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TMI Blog2015 (12) TMI 1873X X X X Extracts X X X X X X X X Extracts X X X X ..... the learned CIT(A) has erred in assuming a piece of paper as constituting "Issar Pavati" i.e. advance receipt disregarding the factual aspects explained before him. 2. On the facts and in the circumstances of the case the learned CIT(A) has erred in availing the power of presumption overlooking the fact that such a power is confined only to a case where search action is conducted u/s 132, while in the case of the appellant this piece of paper was found in survey action u/s 133 which does not confirm such a power of presumption. 3. On the facts and in the circumstances of the case the learned CIT(A) has erred in assuming the said piece of paper and contents thereof as constituting Issar Pavati without bringing on record any cogent material or evidence to support such an assumption and has failed to discharge the onus that laid upon him to justify the addition. 4. On the facts and in the circumstances of the case and considering the denial by the appellant the CIT(A)/Assessing Officer have failed to adduce any corroborative evidence including recording the statement of the buyer confronting him about the alleged payments shown as made in cash on the piece of paper assumed a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,77,30,512/- towards its share attributable to land and shed etc. It was also explained that both the firms i.e. M/s Rockson Industries and M/s Nitin Palekar & Co. intended to carry on the business of quarry on the said land with the use of machinery acquired. The land and shed belonged to the assessee whereas machinery belonged to M/s Nitin Palekar & Co.. This business was discontinued and the total assets belonging to the aforesaid two concerns were stated to be sold to M/s Sunny Udhyog, Pune at a composite amount of Rs.3,05,00,555/- as per registered sale deed. The composite sale consideration was bifurcated into land and shed at Rs.1,77,30,512/- attributable to the assessee and towards machinery Rs.1,27,70,043/- attributable to Nitin Palekar & Co.. The Assessing Officer show caused an explanation of the assessee with respect to allegedly unaccounted cash receipts of Rs.2,30,00,000/- (assessee's share being 58% i.e. Rs.1,33,40,000/- and 42% share i.e. Rs.96,60,000/- attributable to Nitin Palekar & Co.). In the explanation furnished before the Assessing Officer, the assessee stated that "Isar Pavati" was not an agreement to sell and was a just piece of rough paper which only out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . It has been explained that the contents on paper suggests only the proposal to be agreed by the sellers and the proposed buyers. It is also stated that it contains the possible terms and conditions and the noting is dt. 18.12.2007 and it has not been acted upon at all and if acted it did not materialize. It has also been submitted that in order to have enforceability and legal sanctity the 'Isar Pawati' could have been only executed on payment of relevant stamp duty if not fully at least the contents could have been reduced into writing on a stamp paper of Rs.100/-. Therefore, the appellant has contended that the piece of paper has absolutely no evidential value and in the eyes of law is useless and it cannot have any enforceability both on fact and in law and, therefore, the addition based on such meaningless and useless piece of paper can never be said to be made in accordance with law. The appellant has also stated that the Assessing Officer has also failed to corroborate the contents of the piece of paper by not confronting other sellers and even the buyer which could have surfaced the truth of the issue under consideration i.e. the potentiality of the land with respe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer has assumed the piece of paper as 'Isar Pavati' i.e. agreement to sale, as nowhere on the said piece of paper there is any mention that it is 'lsar Pavati' or agreement to sale and also that its contents only suggested proposal to be agreed by the sellers and the proposed buyer. However, on going through the copy of the document filed during the course of appellate proceedings, it is noticed that the said document i.e. the 'Isar Pavati' dated 18.12.2007 contains several facts related to the sale of property which are corroborated by the final sale deed entered into by the appellant on 26.02.2008. On page 2 of the document on the lower left hand side the following jottings are noted: 1. 10,00,000/- 095801/ 20.12.2007 2. 50,00,000/- 095801/ 28.01.2008 3. 1,93,00,000/- Bank Loan 4. 