Income Tax Appellate Tribunal - Chandigarh
M/S Shree Estates, Ambala City vs Jcit (Osd), Patiala on 13 December, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
CHANDIGARH BENCHES, 'B' CHANDIGARH
BEFORE MS. DIVA SINGH, JUDICIAL MEMBER
AND Dr.B.R.R.KUMAR, ACCOUNTANT MEMBER
ITA No 847/CHD/2017
Assessment year: 2006-07
M/s Shree Estates, Vs. The JCIT(OSD),
Near Hotel Amar Palace, Central Circle,
Aggarsain Chowk, Patiala.
Ambala City.
PAN No. AAOFM3576F
(Appellant) (Respondent)
Appellant by : Shri Rohit Goel
Respondent by : Shri Ravi Sarangal, CIT-DR
Date of hearing : 25.09.2017
Date of Pronouncement : 13.12.2017
ORDER
The present appeal has been filed by the assessee assailing the correctness of the order dated 06.03.2017 of ld. CIT (Appeals)-5 Ludhiana pertaining to 2006-06 assessment year on various grounds.
2. However, at the time of hearing, the ld. AR submitted that the assessee does not wish to press ground Nos. 4 to 6 and in fact would be arguing the issues raised in ground Nos. 1 to 3, ground No. 5 on the validity of the proceedings and ground Nos. 7 and 8 on the merits of the addition sustained. For ready reference, these grounds are reproduced hereunder :
1. The learned CIT (Appeals) has erred in law and facts in confirming an addition of Rs. 3,13,68,658/- by considering the same as amount spent by the assessee firm out of the books for the purchase of land as undisclosed investment of the appellant assessee u/s 69B of the Income Tax Act 1961.
2. The learned CIT (Appeals) has erred in law and facts in confirming the action of AO in initiating the proceedings u/s 153C since no books of accounts / documents / valuables of the appellant has been seized and, thus conditions of section 153C are not fulfilled.
3. That learned CIT ( Appeals) has erred in law and facts in confirming the action of AO u/s 153C on the basis of loose documents found from the premises of Nikhil Mittal which do not belong to appellant.
5. The learned CIT (Appeals) 4ws erred in law and facts in confirming the action of VT, AO in initiating the proceedings u/s 153C without any jurisdiction assigned over the case
7. That learned CIT ( Appeals) has erred in law and facts in confirming the action of AO while making addition of Rs. 3,13,68,658/- without considering that seized documents, as alleged ITA 847/CHD/2017 A.Y. 2006-07 Page 2 of 33 were not found from the residence of Shri Nikhil Mittal husband of Smt. Monika MittelTrartner of appellant firm.
8. That learned CIT ( Appeals) has erred in law and facts in confirming the action of AO while making addition of Rs. 3,13,68,658/- without considering that documents as alleged to be found are dump documents and no addition can be made on the basis of such documents."
3. The assessee firm related to H.H.Agarwal Jewellers group of Ambala was subjected to search & seizure operation on 13.10.2006. The firm as per record was constituted on 27.06.2005 with the following 7 partners :
No. Name of the Address %age Remarks
Partner Share
1 Sh.N'itin Aggarwal S/o Naresh 12.50% Sh.Nitin Aggarwal is son of Naresh
(PAN-AD APA4428H) Aggarwal, R/o Aggarwal, who is partner of
927/7, UE, Ambala Sh.Nikhil Mittal
City.
2 Ms.Monika Mittal W/ o Ni k hi l 12.50% She is wife of Nikhil Mittal, partner
M i t t al , R/o of Naresh Aggarwal i n M / s
974/7, UE, Jewellers N.N.Aggarwal
Ambala City. a n d documents 31 & 32 were
seized from their residence.
3 Shri.NitinJain S/o Satish Jain R/o 12.50% He is brother of Ashish Jain S/o Sh.
1739/2, Bazaar Satish Jain(who is also having
Basti Ram, Ambala business transaction with M/s
City. Jewellers N.N.
Aggarwal)
4 Shri.Ashish Jain S/o Satish Jain R/o ' 12.50% -Do-
1739/2, Bazaar Basti
Ram, Ambala City.
5 Shri.Vishal Jain S/o Sh.Pawan 12.50% Sh.Pawan Jain, father of Vishal and
Kumar Jain r/o Vikas jain is running Hotel Amar
Palace (address given for the above
37/1, HUDA,
firm) on lease, at Ambala City.
Ambala City.
6 Shri.VikasJain S/o Sh.Pawan 12.50% -Do-
Kumar Jain r/o
37/1, HUDA,
7 Sh.Manoj Mittal s/o Om Parkash 25% Sh.Om Parkash Mittal is also having
(PAN:-ACGPK6684A Mittal R/o 312, family relationship with Sh.Nikhil
Mittal & Naresh Aggarwal.
Ward/Sec- 18/6,
3.1. In the course of the search, certain documents were found from the residence of Shri Nikhil Mittal, husband of Ms.Monika Mittal considering the documents identified as page No. 31 backside of page 31 and 32 of Annexure-A, the AO required the assessee to explain the same. The explanation offered on behalf of the assessee was rejected. The explanation as per record was supported by way of affidavits filed by Shri Ashok Kumar and Shri Ram Partap Bansal witnesses to the search. The AO required that the witnesses be produced for cross-examination and initially they did not ITA 847/CHD/2017 A.Y. 2006-07 Page 3 of 33 appear, thereafter they appeared and were cross-examined by the AO. The AO did not accept the explanation qua the presence of the documents from the residence, the contents of the affidavit and also the statements made in the cross-examination and instead questioned why did the witnesses leave the premises when they were legally required to stay for the whole duration of the search. Accordingly, explanation on behalf of the assessee was not accepted and the claim that the documents were not found from the residence was treated as an after thought. The AO in the circumstances, summed up the three arguments of the assessee as under:
1. That the said seized documents were not found from the residence of Sh Nikhil Mittal. In this regard the assessee has relied upon the affidavits of the witnesses who were present during search.
2. That the loose documents being considered are not related to assessee firm. In this regard the assessee has stated that details on these slips do not match with the details of the firm, its partners and its actual registration deeds,
3. That it is a dump document and no addition can be made on basis of such document.
3.2 The arguments on behalf of the assessee were dismissed holding as under :
All the three classes of arguments are factually incorrect. Firstly, in earlier parts of this order it has been established that the documents were actually found from the residence of Sh Nikhii Mittal and Smt Monica Mittal and that the issue has been raised merely to get away with the consequences of incriminating documents. Secondly, it has also been established that the loose documents first and particularly the transaction of land purchase by this firm. Thirdly, the details on the loose documents are crystal clear. Not only that, the revenue has explained those entries with facts gathered from enquiry and through linking up of the transaction with actual land purchase by the assessee. This is certainly not the case of a dump document. The evidence is strong and the findings are factually logical and stand proven.
3.3. The objections of the assessee posed on the initiation of the proceedings was also rejected. Addition was made in the following manner in the hands of the assessee which is under challenge in the present proceedings:
Further assessee vide its letter dt.29/11/11 has raised objection with regard to the initiation of proceedings u/s 153C stating that due satisfaction was not recorded. The said objection of the assessee is:
baseless as due satisfaction was recorded by ACIT Karnal on 22/11/2007 and moreover assessee did not object to the said proceedings u/s 153C. earlier during the course of initial assessment the order of which was passed on 26/12/2008.
Therefore it is held that the firm M/s Shree Estates purchased land from Sh.Sudhir Gulati for Rs. 3,74,22,200/- alongwith expenses while the registration was made for Rs. 56,92,000/~. The transaction entered in the books of the assessee firm is \ for Rs 60,53,542/- only. Therefore..-the amount of Rs 3,13,68,658/- is undisclosed; investment of the assessee firm. In this case section 69B of the Income Tax applies. This section is reproduced as under:
ITA 847/CHD/2017 A.Y. 2006-07 Page 4 of 33 "Where in any financial year the assessee has made investments or is found to be the owner of any bullion, jewellery or other valuable article, and the assessing officer finds that the amount expended on making such investments or in acquiring \ such bullion, jewellery or other valuable article exceeds the amount recorded in this behalf in the books of account maintained by the assessee for any source of income, and the assessee offers no explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the excess amount may be deemed to be the income of the assessee for such financial year"
Thus considering the facts and circumstances of the case and the provisions of section 69B of the I.T Act 1961 the amount of Rs 3,13,68,658/- is considered as deemed income of the assessee firm and assessed accordingly.
4. The assessee challenged the order on merits as well as in the assumption of jurisdiction before the CIT(A) unsuccessfully. Still aggrieved, the assessee is in appeal before the ITAT.
5. The ld. AR appearing on behalf of the assessee carrying us through the assessment order and the detailed objections made by the assessee right from the beginning, submitted that the grievance of the assessee remains as these have been reiterated and further elaborated before the CIT(A) who has upheld the order without addressing the facts and arguments. In order to sum-up the relevant issues, the ld. AR invited attention to the fact that a synopsis has been filed which briefly addresses the factual background and is supported by various documents in the Paper Book. It was submitted that Paper Book No. 1 (run from page 1 to 201) and Paper Book No. 2 (page 202 to 276) alongwith copy of the order of the ITAT dated 03.10.2016 in ITA 102/CHD/2013 attached at pages 277-299 for assessment year 2008-09 in the case of assessee itself are the documents relied upon and available on record.
