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TMI Blog2015 (12) TMI 1873X X X X Extracts X X X X X X X X Extracts X X X X ..... and can not give rise to presumption against the Assessee in the absence of any actual cash found as alleged to be unaccounted income. We have already observed that contents of loosed paper i.e. isar pawati impounded is entitled to great weight due to its substantial corroboration of payments with registered document, naturally without cash. We are of the opinion that once it is concluded on facts that the contents of the document found are relevant and true which establishes ownership, non-detection of physical cash or other equivalent asset per se would not be a handicap to invoke section 69A of the Act. Hence, notwithstanding nondeduction of physical cash, deeming provision of section 69A of the Act will apply. In the facts of the case, loose paper found in the drawer of the director of the company surveyed who is also the partner of the Assessee and contents found to have been vindicated, the presumption against the assessee is supportable in law. The loose paper or isar pawati in our opinion assumes the colour of valid evidence against the assessee on its corroboration by payment details of registered document. Thus, the plea of the Assessee in this regard does not hold wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this common order for the sake of brevity. 2. The facts being identical, we shall take ITA No.956/PN/2012 in the case of M/s Rockson Industries as the lead case. This appeal is directed against the order of CIT(A)-II, Pune dated 06.01.2012 relating to assessment year 2008-09 passed under section 143(3) r.w.s. 147 of the Income-tax Act, 1961 (in short the Act ). 3. In this appeal, the Grounds of Appeal raised by the assessee are reproduced as under :- 1. On the facts and in the circumstances of the case the learned CIT(A) has erred in assuming a piece of paper as constituting Issar Pavati i.e. advance receipt disregarding the factual aspects explained before him. 2. On the facts and in the circumstances of the case the learned CIT(A) has erred in availing the power of presumption overlooking the fact that such a power is confined only to a case where search action is conducted u/s 132, while in the case of the appellant this piece of paper was found in survey action u/s 133 which does not confirm such a power of presumption. 3. On the facts and in the circumstances of the case the learned CIT(A) has erred in assuming the said piece of paper and contents th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar Co. respectively. As per the hand written note i.e. Isar Pavati , the sale consideration of the assets were shown at Rs.5,35,00,000/- against Rs.3,05,00,000/- shown in the registered document i.e. registered sale deed dated 26.02.2008 in relation to the same property. In the background of these facts, the case of the assessee was reopened under section 147/148 of the Act. In the assessment proceedings, the assessee declared total consideration as per registered sale deed at Rs.3,05,00,000/- and apportioned sale proceeds of Rs.1,77,30,512/- towards its share attributable to land and shed etc. It was also explained that both the firms i.e. M/s Rockson Industries and M/s Nitin Palekar Co. intended to carry on the business of quarry on the said land with the use of machinery acquired. The land and shed belonged to the assessee whereas machinery belonged to M/s Nitin Palekar Co.. This business was discontinued and the total assets belonging to the aforesaid two concerns were stated to be sold to M/s Sunny Udhyog, Pune at a composite amount of Rs.3,05,00,555/- as per registered sale deed. The composite sale consideration was bifurcated into land and shed at Rs.1,77,30,512/- att ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee and his findings thereon:- 3.3 I have carefully considered the submission made by the appellant and perused material on record. The appellant has raised five grounds of appeal and in ground No. 1 has contested the assessment of income at Rs.1,27,39,190. During the appellate proceedings, the appellant has contended that the AO has wrongly assumed the piece of paper as 'Isar Pawati' i.e. agreement to sale as nowhere on the said piece of paper there is any mention to that effect that it is Isar Pawati or agreement to sale. It has been explained that the contents on paper suggests only the proposal to be agreed by the sellers and the proposed buyers. It is also stated that it contains the possible terms and conditions and the noting is dt. 18.12.2007 and it has not been acted upon at all and if acted it did not materialize. It has also been submitted that in order to have enforceability and legal sanctity the 'Isar Pawati' could have been only executed on payment of relevant stamp duty if not fully at least the contents could have been reduced into writing on a stamp paper of Rs.100/-. Therefore, the appellant has contended that the piece of paper has absolute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has to be regarded as a dumb document. The Assessing Officer has resorted to interpreting the contents of the said paper based on suspicion, surmise, conjecture and imagination which is not permissible. The appellant has relied on the following judicial citations for the proposition. Ahmedabad Hon. ITAT judgement in the case of Amar Natwarlal Shah 60 ITD 560 and also the following citations: a. Brijlal Vs Income tax Officer -Indore Bench 40 TTJ 668. b. CIT Vs Ashokkumar Potdar -16 DTR 55- Kolkatta Hon ITAT. 3.5 The appellant has contested that the Assessing Officer has assumed the piece of paper as 'Isar Pavati' i.e. agreement to sale, as nowhere on the said piece of paper there is any mention that it is 'lsar Pavati' or agreement to sale and also that its contents only suggested proposal to be agreed by the sellers and the proposed buyer. However, on going through the copy of the document filed during the course of appellate proceedings, it is noticed that the said document i.e. the 'Isar Pavati' dated 18.12.2007 contains several facts related to the sale of property which are corroborated by the final sale deed entered into by the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellate proceedings. Moreover, the cheque Nos mentioned along with the dates also exactly tallies with each other. 