Officer that the assessee was associated with Dhariwal group for a long time and the assessee s name appearing in the seized document tally with the regular business association with M/s. Dhariwal Industries Ltd. and if test of human probability is applied to the facts of the case it becomes evident that assessee was part of the entire scheme of unaccounted business chain .....

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tement of Mr. Mehta clearly explains the entire unaccounted business chain and unaccounted business transactions of M/s. Dhariwal Industries Ltd. Mr. Sohan Raj Mehta, the author of the seized document in his statement u/s.132(4) has explained true impact of the contents of the seized documents 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 t .....

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he 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 the finding of the Department. It is also th .....

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s is the C&F Agent of M/s. Dhariwal Industries Ltd. in the State of Maharashtra for their Gutkha and Pan Masala business. A search and seizure action on the premises of Mr. Mittulal at Bangalore was carried on 09-10-2009 wherein documents maintained by Mr. Sohan Raj Mehta, C&F Agent of M/s. Dhariwal Industries Ltd were found. The assessee s premises was also searched on 20-01-2010, i.e. after a period of about 3 months and 10 days. During the course of search at the premises of the asses .....

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g of Bangalore. In course of the search action certain incriminating documents related to Shri Sohanraj Mehta were found in connection with C&F agency of RMD Group of Pan Masala and Gutkha products. Shri Sohanraj Mehta was also covered by the Investigation Wing of Bangalore and on being confronted with these incriminating documents, Shri Sohanraj stated that the said pages interalia contain the notings regarding handing over of ₹ 21.22 crores to Shri Vinit Ranawat of Mumbai which is C& .....

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ccount. 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 .....

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ehta and Shri Prakash R. Dhariwal have stated on oath that payments in cash of ₹ 21.22 cr has been made to you at the direction of Shri Rasiklal Dhariwal by Shri Sohanraj Mehta. As the statements have been given by them on oath, you are therefore once again requested to go through the above referred documents/statement and state whether the said cash receipts are reflected and recorded in your regular books of accounts. A.35 As already stated earlier, I have never received any cash from So .....

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ccounted asset, investment or loose paper evidencing such huge receipt has been found. Further, we find from the query raised during the course of search that the authorised officer has treated the same as short term advance given to the assessee. Therefore, we find some force in the submission of the Ld. Counsel for the assessee that if the amount is a short term advance the question of the same constituting income in the hands of the assessee does not arise. We find from the statement of Mr. S .....

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nd Dhariwal. He considers me as close confident. As per the requirement of the Distributors, I place order for dispatch of Stock either with Mr. Prashant Bafna or Mr. Jeevan Sancheti, who are incharge of the Factory at Bangalore. To send a dispatch with bill or without bill is decided as per their choice and the Stock of Gutka is sent by Matador Van to this office. The stock that comes without bill is immediately dispatched to our customers. We keep only the stock that comes with bill in our off .....

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n 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 numb .....

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standing instructions from Mr.Raskilal Manikchand Dhariwal and his son Mr. Prakash to handover the money to the bearer of the slip. The money is paid out of the collections received from the distributors towards unaccounted sales. Q.34 Do you obtain any receipt from the parties to whom you hand over Cash as per the instructions of Mr.Raskilal Manikchand Dhariwal and his son Mr. Prakash Ans : No. It is not required. After receipt of Cash, they leave the slip with me. That is considered as eviden .....

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ou page No.34 of Bundle No.A/M/29 seized on 9/10/2009. Kindly go through the contents and please explain. Ans. This is a signed chit in my handwriting dt.20/2/2007 wherein I have instructed Shri Vinit Ranawat to hand over an amount of ₹ 500000-00 (Five Lakhs). Q11. Similarly, I am showing you page no.24 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.10/11/2006 wherein I have instructed Shri Vinit R .....

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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 Ho .....

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lore. Therefore u/s.132(4A) they can be presumed to be true, genuine and correct only in the case of the searched person, i.e. Mr. Sohan Raj Mehta who has admitted that the papers belong to him. Therefore, we find force in the submission of the Ld. Counsel for the assessee that on the basis of the papers found with some third party addition cannot be made in the hands of the assessee particularly when there is no business connection between the assessee and that party. 47. The Hon ble Bombay Hig .....

