The ITO, Ward-3(2),, Surat v. Smt. Hetal Ankit Mehta, Surat

1 IN THE INCOME_TAX APPELLATE TRIBUNAL A BENCH AHMEDABAD BEFORE SHRI T.K. SHARMA AND SHRI A.N. P AHUJA. ITA. NO. 343 /AHD/2007 AND C.O..NO.50/AHD/2007 (ARISING OUT OF I.T.A. NO.343/AHD/2007) (ASSESSMENT YEAR: 1998-99 ) INCOME TAX OFFICER WARD 3(2) AAYAKAR BHAVAN MAJURA GATE SURAT VS MS.MONA VIRAT TRIVEDI 301 GARDEN VIEW APARTMENT HONEY PARK ROADM AJAJAN SURAT. (APPELLANT) (RESPONDENT) PAN: ADPPT6808H ITA. NO. 344 /AHD/2007 AND C.O..NO.51/AHD/2007 (ARISING OUT OF I.T.A. NO.344/AHD/2007) (ASSESSMENT YEAR: 1998-99 ) INCOME TAX OFFICER WARD 3(4) AAYAKAR BHAVAN MAJURA GATE SURAT VS SHRI VIRAT JASHWANTBHAI TRIVEDI (HUF) 301 GARDEN VIEW APARTMENT NEW ADAJAN ROAD RANDER SURAT. (APPELLANT) (RESPONDENT) ( PAN: AADHJ 7129 L) ITA. NO. 336 /AHD/2007 AND C.O..NO.47/AHD/2007 (ARISING OUT OF I.T.A. NO.336/AHD/2007) (ASSESSMENT YEAR: 1998-99 ) INCOME TAX OFFICER WARD 3(2) AAYAKAR BHAVAN MAJURA GATE SURAT VS SMT.HETAL ANKIT MEHTA G-11/12 NITA SOCIETY TADWADI RANDER ROAD SURAT. (APPELLANT) (RESPONDENT) PAN: AAJRPM9523E 2 ITA. NO. 337 /AHD/2007 AND C.O..NO.48/AHD/2007 (ARISING OUT OF I.T.A.NO.337/AHJD/2007) (ASSESSMENT YEAR: 1998-99 ) INCOME TAX OFFICER WARD 3(4) AAYAKAR BHAVAN MAJURA GATE SURAT VS SHRI ANKIT YOGESHBHAI MEHTA HUF G-11/12 NITA SOCIETY TADWADI RANDER ROAD SURAT. (APPELLANT) (RESPONDENT) ( PAN: AAGHM 7789 G) ITA. NO. 338/AHD/2007 AND C.O..NO.49/AHD/2007 (ARISING OUT OF ITA. NO.338/AHD/2007) (ASSESSMENT YEAR: 1998-99 ) INCOME TAX OFFICER WARD 3(4) AAYAKAR BHAVAN MAJURA GATE SURAT VS SHRI YOGESHBHAI RAJNIKANT MEHTA HUF G-11/12 NITA SOCIETY TADWADI RANDER ROAD SURAT. (APPELLANT) (RESPONDENT) ( PAN: AAGHM 7790 B) REVENUE BY : SHRI ANAND MOHAN SR.D.R. ASSESSEE BY : SHRI S.N.SOPARKAR SR.ADVOCATE . ( (( ( )/ )/)/ )/ ORDER PER BENCH. THESE APPEALS BY THE REVENUE AND OBJECTIONS FILED BY FIVE DIFFERENT ASSESSES WERE AGAINST THE ORDER OF LD. C.I.T.(A )-II SURAT DATED 28-11-2006 FOR THE ASSESSMENT YEAR 1998-99. ALL T HESE WERE HEARD ON THE SAME DATE INVOLVE COMMON ISSUE ARGUED BY COMMON 3 REPRESENTATIVE THEREFORE THESE ARE DECIDED BY THIS CO MMON ORDER FOR THE SAKE OF CONVENIENCE. 2. THE ONLY GROUND RAISED BY THE REVENUE IN THESE APP EALS IS THAT LD. CIT (A) ERRED IN DELETING THE ADDITIONS MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNEXPLAINED CASH CREDIT U/S. 68 OF THE I. T. ACT FOR THE ASSESSMENT YEAR 1998-99. THE ASSESSEE-WISE AMOUNT OF ADDITION MADE BY A.O. U/S. 68 IS AS UNDER :- NAME OF ASSESSEE . AMOUNT (RS.) 1. MS.MONA VIRAT TRIVEDI. 12 12 372/- 2. SHRI VIRAT J. TRIVEDI.(HUF) 11 85 209/- 3. SMT. HETAL ANKIT MEHTA. 11 78 492/- 4. SHRI ANKIT YOGESHBHAI MEHTA. 11 90 630/- 5. SHRI YOGESH RAJNIKANT MEHTA HUF. 11 91 240/- 3. BRIEFLY STATED THE FACTS ARE THAT IN SURVEY PROCEEDIN GS U/S.133A OF THE ACT IN THE CASE OF SHRI PANKAJ DANAWALA C.A. TH E FILE PERTAINING TO ALL THESE ASSESSES WERE IMPOUNDED AS PER ANNEXURE A-61. IT WAS ADMITTED THAT SHRI PANKAJ DANAWALA C.A. WAS INDULGE D IN CREATION OF BOGUS CAPITAL WITH AN INTENTION TO PROVIDE ENTRIES OF CASH CREDIT FOR THE BENEFIT OF VARIOUS ASSESSES. 4. THE A.O. INITIATED PROCEEDINGS U/S. 147 OF THE ACT BY ISSUING NOTICE U/S .148. IN RESPONSE TO THE SAID NOTICE ALL THE ASSESSES FILED RETURNS OF INCOME WHEREIN THE INCOME DECLARED IS AS UNDE R :- SR. NO. NAME OF THE ASSESSEE. DATE OF FILING RETURN. INCOME DECLARED. 1. MS.MONA V. TRIVEDI. 17-2-2006 NIL 2. VIRAT J. TRIVEDI. 3-3-2006 NIL 3. HETAL ANKIT MEHTA. 17-2-2006 NIL 4. ANKIT YOGESHBHAI MEHTA. 17-2-2006 NIL 4 5. YOGESHBHAI RAJNIKANT MEHTA. 