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TMI Blog2024 (2) TMI 334X X X X Extracts X X X X X X X X Extracts X X X X ..... n account of violating the provisions of section 269SS of the Income-tax Act, 1961. 2) On the facts and in the circumstances of the case, the Ld. CIT(A) erred in holding that the penalty was imposed on the basis of dumb documents despite the fact that the data on the said documents was duly corroborated as per the findings in the penalty order. ITA No. 788/Ind/2019 for A.Y. 2010-11 in the matter of Penalty u/s 271E: 1) On the facts and in the circumstances of the case, the Ld. CIT(A) erred in deleting the penalty of Rs. 1,46,64,000/- levied by the JCIT (Central), Indore, u/s 271E on account of violating the provisions of section 269T of the Income-tax Act, 1961. 2) On the facts and in the circumstances of the case, the Ld. CIT(A) erred in holding that the penalty was imposed on the basis of dumb documents despite the fact that the data on the said documents was duly corroborated as per the findings in the penalty order. ITA No. 790/Ind/2019 for A.Y. 2009-10 in the matter of Penalty u/s 271E: 1) On the facts and in the circumstances of the case, the Ld. CIT(A) erred in deleting the penalty of Rs. 1,59,03,770/- levied by the JCIT (Central), Indore, u/s 271E on accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -1 to 8 from the premise of one Shri G.C. Patidar, an employee of "PATH". The statements of Shri G.C. Patidar were also recorded u/s 132(4) wherein he stated that unsecured loans were taken from various people which were out of books. During assessments of AY 2009-10 & 2010-11 with which were are concerned in these appeals, the assessing authority observed that the assessee has taken loans in cash from "PATH" and also made repayments in cash. Considering such act of assessee as a default committed in violation of section 269SS & 269T of the Act, the assessing authority referred matter to Joint Commissioner of Income-tax (Central), Indore ["JCIT"] for taking action 271D & 271E. Accordingly, the JCIT show-caused assessee in response to which the assessee made a detailed submission including denial of any cash loan having been taken/repaid. However, the JCIT rejected assessee's submission and imposed following penalties: AY Default committed by assessee Penalty section Penalty imposed 2009-10 Cash loan taken from "PATH" 271D 1,59,03,770/- 2009-10 Cash repayment made to "PATH" 271E 1,59,03,770/- 2010-11 Cash loan taken from "PATH" 271D 1,46,64,000/- 2010-11 Cash repay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 21 (supra) as under: "7. We have considered rival submissions as well as relevant material on record. The AO has made the addition on account of unexplained interest payment in respect of unaccounted cash loan on the basis of the loose paper seized from the premises of Shri G.C. Patidar an employee of the assessee as well as the tally account in the name of XYZ 0809-2 taken from laptop. The details of the seized document are reproduced by the AO in assessment order in para 7 & 8 as under: 7.1 The AO then proceeded to conclude that the transactions in the tally account of XYZ 0809-2 are corroborated by the transactions recorded in the loose paper seized from the premises of Shri G.C. Patidar and held that the transactions to the tune of Rs. 5,32,60,000/- are cash loan received by the assessee out of book for A.Y.2009-10 on which the AO has computed the interest expenses of Rs. 82,03,684/-. Similarly for A.Y.2010-11 the AO taken loan of Rs. 54,65,000/- and interest expenses of Rs. 58,55,122/-. The details of these amounts have been given by the AO in para 11 as under: Name of Transaction Period Amount received Amount paid Loan availed by PATH FY 08-09 5,32,60,000 49,00,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The entries as found in the account XYZ 0809-2 are regarding the credit and debit of the amounts which are all in round figures and do not represent any interest payment. Therefore, without going into the merits of the alleged transactions of cash loan taken by the assessee the documents relied upon by the AO itself do not reveal any payment of interest except the statement of Shri G.C. Patidar who has mentioned interest rate only and not the payment of interest during the year under consideration. We further note that the AO in para 13.3.5 rejected the contention of the assessee by considering the signature on the loose sheet on cutting and correction as signature of Shri Puneet Agrawal as under: "13.3.5 The contention of assessee is incorrect, important evidence seized from premise of Shri G.C Patidar is serial of 19 of page no.14 of LPS-1 seized from residence of Patidar it consist of signature of Shri Puneet Agrawal clearly meaning that he has approved the transactions." 