TMI Blog2021 (11) TMI 308X X X X Extracts X X X X X X X X Extracts X X X X ..... ter, has concluded that there was no necessity to make further inquiries as the information available on record is self-sufficient. Assessing officer has merely relied upon extracts of certain uncorroborated excel sheets, found during the course of search in case of Ramesh Manihar Group. Such excel-sheets do not point out to the fact of assessee having given loans, in cash, to different persons through Ramesh Manihar Group. Nothing concrete is discernible from these excel sheets. AO has failed to corroborate the excel sheets with independent evidences. Unless such corroborative evidences were brought on record, the present additions are not justified. Nowhere in the excelsheets found during the course of search in case of Ramesh Manihar Group and relied upon by the AO, it could be established that PCK as mentioned in those documents stand for the assessee only. No trail of documents or corroborative evidences could be established in this regard. The extracts of the excel sheets on which reliance had been placed were found from the computers of employees of Shri Ramesh Manihar. Those employees were never examined independently by the AO to find out whether PCK as mentioned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the assessee. The Assessing Officer is hereby directed to delete the said amount of ₹ 50,05,578/- and the ground of appeal taken by the assessee is allowed. In the result, appeal of the assessee is allowed. - ITA No. 1190/JP/2019, ITA No. 1298/JP/2019, ITA No. 66/JP/2020 - - - Dated:- 12-10-2021 - Shri Sandeep Gosain, JM And Shri Vikram Singh Yadav, AM For the Assessee : Sh. Rajeev Sogani (CA) And Sh. Rohan Sogani (CA) For the Revenue : Sh. B. K. Gupta (PCIT) ORDER PER: VIKRAM SINGH YADAV, A.M. These are two cross appeals filed by the assessee and the Revenue against the order of ld. CIT(A)-4, Jaipur dated 02.09.2019 for AY 2011-12 and another appeal filed by the assessee against the order of ld. CIT(A)-4, Jaipur dated 13.11.2019 for AY 2011-12. Since these are connected matters, all these appeals were heard together and are being disposed off by this consolidated order. 2. In ITA No. 1190/JP/2019, the assessee has taken the following grounds of appeal:- 1. In the facts and circumstances of the case and in law, ld. CIT(A) has erred in confirming the action of the ld. AO in reopening the case of the assessee u/s 147 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 4. Whether on the facts and in the circumstances of the case in law the Ld. CIT(A) has erred in deleting the addition of ₹ 50,05,578/- in spite of the fact the Ld. CIT has not discussed the issue in the appellate order. 4. The facts of the case are that the assessee filed his original return of income on 29.09.2011 declaring total income of ₹ 1,10,86,623/- which was taken up for scrutiny and thereafter, the assessment was completed u/s 143(3) of the Act vide order dated 31.03.2013 wherein the returned income was accepted. Subsequently, search and seizure operations were carried out u/s 132 in case of Ramesh Manihar Group on 07.01.2016 wherein certain information/documents were seized and basis information received from the office of DCIT, Central Circle-3, Jaipur on 29.03.2018, the Assessing Officer recorded reasons that income has escaped assessment in the hands of the assessee and notice u/s 148 of the Act was issued online on 31.03.2018 after taking requisite approval of the competent authority and duly served on the assessee on the same date. 5. In the reasons so recorded before the issuance of notice u/s 148, the Assessing Officer has stated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were issued and copy of the reasons was also provided to the assessee. The assessee filed his objections which were disposed off vide order dated 26.10.2018. Thereafter, the assessee was issued a show cause as to why the addition of ₹ 25 crores should not be made as unaccounted income along interest @ 1% per month. 7. In compliance to the said show cause notice, the assessee asked the Assessing Officer to provide all the relevant documents relied upon by the department for making such additions as well as opportunity for cross examination. The copies of documents were provided to the assessee and thereafter, the assessee furnished his reply stating that he, at no point of time, during the relevant previous year or otherwise, has given any amount in cash, as loan or otherwise, through any person, including Sh. Ramesh Chand Maheshwari. Without prejudice, it was further submitted that from the documents so provided, the assessee is unable to understand as to how the Assessing Officer has inferred that he has provided cash loans to different persons through Sh. Ramesh Chand Maheshwari. It was submitted that the statements of Shri Ramesh Chand Maheshwari are full of contradi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , where name of the assessee PCK , is mentioned along with his full name address in the seized documents. Accordingly, it is proved that the assessee was the only person who has given his unaccounted cash for lending through the Ramesh Manihar Group. On further examination of these pen drives, it was also found that amount of transaction was mentioned after suppressing five zeros i.e. ₹ 25,00,00,000/- was mentioned as 2500 in the form of different entries. In these pen drives, it was also mentioned, as for which period and on what rate of interest, the amount was advanced to the borrowers. The excel sheet notings extracted from the Jagat. XIs from the the PEN drive in possession of Ramesh Manihar (finance broker) as above reveals that name of the person, surname, firm, office address and phone no. (i.e Prakash Chand Ji, Kothari, KGK, Jewellers, 73, Barnala House, 2nd Crossing, Haldiyon Ka Rasta, Johari Bazar, Jaipur respectively) are related to Shri Prakash Chand Kothari (PCK). As per records and phone directory, the said details pertain to the assessee (i.e. Shri Prakash Chand Kothari of KGK Group). Hence all the above transactions of cash loans pertain to the assessee. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13. Being aggrieved, the assessee challenged the order and findings of the Assessing Officer before the ld CIT(A) raising various grounds of appeal challenging the jurisdiction and legality of the order so passed by the Assessing officer as well as merits of the case. The ld. CIT(A) while disposing off the assessee s grounds challenging the reopening the assessment u/s 147 of the Act stated that the Assessing Officer has rightly assumed jurisdiction u/s 147 of the Act for the reason that the information along with documents collected during search on Sh. Ramesh Manihar could easily result into Assessing officer forming a belief of escapement of income on the part of the assessee. The ld. CIT(A) also dismissed the ground taken on behalf of the assessee relating to issuance of notice u/s 148 without obtaining proper sanction u/s 151 stating that A/R of the assessee has not been able to put forth any cogent reason or evidences leading up to the conclusion that the approval taken by the Assessing Officer u/s 151 of the Act was not proper. Therefore, grounds challenging reopening of the assessment u/s 147 and issuance of notice u/s 148 of the Act without seeking proper sanction were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idered as Prakash Chand Kothari . During the course of assessment proceedings, the appellant specifically asked the Assessing officer to point out which portion of the statement on the basis of which it is concluded as to involvement of the appellant in providing cash loan. The Assessing officer is completely silent on the same. If the Assessing officer wants to draw any adverse inference against any other person based on such statement, it was incumbent upon him to relate such statement to the appellant and also to provide an opportunity of cross examination of such person. 15. The ld. CIT(A) thereafter referred to the decision of Hon ble Supreme Court in case of Common Cause (A Registered Society) reported in 394 ITR 220 wherein the earlier decision of Hon ble Supreme Court in case of V. C. Shukla s case has been discussed at length and relying on the said decision, the ld. CIT(A) stated that though these judgments of the Hon ble Supreme Court were rendered in the context of criminal law, yet what the Hon ble Supreme Court Court held that merely on the basis of such uncorroborated entries kept by third-party investigation cannot be conducted and applying the principle in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing considered as an amount advanced by way of cash loans and not recorded in the books of accounts and consequent addition towards notional interest was also directed to be deleted. Against the said findings of the ld CIT(A) deleting the additions, the Revenue is now in appeal before us. 17. In the aforesaid factual matrix of the matter, we find that both the parties are in appeal before us against the findings and order of the ld CIT(A) and have raised respective grounds of appeal. We firstly refer to assessee s grounds of appeal challenging the reopening of assessment and assumption of jurisdiction by the Assessing officer u/s 147 of the Act which has been upheld by the ld CIT(A) and the contentions advanced by the respective parties in this regard. 18. The ld. A/R submitted that elaborate submissions were made before the ld. CIT(A) in this regard, however, he has not appreciated the same in correct perspective and hence the assessee wishes to reiterate the contentions raised before the ld. CIT(A). It was submitted that there is no reason to believe that income has escaped assessment in the hands of the assessee as reopening was done on the basis of borrowed satisfacti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TA No. 1372/Del/2015 dt. 28/10/2015), and ACIT vs. Devesh Kumar (ITA No. 2068/Del/2010). 20. It was further submitted by the ld A/R that the entire re-assessment proceedings were based on the information received from DCIT, Central Circle, 3 during the course of search u/s 132 and Assessing Officer should have taken recourse to section 153C and not section 147, for carrying out impugned re-assessment proceedings in the case of the assessee. In support, the reliance was placed on the Co-ordinate Benches decisions in case of Shri Navrattan Kothari (ITA No. 425/JP/2017), ITO vs. Arun Kumar Kapoor [2011] 140 TTJ 249 (Asr), G. Koteswara Rao [2015] 64 taxmann.com 159 (Visakhapatnam- Trib) and Rajat Shubra Chatterji vs. ACIT (ITA No. 2430/Del/2015). It was submitted that ld. CIT(A) without any cogent basis, dismissed the aforesaid contentions so raised by the assessee. 21. It was further submitted that the original assessment was completed pursuant to search in case of KGK Group to which assessee belongs. During the course of search, only excess jewellery and stock was found which was surrendered. No unaccounted cash was found. The alleged incriminating material relied upon by A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d when the reasons as so recorded were supplied to the assessee and on receipt thereof, the assessee has filed his objections as well. It was submitted that the reasons were duly recorded by the Assessing officer prior to issuance of notice u/s 148 and contains detail reasons for firming the belief that income has escaped assessment and also in terms of the compliance of the proviso to section 147 in terms of failure on the part of the assessee to disclose truly and correctly all material facts necessary for the assessment. 24. It was further submitted by ld PCIT/D/R that the reasons so recorded were based on information received from the DCIT Central Circle-3, Jaipur and detailed enquiries were conducted by the Investigation wing as well as examination of the assessment records was undertaken by the Assessing officer and which shows clearly due and independent application of mind on part of the Assessing officer based on appreciation of material on record that the income in the hands of the assessee has escaped assessment. It was submitted that where the Assessing officer basis detailed information and enquiries conducted by the Investigation wing which forms a tangible mater ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for escapement of income and initiated the proceedings u/s 147 by issuance of notice u/s 148 of the Act. It was accordingly submitted that there is no infirmity in action of the Assessing officer in assumption of jurisdiction u/s 147 instead of section 153C of the Act. In support, reliance was placed on the Coordinate Benches decision in case of Shailesh S. Patel vs ITO Ward-5, Palanpur [2018] 97 taxmann.com 570 (Ahd) and decision of the Hon ble Madras High Court in case of Karti P. Chidambaran vs Principal DIT(Investigation), Unit 3(2), Chennai [2021] 128 taxmann.com 116 (Mad). 27. It was further submitted that the sufficiency and adequacy of material may not be required to be looked into at the time of recording the reasons and what is relevant is whether there was relevant material on which a reasonable person could have formed a requisite belief that the income has escaped assessment. It was submitted that in the instant case, there was relevant material in possession of the AO for him to proceed with recording of reasons that income has escaped assessment and assumption of jurisdiction u/s 147 of the Act. In support, reliance was placed on the Hon ble Supreme Court decisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts and the Assessing officer should record the exact and precise nature of failure on part of the assessee and its linkage thereof with the escapement of income. 