SHRI PRAKASH CHAND KOTHARI,JAIPUR vs. DCIT, CENTRAL CIRCLE-2, JAIPUR

In the assessee has taken the following grounds of appeal:- “1. In the facts and circumstances of the case and in law, ld. CIT(A) has erred in confirming the action of the ld. AO in reopening the case of the assessee u/s 147 of the Income Tax Act, 1961. The action of the ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by quashing the entire re-assessment proceedings, being illegal and without jurisdiction.

In the reasons so recorded before the issuance of notice u/s 148, the Assessing Officer has stated that information has been received from the office of DCIT, Central Circle-3, Jaipur that search and seizure action u/s 132 of the Act was carried out in the case of Ramesh Manihar Group which has been indulging in cash loan financing on a large scale. During the course of search, voluminous data comprising of excel sheets in 18 pen-drives were seized during the course of search action at the main office of the Ramesh Manihar Group at 303, Ratna Sagar, MSB Kaa Rasta, Johari Bazar, Jaipur which included details of cash loans financed by the Ramesh Manihar Group. It was found that the persons of the said group namely Sh. Ramesh Chand Maheshwari and Sh. Manmohan Krishan Bagla were engaged as finance brokers for arranging cash loans between various borrowers and lenders which were not reflected in the books of accounts and that the brokerage received for such unrecorded cash transactions was also not offered for taxation by the Group. It has also been found that the figures in the aforesaid data were suppressed by five zeroes. The Assessing Officer thereafter has listed down certain details of the transactions stating that the same relates to the assessee and from the perusal of the information, it is found that the assessee has paid cash loan of Rs. 25 & 1298/JP/2019 & 66/JP/2020 5 Sh. Prakash Chand Kothari, Jaipur vs. DCIT, Jaipur crores out of his income from undisclosed sources in A.Y 2011-12 and received interest accordingly. The Assessing officer also stated that during the assessment proceedings, the assessee has not furnished the copy of cash book for the year under consideration and not shown the same in the loans and advances given by him in the balance sheet and the assessee has clearly failed to disclose fully and truly all material facts necessary for determination of income for A.Y 2011-12. Basis detailed enquiries made by the Investigation wing and material available on the assessment records, the Assessing officer stated that he has reason to believe that the income of Rs. 25 Crores in the form of loan given in cash and interest thereon has escaped assessment within the meaning of section 147 of the Act in the hands of the assessee.

Thereafter, on receipt and in compliance to the notice issued u/s 148 of the Act, the assessee filed his return of income declaring total income of Rs. 1,10,86,623/- as originally returned and assessed u/s 143(3) of the Act. Thereafter, notices u/s 143(2) and 142(1) of the Act were issued and copy of the reasons was also provided to the assessee. The assessee filed his objections which were disposed off vide order dated 26.10.2018. Thereafter, the assessee was issued a show cause as to why the addition of Rs. 25 crores should not be made as unaccounted income along interest @ 1% per month.

In compliance to the said show cause notice, the assessee asked the Assessing Officer to provide all the relevant documents relied upon by the department for making such additions as well as opportunity for cross examination. The copies of documents were provided to the assessee and thereafter, the assessee furnished his reply stating that he, at no point of time, during the relevant previous year or otherwise, has given any amount in cash, as loan or otherwise, through any person, including Sh. Ramesh Chand Maheshwari. Without prejudice, it was further submitted that from the documents so provided, the assessee is unable to understand as to how the Assessing Officer has inferred that he has provided cash loans to different & 1298/JP/2019 & 66/JP/2020 6 Sh. Prakash Chand Kothari, Jaipur vs. DCIT, Jaipur persons through Sh. Ramesh Chand Maheshwari. It was submitted that the statements of Shri Ramesh Chand Maheshwari are full of contradictions and even contradictions persist in the reasons recorded vis-a-vis documents/statements provided to the assessee. It was further submitted by the assessee that the Assessing Officer may point out specific portions of the statements of Sh. Ramesh Chand Maheshwari, on the basis of which he concluded the involvement of assessee in providing cash loans and for which the case of assessee was reopened. It was further submitted that where the Assessing Officer wishes to rely on the statement of Sh. Ramesh Chand Maheshwari, the assessee may be allowed an opportunity to cross examine him and in absence of such cross examination, such statements/documents cannot be used against the assessee in any manner whatsoever.

The Assessing Officer thereafter stated that during the course of search as well as in post search proceedings, statements of the aforesaid persons of Ramesh Manihar group were taken in which they have admitted that these transactions were made by them and amounts were taken in cash from the lenders and the same was advanced to the borrowers in cash, and they earned commission on these transactions. Further, various incriminating documents were found and seized by the Investigation wing of the Department, which includes loose papers, pen drives etc. On analysis of the seized documents particularly pen drives, it has been found that the lenders as well as the borrowers are the renowned and well known persons/business group of Jaipur & 1298/JP/2019 & 66/JP/2020 7 Sh. Prakash Chand Kothari, Jaipur vs. DCIT, Jaipur and the assessee is one of them. On examination of the documents and data in pen drives, it has been noted that one pen drive is having names in short/code word ‘Jagat.xlsx’ that names of the lenders as well as borrowers were noted in code name or maybe say in short name likewise ‘Prakash Chand Kothari’ the assessee as ‘PCK’. This short name is again verifiable with another pen drive namely ‘from & to group.xlsx’, where name of the assessee ‘PCK’, is mentioned along with his full name address in the seized documents. Accordingly, it is proved that the assessee was the only person who has given his unaccounted cash for lending through the Ramesh Manihar Group. On further examination of these pen drives, it was also found that amount of transaction was mentioned after suppressing ‘five zeros’ i.e. Rs. 25,00,00,000/- was mentioned as 2500 in the form of different entries. In these pen drives, it was also mentioned, as for which period and on what rate of interest, the amount was advanced to the borrowers. The excel sheet notings extracted from the Jagat. XIs from the the PEN drive in possession of Ramesh Manihar (finance broker) as above reveals that name of the person, surname, firm, office address and phone no. (i.e Prakash Chand Ji, Kothari, KGK, Jewellers, 73, Barnala House, 2nd Crossing, Haldiyon Ka Rasta, Johari Bazar, Jaipur respectively) are related to Shri Prakash Chand Kothari (PCK). As per records and phone directory, the said details pertain to the assessee (i.e. Shri Prakash Chand Kothari of KGK Group). Hence all the above transactions of cash loans pertain to the assessee.

The Assessing Officer, thereafter, referred to the statement of Sh. Ramesh Chand Maheshwari dated 07.01.2016 recorded on oath u/s 132(4) of the Act and his subsequent statement dated 08.11.2017 recorded u/s 131 of the Act and reproduced certain questions and replies so submitted by him. The Assessing Officer further stated that after search operations, Ramesh Manihar Group and its associates have filed their application before the the Income Tax Settlement Commission. In their application filed before the Settlement Commission, they have surrendered the income so earned as commission on account of these un-recorded or unaccounted transactions and due taxes has & 1298/JP/2019 & 66/JP/2020 8 Sh. Prakash Chand Kothari, Jaipur vs. DCIT, Jaipur also been paid. The Assessing Officer basis the said application filed by the Ramesh Manihar Group stated that it can clearly be deduced that the assessee also made transactions regarding lending its unaccounted money through said group and advanced the same out of books to earn interest income which was also not recorded in the books of accounts.

Regarding assessee request to provide cross examination of these persons whose statements were recorded and relied upon, the Assessing Officer stated that the right of cross examination is not an absolute right and depends upon facts and circumstances of the each case and in the instant case, the assessee has been allowed ample opportunity but he has failed to furnished any evidence contradicting the information available with the Revenue and no substantive material has been produced by the assessee.

It was accordingly held by the Assessing Officer that the assessee advanced a sum of Rs. 25 crores in cash which is not recorded in his books of accounts through Ramesh Manihar Group and same was brought to tax in the hands of the assessee. Further, it was held that the assessee has advanced the said amount on various dates for different period as per the details mentioned in the reasons for reopening of the case, accordingly, considering the period under consideration as well as amount advanced @1% per month, addition towards interest of Rs. 90,58,625/- was also made in the hands of the assessee. The assessment was accordingly completed u/s 147 read with section 143(3) of the Act at the total income of Rs. 27,01,45,250/- as against the returned income of Rs. 1,10,86,623/- by making addition of Rs 25,90,58,625/-.

Being aggrieved, the assessee challenged the order and findings of the Assessing Officer before the ld CIT(A) raising various grounds of appeal

On merits of the additions made by the AO and grounds of appeal

The ld. CIT(A) thereafter referred to the decision of Hon’ble Supreme Court in case of Common Cause (A Registered Society) reported in 394 ITR 220 wherein the earlier decision of Hon’ble Supreme Court in case of V. C. Shukla’s case has been discussed at length and relying on the said decision, the ld. CIT(A) stated that though these judgments of the Hon’ble Supreme Court were rendered in the context of criminal law, yet what the Hon’ble Supreme Court Court held that merely on the basis of such uncorroborated entries kept by third-party investigation cannot be conducted and applying the principle in the & 1298/JP/2019 & 66/JP/2020 11 Sh. Prakash Chand Kothari, Jaipur vs. DCIT, Jaipur present case which is a civil law, it can be said that though cognizance may be taken in respect of entries by third-party in the assessment of other person so as to initiate inquiry for assessment, yet when there is no finding that such entries are in fact pertaining to such third person only which should be emanating from the entries itself or from the person who has recorded such entry, no cognizance can be taken so as to fasten tax liability on such third person.

The ld. CIT(A) further referred to the observations of the Assessing Officer regarding application filed by the Ramesh Manihar Group before the Settlement Commission and stated that it is not understood as to how an income admitted by one person will bind other person in absence of any nexus between the person admitting and other person. Neither the Investigation wing during search proceedings nor Assessing Officer during the assessment proceedings have put any question as to what ‘PCK’ stand for nor is it discernible from the seized record any reference to the appellant herein against the entries stated to be of Rs. 25 crores. Further, referring to the decisions of Hon’ble Supreme Court in case of Kishinchand Chellaram reported in 125 ITR 713 and Andaman Timber Industries (dated 2 September, 2015 in Civil Appeal No. 4228 of 2006), the ld CIT(A) stated that it is a trite law when the statement of a person is to be used in evidence against any other person, such other persons should be given an opportunity of cross examination and in the present case., the assessee specifically asked for the cross examination which was denied arbitrarily by the Assessing Officer. The ld. CIT(A) stated that relying upon the statement and not providing cross examination to find out any involvement of the person affected by such statement is a gross violation of principles of natural justice which renders such reliance a nullity and if such statement is discarded, there remain no evidence to hold that the appellant has given any such advance to the tune of Rs. 25 crores. The ld CIT(A) finally stated that since no case is made out to relate the entries found during search in the case of Ramesh Manihar Group with the assessee and in absence of any & 1298/JP/2019 & 66/JP/2020 12 Sh. Prakash Chand Kothari, Jaipur vs. DCIT, Jaipur statement of the searched person to relate the entries to the appellant, the Assessing Officer was directed to delete the addition of Rs. 25 crores being considered as an amount advanced by way of cash loans and not recorded in the books of accounts and consequent addition towards notional interest was also directed to be deleted. Against the said findings of the ld CIT(A) deleting the additions, the Revenue is now in appeal before us.

