SHRI SUSHEEL SABHARWAL,JALANDHAR vs. ASSISTANT COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-2, JALANDHAR

Our submission: In this regard it is submitted as follows:-

1. 1. Assessee sold the concerned property for the total consideration of Rs.1,10,00,000/- where assessee’s share being 1/2nd of the total share amounting to Rs.55,00,000/- which is clearly visible from the registered sale deed dated 09.08.2012. Thus assessee cannot be called upon to explain the rough calculations of diary when the registered sale deed clearly shows that the same was registered for Rs.1,10,00,000/-.

2. That from the jottings in the seized diary Ld. AO has inferred that that assessee received Rs.65,50,000/- (being his share) over and above the disclosed consideration but nothing has been brought on record to show that purchaser made any payment over and above the disclosed amount. Also nothing has been brought on record from the witnesses end that assessee received any on money. Addition is purely made on diary notings and no authenticated document/deed/agreement is brought on record to prove that assessee received on money. Moreover the Sale Deed is duly registered with Sub Registrar, Jalandhar-1 and Ld. AO duly accepted the Registered Sale Deed dated 09.08.2012 which clearly mentions that assessee along with other co-owner sold property for Rs.1,10,00,000/- and did not raise any doubt on the sale deed. Also Ld. AO wholly and solely relied on diary noting being reproduced on page 2 of assessment order.

3. That the present case is not the case where circle rate or the value as per stamp registration authorities of the impugned property is more than what has been disclosed.

4. That in the impugned diary notting there is name of Nitin Sabharwal also but he had nothing to do the property as the property belongs to Rakesh Sabharwal and Susheel Sabharwal and Ld. AO, on assumption and presumption basis, on page 3 of the Assessment Order states that Nitin Sabharwal may have been given gift of Rs.10,00,000/- by both Susheel Sabharwal and Rakesh Sabharwal and no evidence have been brought on record in this regard.

5. That it is pertinent to mention that Ld. AO in his initial questionnaire states that “Amount of Rs.2,41,000/- (SK, RK, & Nitin)” and in the subsequent questionnaire sates that “this amount is Rs.2,41,00,000/-.” Thus Ld. AO himself is not clear about the contents of the diary whereas ultimately made addition by relying on said diary noting. Both the questionnaires are enclosed herewith 6. That the figures relates to some expense incurred by the assessee during the period October 2009 (evident from the diary itself where date is OCTOBER 2009) which was incurred when the renovation for the same was going on. These alleged figures are written under the head ‘434 Ex’ which makes it pretty clear that they relates to expense and not to any transaction relating to ‘on money’ receipts. Further assessee incurred expense in the FY 2008-09 and FY 2009-10 and claimed the same as cost of improvement in his return of income. This fact further substantiates the claim of 13 & 683/Asr/2019 Susheel & Rakesh Sabharwal v. ACIT assessee as it these expense relates to previous years and not the impugned assessment year.

8. That the addition made by Ld. AO is purely based on diary notings. Ld. AO on page 3 of Assessment Order states that “………. the description on the page [1/2 + 25 {CH} + 15 +45 +30 {CH}] clearly shows that the actual consideration was Rs.2,41,00,000/- ……………” The diary jottings have not been corroborated from any other findings. The jottings in the diary by no stretch of imagination can be treated as conclusive proof of on money transaction by the assessee. Hence, in the background, presumption u/s 292C of the Act cannot be taken against the assessee.

Reliance is further placed on the following decisions:

2. CIT v/s Sh. Praveen Juneja, Delhi High Court in ITA 57/2017 dated 14.07.2017 in which its was held as under:

“Search and Seizure—Addition—Search took place in premises of Assessee pursuant to which certain documents were seize—AO based on document made addition of amount in return income of assessee—Document on basis of which addition was made was piece of paper and document was hand written paper purportedly containing details of house construction expenses—Since said document had been seized from residence of Assessee, CIT (A) drew presumption under Section 292C of the Act was that it belonged to assessee—Further, CIT(A) proceeded to hold that amount constituted unexplained income of Assessee since Assessee had not submitted any evidence like confirmation letter or any other document to show that expenditure related to any project of aforementioned company—CIT(A) upheld addition made by AO—ITAT noted

14 & 683/Asr/2019 Susheel & Rakesh Sabharwal v. ACIT that document "did not indicate if it pertained to assessee nor address location of property was mentioned therein nor such property had been located by AO during assessment proceedings—AO had also not brought on record any forensic evidence to prove handwriting of loose paper relied upon by him to make addition, which was exclusively made on basis of suspicion and guesswork—Held, addition to returned income of Assessee was made based on surmises and conjectures and that too on basis of single document without making any further enquiry—No attempt was made by AO to find out if in fact it constituted construction expenses of any project of aforementioned company of which Assessee was director—Order of ITAT suffered from no legal infirmity and did not give rise to any substantial question of law—Assessee’s appeal dismissed.”

