TMI Blog2002 (4) TMI 952X X X X Extracts X X X X X X X X Extracts X X X X ..... was set aside by the CIT(A) vide his order dated 14-8-1996 with the following specific directions : (i)A finding of fact has to be given with reference to the total consignment value of ₹ 88,45,624 involved in 6 debit notes as to whether the same had been imported by Canon Steel Pvt. Ltd., and if so, how the same had been accounted for and disposed of. (ii)The claim of the assessee that he had sold goods worth ₹ 78.82 lakhs in small bits in cash and also needed to be properly authenticated. (iii)The assessee should be given opportunity of being heard in respect of seized page 37 of Annexure A-4. (iv)The assessee s claim that the jewellery said to have been purchased from undisclosed sources had disclosed in the wealth-tax return, needs verification and reconciliation. 3. In the reassessment proceedings, the Assessing Officer passed the order on 30-3-1999 wherein addition of ₹ 60 lakhs had been made under the head Income from other sources . This addition was based on a document which was seized during the course of search conducted at the premises of the assessee in Delhi. Aggrieved by the addition of ₹ 60 lakhs, the assessee filed an ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he same could not be considered as planning. He stated that the planning could not be made with retrospective effect but the same is generally made for future. He also stated that the account of the assessee was not in conformity with his regular books of account. The Assessing Officer also observed that the date on the receipt side was very specific i.e. 26-9-1992, on the expenses side also, the dates were specific i.e. 26-9-1992 to 25-10-1992. Thus according to him, it could not be said that it was planning. The Assessing Officer also rejected the explanation of the assessee that the unaccounted cash of ₹ 60 lakhs and other amounts pertaining to 13-10-1992 which was not readable due to punching hole had been channellised through the consignment account. 5. During the course of reassessment proceedings, the assessee filed the following explanation : This paper is nothing except planning and planning is linked with marriage of my daughter, Monika, through matrimonial consultants/agents. Keeping in view the trend in the society, I found that there was good proposals of status families but subject to marriage expenses one crore or more therefore I was planning on the pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itten a specific figure of 5009 gm., at ₹ 20,03,500 which comes to ₹ 4,000 per 10 gm. Further, the miscellaneous expenses had been written as ₹ 50,800. According to him, the specific items and numbers of items valuing at ₹ 8,50,000 prove that the seized paper is a record of facts and events that had happened on the date of recording. Thus, the Assessing Officer concluded that the assessee was in possession of ₹ 60 lakhs as on 26-9-1992 which remains unexplained. 7. The learned CIT(A) supported the findings of the Assessing Officer and has stated that Shri S.P. Goyal was in the possession of ₹ 60 lakhs and he had incurred an expenditure of ₹ 31,21,400 from 26-9-1992 to 25-10-1992. The learned CIT(A) has further stated that the assessee had not been able to prove that ₹ 60 lakhs were available with him as on 26-9-1992 and the same represented amounts withdrawn by him from disclosed sources of income. The learned CIT(A) has also stated that the assessee was also purchasing jewellery in the form of gold and diamond jewellery and silver articles from known sources of income in anticipation of his daughter s marriage. The learned CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cal verification of stock. Due to disturbances/disputes of the partners, proper attention on the account of consignment sales was not passed on to the concerned Accountant, though the said information from Mumbai was already with the company at Ludhiana. He further stated that in the Mumbai account of the assessee, all entries were duly incorporated as per books of account and such books of account were produced before the Assessing Officer. He also explained that the goods which were sent to the assessee by M/s. Canon Steels Pvt. Ltd. were kept and dealt through M/s. Shivganga Warehousing Corporation and the said file pertaining to such goods was a part of seized records. The learned counsel contended that the sales bills/memos and names of the buyers were produced before the Assessing Officer during the course of assessment proceedings. Thus, the goods received by the assessee were evident from the records of M/s. Shivganga Warehousing Corporation and the same were sold as per the books of the assessee. Thus according to the learned counsel, the assessee was expecting cash of ₹ 60 lakhs sometime back in the month of September 1992, but later on instead of cash, the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the addition made is justified. He made reference to pages 2 3 of the paper book filed by the assessee which pertains to the letter written by the Assessing Officer calling for explanation of the assessee regarding the stock issued by M/s. Canon Steels Pvt. Ltd., and the names of the parties to whom the stock was sold. According to him, the assessee did not file any information in response to this letter. He contended that the explanation filed by the assessee regarding the goods imported by M/s. Canon Steels Pvt. Ltd., was