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TMI Blog2018 (1) TMI 725X X X X Extracts X X X X X X X X Extracts X X X X ..... inding of CIT(A) that no corroborative material was found during the course of search or even thereafter to show that the figure mentioned in the diary was actual financial transaction.There is no such presumption that the amount mentioned in seized document will be presumed the amount of actual financial transaction. - Decided against revenue - IT (SS) A No. 32/RPR/2013 - - - Dated:- 12-1-2018 - Shri N.S.Saini, Accountant Member And Shri Pavan Kumar Gadale, Judical Member Revenue by : Shri R.K.Singh, CIT DR Assessee by : Shri S.C.Maheshwari, AR ORDER Per Shri N.S.Saini, AM: This is an appeal filed by the Revenue against the order of the CIT(A), Raipur, dated 14.08.2013 for the assessment year 2009-2010. 2. The sole issue involved in this appeal of the Revenue is that the CIT(A) erred in deleting the addition of ₹ 8,06,14,288/- made by the AO u/s.69C of the I.T.Act, 1961 on account of unaccounted expenditure. 3. Brief facts of the case are that the AO observed that a search and seizure operation u/s.132 of the I.T.Act, 1961 was conducted on 23.06.2010. The assessee filed return of income in response to the notice on 24.04.2012 at an income of &# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which are noted at few places. (c) Names of few persons, namely -Gandhi, Nagpur, Anilbhai, Delhi Wilson, Ahmedabad, found written at some places and all these persons are dealing in supply of election materials. 3.1 Apart from this on the pages having index numbers of 37, 107, 109, 116, 117, 119, 143, 147 and 148 are having notings of figure of expenses against various names. On few of these pages dates against the name/amount and the names meant to be the source are also given. Since the side containing entries which clearly appear to be in the nature of expenditure was definite. The assessee was asked to explain about them in the questionnaire dated 11.03.2013. The summarized date relating to above cited pages, which was been incorporated in the questionnaire is as under:- Sl. No. Page No. Amount entered of the relevant page 1. 37 1,02,00,000/- 2. 107 34,42,084/- 3. 109 3,04,71,004/- 4. 116 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment. The assessee never carried on any business and he had never any other source of income undisclosed which has also been appreciated by the AO in the assessment order. In the assessment order page 1 para 2 it is found that during this year the assessee is having income by way of salary from M/s Aarti Infrastructure Buildcon Limited, share of profit from partnership firms and interest income and in page 2 para 4 the AO has categorically held that the diary is of noting of Vidhan Sabha Chunav, 2008 and that the notings are not relating to the activities of the assessee being, director in ASPL, a partner in Aarti Construction co., Ashok Vihar or other income activity. The incomes from all these sources are found truly stated and no amount is flown/incurred in any unexplained expenditure or in the diary seized. The assessee is Karyakarta of the political party BJP and was not an electorate in Chunav, 2008. The above diary contained rough jottings made by the assessee in discussions of the BJP Karyakartas, etc. in their informal meetings with regard to estimates, proposals, ideas, work to be done, tippings, memorandum, etc. with respect to Chunav, 2008 which the assessee had no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings but concrete material for a single transaction was no found of the seized diary. It is also a fact that in the search and assessment proceeding no corroborative material or supporting evidence/material was found that any expenditure was incurred or there was exhaustion of money from assessee's sources. As per section 69C of the Act the question of the source of such expenditure or part thereof' would arise only when it is shown on the basis of cogent material or evidence that assessee has incurred any expenditure and which was incurred from his income/source or is part of his total income that if the assessee is not found to have incurred any expenses from his sources of total income, he cannot be deemed to be assessable. The 'incur' expenses means paying out by the assessee in cash or by cheque or by receiving credit from another person for receiving goods or services. There was nothing relating to assessee s income earning activity in that diary as found and held by the AO also and so it is a fact that no income of the assessee was involved in any expenditure if any noted in the diary. There is no evidence shown of the passing of money from assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of must be an item taxable under the Act. In the search and post search enquiries also assessee s above claim was not found untrue on the basis of facts, evidences or corroborative materials. The assessee relies upon following judicial pronouncements:- (i) Commissioner of Income Tax v. Noorjahan (P.K.)