PR. COMMISSIONER OF INCOME TAX CENTRAL vs. NARESH SINGHVI

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ITA/114/2017HC RajasthanRJHC01042046201719 January 20184 pages
AI SummaryDismissed

What did the High Court hold?

The Tribunal held that no substantial question of law arises for consideration in the appeal filed by the revenue. The Tribunal affirmed the orders of the CIT(Appeals) and the ITAT, which had deleted the addition of Rs. 3.77 crores made by the Assessing Officer. The reasoning was based on the settled legal principle that loose papers, diaries, and documents found from third parties, which are not regularly maintained books of accounts, cannot form the sole basis for making additions to the income of an assessee. The Tribunal cited judgments from the Supreme Court and the Delhi High Court to support this view. The ratio decidendi is that evidence consisting of loose documents found from third parties, narrating transactions with the assessee, is not sufficient on its own to sustain an addition. The appeal was dismissed as having no force.

What were the facts?

The assessee, engaged in trading gold and silver ornaments, was subjected to a search and seizure operation on December 5, 2012. During the search, the assessee surrendered income of Rs. 1,24,06,251/-. The Assessing Officer (AO) noted that a survey under Section 133A was conducted on Sh. Jaldeep Swami, from whose premises documents belonging to the assessee were found. One document, page 63 of Annexure AS, detailed the purchase of 60 bighas of land for approximately Rs. 6 crores, with Rs. 3.77 crores allegedly received from the assessee for payments. The assessee, in post-search proceedings under Section 131, denied knowledge of this paper and stated his family had property transactions with Sh. Jaldeep Swami that were later cancelled. The AO made an addition of Rs. 3.77 crores to the assessee's income for assessment year 2013-14 based on Sh. Jaldeep Swami's statement. The CIT(Appeals) partly allowed the assessee's appeal, finding no justification for the addition based on the loose paper. The ITAT affirmed the CIT(Appeals)'s order.

What were the issues?

1. Whether the Tribunal erred in upholding the CIT(Appeals)'s decision to delete the addition of Rs. 3.77 crores made by the Assessing Officer, thereby holding that loose papers and documents found from a third party, if containing narration of transactions with the assessee, cannot form the sole basis for an addition. This issue turns on the interpretation and application of principles related to evidence and additions based on documents found from third parties. Assessee's Contention: The assessee argued that the addition was made unilaterally by the AO without any incriminating evidence found during the search concerning the payment for land purchase from undisclosed sources. The CIT(Appeals) found no justification for the addition based on the alleged page 63 of Annexure AS, which was found from the premises of Sh. Jaldeep Swami. Revenue's Contention: The revenue contended that the addition made by the AO was justified. The ITAT, in its decision, relied on settled legal principles, including the judgment of the Hon'ble Supreme Court in CBI Vs. VS Shukla and the Delhi High Court in CIT Vs. Anil Khandelwal, and DCIT Vs. Bhola Nath Radha Krishna, which held that loose papers and documents cannot be construed as regularly kept books of accounts and are outside the purview of Section 34 of the Evidence Act, 1972. Therefore, resting a case solely on such loose papers is not justified.

Which sections of the Income-tax Act were involved?

Section 260A,Section 132,Section 133A,Section 131,Section 143(3),Section 34

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR D.B. Income Tax Appeal No. 114 / 2017 Pr. Commissioner of Income Tax-Central, Jaipur. ----Appellant Versus Shri Naresh Singhvi, 10A, Bathera House Colony, Udaipur. ----Respondent _____________________________________________________ For Appellant(s) : Mr. KK Bissa For Respondent(s) : _____________________________________________________ HON'BLE MR. JUSTICE GOPAL KRISHAN VYAS HON'BLE MR. JUSTICE VINIT KUMAR MATHUR

Judgment / Order Per Hon'ble Mr. Justice Gopal Krishan Vyas 19/01/2018

In this income tax appeal filed under Section 260A of the Income Tax Act, 1961, the order dated 10.7.2017 passed by Income Tax Appellate Tribunal, Jodhpur Bench, Jodhpur in ITA No.136/Jodh/2017 for the assessment year 2013-14 is under challenged.

