2015-VIL-1042-ITAT-PNE
Income Tax Appellate Tribunal PUNE
ITA Nos. 1105 and 1106/PN/2013
Date: 12.06.2015
SHRI VINIT RANAWAT
Vs
ACIT, CENTRAL CIRCLE-1 (1) , PUNE
For the Appellant : Shri Sunil Pathak
For the Respondent : Shri A.K. Modi
BENCH
Shri R. K. Panda And Shri Vikas Awasthy,JJ.
JUDGMENT
Per R. K. Panda, AM :
The above 2 appeals filed by the assessee are directed against the common order dated 12-03-2013 of the CIT(A)-II, Pune relating to Assessment Years 2006-07 & 2007-08 respectively. Since identical grounds have been taken by the assessee in both these appeals, therefore, these were heard together and are being disposed of by this common order.
2. Facts of the case, in brief, are that the assessee is an individual and proprietor of M/s. S. Chains. It is engaged in the business of labour job in gold ornaments. The assessee had filed the original return of income for A.Y. 2006-07 on 31-10-2006 disclosing total income of Rs. 2,80,660/-. The AO had completed the assessment u/s.143(3) vide order dated 30-10-2008 determining the total income at Rs. 3,53,510/- by making the following additions :
Expenses incurred in cash – Personal Expenses – Rs. 60,412/- Telephone Charges – Personal use – Rs. 12,438/-
(The assessee has also filed the return of income for A.Y. 2007-08 disclosing income of Rs. 3,87,030/-. The said return was processed u/s.143(1) accepting the returned income).
3. An action u/s.132 of the I.T. Act was conducted in the RMD Gutkha group of cases on 20-01-2010 during which the assessee’s premises was also searched. In response to notice u/s.153A dated 14-09-2010 the assessee filed his return of income on 20-10-2010 disclosing total income of Rs. 2,80,660/-. In response to notice u/s.143(2) and 142(1) the assessee appeared before the AO and filed the various details as called for from time to time. Since the addition made during the original assessment amounting to Rs. 72,850/- was not offered to tax by assessee while filing its return in response to notice u/s.153A the AO made the aforesaid addition.
4. During the course of assessment proceedings the AO noted that a search action at the residential premises of one Mittulal at Bangalore was conducted at 09-10-2009 during which a large number of incriminating documents were found and seized. These documents were belonging to M/s.Dhariwal Industries Ltd. (in short ‘M/s.DIL’) and were maintained by one Shri Sohan Raj Mehta, C&F Agent of M/s. Dhariwal Industries Ltd., on behalf of M/s.DIL. When confronted on this issue Shri Sohan Raj Mehta had categorically stated in his statement recorded u/s.132(4) that he was effecting unaccounted sale of Gutkha on behalf of M/s. DIL and the sale proceeds were deployed as per the directions of Sri Rasiklal M. Dhariwal/Sri Prakash R. Dhariwal. The AO noted that as per the seized pages being Bundle No. A/M/08 of the panchanama dated 09-10-2009 the assessee has received an amount of Rs. 21 Crores from M/s. Dhariwal Industries Ltd. through Shri Sohan Raj Mehta, the details of which are as under :
|
Page no of Bundle no A/M/08 |
Month of receipt Amount received (Rs.) Assessment Year (AY) AY- wise amount received (Rs.) |
|
50 May 2005 |
1,00,00,000 2006-07 1,00,00,000 |
|
58 Mar 2007 |
5,00,00,000 2007-08 20,00,00,000 |
|
57 Nov2006 |
5,00,00,000 |
|
58 Feb 2007 |
5,00,00,000 |
|
57 Sep2006 |
5,00,00,000 |
|
Total |
21,00,00,000 |
5. He observed that Shri Sohan Raj Mehta in his statement on oath u/s.132(4) of the Act has categorically stated that the said amount of Rs. 21 crores as mentioned in seized documents was paid by M/s Dhariwal Industries Ltd. to the assessee through him as per instructions received from Sri Rasiklal M. Dhariwal/Sri Prakash R. Dhariwal. In view of the above, the AO issued a show cause notice asking the assessee to explain as to why the unaccounted cash receipts of Rs. 1 crore for the year under consideration from M/s. Dhariwal Industries Ltd. through Mr. Sohan Raj Mehta should not be treated as his undisclosed income. The relevant show cause notice dated 09-12-2011 by the AO reads as under :
“Vide Question No.5 of questionnaire dated 12/09/2011 duly served upon you on 21/09/2011, you were asked to confirm and explain the details of receipt of the said amount. However, in the said questionnaire dated 12/09/2011, instead of correct amount of Rs. 21,00,00,000/- received by you as is evident from the copies of seized pages of Bundle no A/M/08 enclosed herewith, an amount of Rs. 10,00,00,000/- was mentioned inadvertently. In response to the querry raised vide said questionnaire, it is submitted by you that you have not received any money from M/s Dhariwal Industries Ltd. (DIL) through Shri Sohan Raj Mehta, However, from the inquiries and the details submitted by you in response to the questionnaire, it is seen that you are a C & F agent of M/s Dhariwal Industries Ltd.for Mumbai region over many years and you have transacted with M/s DIL during the said period of 2003 to 2008 as its C & F agent. Further, Shri Sohan Raj Mehta has accepted to have carried out unaccounted sale of Gutka on behalf of M/s DIL between the period 2003 to 2008 as depicted in the documents seized (29 bundles marked as Exhibit A/M/01 to A/M/29 seized vide Panchanama dated 09/10/2009) seized by Investigation Wing of Bangalore. As per detailed enquiry and evidences gathered by the Department during search, post search enquiries and during the assessment proceedings, it is established beyond reasonable doubt that the above mentioned documents seized from Bangalore are actual details of unaccounted sales of Gutka by M/s Dhariwal Industries Ltd. which it has earned out through Shri Sohan Raj Mehta and that, Shri Sohan Raj Mehta has maintained all the details of these unaccounted sales, unaccounted sale proceeds generated in cash and the utilization of the said cash generated. Shri Sohan Raj Mehta has also admitted that he has earned commission on this unaccounted sale of Gutka effected by him on behalf of M/s DIL and he has offered the said commission income to tax while filing 153A returns In his case.
03. Therefore, it is clearly established that the documents-found at Bangalore are not dumb documents and they are authentic accounts of cash generation and deployment of cash generated out of unaccounted sale proceeds of Rs. 345. 75 crs, between the year 2003 to 2008, which were maintained by Shri Sohan Mehta on behalf of M/s DIL.
04. In view of the foregoing facts, the income arising out of the unaccounted sale transactions of Rs. 345.75 crs is being taxed in the hands of M/s DIL for respective years and the payment of Rs. 21,00,00,000/- clearly reflects the cash paid to you by M/s.Dhariwal Industries Ltd. (DIL) through Shri Sohan Raj Mehta . This is a revenue receipt without corresponding liability and hence, the said amount of Rs. 21,00,00,000/- is liable for tax.
05. Therefore, keeping in view of the above facts, an amount of Rs. 21,00,00,000/- is proposed to be taxed in your hands as your unaccounted income generated on account of supply of raw material out of books to M/s Dhariwal Industries Ltd. for the assessment years asunder:
|
Assessment Year |
Amount (representing your undisclosed income) proposed to be taxed (Rs,) |
|
2006-07 |
1,00,00,000/- |
|
2007-08 |
20,00,00,000/- |
|
TOTAL |
21,00,00,000/- |
06. Kindly state through cogent evidences, if any expenditure is incurred by you for earning the said undisclosed income of Rs. 21,00,00,000/-, so that set off of expenditure, if any, and if permissible by law, could be given to arrive at actual quantum of your undisclosed income.
07. Therefore, you are requested to submit your say by 16/12/2011 in the matter so that the same can be considered by me while finalizing your assessment. Kindly note that the matter is time barring and granting further time may not be possible. If nothing is heard from your side by 16/12/2011, kindly note that I may tax the entire receipts of Rs. 21,00,00,000/- , as your undisclosed income for the respective year (s) receipt.
08. Such an act on my part though judicious and as per the provisions of Income tax Act, 1961, may be highly prejudicial to your interests. Therefore it is my humble request that you furnish your say so that I can consider the same before finalizing the assessment in your case. Accordingly, this Setter may kindly treated as last and final opportunity / final show cause notice-in the matter involved. A formal notice u/s 142(1) of the I. T. Act is enclosed herewith".
6. The assessee in response to the above questionnaire flatly denied to have received any such amount from M/s. Dhariwal Industries Ltd. through Sohan Raj Mehta. The assessee submitted that he is the proprietor of M/s. S. Chains engaged in the business of undertaking labour job in gold ornaments upto A.Y. 2008-09. But for A.Yrs. 2009-10 and 2010-11 he has not carried out any business activity in his individual capacity. He is a partner in the firms Sanghvi Dhanrupji Devaji & & Co., carrying on the business of gold, jewellery, bullion and Shree Mumbadevi Safe Deposits Vaults carrying on business of safe deposit vaults. His uncle Mr. Kiran Mulchand Ranawat is a director of M/s. S.D.D. Agencies Pvt. Ltd. who is trading in shares and securities and packaging drinking water and is also an authorised commission agent of M/s. Dhariwal Industries Ltd. for their products. M/s. S.D.D. Agencies was also trading in pet scrap and waste upto A.Y. 2008-09. The other directors are Mr. Kiran M. Ranawat and Mr. Sachin Mangilal Jain and all the directors are assessed to income-tax. M/s. S.D.D. Agencies Pvt. Ltd. received commission on the sales effected by the company and the same depends upon number of boxes sold of Pan Masala and Gutkha for the Mumbai Region. The assessee strongly denied to have any connection with Shri Sohan Raj Mehta nor any business connection with M/s. Dhariwal Industries Ltd. in his personal capacity. The assessee also objected to the allegation of receipt of Rs. 21 crore in cash from Shri Sohan Raj Mehta on behalf of Dhariwal Industries Ltd. for the supply of raw material to Dhariwal Industries Ltd. The assessee denied to have supplied any form of raw material to Dhariwal Industries Ltd. and denied to have generated income from such supplies. The assessee also requested the AO to provide the copy of statement recorded u/s.132(4) during the course of search of Shri Sohan Raj Mehta, Shri Rasiklal M. Dhariwal and Prakash M. Dhariwal. The assessee also requested the AO to grant opportunity of cross examination of Shri Sohan Raj Mehta, Shri Rasiklal M. Dhariwal and Prakash M. Dhariwal. The assessee further submitted that during the course of search action at his residence and business premises no incriminating documents were found evidencing receipt of Rs. 21 crores from Shri Sohan Raj Mehta. No unaccounted assets were also found to substantiate that assessee has received any amount from Shri Sohan Raj Mehta.
7. However, the AO was not convinced with the explanation given by the assessee. He observed that the evidences seized during search action u/s.132 are speaking documents and proved beyond reasonable doubt, the entire unaccounted business chain of M/s. Dhariwal Industries Ltd. regarding unaccounted purchase, unaccounted manufacture, unaccounted packing, unaccounted printing, clandestine removal of goods, unaccounted sale and utilization of the sale proceeds. The AO further noted that on the basis of the irrefutable strength of the evidences as contained in the said seized pages the addition of Rs. 205.70 crores has been made in the case of Dhariwal Industries Ltd. for A.Y. 2004-05 to A.Y. 2008-09 after elaborately discussing all the relevant issues. The AO reproduced in the assessment order the finding in the case of Dhariwal Industries Ltd. where addition of Rs. 40.88 crore has been made in A.Y. 2004-05. He observed that the irrefutable evidences in the form of seized documents found from the premises of Mr.Mittulal at Bangalore could not be negated by the assessee.
8. As regards the contention of the assessee that the seized documents were not seized from him and he has nothing to do with Shri Sohan Raj Mehta and the same cannot be treated as evidence against him being a third party evidence the AO noted that if such argument of the assessee is accepted, then the provisions of Evidence Act and Section 147, 158BD, 153C become redundant. He observed that although it is true that the strict rules of Evidence are inapplicable to the proceedings under the Income Tax Act 1961, however, that does not mean that the principles of Evidence Act are inapplicable to the proceedings under the Income Tax Act. Relying on the provisions of section 110 of Indian Evidence Act and the decision of Hon’ble Supreme Court in the case of Chuharmal Vs. reported in 172 ITR 230 (SC) the AO held that third party evidence has evidentiary value and therefore the same can be used if corroborated by other circumstantial evidence. Since in the instant case the evidence not only proves authenticity of the said seized document but also proves beyond reasonable doubt assessee’s role in the entire design, the AO held that the assessee has to necessarily face the lawful consequences of his unlawful act in the form of deployment of unaccounted cash outside books.
9. The AO further noted that one of the raw material supplier Mr. Mallikarjun of Shimoga in his statement recorded u/s.132(4) on the date of search has accepted to have supplied raw material outside the books to M/s. Dhariwal Industries Ltd. and confirmed the contents of seized documents. His statement has evidentiary value as it was recorded u/s.132(4) though subsequently he has retracted his statement u/s.132(4). The said retraction was in letter only and not in spirit. According to the AO such retraction is superficial and is not based on any evidence whatsoever. The AO further noted that one Shri S. Balan one of recipients of unaccounted sale proceeds of M/s. Dhariwal Industries Ltd is a close family friend and business associate of Shri RMD of M/s. Dhariwal Industries Ltd. He had admitted on 20-01-2010 vide his statement on oath that he was custodian of about Rs. 14 Crores of money of Mr.Dhariwal and the document also depict that about Rs. 14.35 crores was handed over by Shri Sohan Raj Mehta to Shri S. Balan. Although the said person Shri S. Balan has retracted his statement subsequently but according to the AO the same was at the behest of M/s. Dhariwal Industries Ltd. and it was a feeble attempt to keep M/s.Dhariwal Industries Ltd. away from the irrefutable evidences contained in the seized documents and to save M/s.Dhariwal Industries Ltd. from the lawful consequences of the unlawful Act.
