ACIT, NEW DELHI vs. SH. MUKESH GARG, NEW DELHI

Since the issues involved are common in these appeals which were heard together so these are being disposed off by this consolidated order for the sake of convenience and brevity. , 3547 & 3549/Del/2012 2 Mukesh Garg 3. At the first instance we will deal with the appeal in 2007-08. Following grounds have been raised in this appeal: “1. The order of the Ld. C1T (A) is not correct in law and facts.

The facts related to this issue in brief are that a search and seizure operation u/s 132 of the Income Tax Act, 1961 (hereinafter referred to as the Act) was carried out on the residential premises of the assessee situated at C-1, Model Town East, Ghaziabad on 20.01.2010. Thereafter, a notice u/s 153A of the Act dated 11.07.2011 was issued to the assessee requiring him to file the return of income. In response, the assessee filed the return of income on 19.08.2011 declaring total income of Rs.60,84,360/- and the agricultural income of Rs.2,88,600/-. During the course of assessment proceedings the AO noticed that a search action u/s 132 of the Act in the case of Sh. Mithulal, a real estate 3547 & 3549/Del/2012 4 Mukesh Garg broker of Bangalore, was carried out on 09.10.2009 and certain incriminating documents containing some slips/chits relating to Sh. Sohanraj Mehta were found which were in connection with the C&F agency of RMD Group of Pan masala and Gutkha products for Karnataka Region. Subsequently, on the next day Sh. Sohanraj Mehta was also covered by the Investigation Wing of Bangaloare and confronted with those incriminating documents. During the search operation, Sh. Sohanraj Mehta accepted that those documents were related to him and were in connection with C&F agency of RMD Group for pan masala and gutkha products. According to the AO, those documents suggested the unaccounted sale of Gutkha by RMD Group through Sh. Sohanraj Mehta and that the amounts of unaccounted sale proceeds had been either remitted back to RMD Gutkha Group or handed over to various suppliers of raw materials/parties on the directions of Sh. Prakash R. Dhariwal and Sh. Rasik Lal M. Dhariwal, the head of RMD Gutkha Group. The AO mentioned that on enquiry to ascertain the business connection of RMD Gutkha Group with the parties whose names had figured in the said incriminating documents, it was found that those parties were closely connected with the business activities of RMD ITA Nos. 3546, 3547 & 3549/Del/2012 5 Mukesh Garg Gutkha Group relating to production and sale of Gutkha and Pan Masala products. Accordingly, those business groups/parties which included Mukesh Garg Group i.e. the assessee were also covered alongwith RMD Gutkha Group in search operation conducted on 20.01.2010. The AO pointed out that the documents seized by the Investigation Wing of Bangalore included loose papers containing signed chits having details of payments to various parties including the assessee on which instructions were issued either by Sh. Parkash Dhariwal or Sh. Rasik Lal Dhariwal, owners of RMD Gutkha Group to Sh. Sohanraj Mehta for handing over cash to the persons whose names had been specified in the chits or to the bearer of the chit. He also pointed out that the amounts mentioned in those chits were in codes and in the statement of Sh. Sohanraj Mehta recorded during the search on 09.10.2009, it had been categorically explained that the figures mentioned in Lakhs actually stood for Crores of rupees and the word “packet” stands for Lakh of rupees. The AO observed that the associate firms/concerns pertaining to those groups were supplier of Katha mainly to M/s RMD Group and the documents found/seized by the Investigation Wing, Bangalore during the search of Sh. Sohanraj Mehta mentioned name of person pertaining to Garg Group 3547 & 3549/Del/2012 6 Mukesh Garg specifically as “Mukesh Bhai and Mukesh Bhai Delhi”. The AO, therefore, was of the view that those documents/slip/chits pertained to the assessee Sh. Mukesh Garg and that the details of chits/payments/documents pertaining to the assessee were as under:

