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TMI Blog2019 (7) TMI 1497X X X X Extracts X X X X X X X X Extracts X X X X ..... mmon the Directors of CHL group. Assessee has denied to have entered into the alleged transaction through an affidavit. No other incriminating material was found during the search. Therefore in our considered view CIT (A) was justified in deleting the addition made by the A.O. No interference is therefore called for in the finding of Ld. CIT(A) and the same is confirmed. In the result the appeal of the revenue stands dismissed. - ITA No. 499/Ind/2018 And C.O. No. 10/Ind/2019 - - - Dated:- 29-7-2019 - MR KUL BHARAT, JUDICIAL MEMBER AND MR MANISH BORAD, ACCOUNTANT MEMBER, JJ. For The Revenue : Shri B.J. Boricha, Sr. DR For The Assessee : Shri P.D. Nagar, CA ORDER PER MANISH BORAD, AM. The above captioned appeal and Cross Objection relates to Assessment Year 2010-11. The revenue s appeal for Assessment Year 2010-11 and also the assessee s Cross Objection is directed against the orders of Ld. Commissioner of Income Tax (Appeals)-II, Indore (in short CIT(A) ), dated 17.03.2018, which is arising out of order u/s 143(3)/147 of the Income Tax Act (In short the Act ) dated 21.12.2017 fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment were conveyed by the AO. 4. Being aggrieved by the assessment order, the appellant challenged the same on the ground of validity of issue of notice u/s 147 of the Act as well on merits. The Ld. CIT (A) deleted the addition on the ground that addition was made ignoring the principals of natural justice merely on surmises and suspicion by drawing adverse inference based on pen-drive of the accountant of an unrelated party. However, Ld. CIT(A) did not decided the validity of proceedings initiated u/s 147 of the Act. 5. Now the revenue is in appeal before the Tribunal against the deletion made by Ld. CIT(A). 6. The assessee gave following written submissions; I) Justification of addition u/s 68 of the Act: On Merits. At the outset, AO invoked the provisions of section 68 of the Act which can be applied only when any credit entry is found in the books of assessee. Search proceedings were not carried out in the premises of Shri Mahesh Bansal and no loose paper/hundi/documents/promissory note/cash book or cash flow statement were found or seized, which could prove the movement of cash to fro between Shri Mahesh Bans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esh Bansal with mobile number was found in pendrive of the accountant of the CHL Hospital. It is a settled legal position that the entries found recorded in the books of account of the third party or statement recorded under section 132(4) or 131 of the Act of a third party are binding upon him in his own case only and the same cannot be foisted upon the other parties in the absence of sufficient corroboratory material. The assessee cannot be penalized for entries recorded in the diary maintained by 3rd party unless any evidence is found against him. Assessee further submitted that in spite of specific request made to the Assessing Officer to give an opportunity to cross examine the directors of CHL Hospital by issuing summon to them when the accountant even did not know the appellant. Non issue of summons to the directors of CHP hospital, the assessment order was vitiated as held in the case of Prakash Chand Nahata vs. CIT (2008) 3012 ITR 134 (M.P) Reliance was placed by the assessee on the following judgments; a) Pr. CIT V/s Pukhraj Soni Appeal No. ITA 53 of 2017 (MP) order dated 06.02.19. b) K. P. V ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 31, 830/- ( Cash Loan ₹ 1, 05, 00, 000/-, interest ₹ 8, 31, 830/-). However the Ld. A.O gave the benefit of disclosure made by the assessee in the Income Tax Rules 2016 of ₹ 28, 00, 000/- and the balance amount of ₹ 85, 31, 830/- was added to the income. When the issue came up before Ld. CIT(A) he after appreciating the facts and placing reliance on the judgments deleted the addition observing as follows; 4.1 The appellant had, therefore, requested to cross examine Mr.Ashok Vaishnav as well the directors of CHL Hospital to explain the nature of entries recorded by him and to give an extract from so called pen-drive related to alleged financial transactions. None of the directors of the Hospital were summoned. The statement of the accountant was recorded on 12.12.2017 and he was cross examined on 15.12.2017. Vide answer to Question no. 9 of statement recorded on 12.12.2017, the accountant stated that he did not personally know the appellant with further admission vide answer to question no. 12 that he was not aware whether he had ever talked to Mahesh Bansal even on mobile. Again, during cross exam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts delivered by the Hon'ble Supreme Court 1D the case of Dhirajlal Girdharilal vs. CIT (1954) 26 ITR 736 (SC); Dhakeswari Cotton Mills Ltd vs, CIT (1954) 26 ITR 775 (SC); Lalchand Bhagat Ambica Ram vs, CIT (1959) 37 ITR 288 (SC); Umacharan Shaw Bros. vs. CIT (1959) 37 ITR 271 (SC) Omar Salay Mohamed Sait vs, CIT (1959) 37 ITR 151 (SC) also applies to the facts and circumstances of the case because the adverse inference drawn by the AO was purely based on conjectures, surmises and suspicion and does not have sanction of law. The principal laid down by the Apex Court in the case of Central Bureau Of Investigation vs V.C. Shukla Ors (1998) 3 SCC 410 (SC) is also applicable in the case of the appellant wherein it was held that any loose sheets or diary found with the party where search was conducted, will not have any evidentiary value and it cannot be used against third party without any corresponding corroborative evidence. 