TMI Blog2017 (5) TMI 471X X X X Extracts X X X X X X X X Extracts X X X X ..... nd who should be finally assessed to tax in respect of said bank deposits - Held that:- The records of transaction of the bank accounts basis which the AO has determined the assessee’s company tax liability is a critical piece of evidence which can support and corroborate the statements so recorded. It is equally important to know the contents of these documents and how the AO has established the necessary nexus with the assessee company. Unfortunately, the records and paperbook submitted before us is silent on this and in absence of the same, we are unable to take a view in the matter solely basis the statements so recorded.Further, the ld AR has raised various contentions (as noted above) in terms of inconsistency in the statements of Shri Naresh Agarwal, the absence of nexus with the assessee company, the locus standi of Shri Sharad Heda and how the same cannot be relied upon and held against the assessee. In our view, what is relevant is that the statements should be read as a whole and any inconsistencies should be examined. Further independent investigation be carried out by the AO to determine the necessary nexus with the assessee company with the amounts so deposited in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osited from various stations (places) in their bank accounts and after withdrawing the cash at Kishangarh, same is being passed on to Shri Sharad Heda, Manager of these concerns. The AO has reproduced the statement of Shri Naresh Agarwal recorded during survey on 18.01.2011 on Page No. 3 to 5 of the assessment order and then again recorded his statement u/s 131 on 20.01.2011 in which it was stated that the above three concerns have indulged in making sales outside the books of accounts and sale consideration has been received in cash through the bank accounts of Shri Naresh Kumar Agarwal and his wife. In response to the query letter from the AO, the assessee denied having any business transactions or having received any cash from Shri Naresh Kumar Agarwal and Smt Karan Agarwal. The AO issued the summons u/s 131 and recorded the statement of Shri Naresh Kumar Agarwal during the subject proceedings in which Shri Naresh Kumar Agarwal again reiterated his statement that amount received on behalf of Heda Marble Group (M/s Shobha Marbles, M/s Heda Marbles M/s Shri Asharam Bapu Marbles) was returned in cash after withdrawing from his families bank accounts to Shri Sharad Heda against th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lk daily to Shri Naresh Agarwal in financial year 2009-10 and 2010-11. He further accepted that he meet Shri Naresh Agarwal daily in between 2-3 PM. Shri Sharad Heda accepted that in financial year 2009-10 and 2010- 11, he was making the sale bills of M/s Shobha Marbles, Shri Asharam Bapu Marble and M/s Heda Marbles Pvt. Ltd. In affidavit filed on 18.03.2013, he has denied to take care of any affairs in these concerns. In initial statement recorded of Shri Naresh Agarwal during survey, the number of mobile of Shri Sharad Heda told was 9829270507, the same is told by Shri Sharad Heda. From the statement of Shri Sharad Heda, following points have become clear:- 1. He used to talk telephonically daily to Shri Naresh Agarwal 2. Both meet daily in between 2-3 PM. 3. Shri Sharad Heda is managing affairs of sales of these concerns. From the facts narrated above, it is established that contents mentioned in affidavit of Shri Sharad Heda are wrong. Further it is clear that Shri Sharad Heda has received amount through bank account of Shri Naresh Agarwal and his wife on account of undisclosed sales of three concerns of his family members. 4. Thereafter Shri Naresh Agarwal on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and M/s Shree Asha Ram Bapu Marble, Kishangarh. Their three concerns are of Heda Groups considering the facts of the case the amount is distributed equally in three concerns stated above. Thus ₹ 1,13,99,984/- (1/3rd of ₹ 3,41,99,953/-) are treated as undisclosed sales of the year under consideration of assessee. The declared GP rate is required to be applied on this sales amount received through bank account of Shri Naresh Agarwal. The assessee has not shown any sale during the year under consideration. During the year under consideration, the G.P. rate shown in case of sister concerns M/s Shobha Marble @ 25.33% and in case of M/s Shree Asharam Bapu Marbles @ 25.05%. The average of GP rate is applied on undisclosed sales of ₹ 1,13,99,984/-. Thus the additional income which was not disclosed by assessee comes to ₹ 28,71,656/- and thus ₹ 28,71,656/- is added to the total income of the assessee. 