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Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: MS. MADHUMITA ROY & SHRI B.M. BIYANI
आदेश /O R D E R
Per B.M. Biyani, A.M.:
This appeal by assessee is directed against the order dated 25.09.2019 of learned Commissioner of Income-Tax (Appeals)-I, Bhopal [“Ld. CIT(A)”] in Appeal No. CIT(A)-1/BPL/IT-357/15-16, which in turn arises out of the order of assessment dated 31.03.2015 passed by the learned DCIT-1(1), Bhopal [“Ld. AO”] u/s 143(3) of the Income-tax Act, 1961 [“the Act”] for Assessment-Year 2009-10, on following grounds:
“1. That, the learned CIT(A) grossly erred, both on facts and in law, in confirming the action of the AO in framing the assessment in the case of the appellant under the provisions of s.143(3) r.w.s. 147 of the Income-Tax Act, 1961 without having any valid jurisdiction over the case of the appellant.
That, without prejudice to the above, the learned CIT(A) grossly erred, both on facts and in law, in confirming the actions of the Assessing Officer in issuance of Notice under s.148 and framing reassessment in pursuance thereof u/s. 147 of the Act, merely on guess work, conjectures and surmises, which is quite unjustified, unwarranted, improper, illegal, arbitrary and bad in law.
That, without prejudice to the above, the learned CIT(A) grossly erred, both on facts and in law, in confirming the action of the AO in determining the total income of the appellant u/s. 143(3) r.w.s. 147 of the Income-Tax Act, 1961 at Rs. 1,02,54,050/- as against the Returned Income of Rs. 2,54,050/- thereby making huge addition of Rs. 1,OO,OO,OOO/- which is quite improper, unjustified, unwarranted, arbitrary, excessive and bad-in-law.
4a). That, without prejudice to the above, the learned CIT(A) grossly erred, both on facts and in law, in confirming the addition of Rs. 1,OO,OO,OOO/- made by the AO in the appellant's income, merely on guess work, conjectures and surmises, by making a bald allegation of accepting illegal gratification by the appellant from some companies without considering the material fact that no such gratification was ever accepted by the appellant either from these companies or from anyone else.
4b). That, without prejudice to the above, the learned CIT(A) grossly erred, both on facts and in law, in confirming the addition of Rs. 1,OO,OO,OOO/- made by the AO in the appellant's income, on account of alleged receipt of illegal gratification from two companies without considering and appreciating the material fact that the appellant had neither extended any undue benefit to the subject companies nor he was in a position to influence award of any contract to these companies. 4c) That without prejudice to the above, the ld. CIT(A) grossly erred both on facts and in law, in confirming the addition of Rs. 1,00,00,000/- made by the AO in the appellant’s income, on account of alleged receipt of illegal gratification from two companies without considering and appreciating the material fact that the entire process of award of contract was carried out in accordance with the set process and regulations only and no undue benefit was granted to anyone with the result that there was no occasion for anyone to give any gratification to the appellant. 5. That the appellant further craves leave to add, alter or amend the foregoing ground of appeal as and when considered necessary.”
The registry has informed that the present appeal is against the order of Ld. CIT(A) dated 25.09.2019, served upon the assessee on 04.10.2019 but however the appeal has been filed on 24.01.2020 which is beyond the prescribed period of 60 days and therefore, there is a delay of 52 days in filing the appeal. Ld. AR submitted that the assessee has filed an application, supported by a sworn-affidavit duly notarized, requesting for condonation of delay in which the assessee has averred that during the period from October, 2019 to January, 2020, his father Shri Keshav Singh Jadon was severely ill and had to undergo hospitalisation at Gwalior. The assessee has also submitted that his father underwent coma and finally passed away on 16.01.2020. The assessee has submitted that he had to take care of his father due to which he could not file appeal in time. Taking into account these facts, we find a reasonable cause for delay in filing of appeal. We confronted Ld. DR who did not express any objection. Therefore, having regard to the facts averred by the assessee and keeping in view the larger objective to grant substantial justice, the delay is condoned and appeal was proceeded for hearing.
