Income Tax Appellate Tribunal - Hyderabad
Shri Gyan Kumar Agarwal,, Hyderabad vs Department Of Income Tax on 9 January, 2013
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCH 'B', HYDERABAD
BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER
AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER
IT(SS)A No.3/Hyd/2013 : Block Period from 1997-98
to 2002-03
The Asst. Commissioner of V/s Shri Gyan Kumar Agarwal,
Income-tax Circle 2(2), Hyderabad
Hyderabad
( PAN ABGPA 5780 L)
(Appellant) (Respondent)
Cross Objection No.25/Hyd/2013
(IT(SS)A No.3/Hyd/2013) : Block Period from 1997-98
to 2002-03
Shri Gyan Kumar Agarwal, V/s The Asst. Commissioner of Income-
Hyderabad tax Circle 2(2), Hyderabad
( PAN ABGPA 5780 L )
(Cross Objector) (Respondent)
Assessee by : Shri Syed Jameeluddin
Department by : Shri M.B.Reddy, CIT DR
Date of Hearing 20.06.2013
Date of Pronouncement 28.06.2013
ORDER
Per Chandra Poojari, Accountant Member:
This appeal by the Revenue and cross-objection by the assessee are directed against the order of the Commissioner of Income- tax(Appeals) III, Hyderabad dated 9th January, 2013 for the block period from 1997-98 to 2002-03. Since common issues are involved, these matters are being disposed of with this common order for the sake of convenience.
2IT(SS)A No.3/Hyd/2013 & CO 25/H/13 Shri Gyan Kumar Agarwal, Hyderabad
2. At the time of hearing, the learned counsel for the assessee did not press for the Cross-Objection, and has filed a letter dated 19.6.2013 in that behalf. Cross Objection is accordingly dismissed.
Revenue's Appeal:
IT(SS)A No.3/Hyd/2013
3. Effective grounds of the Revenue in its appeal are as follows-
"1. The order of CIT(A) is erroneous on facts and in law.
2. The CIT(A) erred in law in not appreciating that u/s. 132(4A), the onus is on the assessee to rebut the evidence found in his possession and the same cannot be shifted to the department.
3. The CIT(A) erred in law in not appreciating the fact that the assessee did not utilize the opportunity provided in set aside proceedings persisted with den9al but did not produce any cogent proof for his claim.
4. The CIT(A) erred in law and on facts in granting relief to the assessee though the assessee did not discharge the onus of rebutting the evidence on record.
5. The CIT(A) erred on facts and in law in not considering the evidence on totality because certain other registers seized during the search offer admitted proof that the family members of the assessee are engaged in money lending business.
6. The CIT(A) erred on facts and in law in ignoring the evidence on record in the form of register containing money lending activity and also in holding that the evidence is a dumb record.
7......."
4. Facts of the case in brief are that the assessment in this case was originally framed under S.158BC read with S.143(3) of the Act, on 31.1.2005 as follows-
1. Unexplained jewellery (as admitted) Rs. 2,66,045
2. Unaccounted cash(as admitted) Rs. 2,38,700
3. Unexplained investment in shares In M/s. GVK Leasing Finance Co.
3
IT(SS)A No.3/Hyd/2013 & CO 25/H/13
Shri Gyan Kumar Agarwal, Hyderabad
(as against Rs.2,25,900 admitted
by the assessee) Rs. 14,42,000
5.Unexplaiend money lending Rs. 2,55,50,000
_______________
TOTAL Rs. 2,94,96,745
________________
5. When the above assessment, particularly in relation to income on account of unexplained money lending of Rs.2,55,50,000 was ultimately subject matter of appeal before the Tribunal, in IT(SS)A No.22/Hyd/2008, the Tribunal vide para 18 of its order dated 18th February, 2011, held as follows-
"18. But the issue before us now remains is that whether the seized material A/GAR/05 can be the basis for addition of Rs.2,55,50,000/- As seen from the above seized materials, these are just hand written loose documents. The Department got verified the handwriting of the seized material A/GAR/05 from the Govt. Examiner of Questioned Documents, Directorate of Forensic Science, Govt. of India who had given report that on comparison of the questioned documents and specimen writings of the assessee and his family members the authorship of the questioned document does not tally with the seized material A/GAR/05. But this report of the handwriting experts is not binding on the Department. It is only circumstantial evidence. There is no necessity to the Department to prove the authorship of this document. The other plea of the assessee is that the documents are planted one and it cannot be relied for the purpose of assessment. Though the assessee refused that the documents are not belong to him, the burden is cast upon the assessee to prove conclusively that it does not belong to the assessee. There is no presumption in law that the assessing officer is supposed to discharge tax liability by direct evidence only and thereupon the undisclosed income beyond doubt. The undisclosed income of the assessee is to be computed by the assessing officer on the basis of available record. In many a time, it is very important to have direct evidence or conclusive evidence to prove to determine the undisclosed income. When the assessee gives an evasive reply to the assessing officer, he has no choice but to take estimation of the income. The only thing is it should be reasonable on the basis of material available on record. It should not be based on conjunctures and surmises. As of now material considered by the assessing officer for making the addition is only the seized material marked as A/GAR/05 which is a notebook containing the details of day to day ledger account of various persons to whom the money was advanced. In view of this, we have to consider the seized material A/GAR/05 to see whether it is enough to make addition. In our opinion, this document is only note book/loose slips. We have to look into the statement recorded u/s 132(4) or 132(4A) of the IT Act. The seized material A/GAR/05 