Income Tax Appellate Tribunal - Jaipur
Badri Narain Sodani, Jaipur vs Assessee on 26 July, 2016
IN THE INCOME TAX APPELLATE TRIBUNAL,
JAIPUR BENCH, JAIPUR
BEFORE SHRI R.P. TOLANI, JUDICIAL MEMBER AND
SHRI VIKRAM SINGH YADAV, ACCOUNTANT MEMBER
आयकर अपील सं./ ITA Nos. 872 to 875/JP/2013
िनधा रण वष / Assessment Years : 2007-08 to 2010-11
Shri Badri Narain Sodani, Dy. Commissioner of
38, Jai Jawan-II, Vs Income-tax,
Tonk Road, Jaipur Central Circle-2,
PAN : AJAPS 1375 F Jaipur
आयकर अपील सं./ ITA Nos. 899 to 901/JP/2013
िनधा रण वष / Assessment Years : 2008-09 to 2010-11
Dy. Commissioner of Shri Badri Narain Sodani,
Income-tax, Vs 38, Jai Jawan-II,
Central Circle-2, Tonk Road, Jaipur
Jaipur PAN : AJAPS 1375 F
अपीलाथ /
अपीलाथ (Appellant) ू यथ
यथ /
थ (Respondent)
Revenue by : Shri M. S. Meena, CIT-DR
Assessee by : Shri K. L. Moolchandani, Advocate
सुनवाई क तार ख/ Date of Hearing : 25/05/2016
घोषणा क तार ख / Date of Pronouncement: 26 /07/2016
आदे श/O R D E R
PER R.P. TOLANI, JUDICIAL MEMBER:-
This is a set of cross appeals filed by above assessee and revenue arising from the assessments framed consequent to search operations carried out u/s 132 of the Act on one 'Sodhani Sweets Group'; assessee was also searched on 20.10.2009. Various additions are made in assessment; in the first appeal, partial relief was allowed by ld CIT(A) vide ITA Nos. 872 to 875/JP/2013-Assessee's Appeal ITA Nos. 899 to 901/JP/2013- Deptt's Appeal Shri Badri Narain Sodani vs. DCIT AYs : 2007-08 to 2010-11 2 orders dtd 11-9-2013 for AYs 200708 and dated 12-9-2013 for AYs 2009-10 and 2010-11. Aggrieved both the parties are before us on respective grounds:-
Assessee's appeal for AY 2007-08 On the facts and in the circumstances of the case the learned CIT(Appeal) has factually and legally erred in confirming addition to the extent of Rs.20,50,000/- u/s 69 of the Act out of total additions of Rs.35,80,000/- made by the AO without appreciating the facts of the case in right perspective. The addition so made and confirmed by the Authorities below deserves to be deleted.
Assessee's appeal for AY 2008-09
1. On the facts and in the circumstances of the case the learned CIT(Appeal) has factually and legally erred not only in confirming addition of Rs.1,11,35,000/- made u/s 69 of the Act without appreciating the facts of the case in right perspective but also in enhancing the said addition to Rs.1,41,65,000/- arbitrarily and on flimsy grounds. In the process, the basic and vital facts of the 'financing pattern' as noticed during the course of search proceedings and also as explained during the assessment and appeal proceedings were ignored summarily for no reason. Thus the addition so made and enhanced deserves to be deleted.
2. On the facts and in the circumstances of the case the learned CIT(Appeal) has factually and legally erred in working out the interest income at Rs.19,45,800/- as against Rs.5,45,483/- worked out by the AO without appreciating the facts of the case in right perspective. Though no separate addition on account of such working of the enhanced interest income has been made under Telescoping Theory yet the working of such interest income by the ld. AO and enhanced by the ld. CIT(A) is absurd and without any basis. The same deserves to be quashed.
Assessee's appeal for AY 2009-10 ITA Nos. 872 to 875/JP/2013-Assessee's Appeal ITA Nos. 899 to 901/JP/2013- Deptt's Appeal Shri Badri Narain Sodani vs. DCIT AYs : 2007-08 to 2010-11 3
1. On the facts and in the circumstances of the case the learned CIT(Appeal) has factually and legally erred in passing a well reasoned and self-speaking order without giving categorical and specific findings regarding the relief allowed and the income finally determined for the year. Thus the order so passed is bad in law and deserves to be revisited in the light of detailed submissions as made regarding money-lending business activities as carried out by the appellant.
2. On the facts and in the circumstances of the case the Authorities below have factually and legally erred in working out the interest income at Rs.9,46,581/- by the AO and enhanced to Rs.19,45,800/- by the ld. CIT(A) without appreciating the facts of the case in right perspective and also in absence of any material on record.
3. The ld. CIT(A) has enhanced the income under this head without jurisdiction as no opportunity whatsoever was allowed to the appellant for such enhancement. In absence of such opportunity, the enhancement so made is bad in law and deserves to be deleted summarily.
Assessee's appeal for AY 2010-11
1. On the facts and in the circumstances of the case the learned CIT(Appeal) has factually and legally erred in passing a well reasoned and self-speaking order without giving categorical and specific findings regarding the relief allowed and the income finally determined for the year. Thus the order so passed is bad in law and deserves to be revisited in the light of detailed submissions as made regarding money-lending business activities as carried out by the appellant.
2. On the facts and in the circumstances of the case the Authorities below have factually and legally erred in working out the interest income at Rs.33,000/- by the AO and enhanced to Rs.19,45,800/- by the ld. CIT(A) without appreciating the facts of the case in right perspective and also in absence of any material on record.
3. The ld. CIT(A) has enhanced the income under this head without jurisdiction as no opportunity whatsoever was allowed to the ITA Nos. 872 to 875/JP/2013-Assessee's Appeal ITA Nos. 899 to 901/JP/2013- Deptt's Appeal Shri Badri Narain Sodani vs. DCIT AYs : 2007-08 to 2010-11 4 appellant for such enhancement. In absence of such opportunity, the enhancement so made is bad in law and deserves to be deleted summarily.
Department's appeal for AY 2008-09
1. On the facts and in the circumstances of the case, the ld. CIT(A), Central, Jaipur has erred in telescoping/deleting of Rs.20,50,000/- from the addition on account of Unexplained Advances (investment) in debtors u/s 69 made/enhanced by her of Rs.1,62,15,000/- because the debtors confirmed in AY 2008-09 is different from the list confirmed in AY 2007-08 is. For this Statement of facts is annexed herewith.
As debtors confirmed in AY 2007-08 are different from those of AY 2008-09. No benefit of telescoping should have been allowed by the CIT(A).
2. On the facts and in the circumstances of the case, the Id. CIT(A) has erred in deleting the undisclosed interest income worked out by her at Rs.19,45,800/- as against Rs.5,45,483/- added by the AO by holding that interest income earned during this year (AY 2008-09) is to be allowed to be telescoped against the total addition of advances confirmed during AY 2008-09, though interest income accrued to the assessee and was taxable in AY 2008-09, further no break-up of names and amount has been given by CIT(A) for allowing telescoping in advances addition confirmed. Department's appeal for AY 2009-10
1. On the facts and in the circumstances of the case, the Id. CIT(A), Central, Jaipur has erred in deleting the addition of Rs. 47,65,000/- on account of unexplained advances (investments) in debtors u/s69, because this was enhanced addition as per CIT(A), own finding on the one hand, while on the other hand the same amount was deleted on the ground that addition of Rs.1,41,65,000/- had been confirmed in AY 2008-09, though the list of debtors confirmed in AY 2008-09 is different from the list confirmed/enhanced than deleted in AY 2009-10. For this statement of facts is annexed herewith.
ITA Nos. 872 to 875/JP/2013-Assessee's Appeal ITA Nos. 899 to 901/JP/2013- Deptt's Appeal Shri Badri Narain Sodani vs. DCIT AYs : 2007-08 to 2010-11 5 As debtors confirmed in AY 2008-09 of Rs.1,41,65,000/- are different from those of Rs.47,65,000 of AY 2009-10, no benefit of telescoping of Rs. 47,65,000/- should have been allowed by CIT(A) in AY 2009-10
2. On the facts and in the circumstances of the case, the Id. CIT(A) has erred in deleting the undisclosed interest income worked out by her at Rs.19,45,800/- as against Rs.9,46,581/- added by the AO by holding that interest income earned during this year (AY 2009-10) is to be allowed to be telescoped against the total addition of advances confirmed during AY 2008-09, because the advances in AY 2009-10 were to persons different than those in AY 2008-09, benefit of telescoping of interest could not have been allowed, further interest income of AY 2009-10 cannot be set off against addition of advances of AY 2008-09.
3. On the facts and in the circumstances of the case, the Id. CIT(A), Central, Jaipur has erred in deleting the addition on account of undisclosed investment in FDRs made by the AO of Rs.1,50,000/- without informing from which addition the benefit of telescoping was being allowed, further as clarified in ground 1 above there was no scope of any telescoping.
Department's appeal for AY 2010-11
1. On the facts and in the circumstances of the case, the Id. CIT(A), Central, Jaipur has erred in deleting the addition of Rs.32,75,000/- on account of Unexplained Advances (investments) in debtors u/s 69 because this was an enhanced addition as per CIT (A)own finding on the one hand , while on the other hand the same amount was deleted on the ground that addition of Rs.1,41,65,000/- had been confirmed in AY 2008-09, though the list of debtors confirmed in AY 2008-09 is different from the list enhanced but deleted in AY 2010-11. For this Statement of facts is annexed herewith.
2. On the facts and in the circumstances of the case, the Id. CIT(A) has erred in deleting the undisclosed interest income worked out by her at Rs.19,45,800/- as against Rs 33,000/- added by the AO by holding that interest income earned during this year (AY 2010-11) is to be allowed to be telescoped against the total addition of advances confirmed during AY 2008-09, because the Advances in ITA Nos. 872 to 875/JP/2013-Assessee's Appeal ITA Nos. 899 to 901/JP/2013- Deptt's Appeal Shri Badri Narain Sodani vs. DCIT AYs : 2007-08 to 2010-11 6 AY 2010-11 were to persons different than those in AY 2008-09, benefit of telescoping of interest could not have been allowed , further interest income of AY 2010-11 cannot be set off against addition of advances of AY 2008-09.
2. Brief fact are - assesse derives share income from a partnership firm M/s Marudhar Enterprises, Jaipur engaged in Civil Construction. During the course of search incriminating material in the form of diaries and loose papers along with cash of Rs.12 lacs and family jewelry valued at Rs.14,21,845/- were found and seized. The cash and jewelry were explained in the assessment proceedings and no addition in this behalf was made.
2.1 Incriminating papers revealed that assesse was engaged in financing business mostly by loans repayable in 100 installments, which was accepted by the assesse to be undisclosed. Statement was recorded mentioning that this peculiar type of financing business was carried out on the basis the diaries and loose papers. To avoid the rigor of the search operations and consequent assessment proceedings, declaration of the aggregate additional income Rs.46 lacs attributable to undisclosed capital and interest earned during the entire block period at in the year of search was admitted and offered in the return of income. It is claimed that subsequently on review of same incriminating papers, assesse offered further additional income of Rs.5,00,000/- which also was declared in the A.Y. 2010-11.
2.2 It is also claimed by the assesse that due to pressure of two days' search operations and inability to verify details on the spot, not only ITA Nos. 872 to 875/JP/2013-Assessee's Appeal ITA Nos. 899 to 901/JP/2013- Deptt's Appeal Shri Badri Narain Sodani vs. DCIT AYs : 2007-08 to 2010-11 7 undisclosed but disclosed assets belonging to other persons were also mistakenly owned like the investments in the FDRs and Mutual Funds of Rs.10,08,000/- and the investment of Rs.32,00,000/-. During the course of assessment proceedings explanation in this behalf was found correct and such items were not included. Similarly cash and jewelry found during the course of search were found explained and excluded while framing the assessment.
2.3. In the assessment proceedings, the learned AO on one hand accepted that the incriminating material was written haphazardly with repetition of same entries; however went beyond assessee's declaration and by arbitrary interpretation of haphazard writings on the incriminating material framed the impugned assessments by making following additions:-
(a) Asstt.Yearr. 2006-07 Rs.1,00,000/- (Not in appeal)
(b) Asstt. Year.2007-08 Rs.36,60,886/-
(d) Asstt. Year. 2008-09 Rs.1,16,26,777/-
(e) Asstt. Year.2009-10 Rs.32,83,423/- as against
Returned Income of Rs.47,71,703/-
(After rectification order to Rs.79,55,123/)
(f) Asstt. Year. 2010-11. Rs.27,93,737/-
Total Rs.2,14,64,823/-
Thus as against the total surrender of additional income of Rs.
46,00,000/- + 5,00,000/- = Rs. 51,00,000/-, ld. AO framed the assessments resulting in total additions of Rs. 2,14,64,823/-. For making these additions, ld. AO mainly relied on one seized paper {AS-1 page no.1} only and by reproducing the same contents in all the assessment orders in a stereotyped manner. The quantum and items of addition are neither correlated with any specific paper nor entries relevant to the respective ITA Nos. 872 to 875/JP/2013-Assessee's Appeal ITA Nos. 899 to 901/JP/2013- Deptt's Appeal Shri Badri Narain Sodani vs. DCIT AYs : 2007-08 to 2010-11 8 years of addition. The additions are hugely inflated by adding zeros to figures mentioned in AS-1, page 1; thus extrapolating the undisclosed income to astronomical amounts on surmises and conjectures.
2.4 It is claimed that ld. AO ignored the undisputed vital fact that assessee's financing business was loans repayable in 100 daily installment basis; no categorical reasons have been given by ld. AO to ignore this crucial aspects and resort to an estimate which is neither just nor reasonable. It is trite law that while making any estimate of income the AO has to apply best judgment based on reasonability, nexus and modus operandi of the material on record. Merely because a search is carried out cannot vest ld. AO with arbitrary powers of estimate and assessment. It has not been denied by AO that no corresponding assets were found to indicate application of undisclosed income.
