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Income Tax Appellate Tribunal, DELHI BENCH ‘C’, NEW DELHI
Before: Sh. C. M. GargDr. B. R. R. Kumar
Per Dr. B. R. R. Kumar, Accountant Member:
1. The present appeals have been filed by the assessee and the Revenue against the orders of ld. CIT(A)-30, New Delhi dated 12.08.2016.
2 to 5565, 5756 & 5757/Del/2016 Gurmeet Singh 2. Since, the issues involved in assessee and Revenue appeals are similar, they were heard together and being adjudicated by a common order.
3. In following grounds have been raised by the assessee:
“1. That on the facts and circumstances of the case, the Commissioner of Income tax (Appeals) -30, New Delhi [briefly "the CIT(A)"] has erred in upholding the addition of Rs.75,00,000/- made on account of sale of an house by raising the presumption under section 292C of the Income tax Act, 1961 ("the Act").
1.1 That on the facts and circumstances of the case, the CIT(A) did not appreciate that except for the undated and unsigned loose paper, no other document, paper, agreement or any other material indicating sale of the house property by the Appellant was found during the course of search.
2. That on the facts and circumstances of the case, the CIT(A) has erred in upholding the addition of Rs. 13,00,000/- made on account of interest earned by raising the presumption under section 292C of the Act.
2.1 That on the facts and circumstances of the case, the CFT(A) did not appreciate that except for the undated and unsigned loose paper, no other document, paper, agreement or any other material indicating outstanding loan / advance to any person or receipt of any interest by the Appellant was found during the course of search.
That on the facts and circumstances of the case, it was not appreciated that the unsubstantiated seized paper can lead to the addition only if the seized paper is self sufficient to make such an addition because section 292C cannot make good the deficiency of evidentiary value of the seized paper. The fundamental requirement that no addition can be made
4. That on the facts and circumstances of the case, the CIT(A) has erred in upholding the levy of interest under section 234B of the Act to the extent of the addition sustained.”
In following grounds have been raised by the Revenue:
“1. The order of ld. CIT(A) is not correct in law and facts.
On the facts and circumstances of the case, the ld. CIT(A) has erred in deleting the addition of Rs.5,18,75,000/- made by AO on account of unexplained unsecured loan.
3. On the facts and circumstances of the case, the ld. CIT(A) has erred in relying on the order of Hon’ble Delhi High Court in case of Mr. Kabul Chawla as Section 153A does not restrict the assessment to incriminating documents.”
A search and seizure action under Section 132 of the Income-tax Act, 1961 (‘Act’) was conducted at the resident of the assessee on 10.01.2012. Pursuant to the search, assessments were completed under section 153 A read with section 143(3) of the Act for AYs 2006-07 to 2011-12 vide individual orders dated 28.03.2014 and assessment for A.Y. 2012-13 was also completed u/s 143(3) vide order dated 28.03.2014.
The two common issues involved in all these years viz.,
Addition on account of unsecured loans taken during the years under section 68.
Heard the arguments of both the parties and perused the material available on record.
Addition u/s 68: Unsecured Loans
The Assessing Officer made addition on account of unsecured loan u/s 68 of the Income Tax Act, 1961 for the A.Y. 2006-07, A.Y. 2007-08, A.Y. 2008-09, A.Y. 2009-10, A.Y. 2010- 11 and A.Y. 2011-12. The ld. CIT(A) deleted the additions made u/s 68 respectfully following the decision of the Hon’ble Jurisdictional High Court in the case of CIT Vs. Kabul Chawla (380 ITR 573).
A.Y. Status before ITAT
2006-07 CIT(A) deleted No Revenue appeal 2007-08 5755/Del/2016 CIT(A) deleted Revenue appeal dismissed (low tax effect) 2008-09 5756/Del/2016 CIT(A) deleted Revenue in appeal (GR-2) 2009-10 5757/Del/2016 CIT(A) deleted Revenue in appeal (GR-2) 2010-11 5758/Del/2016 CIT(A) deleted Revenue in appeal (GR-2) 2011-12 CIT(A) deleted No appeal by the Department 2012-13 5565/Del/2016 CIT(A) partly Assessee in appeal confirmed
We have perused the Assessment Order and order of the ld. CIT(A). It is clear that the addition made was devoid of any incriminating material found and seized during the search. The date of search was 10.01.2012. The due date for issue of notice
5 to 5565, 5756 & 5757/Del/2016 Gurmeet Singh u/s 143(3) for the A.Y. 2011-12 has not expired. No appeal by the revenue for the A.Y. 2011-12. With regard to the earlier assessment years, the due date for issue of notice has been expired. Completed assessments can be interfered with by the Assessing Officer while making the assessment under section 153A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment. While under the 1 st Proviso, the AO is empowered to frame assessment for six years, under the 2nd Proviso, only the assessments which are pending on the date of initiation of search abate.
