Appeal details
Counselvise Citation
[2016] 131 COUNSELVISE.COM (IT) 7323 (ITAT-DELHI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
4 year(s) 1 month(s) 21 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
26-08-2016
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
E
Next Hearing Date
02-06-2016
Assessment Year
2007-2008
Appeal Filed On
05-07-2012
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E , NEW DELHI BEFORE SH. N. K. SAINI, A M AND SMT. BEENA PILLAI, JM ITA NO S . 3546, 3547 & 3549 /DEL/2012 ASSTT. YEAR S : 2007 - 08, 2008 - 0 9 & 2010 - 11 ASSISTANT C OMMISSIONER OF INCOME TAX, CIRCLE - 12, NEW DELHI VS SH. MUKESH GARG, 292, KATRA PERAN, TILAK BAZAR, DELHI - 110006 (APPELLANT) (RESPONDENT) PAN NO. AA APG2585Q ASSESSEE BY : SH. K. P. GANGULI , ADV. & SH. G. S. GOEL , CA REVENUE BY : SH. SUNIL CHANDER SHARMA , CIT DR DATE OF HEARING : 02 .06 .201 6 DATE OF PRONOUNCEMENT : 26 .08 .201 6 ORDER PER N. K. SAINI, AM: THESE THREE APPEALS BY THE DEPARTMENT ARE DIRECTED AG AINST THE SEPARATE ORDER S EACH DATED 30.04.2012 OF LD. CIT(A) - XXXI, NEW DELHI 2. SINCE THE ISSUES INVOLVED ARE COMMON IN THESE APPEALS WHICH WERE HEARD TOGETHER SO THESE ARE BEING DISPOSED OFF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE AND BRE VITY. ITA NOS. 3546, 3547 & 3549 /DEL/201 2 MUKESH GARG 2 3. AT THE FIRST INSTANCE WE WILL DEAL WITH THE APPEAL IN ITA NO. 3546/DEL/2012 FOR THE ASSESSMENT YEAR 2007 - 08. FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPEAL: 1. THE ORDER OF THE LD. C1T (A) IS NOT CORRECT IN LAW AND FACTS. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD C1T(A) HAS ERRED IN DELETI NG THE ADDITION OF RS.84,20,000/ - MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNACCOUNTED RECEIPTS ON THE BASIS OF CERTAIN LOOSE PAPERS IN THE FORM OF CHITS FOUND AND SEIZED DURING THE COURSE OF SEARCH. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD C1T (A) HAS ERRED IN DELETI NG THE ADDITION OF RS. 2,88,600/ - MADE BY THE ASSESSING OFFICER ON ACCOUNT OF TREATING THE AGRICULTURAL INCOME DECLARED BY THE ASSESSEE AS INCOME RE CEIVED FROM UNDISCLOSED SOURCES BY APPLYING T HE PROVISIONS OF SECTION 68 OF I T. ACT, 1961 WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE DID NOT FURNISH THE DETAILS/EVIDENCES IN RESPECT OF GENUINENESS OF THE CLAIM OF AGRICULTURAL INCOME. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD C1T(A) HAS ERRED IN DELETING THE DISALLOWANC E OF INTEREST OF RS.15,55,670/ - MADE BY THE ASSESSING OFFIC ER UNDER SECTION 36(1)(III) OF I .T. ACT, 1961ON THE GROUND THAT THE INTEREST BEARING FUNDS WERE DIVERTED FO R NON BUSINESS PURPOSE. ITA NOS. 3546, 3547 & 3549 /DEL/201 2 MUKESH GARG 3 5. THE APPELLANT CRAVES LEAVE TO ADD, AMEND ANY / ALL OF THE GROUNDS OF APPEAL BEFORE OR DURING THE COURSE OF THE HEARING OF THE APPEAL. 4. GROUND NOS. 1 & 5 ARE GENERAL IN NATUR E SO DO NOT REQUIRE ANY COMMENT ON OUR PART. 5. VI DE GROUND NO. 2, THE GRIEVANCE OF THE DEPARTMENT RELATES TO THE DELETION OF ADDITION OF RS.84,20,000/ - MADE BY THE AO ON ACCOUNT OF UNACCOUNTED RECEIPTS ON THE BASIS OF CERTAIN LOOSE PAPERS IN THE FORM OF CHITS FOUND AND SEIZED DURING THE COURSE OF SEARCH. 6. THE FACTS RELATED TO THIS ISSUE IN BRIEF ARE THAT A SEARCH AND SEIZURE OPERATION U/S 132 OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) WAS CARRIED OUT ON THE RESIDENTIAL PREMISES OF THE ASSESSEE SITUATED AT C - 1, MODEL TOWN EAST, GHA ZIABAD ON 20.01.2010. THEREAFTER, A NOTICE U/S 153A OF THE ACT DATED 11.07.2011 WAS ISSUED TO THE ASSESSEE REQUIRING HIM TO FILE THE RETURN OF INCOME. IN RESPONSE, THE ASSESSEE FILED THE RETURN OF INCOME ON 19.08.2011 DECLARING TOTAL INCOME OF RS.60,84,360 / - AND THE AGRICULTURAL INCOME OF RS.2,88,600/ - . DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO NOTICED THAT A SEARCH ACTION U/S 132 OF THE ACT IN THE CASE OF SH. MITHULAL, A REAL ESTATE ITA NOS. 3546, 3547 & 3549 /DEL/201 2 MUKESH GARG 4 BROKER OF BANGALORE , WAS CARRIED OUT ON 09.10.2009 AND CERTAIN IN CRIMINATING DOCUMENTS CONTAINING SOME SLIPS/CHITS RELATING TO SH. SOHANRAJ MEHTA WERE FOUND WHICH WERE IN CONNECTION WITH THE C&F AGENCY OF RMD GROUP OF PAN MASALA AND GUTKHA PRODUCTS FOR KARNATAKA REGION. SUBSEQUENTLY, ON THE NEXT DAY SH. SOHANRAJ MEHTA W AS ALSO COVERED BY THE INVESTIGATION WING OF BANGALOARE AND CONFRONTED WITH THOSE INCRIMINATING DOCUMENTS. DURING THE SEARCH OPERATION, SH. SOHANRAJ MEHTA ACCEPTED THAT THOSE DOCUMENTS WERE RELATED TO HIM AND WERE IN CONNECTION WITH C&F AGENCY OF RMD GROUP FOR PAN MASALA AND GUTKHA PRODUCTS. ACCORDING TO THE AO, THOSE DOCUMENTS SUGGESTED THE UNACCOUNTED SALE OF GUTKHA BY RMD GROUP THROUGH SH. SOHANRAJ MEHTA AND THAT THE AMOUNTS OF UNACCOUNTED SALE PROCEEDS HAD BEEN EITHER REMITTED BACK TO RMD GUTKHA GROUP O R HANDED OVER TO VARIOUS SUPPLIERS OF RAW MATERIALS/PARTIES ON THE DIRECTIONS OF SH. PRAK ASH R. DHARIWAL AND SH. RASIK L AL M. DHARIWAL, THE HEAD OF RMD GUTKHA GROUP. THE AO MENTIONED THAT ON ENQUIRY TO ASCERTAIN THE BUSINESS CONNECTION OF RMD GUTKHA GROUP WITH THE PARTIES WHOSE NAMES HAD FIGURED IN THE SAID INCRIMINATING DOCUMENTS, IT WAS FOUND THAT THOSE PARTIES WERE CLOSELY CONNECTED WITH THE BUSINESS ACTIVITIES OF RMD ITA NOS. 3546, 3547 & 3549 /DEL/201 2 MUKESH GARG 5 GUTKHA GROUP RELATING TO PRODUCTION AND SALE OF GUTKHA AND PAN MASALA PRODUCTS. ACCORDI NGLY, THOSE BUSINESS GROUPS/PARTIES WHICH INCLUDED MUKESH GARG GROUP I.E. THE ASSESSEE WERE ALSO COVERED ALONGWITH RMD GUTKHA GROUP IN SEARCH OPERATION CONDUCTED ON 20.01.2010. THE AO POINTED OUT THAT THE DOCUMENTS SEIZED BY THE INVESTIGATION WING OF BANGA LORE INCLUDED LOOSE PAPERS CONTAINING SIGNED CHITS HAVING DETAILS OF PAYMENTS TO VARIOUS PARTIES INCLUDING THE ASSESSEE ON WHICH INSTRUCTIO NS WERE ISSUED EITHER BY SH. PAR KASH DHARIWAL OR SH. RASIK LAL DHARIWAL, OWNERS OF RMD GUTKHA GROUP TO SH. SOHANRAJ M EHTA FOR HANDING OVER CASH TO THE PERSONS WHOSE NAMES HAD BEEN SPECIFIED IN THE CHIT S OR TO THE BEARER OF THE CHIT. HE ALSO POINTED OUT THAT THE AMOUNTS MENTIONED IN THOSE CHITS WERE IN CODES AND IN THE STATEMENT OF SH. SOHANRAJ MEHTA RECORDED DURING THE S EARCH ON 09.10.2009 , IT HAD BEEN CATEGORICALLY EXPLAINED THAT THE FIGURES MENTIONED IN LAKHS ACTUALLY STOOD FOR CRORES OF RUPEES AND THE WORD PACKET STANDS FOR LAKH OF RUPEES. THE AO OBSERVED THAT THE ASSOCIATE FIRMS/CONCERNS PERTAINING TO THOSE GROUPS W ERE SUPPLIER OF KATHA MAINLY TO M/S RMD GROUP AND THE DOCUMENTS FOUND/SEIZED BY THE INVESTIGATION WING, BANGALORE DURING T HE SEARCH OF SH. SOHANRAJ MEHTA MENTIONED NAME OF PERSON PERTAINING TO GARG GROUP ITA NOS. 3546, 3547 & 3549 /DEL/201 2 MUKESH GARG 6 SPECIFICALLY AS MUKESH BHAI AND MUKESH BHAI DELHI . THE AO, THEREFORE, WAS OF THE VIEW THAT THOSE DOCUMENTS/SLIP/CHITS PERTAINED TO THE ASSESSEE SH. MUKESH GARG AND THAT THE DETAILS OF CHITS / PAYMENTS/DOCUMENTS PERTAINING TO THE ASSESSEE WERE AS UNDER: CHIT NO. DATE OF CHIT PRESCRIPTION ON THE CHITS AMOUNT MENTIONED IN HAVE BEEN DE - CODED AS 6 06/04/2007 PAY 100 PACKETS TO MUKESH BHAI 100 LAKHS 7 06/04/2007 PAY 23 PACKETS TO MUKESH BHAI 23 LAKHS 8 05/09/2006 PAY 340 PACKETS TO MUKESH BHAI 340 LAKHS 40 26/10/2007 MR. SOHANRAJ MEHTA HAS BEEN INSTRUCTED TO PAY 200000=00 TO MUKESH BHAI 200 LAKHS 45 09/08/2007 MR. SOHANRAJ MEHTA HAS BEEN INSTRUCTED TO PAY 168000=00 TO MUKESH BHAI 168 LAKHS 7. THE AO VIDE LETTER DATED 19.12.2011 PROVIDED COPY OF DOCUMENTS/DETAILS OF PAYMENTS AND STATEMENT OF SH. SOHANRAJ MEH TA RECORDED ON VARIOUS DATES TO THE ASSESSEE . THE AO OBSERVED THAT THE ASSESSEE RECEIVED RS.8,31,00,000/ - FROM 