2.5 In appeal proceedings, the additions were vehemently contested by oral as well as written submissions placed in the paper book page no. 19 to
26. Ld. CIT (A) admitted the merits of the submissions and in clear terms observed that the impugned assessment orders passed by the learned AO were very unspecific and vague in nature. To remedy this deficiency a remand report was called by the learned (CIT (A), vide report dated 3.5.2013, ld. AO also admitted the observations of the learned CIT (A) in this behalf and replied that:
"the seized documents contain entries which allegedly pertain to his undisclosed income. The entries are found recorded in/by hand and at many places do not contain complete narration or details. The figures also have been written in a coded form and are either followed or denominated by a date and/or followed by certain dates. The entries ITA Nos. 872 to 875/JP/2013-Assessee's Appeal ITA Nos. 899 to 901/JP/2013- Deptt's Appeal Shri Badri Narain Sodani vs. DCIT AYs : 2007-08 to 2010-11 9 are neither chronological nor arranged in any other seemingly discernible order. There are also several repetitions which added to the complexity of the entries. The entries presented data from which meaningful analysis was not only challenging but also extremely difficult"
(The copy of the remand report is placed in the paper book page No. 27 to 31) Ld. Counsel contends that ld. AO has conceded that:
a. The entries are neither chronological nor arranged in any other seemingly discernible order.
b. There are also several repetitions which added to the complexity of the entries and meaningful analysis of data was not only challenging but also extremely difficult.
c. Ld. AO himself endorses the fact about learned CIT (A) observations about assessment orders being unspecific and vague in nature ( reference is made to ld. CIT(A) order for the A.Y. 2009- 10 at paras (e), (f), (g) & (h) & at page no.8 of the appeal order for A.Y. 2009-10, the relevant observations are as under:
(e) "At no stage, the ld. AO had ever given his working of Rs.21,35,000/- for this year. It is still unknown on what basis such working has been done. As such working has been done on the back of the appellant without any basis and without giving any opportunity to the said working deserves to be quashed.
(f)From the reading of the assessment order, it would be noted that the learned AO had not disputed the working of the additional income of Rs.46 lac as worked out and shown in the Return for the yea. In absence of any reason and material on record, such working could not be denied. More-over, while quantifying the addition for the year at Rs.32 lac approximately, the learned AO had made reference to such working in passing manner as evident from the body of the assessment order.
However it is an evident fact that the AO's working included part of the additional income of Rs.46 as declared by the appellant in the Return of Income. After the lapse of 15 months (even after ITA Nos. 872 to 875/JP/2013-Assessee's Appeal ITA Nos. 899 to 901/JP/2013- Deptt's Appeal Shri Badri Narain Sodani vs. DCIT AYs : 2007-08 to 2010-11 10 filing of the appeal), the learned AO could not know about such lapse in his working and abruptly enhanced the assessed income by Rs.46,71,700/- (adding entire returned income shown in the revised return) vide rectification order passed u/s 154 of the Act on 05.03.2012 without assigning any reason and without giving an opportunity to the appellant. The appellant had already challenged this rectification order which is pending on the date. But this order clearly revealed the erroneous working of the additional income by the learned AO.
(g) Again without prejudice to the above objections, the learned AO had also failed to follow the Telescoping Theory' to give credit of the additions made in earlier years under the same head. Thus such working is contrary to the principles of Telescoping Theory.'
(h) As the appellant had owned all the financial transactions in his own case and offered additional income of Rs.46 lac on account of such transaction. In the circumstances, testimony of the co-called witness in this regard had become irrelevant and immaterial for drawing conclusion.
2.6 These observations together with the crucial facts that assesse was mainly engaged in financing based on 100 daily repayable installments indicate that the financing was not to big business houses who can raise the loans by other institutional means on easier terms and repayment schedule. Thus the assessments framed by ld. AO were without any basis, reasonableness or application of mind. Such financing business is transacted with small people and needy people and not business houses, which get term finance at lesser rate of interest from regular brokers.
2.7 The assessee after separation from family was an unfortunate brother who got less and could not earn much subsequently. The search was aimed at Sodhani Sweets group, assesse has no connection with sweets business. In order to support his family he joined as a partner in civil construction firm ITA Nos. 872 to 875/JP/2013-Assessee's Appeal ITA Nos. 899 to 901/JP/2013- Deptt's Appeal Shri Badri Narain Sodani vs. DCIT AYs : 2007-08 to 2010-11 11 and endeavored to earn some extra income by way of this financing business of 100 daily installments repayments.
2.8 Ld. AO was correct in submitting observations in remand report that no meaningful analysis could be made from the incriminating papers. Despite these categorical observations brought on record by ld. AO in remand report ld. CIT(A) should have deleted the additions by accepting assesssee's s search statement which was endorsed by search party also.
2.9 Despite these admitted facts on record, learned CIT (A) proceeded to make the estimate on entirely different methodology which resulted in more agonizing additions. Ld. CIT(A)'s on one hand has given categorical observations that the incriminating material and papers are haphazard and unspecific, on the other hand, by self-contradictory findings it has been held that the 'incriminating papers' were in the form of 'Regular Books' and each figure is to be suffixed with 3 zeros. Thus the haphazard papers and diaries without assigning any cogent reasons are held as regular books, methodically written and further adding 3 zeros to all figures. By such self- contradictory working the additions made by ld. AO are arbitrarily enhanced on the pretext of tabulation sheets which are neither mentioned in the assessment orders nor in proceeding sheets of the assessment, besides they were never confronted to the assessee.
3. Ld. CIT(A) by unfathomable method worked out total addition at Rs. 1,62,15,000/- on 'peak-theory' on the alleged basis two seized papers (As-1-page-2 for Rs.1,47,15,000/- & Rs.15,00,000/- as per page no.4 of AS-1) and confirmed/enhanced addition of Rs.20,50,000/- in the assessment year 2007-08 and Rs.1,41,65,000/- in the A.Y.2008-09 and ITA Nos. 872 to 875/JP/2013-Assessee's Appeal ITA Nos. 899 to 901/JP/2013- Deptt's Appeal Shri Badri Narain Sodani vs. DCIT AYs : 2007-08 to 2010-11 12 after telescoping the alleged interest income at enhanced figures of Rs.19.46 lac in the peak amount of Rs.1,62,15,000/-. Ld. Counsel for the assesse vehemently contends that the appeal orders suffer from many inconsistencies, factual and legal, besides the observations are not borne out from the record, rather they are self-contradictory and just opposed to the admitted facts on record:-
(i) Ld. CIT(A) has erroneously held that the seized papers and documents were in the form of 'Regular Books' and maintainable in perfect order. These findings are contrary to record, it has not been established as to how haphazard record can become regularly maintained record. Thus there is nothing on record to indicate as to how the field findings of ld. AO given after re-
examination of record vide his remand reply dated 3.5.2013 were unreliable or wrong. It was a remand called by ld. CIT(A) on her own instance which supported her prima facie observations based on assessee's vehement pleadings that additions were made without application of mind by ld. AO.
(ii) Ld. AO impliedly admitted that the additions were made on the basis of haphazard and unspecific incriminating papers. The entries are found recorded in/by hand and same entries at many places and they do not contain complete narration or relevant details. The figures appear to have been written in a coded form and are either followed or denominated by a date and/or followed by certain dates.