3.7 Further, the description of the land property as S.No 78, Hissa No 6, is also mentioned on the so called piece of paper as held by the appellant. The persons mentioned in the 'Isar Pavti' or the agreement of sale as held by the Assessing Officer are the same persons who have finally entered into the final sale deed on 26.2.2008 i.e. Rockson Industries, Nitin Palekar Co and Vinayak M Nimhan. The signatures on the said document has been done by Kashinath Laxman Palekar and Ramachandra Damodar Kad as sellers and by Vinayak Nirnhan as the Purchaser. The signatures as appearing in the 'lsar Pavti' of Kashinath Laxman Palekar and that of Ramachandra Damcdar Kad are prima facie the same as signed on the sale deed. The signature of the purchaser appears to be different because it has been signed in Marathi on the 'Isar Pavti' and in English on the sale deed. On the same page 2 on the lower right hand side the following figures appear: 1. Rs.50,00,000/- ASK 2. 80,00,000/- Nitin 3. Rs.1,00,00,000/-RDK Rs.2,30,00, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar Pavti' was found in the drawer of your office table. Will you please tell me as to whose handwriting is on this 'lsar Pavti' ? Ans. This 'lsar Pavti' is in my own handwriting. But this transaction was not executed according to the terms mentioned therein. Thus, it can be seen from the above that the said document is much more than just a piece of paper as contended by the appellant. The contents on the 'tsar Pavti' or agreement to sale is not meaningless and a useless piece of paper as its contents almost in entirety has been acted upon in the final sale deed entered into by the appellant except for Rs.2,30,00,000/- which clearly points out to the fact that the said amount has been received in cash which has not been disclosed by the appellant in the return of income. 3.10 Therefore, the contention of the appellant that the addition made by the Assessing Officer cannot be said to be made in accordance with law which is based on such meaningless and useless piece of paper is not correct as evident from the discussion made above with respect to the notings made on the said document can be factually linked to the registered sale deed wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h of the documents found. Moreover, the present assessment has not been completed only on the basis of a statement but on a document whose contents are corroborated with the content of the final sale deed and, therefore, the presumption drawn is based on a document having evidential value and along with the statement recorded u/s 131 of the I. T. Act. 3.11 Further, the contention raised by the appellant that the piece of paper containing certain notings represents the rough estimates or scribbling and the same has not been acted upon has to be regarded as a dumb document is not correct. In the case of Khopade Kisanrao Manikrao Vs ACIT (2000) 74 ITD 25 (Pune) TM with respect to the computation of undisclosed income the provisions of Sec. 143(3) has been discussed. It was held that in making the assessment, provision of Sec. 143(3) have been specifically made available to the Assessing Officer. Sec. 143(3) empowers the Assessing Officer to make an assessment of income on the basis of the material which has been gathered by him. Tile language of Sec. 143(3) makes it abundantly clear that the assessment to be made by the Assessing Officer should be based on evidence before the Of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee was found in possession of record regarding monies received in respect of various godowns and shops to be constructed by it, the bench held that as the document speaks of receipt in cash as also receipt by way of cheques on decoding, tallying with the books of account of the assessee, it cannot be said that the document is a dumb document even though it does not contain assessee's name. It was further held by the bench that as per the counsel of the assessee the impugned document is a dumb document and, therefore, it cannot be relied upon for the purpose of assessment. It is not possible to agree with the counsel in either of the matters. The reason is that the authority of names and decoding of amounts received by way of cheques lead to establishment of the fact that the document belongs to the assessee and various amount entered therein are correct if three zeros are supplied. The absence of the names of the assessee thus gets fully corroborated on the basis of aforesaid interpretation of the document. The document speaks of receipt in cash and also receipt by way of cheques. The receipts by way of cheques tally with the books of account. Therefore, it is a natural conseq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In the case of Brijlal Rupchand (Indore) Supra there was nothing on record to connect the assessee with the loose papers found in shop during search action, whereas in the case of ACIT Vs Ashok Kumar Poddar (Kol) supra the Assessing Officer had made addition of profit noted on loose papers merely on the presumption u/s 132(4A) without verifying the handwriting and without making any enquiry whereas in the present case the Assessing Officer has resorted to the addition after proper verification of the aforesaid facts, hence the case law is not applicable and is distinguishable. 