9911796707
TMI Blog2016 (11) TMI 1741X X X X Extracts X X X X X X X X Extracts X X X X ..... 011. No concrete evidence in this regard was produced before the CIT(A) to justify that the despatch of the order have been made after 30-12-2011. Nothing was brought before us to take a contrary view than the view taken by the Ld.CIT(A) while dismissing the ground raised by the assessee on this issue. Under these circumstances we find no merit in the above ground raised by the assessee. Undisclosed income of the assessee - unaccounted generation of cash - reliance on statement as recorded u/s. 132(4) of C F Agent - element of threat or coercion while recording the statement u/s. 132(4) - as argued denial of principles of natural justice as the copy of the statement u/s.132(4) recorded of Shri Sohan Raj Mehta [ C F agent] was not supplied to the assessee and opportunity to cross examine Shri Sohan Raj Mehta was also not given - HELD THAT:- No addition can be made in the hands of the assessee on the basis of papers found in the premises of third party. Assessee being a small taxpayer, some evidence should have been found from the office or residence of the assessee to show that in fact he has received such huge amount. Similarly, the statement of Mr. Rasiklal M. Dhariwal [Compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt is otherwise complete within the period specified in the Scheme as well as it fulfills the conditions envisaged in the Scheme. There is no justification for the denial of deduction nu/s 80-IA(4)(iii) of the Act in the instant assessment year with regard to the profits earned by the assessee from Industrial Park - we set-aside the order of the CIT(A) and direct the AO to allow the deduction made u/s 80IA(4)(iii). Addition on account of cash seized from the appellant - AO had rejected the appellant s sworn affidavit explaining the source and the evidence supporting withdrawal from his bank account summarily - CIT rejected the claim of the assessee trust on the ground that the same was an afterthought since no explanation was furnished during 132(4) statement - HELD THAT:- Nothing plausible was brought to our notice to substantiate with the source of Rs. 33 lakhs so as to take a contrary view than the view taken by the CIT(A). The assessee in our opinion has miserably failed to substantiate with cogent evidence that the amount belong to the trust and the amount of Rs. 10,24,000/- drawn from the Cosmos bank account was available with him. Similarly, nothing was brought to ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notice u/s. 142(1) of the I.T. Act the assessee filed various details. It may be pertinent to mention here that the assessment order u/s.143(3) of the I.T. Act was passed on 15-12-2006 accepting the returned income of the assessee at Rs. 1,13,88,080/-. 3. During the course of assessment proceedings the AO observed that the assessee has claimed dividend income as exempt in accordance with the provisions of section 10 of the I.T. Act. Since the assessee has not attributed any expenditure towards earning of such exempt income and considering the fact that there is always an element of indirect expenditure for earning such exempt income which the assessee has neither identified nor offered to tax the AO was of the opinion that assessee has not made adequate disallowance as mandated u/s.14A of the Act. He, therefore, asked the assessee to explain as to why such expenditure relatable to exempt income should not be disallowed under the provisions of section 14A r.w. Rule 8D of the I.T. Rules. Rejecting the various explanations given by the assessee and observing that the average investment of the assessee during the year was at Rs. 2.56 crores the AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 35,00,000 |
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|
54 |
Feb 2006 |
2,00,00,000 |
2006-07 |
2,00,00,000 |
|
56 |
Aug 2007 |
5,00,00,000 |
2008-09 |
12,00,00,000 |
|
56 |
X X X X Extracts X X X X X X X X Extracts X X X X ..... n that you are a close family friend and a close business associate of Shri Rasiklal M. Dhariwal, Chairman of M/s Dhariwal Industries Ltd. over many years and you have transacted with M/s DIL during the said period of 2003 to 2008. Further, Shri Sohan Raj Mehta has accepted to have carried out unaccounted sale of Gutka on behalf of M/s DIL between the period 2003 to 2008 as depicted in the documents seized (29 bundles marked as Exhibit A/M/01 to A/M/29 seized vide Panchanama dated 09/10/2009) seized by Investigation Wing of Bangalore. As per detailed enquiry and evidences gathered by the Department during search, post search enquiries and during the assessment proceedings, it is established beyond reasonable doubt that the above mentioned documents seized from Bangalore are actual details of unaccounted sales of Gutka by M/s Dhariwal Industries Ltd. which it has carried out through Shri Sohan Raj Mehta and that, Shri Sohan Raj Mehta has maintained all the details of these unaccounted sales, unaccounted sale proceeds generated in cash and the utilization of the said cash generated. Shri Sohan Raj Mehta has also admitted that he has earned commission on this unaccounted sale of Gutka ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p style="text-align:center">12,00,00,000/- |
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TOTAL |
14,35,00,000/- |
6. Kindly state through cogent evidences, if any expenditure is incurred by you for earning the said undisclosed income of Rs. 14,35,00,000/-, so that set off of expenditure, if any, and if permissible by law, could be given to arrive at actual quantum of your undisclosed income.
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9. Therefore, you are requested to submit your say by 16/12/2011 in the matter so that the same can be considered by me while finalizing your assessment. Kindly note that the matter is time barring and granting further time may not be possible. If nothing is heard from your side by 16/12/2011, kindly note that I may tax the entire amounts as stated above, as your undisclosed income for the respective year (s) .....
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..... ion hence, of my receiving any amount from him on the alleged instructions of the persons named therein, does not arise.
b. The ground of I having family relations with the persons named RM Dhariwal or Prakash Dhariwal is neither sufficient nor valid in law to establish any connection with the alleged entry in the statement or account allegedly maintained by said Mehta.
c. Neither the alleged statement of said Mehta nor the alleged entry in the books allegedly maintained by said Mehta can stand scrutiny of law relating to evidence. Such flimsy, unsubstantiated and uncorroborated statement cannot be used in law to fasten any liability of me. It is impermissible in law.
d. There never was any transaction relating to Gutkha by and between myself and Dhariwal Industries Limited. I did not sell any goods to said Mehta or his principals nor offered any services. It is hence, far fetched to connect me with the said amount on the solitary, unsubstantiated, uncorroborated and false statement of said Mehta.
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..... itness Sohan Mehta."
Further, vide his letter dated 17/12/2011, assessee submitted as under :
1. Please refer to your show cause notice dated 09-12-2011 wherein it was stated that I have received an amount of Rs. 14.35 Cr. from Dhariwal Industries Ltd,.through Mr. Sohanraj Mehta.
2. In response to this notice I have already submitted my reply on 1612-2011 to you.
3. In the said notice there is a mention regarding the statement of Mr. Sohanraj Mehta recorded on oath. On my request made in my reply dated 16.12.2011, your office supplied with the copies of the statements of Mr Sohanraj Mehta. On perusal of the said statements of Mr. Sohanraj Mehta following facts are revealed.
(a) Six statements of Mr Sohanraj Mehta were recorded on dates 9-10-09, 15-10- 09, 21-10-09,7-11-09,7-12-09 and on 10-8-2011.
(b) In the statement recorded on 10-8-2011 before DCIT, .....
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..... s. 205.70 crores has been made in the case of M/s. Dhariwal Industries Limited for A.Y. 2004-05 to A.Y. 2008-09, after elaborately discussing all the relevant issues. The AO reproduced in the assessment order, the findings in the case of M/s. Dhariwal Industries Limited where addition of Rs. 40.88 crores has been made in A.Y. 2004-05. He observed that the irrefutable evidence in the form of seized documents found at the premises of Shri Mittulal of Bangalore could not be negated by the assessee.
8. As regards the contention of the assessee that the seized documents were not seized from him and he has nothing to do with Shri Sohan Raj Mehta and therefore, the seized documents cannot be treated as evidence against him being a third party evidence is concerned, the AO noted that if such argument of the assessee is accepted then the provision of Evidence Act and section 147, 158BD, 153C of the Income Tax Act become redundant. He observed that although it is true that the strict rules of evidence are inapplicable to the proceedings under the Income Tax Act, 1961, however, that does not mean that principles of Evidence Act are inapplicable to the proc .....
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..... ment. Therefore, he concluded that the retraction was at the behest of M/s. DIL on which the assessee is dependant. He further noted that the assessee who is one of the prominent recipients of unaccounted sale proceeds of M/s. DIL, is a close family friend and business associate of Shri Rasiklal M. Dhariwal, Chairman of M/s. DIL. The assessee had admitted on 20-01-2010 vide his statement recorded on oath that he was a custodian of about Rs. 14 crores of money of Dhariwal and the said seized document also depict that about Rs. 14.35 crores money was handed over by Shri Sohan Raj Mehta to Shri S. Balan/his representatives on the directions of Shri Rasiklal M. Dhariwal/Shri Prakash R. Dhariwal.
