TMI Blog2015 (8) TMI 1494X X X X Extracts X X X X X X X X Extracts X X X X ..... The guidance was found from Jt. Commissioner of Income Tax u/s 144A was duly received and kept on record. The AO has during the course of assessment proceedings made a detailed enquiry of this loose slips/ dumb loose slips found with Mukesh Sharma. All these evidences have been classified in the form of table and primary evidence and evidence has been apprised as per Income-tax Act, 1961. The AO has made the assessment as per the CBDT guidelines and as per the CBDT guidelines, in the first stage, the AO acquainted with the appraisal report and seized material and took up the case for assessment and thereafter, the AO has made the detailed enquiry and after filing the return, the AO had accepted, prima facie, acceptable evidence and he has made a proper enquiry and after making the enquiry the AO has also called for his report u/s 144A of the Act and after getting the report of 144A, the AO has come to the conclusion that the assessee has not received any money. Whatever the documents are on the record are dumb document and on the basis of these documents, no addition can be made. Commissioner has directed to collect the original file from Indore Commissioner and Bhopal Commiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers. In the case of Shri Narottam Mishra, the Assessing officer issued notice u/s. 133(6) to Municipal Commissioner, Indore Principal Secretary, Department of Urban development, Bhopal and the Commissioner, Urban Development, Bhopal. Through these notices, the Assessing Officer has called for original files of award of contract of sewerage line to M/s.Nagarjun Construction Co. Ltd and M/s. Simplex Infrastructure Ltd, alongwith a set of Xerox copies of original files. These notices were not complied by these persons. The Assessing officer passed the assessment orders without completing these enquiries. In the assessment order the Assessing Officer has elaborately discussed the five primary evidences found during search and seizure action u/s. 132 at the residence of Shri Mukesh Sharma, which reads as under :- S.No. Panchnama and Other details of evidence collection Truth disclosed by this evidence Relevance of Evidence to the present case of assessee Primary Evidence Number 1 Operations of search seizure u/s 132 of the Income-tax Act were carried out at the office a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for facilitating the work from the Ministers and Officers of Department of Urban Development. Sri Mukesh Sharma has been found to be a liasioning intermediary for the practices of transfer and posting and fund allocation. The documents in his possession are proving him to be a liaisoning intermediary a liasioning intermediary. Primary Evidence No. 2 Loose sheets 1/1, page from Matrix Pad, collected from Residence of Mukesh Sharma (B-99, Rajved Colony, Kolar Road, Bhopal i.The word mayor is clearly written on this piece of evidence. ii. M Netaji mentioned in these documents refers to the Minister Urban Development, M.P. because Shri Mukesh Sharma addressed the then Minister of Urban Development, as Netaji iii.PP mentioned in these documents refers to Principal Secretary, Urban Development Department, M.P. iv. The C mentioned in these documents refers to Commissioner. v. The number 267 is having monetary value in rupee and in crores. This amount of 267 is exactly matching with the amount of contract awarded to Nagarjuna Construction Company for Sewerage Work in Indore supervised out by Nagar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Indore who has agreed to receive ₹ 1.33 crore. This name of commissioner of nagar nigam has not been written in this place. But the vertical chain of arrangement of government hierarchy is clearly indicating this missing person to be the commissioner of nagar nigam, Indore. Primary Evidence No. 3 Loose Paper Paper sheets 1/1, page from Matrix Pad, collected from Residence of Mukesh Sharma (B-99, Rajved Colony, Kolar Road, Bhopal This contains the acronym of nagar and simplex. The number written against them are expressed in the monetary value in Rupees in crore. This amount is exactly matching with amount of awarded contract This ₹ 266.87 crore has been rounded off and shown as ₹ 267 crore in the 1st evidence. Primary Evidence No. 4 Loose paper sheets 1/1, page from Matrix Pad collected from Residence of Mukesh Sharma (B-99, Rajved Colony, Kolar Road, Bhopal. This evidence shows the letter M, letter P and word commissioner. The use of numbers 15th and 30th are inferred to be the dates. The use of acronym cr shows to be crore. It implies the rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... structure during the tenure of Principal Secretary, Urban Development, M.P. The AO held that unaccounted gratification found during the course of search was not adequate and not sufficient to make addition in view of Section 34 of Evidence Act. During the course of search and seizure u/s 132 of the Income-tax Act, 1961, at the residence of Shri Mukesh Sharma, certain documents were found and seized. The seized documents included documents regarding award of contract or re-organization of water supply of Ujjain city. The seized documents read alongwith other seized documents give a reason to belief that unaccounted gratifications have been received in respect of this