In the aforesaid factual matrix of the matter, we find that both the parties are in appeal before us against the findings and order of the ld CIT(A) and have raised respective grounds of appeal. We firstly refer to assessee’s grounds of appeal challenging the reopening of assessment and assumption of jurisdiction by the Assessing officer u/s 147 of the Act which has been upheld by the ld CIT(A) and the contentions advanced by the respective parties in this regard.

The ld. A/R submitted that elaborate submissions were made before the ld. CIT(A) in this regard, however, he has not appreciated the same in correct perspective and hence the assessee wishes to reiterate the contentions raised before the ld. CIT(A). It was submitted that there is no reason to believe that income has escaped assessment in the hands of the assessee as reopening was done on the basis of borrowed satisfaction and solely on the basis of information received from DCIT, Central Cricle-03, Jaipur. It was submitted that only on the basis of so called information, the Assessing Officer concluded that ‘PCK’ was no other person but the assessee who has advanced the money in cash through Ramesh Manihar Group and figures mentioned in the table were suppressed by ‘five zeroes’. It was further submitted that the identity of the persons alleged to have received loans from the assessee was also not established and proceedings, if any, initiated against such persons for any contravention of the provisions of the Income Tax Act, 1961 were not disclosed. It was submitted that the Assessing Officer did not corroborate the information received from the DCIT, Central Circle-03, Jaipur and did not & 1298/JP/2019 & 66/JP/2020 13 Sh. Prakash Chand Kothari, Jaipur vs. DCIT, Jaipur mitigate the risk of any lapse/disconnect in the information so provided. It was submitted that the Assessing Officer relied upon extracts of certain excel sheets, however, no steps were taken to mitigate any risk of the Electronic Records having been tempered in terms of section 65A, 65B of Evidence Act, 1872. It was submitted that even the screenshot of excel sheet provided to the assessee, relied upon by the Assessing Officer was taken on 22.10.2018, after recording the reasons for reopening the case. It was accordingly submitted that the AO reopened the case of the assessee on account of borrowed satisfaction and without any tangible material in his possession before recording the reasons for reopening the case.

In support of his contentions, the ld A/R has placed reliance on the decision of Hon’ble Supreme Court in case of Manzil Dinesh Kumar Shah [2019] 101 taxmann.com 259 (SC), Hon’ble Rajasthan High Court decision in case of Sandeep Stocks Pvt. Ltd. (Civil Writ Petition No. 16705/2018), and the decisions of Hon’ble Delhi High Court in case of CIT vs. SFIL Stock Broking Ltd [2010] 325 ITR 285 (Del), CIT vs. Insecticides (India) Ltd. [2013] 357 ITR 330 (Del), Krown Agro Foods (P.) Ltd vs. ACIT [2015] 375 ITR 460 (Del), Pr. CIT vs. RMG Polyvinyl (I) B Ltd [2017] 396 ITR 5 (Del), Pr. CIT vs. Meenakshi Overseas Pvt. Ltd. [2017] 395 ITR 677 (Del) and Pr. CIT vs. G & G Pharma Ltd. (2016) 384 ITR 147 (Del). Further, reliance was placed on the Co-ordinate Benches decisions in case of Deepraj Hospital (P) Ltd. vs. ITO (2018) 65 ITR (Trib.) 663 (Agra), Unique Metal Inds. Vs. ITO (ITA No. 1372/Del/2015 dt. 28/10/2015), and ACIT vs. Devesh Kumar (ITA No. 2068/Del/2010).

It was further submitted by ld PCIT/D/R that the reasons so recorded were based on information received from the DCIT Central Circle-3, Jaipur and detailed enquiries were conducted by the Investigation wing as well as examination of the assessment records was undertaken by the Assessing officer and which shows clearly due and independent application of mind on part of the Assessing officer based on appreciation of material on record that the income in the hands of the assessee has escaped assessment. It was submitted that where the Assessing officer basis detailed information and & 1298/JP/2019 & 66/JP/2020 16 Sh. Prakash Chand Kothari, Jaipur vs. DCIT, Jaipur enquiries conducted by the Investigation wing which forms a tangible material forms a reasonable belief that the income in the hands of the assessee has escaped assessment, there is no infirmity in the action of the Assessing officer in assumping jurisdiction u/s 147 of the Act by recording the reasons and issuance of notice u/s 148 of the Act.

It was further submitted that the sufficiency and adequacy of material may not be required to be looked into at the time of recording the reasons and what is relevant is whether there was relevant material on which a reasonable person could have formed a requisite belief that the income has escaped assessment. It was submitted that in the instant case, there was relevant material in possession of the AO for him to proceed with recording of reasons that income has escaped assessment and assumption of jurisdiction u/s 147 of the Act. In support, reliance was placed on the Hon’ble Supreme Court decisions in case of Assistant Commissioner of Income-tax vs. Rajesh Jhaveri Stock Brokers (P.) Ltd. [2007] 161 Taxman 316 (SC), Yogendra kumar Gupta vs. Income-tax Officer [2014] 51 taxmann.com 383 (SC), and Raymond Woolen Mills Ltd. vs. Income-tax Officer [1999] 236 ITR 34 (SC).

We have heard the rival contentions and purused the material available on record. Both the parties have relied upon a number of decisions rendered by the Hon’ble Supreme Court and by various Hon’ble High Courts regarding conditions precedent for assumption of jurisdiction by the Assessing officer u/s & 1298/JP/2019 & 66/JP/2020 18 Sh. Prakash Chand Kothari, Jaipur vs. DCIT, Jaipur 147 of the Act. We have gone through these decisions as well as other authorities on the subject, and we find that in these decisions, the Courts have laid down certain cardinal tests which need to be fulfilled for assumption of jurisdiction u/s 147 and have reiterated the same from time to time considering the facts and circumstances of the particular case. These cardinal tests provide that before assuming jurisdiction u/s 147, the Assessing Officer must form a prima facie opinion on the basis of material/information in his possession that there is an escapement of income, the opinion formed may be subjective but the reasons recorded or the information available on record must show that the opinion is not a mere suspicion, the documents/material/information available on record must be tangible, specific and not vague and must be evident from reading of the reasons showing a nexus/linkage with the formation of belief and the fact that they are germane and relevant to the subjective opinion formed by the Assessing Officer regarding escapement of income in the hands of the assessee. The reasons are required to be read as they were recorded by the Assessing officer. No substitution or deletion is permissible. No additions can be made to those reasons. No inference can be allowed to be drawn on the basis of reasons not recorded. It is for the Assessing officer to disclose and open his mind through the reasons recorded by him and he has to speak through the reasons and the reasons so recorded should reflect his independent application of mind and not that of any third party/investigating agency/authority. In cases where the first proviso applies, there is an additional requirement that there should be failure or omission on the part of the assessee in disclosing full and true material facts and the Assessing officer should record the exact and precise nature of failure on part of the assessee and its linkage thereof with the escapement of income.

In the instant case, the assessee has challenged the assumption of jurisdiction by the Assessing Officer u/s 147 of the Act and it has been contended that the reopening has been done solely on the basis of information received from DCIT, Central Circle-03, Jaipur and there is no independent & 1298/JP/2019 & 66/JP/2020 19 Sh. Prakash Chand Kothari, Jaipur vs. DCIT, Jaipur application of mind by the Assessing Officer and it is therefore a case of borrowed satisfaction and not his own satisfaction which has been recorded by the Assessing Officer after due application of mind. It was further submitted that there is no tangible material in possession of the Assessing Officer for arriving at the finding that the income has escaped assessment in the hands of the assessee and therefore, no nexus has been established between the material and formation of belief that the income has escaped assessment in the hands of the assessee. It has been further contended that given the fact that the entire reassessment proceedings have been based on the information received from DCIT, Central Circle-03, Jaipur during the course of search u/s 132, the Assessing Officer should have taken recourse to section 153C and not section 147 for carrying out the present reassessment proceedings.

In this regard, we refer to the reasons recorded by the Assessing Officer before issuance of notice u/s 148 of the Act. In the reasons so recorded, the Assessing Officer refers to the information received from the office of DCIT, Central Circle-03, Jaipur pursuant to search and seizure action carried out in case of Ramesh Manihar Group u/s 132 of the Act and the same read as under:-

In the reasons so recorded, the Assessing Officer has further stated that from the perusal of information, it is found that the assessee has paid cash loan of Rs. 25 crores out of his income from undisclosed sources in A.Y 2012- 13 and received interest accordingly. The Assessing Officer has further stated that though the assessee has filed a copy of annual report, audited profit & loss account and balance-sheet along with return of income in the original assessment proceedings wherein various information/material were disclosed, however, requisite full and true disclosure of all material facts necessary for assessment has not been made as the assessee has not furnished the copy of cash book for the year under consideration and source of advance payment of loan in cash and which is not shown in the loans and advances given by the assessee in his balance-sheet attracting Explanation 1 of section 147 of the Act. It was held by the Assessing Officer that the detailed enquiries conducted by the investigation wing and material available on the assessment record is self sufficient and accordingly, he formed reason to believe that the assessee has paid the loan amount of Rs. 25 crores out of his income from undisclosed sources and has failed to disclose fully and truly all material facts necessary for determination of income and therefore, he has reason to believe that income of Rs. 25 crores and interest received thereon has escaped assessment within the meaning of section 147 of the Act.

It is therefore manifest from the reasons so recorded by the Assessing Officer that he has basically relied upon the information received from the DCIT Central Circle -3, Jaipur and enquiries conducted by the Investigation wing. Further, given that the original assessment has been completed u/s 143(3) and more than four years have elapsed from the end of the impugned assessment and proviso to section 147 applies, with a view to satisfy the additional condition that there should be failure or omission on the part of the assessee in disclosing full and true material facts, he has considered the assessee’s assessment records and thereafter, has concluded that there was no necessity & 1298/JP/2019 & 66/JP/2020 22 Sh. Prakash Chand Kothari, Jaipur vs. DCIT, Jaipur to make further inquiries as the information available on record is self- sufficient.

The question that arises for consideration is whether the information so received from the DCIT Central Circle -3, Jaipur constitute tangible material in possession of the Assessing officer and enquiries so conducted by the Investigation wing, and admittedly not conducted by the Assessing officer himself as a sequel to the information so received, provides the necessary nexus between the tangible material and formation of reasonable belief on part of the Assessing officer that income in the hands of the assessee has escaped assessment.