05.09.2006 TO 26.10.2007 AND RS.5,29,00,000/ - FROM APRIL, 2003 TO AUGUST, 2006. THE AO POINTED OUT THAT THE AFORESAID DETAILS REVEALED THAT THE P ERIOD IN RESPECT OF ALL THE PAYMENTS WAS CLEARLY MENTIONED, EXCEPT ONE PAYMENT OF RS.1.29 CROES FOR WHICH PERIOD WAS MENTIONED FROM APRIL, 2003 TO AUGUST, 2006. HE, THEREFORE, CONSIDERED THOSE PAYMENTS TO BE RECEIVED IN AUGUST 2006 PERTAINING TO THE ASSESS MENT YEAR ITA NOS. 3546, 3547 & 3549 /DEL/201 2 MUKESH GARG 7 2007 - 08. THE AO ASKED THE ASSESSEE TO EXPLAIN THE TRANSACTION FOR WHICH AN AMOUNT OF RS.4 .69 CRORES AS REFLECTED ON THE COPIES OF SLIPS/DOCUMENTS GIVEN TO THE ASSESSEE , FOUND AND SEIZED DURING THE COURSE OF SEARCH OF SH. SOHANRAJ MEHTA IN BANGALO RE AND ALSO ASKED TO EXPLAIN AS TO WHETHER THOSE DOCUMENTS WERE PART OF BOOKS FOR THE PERIOD UNDER CONSIDERATION OR NOT. IN RESPONSE, THE ASSESSEE CATEGORICALLY DENIED TO HAVE MADE ANY SUCH TRANSACTION FOR WHICH SUCH AMOUNT WAS RECEIVED AND MENTIONED THAT THE STATEMENT OF SH. SOHANRAJ MEHTA REGARDING DECODING OF FIGURES WAS NOT ALSO APPLICABLE TO HIM S INCE IT HAD NO BEARING OR NEXUS WITH THE ASSESSEE OR HIS BUSINESS TRANSACTION AS THERE WAS NO SPECIFIC MENTION REGARDING THE NAME OF THE ASSESSEE IN THE STATE MENT OF SH. SOHANRAJ MEHTA AS TO LINK ANY PAYMENT AS ALLEGED TO BE MADE TO HIM BY SH. SOHANRAJ MEHTA OR ANYBODY ELSE. IT WAS FURTHER STATED THAT THE EVIDENCE FOUND IN A BUNCH OF LOOSE PAPERS COULD NOT BE CORROBORATED BY ANOTHER BUNCH OF SEVEN LO OSE PAPERS, THEREFORE, THOSE PA PERS , AT THE MOST WERE TO BE TREATED AS DUMB EVIDENCE AND COULD NOT HAVE BEEN A BASIS TO BE CONSIDERED AS HIS INCOME. IT WAS STATED THAT THOSE PAPERS DID NOT RELATE TO THE ASSESSEE AT ALL. ITA NOS. 3546, 3547 & 3549 /DEL/201 2 MUKESH GARG 8 8. HOWEVER, THE AO DID NOT FIND MERIT IN THE S UBMISSIONS OF THE ASSESSEE FOR THE FOLLOWING REASONS: I. SH. RASIK LAL, THE HEAD OF M/S RMD HAS CATEGORICALLY ADMITTED IN STATEMENT DATED 20/01/2010 THAT THE CHITS FOUND WITH SH. SOHAN RAJ MEHTA DURING THE COURSE OF SEARCH OPERATION ON HIM ON 09.10.2009, HAVE BEEN SIGNED BY HIM. AS SUCH M/S RMD HAS ADMITTED THE CONTENTS OF THESE CHITS . II. ADM ISSION BY SH. RASIK LAL DHARIWAL AND SH. PRAKASH DHARIWAL REGARDING THE GENUINENESS OF T HE CHITS AS MENTIONED ABOVE, ESTABLISHES THAT THE TRANSACTIONS AS EVIDENT FR OM THE CHITS WITH RMD HAVE BEEN MADE BY THE PARTIES/PERSONS MENTIONED THEREIN. THEREFORE, THE PAYMENTS OF AMOUNTS TO THE PARTIES MENTIONED IN THESE CHITS WHETHER ON ACCOUNT OF SALE OF GOODS TO RMD OR OTHERWISE IS A PROVEN FACT, NOW. III. THE NAME OF ASSES SEE IS CLEARLY MENTIONED ON THE CHITS AS 'MUKESH BHAI/MUKESH BHAI DELHI'. IV. THE ASSESSEE'S FAMILY CONCERNS ARE REGULAR SUPPLIER OF KATHA FOR MANY YEARS TO RMD GROUP AND SH. SOHAN RAJ MEHTA IS A C& F AGENTS OF M/S RMD GROUP FOR KARNATKA REGIONS FOR A LON G PERIOD, THEREFORE, CLEAR NEXUS IS PROVEN AMONG THEM. SH. SOHAN RAJ MEHTA HAS ADMITTED THAT HE MADE UNACCOUNTED SALE OF UNACCOUNTED PRODUCTION OF GUTKA MANUFACTURED BY M/S RMD AND ON THE DIRECTION OF SH. RASIK LAL AND PARKASH DHARIWAI, SALE PROCEEDS WERE PASSED ON TO VARIOUS ENTITIES/ PARTIES. IT WILL BE PERTINENT TO MENTION HERE THAT SH. SOHAN RAJ MEHTA SURRENDERED AS MUCH AS RS. 25 ITA NOS. 3546, 3547 & 3549 /DEL/201 2 MUKESH GARG 9 CRORES IN HIS OWN CASE AS COMMISSION ON SUCH UNACCOUNTED SALE OF RMD GUTKA. V. IN VIEW OF THE OVERALL FACTS OF THE CASE OF M/S RMD AND SH. SOHAN RAJ MEHTA, IT IS CRYSTAL CLEAR THAT UNACCOUNTED PRODUCTION OF GUTKA ETC WAS MADE BY RMD GROUP AND ACCORDINGLY, NECESSARY INGREDIENTS TO PRODUCE OF THE GUTKA WERE PURCHASED FROM THE REGULAR SUPPLIERS OF VARIOUS ITEMS WHICH ARE USED TO MANUFACTURE THE GUTKA. VI. IT WILL BE WORTHWHILE TO MENTION HERE THAT THE NAMES OF PERSONS/ PARTIES APPEARING ON THE CHITS / SLIPS / DOCUMENTS (AS REFERRED ABOVE) OR OTHER DOCUMENTS RELATED TO SOHAN RAJ MEHTA IN CONNECTION WITH M/S RMD GROUP ARE THE ALL R EGULAR SUPPLIER OF M/S RMD GROUP OR ARE CONNECTED WITH THE BUSINESS OF RMD GROUP. VII. SH. SOHAN RAJ MEHTA HAS CATEGORICALLY DECODED THE AMOUNT MENTIONED ON THE CHITS. FURTHERMORE, ON A PAPER FOUND AND SEIZED DURING THE SEARCH OPERATION OF SH. SOHAN RAJ M EHTA NAMELY, A/M/08OF PAGE 34, SUMMARY OF WORKING OF UNACCOUNTED TURNOVER OF M/S DIL (M/S DHARIWAL INDUSTRIES LTD.) DURING THE PERIOD FROM APRIL '2003 TO AUGUST' 2006 WAS MENTIONED. ON THE SAME PAPER, NAME OF THE PERSONS/ PARTIES WERE CLEARLY MENTIONED TO WHOM UNACCOUNTED SALE PROCEEDS WERE GIVEN ON THE INSTRUCTION OF THE HEADS OF RMD GROUP. 9 . THE AO ON THE BASIS OF THE ABOVE SAID REASONS WAS OF THE VIEW THAT IT WAS ESTABLISHED THAT THE ASSESSEE HAD RECEIVED AN AMOUNT OF RS.4.69 CRORES DURING THE YEAR UN DER ITA NOS. 3546, 3547 & 3549 /DEL/201 2 MUKESH GARG 10 CONSIDERATION THROUGH SH. SOHANRAJ MEHTA ON INSTRUCTION OF THE HEADS OF M/S RMD GROUP AND THAT THE ASSESSEE ALTHOUGH HAD DENIED OF HAVING RECEIVED ANY AMOUNT IN LIEU OF UNACCOUNTED SALE BUT THE ADMISSION OF SH. SOHANRAJ MEHTA, C&F AGENT OF RMD GROUP, H AVING MADE PAYMENTS TO VARIOUS PARTIES ON BEHALF OF M/S RMD FOR UNACCOUNTED SALE MADE BY SUCH PARTIES TO M/S RMD GROUP, MADE IT HIGHLY PROBABLE THAT THE ASSESSEE HAD RECEIVED RS.4.69 CRORES FROM M/S RMD AGAINST UNACCOUNTED SALES DURING THE YEAR UNDER CONSI DERATION. HE ALSO MENTIONED THAT SH. SOHANRAJ MEHTA WITH WHOM SUCH CHITS HAD BEEN FOUND WAS A TRUSTWORTHY PERSON OF THE HEAD PERSONS OF M/S RMD GROUP. THEREFORE, THE ADMISSION MADE BY SH. SOHANRAJ MEHTA IN RESPECT OF CHITS/ SLIPS ISSUED BY THE HEAD PERSONS OF M/S RMD GROUP COULD NOT BE WASHED AWAY BY SAYING THAT HIS STATEMENT ADMISSION WAS CONFIRMED BY SH. DHARIWAL (HEAD OF M/S RMD GROUP). THE AO POINTED OUT THAT THE FAMILY CONCERN OF THE ASSESSEE, NAMELY, M/S YASH PAL NARENDER KUMAR WAS A REGULAR SUPPLIER O F RMD GROUP, THEREFORE, THE TRANSACTION IN QUESTION WAS A TRADING TRANSACTION. HE ALSO POINTED OUT THAT THOUGH ON THE DOCUMENTS IN QUESTION, NAME OF SH. MUKESH GARG, THE ASSESSEE WAS MENTIONED BUT THE ASSOCIATED FIRM/FAMILY CONCERN, NAMELY, M/S YASH PAL NA RENDER KUMAR ITA NOS. 3546, 3547 & 3549 /DEL/201 2 MUKESH GARG 11 WAS THE MAIN SUPPLIER OF KATHA TO RMD GROUP DURING THE PERIOD TO WHICH THOSE DOCUMENTS AND CHITS PERTAINED. THE AO POINTED OUT THAT THE TRADING RESULTS SHOWN BY M/S YASH PAL NARNDER KUMAR FOR THE ASSESSMENT YEARS 2004 - 05 TO 2008 - 09 WERE AS UND ER: S. A.Y. SALES GROSS STOCK RATIO GP REMARKS NO. PROFIT OF STOCK RATIO 1 2004 - 05 37193816 1842814 87360 0.23 4.95 2 2005 - 06 54126742 3667932 1888046 3.49 6.78 3 2006 - 07 29431459 1258588 3032942 10.3 4.28 4 20 07 - 08 108241340 8544451 9809504 9.06 7.8 5 2008 - 09 45116095 8905451 0 0 19.75 THE FIRM CLOSED ITS BUSINESS ACTIVITIES DURING THE YEAR AND NO CLOSING STOCK WAS SHOWN BY THE ASSESSEE AT THE END OF THE YEAR. 10 . THE AO ON THE BASIS OF THE AFORESAID DETAIL WAS OF THE VIEW THAT THE ASSOCIATED CONCERN OF THE ASSESSEE HAD SHOWN GP RATE OF 7.8% AND STOCK RATIO OF 9.06% FOR THE YEAR UNDER CONSIDERATION. H E, THEREFORE, APPLIED THE GP RATE OF 8% AND STOCK RATIO AT 10% ON UNACCOUNTED SALE AMOUNTING TO RS.4.69 CRORES AND WORKED OUT FOR UNACCOUNTED INCOME OF THE ASSESSEE AS UNDER: PROFIT RS.37,52,000/ - UNACCOUNTED INVESTMENT RS.46,90,000/ - TOTAL OF UNACCOUNTED INCOME RS.84,42,000/ - ITA NOS. 3546, 3547 & 3549 /DEL/201 2 MUKESH GARG 12 ACCORDINGLY, THE ADDITION OF RS.84,42,000/ - WAS MADE. 11 . BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND THE SUBMISSIONS MADE BEFORE HIM ARE REPRODUCED VERBATIM AS UNDER: 3.2.1 THE QUESTION THAT ARISES NOW FOR CONSIDERATION IS WHETHER ANY ADDITION CAN BE MADE ON THE BASIS OF PAPERS SEIZ ED FROM THIRD PARTY; THE SEIZED PAPERS DO NOT CONTAIN TH E EXACT DETAILS OF THE PAYMENTS. ACCORDING TO THE SEC 292(1) OF THE ACT, 'WHEN THE DOCUMENT IS FOUND DURING THE COURSE OF SEARCH UNDER SECTION 132, IT MAY BE PRESUMED THAT THE SAID DOCUMENT BELONGS T O SUCH PERSON AND THE CONTENTS OF SUCH DOCUMENT ARE TRUE.' IT NEVER SUGGESTS THAT THE DOCUMENT BELONGS TO ANOTHER PERSON. 