ITO 1(1)(2), MUMBAI V. M/s. CANNON STEELS P. LTD., MUMBAI

ITA 4940/MUM/2005

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 2704 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 5 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-12-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 21-08-2013
• Assessment Year: 1994-1995
• Appeal Filed On: 08-07-2005
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S P GOYAL
• Assessee Lawyers: MRS VANDANA SAGAR
• Keywords: Search and seizure; Onus to prove

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH: MUMBAI BEFORE SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER AND SHRI V DURGA RAO, JUDICIAL MEMBER ITA NO 4940/MUM/2005 (ASSESSMENT YEAR: 1994-95) ITO 1(1)(2), ROOM NO 579, 5TH FLOOR, AAYAKAR BHAVAN, M K ROAD, MUMBAI -400 020 VS M/S CANNON STEELS PVT LTD, 109, CHURCHGATE CHAMBERS, NEW MARINE LINES, MUMBAI -400 020 PAN: AAACC 2189 D APPELLANT RESPONDENT APPELLANT BY: SHRI S P GOYAL RESPONDENT BY: MRS VANDANA SAGAR ORDER PER PRAMOD KUMAR 1. BY WAY OF THIS APPEAL, REVENUE HAS CALLED INTO Q UESTION CORRECTNESS OF CIT (A)S ORDER DATED 24TH FEBRUARY 2005, FOR THE ASSES SMENT YEAR 1994-95, ON THE FOLLOWING GROUNDS : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED CIT (A) ERRED IN DELETING THE DISALLOWANCE OF RS 9,32,697/- ON ACCOUNT OF UNEXPLAINED LOAN. 2. WHILE DOING SO THE LD CIT (A) ERRED IN STATING T HAT THE AO NEITHER CLARIFIED THE FACTS REGARDING THE SEIZED PAPER NOR PRODUCED THE SAME INSPITE OF BEING ASKED TO DO SO. 2. THE RELEVANT MATERIAL FACTS, LEADING TO THIS LIT IGATION BEFORE US, ARE AS FOLLOWS. IN THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS, T HE ASSESSING OFFICER TOOK NOTE OF THE DOCUMENT SAID TO HAVE BEEN SEIZED DURING THE CO URSE OF SEARCH AND SEIZURE OPERATION CARRIED OUT AT THE PREMISES OF THE ASSESS EE. THIS DOCUMENT SHOWED OUTSTANDING BALANCES OF RS 34,12,561. THE ASSESSIN G OFFICER WAS OF THE VIEW THAT THIS DOCUMENT PERTAINS TO THE ASSESSEE AND IT WAS L IABILITY OF THE ASSESSEE TO EXPLAIN IT. THE ASSESSEE, ON THE OTHER HAND, CONTENDED THA T HE HAD NOTHING TO DO WITH THE ASSESSEE, AND, THE ASSESSEE IS, THEREFORE, NOT ANSW ERABLE ABOUT THE ENTRIES CONTAINED IN THESE PAPERS. THE ASSESSING OFFICER NEVERTHELES S VERIFIED THE REGULAR BOOKS OF ITA 4940/M/2005 M/S CANNON STEELS PVT LTD 2 ACCOUNTS MAINTAINED BY THE ASSESSEE VIS--VIS ENTRI ES MADE IN SEIZED DOCUMENT. HE FOUND THAT OUT OF TOTAL AMOUNT OF RS 34,12,561, AN AMOUNT OF RS 25,00,000 WAS EXPLAINED IN THE REGULAR BOOKS OF ACCOUNTS. THE B ALANCE AMOUNT OF RS 9,32,697 WAS ADDED TO ASSESSEES INCOME. WHEN THE MATTER WAS CA RRIED IN APPEAL BEFORE THE CIT (A), THE CIT (A) REMITTED THE SAME TO FILE OF THE A SSESSING OFFICER FOR FRESH ADJUDICATION AFTER GIVING A REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. 