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Facts
The assessee's appeals concern additions made by the AO and sustained by the CIT(A) based on a search operation. The additions relate to unexplained expenditure on election, unexplained cash deposits in a bank account, and unsecured loans. The assessee's representative did not appear for hearings, and the appeals were decided ex-parte.
Held
The Tribunal held that the addition for election expenditure of Rs. 16,70,000/- was not sustainable as the diary containing the entries was not in the assessee's name, and the presumption under Section 132(4A) was wrongly applied. The addition for unexplained bank deposits was deleted as the balances were recorded in the assessee's balance sheet. The addition for unsecured loans of Rs. 1,20,000/- was deleted as the assessee had discharged its onus of proving genuineness. The addition for expenses and investments recorded in seized document BK-2 was partly confirmed to the extent of Rs. 12,75,317/-. The addition for unexplained expenditure of Rs. 60,000/- was confirmed as the source of payment was not explained.
Key Issues
Whether additions made on account of election expenditure, unexplained bank deposits, unsecured loans, and expenses/investments recorded in seized documents are sustainable.
Sections Cited
132(4A), 153A, 250 (6), 292C, 143(3), 142(1), 69C
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, AGRA BENCH, AGRA
Before: SMT. ANNAPURNA GUPTA & SHRI SUNIL KUMAR SINGH
ORDER Per Annapurna Gupta, Accountant Member:
The present appeals relate to the same assessee and are against separate orders passed by the Ld. Commissioner of Income Tax Appeals[(CIT(A) in short ] under section 250 (6) of the Income Tax Act 1961( hereinafter referred to as”Act”) dated 31.03.2012 pertaining to assessment year (A.Y) 2005-06 and 2002-03 respectively.
None appeared on behalf of the assessee nor any application filed seeking adjournment. Since it’s a very old appeal, filed in 2012,it was proceeded to be adjudicated exparte on the basis of the orders of the authorities below, material on record and the assistance of the Ld. DR. As transpires from the orders of the authorities below, both the appeals arise in the same backdrop, of search action being undertaken on the assessee u/s 132 of the Act on 03.03 2005 at his residence resulting in assessments being framed u/s 153A of the Act making various additions to the income of the assessee , a few of which were sustained by the Ld.CIT(A).Both the appeals were therefore taken up together for hearing and are being disposed off by this common consolidated order.
We shall first be dealing with assessees appeal for A.Y 2005-06 in ITA number 495/Agra/2012 A.Y 2005-06 4. The grounds of appeal raised by the assesseeread as under:
“1. (i) That the addition of Rs. 1670000/- on account of alleged unexplained expenditure on election made on mere suspicion and without any adverse material to support even in remand proceedings as conceded by A.O. in his remand report sustained by the C.I.T. (Appeal) is arbitrary, unjust and illegal. (ii) Sustained on mere presumption on the basis of inscription madein the diary which does not bear the date, month or year of alleged transaction in arbitrary, illegal and against natural justice. (iii) That the C.I.T. (Appeal) has erred in law to not follow the ratio laid down by Apex Court that entries in books of account cannot without independent evidence of their trustworthiness fix a liability upon a person as held in the case of CBI vs VC Shukla (1998) 3 SCC 410, 425, 426. (iv) That the C.I.T. (Appeal) has erred on facts and in-law to not follow the ratio laid down by jurisdictional High Court that seized document cannot take place of proof rather they merely create suspicion - CIT vs Chamanlal Dhingra (1994) 121 Taxman 272, 273.
2. That the CIT (appeal) has erred on facts and in-law to sustain the addition of Rs.151286 out of peak bank account deposits and not allowing the credit for redeposit of surplus business funds in bank account and the addition sustained is arbitrary and against principle of natural justice.”
As is evident from a perusal of the grounds raised before us,the assessee has primarily agitated two additions confirmed by the Ld. CIT(A):
addition of Rs. 16,70,000/- on account of unexplained expenditure on election. 2.addition of Rs.1,51,286 /- on account of cash deposited in the bank account of the assessee remaining unexplained.
With respect to the addition made of Rs 16,70,000/- on account of unexplained expenditure on election ,the facts relating to the same are that a diary, BHEL diary-95, was seized from the assessees residence during search, which contained notings of expenses made in the election of one Shri Pradeep Singh Chauhan amounting to rupees 16,70,000.In the absence of any satisfactory explanation given by the assessee regarding the same, the entire expenses recorded therein were treated by the AO as incurred by the assessee out of unexplained sources and added to his income, which addition was confirmed by the Ld. CIT(A).