3.2.2 IN THE CASE OF ASHWANI KUMAR V. ITO [1997] 39 ITD 183 (DELHI). IT WAS HELD THAT WHERE DOCUMENTS FOUND AT THE TIME OF THE SEARC H DID NOT INDICATE WHETHER FIGURES REFERRED TO IN THE PAPER REFLECT QUANTITIES OF MONEY OR TO QUANTITIES OF GOODS, THE SAME ARE ONLY DUMB DOCUMENTS AND THEREFORE, NO ADDITION COULD BE MADE ON THE BASIS OF SUCH DOCUMENTS. IT WAS HELD IN NEENA SYAL'S CASE [1 999] 70 ITD 62 (CHAND) THAT WHERE A DOCUMENT FOUND DURING THE COURSE OF SEARCH IS OPEN TO MORE THAN ONE POSSIBILITY OF INT ERPRETATION A ND DOES NOT PROVE CONCLUSIVELY THAT ANY PREMIUM WAS GIVEN BY THE ASSESSEE OR RECEIVED BY THE SELLER THEN NO ADD ITION IN ITA NOS. 3546, 3547 & 3549 /DEL/201 2 MUKESH GARG 13 R ESPECT OF PREMIUM COUL D BE MA D E ON PURCHASE OF PLOT. FROM THIS DECISION IT IS CLEAR THAT THE DOCUMENT MUST UNMISTAKABLY REFLECT THE TRANSACTION WITHOUT HAVING ANY SECOND INTERPRETATION. 3.2.3 IN ELITE DEVELOPERS V. DEPUTY CIT [2000] 73 1TD 379 (NAG), IT W AS HELD THAT WHERE THE SEIZED DOCUMENTS EVIDENCING RECEIPT OF ON MONEY BY THE ASSESSEE WERE NOT SPEAKING DOCUMENTS AS THEY DID NOT CONTAIN ANY NARRATION OR DESCRIPTION ABOUT DIFFERENT FIGURES NOTED THEREON AND THE DEPARTMENT HAVING FAILED TO BRING ON RECOR D ANY MATERIAL OR EVIDENCE TO CORROBORATE ALLEGATION REGARDING RECEIPT OF ON MONEY, THEN THE PRESUMPTION ON THE BASIS OF THE DOCUMENTS COULD NOT BE RAISED. 3.2.4 'A DOCUMENT SEIZED FROM THE ASSESSEE MAY NOT BE COMPLETE IN ALL RESPECTS AS BUSINESSMEN MAY C HOOSE TO RECORD MINIMUM DETAILS ON A DOCUMENT AND KEEP THE REST IN THEIR MEMORY. IT IS THE DUTY OF THE ASSESSING OFFICER TO CARRY OUT THE NECESSARY INVESTIGATION BY CORRELATING THE DOCUMENT WITH OTHER DOCUMENTS SEIZED, WITH REGULAR BOOKS OF ACCOUNT, WITH R ECORD KEPT BY OUTSIDE AGENCIES, SUCH AS BANK OR FINANCIAL INSTITUTIONS OR DEBTORS/ CREDITORS AND FINALLY BY RECORDING THE STATEMENTS OF CONCERNED PARTIES SO AS TO FILL UP THE GAPS IN CONFIRMING THE INFERENCE ARISING FROM THE DOCUMENTS FOR A PROPER CHARGE O F TAX. SUCH CORRELATION IS NECESSARY UNLESS THE DOCUMENT IS CAPABLE OF GIVING FULL DETAILS SO AS TO ENABLE ANY INTELLIGENT PERSON TO FIND OUT THE NATURE OF THE TRANSACTION, THE YEAR OF THE TRANSACTION, THE OWNERSHIP OF THE TRANSACTION AND QUANTUM THEREOF.' ITA NOS. 3546, 3547 & 3549 /DEL/201 2 MUKESH GARG 14 THE COMPONENTS WHICH ENTER INTO THE CONCEPT OF TAXATION ARE FIRST THE TAXABLE EVENT WHICH ATTRACTS THE LEVY, SECOND, THE PERSON ON WHOM THE LEVY IS IMPOSED AND WHO IS OBLIGED TO PAY THE TAX, THIRD, THE ASSESSMENT YEAR IN WHICH CHARGE OF INCOME TAX IS LEV IED, FOURTH, THE TOTAL INCOME OF THE PREVIOUS YEAR AND FIFTH, THE RATE OR RATES AT WHICH TAX IS TO BE IMPOSED. THE RATES ARE PRESCRIBED IN THE ANNUAL FINANCE ACT AND THEREFORE, THIS COMPONENT HAS NO VALUE IN DETERMINING THE TOTAL INCOME ON THE BASIS OF A S EIZED DOCUMENT. A CHARGE CAN BE LEVIED ON THE BASIS OF DOCUMENT ONLY WHEN THE DOCUMENT IS A SPEAKING ONE. THE DOCUMENT SHOULD SPEAK EITHER OUT OF ITSELF OR IN THE COMPANY OF OTHER MATERIAL FOUND ON INVESTIGATION AND/ OR IN THE SEARCH. THE DOCUMENT SHOULD B E CLEAR AND UNAMBIGUOUS IN RESPECT OF ALL THE FOUR COMPONENTS OF THE CHARGE OF TAX. IF IT IS NOT SO, THE DOCUMENT IS ONLY A DUMB DOCUMENT. NO CHARGE CAN BE LEVIED ON THE BASIS OF A DUMB DOCUMENT. A DOCUMENT FOUND DURING THE COURSE OF A SEARCH MUST BE A SP EAKING ONE AND WITHOUT ANY SECOND INTERPRETATION, MUST REFLECT ALL THE DETAILS ABOUT THE TRANSACTION OF THE ASSESSEE IN THE RELEVANT ASSESSMENT YEAR. ANY GAP IN THE VARIOUS COMPO NENTS FOR THE CHARGE OF TAX MUST BE FILLED UP BY THE ASSESSING OFFICER THROUGH INVESTIGATIONS AND CORRELATIONS WITH OTHER MATERIAL FOUND EITHER DURING THE COURSE OF THE SEARCH OR ON INVESTIGATIONS. IN THE PRESENT CASE THE PERSON SEARCHED ARE SH. RASIK LAL DHARIWAL, SH. PRAKASH DHARIWAL AND SH. SOHANRAJ MEHTA. THEREFORE, THE PRESUM PTION APPLIES TO THEM AND NOT TO THE APPELLANT. ITA NOS. 3546, 3547 & 3549 /DEL/201 2 MUKESH GARG 15 IT HAS BEEN HELD IN THE CASE OF 'ADDL. CIT VS MISS. LATA MANGESHKAR REPORTED IN (1974) 97 ITR 696 (BOM) THAT ENT RIES IN THE BOOKS OF ACCOUNT REGARDING PAYMENT TO AN ASSESSEE WAS NOT SUFFICIENT AS THERE WAS N O GUARANTEE THAT THE ENTRIES WERE GENUINE. ASSISTANT COMMISSIONER OF INCOME TAX V. SATYAPAL WASSAN [2007] 295 ITR (AT) 352 (JABALPUR). 3.2.5 THIS VIEW HAS BEEN ECHOED BY THE MUMBAI TRIBUNAL IN THE CASE OF SAIF ALI KHAN MANSURALI VS ASSIST ANT COMMISSIONER OF INCOME TAX [2012]13 ITR (TRIB) 204 (MUMBAI) . 12 . THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE DELETED THE ADDITION MADE BY THE AO BY OBSERVING IN PARAS 3.3 TO 3. 3. 5 OF THE IMPUGNED ORDER WHICH READ AS UNDER: 3.3 DETERMINATION: - I HAVE CONSIDERED THE RIVAL ARGUMENTS. THE WHOLE ADDITION HINGES ON EVIDENCE GATHERED FROM THIRD PARTY DOCUMENT OR STATEMENT. NOW THE ISSUE IS , CAN THIRD PARTY STATEMENT OR ENTRY IN ABSENCE OF ANY CORROBORATIVE EVIDENCE DESPITE USING ULTIM ATE WEAPON OF SEARCH, CAN RESULT IN JUSTIFIED ADDITION. THE LEGAL PROVISION RELATING TO PRESUMPTION U/S 132(4A) IS APPLICABLE TO THE PERSON FROM WHOSE POSSESSION OR CONTROL THE INCRIMINATING MATERIAL IS FOUND & SEIZED. BASED ON THE INCRIMINATING MATERIAL F OUND FROM THIRD PARTY SEARCH BUT NOT BELONGING TO THE APPELLANT, THIS PRESUMPTION WILL NOT BE APPLICABLE UNLESS CORROBORATED BY OTHER EVIDENCE. PRESUMPTION AVAILABLE UNDER SECTION 132(4A) CAN BE DRAWN AGAINST THE PERSON IN WHOSE CASE SEARCH IS AUTHORIZED A ND ITA NOS. 3546, 3547 & 3549 /DEL/201 2 MUKESH GARG 16 FROM WHOSE POSSESSION OR CONTROL BOOKS OF ACCOUNT, DIARY OR DOCUMENTS ARE FOUND IN THE COURSE OF SEARCH. PRESUMPTIONS REGARDING CORRECTNESS OF CONTENTS OF BOOKS OF ACCOUNT ETC. CANNOT BE RAISED AGAINST THE THIRD PARTY. 3.3.1 PRESUMPTION UNDER SECTION 1 32(4A) IS ONLY AGAINST THE PERSON IN WHOSE POSSESSION THE SEARCH MATERIAL IS FOUND AND NOT AGAINST ANY OTHER PERSON. IT IS FURTHER HELD THAT THE PRESUMPTION IS REBUTTABLE AND NOT CONCLUSIVE AND IT CANNOT BE APPLIED IN THE ABSENCE OF CORROBORATIVE EVIDENCE. STRAPTEX INDIA P LTD. V DY . CIT [2003] 84 ITD 320 (MUM). IN THE CASE OF RAMA TRADERS VS. FIRST ITO [1998] 25 ITD 599 (PAT.) (TM) IT WAS HELD THAT NO ADDITION COULD BE MADE, ON THE BASIS OF PRESUMPTION RAISED BY SECTION 132(4A), IN THE HANDS OF THE ASSES SEE WHERE IN THE BOOKS OF ANOTHER FIRM, CERTAIN F IGURES WERE FOUND SHOWING THE PURCHASE MADE BY THE ASSESSEE. IN ASST CIT V KISHORE LAL BALWANT RAI [2007] 17 SOT 380 (CHD.), IT HAS BEEN HELD THAT THOUGH THE DIARY SEIZED ENABLE THE REVENUE TO PRESUME THAT I TS CONTENTS ARE TRUE, SUCH PRESUMPTIONS IS AVAILABLE ONLY AGAINST THE PERSON TO WHOM IT BELONGS AND THIS IS A REBUTTABLE PRESUMPTION. PRESUMPTION U/S 132(4A) IS NOT AVAILABLE, WHEN THE SEIZED PAPERS IS RECOVERED FROM THIRD PARTY AND NOT FROM THE ASSESSEE. SHETH AKSHAY PUSHPAVADAN V DY. CIT [2010] 130 TTJ 42 (AHD. UO) 3.3.2 THE ADDITION IS MADE BY THE AO BASED ON THIRD PARTY EVIDENCE AND NOT ON THE BASIS OF ANY SOUND EVIDENCE COLLECTED DURING THE SEARCH. ITA NOS. 3546, 3547 & 3549 /DEL/201 2 MUKESH GARG 17 A BUNCH OF LOOSE PAPERS WERE SEIZED FROM THE PREMI SES OF THE THIRD PARTY WHICH INDICATED THE ALLEGED UNRECORDED SALES MADE TO THAT