(Smt.) [237 ITR 570]; (ii) CIT v. Anil Bhalla (2011) 332 ITR 191 (Del.); (iii) ACIT v. Satyapal Wassan (2007 295 ITR (AT) 352; and (iv) CIT v. Lubtec India Limited (2009) 311 ITR 175 (Del.). 4.1 On page 3 of the assessment order a table is made of s.no.1 to 7 of page no.37, 107, 109, 116 117, 119, 143, 147 148 (total 9 ages) and held that in these 9 pages there is shown expenditure of total ₹ 8,06,14,288/- which is the subject of addition u/s 69C of the Act. So the AO has not found any expenditure on other 142 written pages of the diary. The AO impliedly accepted the assessee's explanation with respect to 142 pages of the diary that the above is rough jottings made by him in the diary as told to him by the discussants in their normal meetings of RIP workers, karyakartas, etc. in connection with political activities, programmes, estimates, possibili ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (b) he offers no explanation about the source of such expenditure or part thereof This may be noted that the provisions under section 69C is a machinery provision and is a rule of evidence. In CIT v. Lubtec India Ltd (2009) 311 ITR 175 (Del.):- It is quite clear that what is postulated in section 69C of the Income-tax Act, 1961, is that first of all the assessee must have incurred that expenditure---- . 3. In the Assessment Order at page no.2 paragraph no.4 it is observed that:- On its page 1, the diary prominently contains the name of the assessee, that is `CHHAGAN LAL MUNDRA' written in English Hindi scripts and also his phone number. On the top of this page the noting `Vidhan Sabha Chunav 2008' is also prominently made in Hindi script. The notings on other pages are also not relating to the activities of the assessee of being, director in ASPL, a partner in Aarti Construction Co,/Ashok Vihar or other income earning activity. From examination of the entries it clearly appears that all the notings are relating to expenditure incurred in connection with political activities. It is evident that the A.O. has held that the diary does not relate to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , Vidhan Sabha Chunav 2008 is mentioned on it, that he was not an electorate, in the diary rough and random jottings were done by him by over- hearing from discussions of BJP Chunav Karyakartas, etc. in their informal meetings, gossiping, activities, thinkings, proposals, ideas, work to be done, tippings, estimates, budgets, tentative programmes, trials and were not-intelligible, meaningful, systematic, understandable and were dumb/not speaking. The jottings, etc. were not corroborated or evidenced from any material or legally admissible evidence. In the search also the diary was disowned of having any expenditure incurred by the assessee shown in it. There is not shown by the Department of any material or evidence of expenses incurred saying spending , paying out or away of money gone irretrievably; spending on attaining some object, such as cash paid for goods or services, contract or agreement of expenses, bill, chalan, receipt, supply evidence, L.R., R.R., who incurred/paid for expenses, for what incurred - goods, service, gifts, advertising material, to whom paid, quantity, rates, etc., goods/services where received/ stored, place of delivery, storage, utilisation, mod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #8377; 8,06,14,288/-. 8. In Indian Molasses Co. (Private) Ltd. V. Commissioner Of Income-Tax, West Bengal [1959] 37 ITR 66 (SC), as per Hon. Supreme Court Expenditure , means, Spending in the sense of 'paying out or away of money is the primary meaning of expenditure . There is not shown any spending , paying out or away of money, such as cash paid for goods or services, contract or agreement of expenses, bill, chalan, receipt, evidence of supply, L.R., R.R., who incurred/paid for expenses, for what incurred -goods, service, gifts, advertising material, to whom paid, quantity, rates, etc., goods/services where received/ stored, place of delivery, storage, utilisation, mode of payment, etc. 9. Principles with respect to admissible legal evidence are derived from the judgement of the Hon. Supreme Court in Common Cause (A Registered Society) V. Union of India [2012] 77 taxmann. Corn 245 (SC) and the cases reviewed like CBI v. V.C. Shukla [1998] 35CC 410, etc. by the Hon. Supreme Court. The assessee relies upon the settled proposition that, A court of appeal interferes not when the judgment under attack is not right but only when it is shown to be wrong ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in connection with Vidhan Sabha Chunav-2008, it is also seen that the diary is of 2005 i.e. the calendar year 2005. It is also seen that the A.O had aggregated the sums mentioned on following pages and held that the same are unexplained expenses incurred by the appellant during the year under consideration: Sl. No. Page No. Amount entered of the relevant page 1. 37 1,02,00,000/- 2. 107 34,42,084/- 3. 109 3,04,71,004/- 4. 116 117 3,20,22,500/- 5. 119 14,85,000/- 6. 143 14,40,000/- 7. 