DCIT CEN CIR 8(4), MUMBAI V. HARRESH N MEHTA, MUMBAI

ITA 7619/MUM/2016

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 3331 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-02-2019
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 29-12-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: UDAYA BHASKAR JAKKA
• Keywords: Unexplained expenditure; Search and seizure; Salary income; Loose papers; Principle of natural justice; Question of law
• Section: 131; 132; 10; 2; 271D; 271E

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL H , BENCH MUMBAI BEFORE SHRI M. BALAGANESH , AM & SHRI RAM LAL NEGI , JM ITA NO. 7619 / MUM/20 1 6 ( ASSESSMENT YEAR : 2011 - 12 ) DCIT CEN CIR 8(4) 6 TH FLOOR, R.NO.658 AAYAKAR BHAVAN M.K.ROAD, MUMBAI 400 020 VS. SHR I HARRESH N. MEHTA 2601, SHIV TAPI, 26 TH FLOOR HARISHCHANDRA GOREGAONKAR MARG, GAMDEVI, MUMBAI 400 007 PAN/GIR NO. AALPM3811G ( APPELLANT ) .. ( RESPONDENT ) REVENUE BY SHRI UDAYA BHASKAR JAKKA ASSESSEE BY SHRI VIJAY MEHTA DATE OF HEARING 30/01 / 201 9 DATE OF PRONOUNCEMENT 13 / 02 /201 9 / O R D E R PER M. BALAGANESH (A.M) : THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A) - 50, MUMBAI DATED 21/01/2015 FOR A.Y.2011 - 12 IN THE MATTER OF IMPOSITION OF PENALTY U/S. 271D OF THE IT ACT, 1961. 2. THE ONLY ISSUE TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE PENALTY OF RS.1,50,00,000/ - U/S.271D OF THE ACT IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. THE BRIEF FACTS OF THIS ISSUE ARE THAT THE ASSESSEE IS AN INDIVIDUAL DERIVING SALARY INCOME AND CARRYING O N INVESTMENT ACTIVITIES. THE ASSESSEE IS ALSO A PARTNER IN VARIOUS FIRMS. A SEARCH AND SEIZURE ACTION ITA NO. 7619/MUM/2016 SHRI HARRESH N MEHTA 2 U/S.132 OF THE ACT WAS CARRIED OUT ON 26/05/2011 AT THE RESIDENTIAL, BUSINESS PREMISES AND LOCKERS OF M/S. ROHAN DEVEL O PERS PVT. LTD., AND OTHER COMPANIES AND ENTITIES PROMOTED BY SHRI HARRESH N MEHTA (ASSESSEE HEREIN) AND LATE SHRI JITENDRA N MEHTA ALONG WITH DIRECTORS AND EMPLOYE E S OF THE COMPANIES. ALL THESE ENTITIES ARE REFERRE D AS ROHAN GROUP. THE ASSESSEE IS ONE OF THE DIRECTORS OF ROHAN GROUP. THE SEARCH ACTION WAS ALSO CARRIED OUT AT THE RESIDENCE OF THE ASSESSEE IN THE PREMISES SITUATED AT 26,27,28 TH FLOOR, SHIV TAPI APARTMENTS, GAMDEVI, MUMBAI. 3.1. LD. AO OBSERVED THAT THE ROHAN GROUP HEADED BY SHRI HARRESH N MEHTA I S ONE OF THE LEADING BUILDERS OF THE SOUTH AND CENTRAL MUMBAI AND MAINLY ENGAGED IN CONSTRUCTION OF RESIDENTIAL BUILDING S AND REDEVELOPMENT OF OLD AND DILAPIDATED BUILDINGS. DURING THE COURSE OF SEARCH, UNAC COUNTED CASH / JEWELLERY AND INCRIMINATING DOCUMENTS INDICATING SUPPRESSION OF SALES ETC., WERE FOUND AND SEIZED AS PER PANCHANAMAS PREPARED. IN THE COURSE OF SEARCH PROCEEDINGS, LATE SHRI JITENDRA MEHTA (DEMISED SUBSEQUENT TO THE SEARCH) IN HIS STATEMENT RECORDED ON OATH U/S.132(4) OF THE ACT ON 27/05/2011, ADMITTED UNDISCLOSED INCOME OF RS.100 CRORES IN RESPECT OF VARIOUS ENTITIES OF THE ROHAN G ROUP. HE AGAIN RECONFIRMED THE SAID DISCLOSURE IN HIS STATEMENT RECORDED ON 22/07/2011. LATER THE BREAK - UP OF TH E DISCLOSURE WAS SUBMITTED BY HIM VIDE LETTER DATED 01/08/2011 MENTIONING THE NAME OF THE ENTITY IN WHICH UNDISCLOSED INCOME WAS OFFERED, ASSESSMENT YEAR TO WHICH SUCH OFFER WAS MADE, ITA NO. 7619/MUM/2016 SHRI HARRESH N MEHTA 3 MANNER OF DERIVING SUCH UNDISCLOSED INCOME AND THE QUANTUM OFFER ED THERE ON. THE ASSESSEE FILED HIS RETURN INCOME U/S.139 OF THE ACT ON 14/10/2011 FOR THE A.Y.2011 - 12 DECLARING TOTAL INCOME OF RS.8,45,99,300/ - . AFTER THE SEARCH, NOTICE U/S.153A WAS ISSUED ON 07/01/2013 . I N RESPONSE TO THE NOTICE, THE ASSESSEE FILED HIS RETURN O N 21/10/2013 SHOWING TOTAL INCOME OF RS.8,46,17,360/ - . THE ASSESSMENT WAS COMPLETED U/S.153A R.W.S.143(3) OF THE ACT ON 30/03/2014 BY LD. AO AFTER MAKING AN ADDITION TOWARDS UNEXPLAINED EXPENDITURE U/S.69C OF THE ACT TOWARDS INTEREST ON CERTAIN LOANS PAID IN CASH OVER AND ABOVE THE CHEQUE PORTION IN THE SUM OF RS.2,10,23,428/ - ON PROTECTIVE BASIS. IN THE SAID ASSESSMENT ORDER, THERE WAS NO MENTION BY THE LD. AO ABOUT ANY CASH LOANS BORROWED BY THE ASSESSEE IN VIOLATION OF PROVISIONS OF SECTION 269SS OF THE ACT. THE LD. AO HAD ALSO NOT REFERRED TO ANY SEARCH DOCUMENTS IN HIS ASSESSMENT ORDER INDICATING RECEIPT OF ANY CASH LOANS BY THE ASSESSEE FROM ANY PERSON IN VIOLATION OF PROVISIONS OF SECTION 269SS OF THE ACT. 3.2. A SEARCH AND SEIZURE ACTION WAS CARRIED OUT IN THE PREMISES OF ONE SHRI RAJMAL VANIGOTA U/S.132 OF THE ACT BY THE INCOME TAX DEPARTMENT ON 10/01/2011. DURING THE COURSE OF SEARCH IN THE PREMISES OF SHRI RAJMAL VANIGOTA, ONE DIARY ANNEXURE A - 6 WAS SEIZED. SHRI RAJMAL VANIGOTA WAS ENQUIRED ABOUT THE CONTENTS OF THE DIARY BY THE INCOME TAX DEPARTMENT. IN HIS STATEMENT U/S.132(4) OF THE ACT DATED 