SHRI NARESH JHANWAR,JAIPUR vs DCIT, C.C.-3, JAIPUR

Income Tax Appellate Tribunal, JAIPUR BENCHES,’B’ JAIPUR

Before: SHRI SANDEEP GOSAIN, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;dj vihy la-@ITA No. 259 & 260/JP/2020

Hearing: 30/06/2022Pronounced: 17/08/2022

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,’B’ JAIPUR Jh lanhi xkslkbZ] U;kf;d lnL; ,oa Jh jkBkSM deys’k t;arHkkbZ] ys[kk lnL; ds le{k BEFORE: SHRI SANDEEP GOSAIN, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;dj vihy la-@ITA No. 259 & 260/JP/2020 fu/kZkj.k o"kZ@Assessment Year :2016-17 & 2017-18 cuke Shri Naresh Jhanwar DCIT, Vs. 104/72, Vijay Path, Agarwal Farm, Central Circle-3, Mansarovar, Jaipur. Jaipur. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: ADHPJ7566Q vihykFkhZ@Appellant izR;FkhZ@Respondent

fu/kZkfjrh dh vksj ls@ Assessee by : Sh. P. C. Parwal (CA) jktLo dh vksj ls@ Revenue by : Shri Sanjay Dhariwal (CIT) lquokbZ dh rkjh[k@ Date of Hearing : 30/06/2022 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 17/08/2022 vkns'k@ ORDER PER BENCH: These are two appeals filed by the assessee and is arising out of the common order of the learned Commissioner of Income Tax (Appeals)-4, Jaipur dated 28.02.2022 [hereinafter referred to as (ld. CIT(A)] for assessment years 2016-17 & 2017-18 respectively. The said appeal was arising out of an order dated 24.12.2018 passed u/s. 143(3) r.w.s. 153A of the Act by the ACIT, Central Circle-3, Jaipur.

2 ITA No. 259 & 260/JP/2020 Shri Naresh Jhanwar 2. Both these appeals are listed together and heard on the same day. Even the issues involved in, both the appeals were common and thus disposed off by this common order.

As the facts are similar for both the years, we have taken the ITA No. 259/JPR/2020 for assessment year 2016-17 as lead case. The assessee has marched this appeal on the following grounds of appeal:-

“The Ld. CIT(A) has erred on facts and in law in confirming the addition of Rs. 4,52,59,300/- made by the AO u/s 68 of the Act by not properly appreciating the facts that: i) AO has accepted the fact that assessee is engaged in the business of money transfer on commission basis for which no books of accounts are maintained by him and therefore the amount involved in the money transfer cannot be assessed u/s 68 of the Act. ii) Assessee having declared the income from commission on money transfer under PMGKY for which certificate u/s 199C of the Finance Act, 2016 having been issued, the addition of the amount involved in money transfer is unjustified iii) The AO having accepted at page 14 to 25 of the assessment order that the amount involved in the money transfer for the period 17.10.15 to 19.12.16 of Rs.127,21,69,800/- on credit side is almost the same at Rs.127,31,32,700/- on debit side, addition of the entire credit side ignoring the debit side is unjustified iv) The AO has not rebutted the presumption laid down u/s 292C of the Act before making the addition. 2. The ld. CIT(A) has erred on facts and on in law in confirming the above addition by ignoring the fundamental concept of taxation of real income. 3. The ld. CIT(A) has erred on facts and on in law in incorrectly holding that assessee failed to provide complete name and address of lenders/ borrowers ignoring that the presumption laid down u/s 292C of the Act and also ignoring that the AO himself has verified few of the

3 ITA No. 259 & 260/JP/2020 Shri Naresh Jhanwar lenders/borrowers on the basis of telephone number of these persons as explained to the AO vide letter dt. 12.12.2018. 4. The assessee craves to amend, alter and modify any of the grounds of appeal. 5. The appropriate cost be awarded to the assessee.”

The brief facts of the case are that original return was not

filed u/s. 139 of the Act for the year under consideration. A search

was conducted on 20.12.2016 in case of M. B. & Sons Group,

Sikar to which the assessee belongs. Various assets/ books of

account and documents were found and seized as per annexure

prepared during the course of search. Thereafter, the jurisdiction

was assigned to ACIT, Central Circle-3, Jaipur. Accordingly, notice

u/s. 153A of the Act was issued and duly served upon the

assessee. In compliance return of income was efiled on

15.01.2018 declaring total income at Rs. 6,00,480/-. The ld. AO

noted the assessee runs business of M/s. V. N. Impex and is

engaged in the business of money transfer on commission basis.

He transfer the cash money of many parties and Shri Ram Kumar

Soni ( M. B. & Sons Group, key person ) is one of them. Assessee

for this money transfer business did not maintain any books of

accounts. The modality of this money transfer business was

explained by him in the statement recorded during the search

4 ITA No. 259 & 260/JP/2020 Shri Naresh Jhanwar proceedings on 21.12.2016. The relevant part of his statement

extracted as under:

�o 25 कृपया आपके Money transfer के �वसाय के बारे म� िव�तृत �प से समझाइए ? उ० इस �वसाय म� म� िविभ� लोग� को भारत म� उनके इि�छत �थान� पर नगद फ�ड उपल�ध करवाने का काय" करता #ँ। इस हेतू �ित&दन म� फोन के मा(यम से &कसी �थान पर पैसे देने वाले व लेने वाले क* detail नोट कर लेता #ँ &फर स,बि.धत सौद� का आपस म� िमलान करवा देता #ँ। इस काय" हेतू मुझे कमीशन के �प म� आय होती है । कमीशन क* दर 1,00,000/- � का सौदा करवाने पर 100 �0 से 200 �० तक क* है जो &क मुझे नगद म� �ा0 होती है। यह कमीशन उस पाट2 से िलया जाता है िजसक� क* हम पैसे &दलवात� ह� । �0 26 कृपया बताएँ &क आप अपने Money transfer के �वसाय हेतू &कस �कार क* लेखा पु�तके Maintain करते है तथा ये लेखा पु�तके कहाँ रखी गई है ? उ० म� मेरे Money transfer के �वसाय क* कोई regular books of account maintain नही करता #ँ। म� मेरे इस �वसाय का क7ा िहसाब िवभाग 8ारा ज�त द�तावेज� / डाय9रय� म� ह�तिलिखत रखता #ँ। In that answer he confirmed that he did not maintain any records

for this business and offer the income based on the commission he

receives. It is evident that the assessee is engaged in the business

of money transfer (Angadiaya) for last more than 10 years (Answer

to question no. 5 of the statement recorded on dated 20.12.2016).

A search was conducted at the business and residential premises

of the assessee on 20.12.2016. In search following assets and

documents were found:-

Particulars Cash Jewellery Documents

5 ITA No. 259 & 260/JP/2020 Shri Naresh Jhanwar Residence at Rs.85,500/- Gold jewellery Note pad 104/72, Vijay 337.60 Gms loose papers Path, valued at and mobile Mansarover, Rs.9,92,718/- as per Jaipur annexure AS- 1to AS-7 Locker No.96 - Gold jewellery Dena Bank 177.70 Gms and silver 1.46 Kg Valued at Rs.4,49,459/-. Office at S-2, Rs.14,00,120/- - Loose paper 223, and diary as Kishanpole per annexure Bazar AS-1 to AS- 10.

It was submitted in the statement recorded u/s 132(4) dt.

20.12.2016 assessee explained the nature of transaction recorded

in various diaries and loose paper seized from his residential and

office premises. In reply to Q.No.25 he stated that he is engaged in

money transfer business on which he earns commission @

Rs.100/- to Rs.200/- on Rs.1,00,000/-. In reply to Q.No.26 he

stated that in respect of money transfer business he is not

maintaining any regular books of accounts but the rough noting of

this business is recorded in the loose papers/ diaries. In reply to

6 ITA No. 259 & 260/JP/2020 Shri Naresh Jhanwar Q.No.27 he stated that cash of Rs.14,00,120/- found from his office

is from his money transfer business. Thereafter in reply to Q.No.28

he offered income from money transfer business at Rs.48 lacs for

FY 2010-11 to 2016-17. Again, in statement recorded u/s 132(4)

dt.26.12.2016 he reiterated that he is engaged in money transfer

business and accepted undisclosed income from commission of

Rs.48 lacs between FY 2010-11 to 2016-17 as stated in statement

dt.20.12.2016.

It was further submitted that assessee filed declaration on

03.04.2017 under PMGKY scheme where the above amount of

Rs.48 lacs surrendered for tax in FY 2010-11 to 2016-17 was

declared. The PCIT issued certificate u/s 199C of the Finance Act

on 25.04.2017 in respect of the said declaration. The income so

declared includes Rs. 7 lacs offered for AY 2016-17 and Rs.14

lacs for AY 2017-18.

It was further submitted that after search assessee filed the

return in response to notice u/s 153A. In course of assessment

proceedings assessee vide his letter dt. 05.11.2018 explained the

7 ITA No. 259 & 260/JP/2020 Shri Naresh Jhanwar source of cash and jewellery found as also the nature of

transaction recorded in the loose papers and diaries found in

search. A list, giving names and contact no. of the persons referred

in the seized annexure was provided. Thereafter vide letter

dt.12.12.2018 he again explained the nature of transaction and

manner of recording transaction in the seized document found in

search. It was reiterated that on these transactions he only earned

the commission income. Date wise working of the transaction

recorded in the seized annexure from 17.10.2015 to 19.12.2016

was provided. According to this working the debit transaction in the

name of various persons amounted to Rs.127.31 cr., credit

transaction at Rs.127.22 cr. and commission income at

Rs.11,92,300/-. Thus, the debit total and credit total are almost the

same.

It was further submitted that the AO in the assessment order

at Page 2, Para 4 accepted that assessee is engaged in the

business of money transfer on commission basis, so. Thereafter

AO in the assessment order has time and again stated that

assessee has admitted that he is engaged in the business of

8 ITA No. 259 & 260/JP/2020 Shri Naresh Jhanwar money transfer and the evidence of unaccounted money transfer in

cash was found in search. The AO also mentioned that the Shri

Naresh Jhanwar (assessee) and his employee Shri Prabhudayal

Jat along with the evidence gathered during search establish

beyond doubt that Shri Naresh Jhanwar is engaged in the activities

of money transfer in cash (i.e. Hawala) which is illegal as per the

provisions of FEMA (Foreign Exchange Management Act 2000)

and PMLA (Prevention of Money Laundering Act, 2002).

