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TMI Blog2011 (12) TMI 601X X X X Extracts X X X X X X X X Extracts X X X X ..... nt to the directions of CIT, assessment order was again passed on 31.3.2003 assessing the same income which was determined in earlier assessment order. Assessing officer passed almost same order by reproducing the earlier order. The additions were made on account of undisclosed investment, commission from chit business and income from Lucky car draw scheme. The order was challenged before CIT(A). CIT (A) disposed of the appeal by order dated 28.3.2005. Part relief was granted. Against this order, both sides are in appeal before us. 3. Along with assessee, search also took place at the premises of his brother, Shri Bahadur Singh Sabharwal. In that case additions made on account of commission from chit business and income from lucky car draw scheme. In that case , appeal reached up to ITAT. A copy of the order was supplied by Ld. AR for the assessee during the course of hearing. We have perused the same. 4. The following grounds of appeal have been raised by Revenue in ITA No.296/Del/2005 :- "On the facts and circumstances of the case, whether the Commissioner of Income Tax (Appeals) was right in law: 1. In deleting the addition of ₹ 6,00,000/- out to total addition of &# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the addition of ₹ 1,0,7,89,800/- made on account of undisclosed income from Lucky Car Draw Scheme. 17. In deleting the addition of ₹ 7,87,000/- made on account of undisclosed commission income from auction of chit business. That the appellant craves for the permission to add, delete or amend the ground of appeal before or at the time of hearing of appeal." The following grounds of appeal have been raised by assessee in ITA No.239/Del/2005 :- 1. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in sustaining the addition of ₹ 1,72,000/- out of total addition of ₹ 10,51,153/- made by Ld. A.O. as undisclosed investment in plot No. 702, Starship Cooperative Housing Society Bombay. 2. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in not deleting an addition of ₹ 2,79,153/- out of total addition of ₹ 10,51,153/- made by Ld. A.O. as undisclosed investment in plot No. 702, Starship Cooperative Housing Society Bombay, more so when nothing was paid by the appellant to that extent. 3. That having regard to the facts and circumstances ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stallment as mentioned by Ld. A.O. aggregating to ₹ 2,79,153/-. Ld. AR further submitted that Ld. CIT(A) has deleted the addition of ₹ 6,72,000/- correctly. But CIT (A) has erred in not deleting the whole addition. Ld. AR for the assessee made legal submission that the addition could not be made under Chapter XIV-B as the additions are not based on any evidence found as a result of search. He also submitted that this legal plea is also relevant to other additions made by AO. Ld. AR for the assessee relied upon many decisions of courts one reported at 287 ITR 287 (Del) in the case of Jupiter Builders P Ltd. and Ravi Kant Jain 250 ITR 141 (Del). 9. On the other hand, Ld. CIT (DR) relied upon the order of the Assessing Officer. 10. After considering the submissions made before us, we find that Ld. CIT (A) has recorded the factual findings in this regard which could not be displaced by Ld. CIT (DR). Ld. CIT (A) has recorded the following factual findings and held as under:- "The issue has been examined. Regarding the loan form Sh. Sanjay Chandak and M/s APS Traders Services P. Ltd. the stand of the AO cannot be accepted. Documents clearly show that this was typographica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e find that assessee has paid an aggregate amount of ₹ 6,72,000/- and has not paid the installments of ₹ 2,79,153/-. This has also been confirmed by the investigation wing at Mumbai, which is evident from Departmental paper book. Thus there was no basis with AO to allege that any instalments were paid by the assessee. As far as the source of fund is concerned, there are adequate evidences on record which had been considered by CIT (A) which establishes the source of the investment. In view of these facts, we do not find any infirmity in the order of CIT (A) for granting the relief. We are also not convinced with the part of addition sustained by CIT (A). When availability of cash is explained by assessee with the help of cash flow statement. There is no justification to sustain part of the addition. Thus, we hold that there was no justification for any addition made in the hands of the assessee in respect of flat at Mumabi. Hence Ground No.1 of the departmental appeal is dismissed. Ground Nos.1 & 2 of the assessee's appeal are allowed. 11. Ground No. 3 of the assessee's appeal is regarding the undisclosed investment made in the purchase of one Ceilo car, it was submitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Revenue's appeal is regarding the undisclosed investment of ₹ 60 lacs in purchase of land at village Bajri from Shri Som Nath and his four brothers. 