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2016 (7) TMI 901 - ITAT JAIPUR

2016 (7) TMI 901 - ITAT JAIPUR - TMI - Penalty imposed and sustained u/s. 158BFA (2) - Held that:- As per Section 158BFA(2) no incriminating material found or seized from the possession of the appellant during the course of proceedings on the basis of which the addition was made. Even the basis for filing the block return has shown the undisclosed income of ₹ 4,52,220/- and tax liability as ₹ 2,84,889/- has been change. Subsequent to the passing of the assessment order, the matter wa .....

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is of direction issued by the ld CIT(A). In our view, the basis for addition made by the A.O. was on account of diaries and entries made in the name of Bhandari on the assumption that Mr. Bhandari was the benami of the appellant. However, this very basis was subsequently modified by the ld CIT(A) and by the Tribunal , whereby both the authorities instead of deciding the quantum addition on the basis of Benami transaction in the name of Bhandari , have estimated the income of the assessee on the .....

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y is no more sustainable in the eyes of law. - Also we have gone through the order passed by the ld A.O. on the quantum proceeding, no satisfaction has been mentioned by the ld A.O. in the assessment order before issuing show cause notice and referring the matter for initiation of penalty.The satisfaction for imposition of penalty is required to be recorded by the ld A.O in the assessment order. The ld A.O. has determined the undisclosed income at ₹ 67,77,020/- as against ₹ 4,52, .....

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delete the same - Decided in favour of assessee. - ITSSA No. 01/JP/13 - Dated:- 14-7-2016 - SHRI BHAGCHAND, AM & SHRI LALIET KUMAR, JM For The Assessee : Shri Naresh Gupta (Adv.) For The Revenue : Shri Kalika Singh(CIT) ORDER PER: LALIET KUMAR, JM This is an appeal filed by the assessee against the order of ld. CIT(A) (Central), Jaipur dated 28.01.2013 for the A.Y. 1997-98 to 2003- 04, wherein the assessee has taken the following grounds of appeal: (1) That the ld. Assessing authority (ACIT, .....

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ddition confirmed by the ld.CIT(A) and by the Hon ble ITAT. (2) That the addition to income ₹ 10,63,184/- was confirmed finally by the ld. ITAT after providing the relief ₹ 8,50,000/-. As per law the tax amount @ 60% on this addition is calculated to ₹ 6,37,911/-. The penalty can be either Nil or 100% of the tax amount. The ld. AO imposed penalty @ 156.76% which is much even more than the 100%. The appellant is in appeal before the Hon ble ITAT for seeking total relief from the .....

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s thereof with the appellant. 2(i) That the assessee, being an individual, is a finance broker, earning commission from finance providing advances/loans. The assessee has been deriving his income from brokerage, speculation and interest etc. 3. That during the search & seizure operation conducted on 10th February, 2003 on the premises of third party, namely, M/s Ashish International Group (in short, AI Group ), the revenue authorities alleged to have found some loose papers, Cefari note book .....

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lant-assessee or any person of appellant s name. He further stated that all the entries in the loose papers, diaries and other computer data in name of BH in fact do not belong to Shri Bhagwat Sharan Bhandari. He further stated that he did not take ₹ 18 lacs from Shri B. S. Bhandari and no promissory note was given to him. 4. A search and seizure proceeding under Section 132 of the Act of 1961 was also carried out at the premise of the assessee on 10-02-03 but nothing incriminating, releva .....

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ta, assumed and presumed that the entries of receipt of advances found in the name of BH in loose papers so seized from the possession of III person-AI Group, belonged to appellant-assessee on the ground that Shri Bhagwat Sharan Bhandari (Mr. Bhandari) was the employee and relative of the assessee. In response to the show cause notice issued by the AO, the assessee, vide its reply dated 16-02-2005 denied such entries and financial transactions with AI Group or any relation thereof with him or hi .....

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any relation thereof with him. 7. However, the AO vide its assessment order dated 28-02-2005 passed u/s. 158BC of the Act of 1961 contrary to the statement of Sh. Vinay Gupta recorded on oath and also the reply statements of the appellant-assessee and Sh. B.S. Bhandari as submitted hereinbefore and without proving nexus with the appellant of such loose papers, so seized from III person, and entries contained therein, alleged the same belonged to the appellant-assessee. The AO assumed that the e .....