Reliance is being placed on the judgment of reliance on the following judicial precedents:
The Hon’ble Delhi High Court in the case of CIT Vs Kabul Chawla 380 ITR 573 (DHC) wherein it was held as under:
vii. Completed assessments can be interfered with by the A. O. while making the assessment under section 153A only on the basis of some incriminating , material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment.
The Hon'ble Delhi High Court in its decision in the case of Pr. CIT vs. Meeta Gutgutia (2017) 395 ITR 526 in paras 69 to 72 wherein it was held as under:
69. What weighed with the Court in the above decision was the “habitual concealing o f income and indulging in clandestine operations
6 to 5565, 5756 & 5757/Del/2016 Gurmeet Singh person indulging in such activities “can hardly be accepted to maintain meticulous books or records for long. ” These factors are absent in the present case. There was no justification at all for the AO to proceed on surmises and estimates without there being any incriminating material qua the AY for which he sought to make additions of franchisee commission.
The above distinguishing factors in Dayawanti Gupta (supra), therefore, do not detract from the settled legal position in Kabul Chawla (supra) which has been followed not only by this Court in its subsequent decisions but also by several other High Courts.
For all o f the aforementioned reasons, the Court is of the view that the ITAT was justified in holding that the invocation of Section 153A by the Revenue for the AYs 2000-01 to 2003-04 was without any legal basis as there was no incriminating material qua each of those AYs.
Hence, we decline to interfere with the order of the ld. CIT(A) and the appeal of the Revenue on the issue of addition u/s 68 for the Assessment Years 2007-08 to 2010-11 stands dismissed.
ITA No. 5559/Del/2016 : A.Y. 2006-07 : A.Y. 2009-10 1. Addition on account of Sale of House:
ITA No. 5559/Del/2016 : A.Y. 2006-07 : A.Y. 2007-08 ITA No. 5561/Del/2016 : A.Y. 2008-09 ITA No. 5562/Del/2016 : A.Y. 2009- ITA No. 5564/Del/2016 : A.Y. 2011-12 ITA No. 5565/Del/2016 : A.Y. 2012-13 2. Interest Earned:
7 to 5565, 5756 & 5757/Del/2016 Gurmeet Singh 14. During the course of search & seizure operation u/s 132 of the Income Tax Act, 1961 at the residential premises of the assessee at C-168, Anand Vihar, New Delhi, incriminating documents were found and seized. Pages 17 to 19 of Annexure A- 2, Party - DR6, contains notings of various financial transactions, which is reproduced as under:
April, 2004 -2006 House sold 7500000 1100000 16 plots bought 6400000 1100000 Earning from interest 109000X24=2600000 2600000”
During the course of assessment proceedings, the assessee was asked to explain the above seized documents. The assessee has replied that:
It does not belong to me and not even aware its belong to whom. Apparently someone who had taken my car or his personal use might have left these papers and found by the search party.
The reply of the assessee has been examined by the Assessing Officer. The AO invoked provisions of section 292C of the Income Tax Act, 1961 and held that the documents found from the possession of a person are presumed to be belonging to that person and the contents thereof to be true. The AO held that in the present case, the said documents have been found and seized from the possession of the assessee, hence they belong to the assessee. As the assessee has failed to explain the entries mentioned therein. The AO made addition of Rs.75,00,000/- on
The ld. CIT(A) confirmed the action of the AO holding that, the A.O., having relied upon the provision of section 292C of the Act, has concluded that the documents found from the possession of the person are presumed to be belonging to that person and the contents thereof to be true. The assessee has failed to explain the entries mentioned therein which this proves that the said entries are not reflected in the books of accounts. The ld. CIT(A) held that from these entries, it is clear that the assessee has received an amount of Rs. 75,00,000/-, from sale of house and interest income of Rs. 26,00,000/- for the period from April 2004 to 2006 (2 years). Before the ld. CIT(A), the assessee further submitted that the appellant is a regular income tax and wealth tax assessee. He has also furnished copy of ITRs and WTRs for A.Y. 2005-06 and A.Y. 2006-07, which were accompanied with statement of affairs for these respective financial years. Before the ld. CIT(A), the assessee has reiterated the submissions made in the assessment proceedings and has further submitted that in the statement recorded u/s 132(4) of the Act, he has stated that the seized papers do not belong to him and also not aware to whom they belong. The ld. CIT(A) confirmed the addition on the grounds that the assessee failed to discharge its primary within the meaning of 292C of the Act, by filing any evidence in the assessee proceedings and also in the appellate proceedings, in order to substantiate its claim these papers do not belong to him.
9 to 5565, 5756 & 5757/Del/2016 Gurmeet Singh 18. Before us, it was argued that there is no immovable property or any other assets held by the appellant, which would have been sold for Rs. 75,00,000/- as has been held by the A.O. The assessee is holding exclusively only one residential house property situated at C-168, Anand Vihar, Delhi-92, which is a joint property alongwith his wife Mrs. Ranjit Kaur, wherein he has been living since 2001 and continuing to reside in this house also till this date. As such, there is no sale/purchase deed of any such property presumed to have been sold during the period from April 2004 to 2006 nor any document or corroborative evidence has been found inspite of a detailed search.
It was argued that on perusal to the statement of affairs as on 31.3.2006, there is no such interest bearing loans advanced, which could fetch him in monthly interest of Rs. 1.09 lakhs. Since, all the loans and advances held by the appellant as per statement of affairs as at 31.3.2006 stand duly confirmed by the respective cash creditors.
It was argued that merely on the basis of loose papers found during the course of search, having no relevant date thereon and not even in the assessee's own handwriting, unsigned papers, which are nothing but dumb documents. It was further submitted by the ld. AR that in the absence of any other document about receipt or payment, it could not be held that the appellant was having undisclosed income of Rs. 88,00,000/-. In as much as, while recording the statement during the course of search, the assessee has clearly stated that these documents do not belong to him. Further, during the course of search, no undisclosed investment or any other property or any clue
In view of the above, the ld. AR has summed up his arguments that the A.O. has not brought any material on record or any clinching/circumstantial evidence to establish the theory that the assessee has sold his house for Rs. 75,00,000/- and made interest bearing advances, which have fetched him annual interest of Rs. 13,00,000/-.
On the other hand, the ld. DR taken us through the details on the seized material, Assessment Order and the ratio of the ld. CIT(A) and provisions of Section 292C of the Act.
Heard the arguments of both the parties and perused the material available on record.
From the above, following facts emerged:
the loose papers no. 17, 18 and 19 of Annexure A-l, were found from the car of the appellant, the appellant has denied that these papers belongs to him, the presumption u/s 292C of the Act, regarding these loose papers, has been controverted by the assessee, the transactions reflected in these loose papers are not recorded in the books of account of the appellant.
The Revenue made the addition holding that the assessee could not file any evidence to substantiate the claim that the loose papers do not belong to him. The requirement of the revenue could not be met as it would difficult for the assessee to 11 to 5565, 5756 & 5757/Del/2016 Gurmeet Singh prove the negative. The revenue also alleged that the assessee has not controverted the contents of the loose papers by filing any evidence. The assessee has been stating that the loose papers do not belong to him and hence expecting the assessee to file any evidence to controvert contents is akin to asking for performing a logically impossible task. The contents reveal that there has been a house which has been sold and also purchased 16 plots. The revenue has not even proved that the notings on the loose papers found, were written by the assessee nor his handwriting has been tested for. Further, inspite of conducting a search, no documents pertaining to purchase of the said house or sale of said house and purchase of 16 plots were found. Even in the post search inquiries none of the 17 properties could be traced out. There was no evidence in any of the bank statement with regard to the dealings. The inferences drawn were not backed by any tangible evidences or corroborative evidences. The revenue failed to establish the person to whom these documents belong, name or details of the persons from whom the alleged income was earned, any type of correlation with the business of the assessee. The statement recorded u/s 132(4) on the date of search has also not pointed to any reasonable evidence to come to a conclusion that the figures mentioned on the loose sheets infact constitute income of the assessee.
The provisions of Section 292C reads as under:
“Where any books of account, other documents, money, bullion, jewellery or other valuable article or thing are or is found in the possession or control of any person in the course of a search under section 132 or survey under section 133A, it may, in any proceeding under this Act, be presumed—
(i) that such books of account, other documents, money, bullion, jewellery or other valuable article or thing belong or belongs to such person; (ii) that the contents of such books of account and other documents are true; and (iii) that the signature and every other part of such books of account and other documents which purport to be in the handwriting of any particular person or which may reasonably be assumed to have been signed by, or to be in the handwriting of, any particular person, are in that person’s handwriting, and in the case of a document stamped, executed or attested, that it was duly stamped and executed or attested by the person by whom it purports to have been so executed or attested.”
In the instant case, the documents do not meet any of the criteria envisaged in Section 292C. Coupled with these facts on record, reliance is being placed on the following judicial pronouncements:
The Hon'ble Apex Court in the case of CIT vs. P.V. Kalyanasundaram [2007] 294 ITR 49 in which allegations of on money transaction on the basis of non-convincing loose sheets found during the course of search and conflicting statement of the seller, was deleted by the Tribunal (to which, one of us the Accountant Member was the party) and the same was affirmed by the Hon'ble High Court and Hon'ble Apex Court.
Income from undisclosed sources - unexplained investment – loose papers found from the residential premises of the assessee during search - assessee and his family members having interest in various firms engaged in construction of multi storied buildings and sale of flats therein and also cloth mill- no year mentioned in the loose papers - addition of Rs. 1.36 crores
13 to 5565, 5756 & 5757/Del/2016 Gurmeet Singh made on the basis that 'on money' was received in respect of flats sold - no tangible evidence in the form of unexplained investment found during search -forensic report obtained by AO not supplied to assessee despite request - copies of statements of members of housing societies recorded at the back of the assessee also not supplied - important witnesses not examined - no addition could be made in the hands of the assessee.
Commissioner of Income-tax vs. Anil Bhalla [2010] 322 ITR 191 (Delhi HC)
Where no independent material or evidence had been brought on record by Assessing Officer to establish that notings/jottings recorded on loose sheet of paper seized during search represented an unaccounted transaction and Tribunal held that entries in question belonged to some company, inasmuch as assessee could explain from books of such company that these projects were undertaken by it, and Tribunal held that loose sheet did not represent any expenditure incurred by assessee, deletion of addition based on loose sheet, treating it as unexplained expenditure in assessee's hands was justified.
Assistant Commissioner of Income-tax vs. Sharad Chaudhary [2015] 55 taxmann.com 324 (Delhi - Trib.)
Held that a loose paper found during search standalone could not be used as a basis for making impugned addition without the company of any other supportive material and evidence more so when contents of main three parts of the notings were not interlinked and the Assessing Officer had deleted decimal from noting of the figure of Rs. 4,47,000.00 for reading and accepting
Hence, we hold that an assessment carried out in pursuance of search, no addition can be made simply on the basis of uncorroborated noting in loose papers found during search because the addition on account of alleged receipts made simply on the basis of uncorroborated noting on loose papers made by some unidentified person and having no evidentiary value, is unsustainable. : A.Y. 2012-13 Unsecured Loan- u/s 68:
During the year, the assessee received loans as under:
S.No. Name of the Investor Amount 1 Harish Aneja & Co. 70,00,000 2 Chanson Pearl Hospitality 50,00,000 3 Finsmart Consultants 2,00,000 4 Jot Impex Pvt. Ltd. 12,50,000 5 Sunil Gupta 2,70,00,000 6 Holistics Urban Innovation 9,419 Total 4,04,59,41
The AO made addition of all the loans holding that the assessee failed to prove genuineness of the transactions, identity and creditworthiness of the parties.
The ld. CIT(A) deleted the all additions except the loan received from Chanson Pearl Hospitality amounting to Rs.50,00,000/- on the grounds that the AO in the remand
Before us, it was submitted that the ITR, balance sheet has been submitted, the loan was confirmed by the lender, audited financial statement for the concerned year was filed which duly reflected the advance given to Shri Gurmeet Singh of Rs.50,00,000/-. The lender has a capital of Rs.77.53 crores and total advances given were to the tune of Rs.1.72 crores. The said amount has been lent on 12.03.2012, 15.03.2012 and 17.03.2012 from the regular account of Corporation Bank A/c No. 000190. The confirmation dated 01.08.2014 is also on record and the revenue has not disputed the fact that this said account was not an undisclosed account. Hence, keeping in view the entire facts, we hold that no addition is called for on this account.
In nutshell,
• The addition made on account of unsecured loans u/s 68 which has been duly deleted by the ld. CIT(A) owing to absence of any incriminating material found and seized during the search and based on the judgment of CIT Vs. Kabul Chawla (supra) is affirmed. • With regard to the interest earned, in the absence of any corroborative material and in the absence of non-taxing of the principle amount, the same is directed to be deleted. • With regard to the sale of house and purchase of plots, in the absence of any documents, the same is hereby deleted. • With regard to the unsecured loans for the A.Y. 2012-13, owing to the proof of identity, genuineness and
In the result, the appeals of the assessee are allowed and the appeals Revenue are dismissed. Order Pronounced in the Open Court on 07/03/2023.