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Income Tax Appellate Tribunal, AMRITSAR BENCH, AMRITSAR
Before: SH. SANJAY ARORA & SH. N.K.CHOUDHRY
IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR BEFORE SH. SANJAY ARORA, ACCOUNTANT MEMBER AND SH. N.K.CHOUDHRY, JUDICIAL MEMBER ITA No.542(Asr)/2016 Assessment Year:2008-09
Sh. Didar Singh Vs. Dy. CIT S/o Sh. Prem Singh Ward-1, Phagwara Nakodar Chowk, Canara Bank Distt. Kapurthala Building, Hadiabad Phagwara, Distt. Kapurthala PAN:BBYPS2242G (Appellant) (Respondent) Appellant by: Sh. Harminder Syal (Ld. Adv.) Respondent by: Sh. Rajeev Gubgotra (Ld. DR) Date of hearing: 05.03.2018 Date of pronouncement: 29.05.2018 ORDER PER N.K.CHOUDHRY, JM: The instant appeal has been preferred by the Assessee/Appellant, on feeling aggrieved against the order dated 08.09.2016 passed by the Ld. CIT(A)-2, Jalandhar, u/s 250(6) of the Income Tax Act, 1961 (hereinafter called as ‘the Act’).
The following grounds of appeal raised by the assessee. “1. That the order of the CIT (A) is against the facts on record and provisions of law thus the same is arbitrary, bad in the eyes of law and is liable to be struck down.
That the Ld. CIT (A) has erred in upholding an addition of Rs.15lacs in the returned income made by the A.O by ignoring the retraction) statement of the appellant mentioned on the
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computation of income filed alongwith the return of income and by also overlooking the fact that the loose paper entry sheets containing the name of the appellant and the figures mentioned therein allegedly impounded during the course of survey at the business premises of Sh. Mohan Bajaj in which the appellant has no stake/interest of any kind is neither in his handwriting' nor the same bears any acknowledgement by him under his signatures. Thus the order confirming the said addition is bad in the eyes of law. 3. That the Ld. CIT (A) has further erred in upholding an addition of Rs. 15 lacs on the basis of loose sheet entries, and one power of attorney in the name of the appellant which do not co-relate him with any investment made by him from undisclosed sources. Hence the action of the CIT (A) in confirming the addition by invoking section 68 when the appellant was not under any legal obligation to maintain books of accounts as he had opted to file the return under section 44AD is bad in the eyes of law. Hence the order deserves to be struck down. 4. That the Ld. CIT(A) has failed to exercise his judicious acumen in not appreciating that the admission/confession statement of the appellant recorded by the ITO is not as per the spirit of law. The ITO has neither given caution to the assessee/appellant that any admission/confession can be used against him in any proceedings under the Act and its repercussions nor he was made aware of his right to engage lawyer at the time of recording of his alleged confession statement relied upon by the department though retracted by the appellant at the time of filing of the return of income. Hence the action of CIT (A) in confirming the assessment order is bad in the eyes of law. 5. That CIT (A) has further erred in not appreciating the ratio of the law laid in the judgments referred by the appellant viz. Banarsi di Hatti v/s ITO ITA No.470 (ASR)/2011, CIT v/s M/s Dhingra Metal Works (2010) 43 I.T Reps 592 (Delhi), Vinod Solanki v/s Union of India Civil Appeal No. 7407 of 2008 (SC) and misinterpreted the same and also tried to distinguish them with the judgments which are not applicable to the facts of the case in hand. All the cases referred by the CIT relates to the assessees on whom search & seizure were effected. Hence the impugned order passed by the Ld. CIT (A) is bad in the eyes of law and is liable to be set aside.
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That CIT(A) has also erred in holding in Para No.2.3 of his order that order that appellant was a business associate in real estate business with Sh. Mohan Lal Bajaj and Sh. Des Raj without establishing on record the material on the basis of which he arrived at the said conclusion except for the alleged confession statement as well unreliable piece of entry in the name of Didar Singh which even do not carry the paternity of the said person and a copy of power of attorney which do not establish any unexplained investment by the assessee.
That CIT (A) has also erred in observing in Para No. 2.4 of the impugned order that incriminating documents seized from the premises of Mohan Lai Baiai during the course of survey indicated innumerable transactions of purchase & sale of immovable properties done by theappellant alongwith Sarv~Sh. Mohan Lai & Des Raj. In fact the referred documents do not indicate any alleged Transactions nor do the same implicate the appellant in entering any into any unexplained property transactions.
That the Ld. CIT (A) has wrongly applied the ratio of the judgment laid in the case of Sh. Navdeep Dhingra v/s Department of Income Tax in ITA No. 691/Chd/2011 as the facts of the instant case are totally different from the case referred by the CIT (A).