5. Being aggrieved, the assessee carried the matter in appeal before the ld CIT(A) who has confirmed the addition. The operative portion of the Ld. CIT(A) order is reproduced below as:- 3.3 I have considered that contention of the appellant as well as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orded by the AO during assessment and also during the survey proceedings. It has also been pointed out that they are persons of no means to carry out substantial transactions noted in the bank accounts. Shri Sharad Heda, manager of the assessee concern and a relative of the Heda family has purposely avoided the cross examination given to him by the AO. The assessee has not been able to give any bifurcation of the various transactions carried out through above bank accounts by three concerns owned by Heda family i.e. M/s Heda Marbles Pvt. Ltd., Shobha Marble and Asharam Bapu Marble. Accordingly the AO equally distributed the sale transactions among the three concerns of the assessee group. Shri Naresh Kumar Agarwal had specifically explained the modus operandi regarding the unaccounted sales routed through the bank accounts of Shri Naresh Kumar Agarwal, Smt. Kiran Agarwal and their concern. Inspite of the fact that said transactions were confronted to them, they have not been controverted. The assessee has not denied the sales being made to the concerns stationed at the places from where sale proceeds have originated. Shri Sharad Heda was managing the affairs of the Heda family b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssed to Income Tax under PAN AGRPA6835C( ABP 62 answer of Q No 3). (iv) While answering question no 4, Shri Naresh Agarwal has categorically sated that he and his wife both enjoys cash credit limit with Punjab National Bank(APB 62). (v) While answering question no 8 ,it was further stated that he entered all the transactions in a diary but at present he does not know where the diary is, possibly it would have been destroyed. (vi) In the entire statements he has not stated the name of assessee company i.e M/s Heda Marbles (P) Ltd as a beneficiary. However he has stated the name of Heda ji, Heda Marbles, Shobha Marbles, Asha Ram Bapu Marbles, Sharad Heda, Manish Heda. 6.2. It was further submitted that the statement of Shri Naresh Kumar Agarwal were again recorded u/s 131 on 20/01/2011 and in these statements, Shri Naresh Kumar Agarwal did not stick to his earlier statements, took a somersault and stated that his business was to provide the facility of bank accounts to the marble traders of Kishangarh for depositing cash. However while answering question no 2, he reconfirmed that the statement given on 18/01/2011 is true and correct. It is not understandable that how both ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to produce the same. While answering question no 10 about the nature of evidence, it was stated by Shri Naresh Kumar Agarwal that said records were kept in copies i.e note books. We would like your honour s kind attention on the answer of question no 8 of statement dated 18/01/2011 where Shri Naresh Kumar Agarwal stated that the diary is not traceable and now that diary has been converted into copies/ note book in his statement dated 11/03/2013. 6.5. It was further submitted that in the statement dated 18/01/2011, Sh. Naresh Kumar Agarwal stated that 90% of work done by him through above referred bank a/cs was for Heda Ji (Q no 6 Q no 10). In the statement dated 20/01/2011 which answering Q.No 3, Shri Naresh Agarwal stated that 90% of work was done for Sh. Sharad Heda. The unreliability and untruthfulness of his statement is proved simply from the fact that the alleged total undisclosed sale of said Heda Ji was ₹ 3,41,99,953/- only which is not even 27% of total deposits (appox 13 Crore) in his bank accounts. 6.6. It was further submitted that on the basis of above referred statements only, Ld A.O. took the view that these concerns are included in making sales outsi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... carried out. (3) The address given by these persons in banks and concerns are residential address. There are no separate premises from where their concerns were operating. (4) Assessee is indulged in making sales outside the books of account and sale considerations is received in cash through bank accounts of Shri Naresh kumar Agrawal his wife. And the cash deposited in the above bank accounts of third parties belong to the assessee company. (5) That Sh. Shard Heda is Manager of the assessee company. (6) That M/s Shobha Marbles, M/s Shree Asha Ram Bapu Marbles and the assessee company belong to same group known as HEDA GROUP . (7) That Ld A.R. of the assessee company on 25/03/2013 accepted that the documents produced are reliable. (8) That the amount brought in the account of Naresh Kumar Agarwal pertains to M/s Heda Marbles (P) Ltd. 6.8. It was further submitted that the assessee also filed the affidavits of Shri Sharad Heda, Sh. Manish Heda, Smt Madhu Heda director of the company and CA Sh. Dharmendra. Vide these replies affidavits, the assessee submitted:- 1. That there is no reason/ cause to treat any amount as undisclosed income of our firm for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of third party as a transaction of assessee without proving the said transaction as sales of the assessee. No enquiry from the alleged buyers was made. Assessee company has never accepted the alleged transactions as their sales and has never accepted that the alleged amount was returned to the assessee company by the third party. (iii) Sharad Heda is not at all related with the assessee company. Neither he is a director nor an employee. He was never given any authority on behalf of assessee company to make