Income Tax Appellate Tribunal - Indore
Dcit Central (I), Bhopal vs M/S. K L Sharma & Sunita Maheshwari, ... on 11 February, 2022
आयकर अपील य अ धकरण, इंदौर यायपीठ, इंदौर IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI MAHAVIR PRASAD, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER VIRTUAL HEARING IT(SS)A No.149 to 151/Ind/2019 Assessment Year: 2010-11 to 2012-13 ACIT, Central-1 बनाम/ M/s. K.L. Sharma & Sunita Bhopal Maheshwari Vs. Bhopal (Appellant) (Respondent ) P.A. No.AAEFK2938D IT(SS)A Nos.44 to 47/Ind/2020 Assessment Year: 2009-10, 2010-11,2012-13 & 2013-14 ACIT, Central-1 बनाम/ Suresh Kumar Maheshwari Bhopal Bhopal Vs. (Appellant) (Respondent ) P.A. No.ABDPM0920D IT(SS)A Nos.22/Ind/2020 Assessment Year: 2009-10, Smt. Sunita Maheshwari बनाम/ DCIT, Central-1 Bhopal Bhopal Vs. (Appellant) (Respondent ) P.A. No.ABTPM8195J IT(SS)A Nos.41 to 43/Ind/2020 Assessment Years: 2010-11,2012-13 & 2013-14 DCIT, Central-1 बनाम/ Smt. Sunita Maheshwari Bhopal Bhopal Vs. (Appellant) (Respondent ) P.A. No. ABTPM8195J M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others IT(SS)A Nos.35 & 36/Ind/2021 Assessment Years: 2013-14 & 2014-15 Shri Vijay Maheshwari बनाम/ DCIT, Central-1 Bhopal Bhopal Vs. (Appellant) (Respondent ) P.A. No. ADDPJ8925F Appellant by Shri Arpit Gaur, CA Respondent by Shri P.K. Mitra, CIT-DR Date of Hearing: 18.01.2022 Date of Pronouncement: 11.02.2022 आदे श / O R D E R PER BENCH The above captioned ten appeals in the cases of three assesses filed at the instance of the Revenue and three appeals filed by two Assessees are directed against the Orders of the Ld. Commissioner of Income Tax (Appeals)-3, Bhopal (in short 'CIT(A)'), dated 20.05.2019, 05.12.2019, 05.12.2019 & 15.12.2019, are arising out of the Orders u/s. 153A r.w.s. 143(3) of the Income-Tax Act, 1961 (in short, 'the Act') dated 21.12.2016, 15.12.2016 & 27.12.2016 and u/s. 153C r.w.s. 143(3) of the Act dated 15.12.2016 framed by the DCIT, Central Circle-1, Bhopal.
2. As submitted by the Ld. Counsel for the assessee(s) and also duly accepted by the Ld. Departmental Representative that most of the issues raised in these appeals are common and inter-linked and as also, are arising out of the similar facts, for the sake of convenience and brevity, all these appeals were 2 M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others heard together on the request of both the parties and are being disposed of by this common order.
2.1 Grounds of appeal raised by the Revenue for AY 2010-11 in IT(SS)A No.149/Ind/2019, in the case of M/s. K.L. Sharma & Sunita Maheshwari:
"1 On the fact and in the Circumstances of the case the Ld. CIT(A) has erred in deleting the addition of Rs. 1,33,43,800/- and Rs. 36,343/- made by the A.O. on account of undisclosed investment u/s 69B of the Income Tax Act, 1961 on the basis of the report of the D.V.O.
2. On the fact and in the Circumstances of the case the Ld. CIT(A) has erred in deleting the addition of Rs. 3,04,78,000/- made by the A.O. on account of unexplained expenditure u/s 69C of the Income Tax Act.
3. On the fact and in the Circumstances of the case the Ld. CIT(A) has erred in deleting the addition of Rs. 1,50,00,000/- made by the A.O. on account of unaccounted payments made to partner Shri K.L. Sharma.
4. On the fact and in the Circumstances of the case the Ld. CIT(A) has erred in deleting the addition of Rs. 1,50,00,000/- made by the A.O. on account of unaccounted cash payments made to partners Smt. Sunita Maheshwari and Shri S.K. Maheshwari."
2.2 Grounds of appeal raised by the Revenue for AY 2011-12 in IT(SS)A No.150/Ind/2019, in the case of M/s. K.L. Sharma & Sunita Maheshwari:
"1 On the fact and in the Circumstances of the case the Ld. CIT(A) has erred in deleting the addition of Rs. 1,17,52,082/- and Rs. 23,756/- made by the A.O. on account of undisclosed investment u/s 69B of the Income Tax Act, 1961 on the basis of the report of the D.V.O.
2. On the fact and in the Circumstances of the case the Ld. CIT(A) has erred in deleting the addition of Rs. 1,55,00,000/- made by the A.O. on account of unaccounted payments made to partner Shri K.L. Sharma.
3. On the fact and in the Circumstances of the case the Ld. CIT(A) has erred in deleting the addition of Rs. 1,65,00,000/- made by the 3 M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others A.O. on account of unaccounted cash payments made to partners Smt. Sunita Maheshwari and Shri S.K. Maheshwari."
2.3 Grounds of appeal raised by the Revenue for AY 2012-13 in IT(SS)A No.151/Ind/2019, in the case of M/s. K.L. Sharma & Sunita Maheshwari:
"1 On the fact and in the Circumstances of the case the Ld. CIT(A) has erred in deleting the addition of Rs. 67,42,257/- and Rs. 8,384/- made by the A.O. on account of undisclosed investment u/s 69B of the Income Tax Act, 1961 on the basis of the report of the D.V.O.
2. On the fact and in the Circumstances of the case the Ld. CIT(A) has erred in deleting the addition of Rs. 37,00,000/- made by the A.O. on account of unaccounted payments made to partner Shri K.L. Sharma.
3. On the fact and in the Circumstances of the case the Ld. CIT(A) has erred in deleting the addition of Rs. 1,00,00,000/- made by the A.O. on account of unaccounted cash payments made to partners Smt. Sunita Maheshwari and Shri S.K. Maheshwari."
2.4 Grounds of appeal raised by the Revenue for AY 2009-10 in IT(SS)A No.44/Ind/2020, in the case of Shri Suresh Kumar Maheshwari:
"1 On the fact and in the Circumstances of the case the Ld. CIT(A) has erred in deleting the addition of Rs. 1,50,00,000/- made by AO for A.Y. 2009-10 on account of unaccounted cash payments."
2.5 Grounds of appeal raised by the Revenue for AY 2010-11 in IT(SS)A No.45/Ind/2020, in the case of Shri Suresh Kumar Maheshwari:
"1 On the fact and in the Circumstances of the case the Ld. CIT(A) has erred in deleting the addition of Rs. 1,70,00,000/- made by the AO for A.Y. 2010-11 on account of unaccounted cash receipts."
2.6 Grounds of appeal raised by the Revenue for AY 2012-13 in IT(SS)A No.46/Ind/2020, in the case of Shri Suresh Kumar Maheshwari:
4M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others "1 On the fact and in the Circumstances of the case the Ld. CIT(A) has erred in deleting the addition of Rs. 1,00,00,000/- made by the AO for A.Y. 2012-13 on account of unaccounted cash receipts.
2. On the fact and in the Circumstances of the case the Ld. CIT(A) has erred in deleting the addition of Rs. 1,00,00,000/- made by the AO for A.Y. 2012-13 on account of unaccounted loan given in cash.
3. On the fact and in the Circumstances of the case the Ld. CIT(A) has erred in deleting the addition of Rs. 5,50,000/- made by the AO for A.Y. 2012-13 on account of unaccounted interest received.
4. On the fact and in the Circumstances of the case the Ld. CIT(A) has erred in deleting the addition of Rs. 3,00,00,000/- made by the AO for A.Y. 2012-13 on account of unaccounted loan given in cash."
2.7 Grounds of appeal raised by the Revenue for AY 2013-14 in IT(SS)A No.47/Ind/2020, in the case of Shri Suresh Kumar Maheshwari:
"1 On the fact and in the Circumstances of the case the Ld. CIT(A) has erred in deleting the addition of Rs. 40,00,000/- made by the AO for A.Y. 2013-14 on account of unaccounted cash receipts.
2. On the fact and in the Circumstances of the case the Ld. CIT(A) has erred in deleting the addition of Rs. 3,00,00,000/- made by the AO for A.Y. 2013-14 on account of unaccounted loan given in cash.
3. On the fact and in the Circumstances of the case the Ld. CIT(A) has erred in deleting the addition of Rs. 99,00,000/- made by the AO for A.Y. 2013-14 on account of unaccounted interest received."
2.8 Grounds of appeal raised by the Revenue for AY 2010-11 in IT(SS)A No.41/Ind/2020, in the case of Smt. Sunita Maheshwari:
"1 On the fact and in the Circumstances of the case the Ld. CIT(A) has erred in deleting the addition of Rs. 1,70,00,000/- made by AO for A.Y. 2010-11 on account of unaccounted cash receipts."5
M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others 2.9 Grounds of appeal raised by the Revenue for AY 2012-13 in IT(SS)A No.42/Ind/2020, in the case of Smt. Sunita Maheshwari:
"1 On the fact and in the Circumstances of the case the Ld. CIT(A) has erred in deleting the addition of Rs. 1,00,00,000/- made by AO for A.Y. 2012-13 on account of unaccounted cash receipts.
2. On the fact and in the Circumstances of the case the Ld. CIT(A) has erred in deleting the addition of Rs. 1,00,00,000/- made by AO for A.Y. 2012-13 on account of unaccounted loans given in cash.
3. On the fact and in the Circumstances of the case the Ld. CIT(A) has erred in deleting the addition of Rs. 5,50,000/- made by AO for A.Y. 2012-13 on account of unaccounted interest received."
2.10 Grounds of appeal raised by the Revenue for AY 2013-14 in IT(SS)A No.43/Ind/2020, in the case of Smt. Sunita Maheshwari:
"1 On the fact and in the Circumstances of the case the Ld. CIT(A) has erred in deleting the addition of Rs. 40,00,000/- made by AO for A.Y. 2013-14 on account of unaccounted cash receipts.
2. On the fact and in the Circumstances of the case the Ld. CIT(A) has erred in deleting the addition of Rs. 3,00,00,000/- made by AO for A.Y. 2013-14 on account of unaccounted loans given in cash.
3. On the fact and in the Circumstances of the case the Ld. CIT(A) has erred in deleting the addition of Rs. 99,00,000/- made by AO for A.Y. 2013-14 on account of unaccounted interest received."
2.11 Grounds of appeal raised by the Assessee for AY 2009-10 in IT(SS)A No.22/Ind/2020, in the case of Smt. Sunita Maheshwari:
"1 That on the facts and in the circumstances of the case, the learned CIT(Appeals) erred in giving relief of Rs.24,42,240/- only out of the total addition of Rs.43,55,072/- made on account of unaccounted investment in construction of hostel building and thereby confirming the addition of Rs.19,12,832/- without considering the explanation offered by the assessee and without considering the facts 6 M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others properly and hence, the addition should be deleted by giving full relief in this case.
2. That the appellant craves leave to add, to urge, to alter or to amend any of the ground of appeal on or before the date of hearing."
2.12 Grounds of appeal raised by the Assessee for AY 2013-14 in IT(SS)A No.35/Ind/2021, in the case of Shri Vijay Maheshwari:
"1 That, on the facts and in the circumstances of the case, the action of the learned CIT(A) in confirming the additions to the extent of Rs.8,00,000/- out of the total additions of Rs.1,10,00,000/- made by the AO in the appellant's income which is quite unjustified, unwarranted, excessive, arbitrary and bad-in-law.
2. That, the learned CIT(A) grossly erred, both on facts and in law, in confirming the action of the AO in assuming the jurisdiction over the case of the appellant and in issuing notice under s.153C of the Act without considering and appreciating the material fact that during the course of the Search, no money, bullion, jewellery, other valuable articles or things or books of account or documents belonging/ pertaining to the appellant was seized or requisitioned.
3. That, without prejudice to the above, the learned CIT(A) grossly erred, both on facts and in law, in confirming the addition of Rs.8,00,000/- made by the AO in the appellant's income by invoking provisions of section 68 of the Act without considering and appreciating the material fact that the appellant had genuinely obtained advance against sale of house from Shri Pushpraj Singh and without properly considering and appreciating the written submissions made by the appellant.
4. That, the appellant further craves leave to add, alter and/or amend any of the foregoing grounds of appeal as and when considered necessary."
2.13 Grounds of appeal raised by the Assessee for AY 2014-15 in IT(SS)A No.36/Ind/2021, in the case of Shri Vijay Maheshwari:
"1 That, on the facts and in the circumstances of the case, the action of the learned CIT(A) in confirming the additions to the extent of 7 M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others Rs.20,30,000/- out of the total additions of Rs.30,30,000/- made by the AO in the appellant's income which is quite unjustified, unwarranted, excessive, arbitrary and bad-in-law.
2. That, the learned CIT(A) grossly erred, both on facts and in law, in confirming the action of the AO in assuming the jurisdiction over the case of the appellant and in issuing notice under s.153C of the Act without considering and appreciating the material fact that during the course of the Search, no money, bullion, jewellery, other valuable articles or things or books of account or documents belonging/ pertaining to the appellant was seized or requisitioned.
3a). That, without prejudice to the above, the learned CIT(A) grossly erred, both on facts and in law, in confirming the addition of Rs.20,30,000/- made by the AO in the appellant's income without considering and appreciating the material fact that the subject loose paper was an unsigned document seized from the premises of a third person and was not pertaining to the appellant.
3b). That, without prejudice to the above, the learned CIT(A) grossly erred, both on facts and in law, in confirming the addition of Rs.20,30,000/- made by the AO in the appellant's income without considering and appreciating the facts and circumstances of the case and without properly considering the written and oral submissions made by the appellant.
4. That, the appellant further craves leave to add, alter and/or amend any of the foregoing grounds of appeal as and when considered necessary."
3.1 First, we shall take up the departmental appeals filed in the case of M/s. K.L. Sharma & Sunita Maheshwari for the assessment years 2010-11 to 2012-13.
3.2 The brief facts of the case as culled out from the records are that the assessee is a partnership firm, consisting of four partners, constituted on 01-08-2000 with the main object of carrying out the business of builders & developers of housing project and is also engaged in civil construction work. The assessee firm furnished its returns of income u/s. 139(1) of the Act for the assessment years 8 M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others under consideration. A Search u/s.132 of the Act was carried out in the Regal Homes and Dwarkadhish Haweli Builders Group of Bhopal on 12-08-2014 and also, in the office premises of the assessee firm located at 13-A, Zone-I, M.P. Nagar, Bhopal. Subsequently, in pursuance of the search, notices u/s. 153A of the Act were issued to the assessee and in response, the assessee instead of filing the fresh returns, filed letters before the Ld. Assessing Officer (in short Ld. AO) requesting to consider the original returns as the returns furnished in compliance to the notices issued under s.153A of the Act. Thereafter, the assessment proceedings were commenced and according to the assessee, during the course of such proceedings, it had furnished copies of its audited financial statements for the previous years relevant to the assessment years under consideration. Subsequently, notices under s.142(1) were issued to the assessee from time to time by the AO. In response to the notices so issued, the assessee furnished its written replies along with the documentary evidences. Finally, the Assessing Officer framed the assessments for the relevant assessment years u/s. 153A r.w.s. 143(3) of the Act by passing a common Order dated 21.12.2016 making certain additions in the income shown by the assessee.
4. Aggrieved assessee preferred separate appeals for all the assessment years under consideration before Ld. CIT(A). The ld. CIT(A), vide his common Order dated 20.05.2019 adjudicated the appeals of the assessee firm thereby giving partial relief.
5. Now, aggrieved by the relief granted by the ld. CIT(A) to the assessee, the revenue is in appeal before this Tribunal for the assessment years under consideration. However, against the 9 M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others additions confirmed by the ld. CIT(A), the assessee has not preferred any appeal before us.
7. Ground No. 1 of the Revenue for A.Ys. 2010-11, 2011-12 and 2012-13 7.1 Through this ground of appeal, common for all the assessment years under consideration, the revenue has challenged the action of the ld. CIT(A) deleting the additions of Rs.1,33,43,800/-, Rs.1,17,52,082/- and Rs.67,42,257/- on account of undisclosed investment in project Regal Mohini and additions of Rs.36,343/-, Rs.23,756/- and Rs.8,384/- on account of undisclosed investment in project Abhinav Homes respectively for A.Ys. 2010-11, 2011-12 and 2012-13.
7.2 Briefly stated facts of the issue, as culled out from the records, are that during the years under consideration, the assessee firm had made investment in the construction of two housing projects namely 'Regal Mohini' at Awadhpuri, Bhopal and 'Abhinav Homes Phase-III Extension' at Ayodhya Bypass Road, Bhopal. During the course of the assessment proceedings, Ld. AO vide letter dated 30-06-2016 made a reference to DVO, Bhopal for obtaining valuation reports in respect of the aforesaid two projects of the assessee. The valuation reports were submitted by the DVO on 24-11-2016. The DVO made an estimation of the total investment in "Regal Mohini" project at Rs.26,41,86,626/- as against the same shown by the assessee at Rs.22,07,75,642/- in its audited books of account. Likewise, the DVO estimated the total investment in Abhinav Homes Phase-III Extension project at Rs.5,93,06,535/- as against the same shown by the assessee at Rs.5,91,86,626/-. Thus, on the basis of the valuation reports, the AO computed difference of Rs.4,20,93,398/- in project Regal Mohini and of Rs.1,19,909/- in project Abhinav 10 M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others Homes Phase-III Extension. Accordingly, Ld. AO supplied the copies of valuation reports to the assessee firm and required to show-cause as to why the difference be not treated as undisclosed investment of the assessee in such projects for the respective years. In response ,the assessee filed its detailed objections, which have been reproduced by Ld. AO at para (11.3) on page no. 19 to 24 of his Order (for project Regal Homes) and at para (12.3) on page no. 27 & 28 of his Order (for project Abhinav Homes). The AO, vide para (11.4) at page no. 24, averted that as the comments of the assessee are technical in nature, the same are sent to the DVO again for his comments but, no comments were submitted by the DVO till the passing of the Assessment Order. The AO further held that as the case was barring by time, in the interest of revenue, without receiving any comment from the DVO and without disposing off the objections of the assessee on the DVO's report, passed the Assessment Order. Accordingly, the AO, by invoking the provisions of s.69B of the Act, held that the assessee firm had made undisclosed investment of Rs.4,20,93,398/- and Rs.1,19,909/- u/s.69B of the Act during A.Y. 2009-10 to A.Y. 2015-16 respectively in two projects Regal Mohini and Abhinav Homes Phase-III. in the ratio of amount of investments declared by the assessee in its books of account. The amounts of additions involved in the revenue appeals before us for the years under consideration are given as under:
Assessment Regal Mohini Abhinav Homes
Year project Phase-III
project
2010-11 1,33,43,800 36,343
2011-12 1,17,52,082 23,756
11
M/s. K.L. Sharma and others
IT(SS) No.149/Ind/2019 and others
2012-13 67,42,257 8,384
7.3 Aggrieved with the Order of Assessment, the assessee firm preferred separate appeals for the subject assessment years before the ld. CIT(A). During the course of the first appellate proceedings, the assessee firm made detailed written submissions along with the documentary evidences which were also furnished by it before the AO. Before the ld. CIT(A), the assessee also furnished copies of Valuation Reports obtained by it from an Independent Registered Valuer in respect of both the housing projects, as additional evidences under Rule 46A which were forwarded to the Assessing Officer for comments. According to the Ld. CIT(A), the Assessing Officer neither objected to the admissibility of additional evidences nor offered any comments. The ld. CIT(A) observed that the AO had not made any specific reference of any incriminating material suggesting unaccounted investment in the projects of the assessee, for which a reference to the DVO was required. The ld. CIT(A) further noted that the AO did not spell out any basis which necessitated reference to DVO and had also not given any basis for making addition except relying solely upon DVO's Report. The ld. CIT(A) also observed that the assessee had maintained regular books of account which were subject to audit and the Auditors had not made any adverse remarks about any discrepancy or undervaluation in the projects of the assessee firm. The ld. CIT(A) further observed that the assessee firm had duly produced the necessary bills, vouchers, records etc. before the AO but, the AO could not point out any specific defect or discrepancy in the records. The ld. CIT(A) noted that the AO had not specifically addressed/ replied to the objections, 12 M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others both on technical and merits, raised against the DVO's report. The ld. CIT(A), by placing reliance on various judicial authorities, held that the addition made solely on the basis of valuation report is not sustainable in law. The ld. CIT(A) further noted that the DVO had prepared his report based on DPAR-2007 after applying cost index on above DPAR as base 100 and interestingly, the DVO had applied same rate for cost of construction of the projects even though the investment is spread over many years and more than 75% of construction was complete between 2008-09 to 2012-13. The ld. CIT(A) observed that the DVO adopted PAR Rates of CPWD which are applicable for metro cities like Delhi, etc. and for the city like Bhopal, the rates of MPPWD ought to have been adopted. The ld. CIT(A) referred to some judicial authorities holding that there is a difference of 20-25% between CPWD rates and State PWD rates and that the DVO report is not binding upon the AO because it is merely an opinion of an expert and is an estimate. Further, the ld. CIT(A) observed that the case laws relied upon by the AO are not applicable to the case of the assessee and that the AO failed to appreciate the vital fact that the assessee firm is a member of Regal Homes group which is engaged in the business of real estate for the last many years and has carried out several projects. Thus, they have economies of scale for material and labour obtained in wholesale which saves them atleast 20-25% of the cost as compared to an ordinary contractor. Finally, the ld. CIT(A) allowed a margin of 30% (25% for difference in CPWD & PWD rates and 5% for self- supervision) and prepared a comparative picture of investment shown by the assessee and that estimated by the DVO for both the projects. Accordingly, the ld. CIT(A) deleted the entire additions so 13 M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others made by the AO by holding that the assessee had already shown more than 70% of the estimate by the DVO and the additions being made only on the basis of valuation report which is an estimate and cannot be taken as a conclusive proof of undisclosed investment made in projects.