09/03/2011, SHRI RAJMAL VANIGOTA STATED THAT THE POCKET DIARY SEIZED AS ITA NO. 7619/MUM/2016 SHRI HARRESH N MEHTA 4 PER ANNEXURE A - 6 CONTAINS BRIEF NOTINGS OF CASH TRANSACTIONS UNDERTAKEN BY HIM DU RING THE A.Y.2011 - 12 WHICH HAS BEEN WRITTEN BY HIM FOR THE SAKE OF MEMORY. ON PAGE NOS. 35 AND 36 OF THAT DIARY, IT WAS NOTICED THAT ASSESSEE HAD TAKEN CASH LOAN OF RS.1.5 CRORES ON VARIOUS DATES FROM SHRI RAJMAL VANIGOTA DURING THE PERIOD 01/10/2010 TO 29 /11/2010. LATER PENALTY PROCEEDINGS U/S.271D OF THE ACT WERE INITIATED IN THE HANDS OF THE ASSESSEE FOR A.Y.2011 - 12 AND THE ADDITIONAL CIT, CENTRAL RANGE 8, MUMBAI (PURSUANT TO HIS RE - DESIGNATION AFTER RESTRUCTURING OF INCOME TAX DEPARTMENT, MUMBAI) ISSU ED A SHOW CAUSE NOTICE DATED 15/07/2014 ASKING THE ASSESSEE AS TO WHY THE PENALTY U/S.271D OF THE ACT SHOULD NOT BE LEVIED IN HIS CASE FOR ACCEPTING THE CASH LOAN OF RS.1,50,00,000/ - FROM SHRI RAJMAL VANIGOTA DURING THE A.Y.2011 - 12 IN CONTRAVENTION OF SECT ION 269SS OF THE ACT. DUE TO CHANGE OF INCUMBENT, ANOTHER SHOW - CAUSE NOTICE DATED 08/08/2014 WAS ISSUED TO THE ASSESSEE FOR THE SAME PURPOSE. THE ASSESSEE FILED HIS SUBMISSIONS DATED 22/09/2014 AND 30/09/2014. THE ASSESSEE VIDE ORDER SHEET NOTING DATED 08/ 10/2014 WAS PROVIDED WITH A COPY OF STATEMENT RECORDED U/S.132(4) OF THE ACT DATED 09/03/2011 OF SHRI RAJMAL VANIGOTA AND COPIES OF PAGE NOS.35 AND 36 OF DIARY SEIZED AS ANNEXURE A - 6 WAS ALSO FURNISHED TO THE ASSESSEE. THE ASSESSEE FILED HIS STATEMENT DATE D 26/12/2014 AND 30/12/2014 ALO NG WITH AFFIDAVIT OF SHRI RAJMAL VANIGOTA. LIST OF THE SUBMISSIONS DATED 22/09/2014 AND 26/12/2014 OF THE ASSESSEE AS REPRODUCED IN THE PENALTY ORDER U/S.271D OF THE ACT WAS AS UNDER: - ITA NO. 7619/MUM/2016 SHRI HARRESH N MEHTA 5 (I) NO SUCH CASH LOAN WAS RECEIVE D BY THE ASSESSEE OR THE ROHAN GROUP. (II) NO EVIDENCE WAS FOUND WITH RESPECT TO SUCH RECEIPT I.E. NO EVIDENCE WAS FOUND THAT THE ASSESSEE / ROHAN GROUP HAD RECEIVED SUCH AMOUNT. (III) THE PAPER UNDER QUESTION WAS NOT SEIZED FROM THE PREMISE S OF T HE ASSESSEE. (IV) NO ADDITION WAS MADE BY THE ASSESSING OFFICER ON ACCOUNT OF INTEREST ON THIS AMOUNT UNDER QUESTION. (V) SHRI RA JMAL VANIGOTA IN HIS R EPLY TO QUESTION NO.5 HAD STATED THAT HE ARRANGED LOANS FOR CLIENTS IN CHEQUES. (VI) THE NOTING ON PAGE NUMBER 35 MENTIONS HARRESHBHAI WITHOUT ANY SURNAME OR ANY OTHER IDENTIFICATION. (VII) THE NOTINGS ON PAGE NO.35 ARE SOME ROUGH NOTINGS. (VIII) THE SEIZED PAPERS DO NOT INDICATE THAT THE ASSESSEE HAD TAKEN CASH LOAN. (IX) THE ASSESSEE REQUESTED FOR CROSS - EXAMINATION OF SHRI RAJMAL VANIGOTA . (X) THE ASSESSEE REQUESTED WHETHER SOURCE OF ALLEGED CASH LOANS WAS EXAMINED IN THE CASE OF SHRI RAJMAL VANIGOTA . (XI) THE ASSESSEE SUBMITTED THAT YEAR OF RECEIPT OF LOAN CANNOT BE DETERMINED FROM THE SEIZE D PAPER. ITA NO. 7619/MUM/2016 SHRI HARRESH N MEHTA 6 (XII) THE ASSESSEE FILED AN AFFIDAVIT OF SHRI RAJMAL VANIGOTA IN WHICH HE HAS STATED THAT HE NEVER ARRANGED CASH LOAN FOR MR.HARRESH N.MEHTA. BASED ON THE ABOVE SUBMISSIONS, THE ASSESSEE REQUESTED TO DROP THE PENALTY PROCEEDINGS U/S 271D OF T HE ACT . 3.3. THE LD. AO AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE OBSERVED IN HIS PENALTY ORDER THAT THE SEIZED DOCUMENT ANNEXURE A - 6 CLEARLY INDICATES THE DATE OF LOAN TRANSACTION TOGETHER WITH THE RESPECTIVE AMOUNTS AND CLEARLY MENTIONING THE NAM E OF THE ASSESSEE THEREIN TOGETHER WITH INTEREST AMOUNT THEREON. THESE TRANSACTIONS FULLY INDICATE THAT ASSESSEE HAD INDEED RECEIVE D CASH LOANS OF RS.1.50 CRORES FROM SHRI RAJMAL VANIGOTA . WITH REGARD TO AFFIDAVIT OF SHRI RAJMAL VANIGOTA SUBMITTED BY THE ASSESSEE WHEREIN HE HAD DENIED HAVING GIVEN ANY CASH LOANS TO THE ASSESSEE , THE LD AO OBSERVED THAT IT IS MERELY SELF SERVING DOCUMENT CONTRARY TO THE EVIDENCES FOUND DURING THE SEARCH AND SEIZURE OF SHRI RAJMAL VANIGOTA AND HIS STATEMENT RECORDED U/S.132( 4) OF THE ACT. THE LD. AO ALSO OBSERVED THAT THE STATEMENT GIVEN BY SHRI RAJMAL VANIGOTA U/S.132(4) STAT ING T HAT CONTENTS OF ANNEXURE - A - 6 DIARY REPRESENT CASH TRANSACTION S UNDERTAKEN BY HIM WAS NOT RETRACTED BY HIM. WITH REGARD TO THE OPPORTUNITIES SOUGHT BY THE ASSESSEE FOR CROSS EXAMINATION OF SHRI RAJMAL VANIGOTA , THE LD. AO OBSERVED IN HIS PENALTY ORDER THAT IT HAS BEEN HELD BY VARIOUS COURTS THAT THE INCOME TAX PROCEEDINGS ARE CIVIL PROCEEDINGS AND IT IS NOT NECESSARY THAT THE ASSESSEE SHOULD BE PROVID ED ITA NO. 7619/MUM/2016 SHRI HARRESH N MEHTA 7 THE CROSS EXAMINATION. WHAT IS IMPORTANT THAT THE ASSESSEE SHOULD BE CONFRONTED WITH EVIDENCES BEING USED AGAINST HIM AS PRINCIPLE S OF NATURAL JUSTICE. RELIANCE IN THIS REGARD WAS PLACED FROM THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF T. D EVASAHAYA NADAR VS. CIT REPORTED IN 51 ITR 20. ACCORDINGLY, THE REQUEST OF THE ASSESSEE