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TMI Blog2013 (11) TMI 368X X X X Extracts X X X X X X X X Extracts X X X X ..... nbsp; "The ground or grounds of appeal are without prejudice to one another. 1. On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in confirming the addition of Rs 1,09,51,150/- made by the AO to the income of the Appellant on account of unaccounted hundies/bills of exchange on the basis of certain materials seized from the residence of Shri Jayant Vithaldas by changing the protective addition into substantive addition without examining the issue or facts of the case properly. 2(a) On the facts and in the circumstances of the case and in law, the ld. CIT(A) failed to appreciate that:- (i) no opportunity of hearing was allowed to the Appellant before increasing the tax liability by amending the assessment order passed under section 143(3) r.w.s. 147 while passing the order giving effect to the order of ITAT, Mumbai. (ii) the AO has not followed the directions given by the ITAT, Mumbai correctly and thereby further erred in changing the protective addition of Rs 1,09,51,150/- into substantive addition; (iii) the AO failed to appreciate that the ITAT vide order dated 5.5.2009 in ITA no. 61 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee. If he, however, finds that similar addition made on substantive basis in. the hands of Shri Jayant Vithiildas has not been confirmed, he will then further re-examine as to whether there is any material to link the unexplained hundies/ Bills of Exchange with the assessee and, thereafter decide the matter accordingly as per law. Ground No. is treated as allowed for statistical purposes". In a consequential proceeding in ITA No. 4524/Mum/2003, the coordinate Bench dismissed the appeal of Mr. Jayant Vithaldas on account of non-prosecution, which meant that substantial addition got confirmed in the hands of the Mr. Jayant Vithaldas. But this order was recalled and vide order dated 31.01.2008, the coordinate Bench deleted the addition made in the hands of Mr. Jayant Vithaldas. 4. In ITA No. 6125/Mum/2007, the coordinate Bench, however, to keep the issue alive, allowed the department's appeal. Hence, the instant the proceedings. 5. It is clear from the sequence of proceedings, that the instant proceedings have gone back to the revenue authorities as per the directions given in ITA No. 4029/Mum/1996, wherein it was held that if the substantive addition is not confirmed in the han ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all, implying that no money had been taken by Mr. Dilip Sardesai against these promissory notes, there was no question of any safe custody. Therefore, on the issue under consideration the statement on oath recorded from Jayant Vithaldas is not reliable and cannot be given any credence to. 16. The contention of no linkage between appellant and the promissory notes is misleading. At the outset it must be noted that the promissory notes under consideration are "bearer" promissory notes. the name of the person lending the money having been left blank. These have been seized from Mr. Jayant Vithaldas, a director and employee of appellant during the previous year relevant for this assessment year under consideration and also a close relative of the persons at the helm of affairs of the appellant company. In himself, Mr. Jayant Vithaldas is a person of a small means and, for the assessment year under consideration has no source of income other than what he is earning from appellant company and the group of assessee covered under the search action. Therefore, all circumstantial evidence established beyond doubt that the assets in the form of promissory notes are in reality the property of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the amount of money advanced through the promissory notes under consideration has to be taxed as income of appellant company because the source of funds of the promissory notes, is the primary source of earning of the group, the appellant corporate entity. This decision is contingent upon an undisputed conclusion that looking to the nature of the promissory notes, particularly the bearer character, and the manner of execution where the revenue stamps have been initialed across by the author of the promissory notes, money has definitely been advanced against the promissory notes. The addition made to the income of appellant is therefore confirmed". 10. The CIT(A), therefore, sustained the addition made by the AO. 11. Aggrieved, the assessee is now before the ITAT. 12. Before us, the AR, through fact sheet/synopsis, submitted, "1. The hundies/documents were found from the premises of Mr Jayant Vithaldas. 2. There is no reference of the appellant income in the said hundies/documents or any of the seized documents. &n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt vide its order dated 8.8.2011 in case of Shri Jayant Vithaldas accepted the findings of the ITAT and dismissed the appeal of the IT Dept. 14. The FERA Appellate Tribunal have accepted the contention of Shri Jayant Vithaldas and held that the FERA authorities had failed to prove actual acquisition, lending or borrowing of any foreign exchange. 15. The CIT(A) while passing the order dated 15.2.2011 in case of assessee has not shown any new evidence or reason to make substantive addition. 16. The CIT(A) has mentioned that Shri Jayant Vithaldas was a director in the company. This finding is completely incorrect. He was only an employee of the company. 17. According to CIT(A), money have been advanced against security of the hundies, however the said fact is disagreed by the ITAT and High Court in case of Shri Jayant Vithaldas. 18. In para 15 of the CIT(A) order, the affidavit of Shri Jayant Vithaldas was considered unreliable. However, the ITAT and the High Court in case of Shri Jayant Vithaldas has admitted that no money was advanced against seized hundies. The statement and affidavit of Shri Dilip Sardesai was given due consideration. Even FERA Authorities have admitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rical finding the documents have not been acted upon hence there cannot be addition in the assessment of assessee. 25. The Assessee has proved that the documents seized from third party has no where connected with the assessee hence addition confirmed by the Commissioner (Appeals) may be deleted. 26. As per section 132(4) read with section 292C presumption is that documents is presumed to be that of owner from whom it was seized. 