3-3-2006 NIL. 5. BEFORE THE A.O. DURING THE COURSE OF ASSESSMENT PROCEED INGS MS. MONA VIRAT TRIVEDI IT STATED THAT SHE WAS NOT DOING AN Y ACTIVITY EXCEPT STUDYING AT THAT TIME. SHRI VIRAT J. TRIVEDI STATED T HAT HUF WAS NOT IN EXISTENCE HENCE FILING OF RETURN OF INCOME IN THE STATUS OF HUF DOES NOT ARISE. SMT. HETAL ANKIT MEHTA STATED THAT SHE WAS NOT D OING ANY ACTIVITY EXCEPT STUDYING AT THAT TIME. SHRI ANKIT YOGE SH MEHTA (HUF) STATED THAT HUF WAS NOT IN EXISTENCE HENCE THE FILING OF RETURN IN THE STATUS OF HUF DOES NOT ARISE. IN THE CASE OF SHRI YOGESH R AJNIKANT MEHTA HUF THE A.O. REQUESTED THE ASSESSEE TO PRODUCE ALL THE AVAILABLE RECORD INCLUDING BANK PASS BOOK . STATEMENT O F IMMOVABLE PROPERTIES ETC. THE A.O. REQUESTED THE ASSESSEE FOR INSPECT ION OF RECORDS ON 2 ND AND 3 RD MARCH 2006. HOWEVER ASSESSEE HAS NOT AVAILED THE OPPORTUNITY. THE A .O. THEREFORE NOTICED THAT CR EDIT BALANCE OF CAPITAL ACCOUNT SHOWN BY THE ASSESSEE AT RS.11 91 240/- HAS BEEN DIVERTED TO VARIOUS PARTIES FOR GIVING LOANS AND ADVAN CES AND INVESTMENTS IN PROPERTIES. THE A.O. ALSO NOTICED THAT AS SSESSEE HAS INTEREST INCOME OF RS.39 620/- FROM THE LOAN GIVEN AGG REGATING TO RS.11 91 240/-. ACCORDING TO A.O. SINCE SHRI PANKAJ DANA WALA C.A. ADMITTED THAT HE HAS APPLIED TWO METHODS OF CREATING BOGUS CAPITAL I.E. MANIPULATION OF OPENING CAPITAL BALANCE AND SHOWI NG BOGUS GIFT OR INTEREST ON LOAN THE A.O. THEREFORE TREATED RS.11 91 240/- AS UNEXPLAINED CASH CREDIT U/S. 68 OF THE ACT AND TREATED THE SAME AS DEEMED INCOME OF THE ASSESSEE. 6. THE REASONING GIVEN BY THE A.O. FOR MAKING THE AD DITION U/S. 68 ARE IDENTICAL IN ALL THE CASES. 5 7. ON APPEAL LD. C.I.T.(A)-II SURAT DISCUSSED THE ISSU E IN PARAGRAPH 6 AND 7 OF ALL THE APPELLATE ORDERS AND H ELD THAT A.O. WAS NOT JUSTIFIED IN RELYING UPON UNSIGNED AND UNAUTHENT ICATED ENTRIES IN LOOSE SHEETS OF PAPERS FOUND FROM THE PREMISES OF THE THI RD PARTY I.E. SHRI PANKAJ DANAWALA C.A. WHO HAS ADMITTED FILING O F SUCH ACCOUNTS HIMSELF. THE LD. C.I.T.(A) HELD THAT ENTRIES WERE FOU ND SUPPORTED BY ANY INDEPENDENT AND CORROBORATIVE EVIDENCE SO AS TO ESTA BLISH THEIR GENUINENESS. THEREFORE RELYING ON THE JUDGDEMENT OF HONBLE SUPREME COURT IN THE CASE OF C.B.I. VS. V.C. SHUKLA (1 998) 3 SCC 410 THE LD. CIT(A) DELETED THE ADDITION MADE BY THE A.O . IN RESPECT OF ALL THE FIVE ASSESSES. 8. AGGRIEVED WITH THE ORDER OF LD. C.I.T.(A) REVENU E IS IN APPEAL BEFORE US. ALL THE FIVE ASSESSEE HAVE ALSO FILED CROSS OBJECT IONS WHEREIN ONLY ONE GROUND RAISED IS THAT LD. C.I.T.(A)-II SUR AT HAS RIGHTLY DELETED THE ADDITION MADE BY THE A.O. THUS CROSS OBJE CTIONS FILED BY THE VARIOUS ASSESSES ARE IN SUPPORT OF THE ORDER OF LD. C .I.T.(A). 9. AT THE TIME OF HEARING BEFORE US ON BEHALF OF THE REVENUE SHRI ANAND MOHAN SR. D.R. APPEARED AND CONTENDED THAT DU RING THE COURSE OF SURVEY U/S.133A IN THE PREMISES OF ONE SHRI PANKAJ D ANWALA C.A. IT WAS FOUND THAT HE HAD FILED THE RETURNS OF INCOME I N THE NAMES OF SEVERAL PERSONS WHERE HE HAS INTRODUCED HUGE AMOUNTS WAS BOGUS CAPITAL. IN THE STATEMENT RECORDED THE SAID C.A. ACCEPTED THE METHODOLOGY ADOPTED BY HIM. THE RELEVANT FILE IDENT IFIED AS A-657 WAS FOUND WHICH CONTAIN PROFIT AND LOSS ACCOUNT BALANCE SHEET AND CAPITAL ACCOUNT OF THE ASSESSEE FROM PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 1998-99. ON THE BASIS OF SUCH MATERIAL A O INITIATED PROCEEDINGS U/S. 148 AND MADE THE ADDITION U/S. 68 OF THE ACT. THE LD. 6 D.R. ALSO POINTED OUT THAT ON BASIS OF IMPOUNDED FILE THE A.O. REQUESTED THE ASSESSEE TO PRODUCE ALL THE AVAILABLE RECORD INCLUDING THE BANK PASS-BOOK DETAILS OF IMMOVEABLE PROPERTIES ET C. THE A.O. ALSO REQUESTED THE VARIOUS ASSESSES FOR INSPECTION OF IMPOUND ED DOCUMENTS BUT ALL THESE ASSESSES HAVE NOT AVAILED THE SAID OPPORTUNITY. IN THESE CIRCUMSTANCES THE ADDITION U/S. 68 IS RIGHTLY MADE. THE LD. C.I.T.