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ries in books belonging to them regarding alleged payment to the assessee. The Tribunal examined the statement made by the 2 persons and found that the evidence tendered by them suffered from serious infirmities. It held that mere entries in the accounts regarding payments to the assessee was not sufficient as there was no guarantee that the entries were genuine. The Tribunal therefore held that there was no proof that the amount in question represented income from undisclosed sources belonging .....

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le behind admissibility of parties' books of account as evidence is that the regularity of habit, the difficulty of falsification and the fair certainty of ultimate detection give them in a sufficient degree a probability of trustworthiness (wigmore on evidence $ 1546). Since, however, an element of self interest and partisanship of the entrant to make a person - behind whose back and without whose knowledge the entry is made - liable cannot be ruled out the additional safeguard of insistenc .....

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77; 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 d .....

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he Bank, if it relied on such entries to charge any person with liability, to produce evidence in support of the entries to show that the money was advanced as indicated therein and thereafter the entries would be of use as corroborative evidence. The same question came up for consideration before different High Court on a number of occasions but to eschew prolixity we would confine our attention to some of the judgements on which Mr. Sibal relied. In Yesuvadiyan Vs. Subba Naicker [A. I. R. 1919 .....

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ness. 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 those entries. The legislature however does not require any particular form or kind of evidence in addition to entries in books of account, and I take it that any relevant fact s which can be treated as evidence within the meaning of the Evidence Act would be sufficient corroboration of the evidence furnished by entries in books .....

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t was observed tat entries in book s of account are not by themselves sufficient to charge any person with liability, the reason being that a man cannot be allowed to make evidence for himself by what he chooses to write in his own books behind the back of the parties. There must be 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 V .....

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enquire was subject to the salient proviso that such entries shall not alone be sufficient evidence to charge any person with liability. It is not, therefore, enough merely to prove that the books have been regularly kept in the course of business and the entries therein are correct. It is further incumbent upon the person relying upon those entries to prove that the were in accordance with facts. The evidentiary value of entries relevant under Section 34 was also considered in Hiralal Mahabir P .....

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liability upon a person. Keeping in view the above principles, even if we proceed on the assumption that the entries made in MR 71/91 are correct and the entries in the other books and loose sheets which we have already found to be not admissible in evidence under Section 34) are admissible under Section 9 of the Act to support an inference about the formers' correctness still those entries would not be sufficient to charge Shri Advani and Shri Shukla with the accusations levelled against t .....

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independent evidence under Section 34 as against the above two respondents. So far as Shri Advani is concerned Section 34 would not come in aid of the prosecution for another reason also. According to the prosecution case itself his name finds place only in one of the loose sheets (sheet No. 8) and not in MR 71/91. Resultantly, in view of our earlier discussion, section 34 cannot at all be pressed into service against him. (underline provided by us) 49. We further find identical issue had come u .....

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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 .....

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hird party contained only the names, but, not other details such as their identity, addresses, contact numbers etc. On a perusal of the statement, it is clear that the payments made were to the persons whose names were appearing on the right side of the papers (sheets) which were paid to those persons on the instructions of PRD & RD. Moreover, against the names of Mustufa & Taufik, it was specifically written as (PRD) expenditure in respect of PRD was given by Shri Sohanraj Mehta as per .....

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8377; 218,00,91,198/- (which is recorded on the left hand side of the page). On the right hand side of the page, parties to whom cash payments were made have been recorded, on instructions from Dhariwal Industries Ltd., The instructions were in the form of slips of paper and they contain the signatures of Mr. Rashiklal Manikchand Dhariwal and his son Mr. Prakash Dhariwal. Such payments totaling to ₹ 206,76,54,463/- were made in 2003-2006. The balance of ₹ 11,24,36,739/- was settled b .....