false. He further pointed out that the explanation filed by the assessee regarding the marriage of his daughter at the time of reassessment proceedings was contradictory to his explanation filed during the course of original assessment proceedings. According to him, there was no mention of the marriage of his daughter in the explanation filed regarding the seized paper during the course of the original assessment but the explanation filed during the course of reassessment proceedings pertain to the marriage of his daughter. Therefore, he contended that the explanation filed during the course of reassessment proceedings was contradictory to the explanation f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... point for consideration before us is, therefore, whether an addition can be made on the basis of the seized paper which admittedly had been written by the assessee himself. It is also an admitted fact that the Department did not record any statement of the assessee regarding this paper during the course of search. The explanation of the assessee was called for only during the course of regular assessment proceedings. The assessee filed explanation that the paper was nothing except planning and that planning was linked with the marriage of his daughter, Monika. He stated that during September/October 1992, he was planning on this paper keeping in view the ideas of various matrimonial consultants/agents. He also explained that he started purchasing more jewellery as well as property for Monika during the year 1993. He explained that the jewellery referred in the page was already in possession of his wife, himself and the HUF. Thus the assessee filed the explanation regarding the seized paper. The Department rejected the explanation given by the assessee and made the addition on the presumption that the assessee was having undisclosed cash of ₹ 60 lakhs on 26-9-1992. 10. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icient force in the arguments of the learned counsel for the assessee that the assessee was expecting cash of ₹ 60 lakhs sometimes in the months of Septem-ber/October 1992, later on instead of cash, the assessee was sent goods for sales mostly imported by M/s. Canon Steels Pvt. Ltd. The department also could not find any jewellery during the course of search proceedings which had been mentioned in the seized paper. The jewellery found during the course of search was fully explained and the same also tallied with the records of the Department. Therefore, notings on the seized paper do not indicate the actual transactions. The paper in question does not indicate that any transaction had ever been taken place or the cash was available with the assessee because it does not contain any informa- tion as to what was the nature of the transactions. The Department did not bring any evidence on record to corroborate to the allegation that the assessee had entered into any transaction or the assessee was actually in possession of ₹ 60 lakhs. The Department also could not lay its hand on any evidence regarding the investment of ₹ 60 lakhs in any assets or in sales of any prop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion that the consignment sales were correctly made and therefore, he deleted the addition of ₹ 78,82,775 in the reassessment proceedings made in the original assessment for the assessment year 1993-94. 11. The addition in this case has been made mainly on the basis of suspicion which cannot take the place of proof. There was no material on record on the basis of which the Assessing Officer and the learned CIT(A) can come to the conclusion that the entries made in the paper was not a planning for the marriage of the daughter of the assessee. Allahabad High Court in the case of Pushkar Narain Sarraf (supra) relied upon by the learned counsel for the assessee has laid down that Section 132(4A) does not override the provisions of section 68. The presumption arising under sub-section 4A of section 132 of the IT Act, 1961 applies only in relation to the provisional adjudication which is contemplated under sub-section 5 of section 132. Section 132(5) provides for estimation of undisclosed income or the calculation of the amount of tax on the income so estimated and the determination of the amount of interest payable or the amount of penalty imposable in a summary manner. For th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se papers and documents found from the residence of the third party even if such documents contained narration of transactions with the assessee company. The Department could not bring on record any independent evidence to prove that the assessee was having cash of ₹ 60 lakhs available on 26-9-1992. Entries on the seized paper were relevant only for corroborative evidence. The Department should have brought on record some independent evidence as to the trustworthiness of the entries necessary to fasten liability on the assessee. Keeping in view the facts and circumstances of this case and the various cases mentioned above, we are of the considered opinion that the addition made of ₹ 60 lakhs by the Assessing Officer and confirmed by the CIT(A) is not justified. The addition made is, therefore, deleted and the order of the learned CIT(A) is reversed. 