(iii) Ld. CIT(A) has not denied AO's remand submissions that the incriminating material's entries are neither chronological nor arranged in any other seemingly discernible manner. There were also several repetitions which added to the complexity of the entries. The entries presented data from which meaningful analysis was not only challenging but also extremely difficult". Without controverting these factual findings. how ld. CIT(A) as an imperative question of facts and circumstances do a somersault and hold that same haphazard material is a regular record, so illuminating to be read as regular account books and ITA Nos. 872 to 875/JP/2013-Assessee's Appeal ITA Nos. 899 to 901/JP/2013- Deptt's Appeal Shri Badri Narain Sodani vs. DCIT AYs : 2007-08 to 2010-11 13 reasonable basis of rather enhancing the additions, working out a fantastic peak theory and saddling the small time financier with huge tax liabilities.
(iv) On the face of it, considering the remand report, material on record, assessee's search statement and remand report received from the ld. AO, the contrary findings recorded by ld. CIT (A) are factually incorrect and the astronomical estimate of peak working has no legs to stand. Remand report, clearly mentions that the seized papers and documents were rough, haphazard, indiscernible workings where same entries appeared repeatedly.
(v) On an overall consideration of relevant facts and circumstances about assessee's finance business being undisputedly on daily basis and 100 installments basis have been totally ignored by ld. CIT(A) consequently the estimate of peak, capital and interest income as arrived at by ld. CIT(A) is based on surmises, conjectures and pure assumptions.
(vi) It is contended that is settled law as propounded by various judicial authorities that such estimates which are based on unspecific documents and without considering the relevant facts, record, surrounding circumstances and human conduct can to be sustained. Reliance is placed on the following judicial precedents:
(i) CIT v Girish Choudhary (2008) 296 ITR 619 (Delhi): Hon'ble Delhi High court confirmed the order of ITAT, deleting the addition of Rs.48 lakhs, holding that figure of '48' written on incriminating material cannot be assumed as Rs.48 lakh without corroborative material. Facts of assessee's case are similar to this case. Relevant observations of Hon'ble Delhi High court are as under:
7. The Tribunal vide its impugned order deleted the addition made by the Assessing Officer holding that:-
(ii) "In the present case the Revenue has used its longest arm of search available to the Revenue to unearth unaccounted money ITA Nos. 872 to 875/JP/2013-Assessee's Appeal ITA Nos. 899 to 901/JP/2013- Deptt's Appeal Shri Badri Narain Sodani vs. DCIT AYs : 2007-08 to 2010-11 14 or evidence thereof. Having taken above step and as per law, it has to be proved strictly that undisclosed income assessed in the hands of the Assessee is undisclosed income beyond a reasonable doubt. As noted earlier in the first page, total of all the five figures is 57.50 but addition of Rs.48 lacs was made and not of Rs.57.50 lacs. Why figures mentioned at second place after some gap was not taken into consideration. How 48 have been made as Rs.48 lacs and that too undisclosed income of the Assessee is absolutely not clear from the assessment order. It was stated that Rs.9.50 lacs is recorded to be received through Cheque and therefore above amount was not added. It is correct that before 9.50 the word, "Ch" is written but there was nothing on record to show this amount was any way different from other figures/amounts. No attempt whatsoever was made to link any of the entry in the seized book with any transaction carried by the Assessee in his capacity as Director or by his wife or M/s I.G.Builders and Promoters Ltd. to show the amount in figure as assessable undisclosed income. No proper use of seized material was made to establish that entries in the seized document relates to undisclosed income of Rs.48 lacs. Seized document has rightly been held to be a dump-document. It was for the Revenue to put life into it by collecting other relevant and connected material. This has not been done to establish the case as per requirement of the statute."
(iii) 8. Section 158B of the Act is a part of Chapter XIV-B dealing with special procedure for assessment of search cases. The Chapter contains section 158B to section 158BH. "Block period"
and "undisclosed income" have been defined in clauses (a) and
(b) to section 158B, for the purpose of the Chapter. We are concerned with the definition of "undisclosed income". The provision in its entirety reads as follow:-
(iv) "(b) 'undisclosed income' includes any money, bullion, jewellery or other valuable article or thing or any income based on any entry in the books of account or other documents or transactions, where such money, bullion, jewellery, valuable article, thing, entry in the books of account or other document or transaction represents wholly or partly income or property which has not been or would not have been disclosed for the purposes of the Act."
ITA Nos. 872 to 875/JP/2013-Assessee's Appeal ITA Nos. 899 to 901/JP/2013- Deptt's Appeal Shri Badri Narain Sodani vs. DCIT AYs : 2007-08 to 2010-11 15
(v) 9. It is clear from the above definition that the income or the property, which has been disclosed or would have been disclosed for the purpose of this Act, does not form part of the undisclosed income for purpose of block assessment. Under the provisions of Chapter XIV-B only such of the aforesaid categories of income, which has been found as a result of search can alone be the subject matter of an assessment under this Chapter. The definition specifies that where an Assessee has claimed any expenses or addition, which is found to be false, the same can only be regarded as an undisclosed income for the purpose of this Chapter.
(vi) 10. Under Chapter XIV B of the Act, before an addition of an "undisclosed income" can be made, the Assessing Officer has to bring on record the material to show that on evidence found as a result of search there is an undisclosed income represented by credits appearing in the books of accounts.
(vii) 11. 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 lacs.
(viii) 12. The Apex Court in Central Bureau Investigation vs. V.C.Shukla and Others, (1998) 3 Supreme Court Cases 410 has laid down that: -
(ix) "File containing loose sheets of papers are not 'book' and hence entries therein are not admissible under Section 34 of the Evidence Act, 1872."
(x) 13. 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 lacs made by the Assessing Officer on account of undisclosed income on the basis of seized material.
Further reliance is placed on following judicial citations:
(ii) Nirmal Fashions (P) Ltd. vs DCIT (2009) 23 DTR 386 (Kol)(Trib)
(iii) CIT v Satyapal Wassan (2007) 295 ITR (AT) 352(Jabalpur)
(iv) Bansal Strips (P)Ltd. v ACIT (2006) 99 ITD 177 (Del)
(v) Addl. CIT v Prsant Ahluwalia (2005) 92 TTJ 464 (Ctk)
(vi) CIT v D.K. Gupta (2009) 308 ITR 230 (Delhi).
(vii) Dr. Surenderanath Reddy vs ACIT (2000) 72 itd 205 (Hyd) (Tib):
ITA Nos. 872 to 875/JP/2013-Assessee's Appeal ITA Nos. 899 to 901/JP/2013- Deptt's Appeal Shri Badri Narain Sodani vs. DCIT AYs : 2007-08 to 2010-11 16 3.1 Ld. Counsel further contends that in following cases judicial authorities have held that in block assessment additions can be made in different years on the basis of evidence relevant to specific assessment year only:
i. Pooja Bhatt vs ACIT (2000) 73 ITD 205 (Mum) ii. Amarjeet Singh Baxi (HUF) v ACIT (2003) 263 ITR 75 (Del) iii. CIT v Khajan Singh & Bros. (2008) 304 ITR iv. S.P. Goyal vs. DCIT (2002) 77 TTJ (Mumbai (TM)1 v. Amarjit Singh Bakshi (HUF) vs. ACIT (2003) 81 TTJ (DEL)(TM) 169 3.2 It is contended that after 2 days meticulous search process and after proper verification of incriminating documents, the search party accepted disclosure of Rs. 46 lacs as additional income and assessee further offered Rs. 5 lacs totaling the additional income to 51 lacs. Due to haphazard nature of documents and a long period of 6 years, it was natural that in inquiries during assessment, assessee at times got confused about the entries.
