ACIT, CENTRAL CIRCLE, ALWAR vs. SHRI BABU LAL DATA, 2015-16

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”SMC” JAIPUR Mk0 ,l- lhrky{eh] U;kf;d lnL; ,oa Jh jkBksM deys'k t;UrHkkbZ] ys[kk lnL; ds le{k BEFORE: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;dj vihy la-@ITA Nos. 1231 &1232/JP/2019 fu/kZkj.k o"kZ@Assessment Years : 2015-16 & 2016-17 cuke Assistant Commissioner of Shri Babu Lal Data, Vs. Income Tax, Central Circle, 20, 21 & 22, old Ind. Area, Alwar Alwar LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAQ PD7663J vihykFkhZ@Appellant izR;FkhZ@Respondent vk;dj vihy la-@ITA Nos. 1222 & 1223/JP/2019 fu/kZkj.k o"kZ@Assessment Years : 2015-16 & 2016-17 cuke Shri Babu Lal Data, DCIT, Vs. Central Circle, 20, 21 & 22, old Ind. Area, Alwar Alwar LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAQ PD7663J vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@Assessee by : Sh. P. C. Parwal, CA jktLo dh vksj ls@Revenue by: S. Naiyer Ali Najmi, CIT lquokbZ dh rkjh[k@Date of Hearing : 16/03/2022 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 05/05/2022 vkns'k@ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM These bunch of four appeals are cross appeal of the assessee as well as of the department and are arising out of the order of the learned Commissioner of Income Tax, Appeals-4, Jaipur [ Here in after referred as Ld. CIT(A) ] for the assessment year 2015-16 & assessment year 2016-17 dated 19.08.2019. As this is related to same assessee for two separate assessments year where in the facts are largely similar and issues involved are identical and thus disposed of by a common order.

1.0 That the ld assessing officer has erred in law as well on the facts and circumstances of the case in not accepting the agriculture income of Rupees 1246718.00 disclosed in the return of income, whereas the evidences for earning the agriculture income are lying in the seized material and has also erred in giving various finding in the the ld. CIT (A)-Iv, Jaipur has erred in sustaining the same. 2.0 That the ld assessing offer has erred in law as well on the facts and circumstances of the case in making addition of Rupees. 1246718.00 in respect of agricultural income claimed exempt by the assessee while treating the same to be unaccounted taxable income and the ld. CIT (A)-IV, Jaipur has erred in sustaining the same.

Page no. of Annexure AS Date of A. Y. S.No. Amount in Rs. Exhibit-1 Transaction 1 71A 11.12.2014 2015-16 10,00,000 2 71A 11.12.2014 2015-16 10,00,000 3 71A 12.02.2015 2015-16 1,50,00,000 4 71A 24.02.2015 2015-16 25,00,000 5 71A 11.03.2015 2015-16 30,00,000 6 71A 25.03.2015 2015-16 50,00,000

On perusal of these documents the assessing officer was of the view that these loose papers appear to be related to cash loans/advances given by the assessee. The assessee was asked to explain the nature of these transactions along with source thereof. He was further asked to show cause, in absence of any proper justification, as to why it may not be held that these transactions are his unaccounted cash loans and accordingly why addition of Rs. 2,75,00,000/- along with the interest rate ranging between 12% to 18% as deemed fit, may not be made in his total income for A.Y. 2015-16. 9. In response, the assessee vide letter dated 12/12/2017 furnished written submission which is extracted here under: a) With regard to the seized material, we humbly beg to submit that based upon the copies of the documents provided by the investigation wing and listed down in the query letter and to the best information and knowledge of the assessee, detailed explanation to each and every page for all the exhibits hereby enclosed in the following sequence:

Ann.-1. Page-wise reply of annexures seized during search operation from residential premises at Bank Colony, Alwar having serial no. from A-1 to A- 4. Ann.-2. Page-wise reply of annexures seized during search operation from residential premises at Bank Colony, Alwar having serial no. AS-1. Ann.-3. Page-wise reply of annexures seized during search operation from residential premises at Vaishali Nagar, Jaipur having serial no. from AS-1 to AS-8. In regard to the entries referred by your good office in the loose papers seized as AS-1 seized from residential premises at Bank Colony, Alwar, entry wise reply of the same enclosed herewith as Annexure-4. We also wish to submit that from the explanation given in respect of seized papers as above, which is corroborating with the nottings mentioned on seized documents, it is clear that the assessee has received advances of Rs. 2.75 Crore during AY 2015-16 and advances of Rs. 1.68 Crore during AY 2016-17 against sale of agricultural land. The summary of receipt of such advances is also mentioned on the page no. 71A of Exhibit No. AS-1, which is evident from bare perusal of the seized paper itself. The various payments in the nature of expenditures, investments etc. found to have been Rs. 4.43 Crore (Rs. 2.75 Crore+1.68 Crore-4.43 Crore) received by the assessee. Thus, as explained above, there is no cash loans given by the Assessee. Accordingly, proposed addition of Rs. 2,75,00,000/- on account of alleged unaccounted cash loans is not justified, which is against the facts and accordingly no interest thereon is called for.

The reply of the assessee was considered and the same was examined in the light of reply given on that particular seized papers annexed as page no. 71A (back side of page 71) exhibit-1. The assessee has replied entry wise transaction mentioned on that seized page as annexure-4 which is reproduced here under:- without supporting documents, therefore, not accepted. Thus, the assessee was vide letter dated 18/12/2017 again asked as under:

"1. Kindly refer to your reply dated 11/12/2017 received in this office on 12/12/2017 regarding incriminating documents seized from P.O. operation of your residential premise situated at Bank Colony, Alwar. In reply to page no. 71A of Exhibit-1 of annexure AS, you have submitted that you had received advances of Rs. 2.75 crore (from 11/12/2014 to 25/03/2015) during the year under consideration (F.Y. 2014-15) against sale of agricultural land (from 6 persons) and various payments in the nature of expenditure, investments etc were made in succeeding financial year i.e. (F.Y. 2015 16), out of funds available with the assessee as mentioned in the various documents/loose papers seized and annexed as annexure AS-1, AS-3 & AS- 4. The submission made by you so far, has been considered and thoroughly examined and it was observed that no corroborating document in support of your claim in respect of the said advances and expenditures has been furnished. Therefore, finally you are once again requested to furnish the following details in this regard:

(i) Furnish details of the land(s) against which advance of Rs 4.43 crores, out of which Rs. 2.75 crores pertains to this assessment year, is said to be taken with supporting documents such as copy of agreement and copy of sale deed etc. Also, inform what is the present status of the land(s) whether the same have been sold out in between or not, If yes, then furnish copy of sale deed and if not, then furnish supporting for cancellation of any such agreement.

(ii) Furnish complete details of all the 6 persons from which such cash advances as claimed, and in respect of their identity please furnish name, complete postal address, PAN, copy of their ITR, copy of their bank account or cash books and agreement/Ikararnama done in this regard and establish their credit worthiness and genuineness of the transaction made with them.

(iii) Please furnish complete ledger accounts since opening to 31.03.2016 of the following persons as mentioned at page no. 71A (back side of page no. 71) of the referred annexure: (a) Smt. Madhuri Gupta. (b) Smt. Renu Gupta. (c) Sh. Brahamdat Modi. (d) Sh. Shaurya Kumar. (e) Sh. Amit Agarwal. (f) Sh. Ronak Kumar.