7.3 This observation of the AO is contrary to the statement of Shri G.C. Patidar recorded u/s 132(4) of the Act and question no. 31 and answer to the same are reproduced as page no.93 of the assessment ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ri GC Patidar was recorded on oath which has been retracted vide affidavit dated 28.12.2016. Since, the statement given during search has been retracted, therefore, the same cannot be relied upon. As a matter of fact the appellant before, AO as well as before me has stated that the entries in respect of laptop data which has been seized from the office of the company was used by one of its employee Mr. Nilesh Tawrech who was taking tally accounting training under Shri G.C. Patidar, who used to provide him hypothetical entries for learning purpose for that reason and for learning purpose name of the company was taken as 'XYZ'. The appellant has claimed not having any knowledge of company 'XYZ' which has also been stated by appellant during the course of assessment proceedings. The appellant after the search proceedings enquired from his staff member regarding the impugned printouts. Mr G.C. Patidar, who worked as an accountant usually comes to office and worked for others and uses the printer installed at the premises of the appellant, informed that he has opened this account on tally to train his junior Mr. Nilesh Tawrech and most of the figures are imaginary and fe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rpose only and the data are picked from different sources which also includes random data of appellant. The AO failed to consider that neither the appellant nor his accountant has stated that any such firm actually exists and the transactions as mentioned in the seized printouts have been executed. The additions have been imposed on sheer presumption and assumption basis. Further, the AO did not even bother to carry out independent enquiries from the person whose names are mentioned on LPS-1 & LPS 8 which Was seized from the premises of G C Patidar. The trainee junior Nilesh Tawarech has untimely passed away. Therefore, it is impossible for the appellant to bring Shri Nilesh Tawarech in person for examination on oath. It is pertinent to mention that no incriminating material was found during search having sole direct nexus with any of the impuged cash loan transaction. Furthermore, neither the AO call any of the person whose names were mentioned on loose paper for examination nor any person whose name were mentioned on loose paper turned out to AO and has admitted that any such transaction has taken place. Therefore, in absence of any cogent evidence having direct nexus with the im ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0/- from M/s Agroh Infrastructure Developers Pvt. Ltd (In short AIDPL) and on other hand accepts the same to be cash- buyback of shares. The AO has also held that interest amounting to Rs. 14,83,394/- was charged by AIDPL. Whereas the said document only records some purported cash received and cash paid but nowhere the name of PATH is reflected. Even on second table at page 99, the name of PATH is not reflected therefore to attribute these transactions to PATH is fallacious. The said loose sheet was subject to varying interpretation in the year AY 2008-09 and is a non- speaking/ dumb document. The director of Agroh cannot give any satisfactory reply during the statement recorded at the time of search however during the course of their assessment admitted that they have given loan to PATH. The statement of the Director wherein they admitted giving loan to PATH has not been provided nor the opportunity to cross examination was made available. It is important to mention that the buy-back of shares is duly accounted in audited books of account of appellant and the impugned loose papers were not found from premises of the appellant. Therefore, the AO is not justified in presuming buy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. The assessment order does not discuss any such attempt by the department to conclusively establish that the transaction whereby debtor creditor relationship has been created between the two parties. None of the parties from whom the loans are allegedly taken by Assessee Company in cash were examined for the truth of the happening of such transactions. If the alleged cash loans are taken by the assessee company is taken to be true on the fact of it, then there arises a corresponding liability of income tax on such undisclosed income in the hands of giver of the cash loan. In none of the cases, the reciprocity which is a fundamental necessity of existence of transaction was ever proved or attempted by the department. In two cases reopened by the Department of Mr. Anil Poddar and Mr. Raghunath Poddar of which the Assessee Company has been informed, the reason to believe that cash loans were advanced by those person to assessee company was found unsupported and therefore such doubt has no legs to stand upon. Thus, in entirety the seized loose paper and tally data is dumb document/data and does not reflect any exchange of money by/to appellant. 