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n the following words: "1. I referred my aforesaid statement recorded by Deputy Commissioner of Incometax, Central Circle 2(2), Bangalore on 10.8.2011. 2. In this statement dated 10.8.2011 sense conveys that my detailed letter dt.23.12.2009 filed with the Asst. Director of Income-tax (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 guida .....

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ngalore 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 above the board. 7.5. Moreover, the assessee's plea for permission to cross .....

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mination could not be granted." 7.6. The CIT (A) had also turned down the assessee's request for cross-examination on the ground that - "(On page 53) 2.25................It has also been indicated, as borne out on records, that the appellant had asked for cross examination of the party for the first time only on 14.12.2011. The appellant was also fully aware that the limitation to pass reassessment order in the case expires on 31.12.2011. Thus, between 29.3.2011 till 14.12.2011, th .....

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frame in which such right can be exercised. It is as settled principle of law that rights and duties under a statute go hand in hand and cannot be exercised in isolation. The appellant truly had the right to cross examination but at the same time had the duty to ask for it within a reasonable time frame. A right exercised with ulterior motives does not possess the sanction of law. Facts of the case clearly indicate that the appellant had purposefully demanded cross examination at a time when it .....

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l 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 a .....

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e said amount has not been taxed in the hands of GC. Moreover, no evidence has been adduced to indicate that any transaction in relation to the land in question has actually taken place. The Tribunal has rightly found that the basis for making the addition in the case of the assessee is merely a bald statement of MV, which is not corroborated with any documentary evidence found at the time of search, either in the case of S or MV or the assessee. No plea to the effect that the impugned order of .....

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dictional High Court, the learned Counsel for the assessee submitted that the documents in question have been found from the premises of a third party. The loose papers cannot be stated to be books of account in the light of the decision of the Supreme Court in the case of CBI v. V.C. Shukla and others (1998) 3 SCC 410 as obse rved by the Tribunal and submitted that the Tribunal has based its conclusions on the findings of fact recorded by it upon appreciation of the evidence on record; that the .....

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tatements of the third parties and that the assessee was not granted an opportunity to cross examine the third parties and as such their statements have no evidentiary value. After due consideration of rival submissions and also taking into account the reliance placed by the assessee's counsel in the cases of (i) Kishinchand Chellaram v. CIT (1980) 125 ITR 713 (SC) & (ii) CIT v. S.C. Sethi (2007) 295 ITR 351 (Raj), the Hon'ble Court had held thus: "[PB - 174] 16. Thus, it is app .....

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indings 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 susta .....

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umentary evidence to the effect that the assessee had indeed received the alleged cash payment of ₹ 57.5 lakhs from Shri Sohanraj Mehta as the assessee had categorically pleaded before the AO that he was making purchases through Ambika Distributors who were the C & F Agents for Gujarat Region; (iii) that the total unaccounted sales effected by Shri Sohanraj Mehta C & F of RMD Gutkha on behalf of Dhariwal Industries Limited for the period of April 2003 to Feb 2008 was ₹ 345.72 .....

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fer further tax. This view has been fairly conceded by the CIT (A) "(On page 54) 2.27.......The appellant is right to the extent that no income can be taxed twice......" (v) that the AO had candidly admitted that during the course of assessment proceeding itself the assessee had sought permission to cross examine Shri Sohanraj Mehta which was summarily rejected by taking refuge ".....Due to paucity of time, the cross examination could not be granted" [Refer: Para 2.8 (Page 10 .....

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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 .....

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e assessee and a figure of ₹ 22.75 lakhs appears against his name. As to whether this document evidences payment of ₹ 22.75 lakhs to the assessee is a moot question. There is no basis set out in the order of the AO for coming to the conclusion that the seized document evidences receipt of money by the assessee from Sohanraj Mehta. The presumption u/s. 292C of the Act is only with reference to the person searched and it cannot be extended to the assessee. There is no corroborative evi .....

