TMI Blog2024 (2) TMI 334X X X X Extracts X X X X X X X X Extracts X X X X ..... n present appeals deleting the penalties are in order and do not require any interference from our side. Thus, the CIT(A) means to say that if the factum of taking or repaying loan is itself disputed, there cannot be any default as contemplated u/s 269SS or 269T. In simpler words, section 269SS or 269T has no application when the transactions itself are disputed, those sections can only apply to un- disputed transactions or the existence of the transactions attained finality. We also find merit in this observation/conclusion made by Ld. CIT(A). The above discussions and the reasoning mentioned therein brings us to conclude that the penalties imposed by AO in present cases are not sustainable. Consequently, we are deleting the same. The revenues grounds are dismissed. - SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRIB.M. BIYANI, ACCOUNTANT MEMBER For the Appellant : Shri Anup Garg Shri Vikas Guru, CAs Ld. ARs For the Respondent : Shri Ashish Porwal, Sr. DR ORDER Per Bench: Feeling aggrieved by a consolidated appeal-order dated 31.05.2019 passed by learned Commissioner of Income-tax (Appeals)-3, Bhopal [ CIT(A) ], which in turn arise out of resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 269T of the Income-tax Act, 1961. 2) On the facts and in the circumstances of the case, the Ld. CIT(A) erred in holding that the penalty was imposed on the basis of dumb documents despite the fact that the data on the said documents was duly corroborated as per the findings in the penalty order. 2. Since these appeals arise from common order of lower-authorities and involve issues of common nature; they were heard together at the request of parties and are being disposed of by this common order for the sake of convenience and clarity. 3. At the outset, we may note that originally the Appellant/Revenue filed Form No. 36 of these appeals in the name of Shri Puneet Agrawal as Respondent/Assessee. But subsequently after death of Shri Puneet Agarwal on 31.12.2019, the Appellant/Revenue filed revised Form No. 36 incorporating Legal Representative s name. The Ld. AR appearing from Respondent/Assessee s side has also filed a power of attorney signed by Legal Representative. Accordingly, the name of Legal Representative is mentioned in the title of these appeals. 4. The background facts leading to present appeals are such that the assessee is an individual. A searc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liberty to make arguments first which was allowed after taking consent from Ld. DR for revenue. Then, Ld. AR carried us to Para No. 3 of penalty-order passed by JCIT involved in ITA 787/Ind/2019 and demonstrated that the JCIT has imposed the impugned penalties on the basis of these documents seized during search, namely (i) Page No. 25-26 of LPS-1, (ii) Tally file XYZ 0809 2 recovered from Laptop and (iii) BS-4 seized from office of PATH . Further, on Page No. 9 of penalty- order, the JCIT also relied upon statements of Shri G.C. Patidar. Having shown this, Ld. AR made a pointed submission that all these material were duly analysed by first appellate authority in the appeals of PATH itself and after due consideration, the first appellate authority did not favour the observations/inferences/conclusions drawn by assessing authority, for the very same AYs 2009-10 2010-11 as involved in present appeals. Thereafter, the revenue went in next appeals to ITAT in IT(SS)A No. 32 33/Ind/2021 where upon, vide order dated 13.12.2023, the ITAT, Indore Bench dismissed revenue s appeals and thus upheld the orders of first appellate authority. Furthermore, in the present appeals also, the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penses paid by PATH FY 08-09 82,03,684 FY 09-10 58,55,122 Cash transaction of PATH with directors Relatives FY 08-09 2,85,25,021 5,52,49,940 FY 09-10 1,46,61,842 5,37,00,603 7.2 All these figures as given by the AO are based on the assumption of the AO that the transactions recorded in the loose paper against the name of these persons are cash loan taken by the assessee on interest @ 10%. There is nothing in the loose paper to show that the interest is payable annually or monthly or only at the time of repayment of loan. The AO has computed the repayment as it appears in the loose paper marked as LPS-1. It is also pertinent to note that in the Tally account found in the laptop as well as loose paper seized from the possession of Shri G.C. Patidar do not reveal any transaction of payment of any interest by the assessee. Therefore, the AO has presumed the payment of interest on these transactions without any supporting evidence to substantiate t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contrary to the statement of Shri G.C. Patidar recorded u/s 132(4) of the Act and question no. 31 and answer to the same are reproduced as page no.93 of the assessment year as under: 7.4 Thus, it is clear that Shri G.C. Patidar has stated in the statement that the signature on the loose sheet may be of Mr. Nayaz Ahmmad from the office. Therefore, the observation of the AO is contrary to the record itself and the addition made by the AO on account of alleged payment of interest on the cash loans is only on the basis of the presumption of the AO and not on the basis of any material or evidence. The statement of Shri G.C. Patidar