29. In the instant case, the assessee has challenged the assumption of jurisdiction by the Assessing Officer u/s 147 of the Act and it has been contended that the reopening has been done solely on the basis of information received from DCIT, Central Circle-03, Jaipur and there is no independent application of mind by the Assessing Officer and it is therefore a case of borrowed satisfaction and not his own satisfaction which has been recorded by the Assessing Officer after due application of mind. It was further submitted that there is no tangible material in possession of the Assessing Officer for arriving at the finding that the income has escaped assessment in the hands of the assessee and therefore, no nexus has been established between the material and formation of belief that the income has escaped assessment in the hands of the assessee. It has been further contended that given the fact that the entire reassessment proceedings have been based on the information received from DCIT, Central Circle-03, Jaipur duri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 400 PCK PoongliaJi 07.01.2011 6 10.00 100 PCK A. Kala 11.01.2011 6 8.50 500 PCK PoongliaJi 12.01.2011 6 9.00 200 PCK NKB 13.01.2011 6 10.00 100 PCK NIRAJ 15.01.2011 6 8.50 500 PCK RCB 15.01.2011 6 9.00 100 PCK RMR 21.01.2011 6 10.00 100 PCK SNR 27.01.2011 6 9.00 100 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he end of the impugned assessment and proviso to section 147 applies, with a view to satisfy the additional condition that there should be failure or omission on the part of the assessee in disclosing full and true material facts, he has considered the assessee s assessment records and thereafter, has concluded that there was no necessity to make further inquiries as the information available on record is self-sufficient. 33. The question that arises for consideration is whether the information so received from the DCIT Central Circle -3, Jaipur constitute tangible material in possession of the Assessing officer and enquiries so conducted by the Investigation wing, and admittedly not conducted by the Assessing officer himself as a sequel to the information so received, provides the necessary nexus between the tangible material and formation of reasonable belief on part of the Assessing officer that income in the hands of the assessee has escaped assessment. 34. As we have noticed above, the information so received by the Assessing officer from DCIT Central Circle -3, Jaipur talks in general about the search and seizure action u/s 132 carried out in case of Ramesh Manihar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the reasons for the formation of the belief must have a rational connection with or relevant bearing on the formation of the belief. Rational connection postulates that there must be a direct nexus or live link between the material coming to the notice of the Income-tax Officer and the formation of his belief that there has been escapement of the income of the assessee from assessment in the particular year because of his failure to disclose fully and truly all material facts. It is no doubt true that the court cannot go into the sufficiency or adequacy of the material and substitute its own opinion for that of the Income-tax Officer on the point as to whether action should be initiated for reopening assessment. At the same time we have to bear in mind that it is not any and every material, howsoever vague and indefinite or distant, remote and farfetched, which would warrant the formation of the belief relating to escapement of the income of the assessee from assessment. The fact that the words definite information which were there in section 34 of the Act of 1922, at one time before its amendment in 1948, are not there in section 147 of the Act of 1961, would not lead to the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ramesh Manihar Group during the year under consideration. Here, the question is not about the reliance placed by the Assessing officer on the enquiry conducted by the Investigation Wing which the Assessing officer is well within his jurisdiction to place reliance upon but the question is how the Investigation wing has arrived at the finding that the data so found pertains to the assessee only and the transactions relates to cash loans provided by the assessee through Ramesh Manihar Group and whether the basis of arriving at such a finding has been gone into by the Assessing officer prior to recording of the reasons and whether the same is evident from the reading of the reasons so recorded by the Assessing officer. The said question becomes more relevant and critical to our mind in view of the fact that the data so shared by DCIT Central Circle-3 Jaipur and in possession of the Assessing officer is not tangible and specific rather it is vague and is in abbreviated form and unless the same is analysed and examined thoroughly and necessary linkage is established with the assessee, the same cannot be relied upon. However, we find that the reasons so recorded are totally silent about ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the nature of accommodation entry which the Assessee had taken after paying unaccounted cash to the accommodation entry given (sic giver) . The AO adds that the said accommodation was a known entry operator the source being the report of the Investigation Wing . 21. The third and last part contains the conclusion drawn by the AO that in view of these facts, the alleged transaction is not the bonafide one. Therefore, I have reason to be believe that an income of ₹ 5,00,000 has escaped assessment in the AY 2004-05 due to the failure on the part of the Assessee to disclose fully and truly all material facts necessary for its assessment... 22. As rightly pointed out by the ITAT, the 'reasons to believe' are not in fact reasons but only conclusions, one after the other. The expression 'accommodation entry' is used to describe the information set out without explaining the basis for arriving at such a conclusion. The statement that the said entry was given to the Assessee on his paying unaccounted cash is another conclusion the basis for which is not disclosed. Who is the accommodation entry giver is not mentioned. How he can be said to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of arriving at such satisfaction cannot be a mere repetition of the report of investigation. The recording of reasons to believe and not reasons to suspect is the pre- condition to the assumption of jurisdiction under Section 147 of the Act. The reasons to believe must demonstrate link between the tangible material and the formation of the belief or the reason to believe that income has escaped assessment. 36. In the present case, as already noticed, the reasons to believe contain not the reasons but the conclusions of the AO one after the other. There is no independent application of mind by the AO to the tangible material which forms the basis of the reasons to believe that income has escaped assessment. The conclusions of the AO are at best a reproduction of the conclusion in the investigation report. Indeed it is a 'borrowed satisfaction'. The reasons fail to demonstrate the link between the tangible material and the formation of the reason to believe that income has escaped assessment. 37. For the aforementioned reasons, the Court is satisfied that in the facts and circumstances of the case, no error has been committed by the ITAT in the impugned orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s through Ramesh Maniar Group and he has reasons to believe that income has escaped assessment. Therefore, where the Revenue has not been able to establish, even prima facie, basis any tangible material that the transactions pertains to the assessee or the necessary nexus has been established with the assessee and formation of belief that income in the hands of the assessee has escaped assessment has no sound basis and foundation, as we have noted above, escapement of income cannot be linked merely on account of failure on part of the assessee to reflect truly and fully all material facts as the said condition is an additional condition and a condition which is subservient to satisfaction of the first condition which the Assessing officer has failed to fulfill in the instant case. We are therefore of the view that it would not be necessary for us to examine any further as to whether the escapement of income has happened on account of failure on the part of the assessee to disclose fully and truly all material necessary for his assessment and the contents raised in this regard are thus left open. 38. Looking at the matter from another perspective, it is a matter of record that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssess the income of the other person in accordance with the provisions of section 153A, if, that Assessing Officer is satisfied that the books of account or documents or assets seized or requisitioned have a bearing on the determination of the total income of such other person for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made and for the relevant assessment year or years referred to in sub-section (1) of section 153A 39. On perusal of the aforesaid provisions, it is noted that firstly, the Assessing officer of the searched person has to record satisfaction that any books of account or documents etc, seized during the course of search pertains or pertain to, or any information contained therein, relates to any other person other than the person who has been searched. Once such a satisfaction is recorded, the books of account or documents or assets seized are required to be handed over to the Assessing Officer having jurisdiction over such other person. Thereafter, the Assessing Officer having jurisdiction over such other person has to record his own satisfaction that the books o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lightly exercised by the Assessing officer and the invocation of such powers is based on satisfaction of certain cardinal tests and principles as we have discussed above and which have not been fulfilled in the instant case. 41. In light of above discussions and following the decisions referred supra, we are of the considered view that in the peculiar facts and circumstances of the present case, the assumption of jurisdiction and initiation of the proceedings under Section 147 of the Act to reopen the assessment proceedings does not satisfy the requirement of law and is hereby set-aside. 42. In the result, ground no. 1 of the assessee s appeal is allowed. Ground no. 2 of the assessee s appeal was not pressed during the course of hearing, hence, the same is dismissed as not pressed. Ground no. 3 is also dismissed in light of aforesaid discussions. In the result, the appeal of the assessee is partly allowed. ITA No. 1298/JP/2019 43. We now refer to Revenue s grounds of appeal challenging the deletion of additions made by the ld CIT(A) and the contentions advanced by the respective parties in this regard. 44. The ld PCIT/D/R took us through the findings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so earned as commission on account of these unrecorded or unaccounted transactions and due taxes has also been paid. It was submitted that basis the said application filed and admission by the Ramesh Manihar Group, the Assessing officer has rightly stated that the assessee also made transactions regarding lending its unaccounted money through said group and advanced the same out of books of accounts to earn interest income which was also not recorded in the books of accounts. It was accordingly submitted that the excel sheet notings extracted from the Jagat. XIs from the PEN drive in possession of Sh. Ramesh Chand Maheshwari thus stand corroborated by his statement recorded on oath u/s 132(4) of the Act and subsequent statement recorded u/s 131 of the Act as well as the application moved by his Group before the Settlement Commission. 46. Regarding assessee request to provide cross examination of Sh. Ramesh Chand Maheshwari whose statements were recorded and relied upon by the Assessing officer, it was submitted that the Assessing Officer rightly stated that the right of cross examination is not an absolute right and depends upon facts and circumstances of the each case and in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee in providing cash loans. It was submitted that even identities of the persons alleged to have received cash loans from the assessee through Ramesh Manihar group was not established and thus, the second leg of the alleged transaction could not be proved. It was submitted that extensive search was conducted on 06.05.2010 on KGK Group of which assessee is a part and no unaccounted income, cash or hundis etc. were found. It was submitted that Ramesh Manihar nowhere in his statements stated the name of the assessee and even no opportunity of cross-examining Ramesh Manihar was provided to the assessee. 51. It was further submitted that various discrepancies existed in the extracts of the excel sheet provided by the AO such as there was disconnect between the dates mentioned in different columns (Column No. 1 and Column No. 14 of the excel sheet), dates in Column No. 14 are not in chronological order, Column No. 7 and Column No. 8 are subsequently added by the Department which did not form part of the original format maintained by Ramesh Manihar Group and seized and forming part of reasons recorded. 52. It was further submitted that another set of extracts of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had no link with the regular business carried out by RM. 54. It was submitted that in the extracts of the statement recorded u/s 131, as set out in the AO order at Pages 11 and 12, Ramesh Manihar has not specified the name of the assessee or any transaction done through him in cash. Even copy of such statements recorded, u/s 131 on 08.11.2017 was not provided to the assessee during the course of assessment proceedings. 55. It was further submitted that the ld. AO wrongly relied on the extracts of the excel sheet maintained by Ramesh Manihar Group and seized during search on 07.01.2016 for the reason that ld. AO did not comply with the provisions of section 65A and 65B of the Evidence Act, 1872 and no satisfaction recorded by AO that the output of the pen-drives/ computer records were analyzed on as is basis by the Department and there was no risk of being tempered by anyone. In support, reliance was placed on the decision of Hon ble Supreme Court in the case of Anvar P.V. v. P.K. Basheer [2014] SSC Online SC 732 (SC) wherein it was held that An electronic record by way of secondary evidence shall not be admitted in evidence unless the requirements un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to information contained in an electronic record, admissibility and proof thereof must follow the drill of Section 65B, which is a special provision in this behalf. Requirement under Section 65B(4) is not necessary if the original computer/laptop etc in which the data/information, relied upon, itself is produced and conditions under Sections 65B(2) and 65B(4) must be satisfied cumulatively. 59. It was further submitted that in case of K. Natwar Singh (ITA No. 3258,3290,4168/Del/2013) and Jagat Singh (ITA No. 3036, 3037, 3038 and 3039/Del/2015), having similar factual matrix, wherein pen-drives were seized from one Shri Chetan Gupta allegedly containing details of approx. 148 people, whose money and wealth, allegedly, was administered by the said Shri Chetan Gupta, additions were made in the case of persons, based on entries in such pen-drives/ computer records, however, such additions were deleted by the appellate authorities. Further, reliance was placed on the decision in case of DCIT vs Mahabir Prasad Gupta (ITA No. 713 714/DEL/2011 dated 23.11.2012) where the Tribunal held that the Revenue could not establish that name of the person recorded in the diary as 'MPG ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut examining the persons, who allegedly received loans, and without obtaining due confirmations from them, even the factum of investment is not proved. What would be the case of the Department, if the so-called alleged loan takers refuse to ever having received loan from the assessee? Without agreeing, if the loans given is not proved, what is the point in tracing and taxing the person who allegedly has given the loan. It was submitted that the present case is similar to a situation, wherein, an allegation is made on the assessee to have made investment in land, without even identifying specific piece of land, which has been allegedly purchased by the assessee. This situation can very well arise, wherein search is conducted by the Department, as in the present case, on some broker, dealing in land transactions. It was submitted that Hon ble Gujarat High Court in the case of Ushakant Patel (2006) 282 ITR 553 (Guj) has held that the burden of proof that the investment in the asset not recorded in the books of account is on the revenue. 62. It was submitted that unsubstantiated material found in the Pen-Drive cannot be considered as conclusive evidence so as to make additions, to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly accepted the contentions of the assessee and deleted the additions holding that Ramesh Manihar was never confronted by the ld. AO or the Investigation Wing as to what PCK stands for, against the name PCK , no address or telephone number is found to have been recorded, no evidence or basis to suggest PCK was no one else but the assessee, no evidence to suggest that assessee had advanced loans in cash through Ramesh Manihar, evidences as relied upon by ld. AO do not relate to the assessee, in the statements recorded of Ramesh Manihar, there is no reference to PCK being considered as Prakash Chand Kothari , during the assessment proceedings, ld. AO could not point out any specific portion of the statement of Ramesh Manihar which could suggest involvement of the assessee in providing cash loans, in case of uncorroborated entries kept by third party, no tax liability can be fastened on the assessee and no case could thus be made out to prove that the entries found during the search on Ramesh Manihar Group relate to the assessee. The ld A/R accordingly supported the order and findings of the ld CIT(A) and submitted that the appeal filed by the Revenue be dismissed. 67. We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee is of routine nature having no evidence to contradict the information available with the Revenue and duly incorporated in the reasons for reopening of the case and the assessee has failed to substantiate the onus cast upon him about the impugned transactions of ₹ 25 crores. During the course of hearing, there is reiteration on part of the ld PCIT/D/R that initial onus lies on the assessee which he has failed to satisfy and reliance has been placed on the findings of the Assessing officer in this regard. 70. The ld A/R in his submissions has however stated that the addition has been made by the Assessing officer by way of undisclosed investment in form of cash loans invoking the provisions of Section 69 and therefore, the burden lies on the Assessing officer to prove that the investment by way of cash loans has infact taken place and the amount so invested belongs to the assessee and the burden is on the Revenue to first prove the said allegations by leading positive evidence. In this regard, our reference was drawn to the provisions of Section 69 of the Act which reads as under: Where in the financial year immediately preceding the assessment year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nough to discharge the initial burden cast on the Assessing officer. 72. In order to determine whether the onus cast on the Assessing officer has been satisfied or not and basis of his findings, we refer to the information and other material/documentation available with the Assessing officer prior to initiation of the reassessment proceedings as well as analysis/examination thereof during the course of reassessment proceedings and besides, other information/documentation relied upon by the Assessing officer during the course of reassessment proceedings to arrive at his findings and which forms the basis of subject addition of undisclosed investment in the impugned order. These include information received from DCIT Central Circle-3 Jaipur prior to recording of reasons and issuance of notice u/s 148, copy of extracts of excel sheets/data found in 18 pen drives during the course of search u/s 132 from the premises of Shri Ramesh Manihar and relevant to the assessee, copy of statement of Shri Ramesh Chand Maheshwari alias Shri Ramesh Manihar recorded during the course of search u/s 132(4) dated 7.01.2016, copy of statement of Shri Ramesh Chand Maheswari alias Shri Ramesh Manihar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n possession of the Assessing officer unless the same is analysed and examined thoroughly and necessary linkage is established with the assessee. 