(iv) Furnish the cash flow statement or cash book from 01/04/2014 to 31.03.2015 for the year under consideration.

In absence on any of fulfillment of any of the requirement you are asked to show cause as to why the addition of Rs. 2.75 Crore may not be made to the total income of the year under consideration.

You are also requested to please furnish the statement of affairs for the year under consideration as required vide this office letter no. 1717 dated 16.11.2017 which is still pending."

In response, the assessee vide reply dated 21/12/2017 submitted as under:

"With reference to the notice mentioned hereinabove, at the outset, it is submitted that your good-self has alleged in the impugned notice that no corroborating document in support of the claim of advances against sale of interest in agriculture land and expenditures has been furnished. In this regard, it is submitted that the loose paper [Page No. 71A Exhibit AS-1] pertaining to receipt of advances against sale of share in agricultural land by the Assessee duly forms part of the material/documents seized during the course of search. Also, various loose papers evidencing the expenditures done by the Assessee have also been seized during the course of search and duly form part of the assessment records. This establishes beyond doubt that all the material/documents evidencing the claims made by the Assessee duly form part of the material/documents seized during the course of search due to which no additional corroborative documents are required to prove the case of the Assessee, however, the point-wise replies of the Assessee to the specific queries raised by your goodself are given hereunder: Query No. 1. In regard to the details of the land(s) against which advance against sale of agriculture land of Rs. 2.75 crore for assessment year 2015-16, were received by the assessee, it is submitted that the assessee and data family members consisting of wife Smt. Mohini Devi, sons Sh. Ajay Data and Sh. Deepak Data having various parcels of land at Tehsil Ramgarh, Distt. Alwar. Details of such land family member wise are already lying in the seized material – refer page number 71 to 75 of Exhibit AS-1 and certificate of Tehsildar page number 97 to 105 of Exhibit AS-1. The sale deed of aforesaid land could not be executed till date due to ongoing family disputes between the Data family, which is pending in courts. All the immovable properties including agriculture lands of Data family is subject to courts order and above transaction were made subject to rights being accrued by the court order only.

It would be pertinent to invite your honor kind attention towards the following explanation furnished before the investigation wing during the post search operation:

"Details showing amount received as part advance against sale of rural agriculture land from various parties and on various dates. Sh. Babu Lal Data entered into transaction for sale of portion/part and parcel of rural agriculture land through broker, belonging to his and his family members with the stipulation that the interest would be paid."

Query No. 2. In regard to the details of all the 6 persons from whom such advance against sale of agriculture land was received, it is submitted that such advances were received through brokerls in open market, which is a normal and prevailing practice. All the transactions have been entered through broker. The names of all these persons have been given by the broker/s. At present, the brokers are not in touch with the assessee.

Query No. 3. In regard to the complete ledger accounts of the persons as mentioned at page no. 71A (back side of the page no. 71) from whom assessee has received the advances against sale of agriculture land, it is submitted that assessee does not maintain any of books of accounts for his personal transaction, therefore ledger account since opening to 31.03.2016 of the mentioned in the query letter are not available. persons

Query No. 4. In regard to the submission of cash flow statement or cash book for the desired period, it is submitted that as stated above the assessee does not maintain any of books of accounts, therefore cash flow statement/cash book for the desired period as mentioned in the query letter are not available. However, the assessee has already explained all the entries mentioned in the query letter dated 04.09.2017 through assessee's letter dated 11.12.2017 and annexure attached thereto and a copy of such details and explanations of such entries are again enclosed herewith as annexure-1."

The reply of the assessee was considered meticulously. First of all the contention of A/R is not correct that the said receipts are advance against sale of agriculture land on the following counts:

(i) Assessee has contended that as these transactions are mentioned overleaf at page no. 71 and as page no. 71 contains the details of land holdings of Sh. Babu Lal Data, therefore, these advances are also on account of sale of those land pieces only. Here it is worth to mentioning that no supporting agreement of land has been furnished by the assessee. Just by mentioning of these entries on the backside of a paper, which contains the details of agriculture land, does not sufficient to conclude that the advances have been received against sale of those pieces of land only. In fact, if we take a look on seized documents, we found that page no. 71 to 75 is in continuity of each other and having details of land holdings of all the family member in his/her individual capacity. Therefore, a random noting of transaction on a certain page correlated the transaction with that page automatically without any supporting documentary evidences.

(ii) Moreover, the assessee was specifically asked to furnish details of the land(s) against which advance of Rs. 2.75 crores, is said to be taken with supporting documents such as copy of agreement and copy of sale deed etc. Also, to inform the present status of the land(s) whether the same have been sold out in between or not, if yes, then furnish copy of sale deed and if not, then furnish supporting for cancellation of any such agreement. But assessee has simply submitted that The sale deed of aforesaid land could not be executed till date due to ongoing family disputes between the Data family, which is pending in courts. All the immovable properties including agriculture lands of Data family is subject to courts order and above transaction were made subject to rights being accrued by the court order only but remained silent regarding the sale agreements of the land against which such a huge amount of advances have been said to be received by him. He badly failed to furnish any details in respect of the land against which advances were said to be taken. Also, even the assessee failed to furnish even PAN and address of the persons to whom advances were said to be taken against agricultural land. The assessee submitted that these transactions were entered into through brokers. However, could not provide PAN and complete address of such brokers even. As the assessee has intentionally not furnished the addresses of neither those persons who advanced the money and nor of the brokers to enable this office for any further inquiry either u/s 133(6) or u/s 131 of I.T. Act, 1961 to be conducted. It is quite strange that assessee is unaware of whereabouts of those persons and of the brokers, from whom he had taken such a huge amount of advances.

(iii) On being asked about the present status of land, the A/R simply said that these lands are under dispute and subject to adjudication under Courts and above transaction were made The question arises that on account of disputed land how one can entered into sale agreements with numbers of persons and if so than why those individuals would give him so much of advances without even knowing the title clearance of the land in question which is subject to rights being accrued by the court order only. Further, very interestingly these accounts are still not got settled by them and rolling over time to time.

(iv) Further, if we have a close look over the said document seized and which is under consideration, it transpires that the word "r" in which the assessee is putting stress in support of its claim is actually termed as "a". If we consider as otherwise, than ""/advance could not be subject matter of renewal on time to time on market rate as there is no common practice of renewal of advances in the matter of land deals. Such kind of deals either got finalized and executed through registered document or got cancelled, if not materialized, but not got renewed.

(v) The contention of the assessee of advance against agriculture land is also found contradictory that such transactions were entered into through brokers. On going through subsequent seized pages, it is very much evident, in which name of some loan broker Mr. Rahul reflecting through which transactions was made. It might be possible that any land deal could be done through any mediator/broker but it is received through broker only. Moreover, it is further evident from page no. 88, 89, 90, 91 seized, said advances were renewed from time to time and fixed rate of interest were paid on it which itself proves that the amount taken is not advances taken against agricultural land but cash loan taken on interest through loan broker.

(vi) Furthermore, the assessee vide letter dated 16/11/2017 and again by letter dated 18/12/2017 was asked to furnish the complete details of assets and liabilities u/s 142(1)(iii) of the LT. Act, 1961 which was pending up to the finalization of the order. In absence of this very essential document, the nature of transaction cannot be ascertained or whether accounted for or not. Even cash flow statement/cash book was also not been furnished by the assessee to verify the transaction. He simply stated that the same has not been maintained.