147 148 15,53,700 7 I have carefully perused that relevant pages of the seized diary, it is seen that the sums appearing on Page No. 107, 109, 116, 117, 119 and 143 do not contain any date. Further, no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penditure and he offers no explanation about the source of such expenditure or part thereof or the explanation, if any, offered by him is not, in the opinion of the Assessing Officer, satisfactory, the amount covered by such expenditure or part thereof as the case may be, may be deemed to be the income of the assessee for such financial year : Provided that, notwithstanding anything contained in any other provision of this Act, such unexplained expenditure which is deemed to be the income of the assessee shall not be allowed as a deduction under any head of income. 11. It is clear that Section 69C is applicable (i) where the assessee has incurred any expenditure, and (ii) he offers no explanation or the explanation tendered as to the source is not satisfactory as regards the whole or part thereof. The whole or part of such unexplained expenditure would be construed as assessee's income of the financial year in which the expenditure has been incurred. I find that before invoking the provisions of Section 69C, it has to be proved beyond all shadows of doubt that the expenditure has been incurred as the words in the opinion of the Assessing Officer do not precede the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r election campaigning. The A.O has, except referring to the diary, not brought on record any evidence which gives even iota of doubt that the appellant had incurred and paid for the expenses on election campaigning. The Ld. Counsel asserts that as assessment has to be completed on the basis of records and material available before the AO and personal knowledge and excitement on events and extraneous facts should not lead the AO to a State of affairs where the salient/primary/direct evidences are overlooked and should not influence the AO for resorting to adhoc additions. The additions should not be made by the AO in a routine manner merely on presumption, probabilities, suspicion and surmises since the same action of the AO degenerates the spirit for which the scrutiny assessments were emphasized by the Board. (Mukesh R Marolia v. Addl. CIT [2006] 6 SOT 247 Mumbai). The Ld. Counsel submitted that if general/casual/routine observations of the AO are to be considered as material evidence for the purpose of framing an assessment, the AO shall have blanket and arbitrary powers to dispose of the scrutiny assessments according to his whims and fancies which is not the spirit of the circ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 's action in this regard is opposed to the legal standards enumerated above. 13. In view of the above discussed legal and factual position and also in the absence of any evidence found in search or in post- search inquiry regarding payment by the appellant on account of election campaigning and also of the fact that in the search, no disproportionate undisclosed cash, bank or other deposit, property or any other asset was found with / in the name of the appellant, I am of the considered view that the AO making addition of ₹ 8,06,14,288/- on assumption and presumption and pure guesswork is not proper and unsustainable. Hence, the addition of ₹ 8,06,14,268/- is deleted. 10. Ld. DR submitted that the said seized diary was in the handwriting of the assessee, in the diary name of the assessee has been written and the amount mentioned therein represents the expenses incurred at the time of the election. He also argued that the observation of ld.CIT(A) that the assessee was not a candidate in the election is altogether an irrelevant factor. 11. On the other hand, ld.AR reiterated the order of the CIT(A). 12. We find that at page nos.30 to 71 of the paper bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the amount of actual financial transaction. 17. The Hon ble Supreme Court in the case of Central Bureau Of Investigation vs V.C. Shukla Ors, 1998 (3) SCC 410, held that loose sheets are not admissible in evidence and entries in such loose sheets are not even a prima facie evidence. Still further, the Hon ble Supreme Court in the case of Common Cause (A Registered Society) Vs. Union of India, [2017] 77 taxmann.com 245 (SC) has held that ; (i) Entries in loose papers/sheets are irrelevant and not admissible under Section 34 of the Evidence Act. It is only where the entries are in the books of accounts regularly kept, depending on the nature of occupation, that those are admissible; (ii) As to the value of entries in the books of account, such statement shall not alone be sufficient evidence to charge any person with liability, even if they are relevant and admissible, and that they are only corroborative evidence. Even then independent evidence is necessary as to trustworthiness of those entries which is a requirement to fasten the liability; (iii) The meaning of account book would be spiral note book/pad but not loose sheets; (iv) Entries in books of account ..... X X X X Extracts X X X X X X X X Extracts X X X X
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