Sri Gyan Kumar Agarwal (Ind), Mahabubnagar, Hyderabad v. ACIT, Central Circle-6, Hyderabad

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B HYDERABAD BEFORE SHRI G.C. GUPTA VICE PRESIDENT AND SHRI CHANDRA POOJARI ACCOUNTANT MEMBER IT(SS)A NO.22/H/2008 BLOCK PERIOD OF ASSESSMENT 1997-98 TO 2002-03 & FOR THE PERIOD FROM 1.4.2002 TO 21.1.2003 SHRI GYANKUMAR AGARWAL (IND.) HYDERABAD (PAN ABGPA 5780 L) VS THE ACIT CIRCLE 6 HYDERABAD (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI SYED JAMEELUDIN RESPONDENT BY: SMT. K. KAMAKSHI O R D E R PER CHANDRA POOJARI ACCOUNTANT MEMBER: THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A) I HYDERABA D DATED 4.6.2008 AND PERTAINS TO THE BLOCK PERIOD OF ASSES SMENT 1997-98 TO 2002-03 & FOR THE PERIOD FROM 1.4.2002 T O 21.1.2003. 2. THE ASSESSEE RAISED THE FOLLOWING (REVISED) GROUNDS IN ITS APPEAL: 1. THE ORDER OF THE CIT(A) IN CONFIRMING THE ADDIT ION OF RS.2 55 50 000/- AS UNDISCLOSED NEGATIVE PEAK CRED IT ONLY ON THE BASIS OF AN UNIDENTIFIED NOTE BOOK IS OPPO SED TO LAW AND IS AGAINST THE FACTS CIRCUMSTANCES AND PROBABI LITIES OF THE CASE. 2. DURING THE COURSE OF ASSESSMENT PROCEEDINGS AS PER RECORDS MUTUAL UNDERSTANDING WAS ARRIVED AT TO REF ER THE UNIDENTIFIED DIARY TO THE GOVT. EXAMINER WHOSE DEC ISION WILL BE ACCEPTED IN GOOD SPIRIT TO AVOID PROTRACTED LITI GATION. BUT IT HAS NOT BEEN HONOURED BY THE DEPARTMENT. 3. IN THE MONTH OF JUNE 2007 THE INCOME TAX INSPE CTOR ATTACHED TO THE ASSESSING OFFICER VISITED THE RESID ENCE OF THE IT(SS)A.22/H/2008 SHRI GYAN KUMAR AGARWAL (IND.) ========================= 2 ASSESSEE AND COLLECTED THE HANDWRITING SAMPLES OF E LEVEN MEMBERS OF THE FAMILY AS PER THE REQUIREMENT OF THE GOVT. EXAMINER WHICH IS ON RECORD. THE ASSESSING OFFICE R HAS NOT MENTIONED ANYTHING ABOUT THE REPORT OF THE GEQD WHI CH IS A CRUCIAL PIECE OF EVIDENCE AS IT GOES TO THE VERY R OOT OF THE MATTER IN DECIDING THE OWNER OF THE DIARY. 4. THE ASSESSEE FILED AFFIDAVITS OF THE THREE PERSO NS VIZ. S/SHRI JAI PRAKASH MOHAN BHAI AND MOHAN GUPTA WHO SE NAMES WERE MENTIONED BY THE ASSESSING OFFICER IN TH E ASSESSMENT ORDER. BUT THE ASSESSING OFFICER NEITHE R EXAMINED THEM NOR GAVE REASONS FOR NOT EXAMINING TH EM. 5. THIS IS THE SECOND TIME FOR THE ASSESSEE TO COM E BEFORE THE TRIBUNAL ON THE SAME ISSUE AS THE ASSESSING OF FICER FAILED TO CARRY OUT THE DIRECTIONS OF ITAT HYDERAB AD IN THEIR ORDER IN IT(SS)A NO.151/H/2005 DATED 28.2.2006 TO ALLOW THE ASSESSEE TO EXAMINE OR CROSS EXAMINE CERTAIN PE RSONS WHOSE STATEMENTS MAY BE RELEVANT FOR THE PURPOSE OF DETERMINING THE ISSUE. 6. THE ADDITION OF RS.2 55 50 000/- MADE BY THE AS SESSING OFFICER PURELY ON THE BASIS OF UNIDENTIFIED DIARY WITHOUT BRINGING ON RECORD ANY EVIDENCE BY ANY CORROBORATIV E MATERIAL IS NOT ONLY ERRONEOUS IN LAW BUT IS HIGHLY UNJUSTIFIED. SUCH AN UNIDENTIFIED SEIZED DOCUMENT FOUND IN CELLAR ALONE IS NOT SUFFICIENT TO DRAW DEFINITE CO NCLUSION THAT IT BELONGS TO THE ASSESSEE AND ITS CONTENTS ARE TRU E. 7. NATURAL JUSTICE DEMANDS THAT THE ASSESSING OFFI CER SHOULD HAVE MADE COMPREHENSIVE ENQUIRIES BEFORE MAKING A H UGE ADDITION OF RS.2 55 50 000/- WHICH HE FAILED TO DO SO. THE ASSESSING OFFICER HIMSELF ADMITTED THAT NO ENQUIRIE S WERE MADE VIDE HIS LETTER DATED 25.10.2007 THEREFORE THE ADDITION OF RS.2 55 50 000/- IS NOT ONLY BASELESS B UT IS AGAINST THE PRINCIPLES OF NATURAL JUSTICE AND IS ER RONEOUS IN LAW. 8. THE OBSERVATION OF CIT(A) IN PARA 3.4 AT PAGE 7 THAT THE SUBMISSIONS OF THE ASSESSEE DOES NOT HIGHLIGHT HOW THE SEIZED DOCUMENT WOULD HAVE BEEN PLANTED IN THE CELL AR IS WRONG. 9. THE ORDERS OF THE ASSESSING OFFICER AND THE CIT (A) ARE NOT IN CONFORMITY WITH THE DIRECTIONS OF THE TRIBUNAL A ND ARE THEREFORE LIABLE TO BE QUASHED. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN INDIVIDUAL WHO IS A DIRECTOR OF M/S AMBIKA FOOD IN DUSTRIES LTD. HE IS ONE OF THE MAJOR SHARE HOLDERS OF M/S J IVIKA IT(SS)A.22/H/2008 SHRI GYAN KUMAR AGARWAL (IND.) ========================= 3 LEASING & FINANCE CO. LTD. AND ALSO HAVING INTERES T IN THE FIRM M/S AMBIKA FARMS. THERE WAS A SEARCH AND SEIZ URE OPERATIONS U/S 132 OF THE IT ACT CONDUCTED IN THE R ESIDENTIAL PREMISES OF THE ASSESSEE AT D.NO.8-2-681/A/6 ROAD NO.12 BANJARA HILLS HYDERABAD ON 21.1.2003. DURING THE COURSE OF SEARCH OPERATIONS VARIOUS EVIDENCE WERE FOUND IN THE FORM OF LOOSE SHEETS DIARIES BOOKS OF ACCOUNT DOCUMEN TS AND THE SAME WERE SEIZED. CONSEQUENT TO THE SEARCH AND SEIZURE OPERATIONS A NOTICE U/S 158BC DATED 7.5.2003 WAS I SSUED CALLING FOR THE RETURN OF INCOME FOR THE BLOCK PERI OD. IN RESPONSE TO THE NOTICE THE ASSESSEE FILED RETURN O F INCOME FOR THE BLOCK PERIOD ON 22.12.2003 ADMITTING UNDISC LOSED INCOME OF RS.7 29 750/- ON ACCOUNT OF THE FOLLOWIN G : A) UNEXPLAINED INVESTMENT IN JEWELLERY RS.2 66 045 B) UNACCOUNTED CASH RS.2 38 700 C) UNEXPLAINED INVESTMENT IN THE SHARES OF M/S JEEVIKA LEASING AND FINANCE CO. LTD. RS.2 25 000 --------------- TOTAL RS.7 29 745 ========== 4. THE CASE WAS THE SUBJECT TO SCRUTINY BY ASSESSI NG OFFICER. THEREAFTER BLOCK ASSESSMENT U/S 158BC R. W.S. 143(3) WAS FRAMED. THE ASSESSING OFFICER PASSED TH E ORIGINAL ASSESSMENT ORDER ON 31.1.2005 WHEREIN HE DETERMINED THE INCOME OF THE ASSESSEE AS FOLLOWS: 1. UNEXPLAINED JEWELLERY (AS ADMITTED) RS.2 66 0 45 2. UNACCOUNTED CASH(AS ADMITTED) RS.2 38 700 3. UNEXPLAINED INVESTMENT IN SHARES IN M/S GVK LEASING FINANCE CO. (AS AGAINST RS.2 25 000 ADMITTED BY THE ASSESSEE ) RS.14 42 000 4. UNEXPLAINED MONEY LENDING RS.2 55 50 000 TOTAL RS.2 94 96 745/- IT(SS)A.22/H/2008 SHRI GYAN KUMAR AGARWAL (IND.) ========================= 4 5. AGAINST THIS THE ASSESSEE CARRIED ON THE APPEAL TO THE CIT(A). THE CIT(A) VIDE ORDER DATED 2.9.2005 (ISSU ED ON 28.9.05) CONFIRMED THE ORDER OF THE ASSESSING OFFIC ER. AGAINST THIS THE ASSESSEE CAME IN APPEAL BEFORE THI S TRIBUNAL. THE TRIBUNAL ON FIRST ROUND VIDE ITS ORD ER DATED 28.2.2006 SET ASIDE THE ISSUE TO THE FILE OF ASSESS ING OFFICER WITH THE FOLLOWING DIRECTIONS: 9. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECORD. THERE IS NO DOUBT THAT PRESUMPTION U/S 132(4A) APPLIES TO A DOCUMENT FOUND DURING A SEARCH AND SEIZURE OPERATION FROM THE PREMISES OF THE PARTY. HOWEVER SUCH PRESUMPTION IS A REBUTTABLE PRESUMPTION. IF THE ASSESSEE WANTS TO REBUT THIS PRESUMPTION BY EXAMINING OR CROSS EXAMINING CERTAIN PERSONS WHOSE STATEMENTS MAY BE RELEVANT FOR THE PURPOSE OF DETERMINING THE ISSUE WE DO NOT FIND ANY REASON AS TO WHY AN OPPORTUNITY FOR THE SAME SHOULD NOT BE ALLOWED TO THE ASSESSEE. HOWEVER THE AFFIDAVITS FILED BY THE ASSESSEE ALONG WITH THE APPEAL PAPERS CANNOT BE CONSIDERED AS PART OF RECORD OF THE TRIBUNAL IN THE ABSENCE OF AN APPLICATION UNDER RULE 29 OF THE IT APPELLATE RULE 1962 AND THEREFORE WE DO NOT EXPRESS ANY OPINION ON THE SAME. THE DEPARTMENT HAS ALSO NOT SHOWN THAT ENQUIRIES MADE BY THE ASSESSING OFFICER WITH REFERENCE TO THE DIARY HAS BEEN CONFRONTED TO THE ASSESSEE. IN THIS VIEW OF THE MATTER WE ARE OF THE CONSIDERED OPINION THAT THIS ISSUE REQUIRES TO BE SET ASIDE TO THE FILE OF THE ASSESSING OFFICER F OR DISPOSAL AFRESH IN ACCORDANCE WITH LAW. 10. AS REGARDS TO THE SECOND ADDITION THE FACTS AND CIRCUMSTANCES OF THE CASE ARE SIMILAR TO THAT IN THE CASE OF SHRI GYANKUMAR AGARWAL (HUF) DEALT BY US SEPARATELY IN IT(SS)A 139 OF 2005. FOR THE REASONS MENTIONED THEREIN WE CONFIRM THE ADDITION OF RS.14 42 000/-. 6. ON SETTING ASIDE BY THE TRIBUNAL AS ABOVE THE ASSESSING OFFICER HAS PASSED THE CONSEQUENTIAL ASSE SSMENT IT(SS)A.22/H/2008 SHRI GYAN KUMAR AGARWAL (IND.) ========================= 5 ORDER DATED 20.12.2007 WHEREIN THE ASSESSING OFFI CER REPEATED THE SAME ADDITION AND DETERMINED THE INCOM E AS UNEXPLAINED EXPENDITURE AT RS.2 74 96 700/-. AGAI NST THIS THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A). THE CIT(A) CONFIRMED THE ORDER OF THE ASSESSING OFFICER VIDE O RDER DATED 4.6.2008. AGAINST THIS THE ASSESSEE WENT IN APPEAL BEFORE THE TRIBUNAL. THE TRIBUNAL ON THE SECOND ROUND VID E ITS ORDER DATED 7.11.2008 DISMISSED THE APPEAL OF THE A SSESSEE BY HOLDING AS FOLLOWS: 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ONLY GRIEVANCE OF THE ASSESSEE IS THAT THE DIRECTIONS OF THIS TRIBUNAL CONTAINED IN ITS ORDER DATED 28.2.2006 IN IT(SS)A.151/H/2005 HAVE NOT BEEN COMPLIED WITH. WE HAVE CAREFULLY GONE THROUGH THE ORDER OF THIS TRIBUNAL DATED 28.2.2006. THE TRIBUN AL FOUND THAT SINCE THE ASSESSEE IS MAKING ALLEGATIONS AGAINST THE OFFICERS IT MAY BE NECESSARY TO ALLOW THE ASSESSEE AN OPPORTUNITY TO CROSS EXAMINE THOSE OFFICERS WHOSE STATEMENTS MAY BE RELEVANT FOR DECIDING THE ISSUE. ACCORDINGLY THE ASSESSING OFF ICER HAS PROVIDED AN OPPORTUNITY TO THE ASSESSEE TO CROS S EXAMINE THE OFFICERS WHO PARTICIPATED IN THE IN TH E SEARCH PROCEEDINGS. STATEMENTS RECORDED FROM THESE PERSONS WERE REPRODUCED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER. THEREFORE IT MAY NOT BE CORRECT TO SAY THAT OPPORTUNITY