As we have noticed above, the information so received by the Assessing officer from DCIT Central Circle -3, Jaipur talks in general about the search and seizure action u/s 132 carried out in case of Ramesh Manihar Group and during the course of search, voluminous data comprising of excel sheets in pen drives were seized from the office of this said group. It has been further stated that the said group was indulging in cash loan financing on a large scale and were engaged as finance brokers for arranging cash loans between various borrowers and lenders and the data so seized relate to such unrecorded cash transactions. Thereafter, talking specifically about the assessee, it has been stated in the said information that certain transactions have been noticed regarding the assessee, Shri Prakash Chand Kothari wherein the assessee has paid cash loans of Rs 25 crores to various persons through the said group and has earned interest on the said amount. If we look at the data so provided in form of a table in the information so received from DCIT Central Circle-3 Jaipur and as recorded in the reasons by the Assessing officer, we find that it list down certain transactions on various dates and has various columns with heading “T”, “@”, “AT” and certain figures have been stated under each heading corresponding to various dates, and thereafter, has two columns with heading “from” and “TO” wherein under column “from”, “PCK” has been stated & 1298/JP/2019 & 66/JP/2020 23 Sh. Prakash Chand Kothari, Jaipur vs. DCIT, Jaipur and under column “TO”, certain names again in abbreviated form has been stated. On perusal of the said data, it is not discernible as to what kind and nature of transactions the said data depicts as everything is in abbreviated form, what “T” stand for, what “@” stand for, what “AT” stand for, what “PCK” stand for, what is the linkage of “PCK” with other persons whose name are also written in abbreviated form, and how this data and so called transactions are related to the assessee and how the figures so depicted represent and add up to a figure of Rs 25 crores in cash are again not discernable even from close reading of the said data. Therefore, in our considered view, the said data per se cannot constitute tangible material in possession of the Assessing officer unless the same is analysed and examined thoroughly and necessary linkage is established with the assessee. In this regard, useful reference can be drawn to the decision of the Hon’ble Supreme Court in case of ITO vs Lakhmani Mewal Das reported in 103 ITR 437 wherein the Hon’ble Supreme Court has laid down the following legal proposition (pg 448):

In the reasons so recorded, the Assessing officer has further stated that detailed enquiries have been conducted by the Investigation Wing and it has been found that these transactions pertains to the assessee where the assessee has paid cash loans to various persons through Ramesh Manihar Group during the year under consideration. Here, the question is not about the reliance placed by the Assessing officer on the enquiry conducted by the Investigation Wing which the Assessing officer is well within his jurisdiction to place reliance upon but the question is how the Investigation wing has arrived at the finding that the data so found pertains to the assessee only and the transactions relates to cash loans provided by the assessee through Ramesh Manihar Group and whether the basis of arriving at such a finding has been gone into by the Assessing officer prior to recording of the reasons and whether the same is evident from the reading of the reasons so recorded by the Assessing officer. The said question becomes more relevant and critical to our mind in view of the fact that the data so shared by DCIT Central Circle-3 Jaipur and in possession of the Assessing officer is not tangible and specific rather it is vague and is in abbreviated form and unless the same is analysed and examined thoroughly and necessary linkage is established with the assessee, the same cannot be relied upon. However, we find that the reasons so recorded are totally silent about it in terms of the findings of the Investigation Wing and how the AO has analysed the same and reached to a reasonable brief that such enquiries conducted by the Investigation Wing are self-sufficient to decipher the exact nature of the transactions and its linkage with the assessee and by virtue of it, there is a potential escapement of income. We therefore find that it is a case where the reasons have been recorded merely basis information received from DCIT Central Circle-3, Jaipur and so called enquiry conducted by the Investigation wing, in a mechanical & 1298/JP/2019 & 66/JP/2020 26 Sh. Prakash Chand Kothari, Jaipur vs. DCIT, Jaipur manner without bringing on record the findings of the Investigation Wing which could have provided the tangible material and its nexus with the formation of belief that the transactions so reflected in the data pertains to the assessee which has escapement assessment. It is therefore a case where there is neither any tangible material in possession of the AO nor any nexus/connection has been established by the AO with the assessee by analyzing the data so collected during the course of search and received by him. The reasons so recorded are clearly silent on this and as we have stated above, the Assessing officer has to speak his mind through the reasons so recorded by him and nothing more can be inferred or supplemented in the reasons so recorded. In this regard, useful reference can be drawn to the decision of the Hon’ble Delhi High Court in case of Meenakshi Overseas Pvt Ltd (supra) wherein the Hon’ble High Court held as under:

In the instant case as well, we find that after recording the information received from the office of DCIT Central Circle-3 Jaipur, in the second part of the reasons so recorded, the Assessing officer has stated as to what analysis he has done with the information so collected/received and he says that “from the perusal of the information, it is found that the assessee has paid cash loan of Rs 25,00,00,000/- out of his income from undisclosed in A.Y 2011-12 and received interest accordingly.” What analysis he has done to arrive at the belief that the information so received pertains to the assessee, the nature of transactions are in nature of cash loans only and not otherwise, who are the persons to whom these alleged cash loans have been provided and their identities and whereabouts, and we find that there is nothing which has been stated in the reasons so recorded and apparently, the basis of such conclusions & 1298/JP/2019 & 66/JP/2020 30 Sh. Prakash Chand Kothari, Jaipur vs. DCIT, Jaipur and not just the reasons is the enquiry conducted by the Investigation Wing and as we have noted above, nothing from the report of the Investigation Wing is set out in the reasons and thus, the crucial link between the information and formation of belief that income has escaped assessment is clearly absent in the instant case and the ratio laid down in the aforesaid decision rendered by the Hon’ble Delhi High Court squarely applies in the instant case.

In the reasons so recorded, we find that the Assessing officer has further stated that the transactions so reflected in the data relates to cash loan provided by the assessee to various persons through Ramesh Manihar Group and since the same has not been reflected in the loans and advances account in his balance sheet and no cash book has been produced in the original assessment proceedings, there is a failure on part of the assessee to disclose fully and truly all material facts necessary for determination of income. In our view, in order to establish failure on part of the assessee to reflect the transactions in his books of accounts, firstly, it has to be prima facie established by the Revenue that the transactions infact pertains to the assessee and he has carried out these transactions of cash loans through Ramesh Maniar Group and he has reasons to believe that income has escaped assessment. Therefore, where the Revenue has not been able to establish, even prima facie, basis any tangible material that the transactions pertains to the assessee or the necessary nexus has been established with the assessee and formation of belief that income in the hands of the assessee has escaped assessment has no sound basis and foundation, as we have noted above, escapement of income cannot be linked merely on account of failure on part of the assessee to reflect truly and fully all material facts as the said condition is an additional condition and a condition which is subservient to satisfaction of the first condition which the Assessing officer has failed to fulfill in the instant case. We are therefore of the view that it would not be necessary for us to examine any further as to whether the escapement of income has happened on account of failure on the part of the assessee to disclose fully and truly all & 1298/JP/2019 & 66/JP/2020 31 Sh. Prakash Chand Kothari, Jaipur vs. DCIT, Jaipur material necessary for his assessment and the contents raised in this regard are thus left open.

Looking at the matter from another perspective, it is a matter of record that the information which has been received by the Assessing officer from the DCIT Central Circle-3, Jaipur has been collected during the course of search action u/s 132 in case of Ramesh Manihar Group. Where the Assessing Officer was so sure and clear that the enquiries made by the Investigation wing and the information so collected during the course of search action in case of Ramesh Manihar Group shows that certain transactions of cash loans have been found which are pertaining to the assessee, the question is what precluded the Assessing Officer from taking action u/s 153C of the Act instead of section 148 of the Act. After the amendment made by the Finance Act with effect from 01.06.2016 where any books of account or documents, seized or requisitioned, pertains or pertain to, or any information contained therein, relates to person other the person who has been searched, the action under section 153C can be taken which is notwithstanding anything contained in section 147 and section 148 of the Act. The ld PCIT/D/R has contended that there are conditions specified in section 153C which needs to be fulfilled and only in such cases where the conditions so specified are fulfilled, the Assessing officer can take recourse to section 153C of the Act. It was submitted that in the instant case, the conditions specified in section 153C are not fulfilled and hence, basis receipt of information, the Assessing officer recorded the reasons for escapement of income and initiated the proceedings u/s 147 by issuance of notice u/s 148 of the Act. In this regard, we refer to the provisions of section 153C which read as under: “Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, where the Assessing Officer is satisfied that,- (a) any money, bullion, jewellery or other valuable article or thing, seized or requisitioned, belongs to; or & 1298/JP/2019 & 66/JP/2020 32 Sh. Prakash Chand Kothari, Jaipur vs. DCIT, Jaipur (b) any books of account or documents, seized or requisitioned, pertains or pertain to, or any information contained therein, relates to, a person other than the person referred to in section 153A, then the books of account or documents or assets, seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against each such other person and issue notice and assess or reassess the income of the other person in accordance with the provisions of section 153A, if, that Assessing Officer is satisfied that the books of account or documents or assets seized or requisitioned have a bearing on the determination of the total income of such other person for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made and for the relevant assessment year or years referred to in sub-section (1) of section 153A”

On perusal of the aforesaid provisions, it is noted that firstly, the Assessing officer of the searched person has to record satisfaction that any books of account or documents etc, seized during the course of search pertains or pertain to, or any information contained therein, relates to any other person other than the person who has been searched. Once such a satisfaction is recorded, the books of account or documents or assets seized are required to be handed over to the Assessing Officer having jurisdiction over such other person. Thereafter, the Assessing Officer having jurisdiction over such other person has to record his own satisfaction that the books of account or documents seized have a bearing on the determination of the total income of such other person for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made and for the relevant assessment year or years referred to in sub-section (1) of section 153A. Once the said satisfaction is recorded, he can then proceed against each such other person and issue notice and assess or & 1298/JP/2019 & 66/JP/2020 33 Sh. Prakash Chand Kothari, Jaipur vs. DCIT, Jaipur reassess the income of the other person in accordance with the provisions of section 153A of the Act.

In the instant case, the fact that the Assessing officer has not invoked the provisions of section 153C, it shows that there was no satisfaction which has been recorded by the Assessing officer having jurisdiction over Ramesh Maniar Group that any books of account or documents etc, seized during the course of search pertains or pertain to, or any information contained therein, relates to the assessee and in absence of satisfaction so recorded, the books of account or documents seized during the course of search were not handed over to the Assessing Officer having jurisdiction over the assessee. In absence of satisfaction so recorded and handing over of the seized material by the Assessing officer of the searched person, the Assessing officer could not by himself have invoked the provisions of section 153C of the Act. It is also manifest that in absence of any such satisfaction that documents so found and seized during the course of search pertains to the assessee or any information contained therein relates to the assessee, no linkage or nexus has been established with the assessee and what has been received by the Assessing officer is pure raw data in abbreviated form and information which per se cannot constitute as tangible material, as we have noted earlier, and unless and until the said data and information is properly analysed and examined and necessary linkage and nexus established with the assessee, the same cannot form the basis for initiating action u/s 147 in hands of the assessee. It cannot be a case that since action could not be taken under section 153C, the Assessing officer is free to initiate action u/s 147 of the Act as the Courts have held from time to time that reopening of assessment proceedings is a potent power which cannot be casually and mechanically invoked and lightly exercised by the Assessing officer and the invocation of such powers is based on satisfaction of certain cardinal tests and principles as we have discussed above and which have not been fulfilled in the instant case. & 1298/JP/2019 & 66/JP/2020 34 Sh. Prakash Chand Kothari, Jaipur vs. DCIT, Jaipur 41. In light of above discussions and following the decisions referred supra, we are of the considered view that in the peculiar facts and circumstances of the present case, the assumption of jurisdiction and initiation of the proceedings under Section 147 of the Act to reopen the assessment proceedings does not satisfy the requirement of law and is hereby set-aside.

In the result, ground no. 1 of the assessee’s appeal is allowed. Ground no. 2 of the assessee’s appeal was not pressed during the course of hearing, hence, the same is dismissed as not pressed. Ground no. 3 is also dismissed in light of aforesaid discussions. In the result, the appeal of the assessee is partly allowed.

We now refer to Revenue’s grounds of appeal challenging the deletion of additions made by the ld CIT(A) and the contentions advanced by the respective parties in this regard.

The ld PCIT/D/R took us through the findings of the Assessing officer and submitted that during the course of search as well as in post search proceedings, statements of Shri Ramesh Chand Maheshwari were recorded u/s 132(4) as well as under section 131 of the Act in which he has admitted that Ramesh Manihar Group was involved in cash loan financing transactions on a large scale and amounts were taken in cash from the lenders and the same was advanced to the borrowers in cash, and they earned commission on these transactions. It was further submitted that various incriminating documents were found and seized by the Investigation wing of the department, which includes loose papers, pen drives etc. On analysis of the seized documents particularly pen drives, it has been noted by the Assessing officer that one pen drive is having names in short/code word ‘Jagat.xlsx’ that names of the lenders as well as borrowers were found in code name or maybe say in short name & 1298/JP/2019 & 66/JP/2020 35 Sh. Prakash Chand Kothari, Jaipur vs. DCIT, Jaipur likewise ‘Prakash Chand Kothari’ the assessee as ‘PCK’. This short name is again verifiable with another pen drive namely ‘from & to group.xlsx’, where name of the assessee ‘PCK’, is mentioned along with his full name address in the seized documents. Accordingly, it was established that the assessee was the only person who has given his unaccounted cash for lending through the Ramesh Manihar Group. On further examination of these pen drives, it was also found that amount of transaction was mentioned after suppressing ‘five zeros’ i.e. Rs. 25,00,00,000/- was mentioned as 2500 in the form of different entries. In these pen drives, it was also mentioned, as for which period and on what rate of interest, the amount was advanced to the borrowers. It was accordingly submitted that based on such corroboration, the excel sheet notings extracted from the Jagat. XIs from the PEN drive in possession of Ramesh Manihar revealed that these are related to Shri Prakash Chand Kothari (PCK).

It was further submitted by the ld PCIT/D/R that Sh. Ramesh Chand Maheshwari in his statement dated 07.01.2016 recorded on oath u/s 132(4) of the Act and his subsequent statement dated 08.11.2017 recorded u/s 131 of the Act has admitted that he was involved in cash loan financing transactions on a large scale. It was further submitted that Ramesh Manihar Group have filed their application before the Income Tax Settlement Commission and have surrendered the income so earned as commission on account of these un- recorded or unaccounted transactions and due taxes has also been paid. It was submitted that basis the said application filed and admission by the Ramesh Manihar Group, the Assessing officer has rightly stated that the assessee also made transactions regarding lending its unaccounted money through said group and advanced the same out of books of accounts to earn interest income which was also not recorded in the books of accounts. It was accordingly submitted that the excel sheet notings extracted from the Jagat. XIs from the PEN drive in possession of Sh. Ramesh Chand Maheshwari thus stand corroborated by his statement recorded on oath u/s 132(4) of the Act and & 1298/JP/2019 & 66/JP/2020 36 Sh. Prakash Chand Kothari, Jaipur vs. DCIT, Jaipur subsequent statement recorded u/s 131 of the Act as well as the application moved by his Group before the Settlement Commission.

Regarding assessee request to provide cross examination of Sh. Ramesh Chand Maheshwari whose statements were recorded and relied upon by the Assessing officer, it was submitted that the Assessing Officer rightly stated that the right of cross examination is not an absolute right and depends upon facts and circumstances of the each case and in the instant case, the assessee has been allowed ample opportunity but he has failed to furnished any evidence contradicting the information available with the Revenue and no substantive material has been produced by the assessee. It was alternatively submitted that where the Bench so decide that the assessee be provided an opportunity of cross-examination, the matter may be remanded to the file of the Assessing officer to provide such an opportunity and merely on this ground, the additions cannot be deleted and assessment proceedings set-aside.

It was accordingly submitted by the ld PCIT that the Assessing Officer has rightly held that the assessee advanced a sum of Rs. 25 crores in cash which is not recorded in his books of accounts through Ramesh Manihar Group and same was brought to tax in the hands of the assessee. Further, considering the period under consideration as well as amount advanced and taking rate of interest @1% per month, addition towards interest of Rs. 90,58,625/- was also made in the hands of the assessee.

It was submitted that the ld CIT(A) has not appreciated the entirety of facts and circumstances of the case, the data seized during the course of search, the statement recorded during search and post-search proceedings in right perspective and in a summarily manner has deleted the additions made by the Assessing officer. He accordingly supported the findings of the Assessing officer and submitted that the order of the ld CIT(A) be set-aside and that of the AO be sustained. & 1298/JP/2019 & 66/JP/2020 37 Sh. Prakash Chand Kothari, Jaipur vs. DCIT, Jaipur

In his submissions, the ld A/R submitted that firstly, the contention of the ld PCIT/DR that the ld CIT(A) has passed the order in a summarly manner is not correct. It was submitted that detailed submissions were filed before the ld CIT(A) and the matter was heard at length by the ld CIT(A) and after appreciating the entirety of facts and circumstances of the case and considering various authorities on the subject including the decisions of the Hon’ble Supreme Court, the ld CIT(A) has passed a detailed, speaking and a well-reasoned order. The ld A/R accordingly supported the findings and the order of the ld CIT(A).

The ld A/R further submitted that the Assessing officer, on the basis of extracts of excel sheets and statements recorded during the course of search has failed to point out any basis of allegation of involvement of the assessee in providing cash loans. It was submitted that even identities of the persons alleged to have received cash loans from the assessee through Ramesh Manihar group was not established and thus, the second leg of the alleged transaction could not be proved. It was submitted that extensive search was conducted on 06.05.2010 on KGK Group of which assessee is a part and no unaccounted income, cash or hundis etc. were found. It was submitted that Ramesh Manihar nowhere in his statements stated the name of the assessee and even no opportunity of cross-examining Ramesh Manihar was provided to the assessee.

It was further submitted that various discrepancies existed in the extracts of the excel sheet provided by the AO such as there was disconnect between the dates mentioned in different columns (Column No. 1 and Column No. 14 of the excel sheet), dates in Column No. 14 are not in chronological order, Column No. 7 and Column No. 8 are subsequently added by the Department which did not form part of the original format maintained by Ramesh Manihar Group and seized and forming part of reasons recorded. & 1298/JP/2019 & 66/JP/2020 38 Sh. Prakash Chand Kothari, Jaipur vs. DCIT, Jaipur

It was further submitted that another set of extracts of the excel sheets relied upon by ld. AO was nothing but prepared for the purpose of sending invitation cards and even in these excel sheets, it was submitted that Ramesh Manihar in response to Question No. 20 and Question No. 30 confirmed having prepared these details for the purpose of sending invitation cards. These excel sheets referred to Ankoot, Office, RCM List and XYZ and not w.r.t any transaction allegedly undertaken by the assessee. In the excel sheet, 2610 records have been maintained. It is certainly not the case of the ld. AO that Ramesh Manihar acted as a broker for all of these 2610 individuals for lending money in cash to other persons. What information has been recorded in other worksheets is not clear. The screen shot of the excel sheet, highlighting assessee’s name was taken on 22.10.2018, whereas the search was conducted on 07.01.2016. Whether such screenshot was taken by the ld. AO or by Central Circle-3 or by Investigation Wing or by any other person/Department is also not clear.

It was further submitted that following references from the statement of Ramesh Manihar recorded during search may be noted which indicate no involvement of the assessee in providing cash loans:

It was submitted that in the extracts of the statement recorded u/s 131, as set out in the AO order at Pages 11 and 12, Ramesh Manihar has not specified the name of the assessee or any transaction done through him in cash. Even copy of such statements recorded, u/s 131 on 08.11.2017 was not provided to the assessee during the course of assessment proceedings.

It was further submitted that the ld. AO wrongly relied on the extracts of the excel sheet maintained by Ramesh Manihar Group and seized during search on 07.01.2016 for the reason that ld. AO did not comply with the provisions of section 65A and 65B of the Evidence Act, 1872 and no satisfaction recorded by AO that the output of the pen-drives/ computer records were analyzed on “as is” basis by the Department and there was no risk of being tempered by anyone. In support, reliance was placed on the decision of Hon’ble Supreme Court in the case of Anvar P.V. v. P.K. Basheer [2014] SSC Online SC 732 (SC) wherein it was held that “An electronic record by way of secondary evidence shall not be admitted in evidence unless the requirements under Section 65B are satisfied. Thus, in the case of CD, VCD, chip, etc., the same shall be accompanied by the certificate in terms of Section 65B obtained at the time of taking the document, without which, the secondary evidence pertaining to that electronic record, is inadmissible”

It was further submitted that in Chuharmal (1988) 172 ITR 250 (SC), the Hon’ble Supreme Court pointed out that although rigors of rule of evidence contained in the Evidence Act were not applicable to the Income-tax Act, but & 1298/JP/2019 & 66/JP/2020 40 Sh. Prakash Chand Kothari, Jaipur vs. DCIT, Jaipur the general principles of evidence are applicable to income-tax proceedings. Further, reliance was placed on following decisions to submit that addition cannot be made on the basis of excel sheets or loose sheets or pen drives: • V.C. Shukla [1998] 3 SCC 410 • Common Cause vs. UOI [2017] 394 ITR 220 (SC) • ACIT vs Katrina Rosemary Turcottee [2017] 190 TTJ 681 (Mum)

It was further submitted that the fact that the application of Ramesh Manihar Group has been accepted by the Settlement Commission considering him to be a money broker, has no impact on the case of the assessee. It was submitted that admission of Ramesh Manihar’s petition by Settlement Commission no way establishes that PCK is no one else but the assessee, Shri Prakash Chand Kothari. In support, reliance was placed on the decision of the Coordinate Mumbai Benches in case of Sh. Anil Jaggi vs ACIT [2018] 168 ITD 612 (Mum.)(Trib.).

It was further submitted that authenticity of the data, allegedly contained in the Pen-Drives seized from Ramesh Manihar Group has to be proved independently. Unless the entries are corroborated by independent, credible, tangible and clinching material, the same cannot be used against the assessee, treating the same as “gospel truth”. It was submitted that Hon’ble Supreme Court, in the case of Arjun Panditrao Khotkar Vs. Kailash Kushanrao Gorantyal and Ors. (in Civil Appeal Nos. 20825-20826 of 2017, 2407 and 3696 of 2018 vide its order dated 14.07.2020) confirmed its earlier view in the case of Anvar P.V. v P.K. Basheer (supra) apropos admissibility of electronic recorded as evidence and held that a certificate under Section 65B(4) of the Evidence Act, 1872 is mandatory, and a condition precedent to the admissibility of evidence by way of electronic record. The non-obstante language of Section 65B(1) makes it clear that when it comes to information contained in an electronic record, admissibility and proof thereof must follow the drill of Section 65B, which is a special provision in this behalf. Requirement under Section & 1298/JP/2019 & 66/JP/2020 41 Sh. Prakash Chand Kothari, Jaipur vs. DCIT, Jaipur 65B(4) is not necessary if the original computer/laptop etc in which the data/information, relied upon, itself is produced and conditions under Sections 65B(2) and 65B(4) must be satisfied cumulatively.

It was further submitted that in case of K. Natwar Singh (ITA No. 3258,3290,4168/Del/2013) and Jagat Singh (ITA No. 3036, 3037, 3038 and 3039/Del/2015), having similar factual matrix, wherein pen-drives were seized from one Shri Chetan Gupta allegedly containing details of approx. 148 people, whose money and wealth, allegedly, was administered by the said Shri Chetan Gupta, additions were made in the case of persons, based on entries in such pen-drives/ computer records, however, such additions were deleted by the appellate authorities. Further, reliance was placed on the decision in case of DCIT vs Mahabir Prasad Gupta (ITA No. 713 & 714/DEL/2011 dated 23.11.2012) where the Tribunal held that the Revenue could not establish that name of the person recorded in the diary as 'MPG' meant Mahabir Prasad Gupta only i.e. assessee and additions were deleted. It was submitted that the said decision was approved by the Hon’ble Delhi High Court (in dated 20.10.2015) and also followed subsequently by the Hon’ble Delhi High Court in case of Sant Lal [2020] 317 CTR 483 (Del).

It was submitted that it is a trite law that no addition can be made on the basis of documents found from third party without examining the third party and linking the contents of the documents obtained from such third party with the assessee and in support, reliance was placed on following decisions in case of Bangodaya Cotton Mills Ltd. v. CIT (2011) 330 ITR 104 (Cal), DCIT v. Mahendra Ambalal Patel (2010) 40 DTR 243 (Guj), Prakash Chand Nahtav. CIT (2008) 301 ITR 134 (MP), CIT v. Salek Chand (2008) 300 ITR 426 (All), SMC Share Broker Ltd. (2007) 288 ITR 345 (Delhi), CIT v. JMD Computers & Communications (P.) Ltd.(2009) 180 Taxman 485 (Delhi), Krishna Textiles v. CIT (2009) 310 ITR 0227 (Guj) and CIT v. A.N. Dyaneswaran (2008) 297 ITR 135 (Mad). & 1298/JP/2019 & 66/JP/2020 42 Sh. Prakash Chand Kothari, Jaipur vs. DCIT, Jaipur 61. It was further submitted that the ld. AO has made the addition invoking the provisions of Section 69. For invoking the provisions of Section 69 heavy burden lies on the ld. AO to prove that investment has taken place, and the investment is owned by the assessee. It was submitted that there is the difference of burden under Section 68 vis-à-vis Section 69. If a credit entry is found in books of the assessee, entire burden lies on the assessee to prove identity, credit-worthiness and genuineness of the said creditor. As against this, if any investment is alleged to be in the name of the assessee which as per the Department is not recorded in the books of the assessee, the burden is on the Department to first prove its allegation by way of impeccable evidences. It is well settled that the burden is on the person who makes allegation and to discharge such burden the said person has to lead positive evidences. Mere fact that there were certain entries found from records of third party, it is not sufficient to make additions on grounds that assessee had made investment. It was submitted that even the assessee has not been identified nor is there any allegation by Ramesh Manihar that in the Pen-Drive alleged to be his, there were deposits received by him from the assessee. It was submitted that without examining the persons, who allegedly received loans, and without obtaining due confirmations from them, even the factum of investment is not proved. What would be the case of the Department, if the so-called alleged loan takers refuse to ever having received loan from the assessee? Without agreeing, if the loans given is not proved, what is the point in tracing and taxing the person who allegedly has given the loan. It was submitted that the present case is similar to a situation, wherein, an allegation is made on the assessee to have made investment in land, without even identifying specific piece of land, which has been allegedly purchased by the assessee. This situation can very well arise, wherein search is conducted by the Department, as in the present case, on some broker, dealing in land transactions. It was submitted that Hon’ble Gujarat High Court in the case of Ushakant Patel (2006) 282 ITR 553 (Guj) has held that the burden of proof that the investment in the asset not recorded in the books of account is on the revenue. & 1298/JP/2019 & 66/JP/2020 43 Sh. Prakash Chand Kothari, Jaipur vs. DCIT, Jaipur 62. It was submitted that unsubstantiated material found in the Pen-Drive cannot be considered as conclusive evidence so as to make additions, towards unexplained investments, in the hands of the assessee. Undisputedly no other material has been brought to the fore by the Department, suggesting any such loan having been given by the assessee to certain other alleged person.

It was submitted that inspite of specific request, neither Ramesh Manihar was examined by the ld. AO nor his cross examination was allowed to the assessee. No addition can be made without providing adequate opportunity of cross examination of a person on the basis of whose statements additions made in the name of the assessee and in support, reliance was placed on the Hon’ble Supreme Court decision in case of Andaman Timber Industries v. CCE(2015) 281 CTR 0241 (SC), CIT v. Ashwani Gupta [2010] 191 Taxman 51 (Delhi), CIT v. SMC Share Brokers Ltd. [2007] 288 ITR 345 (Delhi) and State of Kerala v. K.T. Shaduli Yusuff (1977) 39 STC 478 (SC). Similarly, inspite of specific request, ld. AO did not examine the persons who, according to the ld. AO, had received loans from the assessee through Ramesh Manihar Group.

It was submitted that Hon’ble Bombay High Court in the case of CIT v. Lavanya Land (P) Ltd. (2017) 297 CTR 204(Bom.) (HC) held that if the entries on loose sheet of paper, found during search, are not corroborated by any other evidence, no addition can be made. Similarly, in another case of Aarti Colonizers Company, certain incriminating material in the form of data stored in electronic medium was found in search conducted on the partners of the assessee firm. On the basis of such electronic evidences, additions were made in the hands of the assessee firm. Such additions were subsequently deleted by the Raipur Bench of the Tribunal (ITA No. 178 to180/RPR/2014 dated 01.07.2019) and it was observed by the Tribunal that no material was found to show that the amount contained in the data was paid by the assessee firm at any point of time. Resultantly, in the absence of any corroborative evidences no addition can be made. & 1298/JP/2019 & 66/JP/2020 44 Sh. Prakash Chand Kothari, Jaipur vs. DCIT, Jaipur 65. It was further submitted that the ld AO, without any basis, alleged that assessee earned interest, of Rs. 90,58,625, on the loans advanced to different persons through RMG. Since the assessee did not provide any loan, in cash, to any person through RMG, there was no question of any interest being earned by the assessee.

It was accordingly submitted that the ld CIT(A) has rightly accepted the contentions of the assessee and deleted the additions holding that Ramesh Manihar was never confronted by the ld. AO or the Investigation Wing as to what “PCK” stands for, against the name “PCK’, no address or telephone number is found to have been recorded, no evidence or basis to suggest “PCK” was no one else but the assessee, no evidence to suggest that assessee had advanced loans in cash through Ramesh Manihar, evidences as relied upon by ld. AO do not relate to the assessee, in the statements recorded of Ramesh Manihar, there is no reference to “PCK” being considered as “Prakash Chand Kothari”, during the assessment proceedings, ld. AO could not point out any specific portion of the statement of Ramesh Manihar which could suggest involvement of the assessee in providing cash loans, in case of uncorroborated entries kept by third party, no tax liability can be fastened on the assessee and no case could thus be made out to prove that the entries found during the search on Ramesh Manihar Group relate to the assessee. The ld A/R accordingly supported the order and findings of the ld CIT(A) and submitted that the appeal filed by the Revenue be dismissed.

We have heard the rival contentions and purused the material available on record. The case of the Revenue is that the assessee had advanced a sum of Rs. 25 crores by way of cash loans through Ramesh Manihar Group to various persons which is not recorded in his books of accounts and the same was brought to tax as unaccounted income. It was also held that the assessee has advanced the said amount on various dates for different periods of time, accordingly, considering the rate of interest @1% per month, interest of Rs. & 1298/JP/2019 & 66/JP/2020 45 Sh. Prakash Chand Kothari, Jaipur vs. DCIT, Jaipur 90,58,625/- was determined and the same was also brought to tax in the hands of the assessee. The case of the Revenue therefore is that it is the unaccounted money which belongs to the assessee and which has been advanced by the assessee by way of cash loans through Ramesh Manihar Group and the same was thus brought to tax. Besides, the interest on such money advanced by way of cash loans has been determined applying rate of interest of 12% and the same has also been brought to tax.

Here, first and formost issue that arise for consideration is regarding on whom the initial onus lies which needs to be discharged. Whether it is Revenue or the assessee who has to discharge the initial burden of proof that such unaccounted money belongs to the assessee and secondly, the same has been advanced by the assessee by way of cash loans through Ramesh Manihar Group to third parties and he has earned interest thereon and the same has remain unaccounted in the books of accounts.

In this regard, it is noted that during the course of assessment proceedings, the assessee was issued a show cause as to why the addition of Rs. 25 crores should not be made as unaccounted income along interest @ 1% per month. In response to the said show cause notice, the assessee stated that he, at no point of time, during the relevant previous year or otherwise, has given any amount in cash, as loan or otherwise, through any person, including Sh. Ramesh Chand Maheshwari of Ramesh Manihar Group. It was further submitted by the assessee that from the documents so provided, the assessee is unable to understand as to how the Assessing Officer has inferred that he has provided cash loans to different persons through Sh. Ramesh Chand Maheshwari. The reply so furnished by the assessee was examined by the Assessing Officer and as per the Assessing Officer, reply of the assessee is of routine nature having no evidence to contradict the information available with the Revenue and duly incorporated in the reasons for reopening of the case and the assessee has failed to substantiate the onus cast upon him about the & 1298/JP/2019 & 66/JP/2020 46 Sh. Prakash Chand Kothari, Jaipur vs. DCIT, Jaipur impugned transactions of Rs. 25 crores. During the course of hearing, there is reiteration on part of the ld PCIT/D/R that initial onus lies on the assessee which he has failed to satisfy and reliance has been placed on the findings of the Assessing officer in this regard.

The ld A/R in his submissions has however stated that the addition has been made by the Assessing officer by way of undisclosed investment in form of cash loans invoking the provisions of Section 69 and therefore, the burden lies on the Assessing officer to prove that the investment by way of cash loans has infact taken place and the amount so invested belongs to the assessee and the burden is on the Revenue to first prove the said allegations by leading positive evidence. In this regard, our reference was drawn to the provisions of Section 69 of the Act which reads as under:

On perusal of the aforesaid provisions, it is observed that it talks about a situation where in any financial year, the assessee has made investments which are not recorded in his books of accounts and in the instant case, whether the assessee has made investment by way of cash loans and whether the same has not been recorded in his books of accounts, it has to be determined by the Assessing officer and a finding is to be recorded bringing cogent evidence on record that money so invested belongs to the assessee and the same has been advanced by way of cash loans through Ramesh Manihar group. And once it is established that these two conditions are satisfied regarding money so invested & 1298/JP/2019 & 66/JP/2020 47 Sh. Prakash Chand Kothari, Jaipur vs. DCIT, Jaipur belongs to the assessee and making investment by way of cash loans and not recording it in his books of accounts, in such a situation, an opportunity may be provided to the assessee calling for his explanation about the nature and source of such investment. And where either no explanation has been furnished by the assessee or the explanation so offered is not found satisfactory in the opinion of the Assessing officer, the said investment may be deemed to the income of the assessee for such financial year. Looking at it from another perspective, we find that where in response to show-cause notice, the assessee had catergorically denied making any such investment through Ramesh Manihar Group and then, in such a scenario, how can the assessee lead any evidence in support of a transaction which he denied having executed and undertaken at first place. Therefore, we agree with the contentions advanced by the ld A/R that the initial onus lies on the Assessing officer to establish through leading positive evidence that the assessee has infact invested the money by way of cash loans through Ramesh Manihar Group and therefore, we believe that merely stating that the same has not been recorded in the books of accounts so maintained by the assessee is not sufficient enough to discharge the initial burden cast on the Assessing officer.

In order to determine whether the onus cast on the Assessing officer has been satisfied or not and basis of his findings, we refer to the information and other material/documentation available with the Assessing officer prior to initiation of the reassessment proceedings as well as analysis/examination thereof during the course of reassessment proceedings and besides, other information/documentation relied upon by the Assessing officer during the course of reassessment proceedings to arrive at his findings and which forms the basis of subject addition of undisclosed investment in the impugned order. These include information received from DCIT Central Circle-3 Jaipur prior to recording of reasons and issuance of notice u/s 148, copy of extracts of excel sheets/data found in 18 pen drives during the course of search u/s 132 from the premises of Shri Ramesh Manihar and relevant to the assessee, copy of & 1298/JP/2019 & 66/JP/2020 48 Sh. Prakash Chand Kothari, Jaipur vs. DCIT, Jaipur statement of Shri Ramesh Chand Maheshwari alias Shri Ramesh Manihar recorded during the course of search u/s 132(4) dated 7.01.2016, copy of statement of Shri Ramesh Chand Maheswari alias Shri Ramesh Manihar subsequently recorded u/s 131 dated 8.11.2017.

Firstly, we refer to the information so received by the Assessing officer from DCIT Central Circle -3, Jaipur prior to recording of reasons and issuance of notice u/s 148, it talks in general about the search and seizure action u/s 132 carried out in case of Ramesh Manihar Group and during the course of search, voluminous data comprising of excel sheets in pen drives were seized from the office of this said group. It has been further stated that the said group was indulging in cash loan financing on a large scale and were engaged as finance brokers for arranging cash loans between various borrowers and lenders and the data so seized relate to such unrecorded cash transactions. Thereafter, talking specifically about the assessee, it has been stated in the said information that certain transactions have been noticed regarding the assessee, Shri Prakash Chand Kothari wherein the assessee has paid cash loans of Rs 25 crores to various persons through the said group and has earned interest on the said amount. If we look at the data so provided in form of a table in the information so received from DCIT Central Circle-3 Jaipur and as recorded in the reasons by the Assessing officer, we find that it list down certain transactions on various dates and has various columns with heading “T”, “@”, “AT” and certain figures have been stated under each heading corresponding to various dates, and thereafter, has two columns with heading “from” and “TO” wherein under column “from”, “PCK” has been stated and under column “TO”, certain names again in abbreviated form has been stated. On perusal of the said data, it is not discernible as to what kind and nature of transactions the said data depicts as everything is in abbreviated form, what “T” stand for, what “@” stand for, what “AT” stand for, what “PCK” stand for, what is the linkage of “PCK” with other persons whose name are again written in abbreviated form, and how this data and so called transactions are related to & 1298/JP/2019 & 66/JP/2020 49 Sh. Prakash Chand Kothari, Jaipur vs. DCIT, Jaipur the assessee and how the figures so depicted represent and add up to a figure of Rs 25 crores are again not discernable even from close reading of the said data and said data is unclear, vague and in abbreviated and codified form and therefore the said data per se on a standalone basis cannot constitute as tangible and cogent material/evidence in possession of the Assessing officer unless the same is analysed and examined thoroughly and necessary linkage is established with the assessee.

Now, let’s look at as to how the Assessing officer has examined and analysed the said data further during the course of reassessment proceedings. The Assessing officer has referred to and compared the aforesaid data with data found in other pen drives as well as statements of Ramesh Chand Maheshwari recorded u/s 132(4) during the course of search and post search proceedings u/s 131 of the Act given that the said data has been found in pen drives from the premises of Ramesh Manihar Group during the course of search. Apparently, the aforesaid data was found in pen drive “Jagat.xlsx” where name of lenders and borrowers were admittedly stated in code name or abbreviated form and it has been claimed by the Revenue that “PCK” stands for the assessee, Shri Prakash Chand Kothari. The said data was then compared with data in other pen drives namely “from and two group.xlsx”, “copy of New Dir.xls”, data in Ankoot file where name of Prakash Chand Kothari, KGK Jewellers, address and phone number has been stated and basis such exercise, the Assessing officer has reached the final conclusion and recorded a finding that “PCK” stands for the assessee, Shri Prakash Chand Kothari and the transactions stated in the first excel file so found in the pen drive “Jagat.xlsx” pertains to the assessee. The Assessing officer has further stated that on examination of these pen drives, it is found that the amount of transactions were mentioned after suppressing five zeros and different individual entries totaling to Rs 2500 actually means and reflect a total figure of Rs 25 crores. The Assessing officer has thereafter referred to the statement of Shri Ramesh Chand Maheshwari recorded u/s 132(4) during the course of search and in & 1298/JP/2019 & 66/JP/2020 50 Sh. Prakash Chand Kothari, Jaipur vs. DCIT, Jaipur particular, question no. 16, 17, 18 and 19 and the response to the said questions submitted by Shri Ramesh Chand Maheshwari has been considered and reproduced in the reassessment order. The Assessing officer has also referred to the statement of Shri Ramesh Chand Maheshwari recorded u/s 131 during the course of his own assessment proceedings and also the application filed by his Ramesh Manihar Group before the Settlement Commission where they surrendered their commission income on such unrecorded and unaccounted transactions and due taxes have been paid. Basis the same, the AO has arrived at a finding that “PCK” stands for the assessee and he has also advanced cash loans worth Rs 25 crores through Shri Ramesh Manihar Group and has earned interest thereon which has been brought to tax.

In this regard, as we have noted earlier, the proceedings have been initiated under section 147 and not under section 153C as no satisfaction has been recorded by the Assessing officer of Ramesh Manihar Group that seized documents pertains to the assessee or any information contained therein relates to the assessee and the original seized pen drives found during the course of search have not been handed over to the Assessing officer by Assessing officer of the Ramesh Manihar Group. Therefore, what has been received by the Assessing officer in the instant case is only the information in form of extracts and print out of the excel sheets containing the aforesaid data in various pen drives found during the course of search in case of Ramesh Manihar Group. Here, it is relevant to note that presumption available under section 132(4A) in terms of authencity and correctness of contents of such data/information found in the pen drives can be drawn against the person in whose case the search has been authorized and from whose possession or control such pen drives have been found during the course of search. Therefore, in the instant case, the presumption lies against Ramesh Manihar Group, and not against the assessee. In such a case, the burden lies on the Assessing officer by leading corroborative evidence that the data/information so found in the pen drives relates to the cash loan transactions belongs to the & 1298/JP/2019 & 66/JP/2020 51 Sh. Prakash Chand Kothari, Jaipur vs. DCIT, Jaipur assessee and the same have actually been undertaken by the assessee through Ramesh Manihar Group and the contents therein are found as correct and authentic and stand duly corroborated by independent evidences.

The assessee has also challenged the reliance on such extracts and print outs of the excel sheets stating that the AO has not complied with the provisions of section 65A and 65B of the Evidence Act, 1872 and no satisfaction has been recorded by the AO that the output of the pen drives/computer records were analysed on “as is” basis by the Department and there was no risk of the data being tempered by anyone and which has been relied upon by the Assessing officer. In his submissions, the ld PCIT/D/R submitted that there is a well laid down procedure and protocols are strictly followed by the department regarding seized documents and it is unlikely that the search data can be tempered with by any officials of the Revenue department and once, the information has been received from another Assessing officer, there is a presumption that such data and information is shared on “as is” basis and therefore, where there is no basis for raising any suspicion in the mind of the Assessing officer, no further action has been taken regarding verifying the authencity of the data so received and recording any satisfaction in this regard. It was accordingly submitted that it is merely an apprehension on the part of the assessee and the same cannot be a basis for not relying on the data so collected and received by the Assessing officer and which forms part of the assessment records.

We find that though Evidence Act is not strictly applicable to the income tax proceedings, however the general principles so laid down therein can be applied by leading certain positive evidence which can authenticate the data which has changed hands apparently from the Investigation Wing to the Assessing officer of the searched person and then, finally to the Assessing officer who has placed reliance on the same and has passed the impugned order. It may be an apprehension on part of the assessee that the data while & 1298/JP/2019 & 66/JP/2020 52 Sh. Prakash Chand Kothari, Jaipur vs. DCIT, Jaipur shared/handed over to the Assessing officer might have been either modified, altered or tempered with, however, where such an apprehension has been raised by the assessee and more so, it would also be interest of Revenue where there is heavy reliance placed by the Revenue on such data, such apprehension so raised by the assessee needs to be appropriately addressed by leading positive evidence and recording of satisfaction by the Assessing officer which we find has not happened in the instant case.

