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TMI Blog2021 (11) TMI 96X X X X Extracts X X X X X X X X Extracts X X X X ..... onus is on the revenue to collect cogent evidence to corroborate the noting. The revenue has failed to corroborate the noting by bringing some cogent material on record to prove conclusively that the noting in the seized paper reveled the unaccounted income of the assessee. Further, no circumstantial evidence in the form of any unaccounted cash, jewelry or investment outside the books of account was found in the course of search action in the case of assessee. Thus, the impugned addition was made by the AO on gross relief in advocate material or rather no sufficient material at all and as such neither to be deleted. We are of the view that an assessment carried out in pursuance of such action, no addition can be made on the basis of un-corroborative noting and scribbling on loose paper made by unidentified person having no evidentiary value, is unsubstantiated and is bad in law. Addition towards unexplained expenditure - addition on the basis of loose sheet - HELD THAT:- As we have deleted the various additions in all these assessment years, which are based on the seized material marked as A/BHB/11 and not supported by any material evidence. Being so, the amount voluntarily offere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, and by ignoring the case laws cited by the assessee. According to the assessee, the provisions of section 69A of the Act is not applicable but section 69 is applicable. Further, the AO not recorded any satisfaction as required under section 69A of the Act. 6. The ld.DR relied on the order of the lowest authorities and also submitted that presumption u/s 132(4A) is a rebuttable presumption, the assessee herein has been unable to rebut that presumption. Hence, no fault with the conclusion arrived by the lower authorities. He relied on the following judgments :- 1) Surendra M Khandhar Vs. ACIT reported in 224 CTR 409, by the Hon'ble Bombay High Court 2) ITO Vs. Legal heirs of Nazmin Jamal 33 taxmann.com 208, the Hon'ble ITAT, Mumbai 3) Hazari Lal Vs. CIT reported in 20 taxmann.com 714 by the Hon'ble Punjab & Harayana High Court 4) CIT Vs. Naresh Kumar Agarwala, reported in 198 taxman 194, the Hon'ble Delhi High Court. 7. Finally he submitted that considering the seized material there was sufficient material before AO who have made additional u/s 69/69A of the Act in these asst. years and the same to be confirmed. 8. In this case, addition made towards unexplained invest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e possession of the assessee and he did not deny the said document, hence the AO presumed that the amount shown in documents which has not reflected in the accounts made by assessee was his income by way of unexplained investment. He relied on the order of the CIT(A). 15.1 The ld.DR also relied on the following case laws:- 1. Surendra M.Khandhar vs ACIT reported in 224 CTR 409, by the Hon'ble Bombay High Court. 2. ITO vs Legal heirs of Nazmin Jamal 33 taxmann.com 208, the Hon'ble ITAT, Mum ba. 3. Hazari Lal vs CIT reported in 20 taxmann.com 714 by the Hon'ble Punjab & Haryana High Court 4. CIT vs Naresh Kumar Agarwala, reported in 198 taxman 194, the Hon'ble Delhi High Court. 15. We have heard both the parties and perused material on record. In the present case, the basis for addition is entry in the loose sheet, which shown as 25/4/2007 to Shri Vijaya Kumar on the basis of this entry in the loose sheet made addition under section 69A of the Act. To sustain the addition, there should be positive material and more than entry in the loose sheet which is missing in this case. The seized materials in the form of loose sheet marked as A/BHP/11 does not bare any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Trust for Backward Classes in ITA No.500 to 506/Bang/2020 dated 16/8/2021 wherein held as under- "The contention of the ld. DR is that the department relied upon the statement of assessee's own employee, who need not cross-examine its own employee and there is no mistake in not providing opportunity of cross-examination to the assessee. However, we are not in agreement with the contention of the ld. DR. The right to cross-examine is not dependent upon the assessee's relationship with the witnesses. The right to cross-examine depends upon the fact that statement of the party is used against the assessee. Therefore the mere fact that the statement sought to be relied upon by the AO is that of the employee would not disentitle the assessee to cross-examine. Therefore, the ratio relied upon by the assessee squarely applies and it is the prerogative of assessee whether it wants to cross-examine or not. It was held in the case of Smt. Madhu Gupta v. DCIT 2006 (2) TMI 496 - ITAT MUMBAI / [2006] 8 SOT 691 (MUM.) that even if the assessee was provided a copy of the statement recorded by the revenue on the spur of the moment, that should not be treated as an effective opportunity given to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notings, it cannot be deduced whether they are receipt or payments nor it can be concluded whether they are in relation to any particular transaction as no names have been mentioned. In these circumstances, no addition can be made on the basis of such document. 