Income Tax Appellate Tribunal - Pune
Balkrishnan Shanmugam Chettiar Alias S ... vs Acit, Pune on 25 November, 2016
आयकर अपील य अ धकरण, पुणे यायपीठ "ए" पुणे म
IN THE INCOME TAX APPELLATE TRIBUNAL
PUNE BENCH "A", PUNE
ी आर. के. पांडा, लेखा सद य एवं ी वकास अव थी, या"यक सद य के सम#
BEFORE SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM
आयकर अपील सं. / ITA Nos.1311, 1313, 1315 to 1317/PN/2013
"नधा%रण वष% / Assessment Years : 2004-05, 2006-07 &
2008-09 to 2010-11
Shri Balkrishnan Shanmugam .......... अपीलाथ / Appellant
Chettiar alias S. Balan,
1133/5, Nirankar,
Fergussion College Road,
Shivajinagar, Pune - 411 016
PAN : AALPC5158J
बनाम v/s
ACIT, Central Circle-1(1), .......... यथ /Respondent
Pune
आयकर अपील सं. / ITA Nos.1306 & 1307/PN/2013
"नधा%रण वष% / Assessment Years : 2009-10 & 2010-11
ACIT, Central Circle-1(1), .......... अपीलाथ / Appellant
Pune
बनाम v/s
Shri Balkrishnan Shanmugam
Chettiar alias S. Balan,
1133/5, Nirankar,
Fergussion College Road,
Shivajinagar, Pune - 411 016 .......... यथ /Respondent
PAN : AALPC5158J
अपीलाथ क ओर से / Appellant by : Shri Prayag Jha/
Shri M.R. Bhagwat
यथ क ओर से / Respondent by : Shri Suhas S. Kulkarni
सन
ु वाई क तार ख / घोषणा क तार ख /
Date of Hearing :05.10.2016 Date of Pronouncement: 25.11.2016
आदे श / ORDER
PER R.K.PANDA, AM :
ITA No.1311,1313,1315/PN/2013 filed by the assessee are directed against the separate orders dated 28-02-2013 of the CIT(A)-
II, Pune relating to Assessment Years 2004-05, 2006-07 & 2008-09 respectively. ITA No.1316/PN/2013 filed by the assessee and ITA 2 ITA No.1311, 1313,1315 to 1317 & 1306 & 1307/PN/2013 No.1306/PN/2013 filed by the revenue are cross appeals for A.Y. 2009-10. ITA No.1317/PN/2013 filed by the assessee and ITA No.1307/PN/2013 filed by the revenue are cross appeals for A.Y.2010-11. All the above cross appeals are directed against the separate orders dated 28-02-2013 of the CIT(A)-II, Pune. For the sake of convenience all these appeals were heard together and are being disposed of by this common order.
ITA No.1311/PN/2013 (A.Y. 2004-05) (By Assessee) :2. Facts of the case, in brief, are that the assessee is an individual. A search action u/s.132 of the I.T. Act was conducted in the RMD Gutkha group of cases on 20-01-2010. Warrant of authorization u/s.132(1) of the I.T. Act was executed in the case of the assessee. In response to notice u/s.153A of the I.T. Act the assessee filed his return of income on 31-12-2010 disclosing total income of Rs.1,13,88,080/- which is the income as per the original return of income filed on 01-11-2004. In response to notice u/s.143(2) and notice u/s.142(1) of the I.T. Act the assessee filed various details. It may be pertinent to mention here that the assessment order u/s.143(3) of the I.T. Act was passed on 15-12-2006 accepting the returned income of the assessee at Rs.1,13,88,080/-.
3. During the course of assessment proceedings the AO observed that the assessee has claimed dividend income as exempt in accordance with the provisions of section 10 of the I.T. Act. Since the assessee has not attributed any expenditure towards earning of such exempt income and considering the fact that there is always an element of indirect expenditure for earning such exempt income 3 ITA No.1311, 1313,1315 to 1317 & 1306 & 1307/PN/2013 which the assessee has neither identified nor offered to tax the AO was of the opinion that assessee has not made adequate disallowance as mandated u/s.14A of the Act. He, therefore, asked the assessee to explain as to why such expenditure relatable to exempt income should not be disallowed under the provisions of section 14A r.w.
Rule 8D of the I.T. Rules. Rejecting the various explanations given by the assessee and observing that the average investment of the assessee during the year was at Rs.2.56 crores the AO disallowed an amount of Rs.4,37,039/- u/s.14A of the I.T. Act read with Rule 8D.
4. The AO further noted that during the course of search action at the residential premises of Shri Mithulal at Bangalore on 09-10-2009 a large number of incriminating documents were found and seized. These documents were belonging to M/s.Dhariwal Industries Ltd. (in short 'M/s.DIL') and were maintained by one Shri Sohan Raj Mehta, C&F Agent of M/s. Dhariwal Industries Ltd., on behalf of M/s.DIL. When confronted on this issue Shri Sohan Raj Mehta had categorically stated in his statement recorded on oath u/s.132(4) that he was effecting unaccounted sale of Gutkha on behalf of M/s. DIL and the sale proceeds were deployed as per the directions of Sri Rasiklal M. Dhariwal/Sri Prakash R. Dhariwal.
Among the recipients of the unaccounted sale proceeds, assessee's name figures prominently at several places. The AO observed that as per the seized details belonging to Bundle No. A/M/08 seized vide panchanama dated 09-10-2009 the assessee had received an amount of Rs.14,35,00,000/- from M/s. Dhariwal Industries Ltd. through Shri Sohan Raj Mehta, the details of which are as under :
4ITA No.1311, 1313,1315 to 1317 & 1306 & 1307/PN/2013 Page no of Month of Amount Assessment AY- wise amount Bundle no receipt received Year (AY) received (Rs.) A/M/08 (Rs.) 42 Sep 2003 35,00,000 2004-05 35,00,000 54 54 Feb 2006 2,00,00,000 2006-07 2,00,00,000 56 Aug 2007 5,00,00,000 2008-09 12,00,00,000 56 Oct 2007 7,00,00,000 Total amount received 14,35,00,000
5. He noted that Shri Sohan Raj Mehta vide his statement u/s.132(4) of the I.T. Act as well as through subsequent statements dated 15-10-2009, 21-10-2009 and 10-08-2011 has categorically explained the modus operandi of unaccounted cash generation and deployment of the said unaccounted cash which is corroborative of and is corroborated by the innumerable evidences contained in the said seized documents seized vide Panchanama dated 09-10-2009.
He, therefore, was of the opinion that in view of the categorical admission by Shri Sohan Raj Mehta while explaining the said documents the above amount of Rs.14,35,00,000/- as mentioned in the seized document was paid by M/s. Dhariwal to the assessee through him as per the instructions received from Sri Rasiklal M. Dhariwal/Sri Prakash R. Dhariwal. In view of the above facts, the AO issued a show cause notice asking the assessee to explain as to why the unaccounted cash receipts of Rs. 35 lakhs for the year under consideration from M/s. Dhariwal Industries Ltd. through Mr. Sohan Raj Mehta should not be treated as his undisclosed income.
The relevant show cause notice dated 09-12-2011 by the AO reads as under :
"Vide Question No.5 of questionnaire dated 12/09/2011 duly served upon you on 16/09/2011, you were asked to confirm and explain the details of receipt of the said amount. In response to the query raised vide said questionnaire, it is submitted by you that you have not received any money from M/s. Dhariwal Industries Ltd. (DIL) through Shri Sohan Raj 5 ITA No.1311, 1313,1315 to 1317 & 1306 & 1307/PN/2013 Mehta, However, from the inquiries and the details submitted by you in response to the questionnaire, it is seen that you are a close family friend and a close business associate of Shri Rasiklal M. Dhariwal, Chairman of M/s Dhariwal Industries Ltd. over many years and you have transacted with M/s DIL during the said period of 2003 to 2008. Further, Shri Sohan Raj Mehta has accepted to have carried out unaccounted sale of Gutka on behalf of M/s DIL between the period 2003 to 2008 as depicted in the documents seized (29 bundles marked as Exhibit A/M/01 to A/M/29 seized vide Panchanama dated 09/10/2009) seized by Investigation Wing of Bangalore. As per detailed enquiry and evidences gathered by the Department during search, post search enquiries and during the assessment proceedings, it is established beyond reasonable doubt that the above mentioned documents seized from Bangalore are actual details of unaccounted sales of Gutka by M/s Dhariwal Industries Ltd. which it has carried out through Shri Sohan Raj Mehta and that, Shri Sohan Raj Mehta has maintained all the details of these unaccounted sales, unaccounted sale proceeds generated in cash and the utilization of the said cash generated. Shri Sohan Raj Mehta has also admitted that he has earned commission on this unaccounted sale of Gutka effected by him on behalf of M/s DIL and he has offered the said commission income to tax while filing 153A returns In his case.
3. Therefore, it is clearly established that the documents-found at Bangalore are not dumb documents and they are authentic accounts of cash generation and deployment of cash generated out of unaccounted sale proceeds of Rs. 345.75 crs, between the year 2003 to 2008, which were maintained by Shri Sohan Mehta on behalf of M/s DIL.
4. In view of the foregoing facts, the income arising out of the unaccounted sale transactions of Rs.345.75 crs is being taxed in the hands of M/s DIL for respective years and the payment of Rs. 14,35,00,000/- clearly reflects the cash paid to you by M/s.Dhariwal Industries Ltd. (DIL) through Shri Sohan Raj Mehta .
This is a revenue receipt without corresponding liability and hence, the said amount of Rs. 14,35,00,000/- is liable for tax.
5. Therefore, keeping in view the provisions of section 132(4A) of the IT Act and in view of the above facts, an amount of 14,35,00,000/- is proposed to be taxed in your hands as your unaccounted income for the assessment years as under:
Assessment Year Amount (representing your undisclosed income) proposed to be taxed (Rs.) 2004-05 35,00,000/-
2006-07 2,00,00,000/-
2008-09 12,00,00,000/-
TOTAL 14,35,00,000/-
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6
ITA No.1311, 1313,1315 to 1317
& 1306 & 1307/PN/2013
6. Kindly state through cogent evidences, if any expenditure is incurred by you for earning the said undisclosed income of Rs.14,35,00,000/-, so that set off of expenditure, if any, and if permissible by law, could be given to arrive at actual quantum of your undisclosed income.
..........
9. Therefore, you are requested to submit your say by 16/12/2011 in the matter so that the same can be considered by me while finalizing your assessment. Kindly note that the matter is time barring and granting further time may not be possible. If nothing is heard from your side by 16/12/2011, kindly note that I may tax the entire amounts as stated above, as your undisclosed income for the respective year (s) and disallow the claim of deduction u/s.80IA(4)(iii) of the I.T. Act for A.Y. 2009-10 and A.Y. 2010-11.
10. Such an act on my part though judicious and as per the provisions of Income tax Act, 1961, may be highly prejudicial to your interests. Therefore it is my humble request that you furnish your say so that I can consider the same before finalizing the assessment in your case. Accordingly, this letter may kindly treated as last and final opportunity / final show cause notice in the matter involved. A formal notice u/s 142(1) of the I. T. Act is enclosed herewith".
6. The assessee in response to the above questionnaire flatly denied to have received any such amount from M/s. Dhariwal Industries Ltd. through Shri Sohan Raj Mehta. It was submitted that he is not even remotely concerned with any such amount nor received any such amount either from Shri Sohan Raj Mehta or from any other person. It was submitted that he has not seen, met or even talked to the said Shri Sohan Raj Mehta since last more than six years. Therefore, the question of receiving any amount from him on the alleged instructions of the persons named therein does not arise. It was argued that merely because he is having family relationship with the persons named Shri Rasiklal M. Dhariwal and Prakash M. Dhariwal is neither sufficient nor valid in law to establish any connection with the alleged entry in the statement of account allegedly maintained by the said Shri Sohan Raj Mehta. It was submitted that neither the alleged statement of said Shri Sohan Raj 7 ITA No.1311, 1313,1315 to 1317 & 1306 & 1307/PN/2013 Mehta nor the alleged entry in the books allegedly maintained by Shri Sohan Raj Mehta can stand scrutiny of law. The relevant reply of the assessee to the Assessing Officer which has been reproduced by the Assessing Officer in the body of the assessment order reads as under:
"My submissions relating to the said amount of Rs. 14,35,00,000/- (fourteen crore thirty five lakh only) are as follows:
a. I am not even remotely concerned with any such amount, nor I received any such amount either from said Sohan Raj Mehta or from any other person. I have not seen, met or even talked to said Mehta since last more than 6 (six) years. The question hence, of my receiving any amount from him on the alleged instructions of the persons named therein, does not arise.
b. The ground of I having family relations with the persons named RM Dhariwal or Prakash Dhariwal is neither sufficient nor valid in law to establish any connection with the alleged entry in the statement or account allegedly maintained by said Mehta.
c. Neither the alleged statement of said Mehta nor the alleged entry in the books allegedly maintained by said Mehta can stand scrutiny of law relating to evidence. Such flimsy, unsubstantiated and uncorroborated statement cannot be used in law to fasten any liability of me. It is impermissible in law.
d. There never was any transaction relating to Gutkha by and between myself and Dhariwal Industries Limited. I did not sell any goods to said Mehta or his principals nor offered any services. It is hence, far fetched to connect me with the said amount on the solitary, unsubstantiated, uncorroborated and false statement of said Mehta.
e. During the search taken place at my residential premises by Income Tax Department, nothing incriminating of the nature connecting me to the said amount could be found.
f. I deny that any such amount was ever received by me from said Mehta at anybody's instruction. The said amount hence, cannot be added to my income for the purposes of levying tax. The same is illegal.
g. The reliance on the alleged statement and the alleged entry in the books of said Mehta to connect me with the said amount, is illegal and contrary to law relating to evidence. Any copy of said Mehta's statement on oath has not been furnished to me. Moreover, the said statement cannot be taken into account, as no opportunity to his cross examination has been given to me which is a sine qua non. Such statements therefore, cannot be looked into by this authority (see AIR 1957 SC 882, Hartwell v/s Uttar Pradesh).
h. It is therefore, requested that (i) a copy of the alleged statement taken on oath of said Sohan Raj Mehta be supplied to me, and (ii) opportunity to cross examine said Sohan Raj Mehta be granted to me. This is a 'must' in law.8
ITA No.1311, 1313,1315 to 1317 & 1306 & 1307/PN/2013 i. The said notice also calls upon me to submit expenditure incurred for allegedly earning the said amount of Rs. 14,35,00,000/- (fourteen crore thirty five lakh only). However, as I did not earn or receive any such amount from said Mehta, the question of incurring any expenditure by me thereon, does not arise. The said statement is presumptive, and is denied by me.
j. I am not nor was a recipient of the alleged amount, and the same cannot be added to my income, and if done, the same would be illegal.
3. The proposal to add the amounts mentioned in the said show cause notice is baseless on facts, evidence and in law. I strongly object to addition of any such amount.
4. This has been filed, without prejudice to my rights to adduce such evidence and submissions as may be found necessary. I also reserve my rights to cross-examine the witness Sohan Mehta."
Further, vide his letter dated 17/12/2011, assessee submitted as under :
1. Please refer to your show cause notice dated 09-12-2011 wherein it was stated that I have received an amount of Rs.14.35 Cr. from Dhariwal Industries Ltd,.through Mr. Sohanraj Mehta.
2. In response to this notice I have already submitted my reply on 16-
12-2011 to you.
3. In the said notice there is a mention regarding the statement of Mr. Sohanraj Mehta recorded on oath. On my request made in my reply dated 16.12.2011, your office supplied with the copies of the statements of Mr Sohanraj Mehta. On perusal of the said statements of Mr. Sohanraj Mehta following facts are revealed.
(a) Six statements of Mr Sohanraj Mehta were recorded on dates 9-10-09, 15-10- 09, 21-10-09,7-11-09,7-12-09 and on 10-8-2011.
(b) In the statement recorded on 10-8-2011 before DCIT, Central Circle 2(2), Bangalore, Mr. Mehta stated in answer to question No.4, "Mr Santhuramappa, M/s Tejaswini Builders, Mis Mantri Developers and others are the parties with which M/s DIL or its directors had transactions .... "
(c) Mr. Sohanraj Mehta did not even once mentioned my name in any of his statements recorded in the year 2009 & 2011. My name did not appear anywhere in the said statements of Mr Sohanraj Mehta.
(d) I therefore, once again maintain that I was never connected or associated with the Guthka business of Dhariwallndustries Ltd,.or with Mr Sohanraj Mehta. I was not party to the sales effected by Mr Sohanraj Mehta. I did not provide any services or sold any goods to M/s Dhariwal Industries Ltd,. Under the circumstances Mr. Sohanraj Mehta paying me such a huge amount of Rs 14.35 Crore does not arise at all.
(e) Moreover, there was never any cause or occasion for said Mr. Mehta for me to have received any such amount, much less Rs.14.35 crores from 9 ITA No.1311, 1313,1315 to 1317 & 1306 & 1307/PN/2013 Dhariwal Industries Limited through said Mr. Mehta.
(f) Under the circumstances the proposal to tax such alleged receipt of Rs 14.35 Cr, in my hand as unaccounted income is without any basis and illegal, l strongly oppose such action on your part and again request you not to add such amount as unaccounted income.
4. In view of above, it is submitted that no amount either as proposed in the impugned show cause notice or otherwise, be added to my income. "
7. However, the AO was not satisfied with the explanation given by the assessee. He observed that the evidences seized during the search action u/s.132 are speaking documents and proved beyond reasonable doubt about the entire unaccounted business chain of M/s. Dhariwal Industries Limited regarding unaccounted purchase, unaccounted manufacture, unaccounted packing, unaccounted printing, clandestine removal of goods, unaccounted sale and utilisation of the sale proceeds. The Assessing Officer further noted that on the basis of the irrefutable strength of the evidences as contained in the said seized pages, an addition of Rs.205.70 crores has been made in the case of M/s. Dhariwal Industries Limited for A.Y. 2004-05 to A.Y. 2008-09, after elaborately discussing all the relevant issues. The AO reproduced in the assessment order, the findings in the case of M/s. Dhariwal Industries Limited where addition of Rs.40.88 crores has been made in A.Y. 2004-05. He observed that the irrefutable evidence in the form of seized documents found at the premises of Shri Mittulal of Bangalore could not be negated by the assessee.
8. As regards the contention of the assessee that the seized documents were not seized from him and he has nothing to do with Shri Sohan Raj Mehta and therefore, the seized documents cannot be treated as evidence against him being a third party evidence is 10 ITA No.1311, 1313,1315 to 1317 & 1306 & 1307/PN/2013 concerned, the AO noted that if such argument of the assessee is accepted then the provision of Evidence Act and section 147, 158BD, 153C of the Income Tax Act become redundant. He observed that although it is true that the strict rules of evidence are inapplicable to the proceedings under the Income Tax Act, 1961, however, that does not mean that principles of Evidence Act are inapplicable to the proceedings under the Income Tax Act. Relying on the provision of section 110 of Indian Evidence Act and the decision of Hon'ble Supreme Court in the case of Chuharmal Vs. CIT reported in 172 ITR 230 (SC) the AO held that third party evidence has evidentiary value and therefore the same can be used if corroborated by other circumstantial evidence. Since in the instant case the evidence not only proves the authenticity of the said seized document but also proves beyond reasonable doubt regarding assessee's role in the entire design, the AO held that the assessee has to necessarily face the lawful consequences of his unlawful act in the form of deployment of unaccounted cash outside the books.
9. So far as reliance on the decision of Hon'ble Bombay High Court in the case of Lata Mangeshkar reported in 97 ITR 696 is concerned, the AO observed that the Tribunal in the case of Lata Mangeshkar had observed that on the basis of the ledger, which contained payments to Lata Mangeshkar, there were no corresponding entries in the day book. Vasu Films itself did not rely on the ledger in the course of its own assessment proceedings.
Furthermore, the testimony of two witnesses was found unreliable. It is under these peculiar circumstances the said decision had been rendered by the Tribunal. When Department filed an appeal against the order of the Tribunal the Hon'ble Bombay High Court dismissed 11 ITA No.1311, 1313,1315 to 1317 & 1306 & 1307/PN/2013 the appeal of the Department on the ground that no substantial question of law was involved. He accordingly held that the above decision relied on by the assessee is distinguishable and not applicable to the facts of the present case.
10. The AO further noted that one of the raw material supplier Shri Mallikarjuna of Shimoga in his statement recorded u/s.132(4) on the date of search has accepted to have supplied the raw material outside the books to M/s.DIL and confirmed the contents of seized documents. His statement has evidentiary value as it was recorded u/s.132(4) though subsequently he has retracted his statement u/s.132(4). He observed that the said retraction was in letter only and not in spirit. According to the AO such retraction is superficial and is not based on any evidence whatsoever. He observed that there was no proof of any threat or coercion while recording the statement.
Therefore, he concluded that the retraction was at the behest of M/s.
DIL on which the assessee is dependant. He further noted that the assessee who is one of the prominent recipients of unaccounted sale proceeds of M/s. DIL, is a close family friend and business associate of Shri Rasiklal M. Dhariwal, Chairman of M/s. DIL. The assessee had admitted on 20-01-2010 vide his statement recorded on oath that he was a custodian of about Rs.14 crores of money of Dhariwal and the said seized document also depict that about Rs.14.35 crores money was handed over by Shri Sohan Raj Mehta to Shri S. Balan/his representatives on the directions of Shri Rasiklal M. Dhariwal/Shri Prakash R. Dhariwal.
11. The AO observed that although the assessee has retracted the above statement in November 2011 by filing an affidavit stating that 12 ITA No.1311, 1313,1315 to 1317 & 1306 & 1307/PN/2013 the admission made by him during search action was not actually made by him and he has not stated any such fact during the search, however, Shri Balan has admitted that the said statement bears his signature. Moreover the retraction of the assessee is not made immediately after the search and it was made almost after 22 months after the search. Further the assessee could not prove any element of threat or coercion while recording the statement u/s.132(4). The AO further noted that the said retraction of the assessee has come only in November 2011., M/. DIL could intuitively anticipate and could quote the said retraction in its written submissions as early as 01-09-2011. This according to the AO proves that the said retraction was made by the assessee only at the behest of M/s. DIL, away from the irrefutable evidences contained in the said seized documents and try to save himself and M/s. DIL from the lawful consequences of this unlawful act. Relying on the decisions of the Hon'ble Supreme Court in the case of CIT Vs. Durga Prasad More reported in 82 ITR 540, Sumati Dayal Vs.CIT reported in 214 ITR 801 and CIT Vs. Mohan kala reported in 291 ITR 278, the AO made addition of Rs.35 lakhs as undisclosed income of the assessee for the impugned assessment year. Similarly an amount of Rs.2 crores was made in A.Y. 2006-07 and Rs.12 crores was made in A.Y. 2008-09.
12. Before CIT(A) it was argued that the assessment order was received on 03-01-2012 whereas the search took place on 20-01-2010. It was argued that as per section 153B the AO shall make an order of assessment within a period of 21 months from the end of the financial year in which the last of the authorisation for search u/s.132 was executed. In view of the said provision, the order should have been served on the assessee before 31-12-2011.13
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13. The disallowance u/s.14A was also challenged on the ground that the AO has made the disallowance by invoking provisions of Rule 8D which was not on the statute book in A.Y. 2004-05.
Therefore, the addition is untenable in law. Even otherwise also, it is excessive because expenditure of such magnitude is not required to be incurred for earning dividends which are directly credited in assessee's bank account by ECS. It was also argued that the AO had not proved any nexus between the tax free income and the expenditure incurred by the assessee. Relying on the decision of Hon'ble Bombay High Court in the case of Godrej & Boyce Manufacturing Company Ltd. Vs. DCIT reported in 328 ITR 81 and various other decisions it was submitted that Rule 8D cannot be applied to the impugned assessment year. The assessee without prejudice relying on the decision of Kolkata bench of the Tribunal in the case of DCIT Vs. Phillips Carbon Black Ltd. reported in 133 ITD 189 (Kol.)(TM) argued that the Tribunal in the said decision has held that 1% of the income can be considered as reasonable disallowance u/s.14A.
14. So far as addition of Rs.35 lakhs as undisclosed income is concerned it was argued that the addition on this account was against the principles of natural justice as the copy of the statement u/s.132(4) recorded of Shri Sohan Raj Mehta was not supplied to the assessee and opportunity to cross examine Shri Sohan Raj Mehta was also not given. It was argued that the AO is presuming the receipt merely because the assessee's name figures in the loose papers. However, not a shred of evidence that the amount was actually paid to the assessee in the form of any identification relating 14 ITA No.1311, 1313,1315 to 1317 & 1306 & 1307/PN/2013 to him or any express or implied acknowledgement of receipt of the impugned money was found. It was argued that the loose papers show that the alleged payments are not directly made to the assessee but to some other person like Nagraj or Mr. Raja Datta receiving on behalf of the assessee. The Assessing Officer has not recorded their statements nor investigated to verify the correctness or otherwise of the assertions in the seized paper. The relationship between the persons and the assessee has not been brought on record. It was further submitted that the assessee himself has been subjected to simultaneous search and no evidence of such huge sum of money was found. It was contended that the AO's reliance on the assessee's statement about him being custodian of the money belonging to Dhariwal group is misconceived as that statement was recorded u/s.133A in the case of a survey action against Sai Construction Pvt.
Ltd. and it is well settled that a statement u/s 133A unlike 132(4) does not bind the assessee and can be retracted by him at any time.
It was argued that the assessee in his affidavit has clarified the retraction. It was submitted that the assessee does not understand English language very well in which the statement was recorded. The assessee also tried to explain that had he received such huge amount of money totalling to Rs. 14.35 crores, the same would have been utilised in some form or other and the same would have surfaced in the search action conducted in his case. However, no unexplained asset, investment or expenditure was found as evidenced by the assessment order passed u/s 153A. There was no addition on such account except cash of Rs. 33 lakhs. The assessee also submitted that he had categorically denied any business relationship with Dhariwal group in his statement recorded u/s 132(4) on 20-01-2010 15 ITA No.1311, 1313,1315 to 1317 & 1306 & 1307/PN/2013 and that he did not know Mr. Sohan Raj Mehta. The assessee further stated that the conspiracy theory is totally a figment of the Assessing Officer's imagination. Regarding the Assessing Officer's action of taxing the receipts, the assessee stated that it is not to be based on presumption and guess work and has to be based on concrete evidence. The assessee also stated that the entire addition is based upon the statement of a third party which totally lacks credibility and that too against the principles of natural justice of not allowing cross examination of Sohan Raj Mehta. Without prejudice to the above, the assessee submitted that the money received does not constitute his income as income requires a source and mere receipt can never constitute income.