5.1 For ready reference, the synopsis relied upon referring to the specific facts relied is extracted hereunder :
SN FACTS OF THE CASE EMERGING FROM
1 Assessee firm M/s Shree Estates was constituted on 27/6/2005 and AY Page 1 of the
2006-07 the year in question was the first year of Assessment. Assessment order
2. That a search u/s 132 was conducted at residence of Nikhil Mittal Page 1 and 2 of the husband of Monika a partner on 13/10/2006 where loose pages in assessment order question title as page 31, backside of page 31 and page 32 were found
3. Satisfaction u/s 153 C was recorded or/ 22/11/2007 by ACIT Central Paper Book Pg 59 Circle Karnal in the case of Nikhil Mittal
4. Original Assessment completed u/s 143(3)/153C by ACIT Central Paper Book Pg 60 Circle Patiala on 26/12/2008 at Nil Income
5. Order u/s 263 by CIT dated 30-3-2011 Paper Book Pg 31-42
6. Assessee has withdrawn appeal against 263 order dated 27-6-2013 Pg 43 ITA 847/CHD/2017 A.Y. 2006-07 Page 5 of 33
7. Case of Nikhil Mittal was centralised with ACIT Karnal from Ambala on PP 60-63 12-2-2007 under order u/s 127
8. Jurisdiction of Shree Estate was never transferred from Ambala to PP 60-63 Karnal as evident from transfer of jurisdiction order dated 12-2-2007. Moreover, any PAN can not have a direct jurisdiction with Central Circle. 9 That land in question was sold in AT 2008-09 and resultant capital gain PP 277-287 on sale was paid taking cost of acquisition at Rs. 60,53,542/-u/s 143(3) dated 27-12-2010 5.2. Although ground No. 4 addressing initiation of proceedings in the absence of satisfaction has been withdrawn, on ground Nos. 2 and 3 raised in the present proceedings, it was his submission that the documents relied upon do not relate to the assessee. They have not been found from the residence of Shri Nikhil Mittal as has been consistently argued by the assessee. The said argument, it was submitted, contrary to facts and legal position thereon has not been agreed to by the Revenue without upsetting the evidence and facts. Without conceding, it was submitted, that even if for a moment, it is considered that the document is found from the residence claimed, even in such a situation, it was his submission, the fact remains that there is no mention of the name either of the assessee or its partners. Thus, the document even otherwise does not relate to the assessee. The word 'assessee' it was submitted, needs to be understood as the assessee is the firm and not Nikhil Mittal whose residence was being searched. For the said purposes, attention was invited to Paper Book page 31 to 32 and 33 of Annexure-A. This fact has been argued and the relevant objections of the assessee addressing ground Nos. 2 and 3 as reproduced hereunder :
Issue on the satisfaction 1. First 3 lines of satisfaction speaks about the fact a search was recorded u/s 153C by taken place at the residence of Nikhil Mittal at loose papers No. 31- DCIT, Central Circle 32 & 33 of Annexure -A were seized.
Karnal dated 2. Then AO writes that These documents show that the firm M/s Shree 22/11/2007 Page 59 Estates has purchased land amounting Rs. 3,74,22,2001- from Sudhir Gulati r.o A/42 Saraswati Garden New Delhi on different dates i.e. 1-08- 2005, 10-01-2006 and 13-01-2006 but assessee has got registered sale deeds for Rs. 56,92,0001-.
3. This is a total wrong observation as no where in the paper name of Shree Estates, purchase of land, Sudhir Gulati, A/42 Saraswati Garden New Delhi and dates of 1-08-2005, 10-01-2006 and 13-01-2006 is mentioned.
4. 4. Therefore it is clear that the assessee has paid the amount of difference of Rs. 3,17,30,2001- out of undisclosed sources. The case is covered u/s 153C and I am satisfied to issue notice u/s 153C of the IT Act. Issue notice u/s 153C.
4. There is no recording of fact that the document do not relate to Nikhil Mittal, rather word is used as Assessee has paid the amount of difference and Assessee is Nikhil Mittal. There is no recording that documents seized in question belong to Shree Estates. Merely using ITA 847/CHD/2017 A.Y. 2006-07 Page 6 of 33 term "I am satisfied to issue notice u/s 153C" is not enough without mentioning that how the documents belong to Shree Estate.
(emphasis supplied) 5.3 Addressing ground Nos. 2 and 3 raised, it was submitted that the above facts demonstrate that the proceedings deserve to be quashed as the documents even as per the Department's version, have been found from the residence of Shri Nikhil Mittal, who is not a partner in the assessee firm. In the documents, name of assessee is not mentioned, thus being loose dumb document, it cannot be the basis for addition as its relevance for the assessee is to be established.
5.4 The following submissions included in the synopsis which were heavily relied upon are reproduced hereunder :
No. Particulars Submissions 1 Contents of 1. These papers were seized from the residence of Nikhil Mittal.
Loose Paper 2. That at no place in these papers the name of Shree Seized and facts Estates is mentioned. The paper is not part of any books of the matter written, maintained by Shree Associates.
3. Allegation are on account of some money paid over and above the registered sale deed copies of which attached at page 84-115. However, no agreement to sell mentioning higher amount was found / seized by Department.
4. The sale deed are registered at "Circle Rates" fixed by the State administration and no adverse finding of any state authority.
5. The documents in question were never confronted to Nikhil Mittal during the course of search and even during the assessment proceedings. However, witnesses of search and seller of the property were examined during assessment proceedings. Further, there is no statement of any person that the loose papers page 31-32 seized belong to Shree Estates.
6. Please refer to page 17 of AO order, item at sr.no.1 wherein a table is drawn to deal with arguments of the firm and observations of AO wherein Assessee argued that papers are not belonging to the assessee and department is of the view that documents are related to the assessee firm.
7 Affidavit of Sudhir Gulati ( Seller of the property) as mentioned under sr. No.8 of the table is alleged to be self serving document but what about the statement of Sudhir Gulati under sr. No.9 and copy attached at page 72 of_Paper Book. Income of Sudhir Gulati has been completed on the basis of registered sale consideration.
8. Under para 10 page 19 of AO order, it was observed by AO that as per the section 132(4A) it is a legally provided presumption that the contents of such documents found during the search are true. Para 15 of Delhi High Court Judgment in the case of Canyon Financial Services Limited dated 11-7-2017 copy attached at page clearly states that the presumption u/s 132(4A) do not relieve Department to prove that the document belongs to the other person and not the searched person from whom seized.
9. Para 19 Page 21 of the Assessment order Assessee has ITA 847/CHD/2017 A.Y. 2006-07 Page 7 of 33 stated that the seized papers do not belong to assessee since the mentioning of payment of Rs. 60,000/- with reference to bank do not find mentioned in the only bank statement of assessee maintained with Corporation Bank. A document has to be accepted as a whole.
10. Para 16 Page 20 of the Assessment it was contended that 15% share as mentioned on page 32 to Sunil Ji is not related to any partner and also the value of share allocated to Sunil ji for 15% share comes to 94,53,100/- whereas if we take the value at 3,74,22,200/- 15% value should have been Rs. 56,13,330/-. Moreover, the total of share allocation comes to 90% 5.5 It was also submitted that the document does not "belong to" the assessee. Section 153C of the Income Tax Act,1961, it was submitted, was amended by the Finance Act w.e.f. 01.06.2015 and the amended Section 153C(1)(b)w.e.f 1-6-2015 makes it clear that w.e.f. 01.06.2015 "any books of account or documents, seized or requisitioned, pertains or pertain to, or any information contained therein, relates to." Prior to the amendment and as applicable to the present appeal, Section 153C, referred to the specific phrase "belongs to". The provisions applicable read as ""where the Assessing Officer is satisfied that any money, bullion, jewellery or other valuable article or thins °r books of accounts or documents seized or relinquished , belong or belongs to a person other than the person referred to in section 153A" In the facts as available on record it was submitted, considering the provisions of law as it then stood on the Statute relying on the decision of the Delhi High Court in the case of Pepsi Foods P.Ltd. 367 ITR 112 (Del) it was submitted that the document did not belong to the assessee as nowhere the name of the assessee is mentioned therein. The addition based on a loose unrelated sheet cannot be made the basis of the addition. Copy of the said decision placed at pages 156 to 162 and para 6 of the said decision at page 159 of the Paper Book was specifically relied upon. The same is also reproduced hereunder for ready reference :
"6. On a plain reading of Section 153C, it is evident that the Assessing Officer of the searched person must be "satisfied' that inter alia any document seized or requisitioned "belongs to' a person other than the searched person.........Therefore, before a notice under Section 153C can be issued two steps have to be taken. The first step is that the Assessing Officer of the person who is searched must arrive at a clear satisfaction that a document seized from him does not belong to him but to some other person. The second step is - after such satisfaction is arrived at - that the document is handed over to the Assessing Officer of the person to whom the said document "belongs'. In the present cases it has been urged on behalf of the petitioner that the first step itself has not been fulfilled. For this purpose it would be necessary to examine the provisions of presumptions as indicated above. Section 132(4A)(i) clearly stipulates that when inter alia any document is found in the possession or control of any person in the course of a search it may be presumed that such document belongs to such person. It is similarly provided in Section 292C(l)(i). In other words, whenever a document is found from a person who is being searched the normal presumption is that the ITA 847/CHD/2017 A.Y. 2006-07 Page 8 of 33 said document belongs to that person. It is for the Assessing Officer to rebut that presumption and come to a conclusion or "satisfaction' that the document in fact belongs to somebody else. There must be some co gen t m at eri al av ai l a bl e wi t h t he Ass essi ng O f f i ce r b ef or e h e/ sh e a rri ves at t he sat i sf a ct i o n t h at t he seized document does not belong to the searched person but to somebody else. Surmise and conjecture cannot take the place of "satisfact ion' 5.6 In the facts of the present case also, referring to pages 47 to 49 of the Paper Book, it was submitted that the name of the assessee is not mentioned. The document, it was submitted, at best could be said as having been found from the residence of Shri Nikhil Mittal, thus, in the facts of the present case the first step as held to be mandatory by the Hon'ble Delhi High Court itself is not fulfilled. On the basis of these facts and position of law, it was submitted that no doubt, whenever a document is found from a person who is being searched the normal presumption is that the said document belongs to that person. It is for the Assessing Officer to rebut that presumption and come to a conclusion or "satisfaction" that the document in fact belongs to somebody else. There must be some cogent material available with the Assessing Officer before he/she arrives at the satisfaction that the seized document does not belong to the searched person but to somebody else. Surmise and conjecture cannot take the place of "satisfaction".
5.7 Inviting attention to para 11 at page 161 of the Paper Book wherein copy of the said judgement is placed, it was submitted, that the satisfaction note itself must display the reasons or basis for the conclusion that the Assessing Officer of the searched person is satisfied that the seized documents belong to a person other than the searched person.