11. The AO observed that although the assessee has retracted the above statement in November 2011 by filing an affidavit stating that the admission made by him during search action was not actually made by him and he has not stated any such fact during the search, however, Shri Balan has admitted that the said statement bears his signature. Moreover the retraction of the assessee is not made immediately after the search and it was made almost after 22 months .....
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..... The assessee without prejudice relying on the decision of Kolkata bench of the Tribunal in the case of DCIT Vs. Phillips Carbon Black Ltd. reported in 133 ITD 189 (Kol.)(TM) argued that the Tribunal in the said decision has held that 1% of the income can be considered as reasonable disallowance u/s.14A.
14. So far as addition of Rs. 35 lakhs as undisclosed income is concerned it was argued that the addition on this account was against the principles of natural justice as the copy of the statement u/s.132(4) recorded of Shri Sohan Raj Mehta was not supplied to the assessee and opportunity to cross examine Shri Sohan Raj Mehta was also not given. It was argued that the AO is presuming the receipt merely because the assessee’s name figures in the loose papers. However, not a shred of evidence that the amount was actually paid to the assessee in the form of any identification relating to him or any express or implied acknowledgement of receipt of the impugned money was found. It was argued that the loose papers show that the alleged payments are not directly made to the assessee but to some other person like Nagraj or Mr. Raja Datta receiving .....
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..... n:justify">15. However, the CIT(A) also was not satisfied with the explanation given by the assessee. So far as the validity of the assessment u/s.153A is concerned the Ld.CIT(A) relying on various decisions dismissed the contention of the assessee on the ground that search action against the assessee was carried out on 20-01-2010 and the assessment order has been passed on 30-12-2011. The return in response to notice u/s.153A dated 14-09-2010 was filed on 31-12-2010 which means that the order has been made prior to the end of 21 months period as envisaged in section 153(1)(a) of the Act. He observed that the assessee failed to demonstrate during the appeal proceedings that the said assessment order has not been made prior to 30-12-2011 as no concrete evidence in this regard was brought on record to prove the ground raised by the assessee. The assessee also could not prove any such material on record so as to justify the despatch of the order to have been made after 30-12-2011.
16. As regards the validity of assessment u/s.153A in absence of any incriminating material found during the course of search is concerned he held that the requirement of .....
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..... pers No 34 as contained in Bundle A/M/8, A/M/29 found and seized during the course of search and seizure action carried out in the case of Sohanraj Mehta C & F of Dhariwal Group contained the details of the payments of unaccounted money to the persons whose names are appearing on the said document. The name of the assessee appears in the documents seized during the search action. The seized document gives a very detailed and minute notings of the transactions entered into by the Dhariwal group i.e. M/s DIL in the entire Karnataka region, this being so, because Shri. Sohanraj Mehta was the C & F of the RMD Gutka group, certainly one of the most important persons related to the marketing of the product of the Dhariwal group. The said person having admitted to have written the aforesaid document in his own handwriting lends credibility whereby the document seized assumes a much greater value than what it would have been otherwise. Thus, the admission of Shri. Mehta of having paid the unaccounted amount of Rs. 35,00,000/- crores to the assessee during the year under consideration cannot be wished away lightly. The assessee and the Dhariwal group both are based at Pune and both .....
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..... was also written and also admitted that the money so received had been sent to his 'Seth' from time to time and the money was handed over to the persons as per the directions of Mr. Rasiklal Manikchand Dhariwal and his son Mr. Prakash, whom he referred to as 'Seth'. The C&F agent, Shri Mehta regarding the entry mentioned on the lower left side of the page 34 beginning with '31.08.2006' stated that he had prepared the statement as on 31.08.2006 to submit the account for the 'Seth Saheb'. He clarified further that the persons referred to as 'Seth Saheb' were Mr. Rasiklal Manikchand Dhariwal of Dhariwal Industries Ltd. and his son Mr. Prakash R. Dhariwal and that the aforesaid account on page 34 was submitted to Mr. Prakash. In the detailed statement, Shri Mehta has clearly outlined the entire modus operandi of the business and the manner in which the instructions were received by him from the Dhariwals father and son duo wherein it was stated that they sent him a slip of paper or chit indicating the amount and the name of the person to whom the amount needed to be paid irrespective of the fact whether Shri Mehta knew the person personally o .....
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..... by the Assessing Officer cannot be said to be made in accordance with law is not correct as the addition made is based not on a meaningless and useless piece of paper as evident from the discussion made above with respect to the notings made and the said document can be factually linked to the statements given by a close confidante of the Dhariwal Group. Loose papers unlike bound books generally cannot be a basis for ready reference of concealment of figures found in them, but it cannot be said that they are totally irrelevant, if they have something to connect them with assessee's business. The inference has to be on fact. The contents found on the seized documents and papers where appellant's name appears, raises a presumption of legality of documents found and that would mean that they cannot be ignored to arrive at a conclusion. The author of the said 'papers' has already admitted in clear terms that said document was in his own handwriting and the said person is also one of the parties to the transaction through whom the payments were made to several persons. These facts are undisputed. Therefore, the said document is of great evidentiary value and the Assessi .....
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..... ted not only on the basis of a statement but on a document whose contents are appearing in several other seized documents and, therefore, the presumption drawn is based on a document having evidentiary value and along with the statement recorded u/s 132 and also u/s 131 of the I.T. Act. Admission is one important piece of evidence but it cannot be said that it is conclusive. It is rebuttable. It is open to the assessee who made admission to establish that confession was involuntary and the same was extracted under duress and coercion and the burden of proving that the statement was obtained by coercion or intimidation lies upon the assessee. Where the assessee claims that he made the statements under the mistaken belief of fact or law, he should have applied for rectification to the authority who passed the order based upon his statement. The retraction should be made at the earliest opportunity and the same should be established by producing any contemporaneous record or evidence, oral or documentary, to substantiate the allegation that he was forced to make the statement in question involuntarily. It was so held in the case of ACIT Vs Hukumchand Jain (2010) 191 Taxmann 319 (Chhat .....
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..... hip of the same. Courier carrying unaccounted cash is in possession or control of the asset but the owner of the asset is the person or company on whose behalf he is carrying the cash. The income is ultimately liable to be assessed in the hands of owner, but the onus would lie upon the courier to prove as to who is the owner of the asset in question. In the case of Shravan Kumar Gurjar (2010) 230 CTR 539 (Del), the Delhi High Court have held that assessee who only acted as a booking agent could not be presumed to be the owner of valuable detected in search operations by police where it was established that the seized goods belonged to angaria' who had booked the goods with the assessee. Thus a clear distinction was made between possession / control on the one hand and ownership on the other hand. Moreover, in the present case the appellant himself had admitted to have been the custodian of the money received from Dhariwal Group during the course of his statement recorded during the survey action u/s 133A. 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 discus .....
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..... of search action u/s 132, it has been established that what is apparent does not reflect the true state of affairs. Therefore, the burden that rested with the Assessing Officer stands discharged and the onus has shifted to the appellant. In the case of Dhanvarsha Builders and Developers (P) Ltd Vs DCIT (2006) 102 ITD 375 (Pune) the assessee 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 the .....
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..... d 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. An explanation offered, if not accepted is no explanation in law and not only this the legislature while enacting the deeming provisions of the I.T. Act falling under sections 68, 69 to 69D of the I.T. Act, 1961, has clarified that in case the explanation offered is not satisfactory the value of the unexplained deposits shall be deemed to be the income of the assessee. There can be no general proposition of law applicable to all cases irrespective of the facts and circumstances thereof. One thing which can be said without much hesitation is that the burden is always on the assessee, if an explanation is asked for by the taxing authorities to indicate the source of acquisition of a particular asset admittedly owned by the person conc .....
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..... 25 (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.
5.12.2 The notings made on the seized document indicating payments made by the Dhariwal group i.e. Shri Rasiklal M. Dhariwal and his son Shri Prakash R. Dhariwal to the appellant through Shri Sohanraj Mehta, the C&F agent of RMD group for Karnataka Region is an undisputed fact and having held that the said seized document reflect payments made to the appellant, the question which now arises is whether it can be taxed in the hands of the appellant. The deeming part of section 69A comes into play if the following two conditions are satisfied:
1) the assessee is found to be owner of any money
2) such money is not recorded in the books of account.
The Apex Court in Chuharmal Vs CIT (1988) 72 ITR 250 (SC) held that the expression inc .....
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..... transaction which was spread over several assessment years it could not have been expected that the assessee would keep details of each and every transaction connected with the activity. Obviously these could find place in a manner which were discovered by the Investigation Wing during the search action. The efforts of the Assessing Officer in linking up these transactions with the evidences of M/s DIL with others, on this basis needs to be appreciated. Any document has to be necessarily read, as a whole. Applying this principle the genuineness of the seized document and a corollary, the appellant's involvement in the unaccounted business chain gets established beyond any doubt. The seized document do show link between the appellant and M/s DIL. The seized document and the record of the account are not dumb documents rather are true statement of the actual state of affairs amongst various parties including the appellant. I find it difficult in the given facts and circumstances, to accept the arguments of the appellant that no addition on account of the receipt of money could be made. Therefore, I hold that entries related to the appellant can lead to addition in the hands of th .....
