TMI Blog2005 (7) TMI 282X X X X Extracts X X X X X X X X Extracts X X X X ..... ons and evidences of the assessee-firm, which is bad in law, based on surmises and conjectures, and probabilities arbitrary and against the rules of natural justice. 2. That the learned CIT(A) has erred in law and on facts in confirming the additions amounting to Rs. 1,96,123 on account of interest, on frivolous grounds, ignoring the explanations and evidences of the assessee-firm, which is bad in law, based on surmises and conjectures, arbitrary and against the rules of natural justice. 3. That the learned CIT(A) has erred in law and on facts in confirming the additions amounting to Rs. 50,000 on account of commission, on frivolous grounds ignoring the explanations and evidences of the assessee, which is bad in law, based on surmises and conjectures, arbitrary and against the rules of natural justice. 4. That the learned AO has erred in law on facts in issuing notice under s. 148. 5. That the learned CIT(A) has erred in framing an order depicting a deep-rooted bias delivering irrelevant instances and defamatory phraseology against the assessee, the counsel, and the society at large, which is against the modesty of the office of the authority and also reflects the state of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the business premises could not be reconciled as the same had interlacing and interlocking of funds and transactions relating to the assessee and M/s Sunder Sales Corporation, proprietary concern of Sh. Surinder Kumar. He also stated that there were certain calculations made on the loose sheets which show working of interest on the amounts given and he added that in majority of the cases, such interest has not been received in cash and accordingly, the same has not been accounted for in the regular books of account. However, he further added that he was authorised by his brother to make surrender/declare income on behalf of the assessee. Accordingly, he disclosed the income of Rs. 2 lakhs each in the hands of the assessee and in the hands of M/s Sunder Sales Corpn. for the asst. yr. 1998-99. Copies of these loose papers are placed at pp. 19 to 24 of the paper book. Copies of these two letters found during the course of survey are placed at pp. 27 to 62 along with English translation which shows names of various persons, date-wise details of amounts advanced and received. 5. Since the amounts advanced related to the financial years relevant to the assessment years under reference ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,96,123 earned thereon and in addition, the AO also estimated commission/profit on sale of crops of wheat, sunflower and sarson sold at Rs. 50,000. Similarly, for the asst. yr. 1995-96, the AO made an addition of Rs. 4,78,100. 6. Being aggrieved, the assessee impugned additions in appeals before the CIT(A). During the course of appeal proceedings, the assessee filed affidavits of three employees stating that they were working as employees of M/s Sadhu Ram Sons, and they had never seen or heard that this firm was advancing loans over and above shown in the account books to any agriculturists or customers and no dispute between farmers and the partners was seen at shop. Three partners also filed affidavits stating that they had never given cash loans to any farmer over and above those shown in the books over the last 18 years. There were neither a dispute among the partners nor with the farmers. It was also added that the assessee had filed four cases of recovery of loans from the farmers and they were still pending in the civil Court. Besides, the assessee also filed the affidavits of 30 neighbours stating that they had never seen or heard that the assessee was giving any cash l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... He observed that the conduct of the assessee in disclosing huge undisclosed income before the survey authorities clearly proves that the assessee was not only evading income-tax but also violated the various other rules and regulations without which such income could not have been earned. He also observed that mere presence of rules and regulations did not guarantee that the same would not be disobeyed by the persons. Therefore, very assertion of the assessee that it had carried on the business as per rules and regulations was not correct. He observed that the contention of the assessee that it did not have necessary infrastructure was untenable for the reason that for advancing amounts to 19 farmers, one hardly needed such infrastructure. The assertion of the assessee that the Department did not gather any further evidence to conclusively establish that the assessee had advanced those amounts found recorded on the loose sheets was untenable for the reasori that this was not a case of search where premises of the assessee was covered. Such evidence must have been kept at a place or even at the residence of the partners. He also observed that no reliance could be placed on the affid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he farmers have not been cross-examined. The learned CIT(A) has called those persons as abettors in the offence of income-tax evasion along with the assessee. He further referred to the observations made by the Hon'ble CIT(A) that Court is never interested in having an affidavit from a criminal that he has not committed any offence. He further referred to p. 25 of the CIT(A)'s order where the learned CIT(A) has observed that there is little surprise that even when the cash in books was available, the assessee proceeded to make advances from his unaccounted money. He then referred to p. 26 of the impugned orders where the learned CIT(A) has recorded that he was so convinced that this was a concocted story by the assessee for which instructions have been issued to AO to find as to whether the case under s. 278 would be built up against Sh. Raj Kumar for abetting offence of tax evasion particularly when he was writing all the books of account of the assessee from year to year. He further directed the AO in case Sh. Raj Kumar was found involved in the criminal activity, the case must be put up to CIT/CCIT for launching prosecution. He then referred to p. 28 of the impugned orders where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entitled to reject the affidavit filed by the assessee without bringing any contrary material on record. The assessee should have been called upon to produce documentary evidence or could have been cross-examined. He submitted that in the present case, the Department has failed to bring any conclusive evidence to show that the entries recorded on the loose sheets represented unexplained investment. He then referred to the subsequent order dt. 17th May, 2005 of learned CIT(A) for the asst. yr. 1996-97 with regard to penalty imposed by AO under s. 271(1)(c). A copy of the same was also placed on our file. He submitted that in the said order, the learned CIT(A) has given a finding that the observations made in the quantum appeal were confined to deeming provisions of s. 69 and the operation of deeming provision could not be extended to penalty imposed under s. 271(1)(c). He submitted that the same learned CIT(A) has further recorded that there was no direct evidence available and the addition in the quantum appeal was sustained because of deeming provisions. The learned CIT(A) has further gone on to record that the addition was made and confirmed in appeal on the basis of principle of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... advanced to these parties on interest. He submitted that this has not been denied by the assessee. He referred to copies of two letters of Sh. Bhagwan Bansal placed at pp. 19 to 24 of the paper book where he stated that certain loose papers found at the business premises could not be reconciled as the same had interlocking and interlacing of the funds with the sister-concern M/s Sunder Sales Corpn. and the working partner of M/s Sunder Sales Corporation, Sh. Surinder Kumar was out of station. He admitted that these loose papers contained calculation of interest, but in majority of the cases, such interest was not received in cash and the same had not been accounted in the regular books of account. Thus, Sh. Bhagwan Bansal went on to disclose income of Rs. 2 lakhs each in the hands of the assessee and M/s Sunder Sales Corpn. for the asst. yr. 1998-99, where he stated that he was authorized by his brother who was contacted on telephone to make such offer. He submitted that this disclosure was never retracted at any stage. During the course of assessment proceedings, the assessee never denied that these transactions did not belong to him. It was only on the last date of hearing, i.e., ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judge the issues on the basis of preponderance of probabilities. Therefore, the observations made by the learned CIT(A) that the assessee was a criminal would not vitiate the order effecting the merits of the impugned additions. Thus, he strongly argued that considering the fact that assessee chose not to comply with the various notices issued by the AO or kept on seeking adjournment on one pretext or the other in the assessment proceedings, the AO was justified in making the impugned additions and the learned CIT(A) was justified in sustaining the impugned additions. He, therefore, strongly argued that the orders of the learned CIT(A) do not warrant any interference. 9. We have heard both the parties and considered the rival submissions with reference to facts, evidence and material on record. We have also gone through the orders of the authorities below and referred to the relevant pages to which our attention has been drawn. While deciding the appeals, the following important undisputed facts had to be taken into account: (i) In this case, survey under s. 133A was carried out and loose sheets were found during the course of such action. Copies of the same have been placed a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Kumar and the learned counsel. (vi) It is also a fact that the survey took place on 21st Aug., 1997 and notices under s. 148 were issued. Thereafter, notices under s. 133 were also issued on 15th Oct., 2001 and thereafter the hearing of the case was fixed on various dates mentioned above. While discussing the facts of the case and on one pretext or the other, the assessee went on seeking adjournments. It is also a fact that during the course of proceedings spread over from 15th Oct., 2001 till 18th March, 2003, the assessee never denied that the entries recorded on the loose sheet did not belong to its business. It is only at the time of last hearing of the case on 18th March, 2003, the assessee filed an affidavit of Sh. Raj Kumar, accountant and Sh. Surinder Kumar, partner, denying that the loose papers belong to their business concern. This denial has come about after a time span of five years from the date of survey. (vii) It is also a fact that the assessee failed to produce books of account before the AO, though repeatedly asked for by the AO during the course of assessment proceedings. This shows that the assessee was intentionally avoiding producing the books of account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... survey and the assessee never denied that these did not relate to its business during the period of five years from the date of survey. As regards the various other judgments cited by the learned counsel, those are on their own facts. A loose paper which contains details of rough calculation or unspecific entries could be accepted provided the assessee explains so. But in the present case, the assessee has not initially denied these transactions and secondly had not offered any explanation as to whom these belong and what these entries stand for and how and why these came to be kept at the business premises of the assessee. It is also a fact that no business concern other than relating to the two concerns of the assessee were carrying on the business on the same premises of the assessee. In none of the cases relied upon by the learned counsel, the facts of the case are identical as mentioned in the preceding paragraphs of this order. Therefore, the ratio of various decisions is to be considered in the light of facts mentioned in the preceding paragraphs. 9.2 The next aspect relates to filing of various affidavits during the course of appeal proceedings. These affidavits are of 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cument or to cross-examine the witness produced by the appellant, or (b) to produce any evidence or document or any witness in rebuttal of the additional evidence produced by the appellant. (4) Nothing contained in this rule shall affect the power of the Dy. CIT(A) or, as the case may be, the CIT(A) to direct the production of any document, or the examination of any witness, to enable him to dispose of the appeal, or for any other substantial cause including the enhancement of the assessment or penalty (whether on his own motion or on the request of the AO under cl. (a) of sub-s. (1) of s. 251 or the imposition of penalty under s. 271." From the bare reading of the provisions of the aforesaid rule, it is clear that the assessee is not entitled to produce any fresh evidence before the CIT(A) during the course of appeal proceedings except in the circumstances specifically mentioned therein. Such evidence can be admitted only if, the AO has refused to admit such evidence, or the assessee was prevented by sufficient cause from producing the evidence he was called upon to produce by the AO, the assessee was prevented by sufficient cause from producing before the AO any evidence wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A). In fact, the learned CIT(A) has not applied his mind to the relevant provisions of r. 46A while exercising his powers for admission of fresh evidence. The relevance of such evidence to the proceedings in question does not seem to have looked into. Thus, such action of the learned CIT(A) for admission of fresh evidence without application of mind without taking into account the relevant provisions of r. 46A and without assigning reasons either in the order-sheet or in the body of the impugned orders as to why this was considered to be a fit case for admission of evidence cannot be upheld. 9.3 Further, while deciding the present appeals, the learned CIT(A) has made several observations where the assessee and the persons who gave affidavits were branded as criminals and co-criminals. Nowhere he has given any valid and cogent reasons for upholding the additions except by making reference to totally irrelevant comments which were not justified. While deciding the present appeals, the learned CIT(A) was not trying a criminal case against the assessee. He was only required to record his findings whether, on the basis of evidence and material on record, the AO was justified in m ..... X X X X Extracts X X X X X X X X Extracts X X X X
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