recorded u/s 132(4) also cannot be considered as incriminating material in the proceedings u/s 153A of the Act once the assessee has denied the transactions of any cash loan allegedly recorded in the LPS-1 as well as in the tally account found in the laptop. Once the assessee denied the alleged loan taken or payment of interest the AO was required to ascertain the truth by conducting a proper inquiry and at least by examining the parties from whom the alleged loan is found to be taken by the assessee. It is also relevant to consider whether any ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nter installed at the premises of the appellant, informed that he has opened this account on tally to train his junior Mr. Nilesh Tawrech and most of the figures are imaginary and few of the figures were copied from the data of appellant. The appellant in support has filed affidavit of Shri G.C. Patidar regarding the same. 4.2.3 After considering the entire factual matrix and evidence/material on record inter alia written submissions filed, I reach to conclusion that impugned additions have been made on the basis of assumption and presumption which neither sustainable on facts nor in law. The AO has reached to conclusion that few of the entries in printouts and books of appellant are matching, therefore, the same represents correct picture of books of accounts of the appellant and subsequent addition was made to the income of the appellant. On perusal of copy of affidavit filed by Shri G.C. Patidar, it is observed that the said tally dummy company has been created on his instruction in order to train his junior Mr. Nilesh Tawrech. He further submitted that no firm in the name of XYZ exists and neither PATH company i.e. Appellant Company has taken or repaid any loan in cash no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e were mentioned on loose paper turned out to AO and has admitted that any such transaction has taken place. Therefore, in absence of any cogent evidence having direct nexus with the impugned transactions, the said impugned papers and tally data account cannot be used against the appellant. The AO has also alleged that some of the data is accounted and some of the data is unaccounted in books of accounts, however, has failed to explain that the unaccounted data. Also, the data found from the premises of Shri G.C. Patidar was not matching with the data found from the office premises of the appellant in the seized impunged tally data. The AO has also compared data found from premises of Shri GC Patidar and impunged tally account of DM Poddar. On bare reading one could easily establish that the entries mentioned in the ledger account of D.M Poddar does not matches with the jottings of the loose paper seized from premises of Shri GC Patidar. Similarly the ledger account of R.P. Poddar is also not matching with the other account as mentioned in the loose paper sheets. The AO has also reproduced the accounts of various persons as In Recovered Data and In Regular Books of' and has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... res is duly accounted in audited books of account of appellant and the impugned loose papers were not found from premises of the appellant. Therefore, the AO is not justified in presuming buyback of shares as cash loan and interest on a loan was equally hypothetical. The statement given which has to be used against the assessee has to be confronted and opportunity to cross examine has to be provided, which squarely apply in relation to loose paper seized from the premises of Agroh where the statement was taken behind the back. 4.2.5 Another reasoning provided by the AO in support of his allegation that one BS-4 was found during the course of search which contain names of certain persons who are invitees to the party. The AO has applied all possible guess work in support of his allegation and stated that the name of the person whose names are written on BS-04 are known to appellant and in all probability will give loan to appellant. Even if the perusal of the contents of the BS 4 is made, there is only a single name matching with the name from whom loans are allegedly borrowed in cash, which is as under:- Sl. Name of the alleged lenders o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO to prove that actual transaction of cash i.e. movement of cash actually taken place with the help of documentary evidence. The assessment order does not discuss any such attempt by the department to conclusively establish that the transaction whereby debtor creditor relationship has been created between the two parties. None of the parties from whom the loans are allegedly taken by Assessee Company in cash were examined for the truth of the happening of such transactions. If the alleged cash loans are taken by the assessee company is taken to be true on the fact of it, then there arises a corresponding liability of income tax on such undisclosed income in the hands of giver of the cash loan. In none of the cases, the reciprocity which is a fundamental necessity of existence of transaction was ever proved or attempted by the department. In two cases reopened by the Department of Mr. Anil Poddar and Mr. Raghunath Poddar of which the Assessee Company has been informed, the reason to believe that cash loans were advanced by those person to assessee company was found unsupported and therefore such doubt has no legs to stand upon. Thus, in entirety the seized loose paper and tall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt also observed that even assuming that the entries in loose sheets are admissible under s. 9 of the Evidence Act to support an inference about correctness of the entries still those entries would not be sufficient without supportive independent evidence. Rakesh Goyal Vs. ACIT (2004) 87 TTJ (Del) 151 - The findings of Hon'ble Tribunal was as under:- 20.1 After perusing the findings of the CIT(A) and the submissions of both the parties, we do not find any infirmity in these findings. Firstly the finding of the CIT(A) has not been controverted by the learned Departmental Representative by filing any positive evidence. The copies of the pages found from the possession of the assessee are placed in the paper book and after going through these papers, we find that these are simply deaf and dumb documents and they cannot be considered for making any addition. This is a settled principle of law that any document or entry recorded in those documents should be corroborated with positive evidence. Here in the present case nothing has been corroborated or proved that assessee was dealing in money lending business. Mohan Foods Ltd Vs. DCIT (2010) 123 ITD 590 (De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re are concurrent findings of CIT(A) and the Tribunal to this effect. Since the conclusions are essentially factual, no substantial question of law arises for consideration . Jayantilal Patel Vs. ACIT Ors (1998) 233 ITR 588 (Raj) - Held that - During search at the residence of Dr.Tomar, the Department official found a slip containing some figures. This piece of paper claimed to have been recovered at the time of search contains figures under two columns. In one column, the total of these figures comes to Rs. 17,25,000 from 31st May, 1989, to 8th Dec., 1989, and in the other column, the total of these figures comes to Rs, 22, 12,500. An addition of Rs. 22, 12,500 on the basis of figures on a small piece of paper in respect of purchase of Plot No. B-4, Govind Marg, Jaipur was made by the AO. This plot B-4, Govind Marg, Jaipur, has been purchased jointly by Dr.Tomar, Dr. Mrs. Tomar and B.S. Tomar, HUF. Held that no addition on account of entries on a piece of paper which is claimed to have been found at the time of search, can be made treating the figures as investment for purchase of plot No. B-4, Govind Marg, Jaipur in the hands of Dr.Tomar, Dr. Mrs. Tomar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Deletion of additions made by Tribunal of assumed undeclared payments made for purchase of property was on basis of facts. Ashwani Kumar V. ITO (1991) 39 ITD 183 (Del) and Daya Chand V. CIT (2001) 250 ITR 327 (Del) and S.P. Goel V. DCIT (2002) 82 ITD 85 (Mum.): Nine out of 19 slips found were without any name or amount and therefore were dumb documents and no adverse inference could be drawn. Common Cause (A Registered Society) Vs. Union of India - 30 ITJ 197 (SC): In this case, the Hon'ble Court held that without any independent evidence or corroborative material, no addition is permissible on the basis of loose paper jottings notings. The relevant paras of the order are as under :- 6. With respect to the kind of materials which have been placed on record, this Court in V.C. Shukla's case (supra) has dealt with the matter though at the stage of discharge when investigation had been completed but same is relevant for the purpose of decision of this case also. This Court has considered the entries in Jain Hawala diaries, note books and file containing loose sheets of papers not in the form of Books of Accounts and has held that such entries in lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at a man cannot be allowed to make evidence for himself by what he chooses to write in his own books behind the back of the parties. There must be independent evidence of the transaction to which the entries relate and in absence of such evidence no relief can be given to the party who relies upon such entries to support his claim against another. In Hira Lal v. Ram Rakha the High Court, while negativing a contention that it having been proved that the books of account were regularly kept in the ordinary course of business and that, therefore, all entries therein should be considered to be relevant and to have been proved, said that the rule as laid down in Section 34 of the Act that entries in the books of account regularly kept in the course of business are relevant whenever they refer to a matter in which the Court has to enquire was subject to the salient proviso that such entries shall not alone be sufficient evidence to charge any person with liability. It is not, therefore, enough merely to prove that the books have been regularly kept in the course of business and the entries therein are correct. It is further incumbent upon the person relying upon those entries to prove th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons made on the basis of torn papers and loose sheets cannot be sustained as same do not indicate that any transaction ever took place and does not contain any information in relation to the nature and party to the transaction in question. (vi) Jagdamba Rice Mills Vs. ACIT (2000) 67 TTJ (Chd) 838 Held that No addition can be made on dump documents . (vii) In the latest decision of the Hon'ble M.P. High Court, Indore Bench in the case of the PCIT-1 v/s Shri PukhrajSoni (2019) 34 ITJ 489 (MP) has held as under; On the basis of search re-assessment additions were made - Appeal allowed by CIT(A), which was confirmed by ITAT ITAT held that CIT(A) was justified in allowing the appeal as AO has done the addition on the basis of notings found in the books of third person - Revenue filed appeal against the order of ITAT - HELD - Int he case of Common Cause (A Registered Society) v. Union of India, (2017) 30 ITJ 197 (SC). the Supreme Court held that incriminating materials in form of random sheets, loose papers, computer prints, hard disk and pen drive etc. and has held that that are inadmissible in evidence, as they are in the form of loose papers In the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aj Lal Girdharilal v / s CIT (1954) 26 ITR 736 (SC). 4.2.9 Despite the request of the Appellant, during the course of Assessment proceeding and also during the course of Penalty proceedings, the department despite having several weapons in its armory, like giving of summon, survey, search and seizure, re- assessment, revision etc could not establish as to whether the alleged person from whom it is alleged that the appellant has taken huge loan in cash are really existing person or imaginary person. Nothing has been brought on record to suggest any enquiry has been conducted about the alleged lenders. No statement were recorded of the so called lenders by issuing summon, if there be any belief or doubt as to taking of loan in cash, if harbored by the department. Even if some statements were recorded they are not shared nor there was opportunity given to cross examine the person from whom it is alleged that Appellant has taken loan in cash. Further, the theory of huge cash loan being taken by Appellant, which has been built upon the loose sheet and laptop, a presumption u/s. 132 (4A) was available in the statute book but it has been duly rebutted by the Appellant with cogent an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... carried out in the case of L and later L retracted his statement that said document belong to Assessee and moreover there were various internal inconsistencies and contradictions in document in question, impugned addition was to be set aside. In the case of CIT Vs. World wide Township Project Ltd (2014) 106 DTR Del 139 it was held that - A plain reading of the aforesaid Section indicates that (the import of the above provision is limited) it applies to a transaction where a deposit or a loan is accepted by an assessee, otherwise than by an account payee cheque or an account payee draft. The ambit of the Section is clearly restricted to transaction involving acceptance of money and not intended to affect cases where a debt or a liability arises on account of book entries. The object of the Section is to prevent transactions in currency. This is also clearly explicit from clause (iii) of the explanation to Section 269SS of the Act which defines loan or deposit to mean loan or deposit of money . The liability recorded in the books of accounts by way of journal entries, i.e. crediting the account of a party to whom monies are payable or debiting the account of a party fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has to be satisfied and cannot be presumed to have been established on the basis of 132(4A) of the Act. Section 69 opens with the word where any financial year immediately preceding the Assessment year, the Assessee has made investment ... Therefore it was incumbent upon the authority to establish that such investment had been made in a financial year immediately preceding the assessment year in question. In the case in hand, despite presumption, the ingredient of default i.e. actually taking or repaying loan or interest payment or giving loan to directors in cash is to be established by the Authority, with necessary enquires conducted in the case of alleged lenders by summoning them, recording their evidence, giving cross examination to Appellant, exercising recourse to 153C or 147 to bring undisclosed income in the form of cash loan, which in our considered opinion, the authority failed to do. Therefore, Loan or Deposit of Money actually taken by appellant is to be established by independent and direct evidence and not with the help of Laptop data or jottings. The Burden is heavy on the person who allege, once the initial presumption is rebutted with sound explanations. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inal question is whether the said statement of Mohd Rashid could have been utilised against the assessee without calling him for cross-examination. It is of immense significance that Mohd. Rashid has filed an affidavit in variance of his original statement. That apart, the Assessing Officer has ignored the affidavit and ascribed reasons how the transaction with the said Mohd. Rashid was not worth giving credence. The genuineness of bills produced by the assessee has not been accepted exclusively on the basis that the said Mohd. Rashid was a small businessman and was not assessed to income-tax. The aforesaid circumstances eloquently speak that the addition in the order of assessment has been made on the basis of the statement made by Mohd. Rashid. There is no cavil that a prayer was made under Section 131 of the Act to summon the said Mohd. Rashid for cross-examination. That has not been done. The language employed under Section 131 of the Act empowers the Assessing Officer to ensure the attendance of any person. When the statement of Mohd. Rashid was used against the assessee and an affidavit was filed controverting the same, we are disposed to think, it was obligatory on the part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be said that even without calling the Manager of the bank in evidence to prove this letter, it could be taken into account as evidence. But before the Income Tax authorities could rely upon it, they were bound to produce it before the assessee so that the assessee could controvert the statements contained in it by asking for the opportunity to cross examine the Manager of the bank with reference to the statement made by him. ....'' 23.The counsel for the petitioners also placed the recent judgment of the Supreme Court in the case of ICDS Ltd., reported in 2020 10 SCC 529, wherein, the Apex Court has remanded back the matter on account of the assessee being deprived of cross examination. Therefore, the respondent either should not have relied on the statements recorded under Section 132(4) or in case, if they want to rely on the same, they should not have denied the opportunity to the petitioners when they demanded of cross examining the persons who gave the statement. When the department has taken a stand that there are two groups which were searched by a single warrant and that the companies of one group should not be given to another, as rightly pointed out by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut if he desires to use the material so collected, the Assessee must be informed of the material and must be given an adequate opportunity to explain it and controvert the contents of it. (emphasis supplied) [See Dhakeshwari Cotton Mills Ltd. v. Commissioner of Income Tax, (1954) 26 ITR 775 (SC); C. Vasantial and Co. v. Commissioner of Income Tax, Bombay City, (1962) 45 ITR 206 (SC) and Kishinchand Chellaram v. Commissioner of Income Tax, Bombay City (1980) 125 ITR 713 (SC): (1980) 19 CTR 360: (1980) 4 Taxman 29]. In view of this legal position, in our considered view the orders of the CIT(A) and the Tribunal are in violation of principles of the natural justice. The Assessee has been deprived of fair opportunity to object and challenge the correctness of the survey report on the basis of which opinion has been formed by the CIT(A) and the Tribunal against the Assessee. In all fairness the said survey report should have been disclosed to the Assessee and the Assessee should have been provided opportunity to explain and object the findings recorded in it before forming any opinion adverse to it. In this view of the matter the question No.2 is decided in favour of the Assessee by hol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Adjudicating Authority simply relied upon the price list as maintained at the depot to determine the price for the purpose of levy of excise duty. Whether the goods were, in fact, sold to the said dealers/witnesses at the price which is mentioned in the price list itself could be the subject matter of cross-examination. Therefore, it was not for the Adjudicating Authority to presuppose as to what could be the subject matter of the cross- examination and make the remarks as mentioned above. We may also point out that on an earlier occasion when the matter came before this Court in Civil Appeal No. 2216 of 2000, order dated 17.03.2005 was passed remitting the case back to the Tribunal with the directions to decide the appeal on merits giving its reasons for accepting or rejecting the submissions. 7.10 It is also settled proposition of law that the presumption u/s 132(4A) of the Act is subject to rebut and therefore, the assessee has right to be confronted with the information being used against the assessee. The AO has used the loose paper seized from the premises of Shri G.C. Patidar as well as the statement of Shri G.C. Patidar without giving an opportunity to assessee to cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al, we adopt the same reasoning and same view as taken by ITAT in IT(SS)A No. 32 33/Ind/2021 (supra) and accordingly hold that the orders passed by CIT(A) in present appeals deleting the penalties are in order and do not require any interference from our side. 8. We would also like to emphasize one more point noted by Ld. CIT(A) on Page No. 81-82 of order which reads thus: From the above, it is crystal clear that to bring into the effect of penalty provision us 271D or 271E, it has to be established with independent evidence and not merely corroborative evidence (i.e. book entries) that Assessee has actually committed the default contemplated in section 269SS or 269T i.e. it has taken loan in cash or it has repaid the loan in cash exceeding Rs. 20,000. The explanation below 269SS defines the Loans or deposits MEANS Loans or deposits of money. The use of word Means by legislature in the Explanation below Section 269SS or 269T is with a purpose and it is to restrict the meaning to only Loan of Money . The use of Word Means indicates that definition is hard and fast and no other meaning can be assigned to the expression that is put down in definition [P. Kasilingham vs ..... X X X X Extracts X X X X X X X X Extracts X X X X
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