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..... on the cross examination of Shri Mehta when he himself admitted to have received Rs. 14 crores from Shri Sohanraj Mehta, either by self or through his Representatives on the directions of Shri RMD and Shri PRD.
5.13.1 After all, the purpose behind allowing cross examination is to bring out the truth and in the process follow the principles of natural justice. That to me, have been adequately taken care of while finalizing the assessment proceedings. In that context, the Punjab and Haryana High Court in the case of CIT Vs K.D. Bali (2011) 10 Taxmann.com 215 (P & H) has held “No doubt, any quasi judicial authority has to follow principles of natural justice which includes opportunity to cross examine the witness whose statement is relied upon but the principles of natural justice are not fixed principles. The same can vary depending upon the nature of inquiry. In the instant case the person from whom the amount was received initially, stated that the amount belonged to the assessee. They were not shown to have any extraneous reason to give such a version These circumstances could be ignored by the CIT (Appeals) and the .....
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..... . The Courts attach great value for documentary evidence. The Punjab & Haryana High Court in the case of Paramjit Singh Vs ITO (2010) 323 ITR 588 (P & H) pointed out that oral evidence is not conclusive as against documentary evidence under sections 91 and 92 of the Indian Evidence Act, 1872.
5.16 To sum up, on careful consideration of all the evidences and facts cumulatively and also the submission of the appellant, in my considered opinion, the decision of the Assessing Officer in making the addition of Rs. 35,00,000/- was on a sound facts and on legal basis and hence liable to be upheld and the grounds of appeal no. 4 and 5 raised by the appellant are, therefore, liable to be dismissed.”
18. Aggrieved with such order of the CIT(A) the assessee is in appeal before us with the following grounds :
“1.(i) The Ld CIT(A) erred in sustaining the validity of the assessment order passed under section 153A even though the order was served on the assessee beyond the period of limitation.
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..... ections 69 and 69A of the IT Act though the amount added by the ld AO was not found in the appellant's possession and, therefore, he was not required to explain the source thereof.
(vi)The Ld CIT (A) has grossly erred in sustaining the addition of Rs. 35,00,000/- made by the ld AO which is not based on any concrete material but only on presumption and guesswork and hence it is illegal.
4. Without prejudice to the above grounds the alleged amount has no features of income to be taxed in the hands of the appellant.
5. Further, without prejudice to the above grounds, assuming without admitting that a parcel received by the appellant's security staff at the reception of the building which remained in temporary custody of the such security staff does not become income chargeable to tax in the hands of the owner of the building.
6. The above Grounds of Appeal are without prejudice to one another.
7. The Appell .....
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..... or the assessee in the case of Gurinder Singh Bawa (supra) is concerned, the same in our opinion, is not applicable to the facts of the present case. As mentioned earlier, certain loose papers were found during the course of search as per Bundle No.1 containing 78 pages. Under these circumstances, we find no merit in the additional ground raised by the assessee. Accordingly, the additional ground raised by the assessee is dismissed.
24. Grounds of appeal No. 1 (i) to (iv) by the assessee relates to the validity of the assessment order passed u/s.153A on the ground that the same was served on the assessee beyond the period of limitation.
25. After hearing both the sides, we find the Ld.CIT(A) while adjudicating this issue at Para 3.2 of the order has observed that search action u/s.132 against the assessee was conducted on 20-01-2010 and the assessment order has been passed on 30-12-2011. The assessee has filed return in response to notice u/s.153A dated 14-09-2010 on 31-12-2010. He has also given a finding that the order has been made prior to the end of 21 months period as envisaged in section 153(1)(a) of t .....
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..... Raj Mehta the same was never granted. The Ld. Counsel for the assessee referring to page 9 of the assessment order drew the attention of the Bench to the reply given by the assessee vide letter dated 16-12-2011 where he had specifically requested the Assessing Officer to provide a copy of the alleged statement taken on oath of Shri Sohan Raj Mehta and grant an opportunity to cross examine Shri Sohan Raj Mehta. Referring to page 18 and 19 of the assessment order the Ld. Counsel for the assessee drew the attention of the Bench to the observations made by the Assessing Officer where he has discussed the evidentiary value of third party evidence. He submitted that the Assessing Officer in the instant case has gone on mere presumptions without bringing any cogent material or evidence. So far as the application of provisions of section 68, 69 and 69A to 69D are concerned he submitted that these provisions are not applicable to the assessee.
32. So far as the application of provisions of section 68 is concerned he submitted that the same applies to any sum found credited in the books of an assessee maintained for any previous year and the assessee offe .....
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..... been given by me to Shri S. Balan, one chit of Rs. 7 lakhs has been signed by me and another chit of Rs. 5 lakhs has been signed by my son. However, the supporting evidences in respect of this is not available with me at present. But as regards the claim that this amount of Rs. 12 lakhs is actually Rs. 12 crores is not acceptable. My business expediencies require that I have to incur a number of expenses for getting sanctions etc. and for which I cannot disclose the purposes, name of recipients etc.”
He also relied on the following decisions :
1. ACIT Vs. Miss Lata Mangeshkar reported in 97 ITR 696 (Bom.)
2. Kishinchand Chellaram Vs. CIT reported in 4 Taxmann 29 (SC)
36. Referring to the decision of the ITAT, Ahmedabad Bench in the case of Shri Mushtafamia Sheikh he submitted that Shri Sohan Raj Mehta had retracted from the statement. He submitted that although the assessee does not have such retraction statement, however, in view of the decision of the Ahmedabad Bench of the Tribunal it has to .....
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..... He submitted that when the persons were given the money on the basis of chits in that case the same might have been given to some other person. Therefore it does not mean that the assessee has received the amount from Mr. Mehta. He also relied on various decisions filed in the legal computation.
39. The Ld. Departmental Representative on the other hand strongly supported the order of the CIT(A). He submitted that the papers found from the residence of Mr. Mittulal which was minutely maintained by Shri Sohan Raj Mehta clearly indicates that assessee has received an amount of Rs. 14.35 crores from the Dhariwal group. All these things are within the exclusive knowledge of the assessee, Shri Sohan Raj Mehta, Shri Rasiklal M.Dhariwal and Shri Prakash Manikchand Dhariwal of M/s. Dhariwal Industries Ltd. Referring to pages 249 to 326 of the paper book containing the copies of various chits found from Mr. Sohan Raj Mehta, the Ld. Departmental Representative submitted that the same contains the name of the assessee with various amounts against his name. The Ld. Departmental Representative submitted that a thorough discussion was made in the said assessm .....
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..... tries to the assessee through him, however, the statement appears to have been retracted as per the findings given by the Ahmedabad Bench of the Tribunal in the case of Mustafamiya H. Sheikh.
42. It is the case of the Assessing Officer that the assessee was associated with Dhariwal group for a long time and the assessee’s name appearing in the seized document tally with the regular business association with M/s. Dhariwal Industries Ltd. and if test of human probability is applied to the facts of the case it becomes evident that assessee was part of the entire scheme of unaccounted business chain of M/s. Dhariwal Industries Ltd. The role of the assessee was that of a co-conspirator. During the course of search and post search proceedings Mr. Sohan Raj Mehta had stated that the seized books of account, loose sheets and other documents, i.e. A/M/01 and A/M/29 were actually belonging to the C&F business of M/s. Dhariwal Industries Ltd. He had categorically stated that page 34 of A/M/08 and other related documents were written by him and most of the pages were in Marwadi language. The statement of Mr. Mehta clearly explains the entire unacc .....
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..... ucted at the premises of Mr. Mittulal at Bangalore on 09-10-2009 wherein certain incriminating documents were found belonging to the Dhariwal group. Those documents were maintained by one Shri Sohan Raj Mehta, C&F agent of M/s. Dhariwal Industries Ltd. In his statement recorded u/s.132(4) Mr. Mehta had stated that he was effecting unaccounted sales of Gutkha of Dhariwal Industries Ltd. and the sale proceeds were deployed as per the instructions of Shri Rasiklal M. Dhariwal and his son Shri Prakash M. Dhariwal. In some of the seized papers name of certain persons are appearing which contain the name either “Vinit” or “Vinit Ranawat”. On the basis of those names and entries against said names, the Assessing Officer deciphered the amount as Rs. 1 crore for A.Y. 2006-07 and Rs. 20 crores for A.Y. 2007-08 as received by the assessee Shri Vinit Ranawat. Although Mr. Mehta in his statement recorded u/s.132(4) has stated that this amount was paid by Dhariwal Industries to Shri Vinit Ranawat through him, however, the statement appears to have been retracted as per the findings given by the Ahmedabad Bench of the Tribunal in the case of Mustafamiya H. Sheikh.