The above discussion is sufficient to draw the conclusion that the said receipts of advances are not the advances against the land as claimed but the cash loans (cash credits under the ambit of section 68 of I.T. Act, 1961).

Bogus agricultural income claimed to be set off against surrender:

During the search action statement of assessee were recorded and all the seized documents confronted to the assessee. Assessee, after taking into consideration all the transactions recorded in those loose papers and giving a thoughtful consideration to his concealed and unaccounted income, surrendered Rs.2.00 crores on the basis of these loose papers only. However, during course of assessment proceedings, assessee has retracted the said surrender. Out of surrender of Rs. 2.01 crore, only Rs.1,12,92,817/- has been offered as unaccounted income and has contended that, income of Rs. 87,07,183/- was not concealed income at all, and therefore, retracted from taxation. Interestingly, out of total 1,12,92,817/-, Rs. 31,66,065/- only has been admitted as unaccounted taxable income and remaining Rs. 81,26,752/- (Rs. 12,46,718/-has been offered as agriculture income in the year under consideration i.e. AY 2015-16) has been offered in different assessment years as non taxable income in the form of agricultural income. The submission made by assessee in this regard is reproduced as under:

"Under the instruction given by the above assessee, we humbly submit that as per the statement recorded u/s. 132(1) of the Act, dated 11.12.2015 of assessee during search and seizure proceedings conducted by the department on 14.10.2015 onwards, an ad-hoc surrender of Rs. 2,01,00,000/- was made and it was also stated that the details whereof will be provided later-on. In this regard, it is submitted that the surrender of Rs. 2,01,00,000/- was made without verifying seized papers and verification of fact of his income from the books of accounts and other documents. This surrender of income was made with a view of buy peace of mind and to avoid protracted litigation and to maintain good and cordial relation with the Department. The assessee has worked out the details of additional Income for AY 2010- 11 to 2016-17 and additional Income of Rs. 1,12,92,817/ have been included in the return of income filed in response to section 153A of the Income Tax Act, 1961. The details of such additional Income offered is as under:

Sr. No. A. Y. Particulars of Additional Income Amount 1 2010-11 Agricultural Income 13,70,630 2 2011-12 Agricultural Income 13,85,650 3 2012-13 Agricultural Income 11,91,969 4 2014-15 Agricultural Income 11,628 5 2015-16 Agricultural Income 25,78,644 6 2016-17 Agricultural Income 12,46,718 7 2017-18 Agricultural Income 3,41,513 8 Income recorded in the material seized 31,66,065 from A-115, Bank Colony, Alwar during the course of search Total Additional Income 1,12,92,817 Thus, a sum of Rupees 1,12,92,817/- may kindly be considered as income surrendered w/s. 132(4) of the Income Tax Act, 1961 in place of Rs. 2,01,00,000/ and accordingly stated u/s. 132(4) of the Act stands retracted/modified/amended. The assessee has earned the aforesaid additional income from activity of agriculture, business & other miscellaneous activities." The submission of assessee was not found tenable. It is observed that this year assessee had offered Rs. 12,46,718/- as non taxable income in the form of agriculture income and in this way benefit of total Rs. 12,46,718/- has been claimed from the income of A.Y. 2015-16 on account of surrender made. It is also worth mentioning here that the statement of Shri B.L.Data were recorded on the occasion of revoking prohibitory order made on his house on 11.12.2015 i.e almost after one month of the search. Therefore, it can't be assumed that assessee was under pressure of search team and have not been given sufficient time to reconcile his unaccounted transactions when he was much aware that search has already been conducted in his residence on 14.10.2015, Assessee has willfully surrendered Rs. 2.01 crores as unaccounted income after going through all the Seized documents and transactions recorded therein. Further, statement of assessee is reproduced here verbatim:

ू"-7:- "या आप कुछ और कहना चाहते है उ"र अपनी मानिसक शा""त "फलहाल 201,00,000/- (दो करोड एक लाख माऽ) "पये अपनी अघो"षत आय मानते हुए आयकर हेतु सम"प"त करता हूँ। आयकर िनयम" के तहत कृपया इस रािश पर शा"रत क" काय"वाह" न क" जाये ऐसा मेर" और से िनवेदन है इसक" "वगत म" 10 "दन" मे ये गूँगा । - -मैने उपरो" बयान अपने पूण" होश हवाश व "बना "कसी दबाव के ःवे"छा से "दये है जो पूण"ता स"य है तथा इन बयानी को म" अ"छ" तरह से पढ़कर व समझकर हःता"कर कर रहा है ई"र मेर" सहायता कर"।

It is evident that assessee has surrendered its unaccounted income for taxation, meaning thereby he knew that at least so much of income certainly taxable income "not the exempt one" but unaccounted at this end and therefore, assessee made surrender of Rs. 2.01 Crore but now, assessee is claiming that out of total 2:01 Crore Rs. 1,12,92,817/- only was unaccounted income and out of this 1,12,92,817/- also Rs. 81,26,752/- (A.Y. 2015-16 Rs. 12,46,718/-) was although unaccounted so offered in return but was agricultural income only so not taxable at all and moreover, rebate of the same has also been claimed for tax rate calculation purpose. The contention of assessee made during course of assessment proceedings in respect of the retraction of surrendered amount, is found completely cooked up story and an afterthought of the following accounts: (i) First of all, on going through the loose papers seized it was noticed there are hardly some of the loose papers where reference of some agricultural activities was found, those are page no. 19, 20 & 21 of AS-4 for a very petty amount as agricultural income only and no other major papers to substantiate the claim of assessee that surrender was made on the basis of those papers. (ii) It is also interesting and unbelievable as well to know that assessee is a prudent businessman who regularly files his return under Income Tax Act and much aware of provisions of income tax Act but he inadvertently not offered his agriculture income in return which is substantial in amount and for which he could be rebate also. Now, after search, all of sudden realized that so much of agriculture income he had been earned year by year but remained unoffered, so he offered the same. (iii) It is beyond doubt that an assessee-during search always surrenders its unaccounted income which is taxable income and not the exempt income, which otherwise makes no difference in his returned income but except the tax calculation only. So the contention of assessee that suttider Tascade on account of agriculture income was completely a baseless argument as no one will surrender unaccounted exempt income just to take rebate. (iv) The statement of assessee म" अपनी मानिसक शा""त के िलए "फलहाल 201,00,000/- (दो करोड एक लाख माऽ) "पये अपनी अघो"षत आय मानते हुए सम"प"त करता हूँ itself witnessed that the surrender was made for the income which is liable to be taxed (s) and not for the income which is not subject matter of tax. All these facts are sufficient to draw a conclusion that made.

8.2 Now on the other hand discussion regarding merits of the claim regarding agriculture income. It has been noted that assessee was specifically asked to provide the following details regarding agriculture income vide letter dated 04/09/2017:

"(a) Please furnish details of agricultural land holding with documentary evidence of ownership from which you have earned agriculture income of Rs. 12,46,718/-.

(b) Please furnish details of crops grown, expenditure incurred, product sold during the year in respect of agriculture income.