10. In view of the above and relying on the decision of Hon’ble Supreme Court in the case of CIT Vs. Durga Prasad More reported in 82 ITR 540 the AO made addition of Rs. 1 crore in the hands of the assessee as undisclosed cash receipt for A.Y. 2006-07. (Similarly, an amount of Rs. 20 crores was added in the hands of the assessee as undisclosed cash receipts for A.Y. 2007-08).
11. Before CIT(A) the assessee challenged the validity of the assessment on the ground that no incriminating documents were found from the assessee during the course of search. No unaccounted receipt of transaction with Shri Sohan Raj Mehta or M/s.Dhariwal group was found. Therefore, in absence of any incriminating material the additions made by the AO and sustained by the CIT(A) should be deleted. For the above proposition the assessee relied on the decision of the Special bench of the Tribunal in the case of All Cargo Global Logistics Ltd., Vs. DCIT vide ITA Nos. 5018 to 5022 and 5059/Mum/2010. Various other decisions were also relied upon for the above proposition.
12. So far as the merit of the case is concerned it was argued that the assessee has categorically stated that he has never received any such amounts and the assessee had no business connection with either M/s. Dhariwal Industries Ltd or Shri Sohan Raj Mehta. He neither knows Mr. Mittulal nor Mr. Sohan Raj Mehta. Therefore, the observation of the AO that the assessee was a co-conspirator with M/s. Dhariwal Industries Ltd. is baseless. The assessee further submitted that no incriminating documents/evidence was found supporting the cash receipt of Rs. 21 crores from Shri Sohan Raj Mehta. No unaccounted investment or asset was found during the search action against the assessee. It was argued that the seized documents have not been seized from his custody, does not belong to the assessee and not in his hand writing. It was submitted that such third party evidence can be used if corroborated by other circumstantial evidence. The retraction of the statements given u/s.132(4) by Shri Mallikarjun of Shimoga and Shri S. Balan of Pune who had earlier stated to have accepted receipt of cash from M/s. Dhariwal Industries Ltd. through Shri Sohan Raj Mehta was brought to the notice of the CIT(A). The assessee further argued that the evidence seized from the premises of Mittulal containing notinigs relating to Gutka business of M/s. Dhariwal Industries Ltd. may be relevant in their cases but not in the case of the assessee.
13. As regards the allegation of the AO that on the basis of the instructions given in the signed chit either by Shri Rasiklal M. Dhariwal and Prakash M. Dhariwal, Shri Sohan Raj Mehta used to make payments the assessee submitted that no such chits were brought on record or provided to the assessee. It was submitted that S.D.D. Agencies Pvt. is an authorised agent on M/s. Dhariwal Industries Ltd. and the assessee is not a director in the said company and hence there is no association of the assessee with M/s. Dhariwal Industries Ltd. It was argued that the document even after being read as a whole does not establish that cash has been received by the assessee and the assessee has proved beyond doubt that no undisclosed cash was received by him through Sohan Raj Mehta. The assessee further submitted that presumptions u/s.132(4) is only against the person in whose possession the search material is found and not against any other person and that said presumption is refutable and not conclusive. It cannot be applied in absence of any corroborative evidence.
14. However, the Ld.CIT(A) also was not convinced with the arguments advanced by the assessee. So far as the validity of the assessment u/s.153A is concerned he held that the requirement of making assessment/reassessment u/s.153A has no relation with the nature of incriminating material found or not found in the course of search. Provisions of section 153A requires total income for preceding six years to be assessed or reassessed in pursuance to notice u/s.153A. Total income will include any kind of income and it cannot be restricted to undisclosed income or escaped income. In view of the above he dismissed the above contention of the assessee as misplaced and not tenable.
15. So far as the merit of the case is concerned he also dismissed the same and upheld the addition made by the AO. While doing so, he observed that Shri Sohan Raj Mehta, C&F Agent of M/s. Dhariwal Industries Ltd. in his statement u/s.132(4) has explained the entire modus operandi of unaccounted generation of cash and also regarding its deployment which is corroborative and also corroborated by innumerable evidence contained in the seized documents. Further after decoding of the seized document by Shri Sohan Raj Mehta it has been explained that on the basis of the signed chits either by Shri Rasiklal M. Dhariwal/Shri Prakash M. Dhariwal, Shri Sohan Raj Mehta used to make payments to the parties whose names were mentioned on the chits. The AO has pointed out to the signed chit dated 14-08-2007 by Shri Prakash M. Dhariwal which appears on page 44 of the loose paper Bundle No.A/M/29 where the amount mentioned is Rs. 5 lakhs for which decoding has been explained by Shri Sohan Raj Mehta as Rs. 5 crores and the payments related to the said instructions on the chits have been made by way of number of instalments on different dates. The AO has also found and noted that the assessee has been associated with M/s. Dhariwal Industries Ltd for a long time and the assessee’s name appearing in the seized document tallied with the regular business association with M/s. Dhariwal Industries Ltd. and if test of human probabilities is applied to the facts of the case it becomes evident that assessee was part of the entire scheme of unaccounted business chain of M/s. Dhariwal Industries Ltd. While upholding the addition made by the AO, the Ld.CIT(A) at para 4.7 of his order observed as under :
“4.7. It is an undisputed fact that the seized documents including the loose papers No 34 as contained in Bundle A/M/8, A/M/29 found and seized during the course of search and seizure action carried out in the case of Sohanraj Mehta C & F of Dhariwal Group contained the details of the payments of unaccounted money to the persons whose names are appearing on the said document. The name of the assessee appears in the documents seized during the search action A/M/8. The seized document gives a very detailed and minute notings of the transactions entered into by the Dhariwal group through its business line of M/s DIL, this being so, because Shri. Sohanraj Mehta was the C & F of the RMD Gutka group, certainly one of the most important persons related to the marketing of the product of the Dhariwal group. The said person having admitted to have written the aforesaid document in his own handwriting lends credibility whereby the document seized assumes much greater value than what it would have been otherwise. Thus, the admission of Shri. Mehta of having paid the unaccounted money to the assessee during the years under consideration cannot be wished away lightly. The assessee and the Dhariwal group both are known and reputed business persons in the said business field and the assessee has had a long business association with the Dhariwal group with respect to being the C & F agent for the Mumbai region, a fact also admitted by Shri. RMD and his son Shri. PRD. The assessee has been harping on the fact that apart from the documents seized during search no other paper/evidence had been found which could show that the assessee had received the money. This alone is not relevant in the present context. This is because the seized document itself and more so because of the nature of the entries contained therein does not make it as a 'dumb document'. The author of the said seized documents Shri Sohanraj Mehta, C&F agent of the Dhariwal Group at Bangalore has admitted to have written the said document in his own handwriting and also explained that most of the pages to have been written in 'Marwadi' language matching with the statement and the wordings on the seized document. It was also admitted that they represented purchase and sales of RMD Gutkha during financial years 2003-04 to February 2008. So far as the notings on page 34 is concerned, Shri Mehta had specifically stated that it was consolidated working of stock of RMD gutkha received from the company M/s Dhariwal Industries Ltd., whose factory was at Singsandra, Bangalore for the period April 2003 to August 2006. The C&F agent of the Dhariwal group, Shri Mehta also explained that the figures mentioned on the left side of the page 34 represented the stock of RMD Gutkha boxes received from the company and its value was also mentioned therein. It was further explained by Shri Mehta that the total of such stock received from the company as per the sheet worked out to Rs. 2,18,00,91,198/-. It was also stated during the 132(4) statement recorded on 10.10.2009 that the payments received from various distributors, wholesalers and retailers for the supply of RMD Gutkha stock and their names and the amounts received during April 2003 to August 2006 were mentioned. Shri Mehta also stated regarding the notings on page 34 and other documents that the various expenditure incurred in connection with the business was also written and also admitted that the money so received had been sent to his 'Seth' from time to time and the money was handed over to the persons as per the directions of Mr. Rasiklal Manikchand Dhariwal and his son Mr. Prakash, whom he referred to as 'Seth'. The C&F agent, Shri Mehta regarding the entry mentioned on the lower left side of the page 34 beginning with '31.08.2006' stated that he had prepared the statement as on 31.08.2006 to submit the account for the 'Seth Saheb'. He clarified further that the persons referred to as 'Seth Saheb' were Mr. Rasiklal Manikchand Dhariwal of Dhariwal Industries Ltd. and his son Mr.Prakash R. Dhariwal and that the aforesaid account on page 34 was submitted to Mr. Prakash. In the detailed statement, Shri Mehta has clearly outlined the entire modus operandi of the business and the manner in which the instructions were received by him from the Dhariwals; father and son duo wherein it was stated that they sent him a slip of paper or chit indicating the amount and the name of the person to whom the amount needed to be paid irrespective of the fact whether Shri Mehta knew the person personally or not as per the standing instructions from Mr. Rasiklal and his son Mr. Prakash R. Dhariwal to handover the money to the bearer of the slip or the chits and the money was paid out of the collections received from the distributors towards unaccounted sales. In the statement u/s 132(4) a sum of Rs. 2 crores was offered as income as commission on the unaccounted turnover of RMD Gutka of M/s. DIL by Shri Mehta. The aforesaid facts were again confirmed by Shri Sohanraj Mehta in his statement recorded u/s. 131 on 15.10.2009 and 21.10.2009, with respect to the notings made on page 34 of the exhibit A/M/8 and other related document. Thus, the payment made to the assessee has been confirmed by Shri Mehta time and again during the course of the statement recorded both during pre and post search action. The inference thus drawn by the Assessing Officer in taxing the amount in the hands of the assessee is, therefore, based on a sound footing and moreover in such situation where the entire dealing itself is undisclosed, the books of account and other related documents are generally not maintained and corroborative evidences has to be seen within the materials found and seized and the inference drawn based on the statement recorded. The C & F agent Shri Sohanraj Mehta had a long association with the Dhariwals and because of such close association the entire C & F of RMD Gutka for Karnataka region was given to him. Moreover, the magnitude of the transaction which was handled by Shri Mehta and the amount of commission earned and also disclosed as income on such transaction clearly indicates that the statement given were not untrue and the same could be believed. The contention of the assessee that there being no evidence that the Dhariwal Group had paid to the assessee thus gets answered. The records of such undisclosed activity are maintained in the manner in which the document and loose papers have been found and seized in the present case and no regular books of accounts are maintained for such activity. The detailed statement given by Shri Mehta explaining the entries of the document seized makes the document a speaking one and, therefore, the inference drawn by the Assessing Officer in taxing the amount prima facie appear to have been rightly done.”
16. The Ld.CIT(A) further held that the amount is without consideration and liable to tax under provisions of section 56(2)(vi) of the I.T. Act. The relevant observation of Ld.CIT(A) at para 4.17 of his order reads as follows :
“4.17 It is to be noted and remembered that the amount received AO has held that the amount received by the assessee was a revenue receipt without corresponding liability, hence liable to tax. During the search and seizure action no evidence was found whereby it could be established that the said amount was a loan or a liability of any other nature. The fact that has been established is that assessee is in receipt of Rs. 21 crores. In the absence of any contrary evidence or material found during search the said sum represents receipts without consideration. In that view of the matter the taxability of the amount received by the appellant is to be brought to tax u/s 56(2)(vi) of the Act. The said provisions were introduced as a counter evasion mechanism to prevent laundering of unaccounted income. The Board Circular No. 5 of 2005 dated 15.07.2005 (2005) 276 ITR (St.) 151 to 158 explained that in order to in order to curb bogus capital-building and money-laundering, a new sub-clause has been inserted in section 56 to provide that any sum received without consideration on or after the 1st day of September, 2004, by an individual or a Hindu undivided family from any person, shall be treated as income from other sources. In the present case neither the appellant nor M/s. DIL has furnished an explanation indicating the purpose and nature for the said amount to have been given to the appellant nor the documents found and seized during search action point to the fact that the said sum is a liability of the appellant. I am of the considered view that the receipt of the said sum is without consideration and liable to tax under the provision of sec 56(2)(vi) of the Act.”
17. Rejecting the various explanations given by the assessee and relying on various decisions the Ld.CIT(A) upheld the action of the AO in making addition of Rs. 1 crore for A.Y. 2006-07 and addition of Rs. 20 crores for A.Y. 2007-08.
18. Aggrieved with such order of the CIT(A) the assessee is in appeal before us by taking the following grounds :
“The ground or grounds of appeal are without prejudice to one another.
1.a) On the facts and in the circumstances of the case and in law, the Id. CIT(A) erred in not appreciating that the assessment order passed u/s. 143(3) r.w.s. 153A by the AO is without jurisdiction and bad in law as the jurisdiction u/s. 153A is vitiated.
b) The Id. CIT(A) failed to appreciate that neither any incriminating document nor any unaccounted asset or investment was found in the course of the search carried out at the premises of the Appellant.