contract. The AO did not carry out any enquiry on this issue and completed the assessment order without carrying out proper enquiries. Thus, the order is erroneous so far as it is prejudicial to the interests of revenue. Therefore, show cause notice was given and in reply to show cause notice, the assessee filed the written submissions, which reads as under:- In the initial Para of the order, the A.O. has recorded about his methodology and the procedure he followed, as also the basis for his eventual findings: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 263 on the ground that the assessment order passed by the A.O. is erroneous in so far as it is prejudicial to the interest of revenue. In the said notice, your contentions are that (i) That the seized documents found in the course of search with Mukesh Sharma show the receipt of illegal gratification for the award of contract of sewerage line from Nagarjuna Construction Co. Ltd., and Simplex Infrastructure Limited (ii) That contracts in question were awarded by the Urban Development Department of the Government of Madhya Pradesh (iii) That the A.O. passed the assessment order without completing the requisite enquiries of contracts awarded by the Municipal Corporations of Indore and Ujjain (iv) That rigors of Evidence Act do not apply to proceedings under I.T. Act (v) That A.O. has not conducted any enquiry and has completed the assessment by holding that no corroborative evidences have been found, and, therefore, the order is erroneous. It is pointed out and reiterated yet again that the so-called evidences as referred to in the aforesaid notice u/s. 263 are purely dumb papers, because such noting is senseless and does not speak anything even remotely definitive and cred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... verred that in absence of any corroborating evidences, the assessee cannot be charged to tax, and therefore he rightly acknowledged and concluded the assessment that the allegations were not proven and accordingly did not make any addition on the basis of such dumb documents. 4. While once again reechoing the suspicions that were raised at the Enquiry stage (and that were the cause for the Assessing Officer to take the hasty step of issuing a notice under Section 142 of the IT Act but were finally settled as uncorroborated and unsubstantiated by him), you have overlooked the facts that came to be placed before the Assessing Officer in the course of his detailed Enquiry. These significant facts are: i. The Assessee had nothing to do with the preparation of either the Detailed Project Report for the projects mentioned or for their Request for Qualification/RFQ or Request for Proposal/RFP process, nor did he evaluate or approve or issue letters of intent or Award the projects mentioned by you (this has already been duly affirmed by the Assessee before the AO vide our letter dated 29/12/2011) ii. The Municipal Corporations of Indore and Ujjain, as also all other Municipa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etter dated 29/12/2011). iii. The main rationale for your notice of 31/12/2012 relates to the case of another tax-payer. This is another case and not assessee s case. You have stated that certain files of award of contracts were called from the Municipal Corporation Indore, but the Assessing Officer passed the order without completing these enquiries. As you yourself have stated, these files were required for the case of Shri Narottam Misra, and not in assessee s case. This is a different case and of a different tax-payer. As stated above, these documents had no direct relevance to assessee s case. In this case the Assessing Officer looked at all the facts of the matter and after conducting detailed enquiry he was convinced and accordingly passed a legal order. Hence, to now say that these files were sought by him in assessee s case is incorrect. This, therefore, cannot be ground for saying that enough inquiry had not been conducted by the Assessing Officer in assessee s case. Moreover, the assessee fervently believes that there is nothing adverse against him in any other paper or in any other document; nor has any specific material justifying addition to income in his case bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s case is supported by binding decisions of the Hon ble Apex Court and Hon ble High Courts including, inter alia, as referred above. For the aforesaid reasons the AOs order of assessment cannot be dubbed as erroneous. 7. The Hon ble Supreme Court has established basic guidelines in the case of Central Bureau of Investigation vs. VC Shukla and others on 2,,d March 1998 wherein the Jain Hawala Case was adjudicated. The operative paragraph from the judgement is: After having held that the documents were neither books of account nor kept in the regular course of business the High Court observed that even if they were admissible under Section 34, they were not, in view of the plain language of the Section, sufficient enough to fasten the liability on the head of a person, against whom they were sought to be used. As, according to the High, the prosecution conceded that besides the alleged entries in the diaries and the loose sheets there was no other evidence it observed that the entries would not further the case of the prosecution. As regards the admissibility of the documents under Section 10 the High Court held that the materials collected during investigation did not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and there being adequate Case Law to support this, and this being a case of substitution/superimposition of the opinion of a superior functionary upon that of the Assessing Officer, the proceedings u/s 263 should be dropped forthwith. 