SHRI VINOD KUMAR JALAN,GORAKHPUR V. ACIT CENTRAL CIRCLE, VARANASI

ITA 178/ALLD/2016

AI Insights

The case involves multiple appeals by the Revenue and the assessee concerning assessments made under various sections of the Income Tax Act following a search and seizure operation. The primary issues revolved around the treatment of certain cash withdrawals and expenditures as deemed dividends and unexplained expenditures. The Tribunal examined the legality of these assessments, focusing on whether the additions made by the Assessing Officer were supported by sufficient evidence. The Tribunal's decision leaned heavily on the lack of corroborative evidence and the nature of the documents seized during the search operation, leading to the dismissal of the Revenue's appeals and the allowance of the assessee's appeal.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 38616 (ITAT-VARANASI)
• Duration Of Justice: 8 year(s) 4 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-12-2024
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 13-09-2024
• Assessment Year: 2011-2012
• Appeal Filed On: 04-07-2016
• Other Referred Cases: Smt Kavita Jalan vs. Asst. Commissioner of Income Tax, Jalan Jee Polytex Ltd vs. Asst. Commissioner of Income Tax
• Laws Referred To: Income Tax Act
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: AMALENDU NATH MISHRA
• Assessee Lawyers: ASHISH BANSAL
• Keywords: Set aside; Difference of opinion; Proportionate interest; Unexplained expenditure; Unexplained investment; Deemed dividend; Document seized; Documents seized; TDS; Search and seizure; Loose papers; Notional interest
• Section: 144; 250; 132; 153A; 69C; 2(22)(e)

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL CIRCUIT BENCH, VARANASI BEFORE SHRI B.R. BASKARAN, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER ITA No. A.Y. Appellant Respondent 157/Alld/2016 2009-10 Asst. Commissioner of Income Tax, Circle-1, Gorakhpur, Aayakar Bhawan, Civil Lines, Gorakhpur Smt. Kavita Jalan, W/o. Late Vinod Kumar Jalan, Sri Sanchit Jalan, S/o. Late Vinod Kumar Jalan, Kr. Shivangi Jalan, D/o. Late Vinod Kumar Jalan, All Legal Heirs of Late Vinod Kumar Jalan, Boaring No.10, Industrial Estate, Gorakhpur. PAN: AAXPJ3259R 158/Alld/2016 2010-11 159/Alld/2016 2011-12 178/Alld/2016 2011-12 Smt. Kavita Jalan, Legal Heir of Late Vinod Kumar Jalan, Boaring No.10, Industrial Estate, Gorakhpur. PAN: AAXPJ3259R Asst. Commissioner of Income Tax, Circle-1, Gorakhpur (formerly Asstt. Commissioner of Income Tax, Central Circle, Varanasi) Aayakar Bhawan, Civil Lines, Gorakhpur For Assessee : Shri Ashish Bansal, Advocate For Revenue : Shri Amalendu Nath Mishra, CIT-DR Date of Hearing : 13-09-2024 Date of Pronouncement : 02-12-2024 2 ITA Nos. 157, 158, 159 & 178/ALLD/2016 ORDER PER B.R. BASKARAN, A.M : The Revenue has filed appeals for AYs.2009-10 to 2011-12. The assessee has filed appeal for AY.2011-12. All these appeals were heard together and are being disposed of by this common order, for the sake of convenience. 2. The facts relating to the case are set out in brief. The assessee is one of the Directors in M/s Jalan Jee Polytex Ltd and its group companies. The revenue carried out search and seizure operations u/s 132 of the Act on 22-09-2010 in the hands of assessee and group companies. Consequently, the assessment of AY 2009-10 and 2010-11 were completed u/s 153A of the Act and the assessment of AY 2011-12 was completed u/s 143(3) of the Act. Since the assessee did not co-operate with the AO during the course of initial assessment proceedings, all the three assessments were completed to the best of judgment of the assessing officer u/s 144 of the Act. Hence the assessee filed revision petitions u/s 264 of the Act before the Commissioner of Income Tax, who directed the AO to complete the assessments afresh. Accordingly, the present assessment orders were passed by the AO. 3. The first common issue urged by the Revenue in all the three years relate to the relief granted by Ld CIT(A) in respect of deemed dividend assessed u/s 2(22)(e) of the Act. Identical issue has been considered by the Tribunal in the case of Smt Kavita Jalan (ITA No.152/Alld/16) and the Tribunal has confirmed the relief granted by Ld CIT(A) on this issue with the following observations:- “The facts relating to this issue are stated in brief. The assessing officer, during the course of assessment proceedings carried out in the 3 ITA Nos. 157, 158, 159 & 178/ALLD/2016 hands of M/s Jalan Jee Polytex Ltd, examined its bank accounts and collated the details of cash withdrawn from those banks. The AO asked the assessee to furnish the details of utilization of cash so withdrawn. The assessee furnished the details summing up the payments made/expenses incurred under each head. The AO accepted the expenses, but took the view that all other cash withdrawals have been taken away by the directors, viz., Smt Kavita Jalan and Shri Vinod Jalan. Accordingly, the AO held that the cash so alleged to have been taken by them is to be considered as deemed dividend in their respective hands. The AO also treated the said amount as diversion of interest bearing funds and accordingly disallowed interest expenditure claimed by M/s Jalan Jee Polytex Ltd. The issue of interest disallowance was examined by this bench of Tribunal in the case of Jalan Jee Polytex Ltd in AY 2008-09, 2009-10 and 2011-12 in ITA Nos.161, 146 & 163/Alld/2016 and this bench, vide its order of even date, held as under:- “11. The next common issue urged by the revenue relates to disallowance of interest on deemed dividend u/s 2(22)(e) of the Act and this issue arises in AY 2008-09, 2009-10 and 2011-12. The AO has disallowed a sum of Rs.8.24 lakhs, Rs.75.02 lakhs and Rs.57.28 lakhs respectively in AY 2008-09, 2009-10 and 2011- 12. 11.1 The facts relating to this issue are discussed in brief. We noticed earlier that the AO had collated the details of cash withdrawals from various bank accounts. A portion of the said withdrawals were incurred for expenses and the AO had disallowed the same for want of evidences. The balance amount of withdrawals was treated by him as withdrawals by the directors. The AO arrived at this conclusion for the alleged reason that the assessee did not produce books of 4 ITA Nos. 157, 158, 159 & 178/ALLD/2016 accounts. Accordingly, the AO treated the alleged withdrawals by the directors as deemed dividend in their hands. The said details are tabulated below:- Asst. Year Cash withdrawals Expenses Deemed dividend in the hands of Smt Kavita Jalan & Vinod Kumar Jalan 2008-09 2,11,00,000 73,57,829 2009-10 7,28,20,000 97,48,005 6,30,71,995 2011-12 8,99,33,000 1,18,07,054 7,81,25,946 In respect of withdrawals alleged to have been made by the directors, the AO took the view that proportionate interest expenses should be disallowed. Accordingly, he computed notional interest income and restricted the same to the actual interest expenses. 11.2 The Ld CIT(A), however, deleted the disallowance of proportionate interest expenses and hence the revenue is aggrieved. 11.3 We have earlier dealt with the disallowance of expenses made by the AO out of cash withdrawals made from the bank. The remaining amount of withdrawals have been treated as withdrawals by the directors and accordingly, the same was treated as deemed dividend in the hands of directors. Accordingly, the AO has treated the same as diversion of interest bearing funds and accordingly, disallowed proportionate interest expenses. The AO had earlier disallowed proportionate interest expenses relating to interest free loans/advances given by the assessee. Accordingly, the AO has ensured that the aggregate amount of disallowance on both counts does not exceed the total interest expenditure claim. The Ld CIT(A) deleted the disallowance and his reasoning is summarized below (As per observations made in AY 2009-10):- (a) The utilization of cash withdrawals reproduced in the assessment order included investment in construction of building, payment of TDS/Advance tax, VAT/CST etc which was not accepted by the AO without applying his mind. The 5 ITA Nos. 157, 158, 159 & 178/ALLD/2016 view of the AO regarding diversion of funds by the directors is contrary to the facts. (b) The AO has taken such a view only for the reason that the assessee did not produce books of accounts, which was held to be factually incorrect by Ld CIT(A). (c) Hence the disallowance of proportionate interest expenses is not correct. The Ld CIT(A) had earlier deleted the disallowance of proportionate interest expenses on the interest free advances and the same was deleted by the Ld CIT(A). He also found that this disallowance is not warranted on this aspect also and accordingly, the Ld CIT(A) deleted this type of interest disallowance also. 11.4 We heard the parties on this issue and perused the record. We noticed that the Ld CIT(A) has given a clear cut finding that the copies of books of accounts were taken in computer disc by the search officials during the course of search conducted u/s 132 of the Act. The said computer discs containing copies of books of accounts were very much available with the assessing officer. Admittedly, the AO did not refer to those books of accounts. From the assessment order, we notice that the AO had collated details of cash withdrawals and proceeded to ask questions on the manner of utilization of the said funds. We notice that the assessee has furnished the relevant details and it has been extracted in the assessment order by the AO. It was in the form of summation of various payments. Admittedly, the said details would have been collated by the assessee from the books of accounts. 11.5 We noticed earlier that the break-up details of various types of payments included expenses incurred by the assessee and also other types of payments. It is pertinent to note that the AO has accepted the fact of incurring expenses and proceeded to disallow the same on the reasoning that the assessee did not produce relevant vouchers. However, the AO did not accept other types of payments and proceeded to assume that remaining amount of cash withdrawals have been taken away by the directors, i.e., the assessing officer has ignored the nature of payments submitted by the assessee. This kind of pick and choose 6 ITA Nos. 157, 158, 159 & 178/ALLD/2016 method to suit the convenience of AO is not accepted under the Act. The AO should either accept or reject the details in toto. Once the AO has accepted the fact of incurring expenses out of cash withdrawals, then he should have accepted other types of payments, which have been collated from the books of accounts. The Ld CIT(A) has also noticed that the books of accounts of the assessee have been audited and the audit report has also been filed before the AO. If the presumption entertained by the AO is accepted as correct for a moment, such huge withdrawals would have disrupted the business and it may lead to collapse of business, because such kind of huge withdrawals for personal purposes would result in cash crunch for the business. In any case, the AO has not examined the books of accounts and he has also not proved movement of funds to the directors. Accordingly, the view so entertained by the AO is based on surmises and conjectures only. 11.6 Under these set of facts, we are unable to agree with the view entertained by the AO that there were withdrawals by the directors. Accordingly, we reject the theory of cash withdrawals by the directors. Once the foundation of the AO is rejected, then there is no question of disallowing proportionate interest expenses relating to the alleged cash withdrawals by the directors. Accordingly, we uphold the relief grated by the Ld CIT(A) on this issue in all the three years viz., AY 2008- 09, 2009-10 and 2011-12.” 