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n of ₹ 53,82,768/- in the hands of appellant-assessee on substantive basis and in the hands of Sh. Bhandari on protective basis. The additions so made by the AO consists of the following (APB - 107) - Particulars Amount (Inner Col) Rs On Account of Ashish International Group Total ₹ 53,82,768/- as per following break up (grounds of appeal Nos.1 to 7 (a) on account of alleged undisclosed interest on alleged loan ₹ 18,00,000/- to Shri Vinay Gupta 11,34,000/- (b) on account of all .....

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n case of Shri B. S. Bhandari wherein the revenue had accepted that Shri B. S. Bhandari had not given any money to Shri Vinay Gupta and that there was no transaction of ₹ 18 lacs on the strength of the alleged promissory note and also the material on record, deleted all the additions so made by the AO. The CIT (A), during the appellate proceedings, directed the appellant-assessee to work out the peak on the basis of the remaining loose papers found from the possession of AI Group. And it w .....

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preferred an appeal before the Income Tax Appellate Tribunal, Jaipur Bench Jaipur (in short, ITAT or Tribunal ). This Hon ble Tribunal having perused the material on record and also the statements of Shri Vinay Gupta so quoted by the CIT (A) and also the statements of the appellant-assessee so observed by the AO, held that the addition of ₹ 8,50000/- made by the ld. CIT (A) was not justified. Accordingly, this Hon ble Tribunal, vide its order dated 13.04.2011, deleted the addition of ͅ .....

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BFA(2) of the Act of 1961 and imposed the penalty vide its order dated 25.10.2011 assuming that the appellant-assessee has admitted addition of ₹ 10,13,184/- worked out by himself as peak credit before the CIT(A) the finding of the A.O. in assuming admission of the appellant is contrary to record as apparently, the appellant never admitted such addition, rather, the peak credit was worked out only on the directions of the CIT(A) as per record made available to him. The relevant findings of .....

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umed the undisclosed income of the appellant without proving nexus of the loose papers or diaries so seized from III person AI Group. Though, the CIT(A) admitted that the provisions of Section 158 BFA(2) of the Act of 1961 are analogous to the provisions contained in Section 271(1) (c) of the Act of 1961; however, the CIT(A) did not record the findings proving contumacious conduct, concealment, furnishing of inaccurate particulars of income and the evasion of tax positively on the part of appell .....

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in respect of concealment of income or furnishing the inaccurate particulars of income, it may be stated that the AO has clearly mentioned that the penalty proceedings u/s 158BFA(2) are initiated against the undisclosed income determined in assessment order. As penalty was very well initiated u/s 158BFA(2) while completing the assessment therefore inherently the satisfaction of the AO was contained and the intention of the AO was clearly manifested that the appellant has not disclosed its income .....

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nnot be sustained. As regards another objection of the AO that at any stage the appellant has not accepted the finding of the AO or appellate authorities and that such finding is not supported by any incriminating documents, it may be noted that the findings of the AO that income arising on the basis of transactions recorded in the books of accounts of M/s Ashish International in the name of Bhandari and Mr. Bhandari was benami of his appellant is confirmed by the first appellate authority and s .....

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cannot be accepted. Another main objection of the appellant is that all such additions has been made on the basis of estimation in as much as additions made by the AO amounting to ₹ 53,82,768/- were substantially reduced by the first appellate authority to ₹ 19,83,184/- and further by Hon ble ITAT to ₹ 10,63,194/-, it may be stated that the first appellate authority has confirmed one addition of ₹ 10,63,184/-on the basis of peak income/ investment which was determined by .....

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lant and there cannot be any dispute on such quantum amount. The another addition of ₹ 8,50,000/- made by the first appellate authority was not supported by the Hon ble ITAT and therefore for imposition of penalty only such quantum of ₹ 10,63,184/- has only been considered. The important point to be noted is that even if such undisclosed income has been determined by the appellant t the direction of first appellate authority on the basis of peak it cannot said that no such undisclose .....