5.8 Reliance was also placed upon another decision of the Delhi High Court in the case of Pepsico India Holding Ltd. 370 ITR 295 , copy placed at pages 228 to 232 of the Paper Book filed. Relying on the same, it was submitted that after discussing the pre condition of Section 153, the Hon'ble Court was pleased to hold as under :
14. First of all we may point out, once again, that it is nobody's case that the Jaipuria Group had disclaimed these documents as belonging to them. Unless and until it is established that the documents do not belong to the searched person, the provisions of Section 153C of the said Act do not get attracted.
5.8.1 The Court on the facts of the said case had held that; "The assessing officers should not confuse the expression "belongs to' with the expressions "relates to' or "refers to' The loose sheet relied upon in the present proceedings, it was submitted, did not even relate to the assessee.
ITA 847/CHD/2017 A.Y. 2006-07 Page 9 of 33 5.9 Reliance was also placed upon another decision of the Delhi High Court in the case of Canyon Financial Services 2017(7) TMI 539-Delhi High Court. Attention was invited to para 15 of the said decision so as to argue that presumption u/s 132(4A) and 292C can not help AO to show that documents seized do not belong to the other person".
5.10 Reliance was also placed upon the decision of Hon'ble Delhi High Court in the case of CIT Vs Renu Construction Pvt. Ltd. 2017 (G) TMI 670- Delhi High Court dated 06.09.2017, copy placed at pages 240-241 of the Paper Book. Specific attention was invited to the para 9 of the said decision to submit that the Court after considering the position of law after Pepsico Industries Holdings, Vinita Chaurasia (2017) 394 ITR 758 (Delhi) and Apex Court in CIT Vs Sinhgad Technical Education Society (2017) 84 Taxmann.com 290 (S.C) so that the legal position in favour of the assessee. The specific para is reproduced hereunder:
"9. Consequently, this court rejects the contention of the lamed counsel for the Revenue that even prior to 1st June 2015 at the stage of initiation of proceedings under section 153C of the Act, it is sufficient if the seized document 'pertained to' the other person and it is not necessary to show that the seized document belonged to other person."
5.11 Based on these submissions, facts and arguments, it was reiterated that the Tax Authorities have completely and deliberately misdirected themselves. Shri Nikhil Mittal, it was submitted, is not a partner of the firm. Name of the assessee is not found anywhere mentioned in the documents. The two witnesses say that the documents were not found from the premises. These witnesses have been cross examined, their statements corroborate the stand taken in the affidavits on record. These arguments and evidences remain unrebutted on record.
5.12 It was also his submission that the assessee was assessed by JCIT, Central Circle, Patiala and copy of the order u/s 127 dated 12.02.2007 at pages 62 to 63 would show that the jurisdiction of the assessee was never transferred from Ambala to Karnal, copy of the RTI reply of ACIT, Patiala in connection of the transfer of jurisdiction of the assessee from Ambala to Karnal placed at ages 64 to 65 was referred. The following pointed queries of the assessee and the following reply received was referred to :
"The case of M/s Shree Estate was transferred to this office from DCIT, Central Circle, Kamal vide order No. 641 dated 21.05.2008. Hence, order u/s 127 by which jurisdiction in the case of M/s Shree Estates was transferred from ITO, Ward-1, Ambala DCIT, CC, Karnal is not available with this office."
5.13 Accordingly, it was his submission that the jurisdiction has never been transferred. Even otherwise, on merits it was submitted that no agreement ITA 847/CHD/2017 A.Y. 2006-07 Page 10 of 33 to sell has ever been placed on record. Addition has been made on presumptions and surmises. Attention was invited to the order of the ITAT in the case of P.Koteswara Rao Vs DCIT, Central Circle, Visakhapatnam (ITA 251/Vizag/2012). Copy placed at pages 255-258 of the Paper Book. Referring to the said decision, attention was invited to the following legal proposition in case the addition was to be made or sustained and in the absence of the same, it was submitted even on merits, the addition could not have been made :
"24. Considering the total facts and circumstances of the case and also applying the ratios of the Judgements cited above, we are of the opinion that the A.O. is not correct in coming to the conclusion that the on money is exchanged between the parties based on a loose sheet found in the premises of a third person and also admission by a third person. To sustain the addition, the A.O. should have conducted an independent enquiry about the value of the property and ascertain whether any under valuation is done, if so what is the correct value of the property. Further, the A.O. did not brought on record any evidence to support his contention to say that there is on money exchanged between the parties. In the absence of proper enquiry and sufficient evidences, we find no reason to confirm the addition made by the A.O. Therefore, we reverse the CIT(A) order and direct the Assessing Officer to delete the addition."
(emphasis supplied) 5.13.1 The facts in the present case, it was submitted, were much better as there is no admission of any person that any money was paid or received over and above the value recorded.
5.13.2 Attention was also invited to the following observations of the ITAT to support the claim of the assessee :
"17. Considering the facts and circumstances of this case and also applying the ratios of the judgements cited above, we are of the view that the A.O. is not correct in coming to the conclusion that on money exchanged between the parties, based on a loose sheet found in the premises of a third party and also statement given by a third person. To sustain the addition, the A.O. should have taken an independent enquiry about the value of the property and ascertain whether any under valuation is done, if so what is the correct value of the property. Further, the A.O. failed to bring any evidence to support his findings that there is on-money payment over and above what is stated in the sale deed. In the absence of proper enquiry and sufficient evidences, we find no reasons to confirm the additions made by the A.O. The CIT(A) without appreciating facts, simply upheld additions made by the A.O. Hence, we set aside the order passed by the CIT(A) and direct the A.O. to delete the additions made towards alleged on money for the assessment years 2007-08 & 2008-09."
5.14 Reliance was placed upon the decision of the Andhra Pradesh High Court taken into consideration by the said Court in the case of KV Lakshmi Savitri Devi dated 10.12.2012 in ITA 563 of 2011, (2012) (12) TMI 1111- Andhra Pradesh High Court for the following proposition :
"15. We are of the view that the Tribunal has rightly held that the registered document dt. 21.8.2006 unde4r which the respondent purchased the above property showed that only f 65.00 lakhs was paid to the vendor by the respondent; that there was no evidence to show that the respondent had paid f 1.00 crore in cash a/so to the vendor; that no presumption of such payment of f 1.00 crore in cash can be drawn on the basis of an entry found in a diary/loose sheet in the premises of C. Radha Krishna Kumar which is not in the respondent's ITA 847/CHD/2017 A.Y. 2006-07 Page 11 of 33 handwriting and which did not contain the name of the respondent or any date of payment or the name of the person who made the payment.
It rightly held that the Revenue failed to establish the nexus of the seized material to the respondent and had drawn inferences based on suspicion, conjectures and surmises which cannot take the place of proof. We also agree with the Tribunal that the AO did not conduct any independent enquiry relating to the value of the property purchased and the burden of proving the actual consideration in the purchase of the property is on the Revenue and it had failed to discharge the said burden."
5.15 Inviting attention to the aforesaid decision which had been relied upon by the Vishakhapatnam Bench of the ITAT in the case of P.Koteswara Rao Vs DCIT, Central Circle, Visakhapatnam (supra) attention was invited to Paper Book pages 259 and 260 to submit that the ITAT had relied upon the decision of the Hon'ble Andhra Pradesh High Court in the case of CIT Vs Smt. Lakshmi Savitri Devi in ITA 563 of 2011 (supra) and was pleased to dismiss the challenge posed by the Revenue to the deletion of the addition made by the AO u/s 153C.
5.15.1 The facts taken into consideration, it was submitted, are set out in para 10 of the said decision;
"10. The Tribunal held that there was no search action in the case of the respondent; that the seized material was found not in the premises of the respondent but in the premises of C.Radha Krishna Kumar; that it was a loose slip containing certain entries which was not in the handwriting of the respondent; that it does not contain either date of payment or the name of the person who made the payment; that the name of the respondent was not found in the loose sheet and only the names of C.Radha Krishna Kumar and his wife K.Radha Kumari were found therein. It opined that there was no basis for the Revenue to presume that the respondent had made the cash payment of ? 1.00 crore even though the registered sale deed dt.21- 08-2006 in respect of the above sale transaction disclosed only a cheque payment of Rs. 65.00 lakhs by the respondent. Even if the vendor K.Rajani Kumari admitted receipt of sale consideration of ? 1.40 crores, the respondent had not admitted payment of ? 1.65 crores and in the sworn statement only stated that she was not aware of actual consideration paid for the purchase of the property as the transaction was negotiated by her brothers. It held that there was no document or material to show that the respondent actually paid ? 1.65 crores for the purchase of the property and the Revenue had drawn inferences based on suspicion, conjectures and surmises.."
5.15.2 Considering the facts, it was submitted that the Court came to the following conclusion in para 15 which was followed by the Visakhapatnam Bench in the case of P.Koteswar Rao ;
"15. We are of the view that the Tribunal has rightly held that the registered document dt.21-08- 2006 under which the respondent purchased the above property showed that only f 65.00 lakhs was paid to the vendor by the respondent; that there was no evidence to show that the respondent had paid Rs. 1.00 crore in cash also to the vendor; that no presumption of such payment of Rs. 1.00 crore in cash can be drawn on the basis of an entry found in a diary/loose sheet in the premises of C.Radha Krishna Kumar which is not in the respondent's handwriting and which did not contain the name of the respondent or any date of payment or the name of the person who made the payment. It rightly held that the Revenue failed to establish the nexus of the seized material to the respondent and had drawn inferences based on suspicion, conjectures and surmises which cannot take the place of proof. We also agree with the Tribunal that the assessing officer did not conduct any independent enquiry relating to the value ITA 847/CHD/2017 A.Y. 2006-07 Page 12 of 33 of the property purchased and the burden of proving the actual consideration in the purchase of the property is on the Revenue and it had failed to discharge the said burden."