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these circumstances, the CIT(Appeals) was justified in coming to the conclusion that no evidence has been brought on record to prove that the assessee received the sum of ₹ 22.75 lakhs from Sohanraj Mehta. The addition made by the AO was therefore rightly deleted by the CIT(A). We do not find any ground to interfere with the order of the CIT(Appeals). 51. We find the Lucknow Bench of the Tribunal in the case of M/s. Mohd. Ayub Mohd. Yakub Perfumers Pvt. Ltd., (Supra) while deleting the ad .....

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sing Officer has formed a belief in the assessee's case that the income chargeable to tax has escaped assessment, as this amount was not shown by the assessee in its books of account. Accordingly a notice under section 148 of the Income-tax Act, 1961 (hereinafter called in short "the Act") was issued and assessment was completed under section 147 of the Act read with section 144 of the Act in the hands of the assessee, resulting into an addition of ₹ 10.48 lakhs as profit on .....

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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 .....

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f Malik in Kannauj but on the basis of this dumb document, the reopening of assessment in the hands of the assessee is not permissible. Moreover, the searched party has also examined Shri. Sohanraj Gupta and the statement is also placed on record and at nowhere Shri. Sohanraj Gupta has deposed about payment of ₹ 50 lakhs to the assessee. In the absence of any relevant material, the reopening of assessment in the hands of the assessee is not proper. The ld. CIT(A) has given valid reasons wh .....

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npur, Shri Abdul Malik, the M.D. of the appellant company had denied such transaction. In these circumstances, I fail to understand as to how, the A.O. formed the belief that the entry in the name of "Malik Kannauj" (as appearing in the seized document) referred to Shri 'Malik, M.D. of the appellant company. Further, even for argument sake if "Malik Kannauj" indeed referred to Shri Abdul Malik, the M.D. of the appellant company, there was no evidence/material on record wh .....

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ing the case should be that of the A.O. alone and could not be formed at the dictates of others or on suspicion, conjectures or surmises. 5.1.7 In the instant case, in my considered view, the A.O. had no material before him which could link the said payment to the appellant company. The "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 .....

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een 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 the ld. CIT(A), we confirm his order. 52. Similarly the Lucknow Bench of the Tribunal in the case of DCIT Vs. Pawan Kumar Agarwa .....

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of the A.O. It was contended by the learned AR before me that mere jottings and notings should not be the basis for making any addition in the returned income, more particularly when A.O has not allowed the opportunity of Cross Examination of Mr. Shobhan Raj Mehta. The material provided/gathered by the department has also been produced before me. In this paper, it is seen that name of assessee is appearing. It was vehemently argued before me that how the department comes into conclusion that na .....

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the assessing officer. However, the assessing officer did not provide the copies of those statements. During the course of assessment proceedings, the assessing officer did not throw any light on any inquiry/ investigation carried out by him that could justify the additions made by him. That assessee has vehemently stated that the department has not proved that the identity of Shri Pawan Agarwal with the assessee and no slip, letter, document etc. showing any relationship of assessee with Shri S .....

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re 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 ass .....

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compliance of mandatory requirement to provide the assessee incriminating material to defend its own case and therefore it can categorically be held that: (i) Statement of Shri Shobhan Raj Mehta was not given to the assessee. (ii) Beyond the belief of presumption on the information supplied by the ADIT(Inv.) - III, Kanpur, further evidences are not found to corroborate the additions. (iii) Cross-examination of Shri Shobhan Raj Mehta was not allowed. (iv) The assessee firm had strongly denied ha .....

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resumption on the information supplied by the ADIT(Inv.) -III, Kanpur, further evidences are not found to corroborate the additions. He has also given a finding that Cross-examination of Shri Shobhan Raj Mehta was not allowed and the assessee firm had strongly denied having any financial and business transactions with Mr. Shobhan Raj Mehta. These findings of CIT(A) could not be controverted by Learned D.R. of the Revenue and moreover, the name of the assessee i.e. Pawan Kumar Agarwal is very com .....

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ssee on the basis of such seized paper. Considering these facts, we do not find any reason to interfere in the order of CIT(A). 53. We find the Delhi Bench of the Tribunal in the case of M/s. Bhola Nath Radha Krishan (Supra) while deleting an identical issue has observed as under : 7. After considering 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 .....