7.4 Aggrieved with the Order of the ld. CIT(A), the revenue is in appeal before us.
7.5 Before us, learned CIT(DR) vehemently argued supporting the observations of the AO on this issue.
7.6 Per Contra, Learned Counsel for the assessee alongwith supporting the finding of Ld. CIT(A) has also filed written synopsis. The relevant portion of such synopsis is being reproduced as under:
"E. Key Points of Assessee's Submission and Relevant Pages of Paper Book:
S. Marginal Submission in Brief Relevan
No. Notes t Pages
of PB
1 Not based The AO has not made any specific reference of any 49 to
upon any incriminating material which acted as a clinching evidence 54
incriminatin for making a reference to DVO. (Reman
g material d
Further, even in the Remand Report dated 01-05-2019, the Report
AO did not make any comments on the reference of any of the
incriminating material qua the subject issue. AO)
Para (11.1), Page 19 of AO's Order
2 Sec. 69B The AO invoked the provisions of s.69B which is -
v/s. Sec. applicable for investment in a property. In the instant case,
69C the investment in housing projects, being valuation of
inventories, is the business expenditure of the assessee for which sec.69C could have been invoked.
Para (11.5) Page 25 of AO's Order 3 AO's action Pre-amended s.142A (before 1.10.2014) conferred the -
for making power to the AO to make reference to DVO for estimating reference to value of investment referred to in s.69 or 69B, or the value DVO is bad of any bullion, jewellery or other valuable article or thing 14 M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others in law. referred to in s.69A or 69B or fair market value of any property referred to in s.56(2).
Pre- After amendment, the provisions of s.142A only amended contemplates reference to DVO for estimating the value of and Post- any asset, property or investment.
amended Section Neither the pre-amended nor the post-amended provisions 142A confer any power to the AO to refer a case of an unexplained expenditure falling u/s. 69C.
Decision of Hon'ble Supreme Court in the case of Amiya Bala Paul (2003) 130 TAXMAN 511 (SC) 4 Objections In response to the show-cause notice issued by the AO, the - filed against assessee filed its detailed objections challenging the the DVO valuation made by the DVO. Such objections have also report been reproduced by the AO in the Assessment Order.
Para (11.3) Page 19-24 of AO's Order 5 The The objections of the assessee were sent to the DVO for his - objections comments. However, as per the AO, no comments were against received from the DVO. Accordingly, the AO by taking a DVO Report shelter of time barring matter, placed his complete reliance remained on the DVO's report and proceeded for making the uncontrovert addition.
ed Para (11.4) Page 24 of AO's Order 6 Mistakes in i) DVO adopted P.A.R. rates of CPWD. CPWD rates are -
the DVO's applicable only in big cities and not in cities like Bhopal. Report
ii) P.A.R. rates of CPWD are applied for the purpose of initial estimate for construction.
iii) No reason given by DVO for not adopting State PWD rates which are normally lower by 40-50% than CPWD rates.
iv) Regal Mohini project was comprising a huge area of 20090.74 sq.mtr. which was measured hurriedly in a single day by the DVO.
v) DVO adopted a flat rate for valuation whereas the construction was carried out between 2008-09 to 2012-13.
vi) DVO estimated cost of overhead tank at Rs.26,57,500/-
but, the assessee got the same constructed at a competitive rate for a value of Rs.7,50,000/- for which a copy of bill was also provided.
vii) DVO adopted the value of boundary wall at Rs.17,50,000/- for Regal Mohini project. However, the 15 M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others assessee did not make any boundary wall of the project.
viii) DVO valued two projects of the assessee at the same time. Both the projects are within same locality with a distance of just 2 kms. Both the projects commenced and completed in same years. Both comprise of duplex housing facility. Still, without any reason assigned, the construction rate of Rs.12101 per sq.mtr. was taken by DVO for Project Abhinav P-III Extn and Rs.12866 per sq.mtr. for Project Regal Mohini. The estimation of the DVO for Project Abhinav P-III Extn. is almost near to the cost shown by the assessee with a negligible variation of 0.20%. This shows rates adopted by DVO are inconsistent, adhoc and unreliable.
7 Important i) DVO did not consider that the partners of the firm are points not engaged in this line of business from last 20 years. They considered had advantage of lower cost of material and labour. by DVO Further, they have their own plant and machineries.
ii) Both the projects were meant for providing duplex housing facilities for lower & middle class families. The projects were made up of simple housing & basic amenities only.
iii) Regal Mohini project also comprised of 722.67 sq.mtr. of EWS units which involve relatively lower cost. Such fact was ignored by the DVO.
iv) The books of assessee were audited and duly supported by bills, vouchers etc.. Further, payments were made through banking channels.
v) DVO prepared his report based on DPAR-2007 after applying cost index on above DPAR as base 100 and interestingly, the DVO had applied same rate for cost of construction of the projects even though the investment is spread over many years and more than 75% of construction was complete between 2008-09 to 2012-13.
8 Books, bills, The assessee had maintained regular books of account 97-103 vouchers which were subjected to audit and the Auditors had not 106- etc. made any adverse remarks about any discrepancy or 108 maintained. undervaluation in the projects of the assessee firm. 111- Duly 113 audited.
9 Books along The assessee firm had duly produced the necessary bills, - with bills vouchers, records etc. both before the AO & DVO but, 16 M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others duly neither the DVO nor AO pointed out any specific defect or produced discrepancy in the records. Hence, no addition can be before AO & made.
DVO ITO vs. Dreamland Enterprises 80 Taxman 143 (ITAT Ahd) 10 Books of The AO, neither at the time of making reference to the DVO -
Account not nor after receipt of the DVO's report, rejected the books of
rejected by account of the assessee u/s. 145(3) of the Act before
the AO making the subject additions.
11 Supporting Despite making specific request by the assessee, the -
documents necessary documents, information, methods, basis, etc.,
not provided were not provided by the DVO/AO. by DVO 12 Independent The AO obtained a valuation report dated 17-03-2018 from 196- Valuation an Independent Registered Valuer Shri Amogh Kumar 203 Report Gupta in respect of Regal Mohini Project. As per the obtained by valuation report, the project cost was estimated at the Rs.22,81,50,500/-. Such valuation report was furnished assessee before the ld. CIT(A) and the same was forwarded to the AO for his comments.
The AO, in his Remand Report, did not make any comment 44-54 upon the valuation report.
13 DVO report The AO did not apply his independent mind and did not -
is not care to make any comment on the objections raised. The binding AO also did not call for the record of DVO and other upon AO documents relied upon by DVO for making valuation, before finalizing assessment. It is a settled law that the DVO's report is not binding upon the AO and is only an opinion of expert.
14 Valuation In Rajhans Builders vs. DCIT (2010) 41 SOT 331 (Ahd.), -
method of the DVO himself quoted that variation of 20% is possible.
DVO is
prone to In CIT vs. Abeeson Hotels (P) Ltd (2004) 191 CTR 253 (MP),
difference of the Hon'ble MP High Court held that difference of 10% is 20-25% usual phenomenon.
15 Addition It is a settled law that addition made solely on the basis of -
solely on DVO report is not sustainable. DVO's report is not DVO report conclusive.
not M/s. Golden Realities & Ors. vs. ACIT (2021) 42 ITJ 544 sustainable (Indore Trib.) 16 Case laws None of the cases referred to by the AO in the assessment 30-31 relied by AO order are relevant for the assessee's case and are entirely not on different set of facts.
applicable to assessee 17 Onus of the The burden is upon the revenue to establish that the actual -
Revenue consideration was more than that disclosed by the assessee. Decision of Hon'ble Supreme Court in the case of K.P. Varghese 131 ITR 594.
17M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others 8.1 Before us, the ld. counsel for the assessee firm primarily contended that the additions have been made by the AO solely on the basis of the Report of the DVO and that the AO, neither at the time of making a reference to the DVO nor at the time of making the impugned additions, had made any reference to any incriminating material found during the course of the search. The ld. Counsel of the assessee also stressed that the assessee had filed its detailed objections challenging the valuation made by the DVO but, these objections remained uncontroverted by the AO or the DVO. The assessee firm further pointed out various mistakes committed by the DVO while making valuation of the housing projects such as adoption of CPWD rates instead of State PWD rates, adoption of the value of boundary wall at Rs.17,50,000/- for Regal Mohini project whereas there was actually no boundary wall.
8.2 The assessee firm also contended that the DVO valued two projects of the assessee at the same time and both the projects were situated in the same locality with a distance of just 2 kms, both these projects had commenced and completed in same years and both comprised of duplex housing facility. However, without assigning any reason, the construction rate of Rs.12101 per sq.mtr. was taken by DVO for Project Abhinav P- III Extn and Rs.12866 per sq.mtr. for Project Regal Mohini. The assessee firm submitted that the estimation of the DVO for 18 M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others Project Abhinav P-III Extn. was almost near to the cost shown by the assessee with a negligible variation of 0.20% but the estimation of DVO for Regal Mohini project was higher by a difference of 19.65% which shows the approach of the DVO was inconsistent, adhoc and unreliable. The assessee also contended that the DVO did not consider the important factors prevailing in its case such as experience of the partners of the assessee firm in this line of business which could bring them economies of scale in the cost of material and labour and both the projects were meant for providing duplex housing facilities, for lower & middle class families, made up of simple housing & basic amenities only.
8.3 The Ld. Counsel for the assessee argued that the DVO applied CPWD rates applicable for residential bungalows even when the assessee constructed only duplex row houses for sale. The Ld. Counsel further argued that the DVO was not justified in determining the cost of construction on the basis of Plinth Area Method or Cost Indexed Method even when the assessee had maintained day-to-day records of construction expenses actually incurred by it and such records along with the copy of supporting bills and vouchers were duly produced by it before the Ld. Assessing Officer as well as the DVO. The Ld. Counsel further submitted that since the DVO's report was full of discrepancies and faulty, the assessee firm obtained a separate valuation report from a Government approved registered valuer (which was filed before the ld. CIT(A) and was also forwarded to 19 M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others the AO for his comments) wherein cost of construction was estimated at Rs.22,81,50,500/- which was close to the amount of actual cost of construction incurred and shown by the assessee in its audited books of account. The Ld. Counsel vehemently argued that DVO prepared the valuation report by applying CPWD rates completely ignoring the fact that duplex units were constructed near Bhopal, Madhya Pradesh and therefore, valuation ought to have been made using the local PWD rates instead of CPWD rates.
8.4 The Ld. Counsel for the assessee also argued that addition on account of undisclosed investment in construction of project was made by the Ld. Assessing Officer solely on the basis of valuation report of the DVO more so when no incriminating material was unearthed during the course of search and seizure action which itself makes the addition unsustainable. The ld. Counsel of the assessee vehemently submitted that addition made solely on the basis of DVO report is not sustainable for which he relied upon the decision of this Tribunal in the case of M/s. Golden Realities & Ors. vs. ACIT (2021) 42 ITJ 544 (Indore Trib.).
9.1 We have heard rival contentions, perused the records placed before us, duly considered the facts and circumstances, carefully gone through the orders of lower authorities and written and oral submissions made from both the sides and also gone through the judgments and decisions referred to and 20 M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others relied upon by both the sides. We find that the assessee was engaged in the construction of duplex row houses in the vicinity of Bhopal, Madhya Pradesh. During the course of assessment proceedings, the AO referred the matter to the DVO who submitted his reports to the AO on 24.11.2016. The assessee filed its detailed objections before the AO pointing out the various discrepancies in the DVO's report. The AO sent the objections to the DVO for his comments but as no comments were received from the DVO, the AO relied upon the DVO's report and accordingly made the additions to the total income of the assessee on account of undisclosed investment in construction of two projects.
9.2 We find strong force in the arguments of the Ld. Counsel that valuation adopted by the DVO for the project Regal Mohini was way too exorbitant and could not have been considered as the basis for making addition to the total income of the assessee. It is also evident that the DVO undertook the valuation exercise considering the CPWD rates for residential bungalows completely ignoring the fact that the assessee was engaged in construction of duplex row houses for sale and not in construction of residential bungalows.
9.3 It is worth notable here that the assessee firm had maintained regular books of account in its ordinary course of business of construction and such books of account were subjected to audit. It is not the case of the ld. AO that the 21 M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others assessee had either not maintained the proper records for incurrence of construction expenses or such records, upon requirement, were not produced before him. We also find sufficient merit in the contention of the AR of the assessee that while making the subject addition, the learned AO has not made reference of any incriminating material found during the course of search from which it could have been inferred that the assessee had incurred more expenditure in construction activities than that shown in its books of account. We find that the learned AO has made the additions solely on the DVO's report without considering the assessee's objections towards various discrepancies crept into the said report. Even on valuation, we are in agreement with the findings given by the Ld. CIT(A) that in the instant cases, PWD rates ought to have been adopted by the DVO instead of adopting CPWD rates as the subjected properties were not constructed in any metro city. We find that the case of the assessee is covered by various judicial authorities, some of which are listed as under:
i) CIT vs. Raj Kumar 182 ITR 436 All HC ii) CIT vs. Prem Kumar Murdiya 296 ITR 508 Raj HC iii) ITO vs. Nilesh Maheshwari (2011) 53 DTR 43 ITAT Jaipur iv) Rajeev Mewara 35 SOT 001 Indore Trib. v) ITO vs Prakash Chand Soni 94 TTJ 0631 Indore Trib. vi) Shri Jagmohan Jaiswal (2008) 10 ITJ 187 Indore Trib. vii) Kalpana Surana (2016) 28 ITJ 277 Indore Trib. viii) Biswa Mitra Singh vs Dy. CIT (2014) 23 ITJ 413 Indore Trib. ix) M/s. Golden Realities & Ors. vs. ACIT (2021) 42 ITJ 544 Indore Trib. 9.4 We find that this Tribunal in the case of M/s. Golden
Realities & Ors. vs. ACIT (2021) 42 ITJ 544 (Indore Trib.) has 22 M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others already held that the additions made solely on the basis of DVO Report are not sustainable especially in a circumstance when the assessee had clearly demonstrated various discrepancies in the DVO's report. We further find that in the aforesaid decision, this Tribunal, after considering the various decisions on the issue, had allowed a rebate of 35% (being 25% on account of CPWD/PWD rates and 10% on account of self-supervision charges) against the total valuation made by the DVO. We note that in the instant case, the ld. CIT(A), after considering the earlier decisions on this issue, has allowed a margin of 30% from the DVO's report. In such eventuality, we do not find any infirmity in the order of the ld. CIT(A) giving relief to the assessee on this count. Therefore, the finding of the ld. CIT(A) in deleting the additions so made by the AO is confirmed. Accordingly, the ground No. 1 raised by the Revenue on this issue raised for the Assessment Years 2010-11 to A.Y.2012-13 under appeal are hereby dismissed.
10. Ground No. 2 of the Revenue for A.Y. 2010-11 10.1 Through this ground of appeal, the revenue has challenged the action of the ld. CIT(A) deleting the addition of Rs.3,04,78,000/- made by the AO on account of unaccounted cash expenditure u/s. 69C for A.Y. 2010-11 on the basis of some jottings found made in a diary seized during the course of search from the residence of Smt. Sunita Maheshwari, one of the partners of the assessee firm.
23M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others 10.2 Briefly stated facts of the issue, as emerged out from the records, are that during the course of search at the residential premises of Smt. Sunita Maheshwari, a pocket diary was found and seized as per LPS-12 of the panchnama. The small pocket diary contained hand written pages running from 1 to 20. The AO noted that in such diary, various transactions in cash and cheques were mentioned. As per the AO, was clear that these papers were related to the assessee firm. The AO, from pages 2 to 12 of the diary LPS-12, noted that total payment of Rs.4,34,78,000/- was made against various heads out of which Rs.1,30,00,000/- was paid through cheques and the remaining amount of Rs.3,04,78,000/- was paid in cash. The AO further observed that against some entries, dates were also mentioned which ranged from Jan 2010 to March 2010 and thus, as per AO, the transactions pertained to F.Y. 2009-10. The AO also scanned the relevant pages 2 to 12 of LPS-12 at page no. 4 to 6 of the assessment order. As per the AO, the assessee was asked to explain these papers and to reconcile the same with its books but, the assessee did not submit any explanation. However, as per the assessee, vide its letter dated 18.11.2016 (placed at page no. 134 of the Paper Book) it had duly furnished copies of ledger accounts of persons appearing in its books of account. Further, as per the AO, the assessee was also issued a show- cause notice dated 21.11.2016 [placed at Page no. 130 & 131 of the Paper Book] which remained uncomplied. However, as per the assessee, it had duly submitted its reply before the AO 24 M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others [placed at PB Page No. 135]. In its reply, the assessee firm categorically stated that the said diary was not related to it. The AO, from pages 2 to 12 of LPS-12, noted that the names mentioned as Shankar Traders, Prakash Malviya, A.K. Mangal and almost all names were available in the ledger accounts of the assessee firm which established that these pages were related to the firm. Accordingly, the AO prepared a table and bifurcated the amounts noted in the said diary in two columns of cheque and cash aggregating to a sum of Rs.1,30,00,000/- and Rs.3,04,78,000/- respectively. Finally, the AO made an addition of Rs.3,04,78,000/- in the assessee's income as unexplained expenditure u/s. 69C for A.Y. 2010-11.
10.3 Aggrieved with the Order of Assessment, the assessee firm preferred an appeal for the subject assessment year before the ld. CIT(A). The ld. CIT(A), while deleting the addition, held that the AO ought to have examined Shri Suresh Maheshwari in whose possession the said diary was found and seized, so as to ascertain the nature, genuineness and correctness of transactions. The ld. CIT(A) noted that the said diary was seized from residence of Shri S.K. Maheshwari and Smt. Sunita Maheshwari who were not only partners in assessee firm but were also engaged in real estate business and were associated with other firms/ companies. As per ld. CIT(A), the AO should have made detailed enquiry with the firms/ companies/ persons whose names were mentioned in such diary. The ld. CIT(A) further held that such diary was not speaking one 25 M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others having no direct nexus with the assessee. The ld. CIT(A) also held that these pages were undated, unsigned, unclear mode of payment, whether receipt/ payment or balance amount. The ld. CIT(A) also observed that if the transactions were relating to business transactions of the assessee firm, accounted or unaccounted, name of the 4th partner Shri J.C. Sharma would have also been jotted down in the impugned seized diary. The ld. CIT(A) noted that neither any of the person/ firm/ company nor any of the partner has ever stated that any such transaction actually took place and the entire addition has been made on sheer presumption and assumption basis. The ld. CIT(A) also observed that all the details relating to the creditors/ debtors were furnished by the assessee before the AO, however, no independent enquiry was carried out by the AO by way of issuance of summons u/s. 131 to the persons whose names were mentioned on the impugned diary. Further, according to the ld. CIT(A), the AO failed to establish whether the transactions represent receipt/ payment or balance and also very basic details such as date of payment/ receipt, mode of payment/ receipt, place of payment/ receipt, correct amount whether in lakhs or in thousand or in hundred etc. Thus, according to the ld. CIT(A), in absence of any cogent evidence having direct nexus with the impugned transactions, the said pages of diary cannot be used against the assessee. Accordingly, the ld. CIT(A) observed that the absence of vital details made the impugned loose papers as 'deaf and dumb 26 M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others document'. The ld. CIT(A) further noted that not a single transaction mentioned in the diary related with suppliers/ contractors was found in the books of account of the assessee. The ld. CIT(A) observed that the AO, on the one hand, at para (8.3)(i), stated that these amounts were made to different firms/ suppliers but on the other hand, at para (8.3)(iv), the AO stated that the said amounts were paid to Shri K.L. Sharma. The ld. CIT(A) also noted that the AO did not find any major discrepancy in books of account and therefore, the books were not rejected. Finally, the ld. CIT(A) deleted the addition of Rs.3,04,78,000/- made by the AO for A.Y. 2010-11.
