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TMI Blog2018 (11) TMI 478X X X X Extracts X X X X X X X X Extracts X X X X ..... ion, as such, same is incapable for let out and hence the ALV of such property cannot be brought to tax. But after going through the decision the ratio as appears in the decision of the Hon’ble High Court is on different issue and will not be applicable in the present case. Even the dilapidated property as its ALV and thus, the contentions of the Ld. AR does not sustain as the property always has the value. Therefore, Ground No. 6 to 6.1 are dismissed. - ITA No. 3036/Del/2015, ITA No. 3037/Del/2015, ITA No. 3038/Del/2015 And ITA No. 3039/Del/2015 - - - Dated:- 2-11-2018 - SHRI N. K. SAINI, ACCOUNTANT MEMBER AND MS SUCHITRA KAMBLE, JUDICIAL MEMBER For The Appellant : Sh. C. S. Agrawal, Sr. Adv And Sh. D. B. Jain, FCA For The Respondent : Sh. Naina Soin Kapil, Sr. DR ORDER PER SUCHITRA KAMBLE, JM These appeals are filed by the assessee against the order dated 26/03/2015 passed by CIT (A)-XXIV- for Assessment Years 2001-02, 2005-06, 2006-07, 2007-08 respectively. 2. The grounds of appeal are as under:- ITA No. 3036/Del/2015 (A.Y. 2001-02) 1. That the learned CIT(A) has grossly erred both in law and on facts in upholding the initia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppreciate that, the addition made of ₹ 11,53,200/- was unsustainable. The assumption of the learned CIT(A) that the assessee had a clear business link and association between Sh. Chetan Gupta is fallacious, untenable and in any case any such link or association could not be held to be any ground at all to hold that, the assessee had made an investment with Shri Chetan Gupta, even if for the sake of an argument it is accepted that there was a credit in the Pen Drive maintained by Shri Chetan Gupta. 2.1. The learned CIT(A) has failed to appreciate the distinction between unexplained credits falling u/s 68 and unexplained investment u/s 69 of the Income Tax Act. He has failed to appreciate that the learned A.O. made 11,53,200/- u/s 69 of the Act, which had absolutely no application and thus the addition made of ₹ 11,53,200/- was totally unsustainable. 2.2. That the learned CIT(A) has failed to appreciate that, the burden was on the learned AO to establish that the assessee had made an investment and that there were credits in the books of the assessee, and without discharging such a burden, no addition was sustainable u/s 69 of the Income Tax Act. 2.3. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er section 147 of the Income Tax Act, 1961. 1.1. That the learned CIT(A) has failed to appreciate that, in the absence of surfacing of any tangible material, the learned A.O. could not have proceeded to invoke the provisions of section 147 of the Income Tax Act and as such learned CIT(A) ought to have held that the initiation of proceedings u/s 148 of the Income Tax Act was without jurisdiction. 1.2. That the learned CIT(A) has failed to comprehend that, the learned ACIT had no tangible material at the time of initiation of proceedings and the alleged information which was stated to have been allegedly received from the Addl. CIT, too was without any supporting material and was not available with him, as such, reassessment proceedings initiated without any tangible material and upheld by the learned CIT(A) is unsustainable in law. 1.3. That, the finding of the learned CIT(A) that the A.O. has received 'authentic' information from another Statutory Authority about recovery of Pen Drive from Sh. Chetan Gupta during raid conducted by Punjab Vigilance Bureau, Ludhiana, was insufficient to enable the learned A.O. to form his reason to believe, as the learne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further failed to appreciate that, despite the assessee's repeated request to produce Shri Chetan Gupta for the assessee's cross examination to rebut the allegation that, there was credits in the books of Shri Chetan Gupta, having not been provided, no addition was sustainable in the hands of the assessee. 2.4. That in any case and without prejudice, no reliance could have been placed on the statement of Shri Chetan Gupta since the said statement was allegedly made before Police authorities and had further never been confronted to the assessee and that even otherwise in the absence of any statement made by Shri Chetan Gupta that, the alleged credits appearing in his Pen Drive in any manner belongs to the assessee, there was no justification either on facts or in law to have sustained any such addition. 2.5. That the learned CIT(A) has failed to appreciate that, the burden which was on the revenue has not been discharged and there was not any material to establish that, what was credited in the account of Shri Chetan Gupta was the investment made by the assessee. The mere fact, there were certain credits in some abbreviated form does not lead to a conclusion that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned CIT(A) has failed to appreciate that, the addition made of ₹ 1,73,61,108/- was unsustainable. The assumption of the learned CIT(A) that the assessee had a clear business link and association between Sh. Chetan Gupta is fallacious, untenable and in any case any such link or association could not be held to be any ground at all to hold hat, the assessee had made an investment with Shri ChetanGupta, even if for the sake of an argument it is accepted that there was a credit in the Pen Drive maintained by Shri Chetan Gupta. 