9911796707
TMI Blog2006 (9) TMI 625X X X X Extracts X X X X X X X X Extracts X X X X ..... in law and on the facts of the case in deleting the addition of Rs. 46,47,070 made on account of. interest paid by the assessee out of undisclosed sources on various loans. 2. That the learned Commissioner (Appeals) has erred both in law and on the facts of the case in deleting the addition of Rs. 5 lakhs on account of undisclosed investment made to acquire the right of his sister-in-law in family property. In addition, the revenue has also requested for admission of the following additional ground of appeal vide letter dated 4-10-2004: Without prejudice to the grounds of appeal already taken, interest element for the assessment year 1999-2000 amounting to Rs. 3,63,070 is not to be allowed as a deductions and, therefore, the learned Commissioner (Appeals)-I has erred both in law and facts of the case in ignoring the proviso to Section 69C of the Income Tax Act, 1961 . 3. The learned senior departmental Representative, Sh. P.S. Sachdev, submitted that the issue raised in the additional ground is purely a legal issue for which all relevant facts are on record and the case does not call for investigation of facts. Therefore, the additional ground raised by revenue deserves admission. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransactions pertained to sale of empty bottles and cases of empty cartons of liquor in the last few years. However, the assessing officer rejected such explanation by observing that the entries recorded on the various, documents clearly indicated loan transactions for which interest has also been paid. The assessee was asked to file confirmatory affidavits from the persons in whose names these loan transactions appeared. However, the assessee filed none. Besides, the assessee also admitted that no books of account have been maintained to record these transactions. 5.1 The assessing officer also observed that the transactions noted on seized documents were in coded forms i.e. figure of 2,54,180 was recorded as 254.180 . He noted that on reverse side of p. 17 of Annex. A-7, the amount was correctly noted as Rs. 2,54,180. He also made similar observations in respect of other entries noted on pp. 3 and 4 of the assessment order. He also noted that the fact that transactions were written in coded form was obvious from noting on the seized documents compared with the withdrawals/deposits in the bank account. For example, on 29-9-1997, seized document showed entry as '40', but on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come. 5.3 The other addition made by the assessing officer was of Rs. 5 lakhs. BrieRy stated, the facts of the case are that the documents listed in Annex. A-9 seized from the residence of the assessee also included of 'memorandum of oral family settlement' dated 31-12-1991 on pp. 14 to 22. The said family settlement indicated that they were legal owners in respect of property No. 573, Model Town, Jalandhar, namely, Mrs. Sudershan Ghumman W/o Late Sh. Harjit Singh Ghumman (brother of the assessee), Mrs. Jasrajpal Ghumman W/o Late Sh. Jagbir Singh Ghumman (brother of the assessee) and Sh. Ranjit Singh Ghumman S/o Late Sh. Kapoor Singh Ghumman (i.e. the assessee). On the date of settlement, the cost of plot was valued at Rs. 26,00,000 and that of the building at Rs. 3,68,000. It was mutually agreed that Smt. Sudershan Ghumman shall get a piece of land adjacent to the house No. 573 along with a sum of Rs. 1,23,000 from the assessee in lieu of surrender of her share in the property. Similarly, Smt. Jasrajpal Ghumman was to receive Rs. 8,69,666 from the assessee in lieu of her share in the property. In exchange of consideration, the assessee would become owner of the entire Hous ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale of loose bottles/cases and empty whisky cartons sold outside the books of account. Such income was duly disclosed in the return filed for the block assessment. It was submitted that notings on pp. 45, 46 and 47 of the Annex. 9 where plus/minus figures were noted were explained to be in respect of cards game played for fun in leisure time. It was stated that the assessing officer was wrong in treating the loan transactions aggregating to Rs. 1,80,95,000 in para 4.23 of the assessment order. It was submitted that during the course of search only cash of Rs. 3,00,000 was found and the same was also accepted by the assessing officer. No other valuable assets in the form of immovable properties, gold, ornaments, jewellery, FDRs, etc. were found. In case the assessee had received loans aggregating to Rs. 1,80,95,000, there should have been matching assets/investments found at the time of search. Thus, the assessee pleaded that the conclusion drawn by the assessing officer that assessee had raised loans amounting to Rs. 1,80,95,000 was unjustified. It was also submitted that no person would give such huge loans to the assessee without taking any security. The assessee did not have an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Karamjit, Dr. Grover', 'IS', 'SS Randhawa', M', etc. He observed that assessing officer could not trace out these persons to corroborate his suspicion. One Sh. G.D. Chaudhary also filed confirmation dated 15-2-2002 in whose name amount was shown as loan stating that he had not given any loan to Sh. Ranjit Singh Ghumman nor had received any interest. (c) The cash flow statement prepared by the assessee on the basis of seized documents indicated the availability of cash for the so-called interest payments. Even if the stand of the revenue that these transactions represented amounts borrowed by the assessee was accepted for argument's sake, the assessee could have been left with the surplus cash to the tune of Rs. 3,79,125 as on the date of search. This also takes into account the repayment of interest and part payment of loans. Thus, no addition of Rs. 46,47,070 was called for on this score as well. (d) If the contention of the assessing officer that the assessee had paid interest amounting to Rs. 46,47,070 on amounts borrowed was accepted, the assessee would be entitled to deduction of the corresponding amount because the amount could only be considered f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessing officer neither summoned Smt. Jasrajpal Ghumman nor made any enquiry and simply made the addition by referring to the seized documents found during the course of search. Accepting the contentions of the assessee, the learned Commissioner (Appeals) deleted the addition of Rs. 5 lakhs. The revenue is aggrieved with the order of the Commissioner (Appeals). Hence, this appeal before the Bench. 8. The learned senior departmental Representative, Sh. P.S. Sachdev, heavily relied on the findings recorded by the assessing officer in the block assessment order. He submitted that in this case search and seizure action under Section 132(l) was carried out at the premises of the assessee on 8-2-2000. During the course of search cash of Rs. 3 lakhs: was found and further incriminating documents listed in Annexs. A-7 and A-9 were found and seized. He submitted that in response to notice issued under Section 158BC of the Act, the assessee filed return for block assessment admitting undisclosed income of Rs. 3,82,000 for the various assessment years falling in the block period. He submitted that the assessee was carrying on business of sale of foreign made country liquor on wholesale b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essing officer has totaled up transactions on pp. 22 to 24 of the assessment order and found that the total loans aggregating to Rs. 1,80,95,000 were received by the assessee during the years 1997-98 to 1999-2000. He submitted that in para. 5 on p. 24 of the block assessment order, the assessing officer has also worked out interest payments aggregating to Rs. 42,84,000 before 31-12-1998 and Rs. 3,63,070 of the later period. Thus, the total interest paid aggregated to Rs. 46,47,070. He referred to p. 79 of the paper book which is a copy of seized document of Annex. A-7 where the account of one 'DPS' has been mentioned from which the details of pp. 4 and 5 of the assessment order have been noted by the assessing officer. He then referred to pp. 91 and 95 of the paper book in support of the contention that the amount of Rs. 2,54,180 was written in coded form as 254.180. 8.1 He then referred to the findings recorded by the Commissioner (Appeals) on pp. 7 to 10 of the impugned order. He submitted that the learned Commissioner (Appeals) was not correct in observing that since no corresponding assets/investments were found at the time of search, the conclusions drawn by the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee had borrowed funds from various persons duly supported by entries on the seized documents made by the assessee himself; repayment of interest was obvious from the interest rates mentioned at scores of places, the interest payments shown were in conformity with the period, interest rates and amounts mentioned in such documents themselves. He has also mentioned that wherever there was no payment of interest for a longer period like 2 or 3 months, the payments after such period were in proportion covering the intervening periods. Further, entries also indicated interest rate or amount depending on the increase or decrease in the principal amount. Further, entries found in the seized documents were also supported by bank transactions and proof that the amounts mentioned in the assessment order were actual amounts beyond reasonable doubt. He referred to p. 6 of the remand report where the assessing officer has pointed out that the assessee had taken only a few of loan transactions in the cash flow statement and not the entire transactions noted on the seized documents. He has also observed that the assessee must have definitely taken the loans for investments in some business or a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elopers (P) Ltd., where it was held that the assessee must prove the source of expenditure. On failure to do so, unexplained expenditure is liable to be treated as deemed income of the assessee under Section 69C of the Act. 8.2 As regards the additional ground taken by revenue, the learned senior departmental Representative drew our attention to p. 24, para. 5, of the assessment order where the assessing officer has quantified interest before 31-12-1998 at Rs. 42,84,000 and interest of Rs. 3,63,070 after 31-12-1998. He referred to the amendment introduced the Finance (No. 2) Act, 1998, with effect from 1-4-1999., whereby proviso to Section 69C has been inserted. He submitted that as per proviso to Section 69C, it has been clearly mentioned that if the source of expenditure is deemed to be the income of the assessee, the same shall not be allowed as a deduction under any head of income. He submitted that even if interest of Rs. 42,84,000 related to the period prior to 1-4-1999, the remaining expenditure of Rs. 3,63,070 should not have been allowed by the Commissioner (Appeals), in view of the amendment to Section 69C. Thus, he submitted that the order of the Commissioner (Appeals) m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the remand report, the assessing officer submitted that the assessee had not included some of the accounts which must have been squared up before the search and if these were taken into account, there would have been huge negative balance in the account of receipt and payment reflected in the cash flow statement. He submitted that nowhere the assessing officer had pointed out even a single transaction noted by the assessing officer in the assessment order and which has not been taken into account by the assessee while preparing cash flow statement. He submitted that the expression used by the assessing officer that these accounts must have been squared up falls in the realm of presumptions and assumptions. Despite the fact that the search had been carried out but no other document was found indicating any further payment than those noted by the assessing officer in the assessment order, he submitted that even the learned departmental Representative has not been able to point out as to which particular entry has been omitted by the assessee. Relying on the judgment of Delhi High Court in the case of Vinay Kumar Modi v. CIT, the learned Counsel submitted that addition cannot be made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment declaring therein undisclosed income of Rs. 3,82,000. Sub-s. (4A) of Section 132 of the Act provides that where any books of account, other documents, etc. are found in the possession or control of any person in the course of search, it may be presumed that such books of account and other documents belong to such person and that the contents of such books of account and other documents are true. The section further provides that such books of account and other documents which purport to be in the handwriting of any particular person or which may reasonably assumed to have been signed by or to be in the handwriting of any particular person are in that person's handwriting. Thus, the person from whom these books of account/documents have been found cannot simply get away by saying that these do not belong to him or entries noted therein do not relate to him. Sub-s. (4A) of Section 132 casts heavy burden on the assessee to explain the nature of entries recorded on the seized documents and also explain the transactions. No doubt, Section 132(4A) raises a presumption which is rebuttable. But whether such presumption has been rebutted or not has to be seen in the light of fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e was far-fetched. Since the transactions recorded on the seized documents were within the knowledge of assessee, it was for him to explain the same. It appears that learned Commissioner (Appeals) has not referred to the seized documents before recording such finding. 10.1 Thus, in the light of these facts and circumstances of the case, we are of the considered opinion that the assessee had not given proper explanation about the entries noted on the seized documents found during the course of search. Since these entries were written in the handwriting of the assessee himself and the same were not disputed, the onus was on the, assessee to rebut the presumption raised under Section 132(4A) of the Act. However, the assessee has given evasive reply and has not, explained the transactions noted on the seized documents. Therefore, the presumption raised under Section 132(4A) remained unrebutted by the assessee. 10.2 Now the next aspect that requires to be decided by this Bench is whether in the absence of any valid explanation given by the assessee for the entries noted on the seized documents, the assessing officer was justified in treating these transactions as representing amounts bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wed and appeared in the seized documents, much less of filing any confirmation or any supporting evidence for proving the genuineness of such credits, the assessing officer has not made any addition under Section 68 of the Act. Even if these amounts are to be treated as receipts, the onus was entirely on the assessee to prove the nature of such receipts and show how these were exempt from income-tax. Reliance in this regard is placed on the judgment of Hon'ble Supreme Court in the case of Roshan Di Hatti v. CIT 1977 CTR (SC) 200 : (1977) 107 TTR 938 (SC). We do not agree with the finding of Commissioner (Appeals) that revenue has failed to establish the identity of persons in whose names loan transactions appeared with the seized documents. The 'onus' was on the assessee to furnish such evidence/details. But the assessee chose to keep quiet about the same. The burden shifts to revenue only when the assessee explains the entries recorded on the seized documents with some evidence. It was for the assessee to prove that apparent was not real. However, no addition in respect of credits appearing in the seized documents though relating to block period has been made by the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arch. Since the repayment of loan/squared up account mentioned on p. 7 of the remand report is not supported by any entry in the seized documents, it cannot be presumed that the assessee must have repaid those amounts. Now, on the basis of cash flow statement, the source of repayment of interest to the tune of Rs. 46,47,070 stands explained. The learned Commissioner (Appeals) has observed that the assessee would be left with surplus of Rs. 3,79,125 as on 17-2-2002 and such finding has not been challenged by the revenue. In fact, neither the assessing officer nor the learned departmental Representative has been able to point out even a single entry of repayment noted in the seized document which was omitted by the assessee in the cash flow statement. That being so, the source of payment of entire amount of interest stands covered by the availability of cash worked out by the assessing officer on the basis of seized documents. Therefore, no addition is warranted when the assessing officer himself has not considered the loans/receipts of Rs. 1,80,95,000 as undisclosed income of the assessee under Section 68 of the Act. 10.5 As regards the claim of the revenue that provisions of Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the assessment order. He submitted that during the course of search a 'memorandum of oral family settlement' dated 31-12-1991 listed on pp. 22 to 24 of the paper book was found which indicated that there were three joint owners in respect of ancestral property i.e. House No. 537, Model Town, Jalandhar. As a result of such family settlement, the land was valued at Rs. 26,00,000 and that of the building at Rs. 3,68,000. It was mutually agreed that one sister-in-law, namely, Sint. Sudershan Ghumman, shall get a piece of land adjacent to House No. 537 along with a sum of Rs. 1,23,000 from the assessee. He submitted that pp. 102 to 109 of Annex. A-9 are the receipts of amounts aggregating to Rs. 1,23,000 by Smt. Sudershan Ghumman. Thus, she received the entire amount of Rs. 1,23,000. However, the other joint owner, Smt. Jasrajpal Ghumman, was to be paid an amount of Rs. 8,69,666 by the assessee in lieu of surrender of her share in favour of the assessee and the said payment was required to be made by 30-6-1992. He submitted that p. 113 of the paper book is the receipt of Rs. 1,84,666 by demand draft dated 30-6-1992 signed by Smt. Jasrajpal Ghumman and in the said receipt she h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ), thus, he contended that the order of the Commissioner (Appeals) does not merit any interference. 14. We have heard both the parties and carefully considered the rival contentions, examined the facts, evidence and material placed on record. The factual position stated above that there was a 'memorandum of oral family settlement' dated 31-12-1991 which stipulated the after said payments to be made by the assessee, to the other joint owners, is not disputed by the assessee. The said document also mentioned that the payment to Smt. Sudershan Ghumman was to be made by last week of January, 1992 and the possession was to be given by 30-4-1992. It was also mentioned that Smt. Jasrajpal Ghumman was to receive an amount of Rs. 8,69,666 by 30-6-1992. Now, p. 25 of Annex. A-9 referred to and relied upon by the assessing officer for making impugned addition (copy placed at p. 113 of the paper book) duly signed by Smt. Jasrajpal Ghumman reads as under: We have received the sum of Rs. 1,84,666 (one lakh eighty-four thousand six hundred and sixty-six) only vide draft No. 7650970, dated 30-6-1992 payable at Canara Bank, Civil Lines, Jalandhar City,' as per the family settlement with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only grievance of the assessee is that the learned Commissioner (Appeals) was not justified in not appreciating the application filed by the assessee under Section 154 of the Act. The facts of the case are that the assessing officer had made an addition of Rs. 3,00,000 on account of household expenses. On appeal, the learned Commissioner (Appeals) reduced the addition to Rs. 1 lakh. 16. Subsequently, the assessee filed an application under Section 154 before the Commissioner (Appeals) stating that addition of Rs. 1 lakh may be treated to have been covered by undisclosed income of Rs. 3,82,000 declared in the return filed for the block assessment. However, the learned Commissioner (Appeals) rejected the request of the assessee on the ground that he had maintained an addition of Rs. 1 lakh in addition to income declared in the return filed for the block assessment. The assessee is aggrieved with the order of the Commissioner (Appeals). Hence, this appeal before us. 17. The learned Counsel for the assessee, Sh. Sudhir Sehgal did not advance any specific arguments in support of this ground except reiterating the submissions made before the Commissioner (Appeals). 18. The learned depar ..... X X X X Extracts X X X X X X X X Extracts X X X X
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