PARTY BY THE ASSESSEE. VARIATION IN MONTH - WISE AND OTHER ALLIED ENTERPRISES DID NOT INDICATE THAT THE ASSESSEE MADE ANY SALES TO H . AVERAGE YIELD OF THE ASSESSEE WAS HIGHER THAN THAT IN COMPARABLE CASES. THE AO RELIED ONLY ON THE ENTRIES OF THE SAID DIARY AND DID NOT BRING ON RECORD ANY CORROBORATIVE MATERIAL TO PROVE THAT SUCH SALES WERE MADE OUTSIDE THE BOOKS. IT WAS HELD THAT MERE ENTRIES IN THE ACCOUNTS OF A THIRD PARTY W ERE NOT SUFFICIENT TO PROVE THAT THE ASSESSEE INDUL GED IN SUCH TRANSACTIONS. ASSTT. CIT V PRABHAT OIL MILLS [1995] 52 TTJ (AHD.) 3.3.3 MERE STATEMENT OF THE THIRD PARTY THAT PROPERTY WAS SOLD TO THE ASSESSEE FOR A HIGHER AMOUNT THAN SHOWN, NO PROTECTIVE A SSESSMENT COULD BE MADE IN THE CASE OF THE ASSESSEE. THE ALLEGED TRANSACTIONS MENTIONED IN THE SEIZED DIARY OF A THIRD PARTY WERE NOT HANDWRITTEN BY THE APPELLANT. THE UNACCOUNTED PURCHASES HAS ALLEGED WERE NOT CORROBORATED FORM THE SEARCH MATERIAL IN THE APPELLANT OWN CASE. THE ASSESSING OFFICER WHILE USING THE STATEMENT OF THIRD PARTY SHOULD HAVE ALLOWED THE APPELLANT TO CROSS EXAMINE IN ORDER TO USE THIS AS EVIDENCE WHICH WAS NOT DONE. IT IS WELL SETTLED IN LAW THAT THE LOOSE PAPERS AND DOCUMENTS CANNOT POSSIBLY BE CONSTRUED AS BOOKS OF ACCOUNT REGULARLY KEPT IN THE COURSE OF BUSINESS. SUCH EVIDENCE WOULD, THEREFORE, BE OUTSIDE THE PURVIEW OF SECTION 34 OF THE EVIDENCE ACT, 1972. THEREFORE, THE REVENUE WOULD NOT BE JUSTIFIED IN RESTING ITS CASE ON THE LO OSE PAPERS, DIARY AND ITA NOS. 3546, 3547 & 3549 /DEL/201 2 MUKESH GARG 18 DOCUMENTS FOUND FROM THIRD PARTY IF SUCH DO CUMENTS CONTAINED NARRATIONS OF TRANSACTIONS WITH THE ASSESSEE AS DECIDED BY THE HON BLE SUPREME COURT IN THE CASE OF CENTRAL BURE AU OF INVESTIGATION VS. V.C. SHUKLA (1 988) 8 S SC 410 AND CHUH ARMAL VS. COMMIS SIONER OF INCOME TAX (1988) 172 ITR 250 / 38 TAXMAN 190 (SC). RELIANCE WAS ALSO PLACED ON THE FOLLOWING DECISIONS RENDERED BY VARIOUS COURTS AND TRIBUNALS: A. JAI KUMAR JAIN VS. ASSTT. COMMISSIONER OF INCOME TAX (2007) 11 SOT (JAIPUR) (URO ). 'ADDITION IN THE INSTANT CASE WAS MADE ON THE BASIS OF THE PAPERS FOUND FROM 'A' (THIRD PARTY). IN SEARCH THESE PAPERS WERE NOT CONFRONTED TO THE ASSESSEE. FROM THE ASSESSMENT ORDER IT WAS NOT BORNE OUT WHETHER 'A' (THIRD PARTY) HAD STATED THESE P APERS AS PERTAINING TO THE ASSESSEE. NO PRESUMPTION COULD BE DRAWN AGAINST THE ASSESSEE U/S 132(4A) IN RESPECT OF PAPER NOT RECOVERED FROM HIM. NO ADDITION CAN BE MADE ON THE BASIS OF DOCUMENTS FOUND FROM THIRD PARTY IN THE ABSENCE OF CORROBORATIVE EVIDENC E. THEREFORE, THE ASSESSING OFFICE AS WELL AS THE COMMISSIONER OF INCOME TAX (A) ERRED IN MAKING THE ADDITION ON THE BASIS OF SAID PAPERS IN THE HANDS OF ASSESSEE. HENCE, THE ENTIRE ADDITION MADE ON THE BASIS OF PAPERS FOUND FROM 'A' (THIRD PARTY) WAS TO B E DELETED'. B. PRARTHANA CONSTRUCTION (P) LTD. VS. DEPUTY COMMISSIONER OF INCOME TAX (2001) 118 TAXMAN 112 (IT AT - AHMA DABAD) (MAG) 'IT HAS BEEN HELD THAT LOOSE PAPERS AND DOCUMENTS SEIZED FROM PREMISES OF THIRD PARTIES AND STATEMENT ITA NOS. 3546, 3547 & 3549 /DEL/201 2 MUKESH GARG 19 RECORDED AT BACK OF ASSESSEE WITHOUT IT BEING AFFORDED OPPORTUNITY TO INTERROGATE SAID DOCUMENTS AND WITHOUT BRINGING ON RECORD ANY SUPPORTING EVIDENCE, COULD NOT BE MADE BASIS FOR ADDING UNDISCLOSED INCOME IN HANDS OF ASSESSEE'. C. ADDITIONAL COMMISSIONER OF INCOME TAX VS. MISS LATA MANGESHKAR (1974) ITR 696 (MUMBAI) 'IT HAS BEEN HELD THAT ON APPRECIATION OF EVIDENCE ON RECORD, THAT ENTRIES IN THE L EDGER OF A FIRM (THIRD PARTY) DID NOT REPRESENT ASSESSEE'S INCOME FROM UNDISCLOSED SOURCES, WAS FINDING OF THE FACT NOT GIVING RISE TO ANY REFERABLE QUESTION OF LAW'. D. AMARJIT SINGH BAKSHI (HUF) VS. ASSISTANT COMMISSIONER OF INCOME TAX (2003) 86 ITD 13 (DELHI) 'IT HAS BEEN HELD THAT WHERE DOCUMENT IN QUESTION WAS NOT RECOVERED FROM ASSESSEE'S POSSESSION BUT WAS RECOVERED FROM N'S POSSESSION, AND ASSESSEE WAS NOT ALLOWED ANY OPPORTUNITY OF CROSS - EXAMINATION AND FURTHER, N'S TESTIMONY WAS NOT FOUND CREDIBLE AT ALL, IT COULD NOT BE SAID THAT THERE WAS ANY IOTA OF EVIDENCE TO SUPPORT REVENUE'S CASE THAT A HUG E FIGURE OVER AND ABOV E FIGURE BOOKED IN RECORDS AND ACCOUNTS CHANGED HANDS BETWEEN PARTIES AND THEREFORE, NO ADDITION COULD BE MADE BASED ON SUCH DOCUMENT IN HANDS OF ASSESSEE . 3.3.4 THERE LORDSHIP IN THE CASE OF L.K. ADVANI VS CENTRAL BUREAU OF INVESTIGATION ON 1 APRIL, 199 7 HELD THAT I AM TEMPTED HERE TO CITE A FEW LINES FROM MURPHY ON EVIDENCE, PAGE 180 'AT COMMON LAW, AN ADMISSION ITA NOS. 3546, 3547 & 3549 /DEL/201 2 MUKESH GARG 20 MADE BY ONE PARTY IS EVIDENCE AGAINST THE MAKER OF THE STATEMENT, BUT NOT AGAINST ANY OTHER PARTY IMPLICATED BY IT.' 3.3.5 WHEN THE AO WAS PLA CING SOLE RELIANCE ON THE STATEMENT ONLY OF SHRI RASIK LAL DHARIWAL, SHRI PRAKASH DHARIWAL, SOHAN RAJ MEHTA FOR MAKING ADDITION. IT WAS THEREFORE, MORE SO NECESSARY TO MAKE ARRANGEMENT FOR THE CROSS EXAMINATION OF THE WITNESS BY SHRI MUKESH GARG, THE APPEL LANT, IN THE INTEREST OF NATURAL JUSTICE BEFORE TAKING A FINAL VIEW IN THE MATTER. HOWEVER, FROM THE ASSESSMENT ORDER IT IS FOUND THAT SUCH RECOURSE WAS NOT TAKEN BY THE A.O. DESPITE BEING ASKED FOR VIDE APPELLANT S REQUEST LETTER DATED 26.12.2011. THE HON 'BLE DELHI HIGH COURT HAS HELD AS UNDER: I) IN THE CASE OF CIT VS. SMC SHARE BROKER LTD. 288 ITR 345, IT WAS HELD THAT IN ABSENCE OF WITNESS BEING MADE AVAILABLE FOR CROSS EXAMINATION, HIS STATEMENT COULD NOT BE RELIED UPON TO THE DETRIMENT OF THE ASSESSE E. TRIBUNAL WAS JUSTIFIED IN SETTING ASIDE BLOCK ASSESSMENT. II) IN THE CASE OF CIT VS. S M AGGARWAL 293 ITR 43, IT WAS HELD THAT STATEMENT MADE BY THE ASSESSEE'S DAUGHTER, CANNOT BE SAID TO BE RELEVANT OR ADMISSIBLE EVIDENCE AGAINST THE ASSESSEE, SI NCE THE ASSESSEE WAS NOT GIVEN ANY OPPORTUNITY TO CROSS EXAMINE HER AND EVEN FROM THE STATEMENT, NO CONCLUSION CAN BE DRAWN THAT THE ENTRIES MADE ON THE RELEVANT PAGE BELONGS TO THE ASSESSEE AND REPRESENTS HIS UNDISCLOSED INCOME. AFTER CONSIDERING THE SUB MISSIONS MADE, I AM OF THE CONSIDERED OPINION THAT ADDITION ON THE BASIS OF ITA NOS. 3546, 3547 & 3549 /DEL/201 2 MUKESH GARG 21 STATEMENT OF THE THIRD PARTY WITHOUT ANY CORROBORATIVE EVIDENCE IS NOT TENABLE. THUS THE ADDI TION MADE BY THE AO FOR RS.84, 42,000/ - IS HEREBY DELETED. THE GROUND RAISED BY THE APPE LLANT IS THUS ALLOWED. 13 . NOW THE DEPARTMENT IS IN APPEAL. THE LD. DR STRONGLY SUPPORTED THE ORDER OF THE AO AND REITERATED THE OBSERVATION MADE IN ASSESSMENT ORDER DATED 29.12.2011. IT WAS FURTHER SUBMITTED THAT THE VALIDITY OF THE DOCUMENTS FOUND DURI NG THE COURSE OF SEARCH WAS ESTABLISHED IN THE CASE OF DHARIWAL GROUP AND THE ASSESSEE WAS SUPPLIER OF THE KATHA TO DHARIWAL GROUP. THEREFORE, THE PAYMENTS MADE TO THE ASSESSEE NOTED ON THE DOCUMENTS WERE IN LIEU OF THE P URCHASES MADE FROM THE ASSESSEE . AS SUCH THE UNACCOUNTED SALES OF THE ASSESSEE WAS RIGHTLY WORKED OUT BY THE AO AND THE ADDITION WAS MADE CONSIDERING THE GP RATE SHOWN AND THE PRELIMINARY INVESTMENT MADE BY M/S YASH PAL NARENDER KUMAR A PARTNERSHIP FIRM IN WHICH THE ASSESSEE WAS A PARTNER. 