(A) IS NOT JUSTIFIED IN DELETING THE SAME. 10. ON THE OTHER HAND SHRI S.N. SOPARKAR SR. ADVOCA TE APPEARED FOR THE ASSESEE FLOATED THE ORDER OF THE LD. CIT(A)-II SU RAT. HE SUBMITTED THAT NO RETURN FOR THIS ASSESSMENT YEAR WAS FILED. THE C. A. NAMELY SHRI PANKAJ DANAWALA FROM WHOSE PREMISES LOOSE PAPERS WERE F OUND ARE NOT SIGNED BY THE ASSESSEE. THE ASSESSEE HAS NOT MADE ANY INVESTMENT WHATSOEVER WHICH ARE STATED IN THE LOOSE PAPE R. IT WAS ALSO STATED THAT NO GIFTS AS MENTIONED IN LOOSE PAPERS W ERE RECEIVED BY ALL THE FIVE ASSESSES. IN THESE CIRCUMSTANCES THE LD. CIT (A) IS LEGALLY CORRECT IN DELETING THE ADDITION MADE BY THE A.O. IN RESPECT OF ALL THE ASSESSES FOR THE A.Y. 1998-99 THEREFORE THE VI EW TAKEN BY THE LD. C.I.T.(A) IS UPHELD. 11. AFTER HEARING BOTH THE SIDES WE HAVE CAREFULLY GO NE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. 12. IT IS PERTINENT TO NOTE THAT NONE OF THE ASSESSEE HA S CLAIMED THE BENEFIT OF CAPITAL SHOWN BY SHRI PANKAJ DANAWALA C.A . IN THE DOCUMENTS SEIZED FROM HIM. THIS IS EVIDENT FROM THE FILE IMPOUNDED ALSO WHICH CONTAIN DETAILS OF ALL THE ASSESSEES ACCOUNTS FOR THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2003-04 AN D 2004-05. THESE WERE NOT CONSIDERED BY A.O. WHILE FRAMING THE ASSE SSMENTS. IN 7 THESE ACCOUNTS THE CAPITAL SHOWN FOR TWO SUBSEQUENT ASSESSMENT YEARS I.E. A.Y. 2003-04 AND 2004-05 AS UNDER :- CAPITAL SHOWN . NAME OF THE ASSESSEE. A.Y.2003-04 A.Y.2004-05 MS.MONAV.TRIVEDI. 96 607 1 54 897 VIRAT J.TRIVEDI 98 869 1 29 549 SMT.HETAL A. MEHTA 1 01 561 1 59 991 ANKIT Y.MEHTA HUF 1 04 257 1 35 067 YOGESH R.MEHTA HUF 1 04 822 1 35 282 THE ABOVE CAPITAL BALANCES OF ALL THE FIVE ASSESSEES AS ON 3 1-3-2003 AND 31-3-2004 CLEARLY SHOW THAT THEY ARE NOT CLAIMING THE BENEFIT OF CAPITAL REFLECTED IN THE SEIZED DOCUMENTS OF EARLIER YEA R I.E. A.Y. 1998- 99. FOR EXAMPLE THE SEIZED DOCUMENTS PERTAINING TO MS. MONA V. TRIVEDI SHOWS CAPITAL FOR THE PREVIOUS YEAR RELEVANT TO THE A.Y. 1998- 99 SHOWS CAPITAL AT RS.12.05 LAKHS WHEREAS IN THE ASSESSMENT YEAR 2003-04 AND 2004-05 AS PER ACCOUNTS THE CAPITAL SHOWN W AS ONLY RS.96 607 AND RS.1 54 897/- RESPECTIVELY. THE POSITION O F REMAINING FOUR ASSESSES IS ALSO IDENTICAL. FURTHER THERE IS NO EVIDEN CE THAT ASSESSEE WAS HAVING ANY DEALING WITH THE DEBTORS AND CREDI TORS OR GIFT RECEIVED SHOWN IN THE DOCUMENT IMPOUNDED FROM THE PREM ISES OF SHRI PANKAJ DANAWALA C.A. NONE OF THESE DOCUMENTS WERE SIG NED BY THE ASSESSEE. THE A.O. HAS NOT REFERRED AT ALL THE CAPITAL BA LANCE AS ON 31- 3-2003 AND 31-3-2004 FOR WHICH VARIOUS ASSESSES HAVE FILED THE RETURN OF INCOME. WHATEVER DOCUMENTS WERE SEIZED FROM THE PRE MISES OF THE ASSESSEE THESE ARE DIS-OWNED BY ALL THE FIVE ASSESSES. THERE IS NO EVIDENCE THAT ASSESSEE HAS GIVEN ANY LOAN OR ADVANCES TO VA RIOUS PARTIES ALLEGEDLY MENTIONED IN THE LOOSE PAPER SEIZED FROM SHRI PANKAJ DANAWALA C.A. OR RECEIVED PAYMENT FROM ALLEGED CREDI TORS. 8 13. FOR DELETING THE ADDITION MADE BY THE A.O. U/S. 68 IN THE IMPUGNED ORDER THE LD. C.I.T.(A) HAS GIVEN IDENTICAL REASONS. AS UNDER: 6. I HAVE CAREFULLY CONSIDERED THE VIEW TAKEN BY THE AO AS WELL AS THE DETAILED SUBMISSIONS OF THE AR. THE WRITTEN SUBMISSIONS OF THE ASSESSEE HAD BEEN FORWARDED BY MY LD. PREDECESSOR VIDE HIS LETTER DT.28-4-2006 TO THE A.O.. FOR HIS COMMENTS. VIDE HIS LETTER DATED 21-9-2006 THE AO HAS STATED THAT THE ASSESSEE HAD NOT FILED HER RETURN OF INCOME FO R THE A.Y. 1998-99 AND EVEN FOR EARLIER YEARS WHEREAS. ON THE OT HER HAND THE IMPOUNDED MATERIALS SHOWED AN OPENING CAPITAL BALA NCE OF RS.9 55 828. THE ASSSESSEE DID NOT FURNISH ANY DETAIL OR CLARIFICATION IN COURSE OF THE ASSESSMENT PROCEEDINGS. THE ASSESSMENT WAS THEREFORE COMPLETED U/S. 144 