74. Now, let s look at as to how the Assessing officer has examined and analysed the said data further during the course of reassessment proceedings. The Assessing officer has referred to and compared the aforesaid data with data found in other pen drives as well as statements of Ramesh Chand Maheshwari recorded u/s 132(4) during the course of search and post search proceedings u/s 131 of the Act given that the said data has been found in pen drives from the premises of Ramesh Manihar Group during the course of search. Apparently, the aforesaid data was found in pen drive Jagat.xlsx where name of lenders and borrowers were admittedly stated in code name or abbreviated form and it has been claimed by the Revenue that PCK stands for the assessee, Shri Prakash Chand Kothari. The said data was then compared with data in other pen drives namely from and two group.xlsx , copy of New Dir.xls , data in Ankoot file where name of Prakash Chand Kothari, KGK Jewellers, address and phone number has been stated and basis such exercise, the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such data/information found in the pen drives can be drawn against the person in whose case the search has been authorized and from whose possession or control such pen drives have been found during the course of search. Therefore, in the instant case, the presumption lies against Ramesh Manihar Group, and not against the assessee. In such a case, the burden lies on the Assessing officer by leading corroborative evidence that the data/information so found in the pen drives relates to the cash loan transactions belongs to the assessee and the same have actually been undertaken by the assessee through Ramesh Manihar Group and the contents therein are found as correct and authentic and stand duly corroborated by independent evidences. 76. The assessee has also challenged the reliance on such extracts and print outs of the excel sheets stating that the AO has not complied with the provisions of section 65A and 65B of the Evidence Act, 1872 and no satisfaction has been recorded by the AO that the output of the pen drives/computer records were analysed on as is basis by the Department and there was no risk of the data being tempered by anyone and which has been relied upon by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been undertaken on commission basis and in reply to question no. 15, he has stated that cash loan financing is done jointly with Manmohan Bagla in their private capacity and his companies/firms have no relationship with such cash loan transactions. In reply to question no. 16, he has further stated that whatever amount was given as cash loans was his s and Manmohan Bangla s own money which was given on interest and which on receipt, is further given on interest to various parties. Thereafter, in subsequent questions, he has explained since how long these cash loan transactions have been undertaken by them and how the accounts are maintained which has been stated by him to be maintained on computer, pen drives and slips which remains in his possession. Further, questions no. 30 and 31 were asked specifically about the pen drives and the data so found in the pen drives and we deem it appropriate to reproduce the same as under: 79. As noted above, in reply to Q. No. 30 31, he stated that all these transactions found in the pen drives are of similar nature and pertains to cash loan transactions. Further, regarding names in code word and names as found in various p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shwari recorded under Section 132(4) of the Act. 80. Now, coming to the another statement of Shri Ramesh Chand Maheshwari recorded under Section 131 on 8.11.2017 which has been relied upon by the Assessing officer and we refer to response of Shri Ramesh Chand Maheshwari in response to various questions. We find that in this statement recorded u/s 131 on 8.11.2017, after a gap of almost 21 months from the earlier statement which was recorded u/s 132(4) on 27.01.2016, when Shri Ramesh Chand Maheshwari was confronted with his earlier response to question no. 15 in statement recorded u/s 132(4), there has been a change in his stand where he stated that cash loan financing is undertaken in their personal capacity where they acted as a mediator/facilitator. This is unlike his earlier statement where he had stated in response to question no. 15 that cash loan financing is done jointly with Manmohan Bagla in their personal capacity and in reply to question no. 16, he has stated that whatever amount was given as cash loans was his and Manmohan Bangla s own money which is given on interest and which on receipt, is again given on interest. We therefore find that there has been a change i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there is heavy reliance placed by the Revenue on the latter statement recorded u/s 131, it is imperative that the assessee be allowed an opportunity to seek a copy of the said statement and file his objections and secondly and equally important, an opportunity to cross examine Shri Ramesh Chand Maheshwari which has been recognized time and time by the Courts as an important facet through which the principle of natural justice can be implemented and is duly supported by various authorities quoted at the Bar. In absence of such an opportunity, no reliance can be placed on such statement more so where in his statement, Shri Ramesh Chand Maheshwari did not categorically referred the name of the assessee or that the assessee provided cash loans through his Group to different persons. Therefore, the finding of the AO that data so found in the pen drives relates to cash loan financing by the assessee through Ramesh Chand Maheshwari stand corroborated by the statement of Shri Ramesh Chand Maheshwari recorded under Section 131 of the Act cannot be accepted. 