Income Tax Appellate Tribunal - Delhi
Sharad Chaudhary, New Delhi vs Department Of Income Tax on 25 July, 2014
1 ITA No. 933/Del/2012
Asstt. Year: 2006-07
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH 'G' NEW DELHI
BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER
AND
SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER
ITA No. 933/Del/2012
Assessment Year: 2006-07
Asstt.Commissioner of Income Tax, vs Shri Sharad Chaudhary,
Central Circle-2, 20, Okhla Industrial Estate,
New Delhi. Phase-III, New Delhi.
(Appellant) (Respondent)
Appellant by: Shri Ramesh Chandra, CIT DR
Respondent by: Shri K. Sampath
ORDER
PER CHANDRA MOHAN GARG, JUDICIAL MEMBER
This appeal has been preferred by the revenue against the order of the CIT-III, Delhi dated 1.12.2011 in Appeal No. 715/10-11 for AY 2006-07.
2. The sole ground raised by the revenue in this case reads as under:-
"On the facts and in the circumstances of the case, the CIT(A) has erred in law and on facts in deleting the addition of Rs.4,47,00,000/- made by the AO on account of undisclosed income by holding that the seized documents were dumb in nature."
3. Briefly stated the facts giving rise to this appeal are that a search and seizure operation u/s 132 of the Income Tax Act, 1961 (for short the Act) was carried out at the residential premises of the appellant on 15.01.2009. Consequent upon the search and seizure operation, a notice u/s 153A of the 2 ITA No. 933/Del/2012 Asstt. Year: 2006-07 Act was issued on 30.07.2009 to file return and in response, the appellant filed a return on 26.03.2010 declaring income of Rs.16,01,567/-. The AO completed the assessment u/s 153A r/w section 143(3) of the Act at an income of Rs.4,63,01,570/- vide order dated 27.12.2010, thereby making an addition of Rs.4,47,00,000 on account of undisclosed income under section 69 of the Act on the basis of certain written pages containing rough noting found during the course of search and seizure from the residence of the assessee appellant.
4. Admittedly, the assessee is a partner of various partnership firms and sources of income consist of income from salary, profit from various partnership firms, and income from capital gain and interest during the year under consideration. The assessee appellant also made investment in immoveable properties and earned short term/long term capital gains which were also duly considered in the return of income. During the search and seizure operation, certain loose papers and documents were found and seized from the residential premises of the assessee appellant which were named as Annexure A-1 to A-7 and which include certain pages related to transaction of immoveable properties which were duly considered and incorporated in the original return of income of the assessee. As per submissions of the assessee, the said loose papers also contain rough notings of various 3 ITA No. 933/Del/2012 Asstt. Year: 2006-07 proposals/offers in respect of immoveable properties, which were never executed or materialized. During the course of search and seizure operation, page no. 1 of Annexure 1 was also found and seized which contains certain rough notings. The AO was asked to explain the contents of Annexure A-1 as the same was found in the possession of the assessee. The assessee appellant submitted that the said loose papers of Annexure A-1 contains certain rough notings in respect of proposal/offer of land which were never executed/materialized and the assessee appellant has not made any investment in such land. The assessee also submitted that Annexure A-1 also contained details of day to day household expenses incurred on particular dates aggregating to Rs.32,450 which were met out of drawings made from partnership firms and cash withdrawal from bank.
5. The AO rejected the submissions and explanation offered by the assessee with regard to Annexure A-1 and made an addition of Rs.4,47,00,000/- u/s 69 of the Act with following observations and findings:-
"4.1. I have considered the submission of the assessee. The paper cannot be termed as a dumb paper as it clearly reflects the narration of event beginning from area of land, rate of land, payment details as well as consideration. A copy of the document is annexed as Ann- A-I with the order. The assessee for apparent reasons is trying to term the document as a dumb document. The document contains chronological details 4 ITA No. 933/Del/2012 Asstt. Year: 2006-07 of event and reflects period of payments in respect of the property referred to in the document. The fact emerging out of the documents clearly demonstrate that this paper is not a dumb paper and has been maintained to keep an account of date wise details of receipt/payments. The onus lies on the assessee to refute the facts emerging from the document as the same has been found from the possession of the assessee. In spite of being allowed specific opportunity to explain the paper vide order sheet entry dated 30th November, 2010, the assessee has merely termed the same as rough notings. From upper part of the document amount of transaction noted as 2.25 c ( 75 bigha X 30 L ) ,and then second plot of 11.5 bigha at the rate of Rs 17.50 lacs/22.50 lacs per bigha clearly established that the investment amount is in crores and paper is clearly containing detail of unaccounted transaction of the assessee. Under the circumstances the investment along with income reflected in this document is treated to be made outside the books of account and peak balance of Rs. 4,47,00,000/- is added to the income being investment as well as undisclosed profit on the deal. I am satisfied that the assessee has concealed particulars of income and penalty proceedings u/ s 27I (1)(c) of the I.T. Act are being initiated separately."
6. Being aggrieved by the above assessment order, the assessee preferred an appeal before the CIT(A) which was allowed with following conclusions and findings:-
"I have carefully gone through the notings recorded on page no. I of Annexure A-I seized from / the residential premises of the assessee and which has been reproduced in the assessment order. A copy of the said seized document has also been enclosed by the appellant in the paper book. As the finding of the AO with respect to the notings on the said seized paper and the submission of the appellant on the said seized paper has already been reproduced verbatim in the earlier part of this appellate 5 ITA No. 933/Del/2012 Asstt. Year: 2006-07 order therefore the same are not reproduced for sake of brevity. Suffice to say that in my considered opinion the notings on the top portion of the seized paper are apparently in the nature of dumb document as there is no description/ address of the property to which the notings refer neither any detail relating to any payment made either in cheque or in cash to any person has been mentioned on this seized paper. Thus on the face of it these notings are incapable of any interpretation as they do not constitute any coherent recording from which a clear and unambiguous inference relating to unaccounted investment /sale of land by the assessee can be unmistakably concluded. Further the AO has not brought anything on record through investigation or inquiry to corroborate his findings relating to unaccounted investment if any by the appellant or any of his family members as appearing in the list of investments reflected in their statement of affairs or balance sheet. Further from the jottings/notings made on the lower part of the seized paper it is seen that these relate to a total of 32,450/- on the left hand side and another amount of 4,47,000/- on the right hand side is referred to which the appellant has submitted as relating to enquiry for purchase of battery and UPS required by the assessee for his firm which has subsequently also been purchased as substantiated from the enclosed copy of bills for purchase of battery. The fact that these notings on the lower part of the page relates to battery is apparent for the reason that on the seized paper "4700 IC Betty" is written and that IC battery bearing no. 4700 does exist. Further the cost of one of such battery was around Rs. 3,500/- in the month of Sep. /Oct.2006 when these batteries have been purchased by the firms where appellant is a partner further substantiates the explanation given by the appellant. Thus the amount of Rs. 4,47,000/- written on lower right hand part of seized page relates to the price of 99 and 25 number of batteries (372000 & 75000 respectively). In view thereof there is no basis on which the amount of Rs. 4,47,00,000/- can be added as peak balance of investment by the appellant as 6 ITA No. 933/Del/2012 Asstt. Year: 2006-07 even this figure of Rs. 4,47,00,000/- has been wrongly interpreted by the AO as this amount is only for 4,47,000/-.
Coming to the legal position as to the person/party on whom the burden lies to refute the facts recorded in a document, in my considered view, in a case where the A.O. is of the view that the assessee's explanation is not acceptable or satisfactory regarding the contents of the document seized from his premises/possession (the notings being unintelligible and cryptic in nature) then the burden to substantiate or prove the contents of the document shifts over to the person who is making such assertion, that is the assessing officer in this case. This substantiation or drawing of logical and reasonable inference could either be derived by the A.O." from the contents written on the document itself when these are speaking in nature or in case the same are not entirely speaking/ coherent then too a rational correlation can be made by the assessing officer in conjunction with other corroborative material. Section 292C of the Act does raise a presumption against the assessee who has been searched upon that the contents of books of accounts and other documents found from his possession or control are true. However, in my considered view the word contents used in this section presupposes that the contents are intelligible, comprehensible and speaking either by itself or in correlation with other material or upon further investigation. Unless such is the case, mere jottings recorded on seized documents which are capable of several/various interpretations, lacks evidentiary value and is not sufficient enough to fasten tax liability on the assessee."
7. Now, the aggrieved revenue is before this Tribunal against the above impugned order with the sole ground as reproduced hereinabove. 7 ITA No. 933/Del/2012 Asstt. Year: 2006-07
8. We have heard rival arguments of both the parties and carefully perused the record, inter alia assessment order, impugned order of the CIT(A) and legal propositions and decisions/citations relied on by both the parties. Ld. DR supporting the assessment order submitted that Annexure A-1 could not be termed as a dumb paper as the same was clearly reflecting the narration of events beginning from area of land, rate of land, payment details as well as consideration. Ld. DR further submitted that the document Annexure A-1 contained chronological details of events and reflected a period of payment in respect of the property referred in the document. The DR further submitted that the document clearly demonstrated that the document was not a dumb paper and the assessee wrote and maintained the same including an account of date wise details of receipts and payments.
9. The DR vehemently contended that the onus lies on the assessee to reflect/rebut a fact emerging from the document i.e. Annexure-1 and the same has been found from the possession of the assessee appellant. The DR pointed out that as per submissions and explanation offered by the assessee Annexure -A-1 document is rough notings of the various proposals/offers in respect of immoveable property which were never attributed/materialized but on perusal of upper part of the document, the amount of transaction noted as 2.25 c (75 bigha x 30 L) and then second part of noting is related to 8 ITA No. 933/Del/2012 Asstt. Year: 2006-07 land measuring 11.5 bigha @17.50 lakh/22.50 lakh per bigha which clearly establishes that the investment amount was correctly recorded and document Annexure A-1 was clearly reflecting the details of unaccounted transaction of investment in purchase of land amounting to Rs. 4.47 crores of the assessee. The DR also submitted that in the above circumstances and factual matrix, the AO rightly made impugned addition which was deleted by the CIT(A) without any cogent basis and justified reasons. The DR finally submitted that the impugned order may be set aside by restoring that of the AO.
10. Replying to the above submissions of ld. DR, the ld. Counsel of the assessee submitted that the AO erred both in fact and in law in making the impugned addition on account of undisclosed income u/s 69 of the Act only on the basis of doubt, suspicion, conjectures and surmises without bringing out any adverse material on record about the details and imaginary seller of the land property on which the said alleged undisclosed investment was made by the assessee appellant. Ld. counsel of the assessee reiterated the submissions made before the CIT(A) vide letter dated 18.11.2011(Para 04 of the impugned order of the CIT(A) and submitted that the AO made addition on the basis of certain written pages containing rough notings found during the course of search and seizure from the residence of the appellant. 9 ITA No. 933/Del/2012 Asstt. Year: 2006-07 Ld. Counsel of the assessee further submitted that the said loose papers also contain rough notings or various proposals/offers in respect of immoveable properties which were never acted upon or executed or materialized. It was also submitted on behalf of the assessee that the loose papers which were submitted as Annexure A-1 to A-7 include certain pages related to transaction of immoveable properties which were duly considered in the return of income of the assessee and the assessee made the investment in the said properties from his disclosed sources of income. It was also submitted on behalf of the assessee that the document in issue i.e. Annexure A-1 was found and seized from the residential premises of the assessee which only contains certain rough notings of proposal/offer of the land which do not reflect any reliable fact about the investment alleged to have been made by the assesee and which also contain certain details of day to day household expenses incurred by the asssessee on particular dates as mentioned therein.