found during the course of search and the statement recorded is some piece of evidence to make an addition. The assessing officer has to establish the link between the seized material A/GAR/05 and with other books of accounts of the assessee. It cannot be considered alone as conclusive evidence. The word 'may be presumed' appear in section 132(4A) gives an option to the 4 IT(SS)A No.3/Hyd/2013 & CO 25/H/13 Shri Gyan Kumar Agarwal, Hyderabad authorities concerned to presume the things. But it is rebuttable and it does not give a definite authority and conclusive evidence. The assessee has every right to rebut the same by producing the same in support of his claim. The entire case depends on the rule of evidence. The assessee has every right to shift the burden of proof. There is no conclusive presumption. In the present case, assessee as well as the assessee's son and also assessee's brother Shri S.K. Agarwal categorically stated in every stage of examination and statement recorded u/s 132(1) or 132 that the seized material A/GAR/05 is not at all belonged to them. In spite of this the assessing officer proceeded to conclude that these seized materials are conclusively belonged to the assessee. Leave alone the issue relating to authorship of the document seized and the findings of the GEQD, the Department should find out and establish the nexus of these seized materials to the assessee's business while concluding block assessment The assessing officer shall be specific about the nature of nexus of the seized material to the business of the assessee. The allegation of the Department is the seized material that reflected money lending business of the assessee. But they are not able to unearth any background with regard to the money lending business like loan agreement, promissory notes, security details, bank account receipts vouchers or any other corroborative evidence. Without any of these, the department has taken a view that the assessee is carrying on the money lending business. More so, there are so many names of the persons whose addresses are not at all traceable. The department not traced and examined any of them. There is no information from any party that they have taken loan from the assessee. There is no evidence as to whether they repaid the loans towards the principal amount and interest. The department cannot draw inference on the basis of suspicion, conjuncture and surmise. Suspicion, however strong cannot take place of material in support of the findings of the assessing officer. The assessing officer should act in a judicial manner, proceed with judicial spirit and should come to a judicial conclusion. The assessing officer is required to act fairly as a reasonable person and not arbitrarily and capriciously. Assessment made should have adequate material and it should stand on its own legs. The assessing officer without examining any party, who has taken the loan from the assessee, cannot come to the conclusion that the assessee lends money. The basis for addition is only note book/loose slips. These note book/loose slips are unsigned documents. The assessing officer has not established nexus between the note book/loose slips and business of the assessee. There is no narration regarding the address of the parties, the exact amount of loan, period of advance, rate of interest and instalments due. Also there is no evidence for repayment of money towards the loan. There is no valid seized material to come to the conclusion that the assessee has actually made an advance of that amount i.e. Rs.2,55,50,000/- . The note book/loose slips marked A/GAR/05 found during the course of search is a dumb document having no evidentiary value, no addition can be made in the absence of corroborative material. If there is circumstantial evidence in the form of promissory notes, loan agreement and address of the parties or bank entries, the addition is to be made on that basis to the extent of material available. The assessee is not expected to explain the loose papers found as there is no evidence other than note book/loose slips carrying on money lending business of the assessee. The assessing officer has failed to prove the money lending business carried on by the assessee on the basis of seized material A/GAR/05. 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 carried on money lending business. Noting on the note book/diary/loose sheets are required to be supported/ corroborated by other evidence and are 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 5 IT(SS)A No.3/Hyd/2013 & CO 25/H/13 Shri Gyan Kumar Agarwal, Hyderabad 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. In the present case, undoubtedly no statement from the parties whose names found in the note book/loose slips has been recorded and assessee such there is no question of cross examination of them and entire addition in the hands of the assessee on the basis of uncorroborated writings in the loose papers found during the course of search is not possible. The evidence on record is not sufficient to support the revenue's case that huge money lending business has been carried on by the assessee outside the business of the assessee. This is the block assessment and we are concerned only with the undisclosed income and we have to consider only material and evidence detected as a result of search. It means that if an examination of the material already on record before search or if as a result of some external information or some other sources other than a search, it is found that some income had escaped assessment and then it is open for the Assessing Officer to resort to a regular assessment including reopening of a completed assessment if so advised. But he cannot drag these items into the block assessment proceedings envisaged under Chapter XIV-B of the I.T. Act. In our opinion evidence available with the Assessing