That the Ld. CIT (A) has passed the impugned order by considering the week, unreliable and untrustworthy documentary evidence of the department by ignoring the most credible version as well as the retraction made by the appellant. Hence the order of Ld. CIT (A) is unlawful & liable to be struck down.
That the Ld. CIT (A) has also miserably failed in not deciding the legal ground number 3 as he has failed to pass any speaking order in this regard. Hence the order is bad in the eyes of law.”
The brief facts of the case are that a survey u/s 133A of the Act was carried out on 28.06.2007 at the business premises of M/s Mohan Lal Bajaj Group, Hadiabad, Phagwara. During the course of survey proceedings, certain incriminating documents
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were found which contained transactions relating to real estate business done by Assessee/Appellant herein who was summoned u/s 131 of the I.T. Act in the post survey enquiries and his statement was recorded on 06.07.2007 wherein, he allegedly admitted his unrecorded transactions relating to his real estate business done jointly with Sh. Mohan Lal Bajaj and Sh. Des Raj and for that he offered an additional income of Rs.15,00,000/- over and above his normal business income for the A.Y 2008-09, however, while filing the return of income for the A.Y.2008-09 , the Assessee declared income of Rs.10,37,010/-, without adding/showing the said additional income of Rs.15 lacs. However, the same was added to his taxable income at the time of framing assessment order dated 15.12.2010 made u/s 143(3) of the Act.
The said addition was challenged by the assessee before the Ld. CIT(A), however, who while confirming the addition of Rs.15 lacs, rejected the appeal of the assessee.
On feeling aggrieved against the order impugned herein, the assessee preferred the instant appeal and in support of its case submitted that the addition of Rs.15 lacs has been made by the Revenue Department while ignoring the retraction statement of the appellant mentioned on the computation of income filed along with return of income and the said addition has been made on the basis of loose paper entry sheet allegedly impounded during the course of survey at the business premises of third party where the appellant has no stake/interest of any kind and
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even the said document is neither in his handwriting nor bears any acknowledgement by his signature.
Further it was submitted that the addition has been made on the basis of loose sheet entries and one power attorney in the name of the appellant herein which even do not co-relate him with any investment made by him from undisclosed sources as the appellant was not under any legal obligation to maintain books of account, therefore, the addition u/s 68 cannot be sustained.
Further, it was also submitted that ITO has not given any warning to the assessee/appellant herein before putting question to the assessee/appellant to the effect that any admission/confession can be used against him in any proceedings under the Act and its repercussion and, nor he was made aware of his right to engage lawyer at the time of recording of alleged confessional statement. As procedure established by law mandates that it is duty of the officer before recording confession/admission to explain to the person making it that he is not bound to make a confession and that, if he does so, it may be used as evidence against him; and the officer shall not record any such confession unless, upon questioning the person making it, he has reason to believe that it is being made voluntarily.
Further it was also submitted that Ld. CIT(A) erred in observing para. 2.3 of his order to the effect that the appellant
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was a business associate in real estate business of Sh. Mohan Lal Bajaj and Sh. Des Raj. In fact, the referred documents do not indicate any alleged transactions nor do the same implicate the appellant in entering any into any unexplained property transactions. The Ld. AR also relied upon the order passed by the ITAT Bench at Jabalpur wherein it was held that power of attorney is not a statement of transactions with regard to any right, title or interest in any immovable property as the power attorney is recreation of an agency whereby guarantor authorizes guarantee to do acts specified therein on behalf of the guarantor, which will be binding on the guarantor as if done by him. It was further argued that even the presumption u/s 292C can only be drawn when the material as mentioned in Sec.292C of the Act is/are found in the possession or control of an Assessee concerned in the course of a search u/s 132 but not otherwise. The assessee has also filed an application under Right to Information Act, 2005 for seeking information qua material used against the additional/surrendered income of Rs.15 lacs, found during the course of survey conducted u/s 133A of the Act in the case of Sh. Mohan Lal Bajaj, Hadiabad, Phagwara. However, only two documents i.e., copy of the ledger account and one general power attorney dated 27.08.2002 were provided to the appellant herein. From the aforesaid two documents does not depict involvement of the appellant.
On the other hand, Ld. DR relied upon the order passed by the authorities below.
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We have heard the parties and have gone through with the facts and rival submissions of the parties. As in the instant case, the addition was made mainly on the basis of confessional statement made by the appellant before the Assessing Officer. The Assessing Officer also relied upon the loose sheet of ledger where some amount depicts in the name of the appellant, however, the same does not bear acknowledgement in any form and/or signature by/of appellant.
The second document is power of attorney dated 05.09.2002 which has been executed in the name of the appellant, however, in pursuance and basis thereof, no sale deed and/or any document which depicts the transactions carried out. In over all circumstances, more or less, the addition has been made by the Assessing Officer on the confessional statement in pursuance to survey u/s 133A of the Act.