Precisely stated the facts are such that a search u/s 132 of the Act was conducted at the premises of one Shri Mukesh Sharma on 21.07.2008 wherein certain documents were seized on the basis of which it was inferred that Shri Mukesh Sharma was a contractor-cum-liasoning agent who used to manage contracts on behalf of the Govt. and in that line of activity, he facilitated the award of sewerage contracts under JNNRUM to M/s Nagarjuna Construction Co. Ltd., Hyderabad and M/s. Simplex Infrastructure P. Ltd., Kolkata. It was further observed that the assessee, Shri Gyanendra Singh Jadon, was holding the post of Executive Engineer in Municipal Corporation, Indore, at that time. Ld. AO further observed that the documents seized from Shri Mukesh Sharma used code words "M", "P", "C" and "M" which denoted the vertical chain of Govt. hierarchy involved in the deal of 'sewerage-contracts', "M" referring to Minister of Department of Urban Development, “P” referring to Principal Secretary of Department
Urban Development, “C” referring to Commissioner of Department of Urban Development, “M” referring to Mayor, Indore Nagar Nigam and one more “C” referring to Commissioner, Nagar Nigam, Indore, to whom the illegal gratification was paid. Ld. AO further observed that on seized document Page No. 155(ix) backside of LPS 1/1, illegal gratification of Rs. 50 lakh by Nagarjuna Construction Company Limited to “J” is mentioned. Further, on Page 55 of the LPS, an illegal gratification of Rs. 50 lakh by “Simplex Infrastructure Pvt. Ltd. to “Jadon” is mentioned. The Ld. AO inferred that “J” or “Jadon” refers to the assessee, whose name is “Shri Gyanendra Singh Jadon” and who was holding the post of Executive Engineer in the Municipal Corporation. Ld. AO further observed that from the residence of Shri Mukesh Sharma, a mobile set No. E-51, Nokia was also seized in which there was a message on 09.07.2008 at 9:09 PM from the mobile No. 9329555112, which was saved as Jadon SB EE – “nagarjun ko kam karne ki sanction dedia hai”. Ld. AO observed that this mobile number belongs to the assessee and he had sent a SMS to Shri Mukesh Sharma indicating sanction given to M/s Nagarjuna construction Company, Hyderabad, which clearly indicates that the asessee was in touch with Shri Mukesh Sharma and was giving him every information about allotment of contracts. Ld. AO further noted that during search operation on 06.10.2010 in the case of M/s Nagarjuna Construction Co. Ltd., Shri AGVK Raju, Executive Director of the company had admitted unexplained expenditure of Rs. 9.68 Crores in the sewerage-contracts, which tantamounts to admission of payment of illegal gratification in the award of contracts. Based on these observations, Ld. AO initiated action u/s 148 / 147 of the act on the assessee for taxation of Rs. 50 lakh + Rs. 50 lakh, aggregating to Rs. 1 Crore.
At the time of hearing, Ld. AR did not press Ground No. 1. Therefore, the same is treated as withdrawn, being not pressed, and we do not need to adjudicate the same. We take up other Grounds.
Ground No. 2:
In this Ground, the assessee has claimed that the Ld. CIT(A) has erred in confirming the action of the Ld. AO in issuance of notice u/s 148 and framing assessment u/s 147 in pursuance thereof, on the basis of guess- work, conjectures and surmises.
Apropos to this Ground, Ld. AR submitted that the Ld. AO received information from Investigation-Wing and solely on the basis of such information, recorded reason to the effect that the assessee has received illegal gratification of Rs. 1 Crore. According to Ld. AR, the Ld. AO has mechanically acted on the basis of information supplied by Investigation- Wing, without bringing on record any cogent corroborative material to substantiate the allegation. Ld. AR submitted that in the present case, it is very much apparent that the Ld. AO has acted on the basis of mere suspicion, without having any reason to believe as required by section 147. Ld. AR has further relied upon following decisions to claim that no action can be taken on the basis of mere “reason to suspect”:
(a) CIT Vs. Kamdhenu Steel & Alloys Ltd. (2012) 248 CTR 33 (Del HC)
(b) CIT Vs. Multiplex Trading & Industrial Co. Ltd. (2015) 128 DTR 217 (Delhi HC)
(c) ITO Vs. Lakhmani Mewal Das (1976) 103 ITR 437 (SC)
With these submissions, Ld. AR argued that the action of Ld. AO in issuing notice u/s 148 and thereby make assessment u/s 147 does not fulfil the requirement of law. Therefore, the proceeding must be held as invalid and the assessment-order must be struck down.
Per contra, Ld. DR carried our attention to the copy of reasons recorded by Ld. AO, a copy of which is placed at Page No. 52 to 53 of the Paper-Book and the seized-documents, which are placed at Page No. 54 to 57 of the Paper-Book. Ld. DR argued that the Ld. AO has recorded reasons at length running in 2 pages. Ld. DR submitted that a careful reading of the reasons clearly demonstrate that the Ld. AO has made analysis of the
seized-documents in the reasons and thereafter in the last para of the reasons, formed a belief that the income of Rs. 1 Crore has escaped assessment. Ld. DR submitted that the conclusion of Rs. 1 Crore derived by Ld. AO is not baseless, it is derived on the basis of analysis of seized- documents made by Ld. AO which is very much apparent from the facts and figures mentioned in the reasons. Ld. DR submitted that the Ld. AO has noted that the assessee has received Rs. 50 lakh from M/s Nagarjuna Construction Company Ltd., Hyderabad plus Rs. 50 lakh from M/s Simplex Infrastructure Ltd. and that is how the figure of Rs. 1 Crore is determined. Ld. DR, strongly contended that both of the pleas taken by the asssessee, viz. (i) Ld. AO has mechanically relied upon the Investigation-Wing, and (ii) there is no corroborative material in the hands of Ld. AO, do not have merit in as much as the copy of reasons clearly speak that the Ld. AO has made his own analysis on the basis of seized-documents. With these submission, Ld. DR argued that there is no merit in the pleas taken by the assessee.