83. Further, the ld AR has stated at the Bar that even before the settlement Commission, Shri Ramesh Chand Maheshwari has not giv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as emerges from the print out of the pen drive falls short of material facts and remain uncorroborated and mere admission of the amounts recorded in the pen drive as the additional income by Sh. Niranjan Hiranandani in his application before the Settlement Commission falling short of any such material which would inextricably evidence payment of on money by the assessee would not lead to drawing of adverse inference as regards the investment made by the assessee for purchase of the property under consideration and additions made by lower authorities were deleted and the relevant findings of the Coordinate Bench read as under: 14. We shall now take up the case of the assessee on merits and deliberate on the validity of the addition of ₹ 2.23 crore made by the A.O on the ground that the assessee had made a payment of on money for purchase of flats from M/s Lakeview developers. We have perused the facts of the case and the material available on record on the basis of which the addition of ₹ 2.23 crore had been made in the hands of the assessee. We have further deliberated on the material placed on record and the contentions of the ld. A.R to drive home his conte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ional income by Sh. Niranjan Hiranandani, falling short of any such material which would inextricably evidence payment of on money by the assessee would not lead to drawing of adverse inferences as regards the investment made by the assessee for purchase of the property under consideration. We rather hold a strong conviction that the very fact that the consideration paid by the assessee for purchase of the property under consideration when pitted against the 'market value' fixed by the stamp valuation authority is found to be substantially high, further fortifies the veracity of the claim of the assessee that his investment made towards purchase of the property under consideration was well in order. We are of the considered view that though the material acted upon by the department for drawing of adverse inferences as regards payment of on money by the assessee formed a strong basis for doubting the investment made by the assessee for purchase of the property under consideration, but the same falling short of clinching material which would have irrefutably evidenced the said fact, thus, does not inspire much of confidence as regards the way they have been construed by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e through Ramesh Manihar Group. Leaving aside a positive confirmation from the recipients of the loan, the AO has not been able to establish even the identity of the persons alleged to have received loans from the assessee. There is shifting stand of Shri Ramesh Chand Maheshwari in his two statements recorded u/s 132(4) and u/s 131 of the Act. We find that in his latter statement recorded u/s 131, he has stated that cash loan financing is undertaken in their personal capacity where they acted as a mediator/facilitator. This is unlike his earlier statement u/s 132(4) where he had stated that cash loan financing is done jointly with Manmohan Bagla in their personal capacity and whatever amount was given as cash loans was his and Manmohan Bangla s own money which is given on interest and which on receipt, is again given on interest. We therefore find that there has been a change in stand of Shri Ramesh Chand Maheshwari where even in respect of cash loan financing, he has stated that he acts as a mediator and facilitator between the lenders and borrowers and thus earns commission income instead of interest income on amount advanced in their personal capacity as stated earlier. Even no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... computer of a third party who happened to be an employee of Matrix and there are no other corroborative evidence brought on record to prove the fact that the payment mentioned in the seized material was actually received by the assessee and relevant findings read as under: 8. We have heard rival contentions and perused the material available on record. Undisputedly, on the basis of a print out taken from the computer back up of Ms. Sandhya Ramchandra, it was concluded by the Assessing Officer that the assessee has received an amount of ₹ 2,50,000 in cash for appearing as a host at an ICC event in Sidney. It is very much clear that apart from this document, there was no other evidence before the Assessing Officer to indicate that the assessee has received cash amount in question. It is a fact that in course of search as well as post search proceedings, the assessee was confronted with seized material and the assessee categorically stated to have neither appeared as a host in the said event nor received any cash from Matrix. In fact, an Affidavit was also filed on behalf of Matrix categorically stating that no such cash payment of ₹ 2,50,000 was made to the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The learned counsel of the assessee submitted before us that in assessment year 2008-09, addition of ₹ 10,06,43,054 comprises of two additions, one of ₹ 7,32,98,821 and the other of ₹ 2,73,44,233. The facts relating to both the additions are different and therefore both these additions need to be adjudicated at length. We observe that the addition of ₹ 7,32,98,821 has been made by the assessing officer on the basis of the screenshot of journal entry dt. 4-9-2007 taken from the tally data in the pen drive and the printout of the details of land which has been reproduced by the assessing officer on page Nos. 2 and 3 of the assessment order as table 1. Other than these two materials, there is no other basis for making addition, which is undisputed fact as per record also accepted by the learned Commissioner Departmental Representative. The assessing officer has made addition invoking section 69. As held inCIT v. Naresh Khattar (HUF) (supra) and CIT v. Dinesh Jain HUF (supra), the initial burden is on the Revenue to establish that there is any investment, which has not been recorded in books and in respect which the assessee is not able to give satisfactory ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e lands was purchased by the two persons named in the journal entry and was being introduced as their capital contribution in the partnership firm. Since, these journal entries have been relied upon by the assessing officer. Thus, it has remained undisputed that the lands were not purchased by the assessee but by the two persons as named in the journal entry. When the lands were not purchased by the assessee firm, any question of payment of on money does not arise in the case of assessee firm. As rightly contended by learned Authorised Representative of the assessee, that all the lands, except one, described in the assessment order on page Nos. 2 and 3, were purchased prior to formation of the assessee firm. We observe that in para 3 of the assessment order, the assessing officer has himself mentioned that the assessee firm was formed on 4-9-2007. As evident from different entries of land given in table 1 in the assessment order, the date of purchase in all the cases, except in one case, falls prior to 4-9-2007. In other words, the seized material itself shows that the lands were purchased prior to formation of the assessee firm, in this background also, we fail to see how any ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t within a period of 2 months after leaving his school. It was in these facts and circumstances that the addition was held to be not justified, relying upon the decision of Hon ble Supreme Court in the case of Smt. P.K. Noorjahan (supra). If we apply the ratio of aforesaid two decisions to the facts of the present case, we find that when the source of income/revenue for the assessee was missing in the sense that the business