Rajkumar Madan, Indore V. ACIT3(1), Indore

ITSSA 259/Ind/2019

AI Insights

This case involves an appeal by Rajkumar Madan against the order of the Commissioner of Income Tax (Appeals) which confirmed an addition of Rs. 52,50,000 to his income. The addition was based on documents seized during a search and seizure operation at the premises of Convenient Hospital Ltd. (CHL) group, where certain documents pertaining to the assessee were found. The Income Tax Officer (ITO) made the addition based on these documents and other corroborative evidence, which the assessee contested, claiming the documents were not valid evidence against him and that he was not given a fair opportunity to contest the evidence. The Tribunal dismissed the appeal, agreeing with the CIT(A) that the additions were justified based on the seized documents and corroborative evidence.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 130978 (ITAT-INDORE)
• Duration Of Justice: 3 year(s) 9 month(s) 5 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 29-08-2023
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 09-08-2023
• Assessment Year: 2010-2011
• Appeal Filed On: 24-11-2019
• Other Referred Cases: Andaman Timber Industries vs. 62 taxmann.com 3 (SC), Kishinchand Chellaram vs. CIT 125 ITR 713 (SC)
• Laws Referred To: Income Tax Act
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Search and seizure; Document seized; Principle of natural justice; Documents seized
• Section: 56; 132; 153C