OF CROSS EXAMINING THE OFFICERS WAS NOT PROVIDED TO THE ASSESSEE AS PER T HE DIRECTIONS OF THE TRIBUNAL. REGARDING THE REPORT O F HAND WRITING EXPERT THE ASSESSING OFFICER IN CATEGORICAL TERMS STATED IN HIS LETTER DATED 25.10.2007 REFERRED TO ABOVE THAT NO ENQUIRY WAS MADE BY HIM EXCEPT WHAT WAS REFERRED TO IN THE ASSESSMENT ORDER. NO MENTION WAS MADE IN THE ASSESSMENT ORDER ABOUT ANY REFERENCE TO THE HANDWRITING EXPERT. NO MATERIAL IS AVAILABLE ON RECORD TO SUGGEST THAT ANY MATTER WAS REFERRED TO T HE HANDWRITING EXPERT. IN THE ABSENCE OF ANY MATERIAL IN THAT BEHALF WE MAY NOT BE ABLE TO SAY ANYTHING ABO UT ANY REFERENCE TO THE HANDWRITING EXPERT. IN THE CIRCUMSTANCES IN OUR OPINION THERE IS NO VIOLATIO N OF PRINCIPLES OF NATURAL JUSTICE. NO ARGUMENTS WERE ADVANCED BY EITHER SIDE ON MERITS. THEREFORE WE AR E NOT INCLINED TO GO INTO THE MERITS OF THE ADDITION. IT(SS)A.22/H/2008 SHRI GYAN KUMAR AGARWAL (IND.) ========================= 6 7.1 AGAINST THIS THE ASSESSEE MOVED A MISCELLANE OUS APPLICATION BEFORE THIS TRIBUNAL MA. NO.173/H2008. THE TRIBUNAL DISMISSED THE MA FILED BY THE ASSESSEE VID E ITS ORDER DATED 26.12.2008 STATING AS FOLLOWS: 5. RIVAL CONTENTIONS WERE CONSIDERED IN THE LIGHT OF THE MATERIAL AVAILABLE ON RECORD. WHEN THE APPEAL WAS ARGUED BY THE ASSESSEE THE ONLY GRIEVANCE IS WITH REGARD TO NON COMPLIANCE OF THE DIRECTIONS CONTAINED IN THE ORDER OF THIS TRIBUNAL DATED 28.2.2006 IN IT(SS)A NO.151/H/2005. THIS TRIBUNAL FOUND THAT THE ASSESSING OFFICER EXAMINED INSPECTOR OF IT AND ANOTHER OFFICIAL AND THE STATEMENTS RECORDED FROM THEM WERE REPRODUCED IN THE ASSESSMENT ORDER. THE ASSESSEE WAS ALSO GIVEN OPPORTUNITY TO CROSS EXAMINE THOSE OFFICIALS. AS FOR THE REFERENCE TO HAND WRITING EXPERT THE ASSESSING OFFICER BY A LETTER DATED 25.10.2007 CLEARLY STATED THAT THERE WAS NO ENQUIRY MADE BEYOND WHAT WAS REFERRED TO IN THE ASSESSMENT ORDER. IN THE ASSESSMENT ORDER THERE IS NO MENTION WHATSOEVER TO THE REFERENCE TO THE HANDWRITING EXPERT. IN THE ABSENCE OF ANY MATERIAL THIS TRIBUNAL CANNOT GO INTO THE ALLEGATION OF THE ASSESSEE ON PRESUMPTION. UNLESS THERE IS ANY CONCRETE EVIDENCE TO SUGGEST THAT THE DEPARTMENT OFFICIALS PLANTED THE DIARY AS ALLEGED BY THE ASSESSEE THIS TRIBUNAL HAS TO PROCEED ON THE BASIS OF PRESUMPTION CONTAINED IN S.132(4) OF THE ACT. 6. FURTHER WHEN THE APPEAL WAS TAKEN UP FOR HEARING THE ASSESSEE HAS NOT ARGUED ON MERITS. MERE FILING OF THE WRITTEN SUBMISSIONS DO NOT TANTAMOUNT TO ARGUING THE CASE. WHEN OPPORTUNITY IS GIVEN TO ARGUE THE CASE ORALLY IT I S FOR THE ASSESSEE TO POINT OUT THE GRIEVANCE SO THAT THE OTHER PARTY CAN REPLY. WRITTEN SUBMISSIONS MAY BE FILED AFTER COMPLETION OF THE ARGUMENTS IN ADDITION TO THE ORAL SUBMISSION BUT WRITTEN SUBMISSIONS CANNOT BE TAKEN AS SUBSTITUTE FOR ORAL SUBMISSIONS. MOREOVER WHEN THE ASSESSEE ARGUED THE CASE ORALLY HE CANNOT MAKE ANY ADDITIONS IN THE WRITTEN SUBMISSIONS FOR THE REASON THAT THE OTHER SIDE MAY NOT HAVE IT(SS)A.22/H/2008 SHRI GYAN KUMAR AGARWAL (IND.) ========================= 7 ANY OPPORTUNITY TO REPLY TO THE ALLEGATIONS MADE IN THE WRITTEN SUBMISSIONS. UNLESS AND UNTIL WHAT IS CONTAINED IN THE WRITTEN SUBMISSIONS ARE BROUGHT TO THE NOTICE OF THE BENCH IN THE OPEN COURT THE OTHER SIDE MAY NOT HAVE ANY OPPORTUNITY TO REPLY TO THE ALLEGATIONS MADE IN THE WRITTEN SUBMISSIONS. IN THESE CIRCUMSTANCES THE ASSESSEE MAY NOT HAVE ANY GRIEVANCE WHEN THE ADDITIONAL ALLEGATIONS MADE IN THE WRITTEN SUBMISSIONS WERE NOT CONSIDERED. IN OTHER WORDS EITHER PARTY NEEDS TO BE GIVEN ADEQUATE OPPORTUNITY TO REPLY TO THE ALLEGATIONS MADE BY THE ASSESSEE. IN THE ABSENCE OF ANY ARGUMENT IN THE OPEN COURT ON THE MERITS OF THE ASSESSMENT NON CONSIDERATION OF THE WRITTEN SUBMISSIONS CANNOT BE CONSIDERED TO BE AN ERROR ESPECIALLY WHEN THE REVENUE HAS NO OPPORTUNITY TO MEET THE POINTS RAISED IN THE WRITTEN SUBMISSIONS. THEREFORE IN THE OPINION OF THIS TRIBUNAL THERE I S NO ERROR IN THE ORDER OF THIS TRIBUNAL. BY SAYING NO IT IS NOT THE CORRECTNESS OF THE ORDER OF THIS TRIBUNAL IS BEING JUSTIFIED. THERE MAY BE OTHER VIEW POSSIBLE IN THE MATTER. IT IS OPEN FOR THE ASSESSEE TO APPROACH THE APPELLATE FORUM IN CASE IT IS AGGRIEVED BY THE VIEW TAKEN BY THIS TRIBUNAL BUT ON THAT COUNT IT CANNOT BE SAID THAT THE ORDER OF THE TRIBUNAL SUFFERS FROM ANY MISTAKE MUCH LESS A PRIMA FACIE ONE IN TERMS OF S.254(2) OF THE ACT. 7. IN VIEW OF THE ABOVE DISCUSSION THEREFORE THE APPLICATION OF THE ASSESSEE IS DEVOID OF MERIT. IT IS ACCORDINGLY REJECTED. 7.2 THEREAFTER THE ASSESSEE NOT SATISFIED WITH THE ABOVE ORDER FILED ONE MORE MISCELLANEOUS APPLICATION IN MA NO.122/H/2010. THE TRIBUNAL VIDE ITS ORDER DATED 29.10.2010 RECALLING THE ORDER OF THE TRIBUNAL DATE D 7.11.2008 BY HOLDING AS FOLLOWS: 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND HAVE ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. FROM THE VERY BEGINNING THE ASSESSEE CLAIMED THAT THE MATERIAL FOUND DURING THE COURSE OF SEARCH OPERATION DOES NOT RELATE TO THE ASSESSEE AND IT WAS NOT WRITTEN EITHER IN THE IT(SS)A.22/H/2008 SHRI GYAN KUMAR AGARWAL (IND.) ========================= 8 HAND OF THE ASSESSEE OR ANY OF HIS FAMILY MEMBER. ADMITTEDLY A REFERENCE WAS MADE TO THE HAND- WRITING EXPERT TO FIND OUT THE TRUTH OF THE CLAIM O F THE ASSESSEE THAT THE MATERIAL FOUND AT THE TIME OF SEARCH DOES NOT RELATE TO HIM. IN FACT THE ASSESSING OFFICER RECEIVED THE REPORT OF THE HAND- WRITING EXPERT. HOWEVER THE ASSESSING OFFICER FAILED TO CONSIDER THE SAME WHILE COMPLETING THE ASSESSMENT. THE CONTENTION OF THE LEARNED DEPARTMENTAL REPRESENTATIVE IS THAT IT IS NOT NECESSARY FOR THE ASSESSING OFFICER TO CONSIDER SUCH A REPORT WHEN OTHER MATERIAL IS AVAILABLE ON RECORD. WE ARE UNABLE TO ACCEPT THIS CONTENTION O F THE LEARNED DEPARTMENTAL REPRESENTATIVE WHEN THE MATTER WAS REFERRED TO THE HAND-WRITING EXPERT AND THE REPORT OF THE HANDWRITING EXPERT WAS RECEIVED BY THE ASSESSING OFFICER WHICH DISCLOSES THAT THE MATERIAL FOUND DURING THE COURSE OF SEARCH OPERATION WAS NOT WRITTEN BY THE ASSESSEE OR HIS FAMILY MEMBERS IN OUR CONSIDERED OPINION IT HAS TO BE CONSIDERED BY THE ASSESSING OFFICER AND HE HAS TO RECORD HIS REASONS FOR EITHER REJECTING OR ACCEPTING SUCH A REPORT. 5. THE ASSESSING OFFICER AND THE OTHER APPELLATE AUTHORITIES UNDER THE INCOME-TAX ACT ARE QUASI- JUDICIAL AUTHORITIES. THE PROCEEDINGS BEFORE THE ASSESSING OFFICER AND THE APPELLATE AUTHORITIES UNDER THE ACT INCLUDING THIS TRIBUNAL ARE JUDICIA L IN NATURE AND THEREFORE WHENEVER A MATERIAL DOCUMENT WAS FOUND AND OPINION OF THE EXPERT WAS CALLED FOR IT IS THE BOUNDEN DUTY OF THE ASSESSING OFFICER AS WELL AS THE APPELLATE AUTHORIT Y TO CONSIDER THE SAME AND RECORD A CATEGORICAL FINDING AS TO WHY THE SAME WAS NOT ACCEPTABLE. IF SUCH A FINDING WAS NOT RECORDED IN OUR OPINION PEOPLE MAY LOSE CONFIDENCE ON THE SYSTEM. POWERS OF THE ASSESSING OFFICER TO ADJUDICATE AND COMPUTE THE INCOME FLOWS NOT MERELY FROM THE STATUTORY PROVISION BUT ALSO FROM THE CONFIDENCE REPOSED BY THE PUBLIC ON THE SYSTEM. ONCE THE PUBLIC LOSE CONFIDENCE THE ENTIRE SYSTEM WILL FAIL. IN THIS C ASE WHEN THE ASSESSEE RIGHT FROM DAY ONE CLAIMS THAT THE MATERIAL FOUND DURING THE COURSE OF SEARCH OPERATION WAS NOT WRITTEN IN HIS HAND OR IN THE HAND OF ANY OF THE FAMILY MEMBERS THE ASSESSING OFFICER REFERRED THE MATTER TO THE HAND WRITING EXPERT. INSPITE OF THE FACT THAT THE HAND WRITING EXPERT SUBMITTED HIS REPORT TO THE ASSESSING OFFICER THE ASSESSING OFFICER FAILED TO CONSIDER T HE IT(SS)A.22/H/2008 SHRI GYAN KUMAR AGARWAL (IND.) ========================= 9 SAME IN THE ASSESSMENT PROCEEDINGS. MOREOVER THE VERY FACT OF REFERENCE HAVING BEEN MADE TO THE HAND-WRITING EXPERT WAS NOT BROUGHT TO THE NOTICE OF THE BENCH OF THIS TRIBUNAL WHEN THE APPEAL OF THE ASSESSEE WAS HEARD. THEREFORE IN OUR OPINION THERE WAS A MISCARRIAGE OF THE JUSTICE DUE TO NON- CONSIDERATION OF THE REPORT OF THE HAND-WRITING EXPERT. AFTER CONSIDERING THE REPORT OF THE HAND- WRITING EXPERT THE AUTHORITIES CONCERNED MAY ACCEPT OR REJECT THE OPINION OF THE HAND-WRITING EXPERT IN THAT REPORT. AUTHORITIES UNDER THE INCOME-TAX ACT ARE NOT BOUND BY THE OPINION EXPRESSED BY THE HAND-WRITING EXPERT. HOWEVER THE AUTHORITIES ARE BOUND TO CONSIDER THE SAME AND RECORD THEIR FINDINGS/REASONS FOR ACCEPTING OR NOT ACCEPTING THE SAME. NON-CONSIDERATION OF THE REPORT OF THE HAND-WRITING EXPERT THOUGH IT WAS AVAILABLE BEFORE THE ASSESSING OFFICER WOULD GO TO THE ROOT OF THE MATTER. 