The AO on the basis of the above said reasons was of the view that it was established that the assessee had received an amount of Rs.4.69 Crores during the year under ITA Nos. 3546, 3547 & 3549/Del/2012 10 Mukesh Garg consideration through Sh. Sohanraj Mehta on instruction of the heads of M/s RMD Group and that the assessee although had denied of having received any amount in lieu of unaccounted sale but the admission of Sh. Sohanraj Mehta, C&F agent of RMD Group, having made payments to various parties on behalf of M/s RMD for unaccounted sale made by such parties to M/s RMD Group, made it highly probable that the assessee had received Rs.4.69 Crores from M/s RMD against unaccounted sales during the year under consideration. He also mentioned that Sh. Sohanraj Mehta with whom such chits had been found was a trustworthy person of the head persons of M/s RMD Group. Therefore, the admission made by Sh. Sohanraj Mehta in respect of chits/slips issued by the head persons of M/s RMD Group could not be washed away by saying that his statement admission was confirmed by Sh. Dhariwal (Head of M/s RMD Group). The AO pointed out that the family concern of the assessee, namely, M/s Yash Pal Narender Kumar was a regular supplier of RMD Group, therefore, the transaction in question was a trading transaction. He also pointed out that though on the documents in question, name of Sh. Mukesh Garg, the assessee was mentioned but the associated firm/family concern, namely, M/s Yash Pal Narender Kumar 3547 & 3549/Del/2012 11 Mukesh Garg was the main supplier of Katha to RMD Group during the period to which those documents and chits pertained. The AO pointed out that the trading results shown by M/s Yash Pal Narnder Kumar for the assessment years 2004-05 to 2008-09 were as under:

The AO on the basis of the aforesaid detail was of the view that the associated concern of the assessee had shown GP rate of 7.8% and stock ratio of 9.06% for the year under consideration. He, therefore, applied the GP rate of 8% and stock ratio at 10% on unaccounted sale amounting to Rs.4.69 crores and worked out for unaccounted income of the assessee as under:

Being aggrieved the assessee carried the matter to the ld. CIT(A) and the submissions made before him are reproduced verbatim as under: “3.2.1 The Question that arises now for consideration is whether any addition can be made on the basis of papers seized from THIRD PARTY; the seized papers do not contain the exact details of the payments. According to the Sec 292(1) of the Act, "when the document is found during the course of search under section 132, it may be presumed that the said document belongs to such person and the contents of such document are true." It never suggests that the document belongs to another person. 3.2.2 In the case of Ashwani Kumar v. ITO [1997] 39 ITD 183 (Delhi). It was held that where documents found at the time of the search did not indicate whether figures referred to in the paper reflect quantities of money or to quantities of goods, the same are only dumb documents and therefore, no addition could be made on the basis of such documents. It was held in Neena Syal's case [1999] 70 ITD 62 (Chand) that where a document found during the course of search is open to more than one possibility of interpretation and does not prove conclusively that any premium was given by the assessee or received by the seller then no addition in 3547 & 3549/Del/2012 13 Mukesh Garg respect of premium could be made on purchase of plot. From this decision it is clear that the document must unmistakably reflect the transaction without having any second interpretation. 3.2.3 In Elite Developers v. Deputy CIT [2000] 73 1TD 379 (Nag), it was held that where the seized documents evidencing receipt of on money by the assessee were not speaking documents as they did not contain any narration or description about different figures noted thereon and the Department having failed to bring on record any material or evidence to corroborate allegation regarding receipt of on money, then the presumption on the basis of the documents could not be raised. 3.2.4 "A document seized from the assessee may not be complete in all respects as businessmen may choose to record minimum details on a document and keep the rest in their memory. It is the duty of the assessing Officer to carry out the necessary investigation by correlating the document with other documents seized, with regular books of account, with record kept by outside agencies, such as bank or financial institutions or debtors/ creditors and finally by recording the statements of concerned parties so as to fill up the gaps in confirming the inference arising from the documents for a proper charge of tax. Such correlation is necessary unless the document is capable of giving full details so as to enable any intelligent person to find out the nature of the transaction, the year of the transaction, the ownership of the transaction and quantum thereof." , 3547 & 3549/Del/2012 14 Mukesh Garg The components which enter into the concept of taxation are first the taxable event which attracts the levy, second, the person on whom the levy is imposed and who is obliged to pay the tax, third, the assessment year in which charge of income tax is levied, fourth, the total income of the previous year and fifth, the rate or rates at which tax is to be imposed. The rates are prescribed in the annual Finance act and therefore, this component has no value in determining the total income on the basis of a seized document. A Charge can be levied on the basis of document only when the document is a speaking one. The document should speak either out of itself or in the company of other material found on investigation and/ or in the search. The document should be clear and unambiguous in respect of all the four components of the Charge of Tax. If it is not so, the document is only a dumb document. No charge can be levied on the basis of a dumb document. A document found during the course of a search must be a speaking one and without any second interpretation, must reflect all the details about the transaction of the assessee in the relevant assessment year. Any gap in the various components for the charge of tax must be filled up by the Assessing Officer through investigations and correlations with other material found either during the course of the search or on investigations. In the present case the person searched are Sh. Rasik Lal Dhariwal, Sh. Prakash Dhariwal and Sh. SohanRaj Mehta. Therefore, the presumption applies to them and NOT to the Appellant. , 3547 & 3549/Del/2012 15 Mukesh Garg It has been held in the case of "Addl. CIT vs Miss. Lata Mangeshkar reported in (1974) 97 ITR 696 (Bom) that entries in the books of account regarding payment to an assessee was not sufficient as there was no guarantee that the entries were genuine. ASSISTANT COMMISSIONER OF INCOME TAX V. SATYAPAL WASSAN [2007] 295 ITR (AT) 352 (Jabalpur). 3.2.5 This view has been echoed by the Mumbai Tribunal in the case of SAIF ALI KHAN MANSURALI VS ASSISTANT COMMISSIONER OF INCOME TAX [2012]13 ITR (Trib) 204 (Mumbai).”