50,00,000/- PDC 95802/1/5/2008 Vidya Sahakari" 3,05,00,555/- On perusal of the final sale deed, in clause 10 under the mode of payment is mentioned as under : 1) Rs.10,00,000/- The purchaser paid to the name of Rockson Industries by cheque bearing no.095801 dated 20.12.2007 drawn on Cosmons Bank. 2) Rs.50,00,000/- Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... RDK Rs.2,30,00,000/- The names written in abbreviated forms all relate to the persons or parties of the two concerns viz. Rockson industries and Nitin Palekar & Co. For instance "ASK" refers to Anant Shankarrao Kad who is a partner of Rockson industries, "Nitin" refers to Nitin Shamrao Palekar ad 'ROK' refers to Ramachandra Damodar Kad, both of them are partners of Nitin Palekar & Co. 3.8 Moreover, the total figure mentioned below the aforesaid entry is 5,35,00,000/- which is also mentioned on page No. 7 of the said document and on making the total addition of the two totalled figures, the figure of Rs.5,35,00,000/- in a rounded form is written which is also corroborated by the amount mentioned on page 1 (front side). The said figure of Rs.5,35,00,000/- also appears on top left written on page 2 also under the date 20.12.2007 which is actually the date mentioned on page 1 of the document, On the top of the page No. 2 also the following appears which has been cut as the same has been crossed. The total of Rs.2,25,00,000/- appears which has been bifurcated as under: 1. Rs.62,50,000/- 2. Rs.62,50,000/- 3. Rs.1,00,00,000/- Rs. 2,25,00,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was subsequently entered into by the appellant. Loose papers unlike bound books are generally cannot be a basis for ready reference of concealment of figures found in them, but it cannot be said that they are totally irrelevant, if they have something to connect them with assessee's business. The inference has to be on fact. The contents found on the 'Isar Pavti' or agreement to sale raises a presumption of legality of documents found and that would mean that they cannot be totally ignored of further fact to justify a conclusion could be found. The author of the said 'Isar Pavti' has already admitted in clear terms that said document was in his own handwriting and the said person is also one of the signatories of the transaction which was finally formalized by a sale deed on 26.2.2008. These facts are undisputed. Therefore, the said document is of great evidential value and the Assessing Officer has rightly made it as a basis for making addition during the assessment proceedings. The appellant's contention that the Assessing Officer is authorized to assume all the content of the piece of paper found in the course of search and seizure action are true and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... word "evidence' has to be construed in a comprehensive sense and it includes circumstantial evidence. It is well settled principle of law that the material or evidence on which the taxing authorities may base the assessment is not confined to direct testimony by witnesses. It may be reiterated that the word used in Sec. 143 is evidence. However, in making assessment the Assessing Officer does not act merely on what is technically described as evidence in the Indian Evidence Act. It is observed from Sec. 143(3) that the Assessing Officer can base his assessment not only on the evidence found but also on the material gathered by him. It is now well settled that the Assessing Officer is not faltered by technical rules of evidence and the like and that he may act on material which may not strictly speaking be accepted as evidence in a court of law. Such evidence need not necessarily be direct evidence, it may be circumstantial evidence or assessment based on preponderance of probabilities judged by human conduct. If there is material on record to establish that the assessee has charged 'on money' in regard to land deals which is not recorded in the regular books of account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e receipt by way of cash has also to be made. Accordingly, the document is not a dumb document but it is a speaking document and it pertains to the business transactions of the assessee. 3.13 In the case of Dhunjibhoy Stud and Agricultural Farm Vs DCIT (2002) 82 ITD 0018 (Pune) TM, loose paper indicating on money in connection with sale of flat was found and seized from T's possession and the fact that T did not deny his handwriting in the loose paper, it was held that the circumstances coupled with the fact that the transaction of purchase of flat had taken place between T and assessee, go to establish the payment of on-money to the assessee and AO was justified in making addition. The bench also held that there cannot be any direct evidence for receipt of on-money. Obviously no sane person would admit that he is receiving on-money. In the case of P R Patel Vs DCIT (2001) 78 ITD 57 (Mum), it was held that the seized papers cannot be called dumb because they indicate the date, amount and also calculation of interest. 3.14 The appellant has relied on a number of case laws for the proposition that the AO has to prove with cogent evidences that the seller has received the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not accepted is no explanation in law and not only this the legislature while enacting the deeming provisions of the I.T. Act falling under sections 68, 69 to 69D of the I.T. Act, 1961, has clarified that in case the explanation offered is not satisfactory the value of the unexplained deposits shall be deemed to be the income of the assessee. There can be no general proposition of law applicable to all cases irrespective of the facts and circumstances thereof. One thing which can be said without much hesitation is that the burden is always on the assessee, if an explanation is asked for by the taxing authorities to indicate the source of acquisition of a particular asset admittedly owned by the person concerned. The burden cast upon the appellant has not been discharged either at the stage of assessment or during the appellate proceedings by furnishing any acceptable explanation. 