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2014 (10) TMI 938 - AT - Income TaxAddition on account of bogus purchases - Search in the case of the assessee who is the director and chairman of company - Held that - Merely certain papers which does not empower the assessee to carry on the business were found at the premises of the concern in which the assessee is a director cannot authorise the Revenue to regard these concerns to be the benami concerns of the assessee. S/Shri Umesh Kajve and Satyendra Sahu are being assessed separately to Income-tax and the income of these concerns are duly shown by them. The investment made in the concern was not proved to have been made by the assessee. Therefore, in our opinion, these concerns cannot be regarded to be the benami concern of the assessee merely on the ground that the purchaser in the letter has called for the kind attention of the assessee. No doubt, the statement recorded has evidentiary value but it is not conclusive evidence until and unless it is corroborated by certain evidences. There had been search in the case of the assessee. If the assessee had earned income, the evidence would have been found. If the assessee had earned income, he would have either spent it by way of consumption or would have created investment. No undisclosed investment to the extent of ₹ 5.30 crores was found from the premises of the assessee. Even no evidence or material was found which may prove that the assessee had incurred the expenditure to that extent. It is a settled law that no addition can be made merely on the basis of surmises, assumption or presumption. Supposition, however strong it may be, it cannot take the place of actuality. It is a known fact that during the course of search the Revenue forces the assessee to confess undisclosed income even if the assessee had not earned such income or assessee had no source of earning income to that extent. This fact has been even admitted by the Central Board of Direct Taxes and therefore they have issued instructions to their officers that no attempt should be made to obtain confession forcefully. - Decided in favour of assessee. Assessment of gross profit on the purchases - Held that - Since the assessee has accepted that he was assisting these concerns in procuring the order and the assessee has got income on this account from these concerns, we therefore keeping in view the surrounding facts and trade practice direct the Assessing Officer to compute the commission at two per cent. on the supplies/sales made in each year to the Government concerns. Since the assessee has surrendered a sum of ₹ 1,21,80,000 in respect of the cash paid under an agreement for the purchase of land, the source of this in our opinion can be the commission income so earned by the assessee in respect of the service rendered to these companies. In case the Assessing Officer finds that the commission so earned does not exceed ₹ 1,21,80,000 no addition in this regard can be sustained as the assessee will get set-off of commission income against the surrender so made. In case the Assessing Officer finds that the commission so estimated in respect of these three concerns exceeds in all these years ₹ 1,21,80,000, the addition to that extent be sustained. Addition on account of unexplained expenditure - Held that - There is no allegation on the part of the assessee that he was pressurised to admit it as sum of ₹ 20 lakhs. Similarly, on the left side of the paper, figures are written as 10-M, 2-CM, 2-HM, 2-PS, 2-Patel, 2-Delhi, the total of which also comes to 20 and total of both these 20 will come to 40. The assessee has not alleged that he was pressurised to surrender this amount. Three questions were asked relating to this and the assessee has admitted this to be undisclosed expenses of ₹ 40 lakhs. Since the handwriting has also not been denied by the learned authorised representative, admission made by the assessee under free will and without coercion has to be accepted. Had it been dumb paper or contained rough noting, the assessee could have not come forward by explaining the denomination and making the surrender of the said amount as the figures are in the handwriting of the assessee. The assessee could have very well explained what the words represent. The assessee since even did not deny that it is his handwriting, the onus is on the assessee to prove what does these alphabets denote and why this has been written on this. In view of these facts, we are of the view that it is not a fit ground which warrants our interference. Addition made on the basis of paper LPS I/9, page 60 - Held that - This paper consists of letter pad of Ashok Nanda. On the top of this paper, Tilhansangh has been mentioned. Figure of 4,46,000 arrived at by multiplying 20,000 by 22.3 is there. 30 per cent. thereof is mentioned 1,33,800. Lease rent-4014, security deposit of 12,042 and development of 1,55,200 is mentioned and subsequent to that the figure of 1,65,356 is mentioned. Against under hand AKVN 35,000 is mentioned and 2L is mentioned. This paper does not contain any date. It is also not clear in whose handwriting this paper is. With reference to question No. 10 the assessee explained that this official commission represents for filing up DIC, LVN and AKVN. The question was asked with regard to this paper but this paper does not contain the figure of ₹ 2,35,000. No addition in respect of this figure can be made by the Assessing Officer. In these facts, we set aside the order of the Commissioner of Income-tax (Appeals) and delete the addition. Cash given by the assessee to Gaurav Sharma - Held that - There is no relationship between Gaurav Sharma and Ashok Nanda. No person would like to pay taxes on the income until and unless the income belongs to him. It is a settled law that suspicion, howsoever strong it may be, it cannot take the place of actuality. In our opinion, apparent is real. Once the assessee has surrendered the sum of ₹ 1,21,80,000, the onus lies on the Revenue to prove that this money does not belong to the assessee and assessee is the benami of Gaurav Sharma. We do not find that the onus as lies on the Department has been discharged by the Department except relying on the probabilities. We, therefore, set aside the order of the Commissioner of Income-tax (Appeals) on this issue and direct the Assessing Officer to admit the sum of ₹ 1,21,80,000 substantively as the income of the assessee. Thus, this ground stands allowed to that extent. Addition of cash payment to others by the assessee - Held that - As gone through the seized paper which is forming part of the assessment order. We noted that the Commissioner of Income-tax (Appeals) has rightly appreciated that the papers seized does not have name of the assessee, it is not in the handwriting of the assessee, no date, etc., is mentioned and after appreciating all the facts he came to the conclusion that there is no indication of any unaccounted payment and it is a dumb document and not the speaking one. Even he noted that in the document in the end/lower side it is written rough working for the salary of the director of HIPL. No cogent material or evidence was brought to our knowledge by the learned Departmental representative even though he vehemently relied on the order of the Assessing Officer. We are, therefore, of the opinion that it is not a fit case which warrants our interference and, therefore, we confirm the order of the Commissioner of Income-tax (Appeals) deleting the addition of ₹ 21 lakhs.
