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TMI Blog2022 (6) TMI 20X X X X Extracts X X X X X X X X Extracts X X X X ..... mount of Rupees 1,77,34,000/- and had stated it to be received as on-money pertaining to land transaction. Further the ld. CIT(A) has erred in holding that right to cross examination is an absolute right of the assessee. The ld. CIT(A) instead of giving relief to the assessee merely on this ground could have himself gotten a cross examination given/carried out in terms of powers available to he as per provisions of Section 250(4) of the IT Act, 1961. 2.1 The ld. CIT(A) has committed a grave error of law in not getting carried out inquiries/getting cross examination done even though the ld. CIT(A) felt that they were necessary. It was duty of ld. CIT(A) to get the needful done as per powers available to her within the meaning of provisions of Section 250(4) of the Income Tax Act, 1961. 2.2 It has been held by the Hon'ble SC in the case of Kapurchand shrimal vs CIT 131 ITR 451, 460 (SC) at para 13 "It is well known that an appellate authority has the jurisdiction as well as the duty to correct all errors in the proceedings under appeals and to issue, if necessary, appropriate directions to the authority against whose decision the appeal is preferred to dispose of the whole or any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... having noticed want of proper inquiry, could not have closed the chapter simply by allowing the appeal and deleting the additions made." 3. Whether on the facts and circumstances of the case and in law the ld. CIT(A) is justified in deleting the addition of Rs. 10,00,000/- as the buyer of the land denied to pay any on-money in land transaction to his wife. The ld. CIT(A) ignored the principle of preponderance of human probability as laid down by Hon'ble SC in the case of Sumati Dayal V CIT (1995) 214 ITR 801 (SC) & CIT V. Durga Prasad More (1971) 82 ITR 540 (SC). 4. The ld. Commissioner of Income Tax (Appeals) has erred in law and has committed a grace error of law in not giving notice to the A.O. as contemplated within the meaning of provisions of Sections 250(1) of the IT Act, 1961. In this connection, order of Hon'ble SC in the case of Amritlal Bhogilal & Co. (1958) 34 ITR 130 (SC) may be studied." 2. The hearing of the appeal was concluded through video conference in view of the prevailing situation of Covid-19 Pandemic. 3. The brief facts of the case are that the assessee had declared income from salary from Rajasthan State Government, house property, interest from bank ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tly supported the order of the ld. CIT(A). The ld. AR has also relied on the written submissions filed before the Bench and the contents of the same are as under: "1. It is submitted that during the course of search the hard disk of the computer in which the accounts were maintained in Tally software was seized vide Annexure AS dt. 21.07.2016. Further the patient registers for the period 01.04.2015 to 20.07.2016 were seized vide Annexure AS dated 21.07.2016. On the date of search the cash book was incomplete. Accordingly, assessee vide letter dated 24.08.2016 requested ADIT to provide copy of patient register maintained in normal course of business to work out the cash balance as per the books of accounts. Thereafter in statement u/s 131 dt. 01.09.2016 when assessee was asked to confirm the surrender made u/s 132(4), he in reply to Q. No.4 in para (iii) stated as under:- "Regarding point no. 1, 3, 4 and 5; our accounts have already been seized by the department, the cash in hand available as per books of accounts which could not be calculated because our accountant was sick and later busy with his examinations prior to the search operation, therefore, cash in hand available wil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of search. The amount of private practice receipt declared by the assessee is more than the cash amount surrendered by him as evident from the following table:- (Amount in Rs.) Period (F.Y.) Professional income Income from private practice Other professional receipts Total income shown in the books Amount offered in the statement 2015-16 1,59,600/- 65,42,800/- 36,22,046/- 1,03,24,446/- 80,00,000/- 01.04.16 to 20.07.16 26,100/- 24,56,600/- - 24,82,700/- 17,30,300/- The AO accepted the income as shown in the Income & Expenditure A/c (PB 5-6). This income is source of cash found in search. Thus, taxing professional receipt on the one hand and also taxing the cash balance found in search has resulted into double taxation. Hence, separate addition of cash surrendered in search is uncalled for. 4. So far as observation of AO that cash book is manipulated is concerned, we may point out that while making surrender for cash found assessee did not consider the receipt from private practice for which patient register maintained in normal course was seized. The assessee offered the cash found on adhoc basis since