As per facts of the case, the assessee is engaged in the business of trading of gold and silver ornaments. The search and seizure operation under Section 132 of the Act was carried out at the residence of the assessee on 5.12.2012. During the course of search, the assessee surrendered income of Rs.1,24,06,251/- on account of unexplained cash, excess stock of gold and sliver jewellery and unexplained advances towards purchase of land.

(2 of 4) [ITA-114/2017]

Considering the same, the assessee filed the return declaring income of Rs.1,42,11,160/- . The Assessing Officer in course of assessment proceedings observed that on the date of search, a survey under Section 133A of the Act was conducted on Sh. Jaldeep Swami. In the survey various documents belonging to the assessee was found from his premises. One of the annexure was containing 63 pages. In page no.63 contains a note-sheet regarding purchase of 60 bighas of land at village Bhilwara, Udaipur by the assessee for approximately Rs.6 crores and as per the paper, Rs.3.77 crores is received from Sh. Naresh Ji which is shown as used for payment to various persons including for conversion of land and registry expenses. The statement of the assessee on this annexure was recorded in post search proceedings under Section 131. In question no.3, the assessee stated that he know Sh. Jaldeep Swami from last one and half years, in question no.4 he stated that he has no jewellery business with him but his family members has some property transaction with Sh. Jaldeep Swami which is subsequently cancelled. The assessee also stated that Sh. Jaldeep Swami is a property broker and therefore, some times he has given photocopies of his property documents for division and mutation. With regard to pag no.63, in question no.5 it is stated that this paper do not relate to him and he has no knowledge about this paper.

As per further facts, the assessing officer recorded statement of Sh. Jaldeep Swami on 23.12.2014 and after recording his statement, the assessing officer made addition of Rs.3.77 crores

(3 of 4) [ITA-114/2017]

to the income of respondent assessee Naresh Singhvi. The assessment order passed by the Dy. Commissioner of Income Tax, Central Circle-II, Udaipur for the assessment year 2013-14 was challenged by the respondent assessee by way of filing appeal under Section 143(3) of the Income Tax Act, 1961 and the CIT (Appeals), Udaipur vide order dated 9.1.2017 partly allowed the same whereby the finding was given by the CIT (Appeals) that in view of the legal position there is no justification in action of the assessing officer in making addition on the basis of such alleged page no.63 of Annexure AS found from the premises of Sh. Jaldeep Swamy during the course of survey proceedings in his case and no incriminating evidence was found with regard to the payment from the undisclosed source for purchase of land during the course of search. The CIT (Appeals) while giving aforesaid finding held that addition was made by the AO unilaterally is not justified and against the law and also in this case, AO has nothing brought on record for alleged addition.

Against the said order of CIT (Appeals) dated 9.1.2017, an appeal was preferred by the revenue. The said appeal was registered as ITA No.136/Jodh/2017 in which the learned ITAT of Jodhpur Bench affirmed the order of CIT (Appeals) while following the judgment of the Hon'ble Supreme Court in the case of CBI Vs. and DCIT Vs. Bhola Nath Radha Krishna ITA No.5149/Del/2012, decided on 5.4.2013 in which it was held that it is well settled law that loose papers, diaries and document cannot possibly be (4 of 4) [ITA-114/2017]

construed as books of accounts regularly kept in the course of business. Such evidence would, therefore, be outside the purview of Section 34 of the Evidence Act, 1972. Therefore, the revenue would not be justified in resting its case just on the loose papers and documents found from third party if such document contained narration of transactions with the assessee.

In view of the above, we are of the opinion that no substantial question of law emerges for consideration in the judgments of CIT (Appeals) and ITAT impugned in this appeal because the same based upon settled principle of law.

Consequently, there is no force in this income tax appeal. Hence, the same is hereby dismissed.

(VINIT KUMAR MATHUR) J. (GOPAL KRISHAN VYAS) J.

cpgoyal/ps

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