3. IN THE FRESH PROCEEDINGS BEFORE THE ASSESSING OF FICER, THE ASSESSEE ONCE AGAIN SUBMITTED THAT THE SEIZED DOCUMENT WAS NOT FOUND IN ITS POSSESSION AND, THEREFORE, HE IS NOT UNDER ANY OBLIGATION TO EXPLAIN THE ENTRI ES FOUND IN THE SAME. THIS DID NOT SATISFY THE ASSESSING OFFICER WHO OBSERVED THAT, I F THE ASSESSEE CLAIMS THAT THE SAID PAPERS DO NOT PERTAIN TO HIM BUT PERTAIN TO HIS SIS TER CONCERNS THEN WHY HE IS NOT FILING CONFIRMATIONS FROM HIS SISTER CONCERNS WHO C OULD OWN THE ENTRIES ON THIS PAPER. THE ASSESSING OFFICER ALSO REFERRED TO STA TUTORY PRESUMPTION U/S 132(4A) OF THE ACT. HE CONCLUDED THAT SINCE THE ASSESSEE HAS THE ONUS TO EXPLAIN THE ENTRIES FOUND IN SEIZED PAPER AND SINCE THE ASSESSEE HAS N OT DISCHARGED THE ONUS TO PROVE THE NATURE OF AMOUNT OF RS 9,32,697 HENCE THE SAID ADDITION IS MADE TO THE TOTAL INCOME WHILE CONSIDERING IT AS OUTSTANDING UNEXPLAI NED LOSS. AGGRIEVED BY THE ADDITION SO MADE BY THE ASSESSING OFFICER, ASSESSEE ONCE AGAIN CARRIED THE MATTER IN APPEAL BEFORE THE CIT (A). ONCE AGAIN IT WAS CONTE NTION OF THE ASSESSEE THAT SEIZED PAPER WAS NOT RECOVERED FORM THE ASSESSEE, AND, AS SUCH, ASSESSEE CANNOT BE CALLED UPON TO EXPLAIN THE SAME. THIS PLEA FOUND FAVOUR W ITH THE CIT (A). THIS TIME UPHOLDING THE SAID PLEA, THE CIT (A) DELETED THE IM PUGNED ADDITION BY OBSERVING AS FOLLOWS : AT THE TIME OF HARING OF THIS APPEAL, THE LEARNED AR OF THE APPELLANT, MR S.P. GOYAL HAS EXPLAINED THAT THE PAPER WHICH HAS BEEN M ADE THE BASIS FOR THIS ADDITION HAS NOT BEEN FOUND FROM THE BUSINESS PREMI SES OF THE APPELLANT COMPANY. THIS PAPER HAS NOT BEEN SIGNED NEITHER BY THE AUTHORISED OFFICER OF THE SEARCH PARTY NOR BY ANY WITNESSES NOR BY ANY DI RECTOR OF THE COMPANY AND, THEREFORE, THIS KIND OF EVIDENCE CANNOT BE USED AGA INST THE APPELLANT COMPANY AND ON THAT BASIS, THE ALLEGED ADDITION CANNOT BE M ADE. AT THE TIME OF HEARING OF THIS APPEAL, THE PRESENT AO WAS ASKED BY ME TO EXPLAIN WHETHER THIS PAPER WAS FOUND DURING THE COU RSE OF SEARCH OF THE APPELLANT COMPANY AND WHETHER IT WAS SIGNED BY THE AUTHORISED OFFICER OF THE SEARCH OR BY ANY WITNESSES ALSO. THE PRESENT AO DI D NOT CLARIFY THIS FACT AND ITA 4940/M/2005 M/S CANNON STEELS PVT LTD 3 THE ORIGINALLY SEIZED PAPER HAS NOT BEEN PRODUCED B EFORE ME TO ASCERTAIN THE FACT THAT WHETHER THIS PAPER WAS VIRTUALLY SIZED DU RING HE COURSE OF SEARCH AT THE BUSINESS PREMISES OF THE APPELLANT COMPANY. HAVING CONSIDERED THE NATURE OF THIS PAPER AS THE X EROX COPY HAS BEEN FILED BEFORE ME, I AM OF THE OPINION THAT THIS ADDITION D OES NOT SURVIVE BECAUSE REVENUE HAS NOT BEEN ABLE TO PROVE THIS FACT THAT I T WAS THE PIECE OF EVIDENCE WHICH WAS SEIZED DURING THE SOURCE OF SEARCH AND IT WAS MADE A PART OF THE INVENTORY OF THE SEIZED PAPERS. HENCE, THIS PAPER CANNOT BE MADE A BASIS FOR MAKING THIS ADDITION. THEREFORE, I DO NOT FIND ANY MERIT IN THIS ADDITION MADE BY THE AO AND HENCE IT IS DELETED. IN THE RESULT, THE GROUND IS ALLOWED. 