FOR CROSS EXAMINATION WAS REJECTED BY THE LD. AO. WITH REGARD TO THE CONTENTION OF THE ASSESSEE THAT THE LD. AO DID NOT MAKE ANY ADDITION OF INTEREST ON ALLEGED LOANS, THE SAME WAS OMITTED DUE TO OVERSIGHT BY THE LD. AO AND MERE OMISSION BY OVERSIGHT WOULD NOT LEAD TO AUTOMATIC DROPPING OF PENALTY PROCEEDINGS U/S.271D OF THE ACT FOR THE PRINCIPAL COMPONENT OF THE LOAN. WITH REGARD TO ANOTHER CONTENTION OF THE ASSESSEE A S TO WHETHER WHAT ACTION WAS TAKEN BY THE DEPARTMENT WITH REGARD TO THE SEARCH MATERIAL ANNEXURE A - 6 IN THE ASSESSMENT PROCEEDINGS OF SHRI RAJMAL VANIGOTA , THE LD. AO OBSERVED THAT THE DETAILS OF THE ASSESSMENT OF SHRI RAJMAL VANIGOTA CANNOT BE DISCLOSED T O THE ASSESSEE AS THE SAME ARE PERSONAL AFFAIRS OF SHRI RAJMAL VANIGOTA AND CANNOT BE DISCLOSED TO A THIRD PARTY. WITH REGARD TO THE YET ANOTHER CONTENTION OF THE ASSESSEE THAT THE DIARY REFERRED TO ABOVE WAS NOT FOUND FROM HIS PREMISES , THE LD. AO OBSERVE D THAT THERE IS NO RESTRICTION IN LAW THAT EVIDENCE FOUND FROM THE PREMISES OF SOME OTHER PERSON CANNOT BE USED AGAINST THE ASSESSEE. WITH THESE OBSERVATIONS, LD. AO LEVIED PENALTY OF RS.1,50,00,000/ - U/S.271D FOR VIOLATION OF PROVISIONS OF SECTION 269SS O F THE ACT. ITA NO. 7619/MUM/2016 SHRI HARRESH N MEHTA 8 3. 4 . THE LD. CIT(A) DELETED THE LEVY OF PENALTY U/S.271D OF THE ACT BY OBSERVING AS UNDER: - THE GIST OF SUBMISSIONS OF THE APPELLANT IS AS UNDER: 1) NO CASH LOAN WAS RECEIVED BY THE APPELLANT. 2) NO EVIDENCE WAS FOUND THAT THE APPELLANT H AD RECEIVED ANY CASH LOAN AS ALLEGED. 3) THE DOCUMENT RELIED UPON WAS NOT SEIZED FROM THE CUSTODY OF THE APPELLANT. 4) NO ADDITION WAS MADE BY THE AO ARISING FROM THE CASH LOAN. 5) SHRI RAJMAL VANIGOTA IN REPLY TO QUESTION NUMBER FIVE OF THE STATEMENT RECORDED U/S 132 (4) HAD STATED THAT HE HAD ARRANGED LOANS FOR CLIENTS IN CHEQUES. 6) THE NOTING ON PAGE NUMBER 35 MENTIONS 'HARRESHBHAI'. NO SURNAME OR ANY OTHER IDENTIFICATION IS MENTIONED. 7 ) THE NOTING IS ON PAGE 35 OF THE DIARY ARE IN THE NATURE OF ROUGH NOTINGS. 8) IN THE AFFIDAVIT FILED, SHRI RAJMAL VANIGOTA HAS STATED THAT HE NEVER ARRANGED CASH LOAN FOR THE APPELLANT. 7.2.3 THE ADDITIONAL CIT REJECTED APPELLANT'S CONTENTION AND IMPOSE PENALTY U/S 271D OF THE ACT. THE REASONS FOR IMPOSITION OF P ENALTY HAVE BEEN DISCUSSED IN PARAGRAPH 5 AND 6 OF THE ORDER. THE ADDITIONAL CIT NOTED THE FOLLOWING: IN PAGE 35 OF THE SEIZED DIARY THE FOLLOWING ENTRY APPEAR; HARRESHBHAI: 100 1.10.10 TO 25.11.10 45 1.10.10 TO 29.11.10 5 1.10.10 TO 29.11.10 ________ 150 ON THE SAME PAGE (PAGE 35), THERE IS A NOTING OF AN AMOUNT OF RS. 88, 573/ - . ON PAGE NUMBER 36, THERE IS AN ENTRY OF RS. 88,570/ - WHICH IS MENTIONED AS ROHAN INTEREST ACCOUNT. 7.2.4 THE ADDITIONAL CIT MADE THE FOLLOWING SURMIS ES: I. THAT RS. 88,570/ - MENTIONED IN PAGE 36 AND THE AMOUNT OF RS. 88, 573/ - IN PAGE 35 ARE THE SAME AMOUNT AND THAT RS. 88,570/ - IN PAGE 36 IS THE ROUNDED OFF VALUE OF RS. 88,573/ - APPEARING IN PAGE 35. II. THE WORD 'ROHAN' MENTIONED IN PAGE 3 5 THE REFERS TO ROHAN GROUP, III. THE FIGUES IN PAGE 35 REPRESENTS RS. IN LAKHS. ITA NO. 7619/MUM/2016 SHRI HARRESH N MEHTA 9 7.2.5 HAVING FRAMED THE SURMISES, THE ADDITIONAL CIT ARGUED THAT 'THE FACT' THAT THE SAME AMOUNTS (RS. 88,570 OR RS. 88,573/ - J APPEAR IN THE PAGES 35 & 36 MEANS THAT TH E TWO PAGES (PAGE 35 AND PAGE 36) ARE CONNECTED. ON THAT BASIS, HE CONJECTURED THAT 'HARRESHBHAI' MENTIONED IN PAGE 35 IS A PERSON HAVING SOME NEXUS WITH THE ROHAN GROUP. THEREFORE, THE ADDITIONAL CIT ARGUED, 'HARRESHBHAI' MENTIONED IN PAGE 35 REFERS TO TH E APPELLANT. THUS THE ADDITIONAL CIT CAME TO HIS CONCLUSION THAT THE APPELLANT HAD TAKEN A LOAN OF RS. 150 LAKHS IN CASH. 7.3 . I FIND THAT THE ADDITIONAL CIT MADE TOO MANY CONJECTURES AND SURMISES TO ARRIVE AT THE CONCLUSION THAT THE APPELLANT HAD TAKEN A LOAN OF RS. 150 LAKHS IN CASH. THEREFORE, THE CONCLUSION OF THE ADDITIONAL CIT IS NOT BASED ON SOLID FACTS BUT ON A SERIES OF CONJECTURES AND SURMISES. THE MATERIAL IN POSSESSION OF THE ADDITIONAL CIT COULD AT BEST BE SUGGESTIVE OF THE ALLEGED TRANSACTIO N. IN MY VIEW, HE ADDITIONAL CIT DID NOT GATHER SUFFICIENT MATERIAL TO ARRIVE AT A REASONABLE CONCLUSION THAT THE APPELLANT HAD TAKEN A CASH LOAN AS ALLEGED. THEREFORE, I AM OF THE VIEW THAT IT IS NOT A FIT CASE FOR IMPOSITION OF PENALTY U/S 27ID. I, THERE FORE, ALLOW THE 3 RD GROUND OF APPEAL. 4. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. 