6. FURTHERMORE IT IS WELL SETTLED POSITION OF LAW THAT ALL JUDICIAL/QUASI-JUDICIAL/EXECUTIVE AUTHORIT IES HAVE INHERENT POWER TO RECALL AN ORDER PASSED BY THEM IN CASE THE ORDER WAS FOUND TO HAVE BEEN OBTAINED BY SUPPRESSION OF ANY MATERIAL FACT/MISREPRESENTATION/- FRAUD. IN THIS CASE EVEN THOUGH THE DEPARTMENT COULD HAVE BROUGHT TO THE NOTICE OF THE BENCH OF THIS TRIBUNAL DURING THE COURSE OF HEARING OF THE APPEAL ABOUT THE REPORT O F THE HAND-WRITING EXPERT IT FAILED TO DO SO. HOWEVER THE REPORT OF HAND WRITING EXPERT CAME TO LIGHT WHEN THE ASSESSING OFFICER HIMSELF ADMITS IN THE ORDER PASSED UNDER S.154 OF THE ACT. IN OUR OPINION THIS FAILURE ON THE PART OF THE DEPARTMENT TO BRING TO THE NOTICE OF THE BENCH ABOUT THE EXISTENCE OF THE REPORT OF THE HAND-WRITING EXPERT GOES TO THE ROOT OF THE MATTER. THEREFORE AS HELD BY THE APEX COURT IN THE CASE OF HONDA SIEL POWER PRODUCTS (SUPRA) NON-CONSIDERATION OF THE REPORT OF THE HAND-WRITING EXPERT WOULD AMOUNT TO AN ERROR WITHIN THE MEANING OF S.254(2) OF THE ACT. SINCE THE CONSIDERATION OF THE MATTER REQUIRES FRESH ADJUDICATION IN THE LIGHT OF THE REPORT OF TH E HAND-WRITING EXPERT IN OUR OPINION THE ORDER OF THE TRIBUNAL DATED 7TH NOVEMBER 2008 IN IT(SS)A NO22/HYD/2008 IS LIABLE TO BE RECALLED. 7. IN THE LIGHT OF THE ABOVE DISCUSSION IN THE INTERESTS OF JUSTICE AND BY FOLLOWING THE JUDGMEN T OF THE APEX COURT IN THE CASE OF HONDA SIEL POWER IT(SS)A.22/H/2008 SHRI GYAN KUMAR AGARWAL (IND.) ========================= 10 PRODUCTS LTD. (SUPRA) WE RECALL THE ORDER DATED 7.11.208 AND ACCORDINGLY THE APPEAL OF THE ASSESSEE BEING IT(SS)A NO.22/HYD/2008 NOW STANDS RESTORED ON THE FILE OF THIS TRIBUNAL. REGISTRY IS DIRECTED TO POST THE APPEAL FOR FINAL DISPOSAL BEFORE THE REGULAR BENCH ON 13.12.2010. THE COPY FO THIS ORDER SHALL BE TREATED AS NOTICE O F HEARING. THEREFORE THERE IS NO NEED FOR THE REGISTRY TO ISSUE ANY SEPARATE NOTICE OF HEARING. 8. IN THE RESULT MISCELLANEOUS APPLICATION OF THE ASSESSEE IS ALLOWED. 8. SINCE THE TRIBUNAL RECALLED ITS EARLIER ORDER D ATED 7.11.2008 AS ABOVE THIS APPEAL CAME UP FOR ADJUDIC ATION BEFORE US ON 19.1.2011. 9. THE LEARNED AUTHORISED REPRESENTATIVE FOR THE A SSESSEE SUBMITTED THAT THE ASSESSEE MR. GYAN KUMAR AGARWAL IS THE MANAGING DIRECTOR OF M/S JIVIKA LEASING & FINANCE CO. LTD. AND ALSO THE DIRECTOR OF M/S AMBIKA FOOD INDUSTRIES (P) LTD. THE ASSESSEE ALONG WITH HIS WIFE WAS OUT OF HYDERAB AD FROM 15.1.2003 ON A TRIP TO HIS IN LAWS PLACE AT HUBLI AND GOA AND RETURN TO HYDERABAD ONLY AT 9 AM ON 22.1.2003. SEARCH & SEIZURE OPERATION U/S 132 WAS CONDUCTED ON 21.1.2 003 IN THE RESIDENTIAL PREMISES OF THE ASSESSEE. THE ASS ESSEES YOUNGER BROTHER MR. SUNIL KUMAR AGARWAL WAS EXAMINE D BY THE SEARCH PARTY AND STATEMENT WAS RECORDED BY HIM BY THE SEARCH PARTY ON 21.1.03 AT 9.30 AM. AGAIN THE RECO RDING OF STATEMENT WAS RESUMED AT 3.25 AM ON 22.1.03. THE O NLY ISSUE ARISING FOR CONSIDERATION IN THIS APPEAL RELA TES TO AN ADDITION OF RS.2 55 50 000/- UNDER THE HEAD UNEXPLA INED INVESTMENT IN MONEY LENDING. IN HIS STATEMENT THE SEARCH PARTY PUT QUESTION ABOUT 2 NOTE BOOKS FOUND TOGETHE R IN ONE POLYTHENE BAG NUMBERED AS A/GAR/4 WHICH CONTAINED 31 PAGES AND THE 2 ND NOTE BOOK AS A/GAR/5 WHICH HAD 21 IT(SS)A.22/H/2008 SHRI GYAN KUMAR AGARWAL (IND.) ========================= 11 WRITTEN PAGES BOTH WERE FOUND IN THE CELLAR OF THE HOUSE. THE ASSESSING OFFICER MADE THE ADDITION SOLELY ON T HE BASIS OF ONE UNIDENTIFIED NOTE BOOK WHICH SUDDENLY SPRANG U P FROM UNKNOWN PLACE AND FOUND AND SEIZED IN THE CELLAR OF HOUSE LONG AFTER THE COMMENCEMENT OF THE SEARCH WHEN THE ASSESSEE WAS NOT IN CITY. MR. SUNIL KUMAR AGARWAL REPLIED STATING THAT THE NOTE BOOK DOES NOT BELONG TO THEM AND HE DID NOT KNOW IN WHOSE HAND WRITING IT WAS WRITTEN AND THAT THE BOOK WAS NEITHER RECOVERED IN HIS PRESENCE NOR IN THE PRESENCE OF HIS FAMILY MEMBERS AND HE DID NOT KNOW THE CONTENTS OF THE BOOK. NO PRONOTES OR RECEIPTS WERE FOUND BY THE SEARCH PARTY IN ANY PREMISES. THE PARTIES WHO WERE EXAMINED BY THE DDI ALSO DENIED HAVING INDULGED IN ANY MONEY LENDING TRANSACTIONS WITH THE ASSESSEE. SOME HAND LOANS WERE GIVEN BY ACCOUNT PAYEE CHEQUES WERE RECO RDED IN THE REGULAR BOOKS OF ACCOUNT. SIMPLY BECAUSE THE NAMES OF SOME PERSONS VIZ. RAJ KUMAR JAI PRAKASH AND MOHAN BAI WERE INCLUDED IN THE CASH FLOW STATEMENT AND SUCH N AMES WERE FOUND IN ALLEGED DIARY IT CANNOT BE HELD THA T THE DIARY BELONGS TO THE ASSESSEE. THE ASSESSEE CATEGORICALL Y DENIED THAT HE HAD ANY DEALINGS WITH THE PERSONS WHOSE NAM ES ARE NOTED IN THE NOTE BOOK SEIZED IN CELLAR. SOME OF T HE NAMES OF PERSONS IN ASSESSEES FAMILY AND FRIENDS CIRCLE MAY BE SIMILAR TO THE PERSONAL NAMES IN THE SEIZED DIARY. BUT AS THE FAMILY SURNAMES ARE NOT NOTED IN THE SEIZED RECORD IT IS ABSOLUTELY UNREALISTIC TO LINK THOSE NAMES IN THE S EIZED RECORDS WITH THE NAMES IN THE ASSESSEE FAMILY. THE RE IS NO REASON WHY SUCH DIARY SHOULD BE IN THE CORNER OF CE LLAR THAT TOO AT 2 PM AND NOT EARLIER WHEN THE SEARCH PARTY W ENT AROUND EVERY PART OF THE HOUSE MANY TIMES RIGHT FRO M THE COMMENCEMENT OF SEARCH. A LETTER DISOWNING THIS DI ARY WAS IT(SS)A.22/H/2008 SHRI GYAN KUMAR AGARWAL (IND.) ========================= 12 ALSO FILED BY MR. SUNIL KUMAR AGARWAL THE YOUNGER BROTHER OF THE ASSESSEE ON 30.1.03 BEFORE THE DIRECTORATE. 9.1. FURTHER HE SUBMITTED THAT THE ASSESSEE APPRE HENDS THAT SOMEBODY MIGHT HAVE PLANTED THEM TO HARASS THE ASSESSEE. THE CONDITION OF THESE TWO NOTE BOOKS BE ING NEW IS A VERY IMPORTANT ASPECT WHICH WOULD PROVE THAT T HESE ARE FABRICATED BY SOME ONE PROBABLY WITH AN INTENTION T O INVOLVE THE ASSESSEE. THE BOOKS ALLEGED TO BELONG TO THE A SSESSEE WHICH HE HIMSELF DOES NOT KNOW ARE FOUND SOMEWHERE IN THE CORNER OF THE CELLAR. THE ENTIRE SITUATION LOO KS VERY SUSPICIOUS. THE ASSESSEE WAS RATHER SURPRISED THAT ONE PERSON AS WITNESS BROUGHT BY THE DEPARTMENT TO THE RESIDENCE IN THE MORNING HOURS FOR THE SEARCH WHO W AS FROM FIRST DAY MORNING 8 AM TO THE NEXT DAY MORNING. TH IS PERSON WHO SIGNED THE PANCHANAMA IN HIS NAME HAS AL SO SIGNED AS SHRI AMARNATH IMPERSONATING HIS FATHERS NAME WHO WAS NOT THERE AT THE TIME OF SEARCH. THE ASSES SEES BROTHER TOOK THE OBJECTION AND THEN THE DEPARTMENT THOUGHT IT IS BETTER TO GET SOME OTHER PERSONS AS WITNESS AND THEM CALLED ONE OF THE DRIVERS OF THE DEPARTMENT AND TOO K HIS SIGNATURE ON THE PANCHANAMA AND ALSO ON THE SEIZED DIARIES AT 3 AM LATE NIGHT. THE DRIVER WAS NOT PRESENT AT THE TIME OF SEARCH. THERE IS EVERY POSSIBILITY THAT ONE OF THE ENEMIES COULD HAVE MISCHIEVOUSLY FABRICATED THE BOOKS AND D ROPPED THESE BOOKS IN THE CELLAR TO HARASS THE ASSESSEE. THE DEPT. SHOULD HAVE SENT THE BOOKS TO HANDWRITING EXPERTS. THE ASSESSEE STRONGLY BELIEVES THAT THE PERSON WHO HAD SOME IDEA OF THE ASSESSEES BUSINESS AND ASSETS COULD HA VE WRITTEN ENTRIES IN THESE BOOKS ON GUESS WORK. IT(SS)A.22/H/2008 SHRI GYAN KUMAR AGARWAL (IND.) ========================= 13 9.2. HE SUBMITTED THAT IT IS CLEAR FROM THE FACTS THAT THE ENTRIES MADE IN THE DIARY ARE IMAGINARY CONCOCTED AND UNREALISTIC TRANSACTIONS WHICH DO NOT AT ALL RELATE TO THE ASSESSEE. THE ASSESSEE AFFIRMED THAT THE DIARY DOE S NOT BELONG TO HIM. THE SO CALLED DIARY LOOKS ABSOLUTEL Y NEW THEREFORE IT IS OF 2003 ORIGIN. THE ENTRIES FOR EA RLIER YEARS CONTAINED THEREIN ARE OF FABRICATION AND IT DOES NO T BELONG TO THE ASSESSEE. THE SIGNATURES OF THE WITNESSES ARE ALSO NOT GENUINELY MADE BECAUSE ONE WITNESS VIZ. RAJENDER K UMAR GUPTA SIGNED FOR HIMSELF AND ALSO IMPERSONATED HIS FATHER SHRI AMARNATH BY SIGNING FATHERS NAME. TO COVER-U P THIS WRONGFUL ACT THE OFFICER OF THE SEARCH PARTY CALLE D THE TAXI DRIVER AT 3.30 AM AND MADE HIM SIGNED AS A THIRD WI TNESS. ANOTHER PECULIAR FEATURE OF THE POCKET NOTE BOOK IS THAT THE SAME NAME APPEARS AT DIFFERENT PAGES WITH DIFFERENT TRANSACTIONS. 9.3. ACCORDING TO LEARNED AR THE DIARY A/GAR/5 CON TAINS ONLY INCOHERENT ENTRIES WHICH WOULD NOT BE WRITTEN BY ANY BUSINESSMAN. THE DIARY ALLEGED BY THE DEPARTMENT TO BELONG TO THE ASSESSEE CONTAINS LOANS FOR MORE THAN 2 CRORES. IF IT IS SUCH AN IMPORTANT PERSONAL RECORD IT SHOULD BE IN THE PERSONAL CUSTODY OF THE ASSESSEE CONSTANT LY BUT WOULD NEVER BE THROWN IN A CORNER NEAR THE COMPOUND WALL AT 2 PM. THIS ITSELF IS A PROOF THAT IT DOES NOT BELONG TO THE ASSESSEE. THE ASSESSEE WAS ON TOUR TO HUBLI FROM 1 5.1.03 AND RETURN TO HYDERABAD ONLY ON 22.1.03 MORNING AT 9 AM. THE ASSESSEES STATEMENT WAS RECORDED ON 4.2.2003 I N WHICH THE ASSESSEE DENIED THE OWNERSHIP OF THE DIARY. TH E ASSESSEE WAS INFORMED THAT THE DIARY WAS FOUND ALON G WITH ANOTHER NOTE BOOK A/GAR/4 IN A POLYTHENE BAG. THE OTHER BOOK ALSO CONTAINED NOTING REGARDING PROPERTIES BEL ONGING TO IT(SS)A.22/H/2008 SHRI GYAN KUMAR AGARWAL (IND.) ========================= 14 THE ASSESSEES FAMILY WITH ABSOLUTELY WRONG YEARS O F PURCHASE. THIS HAS NOW BEEN ENTIRELY DISCARDED BY ASSESSING OFFICER AS NOT AT ALL USEFUL. THIS BOOK WAS STATED BY THE ASSESSEE AS NOT BELONGING TO HIM OR HIS FAMI LY. SIMILARLY THIS ALLEGED SEIZED MATERIAL MARKED AS A/ GAR/5 DOES NOT BELONG TO THE ASSESSEE AT ALL AND SHOULD B E DISCARDED FOR PURPOSES OF ASSESSMENT. ALL THE FACT S WERE BROUGHT TO THE NOTICE OF THE DEPARTMENT VIDE ASSESS EE LETTER DATED 30.1.2003 IMMEDIATELY AFTER SEARCH AND ALSO IN LETTER DATED 17.3.2003. IF THE NAMES WHICH APPEAR IN THE DIARY ARE OF EXISTING PERSONS THEN THEY SHOULD BE EXAMINED TO FIND OUT THE GENUINENESS OF THE TRANSACTIONS. THIS HAS NOT BEEN DONE. THEREFORE THIS DIARY A/GAR/5 ALSO TO BE DISC ARDED. 