4. After considering the reply, the ld. Commissioner has examined the record and written statement of the assessee and AO has failed to examine the details and has not conducted any enquiry in respect of seized documents regarding award of contract of sewerage line from Nagarjun Construction and Simplex Infrastructure. The seized documents read together with seized documents give a reason to belief that unaccounted gratification has been received in respect of these contracts. Therefore, the ld. CIT has held that the order passed by the Assessing Officer is erroneous and prejudicial to the interests of the revenue. Therefore, the order of the AO was cancelled and the AO was directed to reframe the assessment after examining the above issue after affording sufficient opportunity of hearing to the assessee. 5. The assessee is in appeal before us. 6. The ld. Authorized Representative submitted - That the Assessee was served with a detail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee is accepted Despite the aforesaid background of this case an order has been passed u/s. 263 on the ground that the assessment order passed by the A.O. is erroneous in so far as it is prejudicial to the interest of revenue. In the said order u/s 263 the conclusions are based on the assumptions that (i) That the seized documents found in the course of search with Mukesh Sharma show the receipt of illegal gratification for the award of contract of sewerage line from Nagarjuna Construction Co. Ltd., and Simplex Infrastructure Limited (ii) That contracts in question were awarded by the Urban Development Department of the Government of Madhya Pradesh (iii) That the A.O. passed the assessment order without completing the requisite enquiries of contracts awarded by the Municipal Corporations of Indore and Ujjain (iv) That rigors of Evidence Act do not apply to proceedings under I.T. Act (v) That A.O. has not conducted any enquiry and has completed the assessment by holding that no corroborative evidences have been found, and therefore the order is erroneous. That the so-called evidences as referred to in the aforesaid order u/s. 263 are purely dumb p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... way only for the purpose of enquiry. However, after making such detailed enquiry, the AO staunchly averred that in absence of any corroborating evidences, the assessee cannot be charged to tax, and therefore he rightly acknowledged and concluded the assessment that the allegations were not proven and accordingly did not make any addition on the basis of such dumb documents. The Assessee further submits that it is also not lawful on the part of the Ld. CIT to hold that the Rigors of the Evidence Act do not apply in the tax proceedings. The Assessee submits that it is the settled law that the basic tenets and principles of Evidence Act do apply. The Hon ble Supreme Court in the case of Chuharmal v/s. CIT reported in 172-ITR-250/251 (SC) held that what was meant by saying that the Evidence Act did not apply to proceedings under Income Tax Act 1961, was that the rigor of the rules of evidence contained in the Evidence Act was not applicable; but that did not mean that when the taxing authorities were desirous of invoking the principles of the evidence act in proceedings before them, they are prevented from doing so. In fact, there is not an iota of evidence whether primary, corr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sentatives who have executive and statutory powers under the Municipal Corporation Act, read along with the 74th Constitutional Amendment. That the Assessee did not grant any favors or award projects to either Nagarjuna Construction or Simplex companies and that the allegations of illegal gratification are preposterous to say the least (this has already been duly affirmed by the Assessee before the AO vide our letter dated 29/12/2011). That the person searched had informed that he had submitted an affidavit to the effect that he has had nothing to do with the Assessee in any way, nor had he alluded remotely to him in any way anywhere (this has already been duly affirmed by the Assessee before the AO vide our letter dated 29/12/2011). Thus the notice and the consequent order issued u/s. 263 are clearly not lawful and are without jurisdiction. For the following reasons it was wrong to allege that the order of the assessment passed by the A.O. is erroneous: The A.O. made all due enquiries to the extent possible. The AO issued a detailed questionnaire to the Assessee, and a continuous barrage of questions were raised which was duly replied The AO considered the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9;ble P H High Court has held that suspicion, however strong, cannot take the place of evidence or proof. The Hon'ble P H High Court in the case of CIT vs. Faqir Chaman Lal - 262 ITR 295 has held that it is a well settled proposition that the presumption howsoever strong cannot substitute evidence. In the case of CIT vs. Emerald Commercial Ltd. Anr. -250 ITR 