7.1 The Apex Court and the various High Courts while dealing with the retracted confession analyzed and summarized the position in detail and some of the conclusions drawn by the Apex Court and the High Courts are as under:
The Apex Court in the case of Pulkngode Rubber Producer Co. Ltd. vs. CIT [1973] 91 ITR 18, held that "An admission is an extremely important piece of evidence but it cannot be said that it is conclusive. It is open to the person who made the admission to show that it is incorrect" .
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The Apex Court in the case of CIT vs S. Khader Khan Son (2012) 352 ITR 0480 (SC), held that " The statement recorded u/s 133A of the Act has no evidentiary value and any admission made during survey statement cannot be the basis of addition" .
Further the Apex Court upheld the finding of the Madras High Court to the effect that "Sec. 133A does not empower any ITO to examine any person on oath, so statement recorded u/s 133A has no evidentiary value and any admission made during such statement cannot be made basis of the addition. The word ‘may’ used in Sec.133A(3) (iii) makes it clear that the material collected and the statement recorded during the survey u/s 133A are not conclusive piece of evidence by themselves. The statement obtained u/s 133A would not automatically bind upon the assessee.
7.2 The Punjab and Haryana High Court in the case of Kishan Lal Shiv Chand that (ITR 293) , clarified that: It is an established principle of law that a party is entitled to show and prove that the admission made by him previously is in fact not correct and true.
The Andhra Pradesh High Court in the case of Gajjam Chinna Yellappa and Ors. vs. ITO [2015] 370 ITR 671 (AP) held that “a retracted statement cannot constitute the sole basis of fastened liability of the assessee" .
7.3 Further, Kerala High in the case of Paul Mathews and Sons vs. CIT [2003] 263 ITR 101 (Ker) held that statement recorded
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under Section 133A of the IT Act is not given any evidentiary value obviously for the reason that the officer is not authorized to administer oath and to take any sworn in statement.
para no. 11: The provision also enables the IT authority to impound and retain in his custody for such period as he thinks of any books of account or other documents inspected by him, provided the authority records his reasons for doing so and also shall not retain the books of account for a period not exceeding 15 days. Section 133A(3)(iii) enables the authority to record the statement of any person which may be useful for, or relevant to, any proceeding under the Act. Section 133A however, enables the IT authority only to record any statement of any person which may be useful, but does not authorize for taking any sworn in statement. On the other hand, we find that such a power to examine a person on oath is specifically conferred on the authorized officer only under Section 132(4) of the IT Act in the course of any search or seizure. Thus, the IT Act, whenever it thought fit and necessary to confer such power to examine a person on oath, the same has been expressly provided whereas Section 133A does not empower any ITO to examine any person on oath. Thus, in contra-distinction to the power under Section 133A, Section 132(4) of the IT Act enables the authorized officer to examine a person on oath and any statement made by such person during such examination can also be used in evidence under the IT Act. On the other hand, whatever statement recorded under Section 133A of the IT Act is not given any evidentiary value obviously for the reason that the officer is not authorized to administer oath and to take any sworn in statement which alone has the evidentiary value as contemplated under law. Therefore, there is much force in the argument of the learned counsel for the appellant that the statement, elicited during the survey operation has no evidentiary value and the ITO was well aware of this.
The Hon’ble Delhi High Court in the case of CIT vs. M/s Dhingra Metal Works [2010] 43 ITR 592 (Delhi) also assented with the view taken by Kerala High Court in the case of Paul Mathews and Sons vs. CIT [2003] 263 ITR 101 (Ker) , which is reproduced herein below:-
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The Kerala High Court in Paul Mathews & Sons Vs. Commissioner of Income Tax, (2003) 263 ITR 101 (Kerala) and Madras High Court in CIT Vs. Kader Khan, (2008) 300 ITR 157 have also taken a similar view. The relevant portion of the Kerala High Court judgment in the case of Paul Mathews & Sons (supra) is reproduced herein below :-
"The provision also enables the income-tax authority to ………………………………………………………………………..no evidentiary value and the Income-tax Officer was well aware of this."
Moreover, the word „may‟ used in Section 133A(3)(iii) of the Act clarifies beyond doubt that the material collected and the statement recorded during the survey is not a conclusive piece of evidence by itself.
In any event, it is settled law that though an admission is extremely important piece of evidence, it cannot be said to be conclusive and it is open to the person who has made the admission to show that it is incorrect.
7.4 The High Court Of Telangana And Andhra Pradesh in the case of Gajjam Chinna Yellappa Vs. Income-tax Officer (2015) 370 ITR 671 (AP) ,while dealing with addition based on admission of Asseeee held as under :- 9. The Act empowers the Assessing Officers or other authorities to record the statements of the assessees, whenever a survey or search is conducted under the relevant provisions of law. The statements so recorded are referable to section 132 of the Act. Sub-section (4) thereof enables the authorities not only to rely upon the statement in the concerned proceedings but also in other proceedings that are pending, by the time the statement was recorded. 10. If the statement is not retracted, the same can constitute the sole basis for the authorities to pass an order of assessment. However, if it is retracted by the person from whom it was recorded, totally different considerations altogether, ensue. The situation resembles the one, which arises on retraction from the statement recorded under section 164 of the Code of Criminal Procedure. The evidentiary value of a retracted statement becomes diluted and it loses the strength, to stand on its own. Once the statement is
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retracted, the assessing authority has to garner some support, to the statement for passing an order of assessment. In I. T. T. A. No. 112 of 2003 (see CIT v. Naresh Kumar 11. Agarwal [2014] 369 ITR 171/[2015] 53 taxmann.com 306 (AP) this court dealt with the very aspect and held that a retracted statement cannot constitute the sole basis for fastening liability upon the assessee. 12. In the instant case, the appellants specifically pleaded that the statements were recorded from them by applying pressure, till midnight, and that they have been denied access outside the society. The Assessing Officer made an effort to depict that the withdrawal or retraction on the part of the appellants is not genuine. We do not hesitate to observe that an Assessing Officer does not have any power, right or jurisdiction to tell, much less to decide, upon the nature of withdrawal or retraction. His duty ends where the statement is recorded. If the statements are retracted, the fate thereof must be decided by law meaning thereby, a superior forum and not by the very authority, who is alleged to have exerted force. 13. It is not as if the retraction from a statement by an assessee would put an end to the procedure that ensued on account of survey or search. The Assessing Officer can very well support his findings on the basis of other material. If he did not have any other material, in a way, it reflects upon the very perfunctory nature of the survey. We find that the appellate authority and the Tribunal did not apply the correct parameters, while adjudicating the appeals filed before them. On the undisputed facts of the case, there was absolutely no basis for the Assessing Officer to fasten the liability upon the appellants. Our conclusion find support from the Circular dated March 10, 2003, issued by the Central Board of Direct Taxes, which took exception to the initiation of the proceedings on the basis of retracted statements. 14. Therefore, I. T. T. A Nos. 268, 273 and 308 of 2003 are allowed and the orders of assessment dated December 1, 1998, are set aside. Since the orders of assessment are set aside, I. T. T. A. Nos. 287, 291 and 294 of 2006 have virtually become infructuous and they are, accordingly, closed. There shall be no order as to costs.
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7.5 The CBDT vide its letter dated 10.3.2003 issued certain instructions to follow during search and survey operations, which are reproduced herein below:-
Sub:- Confession of additional Income during the course of search & seizureand survey operation – regarding
Instances have come to the notice of the Board where assessees have claimed thatthey have been forced to confess the undisclosed income during the course of thesearch & seizure and survey operations. Such confessions, if not based upon credible evidence, are later retracted by the concerned assessees while filing returns of income. In these circumstances, on confessions during the course of search& seizure and survey operations do not serve any useful purpose. It is, therefore, advised that there should be focus and concentration on collection of evidence of income which leads to information on what has not been disclosed or is not likely to be disclosed before the Income Tax Departments. Similarly, while recording statement during the course of search it seizures and survey operations no attempt should be made to obtain confession as to the undisclosed income. Any action on the contrary shall be viewed adversely.
Further, in respect of pending assessment proceedings also, assessing officers should rely upon the evidences/materials gathered during the course of search/survey operations or thereafter while framing the relevant assessment orders .
7.6 From the aforesaid decisions of Apex court and High courts and circular issued by the CBDT, it emerges that the confessional statement can not form the sole basis of addition, if the same is retracted and not supported with corroborative material.