19. In CIT v. M/S Khosla Ice & General Mills 2013 (1) TMI 451 - Punjab & Haryana High Court, the Hon'ble Court held that assessee rightly contended that the impugned document was a non-speaking document inasmuch as it does not contain any intelligible narration in support of the inference drawn by the Assessing Officer that it reflected sales carried out by the assessee outside the regular books of account. When a dumb document, is to be made the basis to fasten tax liability on the assessee, the burden is on the Revenue to establish with corroborative evidence that the nature of entries contained therein reflect income and also that such income was in the control of the assessee. Thus, Revenue has to establish, with necessary corroborative evidence, that various entries contained in the seized document reflect sales of rice and broken rice effected by the assessee. Considering the entirety of circumstances, in the absence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oose sheets of papers are wholly irrelevant as evidence being not admissible under Section 34 of Evidence Act so as to constitute evidence with respect to the transactions mentioned therein being of no evidentiary value. The entire prosecution based upon such entries which led to the investigation was quashed by the Court. There has to be some relevant and admissible evidence and some cogent reason, which is prima facie reliable and that too, supported by some other circumstances pointing out that the particular third person against whom the allegations have been levelled was in fact involved in the matter or he has done some act during that period, which may have co-relations with the random entries. In case we do not insist for all these, the process of law can be abused against all and sundry very easily to achieve ulterior goals and then no democracy can survive in case investigations are lightly set in motion against important constitutional functionaries on the basis of fictitious entries, in absence of cogent and admissible material on record, lest liberty of an individual be compromised unnecessarily. 22. The Delhi Tribunal in Vijay Kumar Aggarwal v. ACIT 2017 (5) TMI 1354 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f could be the subject matter of cross-examination. Therefore, it was not for the Adjudicating Authority to presuppose as to what could be the subject matter of the cross-examination and make the remarks as mentioned above. (para 7) If the testimony of these two witnesses is discredited, there was no material with the Department on the basis of which it could justify its action, as the statement of the aforesaid two witnesses was the only basis of issuing the Show- Cause Notice. (para 8)" 24. The Delhi Tribunal in the case of Veena Gupta v. ACIT in ITA No.5662/Del/2018 dated 27.11.2018 relying on the above judgment of Hon'ble Supreme Court in the case of Andaman Timber Industries (supra) quashed the assessment order on the reason of not providing cross-examination of witnesses whose statements were recorded. 25. The Hon'ble Supreme Court in the case of Mehta Parikh & Co. v. CIT, 30 ITR 181 held as under:- "In the instant case a mere calculation of the nature indulged in by the ITO or the AAC was not enough, without any further scrutiny, to dislodge the position taken up by the assessee, supported as it was, by the entries in the cash book and the affidavits put in by the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of (Bogus purchase) - Certain portion of purchases made by assessee was disallowed - Commissioner (Appeals) found that entire disallowance was based on third party information gathered by Investigation Wing of Department, which had not been independently subjected to further verification by Assessing Officer and he had not provided copy of such statements to appellant, thus, denying opportunity of cross examination to appellant, who on other hand, had prima facie discharged initial burden of substantiating purchases