TMI Blog2014 (10) TMI 938X X X X Extracts X X X X X X X X Extracts X X X X ..... ence would have been found. If the assessee had earned income, he would have either spent it by way of consumption or would have created investment. No undisclosed investment to the extent of ₹ 5.30 crores was found from the premises of the assessee. Even no evidence or material was found which may prove that the assessee had incurred the expenditure to that extent. It is a settled law that no addition can be made merely on the basis of surmises, assumption or presumption. Supposition, however strong it may be, it cannot take the place of actuality. It is a known fact that during the course of search the Revenue forces the assessee to confess undisclosed income even if the assessee had not earned such income or assessee had no source of earning income to that extent. This fact has been even admitted by the Central Board of Direct Taxes and therefore they have issued instructions to their officers that no attempt should be made to obtain confession forcefully. - Decided in favour of assessee. Assessment of gross profit on the purchases - Held that:- Since the assessee has accepted that he was assisting these concerns in procuring the order and the assessee has got income on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of this paper, Tilhansangh has been mentioned. Figure of 4,46,000 arrived at by multiplying 20,000 by 22.3 is there. 30 per cent. thereof is mentioned 1,33,800. Lease rent-4014, security deposit of 12,042 and development of 1,55,200 is mentioned and subsequent to that the figure of 1,65,356 is mentioned. Against under hand AKVN 35,000 is mentioned and 2L is mentioned. This paper does not contain any date. It is also not clear in whose handwriting this paper is. With reference to question No. 10 the assessee explained that this official commission represents for filing up DIC, LVN and AKVN. The question was asked with regard to this paper but this paper does not contain the figure of ₹ 2,35,000. No addition in respect of this figure can be made by the Assessing Officer. In these facts, we set aside the order of the Commissioner of Income-tax (Appeals) and delete the addition. Cash given by the assessee to Gaurav Sharma - Held that:- There is no relationship between Gaurav Sharma and Ashok Nanda. No person would like to pay taxes on the income until and unless the income belongs to him. It is a settled law that suspicion, howsoever strong it may be, it cannot take the place ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ming the addition of ₹ 1,08,62,711 being the undisclosed profit of Shri Umesh Kajve Prop. M/s. Netam Industries and M/s. Chhattisgarh Pharmaceuticals in the hands of the assessee substantively without considering the explanation offered by the assessee that the aforesaid income exclusively belongs to Shri Umesh Kajve and not to the asses see. The learned Commissioner of Income-tax (Appeals) before rejecting the explanation of the assessee must ought to consider that Shri Umesh Kajve is regularly assessed to tax before the search and has his own PAN, Sales Tax No. and Drug Licence No. and during the course of search no any document was found which could form the basis that Shri Umesh Kajve is only the name lender and income actually belongs to the assessee. 2. That on the facts and in the circumstances of the case, the learned Commissioner of Income-tax (Appeals) erred in giving relief of ₹ 13,849 out of the total addition of ₹ 1,08,76,560 and thereby confirming the addition of ₹ 1,08,62,711 in the hands of the appellant being undisclosed profit of Shri Umesh Kajve Prop. M/s. Chhattisgarh Pharmaceuticals. It is submitted that the method of dete ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 373/Indore/2012 : 1. That on the fact and in the circumstances of the case, the learned Commissioner of Income-tax (Appeals) erred in confirming the addition of ₹ 2,48,02,158 (including the income of ₹ 86,681 as shown in the original return of Shri Umesh Kajve) being the undisclosed profit of Shri Umesh Kajve Prop. M/s. Netam Industries and M/s. Chhattisgarh Pharmaceuticals in the hands of the assessee substantively without considering the explanation offered by the assessee that the aforesaid income is exclusively belongs to Shri Umesh Kajve and not to the assessee. The learned Commissioner of Income-tax (Appeals) before rejecting the explanation of the assessee must ought to consider that Shri Umesh Kajve is regularly assessed to tax before the search and has his own PAN, Sales Tax Number and Drug Licence No. and during the course of search no any document was found which could form the basis that Shri Umesh Kajve is only the name lender and income actually belongs to the assessee. 2. That on the facts and in the circumstances of the case, the learned Commissioner of Income-tax (Appeals) erred in giving relief of ₹ 1,05,684 out of the total a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a trading concern and particularly in Government supply business where the sale is undisputed, the profit should be at reasonable percentage. 3. That on the fact and in the circumstances of the case, the learned Commissioner of Income-tax (Appeals) erred in confirming the addition of ₹ 17,28,61,528 (including the income of ₹ 6,26,528 as shown in the original return of Shri Satyendra Sahu) being the undisclosed profit of Shri Satyendra Sahu Prop. M/s. Neptune Remedies in the hands of the assessee substantively without considering the explanation offered by the assessee that the aforesaid income is exclusively belongs to Shri Satyendra Sahu and not to the assessee. The learned Commissioner of Income-tax (Appeals) before rejecting the explanation of the assessee must ought to consider that Shri Satyendra Sahu is regularly assessed to tax before the search and has his own PAN, Sales Tax Number and Drug Licence No. and during the course of search no any document was found which could form the basis that Shri Satyendra Sahu is only the name lender and income actually belongs to the assessee. 