11. Ld. Counsel of the assessee also pointed out that the AO has treated the amount of Rs.4,47,000 on rough paper Annexure A-1 as Rs.4.47 crores and added the same as income though no documents for purchase of land in respect of rough noting mentioned in Annexure A-1 were found during the search and seizure operation nor any other evidence or paper/document showing investment of the assessee in purchase of land was there on record. 10 ITA No. 933/Del/2012 Asstt. Year: 2006-07 It was also submitted on behalf of the assessee that on Annexure A-1 in front of amount of Rs.4,47,000 Rs.4700 IC Battery 25 quantity is also written which clearly indicate that the amount of Rs.4,47,000 relates to the inquiry of Betty and UPS required by the assessee for the office of his firm and the same has also been purchased subsequently. Ld. Counsel of the assessee also placed reliance on following decisions including recent decision of Hon'ble Jurisdictional High Court of Delhi vide dated 8.5.2014 in the case of CIT vs Gian Gupta
i) CIT vs Gian Gupta in ITA No. 955/2011 dated 8.5.2014 (Hon'ble High Court of Delhi)
ii) DCIT vs Dr. G.S.C. Rao in ITA No. 221/Del/2011 for AY 2007-08 ITAT Delhi Bench 'C' dated 9.9.2011
iii) DCIT vs M. Aja Babu in ITA No. 1755, 1756 & 1757/HYD/2012 dated 23.04.2014
12. From the impugned order, we observe that the CIT(A) has granted relief for the assessee and allowed the appeal by relying on the decisions of Hon'ble Jurisdictional High Court and on other decisions which are as follows:-
i) Atul Kumar Jain vs DCIT (1999) 64 TTJ (Del) 786
ii) CIT vs Girish Chaudhary (2008) 296 ITR 619 (Del)
iii) CIT vs Anil Bhalla (2010) 322 ITR 191 (Del)
11 ITA No. 933/Del/2012
Asstt. Year: 2006-07
iv) CIT vs Atam Valves (P) Ltd. 184 Taxman 6 (P&H)
v) ACIT vs Satya Pal Wassan (2007) 295 ITR (AT) 352 (Jabalpur)
13. On careful consideration of above submissions and contentions of both the parties, at the outset, we observe that admittedly, during the course of search and seizure operation held on 15.1.2009, Annexure A-1 to A-7 were found and seized from the residential premises of the assessee and except document Annexure A-1, the details and contents of other seized and found documents include certain pages related to transactions of immoveable properties which were duly considered and reflected in the return of income of the assessee and the investment on the said properties were made from the disclosed sources of income of the assessee. Now, the fact remains that the AO picked up document Annexure A-1 and held that from this document, the fact is clearly established that the assessee made investment in crores and relying on the details of the document Annexure A- 1, the AO treated the document reflecting the investment made outside the books of accounts and the AO made an addition of Rs.4,47,00,000/- the income of the assessee u/s 69 of the Act. For the sake of clarity and transparency in our observations and finding we are annexing the document in issue to this order as Annexure A-1.
12 ITA No. 933/Del/2012Asstt. Year: 2006-07
14. From careful perusal of Annexure A-1, we observe that on the top, there are two entries, first entry reflects 75 bigha of 30L 2.25C if this detail is accepted verbatim, then the total amount of 75 bighas land @30 lakh per bigha comes to 22.50 crore and not 2.25 crore. About the second entry, we observe that 11.5 bigha x 17.50/22.50 lacs per bigha and there is no detail of total consideration invested or proposed to be invested. We also observe that these two entries do not reflect any name of the proposer or seller of said land to whom alleged amount, for purchase of land or for making investment out of books of account from income from undisclosed sources was made. Then, after above two entries below the line, on the left side, there is detail of date wise amount and its total comes to Rs.32450. In our considered opinion, this detail has no relevance with the above mentioned two entries/details of land. On the right side, it has been mentioned 99- 372000.00, then the down line 25-75,000.00 and further total of these two entries Rs.4,47,00,000 has been mentioned. Ld. Counsel of the assessee vehemently contended that the AO has deleted the decimal from the total of Rs. 4,47,000/- and made an addition of Rs.4,47,00,000 based upon this dumb document which was containing noting on three counts: a) the amount of household expenditure incurred by the assessee out of drawing from partnership firms and cash withdrawn from the banks; b) cost of IC battery 13 ITA No. 933/Del/2012 Asstt. Year: 2006-07 proposed to be purchased for the office of the firm of the assessee and, c) on the top, there was detail of two proposals/offers in respect of immoveable properties which were never acted upon or executed or materialized. The ld. Counsel of the assessee also added that during the search and seizure operation, the revenue authorities have not found any other incriminating document which could support that the assessee made investment from undisclosed income in the land as per stipulation of entry no. 1 and 2 in Annexure A-1.
15. Ld. Counsel of the assessee has placed reliance on the decision of CIT vs Gian Gupta (supra) wherein it has been held that:-
"4. The Commissioner of Income Tax (Appeals) examined this issue and concluded as under:-
"It would be relevant to mention that the land in reference has never been registered or transferred in the name of the assessee. The document relied upon is unsigned. The other party of the document Mrs. Jind was examined and she denied to have received any cash amount of Rs. 1 crore from the assessee. The AO has also not brought out any material on record to prove the transfer of Rs. 1 crore by the assessee to Jind particularly when both have denied the transfer and also the purchase and sale of such land as mentioned in such document which is only a performa document. The performa document does not contain the signatures of both and besides it does not contain the signature of any witnesses. No evidence has been brought on record by the AO that there is any investment and there is any transfer of cash. There is no question of investment when the land has not been transferred and registered in the name of Gian Gupta. On the contrary, the AO himself 14 ITA No. 933/Del/2012 Asstt. Year: 2006-07 admits in the assessment order that the addition was made on the basis of assumption. Therefore in my considered opinion the addition made by the AO on this ground is not tenable and therefore, the appeal of the appellant is allowed and the AO has been directed to delete the addition of Rs.1 crore made on this account."
5. The Income Tax Appellate Tribunal also examined this issue once again and came to the conclusion that as the transaction itself never took place, there would be no question of investment and, therefore, no question of any unexplained investment. The amount of Rs 1 crore, which was paid by cheque, was returned as the transaction had fallen through. The Tribunal also took the view that the onus was on the Assessing Officer to establish that an investment of Rs 1 crore in cash had been made. That onus was not discharged and, therefore, it could be concluded that an unexplained investment of Rs 1 crore in cash had been made by the assessee. The exact findings of the Tribunal are as under:-
"5. On due consideration of the above facts, we are of the opinion that the Assessing Officer has given unnecessary weightage to the copy of MoU. The factum of transfer of a capital asset by Mrs Jind Singh in favour of the assessee was not established. The case of the assessee is that he has not purchased any land. The alleged MoU is a document exhibiting the negotiation of the purchase of land, but it never materialized. The Assessing Officer has erroneously observed that it is for the assessee to establish that land was not purchased. In our opinion, for charging the assessee with tax on account of unexplained investment, it is the Assessing Officer who ought to have established that land was purchased by the assessee and he failed to disclose the source of such purchase. Instead of discharging this onus, learned Assessing Officer treated a document as gospel truth and tried to put an onus upon the assessee to prove a negative fact which is not permissible in law. Learned First 15 ITA No. 933/Del/2012 Asstt. Year: 2006-07 Appellate Authority has rightly considered this aspect and deleted the addition."
6. After having heard the counsel for the parties on this issue of the deletion of the addition of Rs 1 crore on account of the alleged unexplained investment, we are of the view that the Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal have deleted the said addition on examination of facts. In our view, no question of law arises for our consideration. The facts, as established on record, do not point conclusively to unexplained investment of Rs 1 crore in cash by the assessee particularly because the MoU as well as the receipt in question were unsigned documents and the transaction had not materialized."
16. On behalf of the assessee reliance has also been placed on the decision of ITAT Delhi 'C' Bench in the case of DCIT vs Dr. G.S.C. Rao wherein credence of a seized document has been interpreted as under:-
"3.3 We have considered the facts of the case and submissions made before us. The facts are that in the course of search of the residence of the assessee a computer print out was found, which shows receipts in respect of sale of some immovable property and payments made in respect of some immovable property. The receipts exceed the expenditure by an amount of Rs. 13,900/-. The paper does not contain any name, the dates of transaction, details of bank or the descriptions of the property. The AO has ignored the receipt portion but has brought to tax the amount of investment of Rs. 27,90,000/-. The assessee right from the beginning denied that the paper belongs to him or any of his family member. He gave some indication about the person to whom the transaction may relate but his or his successor's full details have not been furnished, with a result that it was not feasible to get the facts verified. Section 132(4) inter-alia contains a presumption that 16 ITA No. 933/Del/2012 Asstt. Year: 2006-07 where any document is found in possession of a person in the course of search, it may be presumed that such document belongs to him and its contents are true. It is a rebuttable presumption and, in fact, it is for the courts to make such a presumption or not. Even if such a presumption is raised in this case, the same has been rebutted by the assessee on the date of search itself when it was stated that the paper does not belong to him or his family member or that they never dealt in such a property. Nothing further has been done by the revenue to shift the onus on the assessee to establish ownership and truthfulness of the contents qua the assessee. Coming to the provision contained in section 69B, it is provided that where the assessee has made an investment in any financial year, which is not recorded in the books of account, if any, maintained by him, and the assessee offers no explanation about the nature and source of investment or the explanation offered by him is not satisfactory in the opinion of the assessing officer, the value of investment made may be deemed to be the income of the financial year. As already held in the case of Chiraayu Estate & Development Pvt. Ltd. (supra), the burden is on the revenue to show that the assessee has made an investment. Thereafter, the investment has to be related to a financial year. The course of events show that revenue has not proved that investment in the immovable property was made by the assessee. The year in which the investment was made is also not discernible from the document. Therefore, we are of the view that this document alone cannot form basis for making any addition. Accordingly, it is held that the ld. CIT(Appeals) rightly deleted the addition. Ground nos. 1 and 2 are, thus, dismissed."