(c) Please furnish copy of Khasra Girdawari for the relevant period in respect of agriculture income."

In response, the assessee vide letter dated 21/12/2017 submitted the details of land holding of all the family members and P&L account for this income, but still the agriculture is not found genuine for the following reasons that: (a) In support of agricultural land holdings in his name, on which he is claiming agricultural income, the assessee furnished all the lands registered in the name of his family members and tried to club the agricultural income of all the family members in his own. First of all the agriculture land pertains to the person who is the land holder and not to anyone else but here assessee without having any rent agreement tried to club all the agricultural income, if any, of all the family members in its own. If it be so, than, it is unbelievable that they also forgot to offer their respective agriculture income in their respective returns. This fact suggests that the claim of assessee that he forgot to offer it agriculture income is nothing but it is a deliberate attempt to justify its unaccounted income which he otherwise surrendered for tax during search. (b) The assessee failed to furnish any land revenue record such as Khasra, Girdavari, in support of its claim whether any agricultural activity was actually performed in the so much of land(s) which he is owner. (c) Furthermore, in support of sale of agriculture produce, the assessee could not furnish any sale vouchers, dharma Kanta parchi for sale of Safeda, copy of contract / agreement etc to substantitate its claim. (d) More importantly, assessee was specifically asked to provide his statement of affairs vide letter dated 16/11/2017, but the same has not been furnished upto the date of finalization of order. In absence of the same no claim of assessee neither of land holding nor of income can be examined at the end of this office.

In view of the above discussion the agriculture income of Rs. 12,46,718/- offered in his return of income is held as bogus and just an afterthought to cover up the surrender offered for unaccounted taxable income. Therefore, an addition of Rs. 12,46,718/- is being made as income from other sources.

(a) the person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum so credited; and (b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory: venture capital company as referred to in clause (23FB) of section 10. 5.2 Reading the provision of section 68, it becomes clear that the said section is attracted to make addition in respect of unexplained cash credit in following circumstances;

5.3 Before comments are made on the action by the ld. assessing officer vis- a-vis facts of the case it would be worthwhile to discuss general principle relating to section 68 and what constitute books of accounts etc..

Assessee has maintained 'books'

6.2 The existence of books of account is a condition precedent for invoking of the power. Discharging of burden is a subsequent condition. If the first point is not fulfilled the question of burden of proof does not arise. - Anand Ram Raitani v. CIT [1997] 223 ITR 544 (Gau.). Section 68 starts with the words "Where any sum is found credited in the books of an assessee maintained for any previous year". Thus, section 68 comes into play immediately when an entry relating to a sum is found to have been credited in the books kept by the assessee. Meaning thereby, that the condition precedent to apply this section is the existence of books and the recording of a sum, as cash credit therein - ITO v. Rajendra Kumar Taparia [2008] 22 SOT 23 (Jodh.) (URO).

Meaning of 'Books'

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

CBDT's Circular No. 14/2001 explains clause (124) of section 2 as under:

'Defining of 'Books of Account' and 'Document' so as to include electronic records, etc.

7.2 With the passing of the Information Technology Act, 2000, the Act has provided definitions of books of account' and 'document' in section 2 of the Income-tax Act, so as to include electronic records within the meaning of these terms.

7.3 As the definition is not exhaustive and only inclusive, one needs to examine the connotation of the term in ordinary commercial parlance. The following judicial rulings deal with ordinary commercial parlance meaning of the term:

A book which merely contains entries of items of which no account is made at any time, is not a 'books of account' in commercial sense. To account means to reckon, and it is difficult to conceive any accounting which does not involve either additions or subtractions or both of these operations of arithmetic. A book which contains successive entries of items may be a good memorandum book; but until those entries are totalled 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 'books of account' in commercial sense. - Sheraton Apparels v. Asstt. CIT [2002] 123 Taxman 238 (Bom.) Books in which merchants, businessmen and traders generally keep their accounts. 'Books of Account' means such books of account as are usual in the account can be made up." (Per Cave, J., Re. Winslow, 55 LJQB) Loose sheets or scraps of papers cannot be termed as "book" because they can easily be detached and replaced. Where loose sheets seized from assessee's premises consist of pages torn out of diary and contain no closing balances nor opening balances and is no reconciliation of these entries, such loose sheets cannot be termed as books maintained by the assessee during the previous year as these loose sheets S.P. Goyal v. Dy. CIT [2002] 82 ITD 85 (Mum.)(TM). The two words 'books of account' and 'documents' do not carry the same meaning. A document may necessarily be not a books of account. Section 68 is applicable to any entry credited in the books of account. Section 68 is a deeming provision and it is to be strictly interpreted. Applicability of section 68 cannot be enlarged. Hence, section 68 is not applicable in respect of any entry in document - Dy. CIT v. Raja Udayshankar [2006] 7 SOT 680 (Bang.) If a diary is maintained as a memorandum book, it will be treated as 'book' for section 68 purposes.- ITO v. Chikkalingaiah [2006] 9 SOT 786 (Bang.) 7.4 Books of account do not mean cash book only. It would mean complete record which a businessman is required to maintain to record his day to day transactions. According to the well settled principles of accountancy, each transaction is required to be treated under two heads - under one head, debit entry is made while under the other head, credit entry is to be made. For example, if money is received from 'K' then cash account is to be debited and account of 'K' is to be credited by the same amount. For the same reason if any sum is introduced in the books by the assessee from his own sources then cash account is debited while assessee's own account has to be credited. Cash book is nothing but the cash account which is debited if money is received and is credited if money is spent or invested by the assessee. In such cases, corresponding credit or debit entries are to be made by assessee in respect of accounts. If such entries are not made, the accounts of assessee would not tally. Therefore, failure on the part of assessee to make credit entry in the respective account would not entitle the assessee to claim that no account is credited (sic). The assessee cannot be allowed to take undue advantage of his own lapses/mistakes. Therefore, whenever any money is received by assessee and is entered in cash book it can be said that sum is credited in the books of assessee even though corresponding credit entry in the ledger account may be made subsequently. If the contention of assessee is accepted then it would amount to circumvent the provisions of section 68 which would further amount to allow the paying any tax. Such construction of the provisions, in my considered opinion, is not permitted. - Haji Nazir Hussain v. ITO [2004] 91 ITD 42 (Delhi) (TM).