The ld. CIT(A) after considering the submissions of the assessee deleted the addition made by the AO by observing in paras 3.3 to 3.3.5 of the impugned order which read as under: “3.3 Determination:- I have considered the rival arguments. The whole addition hinges on evidence gathered from third party document or statement. Now the issue is, can third party statement or entry in absence of any corroborative evidence despite using ultimate weapon of search, can result in justified addition. The legal provision relating to presumption u/s 132(4A) is applicable to the person from whose possession or control the incriminating material is found & seized. Based on the incriminating material found from third party search but not belonging to the appellant, this presumption will not be applicable unless corroborated by other evidence. Presumption available under section 132(4A) can be drawn against the person in whose case search is authorized and , 3547 & 3549/Del/2012 16 Mukesh Garg from whose possession or control books of account, diary or documents are found in the course of search. Presumptions regarding correctness of contents of books of account etc. cannot be raised against the third party. 3.3.1 Presumption under section 132(4A) is only against the person in whose possession the search material is found and not against any other person. It is further held that the presumption is rebuttable and not conclusive and it cannot be applied in the absence of corroborative evidence. Straptex India P Ltd. v Dy. CIT [2003] 84 ITD 320 (Mum). In the case of Rama traders vs. First ITO [1998] 25 ITD 599 (Pat.) (TM) it was held that no addition could be made, on the basis of presumption raised by section 132(4A), in the hands of the assessee where in the books of another firm, certain figures were found showing the purchase made by the assessee. In Asst CIT v Kishore Lal Balwant Rai [2007] 17 SOT 380 (Chd.), it has been held that though the diary seized enable the revenue to presume that its contents are true, such presumptions is available only against the person to whom it belongs and this is a rebuttable Presumption. Presumption u/s 132(4A) is not available, when the seized papers is recovered from third party and not from the assessee. Sheth Akshay Pushpavadan v Dy. CIT [2010] 130 TTJ 42 (Ahd. UO) 3.3.2 The addition is made by the AO based on third party evidence and not on the basis of any sound evidence collected during the search.