1 4 . IN HIS RIVAL SUBMISSIONS THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND FURTHER SUBMITTED THAT NO PAPERS OR DOCUMENTS WHATSOEVER SEIZED FROM THE PREMISES OF THE ASSESSEE, AT THE TIME OF SEARCH. IT WAS FURTHER SUBMITTED THAT THE PROVISIONS CONTAINED IN SECTION 292(1) OF THE ACT STATES THAT WHEN THE DOCUMENT IS FOUND DURING THE COURSE OF SEARCH U/S 132 OF THE ACT , IT MAY BE PRESUMED THAT THE SAID DOCUMENTS BELONGED ITA NOS. 3546, 3547 & 3549 /DEL/201 2 MUKESH GARG 22 TO SUCH PERSON AND THE CONTENTS OF SUCH DOCUMENTS ARE TRUE BUT IT NEVER SU GGEST THAT THE DOCUMENTS BELONG TO ANOTHER PERSON. IT WAS FURTHER SUBMITTED THAT THE DOCUMENTS FOUND DURING THE COURSE OF SEARCH MUST UNMISTAKABLY REFLECT THE TRANSACTION WITHOUT HAVING ANY SECOND INTERPRETATION , HOWEVER, IN THE PRESENT CASE , THE NAME OF THE ASSESSEE WAS APPEARING ON THE DOCUMENTS FOUND DURING THE COURSE OF SEARCH AND THE ADDITION WAS MADE MERELY ON THE BASIS OF STATEMENT OF ONE SH. SOHANRAJ MEHTA , WHO ALSO DID NOT INDICATE THAT THE ASSESSEE WAS INVOLVED I N THE TRANSACTION. IT WAS FURTHER SUBMITTED THAT IN THE PRESENT CASE, THE PERSONS SEARCHED WERE SH. RASIK LAL DHARIWAL, SH. PRAKASH DHARIWAL AND SH. SOHANRAJ MEHTA, T HEREFORE, THE PRESUMPTION APPLIES TO THEM AND NOT TO THE ASSESSEE , AS THE DOCUMENT FOUND D URING THE COURSE OF SEARCH WERE THE DUMB DOCUMENT S AND DID NOT REFLECT ANY DETAILS ABOUT THE TRANSACTION OF THE ASSESSEE AND THERE WAS NO CO - RELATION WITH OTHER MATERIAL FOUND EITHER DURING THE COURSE OF SEARCH OR ON INVESTIGATION THEREAFTER. THE RELIANCE WAS PLACED ON THE FOLLOWING CASE LAWS: ASHWANI KUMAR VS ITO (1997) 39 ITD 183 (DEL) NEE NA SYAL S (1999) 70 ITD 62 (CHD D . ) ELITE DEVELOPERS VS DCIT (2000) 73 ITD 379 (NAG) ACIT VS SATYAPAL WASSAN (2007) 295 ITR (AT) 352 (JABALPUR) ADDL. CIT VS MISS LATA MA NGESHKAR (1974) 97 ITR 696 (BOM) SAIF ALI KHAN MANSURALI VS ACIT (2012) 13 ITR (TRIB) 204 (MUM) ITA NOS. 3546, 3547 & 3549 /DEL/201 2 MUKESH GARG 23 D. S. AGENCIES AND ASSOCIATES & USHA DISTRIBUTORS VS ADDL. CIT (2015) 44 ITR (TRIB) 46 (MUM) 15 . THE LD. CIT DR IN HIS REJOINDER SUBMITTED THAT THE STATEMENT OF SH. SOHANRAJ MEHTA WAS RECORDED INCONSEQUENCE OF THE DOCUMENT S FOUND DURING THE COURSE OF SEARCH. THEREFORE, THE DOCUMENTS FOUND WERE NOT THE DUMB DOCUMENTS AND THAT THE ABSENCE OF CROSS - EXAMINATION WAS NOT SUFFICIENT TO DELETE THE ADDITION MADE BY THE AO. 16 . WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON THE RECORD. IN THE PRESENT CASE, IT IS AN ADMITTED FACT THAT THE AO MADE THE ADDITION ON THE BASIS OF STATEMENT OF SH. SOHANRAJ MEHTA WHO A DMITTED IN HIS STATEMENT THAT THE MONEY WAS HANDED OVER TO SOME PERSONS AS PER DIRECTION OF SH. RASIK DHARIWAL AND HIS SON SH. PRAKASH DHARIWAL. HOWEVER, IN THOSE STATEMENTS NOWHERE IT WAS STATED THAT ANY AMOUNT WAS HANDED OVER TO THE ASSESSEE OR HIS REPRE SENTATIVE. IN THE PRESENT CASE, IT IS NOTICED THAT THE ASSESSEE ASKED THE AO FOR CROSS - EXAMINATION OF SH. SOHANRAJ MEHTA VIDE LETTER DATED 26.12.2011 (COPY OF WHICH IS PLACED AT PAGE NOS. 73 TO 78 OF THE ASSESSEE S PAPER BOOK) BUT THE AO DID NOT PROVIDE AN Y OPPORTUNITY OF CROSS - EXAMINATI ON . IT IS ALSO NOTICED THAT SH. SOHANRAJ MEHTA IN HIS STATEMENT NOWHERE MENTIONED THE NAME OF THE ASSESSE E . HE SIMPLY STATED THAT CASH WAS HANDED OVER TO THE BEARER OF THE SLIP CONTAINING THE SIGNATURE OF SH. RASIK DHARIWAL AND HIS SON SH. PRAKASH DHARIWAL. IN THE INSTANT CASE, NOTHING IS ITA NOS. 3546, 3547 & 3549 /DEL/201 2 MUKESH GARG 24 BRO UGHT ON RECORD THAT THE ASSESSEE IN FACT RECEIVED ANY AMOUNT FROM SH. SOHANRAJ MEHTA . IT IS WELL SETTLED THAT AS PER THE PROVISIONS OF SECTION 292(1) OF THE ACT, THE DOCUMENTS FOUND DURIN G THE COURSE OF SEARCH MAY BE PRESUMED TO BE BELONGING TO THE PERSON IN WHOSE POSSESSION THOSE DOCUMENT S WERE FOUND , HOWEVER, IN THE PRESENT CASE NO SUCH DOCUMENT WAS FOUND FRO M THE POSSESSION OF THE ASSESSEE AND IN THOSE DOCUMENTS WHICH WERE FOUND AND SEI ZED DURING THE COURSE OF SEARCH IN DHARI WAL GROUP OF CASES, T HERE WAS NO INDICATION THAT THE FIGURES REFERRED THEREIN REFLECTED ANY QUANTITY OF GOODS OR AMOUNT OF MON EY WHICH RELATED TO THE ASSESSEE . IT IS NOT IN DISPUTE THAT THE PRESUMPTION A VAILABLE U/S 132(4A) CAN BE DRAWN AGAINST THE PERSON IN WHOSE CASE SEARCH WAS AUTHORIZED AND FROM WHOSE POSSESSION OR CONTROL DOCUMENTS/BOOKS OF ACCOUNT OR DIARY ETC. WERE FOUND BUT THE PRESUMPTION REGARDING CORRECTNESS OF CONTENTS OF THOSE DOCUMENTS/BOOKS OF ACCOUNTS ETC. CAN BE RAISED AGAINST THE THIRD PARTY ONLY WHEN THE DOCUMENTS ARE SPEAKING ONE. IN THE PRESENT CASE, NO DOCUMENT WAS FOUND FROM T HE POSSESSION OF THE ASSESSEE AND A BUNCH OF LOOSE PAPERS WHICH W ERE SEIZED FROM THE PREMISES OF THIRD PARTY DID NOT INDIC ATE THE UNRECORDED SALES MADE TO THE ASSESSEE. M OREOVER, NO OPPORTUNITY WAS GRANTED BY THE AO TO CROSS EXAMINED SH. SOHANRAJ MEHTA , ON THE BASIS OF WHOSE STATEMENT THE AO PRESUMED THAT UNACCOUNT ED SALE WAS MADE BY THE ASSESSEE . WE, THEREFORE, CONSIDERING T HE TOTALITY OF THE FACTS OF THE PRESENT CASE, DO NOT SEE ANY ITA NOS. 3546, 3547 & 3549 /DEL/201 2 MUKESH GARG 25 VALID REASON TO INTERFERE WITH THE FINDINGS OF THE LD. CIT(A) WHO RIGHTLY DELETED THE ADDITION MADE BY THE AO . IN THAT VIEW OF THE MATTER WE DO NOT SEE MERIT IN THIS GROUND OF THE ASSESSEE S APPE AL. 17 . THE NEXT ISSUE VIDE GROUND NO. 3 RELATES TO THE DELETION OF ADDITION OF RS.2,88,600/ - MADE BY THE AO BY TREATING THE AGRICULTURAL INCOME DECLARED BY THE ASSESSEE AS INCOME RECEIVED FROM UNDISCLOSED SOURCES . 18 . THE FACTS RELATED TO THIS ISSUE IN BRIEF ARE THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAD SHOWN AGRICULTURAL INCOME OF RS.2,88,600/ - AND CLAIMED THE SAME AS EXEMPTED. THE AO ASKED THE ASSESSEE TO FURNISH THE DETAILS AS PER THE FOLLOWING PRO FORMA : 1 NAME OF ASSESSEE 2 ASS TT. YEAR 3 LAND OF AREA (HECTOR & ACRE) 4 LOCATION OF LAND HOLDING 5 NATURE OF LAND ( IRRIGATED OR NOT) 6 NAME OF CROPS 7 QUANTITATIVE OF CROP PRODUCED 8 SALE PRICE OF CROPS RS 9 TOTAL EXPENSES CLAIMED BIFURCATION OF EXPENSES WITH JUSTIFICATION (ALL EXPENSES MUST BE INCLUDING LABOUR EXPENSES) ( LABOUR EXPENSES MEANS NO OF DAYS AND PER DAY PER LABOUR CHARGE) RS PREPARATION OF LAND FOR AG COST OF SEEDS PLOUGHING SOWING OF CROPS / SEEDS PESTICIDE SECURITY CHARGE WATER EXPENSES ELECTRIC EXPENSES HARVESTING CHARGES ITA NOS. 3546, 3547 & 3549 /DEL/201 2 MUKESH GARG 26 TRANSPORTATION CHARGES SALE EXPENSES / MANDI EXPENSES 10 NET AG INCOME (DISCLOSED IN RETURN OF INCOME) 11 % OF NET I NCOME TO GROSS INCOME 12 OTHER OWNERS OF THE LAND WITH THEIR SHARE IN THAT LAND 13 WHAT ARE THE CONSIDERATION PAID FOR USING THEIR LAND (IF NOT PAID EXPLAIN THE REASON) 14 REMARKS ON REASONABLENESS OF THE AG INCOME DISCLOSED BY THE ASSE SSEE 1 9 . IN RESPONSE, THE ASSESSEE FURNISHED COPY OF DOCUMENTS/SALE DEED IN RESPECT OF H OLDING OF LAND AT VARIOUS PLACES AND ALSO FURNISHED A CERTIFICATE DATED 20.08.2010 FROM SH. JAGDISH PRASAD SH ARMA, TEHSIL PATWARI, WHICH HAD CERTIFIED THAT VEGETABLES WERE GROWN IN THE AGRICULTURAL LAND PERTAINING TO THE ASSESSEE. THE ASSESSEE ALSO FURNISHED AGREEMENT ON STAMP PAPER OF RS.5 DATED 25.05.2003 WITH SH. DHIRENDER BHATI SON OF LATE SH. SARDAR SINGH R/O V ILLAGE BISRAK DISTT. GAUTAM BUDH NAGAR, IN RESPECT OF LAND GIVEN TO HIM FOR CULTIVATION. THE SAID AGREEMENT REVEALED THAT ALL THE EXPENSES RELATED TO CULTIVATION SUCH AS SEEDS, KHAD, WATER , WILL BE BORNE BY SH. DHIRENDER BHATI BUT THE SAME WILL BE DEDUCTED AT THE TIME OF SALE OF THE CROPS . I T HAS ALSO BEEN ME NTIONED IN THE SAID AGREEMENT THAT SH. DHIRENDER BHATI WILL GROW ONLY VEGETABLE S AND ALL LABOUR EXPENSES WILL B E BORNE BY HIM AND THAT SH. DHIRNEDER BHATI WILL PAY TO THE ASSESSEE 60% OF THE ACTUAL SALE OF CROP S AFTER DEDUCTING THE EXPENSES AS PER AGREEMEN T. THE AO AFTER CONSIDERING THE SUBMISSIONS OF THE ITA NOS. 3546, 3547 & 3549 /DEL/201 2 MUKESH GARG 27 ASSESSEE OBSERVED THAT MERE FILING OF COPY OF AGREEMENT MADE ON 25.05.2003 , DID NOT PROVE THAT THE AGREEMENT WAS MADE EFFECTIVE IN ACTUAL AND CULTIVATION ACTIVITIES OR