any business dealing with any other person. Therefore if any information was given to Sharad Heda to avail the opportunity of cross examination to third party Naresh Agrawal than the assessee company is not answerable and no negative presumption can be framed against the assessee company. (iv) Ld A.O did not provide the copy of photocopy of records of transaction carried out by Heda Group to the assessee company. Ld A.O did not provide following information s to the assessee company even after specific requests:- (a) Copy of documents inspected and seized. (b) Outcome of the survey operations. (c) Copies of any diary/books/notebook produced by the alleged third pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of alleged diary/ note book is a reliable evidence. Can any assessment be framed on the basis of such evidence. (vii) The alleged modus operandi explained by Naresh Agrawal is the creation of his mind only. No evidence in regards to the allegation that the amount deposited in the bank account of Naresh Agrawal was of assessee company was brought on the record by the Ld A.O. No other corroborative evidence was brought on record either by the Naresh Agrawal or by the department. No Independent evidence was brought on the record. (viii) Naresh Agrawal is running business. He is enjoying cash credit limit from the banks. Naresh Agrawal is the Prop. of M/s Sarveshwar Traders dealing in marble other goods. He has godowns in Kishangarh Industrial Area. His wife is Prop. of M/s Kiran Fabrics a power loom factory. He has own residential house factory premises. His living standard was affluent. All such facts were brought in the knowledge of Ld A.O by the assessee company. Ld A.O has reproduced the same at last para page 51 of assessment order. It is therefore unlawful to say that Naresh Agrawal is a person of no means. (ix) As earlier submitted, Sh. Sharad Heda is not connecte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the depositors of money that the deposits have been made on behalf of the assessee company. No sales from outside the books of assessee was found. Assessee company has never accepted such transactions. Original records were not produced for verification by Sh. Naresh Agrawal. Only photo copies of alleged diary/note book was produced just 2 days before the date of the order. There is no handwriting of any of authorized representative of assessee company in any alleged record. Therefore making assessment simply on the basis of statement photo copy of alleged diary/note book in the hands of assessee company is unlawful. We rely on Hon ble Supreme Court in the case of CBI v/s VC Shukla (1990) 3 SCC 40 (SC) where Hon ble Apex Court has said that entries in books of accounts even if correct and authentic cannot fix a liability without independent evidence. In their above decision Hon ble Supreme Court discussed the case of Chandradhar v/s Gauhati bank [1967(1) SCR 898]. This case arose out of a suit filed by Gauhati bank against Chandradhar for recovery of a loan of ₹ 40,000/-. In defense Chandradhar contended that no loan was taken. The bank relied on certified copy of accounts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts. Therefore making assessment in the hands of assessee company is unlawful. 6.14. It was further submitted that Sh. Naresh Agrawal in his statement dated 11/3/2013 has again stated the name of Sh. Sharad Heda/Shri Manish Heda as a name of main trader and not of the assessee company. Therefore to assess the assessee company for the alleged undisclosed sales is unlawful. 6.15. It was further submitted that the Ld A.O at page 31 of assessment order has mentioned that Sh. Naresh Agrawal produced the photocopy of alleged notebook/diary/record on 22/3/2013 (late evening). Assessee was asked to examine the said record and obtain the photocopy of record and was asked to appear on 25/3/2013 at 10 AM. The photocopy of any record is not a reliable document/evidence and cannot be treated as acceptable evidence in absence of original record. No reason for not producing the original record was given. Moreover no proper opportunity of being heard was given as the alleged records that too a photo copy was available for verification of assessee company on 23/3/2013 and the date of hearing was given for 25/3/2013 and the assessment was made on 26/3/2013. Therefore making assessment on the ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was further submitted that no reason was submitted/ brought on the records by the Ld A.O. why the original diary was not produced. How the alleged diary which was not traceable from last 26 months, suddenly got traced when the assessment was getting time barred. No justification/ reasons have been provided by Ld A.O. regarding authenticity of that alleged diary. No other independent or corroborative evidences have been submitted / brought on the records by Ld A.O. to sustain his version. It is clear case of where third party has been be allowed to make evidence for himself by making diary as per his own will/wish behind the back of the parties which is against the principles of natural justice. Thus any addition on the basis of such manipulated dairy are unjustified, needs to be deleted. 