Now coming to the instant case, although, the statement was recorded by the Assessing Officer in pursuance to survey conducted on 28.06.2007 , u/s 133A of the Act at the business
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premises of Sh. Mohan Lal Bajaj proprietor of M/s. Super Cement and Iron Store, Phagwara and M/s Fine Traders, Phagwara and as per allegations, in the course of survey large number of papers containing incriminating entries relating to the purchase and sales of immovable properties done jointly by Sh. Mohan Lal Bajaj and Sh. Des Raj and the appellant herein were found and impounded. It was further alleged that incriminating documents indicates innumerable transactions of purchase and sale of immovable properties done by the assessee along with aforesaid two persons and accordingly summon dated 06.07.2007 u/s 131 of the Act was issued and served on the assessee by the Assessing Officer and in the said proceedings, the statement of the appellant was recorded where he disclosed/admitted additional income of Rs.15 lac. It is also alleged that the appellant in addition to the statement dated 06.07.2007 given before the ITO, Phagwara, also submitted letter dated 06.07.2007 confirming therein the disclosure of additional income of Rs.15 lacs and tendered three post dated cheques 15.09.2007, 15.12.2007 & 15.03.2008 in three equal installments as security amount in consideration to pay the due tax on the surrendered/disclosed additional income. It is revealed from the assessment order that the Assessing Officer while making the addition of Rs.15 lacs mainly focused on the confessional/disclosure statement of the appellant. The appellant did not disclose the said amount of Rs. 15 Lakhs in his return of income and contested the same not only in the assessment proceeding itself but also vide letter dated 27th March, 2009 submitted to the Income Tax Officer-Ward-1, Phagwara. It was
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specifically mentioned that he was forced to surrender Rs. 15 lacs by showing certain entries appearing in the books of Sh. Mohan Lal Bajaj without supplying the copies of the said entries, however, under protest, he deposited the tax on the surrendered amount and further requested to supply the copies of material which was used against him by the Department for the surrendered amount.
It is a matter of fact that the said reply was not replied by the Assessing Officer. In that eventuality the appellant was compelled to file an application dated 30.03.2009 under RTI Act which is also placed in Paper Book submitted herein, seeking information qua material used against the surrendered income of Rs.15 lacs , found during the course of survey conducted u/s 133 A of the Income Tax Act in the case of Sh. Mohan Lal Bajaj, Hadiabad, Phagwara. In pursuance to RTI application, the assessee was provided the copy of the ledger and a copy of the power attorney dated 05.09.2012. Although, the Assessing Officer as well as the Ld. CIT(A) in their orders observed that in survey, the large number of papers containing incriminating entries relating to the purchase and sale of immovable properties done jointly by Sh. Mohan Lal Bajaj and Sh. Des Raj and the appellant were found and impounded, however, from the document supplied by the Department it reveals that the Revenue Department while making the addition qua additional income of Rs.15 lacs, used two documents only that is one loose sheet of ledger where the name of appellant depicts and the amount of Rs.12,50,000 have been shown as credit in the
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balance of the appellant, however, no-where, the same is acknowledged and/or signed by the appellant herein, therefore, the same cannot be relied upon for any purposes, specifically, in view of the judgments passed in the case of Central Bureau of Investigation vs. V.C. Shukla [1998] Crl.LJ 1905 know as Jain Hawala Case.
7.7 Let us reproduce the ratio laid down by the Apex Court in V.C Shukla’s case (supra)
“That entries in the Jain Hawala Diaries, note books and file containing loose sheets paper not in the form of “Books of Accounts” and has held that such entries in loose papers/ sheets are not relevant and not admissible u/s 34 of the Evidence Act, and that only where the entries in the books of accounts regularly kept, depending on the nature of occupation, that those are admissible.
Further as to value of the entries in the books of account, that such statement shall not alone be sufficient evidence to charge any person with liability, even if they are relevant and admissible and that they are only corroborative evidence. It has been held even then independent evidence is necessary as to trustworthiness of those entries which is a requirement to fasten the liability.
Further the Apex Court laid down that
”Meaning of account book would be spiral note book/pad but not loose sheets. The following extract being relevant is quoted herein below.”
“14. In setting aside the order of the trial court, the High Court accepted the contention of the respondents that the documents were not admissible in evidence under Section 34 with the following words:
"An account presupposes the existence of two persons such as a seller and a purchaser, creditor and debtor. Admittedly, the alleged diaries in the present case are not records of the entries arising out of a contract. They do not contain the debits and credits. They can at the most be described as a memorandum kept by a person for his own benefit which will enable him to look into the
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same whenever the need arises to do so for his future purpose. Admittedly the said diaries were not being maintained on day-to- day basis in the course of business. There is no mention of the dates on which the alleged payments were made. In fact the entries there in are on monthly basis. Even the names of the persons whom the alleged payments were made do not find a mention in full. They have been shown in abbreviated form. Only certain 'letters' have been written against their names which are within the knowledge of only the scribe of the said diaries as to what they stand for and whom they refer to.” x x x x x x x x x x x x x x x
From a plain reading of the Section it is manifest that to make there under it must be shown that it has been made in a book, that book is a book of account and that book of account has been regularly kept in the course of business. From the above Section it is also manifest that even if the above requirements are fulfilled and the entry becomes admissible as relevant evidence, still, the statement made therein shall not alone be sufficient evidence to charge any person with liability. It is thus seen that while the first part of the section speaks of the relevancy of the entry as evidence, the second part speaks, in a negative way, of its evidentiary value for charging a person with a liability. It will, therefore, be necessary for us to first ascertain whether the entries in the documents, with which are concerned, fulfill the requirements of the above section so as to be admissible in evidence and if this question is answered in the affirmative then only its probative value need be assessed.