We have considered submission of both sides and perused the copy of reasons recorded by Ld. AO as also the supporting material in the form of seized-documents. On a careful consideration, we find substantial merit in the submission of the Ld. DR that there existed material in the form of seized-documents before Ld. AO. We further observe that the Ld. AO has noted his own analysis of the material, in the reasons recorded. We observe that the Ld. AO has, after a sufficient analysis which was possible at that stage, formed a belief that the assessee has received a total sum of Rs. 1 Crore as gratification from two companies, viz. Rs. 50 lakh from M/s Nagarjuna Construction Company Ltd., Hyderabad and Rs. 50 lakh from M/s Simplex Infrastructure Ltd. Thus, we observe that the Ld. AO has certainly proceeded on a careful consideration of the material available before him and not on mere suspicion as claimed by Ld. AR. It is also a settled law that at the stage of formation of belief, Assessing Officer is required to make a prima facie belief based on corroborative material to the effect that income chargeable had escaped assessment. It is also a settled law that the courts can look into the existence of reasons but not sufficiency
of the reasons. We further observe that in the facts of present appeal, the decisions relied upon by Ld. AR are not applicable. Therefore, we uphold the action of Ld. AO and dismiss the Ground No. 1 of the assessee.
Ground No. 3 to 4:
In these Grounds, the assessee has challenged the addition of Rs. 1 Crore made by Ld. AO.
During assessment-proceeding, Ld. AO observed that the assessee has received a total sum of Rs. 1 Crore as illegal gratification. Hence the Ld. AO called for explanation from assessee. In response, the assessee denied having received any kind of gratification. Further the assessee also represented that he was merely occupying the post of engineer and did not have any authority or position to give any benefit in the award of contracts. The assessee also submitted that the loose-papers gathered by department were dumb- documents and jottings, which cannot be used for making any conclusion. The assessee further submitted that the documents were not seized from him or his family members and therefore they cannot be used against assessee. Ld. AO, however, rejected all submissions of the assessee and made addition of Rs. 1 Crore.
During appellate-proceeding, the Ld. CIT(A) confirmed the action of Ld. AO by holding as under:
“Ground No. 3 & 4:- Through these grounds of appeal, the appellant has challenged the addition of Rs. 1,00,00,000/- on account of receipt of commission from two companies. In search and seizure operation carried out at the business and residential premises of Shri Mukesh Sharma u/s 132 of the I.T. Act, a document LPS page-55 indicates the payment to the appellant. The A.O. has scanned the document in the page no. 3 of the assessment order. The mobile set of Shri Mukesh Sharma was seized and therein message on 09.07.2008 at 9.09 PM from mobile no. 9329555112, which was saved as Jadon Sb EE "nagarjun ko kam karne ki sanction dedia hai". This mobile number belongs to the assessee and he had sent a SMS to Shri Mukesh Sharma indicating sanction given to M/ s
Nagarjuna Construction Company, Hyderabad. This message clearly indicates that the assessee was in touch with Shri Mukesh Sharma and was giving him every information about allotment of contracts to the company M/s Nagarjuna Construction Company Ltd. The appellant was holding the post of Executive Engineer, JNNURM, Indore Municipal Corporation, and played the important role in facilitating the award of sewerage contract to the impugned companies. The tender notice for laying down primary and secondary sewerage lines under JNNURM was issued on 28.06.2007. While awarding the contract the bids were technically evaluated and after technical evaluation only the following companies were qualified for opening financial bid:- (i) M/s Simplex Infrastructure Ltd., Kolkata. (ii) M/s Nagarjuna Construction Company Ltd., Hyderabad. It was also observed that there was violation of confidentially clause by Ramky Infrastructure Pvt. Ltd. and conflict of interest. Hence, it was held to be technically disqualified. The other companies were found to be non responsive. But no detailed reasons are given, as to why these companies were held to be non responsive. On opening the financial bid, it was observed that the rates quoted by both these companies were much higher than the project rate. These two firms have quoted Rs. 245 crore more than the minimum tender cost. The A.O. in the assessment order narrated the reasons that work orders were issued to M/s Simplex Infrastructure Ltd., Kolkata and M/s Nagarjuna Construction Company Ltd., Hyderabad by holding the other competitors as non responsive without any valid reasons and by escalating the tender cost substantially floating all norms. The appellant is one of the key persons engaged in controlling and decision making process of award of tenders to Simplex M/s Infrastructure Ltd., Kolkata and M/s Nagarjuna Construction Company Ltd., Hyderabad. The A.O. scanned the seized document of page - 155 (viii) back side of LPS-155 at page no 21 of the assessment order in which the commission payment of Rs. 0.50 crore has been mentioned. Also in the LPS at page no. 55 scanned at page no. 22 of the assessment order in which the commission payment of Rs.50,00,000/- has been written. Shri A. K. G. Raju, Managing Director of M/s Nagarjuna Construction Company, Hyderabad had admitted