17. The AO has in his order on Page 4 and 5 dealt with the addition of ₹ 60,00,000. The AO in his order has referred to the statement of one Sh. Som Nath recorded by the DDIT on 27.08.1989 and the AO has stated in the order that in this statement Sh. Som Nath confirmed that a sum of ₹ 60,00,000/- had been received by the brothers from Sh. Inderjeet Singh. The AO accordingly held that the appellant made an undisclosed investment of ₹ 60,00,000/- in the purchase of 20 canals and 12 marlas. 18. Ld. CIT (DR) placed reliance on the assessment order and contended that assessee made undisclosed investment in the purchase of land at Village Bajari from Sh. Som Nath and his four brothers. On the other hand, Ld. AR for the assessee read out before us the consistent reply field before AO submitting that no such investment was made by the assessee and there is no evidence to that effect found as a result of search or thereafter. Therefore Ld. AR submitted that addition could not be made in law and on facts. 19. Ld. CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icate the above transaction. It is to be care fully noted that this is a case where search has been carried out and therefore, onus squarely rests on AO to bring on record good, substantive, solid evidence to back his conclusion. What we have on record, on other had is, full and complete reliance on third party statement without any basis statements which have even not undergone the basic treatment required under the law of confronting the accused of the allegations being leveled by him by the witnesses of the department. Treatment of transactions as undisclosed income of the appellant by such methods cannot be approved. Under the circumstances, the treatment of ₹ 60,00,0000/- as the undisclosed income of the appellant cannot be accepted and the same is deleted." 20. It is seen that Ld. CIT(DR) could not point out before us any evidence to suggest that any land, involving ₹ 60,00,000/- was purchased by the assessee, from Mr. Som Nath and his brothers. We have taken ourselves through the copy of the sale deed of land sold by Mr. Som Nath and his brother to Shankar forge pvt Ltd through Shri Mr. Anil Jindal which is placed at Page 245-252 of the departmental PB. This dee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tates that Sh. Narnder Malhotra stated that plot no. 708, Sector -14, Faridabad was purchased by Sh. Inderjeet Singh along with Sh. Narang and that papers seized from one Sh. Subhash Verma also mentions this plot. The AO thereafter states that enquiries reveal that this plot was in the name of Sh. Ajay Kumar who purchased this property from one Sh. Ram Sharan Kapoor." "The power of Attorney which has been mentioned by the AO has been carefully perused. This document shows that the transaction of the above property plot no. 708 took place between Sh. Ram Sharan Kapoor and Sh. Ajay Kumar on 15.09.1998. This POA does not at all refer to the appellant. Now coming to the statement of Sh. Narinder Malhotra, a copy of which has been furnished by the AO, shows that Sh. Narinder Malhotra mentioned the following properties-Flat at Mumbai, 700 sq. yard plot no Dabua Road, 1-J/9, NIT and on point 4 mentions one property probably 108, sector 14, Faridabad in partnership with Sh. Narang wherein it has been stated that the investment may be about ₹ 15,00,000/-. Thus, what the AO has relied upon is statement of one Sh. Narnder Kumar wherein he has stated that the appellant may have investe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from Sh. Ram Sharan Kapoor to Sh. Ajay Kumar which does not refer the name of the assessee at all and which has not even been seized during the course of search as is evident from the fact that it was a copy taken out from the office of registration authority much after the date of search as is evident from the stamp embossed. We fail to understand as to how is can be alleged on the basis of this document that assessee purchased the said plot and that too for ₹ 15,00,000/-. Reference to Page no. 253 of departmental PB is also of no consequence as it is a paper seized from another assessee Mr. Subhash Verma and there is no reference of assessee's name and admittedly this document was never confronted to the assessee. Therefore, there is no evidence found as a result of search or even thereafter to establish that any Plot bearing No. 708, Sector 14, Faridabad was purchased by the assessee or any undisclosed investment, much of ₹ 15,00,000/- was made by the assessee in the said plot. Therefore, we do not find any justification to disturb the decision of Ld. CIT (A) and we uphold the same. Thus, ground of appeal of the revenue is dismissed. 