4.2.6 This is settled legal position ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rectness of the entries still those entries would not be sufficient without supportive independent evidence. Rakesh Goyal Vs. ACIT (2004) 87 TTJ (Del) 151 - The findings of Hon'ble Tribunal was as under:- "20.1 After perusing the findings of the CIT(A) and the submissions of both the parties, we do not find any infirmity in these findings. Firstly the finding of the CIT(A) has not been controverted by the learned Departmental Representative by filing any positive evidence. The copies of the pages found from the possession of the assessee are placed in the paper book and after going through these papers, we find that these are simply deaf and dumb documents and they cannot be considered for making any addition. This is a settled principle of law that any document or entry recorded in those documents should be corroborated with positive evidence. Here in the present case nothing has been corroborated or proved that assessee was dealing in money lending business." Mohan Foods Ltd Vs. DCIT (2010) 123 ITD 590 (Del) - Held that-although the contents of the relevant seized documents show that the amounts mentioned therein relate to some expenditure, in the absence of an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lal Patel Vs. ACIT & Ors (1998) 233 ITR 588 (Raj) - Held that - "During search at the residence of Dr.Tomar, the Department official found a slip containing some figures. This piece of paper claimed to have been recovered at the time of search contains figures under two columns. In one column, the total of these figures comes to Rs. 17,25,000 from 31st May, 1989, to 8th Dec., 1989, and in the other column, the total of these figures comes to Rs, 22, 12,500. An addition of Rs. 22, 12,500 on the basis of figures on a small piece of paper in respect of purchase of Plot No. B-4, Govind Marg, Jaipur was made by the AO. This plot B-4, Govind Marg, Jaipur, has been purchased jointly by Dr.Tomar, Dr. Mrs. Tomar and B.S. Tomar, HUF. Held that no addition on account of entries on a piece of paper which is claimed to have been found at the time of search, can be made treating the figures as investment for purchase of plot No. B-4, Govind Marg, Jaipur in the hands of Dr.Tomar, Dr. Mrs. Tomar and B.S. Tomar HUF." NK Malhan Vs. DCIT (2004) 91 TTJ (Del) 938 - Held that - "We have perused the aforesaid explanation and the seized document placed at assessee's paper book-l pp. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Goel V. DCIT (2002) 82 ITD 85 (Mum.): Nine out of 19 slips found were without any name or amount and therefore were dumb documents and no adverse inference could be drawn. Common Cause (A Registered Society) Vs. Union of India - 30 ITJ 197 (SC): In this case, the Hon'ble Court held that without any independent evidence or corroborative material, no addition is permissible on the basis of loose paper jottings & notings. The relevant paras of the order are as under :- 6. With respect to the kind of materials which have been placed on record, this Court in V.C. Shukla's case (supra) has dealt with the matter though at the stage of discharge when investigation had been completed but same is relevant for the purpose of decision of this case also. This Court has considered the entries in Jain Hawala diaries, note books and file containing loose sheets of papers not in the form of "Books of Accounts" and has held that such entries in loose papers/sheets are irrelevant and not admissible under Section 34 of the Evidence Act, and that only where the entries are in the books of accounts regularly kept, depending on the nature of occupation, that those are admissible 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ef can be given to the party who relies upon such entries to support his claim against another. In Hira Lal v. Ram Rakha the High Court, while negativing a contention that it having been proved that the books of account were regularly kept in the ordinary course of business and that, therefore, all entries therein should be considered to be relevant and to have been proved, said that the rule as laid down in Section 34 of the Act that entries in the books of account regularly kept in the course of business are relevant whenever they refer to a matter in which the Court has to enquire was subject to the salient proviso that such entries shall not alone be sufficient evidence to charge any person with liability. It is not, therefore, enough merely to prove that the books have been regularly kept in the course of business and the entries therein are correct. It is further incumbent upon the person relying upon those entries to prove that they were in accordance with facts." 20. It is apparent from the aforesaid discussion that loose sheets of papers are wholly irrelevant as evidence being not admissible under Section 34 so as to constitute evidence with respect to the transactions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TTJ (Chd) 838 Held that "No addition can be made on dump documents". (vii) In the latest decision of the Hon'ble M.P. High Court, Indore Bench in the case of the PCIT-1 v/s Shri PukhrajSoni (2019) 34 ITJ 489 (MP) has held as under; "On the basis of search re-assessment additions were made - Appeal allowed by CIT(A), which was confirmed by ITAT ITAT held that CIT(A) was justified in allowing the appeal as AO has done the addition on the basis of notings found in the books of third person - Revenue filed appeal against the order of ITAT - HELD - Int he case of Common Cause (A Registered Society) v. Union of India, (2017) 30 ITJ 197 (SC). the Supreme Court held that incriminating materials in form of random sheets, loose papers, computer prints, hard