unexplained expenditure to the tune of Rs. 9.68 crores in the sewerage deal during the course of search conducted in its premises in Hyderabad, which tantamount to admission of payment of commission in the award `of contract. Therefore, it is held that loose papers seized from the residence of Shri Mukesh Sharma was not dumb documents. The figures written on the seized documents are being corroborated with the amount of contracts awarded to the said companies. The appellant was holding an important position and facilitate the award of sewerage contract to the abovementioned companies by using his position and in return received commission payment has recorded in the seized documents. Therefore the addition made by the AO amounting to Rs.1,00,00,000/- is confirmed. Therefore, appeal on this ground is dismissed.” 12. During hearing, Ld. AR invited our attention to the order of ITAT, Indore Bench in the case of ACIT Vs. Shri Narottam Mishra, Bhopal in Appeal No. 92/Ind/2013, dated 30.11.2017, a copy of which is placed in the Paper-Book at Page No. 72 to 129. Ld. AR submitted that in this order, the assessee was Shri Narottam Mishra, who happened to be a Cabinet Minister in the state Govt. of MP. Ld. AR submitted that the issue involved in the appeal was the addition made by Ld. AO, emanating from illegal gratification alleged to have been received by Shri Narottam Mishra from M/s Nagarjuna Construction Company Ltd., Hyderabad and M/s Simplex Infrastructure Ltd., based on the very same material as in the case of present appeal. Ld. AR submitted that Mr. Narottam Mishra, being the Minister in the State Govt of MP, was treated as being denoted by the alphabhet “M” in the seized- document and the telephonic-SMS sent by Shri Jadon to Mr. Mukesh Sharma was also taken note of in Para No. 3.1 / Page No. 8 of the order. Ld. AR submitted that the addition made by the AO was deleted by Ld. CIT(A) itself in the first appeal and the Revenue filed next appeal to this Indore Bench of ITAT. Ld. AR submitted that this Bench of ITAT examined all factual and legal aspects carefully and passed a very detailed and elaborate order dismissing the appeal of Revenue. We reproduce below the relevant paras of order:
“25. On careful consideration of above rival submissions and perusal of the material placed on the record of the Tribunal inter-alia assessment order, impugned order, paper books filed by the assessee and case-laws cited and relied on at Bar by the parties, at the very outset, from the assessment order, we observed that the Assessing Officer made first addition on account of alleged proceeds received from NCCL by drawing adverse inference against the assessee on the basis of primary evidence no. 1 to 8 (assessment order pages 2 to 11) listed in the table of primary evidence no.1 which are documents relating to request for transfers and postings of officers and request for fund allocations in the Urban Development Department, documents relating to incurring of expenditure for travel and officials, documents relating to illegal gratifications paid to officers of Urban Development Department and documents relating to tenders/contracts of various Nagar Nigams, Nagar Palikas. Primary evidence nos.2 to 8 are loose papers collected from the residence of Mukesh Sharma during search and seizure operation u/s 132 of the Act at his office and residence. The Assessing Officer has also taken into consideration corroborative evidence Sl. No. 1 to 5 (assessment order pages 11 to 28) and thereafter, he proceeded to make addition by referring to the sec. 34 of the Evidence Act and referring to the guidelines established by the Hon'ble Supreme Court in the case of CBI vs. VC Shukla (supra). 26. In the tables of primary and corroborative evidence, the Assessing Officer firstly in sl. No.1 of primary evidence noted the details of documents and thereafter, after mentioning the queries raised to the assessee, directly jumped to the conclusion by holding that from the documents seized through search action against Mukesh Sharma u/s 132 of the Act, it is found that he was an intermediary for facilitating work from the ministers and officers of the department of Urban Development Department and Shri Mukesh Sharma has been found to be liasioning intermediary for the practice of transfers and postings and fund allocations. But, there is no adjudication regarding explanation and reply of the assessee to the queries of the Assessing Officer. Further, on primary evidence no.2 to 8, the Assessing Officer noted that the details of loose papers and thereafter, for primary evidence no.2, he himself put meaning to word "M" and "Netaji" that these have been used by recording the name of the assessee by Shri Mukesh Sharma on standalone basis without any other corroborative or other adverse evidence supporting this abbreviation and meaning taken by him on his own whims and fancies. By giving meaning to word 'M' and 'Netaji', the Assessing Officer made a presumption and drew an inference that Shri Mukesh Sharma was an intermediary through whom the assessee received proceeds/gratifications
from NCCL which was further used for the purpose of making investment in the land through benamidars.