3.1 It can be noticed that this bench of Tribunal has rejected the view entertained by the AO that there were cash withdrawals by the directors. The details of alleged cash withdrawals made by the assessee herein are given below:- Assessment year 2009-10 - 1,55,01,594 Assessment year 2010-11 - 2,30,92,387 Assessment year 2011-12 - 1,92,01,497 7 ITA Nos. 157, 158, 159 & 178/ALLD/2016 In the decision rendered by the co-ordinate bench in the case of Jalan Jee Polytex Ltd (supra), it has been held that there was no cash withdrawals by the directors as presumed by the AO. Hence the question of assessing non- existent cash withdrawals as deemed dividend income u/s 2(22)(e) of the Act will not arise. Accordingly, we are of the view that the Ld CIT(A) was justified in deleting the above said additions.” 3.1. The facts surrounding this issue are identical with the facts of the issue under consideration. In the case of Kavita Jalan (supra), this Bench of Tribunal has expressed the view that the AO has assessed deemed dividend on the presumption that the assessee has withdrawn cash along with another director Kavita Jalan from M/s Jalan Jee Polytex Ltd. It can be noticed that the AO has not brought on record any material to support his presumption that they have withdrawn cash from the company. Accordingly, the Tribunal has expressed the view that the question of assessing non-existent cash withdrawals as deemed dividend income u/s 2(22)(e) of the Act will not arise and accordingly confirmed the order of Ld CIT(A) in deleting the addition made u/s 2(22)(e) of the Act. The facts, being identical in this case, we follow the above said decision of the Tribunal and accordingly, uphold the decision rendered by Ld CIT(A) in respect of relief granted to the assessee in AYs. 2009-10 to 2011-12. 4. The next common issue urged by the Revenue in all the three years related to estimated addition on account house hold expenses as detailed below:- Asst. Year 2009-10 - 4,80,000 Asst. Year 2010-11 - 5,40,000 Asst. Year 2011-12 - 6,00,000 8 ITA Nos. 157, 158, 159 & 178/ALLD/2016 The AO took the view that the withdrawals made by the assessee towards household expenses may not be sufficient vis-a-vis the status of the assessee. Accordingly, he estimated the domestic expenses at a higher figure and accordingly added the differential amount as mentioned above to the total income of the assessee. The Ld CIT(A) deleted the additions in all the years on the reasoning that the additions are not based upon any incriminating material. Hence the revenue is aggrieved. 4.1. We heard the parties on this issue and perused the record. We notice that the above said addition has been made on estimated basis by the AO without taking support of any incriminating material. The basis of estimation is also not spelt out. Further, the AO did not examine the explanations of the assessee that his family is a joint family and all the family members are contributing to the domestic expenses and simply rejected it without assigning any reason. The contribution made by all the family members should have been considered by the AO before resorting to make any addition, that too on estimated basis. Accordingly, we are of the view that the addition so made by the AO cannot be sustained. Accordingly, we uphold the order passed by Ld CIT(A) on this issue in all the three years under consideration. 5. We shall now take up other issues urged in each of the year. We shall first take up the appeal filed by the Revenue for AY. 2009-10. ASSESSMENT YEAR 2009-10 – REVENUE’S APPEAL 6. The Revenue is challenging the relief of Rs.2,81,351/- relating to unexplained expenditure granted by Ld CIT(A). The search team unearthed a loose document wherein certain details relating to purchases and interest payments were noted down. The AO added a sum of Rs.2,81,351/- consisting of transactions relating to AY 2009-10 as unexplained 9 ITA Nos. 157, 158, 159 & 178/ALLD/2016 expenditure u/s 69C of the Act. The Ld CIT(A) accepted the contentions of the assessee that the above said loose sheet is a dumb document and the addition could not have been made on the basis of the same. Accordingly, he deleted this addition. 6.1. We heard the parties on this issue and perused the record. The AO has scanned the said document in the assessment order. A perusal of the same would show that the same does not contain the name of the assessee. Before the AO, the assessee has disowned the transactions. Further, no other material corroborating the entries made in the loose document was found during the course of search. Hence, we are of the view that the said loose paper should be considered as dumb document. Accordingly, the AO should have brought on record any other material to corroborate the said entries. Accordingly, we hold that the Ld CIT(A) was justified in deleting this addition. 7. The next issue urged by the Revenue in AY 2009-10 relates to the addition of Rs.30.00 lakhs relating to unexplained investment. During the course of search proceedings, a copy of sale deed in respect of a land located at Harchandpur, Kanaura, Lucknow was found. The sale consideration was mentioned as Rs.30.00 lakhs. When questioned about the same, the assessee explained that he proposed to purchase the above said land, but ultimately the deal did not materialize. Accordingly, it was submitted that no payment was made and no sale agreement was also entered. The AO did not accept the above said explanations and accordingly added the sum of Rs.30.00 lakhs as unexplained investment u/s 69 of the Act. The Ld CIT(A) deleted the same on the reasoning that the name of the assessee did not find place in the seized document and hence it cannot be said to be related to the assessee. Further, the 10 ITA Nos. 157, 158, 159 & 178/ALLD/2016 Ld CIT(A) noticed that no other document to support the view taken by the AO was found. The revenue is aggrieved. 7.1. We heard the parties and perused the record. Admittedly, the sale agreement seized during the course of search was related to some third parties. The revenue did not find any document to show that the assessee has actually paid any money as consideration for purchase of land. The explanation of the assessee was that he proposed to purchase the above said land, but the transaction did not materialize, meaning thereby, the assessee did not pay any money for purchasing this land. The above said explanation was not proved to be wrong by the AO. Under these set of facts, it can be safely concluded that the assessee did not make any investment as presumed by the AO and accordingly, no addition is warranted. Accordingly, we uphold the relief granted by Ld CIT(A) on this issue. 8. The last issue urged by the revenue in AY. 2009-10 relates to the addition of unexplained expenditure of Rs.78,16,743/-. During the course of search, a document containing payment details aggregating to Rs.1,37,65,319/- was found. The assessee explained that the above payments included a sum of Rs.71,21,900/- incurred by M/s Jalan Jee Polytex Ltd towards erection of new production facility constructed at the factory premises. It was submitted that the above said payments were duly accounted in the books of above said company. The payments to the tune of Rs,.65,87,485/- were made by the assessee on behalf of Late Shree Jugal Kishore and the above payments were accounted in the books of the assessee. In nutshell, it was explained that the above said payment were made out of cash balance available in the books of the above said company and the books of the assessee. Since no document was found during the course of search to support the above said explanation of the assessee, the 11 ITA Nos. 157, 158, 159 & 178/ALLD/2016 AO did not accept the above said explanations. He noticed that the total payments made from Sep, 2008 to June, 2009 were Rs.1,11,66,775/-. The AO computed proportionate amount for the period from Sep. 2008 to March, 2009 at Rs.78,16,743/- and added the same as unexplained expenditure. 8.1. The Ld CIT(A) deleted the addition on the reasoning that these payments have been entered in the books of the above said company and that of the assessee. The revenue is aggrieved. 8.2. We heard the parties and perused the record. We notice that the AO did not accept the explanation of the assessee without verifying the books of accounts. Even though it was claimed that these payments have been accounted for in the books of the above said company and the assessee, the AO rejected the same without verifying the books of accounts. The reasoning given by the AO was that these books were not found during the course of search. The Ld CIT(A) has found that the above said reasoning given by the AO is unjust and unlawful. In our view also, the AO should have examined the books of accounts of the assessee/company to verify the explanations given by the assessee. He could have made addition only if he is able to establish that the books of accounts are not reliable. Since the AO did not carry out this exercise, it has to be held that the AO has made this addition on surmises. Accordingly, we are of the view that the Ld CIT(A) was justified in deleting this addition. ASSESSMENT YEAR 2010-11 – REVENUE’S APPEAL 9. We shall now take up the appeal filed by the revenue for AY 2010-11 for deciding other issues. 10. The first issue urged by the revenue relates to the addition of Rs.3,99,406/- relates to the unexplained expenditure. This addition has 12 ITA Nos. 157, 158, 159 & 178/ALLD/2016 been made by the AO on the basis of entries found in a document, wherein certain details relating to purchase and interest payment were noted down. We noticed earlier that the AO had added a sum of Rs.2,81,351/- in AY 2009-10 as unexplained expenditure u/s 69C of the Act on the basis of the very same document. The payments pertaining to the year relevant to AY 2010-11 amounting to Rs.3,99,406/- noted in that document was added in this year. In AY 2009-10, the addition was deleted by Ld CIT(A) holding that the said document is a dumb document and we have confirmed the same. In Asst. Year 2010-11, the Ld CIT(A) deleted this addition on the very same reasoning. Accordingly, following the decision rendered by us in AY 2009-10, we affirm the order passed by Ld CIT(A) in AY 2010-11 on this issue. 11. The next issue relates to the addition relating to unexplained cash deposit of Rs.20,00,000/-. The assessee had deposited a sum of Rs.20,00,000/- into his bank account maintained with OBC, Gorakhpur. With regard to the sources of the above said deposit, the assessee explained that it was made out of cash balance available in the books of accounts and the said cash balance was built up with opening cash balance and further withdrawals of cash from bank accounts. The AO did not accept the same and accordingly made the addition of Rs.20.00 lakhs. 11.1. The Ld CIT(A) accepted the explanations of the assessee that the cash was deposited out of cash balance available in the books of accounts. He noticed that the Balance sheet as at 31.3.2009 was finalized by the assessee prior to the date of search and accordingly held that opening balance of cash should be accepted. He also noticed that the AO has made the addition without verifying the books of accounts. Accordingly, the Ld CIT(A) deleted the addition. 