17. Ld. Counsel of the assessee has also placed reliance on the decision of ITAT Hyderabad 'B' Bench in the case of DCIT vs M. Aja Babu (supra) wherein 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 17 ITA No. 933/Del/2012 Asstt. Year: 2006-07 Taxman 23 (Del) and CIT vs Jaipal Aggarwal 212 Taxman 1 (Del), ITAT Mumbai in the case of ACIT vs. JP Morgan India Pvt. Ltd. 46 SOT 250(Mumbai) it has been held that the addition made by the AO 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:-
"16. Aggrieved by the order of the CIT(A), the revenue is in appeal before us.
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):18 ITA No. 933/Del/2012 Asstt. Year: 2006-07
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 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 19 ITA No. 933/Del/2012 Asstt. Year: 2006-07 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.
18. As a result appeal in ITA No. 1756/Hyd/20 12 is dismissed."
18. Coming to the decisions/legal propositions as relied on by the CIT(A), we observe that the Hon'ble Jurisdictional High Court of Delhi in the case of CIT vs Anil Bhalla (supra), has held that when no independent material or evidence had been brought on record by the AO to establish that the noting/jottings recorded on loose sheet or on the paper represented an unaccounted transaction, then the CIT(A) was right in accepting the explanation of the assessee and their lordships further held that the Tribunal was right in holding that the loose sheet does not represent any expenditure incurred by the assessee, then the findings of the Tribunal do not warrant any interference.
19. In the case of CIT vs Girish Chaudhary (supra), the Hon'ble Jurisdictional High Court of Delhi dismissing the appeal of the revenue held that when there was no material 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 lakh, then the document recovered during the course of search was a dumb document and led nowhere. The relevant observations and conclusion of their Lordship read as under :
20 ITA No. 933/Del/2012Asstt. Year: 2006-07
"Hence, in the present case there is no material on record to show as to on what basis the Assessing Officer has reached at the conclusion that the figure "48" is to be read as Rs. 48 lakhs.
The apex court in Central Bureau of Investigation v. V.C. Shukla (1998) 3 SCC 410 has laid down that :-
"File containing loose sheets of papers are not book and hence entries therein are not admissible under section 34 of the Evidence Act, 1872."
Similarly, the document annexure A-37 recovered during the course of search in the present case is a dumb document and lead us nowhere. Thus , the Tribunal rightly deleted the addition of Rs. 48 lakhs made by the Assessing Officer on account of undisclosed income on the basis of seized material.
20. In the present case, we are unable to see any valid reason or basis on which the AO made an addition of Rs.4,47,00,000 on the basis of entry in Annexure A-1 which clearly stipulates noting of Rs.4,47,000.00 and we are inclined to hold that the AO has not brought out any other incriminating material or evidence to support the impugned addition as the AO has deleted the decimal mentioned in Rs.4,47,000.00 and treated the same entry of Rs.4,47,000 as Rs. 4,47,00,000 for creating basis of the addition. We are unable to accept and uphold the basis on which the AO held that the assessee has made investment in land out of its undisclosed income as entry No. 1 & 2 on the top of Annexure A-1 itself are ambiguous and there is no relation of 21 ITA No. 933/Del/2012 Asstt. Year: 2006-07 entry No. 1 & 2 with the noting below the line which reflects total of Rs. 4,47,000 with a mention of specification of IC Battery. We are also unable to see any acceptable and cogent basis on which the AO held that the assessee has made investment in land (as per entry No. 1 & 2 on the top) out of books of account from income of undisclosed sources and picked up the amount of Rs. 4,47,00,000 for making addition u/s 69 of the Act by accepting total of Rs. 4,47,000.00 as sacrosanct and also deleting the decimal for converting Rs. 4,47,000 into Rs. 4,47,00,000 for making impugned addition.