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al and Mr. Bhandari essentially and strongly indicated that income was arising/ earned by the appellant by way of making such transactions in the name of Mr. Bhandari who happened to be close associate/employee of the appellant. Such strong corroborative evidence must have convinced the appellant not to defend such issue before the Hon ble ITAT. It is not the case that the appellant did not defend such issue just to purchase or to avoid any further litigation. Such observation also find strong s .....

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ted that the Hon ble Supreme Court in the case of Union of India vs. Dharmendra Textile Processors & Ors (2008)306 ITR 270 has held that the explanation appended to section 271(1)(c) of the IT Act indicate the element of strict liability on the assessee for concealment for giving inaccurate particulars of income. The Hon ble court has held that penalty u/s 271(1)(c) of the IT Act is a civil liability and wilful concealment is not an essential in gradient for imposition of penalty us/ 271(1)( .....

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en then levy of penalty is not automatic and requirement of section 271(1)(c) should be satisfied i.e. either there should be concealment of income or furnishing of inaccurate particulars of income. The admittedly the provisions of section 158BFA(2) are analogous to provisions of section 271(1)(c) and with the confirmation of addition amounting to ₹ 10,63,184/- by the first appellate authority as well as second appellate authority the concealment of income/undisclosed income to such extent .....

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t is confirmed by the first appellate authority as well as the Hon ble ITAT, the case of the appellant was definitely covered u/s 158BFA(2) in respect of undisclosed income to the extent of ₹ 10,63,184/-. Therefore the AO has rightly imposed such penalty amounting to ₹ 10 lacs. The action of the AO is accordingly confirmed. 14. The ld. AR of the appellant submitted that as the entirety of the facts, evidences and circumstances of found and observed in quantum proceedings are relevant .....

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ssioner of Income Tax (Appeals) (in short, CIT(A) ) and order dated 13-01-2011 of this Hon ble Tribunal passed in quantum proceedings. It is settled law that before the penalty can be imposed, the entirety of circumstances of the quantum proceedings must reasonably be point to the conclusion that the assessee had consciously concealed the particulars of his income or had furnished inaccurate particulars to evade tax willfully or whether the additions made by the Assessing Officer (in short, AO ) .....

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party, as reduced by the appellate authorities, can be said to be the assessment of undisclosed income within the meaning of section 158BB of the Act of 1961 wherein the assessment has been made u/s. 158BC and not u/s. 158BD of the Act of 1961. In the case of Commissioner of Income-tax v. Anwar Ali reported in [1970] 76 ITR 696 (SC) at page No. 701 the Hon'ble SC has held "...Before penalty can be imposed the entirety of circumstances must reasonably point to the conclusion that the dis .....

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ed the additions. The AO imposed the penalty on the reasons recorded in assessment order through which the amount was added in the hands of assessee. On appeal, the penalty was confirmed. On further appeal before the ld. Tribunal the main grievance of the assessee was that there has been no independent consideration by the Income-tax Officer or the Appellate Assistant Commissioner whether even on the basis that there has been an omission by it to include certain items in its return, such omissio .....

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is clear that penalty proceedings being penal in character, the department must establish that the receipt of the amount in dispute constitutes income of the assessee. Apart from the falsity of the explanation given by the assessee, the department must have before it before levying penalty cogent material or evidence from which it could be inferred that the assessee has consciously concealed the particulars of his income or had deliberately furnished inaccurate particulars in respect of the same .....

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es of third person, namely, AI Group; and (A) Loose papers, CEFARI diaries and the computer printout or data were seized from the possession of such AI Group; and (B) The addition relevant to the penalty impugned in present appeal was made and sustained drawing inferences from the loose papers, Cefari Diaries and other computer data found and seized from the possession of AI Group; and (C) As per revenue itself in such loose papers, there was no name appearing of the appellant-assessee Madho Das .....

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to question No.10 has categorically stated that he does not have any knowledge about the relation of appellant and Shri Bhandari; and (G) Even in answer to question No.11, Shri Vinay Gupta categorically deposed that all the entries in the name of Shri Bhandari, in fact, do not belong to Shri Bhandari, rather belong to some other persons also; and (H) During the search operation conducted in the premises of the appellant-assessee, no material was found and seized or collected supporting the addit .....