During the course of search, the ld. AO observed that

Annexure AS-Exhibit-1 is a Shree Kind Size Note Book having

total 27 hand written pages. The details in these pages are from

01.12.2016 to 19.12.2016. Two pages are there for each date. The

front page for any particular date is in the form of cash book. The

back part of that page is details of any cash transferred directly at

any place. The amount of commission for such transfer has also

been written with those amounts. The assessee was asked to

explain the entries recorded in those pages. The reply of the

assessee is extracted as under :

मेरे िनवास �थान से िमले Annexure-AS के Exhibits का (यानपूव"क अवलोकन कर िलया है। ये सभी Exhibits मेरे िनवास �थान से िमले ह�। मैन� Exhibit -1 के सभी पेज�

9 ITA No. 259 & 260/JP/2020 Shri Naresh Jhanwar

का (यानपूव"क अवलोकन कर िलया है। इस Exhibit -1 म�, मेरे money transfer के Business से स,बि.धत नामे व जमा का िहसाब &कताब है। इसम� कुल 27 पृ= ह�। िजसका &करण िन? है: � -से 1 - यह &दनांक 01:12.2016 का िहसाब है। िजस पर बांयी ओर नगद �ाि0या तथा दाई और नगद क* गई राशी है। इस &दन का नगद शेष 24,97,220/- है। � -से 2 इस पृ= पर, मेरे 8ारा िविभ� पाAटय� को उपल�ध करवाए गए तथा उनसे �ा0 &कए गए नगद का िहसाब है। जो &क &दनांक 01.12.2016 का है। इस पृ= पर िलखी detaills का अथ" िन?ानुसार है – बांयी ओर क* details का अथ" (i) 4500 UJ का अथ" है &क 4,50,000/- D नगद, उ umeshbhai, जो &क सूरत के िनवासी है, से उठवाए ह� अथा"त् िडलवाए गए ह�। (ii) 4500/ Rsoniji का अथ" है &क 4,50,000/- � नगर, रामकुमार जी सोनी िनवासी-सीकर (कम" - एम.बी. स.स) से उठवाए ह� अथा"त् िलए गए ह�। (iii) 6000/% RA का अथ" है &क 6,00,000 के नगर, रमेश दोदराज (अFवाल), िनवासी-सीकर से उठवाए है अथा"त् िलए गए ह�। (iv) 5000/ Niki का अथ" है &क 5,00,0005 नगर, िनG*, िनवासी- जयपुर से उठवार है' अथा"त् िलए गए ह�। (v) 5000/ Amit Bang ksg का अथ" है &क 5,00,000/- 5 अिनल जी, िनवासी &कशनगढ़ से उठवाए ह� अथा"त् िलए गए ह�। (vi) 20000/0 Manaj KMT का अथ" है &क 20,00,000/- � मनोज, िनवासी &कशनगढ़ से उठवाए ह� अथा"त् िलए गए ह�। दाई ओर िलखी details का अथ" (i) 4500/- R Soniji का अथ" है &क 4,50,000/- Jी नगद Jी रामकुमार सोनी िनवासी- के behalf पर, सूरत म�, &कसी �िK को &दलवाए थे । अथा"त रामकुमार जी को &दए ह�। (ii) 25/00 CM R Soniji का अथ" है &क 2500 Jी रामकुमार सोनी िनवासी- से मुझे कमीशन के �प �ा0 Lए हे ! (iii) 4500/- RA - सीकर का अथ" है &क 4,50,000/- नगर, Jी रमेश दोडराज िनवासी सीकर के को Jी रामकुमार सोनी से &दलवाए ह�। (iv) 6000/ MCI Baglore का अथ" हे क* 600000 Marble center India, Bangalore (कमल जी को Banglore म� &दलवाए थे। (v) 5000/ R. Ajmera Jodh का अथ" है &क 5,00,000/- �ी राजेश अजमेरा को जोधपुर म� Niki से &दलवाए थे। (vi) 25/ CM का अथ" है &क 2500 के मेरा कमीशन है।

10 ITA No. 259 & 260/JP/2020 Shri Naresh Jhanwar (vii) 5000/ R. Ajmera Bik का अथ" है &क 5,00,000 Jी राजेश अंजमेरा को बीकानेर म� िडलवाए थे। (viii) 20000/ R. Ajmera DL का अथ" है &क 20,00,000 Jी राजेश अजमेरा को &दMली म� &दलवाए थे ! इसी �कार ही, इस Exhibit 1 के अ.य 26 पृ=� पर भी एक �थान से दूसरे �थान पर नगर &दल क* details. िलखी गई है। म�, यह money transfer का काय" फोन 8ारा ही एक जगह से दूसरी जगह पर नगदी &दलवाने का काय" करता #ँ तथा सामा.यतया पैसे �ा0 करने वाली पाट2 से कमीशन �ा0 करता #ँ। यही मेरे money transfer के काय" का तरीका है। 10. Thus, he admitted that he was engaged in the business of

money transfer and was earning commission on such money

transfer in cash. He also admitted that the daily cash book details

and details of day wise cash money transfers were there in the

page of Annexure AS, Exhibit-1. But he has not furnished the

details of the persons whose money in cash has been transferred

by him. He was asked to furnish the name and complete details of

those from and to whom cash was transferred vide show cause

notice dated 10.10.2018. The reply of the assessee on this issue is

reproduced here in below:

"Annexure-AS Exhibit-1 contain details of amount received /paid, from/to various persons for the period 01.12.2016 to 19.12.2016. This annexure record the receipt/transfer of amount and payment in which assesse acted as broker. For example page no. 1 which is dated 1-12- 16, contain the opening balance, amount received from certain persons on the left hand side, amount paid to certain persons on right hand side and the closing balance. On page no.2, the left hand side entries contain the details of amount with name of parties who transferred the amount and on the right hand side the amount with name of those parties to whom the amount is transferred. No balance is worked out on

11 ITA No. 259 & 260/JP/2020 Shri Naresh Jhanwar this page. Further the commission earned is also noted on the right hand side with the entries of amount transferred. This page contain the transactions of money transfer effected through assesse out of station whereas page no. I contain detail of transactions where amount physically received and given through the office of assessee. In this manner the entries/transactions are recorded on other pages in this exhibit which can be verified. In the statements recorded w/s 132(4) dated 20.12.2016, the assesse in reply to Q15 explained the modus operandi of his business and each and every entry recorded on Page I and Page 2 in detail. Thus the manner of entries /transactions recorded also establishes that the assesse worked in capacity of broker to these transactions. The assesse in statement recorded during search stated that these transactions relate to money transfer from one place to another place and on such transactions he received commission from the recipient party. The assesse has already offered the commission income in Pradhan Mantri Garib Kalyan Yojana, 2016 for which certificate u/s 199C of the Finance Act, 2016 was received on 25.04.2017.

Your goodself has totalled the receipt side at Rs. 4,74,05,520/- and payment side at Rs. 6,93,43,750/- of various pages of this annexure and asked to explain the source of these transactions and to verify from regular books of accounts. In this connection it is submitted that these transactions are recorded for memoranda purpose by the assesse. The assesse was the broker to these transactions. He arranged to transfer the fund of one party to another party as per their request and earned commission for such activity. The name of person from whom the amount is received and the name of person to whom amount is paid is mentioned in the seized document against each transaction. Thus the source of transaction is recorded in the seized annexure itself. The assesse has explained the modus operandi of his business in detail in the statements recorded during search ws 132(4) dated 20-12-16. The presumption of section 292C is that the contents of the document found in course of search u/s 132 are true. Hence whatever is written in the document found in search is true. The source of transaction is mentioned in the seized document itself. Therefore your proposal to add the total amount of receipts and payments of Rs. 11,67,49,270/- is incorrect and contrary to the facts and legal position. It may also be noted that these transactions have been squared off as noted in the same exhibit. Certain instances of such squared off transactions is enclosed. The assesse earned commission from the transactions effected by him and therefore only commission income which is mentioned in the seized annexure can be assessed in the hands of assesse and not the entire amount of the transactions. Affidavit of assesse in this connection is enclosed. It may be noted that the assesse has already offered the commission income in Pradhan Mantri

12 ITA No. 259 & 260/JP/2020 Shri Naresh Jhanwar Garib Kalyan Yojana, 2016 for which certificate ws 199C of the Finance Act, 2016 was received on 25.04.2017."

11.

The ld. AO observed that assessee is engaged in the

business of money transfer in cash but has only provided

incomplete list of the persons involved in money transfer in cash

though few contacts number have been submitted. The assessee

has not discharged his burden of providing the identities of those

involved in borrowing and lending cash. Thereafter, by reproducing

the date wise transaction noted in the seized document as

provided by the assessee vide his letter dated 22.12.2018, he by

invoking the provision of section 68 made addition of

Rs.4,52,59,300/- in AY 2016-17 taxing the same at 30% as per

section 115BBE of IT Act and Rs.122,69,10,400/- in AY 2017-18

taxing the same at 60% as per section 115BBE of IT Act and thus,

the assessment was completed based on the above set of facts.

12.

Aggrieved from the order of the assessing officer, assessee

has preferred an appeal before the ld. CIT(A). The Ld. CIT(A) held

that the assessee failed to discharge the burden cast upon him of

establishing the identity, genuineness and creditworthiness of the

13 ITA No. 259 & 260/JP/2020 Shri Naresh Jhanwar persons from where he claimed these amounts were received. He

further observed that assessee also failed to provide complete

name and addresses of the persons to whom these amounts were

paid as recorded on debit side. Once the assessee has failed to

prove the identity of person from whom amounts is received,

despite ample opportunity given during assessment and appellate

proceedings, genuineness and creditworthiness also remained

unexplained. The additional income of Rs.48 lacs declared in

PMGKY does not state whether this amount is on account of

commission income or interest earned from the cash loans found

noted in seized records/ investment in the shape of advance. The

assessee is trying to link this additional income with alleged

commission on these hawala transactions and trying to give colour

of money transfer business for the entire entries found noted in the

seized records for which assessee failed to prove the source with

plausible explanation. However, in PMGKY Scheme, assessee has

declared Rs.7 lacs for AY 2016-17 and Rs.14 lacs for AY 2017-18

out of which Rs.14 lacs as available in cash was seized from

assessee by the department during course of search and balance

Rs.7 lacs was available with assessee for further lending.

14 ITA No. 259 & 260/JP/2020 Shri Naresh Jhanwar Therefore, benefit of telescoping of only Rs.7 lacs can be given.

With regard to allowability of benefit of telescoping of undisclosed

income declared for other years in PMGKY, it is not clear whether

the same was utilized in the business or used for other personal

purpose. Therefore, no benefit could be given for the same. As a

results addition of Rs.4,52,59,300/- made in AY 2016-17 and

addition of Rs.1,22,62,10,500/- made in AY 2017-18 is confirmed

by the ld. CIT(A). The verbatim finding recorded by the ld. CIT(A) is

also extracted here in below :

“3.5 I have perused the facts of the case, the assessment orders and the written submissions of the appellant for both AY 2016-17 and AY 2017-18. Appellant has taken Grounds No. 1 to 2.3 which are all related to addition of Rs. 4,52,59,300/- and Rs, 1,22,69,10,500/- made u/s 68 of the Act by the AO in AY 2016-17 and AY 2017-18 respectively. Since the issues in all grounds of appeal for both the assessment years are common, hence taken together for sake of convenience. In this case search u/s 132 was carried out on 20,12.2016 at M.B. & Sons Group, Sikar and also on the assessee. During search, various documents, loose papers were seized & statements u/s 132(4) were recorded. In those statements, assessee stated that in the amounts written in diary/loose papers 2 (two) zeroes were omitted i.e. 10 is 1000, (actual amount is Rs. 1000). This statement was further confirmed by assessee during post search proceedings in statements recorded u/s 131 on 26.12.2016. During the assessment proceedings, AO specifically asked the assessee to furnish complete name & addresses of persons whose name and/or reference is appearing in seized records. Assessee simply gave names & place to which they belonged which is very sketchy and complete addresses were not given.. For those persons thus neither the identity could be established what to say for genuineness and creditworthiness.

15 ITA No. 259 & 260/JP/2020 Shri Naresh Jhanwar The assessee stated before AO that he is engaged in money transfer business (Hawala) & earned commission out of it which was declared in the PMGKY Scheme where total surrender of 48 Lakh was made for various years as commission received on these transfer of Hawala amounts. The AO made the addition of the amount appeared in the credit side of the paper which was admitted by assessee in statement u/s 132(4) himself as amount received by him from various parties. AO further observed that since assessee failed to establish the identity of these parties as complete particulars of their full address such as plot no., colony etc. were not given and even PAN were also not given. Therefore, assessee failed to discharge the burden cast upon him u/s 68 of the Act. In appeal, assessee reiterated the same facts as were submitted before AO. He also placed reliance on judgment of Hon’ble Settlement Commission in case of Ramesh Manihar dated 09.10.2018 wherein the Hon'ble Settlement Commission treated him as a money broker & settled his case by working out additional income of Rs. 50 Crore from money laundering transactions as brokerage earned from such activity. AO’s comments were sought on the submission made by assessee. The said report was given to assessee for his reply. In rejoinder A/R again stated the same facts and further relied upon the decision of Hon'ble ITAT, Jaipur bench in the case of Shiv Prakash Bajaj V/s DCIT in ITA No, 368/JP/18 dated 24/09/2019. On perusal of assessment order, it is seen that in page 4 and 5 para 6.2 and para 6.3 respectively, scanned copies of seized papers page 1 and 2 are reproduced. On perusal of these papers it is seen that there were two types of entries appearing. On top of the papers date is mentioned and left side (Cr.) of, 1St entry relates to opening cash with assessee on that particular day which further increased by the amount received by assessee from various persons whose names are also written in few cases in coded form. On the right hand side (Dr.), the amounts given to various persons & their names in coded form was also noted in few cases If any cash remained available after making payments it was noted as cash balance as on that date. AO made a complete chart of credit and debit side of entries noted in seized documents according to which total of both the sides i.e. amount received and paid by assessee comes to Rs. 1,27,31,327/-separately. Since assessee himself in the statement recorded u/s 132(4) admitted that he had omitted 2 zeroes in each entry, the actual amount of Rs. 1,27,31,327/- of cash receipts comes to Rs. 1,27,31,32,700/, Out of this

16 ITA No. 259 & 260/JP/2020 Shri Naresh Jhanwar a sum of Rs, 4,52,59,300/- relates to AY 2016-17 & Rs. 1,22,69,10,500/-relates to AY 2017-18, for which additions were made in respective assessment years. In appeal also assessee's only contention is that he worked as agent doing money transfer business mainly for Ram Kumar Soni of Sikar & earned commissioner income from such money transfer business which was declared in PMGKY Scheme and since such income stood accepted, therefore, addition made be deleted. The plea of assessee cannot be accepted for reasons that assessee failed to discharge the burden cast upon him of establishing the identity, genuineness and creditworthiness of the persons from where he claimed these amounts were received. He also failed to provide complete name and addresses of the persons to whom these amounts were paid as recorded on Debit side, Once the assessee has failed to prove the identity of the person from whom amounts is received, despite ample opportunity given during assessment and appellate proceedings, genuineness and creditworthiness also remained unexplained. Reliance placed on the decision of Hon'ble Settlement Commission judgment in case of Ramesh Manihar is misplaced as in that case Hon'ble Settlement Commission at page 48, while accepting additional income by treating it as from money laundering business has categorically observed that in that case names and address of borrowers/ lenders are available in seized records, Relevant observations are reproduced herein as under:- "Other than the aforementioned assets, the department has not been able to bring to our notice any other assets of the applicants which have not been disclosed in the balance sheet to justify department's demand for making such astronomical addition to their income. We further note the department has not been able to even point out assets matching the amount of Rs. 50,00,00,000/- disclosed by the applicants as the additional income as per the SOF. The Pr. CIT's observations on this issue are neither legally sustainable nor substantiated by any corroborative evidence seized during the search. We agree with the submission of the applicants that the names and addresses of borrowers/ lenders are available in the seized record and the department is free to take action as per law in their cases. We are therefore, not inclined to accede to the department’s request to make an addition of Rs. 94,50,27,91,000/- on this issue.

17 ITA No. 259 & 260/JP/2020 Shri Naresh Jhanwar In the light of the facts and in the circumstances brought out before us, we fell that no interference on this issue is necessary.”

It is settled proposition that once the assessee even failed to provide complete names and address of borrowers and lenders the source of investment remained unexplained. Therefore, assessee cannot take shelter of this decision of Hon'ble Settlement Commission.

Regarding declaration of additional income declared in PMGKY as commission, it is seen from the letter dated 20.03.2017 filed to Pr. CIT (Central), Jaipur that amount of Rs. 48 lakh in various years was declared but it was not stated whether this amount is on account of commission income or interest earned from the cash loans found noted in seized record/investment in the shape of advances noted. Now assessee tried to link this additional income with alleged commission on these hawala transactions and tried to give colour of money transfer business for the entire entries found noted in the seized records for which assessee failed to prove the source with plausible explanation.

If the assessee failed to provide the complete name/ address of lenders/borrowers, the money noted in the seized records cannot be treated as borrowings and for this assessee has to fulfill all the conditions of identity, genuineness and creditworthiness as provided in Sec. 68 of the Act. Moreover, the AO during assessment proceedings asked to provide these details many times but assessee had made no effort to provide the same.

Regarding the judgment of Shiv Prakash Bajaj of Hon'ble ITAT Jaipur relied upon by the assessee in rejoinder to Remand Report it is seen that facts of this case are distinguishable. In that case, a hundi of 20 Lakh was found with a signed cheque issued by Roshan Lal Sancheti who had taken loan from Navin Maheshwari. Complete address of Roshan Lal Sancheti was available in seized papers in whose case proper action has been taken by Department. Under those circumstances, Hon'ble Bench treated the appellant as commission agent. Here as observed above, neither assessee provided complete name, addresses of lender /borrower nor been able to produce any of such person in support of his contention. Department thus, could not take any action against lender/borrower whose names are written in

18 ITA No. 259 & 260/JP/2020 Shri Naresh Jhanwar coded form in seized papers. Therefore, it is the undisclosed income of the assessee which is recorded in seized papers under various names and since the assessee has failed to discharge the burden cast upon this and has not provided the complete addresses of names noted in seized paper, accordingly the addition made by AO as undisclosed income is confirmed.

However, in the PMGKY Scheme, assessee declared Rs. 7 lakh for AY 2016-17 & Rs. 14 lakh for AY 2017-18, out of which 14 lakh as available in cash was seized from assessee by the Department during course of search and balance Rs. 7 lakh was available with assessee for further lending. Therefore, benefit of telescoping of only Rs. 7 lakh can be given.

With regard to allowability of benefit of telescoping of undisclosed income declared for other years in PMGKY, it is not clear whether the same was utilised in the business or used for other personal purposes. Therefore, no benefit could be given for the same. As a result, addition of Rs. 4,52,59,300/- made in AY 2016-17 is confirmed and addition of Rs. 1,22,62,10,500/- is confirmed for AY 2017-18. Appeal for AY 2016-17 Is dismissed and appeal for AY 2017-18 is partly allowed.”

13.

Being aggrieved by the order of CIT(A), the assessee is in

appeal before us. The ld. AR of the assessee has submitted his

written submission on the grounds raised by him. The written

submission is extracted here in below :

“1. At the outset it is submitted that AO has made the addition u/s 68. Section 68 of the Act reads as under:- Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be

19 ITA No. 259 & 260/JP/2020 Shri Naresh Jhanwar charged to income-tax as the income of the assessee of that previous year.

From plain reading of this section it can be noted that this section applies when any sum is found credited in books of accounts. Therefore,if the credit is not in the books of accounts, section 68 cannot be invoked. The definition of the books of accounts is given u/s 2(12A) of the Act as under:-

“books or books of account" includes ledgers, day-books, cash books, account-books and other books, whether kept in the written form or as print-outs of data stored in a floppy, disc, tape or any other form of electro- magnetic data storage device”

The definition of books of accounts is an inclusive definition. However, notepad, loose papers and diaries which can be easily detached and replaced cannot be termed as books. The AO at page 2 para 5 has also accepted that for money transfer business assessee has not maintained books of accounts. Therefore, recording in loose sheets, notepads and diaries cannot be regarded as the sum found credited in the books of the assessee for the purpose of section 68.Hence on the basis of the entries in such document/ paper, addition u/s 68 cannot be made. In this connection reliance is placed on the following decisions:

ArunaSankhlaVs. DCIT ITA No.484/JP/2016 dt.01.12.2017 (Jaipur) (Trib.) In this case Hon’ble ITAT at para 7.4 of its order held as under:

“After considering the rival submissions and the materials available on record, we are of the considered opinion that the seized papers cannot be treated as books of account. Furthermore, only the commission income can be assessed in the hands of the assessee @ 0.10% on a total of the credits of Rs. 91,67,81,272/-. The addition u/s 68 of the Act can be made only if any sum is found credited in the books of the assessee. A book means a collection of sheets of papers bound together with the intention that such binding shall be permanent and papers used are kept collectively in one volume. A book which contains successive entries of items maybe a good memorandum book but until those entries are totaled or balanced or both as the case may be, there is no reckoning and no accounts. A book which merely contains entries of items of which no account is made at any time, is not a “book of account” in a commercial sense. Thus the addition made u/s 68 is not justified. It is noticed that over and above the peak credit, the AO has further made an addition of Rs. 52,40,137/- on account of debtors exceeding the creditors. We have found that the peak determined by the AO is not correct, otherwise also, when once peak amount has been added then no separate addition is required. It seems that the AO has not properly prepared the list of debtors and creditors based on any logic. The Ld. CIT(A) has confirmed the addition of Rs. 52,40,137/- under the Provisions of Section 69B of the Act. This section

20 ITA No. 259 & 260/JP/2020 Shri Naresh Jhanwar relates to investment made by the assessee in the acquisition of bullion/jewellery or other valuable articles but it does not speak about any investment in debtors. Moreover, Section 69B also stipulates the position where the investment exceeds the amount shown in the books of account. Since the assessee does not maintain any books of account wherein the debtors and creditors are reflected, therefore, this addition has also been wrongly made and upheld u/s 69B of the Act. Hence, in our considered opinion, only commission income has to be determined in this case and nothing more. Accordingly, we reverse the findings of the Ld. CIT(A) and order to delete the entire addition so made. Thus Ground Nos. 3 and 4 of the assessee are allowed.