4. That on the facts and in the circumstances of the case, the learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e above seized material is not purchases belonging to Netam Industries but prima facie it appears that it is a list of material to be supplied. Thus, the addition made is unjust, unfair and bad in law. 5. That on the facts and in the circumstances of the case, the learned Commissioner of Income-tax (Appeals) erred in holding that the amount of ₹ 1,21,80,000 given by the appellant to Shri Gaurav Sharma S/o Dr. Yogi Raj Sharma as advance as per the agreement to sale is to be added in the hands of Dr. Yogi Raj Sharma substantively without considering the fact that the aforesaid advance was given for the purchase of property situated at Gram, Raslakhedi and the same was shown by the assessee in the regular return filed and also included in the balance-sheet of the assessee and taxes due thereon has already been paid. It is submitted that when the appellant himself has declared this amount in the return of income and paid the taxes due thereon and the rate of tax is same for the appellant as well as for the recipient, question of adding the same in the hands of the recipient father is unjustified, unwarranted and bad in law. While the Revenue in its appeals has take ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6,95,207 31-10-2008 17,95,207 2003-04 - 4,57,267 8-11-2007 4,57,267 31-10-2008 4,57,267 2004-05 28-10-2004 2,57,696 8-11-2007 3,17,696 31-10-2008 1,11,94,256 2005-06 28-07-2005 3,63,995 8-11-2007 5,53,995 31-10-2008 1,22,55,250 2006-07 21-06-2006 5,73,583 8-11-2007 7,58,583 31-10-2008 2,77,66,425 2007-08 30-07-2007 10,45,339 8-11-2007 12,45,339 31-10-2008 18,76,86,028 2008-09 31-10-2008 1,78,26,510 8-11-2007 - 31-10-2008 3,04,46,558 The Assessing Officer on the basis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ritten a letter dated June 2, 2007 to Netam Industries c/o HIPL, D-18, BDA Duplex Zone-I, M. P. Nagar, Bhopal in respect of supply of electrical needle and syringe destroyer and in this letter also kind attention of Shri Ashok Nanda was invited. The Assessing Officer further observed that as per the seized document LPS II/11 documents of Netam Industries and HIPL kept together and the manner in which these papers are placed indicated that they belonged to only one person. Even papers of Netam Industries, assuming to be left by Shri Umesh Kajve, how were placed in composite file of HIPL according to date and schedule of work order. The Assessing Officer further noted that not only the above documents but the bill book, transportation bills, all cheques issued by Government and work orders received by Netam Industries were found and seized from the office and factory premises of the assessee. Similarly, in respect of Chhattisgarh Pharmaceuticals which is stated to be the proprietorship concern of Shri Umesh Kajve, documents LPS-33, pages 53-58, LPS-9, LPS-11 and LPS- 12 found and seized and it was noticed that the address of these firms is shown at 96A, Mandideep Industrial Area whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring the course of search of the assessee also supports the conclusion that M/s. Netam Industries and M/s. Chhattisgarh Pharmaceuticals were substantively and effectively owned by the assessee. In view of these facts as elaborately discussed in assessment order, the profit generated by propriety concern of Shri Umesh Kajve in the name of M/s. Netam Industries and M/s. Chhattisgarh Pharmaceuticals was substantively added in the hands of the assessee. 2.1.2 The assessee went in appeal before the Commissioner of Income-tax (Appeals). Before the Commissioner of Income-tax (Appeals) the assessee submitted that the additions have been made in both the concerns which were proprietorship concern of Shri Umesh Kajve on account of alleged bogus purchases of these concerns substantively in the hands of the assessee. Shri Umesh Kajve is regularly assessed to tax since long and is showing income from Netam Industries and Chhattisgarh Pharmaceuticals. Along with the return, tax audit report was also filed. Shri Umesh Kajve has taken sales tax number, drug licence and is registered with DIC, Bhopal. Documents were duly filed. Shri Umesh Kajve is not related to the assessee. The assessee was a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessment year 2006-07 ₹ 1,05,684 Assessment year 2007-08 ₹ 10,49,527 2.2 Before us the learned authorised representative vehemently contended that search under section 132 was carried out on the residence of the assessee on September 7, 2007. The assessment for the assessment years 2004 -05 to 2008-09 were completed in the case of the assessee. The assessee is proprietor of Malwa Drug House. He is also deriving salary from HIPL, Chairman of International Public School, Bhopal. He also derived interest income from FDR. Assessment was made treating following persons/concerns as benami of the assessee : (i) Shri Umesh Kajve (a) M/s. Netam Industries (b) Chhattisgarh Pharmaceuticals, Raipur (ii) Shri Satyendra Sahu-business in the name of Neptune Remedies 2.2.1 Addition on account of Netam Industries was made during the assessment years 2004-05 to 2008-09 while addition in respect of Neptune Remedies (NR) was made during the assessment year 2007-08. No search took place at any of the premises or concerns belonging to Shri Umesh Kajve or Netam Industries or Chhattisgarh Pharmaceutical ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... drawn to pages 12A and 12B of the paper book, the second statement was recorded on September 8, 2007 for which our attention was drawn to pages 22A to 22E and the third statement was recorded on September 18, 2007, copy of which is placed at pages 23-45 of the paper book. Referring to pages 4 and 20 of the assessment order it was pointed out that the Assessing Officer translated the portion of the statement of the assessee recorded on September 18, 2007 from Hindi to English. The Assessing Officer had translated it in the following manner : Answer : Shri Umesh Kajve used