R.W.S. 147 OF THE I.T. ACT TREATING THE OPENING CAPITAL BALANCER AS WELL AS OTHER RECEIPTS AS UNEXPLAINED CASH CREDITS. THE AO HAS SGTRONGLY ARGUED THAT THE ASSESSEE COULD NOT DENY COMPLICITY BY SIM PLY STATING THAT SHRI PANKAJ DANAWALA HAD FABRICATED THE ASSESSEES ACCOUNTS. WHATEVER THE ACCOUNTS THAT WERE PREPARED BY SHR I DANAWALA WERE DONE AT THE INSTANCE OF THE ASSESSEE. ACCOR DING TO THE AO THE AR WAS NOT JUSTIFIED IN CONTENDING THAT THE OTHER PAPERS IN THE IMPOUNDED FILE HAD NOT BEEN CONSIDERED. WHENEVER THERE WAS A JUMP IN THE CAPITAL ACCOUNT AS NOTICED FROM T HE IMPOUNDED PAPERS THE SAME HAD BEEN TAXED IN THE HAND S OF THE ASSESSEE IN THE ABSENCE OF ANY OTHER EVIDENCE. 6.1. FROM A CLOSE PERUSAL OF THE ASSESSMENT ORDER AS WELL AS THE REMAND REPORT IT APPEARS THAT THE MAIN JUSTIFICA TION FOR MAKING THE ADDITION WAS THAT THERE WAS NO EVIDENCE TO CONTRADICT THE CONTENTS OF THE DOCUMENTS THAT WERE IMPOU NDED FROM THE PREMISES OF SHRI DANAWALA AT LEAST NONE WERE PRODUCED BY THE ASSESSEE. THE A.O. ON BOTH OCCASIONS APP EARS TO BE CONTENDING THAT HE HAD NO OTHER OPTION BUT TO MAKE THE ADDITION SINCE THE ASSESSEE DID NOT COME UP WITH ANY EVI DENCE TO COUNTER THE AOS FINDINGS. I DO NOT AGREE WITH SUCH A N APPROACH. THIS IS BECAUSE AS IS EVIDENT FROM THE ASSESSMENT ORDER IN RESPONSE TO THE NOTICE U/S.148 EVEN THOUGH T HE ASSESSEE FILED THE RETURN IN COMPLIANCE SHOWING NIL INCOME YET 9 VIDE LETTER DATED 20-2-2006 THE ASSESSEE HAD CLEARLY STA TED THAT SHE WAS NOT ENGAGED IN ANY BUSINESS ACTIVITY DURING THE Y EAR IN QUESTION WHEN SHE WAS ONLY STUDYING. ONCE THE ASSESSEE HAD DENIED HAVING EARNED ANY INCOME DURING THE SAID YEAR THE BURDEN HAD SHIFTED TO THE A.O. TO SUBSTANTIATE HIS VIE W THAT ALL THE ENTRIES IN THE CAPITAL ACCOUNT REPRESENTED THE ASSESSEE S UNDISCLOSED INCOME AND THAT THE CAPITAL SO GENERATED HA D BEEN UTILIZED FOR GIVING OUT LOANS AND ADVANCES AND MAKING INVESTMENTS. EVEN IN THE REMAND PROCEEDINGS THE AO WAS PRESENTED WITH A SECOND INNINGS TO SUBSTANTIATE AND CORROB ORATE HIS FINDINGS AND CONCLUSION. INSTEAD OF AVAILING OF THE O PPORTUNITY TO REBUT THE DETAILED SUBMISSIONS OF THE AR WHERE THE LIABILITY OF THE ASSESSEE TO BE TAXED ON THE ASSESSED INCOME WAS STRONGLY DENIED THE AO CHOSE TO SIMPLY REITERATE THE CONTENTS OF THE ASSESSMENT ORDER. THIS CLEARLY SHOWED A WEAKNESS IN THE PROPOUNDED BY THE REVENUE. 6.2. COMING TO THE SUBMISSIONS OF THE AR I DO NOT ACCEPT HIS EXPLANATION THAT DURING THE YEAR IN QUESTION THE ASSE SSEE BEING ONLY A STUDENT WOULD NOT HAVE EARNED ANY INCOME. THE FALLACY IN THIS CONTENTION IS VERY CLEAR AND DOES NOT MERIT ANY DI SCUSSION. HOWEVER THERE APPEARS TO BE MERIT IN HIS CONTENTION TH AT FIRSTLY THE PAPERS FOUND IN COURSE OF THE SURVEY DID NOT CONTAIN THE ASSESSEES SIGNATURE AND THEREFORE WERE NOT AUTHENTIC AND COULD NOT BE THRUST ON THE ASSESSEE. SECONDLY THE IMPOUNDED FI LE ALSO CONTAINED THE ROUGH ACCOUNTS OF THE ASSESSEE FOR THE ASSESSMEN T YEARS 2003-04 AND 2004-05. THESE WERE NOT REFERRED T O AT ALL BY THE AO. AS FOR THESE ACCOUNTS THE CAPITAL AS ON 31-3-2004 WAS ONLY 1 54 897/- AND THEREFORE THE ASSESSEE COULD NOT B E EXPECTED TO HAVE A CAPITAL BALANCE OF RS./12 12 372/- I N THE ASSESSMENT YEAR 1998-99. CONSEQUENTLY THE CAPITAL ACCOUNT FOR THE A.Y. 1998-99 IMPOUNDED DURING THE SURVEY WAS NOT GENUINE AND HAD BEEN FABRICATED BY SHRI DANAWAL. APART FROM THESE ARGUMENTS I AM ALSO IN AGREEMENT WITH THE AR THAT TH E AO FAILED TO CONDUCT ANY INQUIRY WITH REGARD TO THE ENTR IES IN THE IMPOUNDED DOCUMENTS AND SIMPLY RELIED UPON THE STATEME NT OF SHRI DANAWALA MADE IN COURSE OF THE SURVEY PROCEEDINGS. HOWEVER THE MOST IMPORTANT ASSERTION OF THE AR IS THAT THE ASSESSEE HAD NOT FILED ANY RETURN OF INCOME FOR THE A.Y . 