Whether piece of paper is 'books' 8. Section 68 essentially contains a deeming provision which applies when the assessee's explanation about cash credit found in his books is rejected. To invoke this section, it is a sine qua non that the sum must be credited in assessee's books maintained for a previous year. The 'piece of paper' impounded at the time of search could not be construed to be a book. The term 'book' is to be construed as it is understood in the common parlance. No special meaning could be assigned to that term. Therefore, the assessee's case could not be put within the ken of section 68.- Kantilal & Bros. v. Asstt. CIT [1995] 52 ITD 412 (Pune) 8.2 In the back drop of the above it is clear that the predominant condition is to maintain the books of accounts & these conditions needs to be cumulatively fulfilled and in absence of anyone of the fulfilling criteria, the amount cannot be added under section 68 of the act. It is also settled law that the onus to prove the genuineness of the credit is upon the assessee. The main plank of the AO is that the assessee has failed to prove the identity, creditworthiness and genuineness of the transaction of the loan was received by him. The counter contention of the appellant is that since the amount is not found credited in the books of an assessee since the assessee is not maintaining any books of accounts itself addition under section 68 is not permissible. There is no dispute to the fact that the assessee is not maintaining any books of accounts. Though the phrase "books of accounts" is not defined in the act, yet by giving of common parlance meaning to the same, it can be defined as regular set of accounts maintained by the assessee in the normal course of his activity to record all the transaction of his income and expenditure as also assets and liabilities. It should also pertain to a specific period which is generally a period of 12 months which coincides with financial year as defined in the act. Any other record of receipts and payment, which if not in the normal course of recording income and expenditure or assets and liabilities but only a summary of such receipt and payment will not amount to books of accounts but only an extract of the receipts and payments. Since the prerequisite for invoking section 68 is that be invoked. There is a well laid down logic behind requirement of books of accounts for purpose of invoking section 68 particularly when said section is read in conjunction with provision of section 69, 69A, 69B, 69C etc. For invoking section 69, 69A, 69B, 69C, the same can be done provided the same is not recorded in the books of accounts if any maintained by him for any source of income. Therefore, if books of accounts are maintained and investment or money or expenditure etc. are recorded therein, addition under section 69,69A, 69B, 69C is not attracted or permissible. It is for the reason that if the investment / expenditure etc. are recorded in books of accounts, the same will be depicted by way of source of such investment or expenditure. In such a situation the source will be by way of credit of any sum. Therefore, if the books of accounts are maintained addition cannot be made under section 69,69A, 69B, 69C etc. but only of the amount credited in books of accounts to explain such investment money or expenditure. Therefore, when provision of section 68 is not attracted due to non- maintenance of books of accounts, provision of section 69,69A, 69B, 69C can be invoked if the investment money expenditure are not explained. In view of such a situation, it can be held that since the appellant is not maintaining any books of accounts wherein such sum is found credited, the addition could not have been made under section 68 of the act. The appellant in this regard has relied upon various case laws wherein such view is adopted. Since there is no contrary judgment and based on simple interpretation of s. 68, I hold that addition of Rs. 2,75,00,000 is not warranted u/s 68 and hence same is deleted.

10 All other grounds taken in this regard are only being arguments advanced and not a different grievance other than addition of Rs. 2,75,00,000, the same are not required to be adjudicated. Since the addition was made u/s 68, but since the appellant has not maintained books of accounts, the addition was not sustainable.

11 However, I need to examine the applicability s. 69. 69A. 69B or 69C etc. In this regard, on my query to the appellant, ld. Counsel for the appellant submitted that since there is no finding that the appellant has also incurred certain expenses or acquired any assets or money etc. the addition in alternative grounds is also not sustainable. I find force in the arguments. Since there is no finding that for explaining any money, or valuable article etc or any expenditure incurred the said amount received as advance against sale of land was offered as source, the addition under alternative provisions is not attracted.

292C (i) 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 the course of a search under (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 account and other documents true; and (iii) that the signature and every other of such books of account other documents which purport to be the handwriting any particular person which may reasonably be assumed to have been signed or to be in the handwriting any particular are in that person's handwriting, in the case of a document stamped, executed attested, that was duly stamped and executed attested the person by whom purports to have been executed attested.

The CBDT in Circular of 2008 dated 12.03.2008 in the explanatory to provisions relating Direct Taxes, clarified rational of introduction section 292C of the Income Act, 1961 which the presumption 132(4A) the Act has been extended to proceedings u/s 153A the Act. The relevant extract from the said circular is reproduced below.

"69. Clarification in respect of presumption to seized books of account, money, bullion, jewellery 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. is further provided that 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 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 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 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. Chordia Vs. 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 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 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) 65 771.1 (Pune) 327 (1999) 71 ITD 245 (Pune) und TS Kumarasamy vs. Asstt. CIT (1998) 65 TTD 388 (Mad) relied on Biren V. Savla Vs. ACIT (2005) 24 CCII 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 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 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 TTR 417 (Guj), Kantilal Bros vs. Asstt. CIT (2995) 51 MI (Pune) 513: (1995)52 TD 412 (Pune), Glass Lines Equipment Co. Lid vs CIT (2001) 170 CTR (G) 170 (2002) 253 ITR 454 (Gnj), Mehta Parikh & Co vs CIT (1956) 30 TR 181 (SC) and Chander Mohan Mehta vs. Asstt. CIT (lm) (1999) 65 TTJ (Pune) 327 (1999) 71 TD 245 (Pune) applied. First thing the AO has to prove is that it is the investment of the assessec. In other words, the ownership of the investment must be proved to be that of the assessee the one 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 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 bus 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 PK. Noorjahan (1999) 155 CTR (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, 4-5 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 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 1-3 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 4-5.- CIT vs SMS Investment Corporation (P) Ltd (1994) 207 FTR 364 (Raj) and I1O 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-3/4-5 belonged to the assessee. It is un admitted position that there are common names of lenders and borrowers in A-2/A-4 und 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-3/4-5. 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 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: 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.

In the present case also Pg 71A of Annexure AS-1 clearly indicates that the amount is received against the land at Ramgarh. This land was purchased by the assessee and his family members long back and therefore, the transaction noted on this paper cannot be with reference to the purchase of land. On this paper statement of the assessee was not recorded u/s 132(4). However, in post search proceedings it was explained that the amount noted on this paper is advance received against sale of rural agricultural land from various persons and on various dates through brokers with the stipulation that interest would be paid. This fact was also stated in course of assessment proceedings vide reply filed on 21.12.2017 (PB 14-15). The AO at Pg 8 of the assessment order in Para (v) has also observed that it might be possible that any land deal could be done through any mediator/ broker but it is unbelievable that advance against such kind of deal would also be received through broker only. This is only the assumption of AO but at the same time he admitted that land deal could be through broker. No material is brought on record by the AO that the amount noted on this paper is not an advance received against sale of Ramgarh land. Therefore, the content of this paper has to be read as such in view of section 292C of the Act and therefore, addition made by the AO by treating these amounts as unexplained cash loan is unwarranted and unjustified.

3 Without prejudice to above, AO has made the addition of the amounts noted on this paper u/s 68 of the Act. 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 charged to income-tax as the income of the assessee of that previous year. 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 2012A) of the Act as under:

"books or books of account" includes ledgers, day-hooks, cash books, account-books and other books, whether kept in the written form or as print- outs of data stored in a floppy, dive, 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. Ilence on the basis of the entries in document/ paper, addition u/s 68 cannot be made. In this connection reliance is placed on the following decisions:

Aruna Sankhla Vs. 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 he 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 where in 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. Mashru ITA No.958/RJT/2010 dt. 04.01.2018 (Rajkot) (Trib.)

"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

"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 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 cash, jewellery or investment outside the books.

The Ld. CIT(A) at Pg 15 to 22 of the order after analyzing section 68 and the fact that assessee is not maintain any books of accounts has rightly deleted the addition holding that section 68 is not attracted in the present case.

