ACIT CC 6(4), MUMBAI vs. SHANTILAL C. SHETH, MUMBAI

Order u/s.254(1)of the Income-tax Act,1961(Act) लेखा सद�य, राजे�� लेखा सद�य राजे�� के अनुसार के अनुसार/ PER Rajendra A.M.- लेखा सद�य लेखा सद�य राजे�� राजे�� के अनुसार के अनुसार Challenging the order dated 02.03.2015 of CIT(A)-48, Mumbai,the Assessing Officer (AO), has filed the present appeal.Assessee,an individual is a finance broker who filed his return of income on 28/09/2011,declaring total income Rs.4.46 crores.The AO completed assessment u/s. 153A r.w.s. 143(3) of the Act determining his income at Rs.6.84 crores.Effective Ground of appeal is about deleting addition of Rs.2.34 crores. Brief facts : 2.A search and seizure action u/s.132(1) of the Act was carried out in the Lodha Group of cases.Simultaneously,search action was also carried out at the premises of the assessee. During the search from the residence of Somnathan Nair (SN),an employee of Lodha Group, certain loose papers were seized by the investigation wing of the Department.The AO held that perusal of documents revealed that the assessee had entered into cash transactions with the Lodha group.He directed the assessee to explain as to why the cash transaction should not be brought to tax in his hands. In his reply, dt.03/03/2013 , the assessee stated that he had no dealings with the Lodha Group,that he had never received any cash/paid cash to the said party,that he had only given finances to the group in the earlier years. The AO recorded the statement of the assessee u/s. 131 of the Act on 15.03.2013. After considering the available material,he stated that statement of SN was recorded during the course of search, that in his statement SN had stated that the assessee had cash transaction with Lodha Group,that Rs.10.00 lakhs were seized from the office premises of the assessee.Finally,he held that the net amount, being amount received from Lodha Group and amount paid to Lodha had to be

2966/M/15-(11-12)Shantilal C. Sheth brought to tax in the hands of the assessee being unexplained funds available with him.He made an addition of Rs.2.34 crores to the total income of the assessee.

3.Aggreived by the order of the AO,the assessee preferred an appeal before the First Appellate Authority(FAA). Before him,it was argued that in the absence of any incriminating material no addition could be made, that the AO had made the addition without any evidence, that the presumption drawn by him was only figment of his imagination, that the AO had not pointed out any defects in the books of the assessee,that he did not know anything about loose papers seized from SN,that in his statement recorded by AO he had denied that he knows SN,that the statements of two of the other employees of the Lodha group were used for the first time.He requested the FAA to provide him the copies of statement of those employees. He directed the AO to confirm as to whether SN had identified the assessee and had confirmed the impugned transaction with the assessee.He also directed the AO to submit the copies of relevant papers based on which addition was made. In his letter dt.28/1/2015, the AO confirmed that in the statement of SN there was no reference and questions regarding the cash transaction entered into by the assessee with the Lodha Group. After considering the available material,the FAA held that the AO had relied upon the loose papers found from the residence of SN wherein transactions for the period 21/12/2010 to 05/01/2011 were recorded, that the AO had relied upon statement of two employees of Lodha group,that statement of Abhinandan Lodha(AL)a key person of Lodha group,was recorded on 11.01.2011,that he was asked a question on the loan entries found pertaining to the group concerns,that in the statement there was no mention of cash received from assessee ,that the AO had quoted statement of two employees of Lodha group,that question asked to them was about cash found from lockers operated by them,that the addition was made on the basis of statement of employees but on the basis of paper found and seized from the residence of SN, that in the statements of employees there was no specific mention of the assessee.He refererd to statement of SN recorded on 10.01.2011 and observed that SN did not identify the specific persons with whom cash transaction were carried out, that the cash found at the residence of SN was owned up by him,that there was nothing in the statement which showed that the cash mentioned in the papers seized belonged to any specific person,that the statement of the assessee was recorded after a few days of search,that he was confronted with the loose paper filed/ seized from the residence of SN, that the assessee denied that the transaction appearing in the loose papers related to him,that the AO did not call upon SN to identify the assessee as a party appearing in the loose papers, that no opportunity of cross examination was given to 2

2966/M/15-(11-12)Shantilal C. Sheth the assessee ,that the AO did not question SN to ascertain the identity of the person with whom alleged cash transaction took place, that third party statement entertained in absence of some corroborative evidence could not result in addition ,that the presumption available u/s. 132(4)A was applicable to the persons from whom incriminating material was found and seized.Referring to certain case laws,he held that the alleged cash transactions, appearing in loose papers were not written by assessee,that the unaccounted cash transactions were not corroborated by any material found in the search,that the AO,while using loose papers /statements of third party should have allowed the assessee to cross examine the persons concerned,that during the search proceedings noevidence was found regarding cash transact tions with Lodha group from the premises of the assessee ,that the perusal of loose papers showed name of one Shantibhai was appearing in the documents, that the AO had not verified the fact about the alleged transaction that SN had not corroborated the inference of the AO, that the names are not legible in the documents, name of one Shatibhai along with so many other was appearing in documents,that it was not established that Shantibhai and the assessee (Shantilal Seth) were the same person.Finally, he deleted the addition made by AO. 4.During the course of hearing before us,the Departmental Representative(DR)strongly relied upon the order of AO.The Authorised Representative (AR) submitted that no incrimin -ating documents were found from the premises of assessee ,that he was not aware of the cash transactions entered into by employees of Lodha Group,that there was no link between loose papers found from residence of SN and assessee.He referred to cases of Maulik Kumar K. Shah (307ITR137) and Amarjit Singh Bakshi(86ITD13) . 5.We have heard the rival submissions and perused the material before us.We find that an action u/s. 132(1) was carried out in Lodha group concern and at the premises of the assessee, that certain loose papers were seized from premises of SN, that in the loose papers name of one Shantibhai was appearing,that assessee had stated that he had not entered into any transaction with Lodha group entities,that the papers found at the residence of SN were written by SN and not by the assessee,that the AO never confronted the assessee and SN , that there were no corroborative evidence of cash transaction allegedly entered into by assessee.The FAA has given a categorical finding of fact that no documentary/supporting evidence were found during the search that could prove that assessee had paid cash to Lodha group or received cash from the group.Considering the peculiar facts and circumstances of the case we are of the opinion that order of the FAA does not suffer from any legal or factual

2966/M/15-(11-12)Shantilal C. Sheth