When we analyzed the basis taken by the Assessing Officer for making second addition on account of proceeds and cash found in the lockers and possession of Shri Usman Khan, which were alleged proceeds from SIL then we found that the basis of this addition is primary evidence no.1 to 5 and corroborative evidence no.7. As we have noted above primary evidence no.1 which are documents relating to request for transfers and postings of officers and request for fund allocations in the Urban Development Department, documents relating to incurring of expenditure for travel and officials, documents relating to illegal gratifications paid to officers of Urban Development Department and documents relating to tenders/contracts of various Nagar Nigams, Nagar Palikas. Primary evidence nos.2 to 8 are loose papers collected from the residence of Mukesh Sharma during search and seizure operation u/s 132 of the Act at his office and residence. So far as corroborative evidence no.7 is concerned, it is warrant of authorization against Shri Usman Khan under search operation Rs.73,41,000 was found and seized from locker no.268 at Axix Bank, Rs.21 lacs from locker no.151 at Bank of Rajasthan and Rs.20 lacs found and seized from locker no.137 at Bank of Rajasthan, Urja Bhavan, Bhopal. The Assessing Officer also noted in the post search inquiry that Shri Usman Khan had jointly purchased house at Arera Colony, Bhopal with mother-in-law of the assessee Smt. Rati Devi Gurbele and on this purchase of house account, the Assessing Officer made addition of Rs.20 lacs which resulted into total addition of Rs.1,53,41,000/-.
In the backdrop of above factual matrix of the evidence relied and taken into consideration of the Assessing Officer, when we logically analyse the conclusion drawn by the ld. CIT(A) on the touch stone of the relevant provisions of the Act, Evidence Act, and other relevant provisions of law in the light of the ratio of the decisions/orders relied by the both the parties then we find that the ld. CIT(A) has taken into consideration all the relevant facts and circumstances of the case and also taken into consideration the basis of the presumption and inferences drawn by the Assessing Officer for establishing direct or indirect nexus of the assessee with the documents found and seized from Shri Mukesh Sharma and cash and documents seized from Shri Usman Khan and thereafter the First Appellate Authority dismissed findings of the Assessing Officer.
The CIT(A) observed that the papers which were taken basis for making addition in the hands of assessee were found during the search and seizure operation in the premises of Shri Mukesh
Sharma and they were not in the handwriting of appellant. It was also correctly observed that though the persons in whose names the investment were made were belonging to the Dabra, the election constituency of the assessee - appellant but they were neither relatives nor employees nor connected in manner with the assessee and on this basis it was concluded by the first appellate authority that in absence of any direct supportive evidence the inference drawn by the Assessing Officer that those persons hail from Dabra and therefore they are benamidars of the appellant is a bais conclusion against the appellant. We are in agreement with the conclusion of the CIT(A) that to hold the persons as benamidar of the other person it needs to be established that the another person who is not infront of transaction is the ultimate beneficiary and enjoying the fruits of the transaction/venture and this fundamental requirement is missing in this case as there is no sufficient reliable evidence or material against the assessee which could show and establish that the persons in who's name investment have been made are benamidars and the assessee and none else is the ultimate beneficiary enjoying the fruits of the investment. In absence of bringing out any such facts on record the Assessing Officer proceeded to draw inference against the assessee and thus we have no hesitation to hold that the CIT (A) was correct in dismissing the same.
The Ld. Senior Counsel has placed reliance on the decision of Hon'ble High Court of Delhi in the case of CIT Vs Gian Gupta (Supra) where in it was held that when no evidence has been brought on record by the Assessing Officer that there is any investment and there is any transfer of cash than there is no any question of investment when the land has not been transferred and registered in the name of alleged assessee. In this case their Lordship held that the CIT (A) and the Tribunal have rightly deleted the addition on examination of the fact. In the present case also the presumption drawn by the Assessing Officer against the assessee was based merely on surmises and conjectures without having any reliable evidence on record to show that investment has been made by the assessee in the name of benamidars and without establishing the movement and transfer of cash from the assessee or on his behalf by any other person. Therefore ratio of this decision supports the conclusion of CIT(A).
