Vildirect: IncomeTax-caselaws-2007-VIL-331-ITAT-JBL

2007-VIL-331-ITAT-JBL

Income Tax Appellate Tribunal JABALPUR

ITA Nos. 201, 290 & 304 to 308/Jab/1999;

Date: 27.02.2007

ASSISTANT COMMISSIONER OF INCOME TAX

SATYAPAL WASSAN

L. L. Sharma, for the Appellant.
P. C. Pancholi, for the Respondent.

BENCH

U. B. S. BEDI J.M. and D. C. AGRAWAL A.M.

JUDGMENT

by the bench :

ITA No. 290/Jab/1999'Asst. yr. 1989-90 (Revenue's appeal)

This is an appeal filed by the Revenue against the order of the learned CIT(A) dt. 26th April, 1999 wherein he has deleted the addition of Rs. 22,30,000. The grounds raised by the Revenue are as under :

"1. On the facts and in the circumstances of the case, the learned CIT(A) erred in deleting the addition of Rs. 22,30,000 made by the AO as income from undisclosed sources.

2. The order of the learned CIT(A) is erroneous in law and on facts."

2. Originally the assessment was completed on Sri Satyapal Wassan. Thereafter, legal heir Sri Naresh Wassan was substituted on the death of Sri Satyapal Wassan. It was reported that Sri Naresh Wassan had also expired on 5th Oct., 2006. Thereafter, Smt. Shraddha Wassan has been taken as legal heir on record.

3. The facts of the case are that the business and residential premises of Sri Satypal Wassan were searched in April, 1995. During the course of the search operations, various documents and books of accounts were seized. The impugned addition of Rs. 22,30,000 was based on a loose paper No. 7 of Annex. A-1/1-4 which was seized from the residence of Late Sri Satyapal Wassan. The AO required Sri Satyapal to explain the transactions. It was taken by the AO that the documents in question reflected advancing of loans and, therefore, he asked the assessee to explain these advances. The assessee denied to have advanced any amount to any person. Originally he disowned the paper seized from his residence. He also denied to have any concern with the document or the figures mentioned in that document. An affidavit to this effect was also filed. In that affidavit, Sri Satyapal Wassan averred that he did not know the persons whose names are appearing in that document. The AO, however, took the view that once a document was seized from the residence of the assessee, then it would be in its knowledge and the explanation or affidavit furnished by him is only with the intention of escapement of tax liability. Since the assessee failed to establish with the supporting evidence that seized paper did not pertain to him or that entries appearing therein are not connected with him or his business, the AO treated the entries in the document as undisclosed investment in money lending business and thus added a sum of Rs. 22,30,000 as the assessee's undisclosed income. The assessee had challenged the reopening of the assessment and also the addition before the learned CIT(A). The learned CIT(A), however, upheld the reopening but deleted the addition by observing as under :

"5. I have gone through the submission of the counsel for the appellant. Relying on the decision of Calcutta High Court in the case of Tara Devi Goenka vs. CIT (1980) 122 ITR 14(Cal) and the decision of the Supreme Court in Jute Corporation of India Ltd. vs. CIT (1990) 88 CTR (SC) 66: (1991) 187 ITR 688(SC), I deem it proper to admit the fresh evidence for adjudication.

6. It has been further submitted that the paper found during the course of search belonged to late Shri Dharamveer Wassan. The paper was his own personal document. It has nothing to do with the firm M/s Om Prakash Satyapal or with the appellant. Late Shri Dharamveer Wassan expired on 7th Oct., 1993. Late Dharamveer Wassan was about to start a business in iron and steel scrap. Page No. 7 denotes the orders placed by various persons for supply of iron and steel scrap.

7. In this regard counsel for the appellant submitted affidavits from the following persons :

Gurdeosingh s/o Vijagarsingh

Ravi Ghai s/o Tilakraj ghai

Ravi s/o late Sri J.G. Kohli

Nanjibhai Patel s/o Meghjibhai Patel

G.A. Swamy s/o G. Suryanarayn

Radheshyam Sharma s/o late Narayandas Sharma

Panchanbhai Patel s/o late Shyamjibhai Patel

Romi s/o Gudeosingh

Hardeep Lamba s/o Mahendra Lamba

Bhim Pita Jagbandhu Sahu

All the above persons had confirmed that they contacted late Shri Dharamveer Wassan for supply of iron and steel.

8. Shri Gurdevsingh stated that he wanted to place order for supply of 5 tons of iron. Shri Ravi Ghai stated that he wanted to place order for supply of 2 tons of iron. Sri G.A. Swamy wanted to place order for supply of 5 tons of iron. All the deponents have certified that they wanted to conduct business with Dharamveer Wassan and the figures noted in the affidavits prove the quantity of iron that they wanted to purchase from late Dharamveer Wassan. Under such circumstances the entries in page No. 7 of the seized document stand explained. Therefore, the AO was not justified in treating them as unexplained loans. The addition of Rs. 22,30,000 should be deleted.

9. Before me the appellant has submitted fresh evidence by way of affidavit from Smt. Nirmal Kanta widow of late Shri Dharamveer Wassan. He has also filed affidavits from the above persons who wanted to have business dealings with late Shri Dharamveer Wassan. I am convinced with the argument of the appellant that these fresh evidences may be admitted in the interest of justice. In this regard, I rely on the judgment of the Supreme Court in Jute Corporation of India Ltd. vs. CIT (supra) wherein it has been held that the powers of CIT(A) are co-terminous with those of the AO and the entire assessment is open before the first appellate authority. Therefore, the first appellate authority can admit fresh evidence. The Calcutta High Court in Tara Devi Goenka vs. CIT (supra) had held that an appeal is continuation of assessment and first appellate authority is empowered to admit additional evidence at the time of hearing. Relying on the above decisions, I deem it proper to admit fresh evidence for adjudication. It appears that Smt. Nirmal Kanta Wassan widow of late Dharamveer Wassan has stated that the paper No. 7 is in the handwriting of her husband late Dharamveer Wassan. She has submitted it by way of affidavit. She has also stated that her husband wanted to start iron and steel business at Korba. Therefore, he negotiated with various persons in connection with iron and steel trading. Counsel for the appellant also submitted affidavits sworn in by S/Sri Gurdevsingh, Ravi Ghai, Ravi s/o late J.G. Kohli, Nanjibhai Patel, G.A. Swamy, Radheshyam Sharma, Panchananbhai Patel, Romi, Hardeep Lamba and Bhim Pita Jagbandhu Sahu. All of them wanted to purchase iron and steel from late Sri Dharamveer Wassan. They have also certified the quantity of iron that they wanted to purchase from late Shri Dharaniveer Wassan. If these evidences are taken into consideration, the view taken by the AO is not justified. In my opinion, the figure taken by the AO is nothing but the quantity of iron that the deponents wanted to purchase from late Sri Dharamveer Wassan. Therefore, loose paper No. 7 stands explained. The AO was not justified in adding Rs. 22,30,000 as income from undisclosed sources. I deem it proper to delete the addition."

4. Thus, the main thrust of learned CIT(A) is that the document in question contained not the advances of loans but orders placed by different parties with Late Dharmvir Wassan, brother of Sri Satyapal Wassan. The document, in fact, did not belong to Satyapal Wassan. In this process, the learned CIT(A) had admitted evidence in the form of affidavits of various persons whose names are stated to be recorded on the seized document No. 7. As there was no advance of money by Sri Satyapal Wassan, he deleted the impugned addition.

5. Against this, the learned Departmental Representative submitted that the learned CIT(A) has wrongly admitted fresh evidence without giving any opportunity of being heard to the AO, which is a violation of r. 46A. In fact, Sri Satyapal Wassan did not file any evidence at the time of assessment and, therefore, the learned CIT(A) was not justified in admitting additional evidence in the form of affidavits. Thus, the matter should be restored back to the file of AO for examining the veracity of evidence. The learned Departmental Representative also submitted that the addition can be made under s. 68 or under s. 69 of the IT Act, 1961.