6.21. It was further submitted that on the basis of facts of the case addition if any should have been made in the hands of third parties that Shri Naresh Agarwal and Smt. Kiran Agarwal only because the unexplained credits were found in their books of accounts and unexplained deposits were also found not recorded in their books of accounts. Therefore, the provision of Section 68 69 are ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e on the basis of statement by 2 persons that they had paid money in black to the assessee and entries in books belonging to them regarding alleged payment to the assessee. The Tribunal examined the statement made by the 2 persons and found that the evidence tendered by them suffered from serious infirmities. It held that mere entries in the accounts regarding payments to the assessee was not sufficient as there was no guarantee that the entries were genuine. The Tribunal therefore held that there was no proof that the amount in question represented income from undisclosed sources belonging to the assessee. On further appeal by the Revenue, the Hon'ble High Court held that the conclusion of the Tribunal had been reached by it on a proper appreciation of the evidence. This was finding of fact by the Tribunal and no question of law arose and no reference would lie from the decision of the Tribunal. Accordingly, the appeal filed by the Revenue was dismissed . 4. We submit that in the case of Common Cause v/s UOI (Sahara diaries), the Hon ble Supreme court while interpretating section 34 of the evidence act held that entries in loose papers/sheets are irrelevant and admissible a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... found to be liable may become barred by time. In this regard, useful guidance can be drawn from the decision of the Hon ble Supreme Court in case of Lalji Haridas v. Income-tax officer [1961] 43 ITR 387 (SC) wherein it was held as under: In cases where it appears to the income-tax authorities that certain income has been received during the relevant assessment year but it is not clear who has received that income and prima facie it appears that the income may have been received either by A or B or by both together, it would be open to the relevant income-tax authorities to determine the said question by taking appropriate proceedings both against A and B. That being so, the appellant would not be justified in resisting the enquiry which was proposed to be held by respondent No. 1 in pursuance of the impugned notice issued by him against the appellant. 8.1 In the instant case, pursuant to survey under section 133A carried out on 18.01.2011 at the business cum residential premises of Shri Naresh Agarwal and Smt Kiran Agarwal, the assessment proceedings in the hands of Shri Naresh Agarwal were re-opened for the subject assessment year 2010-11 and ₹ 6,43,65,158 found d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th the assessee company. Unfortunately, the records and paperbook submitted before us is silent on this and in absence of the same, we are unable to take a view in the matter solely basis the statements so recorded. Further, the ld AR has raised various contentions (as noted above) in terms of inconsistency in the statements of Shri Naresh Agarwal, the absence of nexus with the assessee company, the locus standi of Shri Sharad Heda and how the same cannot be relied upon and held against the assessee. In our view, what is relevant is that the statements should be read as a whole and any inconsistencies should be examined. Further independent investigation be carried out by the AO to determine the necessary nexus with the assessee company with the amounts so deposited in the bank accounts and the locus standi of shri Sharad Heda, the relationship and linkage with the promoters/directors and in the affairs of the assessee company before a final view is taken in the matter. In our view, there is not enough material on record for us to take a view in the matter and the matter deserves to be set-aside to the file of the ld CIT(A) to examine the same afresh. 8.4 Further, the matter rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been carried out by the assessee herself with the assistance of her husband to whom she has authorised and not by the marble traders. Here it is also relevant to note that the AO has also stated in his order about the said market practice in the business of marble trading where there is large scale under invoicing and under billing of sales. The ld. AO has stated that generally, for obtaining sale consideration of actual transaction from the buyers located outside the hometown or throughout India, the traders obtain part amount through cheques and for balance amount, they have been using their confidants (facility providers). The confidents are having multiple bank accounts either in their name or in the names of their family members or concern/forms. Their bank account numbers are intimated to the buyers who deposit the balance amount which is actually on-money, in the bank account of the confidants. The buyers deposit amount below ₹ 50,000/- to avoid mentioning PAN on pay-in-slips. After receipt of amount in bank account, the confidants