The Ld. Senior Counsel has also placed reliance on the decision of I.T.A.T., Hyderabad in the case of DCIT Vs M. Aja Babu in ITA 1755,1756 & 1757/HYD/2012, dated 23/04/2014 wherein the Tribunal referring to the decisions of Hon'ble High Court of Delhi in the case of CIT vs Anil Bhalla (supra), CIT Vs Dinesh Jain (HUF) 211 Taxman 23 (Del) and CIT vs Jaipal
Aggarwal 212 Taxman 1 (Del), ITAT Mumbai in the case of ACIT vs. JP Morgan India Pvt. Ltd. 46 SOT 250 (Mumbai). It has been held that the addition made by the Assessing Officer based on loose papers which is not a conclusive evidence therefore such evidence is not sufficient for making addition. In this case the observations of the Tribunal read as follows: - "we have heard the arguments of both the parties, perused the record and have gone through the orders of the authorities below. In this case, the addition was made by the Assessing Officer based on the loose paper and the same, in our view, cannot be considered as conclusive evidence. As held by the CIT(A) in the impugned order "except relying, the nothings in the loose slips, no attempt has been made to corroborate the notings with independent evidence. The parties to the 'transaction particularly the vendor has not examined. In every transaction there is a circle concerning two parties. It is not known whether the vendor has disclosed the consideration as noted in the diary. Therefore, merely on the basis of presumption and some corroborated notings additions cannot be made." In our opinion, the deletion of addition by the CIT(A) is justified and no interference is called for in the order of the CIT(A). The following cases support the action of the CIT(A):
CIT Vs Anil Bhalla [2010] 322 ITR 191 (Del) - wherein held that the notings recorded on the loose sheet of paper do not represent any expenditure incurred by the assessee director and that the entries related to the company in as much as the assessee could explain from the books of the company that these projects were undertaken by it, and upheld the deletion of the impugned addition under s. 69C, findings arrived at by the Tribunal are pure findings of facts and the same do not wqrrant any interference.
ACIT Vs J. P. Morgan India (P) Ltd [2011 46 SOT 250 (Mum)
CIT Vs Dinesh Jain HUF [2012] 211 Taxman 23 (Delhi)
CIT Vs Jaipal Aggarwal [2013] 212 Taxman 1 (Delhi) - wherein it was held that Dumb documents seized, i.e. from which nothing could be clearly understood, cannot form a justified base for making additions to income of the assessee. 17.1 In view of the above discussion, we are of the view that the addition made by the Assessing Officer based on the loose paper, which is not a conclusive evidence and, therefore, the same is not sufficient to make the addition. In our opinion, no addition can be made on the basis of dumb documents/note book/loose slips in the absence of any other material to show that the assessee has made investments in land. Noting on the note book/diary/loose sheets are required to be supported/corroborated by other evidence and should also include the statement of a person who
admittedly is a party to the noting and statement from all the persons whose names there on the note book/loose slips and their statements to be recorded and then such statement undoubtedly should be confronted to the assessee and he has to be allowed to cross examine the parties. The vendor has not examined in this case. Therefore, we do not find any infirmity in the order of the CIT(A) in directing the Assessing Officer to delete the addition made on the basis of loose paper and the order of the CIT(A) is hereby upheld dismissing the grounds raised by the revenue onthis issue."
In the present case vendor/sellers has not been examined and there is not evidence, documents, admission or averment by the alleged persons that they were instrumental or used by the assessee for making investments in purchase of lands. Per contra, these persons have denied such transactions on affidavit and in their statements recorded by the lower authorities. At this juncture it is also relevant to take note of the ratio of the decision of Hon'ble Jurisdictional High Court of Madhya Pradesh in the case of Prakashchand Nahata Vs CIT, 301 ITR 134 MP. In the case of ACIT Vs Satyapal Wassan 295 ITR 352 (Jabalpur I.T.A.T.) as relied by the Ld. Senior Counsel where in it was held by the Coordinate Bench that the addition is not sustainable where paper not containing any details to indicate nature of transaction, period of transaction, persons involved or code for deciphering figures and assessee denying knowledge and filing affidavit to indicate transactions related to somebody else. It has been further held that document must be speaking document; no addition permissible on basis of dumb document which is also a situation in the present case where the Assessing Officer has relied on the loose sheets/papers without any other corroborative evidence or material against the assessee.
In the case of CIT Vs Anil Bhalla (Supra) it was held that when no independent material or evidence has been brought on record by the Assessing Officer to established that the noting/jottings recorded in the loose sheets or on the paper represented alleged unaccounted transaction, then the CIT (A) was right in accepting the explanation of the assesse. It was also held that the Tribunal was right in holding that loose papers do not represent any expenditure on investment incurred by the assessee then the findings of the Tribunal do not warrant any interference.
In the case of CIT Vs Girish Choudhary the Hon'ble Delhi High Court held that when there was no material on record to show on what basis the Assessing Officer had reached to the conclusion that the figure '48' was to be read as Rs. 48 Lakh, then the document recovered during the course of search was a
dumb document and led nowhere. The relevant observations and conclusion of their Lordship read as under: - "Hence, in the present case there is no material on record to show as to on what basis the Assessing Officer has reached at the conclusion that the figure "48" is to be read as Rs. 48 Lakhs. The apex court in Central Bureau of Investigation Vs. V. C. Shukla (1998) 3 SSC 410 has laid down that: -
"File containing loose sheets of papers are not book and hence entries therein are not admissible under section 34 of the Evidence Act, 1872." Similarly, the document annexure A-37 recovered during the course of search in the present case is a dumb document and lead us nowhere. Thus, the Tribunal rightly deleted the addition of Rs. 48 lakhs made by the Assessing Officer on account of undisclosed income on the basis of seized material.