5.16 Reliance was also placed upon the decision of the Delhi High Court in the case of Pr. CIT, Central-2 Vinita Chaurasia 394 ITR 758 ( copy at pages 236 to 339). Specific attention was invited to the fact that the said decision is dated 18.05.2017 and this fact is evident from para 15 and 16 of the said decision placed at paged 238 of the Paper Book. The specific para is reproduced hereunder for ready reference :
15. It requires to be first noted that the document relied upon by the Revenue (Annexure A-1 page
5) to sustain the additions made to the assessable income of the Respondent has not been shown to 'belong1 to the Assessee. In arriving at this conclusion, the ITAT followed the decision of this Court in Pepsico India Holding Ltd. v. ACIT (2015) 370 ITR 295 (Del). Mr. Shivpuri on the other hand submitted that there have been subsequent decisions of the DBs of this Court which have explained the aforementioned decision and in particular the phrase 'belongs to occurring in Section 153C of the Act. He placed particular reliance on the decisions in Principal Commissioner of lncome-tax-8 v. Super Malls (P.) Ltd. [2017] 291 CTR 142 (Del), Principal Commissioner of Income Tax, Circle-ll v. Satkar Fincap (decision dated 16th November, 2016 inn ITA 82 of 2016) and Principal Commissioner of Income Tax (Central)-2 v. Nau Nidh Overseas Pvt. Ltd. (decision dated 3rd February, 2017 in ITA No.58/2017).
5.17 Inviting attention to decision of the Hon'ble Delhi High Court in the case of CIT Vs Renu Construction Pvt. Ltd., 2017 (9) TMI 670 dated 06.09.2017, attention was invited to the following para 7 to 9 of the said decision which is reproduced hereunder for ready reference :
"7. Learned counsel for the Respondents-Assessees, on the other hand, pointed out that this Court has, in Principal Commissioner of Income Tax (Central-2) v. Vinita Chaurasia [2017] 394 ITR 758 (Del), after considering the aforementioned three decisions, reiterated the settled legal position as explained in Pepsico India Holdings P. Ltd. v. ACIT [2015] 370 ITR 295 (Del), that for the purpose of initiating proceedings under Section 153C of the Act, the seized documents had to be shown to belong to the other person and not merely pertaining to such other person. The change brought about in this regard in Section 153 C of the Act by way of amendment has been given prospective effect from 1st June 2015.
The amended provision therefore has no application to the cases on hand.
8. The recent decision of the Supreme Court in Commissioner of Income Tax, Pune v. Sinhgad Technical Education Society [2017] 84 taxmann.com 290 (SC) settles the legal position in favour of the Assessees. The Supreme Court, while affirming the judgment of the Bombay High Court, approved the decision of the Gujarat High Court in Kamleshbhai Dharamshibhai Patel v. Commissioner of Income Tax-Ill, (2013) 263 CTR (Guj) 362 that a document seized 'should belong to a person other than the person referred to ir Section 153A of the Act'. It has been categorically observed by the Supreme Court that the above positior of law laid down by the Gujarat High Court is correct.
9. Consequently, this Court rejects the contention of the learned counsel for the Revenue that even prior to 1st June 2015 at the stage of initiation of proceedings under Section 153C of the Act, it is sufficient the seized document 'pertained to' the other person and it is not necessary to show that the seize material 'belonged to' the other person. This legal position has been explained by this Court in its recent decision dated 10th July 2017 in W.P. (C) No. 3241/2015 (Canyon Financial Services Ltd. v. Income Tax Officer)."
5.18. Accordingly, it was his submission that the addition on facts has wrongly been made and sustained. The copy of the assessment order in the ITA 847/CHD/2017 A.Y. 2006-07 Page 13 of 33 case of assessee firm for 2008-09 assessment year so as to highlight that the assessee was assessed by Pr. CIT, Central Circle, Patiala.
6. Ld. Sr.DR addressing the facts, on the other hand, submitted that search has been conducted on the group concerns of the assessee on 13.10.2006. The assessee firm, admittedly was constituted on 27.06.2005 and thus 2006-07 assessment year necessarily was the first assessment year of the assessee firm. It was submitted that it is not in dispute that the assessee firm has 7 partners and Monika Mittal, W/o Shri Nikhil Mittal is definitely a partner in the firm. The jurisdiction in the facts of the present case, it was submitted, has correctly been assumed and this fact, it was submitted, is supported by the decision of the Apex Court in the case of Ajanta Industries 102 ITR 281 (copy placed at pages 265-267). Notwithstanding the replies given in RTI, it was his submission that in the first year, it is difficult to pin point where the correct assessment is to be made. It was also his submission that the jurisdiction has not been objected to by the assessee before the AO and the assessee has fully participated in the proceedings before the AO. Referring to the decision of the Hon'ble Punjab & Haryana High Court in the case of Deep Malhotra & others 334 ITR 232 (P&H), it was submitted, the reliance placed by the ld. AR is misplaced. Though the ld. AR has not specifically addressed the said decision, but since it is mentioned in the written submissions, the ld. CIT- DR submitted that his argument may be noted as the said decision is not relevant to the facts of the present case.
6.1 Similarly in the Paper Book, the decision of the Delhi Bench of the ITAT dated 29.11.2016 in the case of Samta Khinda in ITA 336/Del/2012 has been placed at pages 271 to 276. The said order also, it was submitted, is also not applicable as in the facts of the said case, corroborating evidence was not available as the document relied upon by the department was unsigned and undated. In the facts of the present case, it was submitted that the assessee has not explained to whom the documents belong. The AO has held that it belongs to the assessee.
6.2 Inviting attention to the impugned order, it was submitted that the CIT(A) at page 29 has relied upon decision of the Delhi High Court in the case of Pr. CIT Vs M/s Super Malls Pvt. Ltd. 76 Taxman.com 267 (Del) in its judgement dated 22.11.2016 and the Court has held as under :
"9. A Plain reading of the note clearly shows that search in the business premises of two individuals was carried out; equally, survey of premises of the assessee was also carried out. In ITA 847/CHD/2017 A.Y. 2006-07 Page 14 of 33 the course of this search of Shri Ved Prakash Bharti-who also was a director and assessee, some pen drives were found and seized. Further documents listed in Annexure A-1 too were seized after their print outs were obtained. These documents detailed cash receipts for the sale of the shops and offices in the assessee's other concerns. In these circumstances, having regard to all these conspectus of facts, the AO expressed under Section 153C of the Act that the documents so seized "belonged" to the assessee. We are unpursuaded by the assessee's submissions that the expression "belonged" in the context in which it was used has to be understood as imputing "relating to", or any other term. Plainly put, the AO was satisfied that the documents belonged to the assessee in view of what was contained or brought out on a fair reading of their contents. It must not to be overlooked that while construing a document, expression should not be interpreted too literally as if they are, words, carved in stone or in a statue as the ITAT did in this case. For these reasons, we are of the opinion that the ITAT should not have allowed the appeal only on this hyper technical ground with regard to the satisfaction note. Those findings are, accordingly set aside.
10. In view of the above discussion, the ITAT's decision with respect to the satisfaction recorded by the AO under section 153C of the Act is set aside, further direction is issued to the ITAT to hear the appeals afresh on merits uninfluenced by the observations of this Court on the contentions of the parties."
6.3 In the facts of the present case, it was submitted that the note was handwritten and although the name of the assessee is not there, but the fact remains that only the assessee can state to whom it belongs. In the absence of any explanation, the assessee cannot disown the same. The paper, it was submitted, demonstrates that on-money has been paid. The assessee had challenged the 263 order and the challenge was withdrawn. Thus, 263 orders stands accepted. Affidavit of the seller, it was submitted, relied upon is a self serving document and has no meaning. Why would a seller accept that he has received more money, then what has been disclosed. It was the submission of the ld. CIT-DR that the CIT(A) has correctly made the observation in his order that if the document does not belong to the assessee, then has the search party planted the same ? Relevant extract from the order relied upon by the ld. CIT-DR is reproduced hereunder :
"As regard the name or signature on the documents it is observed that the documents are to be dealt with as per the presumption under Section 132 and AO has rightly observed that it is not necessary that only those documents or record of unaccounted transactions can be used in the assessment which are signed by the partners. Regarding the recovery of the documents from the premises of Sh. Nikhil Mittal, the AO has rightly observed that if tie witnesses and the assessee are to be believed, this would imply that such lose documents were brought in by the search team which is logically impossible because the search team is randomly constituted and would not know such things about the assessee group beforehand. As per the 'standard operating procedure' the search team gets sealed envelope with a 'warrant of authorisation' and map of the assessee's premises.
6.4 Accordingly, it was his submission that the onus upon the Tax Authorities stands discharged and in the absence of any cogent explanation on behalf of the assessee, the addition deserves to be sustained.
6.5 Inviting attention to the decision of the Delhi High Court in the case of Pr. CIT Vs Supermalls Pvt. Ltd. (copy placed at pages 226 to 227) it was his submission that the Hon'ble High Court accepting the prayer of the Revenue ITA 847/CHD/2017 A.Y. 2006-07 Page 15 of 33 has held that once the AO was satisfied that the documents belonged to the assessee and the expression "belonged to" is to be understood as imputing "relating to" and it was emphasized that the Court has mentioned that it must not be overlooked that while construing documents, expressions should not be interpreted too literally as if they were, words carved in Statute as had been done in the facts of that case. Thus, it was his submission that the hyper technical approach should not be adopted.
6.6 Inviting attention to the decision in the case of Pr. CIT Vs Vinita Chourasia also, referred to in the written submissions, it was submitted that in the facts of that case, same aspects had been left un-investigated and the AO was found to have proceeded on conjectures unlike in the facts of the present case. Accordingly, it was his submission that the addition may be sustained.
7. The ld. AR on the other hand, submitted that in the facts of the present case, the affidavit of the seller is available on record. Attention was invited to Paper Book pages 82-83 which affirms the position which is apparent itself from the Registered Sale Deed. The law, it was submitted, is well settled and additions cannot be made on suspicions and can be sustained only on the basis of clinching evidences which are missing in the facts of the present case.
8. We have heard the rival submissions and perused the material available on record. The relevant pages in the paper book to which our attention has been invited to by the parties, have been taken into consideration including the decisions cited by the parties before the Bench . It is seen that in the facts of the present case, search and seizure operations were conducted on 13/10/2006 on NN Jewellers group of Ambala. Seized documents on the basis of which the additions have been made by the AO and confirmed by the CIT(A) have been scanned by the Assessing Officer and appear at unnumbered pages 2 and 3 of the assessment order. These handwritten seized documents have been deciphered at unnumbered pages 4 and 5 of the assessment order. The AO has extracted the submissions of the assessee with his comments thereon at unnumbered pages 17 to 22 of his order. The assessee has addressed the comments of the AO at pages 44 to 46 and elaborated these by way of chart with its point wise narration at pages 47 to 55 of the paper book filed and our attention has been invited to the said documents in the course of the arguments by the parties.