AGRICULTURAL OPERATION WAS MADE EFFEC TIVE AS PER AGREEMENT. HE ALSO POINTED OUT THAT THE AGREEMENT WAS MADE IN MAY 2003 BUT IT WAS NOT MENTIONED THAT TILL WHEN THIS AGREEMENT WOULD REMAIN EFFECTIVE. HE FURTHER OBSERVED THAT THE ASSESSEE FAILED TO FURNISH THE DETAILS OF EXPENSES INCURRED AND T HE CROPS GROWN ON THE LAND AND THAT THE CLAUSES OF AGREEMENTS WERE ONLY ON PAPERS AND NO AGRICULTURAL ACTIVITIES HAD BEEN CARRIED OUT. HE FURTHER OBSERVED THAT THE ASSESSEE FAILED TO PRODUCE DETAILS OF EXPENSES INCURRED TO GROW THE CROPS, PURCHASE OF SEEDS , FERTILIZERS, WATERING, CARTAGE, WAGES AND OTHER NECESSARY EXPENDITURE WHICH WERE NECESSARY TO BE INCURRED TO CULTIVATE THE LAND AND ALSO FAILED TO FURNISH THE EVIDENCE IN RESP ECT OF SALE OF CROPS IN THE MARKET . THE AO HELD THAT THE INCOME OF RS.2,88,600/ - WAS RECEIVED BY THE ASSESSEE FROM UNDISCLOSED SOURCES AND NOT FROM AGRICULTURAL ACTIVITIES. ACCORDINGLY, ADDITION OF RS.2,88,600/ - WAS MADE. 20 . BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND SUBMITTED AS UNDER: 3.5 THE GENUINE NESS OF THE DOCUMENT AND THE AGREEMENT DATED 25.05.2003 ENTERED BETWEEN THE APPELLANT AND CULTIVATOR HAS NOT BEEN DOUBTED. IT HAS ALSO NOT BEEN DOUBTED THAT THE AGRICULTURE LAND IS ITA NOS. 3546, 3547 & 3549 /DEL/201 2 MUKESH GARG 28 OWNED BY THE APPELLANT. THE CERTIFICATE OF THE TEHSIL PATWARI WAS ALSO NOT H ELD AS IN GENUINE. HENCE, THERE IS NO DOUBT THAT THE APPELLANT WAS CARRYING ON AGRICULTURAL ACTIVITIES AND THE INCOME DERIVED THERE FROM WAS AGRICULTURAL INCOME UNDER SEC 2(1A) OF THE ACT. IT WOULD BE ADVANTAGEOUS TO REFER TO THE PRINCIPLE OF LAW CULLED OUT BY THE APEX COURT IN RAJA BENOY KUMAR SAHAS ROY'S CASE [1957] 32 ITR 466 (SC). THE SUPREME COURT DEFINED THE SCOPE OF THE TERM 'AGRICULTURE' IN THE FOLLOWING TERMS: 'AS WE HAVE NOTED ABOVE, THE PRIMARY SENSE IN WHICH THE TERM 'AGRICULTURE' IS UNDERSTO OD IS AGAR - FIELD AND CULTRA - CULTIVATION, I.E., THE CULTIVATION OF THE FIELD, AND IF THE TERM IS UNDERSTOOD ONLY IN THAT SENSE, AGRICULTURE WOULD BE RESTRICTED ONLY TO CULTIVATION OF THE LAND IN THE STRICT SENSE OF THE TERM MEANING THEREBY, TILLING OF THE LAND, SOWING OF THE SEEDS, PLANTING AND SIMILAR OPERATIONS ON THE L AND. THEY WOULD BE THE BASI C OPERATIONS AND WOULD REQUIRE THE EXPENDITURE OF HUMAN SKILL AND LABOUR UPON THE LAND ITSELF.' 21 . THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF TH E ASSESSEE DELETED THE ADDITION BY OBSERVING IN PARA 3.6 OF THE IMPUGNED ORDER AS UNDER: 3.6 I HAVE CONSIDERED THE ORDER OF AO AND THE SUBMISSIONS MADE BY THE AR OF THE APPELLANT. THE APPELLANT ENTERED INTO AN AGREEMENT FOR THE CULTIVATION OF AGRICULTURA L LANDS AT BIHARIPUR, ALIPUR, ITA NOS. 3546, 3547 & 3549 /DEL/201 2 MUKESH GARG 29 KHERA KHERAKERA AND SIRASPUR WITH SH. DHIRENDER BHATI ON 24.03.2005. THE APPELLANT SUBMITTED A CERTIFICATE DATED 20.08.2010 FROM TEHSILPATWARI THAT VEGETABLES ARE GROWN ON THE APPELLANT S AGRICULTURAL LANDS FOR THE PAST MANY Y EARS. THE AO JUMPED INTO THE CONCLUSION THAT NO AGRICULTURE OPERATION WAS CARRIED ON THE AGRICULTURE LAND WITHOUT EXAMINING SH. DHIRENDER BHATI WITH WHOM THE APPELLANT ENTERED INTO AGREEMENT. SHE HAS ALSO NOT MADE ANY ENQUIRY FROM TEHSILPATWARI SH. JAGDI SH PRASAD SHARMA. THE REJECTION OF THE CLAIM OF THE APPELLANT WITHOUT MAKING ANY ENQUIRY FROM CULTIVATOR AND TEHSILPATWARI IS NOT TENABLE. I THEREFORE, HOLD THAT THE AO WAS NOT JUSTIFIED IN HOLDING THAT THE AMOUNT OF RS.2,88,600/ - IS NOT AGRICULTURAL INCOM E OF THE APPELLANT FOR THE ASSESSMENT YEAR 2007 - 08. IN THE RESULT, THE APPEAL ON THIS GROUND IS ALLOWED. 22 . NOW THE DEPARTMENT IS IN APPEAL. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE OBSERVATIONS MADE BY THE AO IN PARAS 23 TO 25 OF THE ASSESSMEN T ORDER DATED 29.12.2011 AND STRONGLY SUPPORTED THE SAID ORDER PASSED BY THE AO. 23 . IN HIS RIVAL SUBMISSIONS THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND STRONGLY SUPPORTED THE IMPUGNED ORDER. ITA NOS. 3546, 3547 & 3549 /DEL/201 2 MUKESH GARG 30 24 . WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON THE RECORD. IN THE PRESENT CASE, THE ASSESSEE FURNISHED THE DOCUMENTS RELATING TO THE LAND HOLDING WHICH WERE NOT DOUBTED BY THE AO. THE ASSESSEE ENTER ED INTO AN AGREEMENT FOR CULTIVATION OF THE AGRICULTURAL LAND WITH SH. DHIRENDER BHATI AND FURNISHED THE CERTIFICATE DATED 20.08.2010 FRO M T EHSILPATWARI WHICH REVEALED THAT VEGETABLES WERE GROWN ON THE ASSESSEE S AGRICULTURAL LAND FOR THE PAST MANY YEARS. THE AO IN THE PRESENT CASE, DID NOT EXAMINE SH. DHIRENDER BHATI WITH WHOM THE ASSESSEE ENTERED INTO AN AGREEMENT AND ALSO DID NOT MAKE ANY ENQUIRY FROM TEHSILPATWARI SH. JAGDISH PRASAD SHARMA WHO ISSUED A CERTIFICATE STATING THEREIN THAT THE VEGETABLES WER E GROWN ON THE AGRICULTURAL LAND OF THE ASSESSEE. THEREFORE, THE IMPUGNED ADDITION WAS MADE BY THE AO ON THE BASIS OF PRESUMPTION ONLY WHICH IS NOT TENABLE IN THE EYES OF LAW. IN THAT VIEW OF THE MATTER, WE ARE OF THE VIEW THAT THE LD. CIT(A) RIGHTY DELETE D THE ADDITION MADE BY THE AO. 25 . THE NEXT ISSUE VIDE GROUND NO. 4 RELATES TO THE DELETION OF ADDITION OF DISALLOWANCE OF INTEREST AMOUNTING TO RS.15,55,670/ - MADE BY THE AO U/S 36(1)(III) OF THE ACT, O N ITA NOS. 3546, 3547 & 3549 /DEL/201 2 MUKESH GARG 31 THE GROUND THAT INTEREST BEARING FUNDS WERE DIVER TED FOR NON - BUSINESS PURPOSES. 26 . THE FACTS RELATED TO THIS ISSUE IN BRIEF ARE THAT THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTICED THAT THE ASSESSEE HAD DEDUCTED AN AMOUNT OF RS.15,55,670/ - FROM GROSS TOTAL INCOME ON ACCOUNT OF INTEREST PAID TO M/S RPG CREDIT & CAPITAL LTD. AND M/S YASH PAL NARENDER KUMAR, IN WHICH THE FAMILY MEMBERS OF THE ASSESSEE WERE HAVING SUBSTANTIAL INTEREST. THE AO ALSO OBSERVED THAT THE ASSESSEE HAD INVESTED A LARGE AMOUNT IN THE SHARES OF VARIOUS COMPANIES IN WHICH H E AND HIS FAMILY MEMBERS WERE HAVING SUBSTANTIAL INTEREST. HE ASKED THE ASSESSEE TO FURNISH JUSTIFICATION IN RESPECT OF INTEREST PAID AMOUNTING TO RS.15,55,670/ - . HE ALSO ASKED THE ASSESSEE TO EXPLAIN WITH EVIDENCE THAT LOANS TAKEN ON WHICH INTEREST WAS PA ID , WERE UTILIZED FOR EARNING INCOME WHICH WAS FORMING PART OF TAXABLE INCOME. THE ASSESSEE WAS ALSO ASKED TO SHOW - CAUSE AS TO WHY HIS CLAIM IN RESPECT OF INTEREST PAID ON LOANS SHOULD NOT BE DISALLOWED AND ADDED TO HIS INCOME FOR THE YEAR UNDER CONSIDERAT ION. THE AO OBSERVED THAT THE ASSESSEE ALTHOUGH FURNISHED SOME DETAILS ON 23.12.2011 BUT FAILED TO SUBSTANTIATE HIS CLAIM IN RESPECT OF INTEREST PAID AND NO CATEGORICAL EXPLANATION/REPLY HAD BEEN SUBMITTED. ACCORDING ITA NOS. 3546, 3547 & 3549 /DEL/201 2 MUKESH GARG 32 TO HIM THE ASSESSEE HAD PARKED THE INTE REST BEARING FUNDS IN THE COMPANIES (FAMILY CONCERNS) FROM WHICH NO INCOME HAD BEEN RECEIVED OR SUPPOSED TO BE RECEIVED IN FUTURE OR IF RECEIVED, MIGHT HAVE BEEN IN THE FORM OF DIVIDEND, WHICH MAY BE CLAIMED AS EXEMPTED. THE AO HELD THAT WITHIN THE PROVISI ONS OF SECTION 36(1)(III) OF THE ACT, INTEREST PAYMENT ON THE FUNDS UTILIZED OTHER THAN THE PURPOSE OF BUSINESS WAS NOT DEDUCTIBLE AS BUSINESS EXPENDITURE. 27 . BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND THE SUBMISSIONS MADE AS INCORPORATED IN PARA 3.8 OF THE IMPUGNED ORDER ARE REPRODUCED VERBATIM AS UNDER: A PERUSAL OF THE COPIES OF ACCOUNTS WHICH WERE PLACED BEFORE A.O. SHOWS THAT NON CHARGING OF INTEREST IS A COMMON FACTOR WHETHER THE MONIES GIVEN BY THE ASSESSEE OR RECEIVED BY THE ASSESSEE FROM THE SAID SISTER CONCERN, IT IS FOUND THAT AN IDENTICAL QUESTION CAME UP FOR CONSIDERATION BEFORE THE HON'BLE DELHI HIGH COURT IN THE CASE OF C IT V. LALSONS ENTERPRISES (2010) 324 ITR 426 (DELHI) WHEREIN, THEIR LORDSHIPS EXPRESSED THE CONSIDERED VIEW THAT WHETHER MUTUAL ACCOMMODATIONS BY SISTER CONCERNS, BY WAY OF INTEREST FREE FUNDS, CAN BE SAID TO BE COMMERCIALLY EXPEDIENT OR NOT, IS ESSENTIALLY A QUESTION OF FACT, WHICH IN THE SAID CASE WAS DECIDED IN FAVOR OF ASSESSEE BY THE TRIBUNA L. IT IS THUS CLEAR THAT ON CHARGING OF INTEREST ON ADVANCES BY SISTER CONCERNS, PARTICULARLY IN THE SITUATION WHERE BOTH THE CONCERNS HAVING BENEFITS OF SUCH MUTUAL ACCOMMODATION, COULD ITA NOS. 3546, 3547 & 3549 /DEL/201 2 MUKESH GARG 33 INDEED BE JUSTIFIED ON THE GROUND OF COMMERCIAL EXPEDIENCY IN A PARTI CULAR FACT SITUATION. THE PLEA OF THE ASS ESSEE THEREFORE CANNOT BE SIMPLY BRUSHED ASIDE'. 2 8 . THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE OBSERVED THAT THE LOAN TRANSACTIONS OF THE ASSESSEE WERE WITH THE COMPANIES OF WHICH HE WAS THE DIRECTOR OR HAVING SOME INTEREST AS PARTNER OF THE CONCERNS DOING FINANCE BUSINESS OR TRADING. THEREFORE, THERE WAS BUSINESS EXPEDIENCY INVOLVED. HE FURTHER OBSERVED THAT THE DECISIONS RELIED BY THE AO HAD BEEN OVERRULED BY THE DECISION OF THE HON BLE SUPR EME COURT IN THE CASE OF S.A. BUILDERS VS CIT (2007) 288 ITR 1 WHEREIN IT HAS BEEN HELD THAT IT WAS REQUIRED TO BE ENQUIRED AS TO WHETHER THE INTEREST FREE LOAN WAS GIVEN TO THE SISTER CONCERN AS A MEASURE OF COMMERCIAL EXPEDIENCY AND IF IT WAS SO, INTERES T ON BORROWED FUNDS WAS TO BE ALLOWED. THE LD. CIT(A) ACCORDINGLY DELETED THE DISALLOWANCE MADE BY THE AO. 29 . NOW THE DEPARTMENT IS IN APPEAL. THE LD. DR STRONGLY SUPPORTED THE ORDER OF THE AO. 30 . IN HIS RIVAL SUBMISSIONS THE LD. COUNSEL FOR THE ASSESS EE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND FURTHER SUBMITTED THAT THE INTEREST FREE LOANS WERE ITA NOS. 3546, 3547 & 3549 /DEL/201 2 MUKESH GARG 34 PROVIDED TO THE FAMILY MEMBERS TO HELD THEM IN THEIR BUSINESS AND AS THE INTEREST FREE ADVANCES TO VARIOUS CONCERNS WERE OWING TO COMMER CIAL AND BUSINESS EXPEDIENCY , T HEREFORE, THE LD. CIT(A) RIGHTLY DELETED THE ARBITRARY DISALLOWANCE MADE BY THE AO. THE RELIANCE WAS PLACED ON THE FOLLOWING CASE LAWS: S.A. BUILDERS VS CIT (2007) 288 ITR 1 (SC) DCIT VS MONSANTO HOLDINGS P. LT D. (2012) 13 I TR (TRIB) 90 (MUM) 31 . WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON THE RECORD. IN THE PRESENT CASE, THE LD. CIT(A) HAD GIVEN A CATEGORICAL FINDING THAT THE ASSESSEE ADVANCED THE MONEY TO THOS E CONCERNS IN WHICH HE WAS EITHER A DIRECTOR OR A PARTNER AND THERE WAS BUSINESS EXPEDIENCY , THE SAID CATEGORICAL FINDING OF THE LD. CIT(A) WAS NOT REBUTTED. WE, THEREFORE, DO NOT SEE ANY VALID GROUND TO INTERFERE WITH THE FINDINGS OF THE LD. CIT(A). ACCOR DINGLY, WE DO NOT SEE ANY MERIT IN THIS GROUND OF THE DEPARTMENTAL APPEAL. 32 . IN ITA NO. 3547/DEL/2012, THE ISSUES RAISED VIDE GROUND NOS. 2, 3 & 5 ARE IDENTICAL TO THE GROUNDS RAISED IN ITA NO. 3546/DEL/2012 FOR THE ASSESSMENT YEAR 2007 - 08. THE ONLY DIF FERENCE IS IN THE AMOUNT INVOLVED, THEREFORE, OUR ITA NOS. 3546, 3547 & 3549 /DEL/201 2 MUKESH GARG 35 FINDINGS GIVEN IN THE FORMER PART OF THIS ORDER SHALL APPLY MUTATIS MUTANDIS FOR THESE GROUNDS. 33 . THE ANOTHER ISSUE RAISED BY THE DEPARTMENT VIDE GROUND NO. 4 IN ITA NO. 3547/DEL/2012 RELATES TO THE SHOR T TERM CAPITAL GAIN CLAIMED BY THE ASSESSEE WHICH WAS TREATED BY THE AO AS INCOME FROM OTHER SOURCES. 34 . THE FACTS RELATED TO THIS ISSUE IN BRIEF ARE THAT THE ASSESSEE HAD SHOWN AN INCOME OF RS.64,996/ - UNDER THE HEAD SHORT TERM CAPITAL GAIN FROM SHARE T RADING. THE ASSESSEE WAS ASKED TO FURNISH COPY OF D - MAT ACCOUNT, DETAILS OF SHORT TERM CAPITAL GAINS FROM BROKERS IN RESPECT OF SHARE TRADING. T HE ASSESSEE FURNISHED THE AFORESAID DOCUMENTS. THE AO OBSERVED THAT THE LEDGER ACCOUNT REVEALED THAT AT MOST OF THE OCCASIONS PAYMENTS HAD BEEN MADE AFTER A LONG GAP OF PURCHASE OF SHARES. HE FURTHER OBSERVED THAT IN SOME CASES, PERIOD OF PAYMENTS WERE EVEN MORE THAN SIX MONTHS AFTER THE DATE OF PURCHASE OF SHARES AND MOST OF THE SHARE TRADING S WERE MADE FOR GAINS O NLY AND THAT TO O YEAR TO YEAR , WHEREAS FACTUAL POSITION WAS ABSOLUTELY DIFFERENT AS THE SHARE TRADING WAS THE MOST UNCERTAIN TRADE. HE FURTHER OBSERVED THAT GENERALLY BROKER WAS USED TO SETTLE EVERY TRANSACTION WITHIN A DAY OR TWO AND PAYMENTS WERE DEMANDE D IMMEDIATELY AFTER ITA NOS. 3546, 3547 & 3549 /DEL/201 2 MUKESH GARG 36 EVERY PURCHASE TRANSACTION BY THE BROKER. THE AO OBSERVED THAT IN ALL THE GROUP OF CASES TO WHICH THE ASSESSEE BELONGED , THE CIRCLE PAYMENTS HAD BEEN MADE FOR THE SHARE TRANSACTIONS AFTER LONG GAP DESPITE OF HUGE AMOUNT OF PAYMENT WAS T O BE PAID TO BROKER. THE AO OBSERVED THAT THE ASSESSEE FAILED TO PRODUCE BROKER FOR FURTHER VERIFICATION OF GENUINENESS OF TRANSACTION AND DID NOT FURNISH CONTRACT NOTE, DELIVERY/TRANSFER OF SHARES IN D - MAT ACCOUNT OR ANY SUPPORTING DOCUMENT TO PROVE THAT SHARES WERE TRANSFERRED IN D - MAT ACCOUNT OF THE ASSESSEE. HE FURTHER OBSERVED THAT SIMPLY FILING OF LEDGER ACCOUNT/BILLS OF BROKER DID NOT PROVE THAT DELIVERY OF SHARES WAS MADE, IT ONLY PROVED THAT THE ASSESSEE HAD TAKEN ENTRIES ONLY FOR CAPITAL GAIN TO E VADE TAX OR PAY TAX AT LOWER RATE. THE AO ALSO OBSERVED THAT THE ASSESSEE FAILED TO PROVIDE SUPPORTING EVIDENCE THAT THE SAID SHARE TRANSACTIONS WERE ROUTED THROUGH THE D - MAT ACCOUNT OF THE ASSESSEE WHICH IS NECESSARY TO PROVE THE GENUINENESS OF THE TRANSA CTION. HE, THEREFORE, HELD THAT THE SHARE TRANSACTIONS AS CLAIMED TO HAVE UNDERTAKEN WERE NOT GENUINE AND THE INCOME EARNED WAS FROM UNDISCLOSED SOURCES WHICH HAD BEEN ROUTED THROUGH SHORT TERM CAPITAL GAINS FOR THE PURPOSE OF GIVING TAX AT LOWER RATE. ITA NOS. 3546, 3547 & 3549 /DEL/201 2 MUKESH GARG 37 3 5 . BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND SUBMITTED AS UNDER: 3.7 THAT IT WAS NOT THE CASE OF THE DEPARTMENT THAT THE ASSESSEE HAD NOT SHOWN THE INVESTMENT IN SHARES AS INVESTMENT IN THE BALANCE SHEETS FOR RELEVANT ASSESSME NT YEAR NOR THAT THE INVESTMENT IN SHARES AND MUTUAL FUND WAS FOUND TO BE FALSE AND UNTRUE. THE DEPARTMENT HAD PLACED NO MATERIAL TO SHOW THAT THE ASSESSEE S CASE DID NOT FALL WITHIN THE TESTS LAID DOWN BY THE CBDT CIRCULAR NO. 4 OF 2007 (2007) 291 ITR (ST .) 384. THE SHARE TRANSACTIONS WERE IN THE NATURE OF INVESTMENT AND THE PROFIT RECEIVED THEREFROM WAS ASSESSABLE AS SHORT TERM CAPITAL GAIN AS SHOWN BY THE ASSESSEE. 36 . THE ASSESSEE ALSO MADE A REFERENCE TO CIRCULAR NO. 4 OF 2007 DATED JUNE 15, 2007 ISS UED BY THE CBDT AND THE RELIANCE WAS PLACED ON THE FOLLOWING CASE LAWS: CIT VS ASSOCIATED INDUSTRIAL DEVELOPMENT CO. P. LTD. (1971) 82 ITR 586 (SC) CIT VS HOLCK LARSEN (1986) 160 ITR 67 (SC) 37 . THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASS ESSEE OBSERVED THAT THE ASSESSEE HAD FURNISHED DOCUMENTS RELATING TO TRANSACTION OF SHARES, BROKER S LEDGER ACCOUNT AND BILLS (CONTRACT NOTES). HE FURTHER OBSERVED THAT THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE DENIED THAT THE BROKER WAS ITA NOS. 3546, 3547 & 3549 /DEL/201 2 MUKESH GARG 38 ASKED TO B E BR OUGHT BEFORE THE AO AND EVEN IF THE ASSESSEE HAD NOT BROUGHT THE BROKER THE AO HAD ALL WHEREWITHAL TO ENFORCE HIS ATTENDANCE. HE ALSO OBSERVED THAT NOTHING WAS FOUND DURING THE COURSE OF SEARCH WHICH COULD HAVE INDICATED THE POSSIBILITY OF INDULGING IN ACC OMMODATION ENTRIES AND THAT THE AO HAD NOT BROUGHT ANY SEIZED MATERIAL AND SUBSEQUENTLY INVESTIGATIONS TO PROVE THAT THE ASSESSEE WAS INDULGE D IN ACCOMMODATION ENTRIES . THE LD. CIT(A) POINTED OUT THAT ALL THE SHARE S NEED NOT ROUTED THROUGH D - MAT ACCOUNT BU T THERE WERE PROVISIONS FOR THE TRANSACTIONS IN POOL ACCOUNT OF BROKERS AND THE AO HAD NOT CONDUCTED ANY ENQUIRY FROM THE SAID BROKER. AS REGARDS TO THE GAP IN THE PAYMENT INTERVAL, THE LD. CIT(A) WAS OF THE VIEW THAT IT CANNOT BE SUFFICIENT EVIDENCE TO HO LD THAT THE TRANSACTIONS IN SHARES WERE BOGUS. HE, THEREFORE, HELD THAT THE TRANSACTION IN SHARES OF THE ASSESSEE HAD GIVEN RISE THE SHORT TERM CAPITAL GAINS AND IT COULD NOT HAVE BEEN TREATED AS INCOME FROM OTHER SOURCES. 