Income Tax Appellate Tribunal - Pune
Shri Ashok Keshvlal Oswal,, Pune vs Department Of Income Tax on 19 September, 2013
IN THE INCOME TAX APPELLATE TRIBUNAL
PUNE BENCH "A", PUNE
Before Shri G.S. Pannu, Accountant Member
and Shri R.S. Padvekar, Judicial Member
ITA No. 357/PN/2012
(Assessment Year 2001-02)
ITO, Ward-2(3), Pune .. Appellant
Vs.
Shri Ashok Keshvlal Oswal,
303/1, Nanapeth, Pune-411002 .. Respondent
PAN No. AAAPO6196N
Assessee by : Smt. Deepa Khare
Revenue by : Shri Rajeeb Jain
Date of Hearing : 19-09-2013
Date of Pronouncement : 30-09-2013
ORDER
PER R.S. PADVEKAR, JM :
This appeal is filed by the Revenue challenging the impugned order of the Ld.CIT(A)-II, Pune dated 29-11-2011 for the A.Y. 2001-02.
2. The solitary issue for consideration before us is whether the Ld.CIT(A) was justified in deleting the addition of Rs.22,02,000/- made by the AO towards alleged unaccounted investment fund. During the course of search and seizure operation in the case of Shri Shriram H. Soni, the assessee was issued notice u/s.148 of the Act on 18-03-2008. In response to said notice the assessee informed that his return filed for A.Y. 2001-02 declaring total income of Rs.78,530/- may be treated as in response to notice u/s.148.
2.1 As per the facts on record, the assessee is an individual and he is in the business of trading and running a small grocery shop since 1995 at Nanapeth, Pune. There was a search and seizure action u/s.132 of the Act which was carried out against one Shri Shriram H. Soni on 29-07-2003 and number of documents and 2 books of accounts were seized. It was revealed that Sri Shriram H. Soni was in the Finance/brokerage business. Many of the cash transactions were revealed from the document seized during the course of search in the residence of Shriram H. Soni. The blank as well as signed promissory notes/bills of exchanges, blank undated cheques and amounts of loan mentioned, beside the entries in the cash book, check list of the borrowers indicating the due date of payment of interest and brokerage paid to Shriram H. Soni were found in the documents seized.
2.2 It was noticed that name of one "Ashok Oswal" was appearing in the seized document in abbreviated/distorted form and as per the document there was an indication that the said person has invested nearly 22 lakhs as on 31-03-2000. The AO brought to tax the said amount which was towards the principal and interest amount of Rs.7,721/- u/s.69 for the A.Y. 2000-01 but said year is not before us. In the A.Y. 2001-02, the AO worked out the peak of investment on the basis of loans refunded and loans advanced as per the seized documents available and worked out the peak amount of fresh investment of Rs.18,14,150/- and made addition of Rs.22,02,000/- u/s.69 of the Income Tax Act. The AO has discussed the modus operandi followed by Shriram H. Soni wherein it has been mentioned that loan in cash has to be advanced normally for 90 days after deducting the interest thereon which varies from 1.5% to 2% per annum and he is to charge the brokerage which varies from 0.25% to 0.5%. As noted by the AO the name of the assessee was appearing in the seized document in abbreviated/distorted form as "Oswal Ahsok" or "Oswal ASK". The said document was given to the assessee and sought his explanation. The assessee totally denied having any connection with Shriram Soni and stated that he is running a small grocery shop and in the year 2000 he was 23 years of age. He also contended that assessee has no assets, property or investments and his financial position is not sound. The assessee denied the documents on which name "Ashok Oswal" was appearing as having any nexus with him. The assessee also stated that in one or 2 places signatures are appearing on the documents and those signatures are different than the assessee's signature. The assessee also filed the Telephone Directory of the Pune City to 3 show that there were many persons with the name "Ashok Oswal". But the AO was not convinced and completed the assessment by making addition of Rs.22,02,000/-. The assessee carried the issue before the CIT(A).
3. So far as the A.Y. 2000-01 is concerned the Ld. Counsel as well as the Ld. DR unable to explain whether the department has filed the appeal or not but as assessment in both the A.Yrs. 2000- 01 and 2001-02 are based on the same reasoning and the evidence, hence we decided to dispose of this appeal independently.