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..... search action. Similarly, the statement of Mr. Rasiklal M. Dhariwal is contrary to the finding of the Department. It is also the submission of the Ld. Counsel for the assessee that different Benches of the Tribunal under identical facts and circumstances have deleted the addition made by the Assessing Officer on the basis of notings found from the premises of Mr. Sohan Raj Mehta.
40. We find some force in the submission of the Ld. Counsel for the assessee. The assessee in the instant case is an individual and proprietor of M/s. S. Chains which is engaged in the business of job work in gold ornaments. M/s. S.D.D. Agencies is the C&F Agent of M/s. Dhariwal Industries Ltd. in the State of Maharashtra for their Gutkha and Pan Masala business. A search and seizure action on the premises of Mr. Mittulal at Bangalore was carried on 09-10-2009 wherein documents maintained by Mr. Sohan Raj Mehta, C&F Agent of M/s. Dhariwal Industries Ltd were found. The assessee’s premises was also searched on 20-01-2010, i.e. after a period of about 3 months and 10 days. During the course of search at the premises of the assessee he was q .....
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..... recorded the amount mentioned from Shri Sohanraj Mehta hence the said payment are not recorded in my books.
Q.35 The statement of Shri Sohanraj Mehta recorded u/s.132(4) on 0910-2009 has been confirmed by Shri Prakash Dhariwal in the statement recorded u/s.132(4) on 20-01-2010. Thus, both Shri Sohanraj Mehta and Shri Prakash R. Dhariwal have stated on oath that payments in cash of Rs. 21.22 cr has been made to you at the direction of Shri Rasiklal Dhariwal by Shri Sohanraj Mehta. As the statements have been given by them on oath, you are therefore once again requested to go through the above referred documents/statement and state whether the said cash receipts are reflected and recorded in your regular books of accounts.
A.35 As already stated earlier, I have never received any cash from Sohanraj Mehta at the instant of Shri Rasiklal Dhariwal or Prakash Dhariwal. Hence, no such cash is recorded in my regular books of accounts.”
41. It is also pertinent to note here that the search party during the course of searc .....
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..... "margin-left:48px; text-align:justify">42. Similarly, in his answer to Question Nos. 33 and 34 he has replied as under :
“Q.33 I am showing you exhibit marked as A/M/29, seized from the residence of Mr. Mitulal, No. 219, 68th, Cross, 5th Block, Rajaji Nagar, Bangalore. Please go through these loose sheets serially numbered 1-61 and state the contents written over these loose sheets?
Ans : I have gone through the exhibit marked A/M/29. I have placed my signature on page ho. 24 of this exhibit in confirmation of having seen it. This exhibit contains loose slips serially number 1-61. Slips marked as sl.no. 4 to 8, 49 to 50, 58 arid 59 contain the notings of Mr.Raskilal Manikchand Dhariwal and his son Mr; Mr. Prakash. The notings on these slips contain their directions to me to handover the amount mentioned in the slip to the person who brings the slip. Sometimes, they do not write any name on the slip, I have to handover the money mentioned in the slip to the bearer of the slips. Most of the times, I may not know the person but still I make payment to them as I hav .....
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..... xt-align:justify">45. From the above, it is seen that at one place the Department is treating the amount as short term advance by Mr. Rasiklal Manikchand Dhariwal to the assessee (Question No.34 to assessee u/s.132(4) on 2001-2010). Similarly, Mr. Rasiklal Manikchand Dhariwal in his reply to Question Nos. 9, 11 and 12 recorded u/s.132(4) of the I.T. Act has stated that he has instructed Mr. Vinit Ranawat to hand over the various amounts. Therefore, it is not clear as to whether the Assessing Officer is correct or the Investigation Wing at the time of examining the assessee are correct or the answer of Mr. Rasiklal Manikchand Dhariwal is correct.
46. The Hon’ble Bombay High Court in the case of Aziende Colori Nazionali Affini, Italy (Supra) has held that the agreement had to be considered as a whole and that the different clauses in the agreement could not be considered separately. Therefore, when the Department itself is treating the same at one place as short term advance, therefore, the question of treating the same as income of the assessee does not arise. It is also an admitted fact that the papers were found with Mr. .....
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..... hem in a sufficient degree a probability of trustworthiness (wigmore on evidence $ 1546). Since, however, an element of self interest and partisanship of the entrant to make a person - behind whose back and without whose knowledge the entry is made - liable cannot be ruled out the additional safeguard of insistence upon other independent evidence to fasten him with such liability, has been provided for in Section 34 by incorporating the words such statements shall not alone be sufficient to charge any person with liability.
The probative value of the liability created by an entry in books of account came up for consideration in Chandradhar vs. Gauhati Bank [1967 (1) S. C. R. 898]. That case arose out of a suit filed by Gauhati Bank against Chandradhar (the appellant therein ) for recovery of a loan of Rs. 40,000/- . In defence he contended, inter alia, that no loan was taken. To substantiate their claim the Bank solely relied upon certified copy of the accounts maintained by them under Section 4 of the Bankers' Book Evidence Act, 1891 and contended that certified copies became prima facie evidence of the existence of the or .....
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..... ons the other learned Judge stated as under:
" If no other evidence besides the accounts were given, however strongly those accounts may be supported by the probabilities, and however strong may be the evidence as to the honesty of those who kept them, such consideration could not alone with reference to s.34, Evidence Act, be the basis of a decree."
(emphasis supplied)
In Beni Vs. Bisan Dayal [ A. I. R 1925 Nagpur 445] it was observed tat entries in book s of account are not by themselves sufficient to charge any person with liability, the reason being that a man cannot be allowed to make evidence for himself by what he chooses to write in his own books behind the back of the parties. There must be independent evidence of the transaction to which the entries relate and in absence of such evidence no relief can be given to the party who relies upon such entries to support his claim against another. In Hira Lal Vs. Ram Rakha [ A. I. R. 1953 Pepsu 113] the High Court, while negativing a contention that it having b .....
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..... s so far they are concerned and not others. In other words, the statements of the above witnesses cannot be independent evidence under Section 34 as against the above two respondents. So far as Shri Advani is concerned Section 34 would not come in aid of the prosecution for another reason also. According to the prosecution case itself his name finds place only in one of the loose sheets (sheet No. 8) and not in MR 71/91. Resultantly, in view of our earlier discussion, section 34 cannot at all be pressed into service against him.
(underline provided by us)
49. We further find identical issue had come up before various Benches of the Tribunal on the basis of the notings of Mr.Sohan Raj Mehta found during the course of search. We find the Ahmedabad Bench of the Tribunal in the case of Shri Mustafamiya H. Sheikh (Supra) has observed as under:
“7. On a perusal of the seized materials received from the Investigation wing, Pune, the AO had noticed that Page 34 was a summary of the cash payment made by Shri Sohanraj Mehta f .....
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..... ded, on instructions from Dhariwal Industries Ltd., The instructions were in the form of slips of paper and they contain the signatures of Mr. Rashiklal Manikchand Dhariwal and his son Mr. Prakash Dhariwal. Such payments totaling to Rs. 206,76,54,463/- were made in 2003-2006. The balance of Rs. 11,24,36,739/- was settled by me subsequently over a period of time."
7.2. Considering the statement of the said person, there is strong force in the contention of the assessee that even assuming that the receipt of such amount was merely a collection for on behalf of the company and such amount cannot par take the character of income in the hands of those persons.
7.3. Moreover, according to the assessee, the searched person being a third party had retracted all the statements recorded during the search proceedings in the following words:
"1. I referred my aforesaid statement recorded by Deputy Commissioner of Income-tax, Central Circle 2(2), Bangalore on 10.8.2011.
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..... in-left:144px; text-align:justify">"(On page 53) 2.25................It has also been indicated, as borne out on records, that the appellant had asked for cross examination of the party for the first time only on 14.12.2011. The appellant was also fully aware that the limitation to pass reassessment order in the case expires on 31.12.2011. Thus, between 29.3.2011 till 14.12.2011, the appellant did not make any request to the AO that an opportunity of cross examination is required by him. Fully knowing that it would not be possible for the AO to call a party from distant Bangalore and afford the facility of cross examination during a short period of just 12 working days, the appellant makes request for cross examination. There is no denying the fact that cross examination is an inalienable right of an agreed party but it is also true that there has to be a justifiable time frame in which such right can be exercised. It is as settled principle of law that rights and duties under a statute go hand in hand and cannot be exercised in isolation. The appellant truly had the right to cross examination but at the same time had the duty to ask for it within a reasonable time frame. A ri .....
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..... rder of the Tribunal suffers from any perversity has been raised. The Tribunal having based its conclusion on findings of fact recorded by it after appreciation of the evidence on record, it cannot be stated that the impugned order of the Tribunal suffers from any legal infirmity............"
(ii) During the course of hearing of a reference application of the Revenue in the case of DCIT (Asst) v. Prarthana Construction Pvt. Ltd [Tax Appeal No.79 of 2000 dated 25.3.2001] before the Hon'ble jurisdictional High Court, the learned Counsel for the assessee submitted that the documents in question have been found from the premises of a third party. The loose papers cannot be stated to be books of account in the light of the decision of the Supreme Court in the case of CBI v. V.C. Shukla and others (1998) 3 SCC 410 as observed by the Tribunal and submitted that the Tribunal has based its conclusions on the findings of fact recorded by it upon appreciation of the evidence on record; that the Tribunal had examined the facts and circumstances of the case and had come to the conclusion that the Revenue had not been able to estab .....
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.....
(i) that the learned AO had solely depended upon the information received from the Investigation Wing of Pune;
(ii) that the AO had failed to substantiate the same with any credible documentary evidence to the effect that the assessee had indeed received the alleged cash payment of Rs. 57.5 lakhs from Shri Sohanraj Mehta as the assessee had categorically pleaded before the AO that he was making purchases through Ambika Distributors who were the C & F Agents for Gujarat Region;
(iii) that the total unaccounted sales effected by Shri Sohanraj Mehta C & F of RMD Gutkha on behalf of Dhariwal Industries Limited for the period of April 2003 to Feb 2008 was Rs. 345.72 crores (approx). The unaccounted income for the AY 2004-05 was arrived at Rs. 40,88,32,514/-, the same was added substantively in the case of M/s. Dharival Industries Limited and concluded the assessment for the AY 2004-05 u/s 153A r.w.s. 143 (3) of the Act, dated 29.12.2011 by the ACIT, C.C. 1(1), Pune [Courtesy: P 231 - 238 of PB AR];
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..... px; text-align:justify">“13. We have considered the submissions of the learned DR. It is seen that the document in question was seized from the possession of one Mr. Sohanraj Mehta. The seized document makes a reference to the name of the assessee and a figure of Rs. 22.75 lakhs appears against his name. As to whether this document evidences payment of Rs. 22.75 lakhs to the assessee is a moot question. There is no basis set out in the order of the AO for coming to the conclusion that the seized document evidences receipt of money by the assessee from Sohanraj Mehta. The presumption u/s. 292C of the Act is only with reference to the person searched and it cannot be extended to the assessee. There is no corroborative evidence or statement of Sohanraj Mehta relied upon by the AO, to the effect that a sum of Rs. 22.75 lakhs was paid to the assessee. The assessee has categorically denied having received any payment from Sohanraj Mehta. Even in the proceedings before the AO, when the assessee was examined, he had taken the same stand. The details called for in the scrutiny assessment did not call for any specific details on the seized document or receipt of cash based on the seize .....
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..... ee under section 147 of the Act is not proper and he accordingly annulled the assessment.
4. Aggrieved the Revenue has preferred an appeal before the Tribunal and reiterated its contentions. During the course of hearing, a specific query was raised from the ld. D.R. as to what evidence they have collected during the course of search or thereafter, on the basis of which the Assessing Officer has formed a belief that the income chargeable to tax has escaped assessment in the hands of the assessee. No satisfactory answer was furnished by the ld. D.R. We have also carefully perused the seized documents and we find that there is a debit entry of Rs. 50 lakhs in the name of Mlik Kannauj, but this entry does not indicate that the amount of Rs. 50 lakhs was given to the Managing Director of the assessee. There may be hundred of Malik in Kannauj but on the basis of this dumb document, the reopening of assessment in the hands of the assessee is not permissible. Moreover, the searched party has also examined Shri. Sohanraj Gupta and the statement is also placed on record and at nowhere Shri. Sohanraj Gupta has deposed about payment of Rs. .....
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..... the Act was illegal and, therefore, any asstt. framed pursuant to such illegality cannot be sustained. Thus, the whole asstt. framed u/s 147 is hereby annulled, While taking this view, I am fortified by the decisions of the Hon'ble Apex Court in fie case of CIT vs Daulat Ram Rawat Mull (87 ITR 349) wherein, it was held:
'there should, in our opinion, be some direct nexus between the conclusion of fact arrived at by the authority concerned and the primary facts upon which the conclusion is based. The use of extraneous and irrelevant material in arriving at that conclusion would vitiate the conclusion of facts.............................."
In the result, the appeal is allowed."
5. Since we do not find any infirmity in the order of the ld. CIT(A), we confirm his order.”
52. Similarly the Lucknow Bench of the Tribunal in the case of DCIT Vs. Pawan Kumar Agarwal (Supra) has held as under :
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..... aj Mehta. Therefore, it is clear that the addition made by the Assessing Officer purely based on guess work without any evidence, therefore this addition deserves to be deleted.
7.1 From the facts enumerated above, it is clear that the assessing officer failed to establish any case against the appellant. Further inquiry/ investigation was required to be carried out on the information passed by the ADIT(Inv.)- III, Kanpur but evidences are not collected or placed. Copies of the statements, on the basis of which additions has been made, were not provided nor was the opportunity of cross- examination given to the appellant. The assessing officer merely summarized the salient features of the report of the ADIT (Inv.)-III, Kanpur and thereafter summarily rejected the reply of the appellant as not satisfactory. Learned counsel for the assessee, on the other hand, contends that neither the said Shri Shobhan Raj Mehta was allowed to be crossexamined nor a copy of his statement was given despite several requests. The AO's contention to the effect that the contents of the statement were made known to the assessee, is not a complianc .....
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..... not find any reason to interfere in the order of CIT(A).”
53. We find the Delhi Bench of the Tribunal in the case of M/s. Bhola Nath Radha Krishan (Supra) while deleting an identical issue has observed as under :
“7. After considering the arguments of both the sides and the facts of the case, we do not find any infirmity in the above order of learned 7 ITA-5149/Del/2012 CIT(A). The addition has been made on the basis of certain chits found from Shri Sohan Raj Mehta and his statement. Admittedly, the assessee has no dealing with Shri Sohan Raj Mehta. The assessee is supplying goods (Supari) to RMD Group who are manufacturing Gutkha. Shri Sohan Raj Mehta is C&F agent for Karnataka region of RMD Group. The search had taken place at the assessee's business premises as well as at the business premises of RMD Group. No evidence of any unrecorded sale by the assessee or unrecorded purchase by RMD Group was found. Thus, when, despite search at the premises of seller and buyer, no evidence of any unrecorded sale or purchase is found, in our opinion, merely becaus .....
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..... Kishan Chand Chelaram (125 ITR) it has been held by the Hon'ble Supreme Court of India that before taking a decision the assessee has to be allowed a chance or an opportunity of rebuttal with respect to the documents which are to be used against the assessee. The assessee has gone through the entire statements of Sh. Sohan Raj Mehta recorded under section 132(4) of the Income Tax Act. Nowhere there is any mention of Bhola Nath Radha Kishan or any of its partner in the said statement. The assessee cannot be held liable for any act of the omission or commission done by him. Mr. Sohan Raj Mehta's statement regarding decoding of figures is also not applicable on the assessee since this has no bearing or nexus of connection with the assessee firm or its business transaction.
No addition or adverse decisions can be taken on the basis of surmises and/or conjectures. There has to be specific mention of M/s Bhola Nath Radha Kishan, 6377, Naya Bans, Kahri Baoli, New Delhi in order to link any payment to it from Mr. Sohan Raj Mehta or anybody else..........."
(emphasis .....
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..... g Officer has stated that the papers were seized from Dhariwal Group. The said papers were seized from the residence of Shri Sohanraj Mehta. According to the Assessing Officer, the assessee could not disown the existence of such documents. The Assessing Officer observed that the money has been passed on by Dhariwal Group through their staff. Hence, the assessee must have received the amount noted on the seized papers. The Assessing Officer has proceeded to make the addition of Rs. 5.10 crs. by stating that as per section 114 of the Indian Evidence Act, it is an accepted rule of evidence that if a person possessing an evidence does not produce it, the inference is that such evidence if produced is detrimental to him. Accordingly, the Assessing Officer held that the said receipts were the income of the assessee.
5.2 The Assessing Officer has further held that according to the provisions of section 80 of the Indian Evidence Act, there is a presumption as to the documents produced as record of evidence are genuine. Hence, he has held that the documents seized from Dhariwal Group could be relied upon for making addition in the hands .....
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..... be made merely on the basis of noting in loose papers found during the search proceedings in the case of Dhariwal Group against the name of the assessee.
