Income Tax Appellate Tribunal - Mumbai
Assistant Commissioner Of Income-Tax vs Shailesh S. Shah on 11 March, 1997
Equivalent citations: [1997]63ITD153(MUM)
ORDER
I.S. Verma (JM)
1. This is an appeal by the Revenue wherein the following ground of appeal has been taken :
"On the facts and in view of the circumstances of the case, the learned CIT(Appeals) erred in deleting the addition of Rs. 3,38,152 made by the A.C. on the ground that the addition is merely based on suspicion, even though, the seized paper No. 44 contained ample details of commission including exact number of pieces and labour charges on which when questioned the assessee was mum, without throwing any light on the transaction at the assessment proceedings, besides the transactions recorded in the paper did not tally with that of books, thus assessee avoided to furnish any correct facts/details. The explanation given before the CIT(Appeals) by the assessee is not satisfactory and also had not been given before the A.C. The assessee claims to have deducted his personal drawings out of the total profit of the firm to arrive at a figure of Rs. 1,38,412, which is not possible to believe as the assessee is only a partner in the firm, at least officially. Also the story regarding the personal drawings and dates of repayments selected by the assessee on the basis of their auspiciousness is not possible to believe. In any case the CIT (Appeals) did not allow the A.C. an opportunity to cross-examine the assessee on this explanation given at appeal stage before the CIT(Appeals)."
2. We have heard the learned D.R., as well as assessee's counsel and before elaborating their respective stands, we would like to extract the facts necessary for the disposal of the issue before us.
3. The facts of the case are that the assessee was a partner in a firm styled as M/s. Gem India Manufacturing Co. having 15% share. The firm's business was that of cutting and polishing of diamonds. The appellant assessee as well as the firm were maintaining their accounts for the purpose of income-tax on the basis of Samvat Year and therefore, their previous year relevant for the assessment year 1986-87 - which is under appeal before us; had ended on 12-11-1985 because the Samvat Year 2041 had ended on this date. As a result of search, at assessee's premises on 26-8-1987, certain loose papers were found and seized and one of those loose papers which has been marked as page No. 44 which has been responsible for creating the controversy under appeal before us; has the following details :-
"S.S. Shah Jan. to Dec. 1985 No. Pieces Labour charges 254086 4426304 At 4% = 177052 Less :
Withdrawals 38640
-------
138412
-------
150000 3/6 25000 Int. 937.50
18/9 50000 3187.50
9/11 10000 750.00 750.00
9/12 5000 } 2062.50 2062.50
}
10/12 20000 }
------- -------
150000 110000 3600
Bal. 40,000 3600
------- --------- ---------
11100 10537.50
Final Bal. 138412 --------- ---------
+ 40000
11100
-------
189512"
-------
4. During the course of assessment proceedings, the assessee was asked to explain the contents of this loose paper, which the assessee explained as per his written submissions dated 23-3-1989. In this written submission, the assessee explained that the paper at S. No. 44 is a rough working of estimated earning of M/s. Gem India Manufacturing Co. and it has got no final value. The relevant portion of the assessee's reply from page 2 of his letter dated 23-3-1989 is reproduced as under :-
"Page No. 44 is the rough working of estimated earning of M/s. Gem India Manufacturing Co., out of manufacturing activities which was estimated at Rs. 1,77,052. The profit disclosed by the firm is about Rs. 1,76,916 as worked out below :-"
The Assessing Officer rejected the assessee's claim and added the figures of 1,77,052, 1,50,000 and 11,100 to assessee's taxable income by considering the same as assessee's income in the form of commission (1,77,052), unexplained investment (1,50,000) and interest on the above income 1,50,000 (11,100) respectively. The relevant findings of the A.O. are extracted from page 3 of the assessment order as under :-
"The contention is not accepted. The paper contains exact No. of pieces and labour charges. At the top of the paper name of the assessee is also written. Obviously this paper pertains to the assessee. Although the assessee appeared during the course of hearing but kept mum without throwing any light in respect of transaction recorded in the paper. Further it is seen that the transaction recorded in that paper are not tallying with the transaction of the firm M/s. Gem India Manufacturing Co. It appears that the assessee has made some efforts to do-relate the transaction noted in that paper. In view of this fact, the contentions are not accepted. The assessee had not said anything about Rs. 1,50,000 mentioned in that paper. Nothing has also been said about the interest of Rs. 11,100 shown in that paper. It is clear that assessee does not want to give correct fact about that paper and in view of this fact, I hold that the paper contains such transaction which the assessee does not want to disclose. Since that paper contains income of the assessee, I take the relevant income for tax purpose. As discussed above, the papers shows commission of Rs. 1,77,052 for the period from Jan. 85 to Dec. 85. I hold that this income is assessable in the hands of the assessee for the assessment year 1986-87. Besides, the amount of Rs. 1,50,000 on which interest of Rs. 11,100 has been shown, I hold that the amount of Rs. 1,50,000 also represent undisclosed income of the assessee."
5. The assessee agitated the addition before the CIT(Appeals) and explained the various figures on loose paper 44 as per his written reply dated 2-2-1990 filed before the CIT(Appeals) which is in the following form :-
"Shailesh S. Shah, 7, Hill View, 15, Ridge Road, Bombay-400 006.
Date : 2-2-1990.
The Commissioner of Income-tax (Appeals)-IX, Bombay.
Dear Sir, Re : Appeal No. CIT(Appeals) Ward-7/71/89-90 for Assessment year 1986-87 The learned Assistant Commissioner of Income-tax as made additions totalling to Rs. 3,38,152 to my total income based on loose paper found in the course of an action under section 132 of the Act. The learned Assistant Commissioner has rejected my explanations without giving any reasons whatsoever. A copy of my explanations as submitted to the learned Assistant Commissioner is enclosed marked Annexure 'A'.
In this connection, I would like to make following submissions for your honour's consideration :
1. I was carrying on a business of cutting & polishing of diamonds in partnership under the firm name and style of M/s. Gem India Mfg. Co., along with following partners. A copy of Partnership Deed is enclosed marked as Annexure 'B'.
Profit/Loss sharing Ratio
1. Shri Ramniklal R. Mehta 25%
2. Smt. Naina H. Mehta 25%
3. Smt. Amita S. Mehta 20%
4. Shri Shailesh S. Shah 15%
5. Shri Nitin K. Shah 15%
----
100%
----
2. The first three partners of the firm bail from one of the most eminent group of diamond exporters of our country namely M/s. B. Arunkumar and from the said deed you will observe that I was entitled to 15% share in the profits of the firm. I was not entitled to any commission from the firm as erroneously concluded by the Assistant Commissioner of Income-tax. I was in charge of the day to day management of the firm and also in charge of modernisation and responsible for expansion of the firm.
For the purposes of expansion I had analysed the working results of the Firm M/s. Gem India Manufacturing Co., of which I was a partner. These figures are based on the actual working of the firm. The book results of the firm have always been accepted by the department. I am enclosing the assessment order of the firm for assessment year 1986-87, which is self-explanatory. The learned Assistant Commissioner of Income-tax has accepted my explanations regarding all the seized papers as rough working. Therefore, there is no reason why the same cannot be accepted for paper at serial No. 44.
The relevant rough working on Page at serial No. 44 are reproduced by the learned Assistant Commissioner of Income-tax on Page No. 2 of the order under appeal. In this connection based on my recollection at this distant time I submit as under :
1. No. of pieces 254086.
There appears to be a typographical error as the No. of pieces as per the seized paper at serial No. 44 is 2,54,086. This is the identical production figure of the firm M/s. Gem India Manufacturing Co., of the calendar year 1985. I am enclosing the summary of monthwise production details, labour charges paid, profitability etc. of my firm for the relevant period marked Annexure 'C'.
2. Labour Charges Rs. 44,26,304.
This figure represents the actual labour charges paid by the firm during the relevant period as per Annexure 'B'.
3. At 4% - Rs. 1,77,052.
This is the working of average profit earned in the industry which is in conformity with the book results of the Firm for the relevant period as can be seen from Annexure 'C'.
4. Less - Withdrawals Rs. 38,640.
This is the actual figure of my personal withdrawals for the year 1985 from M/s. Gem India Manufacturing Co. I am enclosing the extracts of my Capital Account for the Calendar year 1985 marked as Annexure 'B'. Incidentally I follow the Samvat Year for the purposes of my tax Assessments.
5. Rs. 1,38,412.
This is the balance drawn after deducting my withdrawals for the relevant period.
6. Rs. 1,50,000.
This is the figure which I am intending to borrow. I was informed by my financial partners that they intended to wind up the operations of the firm. I intended to offer to purchase the Plant & Machinery at book value, which was Rs. 1,50,823 as on 12-11-1985.
7. 3/6, 18/9, 9/11, 9/12, 10/12.
These are the dates on which I intended to pay the amounts written against each date. In 2nd column and the 3rd column is the principal and interest I would have to pay receiving instalment facility of the sum of Rs. 1,50,000 from the firm from 1st January till 31st December. I had selected these' dates as the same represent auspicious days of Hindu Calendar e.g., 3/6 is the full moon night, 18/9 was Ganapati immersion day, 9/11 was Dusshera, etc.
8. Bal. 40,000.
This is a simple arithmetic indicating balance amount payable at the end of the year out of the sum of Rs. 1,50,000 if I could make payments in instalments as per my plan.
9. Final Balance 1,38,412 + 40,000 + 11,100 = 1,89,512.
These figures are simply cash flow that I will have at the end of the year if I could work and achieve the production based on my firm's working. Rs. 1,38,412 as the balance that I will have after my withdrawals, Rs. 40,000 represents my own investment in deposits & cash balance that I had and Rs. 11,000 represents my income from other sources which is evident from the assessment order for the year 1986-87.
Therefore, I respectfully submit that if the firm is obliged to pay commission to me there is no reason why the amount should not be debited in the firm's accounts. The firm had enough profits to cover the so-called commission as alleged by the learned Assistant Commissioner of Income-tax as having been paid to me. If I have earned the commission then in that case, the firm is over-assessed to that extent.
I once again submit that the workings on page No. 44 are the actual working results of the firm M/s. Gem India Manufacturing Co., which were in fact analysed by me for projections. This is confirmed by the books of account of the firm for the year 1985 as already mentioned by me earlier. I further respectfully submit that in the course of search carried out by the department under section 132 at my office as well as my residence did not reveal any evidence even to suggest that I have such huge investments to the extent of Rs. 3,38,152 as alleged by the learned Assistant Commissioner of Income-tax in order under appeal. No seizure of any valuable was made from my house.
Suspicion however strong cannot take place on proof. The learned Assistant Commissioner did not bring any evidence but for a scrap sheet of paper in order to arrive at conclusion. The figures appearing in this page are mere jointings which were explained to the learned officer that these are working in respect of project in contemplation.
It will be observed from records that none of my partners have confirmed any such arrangement of my receiving any income over and above my share of profit much less my earning commission @ 4% as concluded by the learned Assistant Commissioner.
From the above I submit that if at all I was entitled to commission as concluded by the Assistant Commissioner of Income-tax it could not be for one solitary year. I have been a partner since 1981. My assessment records are clear and no addition of this manner has ever been made in my assessments. All my investments and assets have been disclosed by me correctly and at the time of action under section 132, no assets as valuable were seized as unexplained.
I therefore once again pray before your honour that trust my above submission in regard to page at serial No. 44 are based on the best recollections I can make at this distant time. According to the best of my knowledge it is merely a piece of scrap and rough workings and does not by any stretch of imagination indicate any monetary values or any undisclosed income/investment.
Thanking you, Yours faithfully, (Shailesh S. Shah)"
The CIT(Appeals) after considering the facts and circumstances, deleted the addition as per his finding in para 3 of his order which are extracted as under :
"3. I have carefully considered the submissions made by Shri Namlesh Dalal, C.A., learned representative of the appellant and have also perused the order passed by the Assessing Officer. The alleged page No. 44 on the basis of which the addition of Rs. 3,38,152 has been made by the Assessing Officer is one of 99 pages seized from the premises of the appellant in respect of which explanations were called and given by the appellant and it appears that the Assessing Officer has accepted the explanation in respect of all other papers except page No. 44. The explanation of the appellant in respect of other pages was that these contain rough working in the hands of the appellant for making a project report for semi-automatic diamond cutting and polishing machinery different sizes of diamond, after taking into account the cost of machinery, cost of labour and other expenses as explained by Mr. Dalal, in details in his submissions, which has been reproduced supra in fact represents the rough working of the estimated earning of M/s. Gem India Manufacturing Co. out of manufacturing activities which is corroborated by the books of account of the firm for the year 1985. In this view of the matter, it appears that the addition of Rs. 3,38,152 is merely based on suspicion as no corresponding asset in the form of cash/jewellery/F.D.R., etc., were found and seized from the premises of the appellant as a result of action under section 132. Suspicion however strong cannot take the place of proof as held by the Supreme Court in the case of Uma Charan Shaw & Bros. Co. v. CIT [1959] 37 ITR 271. Thus, keeping in view the totality of the facts and circumstances of the case, I am of the opinion that the learned Assessing Officer was not justified in making the impugned addition of Rs. 3,38,152 which is directed to be deleted."
6. On the basis of the aforesaid facts, the learned D.R. first of all, objected against the CIT(Appeals)'s decision to consider the fresh explanation without giving the Assessing Officer an opportunity of being heard. This objection was further supported by the submission that during the assessment proceedings, the assessee had not submitted the explanation which was submitted before the CIT(Appeals) and the same being on quite different footing amounted to fresh material and the CIT(Appeals) should not have considered the same without giving the Assessing Officer an opportunity of being heard. On merits, the learned D.R. submitted that the ownership of the paper having been accepted by the assessee, it was his onus to explain the contents fully and truly and to the satisfaction of the Assessing Officer, which he failed to do and under these circumstances, the Assessing Officer was justified to consider the entries on this paper as assessee's income. He, therefore, supported the order of the Assessing Officer. The learned D.R. put great emphasis on the entry "at 4% = 1,77,052. From this entry, the learned D.R. submitted that if the figure of 44,26,304 appearing just above this entry and below the words "Labour charges" was the amount of labour charges paid by the firm then, if the assessee had no connection with the computation, there was no question for him to compute the income at the rate of 4% which he is claiming to have done for estimating the future profits of the concern. The learned D.R. further put emphasis on the entry appearing at the bottom of this loose paper which is in the following form :
"Final Balance : Rs.
1,38,412
+ 40,000
11,100
----------------
1,89,512"
----------------
From the narration "Final Balance" and addition of three figures, namely, 1,38,412, 40,000 and 11,100, the learned D.R. submitted that this entry clearly goes to show that the assessee was to receive this amount which could not be on any other account except assessee's income. He, therefore, submitted that the Assessing Officer was justified in making the addition and the CIT(Appeals) was not justified deleting the same.
7. The assessee's counsel, on the other hand, in addition to reiterating the submissions made before the CIT(Appeals), including the written submissions, submitted that there is no word as 'commission' anywhere on this paper and, therefore, how the Assessing Officer could assume the figure of 1,77,052 as assessee's income remains to be proved. The word 'commission' has been incorporated by the Assessing Officer as a result of his own assumptions and presumptions which had no relevancy in taxing matters. He further submitted that even if it is assumed for the sake of argument then that figure of 1,77,052 represents commission then, there is no evidence to show that it was either receivable or was received by the assessee. Objecting to the Assessing Officer's conclusion further, the assessee's counsel submitted that if we further presume this figure to be commission receivable by the assessee then also, no addition can be made in this year, i.e., in assessment year 1986-87 because assessee having no source of income from business; was declaring his income on cash system of accounting - though of course, share from the firm was to be declared on the basis of accrual. He, therefore, submitted that there is no evidence either on this paper or in the assessment order which may show that this amount was actually received by the assessee during the previous year relevant to assessment year 1986-87 and, therefore, the amount, even if is considered as commission, cannot be added in this assessment year. Coming to the figure of 1,50,000, the assessee's counsel submitted that the entry against this figure and the entry showing balance of 40,000 can lead to two presumptions; namely, either the amount of Rs. 1,50,000 represents the loan or advance given by the assessee against which 1,10,000 might have received back and that is why 40,000 has been shown as balance or the figure of 1,50,000 might represent loan or advance taken by the assessee but in both the cases, the amount of Rs. 1,50,000 cannot be assessed as assessee's income and that is so because there is no date against this figure as to when it was given or it was taken. Similarly, he submitted that the figure of 11,100 which is below the word "interest" cannot be considered as assessee's income. Concluding his submissions, the assessee's counsel submitted whatever may be case, none of these figures can be taxed in assessee's hand as his undisclosed income for the assessment year 1986-87 as the Revenue has not brought any material except rejecting the assessee's explanation; on record to prove that these figures represent assessee's income. On the point of onus, the assessee's counsel submitted that it is well-settled that every receipt is not income in the hands of the recipient and, therefore, before the assessee can be asked to explain as to why a particular receipt may not be taxed, it is Revenue's onus to prove that such receipt represents income. In the case under appeal, the revenue has not discharged its onus to prove that any of these figures was either assessee's receipts or income and, therefore, in spite of the fact that the assessee explained the entries without having obligation to do so, the revenue has not brought any material to prove that these figures represent receipts or income in assessee's hands and, therefore, the primary onus has not been discharged by the Revenue. As regards to assessee's onus, the assessee's counsel submitted that the assessee has explained each and every figure and, therefore, has discharged his onus.
8. After carefully considering the rival submissions, case laws relied upon by the parties and facts of the case, we have noticed that there is no specific or direct evidence available on this case, which may support the finding of the Assessing Officer wherein he has considered the figures of 1,77,052, 1,50,000 and 11,100 as assessee's income for this assessment year. From the order of the Assessing Officer, what we have been able to understand that -
(i) Figure of 1,77,052 has been taken as commission earned by the assessee during the period Jan. 1985 to Dec. 1985, and
(ii) Figure of 1,50,000 and 11,100 have been taken as assessee's undisclosed income without giving any reason or bringing any material in support of such a conclusion.
At the same time, we have noticed from the contents of the loose paper 44, a copy of which has been placed on record by the Revenue as well as the assessee and the contents of which have been reproduced by us in the foregoing paragraphs, that -
(a) The word "commission" did not find mention any where on this loose paper. What to say of against the figure of 1,77,052,
(b) Similarly, there is no mention of any word or terminology against the figure of 1,50,000,
(c) The word "interest" of course has been mentioned at the top of figure of 1,12,500.
(d) There is no terminology as "Rupees" against any of these figures.
9. In view of the above facts and circumstances and the fact that the Assessing Officer has not given any reasoning or finding or has not mentioned any evidence or material, as to how or on what basis the figures referred to above were considered as assessee's income, we are of the opinion that the Assessing Officer has not invoked any of the deeming provisions of sections 69 to 69D and therefore, it is clear that these figures have been considered as assessee's income under the substantative provision of the Income-tax Act. Under the substantative provision of Income-tax Act, it is now settled law that every receipt is not necessarily or cannot necessarily be income in the hands of the recipient and therefore, the question whether any particular receipt is income or not depends on the nature of the receipt and true scope as well as the fact of the relevant taxing provisions - as has been held by the Hon'ble Mumbai High Court in the case of Mehboob Productions (P.) Ltd. v. CIT [1977] 106 ITR 758. In view of this settled proposition, it follows that Revenue can tax only those receipts, which, first have been proved to be income in the hands of the recipients and secondly, the same have to be proved as non-exempt from tax. We are therefore, of the opinion that it is Revenue's onus, before assessing any receipt as taxable income; to prove that the receipt in the hands of the recipient is income and this can be proved or established only on the basis of some material or evidence. This view finds support from the decision of the Hon'ble Allahabad High Court in the case of Lalchand Gopal Das v. CIT [1963] 48 ITR 324-36 and also of the Delhi High Court in the case of Addl. CIT v. Netar Krishna Sahgals (P.) Ltd. [1983] 141 ITR 681 as well as of the Kerala High Court in the case of Bedi & Co. (P.) Ltd. v. CIT [1983] 144 ITR 352. (Kar.).
10. In the case of Bedi & Co. (P.) Ltd. (supra), the assessee took a loan a from a foreign company under an agreement after obtaining R.B.I's permission. Assessing Officer treated the amount of loan as commission earned by the assessee on the ground that, no interest was paid, no instalment of repayment was implemented and no security was taken by the foreign company. On this fact, it was held that Revenue failed to discharge the onus that lay heavily on it to prove that the loan was by way of commission and not a loan. In view of the aforesaid discussion, we therefore, are of the opinion that it was Revenue's onus first to prove that the figures appearing on the loose paper No. 44 were receipts and were in the nature of commission in the hands of the assessee.
11. Proceeding further, we are of the opinion that before asking the assessee to explain as to how certain receipts in his hands are not taxable incomes, the burden is on the Revenue to prove that it is within the taxing provisions, which has not been discharged by the Revenue because from the order of the Assessing Officer, as well as the submissions of the learned D.R., we have not been able to come across to any iota of evidence whatsoever, which may prove as to how all the figures appearing on this loose paper could be considered as assessee's income and therefore, we hold that there is no evidence on record which may support the finding of the Assessing Officer or the submissions of the learned D.R. As the Revenue has not discharged its primary onus, we are of the opinion that the addition in question cannot be sustained.
12. If we go by probabilities and assumptions, as has been argued by the learned D.R. then the case can be interpreted both ways i.e., against the assessee as well as against the Revenue as will be clear from the following possible interpretations of the figures :-
12.1 If the figure of 1,77,052 is taken as commission, as has been impressed upon by the Revenue, then also, according to us, this figure cannot be assessed as assessee's income for the assessment year 1986-87 because, -
(a) there is no evidence as to how this figure is "commission" and not anything else,
(b) there is no evidence as to whether the assessee had received the amount during this period and if read, then when.
On the other hand, the inclusion of the balance out of the figure of 1,77,052, i.e., of a figure of 1,38,412 (1,77,052 - 38,640) at the bottom of this loose paper goes to show that the figure of 1,38,412 was yet to be received.
In view of this, we are in agreement with the submission of the assessee's counsel that even if it is assumed that this figure represents commission due to the assessee then also, the figure cannot be taxed in this year because if it is taxed in this year then in absence of exact date of receipt, it will be deemed to have been taxed on mercantile system which is not justified as the Revenue has nowhere claimed that the assessee computing his income on accrual basis. On the other hand, the assessee's source of income being share from firm, house property and other sources, none of them is taxable on accrual basis except that the share from the firm has to be declared on the basis of its year of accrual. There is, therefore, no evidence that the assessee was following mercantile system. Consequently, in the absence of any evidence to the contrary and the fact that "undisclosed income" unless relates to the assessee's same business, if not, or is considered as assessee's income by invoking the deeming provisions of sections 69 to 69D, has to be taxed on receipt basis and on accrual basis. We are therefore, clear in our minds and hold that even if it is assumed that the figure of 1,77,052 represented commission due to the assessee, then also it cannot be assumed that it was received by the assessee during the previous year relevant to assessment year 1986-87. On the contrary, the mention of figure of 1,38,412, as already stated by us; at the bottom against the words "final balance" confirms that it was not received till December 1985. We are therefore, of the opinion that in the absence of any evidence that actual receipt of the same by the assessee in the previous year relevant to assessment year 1986-87 which ended on 28-11-1985, this figure cannot be taxed in this assessment year.
12.2 Similarly, there is no evidence as to where the figure of 1,50,000 represents the receipt in assessee's hands or expenditure by the assessee or loan given by the assessee or loan taken by the assessee. There is also no date as to when it was given or taken. If it was taken by the assessee then, unless and until it was proved to be ingenuine loan/advance, it cannot be taxed and that too can be done only under the deeming provisions which is not Revenue's case. If it was given by the assessee then also, in the absence of date, it cannot be taxed in this year as we have already given a finding that Revenue has not invoked the deeming provisions of sections 69 to 69D. So, even if it is assumed that this figure of 1,50,000 represents giving or taking of loan by the assessee during the period Jan. 1985 to Dec. 1985 then also, it cannot be taxed as assessee's income for assessment year 1986-87.
12.3 Similarly, figure of 11,100, in absence of evidence as to whether the assessee has paid or received interest, cannot be taxed as assessee's income.
13. In the ultimate analysis of the aforesaid probabilities, one thing has become clear that except suspicion, there is no evidence in favour of the conclusion arrived at by the Assessing Officer or the one canvassed by the learned D.R. and, as it is settled law that if the decision of the Tribunal is based on suspicions, conjectures and surmises or on no material or partly on evidence and partly on suspicion; same is likely to be set aside by the higher courts. We are therefore, of the opinion that the findings of the Assessing Officer are based only on suspicion and suspicion however strong it may, cannot take the place of proof. So, we are unable to sustain the findings of the Assessing Officer. In support of this finding, we can usefully seek support from the following decision of the Hon'ble Supreme Court :-
(i) In the case of Omar Salay Mohamed Salt v. CIT [1959] 37 ITR 151, where the Hon'ble Apex Court on the facts and circumstances of the case held at page 170 as under :
"We are aware that the Income-tax Appellate Tribunal is a fact finding Tribunal and if it arrives at its own conclusions of fact after due consideration of the evidence before it this court will not interfere. It is necessary, however, that every fact for and against the assessee must have been considered with due care and the Tribunal must have given its finding in a manner which would clearly indicate what were the questions which arose for determination, what was the evidence pro and contra in regard to each one of them and what were the findings reached on the evidence on record before it. The conclusions reached by the Tribunal should not be coloured by any irrelevant considerations or matters of prejudice and if there are any circumstances which required to be explained by the assessee, the assessee should be given an opportunity of doing so. On no account whatever should the Tribunal base its findings on suspicions, conjectures or surmises nor should it act on no evidence at all or on improper rejection of material and relevant evidence or partly on evidence and partly on suspicions, conjectures or surmises and if it does anything of the sort, its findings, even though on questions of fact, will be liable to be set aside by this court."
(ii) In the case of Dhakeswari Cotton Mills Ltd. v. CIT [1954] 26 ITR 775, the Hon'ble Apex Court has observed as under :
"The powers given to the Income-tax Officer under section 23(3) of the Income-tax Act, however wide, did not entitle him to base the assessment on pure guess without reference to any evidence or material. An assessment under section 23(3) of the Act could not be made only on bare suspicion. An assessment so made without disclosing to the assessee the information supplied by the departmental representative and without giving any opportunity to the assessee to rebut the information so supplied and declining to take into consideration all materials which the assessee wanted to produce in support of his case constituted a violation of the fundamental rules of justice and called for exercise of the powers under article 136 of the Constitution."
(iii) Similarly, our conclusion that suspicion cannot take the place of proof is supported by the finding of the Hon'ble Supreme Court in the case of Umacharan Shaw & Bros. v. CIT [1959] 37 ITR 271, where on the facts and circumstances of the case, the Hon'ble Supreme Court set aside the order of the Tribunal holding at page 277 as under :
"Taking into consideration the entire circumstances of the case, we are satisfied that there was no material on which the Income-tax Officer could come to the conclusion that the firm was not genuine. There are many surmises and conjectures and the conclusion is the result of suspicion which cannot take the place of proof in these matters."
14. In view of the above discussions, facts and circumstances of the case as well as the settled principles of law, we are of the opinion that the conclusion arrived at by the Assessing Officer was based purely on suspicions and the CIT (Appeals) was justified in deleting the additions having been made only on suspicions. The order of the CIT (Appeals) is upheld and the Revenue's appeal is dismissed. As regards to D.R.'s plea relating to consideration of Assessee's explanation by the CIT (Appeals) submitted before him, without giving opportunity to Assessing Officer, we have found that the CIT (Appeals) has not based his decision on that explanation, rather has accepted the Assessee's plea made before the Assessing Officer to the effect that the figures on loose paper No. 44 were rough working of the Firm. This plea is therefore, rejected.