5. WE HAVE HEARD RIVAL SUBMISSIONS. AT THE OUTSET WE FIND THAT THE FACTUM OF THE ASSESSEE BEFORE US HAVING RECEIVED CASH LOAN WAS ALLEGED BY THE LD. AO ONLY BASED ON T HE DIARY MARKED AS ANNEXURE - A - 6 WHICH WAS SEIZED DURING THE COURSE OF SEARCH U/S.132 OF THE ACT CONDUCTED IN THE PREMISES OF SHRI RAJMAL VANIGOTA ON 10/01/2014. IT IS THE CASE OF THE REVENUE THAT THIS DIARY IN PAGES 35 AND 36 CONTAINED CERTAIN CASH LOAN TR ANSACTIONS OF SHRI RAJMAL VANIGOTA WITH THE ASSESSEE AND HIS GROUP. BUT THE ASSESSEE WHEN CONFRONTED IN THIS REGARD HAD CATEGORICALLY DENIED HAVING RECEIVED ANY CASH LOAN FROM SHRI RAJMAL VANIGOTA . WE FIND THAT ASSESSEE ALSO WAS SUBJECT TO INDEPENDENT SEAR CH ON 26/05/2011 WHICH WAS AFTER THE SEARCH CONDUCTED IN THE PREMISES OF SHRI RAJMAL VANIGOTA ITA NO. 7619/MUM/2016 SHRI HARRESH N MEHTA 10 WHEREIN NO S U CH DOCUMENTS OR MATERIALS INDICATING THE RECEIPT OF CASH LOAN FROM SHRI RAJMAL VANIGOTA WERE NEITHER FOUND NOR SEIZED. WE FIND FROM THE PERUSAL OF TH E ASSESSMENT FRAMED IN THE HANDS OF THE ASSESSEE HEREIN THAT NO ADDITION WAS MADE WITH REGARD TO THE ALLEGED CASH LOAN FROM SHRI RAJMAL VANIGOTA , NOT EVEN A QUESTION WAS RAISED IN THIS REGARD ON THE ASSES SEE DURING THE COURSE OF SEARCH ASSESSMENTS U/S.153A OF THE ACT. WE FIND FROM THE STATEMENT RECORDED U/S.132(4) OF THE ACT AS RECORDED IN THE ORDER S OF LOWER AUTHORITIES THAT SHRI RAJMAL VANIGOTA IN RE PLY TO QUESTION NO.5 HAD ONLY STATED THAT HE HAD ARRANGED LOANS FOR CLIENTS IN CHEQUES. THE SAID FACT IS AL SO REITERATED BY SHRI RAJMAL VANIGOTA IN HIS AFFIDAVIT FILED WHICH ARE ENCLOSED IN PAGES 17 AND 18 OF THE PAPER BOOK. WE ALSO FIND FROM AFFIDAVIT OF SHRI RAJMAL VANIGOTA THAT HE HAD SPECIFICALLY CONFIRMED THAT HE HAD NOT ARRANGED ANY CASH LOANS FOR THE ASS ESSEE HEREIN. THESE CRUCIAL FACTS CANNOT BE BRUSHED ASIDE, WHILE FASTENING HUGE PENALTY LIABILITY ON THE ASSESSEE IN THE SUM OF RS.1,50,00,000/ - IN RESPECT OF CASH LOAN WHICH THE ASSESSEE HAD NEVER RECEIVED. WE FIND THAT THE LD. CIT(A) HAD CATEGORICALLY RE CORDED IN HIS APPELLATE ORDER THAT THE FIGURES MENTIONED IN PAGE 3 5 OF THE SEIZED DIARY ANNEXURE - A - 6 SEIZED FROM SHRI RAJMAL VANIGOTA JUST CONTAIN ED THE FIGURES OF 100,45 AND 5 TOTAL ING TO 150. IT IS THE ASSESSING OFFICER WHO HAD BY HIS SURMISE AND CONJECT URE HAD CONSTRUED THOSE FIGURES TO BE IN LAKHS AND ACCORDINGLY ARRIVING AT THE ALLEGED LOAN FIGURE OF RS.1,50,00,000/ - . IN ANY CASE , THIS SEIZED DOCUMENT ANNEXURE A - 6 WAS FOUND AND SEIZED FROM THE ITA NO. 7619/MUM/2016 SHRI HARRESH N MEHTA 11 PREMISES OF SHRI RAJMAL VANIGOTA ON WHICH POINT THERE IS N O DISPUTE. HENCE, THE PRESUMPTION IN TERMS OF SECTION 292C WOULD BE O N SHRI RAJMAL VANIGOTA TO REBUT THAT THE CONTENTS OF THE DIARY DOES NOT BELONG TO HIM AND BELONGS TO SOME OTHER PERSON INCLUDING THE ASSESSEE HEREIN BEFORE US. BOTH THE PARTIES BEFORE US WERE NOT ABLE TO POINT OUT AS TO WHAT HAPPENED IN THE ASSESSMENT PROCEEDINGS OF SHRI RAJMAL VANIGOTA WITH REGARD TO THE CONTENTS IN THE SEIZED DIARY ANNEXURE A - 6 AND MORE PARTICULARLY WITH PAGES 35 AND 36 THEREON. WE ARE OF THE CONSIDERED OPINION , THAT IN ANY CASE , IN TERMS OF SECTION 292C OF THE ACT, THE PRESUMPTION WOULD BE ONLY ON SHRI RAJMAL VANIGOTA , ALTHOUGH REBUTTABLE. THE ASSESSEE HAD CATEGORICALLY DENIED HAVING ANY CASH LOAN TRANSACTIONS WITH SHRI RAJMAL VANIGOTA . SHRI RAJMAL VANIGOTA ALSO IN HIS AFFIDAVIT HAD SPECIFICALLY STATED THAT HE HAD NOT ARRANGED ANY CASH LOANS FOR THE ASSESSEE. 5. 1 . ONE MORE CRUCIAL FACT HEREIN BROUGHT TO OUR ATTENTION BY THE LD. AR WAS THAT THE ASSESS MENT FRAMED BY THE LD. AO U/S.153A OF THE ACT IN THE HANDS OF THE ASSESS EE WAS SUBJECT MATTER OF REVISION PROCEEDINGS U/S.263 OF THE ACT BY THE LD. CIT DIRECTING THE LD. AO TO CONSIDER THE ADDITION, IF ANY , BE MADE IN RESPECT OF INTEREST O N ALLEGED CASH LOAN FROM SHRI RAJMAL VANIGOTA . THE ASSESSEE DID NOT PREFER ANY APPEAL AGA INST THIS ORDER U/S.263 BEFORE THIS TRIBUNAL. THE LD. AO LATER PASSED A GIVING EFFECT ORDER TO SECTION 263. THE LD. AO LATER PASSED AN ORDER GIVING EFFECT TO THE LD CIT U/S.26 3 WHEREIN HE MADE ADDITION OF RS.5,50,000/ - AS UNEXPLAINED ITA NO. 7619/MUM/2016 SHRI HARRESH N MEHTA 12 EXPENDITURE U/S.69C OF THE ACT TOWARDS INTEREST O N ALLEGED LOAN. THE ASSESSEE AGITATED THE ISSUE BEFORE THE LD. CIT(A) WHO REDUCED THE ADDITION OF RS.88,570/ - BEING THE INTEREST AMOUNT MENTIONED IN THE SEIZED DOCUMENT. 5. 2 . THE ASSESSEE FURTHER CARRIED THE APPEAL BEFORE THIS T RIBUNAL IN ITA NO.4158/MUM/2018 DATED 09/01/2019 ON APPRECIATION OF THE ENTIRETY OF THE FACTS AND CIRCUMSTANCES OF THE CASE THAT ASSESSEE HAD AT THE FIRST INSTANCE DENIED HAVING OBTAINED CASH LOAN FROM SHRI RAJMAL VANIGOTA WHICH FACT WAS ALSO CONFIRMED BY WAY OF AN AFFIDAVIT BY SHRI RAJMAL VANIGOTA AND HENCE, THERE CANNOT BE ANY INTEREST ON THE CASH LOAN WHICH WAS NEVER RECEIVED BY THE ASSESSEE. WITH THESE OBSERVATIONS, THE TRIBUNAL HAD DELETED THE ADDITION MADE U/S.69C OF THE ACT TOWARDS INTEREST O N ALLEGE D CASH LOAN. WE FIND THAT THIS ORDER ALSO COMES TO THE RESCUE OF THE ASSESSEE IN THESE PROCEEDINGS BEFORE US WHEREIN THERE IS A CATEGORICAL FINDING THAT THE AFFIDAVIT OF SHRI RAJMAL