Having said that, let’s examine whether data so found in the pen drives and received by the Assessing officer stand corroborated by the Shri Ramesh Chand Maheshwari in his statement recorded under Section 132(4) at the time of search conducted on 27.01.2016. In reply to question no. 12, he has stated that through his two firms, namely Amarnath Associates and Amarnath Enterprises, loan financing through cheque/RTGS has been undertaken on commission basis and in reply to question no. 15, he has stated that cash loan financing is done jointly with Manmohan Bagla in their private capacity and his companies/firms have no relationship with such cash loan transactions. In reply to question no. 16, he has further stated that whatever amount was given as cash loans was his’s and Manmohan Bangla’s own money which was given on interest and which on receipt, is further given on interest to various parties. Thereafter, in subsequent questions, he has explained since how long these cash loan transactions have been undertaken by them and how the accounts are maintained which has been stated by him to be maintained on computer, pen drives and slips which remains in his possession. Further, questions no. 30 and 31 were asked specifically about the pen drives and the data so found in the pen drives and we deem it appropriate to reproduce the same as under:

As noted above, in reply to Q. No. 30 & 31, he stated that all these transactions found in the pen drives are of similar nature and pertains to cash loan transactions. Further, regarding names in code word and names as found in various pen drives/excel files found in the receptionist’s computer, he has stated that the name and address so found in excel files in the receptionist computer was prepared for the purpose of sending greetings/invitation cards and has no linkage with the accounts and business dealing. Finally, in reply to Q. No. 36, we find that he has put forth his willingness to surrender the undisclosed investment in the form of cash loans and also the incidental interest income as part of his income. We therefore find that in his statement recorded u/s 132(4), Shri Ramesh Chand Maheshwari has talked about loan financing through formal banking channels and loan financing in form of cash. As far as loan financing in cash is concerned which is under examination before us, the Investigation officer has asked him series of questions and confronted him with the pen drives so seized during the course of search and Shri Ramesh Chand Maheshwari has stated clearly and consistently that loan financing has been done jointly with Manmohan Bangla in their personal capacity where their own money is lent on interest to various parties from time to time and has explained the modalities of such cash financing and how the accounts thereof are maintained in computers and pen drives. Therefore, we are unable to understand as to how the Assessing officer has reached to a conclusion that basis such statement recorded u/s 132(4), which has also been reproduced in the assessment order and relied upon by him, that Shri Ramesh Chand Maheshwari and his partner Shri Manmohan Bagla were involved in cash loan transactions where the amounts were taken in cash from the lenders and the same was advanced to the borrowers in cash and have earned commission income on these transactions, and has recorded a consequential & 1298/JP/2019 & 66/JP/2020 55 Sh. Prakash Chand Kothari, Jaipur vs. DCIT, Jaipur finding that since name of “PCK” is found in the excel sheets, it represent the assessee only and the assessee also made his transactions of lending unaccounted money through the said group and earned interest income thereon. We therefore find that there is a clear disconnect between the findings of the AO and the statement of Ramesh Chand Maheshwari recorded on oath u/s 132(4) of the Act, and data so found in the pen drives which is claimed by the AO as relating to cash loan financing by the assessee through Ramesh Manihar cannot be held to be corroborated by the statement of Shri Ramesh Chand Maheshwari recorded under Section 132(4) of the Act.

Now, coming to the another statement of Shri Ramesh Chand Maheshwari recorded under Section 131 on 8.11.2017 which has been relied upon by the Assessing officer and we refer to response of Shri Ramesh Chand Maheshwari in response to various questions. We find that in this statement recorded u/s 131 on 8.11.2017, after a gap of almost 21 months from the earlier statement which was recorded u/s 132(4) on 27.01.2016, when Shri Ramesh Chand Maheshwari was confronted with his earlier response to question no. 15 in statement recorded u/s 132(4), there has been a change in his stand where he stated that cash loan financing is undertaken in their personal capacity where they acted as a mediator/facilitator. This is unlike his earlier statement where he had stated in response to question no. 15 that cash loan financing is done jointly with Manmohan Bagla in their personal capacity and in reply to question no. 16, he has stated that whatever amount was given as cash loans was his and Manmohan Bangla’s own money which is given on interest and which on receipt, is again given on interest. We therefore find that there has been a change in stand of Shri Ramesh Chand Maheshwari where even in respect of cash loan financing, he has stated that he acts as a mediator and facilitator between the lenders and borrowers and thus earns commission income instead of interest income on amount advanced in their personal capacity as & 1298/JP/2019 & 66/JP/2020 56 Sh. Prakash Chand Kothari, Jaipur vs. DCIT, Jaipur stated earlier. Basis such statement and filing of petition before the Settlement Commission where these cash loan financing transactions have been claimed and shown as transactions undertaken by Shri Ramesh Chand Maheshwari on commission basis, the AO has taken cognizance of the same and held that since name of “PCK” is found in the excel sheets, it represent the assessee only and the assessee also made his transactions of lending unaccounted money through the said group and earned interest income thereon. We therefore find that there is a total disconnect and variance between the two statements and change of stand of Shri Ramesh Chand Maheshwari in his statement recorded u/s 132(4) and the statement subsequently recorded u/s 131 of the Act after a gap of almost 21 months and the Assessing officer in the instant case has effectively placed reliance on the subsequent statement recorded u/s 131 ignoring the earlier statement recorded u/s 132(4) of the Act.

Without getting into the background and basis of such change in stand of Shri Ramesh Chand Maheshwari which is a matter for Revenue and appropriate authorities to ponder and examine, and is in any case beyond the scope of impugned matter under consideration, the question that arises for consideration is whether the Assessing officer can be held justified in placing reliance on such shifting stand of Shri Ramesh Chand Maheshwari in his own two statements which put a question mark on reliability of his statements and can it be said that the data so found in the pen drives relates to cash loan financing of various lenders stand corroborated by the statement of Shri Ramesh Chand Maheshwari recorded under Section 131 of the Act. The assessee has also challenged the same stating that such statement was never confronted to him during the course of reassessment proceedings and even an opportunity of cross-examination of Shri Ramesh Chand Maheshwari so demanded was not provided to him. & 1298/JP/2019 & 66/JP/2020 57 Sh. Prakash Chand Kothari, Jaipur vs. DCIT, Jaipur 82. To our mind, in the facts of the present case, where there is shifting stand of Shri Ramesh Chand Maheshwari in his two statements and there is heavy reliance placed by the Revenue on the latter statement recorded u/s 131, it is imperative that the assessee be allowed an opportunity to seek a copy of the said statement and file his objections and secondly and equally important, an opportunity to cross examine Shri Ramesh Chand Maheshwari which has been recognized time and time by the Courts as an important facet through which the principle of natural justice can be implemented and is duly supported by various authorities quoted at the Bar. In absence of such an opportunity, no reliance can be placed on such statement more so where in his statement, Shri Ramesh Chand Maheshwari did not categorically referred the name of the assessee or that the assessee provided cash loans through his Group to different persons. Therefore, the finding of the AO that data so found in the pen drives relates to cash loan financing by the assessee through Ramesh Chand Maheshwari stand corroborated by the statement of Shri Ramesh Chand Maheshwari recorded under Section 131 of the Act cannot be accepted.

Further, the ld AR has stated at the Bar that even before the settlement Commission, Shri Ramesh Chand Maheshwari has not given any names and identity of the lenders and borrowers and any admission of the Ramesh Chand Maheshwari before the Settlement Commission therefore doesn’t establishes that PCK is no one else but the assessee, Shri Prakash Chand Kothari. In view of what we have found and stated earlier, we are not persuaded by the findings of the Assessing officer that merely because Shri Ramesh Chand Maheshwari and his Group has filed an application before the Settlement Commission where they have surrendered their commission income on such unrecorded and unaccounted cash loan financing transactions and due taxes have been paid, the same should by default form the basis for determining the nature and character of transactions by way of cash loans in the hands of the & 1298/JP/2019 & 66/JP/2020 58 Sh. Prakash Chand Kothari, Jaipur vs. DCIT, Jaipur assessee routed through Ramesh Manihar Group as the said admission is a unilateral admission on part of Ramesh Chand Maheshwari and the assessee cannot be compelled to accept the same in absence of any clinching and irrefutable evidence that the money has infact been paid by the assessee and routed through Ramesh Manihar Group for onward lending and without providing an opportunity of cross-examination. The assessee is not privy to the application filed before the Settlement Comission and proceedings before the Settlement Commission and therefore, the findings of the Settlement Commission cannot be said to bind the assessee and for that matter, the Assessing officer who has to record his own independent findings considering the facts and circumstances of the present case. We therefore agree with the findings of the ld CIT(A) that mere admission by one person before the Settlement Commisison cannot bind the another person in absence of any nexus between the person admitting and the other person.

We find that similar view has been taken by the Coordinate Mumbai Benches in case of Anil Jaggi vs ACIT (supra). In that case, payment of on- money by assessee, Anil Jaggi, was noticed in the course of search in the Hiranandani Group in respect of purchase of certain properties. The Coordinate Bench after appreciating the entirety of facts and circumstances held that the findings of the Assessing officer that assessee had paid "on money" for purchase of property under consideration is based on the contents of the pen drive which was seized from the residence of an ex- employee of Hiranandani group and the information as emerges from the print out of the pen drive falls short of material facts and remain uncorroborated and mere admission of the amounts recorded in the pen drive as the additional income by Sh. Niranjan Hiranandani in his application before the Settlement Commission falling short of any such material which would inextricably evidence payment of “on money” by the assessee would not lead to drawing of adverse inference as regards the investment made by & 1298/JP/2019 & 66/JP/2020 59 Sh. Prakash Chand Kothari, Jaipur vs. DCIT, Jaipur the assessee for purchase of the property under consideration and additions made by lower authorities were deleted and the relevant findings of the Coordinate Bench read as under:

We therefore find that the Assessing officer has merely relied upon extracts of certain uncorroborated excel sheets, found during the course of search in case of Ramesh Manihar Group. Such excelsheets do not point out to the fact of assessee having given loans, in cash, to different persons through Ramesh Manihar Group. Nothing concrete is discernible from these excel sheets. The Assessing officer has failed to corroborate the excel sheets with independent evidences. Unless such corroborative evidences were brought on record, the present additions are not justified. Nowhere in the excelsheets found during the course of search in case of Ramesh Manihar Group and relied upon by the AO, it could be established that “PCK” as mentioned in those documents stand for the assessee only. No trail of documents or corroborative & 1298/JP/2019 & 66/JP/2020 62 Sh. Prakash Chand Kothari, Jaipur vs. DCIT, Jaipur evidences could be established in this regard. The extracts of the excel sheets on which reliance had been placed were found from the computers of employees of Shri Ramesh Manihar. Those employees were never examined independently by the AO to find out whether “PCK” as mentioned in such excel sheets represent assessee only. There is no positive confirmation or concrete evidence available with the AO, in the form of acceptance by the parties alleged to have received loans that they have actually received loans, in cash, which was provided by the assessee through Ramesh Manihar Group. Leaving aside a positive confirmation from the recipients of the loan, the AO has not been able to establish even the identity of the persons alleged to have received loans from the assessee. There is shifting stand of Shri Ramesh Chand Maheshwari in his two statements recorded u/s 132(4) and u/s 131 of the Act. We find that in his latter statement recorded u/s 131, he has stated that cash loan financing is undertaken in their personal capacity where they acted as a mediator/facilitator. This is unlike his earlier statement u/s 132(4) where he had stated that cash loan financing is done jointly with Manmohan Bagla in their personal capacity and whatever amount was given as cash loans was his and Manmohan Bangla’s own money which is given on interest and which on receipt, is again given on interest. We therefore find that there has been a change in stand of Shri Ramesh Chand Maheshwari where even in respect of cash loan financing, he has stated that he acts as a mediator and facilitator between the lenders and borrowers and thus earns commission income instead of interest income on amount advanced in their personal capacity as stated earlier. Even no question was even put to Shri Ramesh Chand Maheshwari as to what “PCK” stand for and there is no response by him either in his entire statement which suggests that the assessee has advanced cash loan through him. Therefore, the data so found in the excel sheets doesn’t stand corroborated by his statements as well. Even where the AO wishes to place reliance on such statement, no opportunity of cross examining Shri Ramesh Chand Maheshwari was provided to the assessee inspite of specific request made by the assessee during the course & 1298/JP/2019 & 66/JP/2020 63 Sh. Prakash Chand Kothari, Jaipur vs. DCIT, Jaipur of assessment proceedings. The ld CIT(A) has rightly held that relying upon the statement and not providing cross examination to find out any involvement of the person affected by such statement is a gross violation of principles of natural justice which renders such reliance a nullity and if such statement is discarded, there remain no evidence to hold that the appellant has given any such advance to the tune of Rs. 25 crores. Merely extracts of excel sheet do not provide any evidence of the allegation made by the AO against the assessee. Thus, mere fact that there were certain entries found from record of third party is not sufficient to make addition on the ground that assessee had made unexplained investments. The ld CIT(A) has rightly held that though cognizance may be taken in respect of entries by third-party in the assessment of other person so as to initiate inquiry for assessment, yet when there is no finding that such entries are in fact pertaining to such third person only which should be emanating from the entries itself or from the person who has recorded such entry, no cognizance can be taken so as to fasten tax liability on such third person.