9.4. HE SUBMITTED THAT THE PRESUMPTION ENVISAGES U /S 132(4A) APPLIES ONLY WHEN THE BOOKS OF ACCOUNTS OT HER DOCUMENTS MONEY JEWELLERY OR OTHER VALUABLE ARTIC LES OR THINGS IN THE COURSE OF SEARCH ARE FOUND IN THE POS SESSION OF THE PERSON NAMED IN THE WARRANT OF SEARCH. IN THIS CASE THE TWO NOTE BOOKS WERE NOT FOUND IN THE BED ROOM OF MR . GYAN KUMAR. THEREFORE THE PRESUMPTION U/S 132(4A) WILL NOT BE APPLICABLE IN REGARD TO THE NOTE BOOKS SAID TO HAVE BEEN FOUND BY SEARCH PARTY NEAR THE COMPOUND WALL OF THE RESIDENTIAL HOUSE. THERE IS NO ALLEGATION BY THE SEARCH PARTY THAT THE DIARY IS THROWN OUT BY INMATES OF TH E ASSESSEES RESIDENCE. IN VIEW OF THIS CIRCUMSTANTI AL EVIDENCE AND THE FACTUAL POSITION THE OWNERSHIP OF THE DIAR Y CANNOT BE ATTRIBUTED TO THE ASSESSEE. WHEN THE ASSESSEE W AS NOT IN STATION ALTHOUGH IN THE WARRANT OF SEARCH NAME OF THE ASSESSEE WAS MENTIONED IN HIS ABSENCE SEARCH WAS CONDUCTED. THE PRESUMPTION ENVISAGED U/S 132(4A) A PPLIES ONLY TO ACCOUNTS OTHER DOCUMENTS MONEY JEWELLERY OR IT(SS)A.22/H/2008 SHRI GYAN KUMAR AGARWAL (IND.) ========================= 15 OTHER VALUABLE ARTICLES OR THINGS IN THE COURSE OF SEARCH ARE FOUND. THE PRESUMPTION U/S 132(4A) IS IN RESPECT O F THE PERSONS IN WHOSE POSSESSION OR CONTROL THE BOOKS OR THE DOCUMENTS ARE FOUND. THE USE OF THE WORDS TO SUCH PERSON IN THE SAID SECTION MEANS THE PERSON IN WHOSE POSSE SSION THE BOOKS OF ACCOUNTS OR DOCUMENT ARE FOUND. CLAUS E (II) OF SECTION 132(4A) PROVIDES THAT THE CONTENTS OF SUCH BOOKS OF ACCOUNTS OR DOCUMENTS ARE TRUE. THIS PRESUMPTION C AN BE APPLIED ONLY AGAINST THE PERSON IN WHOSE POSSESSION THE BOOKS OF ACCOUNTS OR THE DOCUMENTS ARE FOUND. THER EFORE HAD MR. GYAN KUMAR AGARWAL PRESENT AT THE TIME OF S EARCH AND THE ABOVE TWO DIARIES ALONG WITH ANY PROMISSOR Y NOTES OR RECEIPTS WERE FOUND IN HIS BED ROOM OR ALMIRAH THE ASSESSING OFFICER MAY PRESUME THAT THESE DIARIES FO UND IN ASSESSEES POSSESSION WERE CORRECT. HOWEVER WHILE UTILIZING THESE DIARIES IN THE CASE OF ANY OTHER PERSON (THE PERSON PRESENT BEFORE SEARCH PARTY OTHER THAN MR. GYAN KUM AR AGARWAL) THERE CANNOT BE ANY PRESUMPTION ABOUT THE CORRECTNESS OF SUCH DIARIES. THEREFORE THE PRESUMP TION U/S 132(4A) IS APPLICABLE ONLY AGAINST THE PERSON IN WH OSE POSSESSION THESE DIARIES WERE FOUND AND NOT AGAINST ANY OTHER PERSON. THE DIARY DOES NOT BEAR THE NAME OF THE ASSESSEE OR ANY OTHER MEMBER OF HIS FAMILY. THE DI ARIES WERE NOT IN THE HANDWRITING OF ANY FAMILY MEMBERS N OR ANY EMPLOYEE OF THE ASSESSEE. THE FINDING OF THE ASSES SING OFFICER IN MAKING ADDITION OF RS.2 55 50 000 ON THE BASIS OF JOTTINGS IN THE DIARY ARE NEITHER LEGALLY SUSTAINAB LE NOR FACTUALLY MAINTAINABLE BECAUSE THE ASSESSING OFFICE R HAD FAILED TO CONSIDER RELEVANT FACTUAL AND LEGAL ASPEC TS PROPERLY AND MAKING ENQUIRY ABOUT THE NAMES NOTED IN THE DIA RY AND EXAMINE THEM WHILE CONSIDERING THE EVIDENTIARY OF T HE VALUE OF DIARY. THE ASSESSING OFFICER IS CARRIED AWAY BY SUSPICION IT(SS)A.22/H/2008 SHRI GYAN KUMAR AGARWAL (IND.) ========================= 16 AND HAS MADE HUGE ADDITION ON SUSPICION. THE ASSE SSEE WAS NOT IN CONSCIOUS POSSESSION KNOWLEDGE OR CONTR OL OF THE SAID NOTE BOOKS WHICH THE SEARCH PARTY ALLEGED TO H AVE BEEN FOUND IN THE CELLAR AT ABOUT 2PM. THESE NOTE BOOKS WERE NOT IN THE HANDWRITING OF ANY OF THE MEMBERS OF THE FAM ILY OR ANY ACCOUNTANT OR ANY EMPLOYEE OF THE BUSINESS OF T HE FAMILY GROUP. THESE TWO SEIZED NOTE BOOKS WERE REC OVERED IN THE CELLAR NEAR THE COMPOUND WALL. THIS LOCATION S HOWED THAT THE ASSESSEE WAS NOT IN CONSCIOUS POSSESSION O F THE SAID TWO SMALL NOTE BOOKS. THERE IS NO PROOF THAT THE ASSESSEE WAS KNOWINGLY IN POSSESSION OF THESE TWO N OTE BOOKS. THE KNOWLEDGE INVOLVED IN THE POSSESSION OF UNAUTHORIZED NOTE BOOK HAS TO BE PROVED. THE WORD POSSESSION IN SUCH CASES CONNOTES POSSESSION WITH KNOWLEDGE AND KNOWLEDGE IS AN ESSENTIAL INGREDIENT . UNDER THESE CIRCUMSTANCES THE PROVISIONS AND PRESUMPTION U/S 132(4A) DO NOT AT ALL APPLY TO THE ASSESSEE CASE. 9.5. HE SUBMITTED THAT THE TWO NOTE BOOKS WERE FOU ND TOGETHER IN ONE POLYTHENE BAG AND SEIZED MATERIAL B EARING NO.A/AGR/4 WAS DISCARDED BY THE ASSESSING OFFICER EVEN THOUGH IT CONTAINED SOME REFERENCE TO PURCHASE OF PROPERTIES. THE ASSESSING OFFICER IS NOT JUSTIFIED IN PLACING ANY RELIANCE ON THE NOTE BOOK MARKED AS NO.A/AGR/5 . THE ASSESSEE AFFIRMS THAT BOTH THE BOOKS ARE FABRICATED AND ARE TO BE DISCARDED. 9.6. HE SUBMITTED THAT IN THE FIRST ROUND OF APPEA L BEFORE THIS TRIBUNAL THE MATTER CAME UP BEFORE THIS TRIBU NAL IN IT(SS)A.151/H/2005. IT WAS REITERATED THE SUBMISSI ONS MADE BEFORE THE ASSESSING OFFICER AND CIT(A) BEFORE THE TRIBUNAL. EXISTENCE OF EVIDENCE IS MUST FOR MONEY LENDING IT(SS)A.22/H/2008 SHRI GYAN KUMAR AGARWAL (IND.) ========================= 17 BUSINESS. NO OTHER INCRIMINATING MATERIAL OR DOCUM ENTS WERE FOUND DURING THE COURSE OF SEARCH. THEREFORE THE TRIBUNAL BY ITS ORDER DATED 28.2.06 SET ASIDE THE I SSUE TO THE FILE OF ASSESSING OFFICER WITH A DIRECTION TO PROVI DE OPPORTUNITY TO EXAMINE THE PERSONS WHOSE STATEMENTS ARE NECESSARY TO REBUT THE PRESUMPTION U/S 132(4A) AND THEREAFTER DECIDE THE ISSUE AFRESH IN ACCORDANCE W ITH LAW. PURSUANT TO THE DIRECTIONS OF THE TRIBUNAL WHICH I S BINDING ON THE ASSESSING OFFICER THE ASSESSING OFFICER VID E HIS LETTER DATED 22.6.2006 ALLOWED AN OPPORTUNITY TO PRESENT THE CASE ON 3.7.2006 FOR COMPLETION OF SET ASIDE ASSESSMENT. 9.7. HE SUBMITTED THAT THE ASSESSEE FILED HIS REPL Y ON 28.6.2006 BEFORE THE ASSESSING OFFICER WHEREIN HE REQUESTED THE ASSESSING OFFICER TO AFFORD AN OPPORT UNITY: A) TO EXAMINE THE SEARCH PARTY OFFICIALS B) TO SUPPLY A COPY OF THE ENQUIRY MADE BY THE ASSESSI NG OFFICER IN RESPECT OF THREE PERSONS MENTIONED IN TH E ASSESSMENT ORDER VIZ. RAJKUMAR MARWAH JAIPRAKASH AGARWAL AND D. MOHAN GUPTA. C) ENQUIRY MADE BY THE ASSESSING OFFICER IN REGARD TO HANDWRITING IN THE ALLEGED NOTE BOOK D) TO EXAMINE THE PERSONS VIZ. JITENDER MR. RAJKUMAR MR. JAIPRAKASH AND MR. MOHAN GUPTA WHO FILED THEIR AFFIDAVITS BEFORE THE ASSESSING OFFICER. 9.8. THEREFORE IT IS BINDING ON THE ASSESSING OFFI CER TO FOLLOW THE DIRECTIONS GIVEN BY THE TRIBUNAL AND ONL Y AFTER MAKING SUCH FURTHER ENQUIRIES AS MAY BE NECESSARY AND ONLY THEREAFTER THE ASSESSING OFFICER SHOULD HAVE PROCEEDED TO MAKE FRESH ASSESSMENT AS DIRECTED BY TRIBUNAL. IT(SS)A.22/H/2008 SHRI GYAN KUMAR AGARWAL (IND.) ========================= 18 9.9. DURING THE SET ASIDE ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER EXPRESSED HIS INABILITY TO PRODUC E THE 21 PERSONS NAME IN THE NOTE BOOK FOR EXAMINATION BECAU SE THE IDENTITY OF THE DEBTORS IS NOT REFLECTED IN THE NOT E BOOK THEREFORE IT WAS SUGGESTED THAT GUIDANCE OF THE AD DL. CIT U/S 158G 1961 MAY BE SOUGHT. ACCORDINGLY THE AUTHO RISED REPRESENTATIVE AND THE ASSESSING OFFICER REPRESENTE D BEFORE THE ADDL.CIT ON 24.5.07 WITH THE COPY OF THE LETTE R FILED BEFORE THE ASSESSING OFFICER. THE ADDITIONAL CIT A GAIN ON 28.5.07 DISCUSSED THE CASE IN THE PRESENCE OF AUTHO RISED REPRESENTATIVE AND THE ASSESSING OFFICER. AS NEGOT IATED UNDERSTANDING WAS REACHED ON 28.5.07 AND ALSO AGRE ED THAT THE ALLEGED NOTE BOOK SHOULD BE SENT TO GEQD FOR H IS OPINION AND CAME TO DECISION THAT OUT OF THE ABOVE FOUR ITEMS REQUESTED BY THE ASSESSEE THREE SHOULD BE FO REGONE BY THE ASSESSEE TO RESOLVE THE ISSUE FOR WHICH THE DE PT AND THE ASSESSEE AGREED TO ACCEPT THE OPINION OF GEQD IN GO OD SPIRIT TO AVOID PROTRACTED LITIGATION. THIS FACT WAS ALSO RECORDED IN THE ORDER SHEET ON 28.5.07. THE HONBLE TRIBUNAL H AS TO GIVE FINDING ON THIS FACT AND ADJUDICATE. ACCORDINGLY T HE ASSESSING OFFICER VIDE LETTER DATED 31.5.07 SENT T HE HANDWRITING SAMPLES OF 11 PERSONS OF FAMILY MEMBERS ALONG WITH THE SEIZED NOTE BOOK TO GEQD. THE GEQD SENT H IS OPINION DT. 4.10.07 TO THE ASSESSING OFFICER VERY M UCH BEFORE THE LIMITATION PERIOD 31.12.07. AS FOLLOWS: THE WRITINGS IN THE RED ENCLOSED PORTIONS MARKED Q1 TO Q21 IN THE NOTE BOOK MARKED AS A/GAR/5 WERE COMPARED WITH THE SPECIMEN WRITINGS OF 11 PERSONS WHICH WERE MARKED AS S1 TO S146. AN EFFECTIVE AND THOROUGH COMPARISON OF THE QUESTIONED AND SPECIMEN WRITINGS WAS CARRIED OUT BUT IT HAS NOT BEEN POSSIB LE TO CONNECT THE AUTHORSHIP OF THE QUESTIONED WRITING S MARKED Q1 TO Q21 WITH THE WRITINGS OF THE ANY OF TH E 11 PERSONS. IT(SS)A.22/H/2008 SHRI GYAN KUMAR AGARWAL (IND.) ========================= 19 10. THE LD. AR SUBMITTED THAT BY THAT TIME THERE W AS A CHANGE OF INCUMBENT. WHEN THE ISSUE CAME BEFORE TH E NEW ADDL. CIT FOR APPROVAL U/S 158BG HE REFUSED TO ACC EPT THE OPINION OF GEQD. ON LEARNING FROM THIS FACT FROM A SSESSING OFFICER THE ASSESSEE ON 16.11.2007 WROTE THREE LET TERS TO THE ASSESSING OFFICER REQUESTING THE ASSESSING OFFICER TO ALLOW OPPORTUNITY FOR CROSS EXAMINATION. THIS REQUEST OF THE ASSESSEE WAS TURNED