VANIGOTA HAD NOT BEEN CONTROVERTED BY THE REVENUE. THIS ORDER ALSO POINTS OUT THAT THE LD. AO HAD NOT BROUGHT ON RECORD ANY CORROBORATIVE EVIDENCE REGARDING THE ACTUAL PAYMENT OF ANY INTEREST , IF ANY, TO SHRI RAJMAL VANIGOTA . WE FIND THAT THE RELIANCE PLACED BY THE LD. AR ON THE DECISION OF CO - ORDINATE BENCH DECISION OF THIS TR IBUNAL IN THE CASE OF STRAPTEX INDIA PVT. LTD., VS. DCIT REPORTED IN 84 ITD 320(MUM) DATED 30/04/2002 IS APPLICABLE TO THE FACTS OF THE INSTANT CASE WHEREIN IT WAS HELD AS UNDER: - ITA NO. 7619/MUM/2016 SHRI HARRESH N MEHTA 13 7. COMING TO THE MERITS OF THE PENALTY LEVIED, THE MAIN BASIS FOR LEVY OF T HE PENALTY IS THE COMPUTER FLOPPY FOUND FROM THE RESIDENCE OF SHRI NIRANJAN J. SHAH. THE PRINT - OUT OF THE ABOVE COMPUTER FLOPPY SHOWED SEVERAL TRANSACTIONS BETWEEN SHRI SHAH AND THE ASSESSEE - COMPANY. THE ABOVE TRANSACTIONS INCLUDED SOME TRANSACTIONS BY CHE QUE AND SOME BY CASH. THE ASSESSEE HAD ADMITTED THE TRANSACTIONS BY CHEQUE BUT HAD DENIED THE TRANSACTIONS WHICH WERE IN CASH. THE DEPARTMENT, IN SUPPORT OF ITS CONTENTION, HAS HEAVILY RELIED UPON THE PRESUMPTION PROVIDED UNDER SECTION 132(4A) OF THE INCOM E - TAX ACT, WHILE THE ASSESSEE DISPUTED THE APPLICABILITY OF SECTION 132(4A) TO THE PRESENT PROCEEDINGS ON THE FOLLOWING GROUNDS : ( I )THAT THE PRESUMPTION UNDER SECTION 132(4A) IS LIMITED ONLY TO THE PROCEEDINGS UNDER SECTION 132(5) AND NOT IN RESPECT OF O THER PROCEEDINGS; (II )THAT THE PRESUMPTION UNDER SECTION 132(4A) IS ONLY AGAINST THE PERSON FROM WHOM THE DOCUMENTS WAS FOUND AND NOT AGAINST THIRD PARTIES; ( III )THAT THE PRESUMPTION UNDER SECTION 132(4A) IS NOT CONCLUSIVE AND CANNOT BE APPLIED IN THE AB SENCE OF CORROBORATIVE EVIDENCE. LET US EXAMINE THE RIVAL CONTENTIONS REGARDING THE SCOPE AND APPLICATION OF SECTION 132(4A). ( I ) WHETHER SECTION 132(4A) IS APPLICABLE ONLY FOR THE LIMITED PURPOSE OF SECTION 132(5) AND NOT FOR THE ASSESSMENT/PENALTY PROCE EDINGS - SECTION 132(4A) RAISES CERTAIN PRESUMPTIONS AND PROVIDES THAT WHERE ANY BOOKS OF ACCOUNT OR OTHER DOCUMENTS ARE FOUND IN THE POSSESSION OR CONTROL OF ANY PERSON IN THE COURSE OF A SEARCH, IT MAY BE PRESUMED THAT SUCH BOOKS OF ACCOUNT OR DOCUMENTS BELONG TO SUCH PERSON AND THEIR CONTENTS ARE TRUE. FROM A READING OF SECTION 132(4A), WE DO NOT FIND ANY JUSTIFICATION TO SUPPORT THE CONTENTION OF THE ID. COUNSEL FOR THE ASSESSEE THAT THE PRESUMPTION UNDER SECTION 132(4A) IS VALID ONLY FOR THE PURPOSE OF SECTION 132(4A). SECTION 132(5) IS AMENDED BY THE FINANCE ACT, 1995, TO PROVIDE THAT ORDER UNDER SECTION 132(5) IS REQUIRED TO BE PASSED ONLY IN RESPECT OF SEARCH INITIATED BEFORE 1 - 7 - 1995. THEREFORE, SECTION 132(5) HAS BEEN MADE INOPERATIVE IN RESPECT OF SEARCH INITIATED AFTER 1 - 7 - 1995. HOWEVER, NO SUCH RESTRICTION HAS BEEN PROVIDED IN SECTION 132(4A). THE PRESUMPTION UNDER SECTION 132(4A) CONTINUES TO BE APPLICABLE EVEN IN RESPECT OF SEARCH AFTER 1 - 7 - 1995. THIS CLEARLY PROVES THAT THE CONTENTION OF THE I D. COUNSEL FOR THE ASSESSEE THAT THE PRESUMPTION UNDER SECTION 132(4A) IS INTENDED BY THE LEGISLATURE TO BE MADE APPLICABLE TO ORDER UNDER SECTION 132(5) ONLY IS UNTENABLE. ( II ) WHETHER PRESUMPTION UNDER SECTION 132(4A) IS ONLY AGAINST THE PERSON FROM WHO M THE DOCUMENT IS FOUND AND NOT AGAINST THIRD PARTY - AS PER SECTION 132(4A), WHERE ANY BOOKS OF ACCOUNT OR DOCUMENT IS FOUND IN THE POSSESSION AND CONTROL OF ANY PERSON IN THE COURSE OF SEARCH, IT IS ITA NO. 7619/MUM/2016 SHRI HARRESH N MEHTA 14 PRESUMED THAT THEY BELONG TO SUCH PERSON. THUS, CLEARLY , THE PRESUMPTION IS IN RESPECT OF THE PERSON FROM WHOM THEY WERE FOUND. THE USE OF THE WORDS 'TO SUCH PERSON' IN THE SAID SECTION MEAN THE PERSON FROM WHOM THE BOOKS OF ACCOUNT OR DOCUMENTS WERE FOUND. CLAUSE (//) OF SECTION 132(4A) PROVIDES THAT THE CONT ENTS OF SUCH BOOKS OF ACCOUNT OR DOCUMENTS ARE TRUE. IN OUR OPINION, THIS PRESUMPTION CAN ALSO BE APPLIED ONLY AGAINST THE PERSON FROM WHOSE POSSESSION THE BOOKS OF ACCOUNT OR THE DOCUMENTS WERE FOUND. THEREFORE, SO FAR AS THE CASE OF MR. NIRANJAN J. SHAH IS CONCERNED, THE REVENUE AUTHORITIES MAY PRESUME THAT THE BOOKS OF ACCOUNT OR DOCUMENTS FOUND FROM HIS POSSESSION ARE CORRECT. HOWEVER, WHILE UTILISING THOSE DOCUMENTS IN THE CASE OF ANY OTHER PERSON (I.E. THE PERSON OTHER THAN MR. NIRANJAN J. SHAH), THER E CANNOT BE ANY PRESUMPTION ABOUT THE CORRECTNESS OF SUCH BOOKS OR DOCUMENTS. THE HON'BLE APEX COURT HAS CONSIDERED THIS MATTER IN THE CASE OF V.C. SHUKLA (SUPRA). IN THAT CASE, CERTAIN DIARIES, SMALL NOTE BOOK AND VARIOUS LOOSE PAPERS WERE FOUND AND SEIZE D FROM THE PREMISES OF MR. S.K. JAIN OF NEW DELHI. IN THOSE DIARIES/LOOSE PAPERS, THE NAMES OF V.C. SHUKLA AND L.K. ADVANI WERE FOUND RECORDED. THE CBI CHARGESHEETED THOSE PERSONS, NAMELY, SHRI SHUKLA AND SHRI ADVANI UNDER