24. Ground No. 4 of the revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ossed at the foot of each page, whereas the search took place on 12.03.1999. Moreover, these documents relate to some patta of ₹ 10,000/- only, and according to these documents the assessee was appointed power of attorney holder. There is the absence of any evidence discovered during the search or brought on record thereafter also. There was no justification for any addition of ₹ 5,00,000/- made on account of undisclosed investment in purchase of land in Dabua Village, and CIT(A) was thus completely justified in deleting the said addition which we uphold. Moreover, the addition in question could not be made in law also u/s 158BC r.w.s. 158BB as nothing was found during the course of search relating to the said addition and therefore in view of the above mentioned judicial decisions, addition was not permissible in law also and for that reason also, we delete the addition and uphold the order of CIT (A) and dismiss this ground of revenue's appeal. 27. Ground No.5 of the revenue's appeal is in respect of addition of ₹ 6 lacs made on account of undisclosed investment in 2.5 acres of land at village Bharkri, Ld. CIT(DR) referred Pages 243-244 which is the statement o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re operation in the case of the appellant which can corroborate the aforesaid transaction or which can even remotely indicate the involvement of the appellant in the aforesaid transaction least the income from undisclosed sources amounting to ₹ 6,00,000/-. The stand of the AO cannot be upheld and the undisclosed income to the extent of ₹ 6,00,000/- is accordingly deleted." 29. Having gone through the factual findings recorded by CIT(A), we find that Ld. CIT(DR) could not displace these factual findings. We fail to understand the relevance of the statement of Mr. Rampal and Smt. Inder Kaur referred by Ld. CIT (DR) as there is no connection at all of such statements with the impugned addition. Page 254-276 of the departmental paper book are some receipts which do not refer the name of the assessee and have got no relevance whatsoever with the impugned addition. These documents were not found during the course of search and were not referred by Ld. A.O. in the assessment order. Ld. CIT(DR) could not controvert the contention of Ld. AR for the assessee that these documents were never confronted to the assessee. No other adverse evidence could be pointed out in support of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich could be taken, if at all, was not in the case of Sh. Inderjeet Singh but in the case of his wife Smt. Joginder Kaur in whose separate block assessment had been framed. It has been argued by the Ld. AR that there is no case of the AO for making any addition to the undisclosed income on the basis of such documents as if has been categorically stated by Smt. Inder Kaur, appellant's mother-in-law that these documents were kept with he by Smt. Joginder Kaur, her daughter. It has also been argued that this statement was never confronted to the appellant and therefore, there was no question of using this statement of the appellant's mother in law against him more so when the statement clearly shows that the documents which have been referred to were kept by Smt. Inder Kaur by her daughter Smt. Joginder Kaur. In view of the above facts and circumstances of the case it is held that the AO erred in treating a sum of ₹ 3,00,000/- as the undisclosed income in the hands of the appellant and the same is accordingly deleted." 32. Ld. CIT(DR) could not controvert the factual findings recorded by CIT(A) and also this contention of the assessee that the documents referred were not found ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is in respect of addition of ₹ 21 lacs as undisclosed investment in plot at 1-2 chowk, Near Hotel Gazal, Ld. CIT(DR) relied upon the assessment order and the statement of Mr. Narender Malhotra and argued that addition of ₹ 21,00,000/- was correctly made by AO. On the other hand Ld. AR for the assessee replied upon the order of CIT(A) and further argued that there was no evidence found during the course of search or even thereafter to support the impugned addition. 37. CIT(A) has held as under:- "The AO in the assessment order states that one Sh. Narinder Malhotra had stated at the time of search on 12.03.1999 that plot at Chowk of market No.1 had been sold by Sh. Inderjeet Singh for a sum of ₹ 21,00,000/-. A perusal of the statement shows that Sh. Narinder Malhotra stated that the plot was sold for ₹ 21,00,000/- in part and this was also done in a partnership. The AO however, did not considered even it fit to confront the appellant of this alleged transaction. He straight away went and made and addition of ₹ 21,00,000/- to the undisclosed income of the appellant. The Ld. AR has vehemently argued that reliance on such a bald statement of one Sh. N.K ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s made by the assessee in Property No. I-D, 14, NIT, Faridabad and CIT(A) was not justified in deleting the addition. Ld. AR for the assessee on the other hand submitted that CIT(A) was perfectly justified in deleting the addition as there was no evidence of any investment in the impugned property purportedly made by the assessee for alleged amount of ₹ 21,00,000/- and the documents referred by CIT(DR) is the sale deed of ₹ 2,40,000/- only and does not refer either ₹ 21,00,000/- or ₹ 10,70,000/- nor were these documents found during the course of search. 