The Ld. Senior Counsel has also placed reliance on the recent decision of Hon'ble Supreme Court in the case of Common Cause Vs Union of India (Supra). In the present case also the Assessing Officer without any basis proceeded to provide meaning to the word "M" and "Netaji" as these words denotes to the assessee but there is no basis for making such inference against the assessee as neither the Assessing Officer nor the Ld. CIT, DR controverter this fact that the assessee is popular within his private and political circle as "DADA" which means elder brother therefore meaning given by the Assessing Officer to above words for making inference against the assessee and for establishing direct or indirect nexus with the loose papers is baseless and without any supportive evidence which cannot be taken as reliable basis for drawing inference against the assessee. Furthermore, loose papers which were found and seized from the premises of other persons i.e. Shri Mukesh Sharma and written by Shri Sharma only then on the basis of such loose papers no valid inference can be taken or drawn against the assessee for making addition and fastening tax liability on the assessee. This conclusion gets strong support from the ratio of the above noted decisions.
In view of forgoing discussion we are of the view that in the present case the Assessing Officer proceeded to make addition on the basis of primary and other evidence which was in the form of loose papers found and seized from the premises of Shri Mukesh Sharma and was written by Shri Sharma and there was no evidence or material which could show any direct or indirect nexus with these lose papers with the assessee. The Assessing Officer could not also bring any reliable or substantial evidence against the assessee to established that the persons in whose name land was purchased were benamidars and the assessee
was the ultimate beneficiary enjoying the fruits of the purchased lands then the CIT (A) was right in dismissing the action of the Assessing Officer in this regard and we are unable to see any valid reason to interfere with the same. We may also point out that the Assessing Officer could not successfully establish that the amount used for making investment by other persons was actually belonging to the assessee and besides the payment shown in the registered purchase deeds there was also un recorded payments which was made by the assessee or on behalf of the assessee therefore no addition could have been made in the hands of assessee on the basis of loose sheets and the CIT(A) was right in allowing relief to the assessee. There is no valid reason before us to interfere with the impugned order on the conclusion drawn by the CIT (A) on the first issue.
“37………On the basis of forgoing discussion, we have no alternate but to hold that the Assessing Officer made additions on both the account without any basis and only on the basis of suspicion and doubts and the inferences drawn by him were also not based on the reliable evidence and material, therefore we inclined to hold that the conclusion drawn by the CIT(A) on this issue does not carry any ambiguity or perversity and there is no valid reason before us to interfere with the same. Accordingly, Ground No. 3 & 4 of the revenue are dismissed.” Ld. AR submitted that the case of present appeal is exactly same and the addition of Rs. 1 Crore made by Ld. AO hinges on the very same material, same facts, same evidences and same law. Therefore, the case is directly covered by the aforesaid order of ITAT, Indore Bench. Hence the same view as already held in the order must be adopted in the present appeal. According to Ld. AR, therefore, the addition made by Ld. AO and confirmed by the Ld. CIT(A), must be deleted.
Ld. DR, though supported the orders of lower authorities, could not controvert the submissions of Ld. AR.
We have considered rival submissions of both sides and perused the material held on record. We observe that the addition of Rs. 1 Crore has been made in the present case on the basis of same material, same facts, same evidences and same law as was there in ACIT Vs. Shri Narottam Mishra, Bhopal (supra) cited by Ld. AR. In fact, we also observe that ITAT, Indore Bench has also passed another order in the case of DCIT-1(1),
Bhopal Vs. Shri Neeraj Mandloi, New Delhi, ITA No. 680/Ind/2018, dated 28.07.2021, wherein the revenue made additions of Rs. 1.335 Crore and Rs. 0.875 Crore, aggregating to Rs. 2.21 Crore, on account of receipt of illegal gratification on the basis of very same material. Revenue inferred that Shri Neeraj Mandoli was holding the post of Commissioner which was denoted by “C”. We observe that in this case too, the assessee got relief in the first-appeal itself from Ld. CIT(A). Thereafter, the Revenue went in appeal to ITAT whereupon this Indore Bench of ITAT, Indore following its earlier decision in ACIT Vs. Shri Narottam Mishra, Bhopal (supra), dismissed the appeal of Revenue by holding as under:
“6.1 We find that in the case of Ashwin Kumar vs. ITO (1991) 39 ITD 183 (Del), the Tribunal held that "when a dumb document, like the present slip, is recovered and the revenue wants to make use of it, it is the duty of the revenue to collect necessary evidences which may provide acceptable narration to the various entries. The evidences collected should be such that any reasonable man would accept the hypothised advanced by the revenue, that the figure written on the right side of the slip represent incomes earned by the assessee. It was conceded by the Departmental Representative that no such evidence have brought out on record.