6. Against this the learned Authorised Representative of the assessee submitted that the AO had not recorded any statement either during the course of search on the document No. 7 or during the course of assessment proceedings. Thus, without giving any opportunity to the assessee, the AO had inferred something and made the addition. In fact, the assessee had also given affidavit before the AO which was not considered by him. The figures recorded on the seized document are not the advances of money but they are, at best, quantity of orders for purchase or sale placed by different parties to Sri Dharmvir Wassan. The learned Authorised Representative, further, submitted that the document in question is incomplete inasmuch as it does not provide full names and addresses of persons, the date of alleged transactions or the monetary unit in which alleged figures are written. They did not show whether alleged figures are in rupees, tons, kilograms, centimeters, yards and inches. They do not show whether it is a debit transaction or a credit transaction. The total of 22.30 does not show whether it is rupees or something else. The document does not carry signature of any person. In absence of any detail, no transaction can be inferred from that document. No opportunity was given to the assessee to explain the nature of transaction and, therefore, no addition could be made thereupon. The alleged document is only a dumb document and once document is incomplete, then no addition is called for. The learned Authorised Representative, further, submitted that the entries may go even prior to 1993 or to any other year. There is no corroborative evidence collected by the AO so as to support his inference. The learned Authorised Representative, further, submitted that below 22.30, there are two further entries in the names of VKP 2.5 and KK. 34. No inference therefor has been drawn. Once the AO ignores these two entries, there is no justification to consider other entries. Entire document should be read as a whole. Further, Department has not produced any material to counter the affidavits. In fact, no ground has been taken against the alleged admission of evidence by the learned CIT(A). The addition made by the AO is merely on assumptions and presumptions. The document, in question has not been properly decoded by the AO. One does not know whether the figures are in units or in thousands or in lakhs. Therefore, whatever the AO has presumed has no basis. In support of his contention the learned Authorised Representative has placed reliance on the decision of the Mumbai Bench of the Tribunal in Asstt. CIT vs. Shailesh S. Shah (1997) 59 TTJ (Mumbai) 574 in ITA No. 6580/Bom/1990. There was a seized paper. Figures noted on the paper were taken as commission and added as undisclosed income of the assessee. There was no specific or direct evidence available which could have supported the finding of the AO. The word 'commission' or the word 'rupees' was not mentioned on the loose paper. Further, there was no exact date of receipt shown on the document. Therefore, the same could not have been taxed in the assessment year in question. Accordingly that document was treated as dumb document. On the other hand, if they were advances as taken by the AO, they ought to have been added in the wealth of the assessee which has not been done. There is no finding or material with the AO so as to show that the document did not belong to Dharamvir Wassan. The learned Authorised Representative also submitted that the impugned loose paper does not constitute books of account and, therefore, no addition under s. 68 can be made on that basis. Further, there is no charge that there are receipts of money by the assessee. The addition has been made only on the ground that they are unexplained advances made by the assessee. The learned Authorised Representative also argued that presumption under s. 132(4A) cannot be imported for assessment purposes on account of latest decision of the Hon'ble Supreme Court in the case of P.R. Metrani vs. CIT (2006) 206 CTR (SC) 290: (2006) 287 ITR 209(SC). The learned Authorised Representative also submitted that the AO has wrongly presumed that alleged advances were given in the asst. yr. 1989-90 whereas search was done in April, 1995. There is no date on the document which could indicate that the transaction took place in the previous year relevant to the asst. yr. 1989-90. At best one could consider the assessment year as 1995-96 as the document was recovered in April, 1995.

7. We have carefully considered the rival submissions and perused the material on record. In order to resolve the controversy as to whether any taxable income would arise from the alleged document, we may consider it relevant to record its English version :

"G.S.	5
Ravi	2
Kotli	2
Umiya	2
Swamy	5
Ganpath	1-1/2
Radheyshyam	1/2
Shyamjibhai	1
Dari	.30
Lamba	1/2
Bhu	1/2
Dev. Bros.	2
	22.30"

9. Thus there are certain names written either in full or in abbreviation against which certain figures are mentioned whose total is written 22.30. In addition to this, there are two more figures in the names of VKP 2.5 and KK .34. The document does not carry any signature. It does not show any date. It does not show any unit like rupees, tons, kilograms, centimeters, yards or inches. Full names of parties are also not given. They also do not show whether it is the position of assets or of liabilities or they are receipts or payments or they are sale or purchase or advances paid or loan received. The AO also did not carry out any enquiry either during the course of search or thereafter during the course of assessment proceedings so as to find out the nature of transaction and the period in which those transactions were carried out. The explanation of the assessee that the document belonged to his brother Dharamvir Wassan, who was doing the business in iron and steel was also not examined. It is quite clear that the AO simply presumed that 22.30 stands for Rs. 22.30 lakhs and, therefore, these amounts were in rupees and, further, that they are advances given by the assessee. Thus, there are four presumptions made by the AO in this case.

1. The transactions belonged to the financial year 1988-89 relevant to asst. yr. 1989-90.

2. Figures mentioned in the document are advances made by the assessee.

3. The transactions belonged to the assessee.

4. The transactions are in a code of lakh and unit is Rupee.

After going through the order of the AO, we do not find any material so as to draw these presumptions or inferences.

10. The argument of the learned Departmental Representative that the learned CIT(A) has admitted fresh evidence in the form of affidavits is not tenable because the Revenue has not raised any ground to this effect. On the other hand, the learned Authorised Representative has also claimed that this explanation was even before the AO. It was only in support of that explanation that the assessee had filed affidavits before the learned CIT(A). He drew our attention to pp. 42 and 43 which is an affidavit of Sri Satyapal Wassan, dt. 7th Feb., 1999 (date of assessment order is 30th March, 1999) according to which Sri Satyapal Wassan had disowned the document No. 7. On pp. 44 and 45 of the assessee's paper book, there is an affidavit of Smt. Nirmal Kanta Wassan wife of Shri Dharamvir Wassan. This affidavit is dt. 10th Dec., 1997. According to this, document No. 7 belonged to her late husband and they relate to transactions made by him. They are in fact the orders of iron and steel placed by various persons mentioned in the document. The assessment order of the AO also shows that affidavit of Sri Satyapal Wassan was available before him. Once an affidavit was filed before the AO, he was duty-bound to look into it and find out who is the real owner of the transactions and income arising therefrom by carrying out necessary investigation. The fact that he chose to refrain himself from carrying out such enquiries clearly indicates that there was no merit in the presumptions raised by the AO that the document belonged to the assessee and transactions also belonged to him. The additions were apparently made for the sake of additions.

11. For the sake of argument if we accept the submission of the learned Departmental Representative that the learned CIT(A) erred in accepting fresh evidence then what is left after ignoring those affidavits is the bare document No. 7 with the bare details as referred to above. The moot question now arises is whether any addition can be made on the basis of that document. We have already pointed out above that this document is bereft of necessary details about year of transaction, ownership of transaction, nature of transaction, necessary code for deciphering the figures. It may be possible that a document may not be complete in all respects as the businessmen or tax evaders may choose to record minimum details on a document and keep the rest in their memory. It is the duty of the AO to carry out necessary investigations by correlating the impugned document with other documents seized, with regular books of account, with record kept by outside agencies, such as banks or financial institutions or debtors/creditors and finally, by recording the statements of concerned parties so as to fill up the gaps in confirming the inference arising from the documents for a proper charge of tax. Such correlation is necessary unless the document is capable of speaking giving full details so as to enable any intelligent person to find out the nature of transaction, the year of transaction, the ownership of the transaction and quantum thereof. Even in that situation, it is necessary to give opportunity to the assessee to offer his explanation and investigation be carried out to strengthen the direct inference arising from this document.

12. Let us now examine how all these transactions are necessary for the purposes of levying tax on the basis of a seized document.

13. Sec. 4 relates to charge of income-tax. It reads as under :

"Sec. 4 (1) Where any Central Act enacts that income-tax shall be charged for any assessment year at any rate or rates, income-tax at that rate or those rates shall be charged for that year in accordance with, and subject to the provisions (including provisions for the levy of additional income-tax) of this Act in respect of the total income of the previous year of every person :

Provided that where by virtue of any provision of this Act, income-tax is to be charged in respect of the income of a period other than the previous year, income-tax shall be charged accordingly.

(2) In respect of income chargeable under sub-s. (1), income-tax shall be deducted at the source or paid in advance, where it is so deductible or payable under any provision of this Act."

From a reading of above section, we find following components which enter into the concept of taxation. The first is the taxable event which attracts the levy. The second is the person on whom the levy is imposed and who is obliged to pay the tax. The third is the assessment year in which charge of income-tax is levied. The fourth is the total income of the previous year and the fifth is the rate or rates at which tax is to be imposed. The rates are prescribed in the annual Finance Act. Therefore, this component has no value in determining total income on the basis of seized document. Our view in this regard is supported by the decision of Hon'ble Supreme Court in Govind Saran Ganga Saran vs. CST (1985) 155 ITR 144(SC) wherein it was held that for the purpose of charging to tax, there should be four components to be satisfied. For the sake of convenience, we refer to the relevant headnotes from that decision :

"The component which enter into the concept of a tax are well known. The first is the character of the imposition known by its nature which prescribes the taxable event attracting the levy, the second is a clear indication of the person on whom the levy is imposed and who is obliged to pay the tax, the third is the rate at which the tax is imposed and the fourth is the measure or value to which the rate will be applied for computing the tax liability. If those components are not clearly and definitely ascertainable, it is difficult to say that the levy exists in point of law. Any uncertainty or vagueness in the legislation scheme defining any of those components of the levy will be fatal to its validity."

14. Now let us examine these components in detail and how they are relevant for taxing an item.

15. The first component shows that it is necessary to find out the nature of transaction which is the source of generating income. It has to be clearly spelt out as to whether a particular transaction is of income yielding nature as per IT law. Not all transactions yield taxable income. Firstly, it is only the financial transactions which yield taxable income and secondly, it is of revenue character. The capital transactions, unless specified in the IT Act will not yield taxable income. It has to be shown either from the reading of the document or from accompanying investigation that the transaction recorded in a document is of revenue character or is otherwise taxable under IT Act. As a quasi-judicial authority, the AO has to satisfy himself on the basis of cogent material, either found in the search or on post-search enquiries that transaction recorded in the impugned document is real one and nor imaginary (i.e. an estimate or something which is to take place in future) and it has actually taken place. It has to be shown that the transaction recorded in the impugned document is sale or purchase, advance or loan, of capital or of interest; whether it is a statement of existing assets, disclosed or undisclosed; what is the commodity involved; who are the people involved in the transaction; if it is advance, then whether debtors concerned are existing, their identity; whether advance so taken is reflected in their books; whether any interest is paid on such transaction, what are the documents executed for recovery of such advances or what arrangement the assessee has done for recovery of such advances; whether there are any other related document found in the search; whether any person recorded in the impugned documents had, otherwise any other transaction with the assessee recorded in the regular books. In the present case, the AO has simply presumed that the alleged figures are advances without there being any material on record to support such presumption.