the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that in his statement recorded u/s 131 of the act dated 01.09.2016, i.e. during the course of post search proceedings, Dr. Shiv Gautam stated that his books of accounts were incomplete and that the cash in hand available will be calculated after receipt of the papers or seized documents. It is also observed that during the course of search proceedings, the statement of Sh. Piyush Pareek, Accountant was also recorded u/s 132(4) of the Act on 21.07.2016, wherein he also admitted that the books of accounts of the appellant group were incomplete. (iii) It is further observed that after receipt of the photocopies of the papers and patient register seized during search, the appellant has completed the books of accounts. It is seen that the AO has neither objected to the income shown by the appellant in the Profit & Loss account nor has found any defect in the entries incorporated in cash book with reference to the seized documents. Once the AO has accepted the income in the Profit & Loss account, taxing the cash balance found during the course of search would result in double taxation. In fact the AO has neither disbelieved the income shown by the appellant from the private practice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0/- 40,00,000/- 14,00,000/- 22,00,000/- In post search enquiry, the assessee vide letter dated 24.08.2016 requested the ld. ADIT to provide the copy of patient register maintained in normal course of profession seized as Annexure AS to work out the cash balance of the books. In another letter dated 24.08.2016 it was clarified that while making surrender of Rs.1.73crores he has not considered the cash available in books of accounts of various family members and receipt of professional consultation fees in the patient register already in seizure and requested to provide copy of register so that exact position of cash as per regular books of accounts can be ascertained. During the course of assessment proceedings, the AO vide letter dated 30.11.2018 required the assessee to explain why the amount of Rs.17,30,300/- should not be added to the income as surrendered in search. In response to the same assessee vide letter dated 15.12.2018, which are page Nos. 7 to 11 of the paper book reproduced at Pg 3-7 of the assessment order explained that the cash offered in statement was on ad hoc basis without considering the cash balance as per books as the same were incomplete. After receipt o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... operation, therefore, cash in hand available will be calculated now once the papers or photocopies are handed over to us (which are being handed over to us today itself) and after deduction of cash in hand available in hands of respective people exact amount shall be calculated and surrendered for tax liability." It may be noted that cash book at the time of search was found incomplete since the accountant Shri Piyush Pareek was sick and later on busy with his LLB examinations. This fact was also stated by Shri Piyush Pareek in his statement u/s 132(4) dated 21.07.2016 wherein reply to Q. No.8 he stated that the books of accounts for the FY 2015-16 are incomplete and therefore, he is not in a position to provide the same. Further, in reply to Q. No.9 he stated that after the end of FY 2015-16 his health was not good and also he was busy in his LLB second year examination. Thereafter, the computer data was crashed and for all these reasons the books of accounts for the FY 2015-16 could not be completed. After receipt of the photocopies of the papers and patient registers seized during search the assessee completed the books of accounts. As per these books of accounts which are at p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not consider the receipt from private practice for which patient register maintained in normal course was seized. In fact the entries in the cash book are fully verifiable from the patient register found in search. The AO has not found any defect therein. Due to preconceived mind AO has treated the incomplete cash book which was later completed by the assessee on receipt of seized patients register as manipulation of the cash book. At the same time AO has accepted the cash book for assessing the income. Thus, the allegation of manipulation by AO is without basis. Considering the totality of facts and circumstances, we are of the view that the ld. CIT(A) has passed a well-reasoned order and no new facts or circumstances have been brought before us by the ld DR in order to controvert or rebut the factual findings so recorded by the ld. CIT(A), therefore, we see no reason to interfere into or deviate from the findings so recorded by the ld. CIT(A) qua this issue and we uphold the same. 11. Grounds Nos. 2 to 2.5 of the appeal raised by the revenue relates to challenging the order of the ld. CIT(A) in deleting the addition of Rs. 1,77,34,000/- despite the fact that assessee had failed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs.10,00,000/- was