6.2 Hon'ble Supreme Court in the case of Dhakeshwari Cotton Mills Ltd V/s CIT 1954 261 ITR 775 held that "in making assessment u/s 23(3) of the Indian Income Tax Act, the ITO is not fractured by technical rules of evidence and fluctuations and he is entitled to act on material which may not accept an evidence in the court of law, but the it is not entitled to make and power comes and making assessment without reference to any evidence or any material delivered. There must be something more than more where suspicion to support the assessment u/s 23(3)". The rule of law on this subject has been fully and rightly stated by Hon'ble High Court in the case of Sree Shanmugar Mills Ltd v/s Commissioner of Income Tax, Punjab 1944 12 ITR 393. Similar view was also taken by Delhi Tribunal in the case of Bansal Strips V/s ACIT (supra) observing that "the A.O cannot first make certain conjectures and surmises and thereafter deemed provisions based on such conjectures and surmises". In the absence of material as to the nature of ownership of the transaction, undisclosed income cannot be assessed in the hands of the assessee summarily by arithmetically total various figures dotting down on the loose document. Any other seized for
the purpose of exercising to deemed provisions dumb documents order documents with no certainty for no evidential value".
6.3 Hon'ble High Court of Delhi in the case of CIT V/s Anil Bhalla (2010) 322 ITR 191 (Del) also held that "when no independent material or evidence has been brought on record by the A.O to establish that the notices of jottings of loose sheets or on the paper written on accounted transactions cannot be made". Hon'ble High Court of Gujarat in the case of CITV/s Maulikumar K Shah 2008 307 ITR 137 has held that "the additions made by the A.O on the basis of seized paper alone without any corroborative evidence could not be sustained".
6.4 Further, we find that the same issue has been dealt with by ITAT, Indore in the case of ACIT vs. Narottam Mishra (2018) 32 ITJ 510 (Trib.-Indore) wherein on the identical facts and circumstances, the Tribunal deleted the addition made on account of money allegedly received from two companies. The relevant portion of the order dated 30.11.2017 of the Tribunal is reproduced hereunder:
6.5 In view of the facts/circumstances as narrated above and also in the light of the aforesaid judicial pronouncements, we are of the view that in the present case, the Assessing Officer proceeded to make addition on the basis of primary and other evidence which was in the form of loose papers found and seized from the premises of Shri Mukesh Sharma and was written by Shri Sharma and there was no evidence or material which could show any direct or indirect nexus with these lose papers with the assessee. It is also clear from the perusal of the seized documents that the "C" alphabet is not there in the seized documents but the Assessing Officer simply presumed that the missing "C" is nothing but its Commissioner, Indore Nagar Nigam (Assessee) and also presumed that the assessee received the money. Therefore, without bringing any corroborative evidence on record, the findings of the Assessing Officer solely based on assumptions and presumptions are not legally admissible in law in view of the ratio laid down in the aforesaid judicial pronouncements. The Assessing Officer is bound to prove the allegation with the positive and concrete evidence but in this case, there is no positive and concrete evidence with the Assessing Officer to prove the receipt of money from the said two companies by the assessee. Thus, the ld. CIT(A) was right in dismissing the action of the Assessing Officer in this regard and we do not find any reason to interfere with the same. We confirm the findings recorded by the ld. CIT(A).”
Thus, we observe that the two orders of ITAT, Indore Bench, as discussed above, are against the revenue and in favour of assessee. Now,
since the addition of Rs. 1 Crore made in present appeal has also emanated from the same search-proceeding, same material, same evidences, same facts and same law, we follow the existing view taken by the ITAT. Accordingly, we are inclined to hold that the addition of Rs. 1 Crore made in the case of present assessee is also not sustainable. We, therefore, delete the addition and allow Ground No. 3 and 4 of the assessee.
Ground No. 5:
This a general ground and does not require any specific adjudication by us.
In the result, this appeal of assessee is partly allowed.
Order pronounced as per Rule 34 of I.T.A.T. Rules 1963 on 24.08.2022.
Sd/- Sd/- (MADHUMITA ROY) (B.M. BIYANI)
Judicial Member Accountant Member
Indore, �दनांक / Dated : 24.08.2022 Patel/ Sr. P.S. Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order UE COPY Sr. Private Secretary Income Tax Appellate Tribunal Indore Bench, Indore
Date of taking dictation 2. Date of typing & draft order placed before the Dictating Member 3. Date on which the approved draft comes to the Sr. P.S./P.S. 4. Date on which the fair order is placed before the Dictating Member for pronouncement 5. Date on which the file goes to the Bench Clerk 6. Date on which the file goes to the Head Clerk 7. Date on which the file goes to the Assistant Registrar for signature on the order 8. Date of dispatch of the Order