5.4 The presumption u/s 132(4A) is available only in respect of the person from whom the paper is seized. It could not be applied against a third party and hence, no addition could be made on the basis of the evidence found with third party. The presumption u/s. 132(4A) could be used only against the person from whose premises the documents are found and not against the person whose name appears in the seized papers.
5.5 In this case, the addition has been made on the basis of the documents found with Dhariwal Group and thus, the presumption u/s. 132(4A) could not be used against the assessee since no incriminating documents were found with it. In the case of ACIT Vs. Lata Mangeshkar (Miss) (1974) 97 ITR 696 (Bom), the addition was made in the hands of the assessee on the basis of the entries in the books of third persons. Hon'ble Bombay High Court held that such addition could not be made only on the basis of the noti .....
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..... s of account which have already been verified by the concerned Assessing Officer. Hence, the Assessing Officer was not justified in placing reliance on the provision of section 114 of the Indian Evidence Act.
5.8 It was further submitted on behalf of assessee that the Assessing Officer was not justified in making the addition by relying on the provisions of section 80 of the Indian Evidence Act which states that there is a presumption that the documents produced before the court as record of evidence are genuine. In this regard, the stand of the assessee is that in the case of assessee, document produced was merely in the form of a rough noting wherein certain amounts were written against the name 'Pradeep Runwal'. As discussed earlier, there may be many people of that name in Pune and in the absence of any other corroborative evidence to that effect. In such a situation, it cannot be inferred that it belongs to the assessee.
5.9 While making the addition of 5.10 crores as stated above, the CIT(A) relied on the following decisions of Sumati Dayal vs. CIT [(1995) 214 .....
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..... d upon the decision of ITAT Third Member in the case of Khopade Kisanrao Manikrao [74 ITD 25]. In this regard, the stand of assessee is that the decision in the case before Third Member was not applicable to the facts of the present case. In the said case, the assessee was searched and documents were found indicating on money received on sale of plots. On the basis of the documents found, the Assessing Officer estimated the income from on money which was held to be valid. In that case, the issue that no addition could be made on the basis of documents found with third party was neither raised nor applicable. Thus, according to us, the said decision has no application to the facts of the assessee's case.
5.11 The CIT(A) in para 2.5 has placed reliance upon ITAT, Pune decision in the case of Dhanvarsha Builders and Developers Pvt. Ltd. [102 ITD 375]. In the said case, the assessee was searched and documents were found indicating on money received by the assessee. It was held that the document was found with the assessee and therefore, the A.O. was justified in making the addition. Even in this case, the issue of no addition c .....
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..... was reopened. Hon'ble High Court held that the reopening was valid since the assessee herself had made a false disclosure. Thus, the facts are totally different from the present case and hence, the ratio of Vasantibai N. Shah (supra) is not applicable to the assessee's case. The CIT(A) further relied on the decision in the case of Green Valley Builder v. CIT [(2008) 296 ITR 225 (Ker)]. In the said case, the assessee was engaged in real estate business and it had sold certain plots. The assessee stated that the plots were sold at Rs. 1750/- per cent while the Assessing Officer on the basis of evidences held that actually the lands were sold at Rs. 4,000/- per cent. Hon'ble High Court held that the additions made were correct. The said decision is not applicable to the facts of the present case. The CIT(A) has further relied upon the decision in the case of Chuharmal Vs. CIT [(1988) 172 ITR 250 (SC)] for the proposition that documentary evidence plays an important part. There is no dispute to the said proposition but in the absence of any corroborative evidence no addition could be made in the hands of the third party.
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..... belong to " such person". Thus, clearly the presumption is in respect of the person from whom they were found. The use of the word "to such person" in the said Section means the person from whom the books of account or documents were found. Clause (ii) of Section 132 (4A) provides that the contents of such books of account or documents are true. This presumption can be applied only against the person from whose possession the books of account or the document were found. Therefore, the A.O. was not justified in applying the provisions of Section 132(4'A) to the assessee in the present case who was not searched u/s 132 of the Act nor the document was found and seized from, their possession. Even, otherwise, such presumption u/s 132(4A) of the Act is not conclusive and rebuttable one".
6. Similar view has been taken by ITAT, Pune in Amit D Irshid [ITA No.988/PN/11] that presumption u/s. 134(4A) is available only against the person from whose possession the document is found and not against the third person. In the absence of clinching evidence against the third person as stated above, no action could b .....
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..... e are allowed.
46. Identical grounds have been taken in ITA No.1313/PN/2013 for A.Y. 2006-07 (at Rs. 2 crores) and in ITA No.1315/PN/2013 for A.Y.2008-09 (at Rs. 12 crores). Following the same reasonings, the grounds for the above assessment years are allowed.
47. Grounds of appeal No.6 and 7 being general in nature are dismissed.
48. There is one more ground for A.Y. 2006-07 as per grounds of appeal No.3 wherein the assessee has challenged the order of the CIT(A) in sustaining disallowance of Rs. 1,79,633/- on account of interest paid on borrowings.
49. The Ld. Counsel for the assessee did not press the above ground for which the Ld. Departmental Representative has no objection. Accordingly, this ground by the assessee is dismissed.
ITA No.1316/PN/2013 (A.Y.2009-10) (By Assessee) :
50. Ground of appeal No.1 by the assessee reads as under :
“1. The Ld.CIT(A) erred in sustaining t .....
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..... er did not accept the contention of the assessee in absence of any supporting evidence and determined the annual value of Mahabaleshwar property at Rs. 1,80,000/-. After allowing deduction of 30% on repairs u/s.24 and municipal taxes of Rs. 8,0000/- the Assessing Officer determined the annual value at Rs. 1,20,400/-.
56. In appeal the Ld.CIT(A) following his order for A.Y. 2005-06 vide Appeal No. PN/CIT(A)-II/Addl.CIT R-3/778/08-08 dated 28-032012 deleted the addition made by the Assessing Officer and allowed the ground raised by the assessee.
57. Aggrieved with such order of the CIT(A) the Revenue is in appeal before us.
58. We have considered the rival arguments made by both the sides, perused the orders of the AO and CIT(A) and the paper book filed on behalf of the assessee. We find the Assessing Officer, based on his findings in the original assessment order, took annual value of the house property at Mahabaleshwar at Rs. 1,80,000/-. After claiming the statutory repairs u/s.24 and municipal taxes of Rs. 8,000/- he determined the Annual value of the Mahabaleshwar house .....
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..... . Ltd at 604,605, Sai chambers, Wakdewadi Pune on 20-1-2010, certain loose papers, documents were impounded wherein page No 102 of Bundle No. B was a copy of letter dated 4-3-2009 from Under secretary, Ministry of Commerce and Industry, govt. of India to the assessee which stated that on the basis of State Govt's report dated 23-4-2008, the building in which industrial park is being developed by the assessee's proprietary concern M/s. S Balan did not pertain to individual but belonged to a partnership firm M/s S. Balan & Co. Further the said letter mentioned that the building is divided into three different wings and only a part of that building (Central wing) is being developed as industrial park and thus it cannot be said that the industrial park is being developed as a whole and accordingly it informed that the case of the assessee was not eligible under the Industrial Park scheme, 2002. During the course of survey action in the statement recorded on 20-1-2010, the assessee stated that he was withdrawing the claim of deduction u/s 80lA subject to the outcome of the review application filed before the ministry of commerce.
61. The .....
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..... us reasons that the decision was not rendered by that time. The said additional evidence filed u/r 46A was forwarded by the CIT(A) to the Assessing Officer for opportunity and rebuttal with respect to the claim of deduction u/s.80IA(4) for AY. 2009-10 and 2010-11. The Assessing Officer forwarded his remand report which was controverted to the assessee.
63. The assessee in its reply to the remand report submitted that the observation of the Assessing Officer that the assessee has not completed the industrial park even upto the date of scrutiny assessment is factually not correct as the assessee started earning income from the industrial park from F.Y. 2006-07 relevant to AY. 2007-08 but due to losses incurred did not have positive gross total income for AY. 2007-08 and 2008-09 due to which the said claim was not taken and the assessee took the claim for the first time in A.Y. 2009-10 when positive gross total income was there. As regards the objection of the Assessing Officer that the industrial park is' being developed by the assessee's proprietary concern does not pertain to individual but belongs to the partnership firm M/s. S Balan &a .....
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..... n that the appellant had also stated that the review petition filed earlier was pending with the Ministry of commerce and subject to that the appellant had stated that the claim was being withdrawn. However, subsequently the appellant had filed an affidavit denying to said claim being withdrawn as the matter was subjudice before the empowered committee. It is also seen that the appellant has fulfilled the conditions specified u/s 80IA(4)(iii) as per the provision of sec 80IA(5), 80IA(7) and 801A(10). The conditions specified by section 80IA(4)(iii) are:
(1) The asessee develops, develops and operates or maintains and operates an industrial park.