38 . NOW THE DEPARTMENT IS IN APP EAL. THE LD. DR STRONGLY SUPPORTED THE ORDER OF THE AO AND REITERATED THE OBSERVATIONS MADE IN THE ASSESSMENT ORDER DATED 29.12.2011. 39 . IN HIS RIVAL SUBMISSIONS THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELO W ITA NOS. 3546, 3547 & 3549 /DEL/201 2 MUKESH GARG 39 AND STRONGLY SUPPORTED THE IMPUGNED ORDER PASSED BY THE LD. CIT(A). 40 . WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON THE RECORD. IN THE PRESENT CASE, IT IS AN ADMITTED FACT THAT THE ASSESSEE DID NOT PRODUCE THE BROKER FOR VERIFICATION OF GENUINENESS OF TRANSACTION. HOWEVER, IT IS NOT CLEAR AS TO WHETHER THE AO ASKED THE ASSESSEE TO PRODUCE THE BROKER. IT IS ALSO NOT CLEAR AS TO WHETHER THE SHARES WERE TRANSFERRED IN D - MAT ACCOUNT OF THE ASSES SEE AND IF THOSE WERE NOT TRANSFERRED TO THE D - MAT ACCOUNT WHAT WAS THE REASON FOR THE SAME. THIS ISSUE WAS ALTHOUGH DISCUSSED BY THE AO BUT IT HAD NOT BEEN TOUCHED BY THE LD. CIT(A). WE, THEREFORE, IN THE ABSENCE OF THE CLEAR FACTS AVAILABLE ON THE RECORD , DEEM IT APPROPRIATE TO SET ASIDE THIS ISSUE BACK TO THE FILE OF THE AO FOR FRESH ADJUDICATION IN ACCORDANCE WITH LAW AFTER PROVIDING DUE AND REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 41 . IN ITA NO. 3549/DEL/2012 FOR THE ASSESSMENT YEAR 201 0 - 11, THE ISSUE S RAISED VIDE GROUND NOS. 2, 3, & 4 ARE SIMILAR TO THE ISSUES INVOLVED IN ITA NOS. 3546 & 3 5 47/DEL/2012. THEREFORE, OUR FINDINGS GIVEN IN THE FORMER PART OF THIS ORDER ITA NOS. 3546, 3547 & 3549 /DEL/201 2 MUKESH GARG 40 IN THE APPEAL S FOR THE ASSESSMENT YEARS 2007 - 08 AND 2008 - 09 ON THE IDENTI CAL ISSUES SHALL APPLY MUTATIS MUTANDIS FOR THE SE ISSUES RAISED BY THE ASSESSEE VIDE GROUND NOS. 2, 3 & 4 FOR THIS ASSESSMENT YEAR I.E. 2010 - 11. 42 . THE ANOTHER ISSUE RAISED BY THE DEPARTMENT VIDE GROUND NO. 5 RELATES TO THE DELETION OF ADDITION OF RS.4,4 0,100/ - MADE BY THE AO IN RESPECT OF CASH FOUND DURING THE COURSE OF SEARCH FROM THE PREMISES OF THE ASSESSEE. 43 . THE FACTS RELATED TO THIS ISSUE IN BRIEF ARE THAT DURING THE COURSE OF SEARCH OPERATION , CASH OF RS.4,40,100/ - WAS FOUND LYING IN THE ROOM O F THE ASSESSEE. THE AO ASKED TO EXPLAIN THE SOURCE IN RESPECT OF CASH FOUND . I N RESPONSE , THE ASSESSEE FURNISHED THE CASH STATEMENT WHICH HAS BEEN REPRODUCED BY THE AO IN PARA 21 OF THE ASSESSMENT ORDER AND READ AS UNDER: CASH IN HAND AS ON 20.01.2010 A TTHE TIME OF SEARCH AT C - 1 MODEL TOWN EAST. GHA7IABAD S. NO. NAME CASH IN HAND AS ON 01.04.2009 RECEIVED TOTAL DEPOSITED WITH BANK DRAWINGS CASH IN HANDS AS ON 20.01.2010 TOTAL 1. (A) MUKESH GARG 2,29,089.00 1,50,0 00.00 3,79,089.00 1,00,000.00 2,00,000.00 79,089.00 (B) MANJU GARG 42,000.00 2,00,000.00 2,42,000.00 --------- 1,00,000.00 1,42,000.00 (C) PRAVESH GARG 1,03,900.00 1,50,000.00 2,53,900.00 -------- 2,00,000.00 53,900.00 (D) GUNJAN GARG 39,200.00 2,00,000.00 2,39,200.00 -------- 1,00,000.00 1,39,200.00 (E) ANKIT GARG 11,300.00 -------- 11,300.00 ---------- --------- 11,300.00 (F) ARCHIL GARG 19,800.00 ------- 19.800.00 ----------- ---------- 19,800.00 4,45,289.00 2. (A) JAI PAL G ARG 3,21,100.00 ------- 3,21,100.00 ---------- 2,50,000.00 71,100.00 (B) MADHU GARG 1,50,200.00 5,50,000.00 7,00,200.00 5,00,000.00 1,00,000.00 1,00,200.00 (C) NITIN GARG 2,12,183.00 -------- 2,12,183.00 -------- 80,000.00 1,32,183.00 (D) SHALINI GARG 38,640.00 40,000.00 78,640.00 --------- -------- 78,640.00 ITA NOS. 3546, 3547 & 3549 /DEL/201 2 MUKESH GARG 41 (C) VARUN GARG 11,512.00 ------- 11,513.00 ---------- -------- U11,513.00 3,93,636.00 3. (A) DHARAM PAL GARG 5,18,075.00 ------ 5,18,075.00 ------- 2.50,000.00 2,68,075.00 (B) GINNY GARG 1,45,500.00 3,45,058.00 4,90,558.00 -------- 4,60.000.00 30,558. 00 (C) ANUJ GARG 5,21,375,00 -------- 5,21,375.00 -------- 1,50,000.00 3,71,375.00 (D) PRERNA GARG 54,700.00 40,000.00 94,700.00 --------- -------- 94,700.000 7,64,708.00 4. (A) YASH PAL GARG 3,59,900.00 ------- 3,59,900.00 -------- 2,00,000.00 1,59,900.00 (B) SUMAN GARG 1,51,200.00 3,50,000.00 5,01,200.00 ------- 2,00,000.00 3,01,200.00 (C) ANKUR GAR G 8,628.0000 1,50,000.00 1,58,628.00 --------- 40,000.00 1,18,628.00 (D) APARNA GARG 51,800.00 1,00,000.00 1,51,800.00 -------- ------- 1,51,800.00 (E) SANCHIT GARG 35,900.00 ------ 35,900.00 ------- ------- 35,900.00 7,64 ,428.00 23,68,061.00 44 . THE ASSESSEE FURTHER SUBMITTED TO THE AO THAT EXCESS CASH FOUND DURING THE COURSE OF SEARCH PER TAINED TO OTHER FAMILY MEMBERS ALSO. THE AO OBSERVED THAT THE ASSESSEE FAILED TO BRING ON RECORD ANY SUPPORTING EVIDENCES WHICH COULD PROVE THAT THE CASH BELONGED TO OTHER FAMILY MEMBERS AND THAT AS TO WHY CASH BELONGING TO OTHER FAMILY MEMBERS WAS LYING W ITH HIM. HE, THEREFORE, REJECTED THE EXPLANAT ION OF THE ASSESSEE AND TREATED THE AMOUNT OF RS.4,40,100/ - AS UNEXPLAINED CASH AND ACCORDINGLY MADE THE ADDITION IN THE HANDS OF THE ASSESSEE. 4 5 . BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT (A) WHO DELETED THE ADDITION BY OBSERVING THAT THE ITA NOS. 3546, 3547 & 3549 /DEL/201 2 MUKESH GARG 42 FAMILY MEMBERS HAD OWN ED THE CASH AND THEY HAD REFLECTED THIS IN THEIR BOOKS OF ACCOUNTS AS CASH IN HAND, T HEREFORE, THE QUESTION OF EXPLAINING THE CASH DID NOT ARISE . HE FURTHER OBSERVED THAT IT WAS NOT T HE CASE OF THE DEPARTMENT THAT THE BOOKS OF ACCOUNTS WERE NO T GENUINE, T HEREFORE, THE SOURCE OF CASH WAS AUTOMATICALLY EXPLAINED. ACCORDINGLY, THE ADDITION OF RS.4,40.100/ - WAS DELETED. 46 . NOW THE DEPARTMENT IS IN APPEAL. THE LD. DR REITERATED THE OBSER VATIONS MADE BY THE AO AT PAGE NOS. 10 & 11 OF THE ASSESSMENT ORDER DATED 29.12.2011 AND FURTHER SUBMITTED THAT THE FINDINGS OF THE LD. CIT(A) WERE ERRONEOUS BECAUSE NO EXPLANATION WAS GIVEN BY THE ASSESSEE FOR THE SOURCE OF THE CASH. 47 . IN HIS RIVAL SUB MISSIONS THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND FURTHER SUBMITTED THAT THE CASH WAS SHOWN IN THE BOOKS OF ACCOUNTS BY THE FAMILY MEMBERS AND THOSE BOOKS WERE REGULARLY MAINTAINED WHICH WERE NOT DOU BTED BY THE AO. THEREFORE, THE ASSESSEE FULLY EXPLAINED THE SOURCE OF THE CASH FOUND DURING THE COURSE OF SEARCH WHICH BELONGED TO THE FAMILY MEMBERS WHO OWNED THE MONEY. ITA NOS. 3546, 3547 & 3549 /DEL/201 2 MUKESH GARG 43 48 . WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON THE RECORD. IN THE PRESENT CASE, IT APPEARS THAT THE FAMILY MEMBERS OF THE ASSESSEE HAD OWNED THE MONEY WHICH WAS REFLECTED IN THEIR BOOKS OF ACCOUNTS AS CASH IN HAND , THOSE BOOKS OF ACCOUNTS WERE NOT DOUBTED. THEREFORE, THE LD. CIT(A) RIGHTLY DELETED THE ADDITION MADE BY THE AO. WE DO NOT SEE ANY INFIRMITY IN THE IMPUGNED ORDER ON THIS ISSUE. 49 . IN THE RESULT, THE APPEAL OF THE DEPARTMENT FOR THE ASSESSMENT YEARS 2007 - 08 AND 2010 - 11 ARE DISMISSED WHILE THE APPEAL FOR THE ASSESS MENT YEAR 2008 - 09 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES . ( ORDER PRON O UNCE D IN THE COURT ON 26 /08 /2016) SD/ - SD/ - (BEENA PILLAI ) (N. K. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMB ER DAT ED: 26 /08 /2016 *SUBODH* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR
