Income Tax Appellate Tribunal - Mumbai
Annu Anil Agarawal, Mumbai vs Assessee on 11 October, 2011
IN THE INCOME TAX APPELLATE TRIBUNAL
"A" Bench, Mumbai
Before Shri D. Manmohan, Vice President
and Shri B. Ramakotaiah, Accountant Member
ITA No. 320/Mum/2010
(Assessment Year: 2006-07)
Smt. Annu Anil Agrawal ACIT (OSD-1), Central Circle 7
501, Siddhi Building, Marve Road Vs. 4th Floor, Aayakar Bhavan
Malad (W), Mumbai 400064 M.K. Road, Mumbai 400020
PAN - ADMPA 0248 F
Appellant Respondent
Appellant by: Shri S.C. Tiwari
Respondent by: Smt. Usha Nair
Date of Hearing: 11.10.2011
Date of Pronouncement: 18.11.2011
ORDER
Per B. Ramakotaiah, A.M.
This appeal by the assessee is against the order of the CIT(A)-40, Mumbai dated 13.11.2009.
2. Assessee has raised the following grounds: -
"1.a. On the facts and in the circumstances of the case and in law, the Hon. CIT (Appeal) erred in confirming the addition of Rs.3,75,731/- made by the ld. AO u/s. 69C of the Act as unexplained purchases of the appellant.
b. Hon. CIT - Appeal further erred in ignoring the fact that the said addition was made on the basis of nothing in note boom "Annexure A-9" found in appellant's Office Premises during the course of search and seizure action, and the appellant had denied the ownership thereof.
2.a. On the facts and in the circumstances of the case and in law, the Hon. CIT (Appeal) erred in confirming the addition of Rs.3,01,276/- made by the ld. AO u/s. 69C of the Act as unexplained payment of salary made by the appellant. b. Hon. CIT - Appeal further erred in ignoring the fact that the said addition was made on the basis of noting in note book "Annexure a-9" found in appellant's Office Premises during the course of search and seizure action, and the appellant had denied the ownership thereof.2 ITA No. 320/Mum/2010
Smt. Annu Anil Agrawal
3.a. On the facts and in the circumstances of the case and in law, the Hon. CIT (Appeal) erred in confirming the addition of Rs.17,21,592/- made by the ld. AO u/s. 69A of the Act as unexplained investments made by the appellant in giving loans.
b. Hon. CIT - Appeal further erred in ignoring the fact that the said addition was made by AO on the basis of noting in note book marked as "Annexure a-9" found in appellant's Office Premises during the course of search and seizure action, and the appellant had denied the ownership thereof.
3. All the three grounds are interrelated in the sense that the A.O. made additions under section 69C on the basis of Annexure 'A-9' found and seized during the course of search and seizure action. It was the submission that the said notebook does not belong to assessee whereas the A.O. invoking provisions of section 292C made the additions.
4. Briefly stated, there was a search and seizure action under section 132(1) of the I.T. Act on 28.06.2006. The places covered included assessee's residential and office premises, which was also used by assessee's husband, a Chartered Accountant, as his office premises. During the course of search a notebook marked "Annexure A-9" was seized, which has 75 pages. The ownership of the notebook was denied by assessee's husband in the course of his statement recorded under section 132(4). It seems that the search party also verified the handwriting of the staff members and this was also noted in the assessment order vide para 2.1 that the notebook was neither written in his handwriting or in the handwriting of any of the staff members. There was no question recorded from the assessee about the ownership of the notebook in the course of search and seizure proceedings. The search was conducted in order to examine the issue of booking profits by way of long term capital gains on transaction of shares in penny stock companies. The search resulted in identifying that assessee has neither booked any capital gains nor there were any share transactions pertaining to penny stocks. No additions were made in the assessment order on the issue of capital gains, even though assessee voluntarily made declaration of `7,00,000/- in the next assessment year to cover any lapse.