3.17 Under the deeming provisions of the I.T. Act, 1961, the position is that the mere existence of a credit entry is sufficient to attract the provisions and once the appellant's explanation is not satisfactory, the cash credits are to be charged to tax in an exceptionable manner. It was so held in one of the most landmark cases of the Hon'ble Supreme Court of Sumati Dayal (1995) 214 ITR 801 (SC). From a plain reading of the requisite sections it is evident that when the assessee offers no explanation about the nature and source of the credits, its value could be deemed income of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g improper on the part of the Assessing Officer in relying on circumstantial evidence in such cases for arriving at the finding. The Assessing Officer is also entitled to take into consideration the totality of facts and circumstances of the case and to draw his / her own inference on the basis thereof, circumstantial evidence in such cases is not impermissible. On similar facts the Bombay High Court in the case of Smt. Vasantibai N. shah Vs. CIT (1995) 213 ITR 805 (Bom) held that in such cases only circumstantial evidence will be available. No direct evidence can be expected. In the case of Green Valley Builders Vs CIT (2008) 296 ITR 225 (Ker), there were materials constituting circumstantial evidence to prove that land in question had been sold by the assessee at a higher price than that claimed by it and hence addition on account of unaccounted income was justified. 3.17.2 From the plain reading of section 69A, it is evident that when the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable articles in value would be deemed income of the assessee. An explanation offered, if not accepted is no explanati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... situated at Dhayari Gat No.78/6 and the crusher and sand plant owned by these firms is agreed as under:- 1. The price of the above complete project is agreed at Rs.5,35,00,000/- (Rupees Five Crore Thirty Five Lakhs). 2. The deal is agreed to be settled by around 65% by Cheque and 35% by cash. 3. In respect of this complete deal today Rs.50 Lakhs by cash and Rs.10 Lacs by cheque has been agreed to be paid. Thereafter Rs.1,00,00,000/- (Rupees One Crore) to be paid before 20/01/2008. The balance of Rs.3,75,00,000/- (Three Crore Seventy Five Lakhs) to be paid before 25th February and if so not done for every month Rs.10 Lakhs will have to be paid. 4. From today onwards the light bill in respect of the plant and any other expenses, royalty, accidents etc shall be paid fully by Shri Vinayakrao Nimhan and until the deal is completed before 25th February Shri Nimhan can make only necessary changes in the machinery, fabricating as required and take trial. There shall not be carried any blasting and stock or any other goods held are not to be sold. Accordingly deal is agreed and both parties have decided to abide. On completion of the deal all that rubbles ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t involved as purportedly proposed in the loose paper. He contended that the onus lies on the Assessing Officer to prove that the consideration mentioned in the sale deed is not full value of consideration within the meaning of section 48 of the Act. In order to prove that the full value of consideration is more than what is recorded in the document, the Assessing Officer must bring on record some cogent evidence to support actual receipt of excess consideration. For this proposition, he relied upon the decision in the case of Prem Narain Co. vs. CIT, 287 ITR 56 (P H). 7.4 He submitted that the buyer of the land and machinery is M/s Sunny Udhyog of which Mr. Vinayakrao Nimhan is one of the partners. The said buyer carries on the business of stone quarry and for that purpose it purchased the land and machinery from the assessee and Nitin Palekar Co.. It was later found that the land is not suitable for the purpose of carrying on the business of stone quarry. Ld. AR contended that owing to this unsuitability, the impugned proposal of cash payment jotted on the loose paper was not acted upon. He placed reliance certificate issued by the Geologist M/s Sanjivini Consultancy dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7.9 In the light of the above contentions, the Ld. Authorized Representative for the assessee submitted that the impugned addition is incorrect both on the touchstone of law as well as on facts and pleaded for relief as per grounds of appeal. 8. Per contra, the Ld. Departmental Representative for the Revenue strongly relied upon the observations made in the concurrent orders of the AO and CIT(A) and vehemently supported the orders of the authorities below. He submitted that the survey action at the business premises of the assessee under section 133A of the Act has unearthed tangible incriminating document in the form of Isar Pavati which is admittedly written in the handwriting of the partner of the assessee firm namely Mr. Ramchandra Damodar Kad. The loose paper is signed by Mr. Kashinath Palekar and Mr. Ramchandra Damaodar Kad on behalf of the sellers i.e. assessee and also signed by Mr. Vinayakrao Nimhan partner of Sunny Udyog on behalf of the buyer. He next submitted that the most relevant fact is that details of payment noted in the loose paper are substantially matching with the registered sale deed. He adverted our attention to the fact that even the cheque numbers an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... similarity in the cheque payment details as recorded in the registered sale document qua loose paper is overwhelming. He submitted that the decisions cited by the Ld. Authorized Representative for the assessee based on their own facts and are not relevant in the demonstrable facts of this case. The CIT(A) has objectively dealt with the decisions cited before him. He