ACIT Central -2, Indore V. Shri Nakoda Construction o., Indore

ITA 48/Ind/2021

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 9293 (ITAT-INDORE)
• Duration Of Justice: 11 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-02-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2012-2013
• Appeal Filed On: 04-03-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained investment; Search and seizure; Loose papers; Document seized; Principle of natural justice; Question of law; Corroborative evidences; Set aside
• Section: 132; 133A; 153A; 250; 13

Judgement Text

आयकर अपीलȣय अͬधकरण, इंदौर Ûयायपीठ, इंदौर IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI MAHAVIR PRASAD, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER VIRTUAL HEARING ITA No.48/Ind/2021 Assessment Year:2012-13 ACIT (Central)-2, Indore बनाम/ Vs. Shri Nakoda Construction Company, Indore (Appellant) (Respondent ) P.A.N.- AAQFS7918B Revenue by Shri Amit Soni, Sr.DR Assessee by Shri Kunal Agrawal, CA Date of Hearing: 07.01.2022 Date of Pronouncement: 07.02.2022 आदेश / O R D E R Shri Nakoda Construction Company, Indore 2 PER MANISH BORAD, A.M: The above captioned appeal filed at the instance of the Revenue for Assessment Year 2012-13 is directed against the order of Ld. Commissioner of Income Tax(Appeals)-III (in short ‘Ld.CIT(A)- III) Indore dated 03.03.2020 which is arising out of the order u/s 143(3) of the Income Tax Act 1961(In short the ‘Act’) dated 22.03.2016 framed by ACIT(Central)-2, Indore. The Revenue has raised the following grounds of appeal : “On the facts and in the circumstances of the case, the ld. CIT(A) erred in law in deleting the addition of Rs.2,98,00,000/- made on account of undisclosed income.” 2. Facts as culled out from the orders of the Revenue Authorities are that a search and seizure operation u/s 132 of the IT Act, 1961 was carried out on the business premises as well as residential premises of various persons connected to and related to one Doshi Group including the assessee firm which was a group concern of said Doshi Group. During the course of search operation, premises of one Shri Aashish Pallod and his brother Shri Manish Pallod was also covered and action u/s 133A of the Act was conducted in their Shri Nakoda Construction Company, Indore 3 cases. During the action u/s 133A, mobiles phones of Pallod Brothers were impounded and deleted data was recovered. In one of the mobile phone of Samsung Galaxy SIV belonging to Shri Aashish Pallod an image was recovered. On the basis of the said image, it was noticed by the AO that a transaction was done between Shri Sharad Doshi partner of the assessee’s firm and Aashish Pallod. On the basis of the said information, the AO asked the assessee to explain the said transaction. The assessee filed its reply but the AO was not satisfied with the same and made the addition to the assessee’s income. The AO made the addition mainly of undisclosed income from suppressed sale of D-Block in Niranjanpur Project. Being aggrieved, the assessee approached learned CIT(A) and learned CIT(A) considering the facts, the submissions and the material in the light of the relevant judicial pronouncements deleted the addition observing that the alleged sale document, so found, can at best be held to be a dumb document and no addition in the hands of the assessee co. can be made on the basis of such dumb document found in the premises of the third party without any corroborative evidences. Being aggrieved, the Revenue is in appeal before this Tribunal. Shri Nakoda Construction Company, Indore 4 3. Before us, ld. CIT-DR relied upon the order of the Assessing Officer. 4. Per contra, learned Counsel for the assesse, relying upon the order of the learned CIT(A), reiterated the submissions made before Revenue Authorities and submitted that the assessee denied to have any knowledge about the transaction mentioned in said image and the ld. Assessing Officer simply presumed that the handwriting in the image belonged to Shri Sharad Doshi. There was no evidence on record to prove this presumption, thus, the order of the learned CIT(A) deserves to be upheld. 5. We have considered rival contentions and gone through the material available on record. We find that search action u/s 132(4) was conducted on business and residential premises of various persons and concerns related to Doshi Group on 28.02.2014. The assessee is engaged in the business of real estate and part of Doshi Group. During the search action on Doshi Group, there was Survey action u/s 133A of the act on Shri Ashish Pallod and Shri Manish Pallod. During the survey proceedings, an image from mobile phone Shri Nakoda Construction Company, Indore 5 of Shri Ashish Pallod was recovered. The ld. Assessing Officer on the basis of such image alleged that the handwriting in the image closely resembles to that of Shri Sharad Doshi. On the top of the loose paper in image, it was written “Niranjanpur 400” and in the next line it was written “D block 50% hisab”. The Ld. Assessing Officer further