DOWN BY THE ASSESSING OFFICER O N THE GROUND THAT THE LIMITATION WAS INVOLVED. THE FACT THAT THE MATTER INVOLVED LIMITATION COULD NOT BE HELD AGAINS T THE ASSESSEE. IT WAS THE OWN LAPSE OF THE ASSESSING OFF ICER. THE ASSESSING OFFICER SHOULD HAVE TAKEN UP THE ASSESSME NT WELL IN TIME. HAVING NOT DONE SO THE ASSESSING OFFICER WAS NOT CORRECT IN DRAWING ADVERSE INFERENCE AGAINST THE AS SESSEE AND FOR MAKING THE IMPUGNED ADDITION. ACTION OF TH E ASSESSING OFFICER VIOLATED THE PRINCIPLES OF NATURA L JUSTICE. UPON HEARING FROM THE ADDL. CIT THE ASSESSING OFFIC ER SHOULD NOT HAVE REINSTATED HIS EARLIER ORDER ON THE VERY S AME MATERIAL BY IGNORING THE DIRECTION GIVEN BY THE HON BLE ITAT. HE REQUESTED THE TRIBUNAL TO GIVE FINDING AND ADJUD ICATE ON THIS ISSUE. BUT UNFORTUNATELY GEQD REPORT WHICH SH OULD IN FACT BECOME THE BASIS OF ASSESSMENT HAS BEEN TOTALL Y IGNORED DEFEATING THE VERY PURPOSE FOR WHICH IT WAS REFERRE D TO FOR COMPLETION OF SET ASIDE ASSESSMENT. FAIRNESS REQUI RES THAT THE REVENUE SHOULD HAVE RESPECTED ITS OWN FILE NOTE AS HAS BEEN HELD BY HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. SURANA METALS AND STEELS (I) LTD. (300 ITR 324) . WHILE PASSING THE ASSESSMENT ORDER IN THE COURSE OF THE S ECOND ROUND OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFIC ER ALLOWED EXAMINING ONLY THE SEARCH OFFICIALS BUT NOT THE OTHER THREE ISSUES CONTENDED BY THE ASSESSEE WHICH WAS A GAINST IT(SS)A.22/H/2008 SHRI GYAN KUMAR AGARWAL (IND.) ========================= 20 NATURAL JUSTICE AND AGAINST THE DIRECTIONS OF THIS HONBLE TRIBUNAL. 10.1. THE ASSESSING OFFICER ALLOWED THE ASSESSEE T O CROSS EXAMINE SHRI G. KRISHNA RAO THE THEN ITI WHO PARTI CIPATED IN THE SEARCH PROCEEDINGS. CROSS EXAMINATION AND H IS REPLY IS REPRODUCED IN THE ASSESSMENT ORDER. HE ADMITTED THAT NO OTHER BOOKS/DOCUMENTS WERE FOUND ALONG WITH THE NOT E BOOK. POINT TO BE NOTED IS THE ALLEGATION OF THE D EPARTMENT THAT THE ASSESSEE IS DOING MONEY LENDING BUSINESS F OR WHICH EXISTENCE OF EVIDENCE IS MUST. SEIZED ALLEGED NOTE BOOK ALONE WAS NOT SUFFICIENT TO DRAW ANY DEFINITE CONCL USION REGARDING THE EXISTENCE OF UNDISCLOSED INCOME AND THAT IT WAS NOT POSSIBLE TO DRAW ANY INFERENCE ON THE BASIS OF THIS ALLEGED NOTE BOOK WITHOUT PROPER CORROBORATION. IT IS FURTHER SUBMITTED THAT NO ADDITION SHOULD BE MADE ON THE BA SIS OF SURMISES CONJECTURES AND SUSPICION. SURMISES AND SUSPICION CANNOT TAKE THE PLACE OF PROOF IN ASSESSM ENT PROCEEDINGS. 10.2. HE SUBMITTED THAT MR. MOHAN KUMAR WHO WAS THE AUTHORIZED OFFICER OF THE SEARCH TEAM WAS ALLOWED TO CROSS EXAMINE BY THE ASSESSING OFFICER. THE REPLIES OF T HE OFFICER TO THE CROSS EXAMINATION WERE REPRODUCED IN THE ASSESS MENT ORDER AT PG.6 QUESTIONS NOS.4 5 6 7 8 9 & 10 WHICH ARE RELEVANT FOR DECIDING THE ISSUE. IN SUCH AN EVENT IT IS NOT KNOWN AS TO WHY SHRI AMARNATH ACCEPTED TO BE A WIT NESS TO THE SEARCH AND AS TO WHY HE DID NOT PUT FORTH HIS P ROBLEMS AND EXPRESSES HIS INABILITY TO BE A WITNESS BEFORE THE COMMENCEMENT OF SEARCH. HAD HE STATED THESE FACTS B EFORE COMMENCEMENT OF THE SEARCH HE WOULD NOT HAVE BEEN TAKEN AS A WITNESS TO SEARCH. MR. AMARNATH HAS WORKED OU T A IT(SS)A.22/H/2008 SHRI GYAN KUMAR AGARWAL (IND.) ========================= 21 PLAN AND WAS QUITE SUCCESSFUL IN HIS PLAN. THE AUT HORIZED OFFICER ALLOWED HIM TO MOVE FREELY IS QUITE CLEAR F ROM HIS STATEMENT. THE ASSESSEE STRONGLY BELIEVES THAT SHR I AMARNATH HAD IMPLANTED THE ALLEGED NOTE BOOK IN THE CELLAR AS IT WAS IMPOSSIBLE FOR HIM TO DO SO IN THE MAIN P REMISES OF THE ASSESSEE WHERE ALL THE PERSON WERE PRESENT. S O HE HAD SUCCESSFULLY CHOSEN THE CELLAR AS PROPER PLACE FOR HIM TO DO SO AND HE SUCCESSFULLY DID IT. THUS THE ASSESSEE HAS BEEN CORRECTLY AND FACTUALLY REBUTTING THE PRESUMPTION U /S 132 (4A) RIGHTS FROM THE BEGINNING. THUS THE ASSESSEE HAS REBUTTED THE PRESUMPTION WITH COGENT AND PROPER EVI DENCE. THEREFORE THE ONUS LIES ON THE DEPARTMENT TO PROVE THAT THE NOTE BOOK BELONGS TO THE ASSESSEE AND ITS CONTENTS ARE TRUE AND CORRECT. THIS WAS THE REASON WHY THE ASSESSEE HAD REQUESTED TO EXAMINE THE SEARCH OFFICERS. 10.3. HE SUBMITTED THAT THE ASSESSEE THROUGH A LET TER DATED 16.11.2007 REQUESTED THE ASSESSING OFFICER TO AFFOR D AN OPPORTUNITY TO EXAMINE THE THREE PANCHAS WHOSE NAME S AND ADDRESSES WERE FURNISHED IN THE PANCHANAMA ON 21.1. 2003 AND REMINDER ON 10.12.07. THE PANCHAS WERE S/SHRI AMARNATH (FATHER) RAJENDER KUMAR GUPTA (SON) SYED JAFFAR (DRIVER OF QUALIS) ENGAGED BY THE SEARCH PARTY). A LL THE PARTIES SIGNED THE ALLEGED SEIZED NOTE BOOK. ALL T HE THREE PERSONS WERE NEVER PRESENT WHEN THE SEARCH PARTY FO UND AND PICKED UP THIS ALLEGE NOTE BOOK. HOW CAN THE T HREE PANCHAS BECOME WITNESSES FOR FINDING AND PICKING UP THE ALLEGED BOOK WHICH LEADS TO SHOW THAT IT WAS NOT AT ALL PROVED THE EXACT PLACE FROM WHERE THE NOTE BOOK WAS FOUND? 10.4. HE SUBMITTED THAT IN THE PANCHANAMA AND ON T HE SAID NOTE BOOK RAJENDRA KUMAR HAS NOT ONLY SIGNED BUT MR . IT(SS)A.22/H/2008 SHRI GYAN KUMAR AGARWAL (IND.) ========================= 22 RAJENDRA KUMAR GUPTA HAS ALSO SIGNED AS AMARNATH IMPERSONATING HIS FATHERS NAME WHO WAS NOT AT ALL THERE AT THAT TIME. THE YOUNGER BROTHER OF THE ASSESSEE NOTI CED THIS THEREFORE THE DEPARTMENT THOUGHT IT IS BETTER TO GE T SOME OTHER PERSON AS WITNESS AND CALLED ONE OF THE DRIVE RS OF THE DEPARTMENT VIZ. SYED JAFFAR AND TOOK HIS SIGNATURE ON THE PANCHNAMA. OUT OF THE ABOVE FOUR ISSUES THREE WER E IGNORED AS IT IS A LONG DRAWN OUT PROCESS AND THER EFORE THE ASSESSEE HAS TO READILY AGREE TO THE NEGOTIATED SUG GESTION OF THE DEPARTMENT TO REFER THE MATTER TO THE GEQD TO R ESOLVE THE ISSUE. THE ASSESSING OFFICER VIDE HIS LETTER D ATED 25.10.07 INFORMED THE ASSESSEE THAT NO OTHER ENQUIR IES WAS MADE BY ASSESSING OFFICER THAN WHAT WAS DISCUSSED I N THE ASSESSMENT ORDER. 10.5. HE SUBMITTED THAT THE AFFIDAVITS FILED BY TH E FOUR PERSONS WERE ON RECORD BEFORE THE ASSESSING OFFICER AND THE CIT(A). NONE OF THE AUTHORITIES CONSIDERED IT NECE SSARY TO CROSS EXAMINE THE DEPONENTS WITH REFERENCE TO THE S TATEMENT MADE IN THE AFFIDAVITS. CONSEQUENTLY THE ASSESSEE IS ENTITLED TO ASSUME THAT THE AUTHORITIES WERE SATISF IED WITH THE AFFIDAVITS FILED AS SUFFICIENT PROOF ON THIS PO INT. IN THE SECOND ROUND OF APPEAL BEFORE CIT(A) THE ASSESSEE C ONTENDED THAT ASSESSING OFFICER DID NOT ALLOW OPPORTUNITY TO EXAMINE THE OTHER THREE ISSUES BUT ONLY ALLOWED TO EXAMINE SEARCH OFFICIALS WHICH IS AGAINST THE DIRECTIONS OF THIS T RIBUNAL. THE CIT(A) CONFIRMED THE ASSESSMENT. IN THE SECOND ROU ND OF THE APPEAL BEFORE THIS TRIBUNAL IT WAS AGAIN REITE RATED WHAT WAS SUBMITTED BEFORE THE ASSESSING OFFICER AND CIT( A). THE TRIBUNAL DISMISSED THE APPELLANT APPEAL IN IT(SS)A NO.22/H/08 DATED 7.11.2008 STATING THAT NO MENTION WAS MADE IN THE ASSESSMENT ORDER ABOUT ANY REFERENCE TO THE IT(SS)A.22/H/2008 SHRI GYAN KUMAR AGARWAL (IND.) ========================= 23 HANDWRITING EXPERT AND NO MATERIAL IS AVAILABLE ON RECORD TO SUGGEST THAT ANY MATTER WAS REFERRED TO HANDWRITING EXPERT THEREFORE THERE WAS NO VIOLATION OF PRINCIPLES OF NATURAL JUSTICE AND THEREBY DISMISSED THE APPEAL. THEREAF TER THE ASSESSEE FILED MA BEFORE THE TRIBUNAL IN MA NO.173/ H/2008 ON THE GROUND THAT IN FACT A REFERENCE WAS MADE T O THE HANDWRITING EXPERT AND THE HANDWRITING EXPERT HAD A LSO FILED HIS OPINION BEFORE THE ASSESSING OFFICER. AT THIS STAGE THE DEPT. DID NOT COME FORWARD TO ADMIT THAT THE MATTER WAS REFERRED TO HANDWRITING EXPERT AND THEREFORE THE TRIBUNAL REJECTED THE MA VIDE ORDER DATED 26.12.08. THEREAF TER THE ASSESSEE FILED AN APPLICATION U/S 154 OF THE IT ACT BEFORE THE ASSESSING OFFICER. THE ASSESSING OFFICER ORDER U/S 154 DATED 25.2.09 ADMITTED THAT THE MATTER WAS REFERRED TO THE HANDWRITING EXPERT ALONG WITH SAMPLES OF HANDWRITIN G TAKEN FROM 11 NOS. OF THE FAMILY OF ASSESSEE AND THE OPIN ION WAS ALSO RECEIVED BY THE ASSESSING OFFICER MUCH BEFORE PASSING OF THE SET ASIDE ASSESSMENT. IN SPITE OF THESE ADMITT ED FACT THAT THE ASSESSING OFFICER FAILED TO CONSIDER THE S AME IN ASSESSMENT PROCEEDINGS. 10.6. HE SUBMITTED THAT THE DECISION OF THE TRIBUN AL SHOULD BE READ AS A WHOLE AND IT IS NOT PERMISSIBLE TO ACC EPT PART OF THE DIRECTIONS AND IGNORE THE REST OF THE DIRECTION S AND PLACED RELIANCE ON THE JUDGEMENT IN THE CASE OF GLA SS LINES EQUIPMENTS CO. LTD. VS. CIT 253 ITR 454(GUJ.) AS THE DEPARTMENT HAVING REFERRED THE MATTER TO THE GEQD IGNORING THE THREE REQUIREMENTS OF THE ASSESSEE AS WAS AGREED TO BY BOTH THE PARTIES SUCH A REPORT IS BIND ING ON BOTH THE PARTIES. THE DEPT CANNOT BLOW HOT AND COL D. ACTUALLY THE SUGGESTION CAME FROM THE DEPT. TO REFE R THE MATTER TO THE GEQD TO AVOID PROTRACTED LITIGATION A ND TO IT(SS)A.22/H/2008 SHRI GYAN KUMAR AGARWAL (IND.) ========================= 24 RESOLVE THE ISSUE. THEREFORE EITHER THE DEPT SHOU LD STICK TO THE OTHER THREE REQUIREMENTS OF THE ASSESSEE WHEN T HE REPORT OF GEQD IS NOT TAKEN FOR CONSIDERATION TAKE THE ENT IRE THREE REQUIREMENTS OF THE ASSESSEE INTO ACCOUNT OR IGNORE THE THREE REQUIREMENTS BY ACCEPTING THE REPORT OF GEQD. 10.7. HE SUBMITTED THAT AS HAS BEEN HELD BY THE HO NBLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. S.C. SE THI (295 ITR 351) THAT THE ASSESSING OFFICER HAS NOT R EALLY MADE EFFORTS TO GIVE EFFECT TO THE DIRECTIONS OF CIT(A) FOR MAKING AVAILABLE OPPORTUNITY TO CROSS EXAMINING BY THE ASS ESSEE AND THE AFFIDAVITS REMAINS IGNORED. 