DCIT Vs. Smt. Manishaben N. MashruITA No.958/RJT/2010 dt.04.01.2018 (Rajkot) (Trib.)

“89. In the third ground, the Revenue challenges deletion of addition of Rs. 27.00 lakhs by the ld.CIT(A) on account of disallowance of fictitious liability.

90.

We heard both the parties and perused record and the orders of the Revenue authorities. During the assessment proceedings, on the basis of papers found in the survey proceedings, the AO formed an opinion that the assessee was having credit balance of Rs. 8,05,000/-with M/s. Divya Travels, and in the books of the assessee the assessee has shown liability of Rs. 18,95,000/-. The AO held the same to be fictitious liability and taxed accordingly. Assessee challenged this addition before the ld.CIT(A) who deleted the addition on the ground that rough papers found from the premises of wife of the assessee were mere notebooks and diaries and not books of accounts of the assessee. Besides, he observed that wife of the assessee has owned up the noting in the rough diary and taxed accordingly. The ld.CIT(A) has also observed that there is no documents or material evidence with the Revenue to link flow of unrecorded transactions with the assessee. Since there is no contrary material brought before us by the Revenue to convince us to take a different view, we do not find any merit in this ground of appeal. It is dismissed.”

DCIT Vs GSNR Rice Industries Pvt Limited (2021) 90 ITR (Trib.) 114 Chennai The relevant para 21 of this decision reads as under:

“21. The Income Tax Act, 1961 has defined books and books of accounts u/s.2(12A) of the Act, as per which books and books of accounts includes, ledgers, day-books, cash books, account books and other books, whether kept in the written form or as print- outs of data stored in a floppy, disk, tape or any other form of electro-magnetic data storage device. Therefore when books of accounts are clearly defined under the Act, then diary, notebook and retrieved data of computer CPU can be considered as books

21 ITA No. 259 & 260/JP/2020 Shri Naresh Jhanwar of accounts or not is a question that needs to be considered. From the definition of ‘books’ or ‘books of accounts’, it is abundantly clear that books of accounts means regular books of accounts maintained by the assessee for any previous year to record day to day transactions of its business including ledgers, day-books, cash books, account books and other books. The term other books does not mean to include some dumb documents like diary, notebook or deleted entries of computer CPU. The term other books refers to any other books which are relevant and in consonance with ledgers, day-books, cash books, account books, etc. Therefore, in order to include any other books of accounts maintained by the assessee within the ambit of term ‘other books’, those books must be relevant in the business of the assessee to keep track of transactions. Hence, other books refers to in the ordinary course of any business of the assessee are stock books maintained in the ordinary course of business to record movement of stocks, books of accounts maintained for recording salary and wages as required under the Wages Act and other statutory books prescribed under any other law. But, it does not include diary, notebook and some other dumb documents maintained by any person for any reason. Therefore, in our considered view books refer to under section 68 means, regular books of accounts maintained by an assessee in the ordinary course of business to record its business affairs and also to prepare financial statements for the relevant year. Any other documents, including, loose sheets, dairy, note book and other unconnected documents cannot be considered as books, unless the same is part of books of accounts maintained by the assessee.

S.P. Goyal Vs. DCIT (2002) 82 ITD 85(Mum.)(Trib.) In this case the Hon'ble Tribunal held that loose sheet of paper torn out of a diary could not be construed as books for the purpose of section 68 and further held that addition could not be made simply on the basis of certain notings on loose sheets of a diary without any corroborative evidence in the form of extra cash, jewellery or investment outside the books.

The Ld. CIT(A) has not given any finding on these case laws nor controverted the argument of assessee and therefore, addition confirmed by Ld. CIT(A) u/s 68 of the Act is illegal and bad in law.

It is submitted that u/s 4 of the Act, income tax is to be charged in respect of total income of the previous year of every person. As per section 5 of the Act income of a person resident in India includes all income from whatever source derived which is received or is deemed to be received in India, accrues or arises or is deemed to accrue or arise in India or accrue or arises outside India. Thus what can be taxed under the Income Tax Act is only the income of an assessee. Hypothetical income cannot be taxed nor income can be taxed in vacuum. Thus the Act provides for taxation of real income. In the present case the fact that assessee is engaged in the business of money transfer on commission

22 ITA No. 259 & 260/JP/2020 Shri Naresh Jhanwar basis has been accepted by the AO and is also evident from the statement of the assessee recorded u/a 132(4) as well as the various papers/ documents found in search. Even the search party on the basis of these papers and documents accepted that assessee is only earning commission on such money transfer activity and accepted the disclosure of Rs.48 lacs between FY 2010-11 to 2016-17. The same is also honored by the assessee by filing declaration under PMGKY scheme for which certificate u/s 199C of the finance Act, 2016 was issued by the Commissioner. Thus when the search party as well as the commissioner has accepted that in respect of transaction recorded in seized paper, what the assessee has earned is only commission income and this is also accepted by the AO in the assessment order, addition made in respect of amount involved in such money transfer activity is unwarranted and unjustified. 3. It may be noted that in the seized papers/documents jotting of the money transfer amount andthe commission received by the assessee is noted. In search also the assessee has explained the narration noted on these papers as reproduced at page 5 to 6 of the assessment order. On the basis of these papers a statement of money received from one person and transferred on his behalf to another person was prepared in assessment proceedings which is reproduced at page 14 to 25 of the assessment order. From this statement it is evident that amount credited in the name of one person, on the same date or within two to three days has been debited in the same name when the amount has been transferred to other person on his behalf.It is for this reason that the volume of the credit amount and the debit amount noted on these papers is almost the same. The paper clearly indicate that on these money transfer transaction the assessee received commission of Rs.11,92,300/-. As against this assessee has already offered commission income of Rs.7 lacs in AY 2016- 17 and Rs.14 lacs in AY 2017-18 which is much more than the commission income recorded in the seized document. The assessee in course of assessment proceeding has also submitted an affidavit dt.05.11.2018(PB 63-64)where these facts are affirmed. This affidavit is not controverted by the lower authorities. Therefore,addition made for the volume of such transaction is unjustified.

It is submitted that as per the provisions of section 132(4A) of the Act it is presumed that the contents of the books of accounts and other documents found in the possession or control of any person in the course of search are true. Similar presumption is drawn u/s 292C of the Act for the purpose of assessment. Section 292C reads as under:-

292C. (1) Where any books of account, other documents, money, bullion, jewellery or other valuable article or thing are or is found in the possession or control of any person in the course of a search under section 132 or survey under section 133A, it may, in any proceeding under this Act, be presumed—

23 ITA No. 259 & 260/JP/2020 Shri Naresh Jhanwar

(i) that such books of account, other documents, money, bullion, jewellery or other valuable article or thing belong or belongs to such person;

(ii) that the contents of such books of account and other documents are true; and

(iii) that the signature and every other part of such books of account and other documents which purport to be in the handwriting of any particular person or which may reasonably be assumed to have been signed by, or to be in the handwriting of, any particular person, are in that person's handwriting, and in the case of a document stamped, executed or attested, that it was duly stamped and executed or attested by the person by whom it purports to have been so executed or attested.

The CBDT in Circular No.3 of 2008 dated 12.03.2008 in the explanatory notes to provisions relating to Direct Taxes, clarified the rational of introduction of section 292C of the Income Tax Act, 1961 by which the presumption u/s 132(4A) of the Act has been extended to proceedings u/s 153A of the Act. The relevant extract from the said circular is reproduced below.

“69. Clarification in respect of presumption as to seized books of account, money, bullion, jewellery or other valuable article or thing to other proceedings under the Income-tax Act.

69.1 The provisions of sub-section (4A) of section 132 provides that the books of account, money, bullion, jewellery or other valuable article or thing found in the possession or control of any person in the course of a search under section 132 will be presumed to belong to the said person. It is further provided that it will be presumed that the contents of such books of account and other documents are true; and that the signature and every other part of such books of account and other documents which purport to be in handwriting of any particular person or which may reasonably be assumed to have been signed by, or to be in the handwriting of, any particular person, are in that person’s handwriting, and in the case of a document stamped, executed or attested, that it was duly stamped and executed or attested by the person by whom it purports to have been so executed or attested.

69.2 A new section 292C has been inserted so as to clarify that presumptions provided in sub-section (4A) of section 132 can be made in any proceedings under this Act.”

It is thus clear from the above that in order to give effect to the legislative intent, while bringing in section 132(4A) of the Act of presumption, the provisions of section 292C of the IT Act, 1961 was brought in the statute

24 ITA No. 259 & 260/JP/2020 Shri Naresh Jhanwar vide Finance Act, 2007 with retrospective effect from 01.10.1975. It would thus suffice that section 292C of the Income Tax Act, 1961 lays down a binding deeming fiction that the books of account, other documents, money, bullion, jewellery and valuable article or thing found in the possession/control of the person would be deemed to belong to the person in whose possession/control it is found and seized and the contents of the books of account or other documents are true. As held in the judicial rulings, the sole exception to this rule is that if it is alleged that the contents are not true or does not belong to that person, then the person alleging so is obliged to establish it. In this regard reliance is placed on the following judgments:- Ramanlal P. ChordiaVs. ACIT (2001) 20 CCH 0047 (Pune)(Trib.) The assessee, as a broker, was arranging the finance for various persons (borrowers) and the amounts were obtained from the various parties (lenders). The amounts were generally taken by the borrowers or a short period of say 3 months and which, if necessary, was being extended. The assessee was charging brokerage only to the borrowers and not to the lenders. His brokerage was to the tune of about 10 to 15 paise per month for Rs. 100 arranged for the borrower. If this money which is invested in this money-lending business belonged to the assessee, instead of brokerage he would have received the entire interest and in the diary No. 31, the entries of interest received would have been found. The brokerage in the entire year is around Rs. 3,52,000 while if the assessee had received the interest, this amount of interest would have been around 18 per cent (normal rate of interest) which would have been about Rs. 40 lakhs. Thus, diary No. 31, which is seized is itself an evidence in favour of the assessee that he was receiving only brokerage and not the interest and this fact itself indicates that as a broker he arranged the finance for the borrower from the lender and accordingly, the money did not belong to him.

On perusal, it is found that diary No. 27 is a ledger giving the accounts of various borrowers. It contains the accounts of the various borrower's and in the same accounts, the assessee has mentioned the names of the lenders in the coded _form (initials). As against these names are written the amounts again in code form (for example, 100 indicates Rs.1 lakh). The due dates on which the borrowers have to repay the amounts are also mentioned and if there are extensions sought by the borrowers, the extended dates also are mentioned clearly. Some of such accounts which have been fully settled have been scratched. If the assessee had not taken these amounts from the lenders there was no reason for him to write these initials of the lenders in these accounts. The fact itself indicates that he had borrowed the money from these various persons. It is noted that both these diaries are considered by the Department as true, genuine and correct documents under s. 132(4A) and if that be so, the diary. No. 27 gives, on one hand, the ledger accounts of the borrower and in the same accounts, the amounts taken from the lenders are

25 ITA No. 259 & 260/JP/2020 Shri Naresh Jhanwar mentioned. When the Department considers the diary as genuine, there is no reason for the Department to doubt these entries in the diaries regarding the lenders. The principle of law is that under s. 132(4A) the document found in search is genuine vis-a-vis the entire contents thereof and the Revenue is not justified in holding a view that only a part of the content, i.e., the name of the borrower, is correct and not the name of the lender. Hence, in this case on the facts the entire diary has to be considered as genuine, true and correct document and if that is so, the fact that the initials of the lenders are mentioned in the accounts of the borrowers, they are to be considered as genuine- Chandra Mohan Mehta vs. Asstt CIT (1999) 65 771.I (Pune) 327: (1999) 71 ITD 245 (Pune) and T.S. Kumarasamy vs. Asstt.CIT (1998) 65 TTD 388 (Mad) relied on.

Biren V. SavlaVs. ACIT (2005) 24CCH 0634 (Mum.) (Trib.) It is an admitted fact that diaries were maintained in the normal course of finance business. Diaries A-2 and A-4 reflected cheque transactions. The contents in the two sets of diaries are similar in nature. Against the name of the borrowers, the names of various lenders were written, against each transaction interest rate is mentioned. The names of lenders appear against more than one borrower on different pages. Similarly one borrower borrows money from different lenders. There are separate interest rates in respect of different lenders giving money to the common borrower. Each page is borrower-wise kept and no separate page or details is kept in respect of lenders. The transactions recorded in A-2 and A-4 are admittedly made through cheques and recorded in regular books of account and transactions in A-3 and A-5 are in cash and are not recorded in regular books of account. There are common parties in the two sets indicating thereby that some parties have taken money in cash as well as through banking channels. These diaries on right side reflect brokerage received by the assessee from various persons. The assessee is admittedly a finance broker arranging finance for various, persons, i.e., borrowers and money is obtained from parties, i.e., lenders. The money is generally borrowed for a short period of time which is at many times extended and a mark made in the diary. It seems that assessee is charging brokerage only form the borrowers and not from the lenders. The brokerage varies from 10 to 15 paise per hundred per month arranged for the borrower. The entries in A-3 and A-5 did not reflect that assessee is receiving interest. If the assessee had not arranged this finance from the lender then there was no need for him to write the names of such lenders. It is not possible to believe that assessee intended to hoodwink somebody by mentioning the names of lenders. If presumption under s. 132(4) is raised in respect of A-2 and A-4 then same should be equally and in identical proportion be raised in respect of A-3 and A-5. The principle is that a document found in search should be treated as genuine with respect to all the entries recorded therein. The Revenue is not justified in taking a view that only a part of the contents, i.e., the names of the borrowers is correct and not the names of lenders. Entire documents should read as a

26 ITA No. 259 & 260/JP/2020 Shri Naresh Jhanwar whole and contents of entire documents should be treated as correct or rejected as a whole— Navjivan Oil Mills vs. CIT (2001) 170 CTR (Guj) 224: (2001) 252 ITR 417 (Guj), Kantilal Bros. vs. Asstt. CIT (2995) 51 MI (Pune) 513: (1995) 52 ITD 412 (Pune), Glass Lines Equipment Co. Ltd. vs. CIT (2001) 170 CTR (Guj) 470 : (2002) 253 ITR 454 (Guj), Mehta Parikh & Co. vs. C1T (1956) 30 ITR 181 (SC) and Chander Mohan Mehta vs. Asstt. CIT (Inv.) (1999) 65 TTJ (Pune) 327: (1999) 71. ITD 245 (Pune) applied. First thing the AO has to prove is that it is the investment of the assessee. In other words, the ownership of the investment must be proved to be that of the assessee. The onus is on the Department to prove it before actually deeming the income, relevant to the investment, as that of the assessee. Further, the words used in s. 69 are "may presume". It casts discretion with the AO to treat the alleged investment as unexplained or explained. It goes without saying that such discretion has to be exercised judiciously. If the AO ignores the preponderance of probabilities then it could not be said that such discretion was exercised judiciously. For invoking s. 69, the Revenue has to establish that investment belonged to the assessee. In the present case, onus cast on the Revenue to establish that outgoings belonged to the assessee has not been discharged. Therefore, the deeming provisions of s. 69 cannot be invoked in this case. For making addition under s. 69, there ought to be some material to prove that outgoings taken by the borrowers belonged to the assessee.—CIT vs. Smt. P.K. Noorjahan (1999) 155 C.T.R. (SC) 509: (1999) 237 ITR 570 (SC) relied on. Where certain document is found in the search from the premises of the assessee then a presumption is drawn under s. 132(4A) that 'transactions recorded therein belonged to the assessee. But such presumption is not absolute. Presumption under s. 132(4A) is rebuttable as the words used in the section are "it may be presumed". It is only a question of fact as to whether investment in loan advanced belonged to the assessee or not, and such presumption about ownership is always rebuttable. Under s. 132(4A) like in s. 114 of Evidence Act, the words used are "may be presumed". It is not a mandate that whenever books of account, etc. are seized, the authority shall necessarily draw the presumption irrespective of any other facts, which may dissuade the Court or the authorities from doing so. Thus, when the AO raised the presumption under s. 132(4A) about A-3 and A-5 that outgoings so recorded in them are investment for the assessee, then the assessee simultaneously discharged the burden lay on 'him by submitting that A-2 and A-4 are also a similar record of the events as A-3 and A-5 and once outgoings recorded in A-2 and A-4 are treated as investment of the lenders, the similarly placed diaries A-3, A-5 also record the outgoings whose money/investment belonged to the third parties, i.e., the lenders. The AO did not point out any cogent reason as to why the onus lay on the assessee by virtue of presumption under s. 132(4A) is not discharged. The onus lying on the assessee regarding explaining the investments in outgoing or about the ownership of the investment is discharged the moment the AO accepted that the outgoings

27 ITA No. 259 & 260/JP/2020 Shri Naresh Jhanwar recorded in similarly placed document A-2 and A-4 belonged to the third parties. After this, the burden again shifts to the Revenue to prove, with some additional material that even though outgoings recorded in A-2 and A-4 belonged to third parties but outgoings recorded in A-3 and A-5 belonged to the assessee. No such material has been brought on record or no cogent reasons have been advanced. There cannot be two standards of presumption, one for set A-2 and A-4 and other for A-3 and A-5.- CIT vs. S.M.S. Investment Corporation (P) Ltd. (1994) 207 .ITR 364 (Raj) and ITO vs. T. Abdul Majeed (1987) 64 CTR (Ker) 266: (1988) 169 ITR 440 (Ker) relied on. Since all the entries in A-3/A-5 contain the names of the lenders, therefore, what the assessee means in the statement is that money was advanced through him and it does not, therefore, lead to the inference that money so advanced belonged to the assessee. Thus, not much weight can be given to the question and answers recorded on 3rd Jan., 1995 particularly when legal implication of the words used in the statement are not clear to the deponent and when he is under lot of stress due to search operation and— fear of life, due to disclosure of the names of the lenders. Further, the statement cannot be read in isolation of seized documents, which reflect that borrowings by borrowers belonged to the lenders. This is particularly important when Department did not pursue further on the summons issued by it to the common lenders/ borrowers in two sets. Thus, merely on the basis of part of the statement in question No 5, it cannot be inferred that entire lending reflected in A-3/A-5 belonged to the assessee. It is an admitted position that there are common names of lenders and borrowers in A-2/A-4 and A-3/A-5. Nothing stopped the Department from pursuing these common entries by calling the details from the bank, from the regular books, summon the parties and record the statements about transactions so recorded in A-3/ A-5. The Department chose not to pursue the matter further in respect of some summons issued by the AO. If the Department accepts that entries common in two sets are genuine, then it should accept that all the entries in A-3/A-5 are genuine and true. Hence, nothing much can be derived from not providing names/ addresses of all the lenders/borrowers particularly when what was available in common list was accepted as true. Thus, there is no case for making addition in the case of the assessee under s. 69 and even under s. 68, in respect of the borrowings in the case of the finance broker. He can at best be assessed only on the finance brokerage. The additions so sustained by CIT(A) under s. 69 are hereby deleted. Conclusion: AO having accepted that the outgoings recorded in two diaries maintained in the normal course of finance business were from lenders to borrowers and the assessee was entitled only to his brokerage, outgoings found recorded in other two diaries with similar particulars could not, be treated as money belonging to the assessee and unexplained investment under s. 69 and there being no material on record so as to fasten the ownership of the outgoings to the assessee, addition was not called for.

28 ITA No. 259 & 260/JP/2020 Shri Naresh Jhanwar

In the present case alsothe notebook/diaries/loose paper indicate that the amount received from one person is transferred to another person on the same date or within two to three days and on such money transfer transaction the assessee has received the commission. The content of these papers are not disputed by the lower authorities. Thus when the paper itself show that the amount involved in these paper do not belong to the assessee, the addition for such amount cannot be made in the hands of the assessee in view of section 292C of the Act unless the lower authorities rebut this presumption by bringing positive material on record.

The fact that the assesse has only earned commission on these transactions is also proved from the fact that in search no asset corresponding to the figures noted in these papers was found. In search cash of Rs.14 lacs and jewellery of Rs.14.42 lacs was only found from the assesse. No other movable or immovable asset was found. Therefore, in the absence of matching assets, the huge amount of Rs.127.31 cr. noted on these papers cannot be assessed as the income of assessee.

It may be noted that a search was also carried out in case of Ramesh Chand Manihar group on 07-01-2016 who was also engaged in finance brokerage. In his search also various papers were found suggesting that huge loan transactions in cash were carried through him. He therefore approached the Hon’ble settlement commission for settlement of his case.Hon’ble Commission vide its order dated 09-10-2018 in para 6.12.5 has given the following findings while settling his case:-

“We tend to agree with the AR of the applicants that once the department has accepted the explanation of the applicant with regard to modus- operandi conducted by them and accepted that the applicants are acting as the brokers, the amount of loans facilitated by them for various parties cannot be taxed as their undisclosed income under section 68 of the I.T. Act, 1961. The Pr.CIT, in his Rule 9 report, has categorically accepted that the applicants are working as brokers for facilitating loans to various parties and earning commission @ 1.2% per annum of the loan amount. The Pr.CIT has, himself, worked out the total unaccounted commission earned by both the applicants at Rs. 46,00,00,000/- during the F.Y. 2009- 10 to 2015-16. Once the department has taken the said position, it cannot proceed to tax the entire amount of the loan transactions under-taken through the applicants as their undisclosed income under Section 68 of I.T. Act, 1961 for the aforesaid financial years. The very fact that the department has already initiated actions under Section 148 of the I.T. Act, 1961 in the case of a number of lenders, it does not strengthen the case of the department to tax the entire loan amount as undisclosed income of the applicants.