alleged that Shri Sharad Doshi used to write 40,00,000 as 40. Thus, the Ld. AO inferred that ‘D’ block of Niranjanpur was sold for Rs. 4,00,00,000/- in the AY 2012-13 and since the assessee had offered Rs. 1,02,00,000/- as sale of ‘D’ block in the books of accounts in AY 2014-15, an incremental addition of Rs. 2,98,00,000/- for the relevant assessment year was made as undisclosed income. We find that learned CIT(A) discussed the issue as under: “4.2 In written reply, the appellant has stated that the assessment proceedings u/s 153A of the Act was initiated on the basis of loose paper found and seized from the data recovered from the mobile of other person which was never confronted to the appellant. The AO has made the addition mainly of undisclosed income from suppressed sale of D-Block in Niranjanpur Project. The appellant has further stated that the assessment was completed on the basis of mobile image retrieved during the course of survey proceedings u/s 133A of the Act from the residence of Shri Aashish Palod (third party) which were related to transaction of immovable properties at Niranjanpur developed by the appellant. The appellant has taken the plea that the AO ignored the settled principle that loose papers/slips have no evidentiary value unless it is corroborated by independent evidences. Shri Nakoda Construction Company, Indore 6 4.3 It is clear from the assessment order that during the survey proceedings, at the premise of Shri Ashish Palod, the AO had found some documents which the AO had contended that belonged to the appellant firm just on the basis of image retrieved from the mobile phone found at the place of third party. Shri Ashish Palod had also denied to have any knowledge of the same. The AO has also mentioned in this fact in the assessment order. The AO has made the addition on the basis of the incriminating material found with a third party which was in fact not at all corroborative. The appellant has stated in its reply that during the course of search on the premises of the assessee nothing incriminating material/loose paper was found during the search proceedings to indicate that the assessee had actually suppressed its sale during the relevant year consideration. Further, it has been argued that while going through the mobile image this could not be said that any transaction had been done on these rates because this image was not at all corroborative and did not indicate any conclusive/complete financial transaction so it was clearly a Dumb Document. There cannot be any addition on the basis of dumb documents as has been held by number of judicial pronouncement.” We find that considering the above facts and submissions thereof, learned CIT(A) relying upon the orders of jurisdictional ITAT, Indore passed in cases of (Mahesh Bansal, ITA No.499/Ind/2018) & (Pukhraj Soni, ITA No.585/ind/2015, order dated 21.9.2016) having similar issue discussed the various relevant judicial pronouncements and reached to the conclusion that no addition in the hands of the assessee co. can be made on the basis of dumb document found in the premises of the third party without any corroborative evidences. Shri Nakoda Construction Company, Indore 7 6. On consideration of above, we find that before the Revenue Authorities, the assessee denied to have any knowledge about the transaction mentioned in said image. However, the ld. Assessing Officer presumed that the handwriting in the image belonged to Shri Sharad Doshi, that too, without bringing any evidence on record to prove this presumption. We find that the material was impounded during survey proceedings at third party premises and no incriminating material regarding this transaction was found from premises of assessee or assessee group. As stated in section 132(4A) or section 292C, the law of presumption can be applied only on the person from whom documents have been seized/ impounded, as the case may be and since the documents in question were impounded from third party premises, the presumption that these documents belong to assessee cannot apply as per Income Tax Act. Further, we find that the Ld. Assessing Officer did not bring any corroborative evidence on record to substantiate the allegations levied of unaccounted sales because it is a settled law that seized material cannot be considered as conclusive proof of evidence unless and until corroborated by other material as from the image relied on by the department, complete Shri Nakoda Construction Company, Indore 8 details of the alleged financial transaction cannot be worked out. Thus, the said document is nothing but a dumb document and do not possess any evidentiary value as per law. We also find that during the assessment proceedings, no inquiry regarding the said alleged transaction was made by Ld. Assessing Officer from the assessee to examine the said transaction and also no show-cause notice was issued before making such alleged addition which constitutes violation of principles of natural justice. 