13 ITA Nos. 157, 158, 159 & 178/ALLD/2016 11.2. We heard the parties on this issue and perused the record. We notice that the assessee has explained the sources of making above deposit as cash balance available in the books of account. As noticed by Ld CIT(A), the AO rejected the explanations without examining books of accounts. We also notice that the Ld CIT(A) has recorded a finding that the Balance Sheet as on 31.3.2009 has been finalized prior to the date of search. Accordingly, the Ld CIT(A) has held that the explanation of the assessee that the deposits have been made out of cash balance available in the books of account cannot be rejected. Before us, the revenue did not furnish any material to show that the cash balance was not available with the assessee as per the books of accounts. Accordingly, we confirm the relief granted by Ld CIT(A) on this issue. 12. The next issue urged by the Revenue relates to the addition of Rs.59,48,567/- relating to unexplained expenditure u/s 69C of the Act. During the course of search, a document containing payment details aggregating to Rs.1,37,65,319/- was found. The AO made proportionate addition of Rs.78,16,743/- in AY 2009-10. In this year, i.e., in AY 2010- 11, the AO made addition of Rs.59,48,567/-. The Ld CIT(A) deleted the addition following his decision rendered in AY 2009-10, which have been confirmed by us with the following observations:- “8.2 We heard the parties and perused the record. We notice that the AO did not accept the explanation of the assessee without verifying the books of accounts. Even though it was claimed that these payments have been accounted for in the books of the above said company and the assessee, the AO rejected the same without verifying the books of accounts. The reasoning given by the AO was that these books were not found during the course of search. The Ld CIT(A) has found that the above said reasoning given by the AO is unjust and unlawful. In our view also, the AO should have examined the books of accounts of the assessee/company to verify the explanations given by the assessee. He could have made addition only if he is able to establish that the books of accounts are not reliable. Since the AO did not carry out this exercise, it has to be held that the AO has made this addition 14 ITA Nos. 157, 158, 159 & 178/ALLD/2016 on surmises. Accordingly, we are of the view that the Ld CIT(A) was justified in deleting this addition.” Accordingly, following the decision rendered by us in AY 2009-10 on identical addition made in that year, we confirm the relief granted by Ld CIT(A) in this year on this issue. 13. The last issue urged by the Revenue relates to the addition of Rs.33,96,875/- relating to unexplained expenditure/payment made from undisclosed sources made by the AO u/s 69 of the Act. 13.1. The search material contained payment to the tune of Rs.50,36,094/-. The assessee explained that the above said amount consisted of following two items:- (a) Payment of Rs.20,74,864/- made by M/s Jalan Jee Polytex Ltd to M/s Reliance Industries Ltd as advance payment. It was submitted that this payment has been accounted in the books of M/s Jalan Jee Polytex Ltd. (b) Payment of Rs.29,61,230/- made by M/s Jalan Jee Polytex Ltd towards education expenses of Shri Saurabh Jain. It was submitted that this payment has also been accounted in the books of M/s Jalan Jee Polytex Ltd. The assessee furnished ledger account copy of M/s Saurabh Jain in the books of above said company. The AO did not accept the above said explanations of the assessee on the reasoning that the dates and amounts mentioned in the seized documents did not match with the seized documents. Accordingly, he rejected the above said explanations of the assessee and accordingly added the sum of Rs.50,36,094/- as unexplained payments from undisclosed sources u/s 69 of the Act. 15 ITA Nos. 157, 158, 159 & 178/ALLD/2016 13.2. The Ld CIT(A) noticed that the payment of Rs.20,74,864/- made to M/s Reliance Industries Ltd has been duly accounted for in the books of M/s Jalan Jee Polytex Ltd. Accordingly, he deleted this addition. With regard to the payment of Rs.29,61,230/- made towards education expenses of Shri Saurabh Jain, the Ld CIT(A) noticed that the ledger account copies furnished by the assessee depicted payment of Rs.8,06,297/- and Rs.5,19,968/- only, both aggregating to Rs.13,26,265/- only. Accordingly, the Ld CIT(A) deleted the addition to the extent of the above said amount and confirmed the addition of balance amount of Rs.16,39,219/-. The Revenue is aggrieved by the relief granted by Ld CIT(A). 13.3. We heard the parties and perused the record. We notice that the Ld CIT(A) has granted relief on the basis of entries recorded in the books of M/s Jalan Jee Polytex Ltd, meaning thereby, the payments of Rs.20,74,864/-, Rs.8,06,297/- and Rs.5,19,968/- have been duly accounted for in the books of above said company. Hence, the sources of these payments would stand explained. Accordingly, we are of the view that there is no requirement of making addition to the extent of the relief granted by Ld CIT(A). Before us, the revenue did not file any material to controvert the findings given by Ld CIT(A). Accordingly, we confirm the order passed by Ld CIT(A) on this issue. ASSESSMENT YEAR 2011-12 - REVENUE’S APPEAL 14. We shall now take up the appeal filed by the Revenue for AY 2011- 12 for deciding other issues. 15. The first issue relates to the addition of Rs.2,97,93,718/- relating unexplained expenditure added u/s 69C of the Act. The AO has taken this 16 ITA Nos. 157, 158, 159 & 178/ALLD/2016 figure from the seized document. The assessee explained that this payments consisted of two items, viz., (a) Payment of Rs.1,13,95,744/- relating to new production facility constructed by M/s Jalan jee Polytex Ltd. It was submitted that these payments have been accounted in the books of above said company. (b) Payment of Rs.1,83,97,974/- relating to day to day payments made by M/s Jalan Jee Polytex Ltd. It was submitted that these payments have also been duly accounted for in the books of above said company. The AO did not accept the above said explanations of the assessee and accordingly added the above said amounts aggregating to Rs.2,97,93,718/- to the total income of the assessee. 