In view of above, order of Ld. CIT(A) be upheld by dismissing the ground of department. 16. In addition to the written submission filed the Ld. AR has made further arguments before us stating that the assessee, his wife and sons owns approximate 230 vigha of land at village Ramgadh. This fact is not disputed by the department and the seized records consists of the proof of land holding. The seized documents it self is an evidence that on the same very paper which is seized the date, amount and name of person along with the purpose is very well written. The assessee being individual partner in various firms not required to be maintain regular books of accounts. Looking to the nature of transaction being under dispute done with the help of the broker the advance against land is not income not required to be considered as income of the assessee u/s. 68 as the seized paper itself proves the nature of transaction wherein date, amount, name of person paying and the broker itself is evidently written. Merely that paper does not reveal any income chargeable to tax in the year of receipt of money the same cannot be made chargeable to tax under the pretext of section 68 of the Act. For this he relied the provision of section 292C and requested to grant the relief in accordance with the law. He further stated that when any document found during the course of search the content written on the page found is to believe as correct. He also relied on the CBDT circular no. 14/2001. He constantly argued that when on the face of the seized paper it is clearly written that the amount received is Ramgadh jamin pete what else proof require to prove the nature of transaction. He has also argued that it is thus clear 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 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 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. Chordia Vs. ACIT (2001) 20 CCH 0047 (Pune) (Trib.) • Biren V. Savla Vs. ACIT (2005) 24 CCH 0634 (Mum.ITAT)

In this regard, it is submitted that the surrender of Rs. 2,01,00,000/- was made without verifying seized papers and verification of fact of his income from the books of accounts and other documents. This surrender of income was made with a view of buy peace of mind and to avoid protracted litigation and to maintain good and cordial relation with the Department. The assessee has worked out the details of additional Income for AY 2010- 11 to 2016-17 and additional Income of Rs. 1,12,92,817/ have been included in the return of income filed in response to section 153A of the Income Tax Act, 1961. The details of such additional Income offered is as under:

Sr. No. A. Y. Particulars of Additional Income Amount 1 2010-11 Agricultural Income 13,70,630 2 2011-12 Agricultural Income 13,85,650 3 2012-13 Agricultural Income 11,91,969 4 2014-15 Agricultural Income 11,628 5 2015-16 Agricultural Income 25,78,644 6 2016-17 Agricultural Income 12,46,718 7 2017-18 Agricultural Income 3,41,513 8 Income recorded in the material 31,66,065 seized from A-115, Bank Colony, Alwar during the course of search Total Additional Income 1,12,92,817

Thus, a sum of Rupees 1,12,92,817/- may kindly be considered as income surrendered w/s. 132(4) of the Income Tax Act, 1961 in place of Rs. 2,01,00,000/ and accordingly stated u/s. 132(4) of the Act stands retracted/modified/amended.

The assessee has earned the aforesaid additional income from activity of agriculture, business & other miscellaneous activities.

In view of above, addition made by AO and confirmed by Ld. CIT(A) be directed to be deleted.

Now we take up ITA No. 1232/JPR/2019 being the appeal filed by the 34. revenue against the order of the ld. CIT(A) for assessment year 2016-17. In this appeal revenue has taken following grounds of appeal

Particulars Gold Jewellery Silver Articles ( (in gms) in kgs ) From Residence and bank locker 3319.93 5.956 at Alwar From Residence and bank locker 3861.80 39.157 at Jaipur Total 7181.730 45.113

CIT Vs. Balchand Ajit Kumar 263 ITR 610 (MP) (HC) The facts of this case were that in a search conducted at the business and residential premises of the assessee, it was found that there were credit sales which were not reflected in the books of account. On scrutiny of the books of account of the assessee, the Assessing Officer added a sum of Rs.8,19,255/- towards the sales profit of the assessee. The Commissioner (Appeals) came to the conclusion that the entire credit sales could not have been included in the total income of the assessee and accordingly followed the method of adding net profit rate of five per cent, on these sales and accordingly Rs.40,960/- was included on that score. The Tribunal held that the Commissioner (Appeals) had recourse to a reasonable method by adopting the net profit rate of five per cent in as much as the entire sale could not have been regarded as the profit of the assessee. The Tribunal, however, did not think it appropriate to reduce the rate which was added by the first appellate authority.

On appeal, it is held that the total sale could not be regarded as the profit of the assessee. The net profit rate had to be adopted and once it was adopted it could not be said that there was perversity of approach.

Mohan Sadhani Vs. CIT 304 ITR 52 (MP) (HC) Held that entire sale proceeds cannot be added to income, only NP rate to be adopted. CIT Vs. President Industries 258 ITR 654 (Guj.) (HC) The amount of sales could not represent the income of the assessee who had not disclosed the sales. The sales only represented the price received by the seller of the goods; only the realization of the excess over the cost incurred could form part of the profit included in the consideration for the sales. Since there was no finding to the effect that investment by way of incurring the cost in acquiring the goods, which were sold, had been made by the assessee and that investment was also not disclosed, only the excess over the cost incurred could be treated as profit. Accordingly, only profits embedded in sale proceeds can be taxed. ITO VS. Gurubachan Singh J. Juneja 216 ITR 99 (AT) (Ahd.) (Trib.) (TM) It was held that value of the cash sales can't be added to the total income as there was no material on record that assessee made investment to make unaccounted sales. Gross profit rate should be applied to the unaccounted sales. This decision is approved by Hon'ble Gujarat High Court reported in 302 ITR 63 where at Para 6 it was held as under:

"6. Hence, in the absence of any material on record to show that there was any unexplained investment made by the assessee which was reflected by the alleged unaccounted sales the finding of the Tribunal that only the gross profit on the said amount can be brought to tax does not call for any interference. The Tribunal was, therefore, justified in deleting the addition of Rs. 10,85,003 made on account of unaccounted cash sales."

Agrawal Motors Vs ACIT 68 ITD 407 (Jab.), Abhishek Corporation Vs. DCIT 63 TTJ 651 (Ahd.) Addition can be made only of G.P./N.P. on suppressed sales and not entire sale price itself.

The principles laid down in these cases are equally applicable in case of assessee and therefore, the Ld. CIT(A) has rightly held that sales as such cannot be taxed as income.

Name of Turnover (in Rs.) Gross profit (in Rs.) G. P. Rate (in concern %) AY15-16 A.Y.16-17 AY15-16 A.Y.16- AY15 A.Y.1 17 -16 6-17 Saurabh 2570631687 1679784674 116058401 76607325 4.51 4.56 Agrotech P. Ltd. Ritika 1285202945 3618084989 41799397 152312140 3.25 4.21 Vegetabl e Oil P. Ltd Therefore, g.p. rate of 10% applied by Ld. CIT(A) is on a very higher side and the same be reduced to 5% and to that extent the addition confirmed by Ld. CIT(A) be deleted.

CIT Vs. Banwarilal Bansidhar 229 ITR 229 (All.) (HC) When income of the assessee was computed applying the gross profit rate and that when no deduction was allowed in regard to the purchases of the assessee, there was no need to look into the provisions of sec. 40A(3) and Rule 6DD(j). When gross profit rate is applied, that would take care of everything and there was no need for the AO to make scrutiny of the amount incurred on the purchases by the assessee. No disallowance could have been made in view of the provisions of sec. 40A(3) r/w Rule 6DD(j) as no deduction was allowed to and claimed by the assessee in respect of the purchases.

CIT VS. Gobind Ram (2015) 229 Taxman 491 (P&H) (HC) Where income of assessee is computed by applying gross profit rate, section 40A(3) need not be invoked.

CIT Vs. Hindustan Equipment Pvt. Ltd. 84 CCH 285 (MP) (HC) When net profit rate was applied by AO, there was no scope for further disallowance of any expenditure u/s 40A(3) in respect of such purchase. CIT VS. Purshottamlal Tamrakar Uchehra 270 ITR 314 (MP) (HC) Sec. 40A (3) is not applicable when income is determined by applying net profit rate.

In view of above, Ld. CIT(A) has rightly deleted the disallowance made by AO u/s 40A(3) and therefore, this ground of the department be dismissed.

17.2 As regards disallowance invoking provision of s. 40A(3) is concerned, I find that the amount is presumed to be purchases made in cash. Since I have estimated an amount of 10% as income, no further disallowance is attracted. The estimation of income takes care of each and every allowance/disallowance. This view is supported by the decision of Allahabad high court in the case of CIT V. Banwari Lal Bansidhar (229 ITR 229) wherein identical question came before the court. The court held thus:

"The question for consideration is when no deduction was sought and allowed under section 40A(3), was there any need to go into section 40A(3) and rule 6DD(j). We see force in the view taken by the Appellate Tribunal that when the income of the assessee was computed applying the gross profit rate and when no deduction was allowed in regard to the purchases of the assessee, there was no need to look into the provisions of section 40A(3) and rule 6DD(j). No disallowance could have been made in view of the provisions of section 40A(3) read with rule 6DD(j) as no deduction was allowed to and claimed by the assessee in respect of the purchases. When the gross profit rate is applied, that would take care of everything and there was no need for the Assessing Officer to make scrutiny of the amount incurred on the purchases by the assessee."

17.3 Similarly Hon'ble Karnataka High Court in the case of CIT v. Bahubali Neminath Muttin (72 Taxmann. Com 139) held thus:

"Therefore, as no such substantial question of law has been framed and the questions pertain to findings of fact, which cannot be said to be perverse as it is evident that the books of accounts of the respondent had been rejected by the assessing authority, in which case the same books of accounts could not be relied upon in an addition on account of trade creditors and also for arriving at the closing stock. This is an established principle as has been held in the decisions relied upon by the respondent namely Indwell Constructions case (supra), Banwari Lal Banshidhar's case (supra), Aggarwal Engineering Company's case (supra)and Amman Steel and Allied Industries, case (supra)."

17.4 In view of the above discussion, it can be held that since gross profit rate is estimated to be applied, no further addition can be made invoking the provision of S. 40A (3) of the Act. I therefore delete the addition of Rs. 1,95,06,818/-.

"6. Hence, in the absence of any material on record to show that there was any unexplained investment made by the assessee which was reflected by the alleged unaccounted sales the finding of the Tribunal that only the gross profit on the said amount can be brought to tax does not call for any interference. The Tribunal was, therefore, justified in deleting the addition of Rs. 10,85,003 made on account of unaccounted cash sales." Thus, following the ratio of that decision we confirm the action of the ld. CIT(A) that whole sale consideration cannot be added as income only the related profit can be added in the income of the assessee. As regards the estimation of profit the ld. AR of the assessee has filed the comparative rate of profit before us for two parties having substantial turnover and the profit declared by them ranging between 3.25 % to 4.56 % as G. P. On the other hand, the ld. DR has requested that as per provision of estimated profit @ 8 % in section 44AD the same may be considered instead of 10 %. Having considered the rival contentions we feel that 8 % being the rate of general rate of estimate for small assessee, whereas the ld. AR has filed the chart showing the rate of profit declared by the assessee engaged in the similar line of activity. Thus it would be the end of justice if the G. P. addition be restricted to 5 % instated of 10 % estimated by the ld. CIT(A). Thus, the ground no. 4 of the revenue is considered accordingly and the assessee got relief to the extent of 5 % and thus, this ground no. 4 of the revenue is partly allowed. As regards the separate disallowance made u/s. 40A(3) on the alleged unexplained purchases of muster oil/seeds we find no reason to touch the finding given by the ld. CIT(A) relying on the various cited judgement in the order in the absence of any fresh, tangible argument that how and why the finding of the ld. CIT(A) is not correct on fact and in law. Thus, we find no reason to interfere in the finding of the Ld. CIT(A) and this ground no. 4 of the revenue is partly allowed & Ground no. 5 raised by the revenue in this appeal stands dismissed.

Submission:

6.3 Contention of each entry 6.3.1 Entry no. 1 & 6

An amount of Rs. 415760.00 (115760.00+ 300000.00) has been already included in total income of the appellant while filing ROI u/s 153A of Income Tax Act, 1961. Further, the Ld. AO has also agreed with inclusion of such income in return of the appellant and has accordingly, first made addition under this ground and then deducted the same before arriving at total income which nullified the effect of addition made here. Thus, there is no issue regarding this amount. For ready reference, kindly refer computation of total income on page no. 64 of assessment order.

6.3.2 Entry no. 13, 14 & 19 In relation to this, it is submitted that amount of Rs. 169929.00 an (22663.00/23663.00+88938.00+58328.00) is an agricultural income of the appellant which has been dealt by the Ld. AO in ground of agricultural income during assessment years 2016-17. In support of the same, we are furnishing Profit and Loss statement of and sales statement for AY 2016-17 (Annexure 23) wherein the amounts have been explicitly stated for the purpose of calculation of agricultural income of the appellant. Further, it is pertinent to note here that the Ld. AO has also considered such agricultural income of the appellant as bogus and accordingly has made addition for it. Since, the amount has been already added in total income of the appellant as bogus agricultural income, thus, inclusion of same over here too will lead to double taxation. Thus, it is our humble request to delete the same.

6.3.3 Entry no. 15 In relation to this, it is submitted that the appellant is engaged in agricultural activities for which he provides fund for expenses to farmers working on his agricultural fields. This entire amount is paid back to the appellant by the same farmer after sale of crops. Entry no. 15 amounting to Rs. 75000.00 is receipt of such amount only. In support of our explanation, we would like to furnish page no. 21 of AS 4 (Annexure 24) on which such entry is stated. By plain reading of this paper, it is evident that the appellant has paid an amount of Rs. 50000.00 and Rs. 25000.00 on 3/7/2015 and 14/9/2015 respectively for the purpose of carrying on agricultural activities and same was refunded back on 27/9/2017 on by the same individual. Since, the amount received is not in the nature of income of the appellant, thus, addition deserves to be deleted.

6.3.4 Entry no.7 In this context, it is submitted that an amount of Rs. 52970.00 was received from Marudhar Trading Company which is evident from seized document itself (Annexure 25). We have already provided expounded nature of transactions of the appellant with Marudhar Trading Company in para no. 3.9. However, it is reiterated that Marudhar Trading Company works similar like Padam Trading Company i.e the appellant has ance secu extended advance security to even Marudhar Trading Company for the purpose of cracking cheaper supply deals through it. Later, after execution of contract with supplier, Marudhar Trading Company refunds back the advance security after deduction of its commission. As a result, amount of Rs. 52970.00 is nothing but refund of advanc security. Thus, same should not be considered as income of the appellant.