10.4 Aggrieved with the Order of the ld. CIT(A), the revenue is in appeal before us.
10.5 Before us, learned CIT(DR) vehemently argued supporting the observations of the AO on this issue.
10.6 Per Contra, Learned Counsel for the assessee apart from placing reliance on the finding of Ld. CIT(A) has also filed written synopsis. The relevant portion of such synopsis is being reproduced as under:
"E. Key Points of Assessee's Submission and Relevant Pages of Paper Book:
S. Marginal Submission in Brief Relevant
No. Notes Pages of
PB
1 The AO failed The AO has not brought on record any corroborative material to 45 & 46
to establish establish that the subject incriminating material, found and (Remand
any nexus of seized from the premises of a partner, was actually pertaining to Report
the subject the assessee firm. of the
incriminating AO)
material with Further, even in the Remand Report dated 01-05-2019, the AO
27
M/s. K.L. Sharma and others
IT(SS) No.149/Ind/2019 and others
the assessee. did not make any comments and merely reiterated the findings
given in the Assessment Order.
2 Diary seized The said diary was found and seized from the premises of Shri -
from S.K. Maheshwari/ Smt. Sunita Maheshwari who were not the
premises of partners in the assessee firm only but were also engaged in real
Shri SK/ estate business individually and/or in association with other
Sunita concerns as well.
Maheshwari
3 Name of the On the pages 2 to 12 of LPS-12, the name of the assessee firm
assessee firm was not appearing anywhere. Then, how the diary could be
not appearing related to the assessee firm. Further, no unaccounted bill/
anywhere voucher relating to the assessee firm was found during
the search from any premises.
4 Undated & Barring few instances, the jottings made in the diary are -
unsigned completely undated and unsigned. Further, these jottings do not
jottings in convey any clear interpretation of transaction.
diary
5 Mode of Transactions do not convey whether these are payments or -
payments/ receipts.
receipts Barring few instances of cheques or cash, the jottings do not
unclear contain any mode of payment/ receipt. Further, there is no
clarity whether these jottings are in thousands, lakhs or crores.
6 Desired The AO issued a show-cause notice dated 21.09.2016 134
details requiring to furnish details of creditors along with their
furnished in ledgers whose names were appearing in page no. 2 to 12
response to of LPS-12 which were duly furnished vide letters on
Show cause 18.11.2016 & 16.12.2016.
notice of AO No discrepancy was noticed by the AO.
7 The names of The AO, on the sole basis that the names of maximum creditors -
creditors in in the books were getting tallied with those listed in the loose
LPS are very paper, reached to a conclusion that the diary pertains to the
common assessee firm.
It is notable that these creditors/ suppliers are very common and renowned suppliers and therefore, their names could appear in almost all other concerns of the group. The similarity of names would not ipso facto attribute the belongingness of diary to the assessee.
8 No evidence During the course of entire search, not even a single piece -
found for on- of evidence was found which could suggest any receipt of money on-money by the assessee or any of its partners. receipts/ unaccounted When the assessee is not found to have generated unaccounted cash income income/ receipts, how the unaccounted payments in cash would be made.
9 No addition The assessee firm, since its constitution in the year 2000, had -
of on-money/ undergone various assessments u/s. 143(3)/147 in the past but, unaccounted in none of the assessments, any addition on account of payment in unexplained income/ expenditure was made. earlier Even a block assessment u/s. 153C for AY 2002-03 to AY 2008- Assessments 09 was made in which except making disallowance of claim u/s.
80-IB(10), no other addition was made.
10 Contradictory At para (8.3)(i) on page 7, the AO stated that these amounts -28
M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others averments of were made to different firms/ suppliers and on the other hand, AO at para (8.3)(iv) on page 10, the AO averted that the said amounts were paid to Shri K.L. Sharma.
11 Name of 4th Shri J.C. Sharma was also one of the partners of assessee firm -
partner Mr. (30%). On the pages from 2 to 12, nowhere the name of the Shri JC Sharma J.C. Sharma was appearing. If at all the diary was pertaining to not appearing firm, the names of all the partners ought to have been found therein.
12 No cogent The AO failed to bring on record any single corroborative -
material material or evidence which could prove that the said diary was
brought on pertaining to the assessee firm.
record
13 No The AO, except solely relying upon the uncorroborated jottings -
independent made in the diary, had not conducted any independent enquiry
enquiry by from the persons whose names were found noted in such diary
AO by issuing summons u/s. 131 or letters u/s. 133(6) to such
persons.
14 Rough The jottings made in the diary are only rough jottings which do
Jottings not convey either receipt/ payment, mode thereof, nature of
made in the transaction etc.. Thus, the said diary could only be termed as a
diary 'dumb' document.
15 Source also Without prejudice, on a simple perusal of the loose papers, the -
noted on the sources of all the payments are getting reflected on the very
same page same pages. For e.g. Page 2 has total of 80.85 and then from
such figure, 80 has been reduced thereby leaving a balance of 0.85 and so on at further pages too. Thus, the allegation of AO for unexplained expenditure is getting self-explained from the loose paper itself.
Any loose paper ought to be read in its entirety.
11. Before us, the ld. counsel of the assessee firm contended that the impugned addition made solely on the basis of a diary which was found and seized from the residence of two partners of the assessee firm namely Smt. Sunita Maheshwari and Shri Suresh Kumar Maheshwari. It was further contended that Smt. Sunita Maheshwari and Shri Suresh Maheshwari were not only the partners in the assessee firm but they were also engaged in real estate business individually and/or in association with other concerns as well. It is further contended that the AO has not brought on record any corroborative material to establish that the subject incriminating material, found and seized from 29 M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others the premises of a partner, was actually pertaining to the assessee firm only. The ld. counsel for the assessee stressed upon that during the course of entire search, not even a single unaccounted bill or voucher relating to the assessee firm was found from any of the premises. The assessee firm also contended that the jottings made in the diary were undated, unsigned and further, these jottings were unclear regarding the nature of transaction, whether a receipt or payment, mode of receipt or payment, whether the jottings were in hundreds, thousands or lakhs. As per the assessee, the AO did not make any enquiry from the persons/ entities whose names were found in the said diary. It was also contended that during the course of entire search, not even a single incriminating material was found which could suggest any receipt of on-money by the assessee or any of its partners and when the assessee was not found to have generated any unaccounted income/ receipts, then how the unaccounted payments in cash would have been made by it. Finally, the ld. counsel for the assessee contended that the jottings made in the diary were only rough jottings which do not convey either receipt/ payment, mode thereof, nature of transaction etc. and thus, the said diary could only be termed as a 'dumb' document. In support of the contention that no addition is permissible on account of imaginary and non reliable jottings found made in diary, the Ld. Counsel for the assessee placed reliance on the following judgments of Hon'ble Apex Court/Hon'ble High Courts and Tribunals:
30M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others
i) Central Bureau of Investigation vs. (1998) 3 SCC 410 SC V.C. Shukla and Others
ii) Common Cause (A Registered (2017) 30 ITJ 197 SC Society) vs. Union of India
iii) CIT vs. Maulikumar K Shah (2008) 307 ITR 137 Guj HC
iv) Pr. CIT vs. Shri Pukhraj Soni (2019) 34 ITJ 489 MP HC
v) M/s. Vetrivel Minerals and others (2021) 42 ITJ 55 Mad HC vs. ACIT
vi) CIT vs. S M Agarwal (2007) 293 ITR 43 Del HC
vii) Jayantilal Patel vs. ACIT & Ors. (1998) 233 ITR 588 Raj HC
viii) Bansal Strips Pvt. Ltd vs. ACIT (2006) 99 ITD 177 Del HC
ix) CIT vs. Atam Valves (P) Ltd 332 ITR 468 P&H HC
x) ACIT vs. Satyapal Wassan (2007) 295 ITR 352 Jabalpur Trib.
xi) ACIT vs. Narottam Mishra (2018) 32 ITJ 510 Indore Trib.
xii) ACIT vs. Shri Mukesh Sharma (2019) 36 ITJ 14 Indore Trib.
xiii) Dr. Yogiraj Sharma vs. ACIT (2015) 169 TTJ 547 Indore Trib.
xiv) JCIT vs. AG8 Ventures Ltd. & Vice 2021 (2) TMI 1209 Indore Trib.
versa 12.1 We have heard rival contentions, perused the records placed before us, duly considered the facts and circumstances, carefully gone through the orders of lower authorities and written and oral submissions made from both the sides and also gone through the judgments and decisions referred to and relied upon by both the sides. We observe that the AO, except placing sole reliance upon some jottings made on page nos. 2 to 12 of the diary LPS-12, has not brought any cogent material or evidence on record to substantiate his allegation that the jottings made in the diary were actually pertaining to the transactions carried out by the assessee firm. We further note that the jottings made in the said diary are in abbreviated form, the figures jotted in such diary are in decimals from which it could be anybody's guess that whether the jottings are in hundreds or thousands or lakhs or crores and unless these 31 M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others jottings are corroborated with any cogent material on record, no definite conclusion can be drawn on the basis of such jottings. We also note that from these jottings, it is not discernible that who made such jottings, when such jottings were made and what was the purpose of making such jottings. These jottings also do not speak about carrying out of any actual transaction and as also, the nature thereof if they at all pertain to any transaction. From such jottings, it cannot be conclusively proved that these jottings pertained to the assessee firm only and not to any other entity.
12.2 We find that during the course of the assessment proceedings, the assessee firm had furnished the complete details of the creditors and debtors along with copies of their ledger accounts. From such details and ledger accounts, the AO noted that the names of maximum creditors in the books were getting tallied with those listed in the loose papers and reached to a conclusion that the diary pertains to the assessee firm. However, the AO despite giving a finding that certain jottings were containing transactions of cheques, could not bring on record any single instance to establish any correlation with the transactions of the assessee firm. We note that the AO had not conducted any independent enquiry from the persons whose names were found noted in such diary by issuing summons u/s. 131 or letters u/s. 133(6) to such persons. If according to the AO, the assessee firm had made the payment to certain 32 M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others persons, then it was incumbent upon him to make necessary enquiries from such payees.
12.3 We note that the AO neither during the course of the assessment proceedings nor during the course of submission of his Remand Report before the ld. CIT(A) could bring any corroborative evidence to justify his action for making the impugned addition in the hands of the assessee firm. Now, what remains to be adjudicated in the light of judicial pronouncements is that "whether the Ld. A.O was justified in making the addition merely on the basis of the seized diary found during the course of search without establishing any nexus thereof with the assessee firm or placing any corroborative evidence on record".
12.4 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 hypotheses 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".
33M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others 12.5 The Hon'ble High Court of Gujarat in the case of CIT V/s Maulikumar K Shah 2008 307 ITR 137 wherein it was held that "the additions made by the A.O on the basis of seized paper alone without any corroborative evidence could not be sustained".
12.6 In the case of CIT V/s. Girish Choudhary (2008) 296 ITR 691 (Delhi), the Hon'ble High Court had dismissed the revenue's appeals holding that "when there was no materials on record to show on what basis the AO had reached to the conclusion that the figure 48 was to be read as Rs.48 lakhs when the document recovered during the course of search a dumb document and lead nowhere".
12.7 The Hon'ble Apex Court in the case of Common Cause (A registered Society) Vs. Union of India (2017) 77 taxmann.com 245 (SC) held as follows:-
"22. In case of Sahara, in addition we have the adjudication by the Income Tax Settlement Commission. The order has been placed on record along with I.A.No.4. The Settlement Commission has observed that the scrutiny of entries on loose papers, computer prints, hard disk, pen drives etc. have revealed that the transactions noted on documents were not genuine and have no evidentiary value and that details in these loose papers, computer print outs, hard disk and pen drive etc. do not comply with the requirement of the Indian Evidence Act and are not admissible evidence. It further observed that the department has no evidence to prove that entries in these loose papers and electronic data were kept regularly during the course of business of the concerned business house and the fact that these entries were fabricated, non-genuine was proved. It held as well that the PCIT/OR have not been able to show and substantiate the nature and source of receipts as well as nature and reason of payments and have failed to prove evidentiary value of loose papers and electronic documents within the legal parameters. The Commission has also 34 M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others observed that Department has not been able to make out a clear case of taxing such income in the hands of the applicant firm on the basis of these documents.
24. Since it is not disputed that for entries relied on in these loose papers and electronic data were not regularly kept during course of business, such entries were discussed in the order dated 11.11.2016passed in Sahara's case by the Settlement Commission and the documents have not been relied upon by the Commission against assessee, and thus such documents have no evidentiary value against third parties. On the basis of the materials which have been placed on record, we are of the considered opinion that no case is made out to direct investigation against any of the persons named in the Birla's documents or in the documents A-8, A-9 and A- 10 etc. of Sahara.
27. Considering the aforesaid principles which have been laid down, we are of the opinion that the materials in question are not good enough to constitute offences to direct the registration of F.I.R. and investigation therein. The materials should qualify the test as per the aforesaid decision.
The complaint should not be improbable and must show sufficient ground and commission of offence on the basis of which registration of a case can be ordered. The materials in question are not only irrelevant but are also legally inadmissible under Section 34 of the Evidence Act, more so with respect to third parties and considering the explanation which have been made by the Birla Group and Sahara Group, we are of the opinion that it would not be legally justified, safe, just and proper to direct investigation, keeping in' view principles laid down in the cases of Bhajan Lal and V.C. Shukla (supra)."
12.8 The Hon'ble Jurisdictional High Court in the case of PCIT V/s. Pukhraj Soni (2019) 34 ITJ 489 (MP) adjudicated the similar issue relating to addition made by the Ld. A.O. on the basis of notings found in the seized documents, confirmed the order of the Tribunal by relying on the judgment of Hon'ble Apex Court in the case of CBI V/s V.C. Shukla (supra) and in the case of 35 M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others Common Cause (A registered Society) Vs. Union of India (2017) 77 taxmann.com 245 (SC) (supra).
12.9 The Coordinate Bench of ITAT Hyderabad in the case of DCIT vs. M. Aja Babu following the decision 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), held that the addition made by the AO was based on the loose paper, which is not a conclusive evidence and therefore, the same is not sufficient for making the addition. The Tribunal also held that no addition can be made on the basis of dumb document/notebook/loose slips in absence of any other material to show that the assessee has made investment in land. The relevant observations and findings of the Tribunal in this case read as under:-
"17 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 AO 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 notings 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):
1. 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 36 M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others 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 warrant any interference.
2. ACIT Vs. J.P. Morgan India (P) Ltd. [2011] 46 SOT 250 (Mum)
3. CIT Vs. Dinesh Jain HUF [2012] 211 Taxman 23 (Delhi)
4. 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 on this issue."
12.10 Respectfully following the above judgments of Hon'ble Apex Court/Hon'ble High Courts and Tribunals, we are of the considered view that the impugned addition for unaccounted cash expenditure has rightly been deleted by the Ld. CIT(A) as they were merely based on the rough jottings on the alleged seized loose papers which do not convey either receipt/ payment, mode thereof, nature of transaction etc.. Undisputedly, neither during the course of the assessment proceedings nor during the course of submission of remand report before the ld. CIT(A), the AO was able to bring any single 37 M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others cogent material or evidence on record to justify the addition made on the basis of uncorroborated jottings in the diary. Therefore, the alleged seized loose papers are only Dumb documents and no addition could have been made on such dumb documents. We therefore, do not find any reason to interfere in the findings of the ld. CIT(A) deleting the addition of Rs.3,04,78,000/- made in the assessee's income for A.Y. 2010-
11. Accordingly, the ground No. 2 of the Revenue for A.Y. 2010- 11 is dismissed.
13. Ground Nos. 3 & 4 of the Revenue for A.Y. 2010-11 and Ground Nos. 2 & 3 for A.Y. 2011-12 & A.Y. 2012-13 13.1 Through the ground no. 3 for A.Y. 2010-11 and ground no. 2 for A.Y. 2011-12 & A.Y. 2012-13, the revenue has challenged the action of the ld. CIT(A) in deleting the additions of Rs.1,50,00,000/-, Rs.1,55,00,000/- and Rs.37,00,000/- respectively for A.Y. 2010-11, A.Y. 2011-12 and A.Y. 2012-13, made by the AO on account of unaccounted cash payments to Partner Shri K.L. Sharma on the basis of jottings made in a diary seized during the course of search from the residence of Smt. Sunita Maheshwari, one of the partners of the assessee firm. Likewise, on the basis of jottings made in the said diary, through the ground no. 4 for A.Y. 2010-11 and ground no. 3 for A.Y. 2011-12 & A.Y. 2012-13, the revenue has challenged the action of the ld. CIT(A) in deleting the additions of Rs.1,50,00,000/-, Rs.1,65,00,000/- and Rs.1,00,00,000/- respectively for A.Y. 2010-11, A.Y. 2011-12 and A.Y. 2012-13, 38 M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others made by the AO on account of unaccounted cash payments to Partners Smt. Sunita Maheshwari and Shri Suresh Kumar Maheshwari.
13.2 Briefly stated facts of the issue, as culled out from the records, are that during the course of search at the residential premises of Smt. Sunita Maheshwari, a pocket diary was found and seized as per LPS-12 of the panchnama. The small pocket diary contained hand written pages 1 to 20. As per the AO, on a perusal of these papers, it was clear that these papers were related to the assessee firm. The AO, from pages 13 to 16 of the diary LPS-12, noted that total payment of Rs.4,92,00,000/- was made against various heads out of which Rs.90,00,000/- was paid through cheques and the remaining amount of Rs.4,02,00,000/- was paid in cash to one of the partners namely Shri K.L. Sharma. The AO also scanned the relevant pages 13 to 16 of LPS-12 at page no. 11 & 12 of the assessment order. The AO, from pages 17 to 20 of the diary LPS-12, noted that total payment of Rs.5,35,00,000/- was made against various heads out of which Rs.80,00,000/- was paid through cheques and the remaining amount of Rs.4,55,00,000/- was paid in cash to two other partners Smt. Sunita Maheshwari and Shri Suresh Kumar Maheshwari. The AO also scanned the relevant pages 17 to 20 of LPS-12 at page no. 15 & 16 of the assessment order. As per the AO, the assessee was asked to explain these papers and to reconcile the same with its books but, the assessee did not submit any explanation. However, as 39 M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others per the assessee, vide its letter dated 06.12.2016 (placed at page no. 137 of the Paper Book) had duly furnished copies of ledger accounts of all the partners appearing in its books of account. Further, as per the AO, the assessee was also issued a show-cause notice dated 21.11.2016 [placed at Page no. 130 & 131 of the Paper Book] which remained uncomplied. However, as per the assessee, it had duly submitted its reply before the AO [placed at Page No. 135 of the Paper Book]. In its reply, the assessee firm categorically stated that the said diary was not related to it. The AO, from pages 13 to 16 of LPS-12, noted that these pages contain details of account of Shri K.L. Sharma and contain date-wise transactions in cheque and cash under the heading 'KLS'. Further, as per AO, the pages 17 to 20 of LPS-12 contain details of account of Smt. Sunita/ Shri Suresh Maheshwari and contain date-wise transactions in cheque and cash under the heading 'SM' which denotes Sunita Maheshwari. Further, the AO noted that the pages were duly signed by Shri K.L. Sharma and Shri Suresh Maheshwari which clearly establishes that these pages contain details of transactions between Shri K.L. Sharma, Shri Suresh Maheshwari and the assessee firm. Finally, the AO made an addition of Rs.4,02,00,000/- in the assessee's income as unaccounted payments to partner Shri K.L. Sharma in four assessment years i.e. Rs.1,50,00,000/- in A.Y. 2010-11; Rs.1,55,00,000/- in A.Y. 2011-12; Rs.37,00,000/- in A.Y. 2012-13; and Rs.60,00,000/- in A.Y. 2013-14. The AO also 40 M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others made an addition of Rs.4,55,00,000/- in the assessee's income as unaccounted payments to partners Smt. Sunita/ Shri Suresh Maheshwari in four assessment years i.e. Rs.1,50,00,000/- in A.Y. 2010-11; Rs.1,65,00,000/- in A.Y. 2011-12; Rs.1,00,00,000/- in A.Y. 2012-13; and Rs.40,00,000/- in A.Y. 2013-14.
13.3 Aggrieved with the Order of Assessment, the assessee firm preferred separate appeals for the subject assessment years before the ld. CIT(A). During the course of the first appellate proceedings, the assessee firm made detailed written submissions along with the documentary evidences which were also furnished by it before the AO. The ld. CIT(A) held that the AO ought to have examined Shri Suresh Maheshwari in whose possession the said diary was found and seized, to ascertain the genuineness and correctness of transactions. As per ld. CIT(A), the pages of the diary do not contain the name of fourth partner namely Shri J.C. Sharma who was having 30% share in profit. The ld. CIT(A) pointed out that if the transactions were related to business transactions of the assessee firm, the name of fourth partner Shri J.C. Sharma would have also been jotted down which proves that the diary was not pertaining to the assessee firm. The ld. CIT(A) also observed that Shri K.L. Sharma and Shri Suresh Maheshwari were associated since 1999 and were also engaged in the business of trading of land in their individual capacities. The ld. CIT(A) further noted that 41 M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others Shri K.L. Sharma had admitted unaccounted income of Rs.4,02,00,000/- before the Income-Tax Settlement Commission (ITSC) vide his application dated 09.02.2017. Thus, the ld. CIT(A) held that once Shri K.L. Sharma had accepted the amount of Rs.4,02,00,000/- as his unaccounted income through separate transactions not related to the firm, there does not remain any locus to allege that the assessee firm had paid such sum to Shri K.L. Sharma in cash. The ld. CIT(A) also held that the AO failed to establish whether the transactions represented payment/ receipt or balance. The ld. CIT(A) also noted that the AO failed to bring on record any cogent evidence creating direct nexus of payments by the assessee firm. Thus, as per the ld. CIT(A), in absence of any cogent evidence having direct nexus with the impugned transactions, the said pages cannot be used against the assessee. Accordingly, the ld. CIT(A) deleted the entire additions of Rs.4,02,00,000/- and Rs.4,55,00,000/- respectively on account of payments to Shri K.L. Sharma and Smt. Sunita/ Shri Suresh Maheshwari, made by the AO for four assessment years.