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roduced herein- below for the ready reference. The appellant-assessee, in its reply dated 16-02-2005, categorically and specifically denied all such transactions appearing in such loose papers and diaries and material collected during such search operation conducted on such third person AI Group and denied the financial relations with the AI Group either with himself or Shri Bhandari. The statement of the assessee made vide his reply dated 16-02- 2005, as quoted in assessment order for ready ref .....

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his fact I have already stated in my statements on oath before you on dated 10/02/05. 2. My brother in law Sh. Bhagwat Sharna Bhandari has also stated the same facts in his statements on oath before on you dated 31/01/2005 and 8/02/2005 that whatever transactions as has been found entered in seized papers/books or other records of and found from so called M/s Ashish International group do not have any financial relations with him or with me or with my firm M/s M.D. Bangard. 3. As far as your sta .....

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eized papers from M/s Ashish International group provided to us along with the above referred notice. 4. However, we agree with the transactions of ₹ 19497/- and ₹ 4614/- given in the last table of your above referred table which are pertaining to purchase of wooden material i.e. plywood etc. 5. We strongly object for your making addition to my income based on the transactions as referred to in your above letter and humbly request that when I do not have any relation with the transac .....

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basically on loans. Had there been our own funds available to finance then why should we have taken loans for purchase of agriculture land, this alone is conclusive proof that the transactions do not have any relations with me and Sh. B.S. Bhandari. 6. It appears that M/s Ashish International group have wrongly used the name of Sh. B.S. Bhandari ( if said Sh. Bhandari is my brother in law) for the transactions as referred to in your letter under reference. Why has M/s Ashish International group .....

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of AI Group and denied any financial transaction thereof in this regard. The relevant part of the statement so given by Sh. B.S. Bhandari vide his letter dated 22-02-2005, as quoted in assessment order itself in Para 10.12 (APB 79 to 80), is being reproduced here-in-below for ready reference. Regarding Page No.21 of annexure A-5 found from the premises of M/s Ashish International group (as per your above referred letter) Page No.21 is said to be a calculation of various amount, the total appeari .....

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there to make the fair copy of the paper. As a matter of courtesy I copy the entries on another paper and it appears that the same copies paper was found in search by your department from the said M/s Ashish International group. I state the hand writing on the paper appears to be of mine but the contents of the paper has no relation with me. Since I do not have any kind of connection with the contents of the paper, I can not explain anything about the entries therein including the source etc. T .....

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hich is corroborated by the material seized from the third person being not containing the name of appellant-assessee Madho Das Bangard at anywhere. Such loose papers or entries contained therein do not belong to appellant is also corroborated by the statement of Shri Bhandari filed vide his reply dated 22-02-2005. Purchases of wooden material by the appellant were through Cheques of ₹ 19,497/- and ₹ 4614/- which were explained well during the quantum proceedings. As per answer to qu .....

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relative and employee of the appellant. There was no material with the A.O on record to hold even Shri Bhandari to be benami person of appellant-assessee; rather, the findings of the A.O are contrary to record. After coming into operation of The Benami Transactions (Prohibition) Act, 1988, the theory of benami is foreign concept in the context of the Indian Laws unless the case falls in the exceptions provided therein section 3 & 4 of that Act. The burden to prove that the transactions are .....

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reproduced herein below:- …… The Transaction made in the name of Bhandari, can not be attributed to the transaction made by Sh. B. S. Bhandari in its individual Capacity as Sh. Bhandari is a full time employee with the assessee. Sh. Bhandari is a person of no means and the only source of his lively hood is the salary which he gets from your concern. Therefore it is required that the transactions made in the name of Bhandari should be consider in the hands of the assessee on substan .....

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on was sustained on preponderance of probabilities. The relevant findings of CIT (A) (relevant at APB - 120-121) are reproduced here in below:- 4.34 Conclusion:- Addition of ₹ 11,34,000/- on account of undisclosed interest on such loan of ₹ 18,00,000/- to Shri Vinay Gupta I. The Ld counsel has filed the copy of the assessment order dated 13/2/2004 passed by the ITO Ward (1) (1) Jaipur in the case of Shri B S Bhandari, who had accepted in this case that he (Shri B S Bhandari) had not .....