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s, 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 S .....

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llowed an opportunity to crossexamine him. Now, we find that during the assessment proceedings, the assessee specifically requested for allowing opportunity to cross-examine Shri Sohan Raj Mehta also and requested the Assessing Officer to supply the copy of retraction of his statement. The Assessing Officer has reproduced the assessee's letter, paragraph No.11 of which, reads as under:- "11. The assessee had requested your good self to provide the following documents: (a) Copy of the Sw .....

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should be given the opportunity to cross examine the genuineness of the statements of Sh. Sohan Raj Mehta and should be given reasonable opportunity to verify the claims made by him. In the case of Kishan Chand Chelaram (125 ITR) it has been held by the Hon'ble Supreme Court of India that before taking a decision the assessee has to be allowed a chance or an opportunity of rebuttal with respect to the documents which are to be used against the assessee. The assessee has gone through the enti .....

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r 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 h .....

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cannot be used against the assessee in the absence of any corroborative evidence. That merely because some excess stock was found in the survey for which separate addition has already been made, it cannot be further presumed that the assessee made sales outside the books, specially when the survey was followed by the search and neither during the course of survey nor during the course of search, any evidence of sale outside the books was found. In view of the totality of above facts, we do not .....

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e of Dhariwal Group, some loose papers were seized wherein certain amounts were written against the name of 'Pradeep Runwal'. Hence, the case of the assessee was reopened u/s 148 of the Income Tax Act. It was explained to the learned Assessing Officer that the assessee had not earned any such income of ₹ 5.10 crs. and therefore, no addition should be made. However, the Assessing Officer has not accep ted the contention of the assessee. 5.1 The Assessing Officer has stated that the .....

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n 114 of the Indian Evidence Act, it is an accepted rule of evidence that if a person possessing an evidence does not produce it, the inference is that such evidence if produced is detrimental to him. Accordingly, the Assessing Officer held that the said receipts were the income of the assessee. 5.2 The Assessing Officer has further held that according to the provisions of section 80 of the Indian Evidence Act, there is a presumption as to the documents produced as record of evidence are genuine .....

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made by the Assessing Officer were not justified in the facts and circumstances vis-à-vis of the assessee. As discussed earlier, during the course of search in the case of Dhariwal Group, the only documents found on the basis of which the addition u/s 69A has been made in the 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 f .....

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e assessee that there may be many persons of the name Pradeep Runwal in Pune and there was no specific evidence to suggest that the said notings pertained to the assessee. Hence, it was not justified as to how, in the absence of any other corroborative details, the Assessing Officer has assumed that the amounts reflected the income of the assessee himself, while the assessee has no business dealings of his with Dhariwal Group. The Assessing Officer has not brought on record any evidence to sugge .....

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he basis of noting in loose papers found during the search proceedings in the case of Dhariwal Group against the name of the assessee. 5.4 The presumption u/s 132(4A) is available only in respect of the person from whom the paper is seized. It could not be applied against a third party and hence, no addition could be made on the basis of the evidence found with third party. The presumption u/s. 132(4A) could be used only against the person from whose premises the documents are found and not agai .....

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held that such addition could not be made only on the basis of the notings in the books of third persons. The facts of the present case are covered by the decision of Lata Mangeshkar (supra). It is a settled legal position that the decision of jurisdictional High Court is binding on 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 corrob .....

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to mention this rule applies to the cases wherein it is evident or an established fact that a particular evidence or document was in possession of the assessee. For example, an owner of a land may well be expected to be in possession of a 7/12 extract of the said land in order to check whether the said land was used for agricultural purposes. In the present case, the provisions relied by the Assessing Officer are not applicable, the assessee is not withholding any documents. The case of departm .....

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ame 'Pradeep Runwal, there is no corroborative evidence in this regard against the assessee. In such circumstances, where the assessee has not entered into any transaction with the Dhariwal Group, one certainly could not expect the assessee to be in possession of any evidence to suggest that it has not entered into any such transaction except for his books of account which have already been verified by the concerned Assessing Officer. Hence, the Assessing Officer was not justified in placing .....