ITA 847/CHD/2017 A.Y. 2006-07 Page 16 of 33 8.1 The assessee in the facts of the present case, at the assessment stage has taken the position that the documents were not seized or found from the residence of Sh.Nikhil Mittal. The said claim has been rejected by the Assessing Officer on the reasoning that the seized documents are handwritten and make a reference to Gulati ji who is probably the seller of the property i.e. Mr Sudhir Gulati. The fact that the name of the assessee is not found mentioned in the said document which is also an argument raised to state that the document does not belong to the assessee has also been discarded on the reasoning that since it is found from the residence of Sh. Nikhil Mittal and his wife Smt. Monica Mittal was a partner in the assessee firm, accordingly, it has been held that the claim was to be rejected. As we understand, the Assessing Officer has been of the view that since the documents have been found in the course of the search from the residence of the partners/spouse, the requirement of law that it belongs to the assessee is fulfilled. The primary objection that the documents were not found even from the premises of Mr. Nikhil Mittal which assertion is supported by affidavits of the witnesses to the search namely Sh. Ashok Kumar and Sri Ram Partap Bansal, was also not accepted in view of the fact that the assessee initially did not produce the said witnesses. However in response to summons issued under section 131 both the witnesses, it is seen, did appear and were cross- examined. The contents of the cross examination has been recorded at unnumbered pages 11 to 14 of the assessment order. For ready reference the contents of the statements recorded during the cross examination by the assessing officer are extracted hereunder from un-numbered pages 11 to 13 of the assessment order :
Cross examination by the Assessing Officer
1. Sh. Ashok Kumar please state you source of income, whether you are assessee to tax?
Ans. My sources of income are as under:-
a. Salary from Shilpa Agencies, Rai Market, Ambala. The firm carry on the business
of electronic goods.
b. Rental income of Rs. 60,000/- per year from a godwon let out to Shilpa Agencies
situated in 69, New Grain Market, Ambala.
c. Interest Income from Kesriaji Rice Mills, Ambala.
I am assessed to tax with ITO, Ward-1, Ambala. My PAN is AAQPJ3300G.
2. You have stated in your statement on oath in answer of question No. 2 that I was asked by the search party t 9.30 AM thereafter, I was asked to leave the place and remain at the house to be called later on and you have also stated that you were called again at 1.30 PM when the punching work was being carried on, you were appointed as a witness before starting the search and a order under rules 113(6) was served upon you. This order clearly specific that you will not depart until the search is not completed. Whether any written order was given to you to leave the search party?
Ans.: The officers stated that we have to recorded the statement of the party when, we will need you, we call you again. Your availability must be on our call, my house is adjoining ITA 847/CHD/2017 A.Y. 2006-07 Page 17 of 33 with Sh. Nikhil Mittal, you sit there we will call you later, at the time of need. Your staff and policemen were there, they were presenting the entries and exits, your officer ordered the police party to get sit Sh. Ashok Kumar in other side of adjoining common wall of the two houses as I was sitting there in open area not in any room, so that my presence was seen by your staff and waiting for there call. I am not any legal person or a advocate person and not any knowledge of the section 112(6) of the Income Tax, I am a common man and not know any legal aspects of the things. I only obeyed the order of your officer at that time.
3. As you have stated that you had gone to your house on the order of the officers of search party. Order under rule 112(6) of the IT Act, was served upon you not to depart till the search is not completed, therefore, it is clear that no officer of the department can instruct you or the police party to depart from the search place. Therefore, it is clear that you are cooking a story to spoil the proceeding of the Income Tax Department.
ANS.:- I was not told my rights and duties at that time. I have obeyed the order of your officer. I shall have to obey the order of that officer who signed on my order/notice. At present on dated 224(***)-11-2008, in the proceedings you have served order on men I presented and asked me to go out and I shall call you again. I have not asked any written order in this regard, I only obeyed your verbal order and I had to leave during the proceedings. In the same way things happen at the time of search. I have not left that area and I am waiting other side of the common wall for their call.
5. you stated in your statement that the things were not recovered from the residence of Sh. Nikhil Mittal in your preserve, you saw only heap of things which were being punched by the search party. You raised objection in singing three papers relating to properties, but you did not raise any objection in singing the other papers, which were also not recovered in your presence as per your statement as mentioned above, which prove that you raised objection in singing the three papers of the property deliberately without any basis to spoil the proceedings of search best known by you?
Ans.:- Your initial question was which was happening when you reached at 1.30PM. In that reply I stated that when I rejoin there was a heap of things and they were punching the things and papers. In that heap what was talking out I had signed that whatever, was not taken from that heap I signed only with remark that this is not out of that heap. Reference of your questions regarding three papers relating to properties but I not remember the exact No. of the above said property papers what was happening there and there was noting to mislead the department.
Read over and Accepted Correct (Ashok Kumar) Cross examination statement of Sh. Ram Partap Bansal
1. You have stated in your statement that you were called as a witness at 2 PM and nothing was recovered before your eyes from the residence of Sh. Nikhil Mittal. You were appointed withness before starting of search and it is mentioned in the order that you will not leave the palace until the search is ended. Whether your statement is correct that you were called at 2 PM.
Ans.: Yes, I was called at 2 PM and I was not informed prior 2 PM and did not go anywhere later on. Nothing was recovered before me.
2. Where you before 2 PM, whether you were appointed 2 PM. Ans:- I was doing my work before 2 PM and u was appointed as witness at 2 PM. I was going in a cremation programme and I was called on the way.
3. Whether you were not appointed witness before starting of search. Ans.:- No, Sir I was appointed witness at 2 PM.
4. You have raised objection on the papers No. 31,32, 33 of Annexure A-1, seized from the residence of Sh. Nikhil Mittal, please state why have you raised objection in r/o the above said papers, No. 31,32,33 while as per your statement other papers were also not seized before you, which clears that you are not speaking truth. Ans.: No it is wrong that I refused to sign the three papers or not recovered before me. I told clearly what was true. No material was recovered before me. Those were sealed before ITA 847/CHD/2017 A.Y. 2006-07 Page 18 of 33 me. Therefore, I mentioned at the time of signature that no material or document was recovered before me.
8.2 Assessing Officer disbelieves the objections of the assessee supported by affidavits of the two witnesses to the search corroborated by their statements recorded by him in cross-examination extracted in his order only on the reasoning that the documents could not have been brought by the search party. He relies on the protocols established because according to him, as per standard operating procedures, the search team only gets the sealed envelope with search authorization and the map of the assessee's premises. Thus, it has been concluded by him that "it is impossible that they would especially prepare the incriminating loose document and carry them to the assessee 'firm's partner's house'. Thus, on account of lack of motive of the search party and information with them, the said argument was held to be without any basis. The arguments of the assessee that on the document, the only words mentioned is "Gulati" and that by itself does not necessarily mean that it is "Sudhir Gulati" but, even if it is so, then Mr Sudhir Gulati has confirmed by way of his affidavit the fact that the specific property has been sold at the specific price mentioned in the Sale Deed. The said claim has also been held to be not relevant by the AO. The objections of the assessee that these were not in the writing of Shri Nikhil Mittal and were also held to be not relevant. The objection that these were unsigned was also discarded on the reasons that loose papers need not be signed.
8.3 The specific chart at unnumbered pages 17 to 22 of the assessment order brings out the specific reasons on the basis of which these submissions on behalf of the assessee have been discarded. The same is reproduced hereunder for ready reference :
S.No. Argument by the firm Observation
1 It is a fact that no documents This assertion is wrong. It has discussed
or any paper belonging to the in detail that how the documents
assessee have been found from found are related to the assessee firm.
the premises of the appellant.
2 In the documents which have There is no requirement in law that the name
been alleged to be found from or signature is a must for assessment. The
the premises of Sh. Nikhil Mittal, real test is whether those documents show there is no name of the assessee actual detail of the transaction. The finding and neither there are after logical reasoning and the analysis of signatures or notings made by facts is that the entries on the loose documents the appellant or by any of the show investment in land by the firm at its real partner of the firm. value.
3 There is no statement of Sh.Nikhil Mittal relating to the assessee have been ITA 847/CHD/2017 A.Y. 2006-07 Page 19 of 33 recorded, and rather Sh.Nikhil Mittal during the course of search had taken a stand that this piece of paper was never found from their premises.
4 Affidavit of independent In all these points the issue raised by the witness of Sh.Ram Partap assessee f irm, i s t hat t he seized Bansal dated 14-05-2010 documents were not found from the wherein he has confirms that premises of Mr. Nikhil Mittal. The matter those papers were never has been discussed above in detail. It has seized from the premises of been proven beyond doubt that the Sh.Nikhil Mittal. documents were found and seized from the premises of Mr. Nikhil Mittal and Mrs.Monica Mittal, the latter being the partner in the assessee firm.
5 Affidavit of independent
witness of Sh.Ashok Kumar
Jain dated 15-05-2010 wherein
he has confirmed that those
papers were never seized
from the premises of Sh.Nikhil
Mittal.
6 Statement of Sh.Ram Partap
Bansal in response to
summons under section 131
and cross examined by
assessing office where in it
has been confirmed that the
said documents has not been
found in the premises of Sh.
Nikhil Kumar Mittal.
7 Statement of Sh.Ashok Kumar
Jain in response to summons
under section 131 and cross
examined by assessing office
where in it has been
confirmed that the said
documents has not been found
in the premises of Sh. Nikhil
Kumar Mittal.
8 Affidavit by Sh. Sudhir Gulati This is self serving affidavit and of no
seller of the land confirming value. It does not count as evidence as
that he has nothing to do with the seller is himself a party to the
paper found with such paper unaccounted transaction. His name
and he has confirmed he. has appears on the loose documents found
sold the property for and the registration deeds show him as
Rs.6692000/-. seller.
9 The statement of Sh.Sudhir
Gulati was recorded for
which, he was issued
summon u/s 131 by the
assessing officer in which,
he again confirmed that he
has no link or connection with
such seized paper.
10 Said paper is unsigned These points do not minimize in any
undated and without hand manner the potency of the documents.
writing of any partner or It is not necessary in law for a
ITA 847/CHD/2017
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Page 20 of 33
any family member of the documentary e v i d e n c e t o b e s i g n e d
partners or be in handwriting of the
p a r t n e r . T h e requirement of law is
that the entries re co r de d t h er e i n
s h o ul d b e a tr u e reflection of the state
of affai r s. In the present case the
truthfulness of document has been
established through various linkages
as already discussed. Moreover as per
section 132 (4A) of the Act 1961 of it is a
legally provided presumption that the
contents of such documents found
during the search are true.
Furthermore in the present case the
contents of these documents are also
corroborated by the ledger entries
found f r o m t h e r e s i d e n c e o f S h
N a r e s h Aggarwal (partner of Nikhil
Mittal) as already discussed earlier.
11 In this paper place/ Regarding the place /location etc of
location of land persons land. It is clear from the registration
and shares of persons deeds that the land in question is at
not clear. Village Sadupur and Village Kakru,
12 Total shares mentioned in Ambala.
the paper come to 90%
which does not match with
100% shares as per
partnership deed.
13 Partnership deed of the In all these argument the assessee firm
Shree Estate consist seven is attempting to show a mismatch
partners and paper has no between the loose documents and the
link with these partners. partnership deed of the firm. Such
comparison is not required and even if
made it does not make any sense. It is
a. fact that the property was purchased
14 Sushil ji share Rs. 9144007-
by the firm. The evidence in this regard
has no meaning and Sushil
is the registration deeds where the
Ji 15% does not match with
buyer is the firm. Now, on behalf of
share of any person. Sushil
firm whether it was one partner or
is not partner in the firm.
many or all who conducted the
15 Sh.Vikas, Vishal, Manoj and
Ashih Kumar partner of Shree transactions does not matter because in
Estate find no plcice in the the end it is the firm who did the
papers. Manoj has no relation transaction. As far as firm's investment is with Nikhil and Sushil has no considered the entire 100 % share relation with anyone. belongs to the firm.
16The following figures In any case there is no other explanation given in the papers does with the assessee regarding the details not tally in any way. that actually match perfectly with the
1. 37422200 four ¼ seized documents. Thus the primary onus share do not itself at the end of the assessee firm is not match with satisfactorily discharged.
partnership deed
of Shree Estate.
2. N.N. 50% share does
not match with
ITA 847/CHD/2017
A.Y. 2006-07
Page 21 of 33
partnership
deed.
3. Sunil/Sushil 15%
share does not
match with
partnership deed.
4. Nitin 25% share does
not match with
partnership
deed.
5. Total Share 50% +
25% + 15% =90%
Amount
18711100 50%
9355550 15% 15%
9453100 15% 15%
Does not match with
15% of 37422200 -
5613330 = 9453100.
17 M/s.Shree Estate and the -
names of the partners in
M/s.Shree Estate did not
match with the names as
mentioned in the seized
documents in totality?
18 C o p y o f t h e p a rt n ers h i p The document is linked to M/s Shree d e e d of M/s. Shree Estate Estates on the basis of the transaction. proves this fact, where no The land is registered in name of M/s name of NN or Sushil is there Shree Estate and the stamp duty amounts, and , how that paper has the name of the seller, the registered sale been linked with M/s. Shree consideration etc all match with the Estate is totally a presumption. entries in the loose documents 19 Name of the bank has been This fact is wrong. Name of the bank or mentioned where in Rupess its branch is not mentioned. In any case 60000/- has been if this fact were of help to the assessee withdrawn or deposited but then the assessee has the first onus to in the bank statement of bring forth the details of the so called Shree Estate no such entry bank because the document was found has been found. from its possession. Where the assessee has failed to prove its point, there is no burden on revenue to link all irrelevant details because the core details have been established.
20 The name of Sushil ji It has been discussed in great detail in
written and it is not earlier part of this order that how the
understood as to, how, the documents are linked to M/s Shree
assessee is linked with this Estates.
nothing, which is neither in
his own hand writing and
neither it is found from the
assessee's premises and nor
there is any link or
connection of this paper
with the assessee.
21 M/s. Shree Estates, a This point is not relevant here as it is
partnership concern back with reference to the assessment of
side of the seized partners while the case of the firm is
documents by linking it being considered here.
to the partnership deed
ITA 847/CHD/2017
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Page 22 of 33
M/s. Shree Estates, in
which assessee is partner
of 25% share, then how
this Sushil ji is connected
with the partnership
concern, has not been
clarified. As per the
partnership deed, whose
names have bee n
r epr od uc ed in the
assessment order,
Sh.Sushilji is not a partner
22 The share of 15% of Sh.Sushil The said document is not a dump
Ji, whose name do not document. The seized documents are
appear in the partnership full of entries in great details. The
deed of M/s.Shree Estates entries are corroborated by other
and neither any evidence as well. There is no other
assessment has been plausible explanation as well. A
farmed of one Sh.Sushil ji, document is dump when no sense can
therefore, the whole basis be made out of that. In the present
of framing the assessment case the details are crystal clear. The
only on the basis of dump property in question has been
document is void abinitio. identified and its details match with
those on the seized documents except
the amount involved where the
involvement of unaccounted money is
being proved.
23 Nothing of Jagadhari- This appears to be an address and the
Chandigarh Road which is it is the assessee or his group members
as per page no.31 & 32 of who have to give this detail in their
the seized documents found defence. In the present case no detail
from Sh.Nikhil Mittal and has been given and therefore there is
has no link the same with the no further burden on revenue to identify
earlier piece of paper. the meaning of this phrase as with the
help of other evidences the logical
conclusion is easily drawable.
24 The plot is not located at The land in question has been identified
Jagadhri-Chandigarh Road as per the registration deeds in favour
and therefore, there is no of M/s Shree Estates.
link or connection with
the alleged investment in
the property of M/s.Shree
Estates
25 The again it has reproduced This point is not relevant here as it is
the names of the partners with reference to the assessment of
and their shares in the partners while the case of the firm is
assessment order in being considered here.
respect of M/s.Shree
Estate and there is no name
of any of the partner in the
seized documents and thus,
the whole basis of framing
the assessment is not
proper.
ITA 847/CHD/2017
A.Y. 2006-07
Page 23 of 33
8.4 On account of the above reasons, the claim of the assessee was rejected
by the AO.
8.5 The assessee addressed these objections before the CIT(A) vide pages 44 to
46 of the Paper Book and further elaborated by way of a detailed chart placed at pages 47 to 55 of the Paper Book filed. Same is extracted hereunder for ready reference :
SNo. A/Page 31 It is a Hand Written Page containing following details: Comments/observation Our comments (Front on the notings on the Side) above page I-Reg II Reg Gulati Ji 3,67,98,250.00 Stamp 1,09,900.00 Gulati Ji (Shri Sudhir The document was not First Reg 10,700.00 Stamp 1,68,000.00 Gulati) is the seller to found from the Ex Stamp 31,050.00 Re Exp 8,300.00 whom Rs.3,67,98,250/- premises of Sh. Nikhii Re Exp 15,200.00 has been paid. 1- Mittai.
Reg 32,600.00 Reg 1000.00 Registration refer to The name only Writing 1800.00 Writing 3,03,400.00 two times when the mentioned is of Bank Exp 420.00 Reg + registries are done.
Gulati. The 280/- Audit 1,84,000.00 Thus, there are four department is trying to Photostate 3,68,74,800.00 4,87,400 separate registries.
establish that the
Expenses 60,000.00 The detail of the entire
3,69,34.800.00 actual payment done Gulati is Sh. Si.dhir
Bank in number one and Gulati.
+ number two is given The document is a
4,87,400 on front side of Page dumb document as it
3,74,22,200/- 31. does not contain
93,55,550 per Whereas, the details of signatures/date of the
share four registries and the partners of the
payments in number appellant firm, Hence
one- is given on back addition cannot be
side made.
of the Page 31 ("No.l" As per the said paper,
is also written on back there are four partners
side of Page 31). but as per the
i partnership deed, there
On front side of Page are seven partners in
31 the total amount M/s Shree Estates.
paid ; Bhupinder/Bank/Audit
to the seller, stamps
are unknown to the
registry expenses etc.
appellant firm.
is j
totaling to
Rs.3,74,22,200/-.
This is divided in i
four shares and per
share is calculated to
be
Rs.93,55,550/- per
share
NN On the lower portion of Page 31, words "N.N" The assessing officer
9355550x2 are written and two shares are for it (which is unsure as to whom
means one share of Nikhil and One Naresh or the document
Nitin S/o Naresh) and it is worked out to belongs. It is just
Rs.1,87,11,100/-. It means that Rs.18800000/- has his assumption on been paid by them and thus they have paid an the basis Of which ITA 847/CHD/2017 A.Y. 2006-07 Page 24 of 33 excess of Rs.88, 900/- from their two shares of addition is being Rs.1,87,11,100/-. Below this share of "Nitin" made in hands of (this is to refer to Nitin Jain) is worked out and firm. his share is Rs.93,55,550/-. Out of this he paid Rs.93 Lacs 2 A-Page 31 This page is reflecting details of Back side of Page 31 shows the The document has (Backside) amount of Rs.6096000/- with the payments made in number one words no name / words total No.l, Bhupinder Bank "No.l" is also mentioned against these area/location of the and 1524000 per share: amounts by the persons who written this. property.
The top four figures are the amounts for Total "No.1" 543000/- which registries are done which totals The appellant is not 517500/- to Rs.56,92,000/- (Actual registries have aware 2800000/- also been found for these transactions of Bhupinder/bank. 5692000/- these persons). The four figures below it 31,050/- are the amounts oaid for stamp duty. It 109900/- totals to Rs.6033550/-, Rs.2450/- is paid 168000/- to Bhupinder (he is deed writer, as can be 6033550 seen from the stamp on the registries) and Bhupinder 2450/- R_s.60,000/- paid to Bank-The total payment in number one is Rs.6096000/-
Bank 60000/-
and per share (four shares) works out to
6096000
Rs.1524000/- per share.