2. a) On the facts and in the circumstances of the case and in law, the Id. CIT(A) erred in confirming the addition of Rs. 1,00,00,000/- made by the AO to the income of the Appellant on account of undisclosed cash receipts on the basis certain notings on papers seized from the third party without allowing any opportunity to cross examine the third party inspite of specific request for the same.
b) The Id. CIT(A) failed to appreciated that :-
(i) the seized papers relied upon by the AO were found from the possession of the third party,
(ii) the seized papers were not in the handwriting of the Appellant;
(iii) in recording statement u/s. 132(4) of the Appellant, it was explained in explicit terms that no cash was received by the Appellant from Shri Sohan Raj Mehta;
(iv) neither copy of such seized papers and statements of the third parties were provided to the Appellant nor any opportunity was allowed to the Appellant to cross examine those third parties;
(v) there was no business connection of the Appellant either with M/s.Dhariwal Industries Ltd. or Shri Sohan Raj Mehta; and
(vi) the assessment is completed contravening the principles of natural justice.
c. In reaching to the conclusion and confirming such addition the Ld.CIT(A) omitted to consider relevant factors, considerations, principles and evidences while he was overwhelmed, influenced and prejudiced by irrelevant considerations and factors.
The Appellant craves leave to add, alter, amend or delete any or all of the above grounds of appeal.”
19. Identical grounds have been taken in A.Y. 2007-08 except for the amount of addition which is Rs. 20,00,000/-.
20. The Ld. Counsel for the assessee strongly opposed the order of the CIT(A). So far as the legal ground is concerned challenging the validity of the order passed u/s.153A he submitted that the papers were not found in the course of search of Shri Mittulal and those papers were found in the course of search on the assessee. In fact during the course of search on the assessee group there was no incriminating documents found regarding any unaccounted receipt/transaction with Shri Sohan Raj Mehta or M/s. Dhariwal Industries Ltd. group. Referring to the provisions of section 153A he submitted that the same is to be invoked for making an assessment of the person searched on the basis of the material found during the course of search on that person. Since the assessment for A.Y. 2006-07 was already completed u/s.143(3) prior to the search, therefore, in the course of assessment u/s.153A the scope should have been limited to the incriminating material found in the course of search on the assessee group. He submitted that if the material is found with some third party the assessment ought to be initiated u/s.153C which is a specific provision for such purposes. Therefore, on the basis of the incriminating material found with a third party, the addition cannot be made u/s.153A.
21. So far as the merit of the case is concerned, i.e. regarding addition of Rs. 1 crore for A.Y. 2006-07 and Rs. 20 crore for A.Y. 2007-08 he submitted that the addition made by the Assessing Officer and upheld by the CIT(A) is not at all justified. He submitted that the assessee is in jewellery business and has no business connection with M/s. Dhariwal group or Shri Sohan Raj Mehta, C&F Agent of M/s. Dhariwal Industries Ltd. The seized papers indicate payments to one Mr. Vinit and at a few papers the name Vinit Ranawat is mentioned. Referring to pages 143 to 147 of the paper book the Ld. Counsel for the assessee drew the attention of the Bench to the statement recorded u/s.132(4) of Sri Sohan Raj Mehta where he had stated that he effected the unaccounted sales of Dhariwal Industries and had made the payments noted on the loose papers as per the instructions of Shri Dhariwal.
22. Referring to the decision of the ITAT, Ahmedabad Bench in the case of Shri Mushtafamia Sheikh he submitted that Shri Sohan Raj Mehta had retracted from the statement. He submitted that although the assessee does not have such retraction statement, however, in view of the decision of the Ahmedabad Bench of the Tribunal it has to be held that when the same person has retracted from his statement, his original statement cannot be used against the assessee. He submitted it has been clarified a number of times that the assessee does not have any business connection with Dhariwal Group and therefore the question of assessee receiving any money from Dhariwal Group simply does not arise. Only one of his family concerns namely, M/s. S.D.D Agencies is the C&F Agent of Dhariwal Industries Ltd. During the course of survey on its premises nothing incriminating was found during the survey to indicate that the assessee has received the above amounts from Dhariwal Group. Further, there is no question of Dhariwal Group to pay such a huge amount to the assessee. Therefore, it cannot be concluded that simply because the assessee's name figures in the seized papers, he has received these amounts from Dhariwal group and that too as an income. He submitted that when M/s. S.D.D Agencies is the C&F Agent of Dhariwal Group it would receive only commission from Dhariwal Group and otherwise, it would be required to pay the sale proceeds received from the customers to Dhariwal. There is no reason why Dhariwal Group to pay such a huge amount to M/s.S.D.D Agencies. Further, if such unaccounted money was received from Dhariwal Group then during the course of search on the assessee, some evidence would have been found in the form of loose papers or unaccounted assets, etc. However, no such things were found. Both these clearly indicate that there is no justification to hold that the assessee has received the payments from Dhariwal Group.
23. The Ld. Counsel for the assessee submitted that the papers were found from one Mittulal of Bangalore which were maintained by Shri Sohan Raj Mehta, C&F Agent of M/s. Dhariwal Industries Ltd.
24. Referring to the provisions of section 132(4A) he submitted that these papers can be presumed to be true, genuine and correct in the case of the person searched, i.e. Shri Sohan Raj Mehta and he has admitted that the papers belong to him. On the basis of the papers found with some third parties addition cannot be made in the hands of the assessee particularly when there is no business connection between the assessee and that party. For the above proposition the Ld. Counsel for the assessee referred to the following decisions :
a. Bombay H.C. Lata Mangeshkar [97 ITR 696]
b. Straptex (India) P. Ltd. v. DCIT [84 ITD 320 (Mum)]
c. CBI v. V. C. Shukla [3 SCC 410 (SC)]
d. Prarthana Construction P. Ltd. v. DCIT [118 Taxman 112 (Ahd.)]
e. Unique Organizers & Developers P. Ltd. v. DCIT [118 Taxman 147 (Ahd.)]
25. Referring to the statement recorded u/s.132(4) on 20-01- 2010, a copy of which is placed at pages 34 to 44 the Ld. Counsel for the assessee drew the attention of the Bench to the Question No.33 and 34 and submitted that the assessee has categorically denied to have received any such amount from Shri Dhariwal or Shri Sohan Raj Mehta. Referring to Question No.34 he submitted that the authorized officer had termed the notings on the loose papers as “short term advances given to the assessee”. Thus, if this sum is a short term advance the question of the same constituting income of the assessee does not arise. The Ld. Counsel for the assessee referred to the statement of Shri Sohan Raj Mehta wherein Mr. Mehta clarified that this was a short term advance. Hence, by no stretch of imagination the same can constitute income of the assessee. The Ld. Counsel for the assessee referred to the decision of the Hon’ble Bombay High Court in the case of Aziende Colori Nazionali Affini, Italy Vs. CIT reported in 110 ITR 145 wherein it has been held that any statement or document has to be considered wholly and not partly. He accordingly submitted that when Mr. Mehta in his statement has stated that the amount was given as short term advance, the question of treating the same as the income of the assessee does not arise.
26. Referring to the statement of Shri Sohan Raj Mehta recorded during the course of search proceedings u/s.132 a copy of which is placed at pages 138 to 144 of the paper book the Ld. Counsel for the assessee drew the attention of the Bench to Question No.33 put to Mr. Mehta. Referring to the reply given by Mr. Mehta the Ld. Counsel for the assessee submitted that Mr. Mehta has clarified that he has given the advances as per the instructions of Shri Dhariwal to the bearer of the chits. He has never identified the assessee. He submitted that when the persons were given the money on the basis of chits in that case the same might have been given to some other person. There may be so many people by name Mr. Vinit and therefore it does not mean that the assessee has received the amount from Mr. Mehta.
27. Referring to the letter addressed to the Assessing Officer on 15-12-2011 a copy of which is placed at pages 109 to 111 of the paper book he submitted that the assessee has specifically requested the AO to give an opportunity to cross examine Shri Sohan Raj Mehta, Shri Rasiklal M. Dhariwal and Shri Prakash Manikchand Dhariwal of M/s. Dhariwal Industries Ltd. Referring to para 4.13 of the order of the CIT(A) he submitted that before Ld.CIT(A) also the assessee has stated that no opportunity to cross examine Shri Sohan Raj Mehta and other persons was granted which was against the principles of natural justice. However, the Ld.CIT(A) has gone a step further and held that no purpose will be served by allowing cross examination and it is a futile exercise. Therefore, once the assessee was not provide the opportunity of cross examination of Shri Sohan Raj Mehta his statement cannot be used against the assessee.
28. The Ld. Counsel for the assessee without prejudice to the above submitted that the conclusion can be that Dhariwal has paid M/s. S.D.D. Agencies because it has got business connection with M/s. Dhariwal Industries Ltd. In that event, the addition in the hands of the assessee is not justified. It can be considered only in the hands of M/s. S.D.D. Agencies.
29. Still in another alternate contention, the Ld. Counsel for the assessee submitted that there are many persons by such names such as that of the assessee in Mumbai and at other places. Hence it cannot be presumed that it is definitely the assessee who is the recipient of the money as noted in the seized paper. On this logic also, the addition is not justified in the hands of the assessee.
30. The Ld. Counsel for the assessee submitted that on the basis of notings on the seized papers found during the course of serach of Mr. Mehta additions have been made in the hands of such third parties by the Assessing Officers under identical facts. When the matter travelled up to the Tribunal, the Tribunal has deleted such addition. For the above proposition, the Ld. Counsel for the assessee relied on the following decisions :
1. Pradeep Amrutlal Runwal Vs. Tax Recovery Officer reported in149 ITD 548
2. Shri Mustafamiya H. Sheikh vide ITA No.2588/Ahd/2012 order dated 15-02-2013
3. Shri H.S. Chandramouli vide ITA No.1551/Bang/2012 order dated 30-08-2013
4. M/s. Mohd. Ayub Mohd.Yaqub Perfumers Pvt. Ltd vide ITA No.388/LKW/2013 order dated 10-12-2014
5. M/s. Bhola Nath Radha Krishna vide ITA No.5149/Del/2012 order dated 05-04-2013
6. DCIT Vs. Shri Pawan Kumar Agarwal vide ITA No.413/LKW/2012 and CO No.70/LKW/2012 order dated 26-02-2015.
31. As regards the observation of the Ld.CIT(A) that there can be addition in the hands of the assessee under the deeming provisions of the Income Tax Act, the Ld. Counsel for the assessee submitted that the assessee is engaged in the business of jewellery and earn modest income. The family concern which is engaged in the business of C&F Agent earns commission of Rs. 7 to 8 lakhs. Therefore, it is highly improbable even for Dhariwal to give huge amount of Rs. 21 crores to such a person.
32. Referring to para 4.17 of the order of the CIT(A) the Ld. Counsel for the assessee drew the attention of the Bench to the findings given by the CIT(A) wherein he has also held that the receipt of the amount of Rs. 21 crores being without consideration is liable to tax under the provisions of section 56(2)(vi) of the I.T. Act, i.e. Rs. 1 crore for A.Y. 2006-07 and Rs. 20 crores for A.Y. 2007-08. Referring to the provisions of section 56 he submitted that the said provision can be applied only when the sum of money exceeding Rs. 50,000/- or more is received without consideration by an individual from any person or persons on or after the first April 2006 but before the first day of October 2009. Therefore, applying the above provision, one has to prove directly that the money has been received.
33. Referring to para 4.12.2 and 4.15 of the order of the CIT(A) he submitted that the CIT(A) is confirming the addition because of the deeming provision on the basis of the loose paper found. Therefore, provisions of section 56(2)(vi) are not applicable to the facts of the present case. He accordingly submitted that no addition can be made in the hands of the assessee.
34. The Ld. Departmental Representative on the other hand strongly supported the order of the CIT(A). He submitted that the papers found from the residence of Mr. Mittulal which was minutely maintained by Shri Sohan Raj Mehta clearly indicates that assessee has received an amount of Rs. 21 crores from the Dhariwal group. All these things are within the exclusive knowledge of the assessee, Shri Sohan Raj Mehta, Shri Rasiklal M.Dhariwal and Shri Prakash Manikchand Dhariwal of M/s. Dhariwal Industries Ltd. Referring to page 19 of the paper book filed by him the Ld. Departmental Representative drew the attention of the Bench to the notings in the seized documents and submitted that the same contains the name of the assessee with an amount of Rs. 5 lakhs against his name. Referring to page 21 of the paper book he submitted that the name of the assessee appears at page 24 of Bundle No.A/M/29 which contains the name Vinit Ranawat. Referring to paper book page 123 he submitted that in his reply to Question No.3 recorded u/s.132(4) on 21-01- 2010 Shri Rasiklal Manikchand Dhariwal has taken the name of Vinit Ranawat, Mumbai who has been appointed as C&F Agent for the State of Maharashtra. Referring to the assessment order in the case of Dhariwal Industries, a copy of which are placed at pages 1 to 79 of his paper book the Ld. Departmental Representative submitted that a thorough discussion was made in the said assessment order containing the modus operandi and additions have been made in the case of Dhariwal Industries Ltd.
35. Referring to the copy of statement of Shri Sohan Raj Mehta recorded u/s.132(4) on 10-10-2009 copies of which are placed at paper book pages 80 to 86 and the statement of Mr.Mehta recorded u/s.131 on different dates, copies of which are placed at pages 87 to 122 he submitted that Mr. Mehta had categorically stated that on the basis of instructions given by Shri Rasiklal M. Dhariwal/Shri Prakash M. Dhariwal cash has been handed over to the bearers of the slips. Therefore, under these circumstances, when things are clear that money has been given by Dhariwal group to the assessee amounting to Rs. 1 crore for A.Y. 2006-07 and Rs. 20 crores for A.Y. 2007-08, the Assessing Officer was justified in making the addition and the Ld.CIT(A) was justified in confirming the addition. He submitted that the various decisions relied on by the Ld. Counsel for the assessee are not applicable to the facts of the present case and are distinguishable. He accordingly submitted that the order of the CIT(A) be upheld.