Sometimes stating to add one zero, two zeros or three zeros to the jotted figures. When the rough, haphazard and nonspecific entries spreading to 6 years are asked to be explained, there is no gainsaying that assesse will answer every question with precision, thus some mismatch was a natural consequence. This is more so that both authorities also have mismatched many factual aspects while making their own estimates. Ld. AO gave a finding of fact that books are haphazard with repetitions of same entries. Similarly ld. CIT(A) initially gave categorical observations that entries are haphazard and unspecific, this is accepted by ld. AO to be correct in remand proceeedings. However ld. CIT(A) without any new material or information summed up the assumption that same incriminating material is regularly a regularly maintained set of record. Based on this unfounded assumption ld.
ITA Nos. 872 to 875/JP/2013-Assessee's Appeal ITA Nos. 899 to 901/JP/2013- Deptt's Appeal Shri Badri Narain Sodani vs. DCIT AYs : 2007-08 to 2010-11 17 CIT (A) recoursed to an arbitrary estimate of enhancing the additions on surmises to add 3 zeros to all the noting's. The undisputed fact that assessee's financing business was of 100 daily installments repayment basis has been conveniently ignored. Ld. CIT(A) has thus misconstrued the entire methodology, pattern and modus operandi of business and facts emerging from the record. The findings, observations and estimate made by ld. CIT(A) is assailed on following points:-
i. Ld. CIT (A) claims to have relied upon the 'Tabulation Sheets' allegedly generated during the course of the assessment proceedings, however neither they are mentioned in the body of the assessment order nor confronted to assessee. Hon'ble Supreme Court has held that additions based on such working without confronting to assessee cannot be sustained. Thus the alleged tabulation sheets cannot be construed as relevant and material for sustaining such estimate of undisclosed income.
ii. Ld. CIT (A) observing that the additions and assessments as framed were nonspecific and vague called for a remand report thereon. Ld. AO relied on one paper which is re-produced in the order. Ld. CIT(A) without assigning any convincing reason relied on two different papers and without examining the nature of entries and transactions straight-away added 'three zeros' to all the figures written on these nonspecific documents without any exception and worked out the alleged 'peak amount' and confirmed the additions.
iii. The learned CIT (A) summarily over-looked the 'vital' facts and circumstances of the case, that money lending activities carried on in 100 installments basis' recoverable on daily basis. In such money lending activities, its common practice that the 'daily installments' recoverable could never be a substantial amount, by additing 000 to all the inscriptions ld. CIT(A) has arrived at a grossly inappropriate, unreasonable and capricious estimate of peak working. In absence of any corroborative material, evidence or ITA Nos. 872 to 875/JP/2013-Assessee's Appeal ITA Nos. 899 to 901/JP/2013- Deptt's Appeal Shri Badri Narain Sodani vs. DCIT AYs : 2007-08 to 2010-11 18 statement, the summary adoption of 000 to all the is not maintainable.
iv. It is not disputed that appellant had been doing this money lending business for last five years as confirmed by him in his statement recorded at the time of search. In these circumstances, the fair and reasonable way for additions was:
a. Either to compute such investment and interest in year-wise wise manner and estimate the undisclosed income time on the basis of 'Assets and Investment Theory' for each year. However no undisclosed assets except incriminating material were found during search b. To avoid long winding working and the difficulties in doing so, it was agreed that should offer the aggregate of interest and in one year i.e. in the A.Y. 2009-10, which was abided by offering Rs. 51 laces which is assessed.
c. The other logical option of estimate was to accept assessee's sworn assessment during the course of search. Hon'ble Supreme Court also has held that statement given in first blush at the time of search is reliable piece of evidence. Thus an extensive exercise of verification carried out by department's own search party may be adopted in this behalf. d. It is also an undisputed fact that except the investment in the money th3e said 100 daily installments basis financing business, assesse neither possessed any other investment or asset in any form nor any other evidence was found. As such huge undisclosed income could not be reflected in any form at any stage so it would be illogical to estimate the undisclosed income to such magnitude that too in two years i.e. in 2007-08 & 2008-
09. Apparently such working of undisclosed investment is illogical and devoid of merits.
e. It has been lost sight of by the authorities below, that '100 daily installments' basis finance is availed by the persons of 'ordinary means' who are in financially tight condition, unable to raise borrowing from regular sources. No affluent person requiring funds to the magnitude of Rs.50 lac to 60 lac (as envisaged by ITA Nos. 872 to 875/JP/2013-Assessee's Appeal ITA Nos. 899 to 901/JP/2013- Deptt's Appeal Shri Badri Narain Sodani vs. DCIT AYs : 2007-08 to 2010-11 19 the learned CIT (A) would ever opt for such a crude financing scheme. Thus this clinching circumstantial evidences which has potential of changing the entire methodology of estimate has been given no credence.
f. It is trite law that any estimate which lacks the consideration of relevant, pertinent and clinching facts cannot be upheld. The estimate as adopted by ld.CIT(A) deserves to fail on this fundamental mistake.
g. During the course of appeal proceedings, appellant submitted a 'monthly summary of cash' w.e.f. 1.4.2008 to 31.3.2009' on the basis of incriminating papers with ld. CIT (A) vide letter dated 7th August, 2013 (copy of the letter along-with the summary sheet placed on PB No. 33 to 40). The summary sheets for FY 2008- 09 depicted total amount involved in money-lending business at Rs.17,36,900/- for the financial year 2008-09 i.e. A.Y. 2009-10. Another reasonable method was to make forward and backward calculation to determine year wise undisclosed investment. While doing so assesse has made the adjustments of opening investment also.
h. A time tested method to determine year wise undisclosed income was to work out initial investment and interest of first year, thereafter, the year wise interest income along with any incremental capital should have been added in subsequent years. Thus without addressing vital facts, nature of 100 daily installment financing activity, the financial potential of such business, reasonable methodologies of estimation and the working offered by assesse as depicted in 'monthly summary sheets' and a host of other valid considerations, the learned CIT (A) arbitrarily estimated the 'peak amount' of Rs. 1,62,15,000/- by presumptively adding 'three zeros' to all jotted figures. Thus the working of the undisclosed income and peak-amount thereof has no corroboration, sanctity, credence, and respect for the judicial precedents of reasonableness of estimates and demonstrates lack of application of mind. Such untenable estimate deserves to be quashed summarily.
ITA Nos. 872 to 875/JP/2013-Assessee's Appeal ITA Nos. 899 to 901/JP/2013- Deptt's Appeal Shri Badri Narain Sodani vs. DCIT AYs : 2007-08 to 2010-11 20 3.3 Ld. Counsel then adverted to various other inconsistencies emerging from the orders of authorities below:
i. Ld. AO took up the assessment proceedings 'simultaneously' in respect of all the search years. Accordingly, the appellant was required to furnish consolidated reply in respect of all the assessment years. For AY 2008-09, assessee was asked to explain as to why the additional income was not shown as admitted by him u/s 132(4) statements. Assessee replied vide letter dated 27.12.2011 that the investment in the money lending business was Rs.16,93,000/- (as revealed from Ex-A-8/42) and not Rs.1,69,30,000/- as taken by the department. In support, the ld. AO had reproduced a photo copy of an Exhibit at page no.4 of the assessment order. A perusal of this exhibit will reveal that not a single transaction pertained to this assessment year. However, ld. AO had turned down this factual contention emerging from the seized record itself in a summary manner by following observations at page no.6 of the assessment order:
"Thus, in view of the above discussions, the explanation offered by the assessee with regard to the entries found recorded on seized documents is not acceptable and is therefore rejected. An addition of Rs.21,30,000/- (subsequently revised to Rs.47,65,000) being the principal found advanced by the assessee in his money lending business out of his undisclosed income is made to the total income of the assessee. Interest income amounting to Rs.9,46,581/-- is also added to the total income being undisclosed income of the assessee for the year under consideration."
