Income Tax Appellate Tribunal - Delhi
Yash Pal Narender Kumar, New Delhi vs Department Of Income Tax
1 ITA Nos. 5340, 5341 & 5342/D/2012
Asstt.Years: 2004-05, 2007-08, 2008-09
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH `H' NEW DELHI
BEFORE SHRI S.V. MEHROTRA, ACCOUNTANT MEMBER
AND
SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER
I.T.A.No.5340/Del/2012
Assessment Year : 2004-05
I.T.A.No.5341/Del/2012
Assessment Year : 2007-08
I.T.A.No.5342/Del/2012
Assessment Year : 2008-09
Dy.Commissioner of Income Tax, vs Yash Pal Narender Kumar,
Central Circle-12, 292, Katra Peran,
Room No. 330, Tilak Bazar, Khari Baoli,
ARA Centre, Delhi.
Jhandewalan, (PAN: AAAFY0044Q)
New Delhi.
Appellant by: Smt. Priya Sahu, DR
Respondent by : None
ORDER
PER CHANDRA MOHAN GARG, JUDICIAL MEMBER
These appeals have been filed by the Revenue against the consolidated order of Commissioner of Income Tax(A)-XXXI, New Delhi for AYs 2004-05, 2007-08 and 2008-09 dated 20.01.2012.
2. The grounds raised in these appeals read as under:- 2 ITA Nos. 5340, 5341 & 5342/D/2012
Asstt.Years: 2004-05, 2007-08, 2008-09 ITA No.5340/D/2012 A.Y. 2004-05 "On the facts and in the circumstances of the case, the ld. Commissioner of Income Tax(A) has erred in deleting the addition of Rs.24,00,000/- made by the Assessing Officer on protective basis on account of unaccounted in case on the basis of documents and seized during the course of search and seizure operation u/s 132(1) of I.T.Act, 1961."ITA No.5341/D/2012 A.Y. 2007-08
"On the facts and in the circumstances of the case, the ld. Commissioner of Income Tax(A) has erred in deleting the addition of Rs.84,42,000/- made by the Assessing Officer on protective basis on account of unaccounted in case on the basis of documents and seized during the course of search and seizure operation u/s 132(1) of I.T.Act, 1961."ITA No.5342/D/2012 A.Y. 2008-09
"On the facts and in the circumstances of the case, the ld. Commissioner of Income Tax(A) has erred in deleting the addition of Rs.1,47,30,000/- made by the Assessing Officer on protective basis on account of unaccounted in case on the basis of documents and seized during the course of search and seizure operation u/s 132(1) of I.T.Act, 1961."
3. Briefly stated, the facts of the case giving rise to this appeal are that the assessee is a partnership firm and a notice u/s 153C of the Income Tax Act, 1961 (for short the Act) was issued to the assessee requiring it to file the returns of income and the same was filed by the assessee on 18.11.2011 declaring a total income of Rs.67,08,660 for AY 2008-09, Rs.64,66,740 for AY 2007-08 and Rs.7,90,386/- for AY 2004-05 respectively. From the 3 ITA Nos. 5340, 5341 & 5342/D/2012 Asstt.Years: 2004-05, 2007-08, 2008-09 assessment order, we also observe that earlier to above notice, the search and seizure operation u/s 132 of the Income Tax Act was carried out in Shri Mukesh Garg group of cases on 20.01.2010 and the cases of assessee were centralized to the Central Circle No. 12 u/s 127 of the Act vide order dated 11.10.2011 of Commissioner of Income Tax(A)-X, New Delhi. The Assessing Officer observed that the assessee company has made unaccounted profits and investments in the transactions and a protective addition of Rs.1,47,30,000 for AY 2008-09, protective addition of Rs.84,42,000 for AY 2007-08 and protective addition of Rs.24,00,000 for AY 2004-05 was made by the Assessing Officer on similar grounds.