In his rival submissions the ld. Counsel for the assessee reiterated the submissions made before the authorities below and further submitted that no papers or documents whatsoever seized from the premises of the assessee, at the time of search. It was further submitted that the provisions contained in Section 292(1) of the Act states that when the document is found during the course of search u/s 132 of the Act, it may be presumed that the said documents belonged 3547 & 3549/Del/2012 22 Mukesh Garg to such person and the contents of such documents are true but it never suggest that the documents belong to another person. It was further submitted that the documents found during the course of search must unmistakably reflect the transaction without having any second interpretation, however, in the present case, the name of the assessee was appearing on the documents found during the course of search and the addition was made merely on the basis of statement of one Sh. Sohanraj Mehta, who also did not indicate that the assessee was involved in the transaction. It was further submitted that in the present case, the persons searched were Sh. Rasik Lal Dhariwal, Sh. Prakash Dhariwal and Sh. Sohanraj Mehta, therefore, the presumption applies to them and not to the assessee, as the document found during the course of search were the dumb documents and did not reflect any details about the transaction of the assessee and there was no co- relation with other material found either during the course of search or on investigation thereafter. The reliance was placed on the following case laws: � Ashwani Kumar Vs ITO (1997) 39 ITD 183 (Del) � Neena Syal’s (1999) 70 ITD 62 (Chdd.) � Elite Developers Vs DCIT (2000) 73 ITD 379 (Nag) � ACIT Vs Satyapal Wassan (2007) 295 ITR (AT) 352 (Jabalpur) � Addl. CIT Vs Miss Lata Mangeshkar (1974) 97 ITR 696 (Bom) � Saif Ali Khan Mansurali Vs ACIT (2012) 13 ITR (Trib) 204 (Mum) , 3547 & 3549/Del/2012 23 Mukesh Garg � D. S. Agencies and Associates & Usha Distributors Vs Addl. CIT (2015) 44 ITR (Trib) 46 (Mum) 15. The ld. CIT DR in his rejoinder submitted that the statement of Sh. Sohanraj Mehta was recorded inconsequence of the documents found during the course of search. Therefore, the documents found were not the dumb documents and that the absence of cross- examination was not sufficient to delete the addition made by the AO.

We have considered the submissions of both the parties and carefully gone through the material available on the record. In the present case, it is an admitted fact that the AO made the addition on the basis of statement of Sh. Sohanraj Mehta who admitted in his statement that the money was handed over to some persons as per direction of Sh. Rasik Dhariwal and his son Sh. Prakash Dhariwal. However, in those statements nowhere it was stated that any amount was handed over to the assessee or his representative. In the present case, it is noticed that the assessee asked the AO for cross-examination of Sh. Sohanraj Mehta vide letter dated 26.12.2011 (copy of which is placed at page nos. 73 to 78 of the assessee’s paper book) but the AO did not provide any opportunity of cross-examination. It is also noticed that Sh. Sohanraj Mehta in his statement nowhere mentioned the name of the assessee. He simply stated that cash was handed over to the bearer of the slip containing the signature of Sh. Rasik Dhariwal and his son Sh. Prakash Dhariwal. In the instant case, nothing is 3547 & 3549/Del/2012 24 Mukesh Garg brought on record that the assessee in fact received any amount from Sh. Sohanraj Mehta. It is well settled that as per the provisions of Section 292(1) of the Act, the documents found during the course of search may be presumed to be belonging to the person in whose possession those documents were found, however, in the present case no such document was found from the possession of the assessee and in those documents which were found and seized during the course of search in Dhariwal Group of cases, there was no indication that the figures referred therein reflected any quantity of goods or amount of money which related to the assessee. It is not in dispute that the presumption available u/s 132(4A) can be drawn against the person in whose case search was authorized and from whose possession or control documents/books of account or diary etc. were found but the presumption regarding correctness of contents of those documents/books of accounts etc. can be raised against the third party only when the documents are speaking one. In the present case, no document was found from the possession of the assessee and a bunch of loose papers which were seized from the premises of third party did not indicate the unrecorded sales made to the assessee. Moreover, no opportunity was granted by the AO to cross examined Sh. Sohanraj Mehta, on the basis of whose statement the AO presumed that unaccounted sale was made by the assessee. We, therefore, considering the totality of the facts of the present case, do not see any ITA Nos. 3546, 3547 & 3549/Del/2012 25 Mukesh Garg valid reason to interfere with the findings of the ld. CIT(A) who rightly deleted the addition made by the AO. In that view of the matter we do not see merit in this ground of the assessee’s appeal.

The next issue vide Ground No. 3 relates to the deletion of addition of Rs.2,88,600/- made by the AO by treating the agricultural income declared by the assessee as income received from undisclosed sources.