to be received. (ii) Further, Smt. Rajshree Gautam in her statement recorded u/s 132(4) dt. 21.07.2016 also affirmed the statement of the appellant that the cash found in their bed room includes the amount received in land deal. (iii) It is observed that during the course of search, Page no.13 of annexure AS-1 was found which contains complete details of the cash and cheque received on sale of this land. It is observed that as per the aforesaid paper, Rs.1,97,80,000/- was received by cheque and Rs. 1,87,34,000/- in cash thereby totaling to Rs. 3,85,14,000/-. The cash amount has been added with the cheque amount which clearly shows that the cash has been received on sale of this land. (iv) However, the fact also remains that after search carried out in the case of the appellant, a survey action was carried out at the business premises of Sh. Laxman Singh and Sh. Mahendra Singh on 02.09.2016, the purchasers of the aforesaid land. In survey, the statement of Sh. Mahendra Singh was recorded u/s 131 wherein, they accepted of purchasing the land from Smt. Rajshree Gautam, however they denied any payment in cash. Further, the statements of Sh. Sitaram Gurjar a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct that the deal was for Rs. 3.85 crores is established by documentary evidence which has more evidentiary value than the oral statement. These documents contradict the statement of Sh. Mahendra Singh that in this deal there was no cash component. (viii) Thus there is no denying the fact that the amount of Rs.1,87,34,000/- was the cash component against the sale of the agricultural land at village Tannayabas, Jamwaramgarh by Smt. Rajshri Gautam, wife of the appellant. During search, the appellant as well as his wife admitted of cash lying in their bedroom to be out of the aforesaid cash received against the sale of land. The assessing officer, however, on the basis of the statement of the purchasers denied the claim of the appellant and added the cash of Rs. 1,77,60,000/- as being unexplained. However, while denying the claim, the assessing officer neither provided nor confronted the statements of the aforesaid parties/ purchasers to the appellant nor issued any show cause notice in this regard. Thus, no opportunity to cross examine these parties was provided by the AO to the appellant. Denial of such an opportunity is a serious flaw rendering the order as a nullity as held by Ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d an opportunity of cross examination. This is so stated by the honorable Supreme Court in the case of Kishan Chand Chellaram (125 ITR 713). (ix) Thus in view of the aforesaid facts and circumstances of the case, it is observed that while denying the claim, the assessing officer neither provided nor confronted the statements of the aforesaid parties/purchasers to the appellant nor issued any show cause notice in this regard. Therefore, on one hand relying upon the statements and not providing cross examination at least to find out any involvement of the person affected by such statement is a gross violation of principles of natural justice which renders such reliance, a nullity. On the contrary, the documents seized clearly indicate the cash received by the appellant against the aforesaid sale of the agricultural land. The fact that the deal was for Rs. 3.85 Crores is established by documentary evidence which has more evidentiary value than the oral statement. These documents contradict the statement of Sh. Mahendra Singh that in this deal there was no cash component. (x) The AO has also contended that the registry of the land is not executed and that the agreements of the land ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he sale of this land is mentioned at page 9 to 11 of the assessment order. We also observed that one agreement has been executed on 23.07.2014 with Laxman Singh Shekhawat for the entire land of 2.53 hectare for Rs.2.55 crores and three separate agreement is executed for 0.6950, 1.1583 and 0.6765 hectare lands on the same date totaling to 2.53 hector with Sitaram Gurjar, Ashish Pareek and Gauri Shankar Agrawal for Rs.60,00,000/-, Rs.1,00,00,000/- and Rs.57,96,700/- respectively. In all these agreements Shri Mahendra Singh s/o Laxman Singh is a witness. In search when questioned about these agreements, the assessee in reply to Q. No.16 of the statement u/s 132(4) dated 21.07.2016 which are at page No. 28-30 of the paper book explained that his wife Smt. Rajyashree Gautam had entered into an agreement to sale her 2.53 hectare agricultural land at Gram Tannayabas Jamwaramgarh. Against the agreement Rs.3,85,00000/- has been received out of which Rs.1,97,80,000/- is received by cheque and Rs.1,87,20,000/- in cash. The details of the amount received by cheque were also given. Again in reply to Q. No.17 which are page No. 31-32 of the paper book, with reference to pages 1 to 100 of Annexur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so recorded u/s 131 