7. We find that ITAT, Indore in the case of Mahesh Bansal ITA No. 499/2018 had dealt with the similar issue relying on the following judicial pronouncements:- (i) In the case of K.P. Varghese vs ITO, (1981) 131 ITR 597 (SC) Supra , Hon’ble High Court held that “Mere seizure of note books of documents at the personal residence of an employee would not conclude the issue against the employer company that the on money has been received by the employer company. The onus of proving the charging of on money lies on the Revenue.” (ii) In the case of Addl. CIT vs Miss Lata Mangeshkar (1974) 97 ITR 696 (Bom.) Supra , Hon’ble High Court held that the conclusion was reached by the Tribunal on a proper appreciation of evidence and observed as under:- “The evidence on which the income tax authorities relied were statements by two persons that they had paid money in “black” to the assessee and entries in books belonging to them regarding alleged payments to the assessee. The tribunal examined the statements made by the two 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 sufficiently as there was no guarantee that the entries were Shri Nakoda Construction Company, Indore 9 genuine. The Tribunal therefore held that there was of profit that there was no proof that the amounts in question represented income from undisclosed sources be ongoing to the assessee (iii) In the case of DCIT vs Mahendra Ambalal Patel (2010) 40 DTR 243 (Guj) Supra) Hon’ble High Court held that “ addition in the hands of the assessee having been made merely on the basis of a statement made by the third party without there being any corroborative evidence, the Tribunal was justified in deleting the addition particularly when the assessee was not allowed opportunity to cross examine the persons who made such a statement” (iv) In the case of Heirs & L. Rs of Late Laxman Bhai S. Patel vs CIT (2008) 327 ITR 290 ( Guj) (Supra) Hon’ble High Court held that the department had failed to establish any nexus between the promissory note and the amount said to have been given by the assessee to K. The Tribunal was not right in law in upholding the addition of Rs. 8,78,358/- in the hands of the assessee” (v) In the case of Chiranji Lal Steel rolling Mills vs CIT (1972) 84 ITR 222 (P&H) (Supra) Hon’ble High Court held that “ The copy of entries from the accounts of another firm supplied to the Income Tax officer by the Sales tax Department was not legal and admissible evidence on which the Income Tax Officer could act for imposing extra burden of income tax on the assessee when the original accounts were missing and could not be verified and when the assessee denied the entries therein”. (vi) In the case of CIT vs Naresh Khatter (HUF) (2003) 261 ITR 664 ( Del) (Supra) Hon’ble High Court held that “ The Tribunal was correct in holding that merely because counsel for the assessee made a statement in the civil court that the total investment in the property was Rs. 13 Crores and odd, it would not be sufficient material to come to the conclusion that the said figure represented the actual investment. There had to be something more than that. The tribunal’s finding that the Revenue had failed to prove that the total investment of the assessee was Rs. 13 Crores was not preserve.” 8. We also find that the ITAT, Indore had dealt with the similar issue in the case of ITO vs Pukhraj Soni ITA No 585/Ind/2015 order dated 21.09.2016 wherein also documents relating to transactions of Shri Pukhraj Soni with Shri Nilesh Ajmera were Shri Nakoda Construction Company, Indore 10 found at the residence premises of M/s Phoenix Devcon Pvt. Ltd in the form of loose papers and the Tribunal set aside the finding of Ld AO holding that the inference of the AO that the assessee has advanced the money was merely based on suspicion, surmises and conjectures and there was no material to support the connection. Relevant extract of the findings of the Tribunal is reproduced hereunder: - “8. We have considered the facts and materials available on the record. On consideration of above facts and circumstances we find that no search was carried out in the premises of Shri Pukhraj Soni and no loose paper/hundi/ documents/promissory note/ cash book or cash flow statement were found or seized, which could prove the movement of cash to & from between Shri Pukhraj Soni & Shri Nilesh Ajmera with respect to interest and loans . We find that the AO failed to bring on record any corroborative and concrete evidence against the assessee which could prove that the assessee has advanced money to Shri Nilesh Ajmera. The inference of t he AO that the assessee has advanced the money is merely based on suspicion , surmises and conjectures and there was no material to support the conclusion of the AO that the assessee has advanced the money. We derive support from the decision of Hon’ble Supreme Court in the case of Dhakeshwari Cotton Mill Pvt Ltd vs CIT, (1954) 26 ITR 775 (SC), wherein it was held that while making an assessment there must be something more thn the bare suspicion to support the assessment. In another case of K.P. Varghese vs ITO (1981) 131 ITR 597 (SC), the Hon’ble Supreme court has held that mere seizure of note books of documents at the personal residence of an employee would not conclude the issue against the employer company that the on money has been received by the employer company. The onus of the Honble Bombay High Court in the case of ACIT vs Lat Mngeshkar (Miss) (1974) 97 ITR 696 (Bom) has held that no addition could be made in the hands of the assessee on the basis of notings found in the books of third person. 