15.1. The Ld CIT(A) noticed that a part of amount of Rs.1,13,95,744/- had already been added by the AO in AY 2009-10 and 2010-11. Additions made in both the years were deleted by him on the reasoning that they have been accounted for in the books of M/s Jalan Jee Polytex Ltd. He further noticed that the addition of Rs.1,83,97,974/- is part of daily transactions of above said company and they have also been recorded in the books of above said company. Accordingly, the Ld CIT(A) deleted the entire addition of Rs.2,97,93,718/-. 15.2. We heard the parties and perused the record. We notice that the Ld CIT(A) has given a finding that the entire amount of Rs.2,97,93,718/- has been recorded in the books of M/s Jalan Jee Polytex Ltd. Hence, these payments do not pertain to the assessee. Hence the AO should not have made addition in the hands of the assessee. Before us, the revenue did 17 ITA Nos. 157, 158, 159 & 178/ALLD/2016 not file any material to contradict the factual findings given by Ld CIT(A). Accordingly, we confirm the relief granted by Ld CIT(A) on this issue. 16. The next issue relates to the addition of Rs.4,54,484/- relating to unexplained expenditure added u/s 69C of the Act. The AO noticed from a seized document that payments aggregating to Rs.4,61,256/- have been made and accordingly sought explanation from the assessee. In reply thereto, the assessee explained that they are mere jottings made and hence a dumb document. The AO did not accept the same. He noticed that the payments pertaining to the year relevant to AY 2011-12 amounted to Rs.4,58,484/- and accordingly added the same to the total income of the assessee. 16.1. The Ld CIT(A) accepted that the said document is a dumb document, since it is not corroborated by any other credible material. Accordingly, he deleted the addition. 16.2. We heard the parties on this issue and perused the record. The AO has scanned the said document in the assessment order. A perusal of the same would show that the same does not contain the name of the assessee. Before the AO, the assessee has disowned the transactions. Further, no other material corroborating the entries made in the loose document was found during the course of search. Hence, we are of the view that the said loose paper should be considered as dumb document and accordingly, the Ld CIT(A) was justified in deleting this addition. 17. The next issue relates to the addition of Rs.2,41,82,000/- relating to unexplained expenditure. During the course of search proceedings, copies of draft sale agreement for purchasing two lands for a sum of Rs.83,88,000/- and Rs.1,57,94,000/- aggregating to Rs.2,41,82,000/- were found. The assessee explained that the transactions were entered 18 ITA Nos. 157, 158, 159 & 178/ALLD/2016 between two other persons and the assessee was not part of the transactions. He further explained that this transaction was abandoned due to difference of opinion between the parties. The AO did not accept the above said explanation and accordingly assessed the above said consideration of Rs.2,41,82,000/- as income of the assessee u/s 69 of the Act. 17.1. The Ld CIT(A) noticed that the draft sale agreements do not mention the name of the assessee and the buyer’s name is shown as Gorakhpur Dwellings P Ltd. Accordingly, he held that it cannot be related to the assessee. He also observed that the AO has drawn inference that the assessee has purchased these properties without bringing any corroborative material on record. He also noticed that the AO did not enquire with registration authorities to find out whether the draft sale agreements have culminated into registering of sale deed or not. He also held that the addition, if any, is required to be considered in the hands of the buyer, viz., M/s Gorakhpur Dwellings P Ltd and not in the hands of the assessee. Accordingly, he deleted this addition. 17.2. We heard the parties on this issue. We notice that the Ld CIT(A) has deleted this addition with proper reasoning, most importantly, for the reason that the assessee was not a party to the purchase transactions. The revenue could not controvert the factual findings given by Ld CIT(A) on this issue. Accordingly, we confirm the order passed by him on this issue. 18. The next issue relates to the addition of Rs.1,80,19,600/- relating to unexplained expenditure added u/s 69 of the Act. From the seized documents, the AO noticed certain payments aggregating to Rs.1,80,19,600/- were mentioned against the name of six persons. The assessee explained that they are related to proposed sample agreement entered between those persons and M/s Gorakhpur Dwelling P Ltd. It was 19 ITA Nos. 157, 158, 159 & 178/ALLD/2016 further explained that, due to difference of opinion, the transaction did not take place and further no money was given. The AO did not accept the above said explanations and accordingly added the above said amount of Rs.1,80,19,000/- to the total income of the assessee. 18.1. The Ld CIT(A) noticed that these transactions pertain to M/s Gorakhpur Dwelling P Ltd and hence they do not relate to the assessee. Accordingly, he deleted the addition. 18.2. We heard the parties and perused the record. We notice that the AO has made the addition on presumptions. He did not bring any material on record to show that these payments have been made by the assessee. We notice that the assessee as well as Ld CIT(A) has observed that these transactions pertain to M/s Gorakhpur Dwelling P Ltd. We notice that the revenue could not controvert the finding given by Ld CIT(A) that these transactions do not relate to the assessee. Accordingly, we confirm the order passed by Ld CIT(A) on this issue. 19. The next issue relates to the addition of Rs.16,10,181/- as deemed dividend u/s 2(22)(e) of the Act in the hands of the assessee. Since the Ld CIT(A) has given partial relief on this issue, both the parties are in appeal. The appeal of the assessee is adjudicated separately. Now we will address the contentions of the revenue. The AO noticed that the two demand drafts of Rs.9,46,108/- and Rs. 6,64,073/- have been paid from the bank accounts of M/s Jalan Jee Polytex Ltd towards LIC payments on behalf of assessee and his minor daughter respectively. Hence the AO assessed both the amounts aggregating to Rs.16,10,181/- as deemed dividend u/s 2(22)(e) of the Act in the hands of the assessee. 19.1. The Ld CIT(A) noticed that the assessee was having credit balance in the books of M/s Jalan Jee Polytex Ltd and hence the payment of 20 ITA Nos. 157, 158, 159 & 178/ALLD/2016 Rs.9,46,108/- shall be adjusted against the same. Accordingly, he led that the above said amount of Rs.9,46,108/- cannot be assessed as deemed dividend in the hands of the assessee. With regard to the payment of Rs.6,64,073/- made for minor daughter of the assessee named Ms Shivangi Jalan, the Ld CIT(A) noticed that she was having debit balance in the books of above said company. Since the assessee is to be assessed for income of minor daughter, the Ld CIT(A) confirmed the assessment of Rs.6,64,073/- as deemed dividend in the hands of the assessee. 19.2. We heard the parties in the appeal of the Revenue. The fact would remain that the payment of Rs.9,46,108/- has been adjusted against the credit balance available in the name of the assessee in the books of M/s Jalan Jee Polytex Ltd. This factual aspect has not been controverted by the revenue. Hence this payment cannot be considered as advance payment falling within the scope of deemed dividend mentioned in sec. 2(22)(e) of the Act. Accordingly, we do not find any infirmity in the decision rendered by Ld CIT(A) on this issue. 20. The next issue urged by the revenue relates to the addition of Rs.1,19,50,579/- relating to unexplained expenditure added u/s 69 of the Act. This addition was made by the AO on the basis of noting found in a loose paper and also for the reason that the assessee did not offer any explanation with regard to this document. 20.1. Before Ld CIT(A), the assessee contended that it is a dumb document, since it does not relate to the assessee and no name of the assessee is noted in it. Accordingly, it was contended that the addition should not have been made. The Ld CIT(A) has analysed the document and has observed as under:- “18(4) I have examined the facts and circumstances of the case. I have considered the findings of the AO in the assessment order and the 21 ITA Nos. 157, 158, 159 & 178/ALLD/2016 submissions of the appellant. I find that the AO proceeded to make addition of Rs.1,19,50,579/- on the basis of a loose paper found during the course of search, a scanned copy of which is incorporated on page 30 of the assessment order. I find from the examination of the seized paper, that the paper does not carry name of any person. There are no dates mentioned on the paper on the basis of which it could be said that the paper relates to the financial year 2010-2011 under consideration. The finding of the AO reveals that the AO has taken the figures mentioned in the middle of the loose paper as unaccounted transaction of the appellant. What are those unaccounted transactions is not clear either from the paper or from the finding of the AO, which is a total work of assumption without any corroborative evidence. The AO has presumed the paper as belonging to the appellant since the appellant is the main person of the group. Factually however, the loose paper does not contain the name of the appellant or any inkling as to the nature of transactions recorded on the paper. 18(5) The perusal of the above mentioned seized paper would show that there is some kind of rough jottings, no dates or assessee’s name has been mentioned and no transaction can be deciphered there from. There is no way to connect the paper to the assessee apart from the fact that it was found from the assessee’s premises……It is also clear from the paper whether the entries therein are for income or expenditure. The AO has also given a confused finding in this regard. At the most the loose paper can be taken as a dumb document.” The Ld CIT(A) also relied upon the decision rendered by Hon’ble Supreme Court in the case of CBI vs. V C Shukla (1983)(3 SCC 410), wherein it was held that without independent evidence, the entries in the books of account cannot foist liability on a person. He also took support of the following decisions of the Tribunal to hold that the addition should not be based on the basis uncorroborated documents:- (a) Atul Kumar Jain (1999)(64 TTJ (Delhi) 786) (b) CIT vs. Ravi Kumar (2007)(294 ITR 78)(P & H) He also took support of the decision rendered by the Tribunal in the case of Monga Metals P Ltd vs. ACIT (2000)(67 TTJ (Ahd) 247) for the proposition that it was Revenue’s onus first to prove that the arithmetical figures appearing on loose papers were receipts, were in the nature of sale of ingots and amounted to undisclosed income in the assessee’s hands. 22 ITA Nos. 157, 158, 159 & 178/ALLD/2016 Since the AO did not prove that the said document and entries noted therein are related to the assessee, the addition of Rs.1,19,50,579/- was deleted by Ld CIT(A). 20.2. We heard the parties on this issue and perused the record. We notice that the Ld CIT(A) has properly analysed the nature of document and has established that the same fully qualifies to be called as a dumb document. The main points noted by Ld CIT(A) are that it did not contain name of the assessee, dates of transactions; that the AO is also not aware whether the transactions are in the nature of receipts or expenditure; that the AO has picked up certain transactions only to suit his convenience. Thus, it is seen that the Ld CIT(A) has proved it to be a dumb document. Further, the AO did not bring any corroborative material to support the transactions found in the impugned document. Further, we notice that the case laws relied upon by Ld CIT(A) fully support his views. Accordingly, we affirm the order passed by him on this issue. 21. The last issue relates to the addition of Rs.7,97,218/- relating to unexplained expenditure added u/s 69 of the Act. During the course of search conducted in the hands of the assessee, cash balance of Rs.5,40,345, jewellery valued at Rs.2,28,000/- and silver coins/bars valued at Rs.28,873 were found. The value of all these three items is aggregated to Rs.7,97,218/-. The assessee explained that (a) the cash balance belongs to M/s Jalan Jee Polytex Ltd and it was kept with him for safe custody. (b) the jewellery and silver coins/bars were received at the time of marriage. The AO did not accept the explanations of the assessee and accordingly assessed the above said sum of Rs.7,97,218/- as unexplained investment 23 ITA Nos. 157, 158, 159 & 178/ALLD/2016 on substantive basis and in the hands of Smt Kavita Jalan on protective basis. 21.1. The Ld CIT(A) noticed that the physical cash found with the assessee was part of the cash balance available in the books of M/s Jalan Jee Polytex Ltd. He also noticed that the jewellery has already been disclosed in the individual Balance sheet of the assessee and his wife Smt Kavita Jalan. He also noticed that the jewellery has been disclosed in their wealth tax returns also. The Ld CIT(A) also noticed that the quantity of jewellery found was less than 250 grams referred to in the CBDT instruction No.1916 dated 11.5.1994 and hence addition could not have been made as per the decision rendered by Hon’ble Gujarat High Court in the case of CIT vs. Ratanlal Vyaparilal Jain (235 ITR 568)(Guj). Accordingly, the Ld CIT(A) directed for deletion of Rs.7,97,218/-. 21.2. We heard the parties on this issue and perused the record. A perusal of the order passed by Ld CIT(A) would show that the Ld CIT(A) has given a factual finding that the physical cash balance found with the assessee was part of cash balance available in the books of M/s Jalan Jee Polytex Ltd. This factual aspect has not been proved to be incorrect by the revenue before us. With regard to the jewelleries, it was noticed by Ld CIT(A), they are accounted for in the books of the assessee and his wife. Further, they have been disclosed in their wealth tax return also. In view of these factual findings, we are of the view that the cash and jewellery mentioned above cannot be considered as unexplained investments. Accordingly, we affirm the order passed by Ld CIT(A) on this issue. ASSESSMENT YEAR 2011-12 ASSESSEE’S APPEAL: 22. The only issue urged by the assessee relates to the addition of Rs.6,64,073/- relating to the LIC amounts paid by M/s Jalan Jee Polytex 24 ITA Nos. 157, 158, 159 & 178/ALLD/2016 Limited in the name of assessee’s minor daughter, which was treated deemed dividend u/s 2(22)(e) of the Act. 22.1. We noticed earlier that the Ld CIT(A) had noticed that the assessee’s minor daughter named Ms Shivangi Jalan was having debit balance in the books of M/s Jalan Jee Polytex Limited and accordingly held that the LIC amount of Rs.6,64,073/- paid by the above said company on her behalf was to be treated as deemed dividend and since the minor’s income is to be assesseed in the hands of parents, the Ld CIT(A) confirmed assessment of deemed dividend in the hands of the assessee. 22.2. The assessee is challenging the addition so confirmed by Ld CIT(A) on the following two propositions:- (a) The company has paid the LIC premium on behalf of the assessee. Further, there is no dispute that the assessee was having credit balance in the books of the above said company. Hence the said payment will go to reduce the credit balance only. Hence the said payment cannot be considered as deemed dividend. (b) Ms Shivangi Jalan, the minor daughter of the assessee, is not a shareholder in the above said company. Hence, even if it is viewed as an independent transaction unconnected with the assessee, the same cannot be assessed as deemed dividend in the hands of Ms Shivangi Jalan, as she is not a shareholder. The question of clubbing will arise only after a receipt is established as “income”, which is not the case. We find merit in both the above said arguments. If the LIC payment is made on behalf of the assessee, then the same will go to reduce the credit balance of the assessee available in the books of above said company. Hence it cannot be treated as deemed dividend u/s 2(22)(e) of the Act. If 25 ITA Nos. 157, 158, 159 & 178/ALLD/2016 the said payment is treated as paid on behalf of the minor daughter of the assessee, the same cannot be treated as deemed dividend, since Ms Shivangi Jalan is not a shareholder. Accordingly, we are of the view that the Ld CIT(A) was not justified in confirming the assessment of Rs.6,64,073/- as deemed dividend. Accordingly, we set aside the order passed by Ld CIT(A) on this issue in AY 2011-12 and direct the AO to delete the addition of Rs.6,64,073/-. 23. In the result, all the three appeals of the Revenue are dismissed and the appeal of the assessee is allowed. Order pronounced on 02-12-2024 by way of proper mentioning in the Notice Board. Sd/- Sd/- [AMIT SHUKLA] [B.R. BASKARAN] JUDICIAL MEMBER ACCOUNTANT MEMBER Varanasi, Dated: 02-12-2024 TNMM Copy to : 1. The Appellant 2. The Respondent 3. The Pr. CIT, concerned 4. D.R. ITAT, Varanasi 5. Guard File. //By Order// //True Copy // Dy./Asst. Registrar, ITAT, Varanasi "