We have gone through the contents of the orders of the authorities below on the impugned issue and the facts recorded in relation to the impugnedaddition is that the diary was in the name of one Alok Kumar Tiwari.The orders below record the fact of the assessee having pointed out this fact to both the AO and the Ld.CIT(A) and as also stating before them that there was a dispute between the assesses group,i.eShridhar Pandey ,Santosh Kumar Pandey and Suresh Kumar Pandey ,and HarnarayanTiwari and his sons namely Alok KumarTiwari and Vivek Kumar Tiwari.The assessee had given photocopies of the Writ Petitions filed by him before the Hon’ble High Court of Allahabad and the copy of complaint lodged before the district authorities,Auraiya, as evidence of the dispute . The assessee had also pointed out that before the Income Tax Authorities , in his statement recorded during search,theassessee had clearly deposed that the search was organised at the instance of the family members of Har Narayan Tiwari.He had pointed out that at the time of search operation a crowd of 20 to 25 persons had come and entered his house and as such it was possible that somebody had thrown this diary with bad intention, which was subsequently seized by the department .All these facts are recorded at para 4 of the assessment order. Briefly put, the assessee had repeatedly denied having anything to do with the diary seized and pointing out that the name on the diary was that of Alok KumarTiwari,necessary enquiries be conducted with him .The name, address and all details of the concerned person was given to the AO.The assessment order also records the fact that on inquiry conducted by the Department with Shri AlokTiwari,he denied to have maintained this diary.
Before the Ld.CIT(A) also the assessee reiterated that he had nothing to do with the diary and that necessary inquiry be conducted with Alok Tiwari.TheLd. CIT(A) , we have noted,directed the AO to justify the impugned addition made on the basis of the seized diary.Incompliance,theAO submitted that he had tried to make verification from the office of the district election officer about the source of expenditure incurred by Shri Pradeep Singh Chauhan but no reply had beenreceived.The AO stated that the diary being found from the premises of the assessee the addition had been rightly made in his hands in terms of the provisions of section 132(4A)of the Act .The Ld. CIT(A) was convinced with the contention of the AO and held that as per the presumption provided u/s 132(4A) of the Act and section 292C of the Act,the AOhad rightly presumedthe entries made in the diary to pertain to the affairs of the assessee and on this basis confirmed the addition of the election expenses, noted to have been recorded therein, as from unexplained sources, of ₹16,70,000/- The relevant findings of the Ld. CIT(A)are contained para 8.3 of his order as under; “8.3 In view of the above arguments that the seized Diary BK-1 is beyond the provisions of section 153A of the Act and the addition has been made by the AO by completely ignoring the explanation / clarification / deposition made by the assessee (appellant) during the assessment proceeding, the AO has been asked to justify the impugned addition made on the basis of the seized Diary BK-1. In compliance to my direction in the remand report dated 02.03.2012, the AO has submitted that though as per the direction of my predecessor, she has tried to make verification from the office of district election officer about the source of the expenditure incurred by Shri Pradeep Singh Chauhan, no reply could be received from the District Election Office. However, it has been argued by her that the addition made on account of Diary BK-1 being seized from the residence of the assessee, such addition has been rightly made in his hand as per the provisions of section 132(4A) of the Income Tax Act, 1961. Against this argument of the AO in the remand report, the I.d. AR in his rejoinder
submitted that on writing letter to District Authorities on the direction of my predecessor, since no adverse material has been brought on record that any of such expenses was incurred by the assessee (appellant) on his behalf, unless he produce necessary evidence (either by producing Shri Pradeep Singh Chauhan or collecting necessary information from the District Election Office to show that these expenditures were not incurred by the assessee or his brother, Suresh Kumar Pandey and in view of the fact that the assessee has denied in his statement recorded during search operation about any relationship with this diary, no addition can be made in the hand of the assessee (appellant) on the basis of entries in the diary but he has not given any comment on the argument of the AO that such addition can be made as per the provisions of section 132(4A) looking to the fact that this diary was found from the possession of the assessee (appellant) and he has not given any satisfactory reply about the entries made in this diary and despite denying his relationship with this diary, he could not give any cogent reason as to how this diary came in his possession, in support of his argument, the Ld. AR has referred to three judicial pronouncement as given below:-
"The Hon'ble Allahabad High Court in the case of CIT Vs. Chaman Lal Dhingra (1994) 121 Taxation 272, 273 has held that the seized document cannot taken place of proof rather they merely create suspicion. The Hon'ble Supreme Court in the case of Dhakeshwari Cotton Mills Ltd. Vs. CIT (1954) 26 ITR 775, 782 has held that there must be something more than bare suspicion to support the assessment u/s 143(3). In the case of CBI Vs. VC Shukla (1998) 3 SCC 410, 425, 426 it has been held by the Hon'ble Supreme Court that it is incumbent upon the person relying upon these entries to prove that they were in accordance with facts. In other words the entries in the books of accounts cannot without Independent evidence of their trustworthiness fix a liability upon a person."