disk and pen drive etc. and has held that that are inadmissible in evidence, as they are in the form of loose papers In the present case also entries found during search and seizure which are on loose papers are being made the basis to add income of respondent-appellant -ln the light of the Supreme Court judgments, no case for interference is made out with the order passed by ITAT - Moreover no substantial question of law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment, revision etc could not establish as to whether the alleged person from whom it is alleged that the appellant has taken huge loan in cash are really existing person or imaginary person. Nothing has been brought on record to suggest any enquiry has been conducted about the alleged lenders. No statement were recorded of the so called lenders by issuing summon, if there be any belief or doubt as to taking of loan in cash, if harbored by the department. Even if some statements were recorded they are not shared nor there was opportunity given to cross examine the person from whom it is alleged that Appellant has taken loan in cash. Further, the theory of huge cash loan being taken by Appellant, which has been built upon the loose sheet and laptop, a presumption u/s. 132 (4A) was available in the statute book but it has been duly rebutted by the Appellant with cogent and germane explanations, which cannot be disbelieved. Hon. ITAT Indore Bench in the case of Dr. Yogiraj Sharma Vs. asstt CIT (2015) 25 ITJ 105 (Indore Tribunal); [2016] 69 taxmann.com 366 (Indore - Trib.)/[2015] 169 TTJ 547 (Indore - Trib.) categorically held that department has to bring cogent evidence to prove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s held that - A plain reading of the aforesaid Section indicates that (the import of the above provision is limited) it applies to a transaction where a deposit or a loan is accepted by an assessee, otherwise than by an account payee cheque or an account payee draft. The ambit of the Section is clearly restricted to transaction involving acceptance of money and not intended to affect cases where a debt or a liability arises on account of book entries. The object of the Section is to prevent transactions in currency. This is also clearly explicit from clause (iii) of the explanation to Section 269SS of the Act which defines loan or deposit to mean "loan or deposit of money". The liability recorded in the books of accounts by way of journal entries, i.e. crediting the account of a party to whom monies are payable or debiting the account of a party from whom monies are receivable in the books of accounts, is clearly outside the ambit of the provision of Section 269SS of the Act, because passing such entries does not involve acceptance of any loan or deposit of money. In the present case, admittedly no money was transacted other than through banking channels. M/s PACL India Ltd. mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... financial year immediately preceding the assessment year in question. In the case in hand, despite presumption, the ingredient of default i.e. actually taking or repaying loan or interest payment or giving loan to directors in cash is to be established by the Authority, with necessary enquires conducted in the case of alleged lenders by summoning them, recording their evidence, giving cross examination to Appellant, exercising recourse to 153C or 147 to bring undisclosed income in the form of cash loan, which in our considered opinion, the authority failed to do. Therefore, Loan or Deposit of Money actually taken by appellant is to be established by independent and direct evidence and not with the help of Laptop data or jottings. The Burden is heavy on the person who allege, once the initial presumption is rebutted with sound explanations." 7.5 The CIT(A) has considered the tally account as dummy one created for training purpose incorporating the data from different sources including that of assessee and therefore, the Tally account found in the laptop as well as loose paper were held to be having no evidentiary value being dump documents. The CIT(A) has also given more emphasiz ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion with the said Mohd. Rashid was not worth giving credence. The genuineness of bills produced by the assessee has not been accepted exclusively on the basis that the said Mohd. Rashid was a small businessman and was not assessed to income-tax. The aforesaid circumstances eloquently speak that the addition in the order of assessment has been made on the basis of the statement made by Mohd. Rashid. There is no cavil that a prayer was made under Section 131 of the Act to summon the said Mohd. Rashid for cross-examination. That has not been done. The language employed under Section 131 of the Act empowers the Assessing Officer to ensure the attendance of any person. When the statement of Mohd. Rashid was used against the assessee and an affidavit was filed controverting the same, we are disposed to think, it was obligatory on the part of the Assessing Officer to allow the prayer for cross-examination. That would have been in the fitness of things and in compliance with the principles of natural justice. 