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ri Loan, Bhandari Ji Account, Transfer Charges, Interest paid Account, Bh. Comm) and again addition of ₹ 5 lac on account of interest and 1.13 lac on account of undisclosed transfer charges. The learned counsel expressed his difficulty in understanding the basis of various additions and also peak working. In view of the above, the assessing officer was requested to find out the relevant papers and supply them to the appellant on the basis of which various additions were made and how the wo .....

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the peak of the transactions mentioned in the above (i) to (vii) heads in the seized files mentioned in the assessment order and copy provided to the appellant. The appellant calculated the peak at ₹ 10,631.84 on 29.11.2002 this amount is based on the code figure of M/s Ashish International group and would be ₹ 10,63,184/-. The Ld A/R stated that in this peak he has not considered entries which are reflected on page 77 which is also bhandari loan account for the period of 1/4/2001 to .....

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₹ 1913184/- shall be added in the income on account of transactions with ashish International group and the following additions made in the block period income by the learned A.O. are deleted On account of alleged undisclosed loan to Ahsish International Group Rs.18,65,000/- On account of alleged undisclosed Credits appearing in Bhandari Ji Account Rs.17,12,100/- On account of alleged undisclosed transfer charges Rs.1,13,898/- On account of alleged undisclosed interest Rs.5,14,982/- This d .....

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red to work out the peak and the peak was worked out at ₹ 10,63,184/-. Thereafter, the ld. CIT (A) by observing that credit of ₹ 3,50,000/- on 2.7.2001 and ₹ 5,00,000/- is in the name of Mukesh (PC), could not be explained. Therefore, these entries are also liable to be added in the hands of assessee. Accordingly, a further addition of ₹ 8,50,000/- was made by ld. CIT(A). In this way total addition was sustained by ld. CIT(A) at ₹ 19,13,184/-. Since there is a clear .....

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artment. … In view of the above facts and circumstances, apparently and patently, there was no admission of the appellant. Even, about the addition made on the basis of peak credit and the peak credit was worked out by the appellant being a bonafide litigant just to honor the directions of the CIT (A). Even, in the penalty proceedings, the CIT (A) at page 54 of its order has observed thus:- …..I have carefully considered all the contentions raised by the appellant as also the findi .....

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as essentially pertaining to the appellant. ………………………………The important point to be noted is that even if such undisclosed income has been determined by the appellant at the direction of first appellate authority on the basis of peak it cannot said that no such undisclosed income was detected in the hands of the appellant. ……………………………&hell .....

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is of peak worked out by the appellant on the directions of the first Appellate Authority; however, the CIT(A), assumed the undisclosed income of the appellant without proving nexus of the loose papers or diaries so seized from III person AI Group with the appellant. There was no material with the CIT (A) or the AO to hold that the transactions appearing in loose papers found and seized from the AI Group pertains to the appellant. The findings of the A.O. and CIT (A), being perverse in imposing .....

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revenue had accepted that Shri Bhandari had not given any money to Shri Vinay Gupta. CIT (A) deleted all the additions made by the A.O. Further, the CIT (A) having adopted different methodology, directed the assessee to work out the peak credit and, on such peak credit, CIT(A) made the addition. It is pertinent to mention here that the additions made afresh by the CIT (A) regarding entry found in the name of Shri Mukesh (PC), had been deleted by this Hon ble Tribunal vide its order dated 13-01-2 .....

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hands of appellant and on protective basis in the hands of Mr. B.S. Bhandari. Further, as stated hereinbefore, in case of Shri B.S. Bhandari, as observed by the CIT (A), the revenue had accepted that Shri B.S. Bhandari had not given any money to Shri Vinay Gupta that fact also proves the addition made and sustained was merely on hypothetical inferences drawn from illusory information gathered from the possession of III person. The meager additions were later sustained by the CIT(A) only on the g .....