16. About the second component the charging section clearly spells out that income-tax will be levied on the total income of a person. The person must be the one as defined in s. 2(31). It must be clearly established who is that person whether he is the one from whose possession the document is recovered or someone else. Merely because a document is recovered from the body of a person, does not automatically lead to the inference that it belonged to him. It is only for certain purposes that presumption under s. 132(4A) has been enacted and not for all purposes including the assessment. Further, this presumption is not conclusive. It is rebuttable. If the assessee has, by way of affidavit denied ownership of the document and, further, Smt. Nirmal Kanta, wife of Sri Dharamvir Wassan admitted that it belonged to her husband; it could not be inferred without rebutting those evidences (filed in the form of affidavits before the AO) that document and transactions recorded therein, in fact, belonged to Sri Satyapal Wassan. Onus under s. 132(4A) is always shifting. This sub-section provides that :

"Sec.132 (4A)'Where any books of account, other documents, money, bullion jewellery or other valuable article or thing are or is found in the possession or control of any person in the course of a search, it may be presumed'

(i) that such books of account, other documents, money, bullion, jewellery or other valuable article or thing belong or belongs to such person;

(ii) that the contents of such books of account and other documents are true; and

(iii) that signature and every other part of such books of account and other documents which purport to be in the handwriting of any particular person or which may reasonably be assumed to have been signed by, or to be in the handwriting of any particular person, are in that person's handwriting, and in the case of a document stamped, executed or attested by the person by whom it purports to have been so executed or attested."

Thus, the legislature has used the words "may presume". A presumption is an inference drawn from other known or proved facts. It is a rule of law under which Courts are authorized to draw a particular inference from certain set of facts. This can be disproved by other evidence provided by other party. The words "may presume" leave it to the Court to make or not to make the presumption according to the circumstances of the case. Such presumption is optional and the Court is not bound to make it. Even if such presumption is made, it is only rebuttable one. A rebuttable presumption is, thus, clearly a rule of evidence which has the effect of shifting the burden of proof by leading the evidence. Initially the AO would be justified to make such presumption, if drawn after judicial application of mind to the fact of the case. Thereafter, when the assessee leads the evidence, then the AO has to consider it judicially. What amount of evidence one requires to rebut the evidence depends upon facts of each case. There is no rigid rule in this behalf. Sometimes, mere statement of the assessee may be enough. Hon'ble Rajasthan High Court in Addl. CIT vs. Thahrayamal Balchand 1977 CTR (Raj) 219 : (1980) 124 ITR 111 (Raj) observed as under :

"The evidence which satisfied the Tribunal was the facts and circumstances of the case. As pointed out above what quantum of evidence would rebut a legal presumption in a given set of facts does not admit of any rigid rule. The evidence may be direct or circumstantial or both and a mere statement of the assessee may be enough in some cases. It does not raise a question of law."

The assessee filed his affidavit and also the affidavit of Smt. Nirmala Kanta Wassan wife of Dharamvir Wassan to the effect that impugned document contained transaction belonging to Shri Dharamvir Wassan. It could not be said that onus did not shift to the AO. In our considered view, the affidavits, even if regarded as self-serving do not lose their evidentiary value if there is no material contrary to the averments made in the affidavit. When sufficient other material is found in the search which corroborates that document belonged to the assessee, then denial of such ownership merely by affidavits will be meaningless and they do not carry any weight to rebut the presumption lying on the assessee. In the present case, nothing is shown by the AO that there was other material correlated with the impugned document clearly showing that it belonged to the assessee. Under these circumstances, the assessee has successfully shifted the onus on to the AO by filing the affidavits. They may be self-serving but carry enough weight to shift the burden or rebut the presumption. Once the onus is shifted to the AO, he was duty-bound to collect evidence so as to belie the contents of the affidavit and hold that document and transactions recorded therein, in fact, belonged to Satyapal Wassan. If the AO has not done so, it could not be said that the second component of levy of charge has been properly established by him.

17. The third component in levy of charge is assessment year. The document and/or follow up investigation must establish the period of transaction before charge of income-tax could be levied during the current assessment year. The document is silent on this aspect. It is only post-search investigation and correlation with other documents that could have filled up the gap. Since there is no material on record to indicate in certain terms the period of transaction, it is not possible to infer that the transactions belonged to this year.

18. The last component is the quantum of income. As stated above, the AO has failed to properly decode the figures mentioned in the document as to whether they are in thousands or in ten thousands or in lakhs and what is the unit of these transactions. The document does not tell anything about this. It could have been done only by way of investigation. It has not been done. Therefore, one cannot infer merely from the face of the document as to what is the total of those transactions and whether they are in rupees or in kilograms or something else. In the absence of such proper decoding and clarification of number/quantity involved, no charge of income-tax can be levied. If the figures in the documents are same these are the quantities then they have to be converted in terms of money. There has to be some basis for conversion. If it is money, then it has to be shown how much it is. The presumption that these figures are in lakhs is simply bald, wild and baselsss. We have no option but to infer that the AO has failed to discharge his duties. He drew inferences, made presumptions, relied on surmises and thus made unsustainable additions.

19. The above discussion also leads us to infer that a charge on the basis of document can be levied only when the document is a speaking one. The document should speak either out of itself or in the company of other material found on investigation and/or in the search. The speaking from the document should be loud, clear and unambiguous in respect of all the four components as described above. If it is not so, then document is only a dumb document. No charge can be levied on the basis of a dumb document.

20. We also notice that the AO could not establish that the assessee has charged any interest, if at all the impugned figures were advances. There is no material to show that the AO has taxed these advances as wealth of the assessee. There is also no material to show that the assessee has taken any action to recover the money from the alleged debtors. It is not believable that the assessee or his legal heir would forget their money lying with the debtors. By one way or other, he or his legal heir would try to recover the money. The Department has not done anything to find out that after the search in April, 1995. We are also unable to satisfy ourselves as to why the alleged transactions are considered in the asst. yr. 1989-90 when there is no date mentioned on the document. Once search took place in April, 1995, then undated paper could be presumed to be belonging to that period and hence, the year of taxability would be asst. yr. 1996-97. Thus, it is merely by surmises that the AO has taxed it in the year 1989-90.

21. Our view is supported by the decisions of Tribunal in several other cases. In Bansal Strips (P) Ltd. vs. Asstt. CIT (2006) 100 TTJ (Del) 665: (2006) 99 ITD 177(Del), the AO has found certain loose papers during the course of search which indicated that certain figures against certain names were written. They were decoded to make the total to Rs. 53,69,260. The assessee submitted before the Tribunal that (i) the impugned seized papers are dumb documents and no addition can be made on their basis in the absence of corroborative materials. No circumstantial evidence in the form of unaccounted cash, jewellery or investment outside the books was found in the search. (ii) The assessee from the very inception denied having any nexus with the seized papers. (iii) The impugned papers did not constitute books of account. (iv) The said papers are unsigned and, therefore, not sufficient to fasten the liability on the assessee. (v) The AO did not carry out any enquiry by summoning the persons named in the seized papers although the assessee has furnished their addresses. (vi) Some of the documents did not specify the year. The Revenue did not discharge the onus lying on them to prove that the documents pertained to the block period. On this basis, the Tribunal held that no addition could be made on the basis of seized papers as material available with the AO is grossly inadequate.

22. In Kay Cee Electricals vs. Dy. CIT (2003) 81 TTJ (Del) 734: (2003) 87 ITD 35(Del), it has been held in para 21 that where seized slips did not contain any amount the same can be treated only as dumb document and on that basis no addition can be made. In the same case, other slips were found along with the cash. The contents of the slips were correlated with the cash found and, therefore, entries in the slips were treated as reflected unaccounted income. Those slips contained details of the amounts having correlation with the cash found from the same almirah. The Tribunal held them as speaking documents reflecting undisclosed income. In the present case also, it is not established that document No. 7 contained any amount.

23. In D.N Kamani (HUF) vs. Dy. CIT (1999) 65 TTJ (Pat)(TM) 504: (2000) 241 ITR 85(Pat)(TM)(AT), it was held by the Third Member that where document did not reflect any on-money taken in respect of some other flats sold, then additions on that basis could not be made. It means that recording of receipt of on-money in respect of one flat can result into addition in respect of that flat only and on that basis no further addition could be made in respect of other flats sold by the assessee as the document did not reflect receipt of such on-money in respect of others. To that extent, the document was treated as dumb document.

24. In Steel Home vs. Asstt. CIT (1999) 65 TTJ (Del) 393: (1999) 69 ITD 240(Del), the Tribunal held that where the entries recorded on a document found in the course of the search could not be related to the assessee, then any mentioning of low withdrawals or purchase of plots or the mentioning of stock or the figures of stock could not be added as the assessee's income as they could not be related to the assessee. It shows that it is very important for the AO to find out that the entries and related transactions belonged to the assessee. In our case, where affidavit is filed that entries related to Dharamvir Wassan and not to the assessee, it was incumbent on the AO to carry out necessary enquiries and relate the transactions with Sri Satyapal Wassan. Since such exercise has not been done, the document could not be considered in the assessment year in question or even otherwise in the case of the assessee.

25. In the case of Smt. Neena Syal vs. Asstt. CIT (2000) 69 TTJ (Chd) 516: (1999) 70 ITD 62(Chd), the decision of Tribunal in the case of Ashwani Kumar vs. ITO (1991) 42 TTJ (Del) 644: (1991) 39 ITD 183(Del) was referred in which it was held that where documents found at the time of the search did not indicate whether figures referred to in the paper reflect quantities of money or to quantities of goods, the same are only dumb documents and, therefore, no addition could be made on the basis of such documents. It was held in Neena Syal's case (supra) that where a document found during the course of search is open to more than one possibility of interpretation and does not prove conclusively that any premium was given by the assessee or received by the seller then no addition could be made in respect of premium paid on purchase of plot. From this decision, it is clear that the document must unmistakably reflect the transaction without having any second interpretation.

26. In Elite Developers vs. Dy. CIT (2000) 68 TTJ (Nag) 616: (2000) 73 ITD 379(Nag), it was held that where seized documents evidencing receipt of on-money by the assessee were not speaking documents as they did not contain any narration or description about different figures noted thereon and Department having failed to bring on record any material or evidence to corroborate allegation regarding receipt of on-money, then presumption on the basis of documents could not be raised.

27. Similar view was taken by the Tribunal in the cases of Kishanchand Sobhrajmal vs. Asstt. CIT (1991) 42 TTJ (Jp) 423: (1992) 41 ITD 97(Jp) and Agrawal Motors vs. Asstt. CIT (2000) 66 TTJ (Jab) 130: (1999) 68 ITD 407(Jab).

28. The crux of these decisions is that a document found during the course of search must be a speaking one and without any second interpretation, must reflect all the details about the transaction of the assessee in the relevant assessment year. Any gap in various components as mentioned in s. 4 of the IT Act must be filled up by the AO through investigations and correlations with other material found either during the course of the search or on investigation. As a result, we hold that document No. 7 is a non-speaking document.

29. Next issue raised by the learned Departmental Representative is that addition could be considered under s. 68. In our considered view, this submission is misplaced. In fact, it does not arise from the order of the AO. He has only made addition under s. 69 for the undisclosed advances given by the assessee, the question of treating them as cash credits is only an afterthought. The Department is not sure as to whether alleged entries are payments or receipts. If the Department itself is vascillating and two interpretations are possible, then this fact itself justifies the stand of the assessee that no addition can be made. Notwithstanding above, in our considered view, document No. 7 is only a piece of paper and cannot be called to be a "book" within the meaning of s. 68. In ordinary sense a book signifies a collection of sheets of paper bound together in a manner which cannot be disturbed or altered except by tearing them apart. This binding is of a kind which is not intended to be movable in the sense of being undone and put together again. As per s. 34 of Indian Evidence Act, book means a collection of sheets of paper bound together with the intention that such binding shall be permanent. Unbound papers collectively kept in one volume, in whatever quantity, though filled up with one continuous account, are not a book of account within the meaning of s. 34 of Indian Evidence Act. In CBI vs. V.C. Shukla (1998) 3 SCC 410, para 18, it was held that the spiral notebooks and spiral pads are books within the meaning of s. 34 of the Evidence Act. In the same case, it was also held that loose sheets of papers contained in files are not the books. In this regard, it would be relevant to refer to the decision of Hon'ble Bombay High Court in Sheraton Apparels vs. Asstt. CIT (2002) 175 CTR (Bom) 651: (2002) 256 ITR 20(Bom). The concept of word "books" in the context of s. 271(1)(c), Expln. 5 was considered but it is equally relevant for the purposes of s. 68 where the word "books" is used. It would be relevant to refer to the part of the headnote from that decision defining "books" and "books of account".

"If 'books of account' is considered in isolation, then it may mean books in which merchants, traders and businessmen generally keep their accounts and which are maintained for recording (a) all receipts and expenses with matters relating thereto; (b) all sales and purchases; and (c) the assets and liabilities. They are the documents and ledgers which must be prepared and kept by the business entity including the P&L a/c and the balance sheet. In traditional terms, 'books' means a collection of sheets of papers bound together with the intention that such binding shall be permanent and the papers used are kept collectively in one volume. It may also be assumed that it connotes the intention that it should serve as a permanent record. At the same time 'to account' means to reckon, and it is difficult to conceive of any accounting which does not involve either additions or subtractions or both of these operations of arithmetic. A book which contains successive entries of items may be a good memorandum book; but until those entries are totalled or balanced, or both, as the case may be, there is no reckoning and no accounts. A book which merely contains entries of items of which no account is made at anytime, is not a 'book of account' in a commercial sense."

30. In Kantilal & Bros. vs. Asstt. CIT (1995) 51 TTJ (Pune) 513: (1995) 52 ITD 412(Pune) the concept of addition under s. 68 on the basis of a piece of paper found during the course of the search is elaborately discussed. It will be relevant to refer to paras 22 and 23 thereof.

"22. We now come to the question whether s. 68 can be invoked in the facts and circumstances of the present case. Sec. 68 essentially contains a deeming provision which applies when the assessee's explanation about cash credit found in his book is rejected. To invoke this section, it is sine qua non that the sum must be credited in the books of the assessee maintained for a previous year. It may be charged to income-tax as the income of the assessee of that previous year; if'

(i) the assessee who offers no explanation about the nature and source of such sum, or

(ii) the explanation offered by him is, in the opinion of the AO not satisfactory.

23. In that context, it would be necessary here to explain the meaning of the term 'book'. The word 'book' is not defined under the IT Act. We, therefore, take the meaning of the word 'book' as is understood in the common parlance. As per Chambers 20th Century Dictionary (1983 edition), 'book' is defined as under :

'Book; means'

A collection of sheets of paper etc. bound together or made into a roll either printed, written on, or blank.'

As per Bouvior's Law Dictionary (Eight Edition), book is a general name given to every literary composition which is printed, but appropriately to a printed composition bound in a volume.

In view of above, the 'piece of paper' impounded at the time of search cannot construed to be a book. The definition of the book as given in the Stroud's Judicial Dictionary and relied upon by the learned Departmental Representative, deals with its meaning in the context of the Copyright Act, 1842. There the book is defined as every volume, part or division of a volume, pamphlet, sheet of letter press, sheet of music, map, chart or plan separately published. This definition is not relevant for our purpose. For the purpose of explaining the meaning in the context of the IT Act, in our opinion, the term 'book' is to be construed as it is understood in the common parlance. No special meaning can be assigned to that term. We are, therefore, of the opinion that the case of the assessee cannot be put within the ken of s. 68 of the Act."

Since the facts of the present case are similar to the case of Kantilal & Bros. (supra), we are of the view that no addition under s. 68 of the Act can be made on the basis of loose sheet being document No. 7 found during the course of the search.

31. There is another aspect of the matter as to whether presumption lying under s. 132(4A) can be raised against the assessee. In our considered view, such presumption is available to the proceedings under s. 132(5). In s. 278D, a separate presumption has been provided for invoking in prosecution proceedings. As no such presumption is provided in assessment proceedings, we infer that where the legislature intended to provide such presumption it has been so provided in various chapters. In chapter relating to search and seizure that presumption about books of account and documents is provided but it is limited to the summary proceedings about retention or release of the assets under s. 132(5). This cannot be extended to assessment proceedings. Our view is supported by the decision of the Hon'ble Supreme Court in P.R. Metrani vs. CIT (supra). It is relevant to quote from the above decision :

"Words and phrases''May presume', 'Shall presume', 'Conclusive proof', meanings of :

Sub-s. (4A) of s. 132 of the IT Act, 1961, enables an assessing authority to raise a rebuttable presumption that books of account, money, bullion, etc. found in the possession of any person during a search belong to such person and that the contents of such books of account and other documents are true, and that the signatures and every other part of such books of account and other documents are signed by such person or are in the handwriting of that particular person. Raising of such a presumption has been enacted by the legislature to enable the assessing authority to make a provisional adjudication within the timeframe prescribed under s. 132. Otherwise it may not be possible to do so. The object of introduction of s. 132 is to prevent the evasion of tax, i.e., to unearth hidden or undisclosed income or property and bring it to assessment. It is not merely for obtaining information of undisclosed income but also to seize money, bullion, etc. representing the undisclosed income and to retain them for the purposes of realization of taxes, penalties, etc. Search and seizure is a serious invasion into the privacy of the person.

The words in sub-s. (4A) are 'may be presumed'. The presumption under sub-s. (4A), therefore, is a rebuttable presumption. The presumption under sub-s. (4A) would not be available for the purpose of framing a regular assessment. There is nothing either in s. 132 or any other provision of the Act to indicate that the presumption provided under s. 132, which is a self-contained code for search and seizure and retention of etc., can be raised for the purposes of framing of the regular assessment as well. Wherever the legislature intended a presumption to continue, it has provided so. It has not been provided that the presumption available (under) s. 132(4A) would be available for framing the regular assessment under s. 143 as well. Whereas the legislature under s. 132(4A) has provided that the books of account, money, bullion, jewellery and other valuable articles or things and any statement made by such person during examination may thereafter be used as evidence in any other proceedings under the Act, it has not provided so under sub-s. (4A) of s. 132. It does not provide that the presumption under s. 132(4A) would be available while framing the regular assessment or for that matter under any other proceeding under the Act except under s. 278D.

Being a complete code in itself s. 132 cannot intrude into other provision of the Act. Similarly, other provisions of the Act cannot interfere with the scheme or the working of s. 132 or its provisions."

32. Thus, the case of the Revenue is not assisted by s. 132(4A) in any way. Even otherwise our considered view is that such presumption can only be raised when document is speaking one and it reflects complete transactions without two interpretations.

33. As a result, we hold that the impugned document No. 7 is a dumb document and no addition can be made on that basis. Therefore, we confirm the order of the learned CIT(A) and dismiss the appeal filed by the Revenue.

ITA No. 291/Jab/1999'Asst. yr. 1989-90

34. In this case, the assessee has raised the following grounds :

"1. Whether on facts and circumstances of the case and in law, proceeding initiated under s. 148 of IT Act, 1961 is sustainable in law ?

2. Whether on facts and in the circumstances of the case, the learned CIT(A)-II was justified in sustaining addition of Rs. 20,000 found recorded on seized loose p. 9 of Annex. A-1/1(4) which is unsigned and disowned by assessee ?

3. Whether on facts and in the circumstances of the case and in law the learned CIT(A)-II has properly adjudicated issues raised in ground No. 4 regarding charging of interest under ss. 234A and 234B in reassessment proceeding under s. 148 ?"

35. The main grievance of the assessee is that the learned CIT(A) has confirmed the reopening of the assessment under s. 148 and also an addition of Rs. 20,000 on the basis of a seized loose paper No. 9 of Annex. A-1/1(4).

36. The AO had issued a notice under s. 148 on 21st Feb., 1997 in response to which the assessee had filed return of income on 22nd April, 1997 for asst. yr. 1989-90 on a total income of Rs. 1,67,020. As mentioned in Revenue's appeal, there was a search and seizure operation at the business premises of the assessee. Several documents were found. One was document No. 7 in Annex. A-1/1(4) on the basis of which an addition of Rs. 22,30,000 was made. This was deleted by the learned CIT(A) against which the Revenue is in appeal, which has been decided as above in ITA No. 290/Jab/1999. In the present appeal filed by the assessee, the challenge is to the reopening of the assessment under s. 148. The issue was discussed by the learned CIT(A). It was submitted before him that no reasons were recorded and that notice under s. 148 did not disclose the reasons for reopening of the assessment. The assessee had specifically requested for indicating the reasons but they were not allegedly provided to him. The learned CIT(A) confirmed the reopening by observing as under :

"2. I have gone through the order of the AO and the submissions made by the counsel for the appellant. I find that a loose paper No. 7 which formed part of A-1/1(4) was seized from the residential premises of the appellant. It recorded transactions amounting to Rs. 22,30,000. The appellant has not been able to mention the details. In such a situation the AO was justified in reopening the case under s. 147 and issuing notice under s. 148 of the Act. Therefore, ground No. 1 stands rejected."

37. Against this the learned Authorised Representative submitted that there should be a live link between the loose papers and the reasons recorded for issue of notice under s. 148. He relied on the decisions of the Hon'ble Supreme Court in ITO vs. Lakhmani Mewal Das 1976 CTR (SC) 220 : (1976) 103 ITR 437(SC), Ganga Saran & Sons (P) Ltd. vs. ITO (1981) 22 CTR (SC) 112: (1981) 130 ITR 1(SC) and Smt. Shanti Devi vs. Asstt. CIT (1994) 49 ITD 402(Del). He also submitted that the AO cannot draw his own conclusions for reopening of the assessment by relating to certain facts and figures mentioned on the loose papers. He relied on the following decisions :

(1) ITO vs. Lakhmani Mewal Das (supra);

(2) Ganga Saran & Sons (P) Ltd. vs. ITO (supra);

(3) Smt. Shanti Devi vs. Asstt. CIT (supra);

(4) Asstt. CIT vs. Shailesh S. Shah (supra);

(5) S.K. Gutpa vs. Dy. CIT (1999) 63 TTJ (Del) 532;

(6) Atul Kumar Jain vs. Dy. CIT (1999) 64 TTJ (Del) 786;

(7) Agarwal Motors vs. Asstt. CIT (supra).

38. The learned Authorised Representative further submitted that where reasons are incorrect then notice issued under s. 148 on that basis and assessment made thereafter would be bad in law. He relied on the following two authorities :

(1) CIT vs. A Yonus Kunju (1997) 228 ITR 147 (Ker);

(2) CIT vs. Atlas Cycle Industries (1989) 180 ITR 319(P&H).

He took one more plea that if assessee had advanced Rs. 22,30,000 and Rs. 1,10,000 as alleged then, he ought to have considered the same in the wealth of the assessee. Since no such addition is made in the wealth of the assessee, then these figures could not be treated as income of the assessee and, therefore, no addition could be made on that basis. Thus, he submitted that reopening of the assessment was bad and, therefore, assessment so framed is also bad.

39. Against this the learned Departmental Representative submitted that the AO had, in fact, recorded the reasons before reopening the assessment. He referred to pp. 131 and 132 of the assessee's paper book wherein the AO had recorded the reasons. Regarding argument of the learned Authorised Representative that there should be a live link between information and forming of opinion, the learned Departmental Representative submitted that seized documents were found wherein transactions amounting to Rs. 3,30,937 and of Rs. 22,30,000 were recorded. It was enough of the reasons for the AO to form a belief that income of the assessee has escaped assessment. It is not necessary for the AO to come to the final conclusion that income has actually escaped assessment. The belief is only, prima facie, and, therefore, no inference can be drawn as to the final outcome of the assessment proceedings.

40. We have considered the rival submissions and perused the material on record. The reasons recorded by the AO are as under :

"1. Search and seizure operations were carried out at the assessee's business and residential premises in April, 1995. During the search operations books and documents were seized. As per Annex. No. A-1/1(1) one AC steel diary was seized from his residence. The entries in this diary show that the assessee had cash transactions amounting to Rs. 3,30,937. The firm in which the assessee is a partner deals in purchase and sale of scrap and steel items. These transactions are not appearing in the firm's books. The entire transactions amounting to Rs. 3,30,937 appear to be out of assessee's undisclosed income and liable to tax. The assessee has not maintained any separate books of account of his own. The undisclosed income to the extent of Rs. 3,30,937 has escaped assessment.

2. As per Annex. No. A-1/1(4), 98 loose papers were seized from his residence. Entries in loose paper No. 7 indicate advancing of loan amounting to Rs. 22,30,000. Loose paper No. 9 in this bundle shows advancing of Rs. 20,000. In this way the assessee had advanced total amount of Rs. 22,50,000. The above loans advanced have not been disclosed in the return filed by the assessee. Undisclosed income to the extent of Rs. 22,50,000 (Rs. 22,30,000 + 20,000) has been utilized in advancing loans outside books. The undisclosed income as above and a sum of Rs. 3,30,937 amounting in all Rs. 25,80,937 (22,50,000 + 3,30,937) has escaped assessment by reason of assessee's failure to furnish all material facts necessary for his assessment in the return filed. Action under s. 147 is, therefore, necessary to tax the escaped income. The return filed by the assessee was processed under s. 143(1)(a) on 22nd March, 1990."

41. The reasons so recorded reveal that the AO had relied on the seized document, which according to him, reflected undisclosed income. There is a specific allegation that income has escaped assessment. In our considered view, the AO has only to make prima facie belief that the income has escaped assessment and he is not required to come to any final conclusion as to the quantum of escaped income. It is possible that after the assessment alleged escaped income may increase or may reduce or may come to naught. It all depends on the explanation furnished by the assessee and the investigation carried out by the AO. Further, sufficiency of material cannot be questioned for the purposes of reopening of the assessment. It is true that belief should not be arbitrary or irrational but where it is based on relevant matrerial and reasons, then reopening is justified. The Court cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the AO in coming to the belief though Court can examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief. Support is derived from the decisions of Hon'ble Supreme Court in the cases of Ganga Saran & Sons (P) Ltd vs. ITO (supra) and Raymond Woollen Mills Ltd. vs. ITO (1999) 152 CTR (SC) 418: (1999) 236 ITR 34(SC). In the present case, we find that there is a direct nexus of the material available with the AO with the formation of the belief. Once it is done, in our considered view the reopening is justified. As a result, we reject the contention of the learned Authorised Representative in this regard. We uphold the order of learned CIT(A) wherein he has confirmed the reopening of the assessment. This ground of the assessee is, therefore, rejected.

42. The next ground is about addition of Rs. 20,000 as per seized loose paper No. 9 of Annex. A-1/1(4).

43. The seized paper No. 9 of Annex. A-1/1(4) reads as under :

Doobat Khata

	50,000	19.7.89
	40,000	14.7.87	25,000
	20,000	21.1.83	30,000		Krishna Metal
Ambika Enterprises	20,000	10.10.88	20,000
	15,000	8.4.1986	20,000		Geeta Timber
	10,000	4.8.82	50,000		Sandeep Traders
	20,000	10.7.85	20,000		Natwar Saw Mill
	20,000	19.7.83	160,000
	30,000	10.3.85
	40,000	25.7.84
	20,000	23.10.83
	20,000	24.10.83
	50,000	20.7.83		3,40,000
	30,000	19.7.83		1.00.000
	20,000	28.7.82		2,40,000
	20,000	27.7.82
	30,000	27.1.84
	25,000	16.11.83
	50,000	20.3.83
	5,30,000
Iron store	22.000
	5,52,000
	1,60,000
	3,92,000
	22,000	Rathi Iron
	3,70,000
	25.000	Bhavnji Vishram
	3,40,000

44. The learned AO made the addition of Rs. 20,000 by observing in para 4 of is order as under :

"4. Another loose paper No. 9 in the same bundle showed advancement of Rs. 20,000. For this amount also the assessee has put forth the same arguments as discussed above. For the same reason, Rs. 20,000 will be included in the income of the assessee."

45. In appeal, it was argued before the learned CIT(A) that there are debit and credit entries on page No. 9. Since there are credits of Rs. 1,65,000, then debit of Rs. 20,000 is neutralized. The figure of Rs. 20,000 also appears on both the sides. In fact, the assessee claimed that Rs. 20,000 is the bad debt. The learned CIT(A) rejected the contention and held that claim of Rs. 20,000 as bad debt cannot be made as necessary conditions under s. 36(1)(vii) are not satisfied. In this regard, it would be relevant to refer to paras 10, 11 and 12 of the order of the learned CIT(A) :

"10. In ground No. 3 the appellant has challenged addition of Rs. 20,000. While doing so, the AO referred to loose paper No. 9 in Annex. A-1/1(4) and held that the appellant had no explanation for this advancement of Rs. 20,000. Hence he added Rs. 20,000 to the income of the appellant.

11. Before me counsel for the appellant submitted that loose paper No. 9 relates to some debit and credit entries. Corresponding to the credit entries of Rs. 1,65,000 there is a debit entry as bad debt for Rs. 20,000, which neutralizes the credit entry of Rs. 20,000 in the name of Ambika Enterprises. The figure of Rs. 20,000 appears on both the sides. The credit entry of Rs. 20,000 is neutralized by the debit entry of bad debt and, therefore, there is nil effect and hence AO should not have made the addition of Rs. 20,000.

12. I find that the appellant cannot claim bad debt if he does not conform to the conditions prescribed under s. 36(1). There is no apparent explanation given in respect of credit entries in the name of Ambika Enterprises. In my opinion such credit entry is not explained. The AO was justified in adding Rs. 20,000. The addition is confirmed."

46. We have heard the parties and considered the material on record. Before us, the learned Authorised Representative submitted that document No. 9 is also a dumb document and no inference can be drawn therefrom. We have examined document No. 9. It shows entry of Rs. 20,000 in the name of Ambika Enterprises on 10th Oct., 1988 relevant to the assessment year in question. There is a heading which shows Doobat Khata at the top of the paper. On the other hand, the learned Departmental Representative relied on the orders of the authorities below.

47. The learned Authorised Representative raised the same arguments as he has raised in respect of document No. 7 in Revenue's appeal. We find that the AO had not recorded any statement of any person or carried out any investigation so as to show that the sum of Rs. 5,30,000 as mentioned on this paper, which included the sum of Rs. 20,000 in the name of Ambika Enterprises are advances. It does not show that the document belonged to the assessee. No correlation of this document with the assessee has been established. It also does not show that the assessee has, in fact, advanced Rs. 20,000 or for that matter Rs. 5,30,000 on various dates. Thus, on the basis of same reasoning as we have given in respect of document No. 7 in Revenue's appeal, we hold that the document No. 9 also is non-speaking so far as entry of Rs. 20,000 or for that matter entry of Rs. 5,30,000 being the total of various entries are concerned. It is not established by the AO that they are monies advanced. It is also not established that they are not recorded in the regular books of account. It is also not established that they relate to the assessee. As held in Revenue's appeal, presumption under s. 132(4A) cannot be raised in assessment proceedings. They are relevant only to summary assessment prescribed under s. 132. The AO has not established at least two of four components viz. the nature of transaction and the ownership. The AO did not record statement of any person. No correlation with the books of account was made. Gaps appearing in the inferences that they are advances made by the assessee and are undisclosed, have not been filled up. Thus, following our own reasoning in Revenue's appeal, the addition sustained by the learned CIT(A), in our view, is incorrect and the same is, therefore, deleted.

48. So far as ground No. 3 regarding charging of interest under ss. 234A and 234B is concerned, in our view, it is only consequential as to the total income. The charging of interest is mandatory in view of the decision of Hon'ble Surpeme Court in CIT vs. Anjum M.H. Ghaswala (2001) 171 CTR (SC) 1: (2001) 252 ITR 1(SC). We, therefore, reject this ground of the assessee.

49. As a result, the appeal filed by the assessee is partly allowed.

ITA No. 292/Jab/1999'Asst. yr. 1990-91 (Assessee's appeal)

50. In this case, the assessee has raised the following grounds :

"1. Whether on facts and in the circumstances of the case and in law, there was proper adjudication by the learned CIT(A)-II in maintaining addition of Rs. 90,000 found recorded in seized loose p. 9 of Annex. R A-1/1(4).

2. Whether on facts and in the circumstances of the case the learned CIT(A)'II has properly adjudicated issues raised in ground No. 1 regarding charging of interest under ss. 234A and 234B in reassessment proceeding ."

51. In this case, the addition has been made on the basis of entry on document No. 9 of Annex. A-1/1(4). The learned CIT(A) had confirmed the addition.

52. However, we have held in assessee's appeal in ITA No. 291/Jab/199 that document No. 9 is non-speaking. It is a dumb document in the sense that it does not reflect whether the assessee has advanced the money or received the money. The AO has not correlated that the document belonged to the assessee. The presumption under s. 132(4A) could not be invoked for the purpose of regular assessment. As a result, the addition made in the asst. yr. 1989-90 on the basis of document No. 9 was deleted.

53. After hearing the parties, following our decision for the asst. yr. 1989-90, we hold that the addition of Rs. 90,000 on the basis of loose document No. 9, which is a dumb document, could not be made for the same reasons. As a result this addition is deleted.

54. The next ground is about interest under ss. 234A and 234B. Following our order in the asst. yr. 1989-90, we hold that the interest is mandatory in nature and that is consequential on the basis of assessed income.

55. The assessee has sought to raise additional grounds as under :

"(A) Considering the fact that the notice issued under s. 143(2) of the IT Act was contrary to the provisions of law, the impugned notice under s. 143(2) of the Act is bad in law rendering all subsequent actions, including the assessment completed on 30th March, 1999 under s. 143(3) of the Act, bad in law and illegal.

And

(B) Considering the fact that there is no direction to charge interest in the assessment order passed on 30th March, 1999, hence, in view of Supreme Court decision in Ranchi Club Ltd. case (supra), the learned AO erred in charging interest under ss. 234B and 234C of the Act."

56. We have heard the parties. Since additions made by the AO and confirmed by the learned CIT(A) are deleted, the additional grounds so raised by the assessee are mere academic. Therefore, after admitting the same, we reject the same as being only academic.

57. In the result, the appeal is partly allowed.

ITA No. 304/Jab/1999'Asst. yr. 1990-91 (Revenue's appeal)

58. In this case, the Revenue has raised the following ground :

"On the facts and in the circumstances of the case, the learned CIT(A) has erred in deleting the addition of Rs. 5,40,000 made on account of interest income."

59. The AO had worked out notional interest at market rate on a sum of Rs. 20,30,000 and other additions made by the AO on the basis of loose sheets No. 7 and No. 9 of Annex. A-1/1(4).

60. We have heard the parties. While deciding the appeal for the asst. yrs. 1989-90 and 1990-91, we have held that no addition could be made on the basis of loose paper No. 7 and paper No. 9 of that annexure. Since it is not upheld that the assessee has made any advance to any party, question of charging of interest as income of the assessee does not arise. Therefore, we confirm the order of the learned CIT(A) in deleting the addition. The appeal of the Revenue is, therefore, dismissed.

ITA No. 293/Jab/1999'Asst. yr. 1991-92 (Assessee's appeal)

61. In this case, the assessee has raised the following grounds :

"1. Whether on the facts and in the circumstances of the case and in law the learned CIT(A)-II has properly adjudicated issues raised in ground No. 1 regarding levy of interest under ss. 234A and 234B in reassessment proceedings.

2. Whether on the facts and in the circumstances of the case, the learned CIT(A)-II was justified in maintaining addition of Rs. 21,600 as notional interest income an imaginary income."

62. We have heard the parties. We have held in appeal for the asst. yrs. 1989-90 and 1990-91 that interest under ss. 234A and 234B is mandatory and is consequential on the basis of assessed income. This ground of appeal of the assessee is dismissed.

63. The second ground raised by the assessee relates to confirming the notional interest of Rs. 21,600 on the basis of additions sustained by the learned CIT(A) on the basis of seized document No. 9. We have held in appeal of the assessee in asst. yr. 1990-91 that no addition could be made on the basis of loose paper No. 9. Therefore, there is no scope of presuming interest income in respect of such advances. As a result, addition sustained by the learned CIT(A) is deleted. This ground of the assessee is, therefore, allowed.

64. As a result, the appeal is allowed in part.

ITA No. 305/Jab/1999'Asst. yr. 1991-92 (Revenue's appeal)

65. The Revenue has raised the following grounds :

"1. On the facts and in the circumstances of the case, the learned CIT(A) has erred in deleting the addition of Rs. 5,40,000 made on account of interest income.

2. On the facts and in the circumstances of the case, the learned CIT(A) was not legally justified in deleting the addition of Rs. 25,754 made on account of interest income."

66. Grounds relate to deletion of addition of interest income made by the AO on the basis of alleged presumption that the assessee has advanced money to various parties. This inference was drawn by the AO on the basis of seized paper Nos. 7 and 9 of Annex. A-1/1(4).

67. We have heard the parties. While deciding the appeal for the asst. yrs. 1989-90 and 1990-91, we have held that no addition could be made on the basis of loose sheet Nos. 7 and 9 of Annex. A-1/1(4) as they are not speaking documents. Since no inference about advance can be drawn, therefore, no addition of alleged interest income can be made. Therefore, we confirm the order of the learned CIT(A) and dismiss the appeal of the Revenue.

ITA No. 294/All/1999'Asst. yr. 1992-93 (Assessee's appeal)

68. In this appeal, the assessee has raised the following grounds :

2. Whether on the facts and in the circumstances of the case, the learned CIT(A)-II was justified in maintaining addition of Rs. 21,600 as notional interest income an imaginary income ?"

69. We have heard the parties. We have held in appeal for the asst. yrs. 1989-90 and 1990-91 that interest under ss. 234A and 234B is mandatory and is consequential on the basis of assessed income. This ground of appeal of the assessee is dismissed.

70. The second ground raised by the assessee relates to confirming the notional interest of Rs. 21,600 on basis of additions sustained by the learned CIT(A) on the basis of seized document No. 9. We have held in appeal of the assessee in asst. yr. 1990-91 that no addition could be made on the basis of loose paper No. 9. Therefore, there is no scope of presuming interest income in respect of such advances. As a result, addition sustained by the learned CIT(A) is deleted. This ground of the assessee is, therefore, allowed.

71. The assessee has also raised following additional grounds :

"(A) Considering the fact that the notice issued under s. 143(2) of the IT Act was contrary to the provisions of law, the impugned notice under s. 143(2) of the Act is bad in law rendering all subsequent action, including the assessment completed on 30th March, 1999 under s. 143(3) of the Act, bad in law and illegal.

And

72. As held in the appeal for the asst. yr. 1990-91, the additional grounds become academic in view of the deletion of the addition and hence, the additional grounds, after admitting, are dismissed.

73. As a result, the appeal is allowed in part.

ITA No. 306/Jab/1999'Asst. yr. 1992-93 (Revenue's appeal)

74. In this appeal, the Revenue has raised the following grounds :

"1. On the facts and in the circumstances of the case, the learned CIT(A) has erred in deleting the addition of Rs. 5,40,000 made on account of interest income.

2. On the facts and in the circumstances of the case, the learned CIT(A) was not legally justified in deleting the addition of Rs. 44,296 made on account of interest income."

75. Grounds relate to deletion of addition of interest income made by the AO on the basis of alleged presumption that the assessee has advanced money to various parties. This inference was drawn by the AO on the basis of seized paper Nos. 7 and 9 of Annex. A-1/1(4).

76. We have heard the parties. While deciding the appeal for the asst. yrs. 1989-90 and 1990-91, we have held that no addition could be made on the basis of loose sheet Nos. 7 and 9 of Annex. A-1/1(4) as they are not speaking documents. Since no inference about advance can be drawn, therefore, no addition of alleged interest income can be made. Therefore, we confirm the order of the learned CIT(A) and dismiss the appeal of the Revenue.

ITA No. 295/Jab/1999'Asst. yr. 1993-94 (Assessee's appeal)

77. In this appeal, the assessee has raised the following grounds :

"1. Whether on the facts and in the circumstances of the case and in law the learned CIT(A)-II has properly adjudicated issues raised in ground No. 1 regarding levy and interest under ss. 234A and 234B in reassessment proceeding.

2. Whether on the facts and in the circumstances of the case, the learned CIT(A)-II was justified in maintaining addition of Rs. 21,600 as notional interest income an imaginary income.

3. Whether on the facts and in the circumstances of the case, the learned CIT(A)-II was lawfully justified in adjudicating and maintaining an addition of Rs. 1,31,736 as income in hands of the assessee."

78. Ground Nos. 1 and 2 are the same as were raised in the asst. yrs. 1990-91, 1991-92 and 1992-93. In those years, we have dismissed the ground No. 1 of the assessee, whereas ground No. 2 has been allowed. Since facts and circumstances of the case remain the same following our order for those years, we decide accordingly and dismiss ground No. 1 and allow ground No. 2.

79. Regarding ground No. 3, the facts were that during the course of search and seizure operations, loose paper No. 12 Annex. A-1/15 was found with certain transactions in purchase of hardware worth Rs. 1,31,736. A loose paper No. 25 was also found, according to which, the assessee had purchased hardware worth Rs. 17,884. The assessee was required to explain the transactions. It was explained by the assessee that transactions recorded in loose paper No. 12 amounting to Rs. 1,31,736 were quotations with rates and value for hardware materials and not actual purchases thereof. It was also submitted to the AO that no date is mentioned in this paper and it was not possible to correlate these entries. On the other hand, the AO observed that the submission of the assessee is incorrect as a date is mentioned on the paper, which is 27th June, 1992. The AO rejected the contention of the assessee that these are quotations and not actual purchases by saying that the assessee is a big contractor and he would not have obtained quotation for one door closer or 500 screws. The AO observed that these were the purchases made for the use in the assessee's own house. In the loose paper under consideration not only the number of items and their rates are given but total value was also given. Under the circumstances, the AO did not accept the contention of the assessee and treated the sum of Rs. 1,31,736 as unexplained investment and added the same into the total income of the assessee.

80. Before the learned CIT(A), the same arguments were repeated that these are the quotations and not actual purchases. There was no evidence that the assessee has constructed any building of his own or whether he has purchased those hardware items. The learned CIT(A) observed that the name, quantity and price rate of the building rate have been mentioned in the paper which is dt. 27th June, 1992. The total has been shown on each and every page. In fact, there has been wrong total which has been corrected. These items are double glass channel, brass tower bolts, brass rod latch, brass handle heavy glass runner, glass hinges, etc. The details noted in the paper do not show that the paper is in the nature of quotation. Had it been a quotation, then quantities of items would not have been given. The paper is also in the name of Sri Satyapal Wassan. It does not show that any company or concern has given this quotation to the assessee. According to the learned CIT(A), the description of the items and quantity of material and the total price of the material show that they have been purchased for use in the building. Thus, the CIT(A) also rejected the contention of the assessee that the document is in the nature of quotation and accordingly he confirmed the addition.

81. Before us, the learned Authorised Representative repeated the same argument that this document is of the nature of quotation. On the other hand, the learned Departmental Representative relied on the order of the learned CIT(A).

82. We have considered the rival submissions and perused the material on record. We have also examined the copy of the document in question. In our view it is not in the nature of quotation. The document shows the name of the assessee. It shows that about 50 items in different quantities at different rates were purchased. The document is dt. 27th June, 1992. The details of the transactions clearly show that they are purchases. The expenditure is also quantified which is Rs. 1,31,736. Thus all the components for fixing charge under s. 4 are satisfied. There is a name of the person. The nature of transaction is clear that they are purchases. The date is available i.e. 27th June, 1992 and finally, the quantum of expenditure is also clear i.e. Rs. 1,31,736. Thus, there is no room for any doubt and, therefore, we are of the considered view that lower authorities were justified in treating this amount as expenditure/investment and as no explanation was forthcoming, it was rightly treated as unexplained investment. It was for the assessee to submit cogent material so as to show that inference drawn by the AO was incorrect. It was for him to bring evidence from the concerned party that it is not a purchase but only a quotation. Since no such material was produced by the assessee, the onus shifted back to the assessee, remained undischarged. As a result, we confirm this addition. This ground of the assessee, therefore, fails.

83. The assessee has raised following additional grounds :

And

84. After hearing the parties and following the decision of Hon'ble Supreme Court in National Thermal Power Co. Ltd. vs. CIT (1999) 157 CTR (SC) 249: (1998) 229 ITR 383(SC), we admit the additional grounds.

85. The main crux of the argument of the learned Authorised Representative is that the notice under s. 143(2) was beyond the period specified in the proviso below sub-s. (2) of s. 143.