21. On the basis of our aforementioned discussion, we reach to a fortified conclusion that the document Annexure A-1 is a dumb document which is not acceptable and reliable to support conclusion of the AO for making addition u/s 69 of the Act. Per contra, the CIT(A) was right in accepting contentions and explanation of the assessee that the document in issue i.e. Annexure A-1 is a dumb document which does not support findings of the AO that an inference is drawn from annexures that the assessee made investments in land out of books of accounts out of income from undisclosed sources. Accordingly, in view of our above findings and observations, we are of the considered opinion that the benefit of the ratio of the decision of Hon'ble High Court of Delhi is available for the assessee which clearly 22 ITA No. 933/Del/2012 Asstt. Year: 2006-07 supports finding of the CIT(A) in the impugned order that the addition cannot be made and sustained on the basis of Annexure A-1 as the same is dumb document which cannot be used against the assessee for making impugned addition.
22. The CIT(A) has also relied on the decision of ITAT Jabalpur in the case of ACIT vs Satyapal Wassan (supra) wherein elucidating with respect to the same issue, the coordinate bench of the Tribunal has held as under :
"The crux of these decisions is that a document found during the course of search must be a speaking one and without any second interpretation, must reflect all the details about the transactions of the assessee in the relevant assessment year. Any gap in the various components as mentioned in section 4 of the Income Tax Act must be filled up by the Assessing Officer through investigations and correlations with the other material found either during the course of the search or on investigation. As a result, we hold that document No. 7 is a non-speaking document.
Next issue raised by the learned Departmental Representative is that addition could be considered under section 68. In our considered view, this submission is misplaced. In fact it does not arise from the order of the Assessing Officer. He has only made addition under section 69 for the undisclosed advances given by the assessee. The question of treating them as cash credits is only an afterthought. The Department is not sure as to whether the alleged entries are payments or receipts. If the Department itself is vacillating and two interpretations are possible, then this fact itself justifies the stand of the assessee that no addition can be made.23 ITA No. 933/Del/2012 Asstt. Year: 2006-07
23. From above decision of ITAT Jabalpur Coordinate Bench we note that a charge can be levied on the basis of document only when the document is a speaking one. The document should speak either out of itself or in the company of other material found on investigation and /or in the search. The document should be clear and unambiguous in respect of all four components of charge of tax. If it is not so, the document is only a dumb document and no charge of tax can be levied on the assessee on the basis of a dumb document.
24. While granting relief for the assessee, the CIT(A) has also relied on the decision of Hon'ble Punjab and Haryana High Court in the case of CIT Jalandhar vs. Atam Valves (P) Ltd. (supra) wherein it has been held that :
"During the pendency of assessment proceedings, a survey was conducted by the Department under section 133A of the Act on 27.9.2005 in the premises of the assessee and certain incriminating documents were found including a 'Slip Pad' containing payment of Wages to various persons. The slips were written by Manoj Jain, an employee of the assessee who was confronted with the slips, apart from questioning of the Director Manoj Jain as well as Director of the assessee explained the position as to how the slips had been written and the stand of the assessee was that the same did not represent payment of wages during the year in question but were for the earlier year. However, the Assessing Officer did not accept the explanation and made an addition. The CIT(A) as well as the Tribunal partly set aside the addition. It was held that even though explanation of the assessee that the loose papers did not relate to payment of wages during the year in question may not be accepted in absence of any other 24 ITA No. 933/Del/2012 Asstt. Year: 2006-07 material, the loose sheets by itself were not enough to make addition as per estimate of the Assessing Officer."
25. In this case the guiding ratio laid down by their lordship is that when the loose papers did not relate to certain payment during the relevant period in question, then in absence of any other supportive material or evidence these loose sheets by itself were not found to be enough and justified basis to make addition.
26. The CIT(A) has also relied on the decision of ITAT Delhi 'E' Bench in the case of Atul Kumar Jain vs. DCIT (Supra) wherein the coordinate bench of this Tribunal went on to hold that when the AO decided "550" as 5,50,000 by adding "000" to the figure given i.e. "550" without any basis and supportive and corroborative evidence then the AO was not justified in deciphering the figures on a seized paper at his own whims and caprice based on unfounded presumptions and conjectures without bringing any corroborative material evidence in support thereof and the same cannot form the basis for assessing undisclosed income by way of sale proceed or investment of a property. In this case, it was also held that the seized papers being not corroborated by any independent evidence can not be considered as a reliable document as a proof of investment in house property and accordingly this kind of paper is liable to be ignored and addition made on the basis of this land of document is not sustainable. 25 ITA No. 933/Del/2012 Asstt. Year: 2006-07
27. In view of foregoing discussions, we are of the view that in the present case, the AO made addition on the basis of notings on Annexure A- 1( which is enclosed to this order). As we have already stated and concluded earlier that on logical analysis of the notings contents of Annexure A-1, we reach to a conclusion that only Annexure A-1 stand alone is not sufficient to draw an inference that the assessee made investment of Rs. 4,47,00,000 in purchase of land out of books of accounts and statement of investments and assets furnished before Revenue Authorities by using income earned from undisclosed sources. We are also of the opinion that the AO deleted the decimal to convert Rs. 4,47,000 into Rs. 4,47,00,000 for making addition without any basis and corroborative evidence at his own whims which is not permissible. We are also in agreement with the findings of the CIT(A) that the impugned document i.e. Annexure A-1 is a dumb document as on logical analysis, neither the independent nor the collective meaning of the notings or entries written therein support the conclusion of the AO that the assessee made investment against Rs. 4,47,00,000 in purchase of land out of income earned out of books of accounts from undisclosed sources in absence of any other supportive or corroborative evidence or materials. We, therefore, are of the opinion that the notings and contents of Annexure A-1 show noting of household expenses made by the assessee out of drawings and cash 26 ITA No. 933/Del/2012 Asstt. Year: 2006-07 withdrawn from banks and details about quantity and rates of Battery. In absence of any supportive and corroborative material and evidence about location and measurement of the land and its seller (as per AO to whom sale consideration of Rs. 4,47,00,000 was paid by the assessee) from critical and logical analysis of remaining part of notings on Annexure A-1, maximum an inference may be drawn that the assessee noted details of proposal of a land deal nothing else. We also observe that the Annexure A-1 in absence of any other incriminating material or evidence, stand alone is not sufficient proof of investment in land of Rs. 4,47,00,000 by the assessee as the contents of main three parts of the notings are not interlinked and inference drawn by the AO is also not supported by the mathematical calculation of the contents as details of land in first and second part of notings are not itself sufficient to support the impugned addition and in the third part in which there is a noting of total Rs. 4,47,000.00 is written below the details of model / make and quantity of IC Battery from which the AO deleted the decimal for reading and accepting the same as Rs. 4,47,00,000 which is not permissible in absence of other supportive evidence.
28. On the basis of foregoing discussion and respectfully following the ratio of the decisions relied on by the CIT(A) and the assessee, we reach to a conclusion that the AO made addition on the basis of Annexure A-1 on his 27 ITA No. 933/Del/2012 Asstt. Year: 2006-07 own whims, surmises and conjectures and also by converting and moulding the contents of the impounded document to gather support for his baseless findings. We further hold that the Annexure A-1 stand alone can not be used as a basis of making impugned addition without the company of any other supportive material and evidence. We, therefore, also hold that the AO made addition of Rs. 4,47,00,000 without any basis and justified reason which was rightly deleted by the CIT(A) by holding that the Annexure A-1 is a dumb document which cannot be a basis for making addition in regard to investment in purchase of land out of income from undisclosed sources u/s 69 of the Act. We are unable to see any ambiguity, perversity or any other valid reason to interfere with the conclusion and findings of the CIT(A) in the impugned order and we upheld the same.
29. Accordingly, the sole ground of the Revenue being devoid of merits is dismissed.
30. In the result, appeal of the Revenue is dismissed.
Order pronounced in the open court on 25th July, 2014.
Sd/- Sd/-
(SHAMIM YAHYA) (CHANDRA MOHAN GARG)
ACCOUNTANT MEMBER JUDICIAL MEMBER
DT. 25th JULY 2014
'GS'
28 ITA No. 933/Del/2012
Asstt. Year: 2006-07
Copy forwarded to:-
1. Appellant
2. Respondent
3. CIT(A)
4. CIT 5. DR By Order
Asstt. Registrar