thus submitted that the decisions cited by the assessee are on its own facts and are materially different from the facts of this case. He therefore submitted that the argument of the Assessee that loose paper found has not been acted upon stands negated and non receipt of cash component as pleaded on behalf of the Assessee militates against logic. In the context of the plea that the loose paper can not be admitted in evidence, the learned DR relied on the presumption available under S. 292C of the Act. He submitted that the directors of the assessee co. being partners of the Appellant herein, where the contents of loose paper were found hand-written and signed, the revenue is entitled to draw the presumption against the present assessee. He therefore submitted that the action of the revenue in making impugned addition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he reason that cash consideration mentioned in the loose paper was only a proposed consideration not acted upon albeit prepared. The reason propagated for consideration allegedly finalized subsequently without impugned cash component is attributed to unsuitability of land for stone quarry as per some expert report. 9.3 The answer to question no. 7 8 posed before the partner Mr. Ramchandra Kad (deponent) in the statement dated 2/2/ 2010 recorded during the course of survey under S. 133A on Shankar Ramchandra Earthmovers Pvt. Ltd. as appearing on page no. 18 of the paper book wherein the deponent of the statement denied having received cash consideration as per the terms stipulated in the loose paper is what which was heavily relied upon on behalf of the Assessee. The relevant parts of the statement is extracted below for ready reference. Statement of Shri Ramchandra Damodar Kad, Age 48 years residing at 80/85 Om Laxmi Niwas, Prabhat Road, Pune 411 004, recorded on oath u/s 131 of the IT Act, 1961 at the business premises of M/s Shankar Ramchandra Earthmovers Pvt. Ltd. in the course of Survey action u/s 133A of the IT Act, 1961 on 02.02.2010. ------------------------ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taken by the sellers in cash. Further, at page No.2 of Bundle No.1 as impounded in the course of Survey Action carried out on 02/02/2010, the details of payments of cash to the tune of Rs.2,30,00,000/- have been distributed as below: Rs.50,00,000/- to ASK Rs.80,00,000/- to Nitin Rs.1,00,00,000/- to RDK At page No.3 to 39 of Bundle No.1, copy of Sale-deed of the said land is placed in which, it is shown that the land was sold for Rs.3,05,00,555/-. From these documents, it is clear that you had received a sum of Rs.2,30,00,000/- [5,35,00,000 3,05,00,000] in cash and the same have not been shown in the Income Tax record in the Asst. Year 2008-09 (FY 2007-08). What do you want to say on this ? Ans. : Your observation is not correct and I deny this transaction. 9.4 In the background of above facts, We shall examine the issue on merits raised by the Assessee in the facts of the case. The loose paper (isar pawati) which embodies objective details of receipt by cheque as well as cash is the starting point in the present case. We find that the transaction was acted upon and sailed through broadly on the same terms as provided in the isar pawati. The cheque nu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Revenue is entitled to use the incriminating evidence against the assessee in the given facts. 9.5 At this juncture, it is also pertinent to notice the other limb of the argument on behalf of the Assessee that impugned loose paper found in survey under S. 133A do not constitute evidence and can not give rise to presumption against the Assessee in the absence of any actual cash found as alleged to be unaccounted income. We have already observed that contents of loosed paper i.e. isar pawati impounded is entitled to great weight due to its substantial corroboration of payments with registered document, naturally without cash. We are of the opinion that once it is concluded on facts that the contents of the document found are relevant and true which establishes ownership, nondetection of physical cash or other equivalent asset per se would not be a handicap to invoke section 69A of the Act. Hence, notwithstanding nondeduction of physical cash, deeming provision of section 69A of the Act will apply. 9.6 In the facts of the case, loose paper found in the drawer of the director of the company surveyed who is also the partner of the Assessee and contents found to have been vindic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) for the proposition that physical possession of cash etc. is the prerequisite for invoking S. 69A of the Act. We do not find anything in these decisions to suggest that physical possession of cash or other asset is a sin qua non to establish ownership for the purposes of s. 69A of the Act. It was held in these cases that possession is evidence of ownership. In our view, this cannot be read vice versa that without physical possession, there is no ownership. 9.9 While concluding, we also notice that the CIT(A) has dealt with the factual contentions of the assessee threadbare and also the decisions cited. The decisions cited on behalf of the Assessee were rendered on their own facts and are clearly distinguishable. We endorse the essence of the findings of the CIT(A) that in view of the speaking facts narrated in the loose paper found at the time of survey which clearly matches on material particulars with the registered sale deed executed subsequently, there is no room left to disbelieve the contents of the loose paper. It is trite that when a part of the document has been accepted, other part of the same document cannot be ignored in the absence of any tangible proof to the con ..... X X X X Extracts X X X X X X X X Extracts X X X X
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