3.4 The crucial facts regarding methodology of advancing 100 daily installment recoverable in 100 daily installments (as evident from Ex-AS-1 pages 6 to 41 and as explained in reply to question No.28 of the statement and reproduced in the body of the assessment order) have been completely ignored. Without considering such important aspects, no logical working or estimate of the investment made in such finance activities can be estimated in a reasonable manner.
ITA Nos. 872 to 875/JP/2013-Assessee's Appeal ITA Nos. 899 to 901/JP/2013- Deptt's Appeal Shri Badri Narain Sodani vs. DCIT AYs : 2007-08 to 2010-11 21 3.5 Adverting to ld. AO's estimate of undisclosed income, it was assailed before the learned CIT (A) on the following counts:-
(i) On reading of the assessment order, it would be noted that while making additions, the learned AO had referred and re-produced only one incriminating paper Ex-AS-1 along with the relevant extracts from the statement of the appellant vide which such paper was sought to be explained at the time of search operations and made additions of varying amounts in the different assessment years, without relating the specific paper to specific assessment year. In all the impugned assessment years same facts, incriminating paper are reproduced and repeated in stereotyped manner without any pertinent line of action about methodology of estimate. There is no mention of any alleged 'tabulation sheets' as claimed subsequently by the learned AO in his remand report, which are also considered by ld. CIT (A) in working of so-called peak investment in shuffling and enhancing the additions. It is pertinent to note that the re-produced paper in all assessment orders pertain to rough transactions of AY 2009-10 only. The non application of mind and cryptic working is evident from the glaring fact that it has been made basis for additions in all the years. Thus there is neither year wise co-relation nor verification of alleged incriminating material. In the absence of nexus, relevancy and attribution the impugned working sans confrontation of alleged tabulation sheets, there is no basis or justification for ld. CT(A)'s additions. Such perfunctory working and additions are untenable, baseless and liable to be deleted.
(ii) Ld. AO has not indicated any 'omission' of zeros and made additions on the basis of selective use of search statement. It has been alleged that appellant has been changing version from time to time. It has not been appreciated that there is no contradictory version in original search statement, the lengthy post search proceedings made assessee's mind unstable as being alone he could not cope up with the pressure; this resulted in such mismatch of subsequent versions.
Ld. AO has heavily relied upon a 'part of such statement' regarding omission of no of zeros, which suited best to revenues interest.
(iii) The incriminating papers and documents as found and seized in the search operations are 'in the nature of cash book' and the ITA Nos. 872 to 875/JP/2013-Assessee's Appeal ITA Nos. 899 to 901/JP/2013- Deptt's Appeal Shri Badri Narain Sodani vs. DCIT AYs : 2007-08 to 2010-11 22 undisclosed income is worked out on the basis of the jottings as contained in page 2 of exhibit A-1.(kindly refer to page no.14 of the appeal order).
(iv) For the purpose, reliance is placed on one exhibit i.e. page-2 of A-1 instead of Ex.AS-1 page no.1 as relied upon by the AO for working out undisclosed income. (Remaining seized papers and documents were ignored completely).
(v) Three zeros were added in the total of the figures of the entries of the exhibits 16215 for the year. Accordingly, total undisclosed income was worked out at Rs.1,62,15,000/- for the A.Yrs. 2007- 08 & 2008-09 and additions were made which included the estimated interest income of Rs.19,45,800/-. As peak amount of Rs.1,62,15,000/- was worked out and assessed in the A.Y.2007- 08 & A.Y. 2008-09 so the learned CIT (A) has deleted the addition of Rs.21,30,000/- (subsequently revised to Rs.47,65,000 and incorrectly mentioned Rs.30,76,581/- in the appeal order) with the following findings recorded at page no.8 of the appeal order which is re-produced as under for ready reference:
(e) At no stage, the ld. AO had ever given his working of Rs.21,35,000/- for this year. It is still unknown on what basis such working has been done. As such working has been done on the back of the appellant without any basis and without giving any opportunity to the said working deserves to be quashed.
(f)From the reading of the assessment order, it would be noted that the learned AO had not disputed the working of the additional income of Rs.46 lac as worked out and shown in the Return for the yea. In absence of any reason and material on record, such working could not be denied. More-over, while quantifying the addition for the year at Rs.32 lac approximately, the learned AO had made reference to such working in passing manner as evident from the body of the assessment order.
However it is an evident fact that the AO's working included part of the additional income of Rs.46 as declared by the appellant in the Return of Income. After the lapse of 15 months (even after filing of the appeal), the learned AO could not know about such ITA Nos. 872 to 875/JP/2013-Assessee's Appeal ITA Nos. 899 to 901/JP/2013- Deptt's Appeal Shri Badri Narain Sodani vs. DCIT AYs : 2007-08 to 2010-11 23 lapse in his working and abruptly enhanced the assessed income by Rs.46,71,700/- (adding entire returned income shown in the revised return) vide rectification order passed u/s 154 of the Act on 05.03.2012 without assigning any reason and without giving an opportunity to thye appellant. The appellant had already challenged this rectification order which is pending on the date. But this order clearly revealed the erroneous working of the additional income by the learned AO.
(g) Again without prejudice to the above objections, the learned AO had also failed to follow the Telescoping Theory' to give credit of the additions made in earlier years under the same head. Thus such working is contrary to the principles of Telescoping Theory.'
(h) As the appellant had owned all the financial transactions in his own case and offered additional income of Rs.46 lac on account of such transaction. In the circumstances, testimony of the co-called witness in this regard had become irrelevant and immaterial for drawing conclusion.
In view of above discussions, the addition of Rs.30,76,581/- (Rs.21,30,000/ on account of principle amount plus Rs.9,46,581/- on account of interest receipts) is factually and legally incorrect and deserves to be deleted summarily.
3.6 It is further contended that ld. CIT (A) while deleting additions made by AO correctly pointed out various deficiencies in the working, consequently AO's additions for these four years became infructuous. As a logical consequence the additions as enhanced by the ld CIT (A) in the assessment years 2007-08 & 2008-09 will also become automatically infructuous as they are based on AO's earlier observations coupled with assessee's above objections. Ld. CIT (A) findings are self contradictory in as much as once the seized papers and documents are held as haphazard and nonspecific and subsequently without reasons or justification they are summarily held as ITA Nos. 872 to 875/JP/2013-Assessee's Appeal ITA Nos. 899 to 901/JP/2013- Deptt's Appeal Shri Badri Narain Sodani vs. DCIT AYs : 2007-08 to 2010-11 24 Regular Books, the reliance on so called 'Tabulation Sheets' are nowhere discussed in assessment proceedings. Therefore, working of undisclosed income based on such erroneous factual findings and working of Peak Amount thereon being based on evident such self-contradictions is unsustainable. Further ld.CIT(A) erred in law and on facts on following counts:
(a) Despite vehement contentions about facts assessee's financing activities being based on '100 daily installments', its small volumes as evident from the seized papers vide Ex-AS-1 (pages 6 to 41), ld. CIT(A) did not consider the same and arbitrarily added 3 zeros to each writing. Thus the estimate of peak of undisclosed income has arrived at without considering the modus operandi of the money lending business based on 100 installments- basis repayments. Assessee filed a cash flow statement based on 100 daily installments repayments however the same is not at all commented upon much less even considered as there is no mention in appeal orders in this behalf.
(b) The working of the interest income @ 12% on the such exorbitant and arbitrary 'peak amount' is absurd as it based on assumption that entire peak has been advanced throughout the year, which is practically impossible. The contradiction is further clear from the fact that ld. AO estimated mean interest income @ 4% of the cash available. Assessee correctly worked out and offered the estimated additional income of Rs.46 lac plus Rs.5 lac extra income to finalize the search proceedings amicably and peacefully. The Searching Officers of the Investigation Wing were satisfied with such working and the additional income offered, on the basis thereof, such additional income was offered and declared the Block Period returns. The Assessing Officer and the learned CIT (A) had however brushed aside such working without pointing out any discrepancy in the cash flow working, figures of the loans/ investments and without bringing any material on record to counter the assessee's working or cash flow. Thus the working of additions made by AO are admittedly fallacious and the working 'peak-amount' by ld.
ITA Nos. 872 to 875/JP/2013-Assessee's Appeal ITA Nos. 899 to 901/JP/2013- Deptt's Appeal Shri Badri Narain Sodani vs. DCIT AYs : 2007-08 to 2010-11 25 CIT(A) is palpably erroneous, in violation of principles of natural justice and in total disregard of settled judicial proposition and based on arbitrary estimates. The order of authorities below being grossly erroneous and untenable, the additions made deserve to be deleted. Consequently the additional income as disclosed in the block-period returns based on sworn statement deposed during search operations deserves to be accepted.
3.7 It is contended that if assessee's versions were at variance, as per settled legal principles in this situation, recourse could be made to any of the following propositions:
a. Ignore all the statement of assessee as unreliable including search statement and work out correct undisclosed investment by a proper methodology. Surprisingly though assessee has been alleged for giving contradictory version only the one resulting in highest additions has been adopted. If somebody's version is unreliable the same should be ignored, law does not permit selective use of it to saddle taxes on assessee in an arbitrary manner.
b. The search statement being the first blush statement, it being accepted by search party and seized jewelry having been released relying on it, the same should have been followed. Since the assessee having honored the disclosure no further additions can be made.
c. On the basis of such modus operandi, he had worked out his additional income at Rs.51 lac in consultation with the searching party and had offered the additional income with the consent of the searching party only. However, the learned AO had heavily relied upon a part of the statement ignoring the rest of the statement to arrive at arbitrary figures of unimaginable magnitude by adding three zeros in each and every transaction without appreciating the facts and circumstances under which such money lending activities had been carried out. Thus the additions so made were totally illogical and without any basis.
ITA Nos. 872 to 875/JP/2013-Assessee's Appeal ITA Nos. 899 to 901/JP/2013- Deptt's Appeal Shri Badri Narain Sodani vs. DCIT AYs : 2007-08 to 2010-11 26 d. Since the ld. AO and ld. CIT(A) accepted that AOs additions are nonspecific and not based on proper considerations, there is no merit in the additions made by ld. AO.
e. Assessee has demonstrated that the estimation of undisclosed income as made by ld. CIT(A) again worst than the AO and miles away from the reality, the same cannot be relied on.
f. In these facts and circumstances it is desirable that that the surrender as made by assessee by way of a sworn statement during the course of search be relied. Since such disclosure has been offered in the block returns by assessee, no further additions are called for.
4. Ld. DR submitted the copies of tabulation sheets found in the assessment record and relied on the orders of authorities below.
5. We have heard the rival contentions and perused the material available on the record. Relevant facts about the search, statement, declaration of additional income by assesse have been narrated above. Some facts which clearly emerge from the record are that the incriminating material revealed that assesse was engaged in financing business mostly on repayable in 100 installments, carried out of books and not disclosed. Statement was recorded during the course of search stating the peculiar type of financing business was carried out on the basis of the scribbling in the diary and loose papers. In order to avoid the pressure of the search and consequent assessment proceedings, assessee initially declared the aggregate additional income qua the undisclosed capital and subsequently offered further additional income of Rs.5,00,000/- in A.Y. 2010-11.
5.1 Some assessed which were either disclosed or belonging to other persons like FDRs and Mutual Funds were excluded. Similarly cash and ITA Nos. 872 to 875/JP/2013-Assessee's Appeal ITA Nos. 899 to 901/JP/2013- Deptt's Appeal Shri Badri Narain Sodani vs. DCIT AYs : 2007-08 to 2010-11 27 jewelry found during the course of search were found explained and accordingly excluded while framing the assessments.
5.2 In the assessment proceedings, AO did not accept assessee's declaration and assessed the undisclosed income at total amount of Rs.2,14,64,823/- for all these years. In first appeal proceedings, ld. CIT (A) observed that the impugned assessment orders passed by the learned AO were very unspecific and vague in nature and called for a remand report which was submitted on 3.5.2013 by ld. AO, with following relevant observations:
"the seized documents contain entries which allegedly pertain to his undisclosed income. The entries are found recorded in/by hand and at many places do not contain complete narration or details. The figures also have been written in a coded form and are either followed or denominated by a date and/or followed by certain dates. The entries are neither chronological nor arranged in any other seemingly discernible order. There are also several repetitions which added to the complexity of the entries. The entries presented data from which meaningful analysis was not only challenging but also extremely difficult"
5.3 This report by ld. AO mainly stated that:
a. The entries are neither chronological nor arranged in any other seemingly discernible order.
b. There are also several repetitions which added to the complexity of the entries and meaningful analysis of data was not only challenging but also extremely difficult.
c. Thus ld. AO implied that estimate as made in assessment orders were based on unspecific and vague material. Besides ld. AO did not apply the Telescoping Theory as contended by assesse for credit of the additions made in earlier years.
ITA Nos. 872 to 875/JP/2013-Assessee's Appeal ITA Nos. 899 to 901/JP/2013- Deptt's Appeal Shri Badri Narain Sodani vs. DCIT AYs : 2007-08 to 2010-11 28 5.4 These observations coupled with ignoring the crucial fact about assessee's undisclosed finance business was mainly based on 100 days repayable installments indicate that ld. AO's estimate was not arrived at with just and proper considerations and indicates lack of application of mind. It may be mentioned that an estimate or best judgment assessment has to be just and proper with proper nexus with the material available on record.
Judicial precedents hold that an estimate which is not just, proper and reasonable is an arbitrary one and untenable.