10.8 HE SUBMITTED THAT THE ASSESSEE HAS FULLY REBU TTED THE PRESUMPTION U/S 132(4A). THIS FACT IS ALSO PROVED Y THE REPORT OF THE GEQD. DEPARTMENT COULD NOT PRODUCE T HE PERSONS CONCERNED FOR CROSS EXAMINATION AND MISERAB LY FAILED TO PROVE THAT THE ALLEGED NOTE BOOK BELONGS TO THE ASSESSEE WITHOUT CORROBORATIVE EVIDENCE. NO BUSINE SSMAN WOULD INDULGE IN ADVANCING OR TAKING CASH LOANS WIT HOUT ANY CORRESPONDING SURETY FOR THE RECOVERY OF SUCH L OANS. THIS FACTOR HAS NOT BEEN TAKEN INTO CONSIDERATION B Y THE DEPT. BEFORE COMING TO THE CONCLUSION THAT THE NOTE BOOK BELONGS TO THE ASSESSEE. INJUSTICE HAS BEEN DONE I N THIS CASE TWICE. THERE SHOULD NOT BE ANY FURTHER INNING S. UNDER THE ABOVE CIRCUMSTANCES OF THE CASE JUSTICE SHOULD BE DONE BASED ON THE FUNDAMENTAL PRINCIPLE THAT JUSTICE IS ABOVE ALL. EVEN THE LAW BENDS BEFORE JUSTICE. 10.9. ACCORDING TO LEARNED AR THERE HAS BEEN A GRO SS BREACH OF THE PRINCIPLES OF NATURAL JUSTICE BECAUSE ADEQUATE OPPORTUNITY TO MEET THE CASE MADE OUT WAS NOT GIVEN TO THE IT(SS)A.22/H/2008 SHRI GYAN KUMAR AGARWAL (IND.) ========================= 25 ASSESSEE. THE BLOCK ASSESSMENT ORDER IS LIABLE TO BE QUASHED. 11. THE AUTHORISED REPRESENTATIVE FOR THE ASSESSEE HAS ALSO RELIED ON THE FOLLOWING JUDGEMENTS: 1. MEHTA PARIKH & CO. VS. CIT (BOM.) (S.C) (1956) 30 I TR 189 2. GLASS LINES EQUIPMENTS CO. LTD. VS. CIT (GUJ.) (253 ITR 459) (GUJ.) 3. CIT VS. HON'BLE S.C. SETHI (RAJ. HC) 295 ITR 354 4. UMACHARAN SHAW AND BROTHERS VS CIT (WB) (S.C) 37 ITR 277 5. SONA BUILDERS VS. UNION OF INDIA (S.C) 251 ITR 199 6. ACIT VS. SAURASHTRA KUTCH STOCK EXCHANGE LTD. (S.C) 305 ITR 241 7. CIT VS. SURANA METALS & STEELS (I) LTD. (300 ITR 32 7) 8. JAYA S. SHETTY VS. ACIT (AT) (MUM) 69 ITD 372 9. T.S. KUMARASWAMY VS ACIT (AT) 65 ITD 189 10. ACIT VS. OM PRAKASH & CO. (MUM) 87 TTJ 183 11. D.R. RML MEHROTHRA VS. DCIT (ALLAHABAD ) 68 ITD 305 12. BRIJLAL ROOPCHAND VS. ITO (40 TTJ 668 (INDORE) 13. RAJ PAL SINGH RAM AUTAR VS. ITO (39 TTJ) (DEL.) 544 14.ASHWANI KUMAR VS. ITO 39 ITD 183 (DEL.) 12. THE LEARNED DR RELIED ON THE ORDER OF THE LOWER AUTHORITIES. 13. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE MAIN GRIEVANCE OF THE ASSESSEE IN THIS APPEAL IS WITH REGARD TO SUSTAININ G OF IT(SS)A.22/H/2008 SHRI GYAN KUMAR AGARWAL (IND.) ========================= 26 ADDITION AT RS.2 55 50 000/- WHICH IS ON THE BASIS OF SEIZED MATERIALS NOTED AS A/GAR/5. ACCORDING TO THE ASSES SING OFFICER THESE DOCUMENTS CONTAINS DETAILS OF MONEY L ENDING BUSINESS OF THE ASSESSEE AS FOLLOWS: ANALYSIS OF ENTRIES IN THE DIARY DATE NAME RECEIPT PAYMENT DAY BALANCE 12.1.2000 RAJUSETH - 35 LAKHS -35 LAKHS 16.1.2000 RAJKUMAR 0 10 LAKHS -45 LAKHS 15.3.2000 SHYAMBAI 0 5 LAKHS -50 LAKHSW 25.3.2000 RAJUSETH 4 LAKHS 0 -46 LAKHS 30.3.2000 ARVINDBAI 0 8 LAKHS - 54 LAKHS 15.4.2000 ARVINDBAI 0 7 LAKHS -61 LAKHS 15.5.2000 SHYAMBHAI 0 8 LAKHS -69 LAKHS 25.5.2000 RAJUSETH - 5 LAKHS -74 LAKHS 24.6.2000 RAJKUMAR 5 LAKHS 0 -69 LAKHS 26.6.2000 RAJKUMAR 10 LAKHS 0 -68 LAKHS 25.7.2000 RAJKUMAR 0 4 LAKHS -72 LAKHS 20.8.2000 SHYAMBAI 10 LAKHS 0 -62 LAKHS 20.8.2000 SHYAMBAI 15 LAKHS 0 -60.5 LAKHS 20.10.2000 RAJKUMAR 0 5 LAKHS -65.5 LAKHS 2.1.01 ASHOK 0 6 LAKHS -68.5 LAKHS 25.1.01 ASHOK 0 4 LAKHS -72.5 LAKHS 10.2.01 RAJKUMAR 9 LAKHS 0 -63.5 LAKHS 2.3.01 RAJKUMAR 0 2 LAKHS -65.5 LAKHS IT(SS)A.22/H/2008 SHRI GYAN KUMAR AGARWAL (IND.) ========================= 27 3.3.01 PRADEEP 0 10 LAKHS -75.5 LAKHS 5.3.01 NARESH 0 9 LAKHS -84.5 LAKHS 20.3.01 MOHANBAI 0 15 LAKHS -99.5 LAKHS 10.4.01 ARVINDBAI 0 5 LAKHS -109.5 LAKHS 5.5.01 JAIPRAKASH 0 5 LAKHS -114.5 LAKHS 17.5.01 RAJKUMAR 5 LAKHS 0 109.5 LAKHS 25.5.01 RAJKUMAR 2 LAKHS 0 107.5 LAKHS 10.6.01 OMBAI 0 10 LAKHS -117.5 LAKHS 10.6.01 ARVINDBAI 3 LAKHS 0 -114.5 LAKHS 15.6.01 SHYAM 0 5 LAKHS -119.5 LAKHS 1.7.01 SHYAM 0 2 LAKHS -121.5 LAKHS 10.7.01 PRADEEP 5 LAKHS 0 -116.5 LAKHS 15.7.01 RAJKUMAR 0 5 LAKHS -121.5 LAKHS 20.7.01 GOPALBAI 0 10 LAKHS -131.5 LAKHS 10.8.01 NARESH 5 LAKHS 0 -126.5 LAKHS 18.8.01 SHYAMBAI 0 10 LAKHS -136.5 LAKHS 10.10.01 NARESH 0 4 LAKHS -140.5 LAKHS 15.10.01 PRADEEP 3 LAKHS 0 -137.5 LAKHS 18.10.01 MOHANBAI 0 5 LAKHS -142.5 LAKHS 25.10.01 NARESH 1 LAKHS 0 -141.5 LAKHS 1.11.01 PRADEEP 1 LAKHS 0 -140.5 LAKHS 10.12.01 ASHOK 5 LAKHS 0 -135.5 LAKHS 12.12.01 PRADEEP 0 6 LAKHS -141.5 LAKHS IT(SS)A.22/H/2008 SHRI GYAN KUMAR AGARWAL (IND.) ========================= 28 15.12.01 JAIPRAKASH 1 LAKHS 0 -138.5 LAKHS 15.12.01 ASHOK 2 LAKHS 0 -139.5 LAKHS 30.12.01 JAIPRAKASH 1 LAKHS 0 -142.5 LAKHS 2.1.02 JAIPRAKASH 0 5 LAKHS -148.5 LAKHS 10.1.02 RAMESH - 9 LAKHS -151.5 LAKHS 10.1.02 BHAGWANDAS 0 8 LAKHS -159.5 LAKHS 2.2.02 MAHESHJI 0 5 LAKHS -164.5 LAKHS 4.2.02 KISHOREBAI 0 15 LAKHS -179.5 LAKHS 10.2.02 SHYAMBAI 5 LAKHS 0 -174.5 LAKHS 2.3.02 MOHANBAI 2 LAKHS 0 -172.5 LAKHS 2.3.02 SATISH RAJUSETH 0 10 LAKHS -182.5 LAKHS 3.3.02 GOPALBAI 0 5 LAKHS -187.5 LAKHS 10.3.02 SHYAMBAI 0 5 LAKHS -192.5 LAKHS 15.3.02 MOHAN BAI 0 10 LAKHS -202.5 30.3.02 OMBAI 2 LAKHS 0 -200.5 25.4.02 ASHOK 0 5 LAKHS -205.5 27.4.02 BHAGWANDAS 0 7 LAKHS -212.5 6.5.02 NARESH 0 5 LAKHS -217.5 8.5.02 MAHESH 0 10 LAKHS -227.5 23.5.02 PRADEEP RAJUSETH 0 5 LAKHS -232.5 15.6.02 RAMESH 1 LAKH 0 -231.5 16.6.02 SHYAM 0 8 LAKHS -239.5 20.6.02 MAHESHJI 0 5 LAKHS -244.5 23.7.02 BHAGAVANDAS 1 LAKH 0 -248.5 20.8.02 RAJUSETH 0 6 LAKH -249.5 23.8.02 ABHISEKH 0 5 LAKH 254.5 25.8.02 MOHANBAI 2 LAKH 0 252.5 20.9.02 BHAGAWANDAS 5 LAKH 0 247.5 25.L0.02 GOPALBAI 2 LAKH 0 245.5 9.11.02 RAJUSETH 0 5 LAKH 250.5 15.12.02 ABHISEKH 0 5 LAKH 255.5 15.10.02 SHYAM 2 LAKH 0 253.5 IT(SS)A.22/H/2008 SHRI GYAN KUMAR AGARWAL (IND.) ========================= 29 LAKHS 14. WE HAVE ALSO CAREFULLY GONE THROUGH THESE DOCU MENTS AND ALSO THE SEIZED MATERIALS ON THE BASIS OF WHICH THE ADDITION WAS MADE. THESE SEIZED MATERIALS WERE FOU ND AT 2 PM ON 21.1.2003 IN THE CORNER OF THE CELLAR OF THE ASSESSEES HOUSE. THE ASSESSEE SUBMITTED BEFORE THE LOWER AUT HORITIES THAT IT DOES NOT BELONG TO HIM. THE SEARCH WAS COM MENCED AT 8.30 AM ON 21.1.2003 AND THE NOTE BOOK/LOOSE SLI PS MARKED A/GAR/5 WERE FOUND OUT ONLY AT 2 PM ON 21.1.2003. WHEN IT WAS CONFRONTED TO THE ASSESSEE S BROTHER MR. SUNIL AGARWAL WHILE RECORDING THE STATEMENT ON OATH FROM HIM AT 3.25 PM ON 21.1.2003 HE SUBMITTED THAT THE DOCUMENTS DO NOT BELONG TO THEM AT ALL. HE ALSO ST ATED THAT HE CANNOT IDENTIFY THE HANDWRITING. HE ALSO STATED THAT THE SEIZED MATERIAL WAS NOT RECOVERED IN HIS PRESENCE O R HIS FAMILY MEMBERS. HE CATEGORICALLY STATED THAT HE DO ES NOT KNOW THE CONTENT OF THE BOOK. HOWEVER THE LOWER AUTHORITIES DREW INFERENCE FROM THESE DOCUMENTS THA T THE ASSESSEE HAS BEEN CARRYING ON THE MONEY LENDING BUS INESS AND THE PRESUMPTION THAT THESE DOCUMENTS BELONG TO THE ASSESSEE AS IT WAS FOUND IN THE ASSESSEES PREMISES . IT IS ALSO FACT THAT THERE WAS ALSO SEARCH AND SEIZURE OP ERATION IN THE CASE OF PREM CHAND GUPTA COUSIN OF SHRI GYAN K UMAR U/S 132. DURING THE COURSE OF SEARCH AND SEIZURE CERTAIN DOCUMENTS WERE FOUND AND THE SEIZED DOCUMENTS CONTA IN CREDIT CARD AND BANK DOCUMENTS WHICH INDICATE THE N AME OF SHRI DIVESH KUMAR AGARWAL S/O SHRI GYAN KUMAR AGA RWAL AND THE STATEMENT RECORDED FROM DIVESH KUMAR AGARW AL U/S 131 READS AS FOLLOWS: Q.8: I AM SHOWING YOU ANNEXURE APG7 IN WHICH THE PAPERS ARE NUMBERED 1 TO 24 SEIZED FROM IT(SS)A.22/H/2008 SHRI GYAN KUMAR AGARWAL (IND.) ========================= 30 RESIDENCE OF PC AGARWAL 8-2-681 ROAD NO.12 BANJARA HILLS HYDERABAD ON 21.1.2003 AT THIS PREMISES SIMULTANEOUS SEARCH AND SEIZURE OPERATIONS WERE CARRIED ON ALONG WITH YOUR RESIDENTIAL PREMISES WHICH IS JUST BY THE SIDE OF YOUR PREMISES. ARE YOU AWARE THAT SEARCH AND SEIZURE OPERATIONS TOOK PLACE IN THE PREMISES OF PC AGARWAL ON 21.1.2003 SIMULTANEOUSLY ALONG WITH SEARCH AND SEIZURE OPERATIONS IN YOUR RESIDENTIAL PREMISES? ANS. ON THAT DAY AT 11 AM ONLY I CAME TO KNOW THAT SEACH AND SEIZURE OPERATIONS ARE BEING CONDUCTED IN THE RESIDENTIAL PREMISES OF PC AGARWAL BECAUSE I WAS BUSY WITH THE IT OFFICIALS WHO WERE CARRYING ON SEARCH AND SEIZURE OPERATIONS IN MY PREMISES. AS FAR AS THE PAPERS CONTAINING IN ANNEXURE A/PG/7 STATED TO HAVE BEEN SEIZED FROM THE PREMISES OF PC AGARWAL MY REPLY IS AS UNDER: THE SLIPS OF PAPERS SERIALLY NUMBERED 8 9 10 11 12 13 14 15 16 17 18 19 20 AND 21 CONTAINING IN THE ANNEXURE BELONG TO ME. Q.9. CAN YOU EXPLAIN HOW THESE PAPERS FOUND THEIR WAY INTO THE PREMISES OF PC AGARWAL YOUR NEIGHBOUR AND WERE IDENTIFIED BY THE DEPARTMENT AND MADE AS ANNEXURE IN THE CASE OF SRI PC AGARWAL DURING THE SEARCH? ANS.: SOON AFTER THE IT OFFICIALS ENTERED OUR RESIDENTIAL PREMISES MY WIFE SMT. ANSHU AGARWAL WOKE ME UP FROM SLEEP AND I WAS IN MENTAL SHOCK AND IN THAT HURRY WHAT WERE THE PAPERS AVAILABLE WITH ME I HAVE THROWN THROUGH MY WINDOW IN TO THE PREMISES OF SHRI PC AGARWAL WHO HAPPENED TO BE OUR RELATIVE AND NEIGHBOUR. AS I MENTIONED THE PAPERS STATED ABOVE BELONG TO ME AND REFLECT CERTAIN BUSINESS TRANSACTIONS OR OTHER MATTERS PERTAINING TO MYSELF AND MY FAMILY MEMBERS. 