"Book" ordinarily means a collection of sheets of paper or other material, blank, written, or printed, fastened or bound together so as to form a material whole. Loose sheets or scraps of paper cannot be termed as "book" for they can be easily detached and replaced in dealing with the word "book" appearing in Section 34 in Mukundram v. Dayaram a decision on which both sides have placed reliance, the Court observed:-
"In its ordinary sense it signifies collection of sheets of paper bound together in a manner; which cannot be disturbed or altered except by tearing apart. The binding is of a kind which is not intended to the moveable in the sense of being undone and put together again. A collection of papers in a portfolio, or clip, or strung together on a
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piece of twine which is intended to be untied at will, would not, in ordinary English, be called a book.... I think the term 'book' in Section 34 aforesaid may properly be taken to signify, ordinarily, a collection of sheets of paper bound together with the intention that such binding shall be permanent and the papers used collectively in one volume. It is easier however to say what is not a book for the purposes of Section 34, and I have no hesitation in holding that unbound sheets of paper, in whatever quantity, though filled up with one continuous account, are not a book of account within the purview of Section 34."
We must observe that the aforesaid approach is in accord with good reasoning and we are in full agreement with it. Applying the above tests it must be held that the two spiral note books (MR 68/91 and MR 71/91) and the two spiral pads (MR 69/91 and MR 70/91) are “books” within the meaning of Section 34, but not the loose sheets of papers contained in the two files (Mrs 72/91 and 73/91). 7.8 Further in the case of the Common Cause (A registered Society and Ors Vs. Union of India & Ors. interlocutory application Nos. 3 & 4 of 2017 in Writ Petition (Civil) No. 505/2015, the Apex Court dealt with the loose sheets and was pleased to held that
“It is apparent from the aforesaid discussion that loose sheets of paper are wholly irrelevant as evidence being not admissible U/s 34 so as to constitute evidence with respect to the transactions mentioned therein being of no evidentiary value.
Further the Apex Court in para No.22 was pleased to held that in case of Sahara, in addition we have the adjudication by the Income Tax Settlement Commission. The order has been placed on record along with I.A. No.4. The Settlement Commission has observed that the scrutiny of entries on loose papers, computer prints, hard disk, pen drives etc. have revealed that the transactions noted on documents were not genuine and have no evidentiary value and that details in these loose papers, computer print outs, hard disk and pen drive etc. do not comply with the requirement of the Indian Evidence Act and are not admissible evidence. It further observed that the department has no evidence to prove that entries in these loose papers and electronic data were kept regularly during the course of business of the concerned
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business house and the fact that these entries were fabricated, non- genuine was proved. It held as well that the PCIT/DR have not been able to show and substantiate, the nature and source of receipts as well as nature and reason of payments and have failed to prove evidentiary value of loose papers and electronic documents within the legal parameters. The Commission has also observed that Department has not been able to make out a clear case of taxing such income in the hands of the applicant firm on the basis of these documents.
It is apparent that the Commission has recorded a finding that transactions noted in the documents were not genuine and thus has not attached any evidentiary value to the pen drive, hard disk, computer loose papers, computer printouts. Since it is not disputed that for entries relied on in these loose papers and electronic data were not regularly kept during course of business, such entries were discussed in the order dated 11.11.2016 passed in Sahara's case by the Settlement Commission and the documents have not been relied upon by the Commission against assessee, and thus such documents have no evidentiary value against third parties. On the basis of the materials which have been placed on record, we are of the considered opinion that no case is made out to direct investigation against any of the persons named in the Birla's documents or in the documents A-8,A- 9 and A-10 etc. of Sahara.
7.9 On the basis of the aforesaid judgments, we are in complete agreement with the Ld. AR that documents/loose paper seized from third party premises during survey/search operation, without corroboration, have no authenticity and therefore, cannot be relied upon. Even entry recorded in the ledger was not confirmed by the third party from whose premises the alleged document was found and without confirmation, there is no question of any assumption or belief that the entry belongs to the assessee and entry found on loose paper in the premises of third party without any corroborative evidence, cannot be made basis of addition.
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7.10 The second document is the general power attorney dated 05.09.2002 also does not confer substantive right on which it can be said that the appellant herein had received any consideration thereof because G.P.A itself pertains to 2002 whereas search was conducted only in 2007, hence, there is a gap of five years which according to our mind also does not sound a good proof for sustaining the addition.
As it is well settled by the Apex Court that admission is extremely an important piece of evidence but it cannot be said that it is conclusive as it is open to the person who made the admission to say that it is incorrect.
Apex Court further upheld the finding of Madras high Court to the effect that Sec. 133A does not empower any ITO to examine any person on oath, so statement recorded u/s 133A has no evidentiary value and any admission made during such statement cannot be made basis of the addition. The word ‘may’ used in Sec.133A(3) (iii) makes it clear that the material collected and the statement recorded during the survey u/s 133A are not conclusive piece of evidence by themselves. The statement obtained u/s 133A would not automatically bind upon the assessee.
As in the instant case, Revenue Department mainly relied upon statement/admission of the appellant and there is no substantive corroborative material on the basis of which it can
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be inferred that the addition is based upon corroborative material in addition to the admission/confession.
7.11 Even CBDT vide its circular dated 10.03.2003 (Supra) clarified that confessions during the course of search and seizure do not serve any useful purpose, if the same are not based upon the credible evidence and rather later retracted by the concerned assessees, while filing returns of income. The said instruction further states that it is, therefore, advised that there should be focus and concentration on collection of evidence of income which leads to information on what has not been disclosed or is not likely to be disclosed before the Income-tax Department. Similarly, while recording statement during the course of search and seizures and survey operations, no attempt should be made to obtain confession as to the undisclosed income. Any action on the contrary shall be viewed adversely.
It was further cautioned that in respect of pending assessment proceedings also, the assessing officers should rely upon the evidences/materials gathered during the course of search/survey operations or thereafter while framing the relevant assessment orders.
7.12 It is trite to say that the Revenue Department had no concrete material to fasten the addition of Rs.15 lacs and simply relied upon the confessional statement/admission on the part of the appellant herein which he retracted by filing the written statements as well as not disclosing the additional income in his return of income. Even, the Ld. CIT(A) has also
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failed to specify except the disclosure statement, the basis of which corroborative material, the addition has been sustained and while sustaining the addition, relied upon a case titled as Sh. Navdeep Dhingra v/s Department of Income Tax in ITA No. 691/Chd/2011, decided by ITAT Bench at Chandigarh, without discussing the relevant judgments rendered by Apex Court and various High Courts. Even otherwise the facts of the case of Sh. Navdeep Dhingra v/s Department of Income Tax (Supra), are dissimilar to the facts of the instant case because in that case, there was some corroborative material, but in the instant case, in the assessment order, nowhere the corroborative material has been shown on basis of which the addition has been sustained.
7.13 On the aforesaid analyzation and observation and cumulative effect, We are, therefore, of the view that merely on the basis of admission/confession, the assessee could not have been subjected to such additions unless and until, some corroborative evidence found in support of such admission, therefore we are unable to find any justification on the part of the lower authorities to make the addition of Rs.15 lac on the basis of confessional statement, loose sheet of ledger and General Power of Authority (found from the premises of third party). Even there is no reason not to disbelieve the retraction made by the Assessing Officer and explanation duly supported by the evidence. Hence, the addition made by the AO and uphold by the Ld. CIT(A) is not sustainable and is liable to be deleted, ordered accordingly.
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In the result, the appeal filed by the assessee stands allowed. Order pronounced in the open Court on 29 .05.2018.
Sd/- (N.K.CHOUDHRY) JUDICIAL MEMBER Dated:29.05.2018
I have perused the order proposed by my ld. brother, JM in the instant appeal. Though in agreement with him in result, my reasons for the same being different, I propose my separate, assent order.