539, the Hon'ble Calcutta High Court following its own judgment reported in 244 ITR 422 has held that Tribunal was justified in holding that the findings of the Income-tax Officer and the Commissioner of Income-tax (Appeals) were based on presumption and not warranted by the facts of the case. Further reliance is placed on the following decisions on the issue of loose papers being dumb documents :- 1. CBI v. V.C. Shukla 1998 SCC 410 2. CIT vs. Atam Valves (P) Ltd. 332 ITR 468 (P H) 3. Straptex (India) P. Ltd. v. DCIT (2003) 84 ITD 320 (Mum) 4. Bansal Strips v. ACIT 99 ITD 177 (Del) Thus the view taken by the AO was a legal and sustainable view and cannot be termed as erroneous . On the Scope of section 263 :- All the evidences have been duly considered and disc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d on 27/3/2014. In the meanwhile no enquiry was conducted by the CIT himself nor was any enquiry got conducted through someone else. 3.2 There are two limbs in section 263 . The first is regarding the order being erroneous and prejudicial to the interest of the revenue and the second is to pass such order after making or causing to be made such inquiry as deemed necessary 3.3 In the matter of DIRECTOR OF INCOME TAX vs. JYOTI FOUNDATION (2013) 357 ITR 388 (Delhi) it was observed : Thus, in cases of wrong opinion or finding on merits, the CIT has to come to the conclusion and himself decide that the order is erroneous, by conducting necessary enquiry, if required and necessary, before the order under section 263 is passed. In such cases, the order of the Assessing Officer will be erroneous because the order passed is not sustainable in law and the said finding must be recorded. CIT cannot remand the matter to the Assessing Officer to decide whether the findings recorded are erroneous. In cases where there is inadequate enquiry but not lack of enquiry, again the CIT must give and record a finding that the order/inquiry made is erroneous. This can happen if an enquiry and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evidences were overlooked which were very much on record or in the knowledge of the AO. Even this is not the case of Ld. CIT that certain new facts or evidences were brought to the notice of the Revenue Department which were having a direct impact on the income assessed by the AO. Neither there was an escapement of evidence nor there was any evidence now brought to the notice of the revenue department, therefore if that was not the position, then we are not inclined to give our approval to such directions. Issue is thus also covered by the decision of this Hon ble ITAT in the case of Shri Narottam Mishra (supra) wherein these very loose papers were under consideration and the Hon ble ITAT held that the AO had made due inquiry into the matter and hence the CIT could not have exercise his powers u/s 263. Copy of this decision is placed in the paper book on pages 60 to 68. 7. The ld. CIT DR has drawn our attention to the statement recorded of one Shri Mukesh Sharma. The ld. CIT DR has drawn our attention on page 8 of the statement recorded during the course of search and during the course of search, the AO Investigation Officer has specifically held that on 267 1.25% was paid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P 1.25% 3.3375 2.67 C 0.5 % 1.3350 etc. and question was asked relating to this codification, Shri Mukesh Sharma replied that he does not remember anything regarding this and no other questions were put by search party to Shri Mukesh Sharma. Shri Mukesh Sharma is Managing Director of one Prem Prakash Tubes Private Limited and Mukesh Sharma was the middleman. He was the middleman to award of sewerage line contract to Nagarjun Construction and Simplex Infrastructure. In his diary, these three sentences were found. From the above diary, there is not a single iota of evidence was found against the assessee. We have also gone through the statement and in the statement Shri Mukesh Sharma did not point out or give statement against the assessee. 9. We find from the assessment order that the Contract of sewerage line was given to M/s. Nagarjun Construction and Simplex Infrastructure. The AO has recorded a statement of one Gyanchandra and Shri Jadon and in the statement he has informed that he did not know about this contract but he was Project Officer at the relevant time and details relating to project is kept in Indore Muncipal Corporation. The AO has made an enquiry from this Proje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Assessing Officer is unsustainable in law. In CIT vs. Arvind Jewellers, 259 ITR 502, (Gujarat H.C.),in which it was held that the finding of fact by the Tribunal was that the assessee had produced relevant material and offered explanation in pursuance of the notices issued under section 142(1) as well as section 143(2) of the Act and after considering the material and explanations, the Income-tax Officer had come to a definite conclusion. Since the material was there on record and the said material was considered by the Income-tax Officer and a particular view was taken, the mere fact that different view can be taken should not be the basis for an action under section 263. The order of revision was not justified. In CIT Vs. Gabriel India Ltd., 203 ITR 108 (Bombay H.C.). At page 110, it was held that the Income-tax Officer in this case had made enquiries in regard to the nature of the expenditure incurred by the assessee. The assessee had given a detailed explanation in that regard by a letter in writing. All these were part of the record of the case. Evidently, the claim was allowed by the Income-tax Officer on being satisfied with the explanation of the assessee. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITR 206, that the Assessing Officer after making an enquiry and eliciting a response from the assessee came to the conclusion that the assessee was entitled to depreciation on the value of securities held on the trading account. The Commissioner could not have treated this findings to be erroneous or to be prejudicial to the interests of the Revenue. The observation of the Commissioner that the Assessing Officer had arrived at a finding without conducting an enquiry was erroneous, since an enquiry was specifically held with reference to which a disclosure of details was called for by the Assessing Officer and furnished by the assessee. The Tribunal was justified in holding that recourse to the powers under section 263 was not warranted in the facts and circumstances of the case. In CIT vs. Design and Automation Engineers (Bombay) P. Ltd. 323 ITR 632, (Bombay H.C.), be said that the Assessing Officer had not applied his mind while granting deduction under section 80HHC of the Act as regards the net profit earned by the assessee pertaining to its export business. The Tribunal was right in holding that the view taken by the Assessing Officer was a possible view and that the condit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imed under section 35DDA. The Commissioner in the order did not appreciate and deal with this aspect. He had wrongly interpreted and observed that the claim itself was made as a precautionary measure. The Tribunal, was, therefore, right in setting aside this part of the order. In CIT vs. Green World Corporation, 341 ITR 81,( S. C.) wherein it has been held that the assessment order cannot be interfered only because another view is possible. In CIT v. Sunbeam Auto, 341 ITR 81 (Delhi) wherein it has been held that if there is an enquiry, even inadequate, that would not by itself give occasion to the CIT to pass order under section 263 merely because he has different opinion in the matter. In CIT vs. Vikas Polymers, 341 ITR 537 (Delhi), wherein it has been held that if query is raised during the scrutiny by the AO, which was answered to the satisfaction of the AO, but neither the query nor the answer was reflected in the assessment order, this would not by itself lead to the conclusion that the order of the AO called for interference and revision. In CIT vs. Anil Kumar Sharma, 335 ITR 83, (Delhi), wherein it has been held that tribunal has arrived at a conclusive find ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s given illegal gratification for award of contract of sewerage line to Nagarjuna Construction and Simplex Infrastructure Limited. The AO in the case of Mukesh Sharma had been finalized and no addition was made in the case of Mukesh Sharma for this amount. We find that the Commissioner has remanded this assessment order on the ground that the AO should have made inquiry from Municipal Corporations of Indore and Ujjain. These two Corporations are local self-government with full autonomy to prepare and execute the project. Such Projects are neither bid out or awarded by Urban Administration Department. The Commissioner has wrongly held that the AO should have made inquiry from these two Corporations. If at all the inquiry should have been made, then what evidence they can give. They can give only the evidence which is official in nature. We find that it is not the case of some money have been given by Municipal Corporation to this assessee. Moreover, one of the illegal gratification given to Narottam Mishra and there was no addition made in the case of Narottam Mishra, but under section 263, the Commissioner has ordered to make a further inquiry in this case, but the I.T.A.T. Tribuna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs even if it inadequate that cannot flout the Commissioner with jurisdiction u/s 263 merely because he can form another opinion. 13. Now looking to the above case laws and facts of the case, we are of the view that the assessee was served with details in specific questionnaire u/s 141 of the Income-tax Act, 1961. The assessee has also given the detailed submission regarding the admissibility of diary and AO has made the enquiry from the Executive Engineer. Various bank accounts were examined in detail. No investigation or unexplained entry was found by the Assessing Officer. Details of movable and immovable properties were called for by the Assessing Officer. Nothing adverse or unexplained was found. The guidance was found from Jt. Commissioner of Income Tax u/s 144A was duly received and kept on record. The AO has during the course of assessment proceedings made a detailed enquiry of this loose slips/ dumb loose slips found with Mukesh Sharma. All these evidences have been classified in the form of table and primary evidence and evidence has been apprised as per Income-tax Act, 1961. The AO has made the assessment as per the CBDT guidelines and as per the CBDT guidelines, in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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