had not even started during all the three years and since during search, nothing was found to establish that the assessee had any undisclosed income from any other source, the discretion vested in the assessing officer should have been exercised in favour of the assessee and the addition should not have been made. We also observe that the assessing officer has not made any enquiry whatsoever from different vendors of the lands and not even from the two persons named in the journal entry, who, as per the journal entry, introduced their lands as capital contribution in the partnership firm. In absence of any enquiry whatsoever, no addition could have been made only on the basis of inference. It is a settled position of law that for making addition under section 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ined and found during search and in absence of any such corroborative material, the contents of the pen drive/chart does not inspire confidence. It is also worth noting that there is no finding of fact recorded by the assessing officer about any unaccounted assets or unaccounted expenses or excess cash found during search. Considering all the facts, it comes out that apart from the printout in the form of chart, there is no other evidence in support of the addition made by assessing officer and the chart, by itself, does not constitute any material/evidence to establish unaccounted payment. As held by us earlier, for invoking section 69, the initial burden is on the Revenue to establish that any unaccounted investment was made by the assessee. This mandatory requirement of law is missing in the present case and so the addition is not justified. 8.2.1 It is seen that the details of the lands are contained in the printout obtained from the pen drive. When complete details were available with the assessing officer, the assessing officer could have conducted independent enquiry from the vendors, which also does not appear to have been done. On the contrary, the assessee submitte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... given detailed reasons for not accepting the same and in absence of any reason given, we do not approve the action of the assessing officer. 88. Similarly, in case of Mahabir Prasad Gupta (supra), the matter came up before the Coordinate Delhi Benches of the Tribunal. In this case, during the course of search at the premises of Brij Mohan Gupta, a diary containing entries in coded language was found and basis the said entries, the Assessing officer has held that the assessee has advanced loan of certain sum through Shri Brij Mohan Gupta and addition was made under section 69 as undisclosed investment. The Coordinate Bench held that the Revenue could not establish that name of the person recorded in the diary as 'MPG' meant Mahabir Prasad Gupta only i.e. assessee and following its earlier decision in case of Atul Gupta having similar fact patten, deleted the addition and relevant findings of the Coordinate Bench read as under: 7. We have heard the rival contentions and gone through the record carefully. We find that similar issue was considered by the ITAT in a number of cases. The findings recoded in the case of Atul Gupta read as under: 16. We have du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore, all the appeals of the revenue are de void of any merit and they are dismissed. 8. There is no disparity on facts. The revenue could only able to lay its hands on the diary of Shri Brij Mohan Gupta where names of persons were recorded in coded words e.f. 'HD' means Hamamm Dass, R.K. means Ram Kumar. The revenue could not establish that 'MPG' means Mahabir Prasad Gupta only i.e. 'assessee'. The revenue has not placed on record statements of Shri Brij Mohan Gupta or Ram Avtar Singal or Rajiv Gupta before us. Therefore, in our opinion, the issue in dispute is squarely covered in favour of the assessee by the orders of the ITAT passed in the case of other persons i.e. Ashok Prasad Gupta, Atul Gupta, Dev Dutt Prasad etc. 9. On due consideration of all these material, we do not find any merit in this appeal. It is dismissed. 89. In light of aforesaid discussions and following the decisions cited supra, we are of the considered view that in the peculiar facts and circumstances of the case present case, there is no basis for making the addition in the hands of the assessee of ₹ 25,00,00,000/- made on account of cash loans and consequ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3/- as originally returned and assessed. It was further submitted that in the order passed u/s 147 read with section 143(3) dated 25.12.2018, the Assessing Officer has made addition of ₹ 25,90,58,625/- as against the returned income of ₹ 1,10,86,623/- and assessed income was determined at ₹ 27,01,45,250/-. It was submitted that there was no discussion in the assessment order as well as no addition was made by the Assessing Officer while passing the order u/s 147 read with section 143(3) in respect of Long Term Capital Gain amounting to ₹ 50,05,578/- and only addition was in relation to alleged cash loans and alleged interest income of ₹ 25,90,58,625/-. It was submitted that in the Income Tax Computation Form attached with the assessment order, the Assessing Officer had inadvertently included a figure of ₹ 50,05,578/- towards Long Term Capital Gains and which was also brought to tax in the hands of the assessee. It was further submitted that assessee took specific ground of appeal before the ld. CIT(A) and the said ground of appeal was initially not adjudicated upon by the ld CIT(A). Subsequently, the Revenue moved an application u/s 154 before th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of total income is therefore not based on tax filings made by the assessee or any other independent material available on record. Further in the order passed u/s 147 read with section 143(3), it is an admitted fact that the issue of capital gains didn t arise for consideration during the course of reassessment proceedings and there is no finding which has been recorded by the Assessing Officer disputing the figures as reported by the assessee in his return of income under the head long term capital gains . We therefore find that it is a clear mistake on the part of the Assessing Officer while computing the total income wherein the Long Term Capital Gains amounting to ₹ 50,05,578/- has been inadvertently brought to tax in the hands of the assessee. The Assessing Officer is hereby directed to delete the said amount of ₹ 50,05,578/- and the ground of appeal taken by the assessee is allowed. In the result, appeal of the assessee is allowed. 96. In the result, the appeal of the Revenue in ITA No. 1298/JP/2019 is dismissed, the appeal of the assessee in ITA No. 1190/JP2019 is partly allowed and appeal in ITA No. 66/JP/2020 filed by the assessee is allowed in light of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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