4. The aggrieved assessee filed appeals before the Commissioner of Income Tax(A)-XXXI, New Delhi which were allowed by the impugned consolidated order vide dated 20.01.2012. Now, the revenue is before us with these appeals with similar grounds mentioned hereinabove in three assessment years under consideration.
5. When the appeals were called for hearing, neither the assessee nor his representative appeared before us during the course of proceedings. On careful perusal of the orders of the authorities below and peculiar facts and circumstances of the case, we find it appropriate to proceed further to adjudicate the appeals after hearing the DR of the appellant revenue. 4 ITA Nos. 5340, 5341 & 5342/D/2012
Asstt.Years: 2004-05, 2007-08, 2008-09 Accordingly, these appeals are being adjudicated in the absence of respondent assessee and his representative.
6. We have heard arguments of ld. DR and carefully considered submissions and the record placed before us in these appeals. Admittedly, the Assessing Officer made protective additions in the relevant assessment years under calculation of unaccounted profits and investments. We also observe that the assessee partnership firm was asked to file return of income under the notice u/s 153C of the Act which was issued subsequent to the search and seizure operation u/s 132 of the Act in Shri Mukesh Garg group of cases.
7. In the impugned order, the Commissioner of Income Tax(A) has observed that the Assessing Officer has assessed the appellant firm and made protective additions on the ground that the family of the assessee is a joint family. As per observations of the Assessing Officer, the assessee M/s Yash Pal Narender Kumar is a regular supplier of Katha (catechu) to RMD Group, therefore, transaction in question is considered to be of the nature of trading transaction. The Assessing Officer also observed that though on the documents in question, the name of Shri Mukesh Garg is mentioned but the associated firm/family concern, i.e. the assessee firm was the main supplier of Katha (Catechu) to RMD Group during the period to which these chits 5 ITA Nos. 5340, 5341 & 5342/D/2012 Asstt.Years: 2004-05, 2007-08, 2008-09 and documents are related. Therefore, the Assessing Officer made a substantive addition in the hands of Shri Mukesh Garg and protective addition in the hands of assessee partnership firm was made in respect of documents seized during the search and seizure operation.
8. During the proceedings of appeal filed by present assessee firm, the ld. Commissioner of Income Tax(A) noticed that substantive addition in the hands of Shri Mukesh Garg could not be sustained as per order of the first appellate authority i.e. Commissioner of Income Tax(A). The findings in the appellate order of Shri Mukesh Garg are as under:-
"The whole addition hinges on evidence gathered from third party document or statement. Now the issue is can third party statement or entry in absence of any corroborative evidence despite using ultimate weapon of search, can result in justified addition. The legal provision relating to presumption u/s 132(4A) is applicable to the person from whose possession or control the incriminating material is found & seized. Based on the incriminating material found from third party search but not belonging to the appellant, this presumption will not be applicable unless corroborated by other evidence. Presumption available under section 132(4A) can be drawn against the person in whose case search is authorized and from whose possession or control books of account, diary or documents are found in the course of search. Presumptions regarding correctness of contents of books of account etc. cannot be raised against the third party.
Presumption under section 132(4A) is only against the person in whose possession the search material is found and not against any other person. It is further held that the presumption is rebuttable and not conclusive and it cannot 6 ITA Nos. 5340, 5341 & 5342/D/2012 Asstt.Years: 2004-05, 2007-08, 2008-09 be applied in the absence of corroborative evidence. Straptex India P Ltd. v Oy. CIT [2003] 84 ITO 320 (Mum).
In the case of Rama traders vs. First ITO [1998] 25 ITO 599 (Pat.) (TM) it was held that no addition could be made, on the basis of presumption raised by section 132(4A), in the hands of the assessee where in the books of another firm, certain figures were found showing the purchase made by the assessee.