29 ITA No. 259 & 260/JP/2020 Shri Naresh Jhanwar We are also inclined to accept the contention of the AR of the applicants that the disclosure of the names and addresses of the borrowers and lenders shall have no bearing whatsoever on the determination of the undisclosed income of applicants by the commission. We also take note of the fact that as against undisclosed brokerage allegedly earned by the applicants worked out at Rs.46,00,00,000/- by the department, the applicant have come out with the disclosure of income of the Rs. 50,00,00,000/- as per the settlement application which is more than the amount worked out by the department. We are not persuaded by the arguments of the Pr.CIT that in the event of non-disclosure of names and addresses of the lenders/borrowers, the entire amount of loan transacted by the applicant during F.Y. 2009-10 to 2015-16 amounting to Rs. 94,50,27,91,000/- should be taxed as applicants income u/s 68 of the I.T. Act,1961 for the simple reason that the department has failed to unearth the matching assets during the course of search conducted on the applicants. We further note the department has not been able to even point out assets matching the amount of Rs. 50,00,00,000/- disclosed by the applicants as the additional income as per the SOF. The Pr.CIT's observations on this issue are neither legally sustainable nor substantiated by any corroborative evidence seized during the search. We agree with the submission of the applicants that the names and addresses of borrowers/lenders are available in the seized record and the department is free to take action as per law in their cases. We are, therefore, not inclined to accede to the department's request to make an addition of Rs. 94,50,27,91,000/- on this issue.” The fact of the case of assesse are similar to that of Ramesh Chand Maheshwari and therefore the addition of the amount mentioned on various papers as undisclosed income of the assesse as against the claim of assessee to assess brokerage income on the basis of these papers which is already offered for tax under PMGKY is unjustified. So far as the identity of the persons for whom transactions of money transfer has been carried out they have been stated by the assesse in his statement during search, in post search proceedings and the name with mobile no. of these persons was also provided during the assessment proceedings.The contact number of these persons are also available in the Samsung mobile of assesse seized during search. The business of assesse is such where the work of money transfer is done through telephone only. The assesse is not required to maintain or know the postal address or identity of the party. The AO has also examined the veracity of these mobile no. in course of the assessment proceeding by contacting on these no. to verify that whether these persons are existing or not but nothing adverse was found. Even a search was carried out in case of RamkumarSoni, Sikarwith whom the assessee has substantiated money transfer activity. Further as held by Hon’ble ITSC in the order of Ramesh Chand Maheshwari, the disclosure of the names and addresses of the borrowers and lenders shall have no bearing whatsoever on the determination of the undisclosed income of

30 ITA No. 259 & 260/JP/2020 Shri Naresh Jhanwar assessee when it is established that assesse is only a broker to these transactions.

Hon’ble ITAT Jaipur Bench in case of Shiv Prakash Bajaj Vs. DCIT 368/JP/2018 dated 24-09-2019 held that a broker can’t be held liable to pay tax on an income which does not arise or belonging to the assessee. The relevant finding of ITAT is as under:-

“It is not in dispute that the assessee surrendered a sum of Rs. 30.00 lacs on account of incriminating material found during the search, therefore, the transaction of loan between two independent parties even if through the service of the assessee being broker cannot be thrust upon the assessee for want of taxing the same in the hands of the actual parties to the transaction. The reasoning of the A.O. and the ld. CIT(A) for making the addition is that if it is not assessed in the hands of the assessee then it would be a revenue loss as the complete particulars of Shri Naresh Kumar Maheshwari were not furnished by the assessee and therefore, the assessee is responsible for the loss of the revenue and liable to pay tax. There is no provision in the Act to deem such income which is otherwise not an income of the assessee. The documents in question clearly manifest the nature of the transaction and the parties to the transaction. Particulars of one of the parties were already available on the seized material and the revenue has already attempted to tax the said income in the hands of ShriRoshalLalSancheti but the ld. CIT(A) has deleted the said addition on the ground that a loan cannot be assessed to tax except it is unexplained credit U/s 68 of the Act. Therefore, the assessee being a broker cannot be held liable to pay tax on an income which does not arise or belong to the assessee. At the most, the income for providing the service as a broker can be taxed in the hands of the assessee for the transaction of loan which the assessee has already offered to tax as part of the surrendered income. Since the revenue failed to assess the said amount in the hands of the parties to the transaction, therefore, it was attempted to tax in the hands of the assessee on the basis of presumptive provisions of Section 292C of the Act. Once the seized documents are free from any ambiguity and the transaction is between the two independent parties then in such a situation, the said document reveals the transaction of loan cannot be presumed to be the document belongs to the assessee for the purpose of assessing the income being unexplained loan. Hence, in the facts and circumstances of the case, the addition made by the A.O. and sustained by the ld. CIT(A) is not justified and the same is deleted.”

The Hon’ble Bombay High Court in case of PCIT Vs. Alag Securities Pvt. Ltd. (2020) 425 ITR 658 dt. 12.06.2020 has held that where business of assessee centered around customers/ beneficiaries making deposits in cash amount in lieu thereof taking cheques from assessee, question of adding cash credit in the hands of assessee does not arise. Para 20 of this order reads as under:-

31 ITA No. 259 & 260/JP/2020 Shri Naresh Jhanwar

“20. We are in agreement with the view taken by the Tribunal. In a case of this nature Section 68 of the Act would not be attracted. Section 68 would come into play when any sum is found credited in the books of the assessee and the assessee offers no explanation about the nature and source thereof or the explanation offered by the assessee is not in the opinion of the Assessing Officer satisfactory. In such a situation the sum so credited may be charged to income tax as the income of the assessee of the relevant previous year. But that is not the position here. It has been the consistent stand of the assessee which has been accepted by the First Appellate Authority and affirmed by the Tribunal that the business of the assessee centered around customers / beneficiaries making deposits in cash amounts and in lieu thereof taking cheques from the assessee for amounts slightly lesser than the quantum of deposits, the difference representing the commission realized by the assessee. The cash amounts deposited by the customers i.e., the beneficiaries had been accounted for in the assessment orders of these beneficiaries. Therefore, question of adding such cash credits to the income of the assessee, more so when the assessee was only concerned with the commission earned on providing accommodation entries does not arise.”

The Hon’ble Delhi High Court in case of CIT Vs. Anoop Jain 424 ITR 115 dt. 22.08.2019 where the assessee was acting as a financial broker and there was material on record showing that amounts passing through his hands but there was no evidence that amount belongs to assessee, the amount assessed u/s 69A was deleted. The held part of this decision reads as under:-

“The very basis for making the additions was the inference drawn by the AO that the assessee has received pay orders and spent the monies for purchase of shares and units as a result of some ‘financial quid pro quo’. There were certain facts that stood out which showed that these amounts received by the assessee as pay orders did not belong to him. The assessee was only a conduit through whom the amounts were floated. One of the essential conditions in section 69A of the Act is that the assessee should be the “owner of the money” and it should not be recorded in his books of accounts. There was overwhelming evidence to show the involvement of C acting on behalf of SP for SMI. The CBI also did not proceed against the assessee and that discounted the case of any collusion between the assessee and C along with P. The assessee was at the highest used as a conduit by the other parties and did not himself substantially gain from these transactions. In that view of the matter, the concurrent view of both the CIT(A) and the ITAT that the addition of the sum to the income of the assessee was not warranted was justified.”

10.

The Ld. CIT(A) has incorrectly held that section 68 is applicable in the present case without controverting the various arguments taken by the

32 ITA No. 259 & 260/JP/2020 Shri Naresh Jhanwar assessee. She has tried to distinguish the decision of Hon’ble Settlement Commission in case of Ramesh Manihar and ITAT, Jaipur Bench decision in case of Shiv Prakash Bajaj on the ground that in these cases the name and address of borrowers/ lenders were available in the seized record. However, she has ignored the crux of these decisions where it is held that once it is accepted that the assessee is acting as a broker, the amount of loan facilitate by them for various parties cannot be taxed as their undisclosed income u/s 68 of the Act. The Ld. CIT(A) has also not controverted the fact that assessee has given name and contact number of the persons referred in the seized annexure (PB 33-35) and the AOhas also verified the existing of these persons by making call to few of them (PB 36). Only because the department could not take action against the lender or borrower would not mean that the amount noted on the paper which does not belong to assessee can be added to his income particularly when the income from commission earned from such transaction has been declared by the assessee under PMGKY scheme and accepted by the department. In view of above,addition made by AO u/s 68 and confirmed by Ld. CIT(A) be directed to be deleted.”

14.

Relying on the above written submission the ld. AR of the

assessee further submitted that in the search proceeding replying

to the question no. 25 he has categorically accepted the fact that

he is engaged in the business of the money transfer activities. He

has already stated in the statement by way of example decoding

the amount recorded in the diary that this money is belonging to

those person and he has given the example and details of those

person. For the reason best know there is not finding in the orders

of the lower authorities about the averments made by the

assessee. The assessee has already offered by the income related

33 ITA No. 259 & 260/JP/2020 Shri Naresh Jhanwar to the search paper and declared this amount in the PMGKY and

the authorities appointed in that scheme has already accepted the

declaration and the same is supported by proof filed before us and

is already available with the lower authorities. There is no finding

on facts in the order that the telephone numbers given by the

assessee are incorrect. Even the whatsapp chats were in detailed

explained while giving the statements. There is no action to find

the truth by the department to controvert the submission made in

the statement recorded at the time of search. The credit and debit

summation of all these pages are almost similar and the same is

12731327/- and 12721698/- so there is not much difference. The

assessee has already made a statement the diary is not regular

book it is just memorandum of the activities that he carries. As

regards the FEMA and PMLA violation the statement of the AO are

without bringing any material and the department has still it is not

proved. Considering the facts on hand the invocation of provision

of section 68 is also incorrect. There is no finding clear finding in

the order of the lower authorities that how and what basis the

seized material is books of account within the meaning of definition

books given in section 2(12A) of the Act. The ld. CIT(A) has

34 ITA No. 259 & 260/JP/2020 Shri Naresh Jhanwar without dealing with the argument that how the records seized is

books and how the provision of section 68 applied in this case and

thus the order of the ld. CIT(A) is non speaking on the issue. The

search party has already accepted the contention of the assessee

and based on that the disclosure was made by the assessee. The

same cannot be looked a side and new addition is proposed.

Based upon the information available with the assessee he has

filed the detailed placed on record at page 33 to 35 of the

assessee’s paper book where in the details showing sr.no., Name

of persons, page no of annexure AS -1, Page no. of Annexure AS-

2, Page no of Annexure A-4, address or location, contact no of

parties. In spite of all these details made available there is not a

single verification is done if done there is no reference in the

orders of the lower authorities about filling of all these details and

thus, the benefit of filling this details be given to the assessee and

based on these information assessee has already established that

he is engaged in the money transfer activities of these parties.

Even if all the explanation is ignored then the assessee has

accepted the money but has also paid the money recorded in the

same set of evidence and law does not taxed the receipt it is the

35 ITA No. 259 & 260/JP/2020 Shri Naresh Jhanwar income of the assessee that is to be charged. Either the document

found is to be ignored as whole or it is to be accepted it cannot be

half way. The department cannot blow the hot and cold way both

the suit their own imagination. As regards the applicability of the

section 68 he relied on the decision cited in the written submission.