The facts related to this issue in brief are that during the year under consideration the assessee had shown agricultural income of Rs.2,88,600/- and claimed the same as exempted. The AO asked the assessee to furnish the details as per the following proforma:

Being aggrieved the assessee carried the matter to the ld. CIT(A) and submitted as under:

The ld. CIT(A) after considering the submissions of the assessee deleted the addition by observing in para 3.6 of the impugned order as under: “3.6 I have considered the order of AO and the submissions made by the AR of the appellant. The appellant entered into an agreement for the cultivation of agricultural lands at Biharipur, Alipur, 3547 & 3549/Del/2012 29 Mukesh Garg Khera Kherakera and Siraspur with Sh. Dhirender Bhati on 24.03.2005. The appellant submitted a certificate dated 20.08.2010 from tehsilpatwari that vegetables are grown on the appellant’s agricultural lands for the past many years. The AO jumped into the conclusion that no agriculture operation was carried on the agriculture land without examining Sh. Dhirender Bhati with whom the appellant entered into agreement. She has also not made any enquiry from tehsilpatwari Sh. Jagdish Prasad Sharma. The rejection of the claim of the appellant without making any enquiry from cultivator and tehsilpatwari is not tenable. I therefore, hold that the AO was not justified in holding that the amount of Rs.2,88,600/- is not agricultural income of the appellant for the assessment year 2007-08. In the result, the appeal on this ground is allowed.”

Now the department is in appeal. The ld. Counsel for the assessee reiterated the observations made by the AO in paras 23 to 25 of the assessment order dated 29.12.2011 and strongly supported the said order passed by the AO.

In his rival submissions the ld. Counsel for the assessee reiterated the submissions made before the authorities below and strongly supported the impugned order. , 3547 & 3549/Del/2012 30 Mukesh Garg 24. We have considered the submissions of both the parties and carefully gone through the material available on the record. In the present case, the assessee furnished the documents relating to the land holding which were not doubted by the AO. The assessee entered into an agreement for cultivation of the agricultural land with Sh. Dhirender Bhati and furnished the certificate dated 20.08.2010 from Tehsilpatwari which revealed that vegetables were grown on the assessee’s agricultural land for the past many years. The AO in the present case, did not examine Sh. Dhirender Bhati with whom the assessee entered into an agreement and also did not make any enquiry from Tehsilpatwari Sh. Jagdish Prasad Sharma who issued a certificate stating therein that the vegetables were grown on the agricultural land of the assessee. Therefore, the impugned addition was made by the AO on the basis of presumption only which is not tenable in the eyes of law. In that view of the matter, we are of the view that the ld. CIT(A) righty deleted the addition made by the AO.

The next issue vide Ground No. 4 relates to the deletion of addition of disallowance of interest amounting to Rs.15,55,670/- made by the AO u/s 36(1)(iii) of the Act, on 3547 & 3549/Del/2012 31 Mukesh Garg the ground that interest bearing funds were diverted for non- business purposes.

The facts related to this issue in brief are that the AO during the course of assessment proceedings noticed that the assessee had deducted an amount of Rs.15,55,670/- from gross total income on account of interest paid to M/s RPG Credit & Capital Ltd. and M/s Yash Pal Narender Kumar, in which the family members of the assessee were having substantial interest. The AO also observed that the assessee had invested a large amount in the shares of various companies in which he and his family members were having substantial interest. He asked the assessee to furnish justification in respect of interest paid amounting to Rs.15,55,670/-. He also asked the assessee to explain with evidence that loans taken on which interest was paid, were utilized for earning income which was forming part of taxable income. The assessee was also asked to show-cause as to why his claim in respect of interest paid on loans should not be disallowed and added to his income for the year under consideration. The AO observed that the assessee although furnished some details on 23.12.2011 but failed to substantiate his claim in respect of interest paid and no categorical explanation/reply had been submitted. According 3547 & 3549/Del/2012 32 Mukesh Garg to him the assessee had parked the interest bearing funds in the companies (family concerns) from which no income had been received or supposed to be received in future or if received, might have been in the form of dividend, which may be claimed as exempted. The AO held that within the provisions of Section 36(1)(iii) of the Act, interest payment on the funds utilized other than the purpose of business was not deductible as business expenditure.

Being aggrieved the assessee carried the matter to the ld. CIT(A) and the submissions made as incorporated in para 3.8 of the impugned order are reproduced verbatim as under:

The ld. CIT(A) after considering the submissions of the assessee observed that the loan transactions of the assessee were with the companies of which he was the director or having some interest as partner of the concerns doing finance business or trading. Therefore, there was business expediency involved. He further observed that the decisions relied by the AO had been overruled by the decision of the Hon’ble Supreme Court in the case of S.A. Builders Vs CIT (2007) 288 ITR 1 wherein it has been held that it was required to be enquired as to whether the interest free loan was given to the sister concern as a measure of commercial expediency and if it was so, interest on borrowed funds was to be allowed. The ld. CIT(A) accordingly deleted the disallowance made by the AO.