to run Chhattisgarh Pharma earlier and later he started Netam Industries. I used to help him in getting Government orders and supply and I also used to supply from my firm. He used to purchase the goods from my factory and also applied for Laghu Udyog Nigam and other places tenders. The abovementioned both the companies are not benami because they have drug licence No. TAN, MPST and CST numbers. I will produce its copies. Whatever business had been carried out in these. I have declared all that as undisclosed income in the statement given at my residence. Shri Satyendra Sahu runs the Neptune Remedies whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h that these concerns in any way relate to the assessee. The assessee does not have any relationship with Shri Satyendra Sahu or Shri Umesh Kajve. Even in the earlier statement dated September 8, 2007 the assessee never said that these two persons are benamidar of the assessee and the income of these concerns belong to the assessee. Our attention was drawn towards page 22D which contains question No. 11 whereby question was asked about LPS-II, Sr. Nos. 17, 18 Neptune Remedies letter pad and the asses see replied that I purchase and sell medicines of these companies. The letter pad was found not only of Neptune Remedies but also of Karnataka Antibiotic and Pharmaceuticals Ltd. which is a Central Government Enterprise. If on the basis of the letter pad Neptune Remedies is held to be benami concern of the assessee, Karnataka Antibiotic and Pharmaceuticals Ltd. should also have been held to be the benami concern. The assessee was helping these concerns due to friendship. Attention was also drawn towards question No. 12 in which the Assessing Officer has asked whether the assessee has declared the income earned from the transactions which the assessee had with these companies. In reply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... struments and Chemical Pvt. Ltd. in Netam Industries books. Attention was also drawn towards copy of the bank account to prove receipt of the payment by Linco Scientific Instruments and Chemical Pvt. Ltd. Available in the paper book. Control over the business : It was contended that the assessee was not having any control over the business. The address of Shri Umesh Kajve as shown in the Income-tax return for the assessment years 2005-06, 2006- 07 is House No. 244A, Old Ashoka Garden, Raisen Road, Bhopal. In the assessment records of Shri Umesh Kajve same address for the assessment years 2002-03 to 2008-09 is mentioned. So far Netam Industries, a concern of Shri Umesh Kajve is concerned, the address in the following Government document is stated to be D-18, BDA Duplex, Zone-1, MP Nagar, Bhopal-sales tax number, drug licence-II, food and drug administration licence, district trade and commerce licence. Copy of these licences are placed at pages 166-169 of the paper book. Similarly, in respect of Chhattisgarh Pharmaceuticals, a concern of Shri Umesh Kajve it was stated that the address is 32/1559, Shyam Nagar, Raipur. Same address is written in the sales tax as well as drug lice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stries Department, Sales tax registration in State and Central Governments and Sales Tax assessment orders. These have been referred to earlier in the synopsis giving PB numbers, (under the head business premises ). 4. Purchase deals of drugs/instruments. 5. Books of account and audited accounts. The seized documents relate to the activities which already took place. They do not represent the documents of title or controlling documents in respect of the account of Shri Satyendra Sahu, proprietor of Neptune Remedies, Bhopal. It was stated that the audit was carried out by S. K. Goyal, Nagpur. While travelling from Nagpur to Bhopal by Chhattisgarh Express which he boarded on October 23, 2007 the books of account were lost. Complaint has been lodged with the police station. Ultimately, he submitted the following synopsis : (iv) Purchase and sales : The concerns of UK or SS do not belong to the assessee. However, without prejudice to this stand, as the addition at present stands in the hands of the appellant, submissions under this head are being made with the help of seized papers of UK and SS. All the purchases have been made on the names to which the papers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses 1,25,852 Swastik Associates 3,47,836 Agrawal Trading Co. 1,88,441 8,21,111 2005-06 2,17,84,940 P. K. Traders, Kolkata 33,22,000 2,22,60,725 Examples Netam Industries PB 446-477 579-586 CP 491-567 Friends Mgt. and Consultant Private Ltd. 21,20,000 Misc. suppliers 61,59,194 1,16,01,194 2006-07 5,86,21,349 Misc. supp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or SS, as the purchases were not verifiable. In this regard also, it is submitted that the delivery of goods was made to the consignee and the payments against the supply were made by the Madhya Pradesh Government or its concerned Department. This has been shown in the bank accounts of the respective concerns/persons. For the sales, certain examples are as under in respect of the documents referred to in the orders of learned AC and learned Commissioner of Income-tax (Appeals) that appear in the paper book-III. PB 547 to PB 567 LPS-12 under seizure. Relating to C. P. PB 497-506 LPS-3 -do- Relating to Netam Industries orders. PB 481 to 490. LPS-7. The files containing photocopies of purchase and sale vouchers of NI, CP, Neptune are being produced. These photocopies were supplied by the Department. These are voluminous documents. Paper-Book-III contains photocopies of documents that are mentioned in the orders passed by learned AC and learned Commissioner of Income-tax (Appeals). The sales are made only to the Madhya Pradesh Governmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concern, with effect from November 21, 2006 it was noted by CTO PB 322. CST registration was with effect from July 8, 2006. PB 321 The drug licence was granted on November 15, 2006 effective from November 15, 2006 to November 14, 2011. PB 324 The Municipal Corporation registered the establishment with effect from July 12, 2006 to December 31, 2010. PB 326 For Income-tax, the followings facts are submitted. PB 327-342 PB 343-344 Assessment year 2007-08 Returned on October 31, 2007 Income 6,26,528 Audited accounts dated October 16, 2007. Sales shown 35,31,64,152 PB 339 Return under section 153C filed on March 31, 2009 Income 6,26,528 Assessment dated December 29, 2009. Income determined is ₹ 17,28,61,528 relief given by the learned Commissioner of Income-tax (Appeals) ₹ 17,28,61,528. Totally deleted and assessed in the hands of Shri Ashoka Nanda. Appeal in this case is pending before the honourable Appellate Tribunal Appeal No. IT (SS) A/376/Ind/2012. Thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Payment details are mentioned. All through banks. It is to be noted that total purchases from HIPL are ₹ 1,26,394. 2006-07 271-284 6,50,79,734 Nil Purchases and mode of payment PB 285-286. 2007-08 Sales 1,07,94,607 PB 349 as per Vat order Purchase list with payments PB 358-368. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Neptune Remedies : 2007-08 76,550 19,582 PB 339 (vii) Papers/documents found : Also mentioned in Commissioner of Income-tax (Appeals) pages 11 and 19. CIT(A) Page 11 PB 434 LPS-1/14 Page 21. It is not a letter from Linco Surgical. This paper is covered in the immediately following papers. CIT(A) LPS-1/14 pages 16-20-22. There is excess payment of sales tax. (Audit object). These are papers addressed to Neptune Industries, but in brackets. (Netam) is written. PB 436 There seems to be some confusion with the Health Department M. P. Therefore, sales tax by Netam was calculated in handwriting at the bottom of paper. CIT(A) Page 11 PB 441-477 LPS-2/9. It is a complete file. For example, the details are : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PB 508-511 order from C. S. Rajnandgaon. CIT(A) Page 19 PB 512-521 LPS-9 PB 512-513 copy of bank statement of CP. Period October 1, 2000 to January 31, 2004. PB 514-516 Letter from DHS, Raipur for bill payment, cheque and bank slip for CP. PB 517-518 Bank slips for CP. PB 519-520 Bank statement and bank transaction-CP. PB 521 Bank slips for CP. CIT(A) Page 19 PB 522-546 LPS-11 PB 525 Purchase from RDPL to CP. CIT(A )Page 19 PB 547-567 LPS-12 Sale-bills from CP to various Government bodies. CIT(A) Page 19 PB 568-569 LPS 2/13 Letter from Linco SIC Pvt. Limited to NI. CIT(A) Page 19 PB 570-586 LPS-2/11 Details supply of medicines to Government agencies. PB 578 Two DDs to NI and to HIPL. PB 579 Order to MPLUN from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... absurd. The assessee denies ownership of the paper and the addition deserves to be deleted. LPS-IV/95. It mentions words as ENG, SDO and JE, showing that it is some construction project where such officials are engaged. The assessee denies these entries as belonging to him. The paper does not belong to him. The Department did not find any construction activity going on at the place or recently done. The addition may kindly be deleted. Dumb document. LPS-IV/96. The paper mentions designation of various officials and amounts against these names. The assessee denies that any such post was existing in his organisation. He denies the ownership of this paper also. The addition may kindly be deleted. Dumb document for the assessee. General submissions in respect of seized documents : (a) The seized documents are as per paper-book-III. These are mentioned in the order of the Assessing Officer and the learned Commissioner of Income-tax (Appeals). Copies of all seized documents have been brought and produced before Your H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... question No. 16, he furnished names of person from whom medicines were purchased. PB 117 PB 119 But he did not readily remember their names. On his orders, Lunco Company directly made supplies to Madhya Pradesh Government. He had purchases from HIPL also and it was related concern of Shri Nanda and hence some correspondence was do HIPL. Orders are received from MPLUN. He made purchases from Insilco, Bhoj Enterprises (PB 118). Hijco Surgicals (PB 118). There were four employees in his concern. Payments for purchases were made to brokers. Payments from Government were received through bank and balance to be received was ₹ 5 lakhs approx. Statement of Shri Satyendra Sahu : He was nervous at the time of recording of statements. Business of supply of medicines not shown by UK in his Income-tax returns : Commissioner of Income-tax (Appeals) page 18 writes that it was because Nanda was doing business and Umesh Kajve was unaware of such activity. This presumption is wrong. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of UK or SS. It is unjust to say that documents/evidences were created by the assessee, otherwise the assessee would have taken care that the Income-tax return of UK reflected the transactions. It is immaterial that UK or SS did not have any background for such business. This argument is absurd otherwise no person could start any new business. In this case, those persons were getting help from the assessee. As regards the capital employed, this aspect has to be considered in UK or SS. There is no evidence that the assessee, directly or indirectly invested anything in these concerns. Inter-se relationship : The assessee and UK or SS are not related to each other. It is just the friendship that created the connection between them. CIT (A) Page 18 13th line from top Page 3 of this synopsis gives the translation of Shri Nanda s statement that UK was doing business independently and that Nanda used to help him in getting Government ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Conduct. Custody. 5. Union of India v. Moksh Builders and Financiers Ltd., AIR 1977 SC 409, Two tests. Source of consideration. Enjoyment. 2.3 The learned Departmental representative on the other hand relied on the order of the Assessing Officer and the Commissioner of Income-tax (Appeals). He contended that certain documents referred to by the Assessing Officer and the Commissioner of Income-tax (Appeals) were found from the premises of the company in which the assessee is the director. The assessee could not explain why these documents were lying in the premises of the assessee. No doubt these concerns belonging to Umesh Kajve and Satyendra Sahu had made sales to the Government concerns and has also received payment through bank accounts but since part of the documents relating to the transaction which has taken place were found from the premises of the assessee's concern, therefore, the Assessing Officer was correct in law in treating the income derived by these concerns as belonging to the assessee. The Assessing Officer has correctly interpreted the statement given by the assessee. The assessee by offering income of ₹ 5.30 crores has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duly registered with the sales tax and Central sales tax authorities. The concerns which were held to be benami of the assessee no doubt were having drug licence, sales tax number, CST number from various Government agencies. The proprietor of Chhattisgarh Pharmaceuticals as well as Netam Industries is shown to be Shri Umesh Kajve while the proprietor of Neptune Remedies is registered by Shri Satyendra Sahu. The licence as well as registration is granted by the Government authorities after verifying the genuineness of the firms, about its business as well as its ownership. It is not denied that Shri Umesh Kajve and Shri Satyendra Sahu have duly filed Income-tax return. The address shown in the Income-tax return does not belong to the premises belonging to assessee or to the company HIPL. There had been a search in the case of the assessee and in the case of HIPL and during the course of the search at the premises of HIPL certain documents, letter head belonging to these concerns were found on the basis of which the Assessing Officer took the view that these concerns are benami concerns of the asses see. If these letter heads and papers were found, in our opinion, the Revenue was bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shri Satyendra Sahu has been shown as proprietor in the drug licence, sales tax registration, shops and establishment certificate. The assessee has submitted details of the sales and the payments have been received through cheque and supply has been made to all the Government concerns. The assessee has also issued cheques in respect of various purchases, details of which are given before us in the annexure attached with synopsis. We do not find any interlacing, intermingling or transfer of funds to these concerns by the assessee except documents which consists of copy of bill, letter received issued, order to Netam Industries, order on behalf of Netam Industries, bank statement. These documents nowhere prove that they have been written by the assessee or on behalf of the assessee. Merely the documents were found in the concern in which the assessee is the director does not mean the assessee is having control or exercises control over the business belonging to these concerns. It is an undisputed fact that these documents were not found from the premises of the assessee. The presumption, at the most, can be available in respect of the company in which the assessee is director. There ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the consideration for the purchase of the property in the name of another was provided by the assessee. Apart from the relationship between the parties, there must be some evidence or material to support the case of the benani nature of the transaction. A finding regarding benami is a finding of fact. When a, finding of fact is based on material, partly relevant and partly irrelevant, then such a finding is vitiated in law. The ITO held the following purchases made in the years 1965-66 to 1968-69 to be benami, (i) a house in the joint names of the assessee's wife and mother-in-law ; (ii) four shops in the names of the assessee's wife, his mother-in-law and his father-in-law ; (iii) a house in the name of his father-in-law ; and (iv) a house in the name of the assessee's wife, which alone the assessee admitted was purchased by him in his wife's name. The AAC held that the transactions were not benami but, on further appeal, the Tribunal held that the transactions were benami for the following reasons : (i) B, the father-in-law of the assessee, could not be believed when he said that he had a sum of ₹ 1,00,000 in cash with him since he had discontinued his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4.4 We have also gone through the decision in the case of Gulzarilal Rawat v. CIT [2003] 259 ITR 176 (Raj). In this case we noted that the Income-tax Officer held that the income from a certain business concern belonged to the assessee in the assessment years 1974-75 and 1975-76. The assessee explained that the business belonged to his son, S, who invested ₹ 8,000 after disclosure of the same under the Voluntary Disclosure Scheme. It was also explained that though S was a student at that point of time, he employed his maternal uncle who looked after the business of the concern of an ₹ 700 per month had been paid to him. The Income-tax Officer rejected explanation and his decision was upheld by the Tribunal. On a reference (headnote) : Held, that considering the facts that when the investment in the firm, had been shown after disclosure of statement under the Voluntary Disclosure Scheme, that the dealings of the concern were not only with the assessee but in the open market with other similar type of traders, that the concern had got sales tax registration and was also registered under the Shops and Commercial Establishments Act, the business income from the concern ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relevant material or evidence. The finding cannot be based on conjectures, surmises and suspicion. Therefore, the Revenue, in our opinion, cannot hold merely on presumptions that M/s. Chhattisgarh Pharmaceuticals, M/s. Netam Industries and M/s. Neptune Remedies are benami concerns of the assessee. 2.4.6 We have also gone through the decision in the case of Dhakeswari Cotton Mills Ltd. v. CIT [1954] 26 ITR 775 (SC). In this case it was held that (page 782)- In this case we are of the opinion that the Tribunal violated certain fundamental rules or justice in reaching its conclusions. Firstly, it did not disclose to the assessee what information had been supplied to it by the Departmental representative. Next, it did not give any opportunity to the company to rebut the material furnished to it by him, and lastly, it declined to take all the material that the assessee wanted to produce in support of its case. The result is that the assessee had not had a fair hearing. The estimate of the gross rate of profit on sales, both by the Income-tax Officer and the Tribunal, seems to be based on surmises, suspicions and conjectures. It is somewhat surprising that the Tribunal took from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... very fact for and against the assessee must have been considered with due care and the Tribunal must have given its finding in a manner which would clearly indicate what were the questions which arose for determination, what was the evidence pro and contra in regard to each one of them and what were the findings reached on the evidence on record before it. The conclusions reached by the Tribunal should not be coloured by any irrelevant considerations or matters of prejudice and if there are any circumstances which require to be explained by the assessee, the assessee should be given an opportunity of doing so. On no account whatever should the Tribunal base its findings on suspicions, conjectures, or surmises ; nor should it act on no evidence at all or on improper rejection of material and relevant evidence or partly on evidence and partly on suspicions, conjectures or surmises and if it does anything of the sort, its findings even though on questions of fact will be liable to be set aside by the court. [The Supreme Court accordingly, on the facts, set aside the order of the Appellate Tribunal in this case and remanded the matter for reconsideration in accordance with law, on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dence on record that Dilip Enterprise is benami concern of the assessee. The assessee in his statement, has not accepted about the investments in the concern being arranged by him. The concern is not controlled and managed by the assessee. The assessee has not derived the benefit from the concern. 2.4.10 We have also gone through the decision in the case of Kurella Pullayya v. CIT [1962] 45 ITR 364 (AP). In this case also the proposition of law was that the burden of establishing the benami is on the party who alleges so. In this case the business was carried on in the name of the wife. Benami transaction was alleged. It was found the onus was on the Assessing Officer to prove that the business was benami in the name of the wife of the assessee. In the case before us the Revenue in our opinion has not discharged the onus that the business belong to the assessee. This case also on the facts in our opinion support the case of assessee. 2.4.11 We have also gone through the decision in the case of V.Ramaswami Naidu v. CIT [1974] 93 ITR 341 (Mad). It was held that the burden of proof was on the Department to show that the real owner was the assessee and the amount belonged to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at as undisclosed income in the statement given at my residence . The correct translation could be whatever I have taken from these concerns the same I have included in the undisclosed income as stated in the statement given at my residence . Similarly, in respect of answer to question No. 25, the Assessing Officer interpreted that the assessee has stated that he will give the break-up of the three concerns while the correct meaning of the assessee relate to that he will give the break-up year-wise, head-wise and details of total amount of undisclosed income in the next 10 days. No doubt, the statement recorded has evidentiary value but it is not conclusive evidence until and unless it is corroborated by certain evidences. There had been search in the case of the assessee. If the assessee had earned income, the evidence would have been found. If the assessee had earned income, he would have either spent it by way of consumption or would have created investment. No undisclosed investment to the extent of ₹ 5.30 crores was found from the premises of the assessee. Even no evidence or material was found which may prove that the assessee had incurred the expenditure to that exten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... difference in the real income and the income declared in such forceful surrender to the extent as the difference lies between chalk and cheese. It is a fact that Income-tax is levied on the real income. This is apparent from the provision of section 4 of the Income-tax Act. From the reading of this section, it is apparent that it contains five components for charging an income. The first component is the taxable event which attracts the levy. The second is the person on whom levy is imposed and who is obliged to pay the tax. The third is the assessment year in which charge of Income-tax is levied. The fourth is the total income of the previous year and the fifth is the rate/rates at tax is to be imposed. The rates are prescribed in the annual Finance Act. Therefore in our view until and unless it is proved by the Revenue that these concerns are the benami concerns and whatever income is earned in these concerns are in fact received or accrued to the assessee, this component will not have any value in determining the total income on the basis of the seized document. The seized document does not prove that the assessee has made the investment, the assessee is managing or having the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns of the assessee as these documents do not satisfy the basic conditions are enumerated above for establishing a concern to be the benami concern of the assessee. Until and unless an income is earned by the assessee it cannot be taxed. The onus is on the Revenue to prove that the assessee has earned the income. Our aforesaid view is supported by the decision of the honourable Supreme Court in the case of Parimisetti Seetharamamma v. CIT [1965] 57 ITR 532 (SC). Even this fact is also proved from the answer to question No. 12 when the Assessing Officer asked the assessee whether he has disclosed income in his return in respect of trans actions with these companies. The assessee in reply thereto stated No and therefore he has declared a sum of ₹ 5. 