4.4 In view of above, it is true that adverse inference has been drawn ignoring the principals of natural justice and section 34 of evidence Act in the case of the appellant hence addition made based on pen-drive of the accountant found ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no proof that the amounts in question represented income from undisclosed sources belonging to the assessee ( iii) In the case of Dy. CIT Vs. Mahendra Ambalal Patel (2010) 40 DTR 243 (Guj) (supra) Hon ble High Court held that Addition in the hands of the assessee having been made merely on the basis of a statement made by a third party without there being any corroborative evidence, the Tribunal was justified in deleting the addition particularly when the assessee was not allowed opportunity to cross examine the persons who made such a statement. ( iv) In the case of Heirs L.Rs of Late Laxman Bhai S. Patel V s.CIT (2008) 327 ITR 290 (Guj) (supra) Hon ble High Court held that The Department had failed to establish any nexus between the promissory note and the amount said to have been given by the assessee to K. The Tribunal was not right in law in upholding the addition of ₹ 8, 78, 358/- in the hands of the assessee . ( v) In the case of Chiranji Lal Steel Rolling Mills Vs. CIT (1972) 84 ITR 222 (P H) (supra) Hon ble High Court held that The copy of entries from the accounts of another firm suppl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to support the conclusion of the AO that the assessee has advanced the money. We derive support from the decision of Hon'ble Supreme Court in the case of Dhakeshwari Cotton Mill Pvt.Ltd. vs. CIT, (1954) 26 ITR 775 ( S. C.), wherein it was held that while making an assessment there must be something more than the bare suspicion to support the assessment. In another case of K.P. Varghese vs. ITO, (1981) 131 ITR 597 ( S.C.), the Hon'ble Supreme Court has held that mere seizure of note books of documents at the personal residence of an employee would not conclude the issue against the employer company that the on money has been received by the employer company. The onus of proving the charging of on money lies on the Revenue. Further, the Hon'ble Bombay High Court in the case of ACIT vs. Lata Mangeshkar (Miss) (1974) 97 ITR 696 (Bom), has held that no addition could be made in the hands of the assessee on the basis of notings found in the books of third person. 9. In view of facts and circumstances narrated above, we find that this issue is covered by the decision of this Tribunal in the case of Shri Nilesh Ajmera ([IT(SS)A Nos.250 251/Ind/2013, order da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d electronic documents within the legal parameters. The Commission has also observed that Department has not been able to make out a clear case of taxing such income in the hands of the applicant firm on the basis of these documents. 24. Since it is not disputed that for entries relied on in these loose papers and electronic data were not regularly kept during course of business, such entries were discussed in the order dated 11.11.2016 passed in Sahara's case by the Settlement Commission and the documents have not been relied upon by the Commission against assessee, and thus such documents have no evidentiary value against third parties. On the basis of the materials which have been placed on record, we are of the considered opinion that no case is made out to direct investigation against any of the persons named in the Birla's documents or in the documents A-8, A-9 and A- 10 etc. of Sahara. 27. Considering the aforesaid principles which have been laid down, we are of the opinion that the materials in question are not good enough to constitute offences to direct the registration of F.I.R. and investigation therein. The materials should q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the addition of ₹ 85, 31, 830/- made by the Ld. A.O. No interference is therefore called for in the finding of Ld. CIT(A) and the same is confirmed. In the result the appeal of the revenue stands dismissed. 14. Assessee has filed following Cross Objections; C.O.No.10/Ind/2019 (Assessee) 1. That the learned Commissioner of Income tax (A) erred in law in not deciding the validity of invoking the provisions of section 148 of the Act by the A.O. He ought to have considered that the reopening was based on assumptions and presumptions regarding unsecured loan alleged to have been given by the appellant to CHL Hospital as per pen drive found with the accountant of the said Hospital. Such pen drive found and seized in search proceedings of a third party cannot be considered as information within the meaning of section 147 of the Act hence order so passed should have been quashed. 2. That without prejudice to above, learned Commissioner of Income Tax (A) erred in not appreciating the fact that neither the accountant Mr. Vaishnav nor the appellant knew each other as per statement of Mr. Vaishnav recorded under ..... X X X X Extracts X X X X X X X X Extracts X X X X
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