In Asst. CIT v Kishore Lal Balwani Rai [2007] 17 SOT 380 (Chd.), it has been held that though the diary seized enable the revenue to presume that its contents are true, such presumptions is available only against the person to whom it belongs and this is a rebuttable Presumption.
(i) Presumption u/s 132(4A) is not available, when the seized papers is recovered from third party and not from the assessee. Sheth Akshay Pushpavadan v Dy. CIT [2010] 130 TT J 42 (Ahd. UO)
(ii) The addition is made by the AO based on third party evidence and not on the basis of any sound evidence collected during the search.
A bunch of loose papers were seized from the premises of the third party which indicated the alleged unrecorded sales made to that party by the assessee. Variation in month-wise and other allied enterprises did not indicate that the assessee made any sales to 'H'. Average yield of the assessee was higher than that in comparable cases. The AO relied only on the entries of the said diary and did not bring on record any corroborative material to prove that such sales were made outside the books. It was held that mere entries in the accounts of a third party were not sufficient to prove that the assessee indulged in such transactions. Assitt CIT v Prabhat Oil Mills [1995] 52 TT J (Ahd.) 7 ITA Nos. 5340, 5341 & 5342/D/2012 Asstt.Years: 2004-05, 2007-08, 2008-09
(iii) Mere statement of the third party that. property was sold to the assessee for a higher amount than shown, no protective assessment could be made in the case of the assessee.
The alleged transactions mentioned in the seized diary of a third party were not handwritten by the appellant. The unaccounted purchases has alleged were not corroborated from the search material in the appellant own case. The assessing officer while using the statement of third party should have allowed the appellant to cross examine in order to use this as evidence which was not done. It is well settled in law that the loose papers and documents cannot possibly be construed as books of account regularly kept in the course of business. Such evidence would, therefore, be outside the purview of Section 34 of the Evidence Act, 1972. Therefore, the revenue would not be justified in resting its case on the loose papers, diary and documents found from third party if such documents contained narrations of transactions with the assessee as decided by the Hon'ble Supreme Court in the case of Central Bureau of Investigation Vs. V.C. Shukla (1988) 8 SSC 410 and Chuharmal Vs. Commissioner of Income Tax (1988) 172 250 I 38 Taxman 190 (SC). Reliance was also placed on the following decisions rendered by various courts and Tribunals:
a. Jai Kumar Jain Vs. Asstt. Commissioner of Income Tax (2007) 11 SOT (Jaipur) (URO).
"Addition in the instant case was made on the basis of the papers found from 'A' (Third Party). In search these papers were not confronted to the assessee. From the assessment order it was not borne out whether 'A'(Third Party) had stated these papers as pertaining to the assessee. No presumption could be drawn against the assessee u/s 132(4A) in respect of paper not recovered from him. No addition can be made on the basis of documents found from third party in the absence of corroborative evidence. Therefore, the Assessing Office as 8 ITA Nos. 5340, 5341 & 5342/D/2012 Asstt.Years: 2004-05, 2007-08, 2008-09 well as the commissioner of Income Tax (A) erred in making the addition on the basis of said papers in the hands of assessee. Hence, the entire addition made on the basis of papers found from 'A' (Third party) was to be deleted".
b. Prarthana Construction (P) Ltd. Vs. Deputy Commissioner Of Income Tax (2001) 118 Taxman 112 (IT AT- Ahmedabad) (Mag) "It has been held that loose papers and documents seized from premises of third parties and statement recorded at back of assessee without it being afforded opportunity to interrogate said documents and without bringing on record any supporting evidence, could not be made basis for adding undisclosed income in hands of assessee" . c. Additional Commissioner of Income Tax Vs. Miss Lata Mangeshkar (1974) ITR 696 (Mumbai) "It has been held that on appreciation of evidence on record, that entries in the ledger of a firm (third party) did not represent assessee's income from undisclosed sources, was finding of the fact not giving rise to any referable question of law".
d. Amarjit Singh Bakshi (HUF) Vs. Assistant Commissioner of Income Tax (2003) 86 ITD 13 (Delhi) "It has been held that where document in question was not recovered from assessee's possession but was recovered from N's possession, and assessee was not allowed any opportunity of cross- examination and further, N's testimony was not found credible at all, it could not be said that there was any iota of evidence to support revenue's case that a huge figure over and above figure booked in records and accounts changed hands between parties and therefore, no addition could be made based on such document in hands of assessee.