on 16/17.12.2016 where they stated that they know Smt. Rajyashree Gautam through Mahendra Singh Shekhawat as they have purchased the land at Jamvaramgarh but the payment was made by cheque only. During course of assessment proceedings, AO required the assessee to explain the source of cash of Rs.2,83,67,300/- found from the bedroom. The assessee explained that out of it Rs.1,77,34,000/- was received on sale of the agricultural land owned by Smt. Rajyashree Gautam. A detailed reply dated 30.11.2018 was filed. The AO, however, after reproducing the relevant extract of the statement of Shri Laxman Singh Shekhawat, Mahendra Singh Shekhawat, Sitaram Gujar and Ashish Pareek held that all these person have stated that they have not made any cash payment to the assessee or his wife against the sale of the land, registry of the land is not yet executed, the agreement of the land are of July 2015 and Jan 2015 and therefore it was unbelievable that the cash received on sale of this land was still lying at the residence after more than one and half year after the agreement were executed. 15. From the facts stated above we are of the view that in search cash of Rs.2,83,67,3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the agricultural land but in the document found at Pg 13 of Annexure AS-1 it is also noted that Rs.1,87,34,000/- is received in cash which is attributable to the sale of the agricultural land. The AO except for the statement of the interested person in this transaction has not brought any material on record to negate the statement recorded in search and the document found in search. Hence only on the basis of the statement of five interested persons as referred in the assessment order, no adverse inference should be drawn against the assessee. It may be noted that in the statement of these five interested persons, extract of which is reproduced in the assessment order, they have accepted that Smt. Rajyahree Gautam has entered into an agreement to sale her agricultural land but denied making any payment in cash. These statements were neither provided nor confronted to the assessee and thus no opportunity to cross examine to these persons were provided. Hon'ble Supreme Court in case of Andaman Timber Industries Vs. CCE 127 DTR 0241 has held that "denial of opportunity to the assessee to cross-examine the witnesses whose statements were made the sole basis of the assessment is a serio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /- has been considered in the hands of Rajyashree Gautam, the credit of cash found needs to be allowed as related to sale of land and found from bedroom of Rajyashree Gautam. 16. It is an undisputed fact that after search of assessee, survey was carried out at the business premises of Sh. Laxman Singh and Sh. Mahendra Singh on 02.09.2016. In survey, statement of Sh. Mahendra Singh was recorded u/s 131 of the Act and certain documents were impounded and from perusing the same the following facts came in light:- (i) At Pg No.30 to 34 of Annexure AS, Exhibit-2, a mutual arrangement cum partnership agreement was found between Sh. Mahendra Singh, Sitaram Gujar and Ashish Pareek with 15 other persons which are at page Nos. 154-158 of the paper book. In this agreement at Pg 2 it is specifically mentioned that they have purchased 2.53 hectare of agricultural land at village Naya Bass from Rajyashree Gautam for Rs.3,85,00,000/- for developing a residential plot scheme and all the partners have paid the amount in the ratio specified in the agreement. This conclusively proves that agreement for purchase of said land was for Rs.3,85,00,000/-. (ii) Sh. Mahendra Singh in reply to Q. No.9 to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tnership agreement and Pg 13 of Annexure AS-1 which conclusively proves that the total sales consideration of this land was of Rs.3.85 crores out of which Rs.1,97,80,000/- is paid by cheque and Rs.1,87,34,000/- is received in cash. 17. We found from perusal of the assessment order that the AO has also stated that the agreement of the land are of July 2014 and Jan 2015 and therefore it is unbelievable that cash received on sale of this land was still lying with at the residential premises of the assessee after more than one and half years. In this connection, the ld. AR has stated that cash was received subsequently after the agreement to sale. In fact the purchaser first paid the cheque and thereafter paid the cash. The assessee has specifically stated that the cash was received few days back as the cash was to be paid before the registry and registry was to be done after 11th August 2016. Thus there is no basis with the AO to hold that amount was received more than one and half years back. Otherwise also there is no bar that the assessee can't keep cash with himself for more than one and half years and therefore the observation of the AO as to keeping of the cash at the residenti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tains the detail of amount which was to