3 ITA No. 320/Mum/2010Smt. Annu Anil Agrawal
5. A.O. asked the assessee to explain about the contents of the note book seized as Annexure-9. Assessee denied the ownership of the notebook and submitted that this may pertain to any client of her husband who could have come to the premises and left without taking this notebook alongwith him. It was also explained that assessee made efforts in locating from the society members and others to establish the ownership of the notebook but could not get any information about the ownership of the notebook. Assessee maintained that the said notebook did not belong to her and an affidavit was filed in support of the contentions. This was not accepted by the A.O. and invoking provisions of section 292C, which places onus on the assessee, made additions on the basis of entries in the note book, which are categorised as unexplained: purchases to the tune of `3,75,731/-, payment of salary of `3,01,276/- and loan of `17,21,592/-. The first two items were added under section 69C and loans under section 69A.
6. Before the CIT(A), it was submitted that during the search proceedings, there is no enquiry about the said seized note book from assessee. The question of invoking the provisions of Sections 292C, Sec.69C and Sec. 69A came at the later stage. In the course of statement u/s 132(4), assessee's husband had replied that he would provide the necessary details to the Annexures A. 1 to A. 10 later and he voluntarily made declaration of additional income of `7,00,000/- in the hands of assessee so as to cover the lapses if any. Therefore, there should not have been any further addition in assessee's hands for A.Y. 2006-07. The averments made in the duly sworn affidavit, in absence of assessee's statement recorded during the search proceedings, should be considered as her rebuttal of the presumption under the Act. The note book was found in the office premises of the assessee during the course of search and seizure at the time when the assessee or her husband was not present. Therefore, it cannot be regarded as "in the possession and under the control of the assessee". The Assessing Officer has not brought any corroborative evidence to prove that the transaction/entries are related to the assessee. The Assessing Officer has not given any specific show cause before making such a huge addition. The search team has not found any inventory of any imitation or artificial jewellery either from the 4 ITA No. 320/Mum/2010 Smt. Annu Anil Agrawal office of the assessee or from the residence of the assessee. The only thing that the said note book was found in the premises of the assessee can not be regarded that the said note book belongs to the assessee.
7. It was further contended that assessee had made efforts to ascertain the identity of the owner of the notebook and relied on the following decisions: -
i. Ashwani Kumar vs. ITO 42 TTJ (Del) 644 ii. S.K. Gupta vs. DCIT 63 TTJ (Del) 532 iii. Chnader Mohan Mehta vs. ACIT 65 TTJ (Pune) 327 iv. CBI vs. V.C. Shukla 3 SCC 410 v. Umacharan Shah & Bros vs. CIT 37 ITR 271 (SC) vi. Pushkar Naraiin Sarraf vs. CIT 183 ITR 388 (All)
8. The CIT(A), however, considered provisions of section 292C and assessee's inability to substantiate her stand, agreed with the A.O. Not only that he also confirmed the additions so made on the basis of the seized notebook without considering any of the objections raised by the assessee. Hence, assessee is in appeal and raised the grounds accordingly.
9. The learned counsel referred to Annexure A-9 placed in the paper book from page No. 6 to 84 to submit that the ownership of the notebook was not established. Assessee transacts in share market and not in artificial jewellery. It was not even in the handwriting of the assessee. It was also not connected with the business of either the assessee or of her husband. It may be that somebody wanted to seek advice came to assessee's husband and might have left the notebook but the transactions therein does not correlate to any of assessee's transactions. Referring to section 292C it was submitted that there is no dispute with reference to seizure of the note book from assessee's premises but it cannot be stated that it was seized from the possession of the assessee, as assessee does not have any control of common office premises and this book is not in the control of the assessee. In fact the transactions do not pertain to assessee at all and referred to the affidavit placed on record before the A.O. itself to submit that the transactions do not pertain to assessee. Referring to the entries in the 5 ITA No. 320/Mum/2010 Smt. Annu Anil Agrawal notebook it was stated that these pertain to some purchases and sales of artificial jewellery and amounts receivable/amount payable to various