As regards the contention that this diary forms part of books of

account or not he relied upon the decision in the Case of DCIT Vs.

GSNR Rice Industries P Ltd. 90 ITR 114(ITAT(Chennai). This

relied upon part is already discussed in the written submission of

the filed by the ld. AR. The ld. AR of the assessee also relied upon

the provision of section 292C and the CBDT circular no. 3 dated

12.03.2008. The same being discussed in the written submission

the same was relied upon. The ld. AR differentiated the decision

cited and relied upon by the revenue explaining that the same is

not applicable to the facts of the assessee and therefore, the

same is not to be considered. Thus, when the diary is explained,

details of the person on whose behalf acted, revenue has not

exercised to find the correct truth the diary cannot be considered

as books and if so the credit and debit both transaction of the

36 ITA No. 259 & 260/JP/2020 Shri Naresh Jhanwar same seized paper be considered while assessing the income of

the assessee.

15.

Per Contra the ld. DR appearing for revenue submitted that

the assessee is one of the member of syndicate engaged in the

business of unaccounted transaction. The assessee submited that

he did not maintain any records of money transfer business is not

correct as he has maintained the correct cash book showing

opening and closing balance of this activity. The front side shows

the transaction that he has done in Jaipur and back side the

transaction with outstation parties. The assessing officer has

discussed all these seized records in this assessment order and

thus assessee is engaged in the organized business and

transaction are also correctly recorded by him. He has not

submitted the details of the all parties on whose behalf he has

worked and in any many cases he has not submitted the mobile

number of parties and thus the identity is not established. As the

diaries are found from the premises of the assessee it is the duty

of the assessee to submit the correct details. Section 68 is

deeming provisions and thus the addition for all the credit is

required to be confirmed and it has nothing to see the ultimate

37 ITA No. 259 & 260/JP/2020 Shri Naresh Jhanwar assets found in the hands of the assessee at the time of search.

Summarily he has heavily relied upon the findings given in the

orders of the lower authorities.

16.

The ld. DR has relied upon the following judicial decisions support their contentions;

a) Zaveri Diamonds Vs. Commissioner of Income Tax 25 Taxmann.com 552 where in the apex court held that “where the assessee firm had not disclosed names of persons to whom jewellery had been sod and also no evidence had been furnished by the assessee to establish that cash deposited in its bank account was in lieu of sales made of Jewellery, addition made to assessee’s income on account of unverifiable sales was justified. b) Jas Raj Dhoka Vs. Income Tax Officer, 29 SOT 66 (Jodhpur)

Whether in view of fact that the assessee intended ot keep record of loans taken by him when he made entries thereof in diary impounded from his business premises, such a diary having account of assessee’s transactions would be regarded as his books for purpose of section 68.

c) Haji Nazir Hussain Vs. Income Tax Officer 91 ITD 42 (Delhi) Whether whenever any money is received by assessee and is entered in cash book, it can be said that said sum is credited in books of assessee even though corresponding credit entry in the ledger account may be made subsequently.- Held Yes

17.

The ld. DR appearing for revenue has also submitted a

submission dated 08.11.2021 where in the following contentions

were raised

The Hon'ble Members, Bench-B, ITAT, Jaipur

38 ITA No. 259 & 260/JP/2020 Shri Naresh Jhanwar

Sir,

Sub Appellate proceedings in the cases of Shri Naresh Jhanwar in ITA No. 259 & 260/JP/2020: Date of hearing: 09.11.2021

Kindly refer to the above subject.

2 In these two appeals filed by the assessee, similar grounds of appeal have been raised except the amount under dispute which is RS. 4.52 Crore and Rs. 122.62 Crore for AY 2016-17 and 2017-18 respectively. It would be appropriate to reproduce hereunder ground of appeal 1(i) filed by the assessee for AY 2016-17 as under:

1 "The Id. CIT(A) has erred on facts and in law in confirming the addition of Rs. 4,52.59.300/ made by the AO u/s 68 of the Act by not properly appreciating the facts that:

(i) AO has accepted the fact that the assessee is engaged in the business of money transfer on commission basis for which no books of accounts are maintained by him and therefore, the amount involved in the money transfer cannot be assessed u/s 68 the Act."

In the assessment orders under dispute, huge additions were made by the AO on the basis of seized note books, which have been sustained by ld. CIT(A). It is humbly submitted that the above ground of appeal was not specifically raised by the assessee before the Id CIT(A), though, the relevant submissions are appearing in the impugned appellate order of Id. CIT(A). However, there is no finding of the Id. CIT(A) on the issue as no specific ground of appeal was raised before it."

It is, therefore, humbly submitted that the above ground of appeal relating to the claim of the Id. AR that the seized notebooks were not books of accounts and thus no addition u/s 68 could be made should not be entertained as it is nothing but an additional ground of appeal, which requires verification of facts in order to determine whether the seized note books constitute 'books or books of accounts' or not as per provisions of section 2(12A) of the Act.

Further, since, the Id. AR has not made any prayer for admission of the same as additional ground of appeal along with justification thereof, it is humbly submitted that the same should not be admitted by the Hon'ble Bench.

39 ITA No. 259 & 260/JP/2020 Shri Naresh Jhanwar 18. We have heard the rival contentions and have also

persuaded the submission and case laws advanced before us by

both the parties for driving home to their arguments and logic. The

ld. DR has relied upon three judgment which are difference on

facts and are not applicable in this case as the facts of the case

relied upon the case on hand are different. As the contention

raised by the ld. DR taken vide submission dated 08.11.2021 that

the assessee has not taken the ground is incorrect as the ld. AR

shown our attention the order of CIT(A) at page 2 wherein the

assessee has taken this ground is extracted by the CIT(A) as

ground no. 2. On facts the ld. DR heavily relied upon the fact that

the assessee has not submitted the details of all the persons

against whose name the amount is recorded in the seized diary

and thus he supported the order of the lower authorities. On the

other hand ld. AR appearing on behalf of the assessee submitted

that the definition of books of accounts is an inclusive definition.

However, notepad, loose papers and diaries which can be easily

detached and replaced cannot be termed as books. The AO at

page 2 para 5 has accepted that for money transfer business

assessee has not maintained books of accounts. Therefore,

40 ITA No. 259 & 260/JP/2020 Shri Naresh Jhanwar recording in loose sheets, notepads and diaries cannot be

regarded as the sum found credited in the books of accounts for

the purpose of section 68. Hence on the basis of the entries in

such documents / paper addition u/s. 68 cannot be made. The ld.

AR for this contention has placed reliance on the following decision

in his written submission:

ArunaSankhlaVs. DCIT ITA No.484/JP/2016 dt.01.12.2017 (Jaipur) (Trib.) para 7.4 of order held as under: “After considering the rival submissions and the materials available on record, we are of the considered opinion that the seized papers cannot be treated as books of account. Furthermore, only the commission income can be assessed in the hands of the assessee @ 0.10% on a total of the credits of Rs. 91,67,81,272/-. The addition u/s 68 of the Act can be made only if any sum is found credited in the books of the assessee. A book means a collection of sheets of papers bound together with the intention that such binding shall be permanent and papers used are kept collectively in one volume. A book which contains successive entries of items maybe a good memorandum book but until those entries are totaled or balanced or both as the case may be, there is no reckoning and no accounts. A book which merely contains entries of items of which no account is made at any time, is not a “book of account” in a commercial sense. Thus the addition made u/s 68 is not justified. It is noticed that over and above the peak credit, the AO has further made an addition of Rs. 52,40,137/- on account of debtors exceeding the creditors. We have found that the peak determined by the AO is not correct, otherwise also, when once peak amount has been added then no separate addition is required. It seems that the AO has not properly prepared the list of debtors and creditors based on any logic. The Ld. CIT(A) has confirmed the addition of Rs. 52,40,137/- under the Provisions of Section 69B of the Act. This section relates to investment made by the assessee in the acquisition of bullion/jewellery or other valuable articles but it does not speak about any investment in debtors. Moreover, Section 69B also stipulates the position where the investment exceeds the amount shown in the books of account. Since the assessee does not maintain any books of account wherein the debtors and creditors are reflected, therefore, this addition has also been

41 ITA No. 259 & 260/JP/2020 Shri Naresh Jhanwar wrongly made and upheld u/s 69B of the Act. Hence, in our considered opinion, only commission income has to be determined in this case and nothing more. Accordingly, we reverse the findings of the Ld. CIT(A) and order to delete the entire addition so made. Thus Ground Nos. 3 and 4 of the assessee are allowed.

19.

Based on the various other decision relied upon by him in his

written submission submitted that the ld. CIT(A) has incorrectly

held that section 68 is applicable in the present case without

controverting the various arguments taken by the assessee. She

has tried to distinguish the decision of Hon’ble Settlement

Commission in case of Ramesh Manihar and ITAT, Jaipur Bench

decision in case of Shiv Prakash Bajaj on the ground that in these

cases the name and address of borrowers/ lenders were available

in the seized record. However, she has ignored the crux of these

decisions where it is held that once it is accepted that the

assessee is acting as a broker, the amount of loan facilitate by

them for various parties the same cannot be taxed as their

undisclosed income u/s 68 of the Act. The Ld. CIT(A) has also not

controverted the fact that assessee has given name and contact

number of the persons referred in the seized annexure (PB 33-35)

and the AO has also verified the existing of these persons by

making call to few of them (PB 36). Only because the department

could not take action against the lender or borrower would not

42 ITA No. 259 & 260/JP/2020 Shri Naresh Jhanwar mean that the amount noted on the paper which does not belong

to assessee can be added to his income particularly when the

income from commission earned from such transaction has been

declared by the assessee under PMGKY scheme and accepted by

the department.

20.

The central board of direct taxes vide circular (F.No.

286/2/2002/IT, Inv.) dated 10th March, 2003, advised that

Assessing Officers should rely upon the evidence/materials

gathered during the course of search/survey operation or

thereafter while framing the relevant assessment order. The ld. AR

submits that the surrender made during the course of search and

seizure by the assessee has got no value? and that too with the

correct information found on the basis of the seized material. After

careful consideration of the arguments advanced by the parties in

view of the materials available on the record, the orders of the

lower authorities and judgments cited by the ld. DR, we are of the

considered view that a surrender made by the assessee cannot be

solely made basis for assessment but it should be considered

based on the corroborated evidence collected in the search and

43 ITA No. 259 & 260/JP/2020 Shri Naresh Jhanwar the statement recorded based on that material. A surrender or

confession on the part of assessee cannot absolve the department

from doing its duty of 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. Similar is the view of

the CBDT in the aforesaid referred circular as in general practice

assessee takes plea that surrender or confession was made under

fear, influence, pressure, threat or duress during the course of

search and seizure, possibility of the same in all the cases cannot

be totally ruled-out, therefore to secure the proper assessment it

has been advised by the CBDT 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 department. The CBDT has further advised

that while recording statements during the course of search and

seizure and survey operations no attempt should be made to

obtain confession as to the undisclosed income. The CBDT has

made it categorically clear that any action on the contrary shall be

viewed adversely. Nothing new has been told in the CBDT circular

as it is a well established principle of law that surrender or

44 ITA No. 259 & 260/JP/2020 Shri Naresh Jhanwar confession cannot be made the sole basis for conviction. Likewise,

an assessment cannot be made absolutely on the basis of

surrender or confession, because it will lead to high handedness

and arbitrariness against the assessee. The CBDT vide the

aforesaid circular has only reiterated and made clear this aspect of

the established principle. The purpose behind is also that in case

of retraction of the assessee from the surrender or confession

made by it before the searching party, the department should not

feel helpless to assess the income of the assessee in absence of

other evidence which it should have collected during the course of

search. The documents seized during the search however

suggested that the assessee was indulged in money transfer

business. Even the documents seized suggest so and revenue did

not controvert the very basic facts. Thus, the money which is

received is mere for transferring from one place to another cannot

be considered as income of the assessee. The facts and details

required to be mentioned looking to the nature of activities carried

out is available on record department has not find single evidence

to disprove the contention of the assessee. We have considered

the arguments advanced by the parties in view of the materials

45 ITA No. 259 & 260/JP/2020 Shri Naresh Jhanwar available on the record and have gone through the orders of the

lower authorities as well as the judgments relied upon by the

parties. We thus find force in the case of the assessee that he was

indulged in the activities of money transfer from one place to

another on charging some commission from the clients based on

the destination. In absence of contrary finding the whole amount

received and recorded in the diary cannot be considered as

income of the assessee. The contention of the assessee that it is

beyond doubt that the assessee is not engaged in the money

transfer of money business then commission earned on it only can

be taxed in its hands and the whole amount. The case of the

department is that the assessee has not explained the details of

each credit entry that is recorded in the seized diary and thus it is

the undisclosed income of the assessee. We do not agree with this

contention of the department as from the documents seized which

are also the basis of the assessment by the department, it is

evident beyond doubt that the assessee was rendering services of

transferring money on payment of commission and there is nothing

on record to draw different inference. The initial burden has been

discharged by the assessee that he was not owner of the money

46 ITA No. 259 & 260/JP/2020 Shri Naresh Jhanwar and the nature of each credit and debit has been explained at the

time of search it self. Even the credit and debit of the transactions

recorded are almost tallied. The nature of business of the

assessee is as such the details provided by the assessee is

sufficient to carry out the job that he is based on the commission

he is supposed to act. The department has not examined any

single client and not placed any single evidence against what has

been canvassed by the assessee. Thus, in the absence of the

adverse finding the averments made by the assessee is correct.

The ld. AO as well as the search team was appraised about the

transactions apparent on records and in some of the case the

details are evident from the whatsapp and their contract details

and transfer of money viz a viz the owner of the transactions

available on record but for the reasons best known not a single

party was examined that the averments made by the assessee is

correct or not and the same was not reduced from the total added

in the income of the assessee. In the absence of the contrary

finding the initial burden is discharged by the assessee and

thereafter revenue has remained to be silent on the averments of

the assessee. There no single evidence brought on record that

47 ITA No. 259 & 260/JP/2020 Shri Naresh Jhanwar whatever averments that the assessee is making is correct or not?

Thus, this non action on the part of the revenue cannot be a

burden for tax on a amount which is in fact is not earned. In fact

the money that he has recorded in the diary is the amount received

by him for a particular job on a commission basis. The revenue has

already searched the entire business and residential premises of

the assessee, there is no unaccounted assets or investment made

to the extent of the additions made in the hands of the assessee or

of his any of the family members, not the other way the income

earned and expended remained to be taxed as unexplained

expenditure. Even though the assessee has submitted the name

and telephone number which the department has not acted upon.

Once the assessee based on the evidence acted to the best of his

legal duty provided the information and this in-action on the part of

the revenue, assessee cannot punished for adding all the amount

for which he has acted as commission agent only and the real

owner of the money has been of the parties whose information is

recorded in the record seized. The averments of the assessee is

not proved to be wrong, as he has already explained the

transactions and the details available such as whatsapp chat and

48 ITA No. 259 & 260/JP/2020 Shri Naresh Jhanwar mobile number of the persons and based on that information

assessee has already discharged his onus and explained the

entries. In all fairness even the coding of recording the transaction

was also explained by the assessee. There is no doubt that initial

burden of explaining the nature of transaction and the modus

operandi is on the assessee which he has established. Thus, in

such situation only the commission income is required to be taxed

and not the whole credits. The ld. AO has already noted that the

transaction done are not permitted under the other laws such as

FEMA and PMLA but in the proceeding before AO he has

ascertain the true and correct income of the assessee and not to

adjudge the activity itself. Thus, to deal with the present case we

have to see the nature of activity done viz a viz the materials found

and seized. The assessee from the day one stated the correct

activity and explained the nature of the transaction in the seized

material. The department in the assessment proceeding or in the

remind proceeding not placed anything contrary findings to what

has been submitted by the assessee. Merely, the assessee has

not submitted the complete details of all the hawala transaction he

cannot be hold the owner of the money which he has just acted as

49 ITA No. 259 & 260/JP/2020 Shri Naresh Jhanwar transporter or a service provider to arrange the transfer of cash

from one place to another. This activity whether legal or illegal will

not change the ultimate income that is to be taxed which has been

earned by the assessee. Not only that under the income tax

whether the income is legally earned or illegal has no impact so far

as the taxability of income is concerned. The ld. AO instated of

assessing the income has ignored the explanation furnished and

punished him at the fault of the others whose details are already

known to the department may be not the complete but there is no

action on the part of the revenue find the truth. It is well

established law that documentary evidence prevails upon oral

evidence. The documents seized during search in the premises

have very important role to play in arriving at a definite finding. The

documents found and seized without any doubt suggest that the

assessee was indulged in money transfer business which even

revenue has accepted. Admittedly it is also the case of the revenue

and there is no contrary finding to that in the orders of the lower

authorities. Now the issue for adjudication before us is as to

whether the assessee is the owner of the transaction recorded in

the seized diary or is it part of the money with which assessee was

50 ITA No. 259 & 260/JP/2020 Shri Naresh Jhanwar entrusted by its clients to transfer the same to the required

destination on charging of commission? There is no dispute that

person found in possession of assert or money is presumed to be

owner thereof in absence of explanation or materials suggesting

otherwise. In the present case the assessee’s business and

residential premises were searched. He has offered the income

more than the assets found in the search. He has on the day of

search stated that he is not the owner of the money recorded in the

seized diaries. While adjudicating the issue we will have to

examine and consider entire materials including money or

investment / assets found during the course of search, and to see

that, is there any nexus between the money or assets found and

documents. And if there is no nexus between the documents and

the money or the assets then certainly the revenue have no case.

In other words, while considering the entire case in view of

evidence found and submissions thereto advanced by the parties,

that the transaction recorded in the seized material cannot be kept

altogether apart in isolation and the other circumstantial evidence

is totally ignored and kept as part and only the concentration be

made with the amount recorded in the seized diary. In the search

51 ITA No. 259 & 260/JP/2020 Shri Naresh Jhanwar the assessee has already based on the business practice admitted

that they were charging commission of Rs. 100 per to Rs. 200 per

lakh money transferred depending upon destination. Based on the

evidence found the assessee has already offered a sum of Rs. 48

lac for all the years from financial year 2010-11 to 2016-17. Before

the CIT(A) in the remind proceeding the ld. AO has not specifically

co-related the income disclosed by the assessee viz a viz the

income offered by the assessee in the return of income. Even the

ld. CIT(A) or the ld. AO has not considered the nature of activity

carried out by the assessee. The transaction recorded in the diary

is mere memorandum records and based on that the income is

required to taxed and since this records are not books of account

no addition u/s. 68 is called for this ld. AR of the assessee relied

upon the judgment of the co-ordinate bench decision in the case of

Arun Sankhla Vs. DCIT in ITA no. 484/JP/2016. In this

background, addition of total amount recorded in this account is

neither income of the assessee nor the credit within the meaning of

section 68 of the Act considering the definition of books given in

section 2(12A) of the Act. Respectfully following the decision of the

co-ordinate bench of Chennai ITAT we hold that based on the facts

52 ITA No. 259 & 260/JP/2020 Shri Naresh Jhanwar that the assessee has already clarified that he did not maintain the

books of account for money transfer business this loose note, diary

cannot be considered as books unless the same is part of books of

accounts and thus, since this diary is not books of account the

provision of section 68 is not applicable. In the facts of this case

ultimately the income is to be computed based on the statement of

the assessee and that correct income is to be taxed in the hands of

the assessee. As the assessee or the ld. AO has not calculated the

amount chargeable to tax based on the statement of the assessee

that he is earning Rs. 100 to 200 as commission per 1 lac he

transfers. As, this amount is not quantified same is required to be

determined. Therefore, we vacate the addition of Rs. 4,52,59,300/-

but at the same time direct the ld. AO to calculate the commission

on this transaction considering the already amount disclosed by

the assessee and finally ld. AO is directed to tax correct

commission income only in the hands of the assessee if not

covered by the disclosure already made. While doing so the ld.

AO is directed to recalculate the amount after giving sufficient

opportunity of hearing to the assessee. With this direction we are

53 ITA No. 259 & 260/JP/2020 Shri Naresh Jhanwar disposing all the four grounds appeal. In terms of this observations

appeal of the assessee is partly allowed.

21.

We have heard both the parties and perused the materials

available on record. The Bench has noticed that the issues raised

by the assessee in the A.Y. 2016-17 are similar to the case of the

assessee for the A.Y. 2017-18 and it is not imperative to repeat the

facts of the case being similar grounds of appeal. Hence, the

Bench feels that the decision taken by us in the case of the

assessee for the A.Y. 2016-17 in ITA No. 259/JP/2020 shall apply

mutatis mutandis in the case of the assessee for the A.Y. 2017-18

in ITA No. 260/JP/2020.

In the result, both the appeal of the assessee is partly

allowed.

Order pronounced in the open court on 17/08/2022

Sd/- Sd/- ¼ jkBkSM deys’k t;arHkkbZ ½ ¼ lanhi xkslkbZ ½ (Sandeep Gosain) (Rathod Kamlesh Jayantbhai) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member Tk;iqj@Jaipur

54 ITA No. 259 & 260/JP/2020 Shri Naresh Jhanwar fnukad@Dated:- 17/08/2022 *Santosh. आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. vihykFkhZ@The Appellant- Shri Naresh Jhanwar, Jaipur 2. izR;FkhZ@ The Respondent- DCIT, Central Circle-3, Jaipur. 3. vk;dj vk;qDr@ CIT 4. vk;dj vk;qDr@ CIT(A) 5. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत. 6. xkMZ QkbZy@ Guard File {ITA Nos. 259 & 260/JP/2020} vkns'kkuqlkj@ By order, सहायक पंजीकार@Aेेज. त्महपेजतंत

SHRI NARESH JHANWAR,JAIPUR vs. DCIT, C.C.-3, JAIPUR