(2) The industrial park should be noticed by the Central Government.
(3) The notification should be in accordance with the scheme framed and notified by the government for the specified period.
Sec 80IA(4)(iii) thus provides for a deduction of the profit derived by the assessee from developed or development and operation of .....
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..... ained. It is trite law that the powers of the CIT (Appeals) are coterminous with the powers of 'A.O. In the case of Smt. Prabhavati S. Shah Vs CIT (1998) 231 ITR 1 (MUM) it was held that sub-rule (4) of Rule 46A specifically restore power of appellate authority to call for production of any document to enable him to dispose appeal. Subsection (4) of section 250 empowers the appellate authority to take additional evidence. Scope of power is coterminous with ITO. Conjoint reading of section 250 and Rule 46A shows that restriction on the appellant do not affect the' powers of the Appellate Authority for the purpose of Rule 46A appears to be to ensure that evidence is primarily led before the Assessing Officer. Section 250(4) being a quasi-judicial powers, it is incumbent on CIT (Appeals) to exercise the same if the facts and circumstances justify. It appears that due to some genuine reasons the submissions could not be produced during the assessment proceedings, therefore, the evidence produced by the appellant is being taken into consideration for deciding the issue and is accordingly admitted for adjudication. The appellant's prayer for the admission of additional eviden .....
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..... e in it. The Industrial Park scheme is a code in itself wherein it lays down the criteria of eligibility, procedure of approval, condition to be satisfied and once the Central Government in its wisdom grants the approval it is incumbent on the part of the Assessing Authority to grant the claim of deduction. It is only the technical requirement of section 80IA(3), 80lA (5), 80IA(7) and 80IA(10), which could be examined and verified by the Assessing Officer. In the case cited by the appellant of Hon'ble Bombay High Court in the case of Silver Land Developers & Others Vs Empowered Committee (2012) 343 ITR 439 (Bom), the Empowered Committee had refused approval to the assessee under the Industrial Park Scheme and the Court held that section 80IA(4)(iii) does not contain a specific requirement that the Industrial Park has to be developed in accordance with the scheme framed by the Central Government. In the case of Primal Projects (P) Ltd. Vs DCIT (2011) 56 DTR 291 (Bang), the Bangalore ITAT held that once the projects are approved and notifications are made by the appropriate authorities, the approval and notification run back to the date of commencement of the activities.&rdqu .....
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..... or deduction u/s 80-IA(4)(iii) of the Act by the Assessing Officer. In the instant assessment year 2007-08, which is the first year of claim by the assessee, the Assessing Officer as well as the CIT(A) have rejected the claim. The grounds on which the said claim has been denied, have already been enumerated by us in the earlier part of this order.
38. Before we proceed to address the controversy surrounding the objections raised by the Revenue, it would be appropriate to briefly touch-upon the relevant provisions of the Act and the clauses of the IPS, 2008 in question. Section 80-IA of the Act prescribes for deduction in respect of profits and gains from industrial undertakings or enterprises engaged in infrastructure development, etc.. Sub-section (1) of section 80-IA prescribes that where the gross total income of assessee includes any profits and gains derived by an undertaking or an enterprise from any business referred to in sub-section (4), there shall been allowed in computing the total income of the assessee a deduction of an amount equal to hundred per cent of the profits and gains derived from such business for ten co .....
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..... the Central Government for the period beginning on 1st day of April, 1997 and ending on 31st March, 2006 shall be eligible for the benefit of section 80-IA of the Act. It may be noted that by the Finance (No.2) Act, 2006, the applicability of subclause (iii) was extended from 31.03.2006 to 31.03.2009. In other words, any undertaking which was engaged in (i) developing; (ii) developing and operating; or (iii) maintaining and operating an industrial park shall be eligible for deduction for the period beginning on 1st day of April, 1997 and ending on 31st March, 2009.
40. Notably, for the period under consideration before us, the Central Government formulated a Scheme in exercise of the powers under clause (iii) of sub-section (4) of section 80-IA of the Act and it was called ‘Industrial Park Scheme, 2008’. The said Scheme defines ‘industrial park’ in clause 2(h) as under :-
“2(h) “industrial park” means a project in which plots of developed space or built up space or a combination, with common facilities and quality infrastructure fa .....
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..... f section 80-IA of the Act, if it fulfils all of the following conditions, namely :-
(1) The date of commencement of the Industrial Park should be on or after the 1st day of April, 2006 and not later than 31st of March, [2011];
(2) The are allocated or to be allocated to industrial units shall not be less than seventy-five per cent of the allocable area;
(2A) The area allocated or to be allocated for commercial activity shall not be more than ten per cent of the allocable area;
(3) There shall be a minimum of thirty industrial units located in an industrial park;
(4) For the purpose of computing the minimum number of industrial units; all units of a person and his associated enterprises will be treated as a single unit;
(5) The minimum constructed floor area shall not be less than 15,000 square meters;
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..... al.
6. The Central Government may withdraw the approval given to an undertaking under this Scheme if the undertaking fails to comply with any of the conditions listed in paragraphs 4 and 5 of this Scheme :
Provided that before withdrawal of approval, the undertaking shall be given an opportunity of being heard by the Central Government.”
46. Having taken note of the provisions of the scheme, we may also refer to rule 18C of the Income Tax Rules, 1962 (in short “the Rules”) which deals with the eligibility of an Industrial Park for benefits of section 80-IA(4)(iii) of the Act. Rule 18C of the Rules, as applicable for the assessment year under consideration reads as under :-
“Eligibility of Industrial Parks for benefits under section 80-IA(4)(iii).
18C. (1) The undertaking shall begin to develop, develop and operate or maintain and oper .....
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..... ed in clause 5 of the Scheme have been fulfilled by the assessee and in-fact there is no case made out by the Revenue that the Central Government has invoked clause 6 of the Scheme, which permits the Central Government to withdraw the approval given to the undertaking under the Scheme if it fails to comply with any of the conditions listed in clauses 4 and 5 of the Scheme. Be that as it may, it would be appropriate to infer that so far as the compliance of assessee’s undertaking to the requirements of the Scheme are concerned, there is no dispute.
49. Now, the claim of the assessee is that it started the process of development of the Industrial Park somewhere in October, 2004 and the construction was spread over a number of years. As and when the individual units were being completed, assessee sold it to the clients. The assessee was offering and recognizing income on such sales in the respective years, and the income under consideration this year is from the sale of units. During the year under consideration, Assessing Officer has noted that only 21 units were located in the Industrial Park. In other words, only 21 units .....
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..... ed in the context of application of section 80-IA(4)(iii) of the Act r.w. rule 18C of the Rules; and, the answer, in our view, is obviously No.
51. At this point, we may also refer to rule 18C of the Rules which prescribes the eligibility of an Industrial Park for benefits of section 80IA(4)(iii) of the Act. The provisions of the rule as applicable for the year under consideration have been reproduced by us in the earlier paragraphs. Sub-rule (1) of rule 18C of the Rules says that the undertaking ought to begin to develop, develop and operate or maintain and operate an Industrial Park at any time during the period beginning on 01.04.2006 and ending on 31.03.2009. Sub-rule (2) of rule 18C of the Rules says that the undertaking of an Industrial Park shall be notified by the Central Government under the IPS, 2008. Sub-rule (3) of rule 18C of the Rules says that the undertaking shall continue to fulfill the conditions envisaged the IPS, 2008. Notably, there is no dispute that the undertaking of the assessee i.e. Industrial Park – Giga Space is duly notified by the Central Government under the IPS, 2008 and it continues to ful .....
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..... m such development which have been declared by the assessee in its books of account for the year under consideration. The stand of the Revenue that the claim of deduction can be availed only after the park is developed i.e. only after issuance of completion certificate by the ‘local authority’ does not emerge from the reading of section 80-IA(4)(iii) of the Act r.w. rule 18C of the Rules, as it stands for the period under consideration.
53. At this stage, we may also refer to the stand of the Revenue based on the clause 5 of Scheme. As per the condition (2) of clause 5, it is prescribed that the tax benefits under the Act will be available to the undertaking only after minimum number of thirty units are located in the Industrial Park. On the strength of this, it is pointed out that as on 31.03.2007 i.e. before the close of the previous year relevant to the assessment year under consideration, the minimum number of thirty units are not located in the Industrial Park; and, thus as per the Revenue assessee is not entitled to the claim of deduction in this assessment year. The aforesaid condition contained in clause 5(2 .....