3.17.1 It was also held that the tax authorities were entitled to look into the surrounding circumstances to find out the reality, and the matter has to be considered by applying the test of human probabilities. In this decision, the Hon'ble Apex Court also relied upon the ratio of the earlier judg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ture while enacting section 69A has clarified that in case the explanation offered is not satisfactory the value of the valuable articles shall be deemed to be the income of the assessee. 3.18 Section 110 of the Evidence Act is material in this respect which stipulates that when the question is whether any person is owner of anything of which he is shown to be in possession, the onus of proving that he is not the owner, is on the person who affirms that he is not the owner. In other words, it follows from well settled principle of law that normally, unless contrary is established, title always follows possession. Chuharmal vs CIT (1988) 172 ITR 250 (SC). Documentary evidence plays an important part in law. The Courts attach great value for documentary evidence. The Punjab & Haryana High Court in the case of Paramjit Singh Vs ITO (2010) 323 ITR 588 (P & H) pointed out that oral evidence is not conclusive as against documentary evidence under sections 91 and 92 of the Indian Evidence Act, 1872." In view of the above discussion, the CIT(A) upheld the action of the Assessing officer and rejected the pleas raised by the Assessee. 6. Aggrieved by the order of the CIT(A), the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y onwards the liability in respect of payment of interest to bank and loan installments are to be paid by the purchaser. The seller shall not be responsible. Seller - For Rockson Industries Shri Kashinadh Laxman Palekar Sd/- Shri Ramchandra Damodar Kar Sd/- Purchaser- Shri Vinayakrao Nimhan (MLA), Pashan Pune Sd/- 7.1 Another loose paper was found along with the aforesaid loose paper noted above which is appearing at page no. 13 of the paper book, which gives specific details of payment by cheque together with the cheque numbers and dates and also cash component in the payment which is recorded para 3.5 of the order of the CIT(A) extracted above. This loose paper was also simultaneously referred to by the Learned Authrorised Representative for the Assessee. 7.2. Citing reference to the impugned loose paper at 9-10 & page 13 of the paper book reproduced hereinabove, the Ld. Authorized Representative for the assessee stridently contended that the contents of the said loose paper merely suggested the proposal of sale of land and machinery by M/s Rockson Industries to Shri Vinayakrao Nimhan and thus cannot be relied upon. The Ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 The learned AR referred to the statement under S. 133A dated 02.02.2010 of Shri Ramchandra Damodar Kad appearing at Page No.16 to 21 of the Paper Book of partner wherein as per Question No.7 of the statement, the said partner while admitting that the Isar Pavati is in his own handwriting has categorically denied that the transaction was not executed according to terms mentioned therein. He submitted that on the face of such denial by the deponent of the statement, the loose paper which is sole basis for making the addition is rendered irrelevant and extraneous and thus stands discredited. The Ld. Authorized Representative for the assessee contended that the adverse view taken by the Assessing Officer is merely on suspicion, conjecture and imagination, which is not sustainable in law. 7.7 The Ld. Authorized Representative for the assessee also advanced legal contentions that S. 69A has no application in the facts of the case. In the absence of any unaccounted cash physically found or any unaccounted investments found in the case of the assessee at the time of survey, the Assessee cannot be said to be the 'owner' of such unaccounted cash as alleged which has not been recorded in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aper is naturally not appearing in the registered sale agreement. As a corollary to these facts, the cash payment has been received by the assessee and Nitin Palekar & Co. as recorded in the loose paper (isar pavati) which remained unaccounted. The Ld. Departmental Representative for the Revenue pointed out that when a tangible and speaking documents narrating the details of cheque payment and cash payment in explicit terms have been found in survey proceedings which broadly tallied where the cheque details and payment broadly tallied with the registered sale deed and document, there is no further need on the part of the Revenue to make roving enquiries. The onus squarely lies upon the assessee to rebut the contents of the loose paper found in survey which has not been discharged. Further, the Ld. Departmental Representative for the Revenue contended that plea of the assessee that the seller has not been examined for cash payment is a damp squib in the circumstances. The exercise suggested by the Ld. AR would be merely a futile exercise. It is not expected from a person giving purported cash to admit at a belated stage to have done so. Be that at it may, the loose paper was duly si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 69A of the Act on the ground that it represents cash received as attributable to the Assessee on sale of its land and machinery in the light of loose paper found during survey which is not disclosed. 