Now the department is in appeal. The ld. DR strongly supported the order of the AO.

In his rival submissions the ld. Counsel for the assessee reiterated the submissions made before the authorities below and further submitted that the interest free loans were 3547 & 3549/Del/2012 34 Mukesh Garg provided to the family members to held them in their business and as the interest free advances to various concerns were owing to commercial and business expediency, therefore, the ld. CIT(A) rightly deleted the arbitrary disallowance made by the AO. The reliance was placed on the following case laws: � S.A. Builders Vs CIT (2007) 288 ITR 1 (SC) � DCIT Vs Monsanto Holdings P. Ltd. (2012) 13 ITR (Trib) 90 (Mum) 31. We have considered the submissions of both the parties and carefully gone through the material available on the record. In the present case, the ld. CIT(A) had given a categorical finding that the assessee advanced the money to those concerns in which he was either a director or a partner and there was business expediency, the said categorical finding of the ld. CIT(A) was not rebutted. We, therefore, do not see any valid ground to interfere with the findings of the ld. CIT(A). Accordingly, we do not see any merit in this ground of the departmental appeal.

In the issues raised vide Ground Nos. 2, 3 & 5 are identical to the grounds raised

The another issue raised by the department vide Ground No. 4 in relates to the short term capital gain claimed by the assessee which was treated by the AO as income from other sources.

The facts related to this issue in brief are that the assessee had shown an income of Rs.64,996/- under the head Short Term Capital Gain from share trading. The assessee was asked to furnish copy of D-mat account, details of short term capital gains from brokers in respect of share trading. The assessee furnished the aforesaid documents. The AO observed that the ledger account revealed that at most of the occasions payments had been made after a long gap of purchase of shares. He further observed that in some cases, period of payments were even more than six months after the date of purchase of shares and most of the share tradings were made for gains only and that too year to year, whereas factual position was absolutely different as the share trading was the most uncertain trade. He further observed that generally broker was used to settle every transaction within a day or two and payments were demanded immediately after 3547 & 3549/Del/2012 36 Mukesh Garg every purchase transaction by the broker. The AO observed that in all the group of cases to which the assessee belonged, the circle payments had been made for the share transactions after long gap despite of huge amount of payment was to be paid to broker. The AO observed that the assessee failed to produce broker for further verification of genuineness of transaction and did not furnish contract note, delivery/transfer of shares in D-mat account or any supporting document to prove that shares were transferred in D-mat account of the assessee. He further observed that simply filing of ledger account/bills of broker did not prove that delivery of shares was made, it only proved that the assessee had taken entries only for capital gain to evade tax or pay tax at lower rate. The AO also observed that the assessee failed to provide supporting evidence that the said share transactions were routed through the D-mat account of the assessee which is necessary to prove the genuineness of the transaction. He, therefore, held that the share transactions as claimed to have undertaken were not genuine and the income earned was from undisclosed sources which had been routed through short term capital gains for the purpose of giving tax at lower rate. , 3547 & 3549/Del/2012 37 Mukesh Garg 35. Being aggrieved the assessee carried the matter to the ld. CIT(A) and submitted as under:

The assessee also made a reference to Circular No. 4 of 2007 dated June 15, 2007 issued by the CBDT and the reliance was placed on the following case laws:

Now the department is in appeal. The ld. DR strongly supported the order of the AO and reiterated the observations made in the assessment order dated 29.12.2011.

In his rival submissions the ld. Counsel for the assessee reiterated the submissions made before the authorities below 3547 & 3549/Del/2012 39 Mukesh Garg and strongly supported the impugned order passed by the ld. CIT(A).

We have considered the submissions of both the parties and carefully gone through the material available on the record. In the present case, it is an admitted fact that the assessee did not produce the broker for verification of genuineness of transaction. However, it is not clear as to whether the AO asked the assessee to produce the broker. It is also not clear as to whether the shares were transferred in D-mat account of the assessee and if those were not transferred to the D-mat account what was the reason for the same. This issue was although discussed by the AO but it had not been touched by the ld. CIT(A). We, therefore, in the absence of the clear facts available on the record, deem it appropriate to set aside this issue back to the file of the AO for fresh adjudication in accordance with law after providing due and reasonable opportunity of being heard to the assessee.

In for the assessment year 2010- 11, the issues raised vide Ground Nos. 2, 3, & 4 are similar to the issues involved in ITA Nos. 3546 & 3547/Del/2012. Therefore, our findings given in the former part of this order ITA Nos. 3546, 3547 & 3549/Del/2012 40 Mukesh Garg in the appeals for the assessment years 2007-08 and 2008-09 on the identical issues shall apply mutatis mutandis for these issues raised by the assessee vide Ground Nos. 2, 3 & 4 for this assessment year i.e. 2010-11.

The another issue raised by the department vide Ground No. 5 relates to the deletion of addition of Rs.4,40,100/- made by the AO in respect of cash found during the course of search from the premises of the assessee.

The facts related to this issue in brief are that during the course of search operation, cash of Rs.4,40,100/- was found lying in the room of the assessee. The AO asked to explain the source in respect of cash found. In response, the assessee furnished the cash statement which has been reproduced by the AO in para 21 of the assessment order and read as under:

(a) D hara m Pal 5,18,075.00 ----- - 5,18,075.00 ----- -- 2.50,000.00 2,68,075.00 Garg (b) G inny Gar g 1,45,500.00 3,45,058.00 4,90,558.00 ----- --- 4,60.000.00 30,558.00 (c) Anuj Gar g 5,21,375,00 ----- --- 5,21,375.00 ----- --- 1,50,000.00 3,71,375.00 (d) Pr er na Gar g 54,700.00 40,000.00 94,700.00 ----- ---- ----- --- 94,700.000 7,64,708.00 4. (a) Ya sh Pal 3,59,900.00 ----- -- 3,59,900.00 ----- --- 2,00,000.00 1,59,900.00 Garg (b) Suma n Gar g 1,51,200.00 3,50,000.00 5,01,200.00 ----- -- 2,00,000.00 3,01,200.00 (c) Ankur Gar g 8,628.0000 1,50,000.00 1,58,628.00 ----- ---- 40,000.00 1,18,628.00 (d) Apar na Gar g 51,800.00 1,00,000.00 1,51,800.00 ----- --- ----- -- 1,51,800.00 (e) Sanchit Gar g 35,900.00 ----- - 35,900.00 ----- -- ----- -- 35,900.00 7,64,428.00 23,68,061.00 44. The assessee further submitted to the AO that excess cash found during the course of search pertained to other family members also. The AO observed that the assessee failed to bring on record any supporting evidences which could prove that the cash belonged to other family members and that as to why cash belonging to other family members was lying with him. He, therefore, rejected the explanation of the assessee and treated the amount of Rs.4,40,100/- as unexplained cash and accordingly made the addition in the hands of the assessee.

Being aggrieved the assessee carried the matter to the ld. CIT(A) who deleted the addition by observing that the 3547 & 3549/Del/2012 42 Mukesh Garg family members had owned the cash and they had reflected this in their books of accounts as cash in hand, therefore, the question of explaining the cash did not arise. He further observed that it was not the case of the department that the books of accounts were not genuine, therefore, the source of cash was automatically explained. Accordingly, the addition of Rs.4,40.100/- was deleted.

Now the department is in appeal. The ld. DR reiterated the observations made by the AO at page nos. 10 & 11 of the assessment order dated 29.12.2011 and further submitted that the findings of the ld. CIT(A) were erroneous because no explanation was given by the assessee for the source of the cash.

In his rival submissions the ld. Counsel for the assessee reiterated the submissions made before the authorities below and further submitted that the cash was shown in the books of accounts by the family members and those books were regularly maintained which were not doubted by the AO. Therefore, the assessee fully explained the source of the cash found during the course of search which belonged to the family members who owned the money. , 3547 & 3549/Del/2012 43 Mukesh Garg 48. We have considered the submissions of both the parties and carefully gone through the material available on the record. In the present case, it appears that the family members of the assessee had owned the money which was reflected in their books of accounts as cash in hand, those books of accounts were not doubted. Therefore, the ld. CIT(A) rightly deleted the addition made by the AO. We do not see any infirmity in the impugned order on this issue.

In the result, the appeal of the department for the assessment years 2007-08 and 2010-11 are dismissed while the appeal for the assessment year 2008-09 is partly allowed for statistical purposes. (Order Pronounced in the Court on 26/08/2016)