15. However, the CIT(A) also was not satisfied with the explanation given by the assessee. So far as the validity of the assessment u/s.153A is concerned the Ld.CIT(A) relying on various decisions dismissed the contention of the assessee on the ground that search action against the assessee was carried out on 20-01-2010 and the assessment order has been passed on 30-12-2011. The return in response to notice u/s.153A dated 14-09-2010 was filed on 31-12-2010 which means that the order has been made prior to the end of 21 months period as envisaged in section 153(1)(a) of the Act.
He observed that the assessee failed to demonstrate during the appeal proceedings that the said assessment order has not been made prior to 30-12-2011 as no concrete evidence in this regard was brought on record to prove the ground raised by the assessee. The assessee also could not prove any such material on record so as to justify the despatch of the order to have been made after 30-12-2011.16
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16. As regards the validity of assessment u/s.153A in absence of any incriminating material found during the course of search is concerned he held that the requirement of making assessment/reassessment u/s.153A has no relation with the nature of incriminating material found or not found in the course of search.
According to him the provisions of section 153A requires total income for preceeding six years to be assessed or reassessed in pursuance to notice u/s.153A. Total income will include any kind of income and it cannot be restricted to undisclosed income or escaped income. In view of the above, he dismissed the above contention of the assessee as misplaced and not tenable.
17. So far as the merit of the case is concerned he also dismissed the same and upheld the addition made by the AO. While doing so, he observed that Shri Sohan Raj Mehta, C&F Agent of M/s. Dhariwal Industries Ltd. in his statement u/s.132(4) has explained the entire modus operandi of unaccounted generation of cash and also regarding its deployment which is corroborative and also corroborated by innumerable evidence contained in the seized documents. Further after decoding of the seized document by Shri Sohan Raj Mehta it has been explained that on the basis of the signed chits either by Shri Rasiklal M. Dhariwal/Shri Prakash M. Dhariwal, Shri Sohan Raj Mehta used to make payments to the parties whose names were mentioned on the chits. The AO has pointed out to the signed chit dated 14-08-2007 by Shri Prakash M. Dhariwal which appears on page 44 of the loose paper Bundle No.A/M/29 where the amount mentioned is Rs.5 lakhs for which decoding has been explained by Shri Sohan Raj Mehta as Rs. 5 crores and the payments related to the said instructions on the chits 17 ITA No.1311, 1313,1315 to 1317 & 1306 & 1307/PN/2013 have been made by way of number of instalments on different dates.
The AO has also found and noted that the assessee has been associated with M/s. Dhariwal Industries Ltd for a long time and the assessee's name appearing in the seized document tallied with the regular business association with M/s. Dhariwal Industries Ltd. and if test of human probabilities is applied to the facts of the case it becomes evident that assessee was part of the entire scheme of unaccounted business chain of M/s. Dhariwal Industries Ltd. While upholding the addition made by the AO, the Ld.CIT(A) from para 5.7 of his order observed as under :
"5.7 It is an undisputed fact that the seized documents and the loose papers No 34 as contained in Bundle A/M/8, A/M/29 found and seized during the course of search and seizure action carried out in the case of Sohanraj Mehta C & F of Dhariwal Group contained the details of the payments of unaccounted money to the persons whose names are appearing on the said document. The name of the assessee appears in the documents seized during the search action. The seized document gives a very detailed and minute notings of the transactions entered into by the Dhariwal group i.e. M/s DIL in the entire Karnataka region, this being so, because Shri. Sohanraj Mehta was the C & F of the RMD Gutka group, certainly one of the most important persons related to the marketing of the product of the Dhariwal group. The said person having admitted to have written the aforesaid document in his own handwriting lends credibility whereby the document seized assumes a much greater value than what it would have been otherwise. Thus, the admission of Shri. Mehta of having paid the unaccounted amount of Rs. 35,00,000/- crores to the assessee during the year under consideration cannot be wished away lightly. The assessee and the Dhariwal group both are based at Pune and both are known and reputed business persons in the area. In fact in the course of the statement u/s 131 of Shri. RMD on 23-1- 2010, it was stated in Ans. to Q.No 7 that Manikchand group (DIL) was in partnership with Shri. S. Balan, the assessee with respect to project 'Sai Radhe' at Raja Bahadur Mills compound, Kennedy Road, Pune and also for a purchase of plot at Balewadi which clearly establish a link of the assessee with the Dhariwal group. The assessee has been harping on the fact that apart from the documents seized during search no other paper/evidence had been found which could show that the assessee had received the money. This alone is not relevant in the present context. This is because the seized document itself and more so because of the nature of the entries contained therein does not make it as a 'dumb document'. The author of the said seized documents Shri Sohanraj Mehta, C&F agent of the Dhariwal Group at Bangalore has admitted to have written the said document in his own handwriting and also explained that most of the pages to have been written in 'Marwadi' language matching with the statement and the wordings on the seized 18 ITA No.1311, 1313,1315 to 1317 & 1306 & 1307/PN/2013 document. It was also admitted that they represented purchase and sales of RMD Gutkha during financial years 2003-04 to February 2008. So far as the notings on page 34 is concerned, Shri Mehta had specifically stated that it was consolidated working of stock of RMD gutkha received from the company M/s Dhariwal Industries Ltd., whose factory was at Singsandra, Bangalore for the period April 2003 to August 2006. The C & F agent of the Dhariwal group, Shri Mehta also explained that the figures mentioned on the left side of the page 34 represented the stock of RMD Gutkha boxes received from the company and its value was also mentioned therein. It was further explained by Shri Mehta that the total of such stock received from the company as per the sheet worked out to Rs. 2,18,00,91,198/-. It was also stated during the 132(4) statement recorded on 10-10-2009 that the payments received from various distributors, wholesalers and retailers for the supply of RMD Gutkha stock and their names and the amounts received during April 2003 to August 2006 were mentioned. Shri Mehta also stated regarding the notings on page 34 and other documents that the various expenditure incurred in connection with the business was also written and also admitted that the money so received had been sent to his 'Seth' from time to time and the money was handed over to the persons as per the directions of Mr. Rasiklal Manikchand Dhariwal and his son Mr. Prakash, whom he referred to as 'Seth'. The C&F agent, Shri Mehta regarding the entry mentioned on the lower left side of the page 34 beginning with '31.08.2006' stated that he had prepared the statement as on 31.08.2006 to submit the account for the 'Seth Saheb'. He clarified further that the persons referred to as 'Seth Saheb' were Mr. Rasiklal Manikchand Dhariwal of Dhariwal Industries Ltd. and his son Mr. Prakash R. Dhariwal and that the aforesaid account on page 34 was submitted to Mr. Prakash. In the detailed statement, Shri Mehta has clearly outlined the entire modus operandi of the business and the manner in which the instructions were received by him from the Dhariwals father and son duo wherein it was stated that they sent him a slip of paper or chit indicating the amount and the name of the person to whom the amount needed to be paid irrespective of the fact whether Shri Mehta knew the person personally or not as per the standing instructions from Mr. Rasiklal and his son Mr. Prakash R. Dhariwal to handover the money to the bearer of the slip and the money was paid out of the collections received from the distributors towards unaccounted sales. In the statement u/s 132(4) a sum of Rs. 2 crores was offered as income as commission on the unaccounted turnover of RMD Gutka of M/s DIL by Shri Mehta. The aforesaid facts were again confirmed by Shri Sohanraj Mehta in his statement recorded u/s 131 on 15.10.2009 and 21.10.2009, with respect to the notings made on page 34 of the exhibit A/M/8 and other related documents. Thus, the payment made to the appellant has been confirmed by Shri Mehta time and again during the course of the statement recorded both during the pre and post search action. The inference thus drawn by the Assessing Officer in taxing the amount in the hands of the appellant is, therefore, based on a sound footing and, moreover, in such situation where the entire dealing itself is undisclosed, the books of account and other related documents are generally not maintained and corroborative evidences has to be seen within the materials found and seized and the inference drawn based on the statement recorded. The C & F agent Shri Sohanraj Mehta had a long association with the Dhariwals and because of such close association the entire C & F of RMD Gutka for Karnataka region was given to him. Moreover, the magnitude of the transaction which was handled by Shri 19 ITA No.1311, 1313,1315 to 1317 & 1306 & 1307/PN/2013 Mehta and the amount of commission earned and also disclosed as income on such transaction clearly indicates that the statement given were not untrue and the same could be believed. The contention of the assessee that there being no evidence that the Dhariwal Group had paid money to the assessee thus gets answered. The records of such undisclosed activity are maintained in the manner in which the document and loose papers have been found and seized in the present case and no regular books of accounts are maintained for such activity. The detailed statement given by Shri Mehta explaining the entries of the document seized makes the document a speaking one and, therefore, the inference drawn by the Assessing Officer in taxing the amount prima facie appear to have been rightly done.
5.8 The contention of the appellant that the addition made by the Assessing Officer cannot be said to be made in accordance with law is not correct as the addition made is based not on a meaningless and useless piece of paper as evident from the discussion made above with respect to the notings made and the said document can be factually linked to the statements given by a close confidante of the Dhariwal Group. Loose papers unlike bound books generally cannot be a basis for ready reference of concealment of figures found in them, but it cannot be said that they are totally irrelevant, if they have something to connect them with assessee's business. The inference has to be on fact. The contents found on the seized documents and papers where appellant's name appears, raises a presumption of legality of documents found and that would mean that they cannot be ignored to arrive at a conclusion. The author of the said 'papers' has already admitted in clear terms that said document was in his own handwriting and the said person is also one of the parties to the transaction through whom the payments were made to several persons. These facts are undisputed. Therefore, the said document is of great evidentiary value and the Assessing Officer has rightly made it as a basis for making addition during the assessment proceedings. The Assessing Officer is authorized to assume all the contents of the piece of paper found in the course of search and seizure action are true and correct and that such power of assumption can be exercised not only in search action u/s 132 but also under survey action u/s 133A. The Finance Act, 2008 has brought in Sec. 292C bringing the same credibility on materials found during survey at par with materials found during search as regards presumption of ownership and truth of the documents found. Thus the contention raised by the appellant that statement recorded during survey does not bind the appellant and can be retracted is not acceptable. Moreover, the retraction has come after a long gap of nearly eleven months and is not backed by any proof or evidence to its contention raised.
5.8.1 In the case of Dr. S.C. Gupta Vs CIT (2001) 248 ITR 782 (All), it was held that the statement made voluntarily can form basis of assessment. Retraction would not make it non-acceptable. Burden of proof lies on the assessee that the statement was wrong. Addition made on the basis of statement during survey - burden lay on assessee to prove that earlier statement was given under duress. In the case of Video Master Vs JCIT (2003) 78 TTJ 264 (Mum), it was held that retraction after one month has to be rejected as burden of proving that the statement was obtained by coercion and by duress not discharged by the assessee.
20ITA No.1311, 1313,1315 to 1317 & 1306 & 1307/PN/2013 5.8.2 The Ahmedabad ITAT in the case of M.K. Choksi Vs ACIT held that statement is decisive unless successfully withdrawn or proved erroneous. By retraction assessee made himself untrustworthy and unreliable in the eyes of law. What is admitted by assessee as true must be presumed to be true unless contrary is known. The Pune ITAT in the case of Hotel Kiran Vs ACIT (2002) 82 ITD 453 (Pune) held that statement can only be retracted if involuntary or coercion and given under mistaken belief either on fact or law, both of which facts - the assessee has to prove. The Apex Court in the case of Surjeet Singh Chabbra Vs UOI (1977) 508 SCC (SC) held that confession though retracted is an admission and binds the person. Moreover, the present assessment has been completed not only on the basis of a statement but on a document whose contents are appearing in several other seized documents and, therefore, the presumption drawn is based on a document having evidentiary value and along with the statement recorded u/s 132 and also u/s 131 of the I.T. Act. Admission is one important piece of evidence but it cannot be said that it is conclusive. It is rebuttable. It is open to the assessee who made admission to establish that confession was involuntary and the same was extracted under duress and coercion and the burden of proving that the statement was obtained by coercion or intimidation lies upon the assessee. Where the assessee claims that he made the statements under the mistaken belief of fact or law, he should have applied for rectification to the authority who passed the order based upon his statement. The retraction should be made at the earliest opportunity and the same should be established by producing any contemporaneous record or evidence, oral or documentary, to substantiate the allegation that he was forced to make the statement in question involuntarily. It was so held in the case of ACIT Vs Hukumchand Jain (2010) 191 Taxmann 319 (Chhatisgarh). Thus the retraction of statement should be based upon sound reasoning and corroborative evidences. Mere denial of statement is not enough as the appellant has done in the present case.
5.9 Further, the contention raised by the appellant that no evidence has been found to show that the assessee had actually received the said amount or that the assessee had entered into any transaction with the Dhariwal Group and that the A.O. has assumed the amounts reflected to be the income of the assessee is not acceptable in view of the clear notings and admission of its author explaining each and every noting recorded on the seized documents and also explaining the modus operandi of the business and the manner in which the amounts were given to the persons including the appellant cannot be regarded as a dumb documents and the same has rightly been acted upon by the A.O. No addition could be made on the basis of dumb document. Dumb documents are those documents which are found during the course of search or survey and do not indicate whether the figures mentioned therein refers to anything meaningful or corroborative with the affairs of the assessee. The Courts have held that no addition can be made on the basis of dumb documents. However, in the present case document found and seized are not dumb documents as they confirm specific details of the sales made by Shri Sohanraj Mehta C & F agent of the Dhariwal group and also deployment of money as per the instruction of Shri RMD and his son Shri PRD. The words used under the provisions are 'possession or control'. The possession may with one person and the control with another person with respect to the same item. For example, documents relating to unaccounted sales are found from the possession of an 21 ITA No.1311, 1313,1315 to 1317 & 1306 & 1307/PN/2013 employee of the company but the control of the same would lie upon the owner or management of the company and it can't be said to be unaccounted income of the employee but it would relate to the company with whom the control lies.
5.9.1 Possession or control may be different from ownership and it is the person who owns the assets will ultimately be liable to be taxed. It is the responsibility of the person from whose possession or control documents or assets are found to explain about the ownership of the same. Courier carrying unaccounted cash is in possession or control of the asset but the owner of the asset is the person or company on whose behalf he is carrying the cash. The income is ultimately liable to be assessed in the hands of owner, but the onus would lie upon the courier to prove as to who is the owner of the asset in question. In the case of Shravan Kumar Gurjar (2010) 230 CTR 539 (Del), the Delhi High Court have held that assessee who only acted as a booking agent could not be presumed to be the owner of valuable detected in search operations by police where it was established that the seized goods belonged to angaria' who had booked the goods with the assessee. Thus a clear distinction was made between possession / control on the one hand and ownership on the other hand. Moreover, in the present case the appellant himself had admitted to have been the custodian of the money received from Dhariwal Group during the course of his statement recorded during the survey action u/s 133A. In the case of Khopade Kisanrao Manikrao Vs ACIT (2000) 74 ITD 25 (Pune) TM with respect to the computation of undisclosed income the provisions of Sec. 143(3) has been discussed. It was held that in making the assessment, provision of Sec. 143(3) have been specifically made available to the Assessing Officer. Sec. 143(3) empowers the Assessing Officer to make an assessment of income on the basis of the material which has been gathered by him. The language of Sec. 143(3) makes it abundantly clear that the assessment to be made by the Assessing Officer should be based on evidence before the Officer. The word "evidence' has to be construed in a comprehensive sense and it includes circumstantial evidence. It is well settled principle of law that the material or evidence on which the taxing authorities may base the assessment is not confined to direct testimony by witnesses. It may be reiterated that the word used in Sec. 143 is evidence. However, in making assessment the Assessing Officer does not act merely on what is technically described as evidence in the Indian Evidence Act. It is observed from Sec. 143(3) that the Assessing Officer can base his assessment not only on the evidence found but also on the material gathered by him. It is now well settled that the Assessing Officer is not faltered by technical rules of evidence and the like and that he may act on material which may not strictly speaking be accepted as evidence in a court of law. Such evidence need not necessarily be direct evidence, it may be circumstantial evidence or assessment based on preponderance of probabilities judged by human conduct. If there is material on record to establish that the assessee has charged 'on money' in regard to land deals which is not recorded in the regular books of account, it is permissible for the Assessing Officer to make an assessment on the basis of such material.
5.10 In the present case also the Assessing Officer has based the assessment on the material found during the course of search action and which has also been admitted by the author to be written in his own 22 ITA No.1311, 1313,1315 to 1317 & 1306 & 1307/PN/2013 handwriting and also admitted by the appellant to have been received by him. Apparent is real unless contrary is proved. In this case, the money received by the appellant was recorded on the loose papers and seized document and the consideration received was apparent and it was, therefore, for the Assessing Officer to establish the contrary. Further, on the basis of material found during the course of search action u/s 132, it has been established that what is apparent does not reflect the true state of affairs. Therefore, the burden that rested with the Assessing Officer stands discharged and the onus has shifted to the appellant. In the case of Dhanvarsha Builders and Developers (P) Ltd Vs DCIT (2006) 102 ITD 375 (Pune) the assessee was found in possession of record regarding monies received in respect of various godowns and shops to be constructed by it, the bench held that as "the document speaks of receipt in cash as also receipt by way of cheques on decoding, tallying with the books of account of the assessee, it cannot be said that the document is a dumb document even though it does not contain assessee's name. It was further held by the bench that as per the counsel of the assessee the impugned document is a dumb document and, therefore, it cannot be relied upon for the purpose of assessment. It is not possible to agree with the counsel in either of the matters. The reason is that the authority of names and decoding of amounts received by way of cheques lead to establishment of the fact that the document belongs to the assessee and various amount entered therein are correct if three zeros are supplied. The absence of the names of the assessee thus gets fully corroborated on the basis of aforesaid interpretation of the document. The document speaks of receipt in cash and also receipt by way of cheques. The receipts by way of cheques tally with the books of account. Therefore, it is a natural consequence that the receipt by way of cash has also to be made. Accordingly, the document is not a dumb document but it is a speaking document and it pertains to the business transactions of the assessee."
5.11 In the case of Dhunjibhoy Stud and Agricultural Farm Vs DC IT (2002) 82 ITD 0018 (Pune) TM, the bench held that there cannot be any direct evidence for receipt of on-money. Obviously no sane person would admit that he is receiving on- money. In the case of P R Patel Vs DCIT (2001) 78 ITD 57 (Mum), it was held that the seized papers cannot be called dumb because they indicate the date, amount and also calculation of interest. Thus in the given set of facts and circumstances of the case and having considered the factual position including the submission of the appellant, seized documents and various statements relied during the two searches, it is difficult to accept the argument of the appellant that no addition could be made. The seized document do show link between M/s DIL and the appellant and the entire modus operandi of out of books sales of M/s DIL has been explained by Shri Sohanraj Mehta, which also gets corroborated by the seized documents. These documents and the accounting records are not dumb document rather are true statement of actual state of affairs among various parties including the appellant. Therefore, it cannot be said that no additions are called for on the loose papers found at the residence of Mithulal Jain at Bangalore. I, therefore, hold that entries indicating to the appellant can lead to addition in the hands of the appellant. These seized documents and statement of Shri Mehta cannot be ignored but are very much relevant and, therefore, the entries related to the appellant can lead to addition in the hands of the appellant.
23ITA No.1311, 1313,1315 to 1317 & 1306 & 1307/PN/2013 5.12 Under the deeming provisions of the I.T. Act, 1961, the position is that the mere existence of a credit entry is sufficient to attract the provisions and once the appellant's explanation is not satisfactory, the cash credits are to be charged to tax in an exceptionable manner. It was so held in one of the most landmark cases of the Hon'ble Supreme Court of Sumati Dayal (1995) 214 ITR 801 (SC). From 'a plain reading of the requisite sections it is evident that when the assessee offers no explanation about the nature and source of the credits, its value could be deemed income of the assessee. An explanation offered, if not accepted is no explanation in law and not only this the legislature while enacting the deeming provisions of the I.T. Act falling under sections 68, 69 to 69D of the I.T. Act, 1961, has clarified that in case the explanation offered is not satisfactory the value of the unexplained deposits shall be deemed to be the income of the assessee. There can be no general proposition of law applicable to all cases irrespective of the facts and circumstances thereof. One thing which can be said without much hesitation is that the burden is always on the assessee, if an explanation is asked for by the taxing authorities to indicate the source of acquisition of a particular asset admittedly owned by the person concerned. The burden cast upon the appellant has not been discharged either at the stage of assessment or during the appellate proceedings by furnishing any acceptable explanation.
5.12.1 It was also held that the tax authorities were entitled to look into the surrounding circumstances to find out the reality, and the matter has to be considered by applying the test of human probabilities. In this decision, the Hon'ble Apex Court also relied upon the ratio of the earlier judgement in the case of Durga Prasad More, 82 ITR 540 (S.C). In my considered opinion, there are enough circumstantial evidences and preponderance of probabilities in this case, which lead to the inference that the decision of the Assessing Officer was on a sound basis. It may be relevant to quote the above referred decision of the Apex Court in the case of CIT vs. Durga Prasad More, 82 ITR 540 wherein it is held as under:
"It is true that an apparent must be considered real until it is shown that there are reasons to believe that the apparent is not real."
The ownership of the documents or the Loose papers is not under dispute as the same has been admittedly stated to be in the handwriting of one of close associate of the Dhariwals. The document clearly reveals the entire modus operandi, definitely concealed and receipt in cash and which has also been corroborated by statements given by its author which clearly connects them with the Dhariwal Group and, therefore, it cannot be said to be irrelevant and just a piece of paper. From the various material brought on record, there was nothing improper on the part of the Assessing Officer in relying on circumstantial evidence in such cases for arriving at the finding. The Assessing Officer is also entitled to take into consideration the totality of facts and circumstances of the case and to draw his / her own inference on the basis thereof, circumstantial evidence in such cases is not impermissible. On similar facts the Bombay High Court in the case of Smt. Vasantibai N. Shah Vs. CIT (1995) 213 ITR 805 (Bom) held that in such cases only circumstantial evidence will be available. No direct evidence can be expected. In the case of Green Valley Builders Vs CIT (2008) 296 ITR 225 24 ITA No.1311, 1313,1315 to 1317 & 1306 & 1307/PN/2013 (Ker), there were materials constituting circumstantial evidence to prove that land in question had been sold by the assessee at a higher price than that claimed by it and hence addition on account of unaccounted income was justified.
5.12.2 The notings made on the seized document indicating payments made by the Dhariwal group i.e. Shri Rasiklal M. Dhariwal and his son Shri Prakash R. Dhariwal to the appellant through Shri Sohanraj Mehta, the C&F agent of RMD group for Karnataka Region is an undisputed fact and having held that the said seized document reflect payments made to the appellant, the question which now arises is whether it can be taxed in the hands of the appellant. The deeming part of section 69A comes into play if the following two conditions are satisfied:
1) the assessee is found to be owner of any money
2) such money is not recorded in the books of account.
The Apex Court in Chuharmal Vs CIT (1988) 72 ITR 250 (SC) held that the expression income as used in this section has a wide meaning which meant anything which came in or resulted in gain. The seized document clearly revealed that the money had passed hands and had come into the possession of the appellant, a fact which has also been admitted by the appellant, though subsequently retracted. Therefore, I do not have any doubt in my mind or rather I am convinced that the entire sum of money received by the appellant is liable to be taxed u/s 69A of the Act. The appellant thus has been found to be the owner of the said amount of cash and this fact has already been established more so because of the appellant's own admission and the appellant has failed to prove that cash did not belong to him. It is settled that possession is evidence of ownership and the strength of presumption of ownership arising from the fact of possession depends on the nature of property involved. This presumption is one of the strongest in the case of cash found in possession of a person since cash is one of the properties of which title is transferable by mere delivery of possession. The appellant in the present case has admittedly received the cash amounting to Rs. 14.35 crores over a period of time and Rs. 35,00,000/- during the year under consideration and has failed to prove that cash did not belong to him and as he failed to discharge the burden of proof it has rightly been held that the sum was liable to be included as income of appellant from other sources. In such a situation, unless any cogent explanation is given by the person in possession of the cash to show that someone else was the owner of that amount of money, it is reasonable to assume that the cash belonged to the appellant from whose possession it was found. The reasoning given by the A.O. is acceptable as there is no liability against the receipt hence it becomes the income of the appellant. The seized document and the statement recorded clearly suggest that the payment was made to the appellant and in view thereof the liability which is not payable would become income of the appellant i.e. when one of the limb is certain the other limb if denied becomes the income.
5.12.3 Thus, the Assessing Officer has brought on record and discussed in detail the entire scheme of unaccounted business transactions of M/s DIL. Considering the enormity of the transaction which was spread over several assessment years it could not have been expected that the assessee would keep details of each and every transaction connected 25 ITA No.1311, 1313,1315 to 1317 & 1306 & 1307/PN/2013 with the activity. Obviously these could find place in a manner which were discovered by the Investigation Wing during the search action. The efforts of the Assessing Officer in linking up these transactions with the evidences of M/s DIL with others, on this basis needs to be appreciated. Any document has to be necessarily read, as a whole. Applying this principle the genuineness of the seized document and a corollary, the appellant's involvement in the unaccounted business chain gets established beyond any doubt. The seized document do show link between the appellant and M/s DIL. The seized document and the record of the account are not dumb documents rather are true statement of the actual state of affairs amongst various parties including the appellant. I find it difficult in the given facts and circumstances, to accept the arguments of the appellant that no addition on account of the receipt of money could be made. Therefore, I hold that entries related to the appellant can lead to addition in the hands of the appellant.
5.13 The appellant has also raised the issue of not supplying the statement of Shri Sohanraj Mehta recorded u/s 132(4) on the basis of which the undisclosed income addition was made nor opportunity to cross examine him was afforded which was against the principles of natural justice. It is relevant to point out that the search and seizure action u/s 132 took place in the case of Shri Sohanraj Mehta, C&F agent of RMD Gutkha Group on 10.10.2009 whereas that on the Dhariwal Group and the appellant took place on 20.01.2010. During the course of search and survey action carried out in the case of the appellant, the appellant was confronted on the findings of the statement given by Shri Mehta wherein he had stated that Rs. 14,35,00,000/- was given to the appellant on different dates as per the instructions of Shri Rasiklal M. Ohariwal and his son Shri Prakash R. Dhariwal. The appellant in his statement during survey u/s 133A had admitted to have received a sum of Rs. 14,00,00,000/- from the Dhariwals. The appellant has been a family friend and a close business associate of Shri Rasiklal M. Dhariwal, Chairman of the Dhariwal Industries Ltd. (DIL for short), over many years. Thus the appellant was always in knowledge of the entire transaction and admitted to have received the said sum of money. The search action had clearly revealed that the seized documents were not dumb documents and proved beyond reasonable doubt the entire unaccounted business chain of M/s DIL. The appellant though subsequently after nearly 22 months had retracted the admission made earlier of being the custodian of about 14 crores of money of Dhariwal was without any valid evidence. The material on record clearly indicated that the said retraction was made at the behest of M/s DIL. In the given circumstances of the case, the appellant's ground of appeal of not providing cross examination of Shri Sohanraj Mehta and not providing the copies of statement u/s 132(4) is not a valid ground. It is noticed that the Assessing Officer had provided the copies of the statement of Shri Sohanraj Mehta to the appellant during the assessment proceedings and which has also been admitted by the appellant in the submission filed during the appellant proceedings. Even after that it is not understandable as to why the appellant is insisting on the cross examination of Shri Mehta when he himself admitted to have received Rs. 14 crores from Shri Sohanraj Mehta, either by self or through his Representatives on the directions of Shri RMD and Shri PRD.
26ITA No.1311, 1313,1315 to 1317 & 1306 & 1307/PN/2013 5.13.1 After all, the purpose behind allowing cross examination is to bring out the truth and in the process follow the principles of natural justice. That to me, have been adequately taken care of while finalizing the assessment proceedings. In that context, the Punjab and Haryana High Court in the case of CIT Vs K.D. Bali (2011) 10 Taxmann.com 215 (P & H) has held "No doubt, any quasi judicial authority has to follow principles of natural justice which includes opportunity to cross examine the witness whose statement is relied upon but the principles of natural justice are not fixed principles. The same can vary depending upon the nature of inquiry. In the instant case the person from whom the amount was received initially, stated that the amount belonged to the assessee. They were not shown to have any extraneous reason to give such a version These circumstances could be ignored by the CIT (Appeals) and the Tribunal for setting aside the assessment order on the ground that said witnesses were not produced for cross examination ..... " In the context of tax assessment it was observed in State of Kerala Vs K.T. Shauduli Grocery Dealers Etc. (1977) 1977 CTR (SC) 260:
"It is true that the words "opportunity of being heard" are of very wide amplitude but in the context of the sales-tax proceedings which are quasijudicial proceedings, all that the Court has to see is whether the assessee has been given a fair hearing. Whether the hearing would extend to the right of demanding cross-examination of witnesses or not, would naturally depend upon the nature of the materials relied upon by the sales-tax authorities, the manner in which the assessee can rebut those materials and the facts and circumstances of each case. It is difficult to lay down any hard and fast rule of universal application. "
5.14 In view of the above facts, the contention raised by the appellant regarding principle of natural justice is not tenable and is liable to be dismissed.
5.15 According to the Assessing Officer, from the plain reading of section 69A, it is evident that when the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable articles in value would be deemed income of the assessee. An explanation offered, if not accepted is no explanation in law and not only this, the legislature while enacting section 69A has clarified that in case the explanation offered is not satisfactory the value of the valuable articles shall be deemed to be the income of the assessee.
5.15.1 Section 110 of the Evidence Act is material in this respect which stipulates that when the question is whether any person is owner of anything of which he is shown to be in possession, the onus of proving that he is not the owner, is on the person who affirms that he is not the owner. In other words, it follows from well settled principle of law that normally, unless contrary is established, title always follows possession. Chuharmal vs CIT (1988) 172 ITR 250 (SC). Documentary evidence plays an important part in law. The Courts attach great value for documentary evidence. The Punjab & Haryana High Court in the case of Paramjit Singh Vs ITO (2010) 323 ITR 588 (P & H) pointed out that oral evidence is not conclusive as against documentary evidence under sections 91 and 92 of the Indian Evidence Act, 1872.
27ITA No.1311, 1313,1315 to 1317 & 1306 & 1307/PN/2013 5.16 To sum up, on careful consideration of all the evidences and facts cumulatively and also the submission of the appellant, in my considered opinion, the decision of the Assessing Officer in making the addition of Rs. 35,00,000/- was on a sound facts and on legal basis and hence liable to be upheld and the grounds of appeal no. 4 and 5 raised by the appellant are, therefore, liable to be dismissed."
18. Aggrieved with such order of the CIT(A) the assessee is in appeal before us with the following grounds :
"1.(i) The Ld CIT(A) erred in sustaining the validity of the assessment order passed under section 153A even though the order was served on the assessee beyond the period of limitation.
(ii) The Ld CIT(A) erred in not appreciating that the impugned order passed without allowing reasonable opportunity of being heard is illegal and deserves to be cancelled.
(iii) The Ld CIT(A) utterly failed to appreciate that the ld AO had utilized the third party evidence without allowing the appellant an opportunity to cross-examine such party and hence the impugned order passed in contravention of the principle of Natural Justice is illegal and deserves to be quashed.
(iv) The Ld CIT(A) failed to appreciate that the ld AO arrived at conclusions without adopting just, fair and reasonable procedure in the facts and circumstances of the case and .therefore, the impugned assessment order deserves to be quashed.
2. The Ld CIT (A) erred in sustaining a disallowance of Rs.1,00,000/-
under section l4A.
3. (i) The Ld CIT(A) has erred in holding that transaction of Rs. 14.35crores alleged to be noted by Mr. Sohanraj Mehta in his Diary related to the appellant without appreciating that the appellant had not met Shri Mehta in the past.
(ii)The Ld CIT(A) has erred in holding that the appellant was a co- conspirator in tax evasion with M/s Dhariwal Industries Ltd without appreciating that the appellant had no connection with this company engaged in Gutka business.
(iii)The Ld CIT(A) has erred in relying on the notings allegedly made by Mr. Sohanraj Mehta ignoring the fact that the appellant had no connection with Mr Mehta and no papers or documents were found in the appellant's possession in this regard and neither the appellant had given any receipt against the alleged payments.
(iv) The Ld CIT (A) has grossly erred in invoking the provisions of section 68 of the I.T.Act ignoring the fact that no credit entry has been found in the appellant's books of account and the provisions of sec. 68 had no application to the facts of this appellant's case.
28ITA No.1311, 1313,1315 to 1317 & 1306 & 1307/PN/2013
(v) The Ld CIT (A) further erred in relying on provisions of sections 69 and 69A of the IT Act though the amount added by the ld AO was not found in the appellant's possession and, therefore, he was not required to explain the source thereof.
(vi)The Ld CIT (A) has grossly erred in sustaining the addition of Rs. 35,00,000/- made by the ld AO which is not based on any concrete material but only on presumption and guesswork and hence it is illegal.
4. Without prejudice to the above grounds the alleged amount has no features of income to be taxed in the hands of the appellant.
5. Further, without prejudice to the above grounds, assuming without admitting that a parcel received by the appellant's security staff at the reception of the building which remained in temporary custody of the such security staff does not become income chargeable to tax in the hands of the owner of the building.
6. The above Grounds of Appeal are without prejudice to one another.
7. The Appellant craves leave to revise, modify, alter or delete any of the above Grounds of Appeal or to add new Grounds of Appeal."
19. The assessee has also raised an additional ground which reads as under :
"On the facts and circumstances of the case and in law the Ld. Commissioner (Appeals) erred in upholding the validity of the search assessment order passed u/s.153A of the Act for A.Y. 2004-05 even though no incriminating material pertaining thereto were found by the Income Tax authorities in their search action in my case."
20. The Ld. Counsel for the assessee referring to the additional ground submitted that the said ground is purely a legal ground and no fresh facts are required to be investigated. Relying on the decisions of Hon'ble Supreme Court in the case of NTPC Ltd. reported in 229 ITR 383 and in the case of Jute Corporation of India Ltd.
reported in 187 ITR 688 and the decision of Hon'ble Bombay High Court in the case of Ahmedabad Electricity Company reported in 199 ITR 351 he submitted that the additional ground raised by the assessee should be admitted.
29ITA No.1311, 1313,1315 to 1317 & 1306 & 1307/PN/2013
21. After hearing both the sides and considering the additional ground raised by the assessee being purely legal in nature, the same is admitted for adjudication.
22. Before proceeding to decide the other grounds we first adjudicate the additional ground. It is the submission of the Ld. Counsel for the assessee that no incriminating material was found, therefore, the order passed u/s.153A is invalid. He relied on the decision of Hon'ble Bombay High Court in the case of CIT Vs. Gurinder Singh Bawa reported in 386 ITR 483 (Bom.).
23. After hearing both the sides, we find from the copy of the Panchnama dated 20-01-2010 that lot of loose papers marked as per Bundle No.1 containing 1 to 78 pages were found from the premises of the assessee. Apart from the above a pendrive was also found.
Therefore, it cannot be said that no incriminating documents were found during the course of search. The Ld. Counsel for the assessee also could not justify that no incriminating documents were found.
So far as the decision relied on by the Ld. Counsel for the assessee in the case of Gurinder Singh Bawa (supra) is concerned, the same in our opinion, is not applicable to the facts of the present case. As mentioned earlier, certain loose papers were found during the course of search as per Bundle No.1 containing 78 pages. Under these circumstances, we find no merit in the additional ground raised by the assessee. Accordingly, the additional ground raised by the assessee is dismissed.
24. Grounds of appeal No. 1 (i) to (iv) by the assessee relates to the validity of the assessment order passed u/s.153A on the ground that the same was served on the assessee beyond the period of limitation.
30ITA No.1311, 1313,1315 to 1317 & 1306 & 1307/PN/2013
25. After hearing both the sides, we find the Ld.CIT(A) while adjudicating this issue at Para 3.2 of the order has observed that search action u/s.132 against the assessee was conducted on 20-01-2010 and the assessment order has been passed on 30-12-2011. The assessee has filed return in response to notice u/s.153A dated 14-09-2010 on 31-12-2010. He has also given a finding that the order has been made prior to the end of 21 months period as envisaged in section 153(1)(a) of the I.T. Act. The assessee has failed to demonstrate during the appeal proceedings that the said assessment order has not been made prior to 30-12-2011. No concrete evidence in this regard was produced before the CIT(A) to justify that the despatch of the order have been made after 30-12-2011. Nothing was brought before us to take a contrary view than the view taken by the Ld.CIT(A) while dismissing the ground raised by the assessee on this issue. Under these circumstances we find no merit in the above ground raised by the assessee.
Accordingly, the same is dismissed.
26. Identical grounds have been taken in ITA No.1313/PN/2013 for A.Y. 2006-07 and ITA No.1315/PN/2013 for A.Y. 2008-09.
Following the same reasoning ground of appeal No.1 by the assessee for the above assessment years are also dismissed.
27. Ground of appeal No.2 by the assessee relates to the order of the CIT(A) in sustaining disallowance of Rs.1 lakh u/s.14A.
28. The Ld. Counsel for the assessee did not press the above ground for which the Ld. Departmental Representative has no 31 ITA No.1311, 1313,1315 to 1317 & 1306 & 1307/PN/2013 objection. Accordingly, this ground by the assessee is dismissed as 'not pressed'.
29. Identical grounds have been taken by the assessee in ITA No.1313/PN/2013 for A.Y. 2006-07 for Rs.30,000/- and in ITA No.1315/PN/2013 for A.Y. 2008-09 for Rs.1,23,286/-. Since the Ld. Counsel for the assessee did not press the above grounds, therefore, the grounds for the above years are dismissed.
30. In grounds of appeal No.3 to 5 the assessee has challenged the order of the CIT(A) in sustaining the addition of Rs.35 lakhs made by the Assessing Officer.
31. The Ld. Counsel for the assessee reiterated the same submissions as made before the Assessing Officer and the CIT(A). He submitted that there is no business connection between the assessee and Shri Prakash R. Dhariwal and Shri Rasiklal M. Dhariwal so far as the gutkha business is concerned. Further, neither the assessee knows nor has ever met Shri Sohan Raj Mehta. Further, Shri Sohan Raj Mehta had never stated that he met the assessee and gave the money to him. Even though the assessee had specifically asked for cross examination of Shri Sohan Raj Mehta the same was never granted. The Ld. Counsel for the assessee referring to page 9 of the assessment order drew the attention of the Bench to the reply given by the assessee vide letter dated 16-12-2011 where he had specifically requested the Assessing Officer to provide a copy of the alleged statement taken on oath of Shri Sohan Raj Mehta and grant an opportunity to cross examine Shri Sohan Raj Mehta. Referring to page 18 and 19 of the assessment order the Ld. Counsel for the assessee drew the attention of the Bench to the observations made by 32 ITA No.1311, 1313,1315 to 1317 & 1306 & 1307/PN/2013 the Assessing Officer where he has discussed the evidentiary value of third party evidence. He submitted that the Assessing Officer in the instant case has gone on mere presumptions without bringing any cogent material or evidence. So far as the application of provisions of section 68, 69 and 69A to 69D are concerned he submitted that these provisions are not applicable to the assessee.
32. So far as the application of provisions of section 68 is concerned he submitted that the same applies to any sum found credited in the books of an assessee maintained for any previous year and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not satisfactory according to the Assessing Officer, then the sum so credited may be charged to income tax on the income of the assessee of that previous year.
However, no such credit in the books of the assessee was found.
Therefore, this provisions is not applicable.
33. So far as the application of provisions of section 69 is concerned the same relates to unexplained investment. There is no such investment either made by the assessee nor found during the course of search. Therefore, section 69 is also not applicable. So far as application of provisions of section 69A to 69D are concerned the same applies to unexplained money, amount of investments etc. not fully disclosed in books of account, unexplained expenditure or amount borrowed or repaid on Hundi. None of the above provisions are applicable to the assessee since neither any huge amount was found nor was there any such huge unexplained investment or unexplained expenditure etc. found during the course of search.
Therefore, the above provisions are also not applicable.
33ITA No.1311, 1313,1315 to 1317 & 1306 & 1307/PN/2013
34. Referring to the decision of the Pune Bench of the Tribunal in the case of Shri Vinit Ranawat Vs. ACIT vide ITA Nos. 1105 & 1106/PN/2013 order dated 12-06-2015 he submitted that identical issue was decided by the Tribunal by following the decisions of various benches of the Tribunal and the addition made in the hands of the assessee on the basis of the search conducted at the premises of Shri Mithulal at Bangalore on 09-10-2009 was deleted. Therefore, this being a covered matter the ground raised by the assessee should be allowed.
35. Referring to the decision of the Coordinate Bench of the Tribunal in the case of Dhariwal Industrial Ltd. Vs. ACIT he submitted that the addition made in his hands on account of undisclosed income based on the papers found with Shri Mithulal Jain has been deleted. Referring to question No.24 of the statement recorded u/s.132(4) of Shri Rasiklal M. Dhariwal, the Ld. Counsel for the assessee drew the attention of the Bench to the following reply given by Shri Rasiklal M. Dhariwal :
"Ans : I accept that an aggregate amount of Rs.12 lakhs has been given by me to Shri S. Balan, one chit of Rs.7 lakhs has been signed by me and another chit of Rs.5 lakhs has been signed by my son. However, the supporting evidences in respect of this is not available with me at present. But as regards the claim that this amount of Rs.12 lakhs is actually Rs.12 crores is not acceptable. My business expediencies require that I have to incur a number of expenses for getting sanctions etc. and for which I cannot disclose the purposes, name of recipients etc."
He also relied on the following decisions :
1. ACIT Vs. Miss Lata Mangeshkar reported in 97 ITR 696 (Bom.)
2. Kishinchand Chellaram Vs. CIT reported in 4 Taxmann 29 (SC)
36. Referring to the decision of the ITAT, Ahmedabad Bench in the case of Shri Mushtafamia Sheikh he submitted that Shri Sohan Raj 34 ITA No.1311, 1313,1315 to 1317 & 1306 & 1307/PN/2013 Mehta had retracted from the statement. He submitted that although the assessee does not have such retraction statement, however, in view of the decision of the Ahmedabad Bench of the Tribunal it has to be held that when the same person has retracted from his statement, his original statement cannot be used against the assessee. Further, if such unaccounted money was received from Dhariwal Group then during the course of search on the assessee, some evidence would have been found in the form of loose papers or unaccounted assets, etc. However, no such things were found. This clearly indicates that there is no justification to hold that the assessee has received the payments from Dhariwal Group.
37. The Ld. Counsel for the assessee submitted that the papers were found from one Mr. Mithulal of Bangalore which were maintained by Shri Sohan Raj Mehta, C&F Agent of M/s. Dhariwal Industries Ltd. Referring to the provisions of section 132(4A) he submitted that these papers can be presumed to be true, genuine and correct in the case of the person searched, i.e. Shri Sohan Raj Mehta and he has admitted that the papers belong to him. On the basis of the papers found with some third parties addition cannot be made in the hands of the assessee particularly when there is no business connection between the assessee and that party. For the above proposition the Ld. Counsel for the assessee referred to the following decisions :
a. Bombay H.C. Lata Mangeshkar [97 ITR 696] b. Straptex (India) P. Ltd. v. DCIT [84 ITD 320 (Mum)] c. CBI v. V. C. Shukla [3 SCC 410 (SC)] d. Prarthana Construction P. Ltd. v. DCIT [118 Taxman 112 (Ahd.)] e. Unique Organizers & Developers P. Ltd. v. DCIT [118 Taxman 147 (Ahd.)] 35 ITA No.1311, 1313,1315 to 1317 & 1306 & 1307/PN/2013
38. Referring to the statement of Shri Sohan Raj Mehta recorded during the course of search proceedings u/s.132, a copy of which is placed at pages 100 to 147 of the paper book, the Ld. Counsel for the assessee drew the attention of the Bench to Question No.33 put to Mr. Mehta. Referring to the reply given by Mr. Mehta the Ld. Counsel for the assessee submitted that Mr. Mehta has clarified that he has given the advances as per the instructions of Shri Dhariwal to the bearer of the chits. He has never identified the assessee. He submitted that when the persons were given the money on the basis of chits in that case the same might have been given to some other person. Therefore it does not mean that the assessee has received the amount from Mr. Mehta. He also relied on various decisions filed in the legal computation.
39. The Ld. Departmental Representative on the other hand strongly supported the order of the CIT(A). He submitted that the papers found from the residence of Mr. Mittulal which was minutely maintained by Shri Sohan Raj Mehta clearly indicates that assessee has received an amount of Rs. 14.35 crores from the Dhariwal group.
All these things are within the exclusive knowledge of the assessee, Shri Sohan Raj Mehta, Shri Rasiklal M.Dhariwal and Shri Prakash Manikchand Dhariwal of M/s. Dhariwal Industries Ltd. Referring to pages 249 to 326 of the paper book containing the copies of various chits found from Mr. Sohan Raj Mehta, the Ld. Departmental Representative submitted that the same contains the name of the assessee with various amounts against his name. The Ld. Departmental Representative submitted that a thorough discussion was made in the said assessment order containing the modus 36 ITA No.1311, 1313,1315 to 1317 & 1306 & 1307/PN/2013 operandi and additions have been made in the case of Dhariwal Industries Ltd.
40. Referring to the copy of statement of Shri Sohan Raj Mehta recorded u/s.132(4) on 10-10-2009 and his statement recorded u/s.131 on different dates, copies of which are placed at pages 100 to 147 he submitted that Mr. Mehta had categorically stated that on the basis of instructions given by Shri Rasiklal M. Dhariwal/Shri Prakash M. Dhariwal cash has been handed over to the bearers of the slips. Therefore, under these circumstances, when things are clear that money has been given by Dhariwal group to the assessee amounting to Rs. 35 lakhs for A.Y. 2004-05, Rs.2 crores for A.Y.2006-07 and Rs.12 crores for A.Y. 2008-09, the Assessing Officer was justified in making the addition and the Ld.CIT(A) was justified in confirming the addition. He submitted that the various decisions relied on by the Ld. Counsel for the assessee are not applicable to the facts of the present case and are distinguishable. He accordingly submitted that the order of the CIT(A) be upheld.
41. We have considered the rival arguments made by both the sides, perused the orders of the Assessing Officer and the CIT(A) and the Paper Book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find in the instant case a search u/s.132 of the I.T. Act was conducted at the premises of Mr. Mittulal at Bangalore on 09-10-2009 wherein certain incriminating documents were found belonging to the Dhariwal group. Those documents were maintained by one Shri Sohan Raj Mehta, C&F agent of M/s. Dhariwal Industries Ltd. In his statement recorded u/s.132(4) Mr. Mehta had stated that he was effecting 37 ITA No.1311, 1313,1315 to 1317 & 1306 & 1307/PN/2013 unaccounted sales of Gutkha of Dhariwal Industries Ltd. and the sale proceeds were deployed as per the instructions of Shri Rasiklal M. Dhariwal and his son Shri Prakash M. Dhariwal. In some of the seized papers name of certain persons are appearing. On the basis of those names and entries against said names, the Assessing Officer deciphered the amount as Rs. 35 lakhs for A.Y. 2004-05, Rs.2 crores for A.Y. 2006-07 and Rs.12 crores for A.Y. 2008-09 as received by the assessee. Although Mr. Mehta in his statement recorded u/s.132(4) has stated that this amount was paid by Dhariwal Industries to the assessee through him, however, the statement appears to have been retracted as per the findings given by the Ahmedabad Bench of the Tribunal in the case of Mustafamiya H. Sheikh.
42. It is the case of the Assessing Officer that the assessee was associated with Dhariwal group for a long time and the assessee's name appearing in the seized document tally with the regular business association with M/s. Dhariwal Industries Ltd. and if test of human probability is applied to the facts of the case it becomes evident that assessee was part of the entire scheme of unaccounted business chain of M/s. Dhariwal Industries Ltd. The role of the assessee was that of a co-conspirator. During the course of search and post search proceedings Mr. Sohan Raj Mehta had stated that the seized books of account, loose sheets and other documents, i.e. A/M/01 and A/M/29 were actually belonging to the C&F business of M/s. Dhariwal Industries Ltd. He had categorically stated that page 34 of A/M/08 and other related documents were written by him and most of the pages were in Marwadi language. The statement of Mr. Mehta clearly explains the entire unaccounted business chain and unaccounted business transactions of M/s. Dhariwal Industries Ltd.
38ITA No.1311, 1313,1315 to 1317 & 1306 & 1307/PN/2013 Mr. Sohan Raj Mehta, the author of the seized document in his statement u/s.132(4) has explained true impact of the contents of the seized documents and has also acknowledged and substantiated the fact that the seized documents belong to M/s. Dhariwal Industries Ltd. and therefore his statement has immense evidentiary value. Based on the above and on the basis of various other observations in the assessment order the Assessing Officer made addition of Rs. 35 lakhs in A.Y. 2004-05, Rs.2 crores in A.Y. 2006-07 and Rs.12 crores in A.Y. 2008-09 as undisclosed income of the assessee which has been upheld by the CIT(A).
43. It is the submission of the Ld. Counsel for the assessee that from the very beginning the assessee was denying to have received any such amount from Mr. Sohan Raj Mehta. According to him, no addition can be made in the hands of the assessee on the basis of papers found in the premises of third party. Further, the assessee being a small taxpayer, some evidence should have been found from the office or residence of the assessee to show that in fact he has received such huge amount. Similarly, the statement of Mr. Rasiklal M. Dhariwal is contrary to the finding of the Department. It is also the submission of the Ld. Counsel for the assessee that different Benches of the Tribunal under identical facts and circumstances have deleted the addition made by the Assessing Officer on the basis of notings found from the premises of Mr. Sohan Raj Mehta.
44. We find some force in the argument of the Ld. Counsel for the assessee. We find identical issue had come up before the Tribunal in the case of Shri Vinit Ranawat. The Tribunal in ITA Nos. 1105 & 1106/PN/2013 order dated 12-06-2015 for A.Yrs. 2006-07 & 2007- 39 ITA No.1311, 1313,1315 to 1317 & 1306 & 1307/PN/2013 08 deleted the addition of Rs.1 lakh in A.Y. 2006-07 and Rs.20 crores in A.Y. 2007-08 by observing as under :
"37. We have considered the rival arguments made by both the sides, perused the orders of the Assessing Officer and the CIT(A) and the Paper Book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find in the instant case a search u/s.132 of the I.T. Act was conducted at the premises of Mr. Mittulal at Bangalore on 09-10-2009 wherein certain incriminating documents were found belonging to the Dhariwal group. Those documents were maintained by one Shri Sohan Raj Mehta, C&F agent of M/s. Dhariwal Industries Ltd. In his statement recorded u/s.132(4) Mr. Mehta had stated that he was effecting unaccounted sales of Gutkha of Dhariwal Industries Ltd. and the sale proceeds were deployed as per the instructions of Shri Rasiklal M. Dhariwal and his son Shri Prakash M. Dhariwal. In some of the seized papers name of certain persons are appearing which contain the name either "Vinit" or "Vinit Ranawat". On the basis of those names and entries against said names, the Assessing Officer deciphered the amount as Rs. 1 crore for A.Y. 2006-07 and Rs.20 crores for A.Y. 2007-08 as received by the assessee Shri Vinit Ranawat. Although Mr. Mehta in his statement recorded u/s.132(4) has stated that this amount was paid by Dhariwal Industries to Shri Vinit Ranawat through him, however, the statement appears to have been retracted as per the findings given by the Ahmedabad Bench of the Tribunal in the case of Mustafamiya H. Sheikh.
38. It is the case of the Assessing Officer that the assessee was associated with Dhariwal group for a long time and the assessee's name appearing in the seized document tally with the regular business association with M/s. Dhariwal Industries Ltd. and if test of human probability is applied to the facts of the case it becomes evident that assessee was part of the entire scheme of unaccounted business chain of M/s. Dhariwal Industries Ltd. The role of the assessee was that of a co- conspirator. During the course of search and post search proceedings Mr. Sohan Raj Mehta had stated that the seized books of account, loose sheets and other documents, i.e. A/M/01 and A/M/29 were actually belonging to the C&F business of M/s. Dhariwal Industries Ltd. He had categorically stated that page 34 of A/M/08 and other related documents were written by him and most of the pages were in Marwadi language. The statement of Mr. Mehta clearly explains the entire unaccounted business chain and unaccounted business transactions of M/s. Dhariwal Industries Ltd. Mr. Sohan Raj Mehta, the author of the seized document in his statement u/s.132(4) has explained true impact of the contents of the seized documents and has also acknowledged and substantiated the fact that the seized documents belong to M/s. Dhariwal Industries Ltd. and therefore his statement has immense evidentiary value. Based on the above and on the basis of various other observations in the assessment order the Assessing Officer made addition of Rs. 1 crore for A.Y. 2006-07 and Rs.20 crores for A.Y. 2007-08 as undisclosed income of the assessee which has been upheld by the CIT(A).
39. It is the submission of the Ld. Counsel for the assessee that from the very beginning the assessee was denying to have received any such amount from Mr. Sohan Raj Mehta. According to him, no addition can be 40 ITA No.1311, 1313,1315 to 1317 & 1306 & 1307/PN/2013 made in the hands of the assessee on the basis of papers found in the premises of third party. Further, the assessee being a small taxpayer, some evidence should have been found from the residence of the assessee to show that in fact he has received such huge amount. It is also the case of the Ld. Counsel for the assessee that the Department itself is treating this as "short term advance" during the course of search action. Similarly, the statement of Mr. Rasiklal M. Dhariwal is contrary to the finding of the Department. It is also the submission of the Ld. Counsel for the assessee that different Benches of the Tribunal under identical facts and circumstances have deleted the addition made by the Assessing Officer on the basis of notings found from the premises of Mr. Sohan Raj Mehta.
40. We find some force in the submission of the Ld. Counsel for the assessee. The assessee in the instant case is an individual and proprietor of M/s. S. Chains which is engaged in the business of job work in gold ornaments. M/s. S.D.D. Agencies is the C&F Agent of M/s. Dhariwal Industries Ltd. in the State of Maharashtra for their Gutkha and Pan Masala business. A search and seizure action on the premises of Mr. Mittulal at Bangalore was carried on 09-10-2009 wherein documents maintained by Mr. Sohan Raj Mehta, C&F Agent of M/s. Dhariwal Industries Ltd were found. The assessee's premises was also searched on 20-01-2010, i.e. after a period of about 3 months and 10 days. During the course of search at the premises of the assessee he was questioned about the documents found from the premises of Mr. Mittulal which contain documents maintained by Mr. Sohan Raj Mehta. The assessee at the time of search had completely denied to have received any such amount from Mr. Sohan Raj Mehta. Relevant Question and answer of the assessee recorded during the course of search u/s.132(4) are as under
(paper book page 41 and 42) :
"Q.33 A search action u/s.132 was carried out on 0-10-2009 in the case of Shri Mittulal by Investigation Wing of Bangalore. In course of the search action certain incriminating documents related to Shri Sohanraj Mehta were found in connection with C&F agency of RMD Group of Pan Masala and Gutkha products. Shri Sohanraj Mehta was also covered by the Investigation Wing of Bangalore and on being confronted with these incriminating documents, Shri Sohanraj stated that the said pages interalia contain the notings regarding handing over of Rs.21.22 crores to Shri Vinit Ranawat of Mumbai which is C&F agent of RMD group. Shri Sohanraj also stated that the said payments in cash were made as per the direction of Shri R.M. Dhariwal and Shri Prakash Dhariwal. Please state whether the said cash of Rs.21.22 cr received from Shri Sohanraj Mehta on account of RMD group are reflected in your books of accounts. A.33 I have gone through the documents shown to me and say that I have never received this amount from Shri Sohanraj Mehta. Hence, the said payments are not reflected in my books of account.
Q.34 A search action u/s.132 was carried out on 26-1-2010 in the case of Dhariwal group. In the course of statement recorded u/s.132(4) Shri Prakash Dhariwal has explicitly stated that the above referred payments have been made by Shri Sohanraj Mehta at the instruction of my father Shri Rasiklal Dhariwal as short term advance. I am showing you the relevant portion of the said statement. Please go through the same and state whether the payments in cash received from Sohanraj Mehta at the discretion of Shri R.M. Dhariwal are recorded in your books of account.41
ITA No.1311, 1313,1315 to 1317 & 1306 & 1307/PN/2013 A.34 I have gone through the statement shown to me of Shri Prakash Dhariwal recorded on 20-01-2010, however, I have never recorded the amount mentioned from Shri Sohanraj Mehta hence the said payment are not recorded in my books.
Q.35 The statement of Shri Sohanraj Mehta recorded u/s.132(4) on 09- 10-2009 has been confirmed by Shri Prakash Dhariwal in the statement recorded u/s.132(4) on 20-01-2010. Thus, both Shri Sohanraj Mehta and Shri Prakash R. Dhariwal have stated on oath that payments in cash of Rs.21.22 cr has been made to you at the direction of Shri Rasiklal Dhariwal by Shri Sohanraj Mehta. As the statements have been given by them on oath, you are therefore once again requested to go through the above referred documents/statement and state whether the said cash receipts are reflected and recorded in your regular books of accounts.
A.35 As already stated earlier, I have never received any cash from Sohanraj Mehta at the instant of Shri Rasiklal Dhariwal or Prakash Dhariwal. Hence, no such cash is recorded in my regular books of accounts."
41. It is also pertinent to note here that the search party during the course of search at the premises of the assessee has not found any evidence whatsoever to substantiate that the assessee has in fact received any amount either from Mr. Sohan Raj Mehta or from Mr. Rasiklal Manikchand Dhariwal/Mr. Prakash M. Dhariwal or M/s. Dhariwal Industries Ltd. No unaccounted asset, investment or loose paper evidencing such huge receipt has been found. Further, we find from the query raised during the course of search that the authorised officer has treated the same as "short term advance" given to the assessee. Therefore, we find some force in the submission of the Ld. Counsel for the assessee that if the amount is a short term advance the question of the same constituting income in the hands of the assessee does not arise. We find from the statement of Mr. Sohan Raj Mehta recorded during the course of search proceedings u/s.132 on 09-10- 2009 where Mr. Sohan Raj Mehta in his answer to Questiion No.31 has replied as under :
"Q.31 Please state how these transactions are unaccounted?
Ans: M/s Dhariwal Industries Ltd has a manufacturing unit in Singsandra, Bangalore. Our firm M/s Mehta Associates is a sole C & F agent of the Company for their product RMD Gutka since 1994-95. I have very long business and personal association with Mr. Raskilal Manikchand Dhariwal. He considers me as close confident. As per the requirement of the Distributors, I place order for dispatch of Stock either with Mr. Prashant Bafna or Mr. Jeevan Sancheti, who are incharge of the Factory at Bangalore. To send a dispatch with bill or without bill is decided as per their choice and the Stock of Gutka is sent by Matador Van to this office. The stock that comes without bill is immediately dispatched to our customers. We keep only the stock that comes with bill in our office. The stock that comes without bill is dispatched immediately to our customers. I have been involved in these transactions for longtime and I am responsible for all the despatches and also for the collections from our customers; Normally, we extend credit of 7-10 days to our customers. They remit consideration for the Guntka stock received by 42 ITA No.1311, 1313,1315 to 1317 & 1306 & 1307/PN/2013 them. Periodically, I send these Collections to Mr. Rasiklal or his son Mr. Prashant as per their instructions."
42. Similarly, in his answer to Question Nos. 33 and 34 he has replied as under :
"Q.33 I am showing you exhibit marked as A/M/29, seized from the residence of Mr. Mitulal, No. 219, 68th, Cross, 5th Block, Rajaji Nagar, Bangalore. Please go through these loose sheets serially numbered 1-61 and state the contents written over these loose sheets?
Ans : I have gone through the exhibit marked A/M/29. I have placed my signature on page ho. 24 of this exhibit in confirmation of having seen it. This exhibit contains loose slips serially number 1-61. Slips marked as sl.no. 4 to 8, 49 to 50, 58 arid 59 contain the notings of Mr.Raskilal Manikchand Dhariwal and his son Mr; Mr. Prakash. The notings on these slips contain their directions to me to handover the amount mentioned in the slip to the person who brings the slip. Sometimes, they do not write any name on the slip, I have to handover the money mentioned in the slip to the bearer of the slips. Most of the times, I may not know the person but still I make payment to them as I have standing instructions from Mr.Raskilal Manikchand Dhariwal and his son Mr. Prakash to handover the money to the bearer of the slip. The money is paid out of the collections received from the distributors towards unaccounted sales.
Q.34 Do you obtain any receipt from the parties to whom you hand over Cash as per the instructions of Mr.Raskilal Manikchand Dhariwal and his son Mr. Prakash Ans : No. It is not required. After receipt of Cash, they leave the slip with me. That is considered as evidence."
43. From the above it is seen that Mr. Sohan Raj Mehta has never identified the assessee. It is also an admitted fact that the request of the assessee to cross examine Mr. Sohan Raj Mehta was not granted on the ground that the same will not serve any purpose.
44. We further find Mr. Rasiklal Manikchand Dhariwal in his statement recorded u/s.132(4) on 21-01-2010 in reply to Question No. 9, 11 and 12 has answered as under (page 124 of paper book filed by Ld. DR) :
"Q9. Similarly, I am showing you page No.34 of Bundle No.A/M/29 seized on 9/10/2009. Kindly go through the contents and please explain. Ans. This is a signed chit in my handwriting dt.20/2/2007 wherein I have instructed Shri Vinit Ranawat to hand over an amount of Rs.500000-00 (Five Lakhs).
Q11. Similarly, I am showing you page no.24 of Bundle No.A/M/29 seized on 9/10/2009. Kindly go through the contents and please explain.
Ans. This is a signed chit in my handwriting dt.10/11/2006 wherein I have instructed Shri Vinit Ranawat to hand over an amount of Rs.500000-00 (Five Lakhs).43
ITA No.1311, 1313,1315 to 1317 & 1306 & 1307/PN/2013 Q.12 Similarly, I am showing you page no.22 of Bundle No.A/M/29 seized on 9/10/2009. Kindly go through the contents and please explain.
Ans. This is a signed chit in my handwriting wherein I have instructed Shri Vinit Ranawat to hand over an amount of Rs.50000-00 (Fifty Thousand)."
45. From the above, it is seen that at one place the Department is treating the amount as short term advance by Mr. Rasiklal Manikchand Dhariwal to the assessee (Question No.34 to assessee u/s.132(4) on 20- 01-2010). Similarly, Mr. Rasiklal Manikchand Dhariwal in his reply to Question Nos. 9, 11 and 12 recorded u/s.132(4) of the I.T. Act has stated that he has instructed Mr. Vinit Ranawat to hand over the various amounts. Therefore, it is not clear as to whether the Assessing Officer is correct or the Investigation Wing at the time of examining the assessee are correct or the answer of Mr. Rasiklal Manikchand Dhariwal is correct.
46. The Hon'ble Bombay High Court in the case of Aziende Colori Nazionali Affini, Italy (Supra) has held that the agreement had to be considered as a whole and that the different clauses in the agreement could not be considered separately. Therefore, when the Department itself is treating the same at one place as short term advance, therefore, the question of treating the same as income of the assessee does not arise. It is also an admitted fact that the papers were found with Mr. Sohan Raj Mehta at Bangalore. Therefore u/s.132(4A) they can be presumed to be true, genuine and correct only in the case of the searched person, i.e. Mr. Sohan Raj Mehta who has admitted that the papers belong to him. Therefore, we find force in the submission of the Ld. Counsel for the assessee that on the basis of the papers found with some third party addition cannot be made in the hands of the assessee particularly when there is no business connection between the assessee and that party.
47. The Hon'ble Bombay High Court in the case of Addl.CIT Vs. Lata Mangeshkar reported in 97 ITR 696 has held that mere entries in the accounts regarding payment to the assessee was not sufficient as there was no guarantee that the entries were genuine in absence of any corroborative evidence. In that case, the income-tax authorities sought to assessee certain income as income from undisclosed sources received by the assessee on the basis of statement by 2 persons that they had paid money in black to the assessee and entries in books belonging to them regarding alleged payment to the assessee. The Tribunal examined the statement made by the 2 persons and found that the evidence tendered by them suffered from serious infirmities. It held that mere entries in the accounts regarding payments to the assessee was not sufficient as there was no guarantee that the entries were genuine. The Tribunal therefore held that there was no proof that the amount in question represented income from undisclosed sources belonging to the assessee. On further appeal by the Revenue, the Hon'ble High Court held that the conclusion of the Tribunal had been reached by it on a proper appreciation of the evidence. This was finding of fact by the Tribunal and no question of law arose and no reference would lie from the decision of the Tribunal. Accordingly, the appeal filed by the Revenue was dismissed.
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48. The Hon'ble Supreme Court in the case of CBI Vs. Shri V. C. Shukla reported in 3 SCC 410 has observed as under :
"The rationale behind admissibility of parties' books of account as evidence is that the regularity of habit, the difficulty of falsification and the fair certainty of ultimate detection give them in a sufficient degree a probability of trustworthiness (wigmore on evidence $ 1546). Since, however, an element of self interest and partisanship of the entrant to make a person - behind whose back and without whose knowledge the entry is made - liable cannot be ruled out the additional safeguard of insistence upon other independent evidence to fasten him with such liability, has been provided for in Section 34 by incorporating the words such statements shall not alone be sufficient to charge any person with liability.
The probative value of the liability created by an entry in books of account came up for consideration in Chandradhar vs. Gauhati Bank [1967 (1) S. C. R. 898]. That case arose out of a suit filed by Gauhati Bank against Chandradhar (the appellant therein ) for recovery of a loan of Rs. 40,000/- . In defence he contended, inter alia, that no loan was taken. To substantiate their claim the Bank solely relied upon certified copy of the accounts maintained by them under Section 4 of the Bankers' Book Evidence Act, 1891 and contended that certified copies became prima facie evidence of the existence of the original entries in the accounts and were admissible to prove the payment of loan given. The suit was decreed by the trial Court and the appeal preferred against it was dismissed by the High Court. In setting aside the decree this Court observed that in the face of the positive case made out by Chandradhar that he did not ever borrow any sum from the Bank, the Bank had to prove that fact of such payment and could not rely on mere entries in the books of account even if they were regularly kept in the course of business in view of the clear language of Section 34 of the Act. This Court further observed that where the entries were not admitted it was the duty of the Bank, if it relied on such entries to charge any person with liability, to produce evidence in support of the entries to show that the money was advanced as indicated therein and thereafter the entries would be of use as corroborative evidence.
The same question came up for consideration before different High Court on a number of occasions but to eschew prolixity we would confine our attention to some of the judgements on which Mr. Sibal relied. In Yesuvadiyan Vs. Subba Naicker [A. I. R. 1919 Madras 132] one of the learned judges constituting the Bench had this to say:
S.34, Evidence Act, lays down that the entries in books of account, regularly kept in the course of business are relevant, but such a statement will not alone e be sufficient to charge any person with liability. That merely means that the plaintiff cannot obtain a decree by merely proving the existence of certain entries in his books of account even though those books are shown to be kept in the regular course of business. he will have to show further by some independent evidence that the entires represent real and honest transactions and that the moneys were paid in accordance with those entries. The legislature however does not require any particular form or kind of evidence in addition to entries in books of account, and I take it that any relevant fact 45 ITA No.1311, 1313,1315 to 1317 & 1306 & 1307/PN/2013 s which can be treated as evidence within the meaning of the Evidence Act would be sufficient corroboration of the evidence furnished by entries in books of account if true."
While concurring with the above observations the other learned Judge stated as under:
" If no other evidence besides the accounts were given, however strongly those accounts may be supported by the probabilities, and however strong may be the evidence as to the honesty of those who kept them, such consideration could not alone with reference to s.34, Evidence Act, be the basis of a decree."(emphasis supplied) In Beni Vs. Bisan Dayal [ A. I. R 1925 Nagpur 445] it was observed tat entries in book s of account are not by themselves sufficient to charge any person with liability, the reason being that a man cannot be allowed to make evidence for himself by what he chooses to write in his own books behind the back of the parties. There must be independent evidence of the transaction to which the entries relate and in absence of such evidence no relief can be given to the party who relies upon such entries to support his claim against another. In Hira Lal Vs. Ram Rakha [ A. I. R. 1953 Pepsu 113] the High Court, while negativing a contention that it having been proved that the books of account were regularly kept in the ordinary course of business and that, therefore, all entries therein should be considered to be relevant and to have been prove, said that the rule as laid down in Section 34 of the Act that entries in the books of account regularly kept in the course of business re relevant whenever they refer to a matter in which the court has to enquire was subject to the salient proviso that such entries shall not alone be sufficient evidence to charge any person with liability. It is not, therefore, enough merely to prove that the books have been regularly kept in the course of business and the entries therein are correct. It is further incumbent upon the person relying upon those entries to prove that the were in accordance with facts.
The evidentiary value of entries relevant under Section 34 was also considered in Hiralal Mahabir Pershad (supra ) I.D. Dua, ]. (as he then was) speaking for the Court observed that such entries though relevant were only corroborative evidence and it is to be shown further by some independent evidence that the entries represent honest and real transactions and that monies were paid in accordance with those entries.
A conspectus of the above decisions makes it evident that even correct and authentic entries in books of account cannot without independent evidence of their trustworthiness, fix a liability upon a person. Keeping in view the above principles, even if we proceed on the assumption that the entries made in MR 71/91 are correct and the entries in the other books and loose sheets which we have already found to be not admissible in evidence under Section 34) are admissible under Section 9 of the Act to support an inference about the formers' correctness still those entries would not be sufficient to charge Shri Advani and Shri Shukla with the accusations levelled against them for there is not an iota of independent evidence in support thereof. In that view of the matter we need not discuss, delve into or decide upon the contention raised by Mr. Altaf Ahmed in this regard. Suffice it to say that the statements of the 46 ITA No.1311, 1313,1315 to 1317 & 1306 & 1307/PN/2013 four witnesses, who have admitted receipts of the payments as shown against them in MR 71/91, can at best be proof of reliability of the entries so far they are concerned and not others. In other words, the statements of the above witnesses cannot be independent evidence under Section 34 as against the above two respondents. So far as Shri Advani is concerned Section 34 would not come in aid of the prosecution for another reason also. According to the prosecution case itself his name finds place only in one of the loose sheets (sheet No. 8) and not in MR 71/91. Resultantly, in view of our earlier discussion, section 34 cannot at all be pressed into service against him.
(underline provided by us)
49. We further find identical issue had come up before various Benches of the Tribunal on the basis of the notings of Mr.Sohan Raj Mehta found during the course of search. We find the Ahmedabad Bench of the Tribunal in the case of Shri Mustafamiya H. Sheikh (Supra) has observed as under:
"7. On a perusal of the seized materials received from the Investigation wing, Pune, the AO had noticed that Page 34 was a summary of the cash payment made by Shri Sohanraj Mehta for the period from April 2003 - August 2006 as per the direction of RMD Group. As per this version, an amount of Rs.57.50 lakhs pertained to Shri Sheikh Mustafmiya Hussainmiya of Ahmedabad and page 47 was the monthly summary for the month of January - March 2004 of the unaccounted transaction carried out by Shri Sohanraj Mehta C & F of Karnataka Region of RMD Group. After analyzing the issue exhaustively as detailed in the assessment order as well as in the appellate order under dispute, a sum of Rs.57.5 lakhs in cash as evidenced by the seized documents was treated as unaccounted receipt in the hands of the assessee and, accordingly, added to the income of the assessee for the period under consideration by the AO which has been subsequently sustained by the learned CIT (A) for the detailed reasons recorded in his appellate order which is under scrutiny.
7.1. Admittedly, the whole proceedings were initiated on the strength of a statement of a third party (Shri Sohanraj Mehta). The purported seizure of slips, loose sheets etc. at the premises of a third party contained only the names, but, not other details such as their identity, addresses, contact numbers etc. On a perusal of the statement, it is clear that the payments made were to the persons whose names were appearing on the right side of the papers (sheets) which were paid to those persons on the instructions of PRD & RD. Moreover, against the names of Mustufa & Taufik, it was specifically written as (PRD) expenditure in respect of PRD was given by Shri Sohanraj Mehta as per the telephonic and written instruction of Prakash Rasikal Dhasriwal and Rasiklal Manikchand Dhariwal as per the Statement of Sri Sohanraj Mehta dated 21.10.2009 [Refer: Page 99 of PB AR]. To a question No.14 Exhibit A/M/8/dated 9.10.2009 which contained a bunch of loose sheets serially numbered from 01 to 58 to explain the contents, Shri Sohanraj Mehta answered thus -
"Page 34 records receipt of Gutkha consignment from Dhariwal Industries Ltd., during April 2003 to Jan. 2006 totaling to Rs.218,00,91,198/- (which is recorded on the left hand side of the page).47
ITA No.1311, 1313,1315 to 1317 & 1306 & 1307/PN/2013 On the right hand side of the page, parties to whom cash payments were made have been recorded, on instructions from Dhariwal Industries Ltd., The instructions were in the form of slips of paper and they contain the signatures of Mr. Rashiklal Manikchand Dhariwal and his son Mr. Prakash Dhariwal. Such payments totaling to Rs.206,76,54,463/- were made in 2003-2006. The balance of Rs.11,24,36,739/- was settled by me subsequently over a period of time."
7.2. Considering the statement of the said person, there is strong force in the contention of the assessee that even assuming that the receipt of such amount was merely a collection for on behalf of the company and such amount cannot par take the character of income in the hands of those persons.
7.3. Moreover, according to the assessee, the searched person being a third party had retracted all the statements recorded during the search proceedings in the following words:
"1. I referred my aforesaid statement recorded by Deputy Commissioner of Income-tax, Central Circle 2(2), Bangalore on 10.8.2011.
2. In this statement dated 10.8.2011 sense conveys that my detailed letter dt.23.12.2009 filed with the Asst. Director of Income-tax (Investigation) Unit 2(1), Bangalore is negated which is incorrect and untrue.
3. Today on 3.12.2011, Saturday I depose in the name of Almighty God that under wrong promises, mistaken beliefs, inadequate guidance and improper advise, I signed the letter dt. 10.8.2011 in the Income-tax Department, Bangalore which is absolutely wrong and not the correct version of what I wanted to convey to the Income-tax Department at that point of time.
4. With my this letter specifically addressed to you, I once again state that all my statements recorded during the search proceedings on 10.9.2009 and my statement dated 10.8.2011 recorded at Bangalore before Deputy Commissioner of Income-tax, Central Circle 2(2), Bangalore is retracted un- conditionally by me, it being improper."[Refer: Pages 225 - 27 of the assessee's submission dt.12.12.2012].
7.4. Thus, there is force in the assessee's contention that he should have been afforded an opportunity to cross-examine the third party [ Shri Shohanraj Mehta] since his statements on oath were coupled with inconsistency, he retracted his earlier statements and, thus, not above the board.
7.5. Moreover, the assessee's plea for permission to cross examine Shri Sohanraj Mehta at the assessment stage was not conceded by the AO on the ground that -
"[On page 9 CIT (A)] 2.8........................................................................... Comments of the AO:
(ii) Opportunity of cross examination of Shri Sohanraj Mehta: 'The assessee was provided with the copy of the statement of Shri Sohanraj 48 ITA No.1311, 1313,1315 to 1317 & 1306 & 1307/PN/2013 Mehta recorded by the ADIT (Inv), Pune, along with documents on which his statement was recorded. Due to paucity of time the cross examination could not be granted."
7.6. The CIT (A) had also turned down the assessee's request for cross- examination on the ground that -
"(On page 53) 2.25................It has also been indicated, as borne out on records, that the appellant had asked for cross examination of the party for the first time only on 14.12.2011. The appellant was also fully aware that the limitation to pass reassessment order in the case expires on 31.12.2011. Thus, between 29.3.2011 till 14.12.2011, the appellant did not make any request to the AO that an opportunity of cross examination is required by him. Fully knowing that it would not be possible for the AO to call a party from distant Bangalore and afford the facility of cross examination during a short period of just 12 working days, the appellant makes request for cross examination. There is no denying the fact that cross examination is an inalienable right of an agreed party but it is also true that there has to be a justifiable time frame in which such right can be exercised. It is as settled principle of law that rights and duties under a statute go hand in hand and cannot be exercised in isolation. The appellant truly had the right to cross examination but at the same time had the duty to ask for it within a reasonable time frame. A right exercised with ulterior motives does not possess the sanction of law. Facts of the case clearly indicate that the appellant had purposefully demanded cross examination at a time when it was considered impractical and unfeasible....."
7.7. In essence, the principles of natural justice on the legitimate request of the assessee, to cross examine the third party on the basis of whose statement the impugned addition sought to be added to his income, has been denied on flimsy grounds.
7.8. At this point of time, we shall analyze the judicial pronouncements on a similar issue, as under (PB -184):
(i) the Hon'ble jurisdictional High Court in the case of DCIT v. Mahendra Ambalal Patel reported in (2010) 40 DTR (Guj) 243 had held as under:
"From the findings recorded by the Tribunal it is apparent that though it is the case of Revenue that the land has been sold by the assessee to GC through MV, there is no material on record to indicate that the said land in fact belongs to the assessee. Though the AO has placed reliance upon the statements of MV and GC for the purpose of taxing the amount in the hands of the assessee, despite specific request being made by the assessee for cross- examining both the said persons, the AO has not permitted the assessee to cross-examine them. In the circumstances, no reliance could be placed upon the statements of the said persons as the assessee had no opportunity to cross-examine them. The statements made by the aforesaid persons would have no evidentiary value and as such, would not be admissible in evidence. Further, though the said MV has stated that he has paid Rs.60 lakhs to the assessee on behalf of one GC, the said amount has not been taxed in the hands of GC. Moreover, no evidence has been adduced to indicate that any transaction in relation to the land in question has actually taken place. The Tribunal has rightly found that the basis for making the addition in the case of the assessee is 49 ITA No.1311, 1313,1315 to 1317 & 1306 & 1307/PN/2013 merely a bald statement of MV, which is not corroborated with any documentary evidence found at the time of search, either in the case of S or MV or the assessee. No plea to the effect that the impugned order of the Tribunal suffers from any perversity has been raised. The Tribunal having based its conclusion on findings of fact recorded by it after appreciation of the evidence on record, it cannot be stated that the impugned order of the Tribunal suffers from any legal infirmity............"
(ii) During the course of hearing of a reference application of the Revenue in the case of DCIT (Asst) v. Prarthana Construction Pvt. Ltd [Tax Appeal No.79 of 2000 dated 25.3.2001] before the Hon'ble jurisdictional High Court, the learned Counsel for the assessee submitted that the documents in question have been found from the premises of a third party. The loose papers cannot be stated to be books of account in the light of the decision of the Supreme Court in the case of CBI v. V.C. Shukla and others (1998) 3 SCC 410 as observed by the Tribunal and submitted that the Tribunal has based its conclusions on the findings of fact recorded by it upon appreciation of the evidence on record; that the Tribunal had examined the facts and circumstances of the case and had come to the conclusion that the Revenue had not been able to establish its case against the assessee and as such, the order of the Tribunal being based upon findings of fact recorded by it, does not give rise to any question of law. It was, further, submitted on behalf of the assessee that the entire case of the revenue was based upon documents recovered during the course of search from the premises of third parties and the statements of the third parties and that the assessee was not granted an opportunity to cross examine the third parties and as such their statements have no evidentiary value.
After due consideration of rival submissions and also taking into account the reliance placed by the assessee's counsel in the cases of (i) Kishinchand Chellaram v. CIT (1980) 125 ITR 713 (SC) &
(ii) CIT v. S.C. Sethi (2007) 295 ITR 351 (Raj), the Hon'ble Court had held thus:
"[PB - 174] 16. Thus, it is apparent that the conclusions arrived by the Tribunal are based upon the aforesaid findings of fact recorded by it upon appreciation of the evidence on record. On behalf of the revenue nothing is pointed out to show that the findings recorded by the Tribunal are in any manner perverse, nor is it the case of the revenue that the Tribunal has taken into consideration any irrelevant material or that any relevant material has been ignored. The conclusion arrived at by the Tribunal on the basis of the findings of fact recorded by it cannot in any manner be said to be unreasonable. In the aforesaid premises, the impugned order of the Tribunal being based upon findings of fact recorded by it upon appreciation of the evidence on record, which findings have not been dislodged by the revenue by pointing out any evidence to the contrary, therefore, does not warrant any interference."
7.9. Taking into account the submissions of the assessee, the stand of the AO, reasoning of the CIT (A) in sustaining the action of the AO and also in conformity with the rulings of the Hon'ble jurisdictional High Court (supra), we are of the considered view that that learned CIT (A) was not justified in sustaining the addition of Rs.57.5 lakhs made by the AO in the hands of the assessee for the following reasons:
50ITA No.1311, 1313,1315 to 1317 & 1306 & 1307/PN/2013
(i) that the learned AO had solely depended upon the information received from the Investigation Wing of Pune;
(ii) that the AO had failed to substantiate the same with any credible documentary evidence to the effect that the assessee had indeed received the alleged cash payment of Rs.57.5 lakhs from Shri Sohanraj Mehta as the assessee had categorically pleaded before the AO that he was making purchases through Ambika Distributors who were the C & F Agents for Gujarat Region;
(iii) that the total unaccounted sales effected by Shri Sohanraj Mehta C & F of RMD Gutkha on behalf of Dhariwal Industries Limited for the period of April 2003 to Feb 2008 was Rs.345.72 crores (approx). The unaccounted income for the AY 2004-05 was arrived at Rs.40,88,32,514/-, the same was added substantively in the case of M/s.
Dharival Industries Limited and concluded the assessment for the AY 2004-05 u/s 153A r.w.s. 143 (3) of the Act, dated 29.12.2011 by the ACIT, C.C. 1(1), Pune [Courtesy: P 231 - 238 of PB AR];
(iv) that once the alleged sum of Rs.57.5 lakhs was subjected to tax in the hands of Dhariwal Industries Limited, the same cannot be subjected to suffer further tax. This view has been fairly conceded by the CIT (A) "(On page 54) 2.27.......The appellant is right to the extent that no income can be taxed twice......"
(v) that the AO had candidly admitted that during the course of assessment proceeding itself the assessee had sought permission to cross examine Shri Sohanraj Mehta which was summarily rejected by taking refuge ".....Due to paucity of time, the cross examination could not be granted"
[Refer: Para 2.8 (Page 10) of the CIT (A)'s order].
This stand of the AO, to view it mildly, is against the spirit of judicial pronouncements;
(vi) that the AO had merely come to a conclusion based on a statement of a third party, without bringing any credible documentary evidence to the contrary on record to nail the assessee; &
(vii) No reliance can be placed on the statements of a third person whose premises were subjected to a search since he had retracted his own statement made earlier on oath and precisely the assessee has been denied to cross-examine him to bring out the truth.
7.9.1 For the above said reasons, we hereby hold that the addition made for Rs.57,50,000/- by the learned AO on account of undisclosed income, which was further sustained by the learned CIT(A) requires to be deleted and accordingly, we hereby direct the revenue to delete the same. Thus, ground No.1 raised by the assessee with respect to reopening of the assessment u/s 148 of the Act is dismissed and ground No.2 with respect to addition on account of undisclosed income is allowed in favour of the assessee."
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50. We find the Bangalore Bench of the Tribunal in the case of DCIT Vs. H.S. Chandramouli (Supra) had also an occasion to decide an identical issue and deleted the addition by observing as under :
"13. We have considered the submissions of the learned DR. It is seen that the document in question was seized from the possession of one Mr. Sohanraj Mehta. The seized document makes a reference to the name of the assessee and a figure of Rs.22.75 lakhs appears against his name. As to whether this document evidences payment of Rs.22.75 lakhs to the assessee is a moot question. There is no basis set out in the order of the AO for coming to the conclusion that the seized document evidences receipt of money by the assessee from Sohanraj Mehta. The presumption u/s. 292C of the Act is only with reference to the person searched and it cannot be extended to the assessee. There is no corroborative evidence or statement of Sohanraj Mehta relied upon by the AO, to the effect that a sum of Rs.22.75 lakhs was paid to the assessee. The assessee has categorically denied having received any payment from Sohanraj Mehta. Even in the proceedings before the AO, when the assessee was examined, he had taken the same stand. The details called for in the scrutiny assessment did not call for any specific details on the seized document or receipt of cash based on the seized document.
14. In the light of these circumstances, the CIT(Appeals) was justified in coming to the conclusion that no evidence has been brought on record to prove that the assessee received the sum of Rs.22.75 lakhs from Sohanraj Mehta. The addition made by the AO was therefore rightly deleted by the CIT(A). We do not find any ground to interfere with the order of the CIT(Appeals)."
51. We find the Lucknow Bench of the Tribunal in the case of M/s. Mohd. Ayub Mohd. Yakub Perfumers Pvt. Ltd., (Supra) while deleting the addition under identical facts and circumstances as held as under :
"2. The facts in brief borne out from the record are that during the course of search conducted upon Shri. Sohanraj Mehta, C&F of RMD Gutkha group in Bangalore, statement of account was seized in which there was an entry of Rs.50 lakhs in the name of Malik Kannauj. This entry was interpreted by the Revenue as this amount was given to Shri. Abdul Malik, MD of the assessee-company. On the basis of seized documents, the Assessing Officer has formed a belief in the assessee's case that the income chargeable to tax has escaped assessment, as this amount was not shown by the assessee in its books of account. Accordingly a notice under section 148 of the Income-tax Act, 1961 (hereinafter called in short "the Act") was issued and assessment was completed under section 147 of the Act read with section 144 of the Act in the hands of the assessee, resulting into an addition of Rs.10.48 lakhs as profit on this unaccounted sale of Rs.50 lakhs.
3. An appeal was preferred before the ld. CIT(A) with the submission that no document indicating payment of Rs.50 lakhs to the assessee- company was found during the course of search. Only dumb documents were found in which there was a debit entry of Rs.50 lakhks in the name of Malik Kannauj. Even in the statement of Shri. Sohanraj Gupta, there was no mention of the Director of the assessee-company, Shri. Abdul Malik. Therefore, the ld. CIT(A) came to the conclusion that in the absence of any evidence involving the assessee to the alleged receipt 52 ITA No.1311, 1313,1315 to 1317 & 1306 & 1307/PN/2013 of Rs.50 lakhs, reopening in the hands of the assessee under section 147 of the Act is not proper and he accordingly annulled the assessment.
4. Aggrieved the Revenue has preferred an appeal before the Tribunal and reiterated its contentions. During the course of hearing, a specific query was raised from the ld. D.R. as to what evidence they have collected during the course of search or thereafter, on the basis of which the Assessing Officer has formed a belief that the income chargeable to tax has escaped assessment in the hands of the assessee. No satisfactory answer was furnished by the ld. D.R. We have also carefully perused the seized documents and we find that there is a debit entry of Rs.50 lakhs in the name of Mlik Kannauj, but this entry does not indicate that the amount of Rs.50 lakhs was given to the Managing Director of the assessee. There may be hundred of Malik in Kannauj but on the basis of this dumb document, the reopening of assessment in the hands of the assessee is not permissible. Moreover, the searched party has also examined Shri. Sohanraj Gupta and the statement is also placed on record and at nowhere Shri. Sohanraj Gupta has deposed about payment of Rs.50 lakhs to the assessee. In the absence of any relevant material, the reopening of assessment in the hands of the assessee is not proper. The ld. CIT(A) has given valid reasons while holding that the reopening is bad. The relevant observations of the ld. CIT(A) are extracted hereunder:-
"5.1.6 From all the aforesaid correspondence, it is obvious that there is no clue as to how the identity of "MALIK Kannauj" as appearing in the seized document (supra) was interpreted as Shri Abdul Malik, MD of the appellant company. In the statement given by Shri Sohanraj Gupta, there is no mention of any Malik. Further, in his statement under oath before the ADIT(lnv), Kanpur, Shri Abdul Malik, the M.D. of the appellant company had denied such transaction. In these circumstances, I fail to understand as to how, the A.O. formed the belief that the entry in the name of "Malik Kannauj" (as appearing in the seized document) referred to Shri 'Malik, M.D. of the appellant company. Further, even for argument sake if "Malik Kannauj" indeed referred to Shri Abdul Malik, the M.D. of the appellant company, there was no evidence/material on record which could link that payment to the assessee company. Just because the ADIT (Inv), Kanpur had informed the A.O. that the entry of paymen of Rs. 50 Lakhs (as mentioned in the seized document) to one "Malik Kannauj"
related to the Appellant company (without any supporting in this regard), to same could not have been the basis for the A.O. to initiate the reassessment proceedings in the case of the appellant company. It is a trite law that the "reasons to believe" for reopening the case should be that of the A.O. alone and could not be formed at the dictates of others or on suspicion, conjectures or surmises.
5.1.7 In the instant case, in my considered view, the A.O. had no material before him which could link the said payment to the appellant company. The "reasons to believe" in the case have been recorded on irrelevant material. On the basis of such material, no prudent man could have formed the belief that income had escaped asstt. in the hands of the appellant company. Accordingly, I hold that the very assumption of jurisdiction by the A.O. under section 147 of the Act was illegal and, therefore, any asstt. framed pursuant to such illegality cannot be sustained. Thus, the whole asstt. framed u/s 147 is hereby annulled, While taking this view, I am fortified by the decisions of the Hon'ble 53 ITA No.1311, 1313,1315 to 1317 & 1306 & 1307/PN/2013 Apex Court in fie case of CIT vs Daulat Ram Rawat Mull (87 ITR 349) wherein, it was held:
'there should, in our opinion, be some direct nexus between the conclusion of fact arrived at by the authority concerned and the primary facts upon which the conclusion is based. The use of extraneous and irrelevant material in arriving at that conclusion would vitiate the conclusion of facts.............................." In the result, the appeal is allowed."
5. Since we do not find any infirmity in the order of the ld. CIT(A), we confirm his order."
52. Similarly the Lucknow Bench of the Tribunal in the case of DCIT Vs. Pawan Kumar Agarwal (Supra) has held as under :
"5. We have considered the rival submissions. We find that the issue in dispute was decided by learned CIT(A) as per para 7 & 7.1 of his order, which is reproduced below for the sake of ready reference:-
"7. That vide grounds No. 3 to 7, assessee has challenged the additions of Rs.1,13,40,000/- made on account of alleged undisclosed income. I have carefully considered the rival submissions and perused the material on record. I have also gone through the order of the A.O. It was contended by the learned AR before me that mere jottings and notings should not be the basis for making any addition in the returned income, more particularly when A.O has not allowed the opportunity of Cross Examination of Mr. Shobhan Raj Mehta. The material provided/gathered by the department has also been produced before me. In this paper, it is seen that name of assessee is appearing. It was vehemently argued before me that how the department comes into conclusion that name Pawan Agarwal as appearing in the seized material is appellant. The name of appellant is very common and it is possible to be some other Pawan Agarwal instead of appellant. The submissions of the appellant are considered. On examination of the assessment record it is seen that the appellant categorically denied having any financial or business transaction with Sh.Shobhan Raj Mehta. A request was also made to provide complete statements on the basis of which addition was being contemplated by the assessing officer. However, the assessing officer did not provide the copies of those statements. During the course of assessment proceedings, the assessing officer did not throw any light on any inquiry/ investigation carried out by him that could justify the additions made by him. That assessee has vehemently stated that the department has not proved that the identity of Shri Pawan Agarwal with the assessee and no slip, letter, document etc. showing any relationship of assessee with Shri Shobhan Raj Mehta were not found from the possession of Shri Shobhan Raj Metha. The A.O has required assessee's copy of accounts in the books of M/s. Dhariwal Industries, Pune and this was found verified from the assessee's books of A/c. It is clear that the assessee has business relationship with M/s. Dhariwal Industries, Pune and not with the Shobhan Raj Mehta. Therefore, it is clear that the addition made by the Assessing Officer purely based on guess work without any evidence, therefore this addition deserves to be deleted.
7.1 From the facts enumerated above, it is clear that the assessing officer failed to establish any case against the appellant. Further inquiry/ 54 ITA No.1311, 1313,1315 to 1317 & 1306 & 1307/PN/2013 investigation was required to be carried out on the information passed by the ADIT(Inv.)- III, Kanpur but evidences are not collected or placed. Copies of the statements, on the basis of which additions has been made, were not provided nor was the opportunity of cross- examination given to the appellant. The assessing officer merely summarized the salient features of the report of the ADIT (Inv.)-III, Kanpur and thereafter summarily rejected the reply of the appellant as not satisfactory. Learned counsel for the assessee, on the other hand, contends that neither the said Shri Shobhan Raj Mehta was allowed to be cross- examined nor a copy of his statement was given despite several requests. The AO's contention to the effect that the contents of the statement were made known to the assessee, is not a compliance of mandatory requirement to provide the assessee incriminating material to defend its own case and therefore it can categorically be held that:
(i) Statement of Shri Shobhan Raj Mehta was not given to the assessee.
(ii) Beyond the belief of presumption on the information supplied by the ADIT(Inv.)-III, Kanpur, further evidences are not found to corroborate the additions.
(iii) Cross-examination of Shri Shobhan Raj Mehta was not allowed.
(iv) The assessee firm had strongly denied having any financial and business transactions with Mr. Shobhan Raj Mehta.
In view of these factual exigencies, it is held that the addition made by the AO, without any corroborative evidence, was unjustified and accordingly deleted. Accordingly, ground No. 3 to 7 raised by appellant are allowed."
5.1 From the above Para from the order of CIT(A), we find that a categorical finding has been given by him that statement of Shri Shobhan Raj Mehta was not given to the assessee and beyond the belief of presumption on the information supplied by the ADIT(Inv.)-III, Kanpur, further evidences are not found to corroborate the additions. He has also given a finding that Cross-examination of Shri Shobhan Raj Mehta was not allowed and the assessee firm had strongly denied having any financial and business transactions with Mr. Shobhan Raj Mehta. These findings of CIT(A) could not be controverted by Learned D.R. of the Revenue and moreover, the name of the assessee i.e. Pawan Kumar Agarwal is very common name and merely because this name is mentioned in a seized paper found during the course of search at Bangalore at the premises of Shri Shobhan Raj Mehta, with whom the assessee was not having any direct transaction, it cannot be said that the said Pawan Kumar Agarwal, of whom the name was mentioned in the seized paper is the assessee. Without establishing this aspect that the name mentioned in the seized paper is that of the assessee, no addition can be made in the hands of the present assessee on the basis of such seized paper. Considering these facts, we do not find any reason to interfere in the order of CIT(A)."
53. We find the Delhi Bench of the Tribunal in the case of M/s. Bhola Nath Radha Krishan (Supra) while deleting an identical issue has observed as under :
55ITA No.1311, 1313,1315 to 1317 & 1306 & 1307/PN/2013 "7. After considering the arguments of both the sides and the facts of the case, we do not find any infirmity in the above order of learned 7 ITA-5149/Del/2012 CIT(A). The addition has been made on the basis of certain chits found from Shri Sohan Raj Mehta and his statement.
Admittedly, the assessee has no dealing with Shri Sohan Raj Mehta. The assessee is supplying goods (Supari) to RMD Group who are manufacturing Gutkha. Shri Sohan Raj Mehta is C&F agent for Karnataka region of RMD Group. The search had taken place at the assessee's business premises as well as at the business premises of RMD Group. No evidence of any unrecorded sale by the assessee or unrecorded purchase by RMD Group was found. Thus, when, despite search at the premises of seller and buyer, no evidence of any unrecorded sale or purchase is found, in our opinion, merely because in the chits found at the premises of some third party with whom the assessee has no business dealing, it cannot be presumed that the assessee is making sales outside books. Moreover, as per chits found from Shri Sohan Raj Mehta, the payment made to the assessee is only `9 lakhs and not `9 crores. The department has also relied upon the statement of Shri Sohan Raj Mehta. It was pointed out by the learned counsel that Shri Sohan Raj Mehta retracted his statement. However, as per Revenue, Shri Sohan Raj Mehta has retracted his retraction affirming the original statement. On these facts, the learned CIT(A) has come to the conclusion that the statement of Shri Sohan Raj Mehta cannot be relied upon because he is frequently retracting his statement. Moreover, a statement of a third party cannot be used against the assessee unless the assessee is allowed an opportunity to cross-examine him. Now, we find that during the assessment proceedings, the assessee specifically requested for allowing opportunity to cross-examine Shri Sohan Raj Mehta also and requested the Assessing Officer to supply the copy of retraction of his statement. The Assessing Officer has reproduced the assessee's letter, paragraph No.11 of which, reads as under:-
"11. The assessee had requested your good self to provide the following documents:
(a) Copy of the Sworn Statement of Sh. Sohanraj Mehta.
(b) Copy of written statements or Affidavits obtained from Sh. Mehta wherein he has mentioned that Rs.9 crore was payable to the assessee.
(c) Copy of subsequent retraction of the statements made at the time of search operation, if any.
(d) Copy of receipts obtained from the assessee by Sh. Sohanraj Mehta on payment to the assessee, if any.
The assessee has been provided statement of Sh.Sohan Raj Mehta. However, it is further submitted that the assessee should be given the opportunity to cross examine the genuineness of the statements of Sh. Sohan Raj Mehta and should be given reasonable opportunity to verify the claims made by him. In the case of Kishan Chand Chelaram (125 ITR) it has been held by the Hon'ble Supreme Court of India that before taking a decision the assessee has to be allowed a chance or an opportunity of rebuttal with respect to the documents which are to be used against the assessee. The assessee has gone through the entire statements of Sh. Sohan Raj Mehta recorded under section 132(4) of the Income Tax Act. Nowhere there is any mention of Bhola Nath Radha Kishan or any of its partner in the said statement. The assessee cannot be held liable for any 56 ITA No.1311, 1313,1315 to 1317 & 1306 & 1307/PN/2013 act of the omission or commission done by him. Mr. Sohan Raj Mehta's statement regarding decoding of figures is also not applicable on the assessee since this has no bearing or nexus of connection with the assessee firm or its business transaction.
No addition or adverse decisions can be taken on the basis of surmises and/or conjectures. There has to be specific mention of M/s Bhola Nath Radha Kishan, 6377, Naya Bans, Kahri Baoli, New Delhi in order to link any payment to it from Mr. Sohan Raj Mehta or anybody else..........." (emphasis by underlining supplied by us)
8. The Assessing Officer has dealt with this letter but he has not given any reason for not allowing the assessee an opportunity to cross- examine Shri Sohan Raj Mehta. Similarly, he has neither supplied the copy of retraction of his statement nor dealt with the retraction in the 9 ITA-5149/Del/2012 assessment order. It is only in the remand report he has mentioned that Shri Sohan Raj Mehta has retracted his retraction also. Considering the totality of above facts, we entirely agree with the learned CIT(A) that the statement of Shri Sohan Raj Mehta cannot be used against the assessee and, similarly, the chits found from the third party, with which the assessee has no dealing, cannot be used against the assessee in the absence of any corroborative evidence. That merely because some excess stock was found in the survey for which separate addition has already been made, it cannot be further presumed that the assessee made sales outside the books, specially when the survey was followed by the search and neither during the course of survey nor during the course of search, any evidence of sale outside the books was found. In view of the totality of above facts, we do not find any justification to interfere with the order of learned CIT(A). The same is sustained."
54. We find the Pune Bench of the Tribunal in the case of Pradeep Amrutlal Runwal reported in 149 ITR 548 while deleting addition under identical facts and circumstances has observed as under :
"5. After going through the rival submissions and material on record, we find that the issue before us is regarding the addition of 5,10,00,000/-. As stated earlier, during the search proceedings in the case of Dhariwal Group, some loose papers were seized wherein certain amounts were written against the name of 'Pradeep Runwal'. Hence, the case of the assessee was reopened u/s 148 of the Income Tax Act. It was explained to the learned Assessing Officer that the assessee had not earned any such income of 5.10 crs. and therefore, no addition should be made. However, the Assessing Officer has not accepted the contention of the assessee.
5.1 The Assessing Officer has stated that the papers were seized from Dhariwal Group. The said papers were seized from the residence of Shri Sohanraj Mehta. According to the Assessing Officer, the assessee could not disown the existence of such documents. The Assessing Officer observed that the money has been passed on by Dhariwal Group through their staff. Hence, the assessee must have received the amount noted on the seized papers. The Assessing Officer has proceeded to make the addition of Rs. 5.10 crs. by stating that as per section 114 of the Indian Evidence Act, it is an accepted rule of evidence that if a person 57 ITA No.1311, 1313,1315 to 1317 & 1306 & 1307/PN/2013 possessing an evidence does not produce it, the inference is that such evidence if produced is detrimental to him. Accordingly, the Assessing Officer held that the said receipts were the income of the assessee.
5.2 The Assessing Officer has further held that according to the provisions of section 80 of the Indian Evidence Act, there is a presumption as to the documents produced as record of evidence are genuine. Hence, he has held that the documents seized from Dhariwal Group could be relied upon for making addition in the hands of the assessee. The Assessing Officer has placed reliance on the decisions of Sumati Dayal vs. CIT [(1995) 214 ITR 801(SC)], CIT vs. Durga Prasad More [(1969)72 ITR 807(SC], Himmatram Laxminarain vs. CIT [(1986)161 ITR 7(P&H)], CIT vs. Ganapathi Mudaliar [(1964)53 ITR 623(SC)] and CIT vs. Lacchman Dass Oswal [(1980)126 ITR 446(P&H)].
5.3 According to us, the additions made by the Assessing Officer were not justified in the facts and circumstances vis-à-vis of the assessee. As discussed earlier, during the course of search in the case of Dhariwal Group, the only documents found on the basis of which the addition u/s 69A has been made in the case of the assessee are in the form of two loose papers wherein amounts of 4.80 Crores and 30 lacs were noted against the name "Mr. Pradeep Runwal". Apart from this, no evidence has been found to suggest that the assessee had actually received the said amount or that the assessee had entered into any transaction with Dhariwal Group. There is no evidence on record to suggest that the assessee has previous business relations with the Dhariwal Group. In the absence of any documentary evidence to suggest the same, it could not be presumed that the amounts reflected in the loose papers were the income of the assessee received from Dhariwal Group. It has been the consistent stand of the assessee that there may be many persons of the name Pradeep Runwal in Pune and there was no specific evidence to suggest that the said notings pertained to the assessee. Hence, it was not justified as to how, in the absence of any other corroborative details, the Assessing Officer has assumed that the amounts reflected the income of the assessee himself, while the assessee has no business dealings of his with Dhariwal Group. The Assessing Officer has not brought on record any evidence to suggest that Dhariwal Group has admitted that the amounts were paid to the assessee. Hence, simply because the name of the assessee is noted on the seized papers does not mean that the addition could be made in the hands of the assessee. Since no evidence was found relating to the existence of any transaction between the assessee and Dhariwal Group and in the absence of any corroborative evidence to suggest that the assessee had actually received the said amount, no addition could be made merely on the basis of noting in loose papers found during the search proceedings in the case of Dhariwal Group against the name of the assessee.
5.4 The presumption u/s 132(4A) is available only in respect of the person from whom the paper is seized. It could not be applied against a third party and hence, no addition could be made on the basis of the evidence found with third party. The presumption u/s. 132(4A) could be used only against the person from whose premises the documents are found and not against the person whose name appears in the seized papers.58
ITA No.1311, 1313,1315 to 1317 & 1306 & 1307/PN/2013 5.5 In this case, the addition has been made on the basis of the documents found with Dhariwal Group and thus, the presumption u/s. 132(4A) could not be used against the assessee since no incriminating documents were found with it. In the case of ACIT Vs. Lata Mangeshkar (Miss) (1974) 97 ITR 696 (Bom), the addition was made in the hands of the assessee on the basis of the entries in the books of third persons.
Hon'ble Bombay High Court held that such addition could not be made only on the basis of the notings in the books of third persons. The facts of the present case are covered by the decision of Lata Mangeshkar (supra). It is a settled legal position that the decision of jurisdictional High Court is binding on all authorities below it. Thus, the reliance placed by the Assessing Officer on the loose papers is not justified at all. Therefore, the question of making any addition is not justified in the absence of other corroborative evidence to that effect.
5.6 Without prejudice to the above, the learned Authorized Representative submitted that the Assessing Officer was not justified in making the additions by relying on the provisions of section 114 of the Indian Evidence Act. The concerned Assessing Officer has referred the aforesaid section which states that the court may presume that the evidence which could be and is not produced would, if produced be unfavourable to the person who withholds it. It is pertinent to mention this rule applies to the cases wherein it is evident or an established fact that a particular evidence or document was in possession of the assessee. For example, an owner of a land may well be expected to be in possession of a 7/12 extract of the said land in order to check whether the said land was used for agricultural purposes. In the present case, the provisions relied by the Assessing Officer are not applicable, the assessee is not withholding any documents. The case of department is that the amount mentioned on the seized paper found with the Dhariwal Group indicates that the assessee has received the amount, therefore, the burden was on the Assessing Officer to establish the same. The reliance placed on the provisions of section 114 of Indian Evidence Act is misplaced.
5.7 As stated above, it has been consistent stand of the assessee that the assessee has had no business relations whatsoever with the Dhariwal Group. Further, apart from the noting on paper with the name 'Pradeep Runwal, there is no corroborative evidence in this regard against the assessee. In such circumstances, where the assessee has not entered into any transaction with the Dhariwal Group, one certainly could not expect the assessee to be in possession of any evidence to suggest that it has not entered into any such transaction except for his books of account which have already been verified by the concerned Assessing Officer. Hence, the Assessing Officer was not justified in placing reliance on the provision of section 114 of the Indian Evidence Act.
5.8 It was further submitted on behalf of assessee that the Assessing Officer was not justified in making the addition by relying on the provisions of section 80 of the Indian Evidence Act which states that there is a presumption that the documents produced before the court as record of evidence are genuine. In this regard, the stand of the assessee is that in the case of assessee, document produced was merely in the form of a rough noting wherein certain amounts were written against the name 'Pradeep Runwal'. As discussed earlier, there may be many 59 ITA No.1311, 1313,1315 to 1317 & 1306 & 1307/PN/2013 people of that name in Pune and in the absence of any other corroborative evidence to that effect. In such a situation, it cannot be inferred that it belongs to the assessee.
5.9 While making the addition of 5.10 crores as stated above, the CIT(A) relied on the following decisions of Sumati Dayal vs. CIT [(1995) 214 ITR 801(SC)], CIT vs. Durga Prasad More [(1969)72 ITR 807(SC], Himmatram Laxminarain vs. CIT [(1986)161 ITR 7(P&H)], CIT vs. Ganapathi Mudaliar [(1964)53 ITR 623(SC)] and CIT vs. Lacchman Dass Oswal [(1980)126 ITR 446(P&H)]. In this regard, the stand of the assessee has been that the case laws relied by the Assessing Officer are differentiable on facts and hence, the same are not applicable to the case of the assessee. In all the cases relied by the Assessing Officer, the fact that the assessee had actually earned income or received amounts by way of cash credits, unexplained investment etc. was not under dispute. The issue related to whether the receipts were received from genuine lenders or whether the investments or receipts were a part of the disclosed sources of income of the assessee. We find that in the present case, the issue in question itself is whether rough noting on loose paper found in the course of search at the premises of third person could be assumed the income from the assessee as in the cases relied by the Assessing Officer. This fact has not been established in the case of assessee, therefore, the case laws relied by the Assessing Officer are clearly distinguishable on facts and hence, not applicable to the case of the assessee.
5.10 According to CIT(A), the name of the assessee appears on the seized papers and seized documents give a detailed and minute noting of the transactions of Dhariwal Group. He has stated that Shri Sohanraj Mehta has admitted that the documents were written by him and most of the papers were written in marwadi language. The CIT(A) referred to the fact that Shri Mehta had admitted that the papers belonged to Dhariwal Group. In para 4.3, the CIT(A) states that when the author of the paper has accepted the notings made by him, in that event, the document is having great evidentiary value and could not be rejected. As regards, the objection of the assessee that no evidence was found to indicate that the assessee had received the amount, the CIT(A) referred to the fact of acceptance of the paper by Shri Mehta and considering the fact that the modus operandi was clarified by Shri Mehta, the addition was rightly made by the Assessing Officer, has been held by CIT(A). He has referred to various decisions in support of the addition made. Firstly, he has relied upon the decision of ITAT Third Member in the case of Khopade Kisanrao Manikrao [74 ITD 25]. In this regard, the stand of assessee is that the decision in the case before Third Member was not applicable to the facts of the present case. In the said case, the assessee was searched and documents were found indicating on money received on sale of plots. On the basis of the documents found, the Assessing Officer estimated the income from on money which was held to be valid. In that case, the issue that no addition could be made on the basis of documents found with third party was neither raised nor applicable. Thus, according to us, the said decision has no application to the facts of the assessee's case.
5.11 The CIT(A) in para 2.5 has placed reliance upon ITAT, Pune decision in the case of Dhanvarsha Builders and Developers Pvt. Ltd. [102 ITD 375]. In the said case, the assessee was searched and 60 ITA No.1311, 1313,1315 to 1317 & 1306 & 1307/PN/2013 documents were found indicating on money received by the assessee. It was held that the document was found with the assessee and therefore, the A.O. was justified in making the addition. Even in this case, the issue of no addition can be made on the basis of documents found with third party was not raised. The CIT(A) has further referred to the decision of ITAT, Mumbai in the case of P. R. Patel Vs. DCIT [(2001) 78 ITD 51 (Mum)] for the proposition that seized papers cannot be called dumb paper because they indicate date, amount and calculation. There is no dispute with the above proposition. The papers are found pertaining to Dhariwal Group as admitted by Shri Mehta and therefore, these documents may be relevant for deciding the issue in the case of Dhariwal Group. However, in the absence of any corroborative evidence, the addition could not be made in the hands of the assessee on the basis of the said papers.
5.12 The CIT(A) has further relied upon ITAT Third Member decision in the case of Dhunjibhoy Stud and Agricultural Farm Vs. DCIT [(2002) 82 ITD 18 (PUNE)(TM)], In this case, the assessee was a builder and had sold flat to one Mr. Tanna. There was search on Mr. Tanna wherein a document was found indicating flat purchased from the assessee firm and the amount of cheque and cash paid. The amount of cheque paid was tallying with the books and therefore, it was held that cash was paid as noted on the paper. Mr. Tanna had also accepted the fact that cash was paid to the assessee. In these facts, ITAT held that since there was transaction between assessee and Shri Tanna and also the fact that the amounts paid by cheque tallied, the addition was rightly made. The assessee rightly submitted that the said decision is not applicable to the facts of the present case. Firstly, there is no transaction between the assessee and Dhariwal Group. Secondly, there is no corroborative evidence found which could suggest that the assessee had received any amount. The Assessing Officer and CIT(A) have also not brought on record any evidence to suggest that the payment was made to the assessee. Accordingly, considering the factual position, the decision in the case of Dhunjibhoy Stud and Agricultural Farm is not applicable in the case of assessee.
5.13 The CIT(A) has relied on the decision in the case of Vasantibai N. Shah Vs. CIT [(1995) 213 ITR 805 (Bom)]. In this case, the issue was regarding validity of reassessment proceedings. The assessee had made a false disclosure. Subsequently, the case was reopened. Hon'ble High Court held that the reopening was valid since the assessee herself had made a false disclosure. Thus, the facts are totally different from the present case and hence, the ratio of Vasantibai N. Shah (supra) is not applicable to the assessee's case. The CIT(A) further relied on the decision in the case of Green Valley Builder v. CIT [(2008) 296 ITR 225 (Ker)]. In the said case, the assessee was engaged in real estate business and it had sold certain plots. The assessee stated that the plots were sold at Rs.1750/- per cent while the Assessing Officer on the basis of evidences held that actually the lands were sold at Rs.4,000/- per cent. Hon'ble High Court held that the additions made were correct. The said decision is not applicable to the facts of the present case. The CIT(A) has further relied upon the decision in the case of Chuharmal Vs. CIT [(1988) 172 ITR 250 (SC)] for the proposition that documentary evidence plays an important part. There is no dispute to the said proposition but in the absence of any corroborative evidence no addition could be made in the hands of the third party.
61ITA No.1311, 1313,1315 to 1317 & 1306 & 1307/PN/2013 5.14 We find that in Thakkar Developers Ltd. [ITA No. 581/PN/08], ITAT in paras 3 and 4 held as under:-
"The above said Shri Kolhe was examined, cross examined and re- examined and no evidence was gathered from him to establish that the contents of the seized documents were correct and true. Thus, in the absence of any corroborative evidence in the present case, the said seized document has to be treated as a dumb document as rightly observed by the CIT(A). The A.O. dismissed the retraction of the statement dated 29.03.2003 by filing an affidavit as an after thought and self serving. The A.O. concluded that the facts mentioned in the seized documents clearly indicated that the statement given on 29.03.2003 was true and correct. The A.O. has not brought on record any material or corroborative evidences to come to these conclusions. The reasons given by the A.O. in this regard are without any basis and support. The affidavit filed by Shri Kolhe remained uncontroverted and which is against the settled legal position on the issue that the contents of the affidavit be rejected by confronting the same to the deponent which is missing in this case. Nothing was shown by the A.O. that there was any other material co related to the seized documents. The A.O. was not justified in rejecting the contents of the affidavit as mentioned above. The A.O. further relied on the presumptions u/s 132(4A) of the Act on the ground that this section was very clear that the contents of book of account and other documents may be presumed to be true and presumption can be drawn even on the third person who was not searched u/s 132 of the Act. The A.O. further rejected the submissions given by the assessee in his paper book dated 28.12.2007 reiterating the same stand. The A.O. has drawn inferences and presupposes relying on surmises and conjectures. The ITAT Mumbai Bench in their decision in the case of Straptex (India) Pvt. Ltd. [84 ITD 320 (Mum), clearly held that the presumption u/s 132(4A) is applicable only against the person from whom possession the books of accounts or other documentary were found and not against any other person. It is held that as per Section 132(4A) where any books of account or document is found in the possession and control of any person in the course of the search, it is to be presumed that they belong to " such person". Thus, clearly the presumption is in respect of the person from whom they were found. The use of the word "to such person" in the said Section means the person from whom the books of account or documents were found. Clause (ii) of Section 132 (4A) provides that the contents of such books of account or documents are true. This presumption can be applied only against the person from whose possession the books of account or the document were found. Therefore, the A.O. was not justified in applying the provisions of Section 132(4'A) to the assessee in the present case who was not searched u/s 132 of the Act nor the document was found and seized from, their possession. Even, otherwise, such presumption u/s 132(4A) of the Act is not conclusive and rebuttable one".
6. Similar view has been taken by ITAT, Pune in Amit D Irshid [ITA No.988/PN/11] that presumption u/s. 134(4A) is available only against the person from whose possession the document is found and not against the third person. In the absence of clinching evidence against the third person as stated above, no action could be taken against him. In such a situation, the Assessing Officer was not justified to make addition in question in assessee's case. In view of above, we are of the view that the addition made by the Assessing Officer is not justified and the same 62 ITA No.1311, 1313,1315 to 1317 & 1306 & 1307/PN/2013 is directed to be deleted. It is pertinent to mention here that this case is being decided in its facts and circumstances; it cannot be applied to other cases as such.
7. In the result, appeal filed by the assessee is allowed."
55. Since in the instant case the assessee from the very beginning has denied to have received any such payment from M/s. Dhariwal group through Mr. Sohan Raj Mehta and since no incriminating material was found from the residence of the assessee during the course of search and since the assessee is not dealing with M/s. Dhariwal group in his individual capacity, therefore, respectfully following the decisions cited above and in view of our reasonings given earlier, we are of the considered opinion no addition in the hands of the assessee can be made. Since it is held that the assessee has not received any amount, therefore, the question of taxing the same u/s.56(2)(vi) as held by CIT(A) does not arise. In this view of the matter, we set aside the order of the CIT(A) and direct the Assessing Officer to delete the addition of Rs.1 crore for A.Y. 2006-07 and Rs. 20 crores for A.Y. 2007-08. Grounds raised by the assessee on this issue are accordingly allowed.
56. Since the assessee succeeds on merit, therefore, the ground relating to validity of assessment u/s.143(3) r.w.s. 153A become academic in nature and therefore the same is not being adjudicated.
45. Since the facts of the instant case are identical to the facts of the case decided by the Tribunal in the case of Shri Vinit Ranawat (supra), therefore, following the aforesaid decision and in absence of any contrary material or distinguishable feature brought to our notice against the said order, we are of the considered opinion that the CIT(A) is not justified in sustaining the addition of Rs.35 lakhs in the hands of the assessee for A.Y. 2004-05. Accordingly, the order of the CIT(A) is set aside and the grounds raised by the assessee are allowed.
46. Identical grounds have been taken in ITA No.1313/PN/2013 for A.Y. 2006-07 (at Rs.2 crores) and in ITA No.1315/PN/2013 for A.Y.2008-09 (at Rs.12 crores). Following the same reasonings, the grounds for the above assessment years are allowed.
63ITA No.1311, 1313,1315 to 1317 & 1306 & 1307/PN/2013
47. Grounds of appeal No.6 and 7 being general in nature are dismissed.
48. There is one more ground for A.Y. 2006-07 as per grounds of appeal No.3 wherein the assessee has challenged the order of the CIT(A) in sustaining disallowance of Rs.1,79,633/- on account of interest paid on borrowings.
49. The Ld. Counsel for the assessee did not press the above ground for which the Ld. Departmental Representative has no objection. Accordingly, this ground by the assessee is dismissed.
ITA No.1316/PN/2013 (A.Y.2009-10) (By Assessee) :50. Ground of appeal No.1 by the assessee reads as under :
"1. The Ld.CIT(A) erred in sustaining the validity of the assessment order passed u/s.153A even though the order was served on the appellant beyond the period of limitation."
51. After hearing both the sides, we find the above ground is identical to ground of appeal No.1 in ITA No.1311/PN/2013. We have already decided the issue and the ground raised by the assessee has been dismissed. Following the same reasoning this ground by the assessee is dismissed.
52. The Ld. Counsel for the assessee did not press ground of appeal No.2 challenging the addition of Rs.1,18,326/- u/s.14A. The Ld. Departmental Representative has no objection. Accordingly, the ground of appeal No.2 is dismissed as 'not pressed'.
53. Grounds of appeal No.3 and 4 being general in nature are dismissed.
64ITA No.1311, 1313,1315 to 1317 & 1306 & 1307/PN/2013 ITA No.1306/PN/2013 (A.Y.2009-10) (By Revenue):
54. Ground of appeal No.1 by the assessee reads as under :
"1. On the facts and in the circumstances of the case the CIT(A) has erred in deleting the addition made to income from house property (near Mahabaleshwar) at Rs.1,80,000/- as against Rs.25,000/- disclosed in the return."
55. Facts of the case, in brief, are that the Assessing Officer during the course of assessment proceedings observed that the assessee has shown income of Rs.47,59,252/- as income from house property.
From the various details furnished by the assessee he noted that assessee has taken annual value of house property at Mahabaleshwar at Rs.25,000/- and after claiming municipal taxes at Rs.8,000/- and 30% deduction of repairs at Rs.5,100/-, the assessee has shown the total income from Mahabaleshwar property at Rs.11,900/-. The Assessing Officer, therefore, asked the assessee to explain as to why the estimation of annual value of the house at Mabaleshwar at Rs.1,80,000/- as adopted by the Assessing Officer while finalising the assessment order for A.Y. 2008-09 should not be adopted. The assessee submitted that the estimation adopted by the Assessing Officer is not correct and the annual value as disclosed in the computation of income is based on facts. However, the Assessing Officer did not accept the contention of the assessee in absence of any supporting evidence and determined the annual value of Mahabaleshwar property at Rs.1,80,000/-. After allowing deduction of 30% on repairs u/s.24 and municipal taxes of Rs.8,0000/- the Assessing Officer determined the annual value at Rs.1,20,400/-.
56. In appeal the Ld.CIT(A) following his order for A.Y. 2005-06 vide Appeal No. PN/CIT(A)-II/Addl.CIT R-3/778/08-08 dated 28-03- 65 ITA No.1311, 1313,1315 to 1317 & 1306 & 1307/PN/2013 2012 deleted the addition made by the Assessing Officer and allowed the ground raised by the assessee.
57. Aggrieved with such order of the CIT(A) the Revenue is in appeal before us.
58. We have considered the rival arguments made by both the sides, perused the orders of the AO and CIT(A) and the paper book filed on behalf of the assessee. We find the Assessing Officer, based on his findings in the original assessment order, took annual value of the house property at Mahabaleshwar at Rs.1,80,000/-. After claiming the statutory repairs u/s.24 and municipal taxes of Rs.8,000/- he determined the Annual value of the Mahabaleshwar house property at Rs.1,20,400/-. We find the Ld.CIT(A) following his order for A.Y.2005-06 deleted the addition made by the Assessing Officer and thereby allowed the ground raised by the assessee determining the annual value at Rs.25,000/-. Since the Ld.CIT(A) while deciding the issue has followed his order for A.Y. 2005-06 on the very same property and since nothing contrary was brought to our notice against the order of the CIT(A) for A.Y. 2005-06.
Therefore, we find no infirmity in the order of the CIT(A) on this issue. Accordingly, the same is upheld and the ground raised by the assessee is dismissed.
59. Grounds of appeal No.2 to 5 by the Revenue read as under :
"2. On the facts and in the circumstances of the case the CIT(A) has erred in allowing deduction u/s. 80IA(4) of the Act in respect of the assessee project "Sai Trinity" ignoring the fact that the assessee admitted to withdrawn the claim during search action.
3. On the facts and in the circumstances of the case the CIT(A) has erred in allowing deduction u/s. 80IA(4) although assessee has not fulfilled the preconditions for claiming deduction under Industrial Park Scheme 2002.66
ITA No.1311, 1313,1315 to 1317 & 1306 & 1307/PN/2013
4. On the facts and in the circumstances of the case the CIT(A) has erred in allowing deduction u/s. 80IA(4) although the IPS 2002 Scheme talks about Industrial Park as a whole not Industrial Units.
5. On the facts and in the circumstances of the case the CIT(A) has erred in allowing deduction u/s. 80IA(4) although application for approval was filed after 31.3.2006, which is beyond the time limit and no fresh approval was taken after rejection of assessee's claim as the project was not commenced within stipulated time."
60. Facts of the case, in brief, are that the Assessing Officer during the course of assessment proceedings found that the assessee had claimed deduction u/s 80IA(4)(iii) of the Act to the tune of Rs.
3,70,52,575/- for its Sai Trinity project situated at S.No 146, Hisssa No. 2/1A+2B/1 +2/1B, Pashan Pune. During the course of survey action u/s 133A at the office premises of M/s Sai Constructions Pvt.
Ltd at 604,605, Sai chambers, Wakdewadi Pune on 20-1-2010, certain loose papers, documents were impounded wherein page No 102 of Bundle No. B was a copy of letter dated 4-3-2009 from Under secretary, Ministry of Commerce and Industry, govt. of India to the assessee which stated that on the basis of State Govt's report dated 23-4-2008, the building in which industrial park is being developed by the assessee's proprietary concern M/s. S Balan did not pertain to individual but belonged to a partnership firm M/s S. Balan & Co.
Further the said letter mentioned that the building is divided into three different wings and only a part of that building (Central wing) is being developed as industrial park and thus it cannot be said that the industrial park is being developed as a whole and accordingly it informed that the case of the assessee was not eligible under the Industrial Park scheme, 2002. During the course of survey action in the statement recorded on 20-1-2010, the assessee stated that he was withdrawing the claim of deduction u/s 80lA subject to the 67 ITA No.1311, 1313,1315 to 1317 & 1306 & 1307/PN/2013 outcome of the review application filed before the ministry of commerce.
61. The Assessing Officer, however, found that during the return filed u/s 153A for A.Y. 2009-10 and that of A.Y. 2010-11 the assessee had claimed deduction u/s 80lA(4)(iii). The Assessing Officer sought the explanation of the assessee and found the explanation to be not acceptable because on the basis of the letter from the under secretary, Ministry of Commerce & Industry the assessee was not eligible for the said claim of deduction. The Assessing Officer also found and has noted that the pendency of the review petition of the assessee before the concerned authority did not make the assessee eligible for the said claim of deduction rather supported the finding that the assessee is not eligible. The Assessing Officer also noted that the assessee had retracted his statement dated 20-01-2010 by filing an affidavit dated 25-11-2011 stating that the admission made was not made by him. However, the Assessing Officer held that though the assessee had retracted the statement, however, the statement bore his signature and that the retraction was not made immediately after the search rather after 22 months and the assessee could not prove any threat or coercion while recording the statement on 20-1-2012. In view of the above fact the Assessing Officer disallowed the claim of deduction u/s.80IA(4) made by the appellant.
62. Before CIT(A) it was submitted that the disallowance of the claim of deduction u/s 80lA(4) was made on the basis of a letter from Secretary, Ministry of Commerce and industry which was found during the survey proceedings and as per the said letter, the assessee's claim for developing the 'Industrial Park' was disqualified 68 ITA No.1311, 1313,1315 to 1317 & 1306 & 1307/PN/2013 as the competent authority felt that the industrial park was not being developed as a whole and, therefore, the assessee's eligibility under the IPS 2002 was denied. The assessee further submitted that he had challenged the decision of the empowered committee of Ministry concerned and the said committee vide its order dated 11-06-2012 after reconsidering the issue granted approval to the assessee's project. The assessee filed the letter dated 12-5-2012 received from the Ministry of commerce and industry, under Rule 46A(1)(c) with a prayer for admission of the same as additional evidence stating that the said letter could not be produced before the Assessing Officer for the obvious reasons that the decision was not rendered by that time.
The said additional evidence filed u/r 46A was forwarded by the CIT(A) to the Assessing Officer for opportunity and rebuttal with respect to the claim of deduction u/s.80IA(4) for AY. 2009-10 and 2010-11. The Assessing Officer forwarded his remand report which was controverted to the assessee.
63. The assessee in its reply to the remand report submitted that the observation of the Assessing Officer that the assessee has not completed the industrial park even upto the date of scrutiny assessment is factually not correct as the assessee started earning income from the industrial park from F.Y. 2006-07 relevant to AY.
2007-08 but due to losses incurred did not have positive gross total income for AY. 2007-08 and 2008-09 due to which the said claim was not taken and the assessee took the claim for the first time in A.Y. 2009-10 when positive gross total income was there. As regards the objection of the Assessing Officer that the industrial park is' being developed by the assessee's proprietary concern does not pertain to individual but belongs to the partnership firm M/s. S 69 ITA No.1311, 1313,1315 to 1317 & 1306 & 1307/PN/2013 Balan & Co. is concerned it was argued that the same is factually not correct. It was stated that the Sai Trinity building originally completed the bare shell', i.e. the RCC frame, brick work and one plaster without any internal amenities and, thereafter, the wings B & C of the building were taken over by the partner S. Balan from the firm and in his individual capacity incurred the entire cost of completion of the building and the said industrial park is situated in these two wings only which belong to S. Balan, individual and not the firm. As regards the objection of the Assessing Officer that the fresh approval has to be taken as required under the IPS 2002 is concerned it was submitted that the park had become operational within the extended period of one year available upto 21-9-2006 and the assessee had already started offering income from the 'industrial park' since F.Y. 2006-07 relevant to A.Y. 2007-08 onwards. The assessee also cited the decision of the jurisdictional Bombay High Court in the case of Silver Land Developers (P) Ltd. and others Vs Empowered Committee (2012) 343 ITR 439 (Bom).
64. Based on the arguments advanced by the assessee the Ld.CIT(A) allowed the claim of deduction by observing as under :
"6.2 The submission made by the appellant and material on record has been perused so also the remand report and the reply of the appellant has also been considered. The Assessing Officer during the assessment proceedings has disallowed the claim of deduction u/s 80IA(4)(iii) primarily on the basis of the letter dated 4-3-2009 from the Under secretary, Ministry of Commerce and industry and the appellant's admission of the aforesaid fact during the statement recorded during the survey action u/s.133A. The aforesaid letter has referred to the Registration No 63/S1A/IP/2006 dated 12-5-2006 and noted that on the basis of the state government's reported dated 23-4-2008 the building in which industrial park was located belonged to a partnership firm S. Balan & Co and not to an individual and that the 'industrial park' was not developed as a whole as only a part of the building was being developed and hence not eligible under the IPS 2002 scheme. It is seen from the statement of the appellant recorded during the survey action that the appellant had also stated that the review petition filed earlier was 70 ITA No.1311, 1313,1315 to 1317 & 1306 & 1307/PN/2013 pending with the Ministry of commerce and subject to that the appellant had stated that the claim was being withdrawn. However, subsequently the appellant had filed an affidavit denying to said claim being withdrawn as the matter was subjudice before the empowered committee. It is also seen that the appellant has fulfilled the conditions specified u/s 80IA(4)(iii) as per the provision of sec 80IA(5), 80IA(7) and 801A(10). The conditions specified by section 80IA(4)(iii) are:
(1) The asessee develops, develops and operates or maintains and operates an industrial park.
(2) The industrial park should be noticed by the Central Government.
(3) The notification should be in accordance with the scheme framed and notified by the government for the specified period.
Sec 80IA(4)(iii) thus provides for a deduction of the profit derived by the assessee from developed or development and operation of an industrial park notified by the Central govt. The eligibility period of development of such an industrial park was initially between 1st April 1997 to 31st March 2006. However, the Finance Act 2006 has extended the period to 31st March 2011. Thus it is apparent that the responsibility of verifying the authenticity of the appellant's claim vests in the concerned ministry of central govt. and the role of the Assessing Officer in that regard is limited. The IPS scheme as notified from time to time by the central govt. is a code in itself and it lays down the criteria of eligibility, procedure of approval, condition to be satisfied by the developer etc. and once the decision of the concerned ministry in its wisdom grants the approval, it is incumbent on the part of the Assessing Officer to grant the deduction. The Assessing Officer may, however, look into the other technical requirements of the provisions contained in section 80lA i.e. -
(1) the deduction to be computed as if the eligible business i.e. the industrial park is the only source of income for the assessee.
(2) the assessee must submit Audit Report.
(3) Income from eligible business if arising from connected parties, AO can rework the deduction The eligible business as per section 80IA(5) i.e. the industrial park is the only source of income for the assessee: section 80IA(7) i.e. the assessee must submit audit report which the appellant has submitted, and sec 80IA(10) i.e. income of eligible business if arising from connected parties Assessing Officer can rework the deduction, and the Assessing Officer has not disputed these aspects as is evident from the assessment order. In the light of the above fact, the letter of approval dt. 11th June 2012 filed by the appellant u/r 46A assumes importance whereby the empowered committee has accepted the representation made by the appellant and approved the project as an industrial park which prima facie entitles the appellant for the deduction.
6.3 The A.O. in the remand report has stated that the request of the appellant regarding admission of the additional evidence may not be entertained. It is trite law that the powers of the CIT (Appeals) are 71 ITA No.1311, 1313,1315 to 1317 & 1306 & 1307/PN/2013 coterminous with the powers of 'A.O. In the case of Smt. Prabhavati S. Shah Vs CIT (1998) 231 ITR 1 (MUM) it was held that sub-rule (4) of Rule 46A specifically restore power of appellate authority to call for production of any document to enable him to dispose appeal. Sub- section (4) of section 250 empowers the appellate authority to take additional evidence. Scope of power is coterminous with ITO. Conjoint reading of section 250 and Rule 46A shows that restriction on the appellant do not affect the' powers of the Appellate Authority for the purpose of Rule 46A appears to be to ensure that evidence is primarily led before the Assessing Officer. Section 250(4) being a quasi-judicial powers, it is incumbent on CIT (Appeals) to exercise the same if the facts and circumstances justify. It appears that due to some genuine reasons the submissions could not be produced during the assessment proceedings, therefore, the evidence produced by the appellant is being taken into consideration for deciding the issue and is accordingly admitted for adjudication. The appellant's prayer for the admission of additional evidence u/r. 46A(1)(c) is, therefore, admitted for A.Y. 2009-10.
6.4 The empowered committee has reconsidered the earlier rejection and granted approval for these units on 11th June 2012 with reference to the date of application 12.5.2006 as is evident from the said letter. The appellant has also clarified the issue regarding the development of the industrial park by an individual and not by the partnership firm as is also evident from the approval granted by the Ministry of Commerce. It is seen from the record that the appellant applied for approval of the 'Industrial Park' in Sai Trinity building under 'non automatic' approval route on 08.12.2005 and received approval on 09.12.2005. The appellant has, thereafter, applied for reduction in number of units on 26.04.2006. The 'Industrial Park' was commissioned in September 2006. The material on record indicates that on the basis of an erroneous. State Government report about the ownership of property in which industrial park was situated, the Ministry of Commerce & Industry rejected approval vide its letter dated 04.03.2009 and it was the same letter which was found during the survey action and on the basis of which the claim of deduction made by the appellant was rejected by the Assessing Officer. However, the appellant prior to the search and survey action had applied for a review of the rejection to the Empowered Committee on 24.04.2009 as is evident from the documents filed by the appellant. The Empowered Committee after reconsideration of the earlier rejection has granted approval for three units on 11th June 2002 to Shri S. Balan, the appellant which is effective from 12.05.2006. The appellant has also fulfilled the other conditions as envisaged u/s 80IA and which is also not disputed by the Assessing Officer. The objection of the Assessing Officer that the Industrial Park is being developed by the partnership firm is also not factually correct in view of the explanation furnished by the appellant and also the letter issued by the Competent Authority. Thus taking the entire fact in totality it is apparent that the entire responsibility of the assessee about setting up, developing and operating the industrial park vests with the Ministry of Commerce & Industry of the Central Government and thus the A.O. does not have any role in it. The Industrial Park scheme is a code in itself wherein it lays down the criteria of eligibility, procedure of approval, condition to be satisfied and once the Central Government in its wisdom grants the approval it is incumbent on the part of the Assessing Authority to grant the claim of deduction. It is only the technical requirement of section 80IA(3), 80lA 72 ITA No.1311, 1313,1315 to 1317 & 1306 & 1307/PN/2013 (5), 80IA(7) and 80IA(10), which could be examined and verified by the Assessing Officer. In the case cited by the appellant of Hon'ble Bombay High Court in the case of Silver Land Developers & Others Vs Empowered Committee (2012) 343 ITR 439 (Bom), the Empowered Committee had refused approval to the assessee under the Industrial Park Scheme and the Court held that section 80IA(4)(iii) does not contain a specific requirement that the Industrial Park has to be developed in accordance with the scheme framed by the Central Government. In the case of Primal Projects (P) Ltd. Vs DCIT (2011) 56 DTR 291 (Bang), the Bangalore ITAT held that once the projects are approved and notifications are made by the appropriate authorities, the approval and notification run back to the date of commencement of the activities."
65. Aggrieved with such order of the CIT(A) the Revenue is in appeal before us.
66. We have considered the rival arguments made by both the sides, perused the orders of the AO and CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find no infirmity in the order of the CIT(A). We find the Assessing Officer disallowed the claim of deduction u/s.80IA(4)(iii) on the basis of the letter dated 04-03-2009 from the under secretary in the Ministry of Commerce and Industry that the assessee was not eligible for deduction u/s.80IA(4). Further in the statement recorded during the course of survey action u/s.133A the assessee had withdrawn such claim made u/s.80IA(4). According to the Assessing Officer pendency of the review petition before the concerned authority did not make the assessee eligible for the said deduction. We find in appeal the Ld.CIT(A) after obtaining a remand report from the Assessing Officer and considering the comments of the assessee to such remand report allowed the claim of deduction u/s.80IA(4), the reasons of which are already reproduced in the preceding paragraphs.
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67. We do not find any infirmity in the order of the CIT(A) on this issue. We find identical issue had come up before the Tribunal in the case of M/s. Kolte Patil Developers Ltd. vs. DCIT and vice versa vide ITA Nos. 1411 to 1415/PN/2013 and ITA Nos. 1478 to 1483/PN/2013 for A.Yrs. 2004-05 to 2009-10. The Tribunal after elaborately considering identical issue had decided the issue in favour of the assessee by observing as under :
"37. We have carefully considered the rival submissions. Factually speaking, the Industrial park - Giga Space developed by the assessee is notified by the Central Government in accordance with the IPS, 2008. There is also no denying the fact that the Industrial Park - Giga Space approved under the IPS, 2008 has been found to be eligible for deduction u/s 80-IA(4)(iii) of the Act in the subsequent assessment years. In the subsequent assessment years, the profits derived from the development of Industrial Park - Giga Space have been considered for deduction u/s 80-IA(4)(iii) of the Act by the Assessing Officer. In the instant assessment year 2007-08, which is the first year of claim by the assessee, the Assessing Officer as well as the CIT(A) have rejected the claim. The grounds on which the said claim has been denied, have already been enumerated by us in the earlier part of this order.
38. Before we proceed to address the controversy surrounding the objections raised by the Revenue, it would be appropriate to briefly touch-upon the relevant provisions of the Act and the clauses of the IPS, 2008 in question. Section 80-IA of the Act prescribes for deduction in respect of profits and gains from industrial undertakings or enterprises engaged in infrastructure development, etc.. Sub-section (1) of section 80-IA prescribes that where the gross total income of assessee includes any profits and gains derived by an undertaking or an enterprise from any business referred to in sub-section (4), there shall been allowed in computing the total income of the assessee a deduction of an amount equal to hundred per cent of the profits and gains derived from such business for ten consecutive assessment years in accordance with and subject to the provisions of the section. Sub-section (2) of section 80-IA prescribes that the deduction specified in sub-section (1) may, at the option of the assessee, be claimed for any ten consecutive assessment years out of fifteen years beginning from the year in which the undertaking or the enterprise develops and begins to operate any infrastructure facility or starts providing telecommunication services or develops an industrial park or develops a special economic zone or generates power or commences transmission or distribution of power or undertakes substantial renovation and modernization of the existing transmission or distribution lines. Shorn of other details, we may now come to sub-section (4) of section 80-IA, which enumerates the various businesses to which the provisions of section 80-IA of the Act are applicable, such business being referred to as the 'eligible business'. For the purpose of the present controversy, we are concerned with the sub-74
ITA No.1311, 1313,1315 to 1317 & 1306 & 1307/PN/2013 clause (iii) of sub-section (4) to section 80-IA of the Act, whose relevant portion reads as under :-
"(iii) any undertaking which develops, develops and operates or maintains and operates an industrial park [or special economic zone] notified by the Central Government in accordance with the scheme framed and notified by that Government for the period beginning on the 1st day of April, 1997 and ending on the 31st day of March, [2006] :
[Provided that ......................... ..
[Provided further that in the case of any undertaking which develops, develops and operates or maintains and operates an industrial park, the provisions of this clause shall have effect as if for the figures, letters and words "31st day of March, 2006", the figures, letters and words "31st day of March, 2011" had been substituted;]"
39. In terms of the aforesaid, any undertaking which is engaged in (i) developing; (ii) developing and operating; or (iii) maintaining and operating an industrial park notified by the Central Government in accordance with the scheme framed by the Central Government for the period beginning on 1st day of April, 1997 and ending on 31st March, 2006 shall be eligible for the benefit of section 80-IA of the Act. It may be noted that by the Finance (No.2) Act, 2006, the applicability of sub- clause (iii) was extended from 31.03.2006 to 31.03.2009. In other words, any undertaking which was engaged in (i) developing; (ii) developing and operating; or (iii) maintaining and operating an industrial park shall be eligible for deduction for the period beginning on 1st day of April, 1997 and ending on 31st March, 2009.
40. Notably, for the period under consideration before us, the Central Government formulated a Scheme in exercise of the powers under clause
(iii) of sub-section (4) of section 80-IA of the Act and it was called 'Industrial Park Scheme, 2008'. The said Scheme defines 'industrial park' in clause 2(h) as under :-
"2(h) "industrial park" means a project in which plots of developed space or built up space or a combination, with common facilities and quality infrastructure facilities, is developed and made available to the units for the purposes of industrial activities or commercial activities in accordance with this scheme."
41. Similarly, clause 2(i) of the Scheme defines 'infrastructure facility' as under :-
"2(i) "infrastructure facility" means facilities required for development operation and maintenance of the industrial park and include roads (including approach roads), water supply, sewerage and effluent treatment facilities, solid waste management facilities, telecom network, generation and distribution of power, air conditioning."
42. Clause 2(f) of the Scheme defines the term 'date of commencement' as under :-
75ITA No.1311, 1313,1315 to 1317 & 1306 & 1307/PN/2013 "2(f) "date of commencement" means the date of obtaining the completion certificate or occupation certificate, as the case may be, from the relevant local authority, certifying thereby that all the required development activities for the project have been completed."
43. Clause 3 of the Scheme provides for the procedure for approval, which reads as under :-
"(1) Any undertaking which develops, develops and operates or maintains and operates an industrial park may make an application for notification under clause (iii) of sub-section (4) of section 80-IA of the Act, in the prescribed form, IPS-I, to the Secretary (ITA-I section), Central Board of Direct Taxes, Department of Revenue, Ministry of Finance, North Block, New Delhi.
(2) The Central Board of Direct Taxes shall process the application for approval and notification by the Central Government and for this purpose it may call for reports from other Departments or agencies, as it may deem fit."
44. Clause 4 of the Scheme provides the criteria for approval, which reads as under :-
"4. An undertaking shall be considered for notification under clause
(iii) of sub-section (4) of section 80-IA of the Act, if it fulfils all of the following conditions, namely :-
(1) The date of commencement of the Industrial Park should be on or after the 1st day of April, 2006 and not later than 31st of March, [2011];
(2) The are allocated or to be allocated to industrial units shall not be less than seventy-five per cent of the allocable area;
(2A) The area allocated or to be allocated for commercial activity shall not be more than ten per cent of the allocable area;
(3) There shall be a minimum of thirty industrial units located in an industrial park;
(4) For the purpose of computing the minimum number of industrial units; all units of a person and his associated enterprises will be treated as a single unit;
(5) The minimum constructed floor area shall not be less than 15,000 square meters;
(6) No industrial unit, along with the units of an
associated enterprise, shall occupy more than
twenty-five per cent of the allocable area;
(7) The industrial park should be owned by only one
undertaking; and,
(8) Industrial units shall only undertake activities
defined in clause (j) of para (2)."
76
ITA No.1311, 1313,1315 to 1317
& 1306 & 1307/PN/2013
45. Clauses 5 and 6 of the Scheme pertain to General Conditions and Withdrawal of approval which read as under :-
"General Conditions.
"5. (1) The industrial park shall be constructed as developed on the date of commencement.
(2) Tax benefits under the Act will be available to the undertaking only after minimum number of thirty units are located in the Industrial Park. (3) The tax benefits under the Act will be available to the undertaking only if the undertaking and the industrial park have been notified by Central Board of Direct Taxes under section 80-IA of the Act. (4) The tax benefits under the Act will be available only to the undertaking notified by the Central Government and not to any other person who may subsequently develop, develops and operates or maintains and operates the notified industrial park, for any person. (5) The undertaking must keep separate books of account for the industrial park and must file its income-tax returns by the due date to the Income-tax Department.
(6) An industrial park approved under Industrial Park Scheme, 2002 will continue to be governed by the provisions of that Scheme to the extent it is not in contravention with the provisions of Act, as amended from time to time.
(7) The undertaking shall electronically furnish an annual report to the Central Board of Direct Taxes in Form IPS-II.
Withdrawal approval.
6. The Central Government may withdraw the approval given to an undertaking under this Scheme if the undertaking fails to comply with any of the conditions listed in paragraphs 4 and 5 of this Scheme :
Provided that before withdrawal of approval, the undertaking shall be given an opportunity of being heard by the Central Government."
46. Having taken note of the provisions of the scheme, we may also refer to rule 18C of the Income Tax Rules, 1962 (in short "the Rules") which deals with the eligibility of an Industrial Park for benefits of section 80-IA(4)(iii) of the Act. Rule 18C of the Rules, as applicable for the assessment year under consideration reads as under :-
"Eligibility of Industrial Parks for benefits under section 80-IA(4)(iii). 18C. (1) The undertaking shall begin to develop, develop and operate or maintain and operate an industrial park any time during the period beginning on the 1st day of April, 2006, and ending on the 31st day of March, [2011].
(2) The undertaking and the Industrial Park shall be notified by the Central Government under the Industrial Park Scheme, 2008. (3) The undertaking shall continue to fulfill the conditions envisaged in the Industrial Park Scheme, 2008."77
ITA No.1311, 1313,1315 to 1317 & 1306 & 1307/PN/2013
47. From a perusal of the aforesaid relevant provisions of the Act, Rules and Scheme, it is noticed as follows. Than an undertaking which is engaged in (i) developing; (ii) developing and operating; or (iii) maintaining and operating an industrial park notified by the Central Government in accordance with the scheme shall be eligible for the benefits of section 80-IA(4)(iii) of the Act. The aforesaid three categories are distinct and so far as the assessee is concerned, it has claimed approval under the scheme on the strength of it being engaged in developing of an industrial park. Therefore, it is in the aforesaid context that one has to determine the requirements which the assessee is called upon to fulfill in order to claim deduction u/s 80-IA(4)(iii) of the Act.
48. Under the scheme, assessee was eligible to be considered for notification under clause (iii) of sub-section (4) of section 80-IA of the Act, if it fulfilled the criteria laid down in clause 4 of the Scheme, which we have reproduced above. The foremost requirement was that the date of commencement of the Industrial Park should be on or after the 1st day of April, 2006 and not later than 31st March, 2009. Clause 4 of the Scheme has seven other criterion for approval which we are not dealing individually, as undisputedly the Industrial Park of the assessee fulfills all the criteria prescribed in clause 4 of the Scheme for obtaining the notification under clause (iii) of sub-section (4) of section 80-IA of the Act. We say so for the reason that the Revenue does not dispute that the undertaking of the assessee has been approved under the scheme and for the subsequent assessment years the claim of deduction u/s 80-IA of the Act stands allowed by the Assessing Officer. Secondly, the General Conditions prescribed in clause 5 of the Scheme have been fulfilled by the assessee and in-fact there is no case made out by the Revenue that the Central Government has invoked clause 6 of the Scheme, which permits the Central Government to withdraw the approval given to the undertaking under the Scheme if it fails to comply with any of the conditions listed in clauses 4 and 5 of the Scheme. Be that as it may, it would be appropriate to infer that so far as the compliance of assessee's undertaking to the requirements of the Scheme are concerned, there is no dispute.
49. Now, the claim of the assessee is that it started the process of development of the Industrial Park somewhere in October, 2004 and the construction was spread over a number of years. As and when the individual units were being completed, assessee sold it to the clients. The assessee was offering and recognizing income on such sales in the respective years, and the income under consideration this year is from the sale of units. During the year under consideration, Assessing Officer has noted that only 21 units were located in the Industrial Park. In other words, only 21 units were operational and not the complete 30 units, i.e. the total number of units which were to be developed in the Industrial Park. The Assessing Officer has referred to clause 2(f) of the Scheme to say that the 'date of commencement' of Industrial Park is the date on which the completion certificate was obtained from the local authority certifying thereby that all the required development activities of the project has been completed. As per the Assessing Officer, in this case, the certificate from the local authority has been obtained on 09.05.2007 and therefore in terms of the Scheme, the date of commencement of the Industrial Park is to be understood as 09.05.2007 which falls beyond the previous year relevant to the assessment year under consideration. On 78 ITA No.1311, 1313,1315 to 1317 & 1306 & 1307/PN/2013 this basis, it is said that the Industrial Park of the assessee was not complete as on 31.03.2007, and thus deduction u/s 80-IA of the Act could not be allowed for assessment year 2007-08.
50. It is to be appreciated that clause 2(f) of the Scheme defining the expression 'date of commencement' is relevant in the context of condition (1) of clause 4 of the Scheme which prescribes the criteria for approval of an Industrial Park. Condition (1) of clause 4 of the Scheme prescribes that an undertaking shall be considered for notification under clause (iii) of sub-section (4) of section 80-IA of the Act if the date of commencement of the Industrial Park is on or after 01.04.2006 and not later than 31.03.2009. In this case, date of commencement of 09.05.2007 determined in accordance with clause 2(f) of the Scheme fulfills the condition (1) of clause 4 of the Scheme. Pertinently, the meaning of the expression 'date of commencement' contained in clause 2(f) of the Scheme is to be understood in the context of the Scheme. The question is as to whether the 'date of commencement' in clause 2(f) of the Scheme can be used to deny a claim of deduction u/s 80-IA(4) of the Act, especially in the face of an undisputed fact-situation that the undertaking of the assessee contains to be approved/notified under the Scheme. If a condition prescribed in the Scheme is found to fulfilled for the purposes of notification of the Scheme u/s 80-IA(4)(iii) of the Act, can it be simultaneously said that the same condition is not fulfilled in the context of application of section 80-IA(4)(iii) of the Act r.w. rule 18C of the Rules; and, the answer, in our view, is obviously No.
51. At this point, we may also refer to rule 18C of the Rules which prescribes the eligibility of an Industrial Park for benefits of section 80- IA(4)(iii) of the Act. The provisions of the rule as applicable for the year under consideration have been reproduced by us in the earlier paragraphs. Sub-rule (1) of rule 18C of the Rules says that the undertaking ought to begin to develop, develop and operate or maintain and operate an Industrial Park at any time during the period beginning on 01.04.2006 and ending on 31.03.2009. Sub-rule (2) of rule 18C of the Rules says that the undertaking of an Industrial Park shall be notified by the Central Government under the IPS, 2008. Sub-rule (3) of rule 18C of the Rules says that the undertaking shall continue to fulfill the conditions envisaged the IPS, 2008. Notably, there is no dispute that the undertaking of the assessee i.e. Industrial Park - Giga Space is duly notified by the Central Government under the IPS, 2008 and it continues to fulfill the conditions envisaged in the IPS, 2008 inasmuch as there is no withdrawal of approval by the Central Government, as provided for in clause 6 of the Scheme. Therefore, to say on the strength of clause 2(f) of the Scheme that the assessee has not complied with the requirements of the Scheme for staking claim u/s 80-IA(4)(iii) of the Act in the face of the fact that the undertaking i.e. the an Industrial Park continues to be notified by the Central Government, is unjustified and uncalled for.
52. The Revenue has emphasized that the development envisaged in the approval ought to have been completed by the assessee before 31.03.2007 itself i.e. within the previous year relevant to the assessment year under consideration, before it could claim the benefits of section 80-IA(4)(iii) of the Act. There is no dispute that the undertaking of the assessee is notified by the Central Government in accordance with the IPS, 2008 for the purposes of clause (iii) of section 80-IA(4) of the Act. Moreover, the eligibility conditions prescribed in rule 18C of the Rules, 79 ITA No.1311, 1313,1315 to 1317 & 1306 & 1307/PN/2013 which we have reproduced in the earlier paras and which is relevant for the year under consideration, belies the stand of the Revenue. The opening sentence in sub-rule (1) of rule 18C of the Rules says that the "undertaking shall begin to develop; develop and operate; and, maintain and operate .........". The aforesaid wordings show that the Industrial Park in question is eligible for the benefit of section 80-IA(4)(iii) of the Act in the instant year also. Quite clearly, an undertaking which begins to develop is also eligible for the benefit of section 80-IA(4)(iii) of the Act. In this case, in the instant assessment year, assessee has developed and sold 21 units out of the total 30 units envisaged in the approval and it has obtained the completion certificate on 09.05.2007 after completing the balance units. The units sold by the assessee have yielded profits during the year under consideration which the assessee has declared in its Profit & Loss Account. Thus, going by the eligibility conditions contained in rule 18C of the Rules, the undertaking of the assessee which stands notified for the purposes of section 80-IA(4)(iii) of the Act, is entitled to the benefits of section 80-IA(4)(iii) of the Act qua the profits from such development which have been declared by the assessee in its books of account for the year under consideration. The stand of the Revenue that the claim of deduction can be availed only after the park is developed i.e. only after issuance of completion certificate by the 'local authority' does not emerge from the reading of section 80-IA(4)(iii) of the Act r.w. rule 18C of the Rules, as it stands for the period under consideration.
53. At this stage, we may also refer to the stand of the Revenue based on the clause 5 of Scheme. As per the condition (2) of clause 5, it is prescribed that the tax benefits under the Act will be available to the undertaking only after minimum number of thirty units are located in the Industrial Park. On the strength of this, it is pointed out that as on 31.03.2007 i.e. before the close of the previous year relevant to the assessment year under consideration, the minimum number of thirty units are not located in the Industrial Park; and, thus as per the Revenue assessee is not entitled to the claim of deduction in this assessment year. The aforesaid condition contained in clause 5(2) of the Scheme have to be understood in the context of condition (3) of clause 4 of the Scheme. The condition (3) of clause 4 of the Scheme prescribes that for obtaining approval, the Industrial Park should have a minimum of thirty industrial units located in it. The General condition contained in clause 5(2) only echoes the criteria for approval prescribed in clause 4 of the Scheme. However, the conditions prescribed in the Scheme are for the purposes of enabling the Central Government to consider an undertaking fit for notification for the purposes of section 80-IA(4)(iii) of the Act. The approval granted to the Industrial Park of the assessee under the Scheme continues to hold the field and there is no case of the Revenue that it has been withdrawn in terms of clause 6 of the Scheme. Thus, it is safe to deduce that the Industrial Park of the assessee has complied with the provisions prescribed in clause 5 of the Scheme.
54. Moreover, even if one has to appreciate the condition (2) of clause 5 of the Scheme which uses the words "............ tax benefits ........ will be available ............. only after minimum number of thirty units are located ...........". The implication of the said condition, as understood by the Revenue, is that a minimum number of thirty units should be located before the end of the financial year for which the deduction is being claimed. Quite clearly, the aforesaid condition in clause 5 of the Scheme 80 ITA No.1311, 1313,1315 to 1317 & 1306 & 1307/PN/2013 does not prescribe that the compliance for the location of minimum number of thirty units in the Industrial Park is to be seen in the context of every assessment year in which the assessee is claiming deduction u/s 80-IA of the Act. The compliance has to be seen in the context of the period permissible under the Scheme for development of the Industrial Park. Ostensibly, the period permissible in the Scheme for location of minimum thirty units has been complied with by the assessee as its date of completion is 09.05.2007 i.e. much earlier than the outer limit of 31.03.2009 prescribed by the Scheme. On this aspect, the Ld. Representative for the assessee has pointed out that clause 5(2) of the Scheme merely implies that when the claim of deduction is before an income-tax authorities, it should be seen that the minimum number of thirty units are located in the Industrial Park. It is pointed out that even the outer limit for availment of benefit of section 80-IA(4)(iii) of the Act in the present case is 31.03.2009; and, when the assessment order was passed by the Assessing Officer in this case on 31.03.2010, the only point of scrutiny was to enquire whether or not thirty units have been located in the Industrial Park ? In the present case, it is pointed out that it is undisputed that the minimum thirty units have been located in the Industrial Park before the date specified in the Scheme as well as the Act and therefore the said condition has been fulfilled.
55. We find enough merit in the interpretation put-forth by the assessee. Ostensibly, the conditions in the Scheme have been inserted with an objective that once an undertaking is considered for notification u/s 80-IA(4)(iii) of the Act, there is a mechanism available to check as to whether the conditions prescribed in the Scheme have been complied with. In other words, in the context of the present controversy vis-à-vis clause 5(2) of the Scheme the objective is to ensure that the assessee does not claim deduction without putting the park to use for minimum 30 industrial units in accordance with the Scheme approved but it does not envisage that the location of minimum 30 industrial units be seen for every assessment year for which the claim is lodged, moreso, when the profits are declared by an assessee based on its normal method of income recognition. It may be pointed out that the provisions of section 80-IA(4)(iii) of the Act itself envisages deduction in case of an undertaking which develops, develops and operates or maintains and operates an Industrial Park for the period beginning on the 1st April, 2006 and ending on or before 31st March, 2009. Similarly, the scheme also envisages that the date of commencement of an Industrial park should be on or after 01.04.2006 but not later than 31.03.2009. Where the projects involve a period of gestation in its construction, the period of development may extend beyond one assessment year. Therefore, assessee would be eligible to claim deduction with respect to the profits from Industrial Park over multiple assessment years so long as the dates prescribed in the Act as well as in the Scheme for development of the Industrial Park are adhered to. The assessee would declare profits on the basis of its method of accounting and in our view, in respect of the relevant assessment years, any profits derived from the eligible business categorized in section 80-IA(4)(iii) of the Act shall be entitled for a deduction u/s 80-IA(4)(iii) of the Act. In our view, so long as the profits are derived from the eligible business and the business of the undertaking has been developed in accordance with the Scheme in which it is notified, then assessee shall be eligible for the benefit of section 80-IA(4)(iii) of the Act.
81ITA No.1311, 1313,1315 to 1317 & 1306 & 1307/PN/2013
56. In this context, we may mention that a similar controversy had arisen in the context of the claim of deduction u/s 80-IB(10) of the Act, wherein an assessee can claim deduction in the years when it sells some of the residential units although the housing project is still under construction period as stipulated in section 80-IB(10) of the Act. The CBDT vide Instruction No.4 of 2009 dated 30.06.2009 clarified that the deduction u/s 80-IB(10) of the Act can be claimed on a year to year basis where an assessee was showing profits from partial completion of the project in every year. It has also been clarified by the CBDT that on a later date, if it is found that the condition of the completion of project within the stipulated time is not fulfilled by the assessee then the Assessing Officer can withdraw the deduction allowed to the assessee in earlier years. In our considered opinion, a similar analogy has to be applied in the present case to understand the import and meaning of condition (2) of clause 5 of the Scheme. In our considered opinion, the lower authorities are not justified in disallowing the deduction claimed by the assessee u/s 80-IA(4)(iii) of the Act merely because the minimum number of thirty units are not located in the Industrial Park before 31.03.2007 when otherwise it is factually true that the minimum number of units have been located in Industrial Park in compliance with period stipulated and approved in the Scheme. Therefore, on this aspect, we find no reason to uphold the objection of the Revenue.
57. In-fact, the controversy before us in relation to the claim of deduction u/s 80-IA(4)(iii) of the Act pertaining to the instant assessment year is similar to what was considered by the Mumbai Bench of the Tribunal in the case of Ferani Hotels Pvt. Ltd. vs. DCIT, vide ITA Nos.1828 & 1829/Mum/2009 dated 24.02.2012 pertaining to assessment years 2004-05 and 2005-06. The aforesaid decision was relied upon by the assessee in the course of hearing. In the case before the Mumbai Bench of the Tribunal, assessee had claimed deduction u/s 80-IA(4)(iii) of the Act in respect of profits from development of an Industrial Park. The claim was disputed by the Revenue for assessment years 2004-05 and 2005-06. The objection of the Revenue was that the notification issued by the Central Government notifying the Industrial Park was dated 12.07.2006. It was also the case of the Revenue that as on the last day of the relevant assessment years i.e. 2004-05 and 2005- 06, all the 33 units approved in the Scheme were not developed in the Industrial Park. As per the Revenue, the notification was also issued by the Central Government on 12.07.2006, which was posterior to the assessment years 2004-05 and 2005-06. The claim of the assessee was that it was following percentage completion method of accounting and was offering income on the basis of the percentage of construction completed. Thus, the profits from the industrial Park were also offered for assessment years 2004-05 and 2005-06 on which claim for deduction u/s 80-IA(4)(iii) of the Act was made. Assessee also submitted that ultimately all the conditions prescribed for deduction u/s 80-IA(4)(iii) of the Act were complied with and that in the subsequent assessment year 2006-07 assessee was indeed allowed the deduction by the Assessing Officer. The Tribunal held that the denial of deduction on the aforesaid grounds in assessment yeas 2004-05 and 2005-06 was not justified. It was specifically noted that because in the first two years the minimum number of units were not located in the Industrial Park was not a valid ground for disallowing the claim especially when in the ultimate analysis the Industrial Park was developed in accordance with 82 ITA No.1311, 1313,1315 to 1317 & 1306 & 1307/PN/2013 the approval granted by the Central Government. The following discussion in the order of the Tribunal worthy of notice :-
"25. From the reasons assigned by the revenue authorities for rejecting the claim of the Assessee for deduction u/s.80-IA(4)(iii) of the Act, it is clear that an Assessee who adopts the percentage completion method of accounting of income from developing industrial park can get deduction of only that part of the profits that are offered to tax in the year in which the notification is received. Had the Assessee in the present case followed project completion of method of accounting of income from developing industrial park, the Assessee would have got the benefit of deduction of the entire profits from the development of industrial park. It will result in a situation where the method of accounting followed by the Assessee (such as the one in the present case) will deny the benefit available under the law. The method of accounting is such that the Assessee can never get the benefit even in a later year. It is no doubt true that the satisfaction of the conditions for grant of deduction as on the last date of the previous year is necessary. If due to subsequent events that take place after the last date of the previous year, conditions for grant of deduction are satisfied, then the Assessing Officer can take cognizance of the same. The CBDT in Instruction No.4/2009 dt. 30.06.2009 clarified the position with regard to allowing deduction u/s.80-18(10) of the Act. U/s.80-IB(10) of the Act, deduction of 100% profits derived from developing and building housing projects is allowed. One of the conditions to be satisfied for claiming such deduction was that the housing project should have commenced construction on or after 1.10.1998 and completed the construction within 4 years from the financial year in which the housing project is approved by the local authority. The question arose whether the deduction can be claimed by Assessees who follow percentage completion method of accounting by showing part of the profits or the deduction would be available only in the year of completion of the project u/s.80-IB(10) of the Act. The CBDT clarified that deduction can be claimed on a year to year basis where the Assessee is showing profit from partial completion of the project every year. It further clarified that if the condition for completion of the project within the specified time limit is not satisfied, the deduction granted to an Assessee in earlier years can be withdrawn. We are of the view that there is no reason why similar benefit should not be extended to Assessee claiming benefit u/s.80-IA(4)(iii) of the Act when the conditions for grant of deduction were satisfied by the Assessee even before the AO passed the order of assessment. The facts of the present case justify considering the plea of the Assessee for grant of deduction u/s.80-IA(4)(iii) of the Act in respect of profits declared in AY 04-05 and 05-06 and allowing the same as admittedly the conditions for grant of such deduction were satisfied though at a later point of time but nevertheless before completion of assessment for those assessment years. We direct accordingly. The appeals of the Assessee are accordingly allowed."
58. The aforesaid decision of the Tribunal in the case of Ferani Hotels Pvt. Ltd. (supra), in our view, fully covers the controversy before us. In the present case also it is not in dispute that the assessee has developed and located the minimum number of 30 industrial units in the Industrial Park within the period specified in the Scheme as well as the provisions of section 80-IA(4)(iii) of the Act. It is also not in dispute that in the subsequent assessment years, the Assessing Officer has allowed the deduction u/s 80-IA(4)(iii) of the Act. In the instant assessment year, assessee has operationalised 21 industrial units out of the minimum 30 83 ITA No.1311, 1313,1315 to 1317 & 1306 & 1307/PN/2013 required to be developed. The balance of the 9 units have been completed on 09.05.2007 i.e. the date on which assessee has obtained the completion certificate from the Pune Municipal Corporation. Hypothetically speaking, if the assessee had not recognized the profits on the 21 units sold during the year under consideration but would have waited recognition of income after the completion of the complete 30 units, then such profits would have been offered by the assessee to tax in the subsequent assessment year, wherein in any case the Assessing Officer has held the assessee entitled for the deduction u/s 80-IA(4)(iii) of the Act. However, assessee has declared income from the sale of units on a progressive basis i.e. in the year in which the particular industrial units have been sold. This has lead to a conflict between the assessee and the Revenue with regard to the assessee's claim for deduction u/s 80-IA(4)(iii) of the Act. The moot question is - can the method of accounting followed by the assessee be determinative of assessee's claim for deduction u/s 80-IA(4)(iii) of the Act especially in a situation where assessee is otherwise said to have complied with the requirements of section 80-IA(4)(iii) of the Act read along with the provisions of the IPS, 2008 under which the Industrial Park of the assessee has been notified. In-fact, if the stand of the Revenue is to be accepted, what would happen is that assessee's claim for deduction u/s 80-IA(4)(iii) of the Act shall be denied in the instant year and in the subsequent years also assessee would not be able to claim the benefit because the impugned profits would not have been accounted for by the assessee in the subsequent years. That would mean that the assessee would never get the benefit of section 80-IA(4)(iii) of the Act qua the impugned profits derived from the development of the Industrial Park merely because of the method of accounting followed. In-fact, the Mumbai Bench of the Tribunal in the case of Ferani Hotels Pvt. Ltd. (supra) observed that the Revenue deserves to be satisfied that the conditions for grant of deduction are fulfilled on the last day of the previous year, so however, if the subsequent events after the last date of the previous year show that the conditions for grant of deduction are fulfilled, then the Assessing Officer ought to take cognizance of the same and allow the claim of the assessee. Following the aforesaid parity of reasoning, in our view, in the present case too it is undeniable that assessee has complied with the requirement of locating minimum of 30 industrial units in the Industrial Park within the period prescribed in the Scheme, and therefore its claim for assessment year 2007-08 was unjustly disallowed.
59. Before parting, we may also refer to the decision of the Hon'ble Third Member of the Tribunal in the case of Marigold Premises Pvt. Ltd. (supra) relied upon by the Revenue before us. The issue in the case of Marigold Premises Pvt. Ltd. (supra) was the claim of deduction u/s 80- IA(4)(iii) of the Act in the context of the Industrial Park Scheme, 2002. In the case before the Hon'ble Third Member of the Tribunal, assessee had undertaken construction of an Industrial Park approved under the IPS, 2002. Assessee claimed deduction for assessment year 2003-04 which was denied by the Assessing Officer on the ground that as per the approval under the IPS, 2002 assessee had to locate 30 units in the Industrial Park while assessee was able to locate only 6 units by 31.03.2003. The Hon'ble Third Member of the Tribunal held that the deduction u/s 80-IA(4)(iii) of the Act could availed by the assessee only when the undertaking begins to operate an Industrial Park and such a conclusion was arrived at by the Hon'ble Third Member of the Tribunal on the basis of the provisions of section 80-IA(4)(iii) of the Act read with 84 ITA No.1311, 1313,1315 to 1317 & 1306 & 1307/PN/2013 the then applicable rule 18C of the Rules. The relevant discussion in the order of the Hon'ble Third Member of the Tribunal reads as under :-
"31. In my humble opinion the legislature has consciously used the expression "develops an industrial park" instead of using the expression "undertakes to develop an industrial park". Wherever legislature intended to extend the benefit of deduction to an undertaking which has to merely commence its activity, without completing minimum stipulated phase, it was specified in the relevant provisions. For example, in section 80IC(2) it was stated that if an undertaking begins to manufacture or produce any article or thing it becomes an eligible undertaking. On the contrary, section 80IA of the Act specifies that an assessee shall be eligible to claim deduction "in accordance with and subject to the provisions of this section". As stated earlier, sub-clause (2) thereof used the expression "develops" instead of the expression "to develop". Section 80IA (4) (iii) (which was referred to in section 80IA(2)4 specifies that an undertaking which develops an industrial park notified by the Central Government in accordance with the scheme framed and notified by the Government is eligible for deduction. It is relevant to notice here that in section 80(4) (iii) legislature has not used the expression such as "an undertaking which begins to develop". Rule 18C of the I.T. Rules prescribes the procedure to be followed by an industrial park to avail the benefits under section 80IA(4)(iii) of the Act. Rule 18C, as it existed at the relevant point of time, reads as under :
"18C, Eligibility of Industrial Park and Special Economic zones for benefits under section 80-IA(4)(iii) - (1) The undertaking shall begin to operate an industrial park during the period beginning on the 1st day of April, 1997, and. eroding on the 31si day of March, 2002.
(1A) The undertaking shall begin to develop or develop and operate or maintain and operate a special economic zone any time during the period beginning on the 1st day of April, 2001 and ending on 31st day of March, 2006.
(2) The undertaking shall be duly approved by the Ministry of Commerce and Industry in the Central Government under the scheme for industrial park or Special Economic Zones notified by that Ministry.
(3) The undertaking shall continue to fulfill the conditions envisaged in the scheme.
(4) On approval under sub-rule (2), the Central Board of Direct Taxes, shall notify industrial parks for benefits under section 80-
IA."
31.1 As could be noticed from the aforementioned Rule, in order to avail benefit under section 80IA, an industrial park has to begin its operations which can only be a subsequent event i.e., after it has developed to an extent where it fulfills the minimum criteria to be treated as an industrial park. However, Sub-Rule (1A), which refers to an undertaking set up in a Special Economic Zone, used the expression "shall begin to develop"; if the intention was to give the same treatment to an undertaking which develops an industrial park, the same could have been mentioned in Sub-Rule (1) or it could have been included in Sub-Rule (1A).
85ITA No.1311, 1313,1315 to 1317 & 1306 & 1307/PN/2013 Rule making authority, in exercise of its delegated legislation, appears to have consciously maintained a distinction between an industrial park and an undertaking set up in a special economic zone whereby an industrial park gets eligibility to claim deduction only after it begins to operate the park and not before. During the developmental stage, particularly when the minimum development is not achieved, it cannot be said that if: was operating an industrial park since the scheme, to which a reference is made in the subsequent paragraphs, imposes minimum conditions to be fulfilled to be considered as an industrial park. In the instant case, assessee has constructed only six units and at this stage it is difficult to hold that the assessee has fulfilled the stipulated condition of not only construction of specified units but also allocation of floor area to different entrepreneurs as per the scheme. Rule 18C was amended w.e.f. 8.1.2008 whereby an undertaking which begins to develop an industrial park any time during the period beginning on the 1st day of April, 2006 and ending on 31st day of March, 2011 was made eligible to claim deduction. Admittedly, it is not the assessee's case that it has commenced the process of development after 1st day of April, 2006 and thus subsequent rule has not application to the instant case."
60. The aforesaid discussion would show that the Hon'ble Third Member was guided by the then relevant provisions of rule 18C of the Rules which have since been amended qua the assessment year before us. In the previously worded rule 18C of the Rules, the wordings were that the "undertaking shall begin to operate an Industrial Park .......". However, the rule 18C(1) of the Rules, which has since been amended and which is relevant for the year under consideration reads to say that "undertaking shall begin to develop, develop and operate or maintain and operate an Industrial Park.........". This distinction has been noticed by the Hon'ble Third Member himself in the above discussion. Rule 18C of the Rules provides the eligibility of Industrial Parks for the benefits u/s 80-IA(4)(iii) of the Act and even an undertaking which begins to develop is also eligible for the claim of deduction provided that it takes place during the period beginning on 01.04.2006 and before 31.03.2009 and fulfills the conditions envisaged in the IPS, 2008. The aforesaid aspect fully covers the controversy before us even if it is assumed that the objection of the Assessing Officer of locating 30 units is required to be seen as on 31.03.2007 also. Undeniably, assessee has operationalized 21 industrial units in the instant assessment year which signifies that its activities are covered within the expression "begin to develop" contained in rule 18C(1) of the Rules. Therefore, the decision of the Third Member in the case of Marigold Premises Pvt. Ltd. (supra) does not help the case of the Revenue qua the instant assessee. Moreover, the claim before the Hon'ble Third Member was with respect to an Industrial Park which was approved under the Industrial Park Scheme, 2002 whereas assessee's case is covered by the Industrial Park Scheme, 2008.
61. Therefore, considering the amendment of rule 18C of the Rules made w.e.f. 01.08.2008 where an undertaking begins to develop an Industrial Park is also eligible for the deduction so long as the development is otherwise complete within the period specified in the Scheme as well as it fulfills the conditions envisaged in the Scheme. The decision in the case of Marigold Premises Pvt. Ltd. (supra) went against the assessee because at the relevant point of time rule 18C of the Rules mandated that the deduction was available to the assessee when the assessee began to operate an Industrial Park whereas in the 86 ITA No.1311, 1313,1315 to 1317 & 1306 & 1307/PN/2013 subsequently amended rule 18C of the Rules, which is applicable to the case before us, it is differently worded. The aforesaid difference has also been appreciated by the Hon'ble Third Member in its decision in the case of Marigold Premises Pvt. Ltd. (supra). Therefore, in our view, there is no justification for the denial of deduction nu/s 80-IA(4)(iii) of the Act in the instant assessment year with regard to the profits earned by the assessee from Industrial Park - Giga Space of Rs.33,59,56,749/-.
62. In the result, on this aspect we set-aside the order of the CIT(A) and direct the Assessing Officer to allow the deduction made u/s 80- IA(4)(iii) of the Act of Rs.33,59,56,749/-. Thus, on this aspect assessee succeeds."
68. Since the order of the CIT(A) on this issue is in consonance with the issue decided by the Tribunal under identical circumstances, therefore, in absence of any contrary material brought to our notice, we do not find any infirmity in his detailed order on this issue. Accordingly, the same is upheld and the grounds raised by the revenue are dismissed.
69. Grounds of appeal No.6 and 7 being general in nature are dismissed.
ITA No.1317/PN/2013 (A.Y. 2010-11) :70. The Ld. Counsel for the assessee did not press ground of appeal No.1 for which the Ld. Departmental Representative has no objection. Accordingly, the same is dismissed.
71. Ground of appeal No.2 by the assessee reads as under :
"2. The Ld.CIT(A) erred in sustaining the addition of Rs.33,000/- on account of cash seized from the appellant ignoring the fact that the Ld.AO had rejected the appellant's sworn affidavit explaining the source of Rs.22,00,000/- and the evidence supporting withdrawal of Rs.10,24,000/- from his bank account summarily. The addition of Rs.33,00,000/- be deleted."87
ITA No.1311, 1313,1315 to 1317 & 1306 & 1307/PN/2013
72. Facts of the case, in brief, are that during the course of search action u/s.132 at the assessee's residential premises at 1121 & 1121A Sai Shraddha, Model Colony Pune on 20-01-2010, cash of Rs.29,02,670/- was found out of which Rs.28,00,000/- was seized and, thereafter Rs.5,00,000/- was seized from the assessee's locker No.73 with Pune People's Cooperative Bank Ltd. on 15-03-2010.
During the course of search action the assessee could not explain the sources of the cash found and had submitted that the same will be explained later on after verifying the books of account.
73. During the course of assessment proceedings the assessee explained the source of the same as under :
Cash balance of Sadguru Datta Dharmik Trust Rs,22,00,000/- Cash withdrawals from Cosmos Co-operative Bank Rs.10,24,000/- Limited, Bangalore Cash with myself and my family members, duly Rs.74,000/- accounted for
74. However, the Assessing Officer rejected the claim of the assessee that cash amounting to Rs.22,00,000/- was the cash balance entrusted to him by the Sadguru Datta Dharmesh Trust, a charitable trust to be deposited in its account at Pune People's Co-
operative Bank Ltd as the assessee was in charge Officer of the said trust. He noted that the trust had filed a petition before the CIT (Central), Pune on 19-8-2011 requesting release of the seized amount. In the order passed u/s 132B dated 26-9-2011, the claim of the assessee that cash of Rs. 22 lakhs belonged to the trust was rejected on the ground that the same was an 'afterthought' of the assessee in view of the fact that no explanation was furnished during the 132(4) statement recorded during the search action. He also rejected the claim of cash withdrawal from Cosmos Co-operative 88 ITA No.1311, 1313,1315 to 1317 & 1306 & 1307/PN/2013 Bank and cash with self and family members in absence of any cogent evidence.
75. Before CIT(A) the assessee reiterated the same submission as made before the Assessing Officer regarding the cash seized. It was contended that the Assessing Officer has not applied his mind at all to the submissions made before him and is silent about the cash withdrawn from Cosmos Bank and cash in hand as per books of account. The assessee regarding the 22 lakhs belonging to the trust had stated that the Assessing Officer had not gone into its merits and doubted it to be an afterthought.
76. However, the Ld.CIT(A) was also not satisfied with the explanation given by the assessee and upheld the action of the Assessing Officer by observing as under :
"7.1 I have considered the submission made by the appellant and perused material on record. Section 132 presumes that the books of account, document, money, bullion, jewellery or other valuable article or things found in possession and control of any person in the searched premises belong to such person and that their contents are true. In the absence of satisfactory explanation they may be treated as acquired on that date. These are no doubt presumptions but would place heavy responsibility on the person in possession. The appellant during the search action had not furnished any explanation whatsoever for the cash found and seized of Rs. 28 lacs from the residential premises on 20-1- 2010 and Rs. 5 lacs from the bank locker on 15.03.2010. The explanation for the seized cash has come only after a substantial gap of nearly eight months which prima facie appears to be an 'afterthought' which is difficult to be believed and accepted. A person found in possession of cash will be presumed owner unless he establishes that he is not the owner by furnishing cogent evidence. The appellant it appears from the assessment order had also filed an affidavit in this regard during the assessment proceedings before the Assessing Officer and the Assessing Officer after considering the materials filed by the appellant had held the cash to be unaccounted and unexplained. The appellant has not filed any such evidence or brought on record any such material which could justify its claim. In the case of Ashok Kumar Vs CIT (1986) 160 ITR 497 (M.P) it was held that the presumption of ownership in case of cash found in possession of person is viable because cash is one of the properties of which title is transferable merely by delivery of possession. Therefore, unless any contradictory explanation is given by the person in possession, the presumption is justified. The appellant's contention that his age, lack of formal education and mental stress for not remembering the source of cash is not tenable as the explanation has come at a much later date and after a long gap of nearly eight months. It is also noticed that the cash balance of Rs. 22 lacs claimed to be belonging to Sadguru Datta Dharmik Trust was also subject to examination during the 132B proceedings and the claim of the appellant had been subjected to scrutiny and for detailed reasons recorded in the said order 89 ITA No.1311, 1313,1315 to 1317 & 1306 & 1307/PN/2013 dated 26.09.2011 the appellant's claim was rejected. Moreover, the claim of the cash withdrawal made from Cosmos Bank, Bangalore to explain Rs. 10.74 lacs without establishing any nexus with the withdrawal made is difficult to be accepted. Further the amount of Rs. 74,000/- claimed to be belonging to the appellant and his family members, it is seen that during the search action more than Rs. 1 lac was not seized as the total amount found was Rs.29,02,670/- and the seized amount was Rs.28 lacs out of the above amount, which goes on to explain the said amount. The law is well settled that the onus of providing the source of a sum of money found is on the appellant and the appellant did not dispute the liability to tax during the course of search action and hence in the absence of the same the Assessing Officer has rightly held it as undisclosed and unexplained income.
7.2 In view of the above facts the ground of appeal No.5 raised by the appellant is liable to be dismissed."
77. Aggrieved with such order of the CIT(A) the assessee is in appeal before us.
78. We have considered the rival arguments made by both the sides, perused the orders of the AO and CIT(A) and the paper book filed on behalf of the assessee. Admittedly, during the course of search at the premises of the assessee an amount of Rs.29,02,670/-
was found out of which an amount of Rs. 28 lakhs was seized and thereafter another Rs.5 lakhs was seized from the locker maintained with Pune People's Cooperative Bank Ltd. It is also an admitted fact that during the course of search action assessee could not explain the source of the cash found and merely submitted that it will be explained later on after verifying the books. We find during the course of assessment proceedings it was submitted before the Assessing Officer that cash amounting to Rs.22 lakhs was the cash balance entrusted to him by Sadguru Datta Dharmesh Charitable Trust to be deposited in its account at Pune People's Cooperative Bank Ltd. It was explained that the assessee was incharge officer of the said trust. We find although the search took place on 20-01-2010 the trust made a request to the CIT Central, Pune vide letter dated 19-08-2011 requesting to release of the seized amount.
90ITA No.1311, 1313,1315 to 1317 & 1306 & 1307/PN/2013 The Ld.CIT rejected the claim of the assessee trust on the ground that the same was an afterthought since no explanation was furnished during 132(4) statement. Nothing plausible was brought to our notice to substantiate with the source of Rs.33 lakhs so as to take a contrary view than the view taken by the CIT(A). The assessee in our opinion has miserably failed to substantiate with cogent evidence that the amount of Rs.22 lakhs belong to the trust and the amount of Rs.10,24,000/- drawn from the Cosmos bank account was available with him. Similarly, nothing was brought to our notice to substantiate the availability of Rs.74,000/- with the assessee and his family members. We find the Ld.CIT(A) has given valid and cogent reasons while dismissing the ground raised by the assessee on this issue. Under these circumstances and in absence of any contrary material brought to our notice, we do not find any infirmity in his order on this issue. Accordingly, the same is upheld and the ground raised by the assessee is dismissed.
79. Grounds of appeal No. 3 and 4 being general in nature are dismissed.
ITA No.1307/PN/2013 (A.Y.2010-11) (By Revenue):80. Ground of appeal No.1 by the assessee reads as under :
"1. On the facts and in the circumstances of the case the CIT(A) has erred in deleting the addition made to income from house property (near Mahabaleshwar) at Rs.1,80,000/- as against Rs.25,000/- disclosed in the return."
81. After hearing both the sides, we find the above ground is identical to the ground of appeal No.1 in ITA No.1306/PN/2013 for A.Y. 2009-10. We have already decided the issue and the ground 91 ITA No.1311, 1313,1315 to 1317 & 1306 & 1307/PN/2013 raised by the revenue has been dismissed. Following the same reasonings, this ground by the revenue is dismissed.
82. Grounds of appeal No.2 to 5 by the Revenue read as under :
"2. On the facts and in the circumstances of the case the CIT(A) has erred in allowing deduction u/s. 80IA(4) of the Act in respect of the assessee project "Sai Trinity" ignoring the fact that the assessee admitted to withdrawn the claim during search action.
3. On the facts and in the circumstances of the case the CIT(A) has erred in allowing deduction u/s. 80IA(4) although assessee has not fulfilled the preconditions for claiming deduction under Industrial Park Scheme 2002.
4. On the facts and in the circumstances of the case the CIT(A) has erred in allowing deduction u/s. 80IA(4) although the IPS 2002 Scheme talks about Industrial Park as a whole not Industrial Units.
5. On the facts and in the circumstances of the case the CIT(A) has erred in allowing deduction u/s. 80IA(4) although application for approval was filed after 31.3.2006, which is beyond the time limit and no fresh approval was taken after rejection of assessee's claim as the project was not commenced within stipulated time."
83. After hearing both the sides, we find the above grounds are identical to the grounds of appeal No. 2 to 5 in ITA No.1306/PN/2013 for A.Y. 2009-10. We have already decided the issue and the grounds raised by the revenue have been dismissed.
Following the same reasonings, the above grounds by the revenue are dismissed.
84. In the result, the appeals filed by the assessee are partly allowed and the appeals filed by the revenue are dismissed.
Pronounced in the open Court on 25-11-2016.
Sd/- Sd/-
(VIKAS AWASTHY) (R.K. PANDA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
पण
ु े Pune; "दनांक Dated : 25 November, 2016.
th
सतीश
92
ITA No.1311, 1313,1315 to 1317
& 1306 & 1307/PN/2013
आदे श क( )"त+ल प अ,े षत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent
3. The CIT(A)-II, Pune
4. The CIT- II, Pune $वभागीय 'त'न(ध, आयकर अपील य अ(धकरण, "ए" पण ु े / DR,
5. ITAT, "A" Pune;
6. गाड+ फाईल / Guard file.
आदे शानस ु ार/ BY ORDER, //स या$पत 'त //True Copy // व-र.ठ 'नजी स(चव / Sr. Private Secretary आयकर अपील य अ(धकरण, पण ु े / ITAT, Pune