4. In this case, the CIT(A) has called for remand report of the AO in respect of the submissions made by the assessee in the A.Y. 2000-01 and the remand report was submitted by the concerned AO. In this case, before the AO the assessee filed an affidavit stating that he has no business connection or any transaction with Shriram H. Soni. He also did not know Shriram H. Soni. He also denied that he had given any loan on interest to Shriram H. Soni as alleged in the year 1999-2000. The assessee also filed bank statement of Ratnakar Bank Ltd., Nanapeth Branch, Pune for the period 27-09-1998 and the Assessing Officer recorded that no loan transactions were found. It appears that in this case AO has recorded the statement of 5 to 7 persons whose names are "Ashok Oswal" and the statements were forwarded to the Ld.CIT(A). As per the statements recorded names of those persons are as under :
1. Shri Ashok Hansraj Oswal
2. Shri Ashok Kantilal Oswal
3. Shri Ashok Kundanmal Oswal
4. Shri Ashok Hirachand Oswal
5. Shri Ashok Kanhaiyalal Oswal 4.1 As per the remand report sent by the AO on verification of the seized material, it was noticed that no promissory note/blank cheques in the name of "Ashok Oswal" was found. The AO also reported that even if the name "Oswal "Ashok was appearing in the investor column in the diary, there were no signatures. The Ld.CIT(A) accepted the plea of the assessee that the assessee is 4 not the same "Oswal Ashok" whose name is appearing in the seized documents. The reasons given by the Ld.CIT(A) are as under :
"3.10 I have considered the submissions of the appellant, all the remand reports received, counter comments of the appellant and material available on record. The appellant has raised one ground of appeal for both the years i.e. A.Y. 2000-01 and 2001-02, which pertains to addition made by the A.O. of Rs.22,07,701/- at Rs.22,02,000/-for A.Y. 2000-01 and 2001-02, respectively u/s 69 of the IT. Act, 1961. During the assessment proceedings the A.O. received the information from the Addl CIT, Central Range-2, Pune, and the seized documents in the case of Shriram H. Soni, a finance broker and notice u/s 148 was issued to the appellant. These seized documents pertained to search and seizure action u/s 132 carried out in the case of Shriram H. Soni, a finance broker on 29.07.2003. A large number of seized documents, books of account had been seized relating to the finance brokerage business of Shriram H. Soni apart from regular business transactions relating to the finance brokerage business. The incriminating documents relating to the advance of cash loans running into several crores were found and seized along with the related documents in the form of blank promissory notes duly signed by the borrowers, blank undated cheques duly signed and with loan amount mentioned besides the checklist of borrowers indicating the due dates of payment of interest and brokerage. The A.O. during the assessment proceedings found that the name of one Asok Oswal was appearing in the seized document in abbreviated and distorted form as 'Oswal Ashok' or 'Oswal ASK'. During the course of scrutiny of the seized documents of Shri S.H. Soni, the A.O. listed all the transactions appearing on page nos. 85, 86, 87, 88, 89, on which the name of the appellant appeared. The A.O. has also discussed the modus operandi of Shri S.H. Soni with respect to his money lending business in the assessment order for both the assessment years.
3.11 The A.O. then handed over the copy of the seized documents to the appellant and sought the explanation with respect to the entries contained therein on the documents. The appellant denied to have any connection, whatsoever, with Shri Shriram H. Soni and submitted that a small grocery shop was being run by him. However, the A.O. did not accept the explanation of the assessee and held that the cash loans appearing on the seized documents were the investment of the appellant along with the details of interest thereon was the deemed income u/s 69 of the Act, as the same was not recorded in the books of account and the said amounts were taxed as income for assessment years 2000-01 and 2001-02.
3.12 During the appellate proceedings the Ld. Counsel of the appellant submitted that the appellant had no connection with Shri Shriram H. Soni as the appellant is a person having a small grocery business and that he has no assets, property or any investment, and that the financial position of the appellant is not very good and, therefore, he was not capable of advancing such 5 huge amounts to anybody. It was also explained that the appellant was given a copy of the seized material on the basis of which additions were sought to be made and on reference to the said material, it can be seen that wherever the name 'Ashok Oswal' appears, there is no mention of middle name. There is no signature of the appellant except on page 3 of bundle no. 7 of Panchanama dated 02.08.2003 where there are signatures of the respective persons named therein and the signature against the name 'Ashok Oswal' is different than the signature of the present appellant. It was, therefore, emphasized that, the fact that the signature of the person on the said page does not match with the present appellant shows that the person whose name appears as 'Ashok Oswal' on the seized material is not the present appellant and, therefore, more material is required for a conclusion to be arrived at that the person concerned is the present appellant. The telephone directory on being referred indicates several persons residing in Pune where the name 'Ashok Oswal' appears and, therefore, unless the identity of the specific person is proved, the addition cannot be made purely on presumption. The A.O. has not accepted the explanation furnished and, therefore, it was contended that the basis on which notice u/s 148 has been issued should be brought on record as the appellant is unable to understand the reason why the said notice u/s 148 has been issued to him. It was also stated that there has to be some material apart from the similarity of the name to show that the appellant is the only person who has made transactions with Shri Soni. It was also contended by the appellant that apart from the similarity in name of the appellant, there is no other corroborative material to suggest any nexus of the appellant with Shri Soni or the transactions reflected in the seized material as there are no promissory notes or blank cheques found.