6.3.5 Entry no. 2-5, 9-11, 16, 17, 18 & 20

In relation to this, it is submitted that the appellant had provided temporary advance to Mr. Ashok Gupta, Mr. Puran Chand and Mr. Amit for their personal purpose only for a short period of time. The appellant has provided in his reply dated 21/12/2017, verbatim of same is as under:

To Quote

With regard to the temporary advances given to various persons mentioned in the relevant para, it is submitted that the assessee has given the amount for a short period, which was received back after a short while, which is evident from the seized material. The said amount was given out of the amount available with the assessee. The assessee is not maintaining any books of accounts and no ledger account of these parties. Since the amount has been given for a short period, therefore neither any interest have been accrued to the assessee nor have been received by the assessee. These transactions are not in the nature of loan or advances.

To Unquote

Nevertheless, we have extracted out entries from the table made by the Ld. AO on page no. 42-49 of assessment order. This extract contains details of amount given and taken to abovementioned parties. Kindly, refer below tables: ITA Nos. 1232, 1231, 1223 & 1222/JP/2019 ACIT, Alwar vs Shri Babu Lal Data, Alwar

From above tables, it is evident that the appellant has first provided above amount as temporary advance to these parties and then received them back after a short period of time. But in case of Mr. Ashok Gupta, there stands a credit balance; this is because the Ld. AO has considered incomplete details for addition due to which credit balance is standing.

Thus, addition based on perception of Ld. AO is unjustified as she has only obtained partial understanding of the facts

Further, it is pertinent to note that the Ld. AO herself has accepted the fact that the amount was given to these parties. She has explicitly stated the same on page no. 58 of assessment order. Her exact words are as under: "On perusal of documents seized from P.O operation of your residential premise situated at Bank Colony, Alwar annexed as Exhibit- 1 of AS, AS-3 & AS-4 has been observed that you have given cash advances as follows:-"

To Unquote

This implies that the Ld. AO has accepted the fact that the amount was given by the Appellant but she has rejected to believe that the said amounts only were received back by the Appellant from the concerned parties just after a short period of time. This proposition as concocted by the Ld. AO is itself contradictory. Further, it is pertinent to note that these entries have been picked from table drawn by the Ld. AO which clearly emphasizes the fact that Ld. AO was cognizant about these details. However, she has deliberately avoided acceptance of the truth in order to tax the appellant without any cogent basis.

Furthermore, it is reiterated that the appellant does not maintain books of accounts, thus, he was unable to furnish the same. Also, the amount which has been provided to abovementioned parties was out of funds available with the appellant, evident from cash flow statement drawn by Ld. AO. Thus, it is our humble request to delete the addition of Rs. 7650000.00 since it is only the amount received back by the Appellant from the concerned parties and not his income. When the giving of amount as advances was accepted by the Ld. AO then receiving back the said amounts cannot be rejected. The Ld. AO cannot blow hot and cold while making additions to the total income of the Appellant.

6.3.6 Entry no.12

In this regard, it is submitted that amounts of Rs. 2500000.00 was received from Sh. Shorya Kumar as advances from sale of agricultural land on 24.02.2015. The entry number 12 is nothing but a renewal/ rollover of Rupees. 2500000.00 on 15.09.2015 which was originally received on 24.02.2015. Further, we would like to draw your kind attention on page number 34 of assessment order dated 30.12.2017 wherein the Learned Assessing officer has accepted herself in note 5 that AS-1 page number 71 back, AS-1 page number 91 and As-4 page number 27 of Rupees. 2500000.00 amount represent one transaction whereas 3 times amount taken. Since. This entry is already considered while making addition u/s 68 of Income Tax Act, 1961 for page 71A, thus, addition over here too will only lead to double taxation. Thus, kindly delete addition of Rupees. 2500000.00 from this ground.

6.3.7 Entry no. 8 In this respect, it is submitted that the appellant was required to pay interest of Rupees. 80000.00 on advances against sale of agricultural land. In this relation, the appellant has 1st shown payment of amount of Rupees. 1080000.00 on 13.08.2015 then shown receipt of Rupees. 1080000.00 on the same date for settlement of interest. However, actually it is only payment of interest with different approach of presentation. Thus, it is our humble request to delete addition of Rupees. 1000000.00, since, it has been returned on the same date and has no effect.

From above explanation, it can be concluded that the appellant has adequately elucidated nature and source of credits, thus, it is infirmity to consider the same as unexplained and make addition in pursue of section 68 of Income Tax Act, 1961. 6.4 In conjunction to above, it is reiterated that if some documents are found during the course of search, the burden is on the assessee to provide details of the seized paper and explain the transactions as noted down on the seized paper. However, once such explanation is furnished by the Assessee then, the burden shifts upon the Revenue to prove as to how the explanation offered by the Assessee is false. In the case under consideration, no evidence or material has been brought by the revenue on record to distinguish the explanation offered by the appellant and also, no corroborative evidence has been placed to establish the allegation of the Ld. AO. 56. On the other hand on this issue ld. DR argued that in the absence of regular books of account why the transaction can be considered as money given and then received back. The surrender of income made by the assessee is lump sum and not verifiable. In addition, assessee has disclosed unexplained agricultural income. The advance given to Ashok Gupta and Puran Chand are not verifiable as no regular books are maintained. At the same time he has agreed that while making the table two – three entries are repeated and thus he supported the findings of the AO.

The DR admitted that yes there were issues in making the chart and thereby in the addition. On the contrary the ld. AR of the assessee based on the detailed argument presented by way chart proved that the money that has been received as alleged by the AO is in fact the money that has been received back. The source of the advancing this money was the amount received on agricultural land which is already considered and thus, once the money advances sources are proved, then on receipt that money against that receipt is not subjected to tax. Therefore, this credit not attract the provision of section 68 of the Act and thus, the ld. CIT(A) has correctly deleted this addition and in the absence of any tangible material provided by the ld. DR we hold to confirm the view of the ld. CIT(A) and thus ground no. 6 raised by the department is dismissed.

“23. Having considered the impugned order and submission made before me, I am inclined to delete the addition made. First of all there is no logic in charging interest for the entire year when the entries itself reveal the same to be for part of the year. Even after search as narrated in all the pages, there is no entry stating that any interest was received by the appellant from the person stated in p. 58-59 of the impugned order. The assessment is to be made on the basis of evidence and not on hearsay or presumptions. Neither any person has stated so to have paid any interest nor the seized material state so. The entry of payment of interest is of no consequences for the reason that neither any such interest has been allowed while computing the income nor the appellant have ever claimed the same. The addition being solely on the basis of presumption and not on the basis of any evidence is liable to be deleted. I accordingly delete the addition of Rs. 14,23,639.”

Order pronounced in the open court on 05/05/2022. ¼ Mk0 ,l- lhrky{eh ½ ¼ jkBksM deys'k t;UrHkkbZ ½ (Dr. S. Seethalakshmi) (Rathod Kamlesh Jayantbhai) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 05/05/2022 *Ganesh Kr.

आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. The Appellant- Assistant Commissioner of Income Tax, Central Circle, Alwar 2. izR;FkhZ@ The Respondent- Shri Babu Lal Data, Alwar 3. vk;dj vk;qDr@ The ld CIT 4. vk;dj vk;qDr¼vihy½@The ld CIT(A) विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत 5. 6. xkMZ QkbZy@ Guard File (ITA Nos. 1232, 1231, 1223 & 1222/JP/2019) vkns'kkuqlkj@ By order,

सहायक पंजीकार@Aेेजज. त्महपेजतंत