30 crores keeping in view all the irregularities including the transaction with these companies. The assessee did not accept that these concerns belong to him. We accordingly hold that M/s. Chhattisgarh Pharmaceuticals and Neptune Industries belong to Shri Umesh Kajve and similarly Neptune Remedies belongs to Shri Satyendra Sahu and does not belong to the assessee and income earned by these companies cannot be added in the income o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .16 No contrary decisions were brought to our knowledge. We, therefore, delete the addition in respect of the purchases, details of which have been given by the assessee in the paper book. If the Assessing Officer so chooses, he can make addition in respect of profit on these purchases but since we have already held that the income of these concerns cannot be added in the hands of the assessee as these are not bogus concerns of the assessee, therefore, this issue relating to assessment of gross profit on the purchases does not arise in the case of the assessee. Since the assessee has accepted that he was assisting these concerns in procuring the order and the assessee has got income on this account from these concerns, we therefore keeping in view the surrounding facts and trade practice direct the Assessing Officer to compute the commission at two per cent. on the supplies/sales made in each year to the Government concerns. Since the assessee has surrendered a sum of ₹ 1,21,80,000 in respect of the cash paid under an agreement for the purchase of land, the source of this in our opinion can be the commission income so earned by the assessee in respect of the service rendered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es on it. Answer : The abovementioned entries in the page No. 32 of LPS-I/6 is my unexplained income which is total ₹ 40,00,000 (Rs. Forty lakhs). Question No. 7 : Please explain the entries B. L. A.-10, C. M.-2, H./M.-3, P. S.-3 and Patel-2 and M-10, CM-2, HM-2, PS-2, Patel-2 and Delhi-2. Answer : I admit it as my undisclosed business income. Question No. 8 : Please explain whether BLA means Babulal Agarwal, PS Government of Chhattisgarh, CM means Chief Minister, HM means Health Minister, PS means Pramod Singh and Patel Store Keeper. Answer : It is nothing like that and I have voluntarily accepted it as my undisclosed income. In this statement the assessee accepted that the figure of 40 represents ₹ 40 lakhs and the assessee did not deny that it is not in his hand writing, rather the assessee admitted it as his undisclosed business expenses. Even when specific question was asked whether BLA represents Babulal Agarwal, CM represents Chief Minister, HM means Health Minister, PS means Pramod Singh and Patel means Store keeper, the assessee answered that it is nothing like that and that he has voluntarily accepted it as his undisclosed income. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the office premises of the assessee at A5, Kasturba Nagar, Bhopal. The Assessing Officer made addition of sum of ₹ 2,35,000. When the matter went before the Commissioner of Income- tax (Appeals), the Commissioner of Income-tax (Appeals) confirmed the addition. 5.1 We heard the rival submissions and carefully considered the same. We noted that this addition has been made on the basis of paper LPS I/9, page 60. This paper consists of letter pad of Ashok Nanda. On the top of this paper, Tilhansangh has been mentioned. Figure of 4,46,000 arrived at by multiplying 20,000 by 22.3 is there. 30 per cent. thereof is mentioned 1,33,800. Lease rent-4014, security deposit of 12,042 and development of 1,55,200 is mentioned and subsequent to that the figure of 1,65,356 is mentioned. Against under hand AKVN 35,000 is mentioned and 2L is mentioned. This paper does not contain any date. It is also not clear in whose handwriting this paper is. With reference to question No. 10 the assessee explained that this official commission represents for filing up DIC, LVN and AKVN. The question was asked with regard to this paper but this paper does not contain the figure of ₹ 2,35,000. No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mission as also that loan of ₹ 15 lakhs from the assessee. Subsequently, after two months of the search the assessee wrote a letter to ADIT at Bhopal on November 19, 2007 that the cash of ₹ 1,21,80,000 was given to Gaurav Sharma by the assessee against some property dealing. Copy of the agreement dated August 30, 2007 was also filed. The Assessing Officer observed that no such facts of receipt of ₹ 1,21,80,000 were stated either by Dr. Yogiraj Sharma or by Gaurav Sharma during the course of the search though in the statement Gaurav Sharma stated to have received loan of ₹ 15 lakhs from the assessee. Therefore, the Assessing Officer came to the conclusion that the agreement was prepared after the search to explain the availability of the cash with Dr. Yogiraj Sharma. It was made just to save Dr. Yogiraj Sharma from the consequence of discovery of undisclosed income in the hands of a public servant and therefore, the Assessing Officer was of the view that the said sum of ₹ 1,21,80,000 has to be assessed substantively in the hands of Dr. Yogiraj Sharma and therefore he taxed it protectively in the hands of the assessee. The assessee went in appeal befo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n. The return was filed by the assessee on October 31, 2008 at an income of ₹ 1,78,26,510 