through various documentation including purchase bills, transportation bills, confirmed copy of accounts and fact of payment through cheques, VAT Registration of sellers and their Income-tax Return - He held that purchases made by appellant was acceptable and disallowance was to be deleted - Tribunal dismissed revenue's appeal - High Court affirmed judgments of Commissioner (Appeals) and Tribunal being concurrent factual findings - Whether no substantial question of law arose from impugned order of Tribunal - Held, yes [Para 4] [In favour of assessee]" 27. The Hon'ble High Court of Karnataka in Kothari Metals v. ITO, 377 ITR 581 (Karn) held as under:- "Held, al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st a question of form or a question of giving an adverse party its privilege but a necessity of the process of testing the truth of oral evidence of a witness. Without the truth being tested no oral evidence can be admissible evidence and could not form the basis of any inference against the adverse parties. We have also examined the records and we find that this Shri Sukla was examined by a number of officers. The Assistant Director of Investigation examined him on August 4, 1987, and in reply to question No. 2 in that deposition he confirmed that he was a dealer in lubricating oil since 1977. In reply to question No. 3, he confirmed having been assessed to income-tax. Again, in reply to question No. 4, he explained that he used to purchase lubricating oil from different garages as well as through various brokers. Such lubricating oil was processed by him in his factory for sale. All payments were received by him through account payee cheques. In reply to question No. 5, he stated that he had seven full-time employees whose names are mentioned by him. He also claimed to have maintained books of account like sales books, purchase books, cash books and sale bills. In reply to questi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the light of the observations made by us in the foregoing and redo the assessment accordingly. All opportunities should be given to the assessee in order to lead any evidence that the assessee may feel necessary to rebut the case against him. As a result we decline to answer the question. 29. In the present case, as stated above, the purported search action did not leadto discovery of any unaccounted money, bullion, jewellery or other valuable article or thing. Further, no books of accounts or any undisclosed transaction of the assessee were found during the course of search. The entire assessment order revolve around scribbling in loose sheet of paper received from assessee in course of such action. It is the fact that the said rough loose sheet on paper scribbled by some anonymous person seized in the course of search cannot be termed as 'document' having any evidentiary value within the meaning of sec. 132 or sec.132(A) of the Act. Thus, entire addition made at ₹ 25 lakhs in the case of assessee in these assessment years is incorrect and thus to be deleted. 30. In our opinion, the loose sheet found during the course of search are undated and did not bare the signatur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the basis of loose sheet u/s 69A of the Act wherein, the entry as follows in seized material A/BHB/11 25 Anand 25 in the seized material A/BHB/11 34. The ld.AR submitted that as per the loose sheet A/BHP/11, item 13 shows Anand Prasanna Theater and also date is not recorded in the loose sheet but AO takes date of Shri KC Nagarj as 25/3. According to the ld.AR, these additions of ₹ 25 lakhs was unexplained investment as per AO to one Anand Theater, Bangalore is wrong addition since A/BHB/11, there is no such name called Anand Theater, Bangalore. According to assessee only sum of ₹ 13,407/- was paid on 6/2/2009 as per the ledger extract. This also confimed by the assessee in his reply to notice u/s 142(1) dated 24/1/2014 and figure mentioned in seized material marked A/BHB/11 at page 10 only indicate amount due to him from one Shri S.D Anand of Prasanna Theatre, which is reflected in the statement and books of account, therefore, addition cannot be made on the basis of seized document. It was submitted that this was stated by the assessee as a reply to notice issued under section 142(1) of the Act dated 24/01/2014. According to the assessee, the addition is made only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cash. Hence, this addition to be deleted. Bhadra : 25 lakhs 40. The ld.AR submitted that there has no mention of this amount in the loose sheet. The AO observed that the assessee has given 45 lakhs to Shri N Kumar, the producer of the