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rough noting wherein certain amounts were written against the name 'Pradeep Runwal'. As discussed earlier, there may be many people of that name in Pune and in the absence of any other corroborative evidence to that effect. In such a situation, it cannot be inferred that it belongs to the assessee. 5.9 While making the addition of ₹ 5.10 crores as stated above, the CIT(A) relied on the following decisions of Sumati Dayal vs. CIT [(1995) 214 ITR 801(SC)], CIT vs. Durga Prasad More .....

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ceived 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 reli .....

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im and most of the papers were written in marwadi language. The CIT(A) referred to the fact that Shri Mehta had admitted that the papers belonged to Dhariwal Group. In para 4.3, the CIT(A) states that when the author of the paper has accepted the notings made by him, in that event, the document is having great evidentiary value and could not be rejected. As regards, the objection of the assessee that no evidence was found to indicate that the assessee had received the amount, the CIT(A) referred .....

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plicable to the facts of the present case. In the said case, the assessee was searched and documents were found indicating on money received on sale of plots. On the basis of the documents found, the Assessing Officer estimated the income from on money which was held to be valid. In that case, the issue that no addition could be made on the basis of documents found with third party was neither raised nor applicable. Thus, according to us, the said decision has no application to the facts of the .....

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rd party was not raised. The CIT(A) has further referred to the decision of ITAT, Mumbai in the case of P. R. Patel Vs. DCIT [(2001) 78 ITD 51 (Mum)] for the proposition that seized papers cannot be called dumb paper because they indicate date, amount and calculation. There is no 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. Howeve .....

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t 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. The assessee rightly submitted that the said decision is not applicable to the facts of the pres .....

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) has relied on the decision in the case of Vasantibai N. Shah Vs. CIT [(1995) 213 ITR 805 (Bom)]. In this case, the issue was regarding validity of reassessment proceedings. The assessee had made a false disclosure. Subsequently, the case was reopened. Hon'ble High Court held that the reopening was valid since the assessee herself had made a false disclosure. Thus, the facts are totally different from the present case and hence, the ratio of Vasantibai N. Shah (supra) is not applicable to t .....

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aid decision is not applicable to the facts of the present case. The CIT(A) has further relied upon the decision in the case of Chuharmal Vs. CIT [(1988) 172 ITR 250 (SC)] for the proposition that documentary evidence plays an important part. There is no dispute to the said proposition but in the absence of any corroborative evidence no addition could be made in the hands of the third party. 5.14 We find that in Thakkar Developers Ltd. [IT A No. 581/PN/08], ITAT in paras 3 and 4 held as under:- .....

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oncluded 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 confronti .....

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who was not searched u/s 132 of the Act. The A.O. further rejected the submissions given by the assessee in his paper book dated 28.12.2007 reiterating the same stand. The A.O. has drawn inferences and presupposes relying on surmises and conjectures. The ITAT Mumbai Bench in their decision in the case of Straptex (India) Pvt. Ltd. [84 ITD 320 (Mum), clearly held that the presumption u/s 132(4A) is applicable only against the person from whom possession the books of accounts or other documentary .....

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ause (ii) of Section 132 (4A) provides that the contents of such books of account or documents are true. This presumption can be applied only against the person from whose possession the books of account or the document were found. Therefore, the A.O. was not justified in applying the provisions of Section 132(4'A) to the assessee in the present case who was not searched u/s 132 of the Act nor the document was found and seized from, their possession. Even, otherwise, such presumption u/s 132 .....

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ssee's case. In view of above, we are of the view that the addition made by the Assessing Officer is not justified and the same is directed to be deleted. It is pertinent to mention here that this case is being decided in its facts and circumstances; it cannot be applied to other cases as such. 7. In the result, appeal filed by the assessee is allowed. 55. Since in the instant case the assessee from the very beginning has denied to have received any such payment from M/s. Dhariwal group thro .....

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ion 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 therefo .....

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