3 A-Page 32 It is also a hand written slip On Page 32 words Sushil Ji is written and Sushil Ji is not a
reflecting the following details: 15% Shane is 1 mentioned. On the left partner of M/s Shree
Sushilji 15% 9453100-1-No. side, the amount is mentioned as I Estates
Sushilji share 914400/- 9453100/- and expenses of Rs.73100/- are
added and is { total to RS.9526200A,
out of which Rs.3000000/-I received
71100 and Rs.6526200/- is shown as balance.
On the [ right side of this Page, words
"1-No." is written against
SushilJi share and figure of
9526200 914400.00 is written, if we take 15%
3000000 of Rs.6096000/- given on back side of
6526200 Page 31 it is 914400/- which is the
same as SushilJi's No.l share in above
deal. Thus, it is clear that some Sushil
Jin is having 15% share in the actual
deal and Page 31 and 32
interrelated
Jagadhri Total 93555.50 The figure of Rs.93,55,550/- is There is no
Ch "HamneLane" -92500.00 the same as worked out on Page connection or link
Road 1055.50 31 seized from the residential of the land with
Cash__ premises \ of Sh Nikhil Mittal, Jagadri Chandigarh
_ Rs.92,50,000/- has been received I
to the above persons (whose
name is not giver but i from The document has
Jagadhari) been owned by M/s
N.N. Jewellers
before Settlement
SushilJi "HamneLane" 94531.00 The figures of 9453100/- and Commission.
"Pakke" 731.00 expenses of 73100?- is same as
(9144.00) Kharch noted on loose Page 32 seized
- from residence of Shri Nikhil
(8000.00) 95262.00 Mittal.
1144.00 930000.00
2262.00 On the left side figure of
Rs.914400/- is given and 1 word
"Pakke" is noted showing it is
payment in number one. The same
figure of 91MOO/- (as l-No. j share
ITA 847/CHD/2017
A.Y. 2006-07
Page 25 of 33
of 15%) is noted on Page 31 seized
from residence of Shri Nikhil
Mittal.
Extracts from the Order
SNo. Argument by the Firm Observation Clarification of Assessee Firm
1 This assertion is wrong. It Clarification of the Assessee Firm
Argument by the Firm It is has been discussed in The fact that no documents was
a fact that no documents or detail that how the found is solidified by the
any paper belonging to the documents found are statements of independent
assessee have been found from related to the assessee witnesses, namely Sh. Ram Partap
firm Bansal and Sh. Ashok Kumar Jain,
the premises of the Appellant.
who had filed affidavits and till
date the department has only
presumed that this document
pertains to the appellant firm.
2 In the documents which have There is no requirement in The documents without any
been alleged to be found from law that the name or signatures or names of the firm
the premises of Shri Nikhil signature is a must for or partners of the firm are
Mittal, there is no name of the assessment. The real test i s inconclusive and hence dumb. assessee firm and neither there w h e t h er t h ose There are various judgments are signatures or notings documents show actual where it has been held that made by the appellant or by detail of the transaction. additions cannot be made on basis any of the Partner of the Firm. The finding after logical of dumb documents.
reasoning and the analysis of facts is that the entries on the loose documents show investment in land by the firm at its "real value".
3 There is no statement of Shri Nikhil Mittal relating to the assessee have been recorded and rather Shri Nikhil Mittal We rely on our earlier submissions.
during the course of search NIL
had taken a stand that this
oiece of paper was never
found from their
premises.
4 Affidavit of independent In all these points, the
witness of Shri Ram Partap issue raised by the The Assessing Officer has not got
Ransal dated 14.5.2010 .- assessee firm is that the any proof or any witness to
.herein he has confirms that seized documents were substantiate his claims. The
those papers were never not found from the statements of independent
seized from the premises of premises of Mr. Nikhil witnesses are adverse to the
Mittal. The matter has contentions of the Assessing
Shri Nikhil Mittal.
been discussed above in officer and support the claims
detail. It has been proven
5 Affidavit of independent made by the appellant firm.
beyond doubt that the
witness of Shri Ashok documents v., ere found
Kumar Jain dated and seized from the
5.5.2010 wherein he has premises of Mr. Nikhil
confirmed that those Mittal and Mrs. Monica
papers were never seized Mittal, the latter being the
from the premises of Shri Partner in the assessee
Nikhil Mittal firm.
ITA 847/CHD/2017
A.Y. 2006-07
Page 26 of 33
6 Statement of Shri Ram Partap
Bansal in response to summons
under section 131 and cross
examined by assessing officer
where in it has been confirmed
that the said documents has
not been found in the
premises of Shri Nikhil
Kumar Mittal.
7 Statement of Shri Ashok
Kumar Jain in response to
summons under Section 131
and cross examined by
Assessing Officer wherein it
has been confirmed that the
said documents has not been
found in the premises of Shri
Nikhil Kumar Mittal
8 Affidavit by Shri Sudhir This is self-serving The name on the alleged
Gulati, Seller of the land affidavit and of no value. documents is of 'Gulati Ji'. Linking
confirming that he has It does not count as it with Sh. Sudhir Gulati is baseless
nothing to do with paper evidence as the seller is and unjustified.
found with such paper and he himself a party to the Sh. Sudhir Gulati is the seller of
has confirmed he has sold the unaccounted transaction. the property in question and how
Property for Rs.6692000/- His name appears on the can the AO treat his affidavit of no
loose documents found value is out of logic.
9 The Statement of Shri and the registration deeds Furthermore, no action has been
Sudhir Gulati was show him as seller. taken by the department for the
recorded for which, he was alleged difference in the value of
issued summon U/s 131 by the property.
the Assessing Officer in Also that the statement of Sh.
Sudhir Gulati was also recorded by
which, he again confirmed
the ACIT, Central Circle, Patiala,
that he has no link or
and he confirmed the sale of land
connection with such seized for the sum of Rs. 66.92
paper.
10 Sald Paper is unsigned These points do not The documents without any
undated and without hand minimize in any manner signatures or names of the firm or
writing of any Partner or any the potency of the partners of the fir m are
family member of the documents. It is not inconclusive and hence dumb.
Partners. necessary in law for a There are various judgments
documentary evidence to where it has been held that
be signed or be in additions cannot be made on basis
h an dwr i t i n g of t he of dumb documents.
Partner. The requirement
of law is that the entries
recorded therein should
be a true reflection of the
state of affairs. In the
present rase the
truthfulness of documents
has been established
through various linkages
as already discussed.
Moreover, as per Section
132(4A) of the IT. Act,
1961, it is legally provided
presumption that the
ITA 847/CHD/2017
A.Y. 2006-07
Page 27 of 33
contents of such
documents found during
the search are true.
Further in the present
case the contents of these
documents are also
corroborated by the
ledger entries found from
the residence of Shri
Naresh Aggarwal (Partner
of Nikhil Mittal) as already
discussed earlier.
11 In this paper The alleged document found
place/location of land Regarding the should describe the location of the
persons and shares of place/location etc. of land. property but the AO has taken
persons not clear. It is clear from the support of the registry i.e.
registration deeds that the document other than those seized
land in question is at to arrive at the location.
Village Sadupur and
Village Kakru, Ambala
12 Total shares mentioned in the In all these argument the
paper come to 90% which assessee firm is As stated earlier, the document
does not match with 100% attempting to show a does not contain names of all the
shares as per partnership deed. mismatch between the partners of the firm. Furthermore,
13 Partnership Deed of the ; loose documents and the Sushil Ji is not a partner of the
Shree Estate consist seven Partnership Deed of the firm.
Partners and paper has no ; link firm. Such comparison is with these Partners not required and even if It is beyond doubt that the firm 14 Sushil Ji share Rs.914400/- made it door, not make purchased the property; the has nn meaning and Sushil ; Ji any sense. It is a fact that question Is regarding the amount 15% does not match with the property was paid for it, for which the AO has share of any person. Sushil is purchased by the firm. no proof in his possession on the not Partner in the Firm. The evidence in this basis of which he has made the regard is the registration addition.
15 Shri Vikas, Vishal, Manoj and deeds where the buyer is Ashish Kumar, Partner of Shree the firm. Now, on behalf Even if the partners acting on Estate find no place in the of firm whether it was one behalf of the firm had purchased papers. Manoj has no Partner or many or all who the property, the calculation of relation with Nikhil and conducted the the AO results 90% share of the Sushil has no relation with Transactions does not partners of the firm whereas it anyone. should be 100% to tax in hands of the firm.
16 The following figures given in matter because in the end it the papers does not tally in is the firm who dirl thp any way: transaction. As far as firm's investment is
1. 37422200 four l/4th considered the entire share do not match 100% share belongs to the with Partnership Deed firm.-
of Shree Estate.
In any case there is no
2. N N 50% share does other explanation with the not match with assessee regarding the Partnership Deed. details that actually match perfectly with the seized
3. Sunil/Sushil 15% share documents. Thus the ITA 847/CHD/2017 A.Y. 2006-07 Page 28 of 33 does not match with primary onus itself at the Partnership Deed. end of the assessee firm is not satisfactorily
4. Nitin 25% shares does discharged.
not match with
Partnership Deed.
5. Total Share 50% + 25%
+ 15% = 90%
Amount
18711100 50% 9355550
15% 9453100 15% Does
not match with 15% of
37422200 -
5613330 = 9453100.
17 M/s Shree Estate and the
names of the Partners in M/s
Shree Estate did not match
with the names as mentioned
in the seized Documents in
totality?
18 Copy of the Partnership Deed
of M/s Shree Estate proves this The document is linked to fact, where no name of NN or M/s Shree Estates on the Sushil is there and, how that basis of the transaction. I paper has been linked with he land is registered in the M/s Shree Estate is totally a name of M/s Shree Estate presumption. and the stamp duty amount, the name of the seller, the registered sale consideration etc. all match with the entries in the loose documents.
19 Name of the bank has been This fact is wrong. Name We rely on our earlier submissions mentioned wherein Rupees of the bank or its branch is 60000/- has been withdrawn not mentioned. In any or deposited but in the bank case if this fact were of statement of Shrpp Fstate no help to the assessee then the such entry has been found. assessee has the first onus to bring forth the details of the so called bank because the document was found from its possession. Where the assessee has failed to prove its point, there is no burden on revenue to link all irrelevant details because the core details have been established.
20 The name of Sushi! Ji written It has been discussed in The Assessing Officer has not and it is not understood as great detail in earlier part elaborat ed on the basi s to, how, the assessee is linked of this order that how the conclusive evidence and with this nothing, which is documents are linked to merely on assumptions how said neither in his own hand M/s Shree Estates. documents belong to assessee. writing and neither it is found ITA 847/CHD/2017 A.Y. 2006-07 Page 29 of 33 from the assessee's premises and nor there is any link or connection of this paper with the assessee.
21 M/s Shree Estate, a This point is not relevant Partnership concern back side here as it is with reference We rely on our earlier submissions.
of the seized documents by to the assessment of
linking it is to the Partnership Partners while the case of
Deed of M/s Shree Estates, the firm is being
in which assessee is partner of considered here.
25% share, then how this
Sushil Ji is connected with the
Partnership concern, has not
been clarified. As per the
Partnership Deed, whose
names have been
reproduced in Ihe
assessment order, Shri Sushil
Ji is not a Partner.
22 The share of 15% of Shri Sushil
The said document is not a The document is dumb as it is:
Ji, whose name do not dump document. The (i) Unsigned
appear in the Partnership seized documents are full (ii) Undated
Deed of M/s Shree Estates and
of entries in great details. (iii) Without handwriting
neither any assessment has been
The entries are of partners of firm.
farmed of one Shri Sushii Ji,
corroborated by other (iv) Name of Persons not
therefore, the whole basisevidence as well. There is clear
of framing the assessment no other plausible (v) Totals to 90% whereas
only on the bssis of dump explanation as well. A to tax in hands of firm, 100% share
document is void ab-intio.document is dump when no is to be established.
sense can be made nut of Hence, the document is dumb and
that. In the present case the AO's contention that
the details are crystal clear. document is not dumb is out of
The property in question logic.
has been identified and
its details match with
those on the seized
documents except the
amount involved where
the involvement of
unaccounted money is
being proved.
23 Nothing of Jagadhari- This appears to be an The whole expression 'Appears to
Chandigarh Road which is address and it is the be' used by the AO clearly
as per Page No.31 and 32 assessee or his group underlines the fact that the AO is
of the seized documents members who have to using assumptions and not relying
found from Shri Nikhil give this detail in their on conclusive evidence.
Mittal and has no link the defence. In the present Same with the earlier case no detail has been P i ece of p aper given and therefore there is no further burden on revenue to identify the meaning of this phrase as with the help of other evidences the logical conclusion is easily drawable.
24 The located at Jagadhri- The land in question has As stated earlier, the AO should ITA 847/CHD/2017 A.Y. 2006-07 Page 30 of 33 Chandigarh Road and been identified as per the describe the location of the therefore, there link or registration deeds in property as per documents seized connection with the alleged favour of M/s Shree and not from the registry of the investment in the Estates. property i.e. document other than Property of M/s Shree Estate those seized to arrive at the location. Hence, the AO cannot link both the documents on basis of assumptions.
25 The again it has This point is not relevant We rely on our earlier submissions.
reproduced the names of the here as it is with reference partners and their shares in the to the assessment of assessment order in respect of Partners while the case of M/s Shree Estate and there is no t h e firm is being name of any of the partner in considered herewith. the seized documents and thus, the whole basis of framing the assessment is not proper.
8.6 On considering the facts, arguments, position of law on the grounds raised and the submissions and documents available on record, we find that at the threshold itself qua the claim of finding of the documents from the residence of Mr. Nikhil Mittal, the search party at the first blush it would appear has floundered and breached the sanctity of the established protocols of having independent witnesses present and available from the beginning of the search to the end of the search. The legal requirements of necessitating the presence of independent witnesses, it may appear has been treated to be a very casual and mechanical requirement in the facts of the present case. The affidavits of the witnesses available on record and the valiant attempts of the AO to demolish these by way of recording their statements in cross- examination recorded in the assessment order did not strengthen the Revenue's argument, in the face of the consistent claim of the assessee that the documents were not found from the residence of Mr. Nikhil Mittal. The reliance placed by the AO to rebut this claim on the protocols established as standard operation procedures necessarily followed during the search completely may also appear to blast the claim of the tax authorities hollow. As per record, one of the witnesses to the search was allowed/asked by the search party to leave the specific premises searched and the only requirement adhered to during the search in regard to his presence was that the search team could keep an eye on him as opposed to him being an independent witness keeping an eye on the search team. The protocols followed appear to be surprisingly quaint for want of a better word as they do not serve the purposes for which independent witnesses are required to be appointed. As a result of this, the occasion to raise the objection of the said ITA 847/CHD/2017 A.Y. 2006-07 Page 31 of 33 independent witness that certain documents were not found from the residence. The exasperation of the AO in the cross-examination of Shri Ashok Kumar evident from question 3 further blows the claim of the Tax authorities hollow. Although it has already been extracted in the earlier part of this order, the specific question is reproduced hereunder once again:
3. As you have stated that you had gone to your house on the order of the officers of search party. Order under rule 112(6) of the IT Act, was served upon you not to depart till the search is not completed, therefore, it is clear that no officer of the department can instruct you or the police party to depart from the search place.
Therefore, it is clear that you are cooking a story to spoil the proceeding of the Income Tax Department.
(emphasis supplied) 8.6.1 The following reply of Mr. Ashok Kumar which remains unrebutted on record and is in support of the affidavit filed is also again reproduced hereunder for ready reference:
ANS.:- I was not told my rights and duties at that time. I have obeyed the order of your officer. I shall have to obey the order of that officer who signed on my order/notice. At present on dated 224(***)-11-2008, in the proceedings you have served order on men I presented and asked me to go out and I shall call you again. I have not asked any written order in this regard, I only obeyed your verbal order and I had to leave during the proceedings. In the same way things happen at the time of search. I have not left that area and I am waiting other side of the common wall for their call.
(emphasis supplied) 8.7 The other so called witness to the search Mr. Ram Partap Bansal as per record has claimed that he was appointed only at 2 P.M. and called to be present while he was participating in a cremation program, which again gives cause to raise the objection that certain documents/bundles were not found from the residence of Shri Nikhil Mittal. However, these submissions, statements and evidences become meaningless when considered in the light of the fact that the first time the objection is posed is on 14th and 15th May, 2007 addressing what transpired on the date of search i.e. on 13.10.2006.
The evidences accordingly rightly have been discarded as an after thought.
8.8 Addressing the facts on record, we find that the document does appear to refer to some kind of calculations and jottings, however, no effort has been made to show that the document is in the handwriting of any one of the partners of the firm. The name of the assessee firm is not mentioned there. The person named "Sunil" or "Bhupinder" thereon are not made known. The assessee states the persons are not known to it. They are not the partners. Accordingly, in the circumstances, the insistence of the tax authorities that it is the assessee who has to explain these document cannot be supported as ITA 847/CHD/2017 A.Y. 2006-07 Page 32 of 33 there is nothing in the documents which suggests a connection with the assessee. The presence of the document from the residence of Mr. Nikhil Mittal by itself does not make it necessarily relatable to the assessee. Admittedly, no questions have been asked from Shri Nikhil Mittal to explain the said document. The name, admittedly, of the assessee firm is not mentioned in the seized document. The note though is hand written, however, no efforts have been made to establish that it is in the handwriting of any of the partners of the assessee firm. The seized document refers to the name of 'Sunil' however whether it is 'Sudhir Gulati' or not is not coming out from the same. There is no 'Sunil ji' as a partner. The purposes of 15% mentioned in the document remains unaddressed. If it is Shri Sudhir Gulati, then he has confirmed the sale amount as the amount mentioned in the Registered Sale Deed. Affidavit of Shri Sudhir Gulati at pages 82 to 83 stands unrebutted on record. Further, who is 'Bhupinder' referred to in the hand written note found is also not understood. The occasion to hold the assessee firm answerable to explain would arise only if the document can be said to be belonging to the partners or the firm. At best, these are some rough jottings by someone, how they are relatable to the assessee is not addressed by the Revenue. Shri Nikhil Mittal spouse of one of the partners itself has not been met the occasion for the assessee firm to explain the document does not arise. As noted, it is surprising that Shri Nikhil Mittal from whose residence, the document allegedly was found also has not been called upon by the Revenue to explain and instead the tax authorities have chosen to travel directly to the firm where his wife was a partner as admittedly the name of the assessee firm or its partners is no where on the seized documents nor is it in the handwriting of any of the partners. Even otherwise, considering the position of law on the relevant provision i.e. the wording of Section 153C as it then stood and the judicial precedent relied upon, we find that in the absence of any material on record, the occasion to make addition on the basis of the seized documents in the peculiar facts and circumstances of the present case, was contrary to facts and law and for the detailed reasons given hereinbefore cannot be upheld.
9. The decisions relied upon by the parties have been taken into consideration and consequently, the proposition of law as applicable to the facts of the specific case have been taken into consideration even if reference to a specific decision has not been made. On the propositions of law on the facts examined by the Courts, there is no debate as these are well settled. In ITA 847/CHD/2017 A.Y. 2006-07 Page 33 of 33 the facts of the present case, the issues for consideration revolve around facts which needed to be marshaled. Accordingly, the issues being purely factual which were to be determined as such reference to well settled legal propositions on which there is no debate has not been considered necessary. Needless to say that they have all been considered. Accordingly, for the detailed reasons given herein above, the appeal is allowed.
10. In the result, the appeal of the assessee is allowed.
Order pronounced in the Open Court on 13.12. 2017.
Sd/- Sd/-
(Dr. B.R.R.KUMAR) (DIVA SINGH)
ACCOUNTANT MEMBER JUDICIAL MEMBER
'Poonam'
Copy to:
1. The Appellant
2. The Respondent
3. The CIT
4. The CI T(A)
5. The DR
Asstt. Registrar
ITAT,Chandigarh.