2.1 The learned CIT(A) has failed to appreciate the distinction between unexplained credits falling u/s 68 and unexplained investment u/s 69 of the Income Tax Act. He has failed to appreciate that the learned A.O. made ₹ 1,73,61,108/- u/s 69 of the Act, which had absolutely no application and thus the addition made of ₹ 1,73,61,108/- was totally unsustainable. 2.2.That the learned CIT(A) has failed to appreciate that, the burden was on the learned AO to establish that the assessee had made an investment and that there were credits in the books of the assessee, and without discharging such a burden, no addition was sustainable u/s 69 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hus there was heavy burden on the CIT(A) to bring on record the facts which can distinguish the judgments relied by the assessee. It is therefore prayed that, it be held that the addition sustained of ₹ 1,73,61,108/- be deleted and it be further held that, no interest accrued to the assessee as there was no contractual obligation in respect thereof. ITA No. 3039/Del/2015 (A.Y. 2007-08) 1. That the learned CIT(A) has grossly erred both in law and on facts in sustaining the additions of ₹ 11,66,032/- made by the learned ACIT in the order of assessment passed under section 143(3) of the Act. 2. That while sustaining the aforesaid addition, learned CIT(A) has grossly erred in placing reliance on the order of the CIT(A) for the assessment year 2001- 02. 3. That without prejudice to the aforesaid and otherwise too, the learned CIT(A) has failed to appreciate that, the addition made of ₹ 10,46,032/- was unsustainable. The assumption of the learned CIT(A) that the assessee had a clear business link and association between Sh. Chetan Gupta is fallacious, untenable and in any case any such link or association could not be held to be any groun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... return of income filed u/s 139(1) of the Income Tax Act. In the appeals filed, the assessee challenged both the initiation of the reassessment proceedings u/s 148 of the Act which are contended to have been initiated without there being the existence of any material for forming a reasons to believe that the income of the assessee has escaped assessment and as well as on the merits of the additions made. The Ld. AR submitted that soon the proceedings had been initiated by invoking the provisions of Section 147 of the Act, the assessee had been seeking such material as were stated by the Assessing Officer in the reasons to believe to be his basis for initiating the proceedings. The Ld. AR submitted that the said alleged material had never been supplied to the assessee even till the framing of the order of assessment. The Ld. AR pointed out these facts are emerging from the Assessment Order and the order of the CIT(A) for which written submissions were made during the course of hearing. The Ld. AR submitted that despite the aforesaid requests made by the assessee, the Assessing Officer never supplied any such alleged material, and on the contrary, the Assessing Officer merely state ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arly in the case of the father of the assessee, Shri. K. Natwar Singh , and mother of the assessee Smt. Heminder Kumari , proceedings were initiated u/s 148 of the Act and additions had similarly been made. The CIT (A) while disposing off the appeals of the said assessees had however deleted the additions since he found that there was no valid material available on record, but had upheld the validity of the initiation of the reassessment proceedings. In fact it was noted by him that Shri. Chetan Gupta who was allegedly found in possession of a pen drive had even denied that he was found in possession with any such pen drive. The revenue being aggrieved from the aforesaid orders had filed appeals before the Tribunal and the Tribunal by its order upheld the deletion of the addition made by the CIT (A), by holding that no addition was warranted, as there existed no valid material for assuming that any investment as alleged had been made and so allegedly reflected in the pen drive, more particularly when even Shri. Chetan Gupta denied the recovery of any such pen drive. The Ld. AR thus submitted that since the facts and circumstances of the case are absolutely identical to the afores ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the opinion of this court certainly cannot be said to constitute sufficient reasons to believe to warrant a notice u/s 148 during the extended period within the meaning contemplated by law. The aforesaid judgment of the Hon ble High Court was subjected to review petition (Rev. Petition No. 215/2013, in ITA No.266/2011) and the said review petition also got dismissed on 26.04.2013 (reported in [2013] 35 taxmann.com 215 (Delhi)) by holding as under: 7. We are afraid that once it is conceded on behalf of the revenue that the list was not produced before this Court at the time of the hearing of the appeal and is only being produced along with the review petition after locating the same in other files subsequently, then there is no merit in the review petition. This Court had perused the reasons recorded but the list was not found to be part of the assessment record which was seen by this Court. This Court had also noted - shockingly - that the assessment record did not contain even the forwarding letter alleged to have been written by the ADIT to the assessing officer. It was open to the revenue to produce the list when the appeal was heard by this Court, though it w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee who had made any such deposit with him as is allegedly reflected in such a pen drive. The Ld. AR however submitted that the order impugned of the CIT (A) is dated 26.03.2015, when he had not the benefit of the order of the Tribunal in the cases of assessee s father Shri K. Natwar Singh and mother Smt. Heminder Kumari, wherein the Tribunal have upheld the order of the CIT (A) who had deleted the additions similarly made on the identical facts. The orders of the Tribunal are dated 05.03.2015 which orders were not available when the CIT (A) had heard the appeals in February, 2015. However, the Ld. AR further added that the order of the Tribunal in the case of Smt. Heminder Kumari is dated 29.08.2014 which had not been followed by the CIT (A). The Ld. AR submitted that the CIT (A) while disposing off the assessee s appeal, has not followed the order of his colleagues, who has deleted the addition in the case of assessee s father and mother as aforesaid. The assessee has placed in PB-3 the orders of the CIT (A) of his father K Natwar Singh and mother Smt. Hemindar Kumari along with the orders of assessment. The said orders of the CIT (A) were placed at pages 429-465 and 166-260 of PB ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of an argument that there is a business link/nexus (which is disputed), the CIT (A) has failed to comprehend the provisions of section 69 of the Act which postulates that before an addition can be made, it has to be established that an investment has been made by a person in whose hands an addition is made by invoking the provisions of section 69 of the Act. The Ld. AR submits that the aforesaid additions made in each of the assessment years is made only on the basis that in a pen drive which had 'allegedly been found from the possession of Shri Chetan Gupta, and the assessee can be said to have made investment with him since there appears a name of Jagat c/o Biba Ji . In fact, it is well settled rule of law that before making the addition by invoking section 69 of the Act, the burden rests on the revenue to establish that investment has been made by an assessee in whose hands additions are being made. The Hon ble High Court of the Delhi in the case of CIT vs. Commissioner of Income-tax v. Naresh Khattar HUF reported in 261 ITR 664 has held that burden to establish that an investment has been made while the provision of the section 69 of the Act is on the revenue. In the fol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dence has been brought on record to support that assessee has made any such investment. It is thus evident that the burden is upon the revenue first to establish that the investment has been made which are not recorded in the books. In the instant case, very foundation of establishing that an investment has been made by the assessee in the financial year is itself lacking. Further the Hon ble Bombay High Court in its judgment in the case of Babulal C. Borana vs. ITO 282 ITR 251 held that under section 69 of the Act an additions on account of unexplained investments can be made as deemed income, if it established that assessee has made investment which are not recorded in the books maintained by the assessee. It is well settled that the burden is on the person who makes allegation and to discharge his burden it is he who has to lead positive evidence and the mere fact there are certain entries in the books of accounts of third party is insufficient to make addition on the ground that assessee had made investment. The Ld. AR submitted that this finding of the CIT (A) deleting the addition made on the aforesaid basis has been upheld by the Tribunal as is evident from its order when it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee is not known and thus the further findings of the CIT (A) that since the person in whose books the credits are, fails to explain the same, there become a credit in the account of that assessee namely the creditor, is evidently a complete misunderstanding of statutory provisions contained in section 68 of the Act. The Ld. AR thus submits that there is a complete misconstruction of the provisions of sections 68 and 69 of the Act and the findings had been recorded not only without any authority of law but in an arbitrary manner. There can be no presumption of an investment having been made unless the same is established by cogent, positive and impeachable evidence. In the instant case, there is not even any assertion by Shri Chetan Gupta that the assessee has made investment with him. On the contrary all what has happened is that as a result of a pen drive found from Shri. Chetan Gupta which pen drive was stated to have been available to SPE i.e. Special Police Establishment by an anti corruption squad, certain sums were shown to have been reflected as receipt which were allegedly received by him from 148 persons. The fact of the matter remains is that even there is a de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iness relationship with Sh. Chetan Gupta, since the assessee was in control and had utilized the Mercedes and Pajero vehicles of Chetan Gupta s concerns. The Ld. AR further submitted that the assessee had taken on lease the two vehicles from M/s Trans Air and M/s Nikunj Agro and not from Shri. Chetan Gupta wherein Sh Chetan Gupta was either a shareholder or a partner. The mere fact that the assessee had taken on lease the aforesaid two cars from the company or the firm in which Shri Chetan Gupta had interest, it is submitted it does not establish any close association or business connection with each other. In any case it is submitted that the same is wholly an irrelevant consideration in deciding the issue of amount alleged to have been invested by the assessee and is allegedly stated to be reflected in the pen drive. On the contrary, it is an admitted fact that in the alleged pen drive found from the possession of Shri Chetan Gupta, there were 148 accounts holders from where it had been alleged that he has received funds from 148 persons. However even the allegation of having received any such sum from any person has not been ever established by the revenue and thus the allegatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re credit appearing in the books of an assessee, the onus is on him to establish whether the credit are genuine by establishing the identity and creditworthiness of the creditor as is envisaged u/s 68 of the Act. In fact it is for Shri. Chetan Gupta in whose books of accounts there were alleged credits, to have established by cogent evidence that the credits appearing in his books of accounts are genuine both by establishing the source of credits and the genuineness of the transaction so well the identity of the creditor. In the instant case, it has in fact not even been asserted by Sh. Chetan Gupta that he has received any such credit from the assessee. Be that as it may, however, under section 69 of the Act which reads as under; clearly provides that where an assessee has made investment which are not recorded in the books of account, the value of the investments may be deemed to be the income of the assessee of such financial year. Extracts of Section 69 are as follows: 'Where in the financial year immediately preceding the assessment year the assessee has made investments which are not recorded in the books of account, if any, maintained by him for any source of inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hri Chetan Gupta was the investment made by the assessee. The Ld. AR submitted that such a burden has not been discharged and the addition has been sustained in an arbitrary manner with no logic. 14. The Ld. AR submitted that the CIT (A) has further failed to appreciate that section 68 of the Act is applicable only where there are credits in the books of the assessee and not elsewhere. In fact the Hon'ble Bombay High Court in the case of CIT vs. Bhaichand H. Gandhi reported in 141 ITR 67 have held that even the bank account of the assessee is not the books of the assessee and had thus deleted the addition by holding that section 68 of the Act is inapplicable. Further the High Court of Punjab and Haryana in the case of Smt. Shanta Devi vs CIT reported in 171 ITR 532 have held that even the balance sheet is not the books of the assessee. In such circumstances, the CIT (A) has grossly erred in holding that section 68 of the Act could be made applicable. It is again well settled rule of law as has been applied by the Hon'ble Tribunal in the cases referred to above that no addition can be made on the basis of the entries in the third parties books of account which are unsuppo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Emphasis supplied) 16. The Ld. AR submitted that in the instant case revenue has never brought any adverse statement against the assessee of Shri Chetan Gupta much less having produced him for assessee s examination so that assessee could have established in rebuttal the allegation of the revenue that such investment has been made by the assessee which has been the sum added in the hands of the assessee. The Ld. AR submitted that CIT (A) has further erred in failing to comprehend that the alleged statement of Shri. Chetan Gupta which has been referred by the Assessing Officer is of no assistance and is absolutely inadmissible as such statement was recorded under section 161 of the Cr. P.C. and hence Assessing Officer and CIT (A) both have erred in law in relying a statement which is inadmissible in law. Further such statement was never confronted to the assessee and has not seen the light of the day as such, even otherwise, such evidence cannot be relied. The Ld. AR relied upon the following judgments: i. AndamanTimber Industries v. CCE [2015] 127 DTR 241 (SC) ii. Kishinchand Chellaram v. CIT. [1980] 125 ITR 713 (SC). The Ld. AR further submitted that in respect of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i property and brought to tax a sum of ₹ 7,44,055/-. However, the Ld. AR submitted that CIT (A) negated the approach of the Assessing Officer to the extent of treatment by the Assessing Officer of Bharatpur property as self acquired property, by holding that Assessing Officer cannot impose the Bharatpur property as self acquired property, and upheld the contention of the assessee that Delhi property is self acquired property. However, in respect of the Bharatpur property, it was held that merely because the property requires repairs, it cannot be held that ALV of such property is NIL, and hence estimated the ALV at ₹ 1,20,000/-. The Ld. AR submitted that CIT (A) has completely failed to comprehend that such property is dilapidated condition and is not habitable and unless extensive repairs are done, such property is not lettable. It is submitted that no evidence or material has been brought on record to rebut the submissions of the assessee. The Ld. AR submitted that the Assessing Officer is adjudicator as well as investigator and before reaching any conclusion, it is incumbent upon him to make necessary enquiry. The Ld. AR further submitted that in the case of Shree Ni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P. Ludiana is available to the Assessing Officer much less to be assessee nor any statement was recorded by ADIT (Investigation) from Shri Chetan Gupta to corroborate that any cash was paid by the assessee to Shri Chetan Gupta. On the contrary, Shri Chetan Gupta on his deposition clearly denied having received any cash. Shri Chetan Gupta also denied having given any statement admitting receipt of cash. Therefore, in absence of any evidence of record, be addition was not sustainable .. This presumption of fact by the Hon ble High Court no longer holds to in view of developments subsequent to the order of Hon ble High Court and hence order of the Hon ble High Court is sub-silentio on these developments. In this case of Chetan Gupta v. ACIT (2013) 144 ITD 344 (Del. Tri.), not only Chetan Gupta admits that he had been managing funds of others but also requested for benefit of Peak theory and telescoping. And the Tribunal gave a finding of fact that the assessee was managing the funds of others and confirmed the deemed addition u/s 68 of the Income Tax Act by giving the benefit of Peak theory as the source of corresponding funds was not explained. In view of the above, if the Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation of the Assessing Officer is not supported by any documents. Thus the proceedings had been initiated not on the basis of any material but on the basis of mere alleged information. As per Section 147 of the Act, the Assessing Officer should have reasons to believe for initiating the proceedings in support of material found as regard to the escapement of the income. But in the present case addition was made by the Assessing Officer on the basis of the information only and no further inquiry was made or documents verified by the Assessing Officer at the time of the Assessment Proceedings. Thus, the Assessing Officer had no material or evidence whatsoever in his possession or on his record but proceeded to initiate the proceedings u/s 148 of the Act without satisfying the preconditions of the section 147 of the Act. Besides that during the Assessment Proceedings as well the Assessing Officer has not brought out on record that the material found was that of Assessee. Similarly in the case of the father of the assessee, Shri. K. Natwar Singh, mother of the assessee Smt. Heminder Kumari, proceedings were initiated u/s 148 of the Act and additions had similarly been made. The CIT (A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id by the assessee to Sh. Chetan Gupta. On the contrary Sh. Chetan Gupta on his deposition before the Assessing Officer clearly denied having received any cash. Shri Chetan Gupta also denied having given any statement admitting receipt of cash. Therefore, in absence of any evidence on record, the addition was not sustainable. It is strange to note that the Assessing Officer having recorded the statement of Sh. Chetan Gupta chosen to remain silent. This proves that in the statement of Shri Chetan Gupta there was no adverse factor affecting the tax liability of the assessee. Accordingly, the addition was rightly deleted by the learned CIT(A). This order of the Tribunal is upheld by the Hon ble High Court vide order dated 28.02.2011 being ITA No. 1934/2014. Since the facts and circumstances of the case are absolutely identical to the aforesaid cases and there is no evidence or material to support the addition made by the Assessing Officer, the addition made does not sustain. Therefore, issue relating to addition made u/s 69 of the Act on the basis of an alleged pen drive of Shri Chetan Gupta does not survive and the order of the CIT(A) is set aside. Therefore, Ground No. 2 to 2. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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