parties. Referring to the transactions pertaining to purchases the learned counsel submitted that these are purchase of Kundan Jewellery and Chakri Cristal including cost of transportation on rickshaw, etc. It was submitted that the A.O. has added the entire amounts even though it was not pertaining to assessee as assessee is not in the business of purchase and sale of artificial jewellery and there is no artificial jewellery seized from assessee's premises. Referring to the salary payments also the names are given in the assessment order and the search party itself has examined that none of the persons are employed by assessee. Those names mentioned like Anjali, Varsha, Raju, etc. in para 5.2 of the assessment order are not employed by assessee nor their salary is payable or paid from her books of account. With reference to the other transactions of loans it was submitted that these transactions were taken as loans advanced by assessee but it can also be considered that either the amount received from the parties as that notebook is not indicative of either the loans received or advanced. It only contains name of a person and an amount against him, which the A.O. has taken it as loans advanced and invoking the provisions of section 69A added to the income of the assessee. It was submitted that the transactions does not pertain to assessee at all. He referred to the statement of assessee's husband under section 132(4) wherein it was stated that this notebook does not pertain to assessee which the A.O. also records in the assessment order. Coming to the provisions of section 292C, the learned counsel submitted that this provision is a legal fiction and it is foreign body injected in to the body of justice. Therefore, one cannot travel outside the provisions and strictly legal construction should be considered. It is true that it is an office premises but the premises is open to the public who visit her husband as clients and just because the book was found in the premises it cannot be inferred that it belong to assessee. It is the Revenue to ascribe the ownership when assessee denies the ownership. As far as assessee is concerned assessee gave the names of her employees and explained that there is no correlation with assessee's business and further filed an affidavit 6 ITA No. 320/Mum/2010 Smt. Annu Anil Agrawal to submit that it has no connection with the assessee. A.O. did not counter these arguments but simply invoked provisions of section 292C which unfortunately, the CIT(A) also accepted. It was submitted that what sort of evidence is to be produced when assessee denies ownership of the notebooks seized from the office of assessee's husband was not specified. The burden is on Revenue to establish that the transactions in the notebook pertain to assessee and no addition can be made on assumptions and presumptions.
10. Further it was submitted that the notebook contains only details of purchases so the addition of entire purchases without considering the sales or profit is also not correct. It was further submitted that the Assessing Officer's tally of the amounts were also not correct as far as loans are concerned. It can be inferred as loans received by the person (who ever is the owner of the book) and cannot be considered as loans advanced by the said person. On these facts it was the submission of the learned counsel that the additions are not warranted.
11. The learned D.R. in reply submitted that assessee has not disputed that the notebook was found in assessee's premises. He then referred to the statement of assessee's husband wherein he has declared an amount of `7,00,00/- in the course of search where in all the Annexures including Annexure A-9 were referred to in making the disclosure, therefore, it can not be stated that assessee is not aware of the notebook. He referred to the the statement in page 104, Question No. 6 recorded from Shri Anil Agrawal in the course of search by the ADIT (Inv) to state that Annexure A1 to A10 were asked to explain and assessee's husband submitted that he is in the process of preparing the detailed reply and therefore it cannot be stated now that the book does not belong to assessee. He then referred to the decision of the Hon'ble Rajasthan High Court in the case of CIT vs Ambay Abhushan Bhandar, 259 ITR 699 (Raj) to submit that various legal fictions created under various provisions of Income Tax Act are to be made applicable when the assessments were made under section 153A consequent to the search and seizure operations. He submitted that the A.O. has no option than to 7 ITA No. 320/Mum/2010 Smt. Annu Anil Agrawal invoke the legal fiction as the assessee failed to explain the contents of the notebook and also ownership of the notebook to the satisfaction of the A.O.
12. We have considered the issue and examined the papers placed on record. As far as seizure of A-9 is considered it was seized from assessee's premises which was also used by her husband, a Chartered Accountant by profession. It is also on record that a statement under section 132(4) was recorded from assessee's husband, not from assessee, about the seizure of various papers indexed as A-1 to A-10. Assessee disclosed a total of `10,00,000/-, `3,00,000/- on account of gold jewellery and `7,00,000/- to cover various discrepancies, in the statement recorded from her husband. It may be that some client might have left the notebook while seeking advice or for preparation of statements. As seen from the contents of the note book they pertain to some purchase transactions of artificial jewellery, advances/receipts of amounts from various parties, payment of salary month-wise to employees. What the A.O. has done is to total all the entries available in each page and categorised into three types of purchase, salary and loan amounts and making the addition of the amounts. As per the assessment order passed dated 10.12.2008, assessee derives income from house property and trading in shares. The search and seizure operations neither unearthed any unaccounted transactions of share trading nor any other business in which assessee was engaged. There was some excess jewellery and some documents seized as per Annexure 1 to 9 and assessee honoured the disclosure made by her husband under section 132(4) by filing the admitted incomes in the later year. Nowhere in the assessment order, the A.O. has analysed Annexures 1 to 10 to examine whether there is any correlation to the entries in Annexure 9 with other entries in the Annexures seized. There are certain notebooks seized as A-5, A-6,A-7 & A-8 which also were seized in the premises but the fate of these notebooks and the enquiries with reference to that notebooks were not placed on record, whether they pertain to assessee or not. The A.O. in this year has considered Annexure A-9 alone, photocopy of the same was placed on record by assessee from page 6 to 84. As seen from the transactions it is prima facie evident that this notebook does not relate to any of the transactions of 8 ITA No. 320/Mum/2010 Smt. Annu Anil Agrawal the assessee. It cannot be considered as unaccounted business of the assessee in the absence of any correlation with reference to the entries in the other notebooks or at least seizure/ inventory of any artificial jewellery from assessee's premises. It is also stated that the search party enquired from the employees of assessee, correlated their handwriting/signatures which did not tally with the handwriting in the note book. Even these entries, even though in English did not indicate that it is maintained in a regular fashion but maintained by a semi-literate person as there are spelling mistakes and also repetition in the entries. Therefore, we are of the opinion that just because the book was seized from assessee's premises one cannot correlate the entries therein to assessee's transactions more so when assessee denies any connection with the entries therein.
13. Provisions of section 292C do empower the A.O. to presume that search books of account and documents belong to the person. The provisions of section 292C(1) are as under: -
"292C. (1) Where any books of account, other documents, money, bullion, jewellery or other valuable article or thing are or is found in the possession or control of any person in the course of a search under section 132 [or survey under section 133A], it may, in any proceeding under this Act, be presumed--
(i) that such books of account, other documents, money, bullion, jewellery or other valuable article or thing belong or belongs to such person;
(ii) that the contents of such books of account and other documents are true; and
(iii) that the signature and every other part of such books of account and other documents which purport to be in the handwriting of any particular person or which may reasonably be assumed to have been signed by, or to be in the handwriting of, any particular person, are in that person's handwriting, and in the case of a document stamped, executed or attested, that it was duly stamped and executed or attested by the person by whom it purports to have been so executed or attested."
14. As per the above it can be presumed that such book of accounts and other documents belong to such person and the contents of such book are true. However, it is only a presumption which is rebuttable. Assessee has filed an affidavit stating that the contents of the book does not belong to her 9 ITA No. 320/Mum/2010 Smt. Annu Anil Agrawal and it seems the search party also enquired from the employees of the assessee to examine whether the handwriting is tallying or not. In the absence of any correlation with assessee's business transactions the contents of the affidavit can not be rejected by the A.O. without any examination of the transactions with assessee's business or with any other seized material. Therefore, except relying on the provisions of section 292C A.O. did not establish anything which attribute the transactions therein to that of assessee's. In the absence of any correlation with that of assessee's business just because the same was found in assessee's premises the entries therein cannot be, in our view, considered as that of assessee. Moreover, under section 132(4) itself assessee's husband denied the contents therein. It is not on record why the same was considered in the hands of assessee when the premises is also being used by assessee's husband and statement was recorded from him.