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ty so imposed, otherwise also, is not sustainable in view of the fact that the satisfaction to levy penalty has to be recorded by the revenue regarding additions on which the penalty has been proposed. In the instant case, apparently when all the additions made by the A.O were deleted by the CIT (A), no penalty can be initiated on such additions in view of the settled law in this regard. It was the ld. CIT (A) who having exercised the powers conferred to CIT (A) under Section 251 of the Act of 1 .....

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on estimate or preponderance of probabilities is proved by the fact that the third party statement has no relevance against the appellant in absence of cross-examination; though in the present case, in such third party statement, otherwise also, nothing incriminating has been alleged or stated against the appellant. Further, otherwise also, the loose papers and loose diaries or articles seized from the possession of third person have no evidentiary value against the appellant in view of Section .....

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ourt and High Courts: - In the case of CBI Vs. V.C. Shukla, reported in AIR 1998 SC 1406, the CBI authorities searched the premise of Jain Brothers and found and seized diaries and some loose papers from the possession of Shri J.K. Jain. Having decoded the entries contained therein, the CBI alleged Hawala transactions and alleged number of politicians, bureaucrats and executives to have involved in such hawala transactions. The CBI booked as many as 34 persons on the basis of such loose papers o .....

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that loose papers are not books of account maintained in regular course of business; and in Para 19 to 31, having considered plethora of precedents and case laws of the land, held the same to have no evidentiary value being not the books of account or being not maintained the regular course of business. Further, regarding entries found in the loose papers or otherwise in material possessed by third person, the Hon ble Supreme Court in Para 34 of that judgment observed that 34. The rationale behi .....

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dent evidence to fasten him such liability has been provided for in Section 34 of the Evidence Act, 1872, by incorporating the words such statements shall not alone be sufficient to charge any person with liability. The Hon ble Supreme Court in that case of CBI Vs. V. C. Shukla (Supra) relied on the case of Yeshuvadayan Vs. Subba Naicker, reported in AIR 1919 Madras 132, wherein it has been observed that S. 34, Evidence Act, lays down that the entries in books of account, regularly kept in the c .....

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se 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 facts 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 of account if true. While concurring with the above observations the other learned judge stated as under: ..if no other evidence besides the accounts, were given, however st .....

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nce of their trustworthiness, fix a liability upon a person. Keeping in view the above principles, even if we proceed on the assumption that the entries made in MR 71/91 are correct and the entries in the other books and loose sheets (which we have already found to be not admissible I 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 .....

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he above witnesses cannot be independent evidence under Section 34 as against the above two respondents. So far as Shri Advani is concerned Section 34 would not come in aid of the prosecution for another reason. 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. In the case of State of Kerala Vs. K.T. Shaduli G .....

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. A Larger Bench of the Hon ble Supreme Court in Para 5 of the case held that in absence of the crossexamination, the entries of third person, cannot be believed to be true against assessee. 5. The second part of her proviso lays down that where a return has been submitted, the assessee should be given a reasonable opportunity to prove the correctness or completeness of such return This requirement obviously applies at the first stage of the enquiry before this Sales Tax Officer comes to the con .....

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permissible under law./ The usual mode recognized by law for proving fact is by production of evidence and evidence includes oral evidence or witnesses. The opportunity to prove the correctness or completeness of the return, would, therefore, necessarily carry with it the right to examine witnesses and that would include equally the right to cross-examine witnesses examined by the Sales Tax Officer. Here, in the present case the return filed by the assessee appeared to the Sales Tax Officer to .....

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nd completeness of his return only by showing that the entries in the books of account of Hazi UsamKutty and other wholesale dealers were false, bogus or manipulated and that the return submitted by the assessee should not be disbelieved on the basis of such entries, and this obviously, the assessee could not do, unless he was given an opportunity of cross-examining Hazi UsmanKutty and other wholesale dealers with reference to their accounts. Since the evidentiary material produced from or produ .....

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sessee in both cases applied to the Sales Tax Officer for summoning Hazi Usman kutty and other wholesale dealers for cross-examination, but his application was turned by the Sales Tax Officer. This act of the Sales Tax Officer in refusing to summon Hazi Usmankutty and other wholesale dealers for cross-examination by the assessee clearly constituted infraction of the right conferred on the assessee by the second part of the proviso and that vitiated the orders of assessment made against the asses .....