12. In the result, the appeal is allowed. Per Shri M.A. Bakshi, Vice-President On going through the order proposed by my learned brother, I am unable to persuade myself to agree to the proposed view. It is a search and seizure case. In the original assessment, the Assessing Officer had made addition of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessing Officer has accepted the transfer of goods from Ludhiana to Bombay merely on the basis that in assessment year 1994-95, the consignment sales have been accepted by the Assessing Officer. The Assessing Officer has conveniently ignored the fact that on the date of search, no entry was found in the books of M/s. Canon Steels Pvt. Ltd. relating to the consignment of goods and transportation through M/s. Shivganga Warehousing Corporation. Though the Assessing Officer has not made any addition in respect of the consignment sales, yet, the addition of ₹ 60 lakhs which is the subject matter of dispute in this appeal is connected with the claim of the assessee relating to the consignment sales. It is, therefore, necessary to consider this aspect of the matter. Moreover, my learned brother has referred to the findings of the Assessing Officer and gave his approval to the said findings I, not being satisfied, record my dissent and hold that the Assessing Officer has not proceeded to make the fresh assessment order in the spirit of the directions of the CIT (Appeals). I am, therefore, unable to subscribe to the view of my learned brother in regard to the manner of assessment made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f ₹ 60 lakhs is the entries made in a diary and not the loose papers. The issue as to whether diary can be construed as books of account is now well-settled by the decision of the case of V.C. Shukla (supra). Since Their Lordships of the Hon ble Supreme Court have held that the entries made in a diary shall be construed as entries made in the books of account, I am of the firm view that provisions of section 68 are clearly attracted in respect of the entries made in the diary. Applying the provisions of section 68, the burden is upon the assessee to explain the entries in the diary to the satisfaction of the Assessing Officer. The Assessing Officer has not been satisfied with the explanation given by the assessee. The CIT (Appeals) has also not been convinced with the explanation of the assessee relating to the entries in the diary. In these circumstances, the addition of ₹ 60 lakhs made by the Assessing Officer is justified in the light of the provisions of section 68 of the I.T. Act. 4. Reference may also be made to the decision of the Hon ble Supreme Court in the case of Chuharmal v. CIT [1988] 172 ITR 250 2 where Their Lordships have held that when a person is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shri M.A. Bakshi, Vice President In view of the difference of opinion between the two Members, the following point of difference is referred to the Hon ble President, Income-tax Appellate Tribunal under section 255 of the I.T. Act for nominating the Third Member:- Whether, on the facts and in the circumstances of the case, the Assessing Officer was justified in making the addition of ₹ 60 lakhs on the basis of the entries made in the diary found during the course of search ? THIRD MEMBER ORDER Per Shri V. Dongzathang, President The following point of difference was referred to me under section 255(4) of the Income-tax Act, 1961 : Whether, on the facts and in the circumstances of the case, the Assessing Officer was justified in making the addition of ₹ 60 lakhs on the basis of the entries made in the diary found during the course of search ? 2. The assessee is an individual. Its previous year is the year ending on 31-3-1993. The return of income was filed declaring total income of ₹ 34,270. The Assessing Officer however, completed the assessment on a total income of ₹ 79,17,040. The Assessing Officer in this case made a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Misc. expenses : 50,000 Diamonds 6 Bangles 3 Tops 1 Set 8,50,000 1 Ring 2 Tops The assessee was confronted with these details. The assessee admitted that the entries in the paper were in his handwriting. However, it was claimed that the actual writings were in the nature of planning to withdraw ₹ 60 lacs from the firms/companies for personal use. He was making a plan to buy jewellery, silver utensils etc. against payment of consignment sales, account M/s. Canon Steels Pvt. Ltd. The Assessing Officer however, did not accept the claim. According to him, the paper in question is a page of diary of 15th November, 1992. That shows that it was written on 15-11-1992. The entries pertain to dates and period prior to the date of writing on 15-11-1992. Therefore, the same cannot be quoted as planning and planning ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... took up the matter in appeal before the CIT(Appeals). The learned CIT(Appeals) also upheld the order of the Assessing Officer and further supported the findings of the Assessing Officer by stating that the assessee was in possession of ₹ 60 lacs and he had incurred an expenditure of ₹ 31,21,400 in between 26-9-1992 to 25-10-1992 i.e., much before the alleged consignment sale of the goods in cash. The assessee was not in a position to prove that this amount was available with him on 26-9-1992 which represented the amount withdrawn by him from known and disclosed sources of income. Having admitted that the said paper was in his own handwriting and such document being found from his own premises, the onus was on him to prove that the entries showing receipt of