86. After hearing the parties, we are of the view that there is no merit in the argument of the learned Authorised Representative. It is because there has been amendment in s. 148 wherein issuance of notice under s. 143(2) after expiry of 12 months is no longer required and in absence of issuance of such notice within 12 months, the assessment will not be declared invalid. This amendment was introduced by the Finance Act, 2006 with retrospective effect from 1st Oct., 1991. Even otherwise, our view that assessment cannot be annulled merely because notice under s. 143(2) was issued beyond 12 months in reassessment proceedings initiated under s. 148(1) finds support from the decision of Tribunal, Amritsar Bench, in the case of Sharma & Co. vs. Asstt. CIT (2004) 85 TTJ (Asr) 1 (in which one of us was the author) wherein reliance was placed on the decision of the Tribunal, Pune Bench, in the case of Vijay Kapoor vs. Dy. CIT, ITA No. 340/Pn/2002, dt. 13th March, 2003 [reported at (2004) 86 TTJ (Pune) 1079]. The operative portion of the decision in Sharma & Co. (supra) was as under :

"10. Subsequently the interpretation of the said phrase in the context of block assessment in relation to the period of limitation as envisaged in the proviso to sub-s. (2) of s. 143 came up for consideration before the Special Bench of Tribunal, Pune, when during the hearing the decision as referred to above, was also relied upon by the Departmental Representative and Lucknow Bench in the case of Nawal Kishore & Sons Jewellers vs. Dy. CIT (2003) 81 TTJ (Lucknow)(SB) 362: (2003) 87 ITD 407(Lucknow)(SB) has taken a similar view.

11. Similarly, the Pune Bench of the Tribunal has already taken a view in the context of assessment/reassessment under s. 148 in the case of ITO vs. Master Vishal D. Lagade in ITA No. 683/Pn/2000 for the asst. yr. 1993-94, dt. 24th March, 2002 (in which one of us is a party), to the effect that time limit as envisaged in proviso to s. 143(2) will not apply in relation to the assessment completed consequent upon the notice issued under s. 148 of the Act.

12. Since all the provisions of the Act 'so far as may be, apply' as envisaged under s. 148(1) which is the phrase used in relation to assessment under Chapter XIV-B in s. 158BC(c) and 'so far as may be, apply' has been interpreted not only by various Benches but also the Special Bench of the Tribunal to mean 'to the extent necessary and practical', therefore, in our considered opinion, provision of s. 143(2) in its entirety cannot be made applicable to the assessment/reassessment under s. 147 which relates to the income escaped assessments and the same can be to the extent and for the purpose of opportunity only as same is necessary and practical for schemes of provisions relating to escapement of income. Therefore, the plea of the assessee in this regard is found to be not tenable, which is rejected."

87. After the amendment by Finance Act, 2006, the view was explicitly made clear that time-limit for issuance of notice under s. 143(2) will not apply in reassessment proceedings. Therefore, this additional ground taken by the assessee has no force and hence fails. As a result, this ground of the assessee is dismissed.

88. As a result, the appeal filed by the assessee is partly allowed.

ITA No. 307/Jab/1999'Asst. yr. 1993-94 (Revenue's appeal)

89. The Revenue has raised the following grounds of appeal :

"1. On the facts and in the circumstances of the case, the learned CIT(A) has erred in deleting the addition of Rs. 5,40,000 made on account of interest income.

2. On the facts and in the circumstances of the case, the learned CIT(A) was not legally justified in deleting the addition of Rs. 25,754 made on account of interest income."

90. As the facts of this year are the same as for asst. yrs. 1989-90 and 1990-91 in those years, we have held that notional interest could not be charged to income as Revenue has failed to prove that the assessee has advanced any money. Following the order for earlier years, we dismiss the appeal filed by the Revenue.

ITA No. 75/Jab/2001'Asst. yr. 1994-95 (Assessee's appeal)

91. In this year, the assessee has raised the following grounds :

"1. On the facts and in the circumstances of the case, the learned CIT(A) erred in law in sustaining the addition of Rs. 7,07,280 made by the AO on account of notional 'interest income' on the alleged loans/advances of Rs. 29,47,000 particularly when the addition made on account of the alleged loans/advances has been deleted by the learned CIT(A) in the asst. yr. 1989-90.

2. On the facts and in the circumstances of the case, the learned CIT(A) erred in sustaining the addition of Rs. 7,750 made by the AO on account of unexplained investment in gold ornaments.

3. On the facts and in the circumstances of the case, the learned CIT(A) erred in sustaining the addition of Rs. 16,800 made by the AO on account of disallowance of interest payment to Life Insurance Corporation.

4. On the facts and in the circumstances of the case, the learned CIT(A) erred in law in upholding the charging of interest under ss. 234B and 234C of the IT Act, 1961."

92. Ground No. 1 is on account of notional interest on alleged advances given by the assessee in the asst. yr. 1989-90. We have confirmed the order of learned CIT(A) that Revenue has failed to prove that the assessee has actually given advances. Accordingly, there is no case for charging any notional interest on such advances. This ground of appeal of the assessee is, therefore, allowed.

93. Grounds Nos. 2 and 3 relate to the addition of Rs. 7,750 and of Rs. 16,800 on account of unexplained investment and disallowances of interest payment to L.I.C. The learned CIT(A) has confirmed the additions on the ground that the assessee has failed to produce any evidence in support of his claim that these investments are explained. Before us also, no evidence was produced. Therefore, we decline to interfere in the order of learned CIT(A). These grounds, of appeal are, therefore, dismissed.

94. Ground No. 4 is about interest under ss. 234B and 234C. We have held in asst. yr. 1990-91 that the charging of interest is mandatory arid consequential. We, therefore, dismiss this ground of appeal.

95. As a result, the appeal filed by the assessee is partly allowed.

ITA No. 201/Jab//2002'Asst. yr. 1995-96 (Revenue's appeal)

96. In this case, the Revenue has raised the following grounds :

"On the facts and in the circumstances of the case, the learned CIT(A) has erred in

(1) In deleting Rs. 6,85,680 out of addition of Rs. 7,07.280.

(2) The order of the learned CIT(A) is erroneous both in law as well as on facts."

97. We have heard the parties. The addition is on account of notional interest on alleged advances given by the assessee in the asst. yr. 1989-90. We have held in that year that the Revenue has failed to prove that the assessee has actually given any advance as claimed by the Revenue. We have confirmed the order of learned CIT(A) in deleting the addition in the asst. yr. 1989-90. Since giving of advance is not proved, the learned CIT(A) was justified in deleting the addition on account of notional interest. Accordingly, his order is confirmed. The appeal filed by the Revenue is, therefore, dismissed.

C.O. No. 6/Jab/2006'Asst. yr. 1995-96 (Assessee's cross-objection)

98. The assessee has raised the following cross-objection :

"On the facts and in the circumstances of the case, the learned CIT(A) should have deleted the addition of Rs. 21,600 made by the AO on account of notional interest on Rs. 90,000."

99. We have heard the parties. The ground is on account of notional interest on alleged advances given by the assessee in the asst. yr. 1989-90. We have confirmed the order of learned CIT(A) that Revenue has failed to prove that the assessee has actually given advances. Accordingly, there is no case for charging any notional interest on such advances. This ground of cross-objection of the assessee is, therefore, allowed.

100. In the result, the cross-objection is allowed.

ITA No. 296/Jab/1999'Asst. yr. 1996-97 (Assessee's appeal)

101. In this case, the assessee has raised the following grounds :

"1. Whether on the facts and in the circumstances of the case, the learned CIT(A)-II was justified in adjudicating ground No. 1 as general in nature ignoring assessee's claim regarding excess value of gold surrendered and claim under s. 88.

2. Whether on the facts and in the circumstances of the case, the learned CIT(A)-II was justified in legally in maintaining addition of Rs. 21,600 as notional interest income."

102. We have heard the parties. Regarding ground No. 1, we note that no such ground was taken before the learned CIT(A). Therefore, there was no occasion for the learned CIT(A) to adjudicate the issue about claim under s. 88. As a result, this ground does not arise out of the order of the learned CIT(A) and, therefore, the same is dismissed.

103. The ground No. 2 is about notional interest on alleged advances given by the assessee in the asst. yr. 1989-90. We have confirmed the order of learned CIT(A) that Revenue has failed to prove that the assessee has actually given advances. Accordingly, there is no case for charging any notional interest on such advances. This ground of cross-objection of the assessee is, therefore, allowed.

104. In the result, the appeal is partly allowed.

ITA No. 308/Jab/1999'Asst. yr. 1996-97 (Revenue's appeal)

105. In this case, the assessee has raised the following ground :

"On the facts and in the circumstances of the case, the learned CIT(A) has erred in deleting the addition of Rs. 5,40,000 made on account of interest income."

106. We have heard the parties. The addition is on account of notional interest on alleged advances given by the assessee in the asst. yr. 1989-90. We have held in that year that the Revenue has failed to prove that the assessee has actually given any advance as claimed by the Revenue. We have confirmed the order of learned CIT(A) in deleting the addition in the asst. yr. 1989-90. Since giving of advance is not proved, the learned CIT(A) was justified in deleting the addition on account of notional interest. Accordingly, his order is confirmed. The appeal filed by the Revenue is, therefore, dismissed.

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