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a Devi Khetan reported in 2013 352 ITR 482 (Madras), the Revenue Authorities assumed higher turnover of the assessee than that disclosed by him in his books of account on the basis of the information collected in search operation conducted in case of third person. In Para 8, the Hon ble Court held thus:- 8. The Tribunal, therefore, rightly found that the Department could not have made the addition merely on the basisi of the statement of third parties. Consequently, the Tribunal set aside the or .....

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enue, as stated hereinbefore, whatever the additions so made or sustained at reduced figure, were on preponderance of probabilities and on estimate basis. Otherwise also, the additions sustained by the ld. CIT (A) and this Hon ble Tribunal do not even warrant imposition of penalty under Section 158 BFA(2) of the Act of 1961 in law; inasmuch as, there was no assessment of undisclosed income under section 158BC read with section 158BB of the Act of 1961. Nevertheless, the assessment of the appella .....

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t of 1961. With regard to the impugned penalty, there is no determination of undisclosed income under Clause (c) of Section 158 BC read with Section 158 BB of the Act of 1961. Accordingly, Section 158BFA (2) of the Act of 1961, being not attracted at all in any manner on the estimated addition, the penalty is liable to be cancelled on the count alone. It appears that the revenue has made the additions merely on the basis of the fact that the AI Group had approached the Settlement Commissioner by .....

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long to its own income of AI Group; inasmuch as in answer to question No.11, as reproduced hereinbefore, Shri Vinay Gupta has categorically admitted that all the entries found in loose papers from their possession, do not belong to Mr. Bhandari. The possibility of escaping from the tax liability by the AI Group could not be ruled out, which aspect had totally been ignored by the revenue in quantum proceedings; and the same being having relevance direct nexus with the impugned penalty relevant to .....

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ected financial transaction of the JMD Group with the assessee. However, in search statement, the personals of JMD Group stated that they did not know the assessee and his name was appearing in books of account, as instructed by broker. Except some loose papers denoting name of assessee, no other evidence was against assessee; however, assessee surrendered ₹ 8 lakh by itself to avoid litigation. Nevertheless, the revenue imposed penalty on such surrendered amount, based on such loose paper .....

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he basis of surrender does not mean addition on the basis of search material and so the penalty under Section 58 BFA cannot be imposed. 28. This provision clearly stipulates that the undisclosed income of the block period has to be determined or computed "on the basis of evidence found as a result of search or requisition of books of account or other documents and such other materials or information as are available with the Assessing Officer and relatable to such evidence." This court .....

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e assessment for the block period can only be done on the basis of evidence found as a result of search or requisition of books of account or other documents and such other materials or information as are available with the Assessing Officer and relatable to such evidence. It is, therefore, clear that the undisclosed income, which is to be determined under Chapter XIV-B, has to be determined on the basis of evidence discovered during the search. It is obvious that where the computation of undisc .....

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a pre-condition for the imposition of penalty under section 158BFA(2) is that there must be a determination of the undisclosed income by the Assessing Officer under clause (c) of section 158BC of the said Act. If this is not satisfied, then there would be no question of imposing any penalty. Nevertheless, as admitted by the CIT (A) that the provisions of Section 158BFA (2) of the Act of 1961 are analogous to the provisions contained in Section 271(1)(c) of the Act of 1961, the revenue has utterl .....

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n record. The penalty under Section 158BFA(2) is discretionary and not mandatory; and further circumscribed by the limitations imposed under the statue vis-à-vis to prove the ingredients of Section 271(1) (c) of the Act of 1961. Appellant though not admitted the additions so sustained against him, however, by itself in order to avoid protracted litigation, has paid tax at the rate of 60% plus surcharge on such reduced additions so made and sustained on preponderance of probabilities and o .....

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earned counsel for the appellant and examined the impugned order and other documents, placed on record. 9. So far as the case law referred to by the learned counsel for the appellant is concerned, it is sufficient to mention that the Hon'ble apex court in Union of India v. Dharamendra Textile Processors [2008] 306 ITR 277 (SC) ; [2008] 231 ELT 3 (SC), was dealing with the provisions of the Central Excise Act, 1944, and the learned counsel for the appellant is unable to point out that the pro .....