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..... at the minimum number of thirty units are located in the Industrial Park. It is pointed out that even the outer limit for availment of benefit of section 80-IA(4)(iii) of the Act in the present case is 31.03.2009; and, when the assessment order was passed by the Assessing Officer in this case on 31.03.2010, the only point of scrutiny was to enquire whether or not thirty units have been located in the Industrial Park ? In the present case, it is pointed out that it is undisputed that the minimum thirty units have been located in the Industrial Park before the date specified in the Scheme as well as the Act and therefore the said condition has been fulfilled.
55. We find enough merit in the interpretation put-forth by the assessee. Ostensibly, the conditions in the Scheme have been inserted with an objective that once an undertaking is considered for notification u/s 80-IA(4)(iii) of the Act, there is a mechanism available to check as to whether the conditions prescribed in the Scheme have been complied with. In other words, in the context of the present controversy vis-à-vis clause 5(2) of the Scheme the objective is to e .....
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..... its from partial completion of the project in every year. It has also been clarified by the CBDT that on a later date, if it is found that the condition of the completion of project within the stipulated time is not fulfilled by the assessee then the Assessing Officer can withdraw the deduction allowed to the assessee in earlier years. In our considered opinion, a similar analogy has to be applied in the present case to understand the import and meaning of condition (2) of clause 5 of the Scheme. In our considered opinion, the lower authorities are not justified in disallowing the deduction claimed by the assessee u/s 80-IA(4)(iii) of the Act merely because the minimum number of thirty units are not located in the Industrial Park before 31.03.2007 when otherwise it is factually true that the minimum number of units have been located in Industrial Park in compliance with period stipulated and approved in the Scheme. Therefore, on this aspect, we find no reason to uphold the objection of the Revenue.
57. In-fact, the controversy before us in relation to the claim of deduction u/s 80-IA(4)(iii) of the Act pertaining to the instant .....
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..... e Act, it is clear that an Assessee who adopts the percentage completion method of accounting of income from developing industrial park can get deduction of only that part of the profits that are offered to tax in the year in which the notification is received. Had the Assessee in the present case followed project completion of method of accounting of income from developing industrial park, the Assessee would have got the benefit of deduction of the entire profits from the development of industrial park. It will result in a situation where the method of accounting followed by the Assessee (such as the one in the present case) will deny the benefit available under the law. The method of accounting is such that the Assessee can never get the benefit even in a later year. It is no doubt true that the satisfaction of the conditions for grant of deduction as on the last date of the previous year is necessary. If due to subsequent events that take place after the last date of the previous year, conditions for grant of deduction are satisfied, then the Assessing Officer can take cognizance of the same. The CBDT in Instruction No.4/2009 dt. 30.06.2009 clarified the position with regard to .....
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..... the Act. In the instant assessment year, assessee has operationalised 21 industrial units out of the minimum 30 required to be developed. The balance of the 9 units have been completed on 09.05.2007 i.e. the date on which assessee has obtained the completion certificate from the Pune Municipal Corporation. Hypothetically speaking, if the assessee had not recognized the profits on the 21 units sold during the year under consideration but would have waited recognition of income after the completion of the complete 30 units, then such profits would have been offered by the assessee to tax in the subsequent assessment year, wherein in any case the Assessing Officer has held the assessee entitled for the deduction u/s 80-IA(4)(iii) of the Act. However, assessee has declared income from the sale of units on a progressive basis i.e. in the year in which the particular industrial units have been sold. This has lead to a conflict between the assessee and the Revenue with regard to the assessee’s claim for deduction u/s 80-IA(4)(iii) of the Act. The moot question is – can the method of accounting followed by the assessee be determinative of assessee’s claim for deduction u/ .....
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..... e IPS, 2002 assessee had to locate 30 units in the Industrial Park while assessee was able to locate only 6 units by 31.03.2003. The Hon’ble Third Member of the Tribunal held that the deduction u/s 80-IA(4)(iii) of the Act could availed by the assessee only when the undertaking begins to operate an Industrial Park and such a conclusion was arrived at by the Hon’ble Third Member of the Tribunal on the basis of the provisions of section 80-IA(4)(iii) of the Act read with the then applicable rule 18C of the Rules. The relevant discussion in the order of the Hon’ble Third Member of the Tribunal reads as under :-
“31. In my humble opinion the legislature has consciously used the expression "develops an industrial park" instead of using the expression "undertakes to develop an industrial park". Wherever legislature intended to extend the benefit of deduction to an undertaking which has to merely commence its activity, without completing minimum stipulated phase, it was specified in the relevant provisions. For example, in section 80IC(2) it was stated that if an undertaking begins to manuf .....
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..... strial park has to begin its operations which can only be a subsequent event i.e., after it has developed to an extent where it fulfills the minimum criteria to be treated as an industrial park. However, Sub-Rule (1A), which refers to an undertaking set up in a Special Economic Zone, used the expression "shall begin to develop"; if the intention was to give the same treatment to an undertaking which develops an industrial park, the same could have been mentioned in Sub-Rule (1) or it could have been included in Sub-Rule (1A). Rule making authority, in exercise of its delegated legislation, appears to have consciously maintained a distinction between an industrial park and an undertaking set up in a special economic zone whereby an industrial park gets eligibility to claim deduction only after it begins to operate the park and not before. During the developmental stage, particularly when the minimum development is not achieved, it cannot be said that if: was operating an industrial park since the scheme, to which a reference is made in the subsequent paragraphs, imposes minimum conditions to be fulfilled to be considered as an industrial park. In the instant case, assessee .....
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..... se of the Revenue qua the instant assessee. Moreover, the claim before the Hon’ble Third Member was with respect to an Industrial Park which was approved under the Industrial Park Scheme, 2002 whereas assessee’s case is covered by the Industrial Park Scheme, 2008.
61. Therefore, considering the amendment of rule 18C of the Rules made w.e.f. 01.08.2008 where an undertaking begins to develop an Industrial Park is also eligible for the deduction so long as the development is otherwise complete within the period specified in the Scheme as well as it fulfills the conditions envisaged in the Scheme. The decision in the case of Marigold Premises Pvt. Ltd. (supra) went against the assessee because at the relevant point of time rule 18C of the Rules mandated that the deduction was available to the assessee when the assessee began to operate an Industrial Park whereas in the subsequently amended rule 18C of the Rules, which is applicable to the case before us, it is differently worded. The aforesaid difference has also been appreciated by the Hon’ble Third Member in its decision in the case of Marigold Premises Pvt. Ltd .....
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..... uld not explain the sources of the cash found and had submitted that the same will be explained later on after verifying the books of account.
73. During the course of assessment proceedings the assessee explained the source of the same as under :
|
Cash balance of Sadguru Datta Dharmik Trust |
Rs. 22,00,000/- |
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Cash withdrawals from Cosmos Co-operative Bank Limited, Bangalore |
Rs. 10,24,000/- |
|
Cash with myself and my family members, duly accounted for |
Rs. 74,000/- |
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..... d of Rs. 28 lacs from the residential premises on 20-12010 and Rs. 5 lacs from the bank locker on 15.03.2010. The explanation for the seized cash has come only after a substantial gap of nearly eight months which prima facie appears to be an 'afterthought' which is difficult to be believed and accepted. A person found in possession of cash will be presumed owner unless he establishes that he is not the owner by furnishing cogent evidence. The appellant it appears from the assessment order had also filed an affidavit in this regard during the assessment proceedings before the Assessing Officer and the Assessing Officer after considering the materials filed by the appellant had held the cash to be unaccounted and unexplained. The appellant has not filed any such evidence or brought on record any such material which could justify its claim. In the case of Ashok Kumar Vs CIT (1986) 160 ITR 497 (M.P) it was held that the presumption of ownership in case of cash found in possession of person is viable because cash is one of the properties of which title is transferable merely by delivery of possession. Therefore, unless any contradictory explanation is given by the person in poss .....
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..... fying the books. We find during the course of assessment proceedings it was submitted before the Assessing Officer that cash amounting to Rs. 22 lakhs was the cash balance entrusted to him by Sadguru Datta Dharmesh Charitable Trust to be deposited in its account at Pune People’s Cooperative Bank Ltd. It was explained that the assessee was incharge officer of the said trust. We find although the search took place on 20-01-2010 the trust made a request to the CIT Central, Pune vide letter dated 19-08-2011 requesting to release of the seized amount. The Ld.CIT rejected the claim of the assessee trust on the ground that the same was an afterthought since no explanation was furnished during 132(4) statement. Nothing plausible was brought to our notice to substantiate with the source of Rs. 33 lakhs so as to take a contrary view than the view taken by the CIT(A). The assessee in our opinion has miserably failed to substantiate with cogent evidence that the amount of Rs. 22 lakhs belong to the trust and the amount of Rs. 10,24,000/- drawn from the Cosmos bank account was available with him. Similarly, nothing was brought to our notice to substantiate the availability of Rs. 74,000/- .....
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