Officer as a result of search is to be used for the purpose of determining the undisclosed income of the block period. The evidence, if any, relied on by the Assessing Officer for the purpose of determining the undisclosed income of the block assessment is to be put before the assessee for his comments before completing assessment. More so, if the Assessing Officer wants to rely on the statement of any third party the same is required to be furnished to the assessee and if the assessee wants to cross examine any of the parties whose statement was relied on by the Assessing Officer the same is to be provided to the assessee. In the present case the assessee is having grievance for not providing the opportunity of cross examining the parties whose statements were relied on by the Assessing Officer while completing the assessment. The circumstances surrounding the case are not strong enough to justify the rejection of assessee's plea asking the opportunity of cross examination. In view of this, we set aside the block assessment order and remand back the matter to the file of the assessing officer. We direct the Assessing Officer to give an opportunity of cross examination of the parties as required by the assessee and thereafter if there is any sufficient evidence other than the unsubstantiated note book/loose slips marked as document A/GAR/5 or if this document (viz., A/GAR/05) substantiated by any other evidence to establish that the assessee is having undisclosed income, then the Assessing Officer shall complete the assessment in accordance with law determining the undisclosed income covering this block period in addition to the other undisclosed income uncontested before us. It is needless to say that the evidence to be considered by the assessing officer for this block assessment is all the evidence on record found as result of search or requisition of books of account or other documents and such other materials or information as are available with the Assessing Officer and relatable to such evidence. "
6. Consequent to the above order of the Tribunal, the Assessing Officer framed the assessment under S.158BC read with S.143(3) and 254 of the I.T. Act, vide order dated 22.12.2011, whereby he determined the total income of the assessee at Rs.2,74,96,700 as follows-
6IT(SS)A No.3/Hyd/2013 & CO 25/H/13 Shri Gyan Kumar Agarwal, Hyderabad "Total undisclosed income determined as per order giving effect to the order of Hon'ble ITAT dt.21.6.2006 Rs.19,465,700 Add: Unexplained investment in money lending business as discussed above Rs.2,55,50,000 Total undisclosed income Rs.2,74,96,700
7. Against the addition of Rs.2,55,50,000 made by the Assessing Officer in the above assessment , assessee preferred appeal before the CIT(A). The CIT(A) deleted the said addition, vide para 10 of the impugned order, which reads as follows-
"3.10 ....There is no doubt about the fact that the honourable ITAT has clearly held that the two documents in question are only dumb documents and cannot be relied upon to make any addition. It has been held that the Assessing Officer has to collect other evidence to prove that unaccounted money lending business was being carried out by the appellant. In the absence of any other loan notes, pro-notes or other relevant contracts which substantiate the entries in the concern seized documents, no presumption as to the unaccounted business and unaccounted income earned can be made. It has been categorically held by the ITAT that no addition is to be made only on the basis of the seized documents. In find from the assessment order, the relevant portion of which has been quoted above that the Assessing Officer has only relied upon the earlier order to make the additions in question. In fact the direction of the honourable ITAT had not been complied with. It is very clear therefore that absolutely no addition is call for based on the documents already held to be unreliable by the honourable ITAT. Therefore, I have no option but to delete the addition in question. The Assessing Officer is directed accordingly."
8. Revenue is in appeal against the above order of the CIT(A).
9. We heard both the parties and perused the material on record. In the earlier order, the Tribunal clearly observed that the two documents on which reliance was placed in the earlier proceedings were only dumb documents and cannot be relied upon to make any addition. The Assessing Officer was directed to make any addition, if he can gather any evidence to substantiate the entries in the seized material like note book and loose slips, which otherwise are only isolated and dumb documents, and that too after giving the assessee opportunity of cross examine the parties. If there was no sufficient evidence, other than the seized material marked as 'A/GAR/5' or if those documents are unsubstantiated by any other documents to establish that the assessee is 7 IT(SS)A No.3/Hyd/2013 & CO 25/H/13 Shri Gyan Kumar Agarwal, Hyderabad having undisclosed income, it was held that no addition can be made. Being so, as held by the CIT(A) in the impugned order, the Assessing Officer cannot, once again, rely solely on the very same seized documents marked as 'A/GAR/5' and repeat the addition set aside by the Tribunal. Until and unless the Assessing Officer is able to establish any undisclosed income by gathering any material relevant to the seized material, he is precluded from relying on the loose slips and note book, etc. alone for making the addition in question. While passing the consequential order, the Assessing Officer wholly relied on the unsubstantiated seized material alone, and thereby did not strictly comply with the directions of the Tribunal. The CIT(A) in the circumstances of the case, taking due cognizance of the specific directions of the Tribunal, has correctly deleted the addition made by the Assessing Officer.