21. In view of the aforesaid we answer the reference holding that as the Assessing Officer had not summoned Mohd. Rashid, the proprietor of M/s. Rashid and Co., Jabalpur, in spite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anager of the bank with reference to the statement made by him. ....'' 23.The counsel for the petitioners also placed the recent judgment of the Supreme Court in the case of ICDS Ltd., reported in 2020 10 SCC 529, wherein, the Apex Court has remanded back the matter on account of the assessee being deprived of cross examination. Therefore, the respondent either should not have relied on the statements recorded under Section 132(4) or in case, if they want to rely on the same, they should not have denied the opportunity to the petitioners when they demanded of cross examining the persons who gave the statement. When the department has taken a stand that there are two groups which were searched by a single warrant and that the companies of one group should not be given to another, as rightly pointed out by the learned counsel for the petitioners, the assessing officer should not have discussed the statement of the other group for framing the assessment of the petitioners. This completely vitiates the entire assessment proceedings." 7.8 The Hon'ble Jurisdictional High Court has reiterated its view in case Prestige Foods vs. CIT 20 ITJ 1 had held in para 6 as under: "6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (SC) and Kishinchand Chellaram v. Commissioner of Income Tax, Bombay City (1980) 125 ITR 713 (SC): (1980) 19 CTR 360: (1980) 4 Taxman 29]. In view of this legal position, in our considered view the orders of the CIT(A) and the Tribunal are in violation of principles of the natural justice. The Assessee has been deprived of fair opportunity to object and challenge the correctness of the survey report on the basis of which opinion has been formed by the CIT(A) and the Tribunal against the Assessee. In all fairness the said survey report should have been disclosed to the Assessee and the Assessee should have been provided opportunity to explain and object the findings recorded in it before forming any opinion adverse to it. In this view of the matter the question No.2 is decided in favour of the Assessee by holding that the finding that the expenditure of Rs. 16,47,766/- is capital in nature is vitiated as it is based upon the material not disclosed to the Assessee. Having regard to this opinion about question No.2, we do not feel it necessary to answer question No.1." 7.9 Therefore, it is settled preposition of law that if any evidence or statement is made the basis of the assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to what could be the subject matter of the cross- examination and make the remarks as mentioned above. We may also point out that on an earlier occasion when the matter came before this Court in Civil Appeal No. 2216 of 2000, order dated 17.03.2005 was passed remitting the case back to the Tribunal with the directions to decide the appeal on merits giving its reasons for accepting or rejecting the submissions." 7.10 It is also settled proposition of law that the presumption u/s 132(4A) of the Act is subject to rebut and therefore, the assessee has right to be confronted with the information being used against the assessee. The AO has used the loose paper seized from the premises of Shri G.C. Patidar as well as the statement of Shri G.C. Patidar without giving an opportunity to assessee to cross examine or to substantiate its claim based on the affidavit filed by Shri G.C. Patidar. Accordingly, we are of the considered view that there is a violation of principle of natural justice, so far as the addition is made by the AO on account of alleged unaccounted payment of interest on the basis of the statement of Shri G.C. Patidar and consequently, it renders the assessment order nul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , it is crystal clear that to bring into the effect of penalty provision us 271D or 271E, it has to be established with independent evidence and not merely corroborative evidence (i.e. book entries) that Assessee has actually committed the default contemplated in section 269SS or 269T i.e. it has taken loan in cash or it has repaid the loan in cash exceeding Rs. 20,000. The explanation below 269SS defines the "Loans or deposits MEANS Loans or deposits of money. The use of word "Means" by legislature in the Explanation below Section 269SS or 269T is with a purpose and it is to restrict the meaning to only Loan of "Money". The use of Word "Means" indicates that definition is hard and fast and no other meaning can be assigned to the expression that is put down in definition [P. Kasilingham vs. PSG College of Technology AIR 1995 SC 1395]. The expression "money" means currency/cash. Therefore, very essential ingredient to constitute a default within the meaning of 269SS or 269T is that whether there is movement of money. Mere book entries alone, during the course of training, cannot entail a default of taking or repaying the loan in cash, unless it is established that Moneys moved from ..... X X X X Extracts X X X X X X X X Extracts X X X X
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