THE PREVENTION OF CORRUPTION ACT, 1988. THE HON'BLE APEX COURT HELD THAT THE ENTRIES IN THOSE DIARIES/LOOSE PAPERS CANNOT BE USED AGAINST SHRI ADVANI OR SHRI SHUKLA BUT CAN BE USED AGAINST SHRI JAIN AND MAY BE PROVED AS ADMISSION BY HIM. THE ID. DEPARTMENTAL REPRESENTATIVE HAD CONTENDED T HAT THE ABOVE DECISION OF HON'BLE APEX COURT WAS NOT APPLICABLE TO INCOME - TAX PROCEEDINGS BECAUSE THE ABOVE DECISION WAS BASED UPON THE INTERPRETATION OF SECTION 34 OF THE EVIDENCE ACT, 1872. HE CONTENDED THAT EVIDENCE ACT IS NOT APPLICABLE TO INCOME - TAX P ROCEEDINGS. HOWEVER, WE ARE UNABLE TO ACCEPT THE ABOVE CONTENTION OF THE ID. DEPARTMENTAL REPRESENTATIVE IN VIEW OF THE DECISION OF HON'BLE APEX COURT IN THE CASE OF CHUHARMAL V. CIT [1988] 172 ITR 25Q 1 . IN THAT CASE, THEIR LORDSHIPS HELD AS UNDER: '... DI SMISSING THE PETITION AND AFFIRMING THE DECISION OF THE HIGH COURT, (/) THAT WHAT WAS MEANT BY SAYING THAT THE EVIDENCE ACT DID NOT APPLYING TO PROCEEDINGS UNDER THE INCOME - TAX ACT, 1961, WAS THAT THE RIGOUR OF THE RULES OF EVIDENCE CONTAINED IN THE EVIDEN CE ACT WAS NOT APPLICABLE; BUT THAT DID NOT MEAN THAT WHEN THE TAXING AUTHORITIES WERE DESIROUS OF INVOKING THE PRINCIPLES OF THE EVIDENCE ACT IN PROCEEDINGS BEFORE THEM, R THEY WERE PREVENTED FROM DOING SO.' WE FIND THAT SIMILAR VIEW WAS TAKEN BY THE TRIB UNAL, AHMEDABAD BENCH 'C', IN THE CASE OF PRARTHANA CONSTRUCTION (P.) LTD. (SUPRA) WHEREIN IT WAS HELD : 'THE PRESUMPTION UNDER THE PROVISIONS OF SECTION 132(4A) WOULD IN ANY CASE NOT BE APPLICABLE TO A THIRD PARTY FROM WHOSE POSSESSION SUCH PAPERS AND DOC UMENTS HAVE NOT BEEN FOUND BY THE REVENUE'. IN VIEW OF ABOVE, WE HAVE NO HESITATION TO HOLD THAT THE PRESUMPTION UNDER SECTION 132(4A) IS APPLICABLE ONLY AGAINST THE PERSON FROM WHOSE POSSESSION BOOKS OF ACCOUNT OR OTHER DOCUMENTS WERE FOUND AND NOT AGAINS T ANY OTHER PERSON. ITA NO. 7619/MUM/2016 SHRI HARRESH N MEHTA 15 ( III ) WHETHER THE PRESUMPTION UNDER SECTION 132(4A) IS CONCLUSIVE - IN OUR OPINION, THE PRESUMPTION UNDER SECTION 132(4A) IS A REBUTTABLE PRESUMPTION AND NOT A CONCLUSIVE ONE. CERTAINLY, THE BURDEN TO REBUT THE PRESUMPTION IS UPON THE PERSON AGAINST WHOM THE PRESUMPTION IS APPLICABLE. WHILE TAKING THE ABOVE VIEW, WE DERIVE SUPPORT FROM THE DECISION OF HON'BLE KERALA HIGH COURT IN THE CASE OF /TO V. T. ABDUL MAJEED [1988] 169 ITR 440 2 . WHEREIN AT PAGE 444, THEIR LORDSHIPS HELD AS UNDER : - 'IT IS TRUE THAT SECTION 132(4A) OF THE ACT ENABLES THE COURT TO PRESUME THE TRUTH OF THE CONTENTS OF SUCH BOOKS. HOWEVER, IT IS A PRESUMPTION WHICH CAN BE REBUTTED. MOREOVER, THE PRESUMPTION ENVISAGED THEREIN IS ONLY A FACTUAL PRESUMPTION. IT IS IN THE DISCRETION OF THE COURT, DEPENDING UPON OTHER FACTORS, TO DECIDE WHETHER THE PRESUMPTION MUST BE DRAWN. THE EXPRESSION USED IN THE SUB - SECTION IS 'MAY BE PRESUMED' AS IS USED IN SECTION 114 OF THE EVIDENCE ACT, 1872. IT IS NOT A MANDATE THAT WHENEVER THE BOOKS OF ACCOUNT ARE SEIZED, THE COURT SHALL NECESSARILY DRAW THE PRESUMPTION, IRRESPECTIVE OF ANY OTHER FACTORS WHICH MAY DISSUADE THE COURT FROM DOING SO.' SIMILAR VIEW WAS EXPRESSED BY THEIR LORDSHIPS OF RAJASTHAN HIGH COURT IN THE CASE OF CIT V. S.M.S . INVESTMENT CORPN (P.) LTD. [1994] 207 ITR 364 WHERE IT WAS HELD THAT THE PRESUMPTION UNDER SECTION 132(4A) IS REBUTTABLE. IN VIEW OF ABOVE, WE HOLD THAT THE PRESUMPTION UNDER SECTION 132(4A) IS ONLY A REBUTTABLE PRESUMPTION AND NOT A CONCLUSIVE ONE. THE ID. DEPARTMENTAL REPRESENTATIVE HAS RELIED UPON VARIOUS DECISIONS. HOWEVER, ALL OF THEM ARE ON ALTOGETHER DIFFERENT FACTS. THE DISPUTE BEFORE THE HON'BLE KERALA HIGH COURT IN THE CASE OF K. MAHIM(S UPRA) AND SMT. SARALA NAIR (SUPRA) WAS WHETHER THE PURCHASE OF PROPERTY WAS BENAMI OR NOT, WHILE THE ISSUE IN THE CASE UNDER APPEAL BEFORE US IS ALTOGETHER DIFFERENT. SIMILARLY, THE FACTS IN THE CASE OF DURGA PRASAD MORE (SUPRA) ARE ALTOGETHER DIFFERENT. THERE A LSO, THE DISPUTE WAS WHETHER THE HOUSE PROPERTY PURCHA SED IN THE NAME OF ASSESSEE'S WIFE BELON GED TO HER OR TO THE ASSESSEE . IN VIEW OF ABOVE, WE HOLD THAT THE VARIOUS DECISIONS RELIED UPON BY THE ID. DEPARTMENTS REPRESENTATIVE WILL NOT BE APPLICABLE TO THE CASE UNDER APPEAL BEFORE US. 8. LET US EXAMINE THE FACTS OF THIS CASE IN THE LIGHT OF OUR ABOVE FINDINGS. THERE WAS SEARCH AT THE PREMISES OF SHRI NIRANJAN SHAH, IN WHICH A COMPUTER FLOPPY WAS FOUND. ON THE BASIS OF THE CONTENTS OF THE ABOVE FLOPPY, THE REVENUE HELD THAT THE ASSESSEE HAD BORROWED THE MONE Y IN CASH WHICH WAS DENIED BY THE ASSESSEE. IN SUPPORT OF ITS CONTENTION, THE REVENUE HAS RELIED UPON SECTION 132(4A). WE HAVE ALREADY HELD ABOVE THAT THE PRESUMPTION UNDER SECTION 132(4A) IS APPLICABLE ONLY AGAINST THE PERSON FROM WHOSE POSSESSION THE DOC UMENT WAS FOUND AND NOT AGAINST ITA NO. 7619/MUM/2016 SHRI HARRESH N