9 ITA Nos. 5340, 5341 & 5342/D/2012
Asstt.Years: 2004-05, 2007-08, 2008-09 Their Lordship in the case of L.K. Advani vs Central Bureau of Investigation on 1 April, 1997 held that I am tempted here to cite a few lines from Murphy on Evidence, page 180 "At common law, an admission made by one party is evidence against the maker of the statement, but not against any other party implicated by it."
When the Assessing Officer in the instant case was placing sole reliance on the statement only of Shri Rasik Lal Dhariwal, Shri Prakash Dhariwal, Sohan Raj Mehta for making addition. It was therefore, more so necessary to make arrangement for the cross examination of the witness by Shri Mukesh Garg , the appellant, in the interest of natural justice before taking a final view in the matter. However, from the assessment order it is found that such recourse was not taken by the AO. despite being asked for vide appellant request letter dated 26.12.2011. The Hon'ble Delhi High Court has held as under:
i) In the case of CIT Vs. SMC Share Broker Ltd. 288 ITR 345, it was held that in absence of witness being made available for cross examination, his statement could not be relied upon to the detriment of the assessee. Tribunal was justified in setting aside block assessment.
ii) In the case of CIT Vs. S M Aggarwa1 293 ITR 43, it was held that statement made by the assessee's daughter, cannot be said to be relevant or admissible evidence against the assessee, since the assessee was not given any opportunity to cross examine her and even from the statement, no conclusion can be drawn that the entries made on the relevant page belongs to the assessee and represents his undisclosed income.
After considering the submissions made above, I am of the considered opinion that addition on the basis of statement of the third party without any corroborative evidence is not tenable. The addition made by the AO for Rs.
1,47,30,0001/- is hereby deleted. The ground raised by the appellant is thus allowed."
10 ITA Nos. 5340, 5341 & 5342/D/2012
Asstt.Years: 2004-05, 2007-08, 2008-09
9. The above observations have been made in the case of Shri Mukesh Garg by the first appellate authority and on this basis, protective addition in the hands of assessee firm has been deleted by the Commissioner of Income Tax(A) in all assessment years under consideration in these appeals. The Commissioner of Income Tax(A), in the present case, finally held that since the substantive additions made in the cases of Shri Mukesh Garg could not sustain, the protective additions made by the Assessing Officer in the hands of assessee partnership firm cannot survive. With these observations, the Commissioner of Income Tax(A) has allowed the appeal of the assessee. There is nothing before us to take a different view in this regard. We are unable to see any perversity, infirmity and ambiguity in the impugned order as alleged by the ld. DR. It is a well-settled position of law that when substantive addition has been deleted by the competent statutory authority, then the protective addition made thereunder and related to the substantive addition cannot survive. Accordingly, we decline to interfere with the impugned order and all grounds raised in these appeals are devoid of merits and we dismiss them all.
10. In the result, the appeals of the revenue are dismissed. 11 ITA Nos. 5340, 5341 & 5342/D/2012
Asstt.Years: 2004-05, 2007-08, 2008-09 Order pronounced in the open court on 07.02.2013.
Sd/- Sd/-
( S.V. MEHROTRA ) (CHANDRA MOHAN GARG)
ACCOUNTANT MEMBER JUDICIAL MEMBER
DT. 7th FEBRUARY 2013
'GS'
Copy forwarded to:-
1. Appellant
2. Respondent
3. CIT(A)
4. CIT 5. DR True copy
By Order
Asstt. Registrar