3.13 On the basis of the above submission made by the appellant remand report had been called for from the A.O. from time to time. The reports submitted by the A.O. on the basis of enquiries conducted indicated that at least 10 persons by the name of Ashok Oswal were found, however, all of them had denied having any connection with Shri Soni. In this regard, a letter dated 22.07.2009 was also sent by the Addl. CIT, Range-2, Pune to the Addl. CIT, Central Range-2, Pune, in which a request was made for supplying information pertaining to Shri 'Ashok K. Oswal' especially with respect to the determination of PAN and address of Shri Oswal as the proceedings were started on the basis of information passed on by the Central Range. It was also mentioned in the said letter that on a search of the BSNL directory names of more than 10 persons by the name Ashok Oswal were found in Pune and, therefore, to back the assessment order before the CIT (Appeals) the identity of the assessee needs to be established. However, no such reply was received back from the Central Range-2, Pune, by the Addl. CIT Range-2, Pune. The A.O. was, thereafter, again asked vide the letter dated 18.07.2011 to locate any corroborative evidence in the form of signed blank cheques, promissory notes etc. to establish the connection of the appellant with Shri S.H. Soni as found in other related cases during the 6 search action u/s 132. In the said remand report dated 01.08.2011 it was stated by the A.O. that on verification of the seized material contained in Bundle No. 98, no promissory notes or blank cheques in the name of 'Ashok Oswal' were found and that only in the copy of the checklist the name of 'Oswal Ashok' appeared in the 'Investor' column of the page, however, no signatures against the above entries of 'Oswal Ashok' were found in the seized documents. The appellant had also submitted affidavit on 01.11.2010 stating that there was no business connection or any transaction with Shri S.H. Soni.
3.14 The copies of all the remand reports received were given to tie appellant for comments and vide letter dated 02.09.2011 it was submitted that the remand reports were called for to establish the identity of the appellant w.th reference to the seized material apart from the name as appearing in the seized documents. It was stated that in the first remand report dated 21.12.2009, the A.O. has made enquiries with the persons named in the Telephone Directory, which was furnished by the appellant and the persons examined by the A.O. have denied to have any connection with the entries in the seized material, however, no corroborative material has been put forward by the A.O. that could establish the identity of the appellant and on the basis of which the A.O. could have initiated the action u/s 148 and thus, in the first remand report the A.O. has indirectly accepted the non-existence of corroborative material. In the second report dated 14.01.2011,, the A.O. has observed that the appellant has not given any loan to Shri S.H. Soni which support the contention of the appellant that there is no connection of the appellant with the seized material. In the 3rd remand report, the A.O. after verification of the seized material has confirmed that there are no cheques or promissory notes found in the seized material and also confirmed that there were no signatures either of the appellant against the name wherever 'Oswal Ashok' appears. Therefore, the said report conclusively proves that the action has been taken by the A.O. without any corroborative material and, therefore, no notice u/s 148 of the A.O. could have been issued in the case of appellant and the additions made are, therefore, no justified in law.