13.4 Aggrieved with the Order of the ld. CIT(A), the revenue is in appeal before us.
13.5 Before us, learned CIT(DR) vehemently argued supporting the observations of the AO on this issue.
42M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others 13.6 Per Contra, Learned Counsel for the assessee apart from placing reliance on finding of the Ld. CIT(A) has also filed written synopsis. The relevant portion of such synopsis is being reproduced as under:
"E. Key Points of Assessee's Submission and Relevant Pages of Paper Book:
S. Marginal Submission in Brief Relevant
No. Notes Pages of
PB
1 The AO failed The AO has not brought on record any corroborative material to 46 & 47
to establish establish that the subject incriminating material, found and (Remand
any nexus of seized from the premises of a partner, was actually pertaining to Report of
the subject the assessee firm. the AO)
incriminating
material with Further, even in the Remand Report dated 01-05-2019, the AO
the assessee. did not bring any cogent and corroborative evidence on record to
establish that the payments were infact made by the assessee firm.
2 Diary seized The said diary was found and seized from the premises of Shri -
from S.K. Maheshwari/ Smt. Sunita Maheshwari who were not the
premises of partners in the assessee firm only but were also engaged in real
Shri SK/ estate business individually and/or in association with other
Sunita concerns as well.
Maheshwari
3 Name of the On the pages 13 to 16 of LPS-12, the name of the assessee firm -
assessee firm was not appearing anywhere. Then, how the diary could be
not appearing related to the assessee firm.
anywhere
4 Undated & Although many jottings were having dates and were signed by -
unsigned Shri K.L. Sharma, but some jottings were undated and unsigned.
jottings in Thus, these jottings do not convey any clear interpretation of
diary transaction between the assessee and Shri K.L. Sharma.
5 Mode of Transactions do not convey whether these are payments or -
payments/ receipts. The jottings do not contain any mode of payment/
receipts receipt. Further, there is no clarity whether these jottings are in
unclear thousands, lakhs or crores.
6 No evidence During the course of entire search, not even a single piece of -
found for on- evidence was found which could suggest any receipt of on-
money money by the assessee or any of its partners.
receipts/
unaccounted When the assessee is not found to have generated unaccounted
cash income income/ receipts, how the unaccounted payments in cash would
be made by the assessee firm.
7 No addition The assessee firm, since its constitution in the year 2000, had -
of on-money/ undergone various assessments u/s. 143(3)/147 in the past
unaccounted but, in none of the assessments, any addition on account of
payment in unexplained income/ expenditure was made.
43
M/s. K.L. Sharma and others
IT(SS) No.149/Ind/2019 and others
earlier Even a block assessment u/s. 153C for AY 2002-03 to AY 2008-
Assessments 09 was made in which except making disallowance of claim u/s.
80-IB(10), no other addition was made.
8 Name of 4th Shri J.C. Sharma was also one of the partners of assessee firm -
partner Mr. (30%). On the pages from 1 to 20, nowhere the name of the Shri
JC Sharma J.C. Sharma was appearing. If at all the diary was pertaining to
not appearing firm, the names of all the partners ought to have been found
therein.
9 No cogent The AO failed to bring on record any single corroborative -
material or material or evidence which could prove that the said diary was
evidence pertaining to the assessee firm.
brought on
record
10 No The AO, except solely relying upon the uncorroborated jottings -
independent made in the diary, had not conducted any independent enquiry
enquiry by to establish that the said jottings actually pertained to the
AO transactions of the assessee firm.
11 Personal Shri K.L. Sharma had admitted the amounts of Rs.4,02,00,000/- 138-143
Unaccounted as jotted down in the diary as his unaccounted income derived
Income of from his independent business and had filed an application
Shri K.L. before ITSC on 09-02-2017.
Sharma
12 Amount Once Shri K.L. Sharma had accepted the entire amount of -
already Rs.4,02,00,000/- as his separate unaccounted income other
taxed would than that of the assessee firm, then no addition remains to be
lead to made in the hands of the assessee firm. If so made, it would
Double tantamount to double addition of the same amount.
addition
13 Rough The jottings made in the diary are only rough jottings which do -
Jottings not convey either receipt/ payment, mode thereof, nature of
made in the transaction etc.. Thus, the said diary could only be termed as a
diary 'dumb' document.
"E. Key Points of Assessee's Submission and Relevant Pages of Paper Book:
S. Marginal Notes Submission in Brief Relevant
No. Pages of
PB
1 The AO failed to The AO has not brought on record any corroborative material to 47 to 49
establish any establish that the subject incriminating material, found and (Remand
nexus of the seized from the premises of a partner, was actually pertaining Report of
subject to the assessee firm. the AO)
incriminating
material with Further, even in the Remand Report dated 01-05-2019, the AO
the assessee. did not bring any cogent and corroborative evidence on record
to establish that the payments were infact made by the assessee firm.
2 Diary seized The said diary was found and seized from the premises of Shri -
from premises of S.K. Maheshwari/ Smt. Sunita Maheshwari who were not the Shri SK/ Sunita partners in the assessee firm only but were also engaged in Maheshwari real estate business individually and/or in association with other concerns as well.44
M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others 3 Name of the On the pages 17 to 20 of LPS-12, the name of the assessee -
assessee firm firm was not appearing anywhere. Then, how the diary could not appearing be related to the assessee firm.
anywhere 4 Undated & Although many jottings were having dates and were signed by -
unsigned Shri Suresh Maheshwari, but some jottings were undated and jottings in diary unsigned. Moreover, some jottings do not contain vital details and mode of such as mode of payment/receipt, date of payment/receipt etc. payment/receipt Thus, these jottings do not convey any clear interpretation of also missing in nature of transaction between the assessee and Smt. Sunita/ many cases. Shri Suresh Maheshwari.
5 Mode of Transactions do not convey whether these are payments or -
payments/ receipts. The jottings do not contain any mode of payment/ receipts unclear receipt. Further, there is no clarity whether these jottings are in thousands, lakhs or crores.
6 No evidence During the course of entire search, not even a single -
found for on- piece of evidence was found which could suggest any
money receipts/ receipt of on-money by the assessee or any of its
unaccounted partners.
cash income
When the assessee is not found to have generated unaccounted income/ receipts, how the unaccounted payments in cash would be made by the assessee firm.
7 No addition of The assessee firm, since its constitution in the year 2000, had -
on-money/ undergone various assessments u/s. 143(3)/147 in the past unaccounted but, in none of the assessments, any addition on account of payment in unexplained income/ expenditure was made. earlier Even a block assessment u/s. 153C for AY 2002-03 to AY Assessments 2008-09 was made in which except making disallowance of claim u/s. 80-IB(10), no other addition was made. 8 Name of 4th Shri J.C. Sharma was also one of the partners of assessee firm -
partner Mr. JC (30%). On the pages from 1 to 20, nowhere the name of the Sharma not Shri J.C. Sharma was appearing. If at all the diary was appearing pertaining to firm, the names of all the partners ought to have been found therein.
9 No cogent The AO failed to bring on record any single corroborative -
material or material or evidence which could prove that the said diary was
evidence pertaining to the assessee firm.
brought on
record
10 No independent The AO, except solely relying upon the uncorroborated jottings -
enquiry by AO made in the diary, had not conducted any independent
enquiry to establish that the said jottings actually pertained to the transactions of the assessee firm.
11 Rough Jottings The jottings made in the diary are only rough jottings which do -
made in the not convey either receipt/ payment, mode thereof, nature of diary transaction etc.. Thus, the said diary could only be termed as a 'dumb' document.
14. Before us, the ld. counsel for the assessee firm contended that the impugned addition was made solely on the basis of a 45 M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others diary which was found and seized from the residence of two partners of the assessee firm namely Smt. Sunita Maheshwari and Shri Suresh Kumar Maheshwari who were not only the partners in the assessee firm but they were also engaged in real estate business individually and/or in association with other concerns as well. The ld. Counsel also contended that the AO has not brought on record any corroborative material to establish that the jottings made in the subject diary, found and seized from the premises of a partner, were actually pertaining to the transactions carried out by the assessee firm. The assessee firm further stressed upon the fact that Shri J.C. Sharma was also one of the partners of assessee firm having a substantial share in profit of 30%, but, on none of the pages from 1 to 20, the name of Shri J.C. Sharma was appearing. The ld. Counsel for the assessee argued that if at all the diary was pertaining to firm, the names of all the partners ought to have been found therein. The assessee firm also contended that the jottings made in the diary were unclear regarding the nature of transaction, whether a receipt or payment, mode of receipt or payment, whether the jottings were in hundreds, thousands or lakhs. As per the assessee, the AO did not make any independent enquiry. It was also contended that during the course of entire search, not even a single incriminating material was found which could suggest any receipt of on-money by the assessee or any of its partners and when the assessee was not found to have generated any unaccounted income/ receipts, 46 M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others then how the unaccounted cash payments would have been made by it to its partners. Finally, the ld. counsel for the assessee contended that the jottings made in the diary were only rough jottings which do not convey either receipt/ payment, mode thereof, nature of transaction etc. and thus, the said diary could only be termed as a 'dumb' document. In support of the contention that no addition is permissible on account of imaginary and non reliable jottings found made in diary, the Ld. Counsel for the assessee placed reliance on various judgments of Hon'ble Apex Court/Hon'ble High Courts and Tribunals referred to in the preceding paras.
15.1 We have heard rival contentions, perused the records placed before us, duly considered the facts and circumstances, carefully gone through the orders of lower authorities and written and oral submissions made from both the sides and also gone through the judgments and decisions referred to and relied upon by both the sides. We find that the AO except relying solely upon the jottings made in the diary, has not brought any corroborative evidence on record to justify the addition made on the subject issue. We further find that the jottings made in the said diary are in abbreviated form, the figures jotted in such diary are in decimals from which it could be anybody's guess that the jottings are in hundreds or thousands or lakhs or crores unless these jottings are corroborated with any material on record.
47M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others 15.2 We find that during the course of the assessment proceedings, the assessee firm had furnished the copies of the ledger accounts of the partners in its books of account. We find that the AO despite giving a finding that certain jottings were containing transactions of cheques, could not bring on record any single instance to establish any correlation with the transactions of the assessee firm. We find that the AO had not conducted any independent enquiry from the partners of the assessee firm. We also noted that during the course of search, none of the partners had admitted that the jottings made in the said diary are pertaining to the transactions of the assessee firm. Such fact has duly been conceded by the ld. CIT(DR) before us.
15.3 We observe that except relying upon the jottings made on page no. 13 to 20 of the diary LPS-12, the AO has not brought any cogent material on record to substantiate that any unaccounted cash payment was made by the assessee to its partners. We find that the AO neither during the course of the assessment proceedings nor during the course of submission of his Remand Report before the ld. CIT(A) could bring any corroborative evidence to justify his action for making the impugned addition in the hands of the assessee firm.
15.4 In view of our detailed findings made above, we are of the considered opinion that the jottings made in the diary are only rough jottings which do not convey either receipt/ payment, 48 M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others mode thereof, nature of transaction, amount of transaction whether in hundreds, thousands or lakhs etc.. Thus, the said diary could only be termed as a 'dumb' document. Since we have already discussed at length the various judicial authorities while giving our findings in respect of Ground No. 2 of the Revenue for the A.Y. 2010-11, the same are not being discussed here again. Thus, considering the facts and circumstances of the case, we do not find any infirmity in the findings of the ld. CIT(A) in deleting the additions of Rs.1,50,00,000/-, Rs.1,55,00,000/- and Rs.37,00,000/- respectively for A.Y. 2010-11, A.Y. 2011-12 and A.Y. 2012-13, made by the AO on account of unaccounted cash payments to Partner Shri K.L. Sharma. Similarly, we also consciously uphold the findings of the ld. CIT(A) in deleting the additions of Rs.1,50,00,000/-, Rs.1,65,00,000/- and Rs.1,00,00,000/- respectively for A.Y. 2010-11, A.Y. 2011-12 and A.Y. 2012-13, made by the AO on account of unaccounted cash payments to Partners Smt. Sunita Maheshwari and Shri Suresh Kumar Maheshwari. Accordingly, the Ground Nos. 3 & 4 of the Revenue for A.Y. 2010-11 and Ground Nos. 2 & 3 for A.Y. 2011-12 and A.Y. 2012-13 are hereby dismissed.
16.1 Now, we take up the Revenue's appeals filed in the case of Shri Suresh Kumar Maheshwari for the assessment years 2009-10, 2010-11, 2012-13 and 2013-14.
49M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others 16.2 The brief facts of the case as culled out from the records are that the assessee is an individual and as informed by ld. counsel for the assessee the Suresh Kumar Maheshwari has passed away on 13-05-2021. The main sources of income of the assessee were from rental income from house properties and interest income. The assessee furnished his returns of income u/s. 139(1) of the Act. A Search u/s 132 of the Act was also carried out on 12.08.2014 in the residential premises of the assessee located at A-61, Indrapuri, Bhopal. As per the assessee, the Panchnama was drawn only in the name of his wife namely Smt. Sunita Maheshwari and the name of the assessee did not appear in the said Panchnama at the time of search. Thus, as per the assessee, no Search u/s. 132 was carried out in his case. Subsequently, Notices u/s. 153A of the Act were issued to the assessee and in response, the assessee furnished letters declaring same income for the assessment years under consideration as was declared by him in the returns filed u/s. 139(1) of the Act. During the course of the assessment proceedings, the assessee also furnished copies of his financial statements for the previous years relevant to the assessment years under consideration. Subsequently, Notices under s. 143(2) & 142(1) were issued to the assessee from time to time by the AO. In response to the Notices so issued, the assessee furnished his written replies along with the documentary evidences. Finally, the Assessing Officer framed the assessments for the relevant assessment years u/s. 153A 50 M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others r.w.s. 143(3) of the Act by passing a common Order dated 15.12.2016 making certain additions.
17. Aggrieved assessee preferred separate appeals for all the assessment years under consideration before Ld. CIT(A). The ld. CIT(A), vide his common Order dated 05.12.2019 adjudicated the appeals of the assessee thereby giving partial relief. Against the additions confirmed by the ld. CIT(A), the assessee is not under appeal before us.
18. Now, aggrieved by the relief granted by the ld. CIT(A) to the assessee, the revenue is in appeal before this Tribunal for the assessment years under consideration.
19. Ground No. 1 of the Revenue for A.Y. 2009-10 20.1 Through this ground of appeal, the revenue has challenged the action of the ld. CIT(A) in deleting the addition of Rs.1,50,00,000/- made by the AO for A.Y. 2009-10 on account of unaccounted cash payments to Shri Sushil Kumar Bajpai.
20.2 Briefly stated facts of the issue, as culled out from the records, are that during the course of search at the residential premises of Smt. Sunita Maheshwari, page nos. 33 to 39 of LPS-3 were seized. From such loose papers, the AO noted that it was a signed agreement dated 16.03.2009 between Shri Sushil Kumar Bajpai (as first party) and Shri K.L. Sharma, Shri Suresh Maheshwari (i.e. the assessee) & Shri Arvind Jain (as second party). The AO further noted that it was a joint venture 51 M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others agreement as per which duplexes were to be constructed by the second party on the land owned by the first party. The AO noted that as per such agreement, the second party will pay Rs.1.25 crore to first party out of which Rs.75 lacs will be paid through cheque and Rs.50 lacs in cash. It was further written in the agreement that cash of Rs.11 lacs was already paid and the remaining amount was to be paid from 01-04-2009 to 10- 04-2009. The AO also scanned the relevant pages 33 to 39 of LPS-3 at page no. 33 to 39 of the assessment order. As per the AO, the assessee was asked to explain these papers and to reconcile the same with his books and also show-caused as to why an addition be not made. In response, the assessee vide his letter dated 03-12-2016, made his reply which has been reproduced by the AO at para (10.3) on page no. 39 & 40 of his Order. The AO, while rejecting the submission of the assessee, further noted that during the course of the search, the agreement was confronted to the assessee and he was requested to explain the transactions made till date. In response, the assessee in his statement confirmed that the joint venture was done with Shri Sushil Kumar Bajpai by his firm M/s. Mohini Deepika Construction for land at Ayodhya Bypass Road, Bhopal and Rs.75 lacs only were given in cheque, however, the agreement was subsequently cancelled. Further, as per AO, when the assessee was confronted with the cash component, he stated that only Rs.11 lacs were paid in cash which was taken back after cancellation of the agreement. The 52 M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others AO further stated that as per agreement, cash of Rs.50 lacs was to be given and thus, the claim of the assessee that only Rs.11 lacs was given is not justifiable. The AO also took a note of the unsigned cancellation agreement between Shri Sushil Kumar Bajpai (first party) and Shri K.L. Sharma, Shri Suresh Maheshwari & Shri Arvind Jain (second party), which was also seized as page no. 36 to 44 of LPS-13 and as per such agreement, the earlier agreement dated 16-03-2009 had got cancelled. The AO further noted that as per such papers, the second party was withdrawing from the joint venture, had carried out some development work on the said land and had paid an advance of Rs.1,25,00,000/- to the first party. Accordingly, as per the AO, it was clearly mentioned in the cancellation agreement that Rs.1.25 crore was given as per the agreement and further, only Rs.75 lacs were given through cheque and the assessee accepted cash payment of Rs.11 lacs only. Thus, the AO made an addition of Rs.50,00,000/- in the assessee's income as unaccounted cash payment for the A.Y. 2009-10. Further, the AO also by making a reference to the clause (34) of the agreement dated 16-03-2009, noted that Rs.1,00,00,000/- was given earlier to Shri Sushil Kumar Bajpai by the assessee which would be repaid from the advances, bookings etc. to the assessee. The AO concluded that Rs.1,00,00,000/- was given by the assessee out of his undisclosed income and accordingly, the AO made an addition of Rs.1,00,00,000/- in the assessee's income for A.Y. 2009-10.
53M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others Thus, in aggregate, the AO made an addition of Rs.1,50,00,000/- in the assessee's income for A.Y. 2009-10 on account of unaccounted cash payments to Shri Sushil Kumar Bajpai.
20.3 Aggrieved with the Order of Assessment, the assessee preferred an appeal for the subject assessment year before the ld. CIT(A). During the course of the first appellate proceedings, the assessee made detailed written submissions. The ld. CIT(A) noted the contention of the assessee that the agreement did not get materialized because the third partner of the assessee namely Shri Arvind Jain did not agree to the terms of agreement and which is why there is no signature of Shri Arvind Jain on the said agreement and for such reason, the cancellation agreement was prepared. The ld. CIT(A) also noted that the JV agreement was not notarized or registered and was not a legally enforceable document. The ld. CIT(A) further found that a joint account was opened in the name of firm with Canara Bank and on a perusal of bank statement, sum of Rs.65,00,000/- was paid through cheques on various dates. The ld. CIT(A) further noted that the AO did not make any field enquiry which could have proven that there existed a colony as proposed. The ld. CIT(A) stated to have verified from land revenue records that no such joint venture got actually executed for construction of duplex bungalows and the lands were still in the ownership of their original owners namely Shri Sushil Kumar Bajpai, Shri Vaibhav Sharma & Shri Upendra 54 M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others Singh. The ld. CIT(A) further held that the onus was lying upon the revenue to establish, through some cogent evidence, that the assessee had in-fact paid a sum of Rs.1,50,00,000/- in cash. The ld. CIT(A) also noted that the AO did not make any enquiry either from Shri Sushil Kumar Bajpai or from the firm M/s. Mohini Deepika Construction in whose case too, the AO himself had made assessment u/s. 153C of the Act. Finally, the ld. CIT(A) deleted the entire addition of Rs.1,50,00,000/- so made by the AO by holding the seized documents as dumb documents and mere proposals for development of land which ultimately got cancelled.
20.4 Aggrieved with the Order of the ld. CIT(A), the revenue is in appeal before us.
20.5 Before us, learned CIT(DR) vehemently argued supporting the observations of the AO on this issue.
20.6 Per Contra, Learned Counsel for the assessee apart from placing reliance on CIT(A) finding has also filed written synopsis. The relevant portion of such synopsis is being reproduced as under:
"E. Key Points of Assessee's Submission and Relevant Pages of Paper Book:
S. Marginal Notes Submission in Brief AO's Relevant No. Comments Pages of Paper Book 1 Joint Venture In the JVA dated 16.03.2009, as per clause (6), a - 61 Agreement sum of Rs.1,25,00,000/- was to be paid, (JVA) for Rs.75,00,000/- through cheques and Rs.50,00,000/-
proposed through cash.
colony
55
M/s. K.L. Sharma and others
IT(SS) No.149/Ind/2019 and others
Further, as per clause (7), second party paid Rs.11,00,000/- in cash on 23.03.2009 and balance amount of Rs.1,14,00,000/- will be paid between 01.04.2009 to 10.04.2009 which include a sum of Rs.75,00,000/- through cheques and Rs.39,00,000/-
through cash.