This is a case of an individual assessee, filing his returns of income with the Revenue declaring income from house property, work contract and interest. A survey u/s. 133A of the Income Tax Act, 1961 (‘the Act’ hereinafter) at the premises of one, Sh. Mohan Lal Bajaj, Prop. M/s. Super Fine Cement & Iron Store, Hadiabad, Phagwara, and a firm, M/s. M/s. Fine Traders, on June 28, 2007, led to the discovery of several documents indicating dealings in real estate. In relation to the assessee specifically, the two documents found were, a ledger account (PB pgs. 22) and a General Power of Attorney (dated 05/9/2002) in respect of a property in favour of the assessee (PB pgs. 23-27). The assessee, aged 64 years at the relevant time, was accordingly questioned and examined on oath u/s. 131 of the Act by the Assessing Officer (AO) on July 6, 2007 (at PB pgs. 14- 17), whereat he admitted to being engaged in the business of purchase and sale of land along with Sh. Mohan Lal Bajaj and another, Sh. Des
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Raj (of Des Raj Furniture House). The entries in the ledger account found, reflecting receipts from the assessee at a total of Rs.12.50 lacs, were also not denied thereat, i.e., on being confronted therewith. An income of Rs.15 lacs was admitted for the current year. This was followed by a letter of voluntary disclosure dated 06/7/2007, explaining the surrender of income of Rs. 15 lacs, i.e., as he was unable to satisfactorily explain his investment in or income from the property business, also agreeing to pay tax thereon, tendering post dated cheques toward the same. The said income was however was not returned per the return of income for the year, filed on 21/4/2009, disclosing, besides regular incomes, income by way of capital gains (pgs. 5-8 of the supplementary PB). No explanation for not returning the said income was furnished along with. The same was accordingly brought to tax in assessment u/s. 143(3) dated 15/12/2010 and, further, confirmed in first appeal, leading to the instant appeal. The assessee’s case before us, as it was before the Revenue, is that no incriminating material had been found during the survey on 28/6/2007, and that no income could be assessed solely on the basis of a statement, even as in fact advised by the CBDT to its officers. The Revenue, on the other hand, claims that there is corroborative material to support the said statement on oath, bearing reference to the documents found during survey. Further, there is nothing to suggest that the statement was given under duress or influence, the burden to prove which is on the deponent. The
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assessee had, in fact, as assured in his deposition and stated in the disclosure letter, also paid tax on the income surrendered. 3.1 I may begin by referring to some fundamental propositions. Tax can be levied only on real, and not on hypothetical, income. Two, income for a particular year can only be assessed for that year, and it being assessed or not assessed for another year, is no ground for it being assessed for another year. Further, it is the entirety of evidence, including the deposition, if any, that is to be taken into account to come to a positive inference as to income in a particular sum having arisen to or received by the assessee, so that where not returned, it could be assessed as income for the relevant year. Of course, the rules of evidence embodied in the Act, viz. sections 68, 69, 69A to 69D, 292B, 292C, etc., would stand to be applied to appraise the facts as well as to, where applicable, invoked, to arrive at such an inference. The question therefore that arises in the instant case is if an inference could be drawn in the facts and circumstances of the case, given the material on record. Strict rules of evidence are not applicable to the proceedings under the Act, and the preponderance of probabilities can be applied to determine as well as to arrive at findings of fact. 3.2 That the assessee was dealing in purchase and sale of land, is not only admitted, but also evidenced by the GPOA found during survey. The same, however, pertains to the year 2002. There is nothing to show that the assessee returned any income from property dealing for the relevant year/s, so that both the amount invested (in the said business) as well as the income there-from, was chosen not to be
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disclosed by him to the Revenue. There is, at the same time, nothing on record to show that the assessee had been dealing in or, more appropriately, continued to deal in land, buying and selling it, during the current year. There is no admission in this regard in his deposition. The ledger account, reflecting credits in his name, which is the other corroborative material found, is also sans any date/s. The same cannot be said to be regular books of account. In fact, the same are clearly not meant to be disclosed to the Revenue and, further, only in the form of (a) memoranda account/s. It is, all the same, no doubt evidence, and material one at that. However, it does not show that the sum credited (Rs.12.50 lac) as an advance in some property deal continues to be outstand during the relevant year, i.e., the previous year relevant to the current assessment year, so that it represents a debt owed by the recipient to the assessee (during the relevant year), only in which case sections 69/69A would apply to deem it as the income for the current year. There is no question in this regard by the Revenue to the assessee in the latters’ statement. There is nothing to show that the debtor was questioned in the matter, and he had replied indicting the assessee, in which case the same ought to have been put to the assessee, which i have found as not. There is also no question as to how the said advance stood adjusted, or the property/asset in which the same was invested subsequently, i.e., on receipt, in which case ss. 69/69A could be applied with reference to the said property on the basis of the assessee having been found to be its’ owner during the relevant year. Though the assessee’s statement speaks of his name
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being mentioned in several documents, the ld. counsel for the assessee, Sh. Syal, adverting to the assessee’s application to the Department under RTI Act, 2005 (PB pgs. 20-21), was categorical in that no document, apart from the two afore-referred, were found, nor is there any reference to ‘these documents’ in the statement. The assessee has in fact made a specific assertion in this regard before the first appellate authority (PB pg. 6). The material on record only shows the assessee to have been engaged in the property dealing along with others during the year 2002. No asset from the said earnings can be said to have been found by the Revenue for it to invoke ss. 69/69A for the current year. 4. In view of the foregoing, I am clearly unable to hold, despite the surrender statement and the incriminating material found, that there is any basis or material for assessing an income of Rs. 15 lacs in the hands of the assessee for the current year. I decide accordingly and, in the result, the assessee succeeds. Sd/- Date: 29/05/2018 (Sanjay Arora) AM, ITAT, Amritsar Bench /PK/ Ps. Copy of the order forwarded to: (1) Sh. Didar Singh, Kapurthala (2) The DCIT, Ward-1, Phagwara (3) The CIT(A)-2, Jalandhar (4) The CIT concerned (5) The SR DR, I.T.A.T., Amritsar True copy By order