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l and by a reasoned order, both came to a conclusion that additions are based on estimation only. Afact or allegation based on estimation, cannot be said to be correct only, it can be incorrect also. Therefore, in the facts and circumstances of the case, penalty was wrongly imposed by the Assessing Officer. In these circumstances, we find that the judgment of the hon'ble apex court, referred to by the learned counsel for the appellant, is not applicable, in the facts and circumstances of the .....

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at ₹ 2,02,284. The assessee in his block return had declared the undisclosed trade debtors at ₹ 96,71,194. The AO accepted the total trade debtors on the basis of trial balance prepared on search on the basis of books of account found at ₹ 2,48,93,060. The AO allowed the claim of ₹ 4,63,000 on account of bad debts on the basis of affidavit and also allowed the benefit of ₹ 19,52,149 for the debit balance representing payments made to the suppliers or services render .....

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the facts and circumstances of the case has estimated the return of defective and damaged goods at ₹ 1,10,81,250. The finally sustained addition on account of trade debtors at ₹ 2,02,284 is thus based on estimation. Regarding addition of ₹ 44,421 on account of bank balance, the explanation of the assessee remained that it was due to bona fide mistake of the assessee since the photocopy provided by the Department was not clear. Considering these material aspects of the case in .....

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in this regard, the AO was not justified in imposing the penalty. The first appellate order is thus upheld. In the case of CIT Vs Satydndra Kumar Doshi reported in (2009) 315 ITR 172 (Raj), the Hon ble High Court in Para 10 to 12 held that the penalty under Section 158BFA (2) is not mandatory or automatic. It has been held that from the plain reading of Section 158BFA(2), it does not appear that in all the cases where the undisclosed income is determined by the Assessing Officer under Clause (C) .....

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so enumerated will attract the provision of penalty automatically. In the case of CIT Vs Dodsal Ltd. reported in (2009) 312 ITR page 172 (Bom.), the Hon ble Bombay High Court also held that the penalty under Section 158 BFA (2) is discretionary and not mandatory. The discretion applied by the ITAT in deleting penalty, does not call for interference for the reasons so recoded. Against the judgment of the Bombay High Court, the SLP filed by the Revenue has been dismissed by the Hon ble Supreme Co .....

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ndisclosed income of ₹ 4,52,220/-and tax liability thereon comes to ₹ 2,84,899/-. As per column 23 of the block return you have shown balance tax and interest payable is Nil while perusal of the return it came to notice that you have not enclosed any proof of payment of tax liability. In case you have already paid tax, furnish the evidence of the same. Your attention is invited to the provisions of section 158 BFA (2) which reads as under:- 2) The Assessing Officer or the Commissione .....

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tion 158BC; (ii) the tax payable on the basis of such return has been paid or, if the assets seized consist of money, the assessee offers the money so seized to be adjusted against the tax payable; (iii) evidence of tax paid is furnished along with the return; and (iv) An appeal is not filed against the assessment of that part of income which is shown in the return: Provided further that the provisions of the proceeding proviso shall not apply where the undisclosed income determined by the Asses .....

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nalty U/s 158BFA(2) for the income disclosed in the return. As per Section 158BFA(2) of the Act as mentioned in the foregoing paragraphs in the submissions of the assessee. No incriminating material found or seized from the possession of the appellant during the course of proceedings on the basis of which the addition was made. Even the basis for filing the block return has shown the undisclosed income of ₹ 4,52,220/- and tax liability as ₹ 2,84,889/- has been change. Subsequent to t .....

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ent determined by the assessee himself on the basis of direction issued by the ld CIT(A). In our view, the basis for addition made by the A.O. was on account of diaries and entries made in the name of Bhandari on the assumption that Mr. Bhandari was the benami of the appellant. However, this very basis was subsequently modified by the ld CIT(A) and by the Tribunal , whereby both the authorities instead of deciding the quantum addition on the basis of Benami transaction in the name of Bhandari , .....

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