Issues Involved:
1. Addition of undisclosed profit in the hands of the assessee. 2. Initiation of penalty proceedings under section 271(1)(c). 3. Validity of notice under section 153A for the assessment year 2008-09. 4. Addition of unexplained expenditure. 5. Addition of cash payment to others. 6. Addition of advance payment for property purchase. Detailed Analysis: 1. Addition of Undisclosed Profit in the Hands of the Assessee: The primary issue was the addition of undisclosed profit of M/s. Netam Industries and M/s. Chhattisgarh Pharmaceuticals in the hands of the assessee. The Assessing Officer (AO) treated these firms as benami concerns of the assessee based on documents found during a search at the premises of Hindustan Institute of Phamakon Ltd. (HIPL), where the assessee was the Chairman and Managing Director. The AO observed that the documents indicated that the assessee had control over these firms and added the undisclosed profits substantively in the hands of the assessee. The Commissioner of Income-tax (Appeals) (CIT(A)) confirmed the AO's order but allowed partial relief to the assessee. Upon appeal, the Tribunal noted that the concerns had separate registrations, drug licenses, and were assessed to tax separately. The Tribunal emphasized that the burden of proving benami transactions lies with the Revenue, which failed to establish that the assessee had made investments or enjoyed profits from these concerns. The Tribunal concluded that the concerns were not benami of the assessee and deleted the additions. However, the Tribunal directed the AO to compute commission income at 2% on the supplies/sales made to government concerns and adjust it against the surrendered income. 2. Initiation of Penalty Proceedings under Section 271(1)(c): The Tribunal dismissed the grounds related to the initiation of penalty proceedings under section 271(1)(c) as premature, stating that the cause of action would arise only if the penalty is imposed by the AO. 3. Validity of Notice under Section 153A for the Assessment Year 2008-09: The assessee challenged the validity of the notice under section 153A for the assessment year 2008-09, arguing that the search was conducted on September 7, 2007, and the notice could not cover the assessment year 2008-09. The Tribunal did not specifically address this issue in detail, focusing instead on the substantive additions and deletions. 4. Addition of Unexplained Expenditure: The AO made an addition of Rs. 40,00,000 based on a seized document (LPS-I/6) which the assessee admitted as unexplained income during the search. The Tribunal upheld the addition, noting that the assessee admitted the amount as undisclosed income and did not retract the statement or provide an alternative explanation. 5. Addition of Cash Payment to Others: The AO made an addition of Rs. 21,00,000 (assessment year 2006-07) and Rs. 69,46,000 (assessment year 2008-09) based on seized documents indicating cash payments. The Tribunal agreed with the CIT(A) that the documents were rough projections or dumb documents without specific evidence of actual payments. The Tribunal upheld the deletion of these additions, emphasizing that the documents did not indicate any unaccounted payments or transactions. 6. Addition of Advance Payment for Property Purchase: The AO made a protective addition of Rs. 1,21,80,000 in the hands of the assessee, which was claimed to be an advance payment to Gaurav Sharma for the purchase of property. The Tribunal noted that the agreement was executed prior to the search and was notarized. The assessee had shown the amount in his return and paid taxes. The Tribunal held that the addition could not be made substantively in the hands of the assessee and directed the AO to accept the amount as the assessee's income. Conclusion: The Tribunal provided detailed analysis and conclusions on each issue, emphasizing the importance of corroborative evidence and the burden of proof on the Revenue to establish benami transactions. The Tribunal deleted the substantive additions related to undisclosed profits and cash payments, upheld the addition of unexplained expenditure, and directed the AO to accept the advance payment for property purchase as the assessee's income. The appeals filed by the assessee were partly allowed, and the appeals filed by the Revenue were dismissed.
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