15. Be that as it may, the additions itself are also not warranted. Just because the entries contained some purchases of artificial jewellery it cannot be stated that the entire purchases are outside the books of account or unexplained. What the A.O. has done in the assessment is totalling the entries from page 31 to 55. Page 31 contains purchases entries from 18.07.2005 to 12.08.2005. Likewise page 32 contains the transactions up to 22.08.2005. However, the next entry in the same page pertains to 29.07.2005 and 30.07.2005. The next entries in the same page pertain to 01.09.2005 and the continuation entries in page 40. This indicates that these are transaction on certain dates chronologically recorded. These amounts are totalled page wise and added as unexplained purchases. It is nowhere mentioned that these items entered under head 'purchase' are available in closing stock or sold on a day-to-day basis. In the anxiety to add every entry in the purchase account, the A.O. also considered in its total the transactions pertains to 02.04.2006 available in page 45 to 16.05.2006 in page 46. These transactions pertain to next assessment year and not to this assessment year. This shows non-application of mind by the A.O. in analysing the transactions of purchases. Likewise under the head 'salaries' which the A.O. totalled from page 19 to 30, there are mistakes in its 10 ITA No. 320/Mum/2010 Smt. Annu Anil Agrawal consideration. There are certain entries which are struck off in the pages which are also considered while totalling the amount. For example, in page 19 of the notebook there are details of salary payment of August 2005, September 2005 and October 2005 which are totalled to `31,628/- in para 5.2 under the head 'salary'. While tabulating salary payments in respect of various persons A.O. totalled the amounts mentioned against each name. In the case of 'Anjali' there are salaries paid in the month of August, September and October. Likewise to 'Varsha' in the same months. Same for other employees in the above three months. These amounts paid to individual employees were available in different pages were also totalled as salary payments along with the consolidated payment of `31,682/- accounted month-wise in page 19. There is double addition to that extent made under the head 'Salary'. This also shows non-application of mind by the A.O. in analysing the transactions in its correct perspective. Similar is the transaction with loans as extracted in para 5.4 of the assessment order. There are repetition of entries with reference to 'Akbar' in page 6 as well as page 7 and the A.O. made double totalling of the previous amount also. Likewise, there are many other entries which do indicate that the A.O. has not analysed the transactions but just totalled the amounts, so as to make the addition. It is very unfortunate that the CIT(A) also has not examined these even though the assessee was submitting that the transactions do not pertain to assessee. We are of the opinion that the additions so made by the A.O. cannot be sustained not only for the reason that these amounts have no correlation with assessee's business but also on the reason that the transactions categorised as salaries and loans pertain to next assessment year were also added in this assessment year. As seen from the note book and addition made in the case of 'Ajay Bhai' at page 10 the entries where totalled to `26,100/-. These pertain to the period 19.07.2005 to 03.09.2005. Again there are 'Ajay Bhai's transactions in page 11, which were totalled to `3,63,390/-. Whether these amounts are received or paid was not clearly established. 'Ajay Bhai's account continued in page 13 up to 09.05.2006, ie. beyond the accounting year under consideration. Even the transactions pertaining to April and May 2006 were also added in the total pertaining to 11 ITA No. 320/Mum/2010 Smt. Annu Anil Agrawal Ajay Bhai's loan. Whether these amounts are received or paid cannot be ascertained from the entries. The Assessing Officer's action in adding the amount which is to be paid for 'Abrar plating' do indicate that the amounts are not receivable but payable amounts (vide page 9 under the head 'Abrar plating'; stated wrongly as 'Akber' in assessment order). The entry in that page 9 is like this: 'Amount `22,000/- balance', 'to pay `82,474 + 9000'. The total was taken at `1,13,474/- as amount of loan advanced (ignoring the entry of `3,20,203/- stated as 'to receive'). The entries clearly indicate that the amount is payable and not receivable. How an amount which is to be paid to a party can be considered as loan given was not explained. In view of this, the addition so made by the A.O. under various heads and that too including transactions pertaining to April/ May 2006 indicate that the A.O. failed in his duty in examining the entries therein in the proper perspective. Therefore, we are of the opinion that the addition so made by the A.O. cannot be sustained.
16. However, keeping the fact assessee's husband gave a statement relating to additional income on the seized papers and also the fact that the full ownership of the notebook could not be denied or established, we are of the opinion that an amount of `1,00,000/- as a round sum addition would justify the facts of the case, considering also the fact that assessee admitted an amount of `7,00,000/- in the later year. Therefore, instead of making additions under various heads as was done by the A.O. without establishing the transactions therein, we are of the opinion that a round sum addition of `1,00,000/- would meet the ends of justice on a conspectus of the matter. Accordingly the addition made is reduced to `1,00,000/- and the grounds are considered partly allowed.
17. In the result, appeal is partly allowed.
Order pronounced in the open court on 18th November 2011.
Sd/- Sd/-
(D. Manmohan) (B. Ramakotaiah)
Vice President Accountant Member
Mumbai, Dated: 18th November 2011
12 ITA No. 320/Mum/2010
Smt. Annu Anil Agrawal
Copy to:
1. The Appellant
2. The Respondent
3. The CIT(A) - 40, Mumbai
4. The CIT, Central-II, Mumbai City
5. The DR, "A" Bench, ITAT, Mumbai
By Order
//True Copy//
Assistant Registrar
ITAT, Mumbai Benches, Mumbai
n.p.