3.15 The appellant's counsel has also contended that the identity of the appellant has not been established by the A.O. and that there is no corroborative material either in the seized document so as to prove the nexus of the appellant to the transactions with Shri S.H. Soni. It has been, therefore, stated that in the absence of any corroborative material no action can be taken in the case of the appellant. The appellant has placed reliance on the following judicial decisions:
1. Kirti Oswal Vs DCIT, Pune ITAT, ITA No.1700/PN/07
2. Addl. CIT Vs Ms Lata Mangeshkar, 97 ITR 696 (BOM)
3. Ramchandra Oil Mills Vs Commissioner of Sales Tax, 77 CTR 317 (Bom)
4. Anand Prakash Gupta Vs ACIT, 92 TTJ 766 (Jodh)
5. ITO Vs Bala Prasad R. Lokmanyawar, 18 TTJ 167 (Pune) 7 3.16 The addition of the loans along with the interests has been done by the A.O. on the basis of the seized documents found during search action in the case of Shri Shriram Soni. However, no corroborative evidence had been found or has been brought on record by the A.O. during the assessment proceedings to substantiate the notings on the document found during the search action in the case of Shriram Soni. The appellant has categorically denied to have made any transaction with Shriram H. Soni and had also filed affidavit to that effect denying any such transaction with Shri Soni. The appellant has also contended that no independent evidence to support the paper entries that the appellant firm had taken cash loans and incurred expenditure in cash have been found or brought on record by the A.O. In the remand report dated 28.07.2011, the A.O. has categorically mentioned that after verification of the seized material and as per record no blank cheques or any 'promisory note' were found in the case of the appellant. It has also been mentioned that, wherever, the name 'ASHOK Oswal' appears there are no signatures. These specific findings clearly indicate that the A.O. has not identified whether 'Ashok Oswal' mentioned in the seized papers is the same as the appellant. On perusal of the assessment order also, it is apparent that no enquiry in this regard is seen to have been carried out by the A.O. during the assessment proceedings, despite the fact that the appellant had categorically denied to have had any transactions with Shriram H. Soni, however, some enquiry was carried out though with respect to the names of the individual named as 'Ashok K. Oswal' as enlisted in the telephone directory during the remand proceedings. However, in none of the cases of persons whose names were similar to that of appellant, any such transaction with Shri Shriram Soni was found by the A.O.' Even examination of Shriram H. Soni was not carried out with respect to the seized documents and which pertained to that of the appellant and even the cross-examination was also not allowed to be done during the assessment proceedings.
3.17 The appellant has cited a number of case laws in respect of the claim made. In the case of Addl. CIT Vs Lata Mangeshkar (1974) 97 ITR 696 (Bom), the Hon'ble Bombay High Court held that the diaries are not books of account and no liability can be fastened on the person on the basis of an unilateral entry made by another person against such person. Similar view has been taken;
in the case of Pratharna Construction (P) Ltd. Vs. DCIT, (2001) 70 TTJ 122 (Ahd) and SMC Share Brokers Ltd. Vs. DCIT (2007) 109 TTJ (Delhi) 700, that addition cannot be made in the hands of the assessee on the basis of entry in the diary and statement of third party at the back of the assessee from whom diary has been found by the revenue. The burden is on the A.O. to show that the amount found to be credited in the assessee's account from the seized documents of Shriram H. Soni, belonged to the assessee, by bringing proper evidence on record and the assessee could not be expected to explain the source of income to discharge the burden that lay upon him. Possession of another cannot be presumed to be the possession of the assessee. If the ownership is disputed the 8 burden of proving that the possession was not possession as owner and that ownership was of someone else, is on the assessee, however, if the A.O. wants to assert that the assessee is the owner of the amount received from someone else, then the burden lies on him to prove the ownership of the assessee.
3.17.1 Similar view has been taken in the other cases cited by the appellant. In the case of Kirti C. Oswal Vs DCIT, Pune ITAT, ITA No. 1700/PN/07 dated 03.10.2008, where seized papers and incriminating material in the form of ledger account in the books of Ranka Jewellers found from the premises of la third person and on the papers only one name 'Kirti' has reflected. The Tribunal held that the paper shows only one word 'Kirti', which by itself does not lead to the inference that it was the account of the account of the assessee. The assessee had clearly denied any relation in respect of such transaction. Even Ranka Jewellers had nowhere stated that this account referred to the assessee. The address given was found to be a vague statement which could not be related to the assessee. The Tribunal held that no inference can be drawn from, facts from record that transaction from seized material related to the assessee and, therefore, the addition was not justified. In the other cases cited by the appellant Court/Tribunal held that addition cannot be made in cases where books of account/ documents have been seized from the third persons premises and where no corroborative material has been brought on record.
3.17.2 In the case of CBI Vs V C Shukla & Others, AIR 1998 Supreme Court 1406 has held that the word 'Books' - Meaning of spiral pads and spiral note-books are 'Books' within the meaning of section 34 of the Evidence Act, 1872 but, not loose sheets of paper contained in the file. It was also held that correct and authentic entries in books of account cannot fix liability upon the person in absence of independent evidence as their trustworthiness. Since an element of self interest and partisanship of the entrant to make a person - behind whose back and without whose knowledge the entry is made - liable cannot be ruled out, the additional safeguard of insistence upon other independent evidence to fasten him with such liability, has been provided for in Section 34 by incorporating the words 'such statements shall not alone be sufficient to charge any person with liability. Even correct and authentic entries in books of account cannot without independent evidence of their trustworthiness, fix a liability upon a person.