1998-99 AND THEREFORE HAD NOT MADE ANY CLAIM BEFORE THE DEP ARTMENT WHICH MEANT THAT THERE HAD BEEN NO LOSS TO THE REVENUE . 6.3. APART FROM THE ABOVE ARGUMENTS OF THE AR THROUGH WH ICH HE HAS BASICALLY CHALLENGED THE AUTHENTICITY OF THE DOCU MENTS RELIED UPON BY THE AO AND HIS FAILURE TO ESTABLISH TH E SAME 10 THROUGH HIS OWN INQUIRIES I FIND THAT THE ADDITION W AS MADE U/S. 68 OF THE I.T. ACT TREATING ALL THE CREDIT ENTRIES IN THE ALLEGED CAPITAL ACCOUNT INCLUDING THE BROUGHT FORWARD CAPITAL AS UNEXPLAINED CASH CREDIT. IN ORDER TO EXAMINE THE CORRECT NESS OF THE AOS APPROACH IT IS NECESSARY TO EXAMINE THE PROVISIO NS OF SECTION 68 OF THE I. T. ACT WHICH IS REPRODUCED HEREUND ER : WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS OF AN ASSESSEE MAINTAINED FOR ANY PREVIOUS YEAR AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE THEREOF OR THE EXPLANATION OFFERED BY HIM IS NO T IN THE OPINION OF THE A.O. SATISFACTORY THE SUM SO CREDIT ED MAY BE CHARGED TO INCOME-TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR. 6.4. AS PER THE ABOVE PROVISIONS A SUM MAY BE CHARGED TO INCOME-TAX AS THE INCOME OF THE ASSESSEE FOR A PREVIOUS YE AR IF SUCH SUM IS FOUND CREDITED IN THE BOOKS OF THE ASSESSEE MAINTAINED FOR ANY PREVIOUS YEAR AND THE ASSESSEE PROVID ES NO EXPLANATION REGARDING ITS NATURE AND SOURCE OR THE E XPLANATION PROVIDED BY HIM IS NOT SATISFACTORY IN THE OPINION OF T HE A.O. IN THE CASE OF THE ASSESSEE THE SUM OF RS.12 12 372 WAS FOUN D CREDITED IN A SHEET OF PAPER FOUND FROM THE PREMISES OF A THIRD PARTY WHO WAS THE CHARTERED ACCOUNTANT OF THE ASSESSEE. I T WAS THUS NOT ENTERED IN ANY BOOK OF ACCOUNT. IN THE CASE OF CBI VS. V.C. SHUKLA (1998) 3 SCC 410 425 426 430 IT WAS HELD BY THE HON. SUPREME COURT THAT :- BOOK ORDINARILY MEANS A COLLECTION OF SHEETS OR OTHE R MATERIAL BLANK WRITTEN OR PRINTED FASTENED OR BO UND TOGETHER SO AS TO FORM A MATERIAL WHOLE. LOOSE SHEETS OR SCRAPS OF PAPER CANNOT BE TERMED AS BOOK FOR THEY CAN B E EASILY DETACHED AND REPLACED. IN DEALING WITH THE WORD BOOK APPEARING IN SECTION 34 IN MUKUNDRAM V/S. DAYARAM AIR 1914 NAGPUR 44 A DECISION ON WHICH BOTH SIDES HAVE PLACED RELIANCE THE COURT OBSERVED :- IN ITS ORDINARY SENSE IT SIGNIFIES A COLLECTION OF SHEET S OF PAPER BOUND TOGETHER IN A MANNER WHICH CANNOT BE DISTURBED OR ALTERED EXCEPT BY TEARING APART. THE BIN DING IS OF A KIND WHICH IS NOT INTENDED TO BE MOVABLE IN THE SENSE OF BEING UNDONE AND PUT TOGETHER AGAIN. A COLLECTION OF PAPERS IN A PORTFOLIO OR CLIP OR STRUNG TOGETHER ON A PIECE OF TWINE WHICH IS INTENDED TO BE UNTIED AT WILL WOUL D NOT 11 IN ORDINARY ENGLISH BE CALLED A BOOK. I THINK THE TERM BOOK IN S.34 AFORESAID MAY PROPERLY; BE TAKEN TO SI GNIFY ORDINARILY A COLLECTION OF SHEETS OR PAPER BOUND TOGET HER WITH THE INTENTION THAT SUCH BINDING SHALL BE PERMANE NT AND THE PAPERS USED COLLECTIVELY IN ONE VOLUME. IT IS EA SIER HOWEVER TO SAY WHAT IS NOT A BOOK FOR THE PURPOSE OF S .34 AND I HAVE NO HESITATION IN HOLDING THAT UNBOUND SHEE TS OF PAPER IN WHATEVER QUANTITY THOUGH FILLED UP WITH O NE CONTINUOUS ACCOUNT ARE NOT A BOOK OF ACCOUNT WITHIN THE PURVIEW OF S. 34. (EMPHASIS PROVIDED). 6.5 IN THIS CASE THE HON. SUPREME COURT WAS DEALING WITH ENTRIES MADE BY ONE J IN DIARIES AND FILES WHICH SHOWED CERTAIN RECEIPTS AND DISBURSEMENTS. THE ENTRIES ALSO CONTAINED THE NAMES OF SOME OF THE PAYEES SOME OF WHOM HAD ALSO PUT THEIR SIGNATURES AS A TOKEN OF THEIR HAVING RECEIVED [PAYMENT FROM J. THE HON. COURT WHIL E DECIDING THE COMPLICITY OF J WILL THOSE FROM WHOM MONIE S WERE RECEIVED AND THOSE TO WHOM MONIES WERE PAID REFERRED TO VARIOUS SECTIONS OF THE EVIDENCE ACT. SPECIALL Y REFERRING TO SECTION 34 OF THE EVIDENCE ACT THE COURT OBSERVED THAT :- ENTRIES IN BOOKS OF ACCOUNT WHEN RELEVANT ENTRIES IN BOOKS OF ACCOUNT REGULARLY KEPT IN THE COURSE OF BUSINESS ARE RELEVANT WHENEVER THEY REFER TO A MATTER INTO WHICH THE COURT HAS TO INQUIRE BUT SUCH STATEMENT SHALL NOT ALONE BE SUFFICIENT EVIDENCE TO CHARGE ANY PERSON WITH LIABILITY. AS PER THIS SECTION THE HON. COURT OBSERVED THAT TO MAKE AN ENTRY RELEVANT IT MUST BE SHOWN THAT IT HAS BEEN MADE IN A BOOK THAT BOOK IS A BOOK OF ACCOUNT AND THA T BOOK OF ACCOUNT HAS BEEN REGULARLY KEPT IN THE COURSE OF BUSINESS. IT IS ALSO MANIFESTED FROM THIS SECTION THAT EVEN IF SUCH REQUIREMENTS ARE FULFILLED AND THE ENTRY BECOME S ADMISSIBLE AS RELEVANT EVIDENCE STILL THE STATEMENT MADE THEREIN SHALL NOT ALONE BE SUFFICIENT EVIDENCE TO CHARGE ANY PERSON WITH LIABILITY. 6.6 FOR A DEFINITION OF BOOKS OF ACCOUNT THE HON. COURT REFERRED TO SECTION 209 OF THE COMPANIES ACT 1956 WHI CH EXPRESSLY LAYS DOWN WHAT BOOKS OF ACCOUNT TO BE MAINTAINED THEREUNDER MUST CONTAIN. THE HON. COURT 12 FURTHER REFERRED TO THE CASE OF MUKUNDRAM V/S. DAYARAM AIR 1914 NAGPUR 44 (SUPRA) WHERE THE COURT AFTER DEA LING WITH THE WORK BOOK PROCEEDED TO CONSIDER WHAT IS MEA NT BY A BOOK OF ACCOUNT U/S. 34 OF THE EVIDENCE ACT. THE SAME IS REPRODUCED AS UNDER :- TO ACCOUNT IS TO RECKON AND I AM UNABLE TO CONCEIVE ANY ACCOUNTING WHICH DOES NOT INVOLVE EITHER ADDITION OR SUBTRACTION OR BOTH OF THESE OPERATIONS OF ARITHMETIC. A BOOK WHICH CONTAIN SUCCESSIVE ENTRIES OF ITEMS MAY BE A GOOD MEMORANDUM BOOK; BUT UNTIL THOSE ENTIRES ARE TOTALED OR BALANCED. OR BOTH AS THE CASE MAY BE THERE IS NO RECKONING AND NO ACCOUNT. IN THE MAKING OF TOTALS AND STRIKING OF BALANCES FROM TIME TO TIME LIES THE CHIEF SAFEGUARD UNDER WHICH BOOKS OF ACCOUNT HAVE BEEN DISTINGUISHED FROM OTHER PRIVATE RECORDS AS CAPABLE OF CONTAINING SUBSTANTIVE EVIDENCE ON WHICH RELIANCE MAY BE PLACED. 6.7. THE COURT WENT ON TO EXAMINE WHAT IS MEANT BY THE WORDS REGULARLY KEPT. REFERRING TO THE CASE OF RAMCHA ND PITAMBHARDAS V/S. EMPEROR (1913) 19 IND. CAS 534 THE COURT OBSERVED THAT BOOKS ARE REGULARLY KEPT IN THE COURSE O F BUSINESS IF THEY ARE KEPT IN PURSUANCE OF SOME CONTINUOUS AND UNI FORM PRACTICE IN THE CURRENT ROUTINE OF THE BUSINESS OF THE PA RTICULAR PERSON TO WHOM THEY BELONG. REFERRING FURTHER TO TH E CASE OF KESHEO RAO V/S. GANESH AIR 1926 (NAG.) 407 THE COURT OBSERVED THAT REGULARLY OR SYSTEMATICALLY MEANS THAT THE ACCOUNTS ARE KEPT ACCORDING TO A SET OF RULES OR SYSTEM IRRESPECTIVE OF WHETHER THE ACCOUNTANT HAS FOLLOWED THE RULES OF SYSTEM CLOSELY OR NOT. 6.8. APPLYING THE ABOVE PRINCIPLES AND DEFINITIONS AS L AID DOWN BY THE HON. SUPREME COURT TO THE FACTS OF THE ASSESSEES CA SE IT MUST BE ACCEPTED THAT THE AMOUNTS WHICH WERE FOUND CR EDITED AND WHICH HAVE BEEN TREATED AS UNEXPLAINED BY THE AO WERE NOT CREDITED IN THE BOOKS OF ACCOUNT REGULARLY MAINTAIN ED BY THE ASSESSEE. THEY WERE ENTERED ONLY IN LOOSE SHEETS OF PAPER WHICH ACCORDING TO THE HON. SUPREME COURT COULD NOT BE TREATED AS BOOK. ON HIS PART THE A.O. INSTEAD OF CALLING F OR THE ASSESSEES BOOKS OF ACCOUNT TREATED SUCH LOOSE PAPERS AS BOOK AND THEREFORE GROSSLY ERRED IN TREATING THE E NTRIES IN SUCH PAPERS AS UNEXPLAINED CASH-CREDITS. THUS THE PRIMARY A ND 13 BASIC CONDITION LAID DOWN IN THE VERY FIRST LIMB OF SECTI ON 68 WAS NOT SATISFIED. 