Judgement Text

Page 1 of 8 आयकर अपील य अ धकरण, इंदौर यायपीठ, इंदौर IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI B.M. BIYANI, ACCOUNTANT MEMBER IT(SS)A No.259/Ind/2019 (Assessment Year:2010-11) Rajkumar Madan 123-124, Bikunthdham colony Behind Anand Bazar, Indore Vs. ACIT 3(1) Indore (Appellant / Assessee) (Respondent/ Revenue) PAN: AAJPM 8093N Assessee by Shri Pankaj Shah & Soumya Bumb, ARs Revenue by Shri P.K. Mishra CIT- DR Date of He aring 10.08.2023 Date of Pronouncement 30.08.2023 O R D E R Per Vijay Pal Rao, JM: This appeal by the assessee is directed against the order dated 12.07.2019 of Commissioner of Income Tax (Appeal)-II, Indore, for Assessment Year 2010-11. The assesse has raised following grounds of appeal: “1. That, the appellate order passed by Ld. CIT-A is erroneous on the facts and in law. 2. That, the appellate order passed by Ld. CIT-A, is contrary to the weight of evidence on record, perverse, unjustified and, therefore the additions are liable to be struck down. IT(SS)A No.259/Ind/2019 Rajkumar Madan Page 2 of 8 Page 2 of 8 3. That, the CIT-A erred not to follow the principal of natural justice as Ld. CIT-A passed not considering the written submission made by the appellant in which proper explanation was furnished. 4. That, Ld. CIT-A erred to not consider the fact that the notice issued U/s 153C of the Act is invalid as the loose paper/diary in question does not belong to the appellant, though there may be reference to the appellant therein. 5. That, addition in the present case of Rs. 52,50,000/- is totally bad in law and on fact as the same is made totally on assumption in absence of any enquiry and adverse findings against the appellant, further it is settled position of law that hand written rough loose paper found during the search at third party premises is not enough to make addition in the hands of assessee. 6. That, the above addition made by the Ld. A.O. and confirmed by Ld. CIT-A is also against the principles of natural justice as the same is made on the basis of statement made by the third party recorded behind the back of the appellant and no opportunity to cross-examine at any level of the proceedings was provided to the appellant.” 2. The assesse is an individual and showing income from house property, business, capital gain and other sources. There was a search and seizure action u/s 132 of the Act in the case of Convenient Hospital Ltd. (CHL) group, Indore on 04.10.2013. During the course of search operations certain documents were found and seized marked as LPS-10 & BS-19 pertaining to the assesse and accordingly those documents were sent to the AO of the assesse for initiating proceedings u/s 153C of the Act. The AO accordingly issued notice u/s 153C for A.Ys. 2008-09 to 2013-14 on 25 th August 2014. In response to the notice u/s 153C of the Act the assesse stated that the return of income already filed may be treated as return filed to the notice u/s 153C. On verification of the seized material the AO found that as per the diary inventoried as BS-29 seized from hospital premises of CHL, transactions in the name of the assessee were recorded including cash of Rs.87,50,000/- in the year under consideration. The AO further noted that there is an opening balance of payment of Rs.1,20,62,890/- and further payment of cash of Rs.87,50,000/- total amount to Rs.2,08,12,890/- is the undisclosed income of the assesse and added to the total income u/s 56 of the Act. The assesse challenged the action of the AO before the ld. CIT(A). The Ld. IT(SS)A No.259/Ind/2019 Rajkumar Madan Page 3 of 8 Page 3 of 8 CIT(A) has restricted the addition to the extent of Rs.52,50,000/- on account of cash receipt specifically against name of the assesse as recorded in the seized material. Therefore, the balance addition of Rs.1,55,62,890/- was deleted by the CIT(A) on the ground that no name was written against those entries in the seized material. Aggrieved by the impugned order of the Ld. CIT(A) the assessee has filed the present appeal. 3. Before the Tribunal the Ld. AR of the assesse has submitted that the AO has made the addition on the basis of the loose paper BS-29 found during the course of search and seizure action in case of CHL group. He has submitted that the AO has relied upon the statement of one Shri Ashok Vaishnav who has stated that Shri N.C. Maru has signed against entries on the seized documents but no statement of Shri NC Maru has been recorded by the department in this respect. No adverse inference is drawn based on the statement of Shri Ashok Vaishnav when no opportunity was given to the assesse to cross examine him despite specific request. Therefore, no such adverse inference can be drawn without such examination of the person who’s statement was relied upon by the AO. In support of his contention he has relied upon the judgment of Hon’ble Supreme Court in case of Andaman Timber Industries 62 taxmann.com 3 (SC) as well as in the case of Kishinchand Chellaram vs. CIT 125 ITR 713 (SC). Thus, the Ld. AR has submitted that when the statements of the witnesses are made basis of demand, not allowing assesse to cross examine witness is a serious flaw which makes order of the assessing officer nullity, as it amounts to violation of principles of natural justice. Not giving an opportunity to cross examine the witnesses are material irregularities and illegality in the assessment order. 3.1 Ld. AR has further submitted that the impugned documents does not contain year and has not sign or handwriting of the assesse. It is vague to hold R. Madan as Rajkumar Madan based on statement of a person who is not a part of alleged transaction and has himself stated ignorance about the entries and has made a guess work. The entries IT(SS)A No.259/Ind/2019 Rajkumar Madan Page 4 of 8 Page 4 of 8 referred to amount paid and received from R Madan. If it is a real estate transaction it would be payment for purchase or receipt from sale and therefore, the document is vague and dumb in nature. Thus, the Ld. AR has pleaded that the addition sustained by the Ld. CIT(A) is not justified and the same is liable to be deleted. 