27. Neither section 68 nor 69 is applicable hence addition cannot made in the assessment of assessee. 28. In Bimal Kumar Damani v. CIT (2003) 261 ITR 635 (Cal) High Court, amount recovered from possession of another person burden is on department to prove. 29. In Krishna Textiles vs. CIT (2009) 310 ITR 227 (Guj) held that burden to prove that credit shown in the name of assessee in the books of GMDC constituted income of assessee for purposes of sec. 69C is on the Revenue which the Revenue failed to discharge, and therefore addition under 69C was not called for. 30. Considering the subsequent development of law and finality by High Court in the case of Jayant Vithaldas on merits, the addition confirmed by the CIT (A) may be delete". 13. The DR, on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions made by the AR and reproduced in the synopsis that the addition of Rs. 1,09,51,150/- merits to be deleted. 18. We, therefore, set aside the order of the CIT(A) on this issue and direct the AO to delete the addition of Rs. 1,09,51,150/- made by him on account of amounts mentioned on hundies. 19. Ground no. 1 is, therefore, allowed. 20. Ground no. 2: Since we have allowed ground no. 1 by directing the AO to delete the addition of Rs. 1,09,51,150/-, on facts, ground no. 2 becomes academic and needs no adjudication. 21. Ground no. 3 pertains to charge of interest under section 234B. 22. Actually ground is wrongly taken, because in assessment year 1985-86, section 234B did not exist at all. Instead, section 215 was the corresponding section. 23. At the time of hearing, the mistake in the ground was pointed out. Both the parties agreed that even section 215 would not be applicable, as the case has been reopened under section 147/148 and, the provisions of section 215 did not apply on reassessment proceedings. Since even the DR accepted the proposition, the ground is modified, on which we conclude, that the provisions would not apply. 24. In these circumstances, the ground sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lace of protective basis made by the AO, 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. 3. The ld. CIT(A) erred in holding that the charge of interest under section 215 and 220(2) of the Income Tax Act, 1961 is consequential. The Appellant denies its liability for such interest. 4. The id. CIT(A) erred in holding that the ground raised disputing initiation of penalty proceedings under section.271(1)(c) is premature. The Appellant denies her liability for such penalty". 29. Ground no. 1 relates to the addition of Rs. 9,73,13,824/- made by the AO to the income of the assessee on account of unaccounted hundies/bills of exchange on protective basis on the basis of certain materials seized from the residence of Shri Jayant Vithaldas. 30. An identical issue has been dealt with and decided by us in Para 2 to Para 19 of this order in assessee's own appeal in ITA No. 3850/Mum/2011 for AY 1985-86 and we deem it proper to reproduce the relevant decisive paras being 17, 18 & 19, as far as gist & outcome of the issue involved as lead appeal is concerne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hearing to the Appellant before increasing the tax liability by changing the protective addition into substantive addition. 2a) On the facts and in the circumstances of the case and in law, the id. CIT(A) failed to appreciate that:- (i) neither the seized materials belonged to the Appellant nor there is any evidence on record which suggest that the Appellant might have advanced any money on hundies/bills of exchange; (ii) the AO has not followed the directions given by the ITAT, Mumbai correctly and thereby he failed to bring on record any material to link the unexplained hundies/bills of exchange with the Appellant as directed by the ITAT; and (iii) the ITAT vide order dated 5-5-2009 in ITA No. 6125/Mum/2007 for the A.Y. 1985-86 allowed the ground of appeal raised by the Revenue to keep the issue of protective addition alive and no specific findings are given by the ITAT, Mumbai so as the protective addition can be assessed as substantive addition. b) In reaching to the conclusion and confirming such addition on substan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 43. In the result, appeal is treated as partly allowed. ITA No. 3853/Mum/2011 for AY 1994-95, Assessee's appeal: 44. The appeal is filed by the assessee against the order of the CIT(A) 2, Mumbai, dated 11.02.2011 for AY 1994-95, wherein, the assessee has raised the following grounds: The ground or grounds of appeal are without prejudice to one another. 1. On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in confirming the addition of Rs. 1,02,00,000/- made by the AO to the income of the Appellant on account of unaccounted hundies/bills of exchange on protective basis on the basis of certain materials seized from the residence of Shri Jayant Vithaldas, Pune, who was an ex-executive of the Appellant company and he further grossly erred in changing the protective addition into substantive addition without allowing any opportunity of hearing to the Appellant before increasing the tax liability by changing the protective addition into substantive addition. 2.a) On the facts and in the circumstances of the case and in law, the id. CIT(A) failed to appreciate that:- (i) neither the seize ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der of the CIT(A) on this issue and direct the AO to delete the addition of Rs. 1,09,51,150/- made by him on account of amounts mentioned on hundies. 19. Ground no. 1 is, therefore, allowed. 47. Respectfully following our decision taken in ITAs 3850, 3851 & 3852 (supra), Ground no. 1 of the impugned appeal stands allowed. 48. Ground no. 2: Since we have allowed ground no. 1 by directing the AO to delete the addition of Rs. 1,02,00,000/-, on facts, ground no. 2 becomes academic and needs no adjudication. 49. Ground no. 3 relates to penalty proceedings under section 271(1)(c), which is premature in nature, and does not call for any interference from either parties, as such, we reject this ground. 51. In the result, appeal is treated as partly allowed. ITA No. 3846/Mum/2011 for AY 1985-86, Revenue's appeal: 52. The above captioned appeal is against the levy of penalty under section 271(1)(c) of the Income Tax Act, 1961 for AY 1985-86. 53. As we have decided the assessee's appeal for AY 1985-86 in assessee's favour, hence, ITA no. 3846/Mum/2011 is consequential, and as such, we delete the levy of penalty. 54. Revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X
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