6.9. WITHOUT PREJUDICE TO THE ABOVE EVEN IF FOR A M OMENT IT IS ACCEPTED THAT SUCH LOOSE PAPERS PLACED TOGETHER IN A FILE WAS A BOOK FOR THE PURPOSE OF MAKING THE ADDITION U/S. 68 EVEN SUCH A PROPOSITION WAS NOT ACCEPTABLE TO THE HON. SUPREME CO URT IN THE ABSENCE OF ANY CORROBORATIVE AND INDEPENDENT EVIDE NCE. IN THE SAME CASE OF CBI V/S. V.C. SHUKLA (SUPRA) THE HON. CO URT OBSERVED : THE RATIONALE BEHIND ADMISSIBILITY OF PARTIES BOOKS OF F ACCOUNT AS EVIDENCE IS THAT THE REGULARITY OF HABIT T HE DIFFICULTY OF FALSIFICATION AND THE FAIR CERTAINTY OF ULTIMATE DETECTION GIVE THEM IN A SUFFICIENT DEGREE A PROBABIL ITY OF TRUSTWORTHINESS (WIGMORE ON EVIDENCE 1546). SINCE HOWEVER AN ELEMENT OF SELF INTEREST AND PARTISANSHIP O F THE ENTRANT TO MAKE A PERSON BEHIND WHOSE BACK AND WITHOUT WHOSE KNOWLEDGE THE ENTRY IS MADE LIABLE CA NNOT BE RULED OUT THE ADDITIONAL SAFEGUARD OF INSISTENCE UP ON OTHER INDEPENDENT EVIDENCE TO FASTEN HIM WITH SUCH LIABILITY HAS BEEN PROVIDED FOR IN SECTION 34 BY INCORPORATING THE WORDS SUCH STATEMENTS SHALL NOT ALONE BE SUFFICIENT TO CHARGE ANY PERSON WITH LIABILITY. THE HON. SUPREME COURT SUBSTANTIATED THE ABOVE VIEW B Y PLACING RELIANCE ON SEVERAL CASES EARLIER DECIDED WHICH ALSO INCLUDED THE CASE OF BENI V/S. BISAN DAYAL AIR (1925) (NAG) 445 WHERE IT WAS OBSERVED THAT ENTRIES IN BOOKS OF ACCOUNT ARE NOT BY THEMSELVES SUFFICIENT TO CHARGE ANY PERSON WITH LIABILITY THE RE ASON BEING THAT MAN CANNOT BE ALLOWED TO MAKE EVIDENCE FOR HIMSELF BY WHAT HE CHOOSES TO WRITE IN HIS OWN BOOKS BEHIND THE BACK OF THE PARTIES. THERE MUST BE INDEPEND ENT EVIDENCE OF THE TRANSACTION TO WHICH THE ENTRIES RELATE AND IN ABSENCE OF SUCH EVIDENCE NO RELIEF CAN BE GIVEN TO THE PARTY WHO RELIES UPON SUCH ENTRIES TO SUPPORT HIS CLAIM AGAINST ANOTHER. THE HON. COURT ALSO REFERRED TO THE CASE OF HIRALAL MAN AVIR PERSHAD ILR (1967) 1 (PUNJ) 435 WHERE IT WAS OBSERVED THAT ENTRIES IN BOOKS OF ACCOUNT THOUGH RELEVANT WERE ONLY CORROBOR ATIVE EVIDENCE AND IT IS TO BE SHOWN BY SOME INDEPENDENT EVIDENCE THAT THE ENTRIES 14 REPRESENTED HONEST AND REAL TRANSACTION AND THAT MONIE S WERE PAID IN ACCORDANCE WITH THOSE ENTRIES. THE HON. SUPREME COURT IN THE INSTANT CASE THUS HELD THAT EVEN CORRECT AND AUTHENTIC ENTRIE S IN BOOKS OF ACCOUNT CANNOT WITHOUT INDEPENDENT EVIDENCE OF THEIR TR USTWORTHINESS FIX LIABILITY ON A PERSON. IN THE CASE OF OUR ASSESSEE E VEN IF WE WERE TO ACCEPT THAT THE IMPOUNDED FILE CONTAINING THE LOOSE SHEETS OF PAPER WITH ENTRIES ALLEGEDLY PERTAINING TO THE ASSESSEES CAPITA L ACCOUNT WERE TO BE ACCEPTED AS A BOOK OF ACCOUNT MAINTAINED IN THE REGULAR COURSE OF BUSINESS YET FIRSTLY SUCH ENTRIES WERE TO BE SUBST ANTIATED BY INDEPENDENT EVIDENCE TO ESTABLISH THEIR CORRECTNESS SO AS TO SHOW THAT THE ASSESSEE HAD ACTUALLY EARNED SUCH INCOME WHILE SECONDLY IT WAS ALSO TO BE ESTABLISHED THAT SUCH ACCOUNTS HAD BEEN PREPAR ED BY THE ASSESSEE AND MAINTAINED. THERE WAS HOWEVER NO INDEPENDE NT EVIDENCE TO SUBSTANTIATE THE GENUINENESS OF EITHER THE ENTRIES OR THE UNDISCLOSED INCOME ALLEGEDLY EARNED BY THE ASSESSEE. MOREO VER IN THE BACKGROUND OF THE SURVEY CONDUCTED OF THE PREMISES OF SHR I PANKAJ DANAWALA AND HIS UNEQUIVOCAL ADMISSION THAT HE HAD CREA TED BOGUS CAPITAL IN THE NAMES OF VARIOUS PERSONS EVEN THOUGH HE DID NOT SPECIFICALLY MENTION THE NAME OF THE ASSESSEE ANYWHERE IT WAS ABSOLUTELY CLEAR THAT THE ACCOUNTS IN THE PAPERS IMPOUNDE D IN THE COURSE OF THE SURVEY HAD BEEN CREATED BY SHRI DANAWALA HIMSELF AND THEREFORE NO LIABILITY COULD BE FASTENED ON THE ASSESSEE . 