10. It is pertinent to mention at this juncture that the income-tax authorities are required to exercise their powers in accordance with law, as per the power given to them in specific sections. If the powers conferred on a particular authority are exercised by another authority without mandate of law, it would create chaos in the administration of law and hierarchy of administration would mean nothing. Judgment of a higher forum cannot be substituted by the decisions of the lower authorities. Judicial discipline requires that there cannot be any amount of disregard to the superior authority in the hierarchy by the Assessing Officer. When once the Tribunal decides an issue in one way, the only course available to the Assessing Officer is to follow the order of the Tribunal in true spirits, and it is not permissible for the Assessing Officer to take a different view, or to sit in judgment over the order of the Tribunal by interpreting the same in the manner he wanted. Thus, the Assessing Officer is duty bound to strictly adhere to the directions of the Tribunal while re-deciding the issues in pursuance of the orders of the Tribunal. At this juncture, it is apt to refer to the decision of the 8 IT(SS)A No.3/Hyd/2013 & CO 25/H/13 Shri Gyan Kumar Agarwal, Hyderabad jurisdictional High Court in the case of State of Andhra Pradesh V/s. CTO and Another (169 ITR 564), wherein it has been held as follows-
"The Tribunal's functioning within the jurisdiction of a particular High Court in respect of whom the High Court has the power of superintendence under article 227 are bound to follow the decisions of the High Court unless, on an appeal to the Supreme Court, the operation of the judgment is suspended. It is not permissible for the authorities and the Tribunals to ignore the decisions of the High Court or to refuse to follow the decisions of the High Court on the pretext that an appeal has been filed in the Supreme Court which is pending or that steps are being taken to file an appeal. If any authority or the Tribunal refuses to follow any decision of the High Court on the above grounds, it would be clearly guilty of committing contempt of the High Court and is liable to be proceeded against."
At this juncture, it is also pertinent to mention the observations of the High Court, by placing reliance on the judgment of the Bombay High Court in the case of Subramanian ITO V/s Siemens India Ltd. (156 ITR
11), which are as follows-
"Reference may also be invited to the decision of the Bombay High Court in Subramanian, ITO v. Siemens India Ltd. [1985] 156 ITR
11. The question that arose for consideration in this case is whether the Income-tax Officer is bound by the decision of a single Judge or a Division Bench of the Court within whose jurisdiction he is operating even if an appeal has been preferred against such decision and is pending. The following observations of the Bombay High Court may be extracted :
"So far as the legal position is concerned, the ITO would be bound by a decision of the Supreme Court as also by a decision of the High Court of the State within whose jurisdiction he is (functioning), irrespective of the pendency of any appeal or special leave application against that judgment. He would equally be bound by a decision of another High Court on the point, because not to follow that decision would be to cause grave prejudice to the assessee. Where there is a conflict between different High Courts, he must follow the decision of the High Court within whose jurisdiction he is (functioning), but if the conflict is between decisions of other High Courts, he must take the view which is in favour of the assessee and not against him. Similarly, if the Income-tax Appellate Tribunal has decided a point in favour of the assessee, he cannot ignore that decision and take a contrary view, because that would equally prejudice the assessee." (Emphasis supplied) 9 IT(SS)A No.3/Hyd/2013 & CO 25/H/13 Shri Gyan Kumar Agarwal, Hyderabad The CIT(A), having found that the Assessing Officer in the present case, has not strictly complied with the directions of the Tribunal, and has, without gathering any corroborative evidence, repeated the additions based on the very same material which the Tribunal held to be dumb documents and hence not reliable, has deleted the same. We find no infirmity in the action of the CIT(A) in this behalf.
11. In the light of the above discussion, we uphold the impugned order of the CIT(A) and reject the grounds of the Revenue in this appeal.
12. In the result, Revenue's appeal is dismissed.
13. To sum up, appeal of the Revenue as well as cross objection of the assessee are dismissed.
Order pronounced in the Court on 28.06.2013
Sd/- Sd/-
(Asha Vijayaraghavan) (Chandra Poojari)
Judicial Member Accountant Member.
Dt/- 28th June, 2013
Copy forwarded to:
1. Shri Gyan Kumar Agarwal, D.No.15-9-480, Mahaboobgunj, Hyderabad
2. Asstt. Commissioner of Income-tax Circle 2(2), Hyderabad 3 Commissioner of Income-tax(Appeals) III Hyderabad
4. Commissioner of Income-tax II Hyderabad
5. Departmental Representative, ITAT, Hyderabad B.V.S.