movie. In the ledger account filed during the course of search, it was observed that an amount of ₹ 20 lakhs was shown. Thus, there was a difference of ₹ 25 lakhs with the AO without proof, he assumed that it was the payment by cash. Further, the date mentioned in the assessment order was as 08/2/2010 instead of 08/12/2010 (as per loose sheet vide item no.3 - N Kumar 45=00). The AO wrongly assumed the date as 08/12/2010 and made addition for the above assessment year under consideration. The same may be deleted. Bhanu Hassan : ₹ 25 lakhs 41. In the loose sheet, the date mentioned was 02/02/2010 but there was no statement recorded from Bhanu Hassan under section 131 of the Act and also no letter was issued from Bhanu Hassan to substantiate that the assessee is either given ₹ 35 or taken ₹ 35 lakhs. The AO cannot tax this amount as unexplained income without having any proof of cash transaction, hence addition of ͅ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rked as page-5 of seized material A/BE/6 shows as follows:- 48. According to AO, there was unexplained expenditure of ₹ 24.10 lakhs and same was brought to tax. 49. As discussed earlier, the addition is based on unsubstantiated loose sheets and on that basis addition cannot be made. Accordingly, the addition is deleted. Additional ground : ITA No.1377/Band/16 "The appellant having admitted u/s132(4) a sum of ₹ 3.03 crore as his income and the same having been accepted and assessed as income from other sources by the AO, the AO ought to have given the benefit of telescoping of alleged cash payments against this admitted income, in the interest of justice." 50. This additional ground is infructuous in view of our finding in the main grounds in this appeal. Hence, this additional ground is dismissed. ITA No.1372/Bang/2016 (Asst. Year 2011-12) 51. In this asst. year, the AO made addition of ₹ 328.50 lakhs as unexplained investment and also not given deduction towards voluntary disclosure of income by the assessee himself . Regarding the addition, the AR Submitted as follows:- Kanteerava : 45 Lacks 52 As per item Nos.6 & 7 in the loose sheet, it was mentione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e No.27, the AO linked the letter of CMR Production, wherein they have directed to pay 30 Lakhs directly to the assessee vide letter dated 22/03/2011. The AO overlooking the ledger extracts and without having any proof of cash transaction between Shankar Reddy and the assessee, made addition of ₹ 16 lakhs and same has to be deleted. Mass : ₹ 45 lakhs 55. As per item No.2 A.Ganesh Mass - 12/01/2011 - 65=00 as mentioned in the seized material. Vide letter dated 11/01/2011 written by A.Ganesh to the secretary, KFCC that Bahar films has been given negative right holder of Kannada film Mass. But nowhere there is mention of cash transaction in the letter but only the letter given by A.Ganesh to Mahesh Kothari to pay ₹ 23 lakhs to the assessee. The AO wrongly presumed that balance ₹ 45 lakhs has been paid by cash to A.Ganesh without having any proof for cash transaction. There was no confirmation to sworn statement recorded in the case of A.Ganesh that assessee has given ₹ 45 lakhs to A.Ganesh. Hence, addition to be deleted. Sanju Weds Geetha ₹ 45 lakhs : 56. The AO in para-2 of the assessment order at page 35 recorded that payment of ₹ 120 la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d both the parties on admission of above additional grounds. In our opinion, these are legal issued and it does not require any investigation of facts which are already on record. Accordingly by placing reliance on the judgment of Hon'ble Supreme Court in the case of National Thermal Power Co. Ltd., cited Supra, we admit the additional ground for adjudication. 63. Now coming to the issue relating to not giving the telescopic benefits of ₹ 3.03 crores the AO given only ₹ 1.33 crores. 64. In the present case, we have deleted the various additions in all these assessment years, which are based on the seized material marked as A/BHB/11 and not supported by any material evidence. Being so, the amount voluntarily offered by the assessee in his return of income at ₹ 3,03,05,017/- is to be taxed and as such there is no question of giving any telescopic benefit and the AO not at all required to deduct ₹ 1.35 crores from the computation of income in assessment year 2011-12. He has to go by return filed by the assessee on 26/11/2011 in acknowledgment No.292359831260911 for the asst. year 2011-12 while passing the giving effect order to our findings in this order. Thi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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