3. Hon’ble Delhi High Court in the case of Girish Chaudhary 163 Taxman 608 in which it was held as under:

Search and seizure—Block assessment—Undisclosed income—Before an addition of an undisclosed income can be made, the AO has to bring on record the material found as a result of search of show that there is an undisclosed income—AO treated Rs. 48 lakhs as assessee’s undisclosed income on the basis of seizure of a document which showed certain unexplained entries totalling ‘48’—Not justified—There is no material on record to show as to an what basis the AO has reached the conclusion that the figure ‘48’ is to be read as Rs. 48 lacs—Said document is a dumb document and leads to now here—Addition rightly deleted by the Tribunal—There is no error in the order of the Tribunal and it does not give rise to a question of law, much less a substantial question of law

Search and seizure—Block assessment—Computation of undisclosed income— Addition on the basis of uncorroborated chit of paper—AO has deciphered the figures on the paper by adding ‘00’, ‘000’ or ‘0000’ at his whim and caprice based on presumption and conjectures without bringing any corroborative material evidence in support for adding the zeros—Not justified—He has not examined the assessee or the author of the said paper—AO has not brought any material on record to show that the figures related to sale or purchase of property—He made no enquiry from the purchaser—Said paper does not fall within the definition ‘books of account’ or document—Paper seized had no evidentiary value and it does not prove that consideration was understated—Same cannot form the basis for assessing the undisclosed income

Addition on account of Cost of Improvement Sir, it is further submitted that Ld. AO has disallowed the cost of improvement expense claimed by the assessee and restricted the same to the extent of Rs.12,77,786/- being lower of the cost of improvement claimed by assessee or his brother in the FY 2008-09 and 2009-10 respectively. In this regard it is submitted as under:

15 & 683/Asr/2019 Susheel & Rakesh Sabharwal v. ACIT 1. That in this regard no incriminating material is found during search and the return was already processed u/s 143(1) of the Act on 23.06.2014 and the same is reflected/stated on page 1 of the Assessment Order and date of search is 08.09.2016. Thus, there was no incriminating material, much less, in respect of the impugned addition and hence impugned addition has been made in the absence of any incriminating material unearthed from the search, which is not permissible in law and is supported by the following judicial decision: -

COMMISSIONER OF INCOME TAX vs. KABUL CHAWLA HIGH COURT OF DELHI (2016) 380 ITR 0573 (Delhi)

Search and seizure—New scheme of assessment in search cases—Search was carried out u/s 132 on a leading real estate developer operating all over India and some of its group companies—Search was also carried out in the premises of the assessee— Pursuant to the search a notice u/s 153A(1) was issued to assessee and thereafter he filed returns—As on the date of the search, no assessment proceedings were pending for relevant AYs and for said AYs, assessments was already made u/s 143(1), assessee filed an application u/s 154 seeking rectification of the assessments on the ground that the accumulated profits of the companies paying the dividend were less than the amount of loan or advance given by them to the recipient companies—AO declined to rectify the assessments—CIT also held that addition need not be restricted only to the seized material—ITAT on appeal however deleted addition on grounds that the additions made for relevant AY’s u/s 2(22)(e) were not based on any incriminating material found during search operation and same was not sustainable in law—Issue was whether the additions made to the income of the assessee for the said AYs u/s 2(22)(e) was not sustainable because no incriminating material concerning such additions were found during the course of search and further no assessments for such years were pending on the date of search—Held, present appeals concerned AYs, 2002-03, 2005-06 and 2006- 07—On the date of the search the said assessments already stood completed—Since no incriminating material was unearthed during the search, no additions could have been made to the income already assessed—Question framed by the Court was answered in favour of the assessee and against the Revenue—Revenue’s appeal dismissed

Smt. Sanjana Mittal Vs. DCIT wherein the jurisdictional bench of Hon’ble ITAT, Amritsar held as under: “…….no incriminating material has been found, no assessment proceedings were pending on the date of search proceedings, therefore, it was held by the bench that in a case, where no incriminating material is found during course of search proceedings and the assessment proceedings remain un-abated as on the said date, no addition cane be made validly in the hands of assessee….”

16 & 683/Asr/2019 Susheel & Rakesh Sabharwal v. ACIT 4. That assessee has provided the details of expenses incurred on the improvement of the property sold and the same are substantiated by the withdrawals made from the bank account.