In this regard, we find that under similar fact pattern, Coordinate Benches of the Tribunal have taken a similar view and reference can be drawn to decision of the Coordinate Mumbai Benches in case of Katrina Rosemary Turcotte (supra). In this case, on the basis of a print out taken from the computer back–up of Ms. Sandhya Ramchandra, assessee’s manager and assessee’s agent Matrix India, it was concluded by the Assessing Officer that the assessee has received an amount of Rs. 2,50,000 in cash for appearing as a host at an ICC event in Sidney. The Coordinate Bench deleted the additions holding that the addition was made on the basis of a print out taken from the computer of a third party who happened to be an employee of Matrix and there are no other corroborative evidence brought on record to prove the fact that the payment mentioned in the seized material was actually received by the assessee and relevant findings read as under: & 1298/JP/2019 & 66/JP/2020 64 Sh. Prakash Chand Kothari, Jaipur vs. DCIT, Jaipur “8. We have heard rival contentions and perused the material available on record. Undisputedly, on the basis of a print out taken from the computer back–up of Ms. Sandhya Ramchandra, it was concluded by the Assessing Officer that the assessee has received an amount of Rs. 2,50,000 in cash for appearing as a host at an ICC event in Sidney. It is very much clear that apart from this document, there was no other evidence before the Assessing Officer to indicate that the assessee has received cash amount in question. It is a fact that in course of search as well as post search proceedings, the assessee was confronted with seized material and the assessee categorically stated to have neither appeared as a host in the said event nor received any cash from Matrix. In fact, an Affidavit was also filed on behalf of Matrix categorically stating that no such cash payment of Rs. 2,50,000 was made to the assessee. Thus, from the aforesaid facts, it is to be seen that the addition was made on the basis of a print out taken from the computer of a third party who happened to be an employee of Matrix and there are no other corroborative evidence brought on record to prove the fact that the payment mentioned in the seized material was actually received by the assessee. On the contrary, the passport submitted by the assessee clearly established the fact that neither she had travelled to Sidney in relevant period nor hosted the ICC event for which she was supposed to receive cash payment. It is further relevant to observe, even Ms. Sandhya Ramchandra, from whose computer such print out was taken had stated before the Departmental Authorities that she was not aware of the fact mentioned in the said Annexure as it was for a period prior to her appointment in Matrix. In these circumstances, simply relying upon a untested / unverified document and without any other corroborative evidence to demonstrate that the assessee has actually received cash payment of Rs. 2,50,000 for hosting an event in Sidney, the addition, in our view, is unsustainable. Therefore, we uphold the order of the learned Commissioner (Appeals) on this issue by dismissing the ground raised

Similarly, in case of Mahabir Prasad Gupta (supra), the matter came up before the Coordinate Delhi Benches of the Tribunal. In this case, during the course of search at the premises of Brij Mohan Gupta, a diary containing entries in coded language was found and basis the said entries, the Assessing officer has held that the assessee has advanced loan of certain sum through Shri Brij Mohan Gupta and addition was made under section 69 as undisclosed investment. The Coordinate Bench held that the Revenue could not establish that name of the person recorded in the diary as 'MPG' meant Mahabir Prasad Gupta only i.e. assessee and following its earlier decision in case of Atul Gupta having similar fact patten, deleted the addition and relevant findings of the Coordinate Bench read as under:

In light of aforesaid discussions and following the decisions cited supra, we are of the considered view that in the peculiar facts and circumstances of the case present case, there is no basis for making the addition in the hands of the assessee of Rs. 25,00,00,000/- made on account of cash loans and consequent interest charged thereon amounting to Rs. 90,58,625/- and for the reasons cited supra, we affirm the findings of the ld CIT(A) deleting the said & 1298/JP/2019 & 66/JP/2020 75 Sh. Prakash Chand Kothari, Jaipur vs. DCIT, Jaipur additions. We make it clear that our findings are based on appreciation of peculiar facts and circumstances of the present case and therefore should not be taken as binding precedent in other cases which need to be examined in light of respective facts and circumstances. The grounds of appeal no 1-3 taken by the Revenue are thus dismissed.

Ground no. 4 relating to deletion of Rs 50,05,578/- on account of Long Term Capital Gain has become infructious in view of subsequent decision of the ld CIT(A) passed u/s 154 of the Act and which any way is subject matter of our adjudication in in subsequent paragraphs. Similarly, we find that the assessee has also sought to raise additional grounds of appeal relating to long term capital gains of Rs 50,05,578/- and since the assessee has filed separate appeal as well which is registered as ITA No. 66/JP/2020, the same have again become infructious and are not admitted.

In the result, the appeal of the Revenue is dismissed.

In this appeal, the assessee has challenged the order passed u/s 154 by the ld CIT(A) for A.Y 2011-12 and has taken the following sole ground of appeal:- “In the facts and circumstances of the case and in law, ld. CIT(A), while passing the order under section 154, has erred in not considering the submissions of the assessee, already placed on record w.r.t the addition made by the ld. AO of Rs. 50,05,578/- on account of Long Term Capital Gain, in the Income Tax Computation Form. The action of the ld. CIT(A) is illegal, unjustified, arbitrary, against the facts of the case and also against the principles of natural justice. Relief may please be granted by deleting the said addition of Rs. 50,05,578/-.”

The ld. AR submitted that the assessee had filed his return of income on 29.09.2011 declaring total income of Rs.1,10,86,623/- and assessment was completed vide order passed u/s 143(3) dated 31.03.2016 wherein returned income of Rs. 1,10,86,623/- was accepted. It was further submitted that the & 1298/JP/2019 & 66/JP/2020 76 Sh. Prakash Chand Kothari, Jaipur vs. DCIT, Jaipur pursuant to notice u/s 148 of the Act, the assessee filed his return of income on 17.04.2018 wherein he has declared his income at Rs. 1,10,86,623/- as originally returned and assessed. It was further submitted that in the order passed u/s 147 read with section 143(3) dated 25.12.2018, the Assessing Officer has made addition of Rs. 25,90,58,625/- as against the returned income of Rs. 1,10,86,623/- and assessed income was determined at Rs. 27,01,45,250/-. It was submitted that there was no discussion in the assessment order as well as no addition was made by the Assessing Officer while passing the order u/s 147 read with section 143(3) in respect of Long Term Capital Gain amounting to Rs. 50,05,578/- and only addition was in relation to alleged cash loans and alleged interest income of Rs 25,90,58,625/-. It was submitted that in the Income Tax Computation Form attached with the assessment order, the Assessing Officer had inadvertently included a figure of Rs. 50,05,578/- towards Long Term Capital Gains and which was also brought to tax in the hands of the assessee. It was further submitted that assessee took specific ground of appeal before the ld. CIT(A) and the said ground of appeal was initially not adjudicated upon by the ld CIT(A). Subsequently, the Revenue moved an application u/s 154 before the ld. CIT(A) and the ld. CIT(A) has passed the impugned rectification order u/s 154 wherein the ground of appeal has been dismissed. It was submitted that against the said findings and order of the ld. CIT(A), the assessee has filed the present appeal before the Tribunal and given the fact that the Assessing Officer has not given any finding in respect of any capital gains which has escaped taxation while passing the order u/s 147 read with section 143(3), it is a clear mistake which has happened while computing total income by the Assessing Officer and which has wrongly been upheld by the ld CIT(A). Hence, the Assessing Officer may be directed to provide the necessary relief to the assessee by way of deletion of additions towards the so called capital gains of Rs. 50,05,578/-.

Per contra, ld. PCIT/DR drawn our reference to the order of the ld. CIT(A). It was submitted that during the course of appellate proceedings, a & 1298/JP/2019 & 66/JP/2020 77 Sh. Prakash Chand Kothari, Jaipur vs. DCIT, Jaipur report from the Assessing Officer was called and in the said report, the Assessing Officer has stated that the assessee himself while filing the return of income u/s 148 of the Act has taken capital gains of Rs. 50,05,578/- in the computation of total income. Hence, the basis the said report of the AO, in the absence of any further submission by the assessee, the ld. CIT(A) has upheld the action of the Assessing Officer. Accordingly, it was submitted that there was no infirminity in the impugned order so passed by the ld. CIT(A). Hence, the ground of appeal so taken by the assessee be dismissed.

We have heard the rival contentions and perused the material available on record. We have gone through the return of income filed by the assessee in response to notice issued u/s 148 and find that in the computation of income filed along with the return of income, the assessee has offered long term capital gains on sale of shares amounting to Rs 23,19,214/- and has also claimed long term capital loss on transfer of immoveable property amounting to Rs 23,91,888/-, and after setting off long term capital gains against long term capital loss, the assessee has claimed carry forward of long term capital loss of Rs 72,673/-. The findings of the Assessing Officer in the remand report that the assessee himself while filing the return of income u/s 148 of the Act has taken capital gains of Rs. 50,05,578/- in the computation of total income is therefore not based on tax filings made by the assessee or any other independent material available on record. Further in the order passed u/s 147 read with section 143(3), it is an admitted fact that the issue of capital gains didn’t arise for consideration during the course of reassessment proceedings and there is no finding which has been recorded by the Assessing Officer disputing the figures as reported by the assessee in his return of income under the head “long term capital gains”. We therefore find that it is a clear mistake on the part of the Assessing Officer while computing the total income wherein the Long Term Capital Gains amounting to Rs. 50,05,578/- has been inadvertently brought to tax in the hands of the assessee. The Assessing Officer is hereby directed to & 1298/JP/2019 & 66/JP/2020 78 Sh. Prakash Chand Kothari, Jaipur vs. DCIT, Jaipur delete the said amount of Rs. 50,05,578/- and the ground of appeal taken by the assessee is allowed. In the result, appeal of the assessee is allowed.

In the result, the appeal of the Revenue in is dismissed, the appeal of the assessee in ITA No. 1190/JP2019 is partly allowed and appeal in ITA No. 66/JP/2020 filed by the assessee is allowed in light of aforesaid directions.