be received as last installment at the time of registration of agriculture land sold by Smt. Rajyashree Gautam situated at Village Tannayabas. According to this page, Rs.9,60,500/- was to be received with interest of Rs.39,500/- upto 11.08.2016 which aggregates to Rs.10,00,000/-. However, the buyer did not agree to this and as the registry of land has not been executed no such amount was received. This fact was also explained by the assessee in the statement recorded in search. The AO only on assumption and presumption held that this represents the undisclosed investment. There is neither any mention of name or the date to whom the alleged loan has been given and therefore on the basis of this paper no addition can be made on account of the alleged loan. 2. So far as the statement of the buyers are concerned, neither any specific question was asked from them nor any person making payment of 'On money' will accept about the same. Hence simply because the buyer did not say anything about the 'on money payment' statement of the assessee in the absence of any contrary evidence can't be rejected. 3. The AO has made the addition u/s 68. This se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10,00,000/-. The Ground of Appeal No. 3 is accordingly decided in favour of the appellant." 21. Having considered the rival contentions and carefully perused the material placed on record. From perusal of the record, we observed that during the course of search, a paper was seized from the residential premises of Dr. Shiv Gautam as Pg No. 102 Annexure AS Exhibit-2 which is at page No. 121 of the paper book. It is a handwritten paper which has been written on the back side of a computer generated cash receipt dated 20.07.2016 of Gautam Hospital and Research Centre. On this paper an amount of Rs.9,60,500/- is noted to which Rs.39,500/- is added for interest to make a total of Rs.10,00,000/-. Below this calculation there is a noting that it is from 11.08.2016 after deducting interest till 11.08.2016. In search the assessee in statement u/s 132(4) dated 22.07.2016 in reply to Q.No.17 which are at page No. 31-32 of the paper book explained that he do not completely remember the noting on this paper but it is the last installment of Rs.10 lacs which was to be given on 11.08.2016 in respect of the agricultural land sold by his wife on which we asked to pay the interest but the other part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... books of the assessee. A book means a collection of sheets of papers bound together with the intention that such binding shall be permanent and papers used are kept collectively in one volume. A book which contains successive entries of items maybe a good memorandum book but until those entries are totaled or balanced or both as the case may be, there is no reckoning and no accounts. A book which merely contains entries of items of which no account is made at any time, is not a "book of account" in a commercial sense. Thus the addition made u/s 68 is not justified. It is noticed that over and above the peak credit, the AO has further made an addition of Rs. 52,40,137/- on account of debtors exceeding the creditors. We have found that the peak determined by the AO is not correct, otherwise also, when once peak amount has been added then no separate addition is required. It seems that the AO has not properly prepared the list of debtors and creditors based on any logic. The Ld. CIT(A) has confirmed the addition of Rs. 52,40,137/- under the Provisions of Section 69B of the Act. This section relates to investment made by the assessee in the acquisition of bullion/jewellery or other val ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1961 has defined books and books of accounts u/s.2(12A) of the Act, as per which books and books of accounts includes, ledgers, day-books, cash books, account books and other books, whether kept in the written form or as printouts of data stored in a floppy, disk, tape or any other form of electro-magnetic data storage device. Therefore when books of accounts are clearly defined under the Act, then diary, notebook and retrieved data of computer CPU can be considered as books of accounts or not is a question that needs to be considered. From the definition of 'books' or 'books of accounts', it is abundantly clear that books of accounts means regular books of accounts maintained by the assessee for any previous year to record day to day transactions of its business including ledgers, day-books, cash books, account books and other books. The term other books does not mean to include some dumb documents like diary, notebook or deleted entries of computer CPU. The term other books refers to any other books which are relevant and in consonance with ledgers, day-books, cash books, account books, etc. Therefore, in order to include any other books of accounts maintained by the assessee wi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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