9.1 We notice from the submissions of the assessee that the assessee as a partnership firm was engaged in the business of stone quarry. It had purchased the land for that purpose. Other firm, namely, Nitin Palekar & Co. contributed towards purchase of machineries that were installed on this land. The assessee, however, discontinued the business and sold all the assets on 26.02.2008 to one M/s Sunny Udyog represented by one Mr. Vinayak Rao Nimhan. We also notice that the partners of the assessee are also the directors of M/s Shankar Ramchandra Earth Movers Pvt. Ltd. where survey action under S. 133A took place. The partners of the assessee and Nitin Palekar & Co. are also common. Pursuant to a survey action under section 133A of the Act on the business premises of associate concern, M/s Shankar Ramchandra Earth Movers Pvt. Ltd. on 02.02.2010 a loose paper dated 18.12.2007 written in Marathi was found which is the source of present addition and controversy which is already reproduced (s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Q2. Please explain in detail the business activities carried out by you. Also state the details of the concerns where you are either partner or director and proprietor ? A2. I am director and partner in the following concerns, which are engaged in the business of Civil Constructions and undertake contracts for construction of Road, Dam, Canal, Tunnel, Airports and etc. These concerns undertake contracts from Government and Private Parties: 1. M/s Shankar Ramchandra Earthmovers Pvt. Ltd. (SREPL) - Director 2. M/s SREPL - CPBC (C.P. Bagal and Company) - Joint Venture 3. M/s SREPL - Teckson - Joint Venture 4. M/s SREPL - Prime - Joint Venture 5. M/s SREPL - NPCC - (Naikare Patil Construction Co.) - Joint Venture. 6. M/s Nitin Palekar and Co. - partner. I was also partner in M/s Rockson Industries, the business activities of this concern has been closed down and assets and properties of the said firm have been sold out. I also have income from House Property and income from Other Sources being Interest Income and Agricultural Income. Q.No.7 I am showing you a "Isar Pavati" dated 18.12.2007 which is signed by Shri Kashinath Laxman Palekar & Shri Ramchandr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cernable and has a sound basis. The averments made in the statement given before survey team of I.T. Department that the transaction was not executed according to terms mentioned in loose paper is clearly opposed to what is obvious and thus ostensibly unreliable and devoid of any rational probative value. We find that the justification advanced on behalf of the assessee that cash component initially agreed was dropped due to unsuitability of land for stone quarry as shallow and judicially unpalatable. The assessee intending to indulge in stone quarry business and having incurred large capital expenditure on acquisition of the machinery etc., it is difficult to accept that said isar pawati has been prepared and signed without due diligence on this basic aspect involving amount of such magnitude. The explanation offered on behalf of the Assessee is totally incomprehensible when surrounding circumstances existing in the case are tested on the touchstone of preponderance of probabilities. The corroboration of loose paper with registered document in material particulars are compelling. We are of the considered opinion that the initial burden of proving presence of understatement in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation the scope and effect of S. 69A while making addition towards alleged unaccounted cash component. On a plain reading, it can be seen that section 69A of the Act provides that where the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and which is not recorded in the books of account maintained by him for any source of income and fails to explain the source and nature of its acquisition the money or the value of bullion, jewellery, etc. the unrecorded amount will be deemed to be the income of the assessee. On behalf of the assessee, it is contended that the since no unaccounted cash were actually found, nor any investment was found, section 69A of the Act is not attracted. We do not find any merit in such argument. The word 'owner' employed has to be understood in the context. We have already observed that physical presence of cash or other corresponding unaccounted investment per se to support an entry found in the documents is not the pre requisite to support its ownership for assessment purposes under section 69A of the Act. We are alive to the fact that the scope in respect of coverage of premises under section 133A of the Act are ..... X X X X Extracts X X X X X X X X Extracts X X X X
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