9. We have heard the rival contentions, perused the material available on record and the case laws cited at bar. Admittedly, in the present case there was rough loose paper of diary containing scattered jotting of expenses, seized from the premises of the appellant, during the course of search u/s 132(4) of the act. The AO being not satisfied with the submission of the Capital Gains on sale of property by restricting cost of improvement at Rs. 12 lacs. The Ld. CIT (A) has confirmed the said addition of Rs 74,57,194/- and Rs 60,07,194/- in the hands Rakesh Sabharwal and Sushil Sabharwal respectively besides cost of improvement of Rs. 12, 86,776/- in each hand by observing and interpreting coding and decoding of rough jotting as ‘RK’ stands for Rakesh Sabharwal and ‘SK’ stands for Sushil Sabharwal and doubted the real transaction as per registered deed as if in Indian style and other figures of rough papers as “On money” transaction in international style. However, no observation has been made as regards to the rough jotted figure mentioned 10 against Mr. Nitin and 115 against each RK and SK, making it to 240 and not 241 figure and thereafter interpreting same figures by the lower authorities in their own way presuming as international style to crores without bringing on record, the required corroborative documentary evidences. Thus, neither the AO nor the CIT(A) could establish the factual nexus of receipt of alleged disputed on money decoded by way of bringing relevant corroborative documentary evidences to establish the veracity of the receipt of “On money” if any and improvement cost qua the loose papers viz -a- viz rough diary allegedly seized, during the search from the assessee’s premises. situated at 434, New Jawahar Nagar, Jalandhar was sold for the total consideration of Rs.1,10,00,000/- on 09.08.2012. It is admitted fact on record that this property was inherited by the assessee along with brother.

Thus, the share of assessee and his brother @ 50% each, stood computed at Rs.55,00,000/-. The Ld. AR contended that the assessee has duly reflected the said income under the head ‘Capital Gain’ income in his ‘Return of Income’ for the year under consideration.

Since, the diary jottings have not been corroborated from any relevant material documentary evidence and hence, the jottings in the diary by no stretch of imagination can be accepted as an evidence or conclusive proof of ‘on money’ transaction by the assessee for the purpose of presumption u/s 292C of the Act against the assessee.

34 of the Evidence Act, 1872."

21 & 683/Asr/2019 Susheel & Rakesh Sabharwal v. ACIT to assessee—Further, CIT(A) proceeded to hold that amount constituted unexplained income of Assessee since Assessee had not submitted any evidence like confirmation letter or any other document to show that expenditure related to any project of aforementioned company—CIT(A) upheld addition made by AO—ITAT noted that document "did not indicate if it pertained to assessee nor address location of property was mentioned therein nor such property had been located by AO during assessment proceedings—AO had also not brought on record any forensic evidence to prove handwriting of loose paper relied upon by him to make addition, which was exclusively made on basis of suspicion and guesswork—Held, addition to returned income of Assessee was made based on surmises and conjectures and that too on basis of single document without making any further enquiry—No attempt was made by AO to find out if in fact it constituted construction expenses of any project of aforementioned company of which Assessee was director—Order of ITAT suffered from no legal infirmity and did not give rise to any substantial question of law—Assessee’s appeal dismissed.”

“Search and seizure—Block assessment—Computation of undisclosed income—Addition on the basis of uncorroborated chit of paper—AO has deciphered the figures on the paper by adding ‘00’, ‘000’ or ‘0000’ at his whim and caprice based on presumption and conjectures without bringing any corroborative material evidence in support for adding the zeros—Not justified—He has not examined the assessee or the author of the said paper—AO has not brought any material on record to show that the figures related to sale or purchase of property—He made no enquiry from the purchaser—Said paper does not fall within the definition ‘books of account’ or document—Paper seized had no evidentiary value and it does not prove that consideration was understated—Same cannot form the basis for assessing the undisclosed income.” uncorroborated rough noting of paper/diary. The Ld. CIT(A) has deciphered the figures on the paper by decoding in the form of Indian style and international style at his whim and caprice based on presumption and conjectures without bringing any corroborative material evidence in support for such assumption of the decoded figures is not justified. Further, the AO had made no enquiry from the purchaser on the said rough noting of the paper of diary which does not fall within the definition of ‘books of account’ or document. Even if, a rough diary paper seized without being corroborated with relevant documentary evidence to the effect of understatement of the sale consideration had no evidentiary value and it would not prove that consideration was understated, According, same cannot form the basis for presumption u/s 292C of the act for the purpose of assessing the undisclosed income of the appellant assessee. The Ld. CIT (DR) has not filed any judgement in rebuttal to the contentions raised by the Ld. Counsel for the assessee.

2013-14.

Order pronounced in the open court on 16.09.2022.