2 Only a sum of Under such agreement, only Rs.75,00,000/- was - -
Rs.75,00,000/- paid through cheques on various dates during F.Y.
actually paid 2009-10 (A.Y. 2010-11).
through
cheques and Further, a sum of Rs.11,00,000/- was paid by the
Rs.11,00,000/- assessee in cash, on behalf of all 3 partners.
through cash
3 Clause 34 of The clause reads: यह क " ी सुरेश महे वर वारा पूव म पये - 65
JVA. No such &
cash paid by 1,00,00,000/- लगभग ( पये एक करोड़ लगभग) दए गए ह". 66 to 68
assessee Factually, no cash was paid in the past by the
assessee.
Also gets established from the cancellation agreement which does not contain reference of any such amount.
4 Agreement did Shri Arvind Jain refused to agree with the terms and - 59 to 65 not materialize conditions of agreement and refused to sign the same. There arose dispute among the parties of second part.
5 Cash of The assessee, in his statement dated 15-11-2014, Para - Rs.11,00,000/- recorded on oath before the search party, was (10.4) on paid by the confronted with such loose papers and the assessee, page 40 assessee got in reply to Q. No. 6, had categorically in an returned unambiguous term, had stated that such JVA did not get executed due to disputes and the amount of Rs.11,00,000/- given earlier got returned.
6 Draft Along with such JVA, a draft cancellation agreement - 66 to 68
Cancellation had also been found and seized as page no. 36 to 44
Agreement also of LPS-13 which proves that the JVA had got
found & seized cancelled subsequently.
7 No reference in There is no mention of any amount of - 65, 66
cancellation Rs.1,00,00,000/- in cancellation agreement which to 68
agreement of was allegedly paid by the assessee as per clause
Rs.1 crore paid (34) of the JVA. If the assessee had actually paid by assessee such amount, the same would have also found mentioned in cancellation agreement.
8 No cogent The AO failed to bring on record any single - - material or corroborative material or evidence which could prove evidence that the cash of Rs.1,50,00,000/- was actually paid brought on by the assessee. The onus was lying upon the record - ONUS revenue which the AO had miserably failed. OF REVENUE 9 No The AO, except solely relying upon the - -
independent uncorroborated draft agreement, had not conducted enquiry by AO any independent enquiry from the persons whose names were found noted in such agreement by issuing summons u/s. 131 or letters u/s. 133(6) to 56 M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others such persons.
10 CIT(A) verified The ld. CIT(A), at first para on page no. 72 of - -
the ownership his Order, had verified from online land revenue of lands records that the lands were still acquired by Shri Sushil Kumar Bajpai, Shri Vaibhav Sharma & Shri Upendra Singh and no such joint venture actually executed for construction of duplex bungalows. 11 Impugned In the JVA, anomalies are persisting and various - 59,61, document is important details are missing such as dates of 65 not speaking execution of JV agreement (first page states one, hence 16.03.2009 and clause 7 states "आज दनांक ought to be 23.03.2009"), signature of all partners (Shri Arvind considered as Jain did not sign), details of alleged payment of 'dumb' Rs.1 crore by assessee at clause (34), not notarized etc..
21. Before us, the ld. counsel of the assessee contended that the joint venture agreement with Shri Sushil Kumar Bajpai was a draft agreement which was never actually acted upon by the parties. It was further contended that under such agreement, only Rs.75,00,000/- was paid through cheques from a Joint Account in the name of firm opened with Canara Bank, BHEL Branch, Bhopal. It was also stressed that no cash of Rs.1,00,00,000/- was paid by the assessee at any point of time in the past. The ld. counsel for the assessee also brought to our notice that along with such Draft JVA, a Draft Cancellation Agreement was also found and seized during the course of search and inventorized as page no. 36 to 44 of LPS-13 which has also been taken into consideration by the AO in his assessment order. It was contended that since the Joint Venture Agreement with Shri Sushil Kumar Bajpai could not get materialized due to differences amongst the parties to the purported agreement and eventually, the draft cancellation agreement was prepared and was also found during the course of the search. It was also contended that one of the persons to the agreement namely Shri Arvind Jain did not agree to the terms and conditions of the JV and 57 M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others therefore, he did not sign the said agreement which is also clearly evident from the draft JV agreement itself that out of total 4 persons, only 3 persons put their signature on the purported agreement. The ld. counsel for the assessee further contended that the AO failed to bring any cogent material or evidence on record to establish that the cash of Rs.1,50,00,000/- was actually paid by the assessee. It was also contended that the AO did not make any independent enquiry from any of the other 3 persons whose names were mentioned in the draft agreement, especially from Shri Sushil Kumar Bajpai. The ld. counsel for the assessee also pointed out the finding given by the ld. CIT(A) at first para on page no. 72 of his Order, that on verification of the land revenue records, it was found that the lands were still in the ownership of Shri Sushil Kumar Bajpai, Shri Vaibhav Sharma & Shri Upendra Singh which fact goes to prove that no such joint venture agreement actually got executed or implemented for construction of any duplex bungalows on the subject lands.
22.1 We have heard rival contentions, perused the records placed before us, duly considered the facts and circumstances, carefully gone through the orders of lower authorities and also gone through the judgments and decisions referred to and relied upon by both the sides. We find that the AO has made the impugned addition on the basis of one Joint Venture Agreement dated 16.03.2009 executed between some Shri Sushil Kumar Bajpai (as first party) and Shri K.L. Sharma, Shri Suresh Maheshwari & Shri Arvind Jain (as second party), for constructing residential duplexes at 6.76 acre of land situated at Khasra No. 89/1/1, 89/1/3, 89/1/4, 88/2 & 88/3 at village Narela, Tehsil Huzur, Bhopal. Such JV agreement was found and seized as page no. 33 to 39 of LPS-3 during the course of 58 M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others search from the residence of the assessee. The said agreement has also been reproduced by the AO in the assessment order. Under such agreement, the second party was supposed to undertake the construction work on the lands owned by the first party. As per the terms of agreement, the second party would pay a sum of Rs.1,25,00,000/- as advance to the first party out of which a sum of Rs.75,00,000/- through cheque and Rs.50,00,000/- in cash. It was also stated in the agreement that cash of Rs.11 lacs had already been paid and the remaining amount and the remaining amount was required to be paid from 01.04.2009 to 10.04.2009. Further, as per clause 34 of the said agreement, a sum of Rs.1,00,00,000/- was paid earlier by the assessee. We also note that the said agreement was signed by the first party and two members from the second party viz. Shri K.L. Sharma and Shri Suresh Maheshwari (the assessee). The signature of the third member of the second party namely Shri Arvind Jain has not been found on the said agreement. In our considered view, since the agreement was not signed by all the parties thereof, it cannot be said to be a complete legally enforceable agreement and such agreement has no evidentiary value in the eyes of the law.
22.2 We also find that during the course of search and post search investigation, the aforesaid JV agreement was confronted to the assessee and in response, he had stated that the joint venture agreement was done with Shri Sushil Kumar Bajpai and only Rs.75 lacs was given through cheque, however, the agreement was subsequently cancelled. We further find that during the course of search, one draft cancellation agreement of the aforesaid JV was also found and seized as page no. 36 to 44 of LPS-13. As per such 59 M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others agreement, the JV agreement dated 16.03.2009 was cancelled and the second party was withdrawing from the joint venture.
22.3 Considering the facts and circumstances of the case, we find sufficient merit in the contention of the ld. counsel for the assessee that the JV agreement did not materialize due to disputes between the members of the second party which could be ascertained from the vital fact that Shri Arvind Jain did not sign on the said agreement and as a result whereof the cancellation agreement was also prepared. It is noteworthy that the JV agreement under consideration is not notarized or registered. In our considered opinion, since the Joint Venture itself did not materialize, the terms and conditions stipulating the payments cannot be treated to be materialized either.
22.4 We find sufficient force in the contention of the ld. counsel for the assessee that the AO had not brought on record any corroborative material or evidence to show that the Joint venture agreement had actually been executed or for that matter, any unaccounted payments were actually made by the assessee or anyone else. We note that the AO had not made any field enquiry to ascertain the existence of any colony proposed in the said JV agreement. Further, there is sufficient merit in the contention of the assessee that the AO, except solely relying upon the uncorroborated draft agreement, had not conducted any independent enquiry from the persons whose names were found noted in such agreement by issuing summons u/s. 131 or letters u/s. 133(6) to such persons. ld. CIT(A), on page no. 72 of his Order, had given a finding that upon verification from online land revenue records, it was found by him 60 M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others that no such joint venture actually executed for construction of duplex bungalows and the lands bearing khasra no. 88/2, 89/1/2, 89/1/3 & 89/1/1 were still owned by Shri Sushil Kumar Bajpai, Shri Vaibhav Sharma and Shri Upendra Singh.
22.5 We are thus in agreement with the findings of the ld. CIT(A) to the effect that the onus of proof lies upon him who affirms and not upon him who denies. We find that the Ld.AO grossly failed to bring on record any cogent material to establish the execution of the proposed Joint Venture Agreement and has merely ventured into making the impugned addition in the hands of the assessee. In such circumstances, we find sufficient force in the contention of the ld. counsel for the assessee that the said loose papers inventorized as page no. 33 to 39 of LPS-3 are not legally admissible documents and therefore, the same could not have been used against the assessee. Thus, considering the facts and circumstances of the case, we do not find any infirmity in the findings of the ld. CIT(A) in deleting the addition of Rs.1,50,00,000/- for A.Y. 2009-10, made by the AO on account of unaccounted cash payments to Shri Sushil Kumar Bajpai. Accordingly, the Ground No. 1 of the Revenue for A.Y. 2009- 10 is hereby dismissed.
23. Ground No. 1 of the Revenue for A.Ys. 2010-11, 2012-13 & 2013-14 23.1 Through this ground of appeal, the revenue has challenged the action of the ld. CIT(A) in deleting the additions of Rs.1,70,00,000/-, Rs.1,00,00,000/- and Rs.40,00,000/- made by the AO, on protective basis, on account of unaccounted cash receipts from the partnership firm M/s. K.L. Sharma & Sunita Maheshwari, respectively for A.Ys.
61M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others 2010-11, 2012-13 & 2013-14, on the basis of jottings made in some diary seized during the course of search from the residence of the assessee.
23.2 We find that the issue relating to the subject diary has already been discussed at length by us in the preceding paras while dealing with the revenue's appeals in the case of the partnership firm 'M/s. K.L. Sharma & Sunita Maheshwari' in which the assessee is one of the partners, where we have already held that the subject seized diary was a 'dumb document' and from such document, the allegation of the AO regarding payments to Shri Suresh Maheshwari (the assessee here) and others does not get established. We have already deleted the substantive addition made in the hands of the aforesaid partnership firm while adjudicating the Appeal Nos. IT(SS) 149 to 151/Ind/2019 in case of M/s. K.L. Sharma & Sunita Maheshwari and therefore, as a consequential result, we find no justification in the action of the AO in making the additions in the hands of the assessee on the allegation of receipts aggregating to a sum of Rs.3,10,00,000/- from the partnership firm. Accordingly, we do not find any infirmity in the findings of the ld. CIT(A) in deleting the additions of Rs.1,70,00,000/-, Rs.1,00,00,000/- and Rs.40,00,000/- respectively for A.Y. 2010-11, A.Y. 2012-13 and A.Y. 2013-14, made by the AO, on protective basis, on account of unaccounted cash receipts from partnership firm M/s. K.L. Sharma & Sunita Maheshwari. Accordingly, the Ground No. 1 of the Revenue for A.Ys. 2010-11, 2012-13 and 2013-14 are hereby dismissed.
24. Ground No. 2 and Ground No. 3 of the Revenue for A.Y. 2012- 13 and A.Y. 2013-14 62 M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others 24.1 Through the Ground No. 2, the revenue has challenged the action of the ld. CIT(A) in deleting the additions of Rs.1,00,00,000/- and Rs.3,00,00,000/- made by the AO respectively for A.Y. 2012-13 and A.Y. 2013-14, on substantive basis, on account of unaccounted cash loans given to Shri Bhav Singh Rajput. Further, through the Ground No.3, the revenue has challenged the action of the ld. CIT(A) in deleting the additions of Rs.5,50,000/- and Rs.99,00,000/- made by the AO respectively for A.Y. 2012-13 and A.Y. 2013-14, on substantive basis, on account of unaccounted interest income from cash loans given to Shri Bhav Singh Rajput.
24.2 Briefly stated facts of the issue, as culled out from the records, are that during the course of search, page nos. 6 to 8 of LPS-13 were seized. From such loose papers, the AO noted that it was an unsigned and undated loan agreement between Shri S.K. Maheshwari (assessee) & Smt. Sunita Maheshwari (as first party) and Shri Bhav Singh Rajput (as second party). The AO further noted that as per such agreement, Rs. 1 crore was given to second party by the first party on 06.02.2012, Rs.25 lacs on 20.05.2012 and Rs.75 lacs on 20.05.2012. It was also mentioned therein that the second party was paying interest on this amount of Rs.2 crores on time. The AO further noted from the agreement that the second party had proposed before the first party to give Rs.2 crores for his personal needs and therefore, Rs.2 crores were being given on certain conditions, Rs. 1 crore was to be given on the date of agreement and the remaining Rs.1 crore would be given within one month of the date of agreement. Further, the rate of interest would be 2.75% per month which would be paid from 1st to 10th of every month by the second party. The AO also scanned the relevant pages 6 to 8 of 63 M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others LPS-3 at page no. 26 to 28 of the assessment order. The AO issued a show-cause notice dated 10.10.2016 requiring the assessee to show- cause as to why an addition should not be made. In response, the assessee vide his letter dated 03-12-2016, made his reply which has been reproduced by the AO at para (9.5) on page no. 28 & 29 of his Order. The AO, while rejecting the submission of the assessee, further averted that during the course of the search, the agreement was confronted to the assessee and in response, the assessee stated that the agreement was a draft which was never executed. The AO observed that cash of Rs.3 crores had been given as loan by the assessee and Smt. Sunita Maheshwari to Shri Bhav Singh Rajput till the date of agreement and rest of Rs.1 crore was to be given within one month of the agreement. Further, the AO noted that although the loan agreement is not signed, however there were evidences that this agreement was executed for example an undated cheque no. 000016 for amount of Rs.75 lacs was given by Shri Bhav Singh Rajput to the assessee. Such cheque was seized as page no. 52 of LPS-13 from the residence of the assessee. A copy of such cheque is scanned by the AO at page no. 30 of the Assessment Order. The AO further noted that during the search, page no. 48 of LPS-13 was also seized which was an affidavit dated 29.05.2014 of Shri Bhav Singh Rajput on 100 Rs. Stamp paper and which was duly signed by Shri Bhav Singh Rajput. The affidavit of Shri Bhav Singh Rajput is scanned at page no. 31 of the assessment order. Finally, the AO concluded that even though the seized agreement was unsigned, however it was duly executed and accordingly, the assessee had given cash loan of Rs. 4 crores to Shri Bhav Singh Rajput and charged interest @2.75% per month. Thus, the AO made additions of 64 M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others Rs.1,00,00,000/- and Rs.3,00,00,000/- respectively for A.Y. 2012- 13 and A.Y. 2013-14 thereby aggregating to a sum of Rs.4,00,00,000/-, on substantive basis, in the assessee's income on account of unaccounted cash loans to Shri Bhav Singh Rajput. The AO further stated that substantive addition was made in the hands of the assessee as his name appeared in the seized cheque and the land was also transferred in his name. But, the loan agreement also bear the name of Smt. Sunita Maheshwari, hence a protective addition of Rs.4,00,00,000/- has also been made in the hands of Smt. Sunita Maheshwari. The AO, on the basis of para (3) of loan agreement regarding charging of interest @2.75% p.m., also computed amount of interest income on the aforesaid cash loans at Rs.5,50,000/- for A.Y. 2012-13 and Rs.99,00,000/- for A.Y. 2013-14 and made additions in the assessee's income for such years, on substantive basis.
24.3 Aggrieved with the Order of Assessment, the assessee preferred separate appeals for the subject assessment years before the ld. CIT(A). During the course of the first appellate proceedings, the assessee made detailed written submissions. The ld. CIT(A) noted that the loan agreement was undated, unsigned and was just a draft agreement which did not materialize on ground. The agreement was neither signed by both the parties nor by any witnesses and it was neither on a stamp paper nor notarized. The ld. CIT(A) observed that the cheque of Rs.75,00,000/- which was found and seized as page no. 52 of LPS-13 had no reference in the draft loan agreement. Thus, as per the ld. CIT(A), there was no direct nexus of the cheque of Rs.75,00,000/- with the said loan agreement. The ld. CIT(A) further noted that the affidavit found and seized as page no. 48 of LPS-13, 65 M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others was also undated and not notarized. Thus, as per ld. CIT(A), there was no legal sanctity of the loan agreement and the affidavit. The ld. CIT(A) further held that the onus was lying upon the revenue to establish, through some cogent evidence, that the loan agreement was duly executed or breach of the agreement according to which the 2 acres of land would be acquired by the first party. Further, the ld. CIT(A) observed that the AO never examined the only beneficiary of the loan i.e. Shri Bhav Singh Rajput. Finally, the ld. CIT(A), in view of his detailed findings, deleted the entire additions of Rs.1,00,00,000/- & Rs.5,50,000/- for A.Y. 2012-13 and Rs.3,00,00,000/- & Rs.99,00,000/- for A.Y. 2013-14 so made by the AO respectively on account of unaccounted cash loans given to Shri Bhav Singh Rajput and interest income thereon.
24.4 Aggrieved with the Order of the ld. CIT(A), the revenue is in appeal before us.
24.5 Before us, learned CIT(DR) vehemently argued supporting the observations of the AO on this issue.
24.6 Per Contra, Learned Counsel for the assessee has filed written synopsis. The relevant portion of such synopsis is being reproduced as under:
"E. Key Points of Assessee's Submission and Relevant Pages of Paper Book:
S. Marginal Submission in Brief AO's Relevant No. Notes Comments Pages of Paper Book 1 Draft, unsigned, The loan agreement is not signed by any of the parties and - 56 to 58 undated and not by any witness. Further, the loan agreement is undated.
unexecuted loan agreement 2 Only a sum of Only a loan of Rs.25,00,000/- was given by Smt. Sunita - -
66M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others Rs.25,00,000/- Maheshwari to Shri Bhav Singh Rajput through account actually paid payee cheque bearing no. 469589 dated 02-05-2012 drawn through on Canara Bank and the same had also got repaid by Shri cheque by Smt. Bhav Singh Rajput on 31-03-2015 vide cheque no. 52015 Sunita which got deposited in the aforesaid bank account of Smt. Maheshwari Sunita Maheshwari.
on earlier
occasion Apart from above, no other amount was given by the
which also got assessee or his wife to Shri Bhav Singh Rajput and no
repaid interest income received.
3 Draft loan The agreement was merely a draft. Since it had never got - -
agreement executed, it was never acted upon.
which did not
materialize
4 Undated The undated cheque of Rs.75,00,000/- found during the Page 30 -
Cheque of search was not related to the loan agreement. The assessee,
Rs.75,00,000/- in his statement recorded during the course of search had
by Shri Bhav categorically stated that such cheque was given for another
Singh Rajput land deal which did not get materialized.
5 Draft The draft affidavit referred to by the AO at page no. 31 of Page 31 -
Afffidavit of the Assessment Order, was not related to the said loan Shri Bhav agreement. On a perusal itself, one would find that it is Singh Rajput undated. Further, it is a joint Affidavit of Shri Bhav Singh Rajput and Shri Sunil Maheshwari, but, only Shri Bhav Singh Rajput has signed. It does not contain the signature of the other person to the affidavit Shri Sunil Maheshwari. Further, the affidavit is not notarized. Furthermore, the affidavit is pertaining to proposed sale of some land which was an independent transaction.
6 No cogent The AO failed to bring on record any single corroborative - - material or material or evidence which could prove that the cash loan of evidence Rs.4,00,00,000/- was actually given by the assessee or his brought on wife Smt. Sunita Maheshwari. The onus was lying upon the record - revenue which the AO had miserably failed.
ONUS OF
REVENUE
7 No The AO, except solely relying upon the uncorroborated draft - -
independent loan agreement, had not conducted any independent enquiry
enquiry by AO from the sole beneficiary namely Shri Bhav Singh Rajput by issuing summons u/s. 131 or letter u/s. 133(6) to such person.