15. FROM THE ABOVE THE DEPARTMENT DREW INFERENCE THAT THE DOCUMENTS WERE THROWN FROM ASSESSEES PREMISES TO THE PREMISES OF MR. PREM CHAND GUPTA. IT IS ALSO FACT THAT ON THE BASIS OF INFORMATION GATHERED FROM THESE SEIZED MATERIALS THE ASSESSMENT WAS FRAMED. THERE WAS AL SO IT(SS)A.22/H/2008 SHRI GYAN KUMAR AGARWAL (IND.) ========================= 31 INFORMATION WHICH REVEALED THE BANK ACCOUNT INDICAT ING THE NAMES OF THE ASSESSEE AND IT WAS ALSO FOUND THAT SH RI DV AGARWAL ADMITTED TRANSACTION THROUGH BANK CREDIT CA RDS SEIZED FROM THE PREMISES OF SHRI PREM CHAND GUPTA A S HIS UNDISCLOSED INCOME. FROM THE ACT AND CONDUCT OF TH E ASSESSEE AND THEIR FAMILY MEMBERS THE REVENUE AUTH ORITY DREW CONCLUSION THAT THEY INTEND TO CONCEAL VITAL E VIDENCE WHICH THREW LIGHT ON THEIR UNDISCLOSED INCOME TO TH E DEPARTMENT. AS SUCH THEY RELIED ON THE SEIZED MAT ERIAL MARKED AS A/GAR/5 TO DETERMINE THE UNDISCLOSED MONE Y LENDING BUSINESS AND INCOME WHICH WAS REFLECTED IN THE SEIZED DOCUMENT MARKED AS A/GAR/5. SINCE SHRI G.K. AGARWAL IS THE HEAD OF THE FAMILY LOOKING AFTER TH E BUSINESS AND FAMILY INTERESTS THE MONEY LENDING BUSINESS IS CONSIDERED IN THE HANDS OF SHRI G.K. AGARWAL THE PRESENT ASSESSEE. THE ONLY CONTENTION OF THE ASSESSEE REGA RDING THE SEIZED MATERIAL A/GAR/5 IS THAT THESE MATERIALS WER E PLANTED BY HIS BUSINESS COMPETITORS IN HIS PREMISES AND HE SOUGHT FOR CROSS EXAMINATION OF THE WITNESSES AND T HE OFFICERS INVOLVED IN THE SEARCH ACTION FROM THE DEP ARTMENT. ACCEDING TO THE REQUEST OF THE ASSESSEE THE TRIBUN AL VIDE ITS ORDER DATED 28.2.2006 GIVEN AN OPPORTUNITY TO THE A SSESSEE TO CROSS EXAMINE THE PARTIES. ACCORDINGLY THE ASSE SSEE CROSS EXAMINED ONE OF THE INSPECTORS OF THE DEPARTMENT VI Z. SHRI G. KRISHNA RAO AND THE DETAILS ARE AS FOLLOWS: Q. SOON AFTER COMMENCEMENT OF THE SEARCH AT 8.20 AM DID ANY OFFICIAL OF SEARCH PARTY TAKE ROUNDS OF THE PREMISES INCLUDING THE CELLAR IF SO WHAT WAS THE TIME? ANS: AFTER ENTERING THE PREMISES ALL THE FAMILY MEMBERS WERE CALLED TO THE MAIN HALL OF THE ENTRY FLOOR AND THE DOOR OF THE STAIR CASE WHICH LEADS TO THE CELLAR WAS LOCKED IT(SS)A.22/H/2008 SHRI GYAN KUMAR AGARWAL (IND.) ========================= 32 BY CONFIRMING THAT THERE WAS NO ONE PRESENT IN THE CELLAR. CHILDREN WHO WERE SLEEPING IN UPPER FLOOR BED ROOMS WERE ALSO CALLED TO THE MAIN HALL AND WE HAVE LOCKED ALL THE INDEPENDENT BED ROOMS AT AROUND 9 AM AND ALL THE KEYS WERE KEPT WITH THE SEARCH TEAM. THE BED ROOMS OF THE UPPER FLOORS AND THE CELLAR WERE LOCKED FROM OUTSIDE WITHOUT MAKING ANY ROUNDS INTO THEM. AFTER COMPLETION OF THE PHYSICAL SEARCH OF ALL THE LIVING ROOMS OF THE MAIN MEMBERS OF THE FAMILY THE OTHER PLACES WHICH WERE LOCKED WERE SEARCHED ONE BY ONE IN THE PRESENCE OF ONE OF THE FAMILY MEMBERS. 1. DID YOU FIND ANY PARTITION WALLS IN THE CELLAR OR IS IT OPEN WITHOUT ANY HINDRANCE? ANS: TO THE BEST OF MY REMEMBRANCE THERE WERE NO PARTITION WALLS IN THE CELLAR. ONLY THE PILLARS OF THE BUILDING WERE THERE. 2. DID YOU NOT FIND THE POLYTHENE BAG CONTAINING TWO NOTE BOOKS WHEN YOU FIRST TOOK THE POSSESSION OF THE CELLAR? ANS: AT THE TIME OF LOCKING THE CELLAR DOOR IT IS NOT POSSIBLE TO ASCERTAIN WHETHER ANY BAG IS AVAILABLE ON THE FLOOR OF THE CELLAR AS THE LOCATION OF THE BAG IS NOT VISIBLE FROM THE FIRST LEVEL WHERE WE HAVE LOCKED THE CELLAR ENTRANCE. THOUGH WE HAVE LOCKED THE CELLAR ENTRANCE AT 8.20 AM WE HAVE ENTERED THE CELLAR ONLY AT 3 PM. 3. AS STATED ABOVE BY YOU THAT SEARCH OFFICIALS CALLED YOU TO TAKE PHYSICAL SEARCH OF THE CELLAR WHAT DID YOU FIND IN CELLAR BY PHYSICAL SEARCH? PLEASE NAME THE DOCUMENTS FOUND. ANS: IN THE CELLAR BESIDES THE POLYTHENE BAG REFERRED ABOVE SOME HOUSEHOLD ARTICLES WERE THERE. NO OTHER BOOKS/DOCUMENTS WERE FOUND. IT(SS)A.22/H/2008 SHRI GYAN KUMAR AGARWAL (IND.) ========================= 33 4. HOW MANY PANCHAS ATTENDED YOUR SEARCH OPERATION ANS: I DO NOT REMEMBER. 16. THE ASSESSEE HAS ALSO CROSS EXAMINED THE AUTHO RIZED OFFICER MR. MOHAN KUMAR AND THE CONTENTS OF CROSS EXAMINATION WHICH READS AS FOLLOWS: Q.6: THE WITNESS MR. SYED JAFFER APPEARED TO BE DRIVER OF VEHICLE ENGAGED BY YOUR SEARCH TEAM. HOW CAN A DRIVER BE PRESENT AT THE MATERIAL TIME? WAS HE AWARE OF THE SEARCH PROCEEDINGS CONDUCTED BY YOUR TEAM? ANS: I DO NOT RECOLLECT THE VOCATION OF MR. SYED JAFFER. AS FAR AS I KNOW THERE IS NO LEGAL BAR IN HAVING A DRIVER AS A WITNESS. THIS WITNESS WAS PRESENT THROUGHOUT THE COURSE OF THE SEARCH. HE WAS AWARE OF THE SEARCH BEING CONDUCTED BY THE IT DEPTT. CONSISTING OF MYSELF AND MY TEAM IN THE ABOVE PREMISES. 7. IT APPEARED THAT MR. SYED JAFFER WAS A DRIVER OF A PRIVATE TAXI CAR AND HE WAS ALL THROUGH SITTING IN THE CAR OUTSIDE THE GATE OF THE PREMISES. HOW CAN HE BE EXPECTED TO WITNESS THE SEARCH PROCEEDINGS AND FINDING OF TWO NOTE BOOKS NUMBERED A/GAR/4 & A/GAR/5? ANS: I DENY THAT MR. S. JAFFER WAS NOT IN THE PREMISES DURING THE COURSE OF SEARCH. REGARDING THE SEIZURE OF THE ABOVE MENTIONED TWO NOTE BOOKS IT IS NOT NECESSARY AND POSSIBLE TO SEIZE EACH AND EVERY DOCUMENT IN THE PRESENCE OF BOTH THE WITNESSES. THE SAID DOCUMENTS CAN ALSO BE SEIZED IN THE PRESENCE OF OTHER TWO WITNESS MENTIONED. 17. AT THIS STAGE WE ARE NOT ABLE TO CONSIDER THE ARGUMENT OF THE ASSESSEES COUNSEL REGARDING THE PLANTING OF SEIZED IT(SS)A.22/H/2008 SHRI GYAN KUMAR AGARWAL (IND.) ========================= 34 DOCUMENTS BY HIS BUSINESS RIVALS SINCE THERE IS NO CONCRETE EVIDENCE TO SUGGEST THE PLACING OF THE SEIZED MATER IAL BY THIRD PARTY. IT IS ALSO FACT THAT ASSESSEE HAS NOT AT ALL TAKEN ANY STEP AS PER LAW AGAINST THE ISSUE RELATING TO P LANTING OF DOCUMENTS. FURTHER THE CONTENTION OF THE ASSESSEE S COUNSEL IS THAT THE DEPARTMENT HAS NOT GIVEN AN OPP ORTUNITY TO CROSS EXAMINE THE WITNESSES. THE ASSESSEE IS AL SO HAVING GRIEVANCE REGARDING NOT CONSIDERING THE REPRESENTAT ION FILED BY THE ASSESSEE ON VARIOUS OCCASIONS. 18. BUT THE ISSUE BEFORE US NOW REMAINS IS THAT W HETHER THE SEIZED MATERIAL A/GAR/05 CAN BE THE BASIS FOR A DDITION OF RS.2 55 50 000/- AS SEEN FROM THE ABOVE SEIZED MATERIALS THESE ARE JUST HAND WRITTEN LOOSE DOCUME NTS. THE DEPARTMENT GOT VERIFIED THE HANDWRITING OF THE SEIZ ED MATERIAL A/GAR/05 FROM THE GOVT. EXAMINER OF QUESTI ONED DOCUMENTS DIRECTORATE OF FORENSIC SCIENCE GOVT. O F INDIA WHO HAD GIVEN REPORT THAT ON COMPARISON OF THE QUES TIONED DOCUMENTS AND SPECIMEN WRITINGS OF THE ASSESSEE AND HIS FAMILY MEMBERS THE AUTHORSHIP OF THE QUESTIONED DOC UMENT DOES NOT TALLY WITH THE SEIZED MATERIAL A/GAR/05. BUT THIS REPORT OF THE HANDWRITING EXPERTS IS NOT BINDING ON THE DEPARTMENT. IT IS ONLY CIRCUMSTANTIAL EVIDENCE. T HERE IS NO NECESSITY TO THE DEPARTMENT TO PROVE THE AUTHORSHIP OF THIS DOCUMENT. THE OTHER PLEA OF THE ASSESSEE IS THAT THE DOCUMENTS ARE PLANTED ONE AND IT CANNOT BE RELIED F OR THE PURPOSE OF ASSESSMENT. THOUGH THE ASSESSEE REFUSED THAT THE DOCUMENTS ARE NOT BELONG TO HIM THE BURDEN IS CAST UPON THE ASSESSEE TO PROVE CONCLUSIVELY THAT IT DOE S NOT BELONG TO THE ASSESSEE. THERE IS NO PRESUMPTION IN LAW THAT THE ASSESSING OFFICER IS SUPPOSED TO DISCHARGE TAX LIABILITY BY DIRECT EVIDENCE ONLY AND THEREUPON THE UNDISCLOSED INCOME IT(SS)A.22/H/2008 SHRI GYAN KUMAR AGARWAL (IND.) ========================= 35 BEYOND DOUBT. THE UNDISCLOSED INCOME OF THE ASSESS EE IS TO BE COMPUTED BY THE ASSESSING OFFICER ON THE BASIS O F AVAILABLE RECORD. IN MANY A TIME IT IS VERY IMPOR TANT TO HAVE DIRECT EVIDENCE OR CONCLUSIVE EVIDENCE TO PROV E TO DETERMINE THE UNDISCLOSED INCOME. WHEN THE ASSESSE E GIVES AN EVASIVE REPLY TO THE ASSESSING OFFICER HE HAS N O CHOICE BUT TO TAKE ESTIMATION OF THE INCOME. THE ONLY THI NG IS IT SHOULD BE REASONABLE ON THE BASIS OF MATERIAL AVAIL ABLE ON RECORD. IT SHOULD NOT BE BASED ON CONJUNCTURES AND SURMISES. AS OF NOW MATERIAL CONSIDERED BY THE ASS ESSING OFFICER FOR MAKING THE ADDITION IS ONLY THE SEIZED MATERIAL MARKED AS A/GAR/05 WHICH IS A NOTEBOOK CONTAINING T HE DETAILS OF DAY TO DAY LEDGER ACCOUNT OF VARIOUS PER SONS TO WHOM THE MONEY WAS ADVANCED. IN VIEW OF THIS WE H AVE TO CONSIDER THE SEIZED MATERIAL A/GAR/05 TO SEE WHETHE R IT IS ENOUGH TO MAKE ADDITION. IN OUR OPINION THIS DOCU MENT IS ONLY NOTE BOOK/LOOSE SLIPS. WE HAVE TO LOOK INTO T HE STATEMENT RECORDED U/S 132(4) OR 132(4A) OF THE IT ACT. THE SEIZED MATERIAL A/GAR/05 FOUND DURING THE COURSE OF SEARCH AND THE STATEMENT RECORDED IS SOME PIECE OF EVIDENCE TO MAKE AN ADDITION. THE