40. Ld. CIT(A) held as under:- "In the assessment order on page 5, the AO states that 50% share in plot, I-D/14, NIT was purchased along Sh. Amarjeet Singh Chawla. And that this property was sold by the appellant to M/s East Bengal Investment P. Ltd. and that the market value of this property was ₹ 21,40,000/- and that undisclosed income in the hands of the appellant was therefore ₹ 10,75,000/- The assessment order is silent on the evidence relied upon except on page 119 and 118. A perusal of the aforesaid papers shows that both Sh. Inderjeet Singh and Sh. Amarjeet Singh Chawla sold the proper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the issue in ground 10 where the AO utilized the statement of Sh. N.K. Malhotra to make an addition of ₹ 21,00,000/-. For similar reasons the stand of the AO cannot be accepted and the treatment of ₹ 6,66,666/- as the undisclosed income / investment of the appellant is accordingly deleted." 44. We also find that there is no adverse evidence against the assessee on the basis of which the impugned addition could be justified and Ld. CIT(A) could not controvert the factual findings recorded by CIT(A). We uphold the order of CIT(A) deleting the said addition. Statement of Mr. Narender Malhotra was never confronted to the assessee. Therefore, Ground No. 10 of the revenue appeal is also rejected. 45. Ground No. 11 of the appeal is in respect of addition of ₹ 8 lacs made on account of undisclosed investment in shops at Badkhal Road, Ld. CIT(DR) relied upon the assessment order and the statement of Mr. Narender Malhotra. On the other hand Ld. AR for the assessee relied upon the order of CIT(A) 46. Ld. CIT(A) has held as under:- "The AO in his order has again relied upon the statement of Sh. N.K. Malhotra, who made the addition of ₹ 8,00,000/- in the purcha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as on 6th Sept., 1999 and 3rd November, 1999 amounting to ₹ 2,00,000/- and ₹ 17,800/- and that this transactions were made outside the block period which had expired on the date of search i.e. 12.03.1999. A perusal of the PB 54 supports the claim made by the Ld. AR. Whatever action is required to be taken can only be done either in the name of Sh. Gulshan Bhatia or in the name of the appellant only for the assessment year 2000-01 and action taken for treating the aforesaid sum as undisclosed income for the block period cannot be accepted. The same is accordingly deleted." 51. We do not find any infirmity in the order of CIT(A) as the car stands in the name of Mr. Gulshan Bhatia and not in the name of assessee as per the registration documents placed at Page 47-53 of the assessee's PB. Statement of account of Mr. Gulshan Bhatia in the books of M/s BTL Investment Ltd., which was before the AO also clearly shows that the car was financed to Mr. Gulshan Bhatia by M/s BTL Investments Ltd. Therefore, the impugned car cannot be treated to be belonging to the assessee nor can any addition be made as undisclosed investment in the hands of the assessee. Moreover, documents clear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the addition of ₹ 25,00,000/- and therefore CIT(A) deleted the addition correctly. We uphold the order of CIT(A). Therefore Ground No. 13 is dismissed. 55. Ground No. 14 is in respect of addition of ₹ 8,56,931/- made on account of deposits in bank account in the name of Shri Ashok Kumar as benami, Ld. CIT(DR) relied upon the assessment order and it was submitted that since cheque book was found in search from the possession of the assessee and therefore, AO rightly treated the deposit in the bank account of. Ashok Kumar as belonging to the assessee. On the other hand Ld. AR for the assessee relied upon the order of CIT(A). 56. Ld. CIT(A) held as under:- "The issue has been carefully examined. On page 5 of the statement Sh. N.K. Malhotra was asked regarding three cheques of ₹ 1,00,000/-, ₹ 1,08,000/- and ₹ 60,000/- which was signed by Sh. Ashok Kumar. In reply, Sh. N.K. Malhotra stated that these cheques belong to Sh. Ashok Kumar who was the Manager of Samrat Electronics Co. and that he had given these cheques to him to keep. This is the only reference to Sh. Ashok Kumar as can be gathered from the statement of Sh. N.K. Malhotra. How the AO came t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r:- "Document A-14 and A-17 have been carefully examined. No where does these documents mention that the appellant earned any interest much less interest at the rate of 2% per month. None of the entries even indicate that amounts had been advanced by the appellant and interest had accordingly been earned. There is absolutely no evidence to come to a such conclusion. The addition is accordingly deleted." 