6.10. VIEWS SIMILAR TO THE VIEW TAKEN BY THE HON. SUPR EME COURT IN THE CASE OF CBI V/S. V.C.SHUKLA (SUPRA) WERE ALSO TAKE N BY SEVERAL COURTS IN SUBSEQUENT CASES. IN THE CASE OF ISHWAR DASS JAIN V/ S. SOHANLAL AIR (2000) SC. 426 THE HON. SUPREME COURT HELD :- FROM SECTION 34 OF THE EVIDENCE ACT 1872 IT MAY BE N OTICED THAT SANCTITY IS ATTACHED IN THE LAW OF EVIDENCE TO BOOK S OF ACCOUNT IF THE BOOKS ARE INDEED ACCOUNT BOOKS I.E. IN ORIGINAL AND IF THEY SHOW ON THEIR FACE THAT THEY ARE KEPT I N THE REGULAR COURT OF BUSINESS. SUCH SANCTITY CANNOT ATTACH TO PRIVAT E EXTRACTS OF ALLEGED ACCOUNT BOOKS WHERE THE ORIGINAL ACCO UNTS ARE NOT FILED INTO COURT. THIS IS BECAUSE FROM THE EXT RACTS IT CANNOT BE DISCOVERED WHETHER ACCOUNTS ARE KEPT IN THE REG ULAR COURSE OF BUSINESS OR IF THERE ARE ANY INTERPOLATIONS OR WHETHER THE INTERPOLATIONS ARE IN A DIFFERENT INK OR WHETHER THE ACCOUNTS ARE IN THE FORM OF A BOOK WITH CONTINUOUS PAGE NUMBER ING. THE HON. COURT THUS HELD THAT WHERE THE ORIGINAL BOO KS OF ACCOUNT ARE NOT AVAILABLE AND HAVE NOT BEEN PRODUCED IT IS NOT P OSSIBLE TO KNOW WHETHER THE ENTRIES MADE THEREIN ARE ENTRIES MADE IN THE REGULAR COURSE OF BUSINESS. THEREFORE EXTRACTS FROM ACCOUNTS CANNOT BE 15 TREATED AS BOOKS OF ACCOUNT FALLING UNDER THE SAID SECTI ON 34 AND ARE INADMISSIBLE. THIS VIEW WAS FOLLOWED IN SHERATON APPAR ELS: MAX CORPORATION TRESSA FASHION V/S. ASST. CIT (2002) 256 IT R 20(BOM) AND IN MANISH DIXIT V/S. STATE OF RAJASTHAN AIR 2001 S C-93. IN THE CASE OF THE ASSESSEE THE LOOSE SHEETS OF PAPER EVEN IF WE RE TO BE TREATED AS EXTRACTS OF ACCOUNTS OF THE ASSESSEE THEY COULD NO T BE RELIED UPON SINCE IT COULD NOT BE ESTABLISHED THAT SUCH ACCOUNTS HAD BEEN KEPT IN THE REGULAR COURSE OF BUSINESS AND CONSEQUENT LY THEY COULD NOT BE TREATED AS BOOKS OF ACCOUNT. IF THAT BE SO ANY ENTRY MADE THEREIN COULD NOT BE USED TO THRUST A LIABILITY O N THE ASSESSEE. 6.11. SUMMARISING THE ABOVE DISCUSSION IT IS HELD THAT THE AO WAS NOT JUSTIFIED IN RELYING UPON THE UNSIGNED AND UNAUTHENTI CATED ENTRIES IN LOOSE SHEETS OF PAPER FOUND FROM THE PREMISES OF A THIRD PARTY THAT IS THE C.A. SHRI PANKAJ DANAWALA WHO HAD ADMITTED TO HAVE CREATED SUCH ACCOUNTS HIMSELF. FOR THE CONDITIONS U/S. 68 TO BE SATI SFIED AND FOR ANY ADDITION TO BE MADE AS UNEXPLAINED CASH-CREDIT THE CREDIT SHOULD HAVE BEEN MADE IN THE ASSESSEES BOOKS OF ACCOUNT KE PT IN THE REGULAR COURSE OF BUSINESS. SINCE THE C .A. HAD ADMITTE D TO HAVE CREATED THE ACCOUNTS HIMSELF AND THE COMPLICITY OF THE ASSESSEE IN SUCH CREATION WAS NOT ESTABLISHED THE CREDIT ENTRIES IN SUCH ACCOUNTS IN LOOSE SHEETS OF PAPER COULD NOT BE TREATED AS ENTRI ES IN THE ASSESSEES OWN BOOKS OF ACCOUNT KEPT IN THE REGULAR COURSE OF BUSINESS. MOST IMPORTANTLY THE ASSESSEE HAD NOT FILED AN Y RETURN OF INCOME UNTIL FOR THE A.Y. 2003-04 WHICH MEANT THAT SU CH ENTRIES/ACCOUNTS HAD NOT BEEN UTILIZED DURING THE YEAR BY THE ASSESSEE TO MAKE ANY CLAIM OR SEEK ANY RELIEF BEFORE THE REVEN UE OR EVEN TO INTRODUCE ANY UNACCOUNTED INCOME. FURTHER THESE ENTRIE S WERE NOT SUPPORTED BY ANY INDEPENDENT CORROBORATIVE EVIDENCE SO AS TO ESTABLISH THEIR INGENUINENESS AS ALSO TO SUPPORT THE ADD ITION MADE BY THE AO IN THE HANDS OF THE ASSESSEE. CONSEQUENTLY THE A DDITION OF THE SUM OF RS.12 12 372 UNDER THE PROVISIONS OF SECTION 68 OF THE I.T. ACT WILL STAND DELETED. 15. IN OUR OPINION LD. C.I.T.(A) HAS GIVEN COGENT RE ASONS FOR DELETING THE ADDITION MADE BY A.O. UNDER SECTION 68 O F THE IN COME TAX ACT ACT IN RESPECT OF ALL THE FIVE ASSESSES. WE THEREFO RE INCLINED TO UPHOLD THE ORDER OF THE LD. C.I.T.(A). IN THE RESULT ALL THE FIVE APPEALS OF THE REVENUE ARE DISMISSED. 16 16. THE CROSS OBJECTIONS ARE IN SUPPORT OF ORDER OF LD. C .I.T.(A)-II SURAT. IN VIEW OF DECISION RENDERED IN REVENUE APPEA LS (SUPRA) ALL THE FIVE CROSS OBJECTIONS ARE RENDERED IN-FRUCTUOUS THEREFO RE DISMISSED. 17. IN THE RESULT APPEALS AS WELL AS CROSS OBJECTIONS ARE DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 30/04/2010. SD/- SD/- (A.N. PAHUJA ) (T.K.SHARMA) ACCOUNTANT MEMBER. JUDICIAL MEM BER. AHMEDABAD. DATED: 30/04/2010. S.A.PATKI. COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNED. 5. THE DR. ITAT AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT AHMEDABAD.