I have considered all the above mentioned decisions cited by the Ld. AR, but in none of the decisions, I have found that the provisions of section 132(4A) have been questioned by the Hon'ble Court for applying it to the seized document found from the possession of the person searched, in case he does not offer any satisfactory explanation explaining all the entries in such seized documents. Mere denial by the (assessee about any seized document as not belonging to him is not sufficient, he has to establish with cogent reasons to show that any particular document found from his possession does not belong to him. In the present case, despite giving sufficient opportunities, I find that the assessee (appellant) has failed to establish that the diary BK-1 does not belong to him and therefore, as per the presumption provided u/s 132(4A) and section 2920, the AO can rightly presume that whatever entries are made in this diary, they pertain to the affairs of the assessee (appellant). As in this diary, expenditure of Rs 16,70,000/- made in connection with the election of Shri Pradeep Singh Chauhan are recorded, this expenditure can be considered as incurred by the assessee (appellant) on his behalf, unless he produce necessary evidence either by producing Shri Pradeep Singh Chauhan or collecting necessary information from the District Election Office to show that these expenditures were not incurred by him but some other person or by Shri Pradeep Singh Chauhan, the natural presumption would be that these expenditure were incurred by him. Since the assessee (appellant) has failed to produce any evidence to show that these expenditures were hot incurred by him, in my considered opinion, the AO has rightly concluded that these expenditures were incurred by him and hence, I confirm the addition of Rs. 16,70,000/- made in this respect, as unexplained expenditure u/s 69C in the income of the assessce (appollant) and accordingly, Ground No. 4 is dismissed.”
It is evident from the above that the entire basis for making the addition in the hands of the assessee and confirming the same ,is the presumption provided under section 292C of the Act and section 132( 4A) of the Act, which provides that any books of accounts/documents found during search are to be ppresumed to belong to the searched person and the contents thereof to true unless rebutted with cogent evidence.But we have noted that both the authorities below have applied the provisions to suit their own purposes of making and confirming the addition in the hands of the assessee.It is settled law that a document has to be read in its entirety and not in parts.The fact of the case is that the diary carried the name of Alok Tiwari.The diary ,as a matter of fact, was not in the name of the assessee.Therefore reading the document as a whole, the diary could not be set to belong /relate to the assessee nor its contents said to relate to the assessee, more particularly in the light of the fact that the assessee had in the first instance itself , in his statement recorded during search , denied having anything to do with the diary, and had pointed out his adversarial relationship with Alok Tiwari , duly evidenced with court documents reflecting ongoing dispute between the two. It is alsoafact that Alok Tiwari was an identifiable person and not a bogus person. In fact the AO had conducted inquiries from him regarding the diary , which he had completely denied having anything to do with.Reading the contents of the diary as a whole and noting the fact that the diary was in the name of MrAlok Tiwari,theLd.CIT(A), we hold, has wrongly applied the presumption provided in section 139(4A) and 292C of the Act to hold that the diary belonged to the assessee and the contents thereof pertained to him.Ld.CIT(A) , has wrongly held the onus to rest on the assessee to dislodge the presumption with cogent evidence.
Therefore considering the facts on record that the diary found with the assessee was in the name of MrAlok Tiwari, that it contained details of expenses incurred during election of 16,70,000 and the source of these expenses remained unverified by the Department, the only conclusion which can be drawn is that the diary belonged to MrAlok Tiwari and the said expenses were incurred by him .In the light of the same we do not agree with the Ld CIT (A) that applying the provisions of section 132( 4A) of the Act and section 292C of the Act, the diary is to be attributed to as belonging to the assessee and addition to be confirmed in the hands of the assessee.Theaddition of ₹16,70,000/- made in the hands of the assessee is therefore directed to be deleted .
Ground of appeal
No. 1 is accordingly allowed.
12. Ground of appeal no. 2 relates to the addition made on account of cash found deposited in the bank account of the assessee allegedly for the reason that the source of the same remained unexplained.TheAO made addition of the peak of the bank deposits amounting to ₹8,77,914 ,while the Ld. CIT (A) rejected the addition made of the peak balance and on the basis of data available with him, extracted from the Balance Sheet of the assessee, reworked the availability of cash with the assessee and accordingly noted that an amount of ₹1,51 ,286/-deposited in the bank account of the assessee remained unexplained and sustained the addition made by the AOto this extent.
We have gone through the orders of the authorities below and we do not find any merit in the addition made by the revenue authorities on account of the cash found deposited in the bank account of the assessee remaining unexplained .It is a fact on record that the assesseehad maintained Balance Sheet for the impugned year.TheLd. CIT(A), we have noted ,has picked up the figures of the cash and bank balance available as at the beginning of the year and as at the end of the year from this balance sheet to workout the availability of cash with the assessee.We have gone through the contents of the Balance Sheet, which was placed before us in a paper book at page number 21-24.The saidBalanceSheet, we have noted, records the opening and closing balances of both the bank accounts in which the Revenue authorities have noted cash to be deposited by the assessee.Considering the fact that both the bank accounts are recorded in the balance sheet of the assessee, there can be no case with the Revenue of the cash found deposited therein being from unexplained sources .As long as the cash and bank balances are recorded in the Balance Sheet of the assessee, it is simple accounting, that all the transactions recorded therein are duly accounted for in the books of the assessee and therefore are from accounted sources.The addition therefore made by the Revenue authorities, we hold, is without any basis and is therefore directed to be deleted. Ground of appeal
number 2 is allowed In effect appeal of assessee is allowed
14. We shall now take up assessees appeal forA.Y 2005-06 in Ground No.1 raised by the assessee reads as under: “(i) That the C.I.T. (Appeal) has erred on facts and in-law in sustaining addition of Rs.588053 out of peak deposit in bank account.”
15. Issue raised in the above ground, we find, is identical to that raised in ground number 2 of assessees appeal in 2012 ,pertaining to addition made to the income of the assessee on account of cash found deposited in the bank account, source of which allegedly remained unexplained. The facts and circumstances in which the addition has been made, in the present case, we find is identical to that in A.Y 2002-03, dealt with us above. The issue therefore stands covered by our decision in the case of the assessee in A.Y 2002-03 wherein we have directed deletion of the impugned addition at para13 of our order above . The addition made of ₹5,88,053/- is accordingly deleted.
Ground of appeal
No.1 is allowed
17. Ground of appeal No.2reads as under:
(ii) That the C.I.T. (Appeal) has erred on facts and in-law in not allowing credit for redeposit of surplus business funds in bank account and the addition sustained is unjust, arbitrary and against principal of natural justice.”
The issue raised relates to addition made to the income of the assessee on account of unsecured loans of ₹1,20,000/- from different persons found to be not genuine .The Ld. CIT(A) has dealt with the issue at add page 21 of his order as under: “With regard to the issue of establishing the genuineness of loans of Rs. 1,20,000/- from farmers as shown by the assessee (appellant), no further arguments have been offered by the Ld. AR in his rejoinder and he has submitted that in this regard, the submissions have already been made in the written submission filed earlier. After considering, the submission of the Ld. AR on the remand report of the AO as discussed above, It is clear that he has failed to establish the genuineness of the affidavits filed by him along with the written submission in support of claiming the genuineness of the loans of Rs. 1,20.000/- shown by the assessee (appellant) because all the persons in whose names, these affidavits were filed could not be produced to confirm that they have issued these affidavits and therefore, these affidavits remained unsubstantiated. In view of these affidavits being in form of additional evidence and remained unsubstantiated during the inquiry made at remand stage by the AO and also it has not been explained as what was sufficient cause for not producing these affidavits before the AO during the assessment proceeding, these affidavits cannot be admitted as additional evidence in appeal proceeding as the condition stipulated u/r 46A of the Income-tax Rule, 1962 has not been satisfied as well as these affidavits were not got verified by producing the persons in whose names they are made and hence, I find that the assessee (appellant) failed to establish the identity as well as creditworthiness of all the lenders in whose name these loans were shown and hence, genuineness of these loans could also not be established. Therefore, I confirm the amount of Rs. 1,20,000/- for the loans found to be taken by the assessee (appellant) during the year under consideration as income of the assessee from undisclosed sources because the assessee (appellant) failed to establish the genuineness of this amount being unsecured loan as shown by him and hence, I confirm the addition of Rs. 1,20,000/- out of the amount of Rs. 9,70,000/- added by the AO and assessee (appellant) gets a relief of Rs. 8,50,000/- Accordingly, Ground No. 4 is dismissed.”