8 Impugned It is a draft loan agreement. It is completely unsigned and is - 56 to 58 document is undated. It is not even on a stamp paper (even required by not speaking clause 8 of such agreement) one, hence 'dumb' 9 No It is written in the opening para of the draft agreement that - 56 incriminating loan of Rs.2 crores was given earlier by the first party to 67 M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others material found second party and the second party was making regular in search payment of interest on such loan.
evidencing that cash loan During the course of search, no incriminating material was Rs.2 crores found which could suggest that the cash loan of Rs.2 crores was given was given earlier to Shri Bhav Singh Rajput. earlier
25. Before us, the ld. counsel of the assessee strongly contended that the impugned loan agreement was undated, unsigned and was just a draft agreement which did not materialize at all. The ld. counsel for the assessee vehemently argued that the agreement was neither signed by both the parties nor by any witnesses and it was neither on a stamp paper nor notarized. It was further contended that the wife of the assessee Smt. Sunita Maheshwari on an earlier occasion had given a loan of Rs.25,00,000/- to Shri Bhav Singh Rajput through banking channels which was also repaid by him. As per the assessee, except the above loan of Rs.25,00,000/-, no other amount was given by him or his wife to Shri Bhav Singh Rajput as loan. It was also contended that the undated cheque of Rs.75,00,000/- as referred to by the AO was not related to the loan agreement but the same was given by Shri Bhav Singh Rajput for another land deal which did not get materialize. The ld. counsel for the assessee further stressed that the draft affidavit referred to by the AO at page no. 31 of the Assessment Order, was not related to the said loan agreement but, the same was a proposed joint Affidavit of Shri Bhav Singh Rajput and Shri Sunil Maheshwari, where only Shri Bhav Singh Rajput had signed and the same did not contain the signature of Shri Sunil 68 M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others Maheshwari. Furthermore, the affidavit was pertaining to proposed sale of some land which was an independent transaction. The ld. counsel for the assessee vehemently argued that the AO failed to bring on record any single corroborative material or evidence which could prove that the cash loan of Rs.4,00,00,000/- was actually given by the assessee or his wife Smt. Sunita Maheshwari. It was strongly contended by the ld. counsel for the assessee that the AO had not conducted any independent enquiry from the sole beneficiary of the agreement namely Shri Bhav Singh Rajput by issuing summons u/s. 131 or letter u/s. 133(6) to such person.
26.1 We have heard rival contentions, perused the records placed before us, duly considered the facts and circumstances, carefully gone through the orders of lower authorities. We find that the loan agreement, which has also been reproduced by the AO in the body of the assessment order, appears to be a draft. On a careful perusal of such agreement, we find that the said agreement is printed on a plain paper, it is undated, does not contain any signature of any of the parties to the agreement or any of the witnesses.
26.2 We observe that Ld. AO has failed to bring on record any single corroborative material or evidence from which it could be established that the cash loan of Rs.4,00,00,000/- was actually given by the assessee or his wife Smt. Sunita Maheshwari. We find ourselves in agreement with the contention of the ld.
69M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others counsel for the assessee that the onus was heavily lying upon the AO to establish the contents of the seized loose paper beyond all doubts and the AO has miserably failed to do so. We also find that the AO, except solely relying upon the uncorroborated draft loan agreement, had not conducted any independent enquiry from the sole beneficiary of the loan agreement namely Shri Bhav Singh Rajput. Such fact has also been conceded by the ld. CIT (DR) before us.
26.3 We find that the AO has referred to one undated cheque of Rs.75 lakhs issued by Shri Bhav Singh Rajput in favour of the assessee, which was found and seized during the course of search and the AO has alleged the same as a security cheque given by Shri Bhav Singh Rajput against the cash loan given by the assessee under such agreement. We find that the AO has proceeded on mere presumption and undisputedly, there is no material on record which could relate the aforesaid cheque of Rs.75 lakhs with the subject loan agreement. As against the same, it was contended by the assessee that such undated cheque of Rs.75,00,000/- was not related to the loan agreement and the assessee, in his statement recorded during the course of search, had categorically stated that such cheque was given for another land deal which did not get materialize. We also find that the draft affidavit referred to by the AO at page no. 31 of the Assessment Order, was not related to the said loan agreement and it was undated Joint Affidavit of Shri Bhav Singh Rajput and Shri Sunil Maheshwari in respect of some 70 M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others sale of land. Further, the affidavit was not notarized. In such circumstances, by no stretch of imagination, the said affidavit could be attributed to the cash loans allegedly given by the assessee to Shri Bhav Singh Rajput.
26.4 Before concluding our findings on the impugned issue, we consider it appropriate to discuss the ratios of the following authorities.
26.4.1. In CIT v/s. Kulwant Rai (2007) 291 ITR 36 (Del), the ruling of the Hon'ble Supreme Court in Dhakeswari Cotton Mills Ltd. v/s. CIT (1954) 26 ITR 775 (SC) was relied upon. The Hon'ble Supreme Court held that even though Income Tax Authorities including the Assessing Officer has unfettered discretion and not strictly bound by the rules and pleadings as well as materials on record and is legitimately entitled to act on the material which may not be accepted as evidence, nevertheless such discretion does not entitle them to make a pure guess and base an assessment entirely upon it without reference to any material or evidence at all. Given the above state of law, the Hon'ble Delhi High Court stated that it has no hesitation in so concluding, since the document seized was both undated and unsigned and even taken at face value did not lead to further enquiry on behalf of the AO. The Hon'ble Delhi High Court in the case of CIT Vs Kulwant Rai 291 ITR 36 held as under :
71M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others "Held, dismissing the appeal, (i) that, admittedly, the assessee had not signed the agreement in question and since he had not signed the agreement, no liability could be attributed qua that that agreement towards him since he was not a party to the agreement till he had signed the agreement. The mere fact that this agreement was found in the possession of the assessee did not lead anywhere. Thus, the addition of Rs.17,00,892 made by the Assessing Officer by way of half share of the assessee in the earnest money was based on surmises and guess work only and was liable to be deleted."
26.4.2 The Coordinate Bench of ITAT Mumbai in the case of Siddhi Gaurav Enterprises vs. DCIT [ITA No. 2302/Mum/2013 Dated 09.09.2015] held as under:
"The Assessing Officer has failed to prove that any cash transaction had been undertaken between the assessee and the sellers of the land in question. No such evidence has been brought on record before us by the authorities below. In our view, the addition on the basis of unsigned, undated draft agreement, the figures written on which had been struck off, cannot be a basis of addition in this case, especially in the absence of any other incriminating or corroborating evidence of exchange of cash."
26.4.3 The Coordinate Bench of ITAT Mumbai again in the case of Shri Bharat Singh vs. ACIT [ITA Nos. 2001 & 3256/Del/2017 Dated 25.01.2019] held as under:
"We are of the opinion that no addition can be sustained only on the basis of the unsigned draft agreement to sell found from the premises of the third party and that too without any corroborative evidences. Accordingly, we set aside the order of the Ld. CIT(A) and the Assessing Officer on the issue in dispute and direct the Assessing Officer to delete the addition for alleged cash received on sale of 1st floor of the property under reference. The grounds No. 2 and 3 of the appeal are, accordingly, allowed."72
M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others 26.4.4 We also find that this Tribunal in the case of ACIT vs. Shri Mohanlal Chugh and Others (2021) 42 ITJ 69 (Trib.- Indore) has held as under:
"We also find that the Assessing Officer, except placing his reliance on the payment terms stated in the unsigned and undated agreement, could not bring any corroborative evidence on record to establish that the installment of Rs.1,75,00,000/- was actually paid before the date of the search. We have also carefully perused the judicial pronouncements cited and discussed by the Ld. CIT(A) in the impugned order. The decisions relied upon by the Ld. CIT(A) are directly applicable to the present issue to avoid repetition, the same are not discussed here again. In view of the above facts, circumstances and material available on record, we find no infirmity in the order of the Ld. CIT(A) in deleting the addition of Rs.1,75,00,000/- made by the Assessing Officer on this count. Accordingly, this ground of appeal of the Revenue to this effect has no merits."
26.5 In view of above discussions and our detailed findings and especially in view of the various judicial authorities, we consider it appropriate to hold that there is no evidentiary value of the impugned loan agreement especially in a circumstance when the AO had neither brought any corroborative material on record nor made any independent enquiry from Shri Bhav Singh Rajput to whom the loan has allegedly been given. Thus, considering the facts and circumstances of the case, we do not find any infirmity in the findings of the ld. CIT(A) in deleting the additions of Rs.1,00,00,000/- and Rs.3,00,00,000/- respectively for A.Y. 2012-13 and A.Y. 2013-14, made by the AO, on substantive basis, on account of unaccounted cash loans given to Shri Bhav Singh Rajput. Accordingly, the Ground 73 M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others No. 2 of the Revenue for A.Ys. 2012-13 and 2013-14 is hereby dismissed.
26.6 Further, once it has been held that the assessee did not give any cash loan, there does not arise any question of earning any unaccounted interest income thereon by the assessee. In such eventuality, the additions of Rs.5,50,000/- and Rs.99,00,000/- respectively for A.Y. 2012-13 and A.Y. 2013-14, made by the AO, on substantive basis, on account of unaccounted interest income on the cash loans given to Shri Bhav Singh Rajput has rightly deleted by Ld. CIT(A). Accordingly, the Ground No. 3 of the Revenue for A.Ys. 2012-13 and 2013-14 is also dismissed.
27. Ground No. 4 of the Revenue for A.Y. 2012-13 27.1 Through this ground of appeal, the revenue has challenged the action of the ld. CIT(A) in deleting the addition of Rs.3,00,00,000/- made by the AO for A.Y. 2012-13 on account of unaccounted cash loans given.
27.2 Briefly stated facts of the issue, as culled out from the records, are that the AO noted that during the course of search, page nos. 19 & 20 of LPS-4 were seized which contain ledger account of cash paid against loan repayments handed over to Shri Vijay Maheshwari and others between 03.01.2012 to 23.05.2013 totaling to Rs.1.62 crores. Further, page no. 21 of LPS-4 also contains month wise amounts from January, 2012 to August, 2012 totaling to Rs.300 lacs. The AO also scanned 74 M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others the relevant loose papers at page no. 42 to 44 of the assessment order. The AO noted that these loose papers are systematic ledger accounts and monthly sheet, the veracity of transactions contained cannot be doubted. The AO concluded that on page no. 21, cash loan of Rs.3,00,00,000/- was given by the assessee before January 2012 and schedule was fixed for repayment. Finally, the AO made an addition of Rs.3,00,00,000/- in the assessee's income for A.Y. 2012-13 on account of unaccounted cash loans given.
27.3 Aggrieved with the Order of Assessment, the assessee preferred an appeal for the subject assessment year before the ld. CIT(A). During the course of the first appellate proceedings, the assessee made detailed written submissions. The ld. CIT(A) noted that the AO had considered each and every content of these loose papers as true and correct, without making any ground enquiry or say independent enquiry. The ld. CIT(A) further observed that the entire addition has been made on sheer presumption and assumption basis. The ld. CIT(A) noted that if as per the AO, the page no. 21 of LPS-4 is taken as repayment schedule for Rs.300 lacs and the impugned ledger account at page no. 19 & 20 represents loan repayment, the entries should have been on credit side and not debit side. The ld. CIT(A) observed that the very basic details such as loan beneficiary, agreement of loan, terms and conditions of loan, date of loan, mode of loan in cash/cheque/kind were completely missing. As per the ld. CIT(A), the AO failed to bring 75 M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others on record any cogent evidence creating direct nexus of loan given by the assessee. The ld. CIT(A) further noted that the subject document must be speaking one and without any second interpretation and must reflect all the details about the transactions. The ld. CIT(A) noted that the AO never enquired from persons whose names were written on impugned loose papers. The ld. CIT(A) negated the allegation of the AO to the effect that page no. 21 of LPS-4 was duly signed, by observing that the jotting which was considered as signature by the AO seemed to be written as '1 July'. The ld. CIT(A) further relied upon various case laws and held that the addition cannot be made on the basis of sheer imagination and guess work. The ld. CIT(A) also observed that the repayment schedule and ledger account do not match in entirety. Finally, the ld. CIT(A) deleted the addition of Rs.3,00,00,000/- so made by the AO on account of alleged unaccounted cash loans given by the assessee by holding that the AO was not justified in making additions simply on guess work and solely on the basis of dumb estimated loose papers.
27.4 Aggrieved with the Order of the ld. CIT(A), the revenue is in appeal before us.
27.5 Before us, learned CIT(DR) vehemently argued supporting the observations of the AO on this issue.
76M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others 27.6 Per Contra, Learned Counsel for the assessee has filed written synopsis. The relevant portion of such synopsis is being reproduced as under:
"E. Key Points of Assessee's Submission and Relevant Pages of Paper Book:
S. Marginal Submission in Brief AO's Relevant No. Notes Comments Pages of Paper Book 1 Projection of The assessee is a builder having various projects at various - 71 the assessee sites. The assessee might have prepared the same for for receipts/ estimating the future receipts in some project or estimating expenses the future expenses of some project. 2 Not related to Nowhere in the entire page, there is any mention of any - 71 any loan name of payer of loan or receiver of loan. If such a huge amount is given, atleast there would be some name. Date on which the alleged loan was given is not mentioned anywhere. On what basis, the AO presumed that loan was given during the previous year relevant to A.Y. 2012-13? 3 Vital details The very basic details such as loan beneficiary, agreement - 69 to 71 missing of loan, terms and conditions of loan, date of loan, mode of loan in cash/cheque/kind were completely missing in these papers. Hence, no addition can be made on the basis of such loose papers.
4 Loose papers The loose papers are completely unsigned. The AO's Para 11.1 71 are unsigned presumption of signature at page no. 21 of LPS-4 is actually page 41 written as '1 July'.
5 Entries should If the page no. 19 & 20 of LPS-4 are presumed to be related - 69 & 70 be on credit with recovery of loan, then as per accounting principles, the side. entries should have been on credit side and not on the debit side.
6 Dates and The AO alleged that the page no. 21 is getting tallied with - 69 to 71 amounts not page no. 19 & 20, but it is factually incorrect. At many matching places such as April 2012, Sept.12, Oct.12, Nov.12, Jan.13, Feb.13 to Aug13 are not tallying with each other. (12 times) 7 No cogent The AO failed to bring on record any single corroborative - -
material or material or evidence which could prove that the cash loan of evidence Rs.3,00,00,000/- was actually given by the assessee. The brought on onus was lying upon the revenue which the AO had record - ONUS miserably failed.
OF REVENUE 8 No The AO, except solely relying upon the uncorroborated - 69 & 70 independent proposed income/expenses sheet, had not conducted any enquiry by AO independent enquiry from various persons whose names were stated on the loose papers, by issuing summons u/s. 131 or letter u/s. 133(6) to such persons.
77M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others 9 Impugned Page no. 21 is a proposed income/expenses sheet in respect - 71 documents are of some project of the assessee. It is just an estimate which not speaking might have been prepared by some accountant of the one, hence assessee. It is completely unsigned and is undated. ought to be considered as Page 19-20 of LPS-4 are in the form of some abstract of 'dumb' some ledger. It is not clear whether the such ledger pertains to the assessee, especially when there is no name of the assessee anywhere. Further, the narrations also do not suggest whether they have been paid by/through the assessee. Entries in such ledger are not corroborated with any other evidence found during search.
28. Before us, the ld. counsel of the assessee contended that the assessee was a builder having multiple projects at various sites and generally, the builders to estimate receipts or expenses in the projects, prepare some projections. The ld. counsel for the assessee vehemently argued that the loose paper did not contain vital details such as name of the receiver of money or payer of money, date of loan, mode of giving the loan etc. It was further contended that the presumption of the AO for signature on the loose paper is actually written as '1 July'. The ld. counsel for the assessee also contended that if the page no. 19 & 20 of LPS-4 are presumed to be related with recovery of loan, then as per accounting principles, the entries should have been appearing on the credit side and not on the debit side. Further, it was also contended that the AO failed to bring any corroborative material on record to establish that the cash loan of Rs.3,00,00,000/- was actually given by the assessee to any person. The ld. counsel for the assessee stressed that the AO had not conducted any independent enquiry from various persons whose names were stated on the 78 M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others loose papers, by issuing summons u/s. 131 or letter u/s. 133(6) to such persons. It was also contended that the allegation of the AO to the effect that the loose paper page no. 21 was getting tallied with loose papers page no. 19 & 20, is factually incorrect. Lastly, the ld. counsel for the assessee vehemently argued that the subject loose papers were mere dumb documents and no addition could have been made by the AO on the basis of such uncorroborated loose papers.
29.1 We have heard rival contentions, perused the records placed before us, duly considered the facts and circumstances, carefully gone through the orders of lower authorities. We find that the AO has made the impugned addition on the basis of the loose papers page no. 19 to 21 of LPS-4 found and seized during the course of search. We find that the AO has alleged that the loose papers represent schedule of repayment of loan of Rs.3,00,00,000/- given by the assessee. We also find that nowhere in the entire loose paper page 21, there is any mention of any name of payer of loan or receiver of loan. In our considered opinion, if such a huge amount is given, atleast there would have been some name. Further, the date on which the alleged loan was given is not mentioned anywhere and in absence of such material information, there was absolutely no justification for the AO to presume that loan was given during the previous year relevant to A.Y. 2012-13.
79M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others 29.2 We find sufficient merit in the contention of the assessee that the very basic and vital details such as loan beneficiary, agreement of loan, terms and conditions of loan, date of loan, mode of loan in cash/cheque/kind were completely missing in these loose papers. We also noted that the subject loose papers are completely unsigned and the presumption of the AO for signature on page no. 21 appears to be '1 July'. We also find sufficient merit in the contention of the ld. counsel for the assessee that if the page no. 19 & 20 of LPS-4 are presumed to be related with recovery of any loan, then as per the accounting principles, the entries should have been on credit side and not on the debit side.
29.3 We find that the AO has failed to bring on record any single corroborative material or evidence from which it could be established that the cash loan of Rs.3,00,00,000/- was actually given by the assessee. We find sufficient force in the contention of the ld. counsel for the assessee that the onus was heavily lying upon the AO to establish the contents of the seized loose papers beyond all doubts and the AO has miserably failed to do so. We also find that the AO, except solely relying upon the uncorroborated loose papers, had not conducted any independent enquiry. Such fact has also been conceded by the ld. CIT (DR) before us.
29.4 In view of above discussions and our detailed findings, we consider it appropriate to hold that there is no evidentiary value 80 M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others of the impugned loose sheets especially in a circumstance when the AO had neither brought any corroborative material on record nor made any independent enquiry from the persons whose names were stated in the said loose papers. Thus, the said loan agreement could only be termed as a 'dumb' document. Since we have already discussed at length the various judicial authorities while giving our findings in respect of Ground No. 2 of the Revenue in the case of the partnership firm M/s. K.L. Sharma & Sunita Maheshwari for the A.Y. 2010- 11 supra, the same are not being referred to here again. Thus, considering the facts and circumstances of the case, we do not find any infirmity in the findings of the ld. CIT(A) in deleting the addition of Rs.3,00,00,000/- for A.Y. 2012-13, made by the AO, on account of unaccounted cash loans given by the assessee. Accordingly, the Ground No. 4 of the Revenue for A.Y. 2012-13 is hereby dismissed.
30.1 Before us, the ld. counsel for the assessee, through the Written Synopsis, also made an application for raising a legal issue under Rule 27 of the Income-Tax Appellate Rules, 1963. According to the assessee, no search under s.132 of the Act was carried out in his case and therefore, the notices issued u/s. 153A as well as Orders passed u/s. 153A in his case were illegal and bad-in-law. The ld. counsel for the assessee contended that the Panchnama for conducting the search at 61, Indrapuri, Bhopal was drawn in the name of Smt. Sunita Maheshwari and no Warrant of Authorization was issued in the 81 M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others case of the assessee. For such assertion, the assessee furnished a copy of Panchnama which is placed at page no. 25 to 27 of his Paper Book. The ld. counsel for the assessee further contended that the assessee had raised the aforesaid legal ground before the ld. CIT(A). However, the ld. CIT(A) vide para (4.1.1) on page no. 33 & 34 of his Order, had dismissed such legal ground of the assessee. The ld. counsel of the assessee conceded that although against the dismissal of the aforesaid legal ground by the ld. CIT(A), the assessee has neither filed any appeal nor filed any Cross Objections before us, but, since the aforesaid legal issue is quite vital, the assessee made an application to raise the same before us under Rule 27 of the Income-Tax Rules, 1963. For making the application under Rule 27, the ld. counsel for the assessee relied upon the decision of the Hon'ble Delhi High Court in the case of Sanjay Sawhney [2020] 116 taxmann.com 701 (Delhi) and the decision of this Tribunal in the case of DCIT-5(1), Indore vs. M/s. Sunderdeep Construction Pvt. Ltd. (2021) 41 ITJ 221 (Trib.- Indore).
30.2 We consider it appropriate to admit the application made by the assessee before us. However, we are not inclined to accept the contention of the assessee that no warrant of authorization was issued in his name. We find that at para (3.0) of the Assessment Order, the AO has clearly stated that a Warrant of Authorization was issued for carrying out search operations u/s. 132 of the Act at residential premises of the 82 M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others assessee at A-61, Indrapuri, Bhopal on 12.08.2014 and bank locker no. 104, Central Bank of India, Narela Shankri Branch, Bhopal on 13.08.2014. Thus, the plea raised by the assessee is devoid of any merit. We, therefore, do not find any infirmity in the findings of the ld. CIT(A) in dismissing the legal ground so raised by the assessee. Accordingly, the legal ground so raised by the assessee before us is hereby dismissed.
31.1 Now, we take up the appeals filed in the case of Smt. Sunita Maheshwari for the assessment years 2009-10, 2010- 11, 2012-13 and 2013-14.
32.2 The brief facts of the case as culled out from the records are that the assessee is an individual presently aged 56 years. The main sources of income of the assessee were from rental income from house properties and interest income. The assessee duly furnished her returns of income u/s. 139(1) of the Act for the assessment years under consideration. A Search u/s.132 of the Act was carried out in the Regal Homes and Dwarkadhish Haweli Builders Group of Bhopal on 12-08-2014. A Search was also carried out in the residential premises of the assessee located at A-61, Indrapuri, Bhopal. Subsequently, Notices u/s. 153A of the Act were issued to the assessee and in response, the assessee furnished letters declaring same income for the assessment years under consideration as was declared by her in the returns filed u/s. 139(1) of the Act. During the course of the assessment proceedings, the assessee also furnished copies of her financial statements for the previous years relevant to the assessment years under consideration. Subsequently, Notices under s. 143(2) & 142(1) were issued to the assessee from time to time by the AO. In response to the Notices so issued, the assessee furnished her written replies along with the documentary evidences. Finally, the Assessing 83 M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others Officer framed the assessments for the relevant assessment years u/s. 153A r.w.s. 143(3) of the Act by passing a common Order dated 27.12.2016.
33. Aggrieved assessee preferred separate appeals for all the assessment years under consideration before Ld. CIT(A). The ld. CIT(A), vide his common Order dated 05.12.2019 adjudicated the appeals of the assessee thereby giving partial relief and also confirming certain additions for the assessment years under consideration.
34. Now, aggrieved by the relief granted by the ld. CIT(A) to the assessee, the revenue is in appeal before this Tribunal for the A.Ys. 2010-11, 2012-13 and 2013-14. As against the addition confirmed by the ld. CIT(A) for A.Y. 2009-10, the assessee is in appeal before us.
35. As all four appeals relate to the same assessee and the issues raised are common, they were heard together and are being disposed off by this common order for sake of convenience and brevity.
36. Ground No. 1 of the Assessee for A.Y. 2009-10 36.1 Through this ground of appeal, the assessee has challenged the action of the ld. CIT(A) in sustaining the addition to the extent of Rs.19,12,832/- out of the total addition of Rs.43,55,072/- made by the AO on account of unaccounted 84 M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others investment in construction of hostel building u/s. 69B for A.Y. 2009-10.
36.2 Briefly stated facts of the issue, as culled out from the records, are that during the course of search and post-search proceedings, it was noticed that the assessee had made huge investment in hostel building located at 208 & 209, Indrapuri, Sector-C, Bhopal. Accordingly, during the course of the assessment proceedings, the AO made a reference to DVO, Bhopal. The AO, as per DVO's report dated 07-11-2016, noted that the assessee had made huge investment in construction of hostel building and the same had not been declared by the assessee in her books. The AO further noted that as against the investment declared by the assessee at Rs.37,85,728/-, the DVO had assessed the same at Rs.81,40,800/-. The AO required the assessee to show-cause as to why the difference be not treated as undisclosed investment in hostel building and addition should not be made on the basis of DVO's report. In response, the assessee vide her letter dated 03-12-2016, filed her detailed objections, which have been reproduced by the AO at para (10.4) on page no. 29 of his Order. Finally, the AO, by discarding the objections of the assessee, made an addition of Rs.43,55,072/- on account of undisclosed investment in hostel building for A.Y. 2009-10 on the basis of the DVO's Report.
36.3 Aggrieved with the Order of Assessment, the assessee preferred an appeal for the subject assessment year before the 85 M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others ld. CIT(A). During the course of the first appellate proceedings, the assessee made detailed written submissions along with the documentary evidences which were also furnished by her before the AO. The ld. CIT(A), vide Para (4.1) at page no. 32 to Para (4.1.9) at page no. 50 of his Order, has given his findings on the subject issue. The ld. CIT(A) observed that the AO had not made any specific reference of any incriminating material suggesting unaccounted investment of the assessee in the hostel building. The ld. CIT(A) further noted that the AO did not spell out any basis which necessitated reference to DVO and had also not given any basis for making addition except relying solely upon DVO's Report. The ld. CIT(A) noted that the AO had not specifically addressed/ replied to the objections, both on technical and merits, raised against the DVO's report. The ld. CIT(A), by placing reliance on various judicial authorities, held that the addition made solely on the basis of valuation report is not sustainable in law. The ld. CIT(A) further noted that the DVO had prepared his report based on DPAR-1992 after applying cost index on above DPAR as base 100 and interestingly, the DVO had applied same rate for cost of construction even though the investment is spread over many years. The ld. CIT(A) observed that the DVO adopted PAR Rates of CPWD and the DVO should have adopted MPPWD rates. The ld. CIT(A) referred to some judicial authorities wherein it has been held that there is a difference of 20-25% between CPWD rates and State PWD rates. The ld. CIT(A) also held that the 86 M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others DVO report is not binding upon the AO because it is merely an opinion of an expert and is an estimate. Further, the ld. CIT(A) has observed that the case laws relied upon by the AO are not applicable to the case of the assessee. The ld. CIT(A) observed that the AO failed to appreciate the vital fact that the assessee is a member of Regal Homes group which is engaged in the business of real estate for the last many years. Thus, they have economies of scale for material and labour obtained in wholesale which save them atleast 20-25% of the cost to an ordinary contractor. Finally, the ld. CIT(A), at para (4.1.9) on page no. 49 of his Order, has allowed the margin of 30% (25% for difference in CPWD & PWD rates and 5% for self- supervision) and prepared a comparative picture of investment shown by the assessee and that estimated by the DVO. Accordingly, the ld. CIT(A) deleted the partial addition to the tune of Rs.24,42,240/- and confirmed the remaining addition of Rs.19,12,832/-.
36.4 Aggrieved with the Order of the ld. CIT(A), the assessee is in appeal before us.
36.5 Before us, learned CIT(DR) vehemently argued supporting the observations of the AO on this issue. The learned CIT(DR) also filed a Paper Book containing the judgments in favour of the Revenue on the issue of addition made in the completed year of assessment in a completed year of assessment.
87M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others 36.6 Per Contra, Learned Counsel for the assessee has filed written synopsis. The relevant portion of such synopsis is being reproduced as under:
"E. Key Points of Assessee's Submission and Relevant Pages of Paper Book:
S. Marginal Submission in Brief AO's Relevant No. Notes Comments Pages of Paper Book 1 Not based The AO has not made any specific reference of any Para 25 upon any incriminating material which acted as a clinching evidence (10.1), incriminating for making a reference to DVO. Page 28 material Completed year of assessment - Return u/s. 139 filed on 15-
03-2010. No assessment pending on the date of search.
2 Objections In response to the show-cause notice issued by the AO, the Para -
filed against assessee filed its detailed objections challenging the (10.4) the DVO valuation made by the DVO. Such objections have also been Page 29 report reproduced by the AO in the Assessment Order. 3 The objections The objections of the assessee were neither sent to the DVO Para -
against DVO for his comments nor the AO deemed it necessary to deal (10.5)
Report with the genuine objections. Page 29
remained
uncontroverted
4 Mistakes in the i) DVO adopted P.A.R. rates of CPWD. CPWD rates are - -
DVO's Report applicable only in big cities and not in cities like Bhopal.
ii) P.A.R. rates of CPWD are applied for the purpose of initial estimate for construction.
iii) No reason given by DVO for not adopting State PWD rates which are normally lower by 40-50% than CPWD rates.
iv) DVO adopted a flat rate for valuation whereas the construction was carried out between 2006-07 to 2008-09.
5 Important i) DVO did not consider that the assessee group are points not engaged in this line of business from last 20 years. They had considered by advantage of lower cost of material and labour. Further, DVO they have their own plant and machineries.
ii) The books of assessee were audited and duly supported by bills, vouchers etc.. Further, most of the payments were made through banking channels.
iii) DVO prepared his report based on DPAR-1992 after applying cost index on above DPAR as base 100 and 88 M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others interestingly, the DVO had applied same rate for cost of construction of the projects even though the investment is spread over many years.
6 Books along The assessee had duly produced the necessary bills, - -
with bills duly vouchers, records etc. both before the AO & DVO but, produced neither the DVO nor AO pointed out any specific defect or before AO & discrepancy in the records. Hence, no addition can be DVO made.
ITO vs. Dreamland Enterprises 80 Taxman 143 (ITAT Ahd) 7 Books of The AO, neither at the time of making reference to the DVO - -
Account not nor after receipt of the DVO's report, rejected the books of rejected by the account of the assessee u/s. 145(3) of the Act before making AO the subject additions.
8 Supporting Despite making specific request by the assessee, the - -
documents not necessary documents, information, methods, basis, etc.,
provided by were not provided by the DVO/AO.
DVO
9 Independent The assessee obtained a valuation report dated 15-04-2016 - 71-74
Valuation from an Independent Registered Valuer Shri Sunil Joshi. As
Report per the valuation report, the cost of building was valued at
obtained by Rs.74,14,129/- as against Rs.70,66,321/- uptill 2015-16.
the assessee Such valuation report was furnished before the ld. AO.
However, the AO did not make any comment upon such valuation report.
10 DVO report is The AO did not apply his independent mind and did not care - -
not binding to make any comment on the objections raised. The AO also upon AO did not call for the record of DVO and other documents relied upon by DVO for making valuation, before finalizing assessment. It is a settled law that the DVO's report is not binding upon the AO and is only an opinion of expert. 11 Valuation In Rajhans Builders vs. DCIT (2010) 41 SOT 331 (Ahd.), the - -
method of DVO himself quoted that variation of 20% is possible. DVO is prone to difference of In CIT vs. Abeeson Hotels (P) Ltd (2004) 191 CTR 253 20-25% (MP), the Hon'ble MP High Court held that difference of 10% is usual phenomenon.
12 Addition solely It is a settled law that addition made solely on the basis of - -
on DVO report DVO report is not sustainable. DVO's report is not not sustainable conclusive.
M/s. Golden Realities & Ors. vs. ACIT (2021) 42 ITJ 544 (Indore Trib.) 13 Onus of the The burden is upon the revenue to establish that the actual - -
Revenue consideration was more than that disclosed by the assessee.
Decision of Hon'ble Supreme Court in the case of K.P. Varghese 131 ITR 594 (SC).
89M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others 37.1 Before us, the ld. counsel of the assessee primarily contended that the impugned addition has been made by the AO merely on the basis of the report of the DVO. The ld. Counsel for the assessee stressed that, no addition could have been made by the AO in a completed year of assessment without having recourse to any incriminating material for which the ld. Counsel relied upon the decision of the Hon'ble Delhi High Court in the case of CIT vs Kabul Chawla 380 ITR 573 (Del.) and other judicial authorities on this issue. The ld. Counsel for the assessee also stressed that the assessee had filed her detailed objections challenging the valuation made by the DVO but, these objections remained uncontroverted by the AO or the DVO. The assessee firm further pointed out various mistakes committed by the DVO while making valuation of the hostel building such as adoption of CPWD rates instead of State PWD rates, etc. The assessee also contended that the DVO did not consider the important factors prevailing in her case such as experience of the assessee group in this line of business which would bring them economies of scale in the cost of material and labour.
37.2 The Ld. Counsel for the assessee argued that a valuation report was also obtained from the Government approved registered valuer and the same was filed before the AO wherein cost of construction was estimated close to the amount of actual cost of construction incurred by the assessee. The Ld. Counsel vehemently argued that DVO prepared the valuation 90 M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others report by applying CPWD rates completely ignoring the fact that the hostel building was constructed in Bhopal, Madhya Pradesh and therefore, valuation ought to have been done using the local PWD rates and not using the CPWD rates.
37.3 The Ld. Counsel for the assessee also argued that addition on account of undisclosed investment in construction of hostel building was made by the Ld. Assessing Officer solely on the basis of valuation report of the DVO without having recourse to any incriminating material found or seized during the course of search and this fact alone has made the entire addition unsustainable in view of the settled position of the law. The ld. Counsel of the assessee vehemently submitted that addition made solely on the basis of DVO report is not sustainable for which he relied upon the decision of this Tribunal in the case of M/s. Golden Realities & Ors. vs. ACIT (2021) 42 ITJ 544 (Indore Trib.).
38.1 We have heard rival contentions, perused the records placed before us, duly considered the facts and circumstances, carefully gone through the orders of lower authorities and written and oral submissions made from both the sides and also gone through the judgments and decisions referred to and relied upon by both the sides. We find that the assessee had constructed a hostel building in the city of Bhopal, Madhya Pradesh. During the course of assessment proceedings, the AO referred the matter to the DVO who submitted his report to the 91 M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others AO. The assessee filed her detailed objections before the AO pointing out the various discrepancies in the DVO's report. The AO neither sent the objections to the DVO for his comments nor the AO himself controverted the objections of the assessee and instead, the AO relied upon the DVO's report and accordingly made the addition to the total income of the assessee on account of undisclosed investment in construction of hostel building.
38.2 As regard the legal contention of the ld. Counsel for the assessee that the impugned addition has been made by the AO without having recourse to any incriminating material, we find that in the instant case, the assessment order has been framed by the AO in pursuance of the search operations carried out u/s. 132 of the Act on 12.08.2014. Further in response to the return of income furnished by the assessee u/s. 139 of the Act, no notice u/s. 143(2) of the Act was issued and further, time limit for issuance of any such notice had also got expired much prior to the date of search with the consequence that the income shown by the assessee in her return u/s. 139 had attained finality prior to the date of the search. Thus, we find that the impugned addition of Rs.43,55,072/- made by the AO on account of unaccounted investment in construction of hostel building in a completed assessment year without having recourse to any incriminating material found during the course of the search. Such fact has also been fairly admitted by the ld. CIT (DR). Therefore, in light of the findings of the decision of 92 M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others Hon'ble Delhi High Court in case of CIT vs. Kabul Chawla, (2016) 2 ITJ online 869 (Delhi): (2016) 380 ITR 573: (2015) 281 CTR 45: (2015) 234 Taxman 300 and also decision of Pr. CIT vs. Meetagutgutia (2020) 8 ITJ online 273 (Delhi): (2017) 395 ITR 526, we are of the considered view that proceedings initiated u/s 153A of the Act for A.Y. 2009-10 being non-abated and completed assessments deserved to be quashed since no incriminating material was found during the course of search thereby warranting initiation of proceedings u/s 153A of the Act for these years. Thus, following the settled judicial precedence which are squarely applicable on the instant issue, we are of the view that no addition could have been made by the AO in the assessee's income without having recourse to any incriminating material. Accordingly, we are inclined to uphold the deletion of the addition of Rs.24,42,240/- so made by the ld. CIT(A) and are also inclined to hold that in the facts and circumstances of the case, the addition of Rs.19,12,832/- sustained by the ld. CIT(A) is also liable to be deleted. Accordingly, the ground No. 1 raised by the assessee on this issue for the A.Y. 2009-10 is hereby allowed.
39. Ground No. 1 of the Revenue for A.Ys. 2010-11, 2012-13 & 2013-14 39.1 Through this ground of appeal, the revenue has challenged the action of the ld. CIT(A) in deleting the additions of Rs.1,70,00,000/-, Rs.1,00,00,000/- and Rs.40,00,000/- made by the AO, on substantive basis, on account of 93 M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others unaccounted cash receipts from the partnership firm M/s. K.L. Sharma & Sunita Maheshwari, respectively for A.Ys. 2010-11, 2012-13 & 2013-14, on the basis of jottings made in some diary seized during the course of search from the residence of the assessee.
39.2 Briefly stated facts of the issue, as culled out from the records, are that the AO, from pages 17 to 20 of the diary LPS- 12, made an addition of Rs.4,55,00,000/- in the assessee's income, on substantive basis, as unaccounted receipts from partnership firm M/s. K.L. Sharma & Sunita Maheshwari in four assessment years i.e. Rs.1,70,00,000/- in A.Y. 2010-11; Rs.1,45,00,000/- in A.Y. 2011-12; Rs.1,00,00,000/- in A.Y. 2012-13; and Rs.40,00,000/- in A.Y. 2013-14. A corresponding addition of Rs.4,55,00,000/- was also made by the AO, on protective basis, in the hands of the assessee's husband namely Shri Suresh Maheshwari which has already been dealt by us in the preceding paras.
39.2 We find that the issue relating to the subject diary has already been discussed at length by us in the preceding paras while dealing with the revenue's appeals in the case of the partnership firm 'M/s. K.L. Sharma & Sunita Maheshwari' in which the assessee is one of the partners, where we have already held that the subject seized diary was a 'dumb document' and from such document, the allegation of the AO regarding payments to Smt. Sunita Maheshwari (the assessee 94 M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others here) and others does not get established. We have already deleted the corresponding addition made in the hands of the aforesaid partnership firm while adjudicating the Appeal Nos. IT(SS) 149 to 151/Ind/2019 in case of M/s. K.L. Sharma & Sunita Maheshwari and therefore, as a consequential result, we find no justification in the action of the AO in making the additions in the hands of the assessee on the allegation of receipts aggregating to a sum of Rs.3,10,00,000/- from the partnership firm. Accordingly, we do not find any infirmity in the findings of the ld. CIT(A) in deleting the additions of Rs.1,70,00,000/-, Rs.1,00,00,000/- and Rs.40,00,000/- respectively for A.Y. 2010-11, A.Y. 2012-13 and A.Y. 2013-14, made by the AO, on substantive basis, on account of unaccounted cash receipts from partnership firm M/s. K.L. Sharma & Sunita Maheshwari. Accordingly, the Ground No. 1 of the Revenue for A.Ys. 2010-11, 2012-13 and 2013-14 are hereby dismissed.
40. Ground No. 2 and Ground No. 3 of the Revenue for A.Y. 2012-13 and A.Y. 2013-14 40.1 Through the Ground No. 2, the revenue has challenged the action of the ld. CIT(A) in deleting the additions of Rs.1,00,00,000/- and Rs.3,00,00,000/- made by the AO respectively for A.Y. 2012-13 and A.Y. 2013-14, on protective basis, on account of unaccounted cash loans given to Shri Bhav Singh Rajput. Further, through the Ground No.3, the revenue has challenged the action of the ld. CIT(A) in deleting 95 M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others the additions of Rs.5,50,000/- and Rs.99,00,000/- made by the AO respectively for A.Y. 2012-13 and A.Y. 2013-14, on protective basis, on account of unaccounted interest income from cash loans given to Shri Bhav Singh Rajput.
40.2 We find that the issue relating to the loan to Shri Bhav Singh Rajput has already been discussed at length by us in the preceding paras while dealing with the revenue's appeals in the case of the husband of the assessee 'Shri Suresh Kumar Maheshwari', where we have already held that no addition could have been made on the basis of unsigned and undated agreement. We have already deleted the addition made on substantive basis in the hands of Shri Suresh Kumar Maheshwari while adjudicating the Appeal Nos. IT(SS) 46 & 47/Ind/2020 in his case and therefore, as a consequential result, we find no justification in the action of the AO in making the additions in the hands of the assessee on the basis of an unsigned and undated draft agreement. In such eventuality, we uphold the findings of the ld. CIT(A) in deleting the additions of Rs.5,50,000/- and Rs.99,00,000/- respectively for A.Y. 2012-13 and A.Y. 2013-14, made by the AO, on protective basis, on account of unaccounted interest income on the cash loans given to Shri Bhav Singh Rajput. Accordingly, the Ground Nos. 2 and 3 of the Revenue for A.Ys. 2012-13 and 2013-14 are hereby dismissed.
96M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others 41.1 Now, we take up the appeals filed in the case of Shri Vijay Maheshwari for the assessment years 2013-14 and 2014-15.
41.2 The brief facts of the case as culled out from the records are that the assessee is an individual presently aged 43 years. The main sources of income of the assessee were from carrying out the business of construction and interest income. The assessee duly furnished his returns of income u/s. 139(1) of the Act for the assessment years under consideration. A Search under s.132 of the Act was carried out in the various premises of one Regal Homes and Dwarkadheesh Haveli Builders Group on 12-08-2014. During the course of search carried out under s.132 of the Act in the case of Smt. Sunita Maheshwari, certain loose papers, documents etc. allegedly belonging to the assessee were found and seized from the premises situated at A-61, Indrapuri, Bhopal. According to the AO, the case of the assessee was centralized in the jurisdiction of DCIT (Central)-1, Bhopal by the ld. CIT, Bhopal u/s. 127 of the Act vide Order dated 22-07-2016. Further, as per AO, the reason for initiation of assessment proceedings u/s. 153C was recorded on 05-07- 2016. Thereafter, Notices u/s. 153C of the Act were issued to the assessee and in response, the assessee furnished letters declaring same income for the assessment years under consideration as was declared by him in the returns filed u/s. 139(1) of the Act. During the course of the assessment proceedings, the assessee also furnished copies of his financial statements for the previous years relevant to the assessment 97 M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others years under consideration. Subsequently, Notices under s. 143(2) & 142(1) were issued to the assessee from time to time by the AO. In response to the Notices so issued, the assessee furnished his written replies along with the documentary evidences. Finally, the Assessing Officer framed the assessments for the relevant assessment years u/s. 153C r.w.s. 143(3) of the Act by passing a common Order dated 15.12.2016 by making certain additions.
42. Aggrieved assessee preferred separate appeals for both the assessment years under consideration before Ld. CIT(A). The ld. CIT(A), vide his common Order dated 09.11.2020 adjudicated the appeals of the assessee thereby giving partial relief and also confirming certain additions for the assessment years under consideration.
43. Now, aggrieved by additions confirmed by the ld. CIT(A) for the assessment years under consideration, the assessee is in appeal before us.
44. As both the appeals relate to the same assessee and the issues raised are common, they were heard together and are being disposed off by this common order for sake of convenience and brevity.
45. Ground Nos. 1, 2 and 3 of the Assessee for A.Y. 2013- 14 45.1 Through these grounds of appeal, the assessee has challenged the action of the ld. CIT(A) in upholding the addition 98 M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others of Rs.8,00,000/- made by the AO on account of unexplained cash credit u/s. 68 for A.Y. 2013-14.
45.2 Briefly stated facts of the issue, as culled out from the records, are that during the course of the assessment proceedings, the AO found that the assessee had claimed to have received unsecured loan of Rs.8,00,000/- from Shri Pushpraj S/o. Shri Gendraj Singh. The AO required the assessee to furnish documentary evidences with regard to identity and creditworthiness of the lender and genuineness of transaction. However, the assessee merely submitted the confirmation of Shri Pushpraj which according to the AO, was a bald confirmation. The AO noted that Shri Pushpraj was not even assessed to tax as he did not even had a PAN. Thus, as per AO, the assessee had not established the identity and creditworthiness of the lender and genuineness of transaction. Accordingly, the AO made an addition of Rs.8,00,000/- u/s. 68 of the Act on account of unexplained credit in the form of unsecured loan.
45.3 Aggrieved with the Order of Assessment, the assessee preferred an appeal for the subject assessment year before the ld. CIT(A). The ld. CIT(A), vide Para (4.3) at page no. 14, noted that the assessee was in receipt of loan of Rs.8,00,000/- from Shri Pushpraj Singh. The ld. CIT(A) further noted that Shri Pushpraj was not having any income. As per ld. CIT(A), the assessee stated that Shri Pushpraj had sold the agricultural 99 M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others land and given loan to the assessee. The ld. CIT(A) observed that no prudent person will sell agriculture land and give a loan to the assessee. The ld. CIT(A) then discussed the principle of section 68. Finally, the ld. CIT(A) held that the assessee failed to discharge the burden of proof by not establishing the genuineness of transaction and creditworthiness of the party. Accordingly, the ld. CIT(A) confirmed the addition of Rs.8,00,000/- in the assessee's income.
45.4 Aggrieved with the Order of the ld. CIT(A), the assessee is in appeal before us.
45.5 Before us, learned CIT(DR) vehemently argued supporting the observations of the AO on this issue. The learned CIT(DR) also filed a Paper Book containing the judgments in favour of the Revenue on the issue of addition made in the completed year of assessment in a completed year of assessment.
45.6 Per Contra, Learned Counsel for the assessee has filed written synopsis. The relevant portion of such synopsis is being reproduced as under:
"C. Key Points of Assessee's Submission and Relevant Pages of Paper Book:
S. Marginal Submission in Brief Relevant
No. Notes Pages of
PB
1 No reference The AO has not made any single reference of any incriminating -
of any material for making the impugned addition of Rs.8,00,000/-.
incriminating [refer para (6.1) on page no. 10 of the assessment order] material 2 Return u/s. For the A.Y. 2013-14, the assessee had duly filed his return u/s. 139 of 10 100 M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others 139 duly filed the Act on 19-03-2014.
3 Completed / Since the return for A.Y. 2013-14 was duly filed on 19-03-2014, any Non-abated notice u/s. 143(2) for selection of case under scrutiny could have been year issued by the AO uptill 30-09-2014. However, no such notice was issued to the assessee for the A.Y. 2013-14.
In this case, no search was conducted in the premises of the assessee and therefore, the case of the assessee is that of the other person. In such circumstances, the reference to the date of initiation of search u/s. 132 in the case of the assessee shall be construed as reference to the date of receiving the books of account or documents etc. having jurisdiction over the assessee. [First Proviso to sub-section (1) of section 153C] Accordingly, in the case of the assessee, the date of search would be construed as 22-07-2016 i.e. the date on which Order u/s. 127 was passed by the CIT for transferring jurisdiction to the AO [here, the date of recording of reason i.e. on 05-07-2016 is irrelevant as by such time, the AO did not have any valid jurisdiction over the case of assessee].
Thus, on 22-07-2016, the assessment proceedings in the case of the assessee for A.Y. 2013-14 were deemed to have been completed. Accordingly, the A.Y. 2013-14 was a completed year of assessment.
3 Addition It is a settled law that no addition could be made in a completed year -
without of assessment without having recourse to any incriminating material.
incriminating
material
S. Marginal Submission in Brief Relevant
No. Notes Pages of
PB
1 Not based The AO has not made any single reference of any incriminating -
upon any material for making the impugned addition of Rs.8,00,000/-.
incriminating [refer para (6.1) on page no. 10 of the assessment order] material 2 No question of The Hon'ble Supreme Court in the case of Super Malls Pvt. Ltd. vs. -
belongingness PCIT (2020) 423 ITR 0281 (SC), have laid down the law that before arise. issuing notice under Section 153C, the Assessing Officer of the searched person must be "satisfied" that any document seized or Decision of requisitioned "belongs to" a person other than the searched person. SC in Super Malls Pvt. Since on the subject issue, the AO was not having any incriminating Ltd. material, the question of belongingness/pertainingness of any material does not arise at all. In such eventuality, the assessment order so passed by the AO u/s. 153C of the Act deserves to be knocked down on this legal ground alone.
101
M/s. K.L. Sharma and others
IT(SS) No.149/Ind/2019 and others
S. Marginal Notes Submission in Brief Relevant
No. PB Page
1 Nature of Both the authorities below had failed to appreciate the very vital fact 28
transaction not a that the subject transaction was not that of a loan but was an advance loan but advance against sale of house.
Shri Pushpraj in his confirmation had clearly stated that he had given advance against sale of house.
2 Confirmation The assessee duly filed a confirmation letter from Shri Pushpraj Singh 28 letter filed in which the complete name and address of Shri Pushpraj was given. 3 Through The advance of Rs.8,00,000/- was received through banking channel 29 banking channel which was received in the saving bank account of the assessee maintained with Canara Bank, on 24-04-2012 4 Identity, The assessee duly furnished confirmation letter of Shri Pushpraj 28 & 29 Creditworthiness Singh containing his complete name, phone no. and address. Further, and Genuineness Shri Pushpraj had certified to have given the said amount from sale of proved agricultural land. Furthermore, the amount was paid through banking channel.
5 No enquiry by The AO could have issued a summons u/s. 131 or notice u/s. 133(6) to -
the AO Shri Pushpraj Singh to verify the claim of the assessee. The AO merely alleged the confirmation to be a bald confirmation. The onus was lying upon the AO to disprove the claim of the assessee. However, no independent enquiry was made by the AO.
46. Before us, the ld. counsel of the assessee primarily contended that the impugned addition has been made by the AO merely on the basis of the documents furnished by the assessee during the course of the assessment proceedings. The ld. Counsel for the assessee stressed that no addition could have been made by the AO in a completed year of assessment without having recourse to any incriminating material for which the ld. Counsel relied upon the decision of the Hon'ble Delhi High Court in the case of CIT vs Kabul Chawla 380 ITR 573 (Del.) and other judicial authorities on this issue. The ld. Counsel for the assessee also contended that both the authorities below had failed to appreciate the very vital fact that 102 M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others the subject transaction was not that of a loan but was an advance against sale of house and Shri Pushpraj in his confirmation had clearly stated that he had given advance against sale of house. It was further contended that the assessee had duly furnished confirmation letter of Shri Pushpraj Singh containing his complete name, phone no. and address and the AO could have issued a summons u/s. 131 or notice u/s. 133(6) to Shri Pushpraj Singh to verify the claim of the assessee. However, no independent enquiry was made by the AO.
46.1 We have heard rival contentions, perused the records placed before us, duly considered the facts and circumstances, carefully gone through the orders of lower authorities and written and oral submissions made from both the sides and also gone through the judgments and decisions referred to and relied upon by both the sides.
46.2 As regard the legal ground of the assessee that the impugned addition has been made by the AO without having recourse to any incriminating material, we find that in the instant case, the assessment order has been framed by the AO in pursuance of the search operations carried out u/s. 132 of the Act on 12.08.2014. We further find that in the instant case, no search was conducted in the premises of the assessee and therefore, the case of the assessee is that of the other person. In such circumstances, by virtue of the first Proviso to sub-section 103 M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others (1) of section 153C of the Act, the reference to the date of initiation of search u/s. 132 in the case of the assessee shall be construed as reference to the date of receiving the books of account or documents etc. having jurisdiction over the assessee. We find sufficient force in the contention of the ld. Counsel for the assessee that in the case of the assessee, the date of search would be construed as 22-07-2016 i.e. the date on which Order u/s. 127 was passed by the CIT for transferring jurisdiction to the AO. We also find ourselves in agreement with the contention of the ld. Counsel for the assessee that in the instant case, the date of recording of reason i.e. on 05-07-2016 is irrelevant as by such time, the AO did not have any valid jurisdiction over the case of assessee.
46.3 We find that this Tribunal in the case of M/s. Golden Realities & Ors. vs. ACIT (2021) 42 ITJ 544 (Indore Trib.) has considered and discussed at length the applicability of the first proviso to sub-section (1) of section 153C of the Act for making a reference to the date of search in the case of third person and has accordingly allowed the legal grounds raised by the aforesaid assessee in that case.
46.4 Thus, we find that in response to the return of income furnished by the assessee u/s. 139 of the Act on 19-03-2014, no notice u/s. 143(2) of the Act was issued in the case of the assessee and therefore, the income so shown in the return u/s. 139 had attained finality prior to the date of the search qua the 104 M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others assessee i.e. 22.07.2016. Thus, we find that the impugned addition of Rs.8,00,000/- on account of unexplained cash credit u/s. 68 has been made by the AO in a completed assessment year i.e. A.Y. 2013-14 in respect whereof the time limit for issuance of notice under s.143(2) of the Act had already got expired and as such, no assessment proceedings were pending on the date of search. In such eventuality, the A.Y. 2013-14 cannot be considered as an abated assessment year. Undisputedly, the AO has not brought any incriminating material on record for making the impugned addition. Such fact has also been conceded by the ld. CIT (DR). Thus respectfully following the settled judicial precedence which are squarely applicable on the instant issue we are of the view that no addition could have been made by the AO in the assessee's income without having recourse to any incriminating material. Accordingly, we are inclined to delete the addition of Rs.8,00,000/- so made by the AO for the A.Y. 2013-14. Since we have already deleted the addition on the legal ground raised by the assessee, we do not consider it necessary to adjudicate the issue on merits.
46.5 We find that through legal ground No. 2, the assessee has contended that the AO had invoked the provisions of s.153C of the Act in the case of the assessee for the A.Y. 2013-14 without having recourse to the incriminating material belonging/ pertaining to the assessee for such assessment year and the very initiation of the assessment proceedings by the AO is 105 M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others illegal and void-ab-initio. We do not find any force in the plea of the assessee for the very reason that the AO had made some other additions in the hands of the assessee for the A.Y. 2013- 14 which were based upon the incriminating material found during the course of search. Thus, we do not find any infirmity in the action of the AO for invoking the provisions of s.153C in the case of the assessee for the A.Y. 2013-14. Thus, ground no.2 raised by the assessee for A.Y.2013-14 is dismissed.
46.6 Ground no.3 being alternative ground becomes infructuous as we have already allowed ground no.2 for A.Y. 2013-14.
46.7 In the result, assessee's appeal for A.Y. 2013-14 is partly allowed.
47. Ground No. 1 of the Assessee for A.Y. 2014-15 47.1 This is a general ground of appeal and the assessee himself has not made any specific submission in respect of this ground of appeal. Therefore, no adjudication is considered necessary and accordingly, this ground of appeal of the assessee is dismissed.
48. Ground Nos. 2 and 3(a) & 3(b) of the Assessee for A.Y. 2014-15 48.1 Through these grounds of appeal, the assessee has challenged the action of the ld. CIT(A) in upholding the addition of Rs.20,30,000/- made by the AO on account of unexplained cash loan given to Shri R.B. Singh for A.Y. 2014-15. 48.2 Briefly stated facts of the issue, as culled out from the records, are that during the course of the search, page no.48 of 106 M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others LPS-6 was seized. From such loose paper, the AO noted that it was an acknowledgment by Shri R.B. Singh wherein he stated that on 03.01.2014, Rs.20.30 lacs were taken as loan from Shri Vijay Maheshwari (assessee) which would be repaid on 30.04.2014 and in case, he was not able to repay the amount on due date, then he will repay Rs.21,70,000/- on 30.06.2014. A copy of the loose paper has been scanned by the AO at page no. 3 of his Order. The AO required the assessee to explain the loose paper and in response, the assessee vide letter dated 29.11.2016 submitted that such letter was a projection which did not materialize. The relevant reply of the assessee has been reproduced by the AO at para (4.2) on page 3 & 4 of the Assessment Order. The AO, by rejecting the submission of the assessee, concluded that the nature and language of such page clearly establishes that the transaction actually took place and it was not a projection as claimed by the assessee. Accordingly, the AO held that the assessee had given an unsecured loan of Rs.20,30,000/- in cash to Shri R.B. Singh on 03.01.2014 and the source was unexplained. Finally, the AO made an addition of Rs.20,30,000/- in the hands of the assessee.
48.3 Aggrieved with the Order of Assessment, the assessee preferred an appeal for the subject assessment year before the ld. CIT(A). The ld. CIT(A), vide Para (4.2) at page no. 13 & 14, held that the paper clearly states the amount of loan taken and repayment of loan and it was not a projection but it was an 107 M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others actual transaction between the assessee and Shri R.B. Singh. Finally, the ld. CIT(A) confirmed the addition made by the AO.
48.4 Aggrieved with the Order of the ld. CIT(A), the assessee is in appeal before us.
48.5 Before us, learned CIT(DR) vehemently argued supporting the observations of the AO on this issue.
48.6 Per Contra, Learned Counsel for the assessee has filed written synopsis. The relevant portion of such synopsis is being reproduced as under:
"Key Points of Assessee's Submission and Relevant Pages of Paper Book:
S. Marginal Submission in Brief Relevant
No. Notes Pages of
PB
1 Loose paper The subject loose paper page no. 48 of LPS-6 was seized during the -
seized from course of search from the premises of Smt. Sunita Maheshwari.
premises of
third person No presumption u/s. 292C can be drawn against the assessee
2 Appears to be The loose paper appears to be a draft promissory note proposed to be 27
a draft given by some Shri R.B. Singh.
promissory It is incomplete inasmuch it is not giving full details such as address
note of both the parties is blank, mode of payment not given. Most
importantly, it is not signed by anyone.
3 Does not at all The subject loose paper is unsigned. It appears to be a draft 27
belong/ promissory note written by Shri R.B. Singh in favour of the assessee.
pertain to the However, such loose paper cannot be said to be belonging to the assessee assessee.
Since the loose paper is not signed by the assessee, the same can also not be said to be pertaining to the assessee.
4 Decision of The Hon'ble Supreme Court in the case of Super Malls Pvt. Ltd. vs. -
SC in Super PCIT (2020) 423 ITR 0281 (SC), have laid down the law that before Malls Pvt. issuing notice under Section 153C, the Assessing Officer of the Ltd. searched person must be "satisfied" that any document seized or requisitioned "belongs to" a person other than the searched person.
Since the loose paper was not belonging/ pertaining to the assessee, 108 M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others the AO was not justified to issue notice u/s. 153C of the Act for the A.Y. 2014-15. In such eventuality, the assessment order so passed by the AO u/s. 153C of the Act deserves to be knocked down on this legal ground alone.
S. Marginal Notes Submission in Brief Relevant No. PB Page 1 Transaction had The said promissory note was a draft. Shri R.B. Singh intended to 27
not taken place. obtain some loan from Shri S.K. Maheshwari. Since, Shri S.K. Maheshwari did not have the necessary funds in his bank account, he Draft proposed to lend the amount through the bank account of his nephew promissory note. Shri Vijay Maheshwari (being the assessee). Accordingly, Shri S.K. Maheshwari asked Shri R.B. Singh to prepare a promissory note Shri R.B. Singh undertaking the necessary details. In such circumstances, Shri R.B. did not obtain Singh prepared a draft and submitted to Shri S.K. Maheshwari.
funds from
assessee However, subsequently, Shri R.B. Singh got his funds arranged from
eventually. some other source and he did not obtain the said funds from Shri S.K.
Maheshwari or the assessee.
The factum of the non-materialization of transaction is clearly evident from the loose paper itself which is completely unsigned, missing various important details such as mode of loan, address of payer/payee etc. In such eventuality, merely because some draft unsigned and unexecuted promissory note was found from the premises of a third person, no addition can be made in the hands of the assessee.
2 No enquiry by The AO merely on the basis of some draft, unsigned and unexecuted -
the AO promissory note, ventured into making of addition in the hands of the assessee. The AO could have made an enquiry from Shri R.B. Singh by issuing summons u/s. 131 or notice u/s. 133(6) which was not done.
49. Before us, the ld. counsel of the assessee contended that in respect of the impugned loose paper page no. 48 of LPS-6 which was seized during the course of search from the premises of Smt. Sunita Maheshwari, no presumption u/s. 292C can be drawn against the assessee. It was further contended that the loose paper was a draft promissory note proposed to be given by some Shri R.B. Singh and the same was incomplete inasmuch it was not giving full details such as address of both the parties 109 M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others is blank, mode of payment not given. Most importantly, it was not signed by anyone. In such circumstances, according to the assessee, since the loose paper was not belonging/ pertaining to the assessee, the AO was not justified to issue notice u/s. 153C of the Act and frame assessment in pursuance thereto for the A.Y. 2014-15. It was further contended that Shri R.B. Singh had initially intended to obtain loan from the assessee but, meanwhile he got the funds arranged from some other sources and therefore, the transaction of loan with the assessee did not materialize. It was only for such reason that the said promissory note remained a mere draft and was unsigned by any of the parties. The ld. Counsel for the assessee contended that the AO could have made an enquiry from Shri R.B. Singh by issuing summons u/s. 131 or notice u/s. 133(6) which was not done. Further, the AO did not bring any corroborative material on record to establish that any such loan was actually given by the assessee to Shri R.B. Singh.
50.1 We have heard rival contentions, perused the records placed before us, duly considered the facts and circumstances, carefully gone through the orders of lower authorities and written and oral submissions made from both the sides and also gone through the judgments and decisions referred to and relied upon by the Ld. Counsel for the assessee.
50.2 As regard the legal ground raised by the assessee that the impugned loose paper was not relating to him, we do not find 110 M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others any merit in such a contention of the assessee. We find that the loose paper was containing the name of the assessee. We further find that the subject loose paper was found from the residence of Shri Suresh Maheshwari and the assessee is a nephew of Shri Suresh Maheshwari. In such circumstances, the loose paper containing the name of the assessee cannot be said to be not relating to the assessee. Accordingly, we do not find any force in the legal plea raised by the assessee and therefore, the legal ground no. 2 of the assessee is hereby dismissed.
50.3 On merits of the issue, we find that the subject loose paper which was in the form of a promissory note written by Shri R.B. Singh was undated and unsigned. Further, we also find that the AO except relying on the subject loose paper, could not bring any cogent material on record to establish that the loan was actually given by the assessee. We also find that the AO had not conducted any independent enquiry from Shri R.B. Singh for unearthing the truth on surface. Such fact of non-conduction of any enquiry by the AO has also been conceded by the ld. CIT (DR) before us. Thus, we find that the AO merely on the basis of some rough draft, unsigned and unexecuted promissory note, ventured into making of addition in the hands of the assessee which is not permissible in the eyes of law. In such circumstances, we do not find any reason to uphold the addition made by the AO on this count. Accordingly, we set aside the findings of the ld. CIT(A) in 111 M/s. K.L. Sharma and others IT(SS) No.149/Ind/2019 and others confirming the addition made by the AO and we hereby direct the AO to delete the addition of Rs.20,30,000/- made in the hands of the assessee. Resultantly, the ground Nos. 3(a) & 3(b) of the assessee are allowed.
51. In the result, all the captioned appeals at the instance of revenue are dismissed. Assessee's appeal in IT(SS)ANo.22/Ind/2020 is allowed and assessee's appeal in IT(SS)ANos. 35 & 36/Ind/2021 are partly allowed.
The order pronounced as per Rule 34 of ITAT Rules, 1963 on 11.02.2022.
Sd/- Sd/- (MAHAVIR PRASAD) (MANISH BORAD) JUDICIAL MEMBER ACCOUNTANT MEMBER दनांक /Dated : 11.02.2022 Patel/PS
Copy to: The Appellant/Respondent/CIT concerned/CIT(A) concerned/ DR, ITAT, Indore/Guard file.
By Order, Asstt.Registrar, I.T.A.T., Indore 112