5.5 Ld. CIT(A) called for a remand report with categorical observations that the assessment order was unspecific and haphazard as the incriminating material and papers are also haphazard and unspecific. The remand report did not offer any new material or information as the same was already on record. Ld. CIT(A) has not offered any cogent reasons as to how the same haphazard papers, became regular books. The additions have been enhanced by suffixing 3 zeros to haphazard figures. The alleged tabulation sheets are neither mentioned in the body of the assessment orders nor confronted to the assessee. In the entirety of submissions, facts and circumstances it emerges that:-
a. Ld. CIT(A) has erroneously held that the seized papers and documents were in the form of 'Regular Books' and maintainable in perfect order. These findings are contrary to record, it has not been established as to how the incriminating material which admittedly was haphazard in nature became regularly maintained record. Thus there is nothing on record to indicate as to how the field findings of ld. AO given after re-examination of record vide remand reply dated 3.5.2013 were unreliable or wrong. It was a remand called by ld. CIT(A) on her own instance which supported her prima facie observations that additions were in vague and unspecific manner by ld. AO.
ITA Nos. 872 to 875/JP/2013-Assessee's Appeal ITA Nos. 899 to 901/JP/2013- Deptt's Appeal Shri Badri Narain Sodani vs. DCIT AYs : 2007-08 to 2010-11 29 b. Ld. AO impliedly admitted that the additions were made on the basis of haphazard and unspecific incriminating papers.The entries are found recorded in hand and same entries at many places and they do not contain complete narration or relevant details. The figures appear to have been written in a coded form and are either followed or denominated by a date and/or followed by certain dates.
c. Ld. CIT(A) has not denied AO's remand submissions that the incriminating material's entries are neither chronological nor arranged in any other seemingly discernible manner. There were several repetitions which added to the complexity of the entries. The entries presented data from which meaningful analysis was not only challenging but also extremely difficult.
d. Assessee's reliance on Hon'ble Delhi High Court judgment in CIT v Girish Choudhary (supra) supports his case that a figure of 48 written on incriminating material cannot be assumed to be Rs.48 lakh without corroborative material.
Further reliance placed on other judicial citations: Nirmal Fashions; Satyapal Wassan; Bansal Strips; Prsant Ahluwalia; D.K. Gupta; Dr. Surenderanath Reddy (all supra) support the propositions put forward by the assesse in this behalf.
5.6 Besides it emerges that due to haphazard, repetitive and unspecific nature of jottings, additions have not been made as relatable to particular years based on nexus or evidence to that assessment year. Consequently the ratio of judgments in the cases of Pooja Bhatt; Amarjeet Singh Baxi (HUF); Khajan Singh & Bros. (2008) 304 ITR ; S.P. Goyal (Mumbai (TM) (all supra) is also applicable to this case:
Ld. CIT (A) claims to have relied upon the 'Tabulation Sheets' allegedly generated during the course of the assessment proceedings. Hon'ble Supreme Court in the case of Andaman Timber Industries v CCE (2015) 281 CTR (SC) 241 has held that additions based on any material without confronting to assessee cannot be sustained. Consequently the alleged tabulation sheets ITA Nos. 872 to 875/JP/2013-Assessee's Appeal ITA Nos. 899 to 901/JP/2013- Deptt's Appeal Shri Badri Narain Sodani vs. DCIT AYs : 2007-08 to 2010-11 30 cannot be a valid basis and material for sustaining such estimate of undisclosed income.
5.7 There are some variations in assessee's versions during the course of assessment proceedings. Having said that it cannot be lost sight of, that both ld. AO and ld. CIT(A) also were inconsistent in their approach and working of estimate. In these circumstances the search statement of the assesse which is a first blush account of assessee's affairs and impliedly endorsed by search party also, becomes more reliable and preferable on preponderance of probabilities, surrounding circumstances and human conduct. This approach to resolve income tax issues has been endorsed by Hon'ble Supreme Court in the case of Sumati Dayal 241 ITR 801. It is noteworthy that assessee's version of search assessment about cash and jewelry found during search and statement about FDR and Mutual Fund investment was also found to be correct. Thus it cannot be held that search statement and the disclosure of additional income have no evidentiary value. When there are conflicting opinions about estimate of income, one which is spelt out in the first blush will carry appreciable force more so when other estimates have self contradictory observations.
5.8 In view of the fact that ld. CIT(A) initially observed that AOs additions are nonspecific and not based on proper considerations, which is accepted by ld. AO in remand proceedings, the estimate of ld. CIT(A) cannot be held to be just and reasonable. the estimate of ld. CIT(A) suffers from the infirmities as it is made with complete ignorance about nature of assessee's undisclosed financing business being based on 100 daily instilments repayments basis; no cogent reasons have been given as to how the ITA Nos. 872 to 875/JP/2013-Assessee's Appeal ITA Nos. 899 to 901/JP/2013- Deptt's Appeal Shri Badri Narain Sodani vs. DCIT AYs : 2007-08 to 2010-11 31 haphazard and unspecific incriminating material became regular books despite AO's acceptance. Similarly ignoring the search assessment and preferring one of the wavering versions suitable to revenue cannot be called reliance on proper estimate.
5.9 In these facts and circumstances it is desirable that that the estimate based on surrender of additional income as made by assessee by way of a sworn statement during the course of search is more preferable than the estimates made by ld. AO and ld. CIT(A). Both the estimates made by authorities below are arrived at in unjust and untenable manner, which cannot be upheld in view of the observations mentioned above.
5.10 In view of the facts, circumstances, rival contention and respectfully following the judicial precedents cited above and that of Hon'ble supreme court Andamans Industries and Sumati Dayal (supra) we accept the assessee's disclosure to be more reliable than the estimate made by AO or ld. CIT(A). In view thereof we delete all the additions made by the authorities below.
6. In the result appeals filed by the assesse are allowed and revenue's appeals are dismissed.
Order pronounced in the Court on 26th July, 2016 at Jaipur.
Sd/- Sd/-
Sd/- Sd/-
(VIKRAM SINGH YADAV) (R.P. TOLANI)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Jaipur Dated 26 /07/2016
*Biju T.
ITA Nos. 872 to 875/JP/2013-Assessee's Appeal ITA Nos. 899 to 901/JP/2013- Deptt's Appeal Shri Badri Narain Sodani vs. DCIT AYs : 2007-08 to 2010-11 32 षत Copy आदे श क ूितिल#प अमे#षत/ of the Order forwarded to :
1. अपीलाथ / The Appellant
2. ू यथ / The Respondent.
3. संबंिधत आयकर आयु& / Concerned CIT
4. आयकर आयु&(अपील) / The CIT(A)
5. #वभागीय ूितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Jaipur
6. गाड फाईल / Guard file.
/ BY ORDER, आदे शानुसार TRUE COPY सहायक पंजीकार (Asstt.Registrar) आयकर अपीलीय अिधकरण, अिधकरण / ITAT, Jaipur
1. Date of dictation- ...........
2. Date on which the typed draft is placed before the Dictating Member ......
Other member ...................
3. Date on which the approved draft comes to the Sr.P.S./P.S. - ...........
4. Date on which the fair order is placed before the Dictating Member for Pronouncement .........................
5. Date on which the file goes to the Bench Clerk......................
6. Date on which the file goes to the Head Clerk..................................
7. The date on which the file goes to the Assistant Registrar for signature on the order..........................
8. Date of Despatch of the Order..................