ASSESSING OFFICER HAS TO ESTABLISH THE LINK BETWEEN THE SEIZED MATERIAL A/GAR/05 AND W ITH OTHER BOOKS OF ACCOUNTS OF THE ASSESSEE. IT CANN OT BE CONSIDERED ALONE AS CONCLUSIVE EVIDENCE. THE WORD MAY BE PRESUMED APPEAR IN SECTION 132(4A) GIVES AN OPTION TO THE AUTHORITIES CONCERNED TO PRESUME THE THINGS. BUT I T IS REBUTTABLE AND IT DOES NOT GIVE A DEFINITE AUTHORIT Y AND CONCLUSIVE EVIDENCE. THE ASSESSEE HAS EVERY RIGHT TO REBUT THE SAME BY PRODUCING THE SAME IN SUPPORT OF HIS CL AIM. THE ENTIRE CASE DEPENDS ON THE RULE OF EVIDENCE. T HE ASSESSEE HAS EVERY RIGHT TO SHIFT THE BURDEN OF PRO OF. THERE IS NO CONCLUSIVE PRESUMPTION. IN THE PRESENT CASE THE IT(SS)A.22/H/2008 SHRI GYAN KUMAR AGARWAL (IND.) ========================= 36 ASSESSEE AS WELL AS THE ASSESSEES SON AND ALSO ASS ESSEES BROTHER SHRI S.K. AGARWAL CATEGORICALLY STATED IN E VERY STAGE OF EXAMINATION AND STATEMENT RECORDED U/S 132(1) OR 132 THAT THE SEIZED MATERIAL A/GAR/05 IS NOT AT ALL BEL ONGED TO THEM. IN SPITE OF THIS THE ASSESSING OFFICER PROCE EDED TO CONCLUDE THAT THESE SEIZED MATERIALS ARE CONCLUSIVE LY BELONGED TO THE ASSESSEE. LEAVE ALONE THE ISSUE RE LATING TO AUTHORSHIP OF THE DOCUMENT SEIZED AND THE FINDINGS OF THE GEQD THE DEPARTMENT SHOULD FIND OUT AND ESTABLISH THE NEXUS OF THESE SEIZED MATERIALS TO THE ASSESSEES B USINESS WHILE CONCLUDING BLOCK ASSESSMENT THE ASSESSING OF FICER SHALL BE SPECIFIC ABOUT THE NATURE OF NEXUS OF THE SEIZED MATERIAL TO THE BUSINESS OF THE ASSESSEE. THE ALLE GATION OF THE DEPARTMENT IS THE SEIZED MATERIAL THAT REFLECTE D MONEY LENDING BUSINESS OF THE ASSESSEE. BUT THEY ARE NOT ABLE TO UNEARTH ANY BACKGROUND WITH REGARD TO THE MONEY LEN DING BUSINESS LIKE LOAN AGREEMENT PROMISSORY NOTES SEC URITY DETAILS BANK ACCOUNT RECEIPTS VOUCHERS OR ANY OTHE R CORROBORATIVE EVIDENCE. WITHOUT ANY OF THESE THE DEPARTMENT HAS TAKEN A VIEW THAT THE ASSESSEE IS CA RRYING ON THE MONEY LENDING BUSINESS. MORE SO THERE ARE SO MANY NAMES OF THE PERSONS WHOSE ADDRESSES ARE NOT AT ALL TRACEABLE. THE DEPARTMENT NOT TRACED AND EXAMINED ANY OF THEM. THERE IS NO INFORMATION FROM ANY PARTY THAT THEY HAVE TAKEN LOAN FROM THE ASSESSEE. THERE IS NO EVIDENCE AS TO WHETHER THEY REPAID THE LOANS TOWARDS THE PRINCIPAL AMOUNT AND INTEREST. THE DEPARTMENT CANNOT DRAW INFERENCE ON THE BASIS OF SUSPICION CONJUNCTURE AND SURMISE. SUSPI CION HOWEVER STRONG CANNOT TAKE PLACE OF MATERIAL IN SUP PORT OF THE FINDINGS OF THE ASSESSING OFFICER. THE ASSESSI NG OFFICER SHOULD ACT IN A JUDICIAL MANNER PROCEED WITH JUDIC IAL SPIRIT AND SHOULD COME TO A JUDICIAL CONCLUSION. THE ASSE SSING IT(SS)A.22/H/2008 SHRI GYAN KUMAR AGARWAL (IND.) ========================= 37 OFFICER IS REQUIRED TO ACT FAIRLY AS A REASONABLE P ERSON AND NOT ARBITRARILY AND CAPRICIOUSLY. ASSESSMENT MADE SHOULD HAVE ADEQUATE MATERIAL AND IT SHOULD STAND ON ITS O WN LEGS. THE ASSESSING OFFICER WITHOUT EXAMINING ANY PARTY WHO HAS TAKEN THE LOAN FROM THE ASSESSEE CANNOT COME TO TH E CONCLUSION THAT THE ASSESSEE LENDS MONEY. THE BASI S FOR ADDITION IS ONLY NOTE BOOK/LOOSE SLIPS. THESE NOTE BOOK/LOOSE SLIPS ARE UNSIGNED DOCUMENTS. THE ASSES SING OFFICER HAS NOT ESTABLISHED NEXUS BETWEEN THE NOTE BOOK/LOOSE SLIPS AND BUSINESS OF THE ASSESSEE. THE RE IS NO NARRATION REGARDING THE ADDRESS OF THE PARTIES THE EXACT AMOUNT OF LOAN PERIOD OF ADVANCE RATE OF INTEREST AND INSTALMENTS DUE. ALSO THERE IS NO EVIDENCE FOR REPA YMENT OF MONEY TOWARDS THE LOAN. THERE IS NO VALID SEIZED MATERIAL TO COME TO THE CONCLUSION THAT THE ASSESSEE HAS ACT UALLY MADE AN ADVANCE OF THAT AMOUNT I.E. RS.2 55 50 000/ - . THE NOTE BOOK/LOOSE SLIPS MARKED A/GAR/05 FOUND DURING THE COURSE OF SEARCH IS A DUMB DOCUMENT HAVING NO EVIDE NTIARY VALUE NO ADDITION CAN BE MADE IN THE ABSENCE OF CORROBORATIVE MATERIAL. IF THERE IS CIRCUMSTANTIAL EVIDENCE IN THE FORM OF PROMISSORY NOTES LOAN AGREEMENT AND AD DRESS OF THE PARTIES OR BANK ENTRIES THE ADDITION IS TO BE MADE ON THAT BASIS TO THE EXTENT OF MATERIAL AVAILABLE. T HE ASSESSEE IS NOT EXPECTED TO EXPLAIN THE LOOSE PAPERS FOUND A S THERE IS NO EVIDENCE OTHER THAN NOTE BOOK/LOOSE SLIPS CARRYI NG ON MONEY LENDING BUSINESS OF THE ASSESSEE. THE ASSESS ING OFFICER HAS FAILED TO PROVE THE MONEY LENDING BUSIN ESS CARRIED ON BY THE ASSESSEE ON THE BASIS OF SEIZED M ATERIAL A/GAR/05. IN OUR OPINION NO ADDITION CAN BE MADE ON THE BASIS OF DUMB DOCUMENTS/NOTE BOOK/LOOSE SLIPS IN TH E ABSENCE OF ANY OTHER MATERIAL TO SHOW THAT THE ASSE SSEE HAS CARRIED ON MONEY LENDING BUSINESS. NOTING ON THE NO TE IT(SS)A.22/H/2008 SHRI GYAN KUMAR AGARWAL (IND.) ========================= 38 BOOK/DIARY/LOOSE SHEETS ARE REQUIRED TO BE SUPPORTE D/ CORROBORATED BY OTHER EVIDENCE AND ARE ALSO INCLUDE THE STATEMENT OF A PERSON WHO ADMITTEDLY IS A PARTY TO THE NOTING AND STATEMENT FROM ALL THE PERSONS WHOSE NAM ES THERE ON THE NOTE BOOK/LOOSE SLIPS AND THEIR STATEM ENTS TO BE RECORDED AND THEN SUCH STATEMENT UNDOUBTEDLY SHO ULD BE CONFRONTED TO THE ASSESSEE AND HE HAS TO BE ALLO WED TO CROSS EXAMINE THE PARTIES. IN THE PRESENT CASE UN DOUBTEDLY NO STATEMENT FROM THE PARTIES WHOSE NAMES FOUND IN THE NOTE BOOK/LOOSE SLIPS HAS BEEN RECORDED AND ASSESSE E SUCH THERE IS NO QUESTION OF CROSS EXAMINATION OF THEM A ND ENTIRE ADDITION IN THE HANDS OF THE ASSESSEE ON THE BASIS OF UNCORROBORATED WRITINGS IN THE LOOSE PAPERS FOUND D URING THE COURSE OF SEARCH IS NOT POSSIBLE. THE EVIDENCE ON RECORD IS NOT SUFFICIENT TO SUPPORT THE REVENUES CASE THA T HUGE MONEY LENDING BUSINESS HAS BEEN CARRIED ON BY THE A SSESSEE OUTSIDE THE BUSINESS OF THE ASSESSEE. THIS IS THE BLOCK ASSESSMENT AND WE ARE CONCERNED ONLY WITH THE UNDIS CLOSED INCOME AND WE HAVE TO CONSIDER ONLY MATERIAL AND EV IDENCE DETECTED AS A RESULT OF SEARCH. IT MEANS THAT IF A N EXAMINATION OF THE MATERIAL ALREADY ON RECORD BEFOR E SEARCH OR IF AS A RESULT OF SOME EXTERNAL INFORMATION OR S OME OTHER SOURCES OTHER THAN A SEARCH IT IS FOUND THAT SOME INCOME HAD ESCAPED ASSESSMENT AND THEN IT IS OPEN FOR THE ASSESSING OFFICER TO RESORT TO A REGULAR ASSESSMENT INCLUDING REOPENING OF A COMPLETED ASSESSMENT IF SO ADVISED. BUT HE CANNOT DRAG THESE ITEMS INTO THE BLOCK ASSESSMENT PROCEEDINGS ENVISAGED UNDER CHAPTER XIV-B OF THE I. T. ACT. IN OUR OPINION EVIDENCE AVAILABLE WITH THE ASSESSIN G OFFICER AS A RESULT OF SEARCH IS TO BE USED FOR THE PURPOSE OF DETERMINING THE UNDISCLOSED INCOME OF THE BLOCK PER IOD. THE EVIDENCE IF ANY RELIED ON BY THE ASSESSING OFFICE R FOR THE IT(SS)A.22/H/2008 SHRI GYAN KUMAR AGARWAL (IND.) ========================= 39 PURPOSE OF DETERMINING THE UNDISCLOSED INCOME OF TH E BLOCK ASSESSMENT IS TO BE PUT BEFORE THE ASSESSEE FOR HIS COMMENTS BEFORE COMPLETING ASSESSMENT. MORE SO IF THE ASSESSING OFFICER WANTS TO RELY ON THE STATEMENT OF ANY THIRD PARTY THE SAME IS REQUIRED TO BE FURNISHED TO THE A SSESSEE AND IF THE ASSESSEE WANTS TO CROSS EXAMINE ANY OF T HE PARTIES WHOSE STATEMENT WAS RELIED ON BY THE ASSESSING OFFI CER THE SAME IS TO BE PROVIDED TO THE ASSESSEE. IN THE PRE SENT CASE THE ASSESSEE IS HAVING GRIEVANCE FOR NOT PROVIDING THE OPPORTUNITY OF CROSS EXAMINING THE PARTIES WHOSE ST ATEMENTS WERE RELIED ON BY THE ASSESSING OFFICER WHILE COMPL ETING THE ASSESSMENT. THE CIRCUMSTANCES SURROUNDING THE CASE ARE NOT STRONG ENOUGH TO JUSTIFY THE REJECTION OF ASSES SEES PLEA ASKING THE OPPORTUNITY OF CROSS EXAMINATION. IN VI EW OF THIS WE SET ASIDE THE BLOCK ASSESSMENT ORDER AND REMAND BACK THE MATTER TO THE FILE OF THE ASSESSING OFFICER. W E DIRECT THE ASSESSING OFFICER TO GIVE AN OPPORTUNITY OF CROSS E XAMINATION OF THE PARTIES AS REQUIRED BY THE ASSESSEE AND THER EAFTER IF THERE IS ANY SUFFICIENT EVIDENCE OTHER THAN THE UNSUBSTANTIATED NOTE BOOK/LOOSE SLIPS MARKED AS DOC UMENT A/GAR/5 OR IF THIS DOCUMENT (VIZ. A/GAR/05) SUBSTANTIATED BY ANY OTHER EVIDENCE TO ESTABLISH TH AT THE ASSESSEE IS HAVING UNDISCLOSED INCOME THEN THE ASS ESSING OFFICER SHALL COMPLETE THE ASSESSMENT IN ACCORDANCE WITH LAW DETERMINING THE UNDISCLOSED INCOME COVERING THI S BLOCK PERIOD IN ADDITION TO THE OTHER UNDISCLOSED INCOME UNCONTESTED BEFORE US. IT IS NEEDLESS TO SAY THAT T HE EVIDENCE TO BE CONSIDERED BY THE ASSESSING OFFICER FOR THIS BLOCK ASSESSMENT IS ALL THE EVIDENCE ON RECORD FOUND AS R ESULT OF SEARCH OR REQUISITION OF BOOKS OF ACCOUNT OR OTHER DOCUMENTS AND SUCH OTHER MATERIALS OR INFORMATION AS ARE AVAI LABLE WITH THE ASSESSING OFFICER AND RELATABLE TO SUCH EV IDENCE. IT(SS)A.22/H/2008 SHRI GYAN KUMAR AGARWAL (IND.) ========================= 40 19. IN THE RESULT THE APPEAL OF THE ASSESSEE IS AL LOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 18.2.201 0 SD/- SD/- G.C. GUPTA CHANDRA POOJARI VICE PRESIDENT ACCOUNTANT MEMBER DATED THE 18 TH FEBRUARY 2010 COPY FORWARDED TO: 1. C/O SYED JAMEELUDDIN (IT CONSULTANT) 16-7-302 ERRAM COTTAGE. AZAMPURA HYDERABAD-24 2. THE ACIT CENTRAL CIRCLE-6 HYDERABAD 3. CIT(A)-I HYDERABAD. 4. CIT HYDERABAD 5. THE D.R. ITAT HYDERABAD. NP