4. On the other hand, Ld. DR has submitted that the AO made the addition of cash received by assesse as recorded in the seized material. The said amount was received by the assessee as sale consideration for sale of house. The addition has been made by the AO on the basis of the seized material along with other corroborative evidence being certain entries in Cheque are found corroborated with bank account statement of the assessee. Therefore, seized material cannot be held to be a dumb documents when part of the entries are not in dispute so far as the payment in Cheque of Rs. 1 crore is concerned. He has relied upon the order of the AO. 5. We have considered the rival submissions as well as relevant material on record. During the course of search and seizure in the case of Convenient Hospital Ltd. (CHL) certain documents belonging to the assesse were found and seized and inventoried as LPS-10 page 1 to 14, an agreement between the assesse and Shri N.C. Maru general power of attorney holder of Dr. B.S. Mehta and Shri Rajesh Bharghav. Another documents seized and belongs to the assesse was marked as BS-29, a diary contains various entries of opening balance and cash payment & Cheque payment which is relevant document based on which the AO has made the addition. The said documents are reproduced in the assessment order as scanned copy which cannot be scanned again here and therefore, the entries of the said documents are reproduced as under: Date Particulars Dr. IT(SS)A No.259/Ind/2019 Rajkumar Madan Page 5 of 8 Page 5 of 8 19/01 Openign Balance 1,20,62,890 09/02 Cash paid 10,00,000 09/02 Cash paid to R.Madan 2,50,000 18/02 Cash paid to R. Madan 50,00,000 20/02 Cash paid personal 25,00,000 18/02 Chq. Paid 1,00,00,000 5.1 The AO has also referred to the statement of one Shri Ashok Vaishnav recorded on 06.10.2013 during the course of search and seizure action wherein he explained the documents BS-29 as contain the entries relating to the purchase and sale of plots and also stated that the signature on the seized documents is of Shri N.C. Maru. Therefore, it is clear that Shri N.C. Maru who was also general power of Attorney holder of Dr. B.S. Mehta was very much part of the transaction of purchase and sale of plots as well as the house property of the assesse. The AO has then referred to another document seized during the search being excel sheet TH-1 of LN78 wherein the details of two transactions are found as under: Date Particular Receipt Payment 18.2.10 NCM-MADAN 5000000 19.02.10 NCM-MADAN 2500000 IT(SS)A No.259/Ind/2019 Rajkumar Madan Page 6 of 8 Page 6 of 8 5.2 These two transactions are same and part of the transactions recorded in the seized material BS-29 in the name of the assesse. These transactions are also bearing date as 18.02.2010 and 19.02.2010. Further the assessing officer has recorded the fact at page no.16 as under: “The reply filed by the assessee has been perused carefully but not acceptable. BS-29 is a ledger of Shri Rajkumar Madan and cheque of Rs. 1,00,00,000/- is common in both documents BS-29 and the registered deed of the house which was paid in the HSBC bank ccount no. 136043452006 of Shri Rajkumar Madan which is placed on record. Therefore the contention of the assessee with regard to the transaction made as per BS-29 not pertaining to him is totally wrong and unjustified as it is well established that the entries made in the diary appearing in the name of assessee pertains to him.” 5.3 This makes abundantly clear that the transaction of payment by Cheque of Rs.1 crore is common in both documents BS-19 and registered deed of house which was also found recorded in the HSC bank account of the assesse. It is not a case of addition made by the AO solely on the basis of the statement of third person but the addition is based on the seized documents BS-29 and the entries which are corroborated by another documents i.e. TH-1 of LN-78 as well as registered sale deed and the entries in the bank account of the assesse not in dispute to the extent of the transaction of Rs.1 crore through Cheque. Therefore, this seized document cannot said to be dumb document when the entries in the said document are corroborated with the other undisputed evidence in the shape of registered sale deed and bank account of the assesse. The seized document marked as LPS-10 an agreement dated 12.12.2012 signed by the assesse though, it is not relevant for the year under consideration but establishes the fact that Shri N.C. Maru is not stranger to the transactions or to the assesse. Accordingly we do not find any merit or substance in the contention of the Ld. AR of the assessee that the seized documents BS-29 is dump documents. The Ld. CIT(A) has restricted the IT(SS)A No.259/Ind/2019 Rajkumar Madan Page 7 of 8 Page 7 of 8 addition by considering the fact that cash payment of Rs.50,00,000/- and Rs.2,50,000/- are recorded in the seized documents in the name of the assessee and deleted the addition of the other entries against which no name was recorded in the seized documents. The relevant finding of the Ld. CIT(A) in para 4.1 to 4.3 as under: “4.1 Brief fact of this case is that a search and seizure operation u/s 132 of the Act was carried out at the business as well as residential premises of the CHL Group, Indore along with other concerns/ business associates on 04.10.2013. During the course of search operation certain documents as per LPS-10 (Page no. 1 to 4) and BS- 29 pertaining to assessee was seized and the information was sent to the AO by the DCIT(Central), Indore. On the basis of said information, the AO had reopened the case of the appellant and had issued notice to the appellant. During the search operation, a small diary inventorised as BS-29 was found in seized documents of CHL group regarding the payment made to Rajkumar Madan. In the said diary one recording regarding the transactions in the name of the appellant was found by the AO. On the basis of the said information, the AO had asked the appellant to explain the said transactions. The appellant had filed its reply before the AO. The appellant had filed its reply before the AO. The AO was not satisfied with the same and had made the addition to the appellant's income accordingly. 4.2 The appellant has taken the plea that the search party was seized a dumb document and on the basis of any dumb document, no addition can be made. The appellant has also taken the plea that in the said page, the name of the appellant was mentioned only for two transactions. After going through the seized document i.e. BS-29 (seized from the third party premises) so pasted by the AO in its assessment order at page no. 12, it is clear that the name of the appellant was mentioned only for the two transactions which were done in cash. But on the other hand, besides of the two transactions, nowhere the name of the appellant was mentioned in the said document. Thus, the transaction of Rs. 2,50,000 and Rs. 50,00,00 appearing in the loose paper with the appellant's name is hereby confirmed. 4.3 For the other transactions, the name of the appellant was not mentioned. The AO had added the said amount on presumption basis without giving any cogent reason. The AO had also not brought on record any evidence for proving this fact that the said amount was pertaining to the appellant. Thus, the addition of Rs. 1,55,62,890 so made by the AO is hereby deleted. These grounds of appeal are hereby partly allowed.” IT(SS)A No.259/Ind/2019 Rajkumar Madan Page 8 of 8 Page 8 of 8 5.4 In view of the facts and circumstances of the case as discussed above we do not find any reason to interfere with the impugned order of the Ld. CIT(A), same is upheld. 6. In the result, appeal of assessee is dismissed. Order pronounced in the open court on 30 .08.2023. Sd/- sd/- (B.M. BIYANI) (VIJAY PAL RAO) Accountant Member Judicial Member Indore, 30 .08.2023 Patel/Sr. PS Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order UE COPY Sr. Private Secretary Income Tax Appellate Tribunal Indore Bench, Indore