9. In view of facts and circumstances narrated above, we find that this issue is covered by the decision of this Tribunal in the case of Shri Nilesh Ajmera (IT[SS] A No 250 to 251/Ind/2012, order dated17-05-2016] (Supra). Even before us, Ld Sr Departmental Representative was not able Shri Nakoda Construction Company, Indore 11 to controvert the finding of the Ld CIT(A) as well as the submission of the Ld AR of the assessee by bringing any contrary material on record. Thus, following the order of this Tribunal (Supra) in the light of above judicial pronouncements , we dismiss the present appeal of the Revenue i.e. ITA No 585/Ind/2015 for assessment year 2009-10 of the assessee was Rs. 13 crores was not perverse. 10. In the result, the appeal of the Revenue is dismissed” We find that the above finding of the Tribunal was confirmed by the Hon’ble Jurisdictional MP High Court vide order dated 06-02-2019 wherein the Hon’ble High Court placing reliance on the judgment of Hon’ble Supreme Court in the case of Central Bureau of Investigation vs V.C. Shukla & Ors 91998) 3 SCC 410 (SC) and another judgment of Apex Court in the case of Common Cause (A registered Society) vs Union of India (2017) 30 ITJ 197 (SC) (Supra) held as follows; “6. The tribunal has considered the aforesaid judgment while dismissing the appeal of the Revenue. The apex Court in the case of common cause (A Registered Society) versus Union of India reported in (2017) 77 taxmann.com 245 (Hon’ble Supreme court) 22, 24 and 27 has held as under:- 22. In case of Sahara, in addition we have the adjudication by the Income Tax Settlement Commission. The order has been placed on record along with IA No 4. The settlement Commission has observed that the scrutiny of entries on loose papers, computer prints, hard disk, pen drives etc have revealed that the transactions noted on documents were no genuine and have no evidentiary value and that details in these loose papers, computer print outs, hard disk and pen drive etc do not comply with the requirement of the Indian Shri Nakoda Construction Company, Indore 12 Evidence Act and are not admissible evidence. It further observed that the department has no evidence to prove that entries in these loose papers and electronic data were kept regularly during the course of business of the concerned business house and the fact that these entries were fabricated , non genuine was proved. The held as well that the PCIT/Or have not been able to show and substantiate the nature and source of receipts as well as nature and reason of payments and have failed to prove evidentiary value of loose papers and electronic documents within the legal parameters. The Commission has also observed that Department has not been able to make out a clear case of axing such income in the hands of the applicant firm on the basis of these documents. 24.Since it is not disputed that for entries relied on in these loose papers and electronic data were not regularly kept during course of business and such entries were discussed in the order dated 11.11.2016 passed in Sahara’s case by the Settlement Commission and the documents have not been relied upon by the Commission against assessee, and thus such documents have no evidentiary value against third parties. On the basis of the materials which have been placed on record, we are of the considered opinion that no case is made out to direct investigation against any of the persons named in the Birla’s documents or in the documents A-8, A-9 and A-10 etc of Sahara. 27. considering the aforesaid principles which have been laid down, we are of the opinion that the materials in question are not good enough to constitute offences to direct the registration of FIR and investigation therein. The materials should qualify the test as per the aforesaid decision. The complaint should not be improbable and must show sufficient ground and commission of offence on the basis of which registration of a case can be ordered. The materials in question are not only irrelevant but are also legally inadmissible under section 34 of the Evidence Act, more so with respect to third parties and considering the explanation which have been made by the Birla Group and Sahara Group, we are of the opinion that it would not be legally justified, safe, just and proper to direct investigation, keeping in view principles laid down in the cases of Bhajan Lal and VC Shukla (Supra). Shri Nakoda Construction Company, Indore 13 7. The Apex Court has been taken into account in similar circumstances the incriminating materials in form of random sheets, loose papers, computer prints, hard disk and pen drive etc and has held that they are inadmissible in evidence, as they are in the form of loose papers. 8. In the present case also entries found during search and seizure which are on loose papers are being made the basis to add income of third respondent. 9. Resultantly, in light of the Supreme Court judgments, referred above, no case for interference is made out with the order passed by the Tribunal. Moreover no substantial question of law arises in the present appeal, the appeal is dismissed.” 9. We find that in case of Punjab Traders vs. ITO (2004) 88 TTJ 394 (Chd), it was held that addition on the basis of diary found in search proceedings of a third party could not be sustained in the absence of any corroborative evidence. 10. ITAT, Jabalpur Bench, in the case of ACIT vs. Satyapal Wassan (2008) 5 DTR (Jab) (Trib) 202 held that a charge on the basis of document can be levied 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 search. The speaking from the documents should be loud, clear and unambiguous in respect of all the four components as described above. If it is not so, then document is only a dumb Shri Nakoda Construction Company, Indore 14 document. No change can be levied on the basis of a dumb document. 11. The ITAT, Delhi ‘A’ Beach in case of Bansal Strips (P) Ltd. & Ors. Vs. ACIT (2006) 100 TTJ (Del) 665 held that in the absence of adequate material as to the nature and ownership of the transaction, undisclosed income cannot be assessed in the hands of the assessee merely by arithmetically totaling various figures jotted down on the loose documents. 12. The Hon’ble Delhi High Court in case of CIT vs. Lalit Bhasin (2007) 290 ITR 245 (Del) held that the Assessing Officer arrived at a conclusion, primarily on imaginative basis and conjecture rather than on the basis of any record or books of account. The Tribunal had found that here was no evidence of unexplained investment, the deletion of addition was justified. 13. In the case of S. K. Gupta vs. Dy. CIT (1999) 63 TTJ (Del) 532, the Tribunal Delhi "C" Bench has observed that "The notings on the piece of paper do not indicate the actual transaction. The paper in question does not indicate that any Shri Nakoda Construction Company, Indore 15 transaction had ever taken place because it does not contain any information as to what was the nature of transactions. If at all, any such transaction took place for the parties to the transactions, what was the date of transaction, what did the figure noted on the piece of paper represent, and whether in any manner the paper in question has any relevancy to the determination of the income in the hands of the assessee. No evidence has been brought on record to corroborate the allegation that the assessee had entered into any transaction or had earned any income". In this case, inference as to receipt of "on-money" was merely based on suspicion and surmises and there was no material whatsoever to support the conclusion that the appellant in fact had received any "on-money". 14. We also find that the learned Counsel for the assessee contended that the AO had not given proper opportunity of cross-examination. We find force in the plea raised by the learned Counsel for the assessee in view of the ratio laid down by the Hon'ble Supreme Court in case of Andaman Timber Industries vs CCE 281 CTR 241 (SC) Shri Nakoda Construction Company, Indore 16 wherein on the issue of non-providing opportunity to cross-examine, the Hon’ble Apex Court held as under:- “ Not allowing Assessee to cross-examine witnesses by Adjudicating Authority though statements of those witnesses were made as basis of impugned order, amounted in serious flaw which make impugned order nullity as it amounted to violation of principles of natural justice." 15. On consideration of above facts in the light of relevant judicial pronouncements (supra), we find that in the instant case, the document seized from the premises of the third party without any corroborative evidence was a dumb document having no evidentiary value and cannot be relied upon for making any addition and the assessee was also not given proper opportunity of cross- examination which was unjustified. Further, before us, learned CIT(A) could not controvert the findings of learned CIT(A) by bringing any contrary material on record. Thus, we do not find any infirmity in the order of the learned CIT(A). We confirm the same. Accordingly, ground raised in the departmental appeal stands dismissed. Shri Nakoda Construction Company, Indore 17 16. In result, the departmental appeal i.e. ITA No.48/ind/2021 is dismissed. The order pronounced as per Rule 34 of ITAT Rules, 1963 on 07.02.2022. Sd/- Sd/- (MAHAVIR PRASAD) (MANISH BORAD) JUDICIAL MEMBER ACCOUNTANT MEMBER Ǒदनांक /Dated : 07.02.2022 !vyas! Copy to: The Appellant/Respondent/CIT concerned/CIT(A) concerned/ DR, ITAT, Indore/Guard file. By Order, Asstt.Registrar, I.T.A.T., Indore