Where there was no independent evidence regarding payment of amount in question as represented by entries to the accused and the evidence of witnesses who had admitted the receipts of payments as shown against them in the books of account in question, could not be held to be an independent evidence against the accused, Section 34 cannot be pressed into service so as to hold the said books of account as admissible in service.
93.18 It would be relevant to mention here the case of CIT Vs Salekchand Agarwal (20,08) 300 ITR 426 (All), the facts of which were that in a search in the premises of a third party indicated evidence of loan from the assessee, but the assessee denied having given any such loan or advance to the searched party and the A.O. made an addition disbelieving the denial. Tie Tribunal found that apart from the material, there was no corroborating evidence to suggest that the assessee did advance the loan. The High Court held that in the face of assessee's denial and in absence of any other material, the deletion was found justified. Where documents are found in the premises of a party searched, it becomes the duty of the searched party to explain the contents to the satisfaction of the; A.O. Would this constitute evidence against third party as well? The law presumes that it could so constitute by providing for initiation of block assessment proceedings against such third party u/s 158BD or 153C of the Act. It was such initiation which was questioned successfully in the case of Amarjot Singh Bakshi (HUF) Vs ACIT (2003) 263 ITR (AT) 75 (Del) where, what was if found against the third party was a mere noting in a slip of paper. Such slip indicated as per the A.O., sale consideration received and an addition was made. The matter was referred to a third member on difference between the members of the Bench, the Third Member agreed that, though Indian Evidence Act has no strict application, its principles require consideration. If the noting was in regular books of account, it would have some relevance. But what was found on a; slip of paper or loose sheet is not covered by any rule under the Evidence Act. In absence of anything more to corroborate the inference drawn on the basis of noting on a slip of paper, the addition could not be sustained and the statements recorded were also not subjected to cross examination.
3.19 In the present case, however, there was not even the existence of any promissory note or blank cheque signed by any of the partners of the appellant firm. This is also revealed from the remand reports of the A.O. which was obtained during the appellate proceedings and discussed in the earlier paras. Foremost, the identity of the appellant has not been established by the A.O. land that there is no corroborative material either in the seized documents or otherwise so as to prove the nexus of the appellant to the transaction with Shri Shriram H. Soni. In view of the above stated facts, and the ratio of the judicial citations and also in the absence of any corroborative material, the loans advanced along with interest cannot be treated as income u/s.69 of the Act. Therefore, the additions made by the A.O. of Rs.22,07,721/- and Rs.22,02,000/- for A.Y. 2000-01 and A.Y. 2001-02, respectively are liable to be deleted and the ground of appeal No.1 raised by the appellant for both the assessment years are allowed."
Now the Revenue is in appeal before us.
5. We have heard the rival submissions of the parties and perused the record. The first issue we have to decide is whether 10 the identity of the assessee is proved that he is the same "Oswal Ashok" or "Oswal ASK". As per the remand report given by the Assessing Officer, no promissory note or blank cheques on the names of the assessee were found. On perusal of the remand report, we find that Assessing Officer himself has examined many persons on suspicion, whose names were "Ashok Oswal" and the middle name was different. Admittedly, in the seized document, there is no middle name. The assessee filed the specific affidavit denying having any relation with Shriram H. Soni. In the remand proceedings, the AO examined bank account and has reported that no transaction was found between Shriram H. Soni and the assessee. It is very much interesting that when the AO himself is not sure about the identity of "Oswal Ashok", the name which is found in the seized document, how the assessee can be fastened with the liability of unaccounted transactions. We find that the AO himself admits that the assessee has specifically denied. Law is well settled that burden is on the Revenue to establish the identity if any person is to be charged under the Act. The action of the AO examining the different persons having the same name prima-facie establishes that Assessing Officer himself is not sure that the assessee is the same person whose name was found noted in the seized document. Moreover, nothing is on record to show that Shriram H. Soni has stated about the assessee that whatever the notings found were in respect of the assessee. No corroborative material is found. In our opinion, the Ld.CIT(A) has rightly deleted the entire addition as there is no evidence against the assessee. We find no merit in the appeal filed by the Revenue. Accordingly, the same is dismissed.
6. In the result, the appeal filed by the Revenue is dismissed.
Pronounced in the open court on this the 30th day of September 2013.
Sd/- Sd/-
(G.S.PANNU) (R.S.PADVEKAR)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Pune Dated: 30th September 2013
Satish
11
Copy of the order forwarded to :
1. Assessee
2. Department
3. CIT(A)-II, Pune
4 CIT-II, Pune
5. The D.R, "A" Pune Bench
6. Guard File
By order
// True Copy //
Senior Private Secretary
ITAT, Pune Benches, Pune