MEHTA 16 ANY PERSON. WE HAVE ALSO HELD THAT THE PRESUMPTION UNDER SECTION 132(4A) IS ONLY A REBUTTABLE PRESUMPTION AND NOT A CONCLUSIVE ONE. THE ASSESSEE, IN ITS STATEMENT BEFORE THE ASSESSING OFFICER, HAS DENIED HAVING BORROWED ANY MONEY FROM SHRI NIRANJAN SHAH IN CASH. THE ASSESSING OFFICER, TO SUPPORT THE CONTENTS OF THE FLOPPY, HAS RELIED UPON THE STATEMENT OF SHRI NIRANJAN SHAH GIVEN AT THE TIME OF SEARCH. HOWEVER, WE FIND THAT THE ASSESSING OFFICER AGAIN EXAMINED HIM UNDER SECTI ON 131 WHEREIN HE HAD DENIED HAVING ADVANCED ANY CASH TO THE ASSESSEE. THE ASSESSING OFFICER HAS REPRODUCED THE SAID STATEMENT AT PAGE 3 OF THE ASSESSMENT ORDER AND IT WOULD BE USEFUL TO REPRODUCE THE SAME HEREIN AS UNDER : - 'Q.I AM SHOWING YOU ACCOUNT WI TH ACCOUNT HEAD '12A (RS, A/C,)'. KINDLY EXPLAIN THE ENTRIES THEREIN? A.THIS IS THE ACCOUNT HEADED '12A RS. (A/C.)' IS OF M/S. STRAPTEX INDIA PVT. LTD. THE FIGURES ARE IN FULL. IN THIS ACCOUNT AS REGARDS THE DEBIT AND CREDIT BY CHEQUE/D.D. ARE ACCOUNTED. AS REGARDS THE CASH AMOUNT WHICH ARE DEBITED/CREDITED THEY HAVE ACTUALLY NEVER TAKEN PLACE. THESE ARE THE FIGURES I HAVE INFLATED TO IMPRESS MY ASSOCIATES AND KEEPING IN VIEW TO TAKE AN UNDUE - ADVANTAGE OF MY PERSONS AT A LATER STAGE. HERE THE N.J. MEANS MY SELF (NIRANJAN J. SHAH); M.R. SHAH INDICATES MUNJAL R. SHAH; N.R. SHAH IS NIKHIL R. SHAH; SJ. SHAH IS MY MOTHER SUSHILA J. SHAH; ADITI IS THE PROPRIETORY CONCERN OF SHRI MUNJAL R. SHAH; SATISH IS SATISH MODY; VIPUL MEANS VIPUL R. SHAH; R.E. IS REOMIL EXPOR TS; N. MODY SHOULD BE NANABHAI MODY. Q.FROM THE ABOVE STATEMENT IT APPEARS THAT THIS ACCOUNT SHOWS THAT PAYMENTS MADE TO/FOR STRAPTEX INDIA PVT. LTD. ARE ENTERED IN DEBIT SIDE AND RECEIPTS FROM STRAPTEX INDIA PVT. LTD. ARE CREDITED. MOST OF THE ENTRIES IN THIS ACCOUNT ARE FROM BANKING CHANNEL WHICH CONFIRM THE CORRECTNESS OF THE ACCOUNT. THEN ON WHAT BASIS AND WHAT EVIDENCE, YOU ARE SIMPLY STATING THAT CASH PAYMENT HAS NOT TAKEN PLACE? A.AS I STATED BEFORE I WANTED TO IMPRESS MY ASSOCIATES, MY FRIENDS AND WANTED TO HAVE UNDUE ADVANTAGE FROM MY ASSOCIATES AT A LATER STAGE I.E. AFTER A LAPSE OF SOME MORE TIME, I CAN ALWAYS TELL THEM THAT SO MUCH AMOUNT I HAVE GIVEN FOR THIS COMPANY AND I WAS SURE THAT AFTER A LAPSE OF SOMETIME NOBODY WILL ARGUE OR DISPUTE WI TH ME AND SINCE I WAS THE ONLY PERSON WHO WAS MAINTAINING THE ACCOUNT, THIS ACCOUNT WOULD HAVE BEEN ACCEPTED NOT TO THE FULL EXTENT BUT TO THE CERTAIN EXTENT BY THEM SO I COULD HAVE MADE MONEY WITH THIS TRICK.' THUS, SHRI SHAH HIMSELF HAD DENIED HAVING ADV ANCED ANY MONEY IN CASH TO THE ASSESSEE. HE HAS ALSO EXPLAINED THE REASONS WHY HE HAS MADE CASH ENTRIES IN THE NAME OF THE ASSESSEE. IT IS ALSO NOT IN DISPUTE THAT THE ASSESSEE WAS NEVER GIVEN ANY OPPORTUNITY TO CROSS EXAMINE SHRI SHAH. IT IS A SETTLED LAW THAT THE STATEMENT OF ANY PERSON CANNOT BE UTILISED AGAINST THE OTHER PERSON UNLESS THE OTHER PERSON IS GIVEN AN OPPORTUNITY TO CROSS ITA NO. 7619/MUM/2016 SHRI HARRESH N MEHTA 17 EXAMINE THE WITNESS. IN THE CASE BEFORE US, NOT ONLY SHRI SHAH WAS NOT ALLOWED TO BE CROSS EXAMINED BY THE ASSESSEE BUT S HRI SHAH HIMSELF IN THE SUBSEQUENT STATEMENT BEFORE THE ASSESSING OFFICER HAD DENIED WHATEVER WAS STATED AT THE TIME OF SEARCH. FURTHER, SHRI SHAH IN A DECLARATION DATED 23 - 9 - 1994 BEFORE THE NOTARY PUBLIC HAS RETRACTED HIS STATEMENT GIVEN AT THE TIME OF SE ARCH. IN VIEW OF ABOVE, IN OUR OPINION, THE STATEMENT OF MR. SHAH GIVEN AT THE TIME OF SEARCH CANNOT BE UTILISED AS AN EVIDENCE AGAINST THE ASSESSEE. NO OTHER CORROBORATIVE EVIDENCE IN SUPPORT OF CASH BORROWING BY THE ASSESSEE IS BROUGHT ON RECORD BY THE R EVENUE. NO PROMISSORY NOTE, HUNDI, ETC,, SIGNED BY THE ASSESSEE WAS FOUND FROM MR. SHAH, WHICH MAY PROVE CASH BORROWING BY THE ASSESSEE - COMPANY. ON THE OTHER HAND, MR. TRIVEDI, THE ID. COUNSEL FOR THE ASSESSEE, HAS POINTED OUT THAT THE ASSESSEE IS A PRIVAT E LIMITED COMPANY AND IF ANY MONEY HAD BEEN BORROWED IN CASH, IT WOULD HAVE CERTAINLY BEEN RECORDED IN THE ASSESSEE'S BOOKS OF ACCOUNT. THE COMPANY CANNOT UTILISE THE MONEY UNLESS IT IS RECORDED IN THE BOOKS OF ACCOUNT. IN VIEW OF THE TOTALITY OF THE ABOVE FACTS, WE HOLD THAT ON THE BASIS OF THE COMPUTER FLOPPY FOUND FROM SHRI NIRANJAN SHAH, IT CANNOT BE HELD THAT THE ASSESSEE BORROWED THE MONEY IN CASH. THEREFORE, THE LEVY OF PENALTY UNDER SECTION 271D FOR VIOLATION OF SECTION 269SS CANNOT BE SUSTAINED AND ACCORDINGLY THE SAME IS CANCELLED. ITA NO. 694/BOM./2001 - PENALTY UNDER SECTION 271E. 9. BOTH THE PARTIES RELIED UPON THEIR SUBMISSIONS WITH REGARD TO PENALTY UNDER SECTION 271D EXCEPT MR. TRIVEDI POINTING OUT THAT THE DEPARTMENT HAS LEVIED THE PENALTY ON THE GROUND THAT THE ASSESSEE MADE THE REPAYMENT OF LOANS IN CASH TO SHRI NIRANJAN SHAH. HE POINTED OUT THAT SECTION 269T AS IT STOOD