60. There is nothing before us which could have persuaded us to restore the order of A.O. Document No. A-14 and A17 nowhere mentioned about any thing which could have justified the impugned addition. CIT(A) has rightly deleted the addition and which we uphold. Thus Ground No.15 appeal is also dismissed. 61. Ground No. 16 & 17 of the appeal are in respect of additions of ₹ 1,07,89,800 and ₹ 7,87,000/- made on account of undisclosed income from Lucky car draw scheme and undisclosed commission income from auction of chit business based on the assessment order of brother of the assessee namely Shri Bahadur Singh Sabharwal, Ld. CIT(DR) relied upon the assessment order and it was submitted by him that Document A-4 and A-5 seized from the premises of the assessee clearly pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and correctly so, that the AO could not under law rely on such unsubstantiated uncorroborated statements. The AO has again referred to the documents seized from one Sh. M.L. Saini. Once again a perusal of these documents do not refer to the alleged lottery business carried out allegedly by the appellant except at one place where it is written (B.S. Sabarwal-lottery March, 10th 97 to April, 97). In this regard the Ld. AR has argued that this nothing in a document found at the third person' residence can never be utilized for determining the undisclosed income of the appellant in as much as this document was never confronted and appellant has never ever admitted to any transactions as recorded in the document. It has been argued that there is no document or evidence available with the AO which was found during the search which can corroborate the evidence found from the residence of a third person namely Sh. M.L. Saini was never confronted to the appellant and so the AO committed an error in using this piece of third parts statements of against the appellant to determine that the lottery scheme was being run which resulted in huge undisclosed income. The AO has relied on the two diar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lied upon it cannot at all be understood and comprehended how the AO has been able to decipher these diaries to come to a conclusion that undisclosed interest income and been earned from these Lucky Draw Scheme. Moreover, any reliance on this evidence appears to be grossly unjustified -Sh. Inderjeet Singh the Brother of the appellant had in his statement recorded during the search itself objected to these documents. Q. No.21 : I am showing you A-4 And A-5 A. : I will sign on these diaries as these are not mine documents. This statement was recorded during the search and seizure proceedings and has significant evidentiary value and this statement gets further cemented with the affidavit of Sh. Harish Ratra and Sh. Inderpal Singh (PB 83-84 case of Sh. Inderjeet Singh Sabarwal). In fact the statement of Sh. Inderjeet Singh the Panch recorded on 29.03.2001 further confirms the stand of the appellant. The extract of the statement is as under :- "Sh. Inderjeet Singh Sabarwal, I-J/6, in the capacity of "Panch" during the search two documents now seen as A-4 and A-5 were not found from the premises of Sh. Inderjeet Sing Sabarwal but these were brought from outside and the same was ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utilized for computing the chit business and it is difficult to appreciate the following comments of the AO: "It is quire clear that these 433 persons were very close to Sh. Inderjit Sigh and it was natural for them to participate in the auction chits as well as lucky car draw scheme as their names appear in various papers especially diary A-4 and A-5. The commission income earned by Sh. Inderjit Singh from auction chits as per Annexure -4 @ 3% comes to ₹ 7,87,000/- which is undisclosed income of the assessee for the block period is added to the income of the assessee." Reliance on the diaries A-4 and A-5 has already been dealt in detail while deciding the grounds no. 19-20. It has vehemently been argued by the Ld. AR and correctly so that the statements of Sh. M.L. Saini, Sh. Manohar Lal, Sh. Sham Lal and Sh. Kamaljeet Singh was recorded at the back of the assessee and that the appellant was never confronted with those statements and these persons have never been subjected to cross examination. It has further been argued that under such circumstances their statements are not acceptable as any form of evidence which can be utilized against the appellant. After having c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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