On going through the contents of the same, we find that the assessee had given details of all persons from whom the impugned loans were taken and had also furnished their affidavits. The only reason for holding the loans ingenuine was the fact that the said persons could neither be produced by the assessee for examination nor did they respond to notices issued by the AO with regard to the same.
We find that this is not sufficient for treating the impugned loans as not genuine. Undoubtedly the assessee had furnished the names and details of all persons from whom the loans had been taken and had also given their affidavits. In this regard no infirmity has been pointed out as such in the affidavits furnished by the assessee of these persons .Merely because the said persons did not respond to notices issued by the AO cannot be read adversely against the assessee and neither does it establish that the loans were not genuine . In the light of the same we do not find any merit in the basis adopted by the Revenue authorities for holding the loans of ₹1,20,000 taken by the assessee as not being genuine. On the contrary we find that the assessee had duly discharged its onus of establishing the genuineness of the loan by furnishing all details of the lenders and also their affidavits. In the light of the same we hold that the addition made by the AO and confirmed by the Ld. CIT(A) of Rs 1,20,000 on account of loans taken by the assessee is not sustainable and direct deletion of the same. Ground of appeal
no. 2 is accordingly allowed Ground of appeal No.3 raised by the assesseereads as under “That the C.I.T. (Appeal) has erred on facts and in-law in treating the unsecured loans of Rs. 120000/- from different persons and not genuine. No particular name of lender is identified to be not genuine. That the C.I.T. has erred on facts and in law to sustain the addition of Rs. 1275317 on account of seized document BK-2.”
21. The contents of the CIT (A)’s order dealing with the facts of the issue and his findings on the same are contained in para 13.1 to13.5 as under
As per the above the addition of Rs. 12,75,317/- pertains to entries of expenses and investments found recorded in seized document BK 2 ,treating them to be unexplained.The findings of the Ld. CIT (A), contained at para 13.5 of his order ,we have noted ,is a detailed finding who has considered all the contentions of the assessee and after dealing with all of them has given part relief to the assessee.The original edition made by the AO was to the tune of Rs.20,23,567 /-which the Ld. CIT(A), after considering each and every argument and contention made before him and corraborating it with the documents on record ,has confirmed to the extent of ₹12,75,317/- which he noted to have remained unexplained. In the absence of any assistance on behalf of the assessee on this factual issue we are left with no option but to confirm the order of the Ld. CIT(A) upholding the addition of ₹12,75,317/- 23. Ground of appeal
No. 3 is accordingly dismissed.
24. Ground of appeal No. 4 raised by the assessee reads as under: “That the CIT (A) has erred on facts and in-law in sustaining addition of Rs. 60000/- as unexplained expenditure incurred through the employee Rajan Dubey for the purchase of fertilizer for agriculture, ignoring the fact that net income from ^^agriculture at Rs. 350000 disallowed by A.O. had been accepted by the CIT (A).”
25. The learned CIT appeal deals with the issue at para 15.1 to 15.3 of his order as under:
Contents of the above reveal that a payment of ₹60,000/- to one Sh. Rajan Dubey was 26. reflected at page 62 of Annexure BK- 3 ,the explanation with regards to which furnished by the assessee was not found to be satisfactory, the assessee having stated that the impugned amount was paid in cash by the him to Shri Rajan Dubey for purchase of fertilizers for his own agricultural land .In the absence of any explanation of the source of the same, the impugned amount was added to the income of the assessee. The Ld. CIT(A), we have noted ,has confirmed the addition since the assessees explanation of having made the payment out of his available cash balance was not substantiated through any cash book and the assessee, as per its Balance Sheet ,was found to have only nominal cash balance of 3000 odd rupees.
We find no merit in the ground raised
by the assessee seeking deletion of the impugned addition in the absence of any assistance from the assessee controverting the findings of the AO and Ld.CIT(A).
28. The addition therefore by the AO and confirmed by the Ld. CIT(A) of Rs.60,000/- is confirmed. Ground of appeal No. 4 of the assesseeis dismissed.
In effect appeal of the assessee is partly allowed. 30. is accordingly allowed 31. is partly allowed.
Order pronounced in the open court on 24.04.2025.