own money in cash are not real receipts. The learned CIT (Appeals) also fully concurred with the view taken by the Assessing Officer that the entries made on 26-9-1992, that if one is planning to spent an amount in the future, one does not write expenses from 26-9-1992 to 25-10-1992. One could not give the details of jewellery in terms of specific weight and in odd numbers. The learned CIT (Appeals), therefore, held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no evidence regarding investment of ₹ 60 lakhs in any asset or in sales of any property or goods. The Department did not bring on record any corroborative evidence to show that the assessee was actually in possession of ₹ 60 lacs in cash on 26-9-1992. Therefore, the addition made on the basis of the entries by itself is not sufficient to prove the possession of a sum of ₹ 60 lakhs on the said date. The learned Accountant Member, further found that the provisions of section 132(4A) does not override the provisions of section 68 and the presumption arising under sub-section (4A) of section 132 of the Act applies only for the purpose of provisional adjudication which is contemplated under sub-section (5) of section 132 of the Act. Reliance was placed by him on the decision of the Delhi Tribunal in the case of S.K. Gupta 63 TTJ (Delhi) 532. Reliance also was placed on the decision of the Hon ble Supreme Court in the case of V.C. Sukhla (supra) for the proposition that entries in the books of account shall not alone be sufficient evidence to charge any person with liability. Entries found if relevant are only corroborative evidence. Reference was also made to the deci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o. The learned Judicial Member further expressed doubt regarding the nature of the loose paper found which the Accountant Member held that loose papers and documents cannot possibly be construed as books of account regularly kept in the course of business to warrant invoking of provisions of section 68 of the I.T. Act. According to him the decision of the Tribunal in the case of Prarthana Construction (P.) Ltd. (supra) would not be applicable to the facts of the present case. The foundation for the addition of ₹ 60 lakhs in this case is the entries made in a diary and not the loose papers. The issue as to whether the diary can be construed as books of account is now well settled by the decision of the case of V.C. Shukla ( supra). Since their Lordships of the Hon ble Supreme Court held that the entries made in a diary shall be considered as entries made in the books of account, he was of the view that the provisions of section 68 are clearly attracted in respect of the entries made in the diary. He, therefore, held that the addition of ₹ 60 lakhs made by the Assessing Officer is justified in the light of the provisions of section 68 of the Act. The Judicial Member, furt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cision of the Hon ble Supreme Court in the case of V.C. Shukla (supra). The decision of the Hon ble Supreme Court is in connection with section 34 of the Evidence Act. In any case, this issue will not detain us as the Hon ble Supreme Court itself made absolutely clear as to what are books and what are not books at paragraph 18 of the judgment as follows : 18. Book ordinarily means a collection of sheets of paper or other material, blank, written, or printed, fastened or bound together so as to form a material whole. Loose sheets or scraps of paper cannot be termed as book for they can be easily detached and replaced. In dealing with the word book appearing in section 34 in Mukundram v. Dayaram AIR 1914 Nag. 44 : 10 Nag. (44) a decision on which both sides have placed reliance, the Court observed : In its ordinary sense it signifies a collection of sheets of paper bound together in a manner which cannot be disturbed or altered except by tearing apart. The binding is of a kind which is not intended to be movable in the sense of being undone and put together again. A collection of papers in a portfolio, or clip, or strung together on a piece of twine which is intende ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were purchased from outside the books. The books of account tallied with the items found at the time of search on 14-10-1993. In such a case, the contention of the assessee that the entries made on 26-9-1992 was in the nature of planning is more probable. The Assessing Officer did not give any concrete proof to reject the explanation offered by the assessee. 14. The Hon ble Vice-President (Judicial Member) expressed his doubt about the acceptance of the findings given by the Assessing Officer in regard to the consignment sales. However, that issue has been concluded and it is no more a point for discussion or debate at the stage of second appeal. Mere doubt about that finding will not change the facts that the sales were genuine. The Tribunal can only proceed on the basis and give a specific finding in regard to the entry of 26-9-1992 at page 37 of Annexure A-4. The learned Accountant Member fully analysed and found that there was no supporting evidence to hold that the entry represent hard cash. He could not find any evidence to show that the assessee invested in any movable or immovable property. On the basis of these findings, he held that the addition was on mere suspicion w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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