4. REVENUE IS AGGRIEVED OF THE RELIEF SO GIVEN BY T HE CIT (A) AND IS IN APPEAL BEFORE US. THE GRIEVANCE OF THE REVENUE IS TWO FOL D FIRST, THAT THE CIT (A) ERRED IN DELETING THE IMPUGNED ADDITION; AND SECOND, THAT THE CIT (A) ERRED IN STATING THAT THE ASSESSING OFFICER NEITHER CLARIFIED THE FACTS R EGARDING THE SEIZED PAPER NOR PRODUCED THE SAME, INSPITE OF BEING ASKED TO DO SO. 5. HAVING HEARD THE RIVAL CONTENTIONS AND HAVING PE RUSED THE MATERIAL ON RECORD, WE ARE UNABLE TO SEE ANY MERITS IN THE GRIEVANCES S O RAISED BY THE REVENUE. WE HAVE NOTED THAT THE CIT (A) HAD DELETED THE IMPUGNE D ADDITION MAINLY BECAUSE THERE WAS NO EVIDENCE TO SUGGEST THAT THE DOCUMENT IN QUE STION WAS SEIZED FROM THE ASSESSEE OR THAT IT WAS INVENTORIZED EVEN. DURING THE COURSE OF HEARING BEFORE US, WE SPECIFICALLY REQUIRED THE DEPARTMENTAL REPRESENT ATIVE TO FURNISH ANY EVIDENCE TO THE EFFECT THAT THE DOCUMENT, BASED ON WHICH IMPUGN ED ADDITION IS MADE, WAS SEIZED FROM THE ASSESSEE, AND TO PRODUCE RELEVANT PANCHNAM A ETC. HOWEVER, ON THE SCHEDULED DAY OF HEARING ON WHICH DEPARTMENTAL REPR ESENTATIVE WAS ASKED TO PRODUCE SUCH EVIDENCE, THERE WAS NO COMPLIANCE TO O UR REQUISITION. ON THE SAID DATE, LEARNED DEPARTMENTAL REPRESENTATIVE STATED TH AT THE ASSESSING OFFICER, WHO WAS SAID TO BE PRESENT IN THE COURT ROOM, HAS NOT B EEN ABLE TO PRODUCE REQUISITIONED EVIDENCE. IN THIS VIEW OF THE MATTER, IT IS CLEAR THAT THE REVENUE IS NOT ABLE TO SUBSTANTIATE THE GRIEVANCE RAISED IN APPEAL BEFORE US. THE FACTUAL ELEMENT EMBEDDED IN REVNEUES GROUNDS OF APPEAL REMAIN UNSU BSTANTIATED. AS FOR THE STATUTORY PRESUMPTION U/S 132(4A), THE SAME COMES T O PLAY ONLY IN THE EVENT WHEN IT IS ESTABLISHED THAT THE DOCUMENT IN QUESTION IS FOU ND TO BE IN POSSESSION OF THE ASSESSEE. THAT IS NOT THE CASE BEFORE US. IN VIEW OF THESE DISCUSSIONS, AS RIGHTLY ITA 4940/M/2005 M/S CANNON STEELS PVT LTD 4 HELD BY THE CIT (A), AN ADDITION PURELY BASED ON A DOCUMENT, WHICH IS NOT ESTABLISHED TO HAVE BEEN SEIZED FORM THE ASSESSEE, CANNOT BE SUSTAINED IN LAW. WE APPROVE THE STAND TAKEN BY THE CIT (A). 6. FOR THE REASONS SET OUT ABOVE, WE CONFIRM THE OR DER OF THE CIT (A) AND DECLINE TO INTERFERE IN THE MATTER. 7. IN THE RESULT, APPEAL IS DISMISSED WITH NO ORDER AS TO COSTS. PRONOUNCED IN THE OPEN COURT TODAY ON THE 29TH DEC EMBER 2009. SD/- (V DURGA RAO) JUDICIAL MEMBER SD/- (PRAMOD KUMAR) ACCOUNTANT MEMBER MUMBAI, DATE: 29TH DECEMBER 2009 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A)-I, MUMBAI. 4) THE CIT- I, MUMBAI. 5) THE D.R. E BENCH, ITAT, MUMBAI. BY ORDER / / TRUE COPY / / ASSTT. REGISTRAR CHAVAN* I.T.A.T., MUMBAI ITA 4940/M/2005 M/S CANNON STEELS PVT LTD 5 SR.N. EPISODE OF AN ORDER DATE INITIALS CONCERNED 1 DRAFT DICTATED ON 29.12.09 SR.PS 2 DRAFT PLACED BEFORE AUTHOR 29.12.09 SR.PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.PS SR.PS 6 KEPT FOR PRONOUNCEMENT ON SR.PS 7 FILE SENT TO THE BENCH CLERK SR.PS 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER