TMI Blog1999 (12) TMI 97X X X X Extracts X X X X X X X X Extracts X X X X ..... al on 7th July, 1998. Pleading for condonation of delay it is prayed that the bona fide of the assessee are clearly manifested in the fact that the original appeal before the CIT(A) has been filed within time and the mistake in choosing the correct appellate form has arisen due to bona fide lack of knowledge on the part of the chartered accountant. In the circumstances of the case we condone the delay and admit the present appeal. 3. A few facts may be stated at the outset. Search and seizure operations under s. 132 of the IT Act, 1961 were carried out by the IT authorities in the case of M/s Gokul Corpn and its partners viz. Shri Sureshbhai A patel and Shri Deepak Mehta on 21st Sept, 1995. During the course of search operation certain documents were seized containing inter alia details or various land transactions which pertained to the assessee-company also. Accordingly the requisite information regarding these transactions was communicated to the AO and proceedings under s. 158BC r.w. s. 158BD were initiated. On 4th March, 1997, the assessee furnished the return for the block period for financial year 1985-86 upto 21st Sept., 1995, disclosing undisclosed income at nil figure o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er s. 131(1A) dt. 30th Oct., 1995, wherein Shri Sureshbhai A. Patel has explained the nature of the transactions recorded on p. 22 of the Annexure A-l seized from his residence. The gist of these statements, as appearing in the assessment order at pp. 5 and 6 reads as under: "(i) On the front side of page No. 22, details of payments made (left hand side (LHS) for the settlement of disputes of various members and sources thereof (right hand side (RHS) are mentioned in respect of the land of silver Arc Scheme. For resolving the disputes of the members, a sum of Rs. 1,35,00,000 was decided to give to one Shri Arun Thakkar. Out of this Rs. 1,10,00,000 was actually paid; the details of which are mentioned on LHS under the heading 'Silver Arc Member Samadhan Khate Arunbhaine". (ii) RHS of page No. 22 shows details or collection of money relating to this scheme and it shows a total collection of Rs. 1,85,00,000. Accordingly to Shri Suresh Patel, this was received from Shri Suresh Patel, this was received from Shri Gautam Adani through Shri Manoj Vadodaria. The money was collected by Shri Suresh Patel himself from the office of Shri Manoj Vadodaria and was given to Shri Govind C. Patel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch relate to Kundan Nagar Co-operative Housing Society. According to Shri Suresh Patel, as per his statement dt. 10th Oct., 1995, these papers were given to by Shri Deepak Mehta for settlement of the problems of members. The control over this land situated near Ocean Park, Satellite, Ahmedabad, according to Shri Suresh Patel was exercised by the assessee-company though the possession was with Rabara by way of encroachment. From the backside of A1/22, document referred to earlier it appears that Zundannagar land was earlier purchased by Shri G.C. Patel from the assessee on token payment of Rs. 25, lakhs and subsequently he sold this land to Shri Mahesh Sharma after taking token payment of Rs. 11 lakhs. However, it appears that the deals were subsequently cancelled. On the basis of the aforesaid documents seized during search operations as well as the statements the AO came to the conclusion that the two amounts of Rs. 20 lakhs and Rs. 25 lakhs have been paid to the assessee in cash relating to the deals of Silver Arc and Kundannagar Co-operative Housing Society which represents the undisclosed income of the assessee-company. 9. When confronted with the statements of Shri Suresh Pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... these deals which leaves him also open for taxation, and accordingly the evidential value comes even more. Therefore, his statement also points to the involvement of the assessee-company in this deal during that period i.e., September-October, 1994." The AO accordingly proceeded to make the addition of Rs. 45 lakhs concluding that the amount of Rs. 20 lakhs and Rs. 25 lakhs was unaccounted cash. The amount of Rs. 20 lakhs relating to Silver Arc Scheme and Rs. 25 lakhs relating to Kundannagar land represented unaccounted cash received during the financial year 1994-95. 10. The learned counsel for the assessee-company strongly assailed the conclusions and reasoning adopted by the AO for making the impugned additions of Rs. 45 lakhs and argued that the loose papers and documents relied upon by the AO do not constitute admissible evidence against the assessee. The mainstay of the assessee's case as set up by the learned counsel is based on the landmark decision of the apex Court in the case of CBI vs. V.C. Shukla Ors. (1998) 3 SCC 410. The learned counsel argued that the assessee has totally denied the alleged undisclosed transactions relating to Silver Arc and Kundannagar land a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authorities, that rigours of the rules of evidence contained in the Evidence Act are not applicable to income-tax proceedings. However the principles contained in the Evidence Act, incorporated from Rules of natural justice forming part of the common law would naturally be applicable to income-tax proceedings. Reference in this connection may be made to the decision of Supreme Court in the case of Chuharmal vs. CIT (1988) 70 CTR (SC) 88 : (1988) 172 ITR 250 (SC). Now if we consider the evidentiary value of these documents as per s. 34 of the Evidence Act, 1872 it is amply clear that these loose papers and documents cannot possibly be construed as books of accounts regularly kept in the course of business. Such evidence would, therefore, be outside the purview of s. 34 of the Evidence Act, 1872. The ratio of the landmark decision of apex Court in the case of Central Bureau of Investigation vs. V.C. Shukla Ors. relied upon by the learned counsel would apply. We are, therefore, of the considered opinion that the Revenue would not be justified in resting its case on the loose papers and documents found from the residence of a third party even if such documents contain narrations of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Tax authorities in the case of Shri Govind- C. Patel and Shri Gautam Adani Management Consultancy Services Ltd. From these orders we find that in the case of Silver Arc addition has been made on substantive basis in the case of Shri Manoj Vadodaria and protective basis in the case of Gautam Adani Management Consulting Services Ltd. It appears to us that the statement of Shri Manoj Vadodaria, again recorded at the back of the assessee would not in any manner land any support to the impugned additions made in the assessee's case. 13. Having regard to the aforesaid discussion we would proceed to delete the impugned additions of Rs. 45 lakhs with the observation that the AO has failed to adduce evidence in support thereof. Ground No. 1 is, therefore, allowed. 14. Ground No. 2 is against the addition of Rs. 28 lakhs in respect of Hasunagar Co-operative Housing Society land. The addition is mainly based on the statement of Shri Ramanbhai Patel recorded before the ADI on 8th Jan, 1996, wherein Shri Patel admitted that he received a sum of Rs. 28 lakhs in cash from the assessee-company for assigning the development rights of a part of the land on which the development schem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of liaison work. Without prejudice to his main contentions, the learned counsel took up the alternative plea that even if the assessee has paid a sum of Rs. 28 lakhs to Shri Patel, and the expenditure is treated as unexplained expenditure under s. 69C, a. corresponding deduction under s. 37 would be allowable to the assessee. 16. After careful consideration of the matter, we are inclined to delete the addition of Rs. 28 lakhs made by the AO. The legal contentions raised by the learned counsel regarding the action of the AO in roping in the so-called cash payment made to Shri Ramanbhai for acquiring development rights have substantial merit in view of the decision of Gujarat High Court in the case of N.R. Paper Board Ltd. vs. Dy. CIT (1998) 146 CTR (Guj) 612 : (1998) 234 ITR 733 (Guj). In the instant case no search operations have been carried out by the Revenue authorities on the premises of Shri Ramanbhai or Shri Subhash Pandey and no documents and records evidencing payment of on money by the assessee on the Hasunagar Co-operative Society land has been seized. Therefore, provisions of s. 158BC, applicable for search cases would not come into play in so far as the impugned ad ..... X X X X Extracts X X X X X X X X Extracts X X X X
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