within the due date of filing the return. This is a fact that the assessee has entered into an agreement for purchase of land with Gaurav Sharma, s/o Dr. Yogiraj Sharma. The agreement is dated August 30, 2007 which is duly notarised. The assessee as well as Gaurav Sharma have duly signed the agreement. The assessee himself has written letter to ADIT, Bhopal on November 19, 2007 about the agreement being entered into on August 30, 2007 for the purchase of the property and also the fact that the assessee has given advance of ₹ 1,21,80,000 to Gaurav Sharma. The agreement is dated August 30, 2007, i.e., executed much prior to search and was not found during the course of the search. On the basis that the agreement was not found during the course of the search and neither the assessee nor Gaurav Sharma stated during the course of the search about the agreement, the Revenue did not accept the agreement and the fact that the assessee has paid a sum of ₹ 1,21,80,000 to Gaurav Sharma. The agreement is duly signed by not only Gaurav Sharma but also by the assessee. Gaurav Sharma is bei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... search. There had been search in the case of Dr. Yogiraj Sharma but not such evidence was found or brought on record by the Assessing Officer during the course of the assessment proceedings in the case of Dr. Yogiraj Sharma that he has earned income by illegal or unlawful means. Merely because Dr. Yogiraj Sharma is a Government servant and his son is carrying on business and cash was found from family of Dr. Yogiraj Sharma especially when the Government servant has been allotted and putting up in separate Government accommodation, it cannot be presumed that the cash so found belonged to Dr. Yogiraj Sharma and on that basis the cash surrendered by the assessee cannot be carved out of his income and added substantively in the hands of Dr. Yogiraj Sharma. Our aforesaid view is duly supported by the decision of the honourable Supreme Court in the case of DSP, Chennai v. K. Inbasagaran [2006] 1 SCC 420 in which at page 430 it was held as under : Since the crucial question in this case was of possession and the premises in question were jointly shared by the wife and the husband and the wife having accepted the entire recovery at her hand, it will not be proper to hold the husband ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... total remuneration is ₹ 5,94,000 and the total salary of the staff is only ₹ 5,33,100 for the year ended March 31, 2005. It contains rough and projected figures. Reliance was placed on the various decisions for the proposition of the law that in case of any documents found during the course of search which do not indicate the nature of the transaction, quantity, volume or money etc., no adverse inference can be drawn. The Commissioner of Income-tax (Appeals) after appreciating the submission of the assessee deleted the addition by observing as under : 9.4 I have carefully considered the submission of the appellant as also observation of the Assessing Officer. I have also perused the legible copy of such seized document. It is noted that the document is dated July 19, 2005 and on the top of the document it is written 'from the desk of BPO' then names like CMD, JMD, EP, CFO, DGM (M M), DGM (P P) are written and against their names amount is mentioned it is multiplied by 12 and total of such amount is arrived at ₹ 21,00,000. At the last of this paper it is also written 'rough working of salary of director of HIPL' and key staff. The Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e document in the end/lower side it is written rough working for the salary of the director of HIPL. No cogent material or evidence was brought to our knowledge by the learned Departmental representative even though he vehemently relied on the order of the Assessing Officer. We are, therefore, of the opinion that it is not a fit case which warrants our interference and, therefore, we confirm the order of the Commissioner of Income-tax (Appeals) deleting the addition of ₹ 21 lakhs. In the result, the appeal stands dismissed. Revenue's appeal (assessment year 2008-09) 8. The only issue in this appeal filed by the Revenue relates to the deletion of the addition of ₹ 69,46,000 made by the Assessing Officer as cash payment to others by the assessee. The Assessing Officer on the basis of the paper Nos. 94-95 of LPS 4 formed an opinion that these papers contained the details aggregating to ₹ 69.46 lakhs and since the paper was found and seized from the assessee's residence, therefore, he presumed it belonged to the assessee and accordingly after rejecting the explanation of the assessee he took the view that it represents payment for illegal gratificati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itself by way of corroborative or other evidence or circumstantial evidence should indicate some relevance that the transactions are of income nature. The findings given earlier are again repeated that each and every transaction of the seized paper cannot be the undisclosed income. The inference is to be drawn by way of any corroborative or any specific evidence. Therefore, prima facie such transactions of recording of 69.46 do not justify addition of ₹ 69.46 lakhs. Therefore, the addition made by the Assessing Officer is deleted. 8.1 We heard the rival submissions and carefully considered the same along with the order of the tax authorities below. We noted that the asses see reiterated his submission as has been made before the Commissioner of Income-tax (Appeals). The Commissioner of Income-tax (Appeals) had given a finding of fact after appreciating the documents seized on the basis of which the Assessing Officer made the addition. It is a fact that no date, no name of the assessee or assessee's concern are mentioned on the paper seized although three figures, 48, 10.37 and 11.01 totalling to 69.46 is mentioned. It is not clear whether it is a payment or receipt o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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