AT THE RELEVANT TIME, PROHIBITED THE REPAYMENT OF DEPOSITS. IT IS BY THE FINANCE BILL 2002 THAT THE WORD 'LOANS' IS INS ERTED IN SECTION 269T. THEREFORE, THE LEVY OF PENALTY UNDER SECTION 271E FOR THE YEAR UNDER CONSIDERATION FOR ALLEGED VIOLATION OF SECTION 269T FOR THE REPAYMENT OF LOAN IS NOT SUSTAINABLE. HOWEVER, WHILE DECIDING THE ASSESSEE'S APPEAL IN REGARD TO PENALTY UNDER SECTION 271 D, WE HAVE HELD THAT ON THE BASIS OF THE CONTENTS OF COMPUTER FLOPPY, IT CANNOT BE SAID THAT THE ASSESSEE BORROWED THE MONEY. FOR THE SAME REASONS, WE HOLD THAT IT CANNOT BE PRESUMED THAT THE ASSESSEE MADE THE REPAYMENT IN CASH. IN VIEW OF OUR ABOVE FINDING, WE HEREBY CANCEL THE PENALTY LEVIED UNDER SECTION 271 E. 10. IN THE RESULT, BOTH THE APPEALS BY THE ASSESSEE ARE ALLOWED. 5. 3 . WE ALSO FIND THAT THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. DAGA FIBRES PVT. LTD., IN I TA NO.2928/MUM/2010 DATED 26/03/2011 HAD OBSERVED AS UNDER: - ITA NO. 7619/MUM/2016 SHRI HARRESH N MEHTA 18 1. WHETHER THE ITAT WAS JUSTIFIED IN DELETING THE ADDITION OF RS.17.97 LAKHS MADE BY THE ASSESSING OFFICER IN THE ASSESSMENT YEAR 1998 - 99, IS THE QUESTION RAISED IN THIS APPEAL. 2. ON PERUSAL OF THE ORDER PASSED BY THE ITAT, IT IS SEEN THAT THE ITAT HAS RECORDED A FINDING ON FACT THAT IN THE PRESENT CASE ADDITIONS WERE MADE ON THE BASIS OF A LOOSE PAPER FOUND BY THE ASSESSING OFFICER AT THE RESIDENCE OF A THIRD PARTY, VIZ SHRI. SUSHIL KUMAR BAGAD IA DURING THE COURSE OF SEARCH AT HIS PREMISES, THE FINDING OF FACT RECORDED BY THE TRIBUNAL IS THAT THE ASSESSEE AS WELL AS THE SAID THIRD PARTY HAVE DENIED TO HAVE ENTERED INTO ANY TRANSACTION AND IN THE ABSENCE OF ANY CORROBORATIVE EVIDENCE TO SUGGEST T HAT SUCH TRANSACTION EVER TOOK PLACE, NO ADDITION COULD BE MADE IN THE HANDS OF THE ASSESSEE ON THE BASIS OF THE LOOSE PAPERS FOUND DURING THE COURSE OF SEARCH AT THE PREMISES OF A THIRD PARTY. IN OUR OPINION, THE DECISION OF THE TRIBUNAL IS BASED ON FIN DING OF FACT. NO QUESTION OF LAW ARISES. HENCE, THE APPEAL IS DISMISSED. 5. 4 . WE FIND THAT THIS DECISION IS SQUARELY APPLICABLE TO THE FACTS OF THE INSTANT CASE. 5. 5 . WE F I ND THAT THE LD. AO HAD RELIED ON THE DECISION OF HONBLE MADRAS HIGH COURT REPORT ED IN 51 ITR 20. THIS DECISION WAS RENDERED WAY BACK ON 25/09/1963 ON THE ASPECT OF WHETHER CROSS EXAMINATION IS TO BE PROVIDED TO THE ASSESSEE. BUT WE FIND THAT THE HONBLE SUPREME COURT IN THE CASE OF KISHINCHAND CHELLARAM VS. CIT REPORTED IN 125 ITR 713 DATED 16/09/1980 HAD HELD CATEGORICALLY THAT THE BURDEN WAS ON THE DEPARTMENT TO SHOW THAT THE MONEY BELONG TO THE ASSESSEE BY BRINGING PROPER EVIDENCE ON RECORD AND ASSESSEE COULD NOT BE EXPECTED TO CALL THIRD PARTIES WHO HAD LEFT THE SERVICE AT THE TIM E WHEN THE ASSESSMENT WAS REOPENED IN EVIDENT TO HELP THE DEPARTMENT TO DISCHARGE THE BURDEN THAT LAY UPON IT. IN OTHER WORDS, IF THE DEPARTMENT RELIES ON CERTAIN ITA NO. 7619/MUM/2016 SHRI HARRESH N MEHTA 19 STATEMENTS OR CERTAIN EVIDENCES RECORDED FROM A THIRD PARTY THEN IT IS FOR THE DEPARTMENT TO PRODUCE THOSE EVIDENCES AND PRODUCE THOSE PARTIES TO THE ASSESSEE AS TH EIR WITNESS AND CONFRONT ASSESSEE WITH THE SAME AND THEREAFTER , IF THE ASSESSEE SO DESIR E S, T HE ASSESSEE MAY OPT FOR CROSS EXAMINATION. I T IS THE BOUNDEN DUTY OF THE DEPARTMENT TO PROV IDE CROSS EXAMINATION TO THE ASSESSEE. HENCE, THE RELIANCE PLACED BY THE LD. AO ON THE DECISION OF HONBLE MADRAS HIGH COURT SUPRA TO THE PRESENT CASE DOES NOT ADVANCE THE CASE OF THE REVENUE. 5. 6 . WITH REGARD TO THREE MORE DECISIONS RELIED UPON BY THE LD. DR VIZ., 160 TAXMAN 233 (ALL), 136 TAXMAN 644 (BOM) AND 42 TAXMANN.COM 261 (KERALA HIGH COURT), WE FIND THAT IN ALL THOSE CASES , THERE WAS NO DISPUTE ON THE TRANSACTIONS HAVING TAKEN PLACE. IN OTHER WORDS, THE PARTIES THEREON IN THE SAID CASES HAD ACCEPTE D THE TRANSACTIONS HAPPENED BUT IN THE INSTANT CASE BEFORE US BOTH THE ALLEGED LENDER AS WELL AS THE ALLEGED RECEIVER (ASSESSEE HEREIN) OF LOANS HAD CATEGORICALLY DENIED HAVING ANY TRANSACTIONS WITH EACH OTHER. HENCE, THE CASE LAWS RELIED UPON BY THE LD. D R ARE FACTUALLY DISTINGUISH ABLE AND CANNOT BE MADE APPLICABLE TO THE FACTS OF THE INSTANT CASE. 5.7. IN VIEW OF THE AFORESAID OBSERVATIONS AND RESPECTFULLY FOLLOWING THE JUDICIAL PRECEDENTS RELIED UPON HEREIN SUPRA, WE HOLD THAT IT IS NOT A FIT CASE FOR LEVY OF PENALTY U/S.271D OF THE ACT IN THE SUM OF ITA NO. 7619/MUM/2016 SHRI HARRESH N MEHTA 20 RS.1,50,00,000/ - IN THE FACTS AND CIRCUMSTANCES OF THE CASE. ACCORDINGLY, THE GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 13 / 02 /201 9 SD/ - ( RAM LAL NEGI ) SD/ - ( M. BALAGANESH ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 13 / 02 /201 9 KARUNA SR. PS COPY OF THE ORDER FORWA RDED TO : BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//