36. The Ld. Counsel for the assessee in his rejoinder drew the attention of the Bench to Question No.9 and 11 put to Shri Rasiklal M. Dhariwal during recording of his statement u/s.132(4) on 21-01-2010. Referring to the answer given by Shri Rasiklal M. Dhariwal the Ld. Counsel for the assessee submitted that Shri Dhariwal on the other hand has stated that he has instructed Vinit Ranawat to hand over an amount of Rs. 5 lakhs on 20-02-2007 and another Rs. 5 lakhs on 10-11-2006. Therefore, what the Department is stating is contrary to what Shri Rasikal M. Dhariwal has stated. He submitted that the Assessing Officer has not referred to the relevant parts which were favourable to the assessee. He submitted that the Assessing Officer and the CIT(A) are treating what Mr. Mehta says as sacrosanct. However, it is settled proposition of law that provisions of section 132(4) does not apply to third parties. When the assessee has not received any money and has completely denied at the time of search itself and no incriminating material was found from the residence of the assessee such as unaccounted cash or unaccounted investment and when Mr. Mehta has never identified the assessee specifically, therefore, in view of the various decisions of the Tribunal under identical facts and circumstances, the addition made by the Assessing Officer and upheld by the CIT(A) should be deleted. He also strongly relied on the decision of Hon’ble Supreme Court in the case of CBI Vs. V.C Shukla reported in 3 SCC 410 where it has been held that addition cannot be made in the hands of the assessee on the basis of entries in the books of account of third parties in absence of any corroborative evidence.
37. We have considered the rival arguments made by both the sides, perused the orders of the Assessing Officer and the CIT(A) and the Paper Book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find in the instant case a search u/s.132 of the I.T. Act was conducted at the premises of Mr. Mittulal at Bangalore on 09-10-2009 wherein certain incriminating documents were found belonging to the Dhariwal group. Those documents were maintained by one Shri Sohan Raj Mehta, C&F agent of M/s. Dhariwal Industries Ltd. In his statement recorded u/s.132(4) Mr. Mehta had stated that he was effecting unaccounted sales of Gutkha of Dhariwal Industries Ltd. and the sale proceeds were deployed as per the instructions of Shri Rasiklal M. Dhariwal and his son Shri Prakash M. Dhariwal. In some of the seized papers name of certain persons are appearing which contain the name either “Vinit” or “Vinit Ranawat”. On the basis of those names and entries against said names, the Assessing Officer deciphered the amount as Rs. 1 crore for A.Y. 2006-07 and Rs. 20 crores for A.Y. 2007-08 as received by the assessee Shri Vinit Ranawat. Although Mr. Mehta in his statement recorded u/s.132(4) has stated that this amount was paid by Dhariwal Industries to Shri Vinit Ranawat through him, however, the statement appears to have been retracted as per the findings given by the Ahmedabad Bench of the Tribunal in the case of Mustafamiya H. Sheikh.
38. It is the case of the Assessing Officer that the assessee was associated with Dhariwal group for a long time and the assessee’s name appearing in the seized document tally with the regular business association with M/s. Dhariwal Industries Ltd. and if test of human probability is applied to the facts of the case it becomes evident that assessee was part of the entire scheme of unaccounted business chain of M/s. Dhariwal Industries Ltd. The role of the assessee was that of a co-conspirator. During the course of search and post search proceedings Mr. Sohan Raj Mehta had stated that the seized books of account, loose sheets and other documents, i.e. A/M/01 and A/M/29 were actually belonging to the C&F business of M/s. Dhariwal Industries Ltd. He had categorically stated that page 34 of A/M/08 and other related documents were written by him and most of the pages were in Marwadi language. The statement of Mr. Mehta clearly explains the entire unaccounted business chain and unaccounted business transactions of M/s. Dhariwal Industries Ltd. Mr. Sohan Raj Mehta, the author of the seized document in his statement u/s.132(4) has explained true impact of the contents of the seized documents and has also acknowledged and substantiated the fact that the seized documents belong to M/s. Dhariwal Industries Ltd. and therefore his statement has immense evidentiary value. Based on the above and on the basis of various other observations in the assessment order the Assessing Officer made addition of Rs. 1 crore for A.Y. 2006-07 and Rs. 20 crores for A.Y. 2007-08 as undisclosed income of the assessee which has been upheld by the CIT(A).
39. It is the submission of the Ld. Counsel for the assessee that from the very beginning the assessee was denying to have received any such amount from Mr. Sohan Raj Mehta. According to him, no addition can be made in the hands of the assessee on the basis of papers found in the premises of third party. Further, the assessee being a small taxpayer, some evidence should have been found from the residence of the assessee to show that in fact he has received such huge amount. It is also the case of the Ld. Counsel for the assessee that the Department itself is treating this as “short term advance” during the course of search action. Similarly, the statement of Mr. Rasiklal M. Dhariwal is contrary to the finding of the Department. It is also the submission of the Ld. Counsel for the assessee that different Benches of the Tribunal under identical facts and circumstances have deleted the addition made by the Assessing Officer on the basis of notings found from the premises of Mr. Sohan Raj Mehta.
40. We find some force in the submission of the Ld. Counsel for the assessee. The assessee in the instant case is an individual and proprietor of M/s. S. Chains which is engaged in the business of job work in gold ornaments. M/s. S.D.D. Agencies is the C&F Agent of M/s. Dhariwal Industries Ltd. in the State of Maharashtra for their Gutkha and Pan Masala business. A search and seizure action on the premises of Mr. Mittulal at Bangalore was carried on 09-10-2009 wherein documents maintained by Mr. Sohan Raj Mehta, C&F Agent of M/s. Dhariwal Industries Ltd were found. The assessee’s premises was also searched on 20-01-2010, i.e. after a period of about 3 months and 10 days. During the course of search at the premises of the assessee he was questioned about the documents found from the premises of Mr. Mittulal which contain documents maintained by Mr. Sohan Raj Mehta. The assessee at the time of search had completely denied to have received any such amount from Mr. Sohan Raj Mehta. Relevant Question and answer of the assessee recorded during the course of search u/s.132(4) are as under (paper book page 41 and 42) :
“Q.33 A search action u/s.132 was carried out on 0-10-2009 in the case of Shri Mittulal by Investigation Wing of Bangalore. In course of the search action certain incriminating documents related to Shri Sohanraj Mehta were found in connection with C&F agency of RMD Group of Pan Masala and Gutkha products. Shri Sohanraj Mehta was also covered by the Investigation Wing of Bangalore and on being confronted with these incriminating documents, Shri Sohanraj stated that the said pages interalia contain the notings regarding handing over of Rs. 21.22 crores to Shri Vinit Ranawat of Mumbai which is C&F agent of RMD group. Shri Sohanraj also stated that the said payments in cash were made as per the direction of Shri R.M. Dhariwal and Shri Prakash Dhariwal. Please state whether the said cash of Rs. 21.22 cr received from Shri Sohanraj Mehta on account of RMD group are reflected in your books of accounts.
A.33 I have gone through the documents shown to me and say that I have never received this amount from Shri Sohanraj Mehta. Hence, the said payments are not reflected in my books of account.
Q.34 A search action u/s.132 was carried out on 26-1-2010 in the case of Dhariwal group. In the course of statement recorded u/s.132(4) Shri Prakash Dhariwal has explicitly stated that the above referred payments have been made by Shri Sohanraj Mehta at the instruction of my father Shri Rasiklal Dhariwal as short term advance. I am showing you the relevant portion of the said statement. Please go through the same and state whether the payments in cash received from Sohanraj Mehta at the discretion of Shri R.M. Dhariwal are recorded in your books of account.
A.34 I have gone through the statement shown to me of Shri Prakash Dhariwal recorded on 20-01-2010, however, I have never recorded the amount mentioned from Shri Sohanraj Mehta hence the said payment are not recorded in my books.
Q.35 The statement of Shri Sohanraj Mehta recorded u/s.132(4) on 09-10-2009 has been confirmed by Shri Prakash Dhariwal in the statement recorded u/s.132(4) on 20-01-2010. Thus, both Shri Sohanraj Mehta and Shri Prakash R. Dhariwal have stated on oath that payments in cash of Rs. 21.22 cr has been made to you at the direction of Shri Rasiklal Dhariwal by Shri Sohanraj Mehta. As the statements have been given by them on oath, you are therefore once again requested to go through the above referred documents/statement and state whether the said cash receipts are reflected and recorded in your regular books of accounts.
A.35 As already stated earlier, I have never received any cash from Sohanraj Mehta at the instant of Shri Rasiklal Dhariwal or Prakash Dhariwal. Hence, no such cash is recorded in my regular books of accounts.”
41. It is also pertinent to note here that the search party during the course of search at the premises of the assessee has not found any evidence whatsoever to substantiate that the assessee has in fact received any amount either from Mr. Sohan Raj Mehta or from Mr/ Rasiklal Manikchand Dhariwal/Mr. Prakash M. Dhariwal or M/s. Dhariwal Industries Ltd. No unaccounted asset, investment or loose paper evidencing such huge receipt has been found. Further, we find from the query raised during the course of search that the authorised officer has treated the same as “short term advance” given to the assessee. Therefore, we find some force in the submission of the Ld. Counsel for the assessee that if the amount is a short term advance the question of the same constituting income in the hands of the assessee does not arise. We find from the statement of Mr. Sohan Raj Mehta recorded during the course of search proceedings u/s.132 on 09-10-2009 where Mr. Sohan Raj Mehta in his answer to Questiion No.31 has replied as under :
“Q.31 Please state how these transactions are unaccounted? Ans: M/s Dhariwal Industries Ltd has a manufacturing unit in Singsandra, Bangalore. Our firm M/s Mehta Associates is a sole C & F agent of the Company for their product RMD Gutka since 1994-95. I have very long business and personal association with Mr. Raskilal Manikchand Dhariwal. He considers me as close confident. As per the requirement of the Distributors, I place order for dispatch of Stock either with Mr. Prashant Bafna or Mr. Jeevan Sancheti, who are incharge of the Factory at Bangalore. To send a dispatch with bill or without bill is decided as per their choice and the Stock of Gutka is sent by Matador Van to this office. The stock that comes without bill is immediately dispatched to our customers. We keep only the stock that comes with bill in our office. The stock that comes without bill is dispatched immediately to our customers. I have been involved in these transactions for longtime and I am responsible for all the despatches and also for the collections from our customers; Normally, we extend credit of 7-10 days to our customers. They remit consideration for the Guntka stock received by them. Periodically, I send these Collections to Mr. Rasiklal or his son Mr. Prashant as per their instructions.” 42. Similarly, in his answer to Question Nos. 33 and 34 he has replied as under :
“Q.33 I am showing you exhibit marked as A/M/29, seized from the residence of Mr. Mitulal, No. 219, 68th, Cross, 5th Block, Rajaji Nagar, Bangalore. Please go through these loose sheets serially numbered 1- 61 and state the contents written over these loose sheets?
Ans : I have gone through the exhibit marked A/M/29. I have placed my signature on page ho. 24 of this exhibit in confirmation of having seen it. This exhibit contains loose slips serially number 1-61. Slips marked as sl.no. 4 to 8, 49 to 50, 58 arid 59 contain the notings of Mr.Raskilal Manikchand Dhariwal and his son Mr; Mr. Prakash. The notings on these slips contain their directions to me to handover the amount mentioned in the slip to the person who brings the slip. Sometimes, they do not write any name on the slip, I have to handover the money mentioned in the slip to the bearer of the slips. Most of the times, I may not know the person but still I make payment to them as I have standing instructions from Mr.Raskilal Manikchand Dhariwal and his son Mr. Prakash to handover the money to the bearer of the slip. The money is paid out of the collections received from the distributors towards unaccounted sales.
Q.34 Do you obtain any receipt from the parties to whom you hand over Cash as per the instructions of Mr.Raskilal Manikchand Dhariwal and his son Mr. Prakash
Ans : No. It is not required. After receipt of Cash, they leave the slip with me. That is considered as evidence.”
43. From the above it is seen that Mr. Sohan Raj Mehta has never identified the assessee. It is also an admitted fact that the request of the assessee to cross examine Mr. Sohan Raj Mehta was not granted on the ground that the same will not serve any purpose.
44. We further find Mr. Rasiklal Manikchand Dhariwal in his statement recorded u/s.132(4) on 21-01-2010 in reply to Question No. 9, 11 and 12 has answered as under (page 124 of paper book filed by Ld. DR) :
“Q9. Similarly, I am showing you page No.34 of Bundle No.A/M/29 seized on 9/10/2009. Kindly go through the contents and please explain.
Ans. This is a signed chit in my handwriting dt.20/2/2007 wherein I have instructed Shri Vinit Ranawat to hand over an amount of Rs. 500000-00 (Five Lakhs).
Q11. Similarly, I am showing you page no.24 of Bundle No.A/M/29 seized on 9/10/2009. Kindly go through the contents and please explain.
Ans. This is a signed chit in my handwriting dt.10/11/2006 wherein I have instructed Shri Vinit Ranawat to hand over an amount of Rs. 500000-00 (Five Lakhs).
Q.12 Similarly, I am showin you page no.22 of Bundle No.A/M/29 seized on 9/10/2009. Kindly go through the contents and please explain.
Ans. This is a signed chit in my handwriting wherein I have instructed Shri Vinit Ranawar to hand over an amount of Rs. 50000-00 (Fifty Thousand).”
45. From the above, it is seen that at one place the Department is treating the amount as short term advance by Mr. Rasiklal Manikchand Dhariwal to the assessee (Question No.34 to assessee u/s.132(4) on 20-01-2010). Similarly, Mr. Rasiklal Manikchand Dhariwal in his reply to Question Nos. 9, 11 and 12 recorded u/s.132(4) of the I.T. Act has stated that he has instructed Mr. Vinit Ranawat to hand over the various amounts. Therefore, it is not clear as to whether the Assessing Officer is correct or the Investigation Wing at the time of examining the assessee are correct or the answer of Mr. Rasiklal Manikchand Dhariwal is correct.
46. The Hon’ble Bombay High Court in the case of Aziende Colori Nazionali Affini, Italy (Supra) has held that the agreement had to be considered as a whole and that the different clauses in the agreement could not be considered separately. Therefore, when the Department itself is treating the same at one place as short term advance, therefore, the question of treating the same as income of the assessee does not arise. It is also an admitted fact that the papers were found with Mr. Sohan Raj Mehta at Bangalore. Therefore u/s.132(4A) they can be presumed to be true, genuine and correct only in the case of the searched person, i.e. Mr. Sohan Raj Mehta who has admitted that the papers belong to him. Therefore, we find force in the submission of the Ld. Counsel for the assessee that on the basis of the papers found with some third party addition cannot be made in the hands of the assessee particularly when there is no business connection between the assessee and that party.
47. The Hon’ble Bombay High Court in the case of Addl.CIT Vs. Lata Mangeshkar reported in 97 ITR 696 has held that mere entries in the accounts regarding payment to the assessee was not sufficient as there was no guarantee that the entries were genuine in absence of any corroborative evidence. In that case, the incometax authorities sought to assessee certain income as income from undisclosed sources received by the assessee on the basis of statement by 2 persons that they had paid money in black to the assessee and entries in books belonging to them regarding alleged payment to the assessee. The Tribunal examined the statement made by the 2 persons and found that the evidence tendered by them suffered from serious infirmities. It held that mere entries in the accounts regarding payments to the assessee was not sufficient as there was no guarantee that the entries were genuine. The Tribunal therefore held that there was no proof that the amount in question represented income from undisclosed sources belonging to the assessee. On further appeal by the Revenue, the Hon’ble High Court held that the conclusion of the Tribunal had been reached by it on a proper appreciation of the evidence. This was finding of fact by the Tribunal and no question of law arose and no reference would lie from the decision of the Tribunal. Accordingly, the appeal filed by the Revenue was dismissed.
48. The Hon’ble Supreme Court in the case of CBI Vs. Shri V. C. Shukla reported in 3 SCC 410 has observed as under :
“The rationale behind admissibility of parties' books of account as evidence is that the regularity of habit, the difficulty of falsification and the fair certainty of ultimate detection give them in a sufficient degree a probability of trustworthiness (wigmore on evidence $ 1546). Since, however, an element of self interest and partisanship of the entrant to make a person - behind whose back and without whose knowledge the entry is made - liable cannot be ruled out the additional safeguard of insistence upon other independent evidence to fasten him with such liability, has been provided for in Section 34 by incorporating the words such statements shall not alone be sufficient to charge any person with liability.
The probative value of the liability created by an entry in books of account came up for consideration in Chandradhar vs. Gauhati Bank [1967 (1) S. C. R. 898]. That case arose out of a suit filed by Gauhati Bank against Chandradhar (the appellant therein ) for recovery of a loan of Rs. 40,000/- . IN defence he contended, inter alia, that no loan was taken. To substantiate their claim the Bank solely relied upon certified copy of the accounts maintained by them under Section 4 of the Bankers' Book Evidence Act, 1891 and contended that certified copies became prima facie evidence of the existence of the original entries in the accounts and were admissible to prove the payment of loan given. The suit was decreed by the trial Court and the appeal preferred against it was dismissed by the High Court. In setting aside the decree this Court observed that in the face of the positive case made out by Chandradhar that he did not ever borrow any sum from the Bank, the Bank had to prove that fact of such payment and could not rely on mere entries in the books of account even if they were regularily kept in the corse of business in view of the clear language of Section 34 of the Act. This Court further observed that where the entries were not admitted it was the duty of the Bank, if it relied on such entries to charge any person with liability, to produce evidence in support of the entries to show that the money was advanced as indicated therein and thereafter the entries would be of use as corroborative evidence.
The same question came up for consideration before different High Court on a number of occasions but to eschew prolixity we would confine our attention to some of the judgements on which Mr. Sibal relied. In Yesuvadiyan Vs. Subba Naicker [A. I. R. 1919 Madras 132] one of the learned judges constituting the Bench had this to say: S.34, Evidence Act, lays down that the entries in books of account, regularly kept in the course of business are relevant, but such a statement will not alone e be sufficient to charge any person with liability. That merely means that the plaintiff cannot obtain a decree by merely proving the existence of certain entries in his books of account even though those books are shown to be kept in the regular course of business. he will have to show further by some independent evidence that the entires represent real and honest transactions and that the moneys were paid in accordance with those entries. The legislature however does not require any particular form or kind of evidence in addition to entries in books of account, and I take it that any relevant fact s which can be treated as evidence within the meaning of the Evidence Act would be sufficient corroboration of the evidence furnished by entries in books of account if true." While concurring with the above observations the other learned Judge stated as under:
" If no other evidence besides the accounts were given, however strongly those accounts may be supported by the probabilities, and however strong may be the evidence as to the honesty of those who kept them, such consideration could not alone with reference to s.34, Evidence Act, be the basis of a decree."(emphasis supplied)
In Beni Vs. Bisan Dayal [ A. I. R 1925 Nagpur 445] it was observed tat entries in book s of account are not by themselves sufficient to charge any person with liability, the reason being that a man cannot be allowed to make evidence for himself by what he chooses to write in his own books behind the back of the parties. There must be independent evidence of the transaction to which the entries relate and in absence of such evidence no relief can be given to the party who relies upon such entries to support his claim against another. In Hira Lal Vs. Ram Rakha [ A. I. R. 1953 Pepsu 113] the High Court, while negativing a contention that it having been proved that the books of account were regularly kept in the ordinary course of business and that, therefore, all entries therein should be considered to be relevant and to have been prove, said that the rule as laid down in Section 34 of the Act that entries in the books of account regularly kept in the course of business re relevant whenever they refer to a matter in which the court has to enquire was subject to the salient proviso that such entries shall not alone be sufficient evidence to charge any person with liability. It is not, therefore, enough merely to prove that the books have been regularly kept in the course of business and the entries therein are correct. It is further incumbent upon the person relying upon those entries to prove that the were in accordance with facts.
The evidentiary value of entries relevant under Section 34 was also considered in Hiralal Mahabir Pershad (supra ) I.D. Dua, ]. (as he then was) speaking for the Court observed that such entries though relevant were only corroborative evidence and it is to be shown further by some independent evidence that the entries represent honest and real transactions and that monies were paid in accordance with those entries.
A conspectus of the above decisions makes it evident that even correct and authentic entries in books of account cannot without independent evidence of their trustworthiness, fix a liability upon a person. Keeping in view the above principles, even if we proceed on the assumption that the entries made in MR 71/91 are correct and the entries in the other books and loose sheets which we have already found to be not admissible in evidence under Section 34) are admissible under Section 9 of the Act to support an inference about the formers' correctness still those entries would not be sufficient to charge Shri Advani and Shri Shukla with the accusations levelled against them for there is not an iota of independent evidence in support thereof. In that view of the matter we need not discuss, delve into or decide upon the contention raised by Mr. Altaf Ahmed in this regard. Suffice it to say that the statements of the four witnesses, who have admitted receipts of the payments as shown against them in MR 71/91, can at best be proof of reliability of the entries so far they are concerned and not others. In other words, the statements of the above witnesses cannot be independent evidence under Section 34 as against the above two respondents. So far as Shri Advani is concerned Section 34 would not come in aid of the prosecution for another reason also. According to the prosecution case itself his name finds place only in one of the loose sheets (sheet No. 8) and not in MR 71/91. Resultantly, in view of our earlier discussion, section 34 cannot at all be pressed into service against him.
(underline provided by us)
49. We further find identical issue had come up before various Benches of the Tribunal on the basis of the notings of Mr.Sohan Raj Mehta found during the course of search. We find the Ahmedabad Bench of the Tribunal in the case of Shri Mustafamiya H. Sheikh (Supra) has observed as under:
“7. On a perusal of the seized materials received from the Investigation wing, Pune, the AO had noticed that Page 34 was a summary of the cash payment made by Shri Sohanraj Mehta for the period from April 2003 - August 2006 as per the direction of RMD Group. As per this version, an amount of Rs. 57.50 lakhs pertained to Shri Sheikh Mustafmiya Hussainmiya of Ahmedabad and page 47 was the monthly summary for the month of January - March 2004 of the unaccounted transaction carried out by Shri Sohanraj Mehta C & F of Karnataka Region of RMD Group. After analyzing the issue exhaustively as detailed in the assessment order as well as in the appellate order under dispute, a sum of Rs. 57.5 lakhs in cash as evidenced by the seized documents was treated as unaccounted receipt in the hands of the assessee and, accordingly, added to the income of the assessee for the period under consideration by the AO which has been subsequently sustained by the learned CIT (A) for the detailed reasons recorded in his appellate order which is under scrutiny.
7.1. Admittedly, the whole proceedings were initiated on the strength of a statement of a third party (Shri Sohanraj Mehta). The purported seizure of slips, loose sheets etc. at the premises of a third party contained only the names, but, not other details such as their identity, addresses, contact numbers etc. On a perusal of the statement, it is clear that the payments made were to the persons whose names were appearing on the right side of the papers (sheets) which were paid to those persons on the instructions of PRD & RD. Moreover, against the names of Mustufa & Taufik, it was specifically written as (PRD) expenditure in respect of PRD was given by Shri Sohanraj Mehta as per the telephonic and written instruction of Prakash Rasikal Dhasriwal and Rasiklal Manikchand Dhariwal as per the Statement of Sri Sohanraj Mehta dated 21.10.2009 [Refer: Page 99 of PB AR]. To a question No.14 Exhibit A/M/8/dated 9.10.2009 which contained a bunch of loose sheets serially numbered from 01 to 58 to explain the contents, Shri Sohanraj Mehta answered thus -
"Page 34 records receipt of Gutkha consignment from Dhariwal Industries Ltd., during April 2003 to Jan. 2006 totaling to Rs. 218,00,91,198/- (which is recorded on the left hand side of the page). On the right hand side of the page, parties to whom cash payments were made have been recorded, on instructions from Dhariwal Industries Ltd., The instructions were in the form of slips of paper and they contain the signatures of Mr. Rashiklal Manikchand Dhariwal and his son Mr. Prakash Dhariwal. Such payments totaling to Rs. 206,76,54,463/- were made in 2003-2006. The balance of Rs. 11,24,36,739/- was settled by me subsequently over a period of time."
7.2. Considering the statement of the said person, there is strong force in the contention of the assessee that even assuming that the receipt of such amount was merely a collection for on behalf of the company and such amount cannot par take the character of income in the hands of those persons.
7.3. Moreover, according to the assessee, the searched person being a third party had retracted all the statements recorded during the search proceedings in the following words:
"1. I referred my aforesaid statement recorded by Deputy Commissioner of Income-tax, Central Circle 2(2), Bangalore on 10.8.2011.
2. In this statement dated 10.8.2011 sense conveys that my detailed letter dt.23.12.2009 filed with the Asst. Director of Income-tax (Investigation) Unit 2(1), Bangalore is negated which is incorrect and untrue.
3. Today on 3.12.2011, Saturday I depose in the name of Almighty God that under wrong promises, mistaken beliefs, inadequate guidance and improper advise, I signed the letter dt. 10.8.2011 in the Incometax Department, Bangalore which is absolutely wrong and not the correct version of what I wanted to convey to the Income-tax Department at that point of time.
4. With my this letter specifically addressed to you, I once again state that all my statements recorded during the search proceedings on 10.9.2009 and my statement dated 10.8.2011 recorded at Bangalore before Deputy Commissioner of Income-tax, Central Circle 2(2), Bangalore is retracted un- conditionally by me, it being improper."[Refer: Pages 225 - 27 of the assessee's submission dt.12.12.2012].
7.4. Thus, there is force in the assessee's contention that he should have been afforded an opportunity to cross-examine the third party [ Shri Shohanraj Mehta] since his statements on oath were coupled with inconsistency, he retracted his earlier statements and, thus, not above the board.
7.5. Moreover, the assessee's plea for permission to cross examine Shri Sohanraj Mehta at the assessment stage was not conceded by the AO on the ground that -
"[On page 9 CIT (A)] 2.8........................................................................... Comments of the AO:
(ii) Opportunity of cross examination of Shri Sohanraj Mehta: 'The assessee was provided with the copy of the statement of Shri Sohanraj Mehta recorded by the ADIT (Inv), Pune, along with documents on which his statement was recorded. Due to paucity of time the cross examination could not be granted."
7.6. The CIT (A) had also turned down the assessee's request for cross-examination on the ground that -
"(On page 53) 2.25................It has also been indicated, as borne out on records, that the appellant had asked for cross examination of the party for the first time only on 14.12.2011. The appellant was also fully aware that the limitation to pass reassessment order in the case expires on 31.12.2011. Thus, between 29.3.2011 till 14.12.2011, the appellant did not make any request to the AO that an opportunity of cross examination is required by him. Fully knowing that it would not be possible for the AO to call a party from distant Bangalore and afford the facility of cross examination during a short period of just 12 working days, the appellant makes request for cross examination. There is no denying the fact that cross examination is an inalienable right of an agreed party but it is also true that there has to be a justifiable time frame in which such right can be exercised. It is as settled principle of law that rights and duties under a statute go hand in hand and cannot be exercised in isolation. The appellant truly had the right to cross examination but at the same time had the duty to ask for it within a reasonable time frame. A right exercised with ulterior motives does not possess the sanction of law. Facts of the case clearly indicate that the appellant had purposefully demanded cross examination at a time when it was considered impractical and unfeasible....."
7.7. In essence, the principles of natural justice on the legitimate request of the assessee, to cross examine the third party on the basis of whose statement the impugned addition sought to be added to his income, has been denied on flimsy grounds.
7.8. At this point of time, we shall analyze the judicial pronouncements on a similar issue, as under (PB -184):
(i) the Hon'ble jurisdictional High Court in the case of DCIT v. Mahendra Ambalal Patel reported in (2010) 40 DTR (Guj) 243 had held as under:
"From the findings recorded by the Tribunal it is apparent that though it is the case of Revenue that the land has been sold by the assessee to GC through MV, there is no material on record to indicate that the said land in fact belongs to the assessee. Though the AO has placed reliance upon the statements of MV and GC for the purpose of taxing the amount in the hands of the assessee, despite specific request being made by the assessee for cross- examining both the said persons, the AO has not permitted the assessee to cross-examine them. In the circumstances, no reliance could be placed upon the statements of the said persons as the assessee had no opportunity to cross-examine them. The statements made by the aforesaid persons would have no evidentiary value and as such, would not be admissible in evidence. Further, though the said MV has stated that he has paid Rs. 60 lakhs to the assessee on behalf of one GC, the said amount has not been taxed in the hands of GC. Moreover, no evidence has been adduced to indicate that any transaction in relation to the land in question has actually taken place. The Tribunal has rightly found that the basis for making the addition in the case of the assessee is merely a bald statement of MV, which is not corroborated with any documentary evidence found at the time of search, either in the case of S or MV or the assessee. No plea to the effect that the impugned order of the Tribunal suffers from any perversity has been raised. The Tribunal having based its conclusion on findings of fact recorded by it after appreciation of the evidence on record, it cannot be stated that the impugned order of the Tribunal suffers from any legal infirmity............"
(ii) During the course of hearing of a reference application of the Revenue in the case of DCIT (Asst) v. Prarthana Construction Pvt. Ltd [Tax Appeal No.79 of 2000 dated 25.3.2001] before the Hon'ble jurisdictional High Court, the learned Counsel for the assessee submitted that the documents in question have been found from the premises of a third party. The loose papers cannot be stated to be books of account in the light of the decision of the Supreme Court in the case of CBI v. V.C. Shukla and others (1998) 3 SCC 410 as observed by the Tribunal and submitted that the Tribunal has based its conclusions on the findings of fact recorded by it upon appreciation of the evidence on record; that the Tribunal had examined the facts and circumstances of the case and had come to the conclusion that the Revenue had not been able to establish its case against the assessee and as such, the order of the Tribunal being based upon findings of fact recorded by it, does not give rise to any question of law. It was, further, submitted on behalf of the assessee that the entire case of the revenue was based upon documents recovered during the course of search from the premises of third parties and the statements of the third parties and that the assessee was not granted an opportunity to cross examine the third parties and as such their statements have no evidentiary value.
After due consideration of rival submissions and also taking into account the reliance placed by the assessee's counsel in the cases of (i) Kishinchand Chellaram v. CIT (1980) 125 ITR 713 (SC) &
(ii) CIT v. S.C. Sethi (2007) 295 ITR 351 (Raj), the Hon'ble Court had held thus:
"[PB - 174] 16. Thus, it is apparent that the conclusions arrived by the Tribunal are based upon the aforesaid findings of fact recorded by it upon appreciation of the evidence on record. On behalf of the revenue nothing is pointed out to show that the findings recorded by the Tribunal are in any manner perverse, nor is it the case of the revenue that the Tribunal has taken into consideration any irrelevant material or that any relevant material has been ignored. The conclusion arrived at by the Tribunal on the basis of the findings of fact recorded by it cannot in any manner be said to be unreasonable. In the aforesaid premises, the impugned order of the Tribunal being based upon findings of fact recorded by it upon appreciation of the evidence on record, which findings have not been dislodged by the revenue by pointing out any evidence to the contrary, therefore, does not warrant any interference."
7.9. Taking into account the submissions of the assessee, the stand of the AO, reasoning of the CIT (A) in sustaining the action of the AO and also in conformity with the rulings of the Hon'ble jurisdictional High Court (supra), we are of the considered view that that learned CIT (A) was not justified in sustaining the addition of Rs. 57.5 lakhs made by the AO in the hands of the assessee for the following reasons:
(i) that the learned AO had solely depended upon the information received from the Investigation Wing of Pune;
(ii) that the AO had failed to substantiate the same with any credible documentary evidence to the effect that the assessee had indeed received the alleged cash payment of Rs. 57.5 lakhs from Shri Sohanraj Mehta as the assessee had categorically pleaded before the AO that he was making purchases through Ambika Distributors who were the C & F Agents for Gujarat Region;
(iii) that the total unaccounted sales effected by Shri Sohanraj Mehta C & F of RMD Gutkha on behalf of Dhariwal Industries Limited for the period of April 2003 to Feb 2008 was Rs. 345.72 crores (approx). The unaccounted income for the AY 2004-05 was arrived at Rs. 40,88,32,514/-, the same was added substantively in the case of M/s. Dharival Industries Limited and concluded the assessment for the AY 2004-05 u/s 153A r.w.s. 143 (3) of the Act, dated 29.12.2011 by the ACIT, C.C. 1(1), Pune [Courtesy: P 231 - 238 of PB AR];
(iv) that once the alleged sum of Rs. 57.5 lakhs was subjected to tax in the hands of Dhariwal Industries Limited, the same cannot be subjected to suffer further tax. This view has been fairly conceded by the CIT (A) "(On page 54) 2.27.......The appellant is right to the extent that no income can be taxed twice......"
(v) that the AO had candidly admitted that during the course of assessment proceeding itself the assessee had sought permission to cross examine Shri Sohanraj Mehta which was summarily rejected by taking refuge ".....Due to paucity of time, the cross examination could not be granted"
[Refer: Para 2.8 (Page 10) of the CIT (A)'s order].
This stand of the AO, to view it mildly, is against the spirit of judicial pronouncements;
(vi) that the AO had merely come to a conclusion based on a statement of a third party, without bringing any credible documentary evidence to the contrary on record to nail the assessee; &
(vii) No reliance can be placed on the statements of a third person whose premises were subjected to a search since he had retracted his own statement made earlier on oath and precisely the assessee has been denied to cross-examine him to bring out the truth.
7.9.1 For the above said reasons, we hereby hold that the addition made for Rs. 57,50,000/- by the learned AO on account of undisclosed income, which was further sustained by the learned CIT(A) requires to be deleted and accordingly, we hereby direct the revenue to delete the same. Thus, ground No.1 raised by the assessee with respect to reopening of the assessment u/s 148 of the Act is dismissed and ground No.2 with respect to addition on account of undisclosed income is allowed in favour of the assessee.”
50. We find the Bangalore Bench of the Tribunal in the case of DCIT Vs. H.S. Chandramouli (Supra) had also an occasion to decide an identical issue and deleted the addition by observing as under :
“13. We have considered the submissions of the learned DR. It is seen that the document in question was seized from the possession of one Mr. Sohanraj Mehta. The seized document makes a reference to the name of the assessee and a figure of Rs. 22.75 lakhs appears against his name. As to whether this document evidences payment of Rs. 22.75 lakhs to the assessee is a moot question. There is no basis set out in the order of the AO for coming to the conclusion that the seized document evidences receipt of money by the assessee from Sohanraj Mehta. The presumption u/s. 292C of the Act is only with reference to the person searched and it cannot be extended to the assessee. There is no corroborative evidence or statement of Sohanraj Mehta relied upon by the AO, to the effect that a sum of Rs. 22.75 lakhs was paid to the assessee. The assessee has categorically denied having received any payment from Sohanraj Mehta. Even in the proceedings before the AO, when the assessee was examined, he had taken the same stand. The details called for in the scrutiny assessment did not call for any specific details on the seized document or receipt of cash based on the seized document.
14. In the light of these circumstances, the CIT(Appeals) was justified in coming to the conclusion that no evidence has been brought on record to prove that the assessee received the sum of Rs. 22.75 lakhs from Sohanraj Mehta. The addition made by the AO was therefore rightly deleted by the CIT(A). We do not find any ground to interfere with the order of the CIT(Appeals).”
51. We find the Lucknow Bench of the Tribunal in the case of M/s. Mohd. Ayub Mohd. Yakub Perfumers Pvt. Ltd., (Supra) while deleting the addition under identical facts and circumstances as held as under :
“2. The facts in brief borne out from the record are that during the course of search conducted upon Shri. Sohanraj Mehta, C&F of RMD Gutkha group in Bangalore, statement of account was seized in which there was an entry of Rs. 50 lakhs in the name of Malik Kannauj. This entry was interpreted by the Revenue as this amount was given to Shri. Abdul Malik, MD of the assessee-company. On the basis of seized documents, the Assessing Officer has formed a belief in the assessee's case that the income chargeable to tax has escaped assessment, as this amount was not shown by the assessee in its books of account. Accordingly a notice under section 148 of the Income-tax Act, 1961 (hereinafter called in short "the Act") was issued and assessment was completed under section 147 of the Act read with section 144 of the Act in the hands of the assessee, resulting into an addition of Rs. 10.48 lakhs as profit on this unaccounted sale of Rs. 50 lakhs.
3. An appeal was preferred before the ld. CIT(A) with the submission that no document indicating payment of Rs. 50 lakhs to the assessee- company was found during the course of search. Only dumb documents were found in which there was a debit entry of Rs. 50 lakhks in the name of Malik Kannauj. Even in the statement of Shri. Sohanraj Gupta, there was no mention of the Director of the assesseecompany, Shri. Abdul Malik. Therefore, the ld. CIT(A) came to the conclusion that in the absence of any evidence involving the assessee to the alleged receipt of Rs. 50 lakhs, reopening in the hands of the assessee under section 147 of the Act is not proper and he accordingly annulled the assessment.
4. Aggrieved the Revenue has preferred an appeal before the Tribunal and reiterated its contentions. During the course of hearing, a specific query was raised from the ld. D.R. as to what evidence they have collected during the course of search or thereafter, on the basis of which the Assessing Officer has formed a belief that the income chargeable to tax has escaped assessment in the hands of the assessee. No satisfactory answer was furnished by the ld. D.R. We have also carefully perused the seized documents and we find that there is a debit entry of Rs. 50 lakhs in the name of Mlik Kannauj, but this entry does not indicate that the amount of Rs. 50 lakhs was given to the Managing Director of the assessee. There may be hundred of Malik in Kannauj but on the basis of this dumb document, the reopening of assessment in the hands of the assessee is not permissible. Moreover, the searched party has also examined Shri. Sohanraj Gupta and the statement is also placed on record and at nowhere Shri. Sohanraj Gupta has deposed about payment of Rs. 50 lakhs to the assessee. In the absence of any relevant material, the reopening of assessment in the hands of the assessee is not proper. The ld. CIT(A) has given valid reasons while holding that the reopening is bad. The relevant observations of the ld. CIT(A) are extracted hereunder:-
"5.1.6 From all the aforesaid correspondence, it is obvious that there is no clue as to how the identity of "MALIK Kannauj" as appearing in the seized document (supra) was interpreted as Shri Abdul Malik, MD of the appellant company. In the statement given by Shri Sohanraj Gupta, there is no mention of any Malik. Further, in his statement under oath before the ADIT(lnv), Kanpur, Shri Abdul Malik, the M.D. of the appellant company had denied such transaction. In these circumstances, I fail to understand as to how, the A.O. formed the belief that the entry in the name of "Malik Kannauj" (as appearing in the seized document) referred to Shri 'Malik, M.D. of the appellant company. Further, even for argument sake if "Malik Kannauj" indeed referred to Shri Abdul Malik, the M.D. of the appellant company, there was no evidence/material on record which could link that payment to the assessee company. Just because the ADIT (Inv), Kanpur had informed the A.O. that the entry of paymen of Rs. 50 Lakhs (as mentioned in the seized document) to one "Malik Kannauj" related to the Appellant company (without any supporting in this regard), to same could not have been the basis for the A.O. to initiate the reassessment proceedings in the case of the appellant company. It is a trite law that the "reasons to believe" for reopening the case should be that of the A.O. alone and could not be formed at the dictates of others or on suspicion, conjectures or surmises.
5.1.7 In the instant case, in my considered view, the A.O. had no material before him which could link the said payment to the appellant company. The "reasons to believe" in the case have been recorded on irrelevant material. On the basis of such material, no prudent man could have formed the belief that income had escaped asstt. in the hands of the appellant company. Accordingly, I hold that the very assumption of jurisdiction by the A.O. under section 147 of the Act was illegal and, therefore, any asstt. framed pursuant to such illegality cannot be sustained. Thus, the whole asstt. framed u/s 147 is hereby annulled, While taking this view, I am fortified by the decisions of the Hon'ble Apex Court in fie case of CIT vs Daulat Ram Rawat Mull (87 ITR 349) wherein, it was held:
'there should, in our opinion, be some direct nexus between the conclusion of fact arrived at by the authority concerned and the primary facts upon which the conclusion is based. The use of extraneous and irrelevant material in arriving at that conclusion would vitiate the conclusion of facts.............................."
In the result, the appeal is allowed."
5. Since we do not find any infirmity in the order of the ld. CIT(A), we confirm his order.”
52. Similarly the Lucknow Bench of the Tribunal in the case of DCIT Vs. Pawan Kumar Agarwal (Supra) has held as under :
“5. We have considered the rival submissions. We find that the issue in dispute was decided by learned CIT(A) as per para 7 & 7.1 of his order, which is reproduced below for the sake of ready reference:-
“7. That vide grounds No. 3 to 7, assessee has challenged the additions of Rs. 1,13,40,000/- made on account of alleged undisclosed income. I have carefully considered the rival submissions and perused the material on record. I have also gone through the order of the A.O. It was contended by the learned AR before me that mere jottings and notings should not be the basis for making any addition in the returned income, more particularly when A.O has not allowed the opportunity of Cross Examination of Mr. Shobhan Raj Mehta. The material provided/gathered by the department has also been produced before me. In this paper, it is seen that name of assessee is appearing. It was vehemently argued before me that how the department comes into conclusion that name Pawan Agarwal as appearing in the seized material is appellant. The name of appellant is very common and it is possible to be some other Pawan Agarwal instead of appellant. The submissions of the appellant are considered. On examination of the assessment record it is seen that the appellant categorically denied having any financial or business transaction with Sh.Shobhan Raj Mehta. A request was also made to provide complete statements on the basis of which addition was being contemplated by the assessing officer. However, the assessing officer did not provide the copies of those statements. During the course of assessment proceedings, the assessing officer did not throw any light on any inquiry/ investigation carried out by him that could justify the additions made by him. That assessee has vehemently stated that the department has not proved that the identity of Shri Pawan Agarwal with the assessee and no slip, letter, document etc. showing any relationship of assessee with Shri Shobhan Raj Mehta were not found from the possession of Shri Shobhan Raj Metha. The A.O has required assessee's copy of accounts in the books of M/s. Dhariwal Industries, Pune and this was found verified from the assessee's books of A/c. It is clear that the assessee has business relationship with M/s. Dhariwal Industries, Pune and not with the Shobhan Raj Mehta. Therefore, it is clear that the addition made by the Assessing Officer purely based on guess work without any evidence, therefore this addition deserves to be deleted.
7.1 From the facts enumerated above, it is clear that the assessing officer failed to establish any case against the appellant. Further inquiry/ investigation was required to be carried out on the information passed by the ADIT(Inv.)- III, Kanpur but evidences are not collected or placed. Copies of the statements, on the basis of which additions has been made, were not provided nor was the opportunity of cross- examination given to the appellant. The assessing officer merely summarized the salient features of the report of the ADIT (Inv.)-III, Kanpur and thereafter summarily rejected the reply of the appellant as not satisfactory. Learned counsel for the assessee, on the other hand, contends that neither the said Shri Shobhan Raj Mehta was allowed to be cross-examined nor a copy of his statement was given despite several requests. The AO's contention to the effect that the contents of the statement were made known to the assessee, is not a compliance of mandatory requirement to provide the assessee incriminating material to defend its own case and therefore it can categorically be held that:
(i) Statement of Shri Shobhan Raj Mehta was not given to the assessee.
(ii) Beyond the belief of presumption on the information supplied by the ADIT(Inv.)-III, Kanpur, further evidences are not found to corroborate the additions.
(iii) Cross-examination of Shri Shobhan Raj Mehta was not allowed.
(iv) The assessee firm had strongly denied having any financial and business transactions with Mr. Shobhan Raj Mehta.
In view of these factual exigencies, it is held that the addition made by the AO, without any corroborative evidence, was unjustified and accordingly deleted. Accordingly, ground No. 3 to 7 raised by appellant are allowed.”
5.1 From the above Para from the order of CIT(A), we find that a categorical finding has been given by him that statement of Shri Shobhan Raj Mehta was not given to the assessee and beyond the belief of presumption on the information supplied by the ADIT(Inv.)- III, Kanpur, further evidences are not found to corroborate the additions. He has also given a finding that Cross-examination of Shri Shobhan Raj Mehta was not allowed and the assessee firm had strongly denied having any financial and business transactions with Mr. Shobhan Raj Mehta. These findings of CIT(A) could not be controverted by Learned D.R. of the Revenue and moreover, the name of the assessee i.e. Pawan Kumar Agarwal is very common name and merely because this name is mentioned in a seized paper found during the course of search at Bangalore at the premises of Shri Shobhan Raj Mehta, with whom the assessee was not having any direct transaction, it cannot be said that the said Pawan Kumar Agarwal, of whom the name was mentioned in the seized paper is the assessee. Without establishing this aspect that the name mentioned in the seized paper is that of the assessee, no addition can be made in the hands of the present assessee on the basis of such seized paper. Considering these facts, we do not find any reason to interfere in the order of CIT(A).”
53. We find the Delhi Bench of the Tribunal in the case of M/s. Bhola Nath Radha Krishan (Supra) while deleting an identical issue has observed as under :
“7. After considering the arguments of both the sides and the facts of the case, we do not find any infirmity in the above order of learned 7 ITA-5149/Del/2012 CIT(A). The addition has been made on the basis of certain chits found from Shri Sohan Raj Mehta and his statement. Admittedly, the assessee has no dealing with Shri Sohan Raj Mehta. The assessee is supplying goods (Supari) to RMD Group who are manufacturing Gutkha. Shri Sohan Raj Mehta is C&F agent for Karnataka region of RMD Group. The search had taken place at the assessee's business premises as well as at the business premises of RMD Group. No evidence of any unrecorded sale by the assessee or unrecorded purchase by RMD Group was found. Thus, when, despite search at the premises of seller and buyer, no evidence of any unrecorded sale or purchase is found, in our opinion, merely because in the chits found at the premises of some third party with whom the assessee has no business dealing, it cannot be presumed that the assessee is making sales outside books. Moreover, as per chits found from Shri Sohan Raj Mehta, the payment made to the assessee is only Rs. 9 lakhs and not Rs. 9 crores. The department has also relied upon the statement of Shri Sohan Raj Mehta. It was pointed out by the learned counsel that Shri Sohan Raj Mehta retracted his statement. However, as per Revenue, Shri Sohan Raj Mehta has retracted his retraction affirming the original statement. On these facts, the learned CIT(A) has come to the conclusion that the statement of Shri Sohan Raj Mehta cannot be relied upon because he is frequently retracting his statement. Moreover, a statement of a third party cannot be used against the assessee unless the assessee is allowed an opportunity to cross-examine him. Now, we find that during the assessment proceedings, the assessee specifically requested for allowing opportunity to cross-examine Shri Sohan Raj Mehta also and requested the Assessing Officer to supply the copy of retraction of his statement. The Assessing Officer has reproduced the assessee's letter, paragraph No.11 of which, reads as under:-
"11. The assessee had requested your good self to provide the following documents:
(a) Copy of the Sworn Statement of Sh. Sohanraj Mehta.
(b) Copy of written statements or Affidavits obtained from Sh. Mehta wherein he has mentioned that Rs. 9 crore was payable to the assessee.
(c) Copy of subsequent retraction of the statements made at the time of search operation, if any.
(d) Copy of receipts obtained from the assessee by Sh. Sohanraj Mehta on payment to the assessee, if any.
The assessee has been provided statement of Sh.Sohan Raj Mehta. However, it is further submitted that the assessee should be given the opportunity to cross examine the genuineness of the statements of Sh. Sohan Raj Mehta and should be given reasonable opportunity to verify the claims made by him. In the case of Kishan Chand Chelaram (125 ITR) it has been held by the Hon'ble Supreme Court of India that before taking a decision the assessee has to be allowed a chance or an opportunity of rebuttal with respect to the documents which are to be used against hte assessee. The assessee has gone through the entire statements of Sh. Sohan Raj Mehta recorded under section 132(4) of the Income Tax Act. Nowhere there is any mention of Bhola Nath Radha Kishan or any of its partner in the said statement. The assessee cannot be held liable for any act of the omission or commission done by him. Mr. Sohan Raj Mehta's statement regarding decoding of figures is also not applicable on the assessee since this has no bearing or nexus of connection with the assessee firm or its business transaction. No addition or adverse decisions can be taken on the basis of surmises and/or conjectures. There has to be specific mention of M/s Bhola Nath Radha Kishan, 6377, Naya Bans, Kahri Baoli, New Delhi in order to link any payment to it from Mr. Sohan Raj Mehta or anybody else..........."
(emphasis by underlining supplied by us)
8. The Assessing Officer has dealt with this letter but he has not given any reason for not allowing the assessee an opportunity to cross-examine Shri Sohan Raj Mehta. Similarly, he has neither supplied the copy of retraction of his statement nor dealt with the retraction in the 9 ITA-5149/Del/2012 assessment order. It is only in the remand report he has mentioned that Shri Sohan Raj Mehta has retracted his retraction also. Considering the totality of above facts, we entirely agree with the learned CIT(A) that the statement of Shri Sohan Raj Mehta cannot be used against the assessee and, similarly, the chits found from the third party, with which the assessee has no dealing, cannot be used against the assessee in the absence of any corroborative evidence. That merely because some excess stock was found in the survey for which separate addition has already been made, it cannot be further presumed that the assessee made sales outside the books, specially when the survey was followed by the search and neither during the course of survey nor during the course of search, any evidence of sale outside the books was found. In view of the totality of above facts, we do not find any justification to interfere with the order of learned CIT(A). The same is sustained.”
54. We find the Pune Bench of the Tribunal in the case of Pradeep Amrutlal Runwal reported in 149 ITR 548 while deleting addition under identical facts and circumstances has observed as under :
“5. After going through the rival submissions and material on record, we find that the issue before us is regarding the addition of 5,10,00,000/-. As stated earlier, during the search proceedings in the case of Dhariwal Group, some loose papers were seized wherein certain amounts were written against the name of 'Pradeep Runwal'. Hence, the case of the assessee was reopened u/s 148 of the Income Tax Act. It was explained to the learned Assessing Officer that the assessee had not earned any such income of 5.10 crs. and therefore, no addition should be made. However, the Assessing Officer has not accepted the contention of the assessee.
5.1 The Assessing Officer has stated that the papers were seized from Dhariwal Group. The said papers were seized from the residence of Shri Sohanraj Mehta. According to the Assessing Officer, the assessee could not disown the existence of such documents. The Assessing Officer observed that the money has been passed on by Dhariwal Group through their staff. Hence, the assessee must have received the amount noted on the seized papers. The Assessing Officer has proceeded to make the addition of 5.10 crs. by stating that as per section 114 of the Indian Evidence Act, it is an accepted rule of evidence that if a person possessing an evidence does not produce it, the inference is that such evidence if produced is detrimental to him. Accordingly, the Assessing Officer held that the said receipts were the income of the assessee.
5.2 The Assessing Officer has further held that according to the provisions of section 80 of the Indian Evidence Act, there is a presumption as to the documents produced as record of evidence are genuine. Hence, he has held that the documents seized from Dhariwal Group could be relied upon for making addition in the hands of the assessee. The Assessing Officer has placed reliance on the decisions of Sumati Dayal vs. CIT [(1995) 214 ITR 801(SC)], CIT vs. Durga Prasad More [(1969)72 ITR 807(SC], Himmatram Laxminarain vs. CIT [(1986)161 ITR 7(P&H)], CIT vs. Ganapathi Mudaliar [(1964)53 ITR 623(SC)] and CIT vs. Lacchman Dass Oswal [(1980)126 ITR 446(P&H)].
5.3 According to us, the additions made by the Assessing Officer were not justified in the facts and circumstances vis-à-vis of the assessee. As discussed earlier, during the course of search in the case of Dhariwal Group, the only documents found on the basis of which the addition u/s 69A has been made in the case of the assessee are in the form of two loose papers wherein amounts of 4.80 Crores and 30 lacs were noted against the name "Mr. Pradeep Runwal". Apart from this, no evidence has been found to suggest that the assessee had actually received the said amount or that the assessee had entered into any transaction with Dhariwal Group. There is no evidence on record to suggest that the assessee has previous business relations with the Dhariwal Group. In the absence of any documentary evidence to suggest the same, it could not be presumed that the amounts reflected in the loose papers were the income of the assessee received from Dhariwal Group. It has been the consistent stand of the assessee that there may be many persons of the name Pradeep Runwal in Pune and there was no specific evidence to suggest that the said notings pertained to the assessee. Hence, it was not justified as to how, in the absence of any other corroborative details, the Assessing Officer has assumed that the amounts reflected the income of the assessee himself, while the assessee has no business dealings of his with Dhariwal Group. The Assessing Officer has not brought on record any evidence to suggest that Dhariwal Group has admitted that the amounts were paid to the assessee. Hence, simply because the name of the assessee is noted on the seized papers does not mean that the addition could be made in the hands of the assessee. Since no evidence was found relating to the existence of any transaction between the assessee and Dhariwal Group and in the absence of any corroborative evidence to suggest that the assessee had actually received the said amount, no addition could be made merely on the basis of noting in loose papers found during the search proceedings in the case of Dhariwal Group against the name of the assessee.