i.e, facility providers withdraw the amount of on-money and hand over to the beneficiaries i.e. sellers. The AO has therefore, given his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the watches. A panchnama was prepared. The Department found that the assessee was the owner. Sec. 110 of the Evidence Act is material in this respect and the High Court relied on the same which stipulates that when the question is whether any person is owner of any-thing of which he is shown to be in possession, the onus of proving that he is not the owner is on the person who affirms that he is not the owner. In other words, it follows from the well-settled principle of law that normally, unless the contrary is established, title always follows possession. In the facts of this case, indubitably, possession of the wristwatches was found with the petitioner. The petitioner did not adduce any evidence, far less discharge the onus of proving that the wristwatches in question did not belong to the petitioner. Hence, the High Court held, and in our opinion rightly, that the value of the wristwatches is the income of the assessee. In this connection, reference may be made to the views expressed by Justice Tulzapurkar, as his Lordship then was, of the Bombay High Court in the case of J.S. Parkar vs. V.B. Palekar (1974) 94 ITR 616 (Bom) : TC42R.1775, where, on a difference of opinion betw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arious depositers and the beneficiaries. The assessee could have submitted the said information/data to the AO during the course of assessment proceedings. There is nothing on record to suggest that the assessee was not having access to the said information or was prevented by sufficient cause from sharing these information with the AO. It is not the plea of the assessee all these documents were seized during the course of survey and she was not having access to all these documents which were admittedly maintained by her while transacting through her bank accounts. In our view it is for the assessee in whose bank accounts the money has been found deposited to explain the nature and source of such deposits and it is in respect of every such transaction, the assessee has to provide the necessary explanation to the AO. Similarly, the claim of the asseseee that the money was withdrawn and given to the various beneficiaries has to be explained for each of the transactions and the necessary linkage/nexus has to be established by the assessee. The same is in conformity with the proposition of law laid down by the Hon ble Rajasthan High Court in the case of R.S. Rathore 212 ITR 350 (Raj.). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nly if the Tribunal was satisfied that all the investments were satisfactorily explained. The Tribunal itself was not in a position to feel satisfied with regard to the explanation submitted and observed that some of the investments were not genuine. It was not justified on the part of the Tribunal in such a case to uphold the order of the CIT(A). While explaining the various credits and investments, it may be possible that the assessee may be successful in explaining some of them, but that does not by itself mean that the entire investments have to be considered as explained. Even lapse of time or inability of the assessee would not make the unexplained investment an explained one. It is each and individual entry on which the mind has to be applied by the taxing authority when an explanation is offered by the assessee. If no explanation has been offered in respect of a particular entry, the taxing authority will be justified in coming to the conclusion that the said investment is unexplained. It is not the totality of the credit entries which are to be allowed or to be disallowed. This work has to be done on the basis of the explanation offered for different entries and if the exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osits and withdrawals in respect of various bank accounts maintained by the assessee, the details in respect of which has been obtained by the AO by issuing notices calling for the information from the various banks. It seems to us that the reason for inaction on the part of the AO is account of AO not having necessary records of survey maintained by the Investigation Wing. There thus seems to be a clear lack of co-ordination between the Investigation wing and the Assessing Officer handling the assessment. We do not see a justifiable reason especially where the case of the assessee alongwith other similar assesses were centralized before a single assessing authority, why the survey records cannot be shared with the said authority so that the efforts initiated through survey can lead to a logical conclusion by arriving at the appropriate assessment in the hands of right persons. The fact is that huge cash has been found deposited in the bank accounts maintained by the assessee and it is the assessee s plea that money does not belong to her and it belongs to some other beneficiaries. The money therefore belongs to someone who should be brought to tax as per law where the plea of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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