TMI Blog2018 (1) TMI 1100X X X X Extracts X X X X X X X X Extracts X X X X ..... the aforesaid deposit of ₹ 9.65 crores in the bank account of M/s Shree Bullion. - Decided against revenue Addition u/s.69C on account of unexplained house hold expenses - CIT-A delted the addition - Held that:- DR though supported the order of AO but could not bring any material on record to controvert the finding of the CIT(A) that the AO has estimated the household expenses on the basis that family consists of 28 members, which comprised 18 adult and 10 children. But the CIT(A) held that the family members of brother of Shri Mahendra Lal Saluja resides separately and that family consists of only 10 members and not 28 members as held by the AO.- Decided against revenue Un-explained excess stock of gold and silver - Search & Seizure action in the case of the assessee - Held that:- No positive material could be brought on record to controvert the finding of CIT(A) that gold and silver declared under the VDIS Scheme, was kept in the business premises of the assessee and stood duly reflected in the books of account, which on the last page of the ledger of Mahendra Jewellers for the AY 2007-08. Copies of which were produced before the CIT(A) and verified from the relevant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd in the circumstances of the case, the learned CIT (A) has erred in law and on facts in deleting the above addition in spite of the facts on records that the Branch Manager of the P.N.B Budhwari Bazar Bilaspur has deposed on oath in a statement U/s 131. (d) The reliance by CIT(A) on the decision of MP High Court in the case of CIT V, Raja Ginning Udyog 268 ITR 383 (MP) is not justified as opportunity had been given to the assessee before making the addition . (e) The CIT(A) erred in holding that the appellant was not given opportunity to cross examine the persons whose statements were recorded as no such opportunity was asked for by the assessee and the appellant had been confronted with the statements and the appellant though was asked to produce Om Prakash Nema did not produce him . (f) The CIT(A) erred in appreciating the fact that as per section 106 of Evidence Act where any fact is within the knowledge of any person , the burden of proving that fact is upon him , thus when certain transactions are recorded by the assessee then primary onus of explaining the transactions lies on the assessee and not on the revenue. (g) The CIT(A) erred in not appreciating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plaining the transactions lies on the assessee and not on the revenue. (e) The CIT(A) erred in not appreciating the fact that as per the decision of Delhi H.C. in CIT V. Motor General Finance Ltd. (254 ITR 449) for failure of the assessee to produce documents and facts, adverse inference can be drawn against the assessee . 2. (a) That on the facts and in the circumstances of the case, the learned CIT(A) erred in law and on facts in deleting the addition of ₹ 2,12,566/-made U/s 69C on account of unexplained house hold expenses without properly appreciating the facts. (b) That on the facts and in the circumstances of the case, the learned CIT(A) erred in law and on facts in deleting the above addition which has been made on the basis of the facts collected during the search and seizure operation in the case of the assessee. 3. (a) That on the facts and in the circumstances of the case, the learned CIT (A) has erred in law and on facts in deleting the addition of ₹ 47,340/- and ₹ 6,10,223/- made by the A.O. U/s 69A on the basis of loose paper found and seized during search in the case of the assessee. (b) That on the facts and in the circumst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gned by servants. He further deposed that sons of Mahendralal Saluja threatened him for the consequences if this information is revealed. In response to summons u/s.131 of the Act, Shri O.K. Sharma, Branch Manager of the said bank attended and had not refuted the depositions given on oath by Shri Sunil Shrivastav. According to the AO, the assessee was confronted with these statements/depositions of the bank official-cum-cashier Shri Sunil Shrivastava and except denying the same, the assessee had not adduced any evidence substantiating such denial, photocopies of two letters from Shri Shyam Bullions (prop. Omprakash Nema) were filed. Since the said Omprakash Nema had not complied with the summons u/s.131 of the Act, for further verification of the facts and for arriving at right, and reasonable conclusions on the claimed crux of the issues, the assessee was specifically directed to produce the said Omprakash Nema with books of account of Shri Shyam Bullion, but there was no compliance from the assessee, except laying emphasis on the confirmation purported to have been given by the alleged Shri Shyam Bullion. The AO opined that mere denial by the assessee having any connection or rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s : (i) In the case of Mriganka Mohan Sur (Supra), the assessee admitted that he had two accounts in the bank which were not disclosed in the original assessment. The pass book of only one of the said accounts was produced. From the copy of the accounts of Oriental Traders obtained by the ITO, he found that the sole proprietor of the business was one M, who was none other than the assessee While in the case of the assessee, under consideration, the following are the facts obtaining from the record. In the case of Praveen Kumar Saluja, vide query letter dt. 04-12-08, referring to the deposits of above ₹ 50 Crores in A/c No. 990 in Punjab National Bank, Budhwari Bazar Branch, Bilaspur, the assessee was requested to produce Shri Omprakash Nema, Proprietor of Shree Shyam Bullion, Indore. When contacted, Shri Omprakash Nema, Proprietor of that concern had categorically affirmed that he is the sole owner of the said concern and is being assessed by ITO Ward -1(2) Indore under PAN No ACRPN2535N. Shri Omprakash Nema affirmed that in the name of the above proprietary concern, he has business dealing in Bilaspur Region and for facilitating safe and secured depositing of the bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of his proprietory concern named above. In the confirmation given by him, Shri Omprakash Nema had verified the above stated facts to be true to the best of his knowledge and belief. Copy of the same was submitted before the AO in assessment proceedings. No evidence whatsoever was found during search nor thereafter to controvert the aforementioned affirmation of facts confirmed by Shri Omrakash Nema. (ii) In the case of Mriganka Mohan Sur (Supra), the ITO also found that the assessee had several accounts in the bank, was well known to the bank authorities and the assessee s cousin was a director of the bank. The ITO also found that the assessee had one-third share in the premises of Oriental Traders, and that there was no other person at the premises having the same name and surname as that of the assessee. These are not the facts forthcoming in the assessee s case, under consideration, and hence no adversity should be held against the assessee. (iii) In the case of Mriganka Mohan Sur (Supra), the denial of the assessee that he had any connection with the Oriental Traders and its bank account was not accepted by the ITO who held that the bank account in the name of O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unsustainable on facts and in law. Therefore, in the light of the above, the assessee submitted that the impugned addition made by the AO, is unsustainable on facts and in law and hence the same be deleted. 9. The CIT(A) considering the submissions of assessee, deleted the addition. 10. We have heard rival submissions and perused the orders of lower authorities and materials available on record. The assessee is a proprietor of M/s. Mahendra Jewellers. A search and seizure operation was conducted in the case of the assessee on 31.01.2007 and 01.02.2007. Thereafter notice u/s.153A of the Act was issued and in pursuance of which the impugned order of assessment was made. The AO made addition of ₹ 9.65 crores to the income of the assessee on the ground that the assessee has deposited the said amount in cash in Punjab National Bank, Budhwari Bazar Branch, Bilaspur(C.G.), Account No.990. According to the AO, an information was received from the bank that that during the period 02.04.2005 to 31.05.2005 the assessee deposited vide 149 entries of ₹ 9.65 crores in account No.990 in the name of Shree Shyam Bullion. On being confronted the assessee denied his making of said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r facilitating safe and secured depositing of the business, cash collected towards sales proceeds from various customers of that area and for transferring the same to his bank account at Indore. (i.e. to the business headquarters of this proprietory concern), he had opened account with Punjab National Bank, Budhwari Bazar Branch, Bilaspur, Account No. 990; (iii) The business cash so collected from time to time is deposited in this account by the personnel deputed by him for the purpose and according to the business needs, the sums so required are transferred from this bank account to his bank account hi Punjab National Bank at Ahmedabad; (iv) Shri Omprakash Nema affirmed that all the deposits, debits and credits appearing in this bank account No. 990 in Punjab National Bank, Budhwari Bazar Branch, Bilaspur, absolutely and exclusively related to the business of his proprietory concern named above and none of the entries in this Bank Account No. 990 in Punjab National Bank, Bilaspur, have any connection or relation with either Shri Mahendralal Saluja, Tikrapara, Bilaspur or with any member or concern of that family group; (v) Since the aforementioned Bank Account No. 990 in Punjab Na ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO solely placing reliance on the statements of the aforementioned persons, recorded by him. There is no dispute with regard to the fact that these statements were recorded behind the back of the appellant and the appellant was not given opportunity to cross-examine them. Despite specific request, it was vehemently urged that the appellant was not supplied with copies of the same. In the given circumstances, such statements, recorded behind the back of the appellant, in my considered view, had no evidentiary value. In Kishinchand Chellaram v CIT (1980) 125 1TR 713 (SC) it was held that since the IT Authorities propose to rely on the statements of a witness obtained behind the back of the appellant, they are bound to produce the same before the appellant so that he can controvert the statements by asking for an opportunity to cross examine the said witness with reference to the statements made by him. In CIT v Eastern Commercial: 210 ITR 103 (Cal.) it was held that: As a matter of fact, the right to cross-examine a witness adverse to the appellant is an indispensable right and the opportunity of such cross examination is one of the corner stones of natural justice. It is the n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... because the extensive search did not unearth any incriminating evidence to substantiate the impugned presumptive addition. 2.6 There is not even remotest link established to prove any undisclosed sources of income. The extensive search had not unearthed any incriminating evidence to prove the case against the appellant in this regard. The AO had also not placed on record any incriminating evidence to substantiate his allegations against the appellant in this regard. The AO had simply proceeded arbitrarily in finalizing the assessment, by treating the impugned deposits in bank account of somebody else, as undisclosed income of the appellant. Before resorting to such arbitrary conclusions against the appellant, it was incumbent upon the AO to have brought evidence to substantiate that the appellant in fact earned the aforementioned sum during the relevant previous year from undisclosed sources. This was not done. Hence the impugned addition made on presumptions and suspicions is unsustainable on facts and in law. It is settled position of law that in the scrutiny assessments that too completed as a result of extensive search operations, the AO was not empowered to base his conc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year 2006-07 regarding deleting the of addition of ₹ 1,91,133/- out of the total addition of ₹ 2,12,333/- and ₹ 2,12,566/- for the assessment year 2007-08 made by the AO u/s.69C of the Act on account of unexplained house hold expenses. 22. Brief facts relating to the above ground are that the AO during the course of search u/s. 132(1) of the Act in residential premises of the assessee, the search team found air-conditions, televisions and other luxury goods which, prima facie indicate that the assessee was enjoying luxurious life whereas the household withdrawal shown in IT returns, were meager. The AO further noted that the family of the assessee consists of 28 members, which comprised of 18 adult and 10 children. The total withdrawal shown by the family members were ₹ 3,20,900/- (about ₹ 31/- per day per person) and ₹ 3,70,300/- (about ₹ 36/- per day per person) respectively for the two assessment years, under consideration, summarized at page No. 28 by the AO. The AO found the withdrawal ridiculously low in view of the facts that they have three cars, five two wheelers, two Alsatian pet dogs. The AO has also taken on record some tele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M Satyanarayana Setty 71 TTJ 186; ITO v. Rajendra Kumar Taparia 106 TTJ 712 and LMJ International Ltd v. DCIT 22 SOT 315. 24. The CIT(A) after considering the submissions of the assessee deleted the addition of ₹ 1,91,133/- for the assessment year 2006-07 and ₹ 2,12,566/- for the assessment year 2007-08 after observing as under :- 5.3 I have carefully considered the submissions made on behalf of the appellant with reference to the facts obtaining from the record. The appellant has claimed the withdrawals and the agrl. income as source of family expenditure. On verification of capital account, it was noticed that the agrl. income has been credited in accounts and therefore, the same could not be the source of household withdrawal. Otherwise also, since no evidence was adduced to prove earning of agrl. income, action of the AO in assessing the returned agrl. income, as income from undisclosed sources, was upheld. Thus, the withdrawals shown in books were only the source for meeting household expenses. Another fact noticed is that the appellant claimed that Shri Mahendra lal Saluja is residing with his sons; and the brothers of Shri Mahendra Lal Saluja are residin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roduced in the assessment order. The