5.4 The presumption u/s 132(4A) is available only in respect of the person from whom the paper is seized. It could not be applied against a third party and hence, no addition could be made on the basis of the evidence found with third party. The presumption u/s. 132(4A) could be used only against the person from whose premises the documents are found and not against the person whose name appears in the seized papers.
5.5 In this case, the addition has been made on the basis of the documents found with Dhariwal Group and thus, the presumption u/s. 132(4A) could not be used against the assessee since no incriminating documents were found with it. In the case of ACIT Vs. Lata Mangeshkar (Miss) (1974) 97 ITR 696 (Bom), the addition was made in the hands of the assessee on the basis of the entries in the books of third persons. Hon'ble Bombay High Court held that such addition could not be made only on the basis of the notings in the books of third persons. The facts of the present case are covered by the decision of Lata Mangeshkar (supra). It is a settled legal position that the decision of jurisdictional High Court is binding on all authorities below it. Thus, the reliance placed by the Assessing Officer on the loose papers is not justified at all. Therefore, the question of making any addition is not justified in the absence of other corroborative evidence to that effect.
5.6 Without prejudice to the above, the learned Authorized Representative submitted that the Assessing Officer was not justified in making the additions by relying on the provisions of section 114 of the Indian Evidence Act. The concerned Assessing Officer has referred the aforesaid section which states that the court may presume that the evidence which could be and is not produced would, if produced be unfavourable to the person who withholds it. It is pertinent to mention this rule applies to the cases wherein it is evident or an established fact that a particular evidence or document was in possession of the assessee. For example, an owner of a land may well be expected to be in possession of a 7/12 extract of the said land in order to check whether the said land was used for agricultural purposes. In the present case, the provisions relied by the Assessing Officer are not applicable, the assessee is not withholding any documents. The case of department is that the amount mentioned on the seized paper found with the Dhariwal Group indicates that the assessee has received the amount, therefore, the burden was on the Assessing Officer to establish the same. The reliance placed on the provisions of section 114 of Indian Evidence Act is misplaced.
5.7 As stated above, it has been consistent stand of the assessee that the assessee has had no business relations whatsoever with the Dhariwal Group. Further, apart from the noting on paper with the name 'Pradeep Runwal, there is no corroborative evidence in this regard against the assessee. In such circumstances, where the assessee has not entered into any transaction with the Dhariwal Group, one certainly could not expect the assessee to be in possession of any evidence to suggest that it has not entered into any such transaction except for his books of account which have already been verified by the concerned Assessing Officer. Hence, the Assessing Officer was not justified in placing reliance on the provision of section 114 of the Indian Evidence Act.
5.8 It was further submitted on behalf of assessee that the Assessing Officer was not justified in making the addition by relying on the provisions of section 80 of the Indian Evidence Act which states that there is a presumption that the documents produced before the court as record of evidence are genuine. In this regard, the stand of the assessee is that in the case of assessee, document produced was merely in the form of a rough noting wherein certain amounts were written against the name 'Pradeep Runwal'. As discussed earlier, there may be many people of that name in Pune and in the absence of any other corroborative evidence to that effect. In such a situation, it cannot be inferred that it belongs to the assessee.
5.9 While making the addition of 5.10 crores as stated above, the CIT(A) relied on the following decisions of Sumati Dayal vs. CIT [(1995) 214 ITR 801(SC)], CIT vs. Durga Prasad More [(1969)72 ITR 807(SC], Himmatram Laxminarain vs. CIT [(1986)161 ITR 7(P&H)], CIT vs. Ganapathi Mudaliar [(1964)53 ITR 623(SC)] and CIT vs. Lacchman Dass Oswal [(1980)126 ITR 446(P&H)]. In this regard, the stand of the assessee has been that the case laws relied by the Assessing Officer are differentiable on facts and hence, the same are not applicable to the case of the assessee. In all the cases relied by the Assessing Officer, the fact that the assessee had actually earned income or received amounts by way of cash credits, unexplained investment etc. was not under dispute. The issue related to whether the receipts were received from genuine lenders or whether the investments or receipts were a part of the disclosed sources of income of the assessee. We find that in the present case, the issue in question itself is whether rough noting on loose paper found in the course of search at the premises of third person could be assumed the income from the assessee as in the cases relied by the Assessing Officer. This fact has not been established in the case of assessee, therefore, the case laws relied by the Assessing Officer are clearly distinguishable on facts and hence, not applicable to the case of the assessee.
5.10 According to CIT(A), the name of the assessee appears on the seized papers and seized documents give a detailed and minute noting of the transactions of Dhariwal Group. He has stated that Shri Sohanraj Mehta has admitted that the documents were written by him and most of the papers were written in marwadi language. The CIT(A) referred to the fact that Shri Mehta had admitted that the papers belonged to Dhariwal Group. In para 4.3, the CIT(A) states that when the author of the paper has accepted the notings made by him, in that event, the document is having great evidentiary value and could not be rejected. As regards, the objection of the assessee that no evidence was found to indicate that the assessee had received the amount, the CIT(A) referred to the fact of acceptance of the paper by Shri Mehta and considering the fact that the modus operandi was clarified by Shri Mehta, the addition was rightly made by the Assessing Officer, has been held by CIT(A). He has referred to various decisions in support of the addition made. Firstly, he has relied upon the decision of ITAT Third Member in the case of Khopade Kisanrao Manikrao [74 ITD 25]. In this regard, the stand of assessee is that the decision in the case before Third Member was not applicable to the facts of the present case. In the said case, the assessee was searched and documents were found indicating on money received on sale of plots. On the basis of the documents found, the Assessing Officer estimated the income from on money which was held to be valid. In that case, the issue that no addition could be made on the basis of documents found with third party was neither raised nor applicable. Thus, according to us, the said decision has no application to the facts of the assessee's case.
5.11 The CIT(A) in para 2.5 has placed reliance upon ITAT, Pune decision in the case of Dhanvarsha Builders and Developers Pvt. Ltd. [102 ITD 375]. In the said case, the assessee was searched and documents were found indicating on money received by the assessee. It was held that the document was found with the assessee and therefore, the A.O. was justified in making the addition. Even in this case, the issue of no addition can be made on the basis of documents found with third party was not raised. The CIT(A) has further referred to the decision of ITAT, Mumbai in the case of P. R. Patel Vs. DCIT [(2001) 78 ITD 51 (Mum)] for the proposition that seized papers cannot be called dumb paper because they indicate date, amount and calculation. There is no dispute with the above proposition. The papers are found pertaining to Dhariwal Group as admitted by Shri Mehta and therefore, these documents may be relevant for deciding the issue in the case of Dhariwal Group. However, in the absence of any corroborative evidence, the addition could not be made in the hands of the assessee on the basis of the said papers.
5.12 The CIT(A) has further relied upon ITAT Third Member decision in the case of Dhunjibhoy Stud and Agricultural Farm Vs. DCIT [(2002) 82 ITD 18 (PUNE)(TM)], In this case, the assessee was a builder and had sold flat to one Mr. Tanna. There was search on Mr. Tanna wherein a document was found indicating flat purchased from the assessee firm and the amount of cheque and cash paid. The amount of cheque paid was tallying with the books and therefore, it was held that cash was paid as noted on the paper. Mr. Tanna had also accepted the fact that cash was paid to the assessee. In these facts, ITAT held that since there was transaction between assessee and Shri Tanna and also the fact that the amounts paid by cheque tallied, the addition was rightly made. The assessee rightly submitted that the said decision is not applicable to the facts of the present case. Firstly, there is no transaction between the assessee and Dhariwal Group. Secondly, there is no corroborative evidence found which could suggest that the assessee had received any amount. The Assessing Officer and CIT(A) have also not brought on record any evidence to suggest that the payment was made to the assessee. Accordingly, considering the factual position, the decision in the case of Dhunjibhoy Stud and Agricultural Farm is not applicable in the case of assessee.
5.13 The CIT(A) has relied on the decision in the case of Vasantibai N. Shah Vs. CIT [(1995) 213 ITR 805 (Bom)]. In this case, the issue was regarding validity of reassessment proceedings. The assessee had made a false disclosure. Subsequently, the case was reopened. Hon'ble High Court held that the reopening was valid since the assessee herself had made a false disclosure. Thus, the facts are totally different from the present case and hence, the ratio of Vasantibai N. Shah (supra) is not applicable to the assessee's case. The CIT(A) further relied on the decision in the case of Green Valley Builder v. CIT [(2008) 296 ITR 225 (Ker)]. In the said case, the assessee was engaged in real estate business and it had sold certain plots. The assessee stated that the plots were sold at Rs. 1750/- per cent while the Assessing Officer on the basis of evidences held that actually the lands were sold at Rs. 4,000/- per cent. Hon'ble High Court held that the additions made were correct. The said decision is not applicable to the facts of the present case. The CIT(A) has further relied upon the decision in the case of Chuharmal Vs. CIT [(1988) 172 ITR 250 (SC)] for the proposition that documentary evidence plays an important part. There is no dispute to the said proposition but in the absence of any corroborative evidence no addition could be made in the hands of the third party.
5.14 We find that in Thakkar Developers Ltd. [IT A No. 581/PN/08], ITAT in paras 3 and 4 held as under:-
"The above said Shri Kolhe was examined, cross examined and reexamined and no evidence was gathered from him to establish that the contents of the seized documents were correct and true. Thus, in the absence of any corroborative evidence in the present case, the said seized document has to be treated as a dumb document as rightly observed by the CIT(A). The A.O. dismissed the retraction of the statement dated 29.03.2003 by filing an affidavit as an after thought and self serving. The A.O. concluded that the facts mentioned in the seized documents clearly indicated that the statement given on 29.03.2003 was true and correct. The A.O. has not brought on record any material or corroborative evidences to come to these conclusions. The reasons given by the A.O. in this regard are without any basis and support. The affidavit filed by Shri Kolhe remained uncontroverted and which is against the settled legal position on the issue that the contents of the affidavit be rejected by confronting the same to the deponent which is missing in this case. Nothing was shown by the A.O. that there was any other material co related to the seized documents. The A.O. was not justified in rejecting the contents of the affidavit as mentioned above. The A.O. further relied on the presumptions u/s 132(4A) of the Act on the ground that this section was very clear that the contents of book of account and other documents may be presumed to be true and presumption can be drawn even on the third person who was not searched u/s 132 of the Act. The A.O. further rejected the submissions given by the assessee in his paper book dated 28.12.2007 reiterating the same stand. The A.O. has drawn inferences and presupposes relying on surmises and conjectures. The ITAT Mumbai Bench in their decision in the case of Straptex (India) Pvt. Ltd. [84 ITD 320 (Mum), clearly held that the presumption u/s 132(4A) is applicable only against the person from whom possession the books of accounts or other documentary were found and not against any other person. It is held that as per Section 132(4A) where any books of account or document is found in the possession and control of any person in the course of the search, it is to be presumed that they belong to " such person". Thus, clearly the presumption is in respect of the person from whom they were found. The use of the word "to such person" in the said Section means the person from whom the books of account or documents were found. Clause (ii) of Section 132 (4A) provides that the contents of such books of account or documents are true. This presumption can be applied only against the person from whose possession the books of account or the document were found. Therefore, the A.O. was not justified in applying the provisions of Section 132(4'A) to the assessee in the present case who was not searched u/s 132 of the Act nor the document was found and seized from, their possession. Even, otherwise, such presumption u/s 132(4A) of the Act is not conclusive and rebuttable one".
6. Similar view has been taken by ITAT, Pune in Amit D Irshid [ITA No.988/PN/11] that presumption u/s. 134(4A) is available only against the person from whose possession the document is found and not against the third person. In the absence of clinching evidence against the third person as stated above, no action could be taken against him. In such a situation, the Assessing Officer was not justified to make addition in question in assessee's case. In view of above, we are of the view that the addition made by the Assessing Officer is not justified and the same is directed to be deleted. It is pertinent to mention here that this case is being decided in its facts and circumstances; it cannot be applied to other cases as such.
7. In the result, appeal filed by the assessee is allowed.”
55. Since in the instant case the assessee from the very beginning has denied to have received any such payment from M/s. Dhariwal group through Mr. Sohan Raj Mehta and since no incriminating material was found from the residence of the assessee during the course of search and since the assessee is not dealing with M/s. Dhariwal group in his individual capacity, therefore, respectfully following the decisions cited above and in view of our reasonings given earlier, we are of the considered opinion no addition in the hands of the assessee can be made. Since it is held that the assessee has not received any amount, therefore, the question of taxing the same u/s.56(2)(vi) as held by CIT(A) does not arise. In this view of the matter, we set aside the order of the CIT(A) and direct the Assessing Officer to delete the addition of Rs. 1 crore for A.Y. 2006-07 and Rs. 20 crores for A.Y. 2007-08. Grounds raised by the assessee on this issue are accordingly allowed.
56. Since the assessee succeeds on merit, therefore, the ground relating to validity of assessment u/s.143(3) r.w.s. 153A become academic in nature and therefore the same is not being adjudicated.
57. In the result, both the appeals filed by the assessee are allowed.
Pronounced in the open court on 12-06-2015.
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