AO also observed that the claim of the assessee that some of this excess jewellery was purchased, by selling of the diamond jewellery declared in VDIS scheme, was not substantiated by any evidence. Letters written to purchaser to these diamonds remained uncomplied. In the given circumstances, the AO concluded that the link between VDIS disclosure and excess jewellery found in the premises of M/s. Mahendra Jewellers, was not established and the explanation given by the assessee was only self serving evidence and hence, the AO observed that no credence could be given to it. On this premise, the entire excess stock of gold weighing 7.697 kg, valued at ₹ 47,79,969 and excess stock of silver of 227 kg, valued at ₹ 43.13 lakh, was treated as amount of investment not fully disclosed in books of account and the same was added to the income of the assessee. 29. On appeal before the CIT(A), the assessee submitted that when confronted to explain the alleged excess stock of gold/silver, it was explained, in proceedings before the AO, that there was no such difference as alleged since Mahendra lal Saluja and other members of the family are hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he factual position which stood accepted in the past. Nothing incriminating was found/recovered either during extensive search operation or thereafter to prove that the aforementioned items, disclosed and stood accepted earlier, were assessable as undisclosed income. The AO had not brought any evidence on record to substantiate his presumption in this regard. It is settled position of law that in the scrutiny assessments that too completed as a result of extensive search operations, the AO was not empowered to base his conclusions on presumptions and surmises as held by the SC in Dhakeshwari Cotton Mills Ltd. v. CIT (1954) 26 JTR 775 (SC). In CIT v Bhayana (2008) 296 ITR 101 (P H) it was held that in case the explanation of the appellant was to be disbelieved, the AO should have some material to rebut the same. Mere conjectures and surmises cannot form the basis for making additions. To the extent of income and assets, entered in the current books, there is no question of any allegation for concealment of income. In order to reduce the rigours of new procedure, it is essential that the additions should be made only in relation to such income in respect of which some incriminating m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no material was brought on record to controvert the finding of CIT(A) that nothing incriminating was found/recovered either during extensive search operation or thereafter to prove that the aforementioned items, disclosed and stood accepted earlier, were assessable as undisclosed income. In absence of the same, we do not find any good reason to interfere with the order of CIT(A), which is confirmed and this ground of appeal of Revenue is dismissed. 32. In Ground No.3 in appeal for assessment year 2007-08, the grievance of the Revenue is that the CIT(A) erred in deleting the addition of ₹ 47,340/- and ₹ 6,10,223/- made by the A.O. U/s 69A on the basis of loose paper found and seized during search in the case of the assessee. 33. Brief facts to the above ground are that the during the course of assessment proceedings the assessee was equired to explain loose paper No. A-2/33- Page No.14 which is a receipt of ₹ 47,340/- dated 27.10.2006 by M/s. Mahendra Jewellers and not found recorded anywhere. Since the assessee failed to submit any plausible explanation, this sum of ₹ 47,340/- was presumed as unexplained money received by the assessee and added to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the purpose of resorting to deeming provisions u/s.68, 69, 69A to 69C and no addition could be made, on account of undisclosed income, merely by arithmetically totaling various figures jotted therein, particularly when no evidence whatsoever was brought on record to prove the nature and ownership of the impugned jottings. If they were unrecorded sales, as assumed by the AO, then the name of the purchaser should have appeared therein. Prime facie, there is no evidence on record to conclusively prove that the impugned jottings represented the transactions in fact materialized. No doubt, u/s. 132(4A), there is a presumption against the appellant that such loose papers pertained to the appellant and its contents were correct. However, such presumption is rebuttable. Loose papers, in question, contained scribblings or rough notes and do not mean anything. Hence income should not be estimated by applying multiplier of thousand or even lac. Over the course of time, the courts have held that the AO has no such authority and unless meaningful data could be culled out, which could be corroborated from other material, no addition is called for on the basis of such dump documents. It is for th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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